The Implementation of an ERP - Assignment Example

Information Technology Assignment ID # Table of Contents Information Technology Assignment Table of Contents 2 Task Number 3 Case Overview 3 Challenges faced by the organization 4 Why need for an ERP system? 5 Selection of an ERP System 5 The Implementation of an ERP 6 Impact of the ERP system 7 Reducing inventory costs and optimizing capacity use 7 Transparent operations support strategic planning and controlling 8 Aligning management to ICT systems 8 Task Number 2 9 Supply Chain Re-engineering 9 Role of IT in Supply Chain 10 A case of Supply chain re-engineering 12 The main outcomes and impacts of integrating IT into Supply chain re-engineering process 14 References 16 Task Number 1 At the present, the majority of business organizations heavily relies on the latest tools and technologies in order to carry out their daily business tasks. In fact, a large number of tools and technologies have been developed to support a wide variety of business processes. In this scenario, business intelligence tools, enterprise resource planning systems and customer relationship management systems are some of the well-known examples of these modern technologies. This part of the assignment is aimed at analyzing the role of an enterprise resource planning system in improving supply chain. In this part an analysis will be performed on the case study of a specific organization in order to determine the usefulness of an enterprise resource planning system in improving the supply chain. Case Overview OZS (Odlewnia Żeliwa Śrem) is the leading Iron foundry among three major foundries of Poland. More than 1,450 employees are working with this organization and approximately 50 thousand castings are being produced each year. It has faced many challenges during the last twenty years that resulted in an extreme level of re-structuring processes for achieving process efficiencies. For this purpose, it began to employ a new system in 2000 within the firm that was Enterprise Resource Planning or in short, “ERP”. The decision of employing ERP had some strategic reasons. It was supposed to bring about two major effects. One effect would be the considerable decline in inventory cost and enhancement of production volume by re-organizing the business procedures more proficiently. Another effect of improvement in the management ways and business procedures would be the result of decreasing ambiguousness in operations (e-Business Watch, 2008). Challenges faced by the organization OZS is involved in the export of its partial yield to different countries, such as the Netherlands, United Kingdom, Germany, France and all around the Scandinavian Countries. It has occupied nine percent market segment in the steel market of Poland. Steel industry of Poland had faced many contests over the previous years and so faced by OZS too. The reasons for such challenges were the emergence of Globalization and being a member of the European Union. It created such a trade area for OZS that was free from the restrictions which enhanced the competition with foreign companies. In addition to this, privatization of OZS in 1999 created an extra burden for enhancing the production volume and downsizing the employees that was only possible by restructuring the company’s processes. So, this pressure resulted in trimming of employees to half and making new large investments in arrears for efficient procedures and upgraded operations. It enabled the company to enhance the efficiency of operations in distribution side and the manufacturing side. The company employed an incorporated ICT system to enhance the production volume, being the first one who did so among all steel companies in the Poland. It started the execution of Enterprise Resource Planning system in the year of 2000. Why need for an ERP system? OZS benchmarked some more innovative industries, who created operational proficiency in the manufacturing side, and employed a cohesive ICT system. The reason for the employment of such a system was to achieve maximum production capacity and an edge over competitors as the firm was trying to maintain its market share. The company realized some problems with the existing ICT system that it was an outmoded system with limited support that cannot collaborate all the business processes. The company thought of a strategic stance that it needed such an application that could be able to collaborate all the operational processes and related information. Thus, the company implemented the Enterprise Resource Allocation system in 2000 with a high consideration of improving the operational efficiency and its management. Selection of an ERP System As the company OZS was the first one to be able to implement such a system, so it posed a big threat to the company’s management with the level of project being undertaken and the possibility of failure. For this purpose, the company took substantial time to choose the appropriate solution and the system supplier. It delineated the main necessities of the ICT system that would support the company’s operations and management by collaborating its own process knowledge and ICT competencies. Then it assessed many proposals and consequently elected the most suitable solution for the company. The reason behind this considerable assessment was that OZS had been involved in manufacturing extensively diverse products with different number of castings and time of production, such as small to large number of castings being produced in chains or just the once. Therefore, the company made the main necessity as the new implemented system must be able to sustain quite diverse manufacturing process modes. OZS also considered the benchmark solution being used in its’ customer industries like machinery, automotive industries, and so on. ERP was being used by all of its clients, especially in Western Europe, thus to conform with the clients’ custom solutions, it selected the ERP software from SAP. ERP system was considered to be more consistent and lasting product, and it was with conformance to the company’s main necessity, enabling the array of production modes. OZS selected the SAP system supplier, BBC among the local suppliers and contracted with the company for procurement and installation of the new hardware system. There were many other applications to be installed, incorporated in the agreement, such as Sun Open Office and Microsoft Office, Linux OS, Novell NetWare 5.0 and Windows NT 4.0/2000. Moreover, ICT provider Unigraphics were contracted for procurement of advanced system operations, such as the product development by using the computer assisted design and manufacturing tools, further, an advanced computer assisted engineering software was procured from Magmasoft. The Implementation of an ERP The ERP system was started its execution in 2000. A pilot test for system operations and integration was taken right after the production of trial product of application. Then by the end of the year 2000, the system was commenced by the group. The main and significant phase of execution of production modes was to categorize all the data related to production and save it to the database of the new system. This process of evaluation and authenticating the earlier data recorded in the papers and feeding that into databases took about seven months to be completed more than planned period. Though it was a precarious phase, as this data would be used in all operations in the future. The database was fed by 8,000 technical terms, about 30,000 material protocols, and more than 10,000 material stipulations. After the training of users in one whole year, the system started to operate, thus, making it a success. The firm started operations in 2001 by using system components related to fixed asset management, financial accounting, production, distribution and sale planning and controlling, but only in its middle foundry and in 2002 also in other foundries. Within two years the project was implemented by the efforts of full-time working employees and ad-hoc specialists. Impact of the ERP system Reducing inventory costs and optimizing capacity use The company’s performance was substantially bettered as foundry was able to sustain a production approach in which the product to be produced was recognized by order number and its serial number. Such approach provided better handling of the manufacturing procedure and information about the product manufacture, such as components and technical stipulations of casting. It enhanced the visibility of order-delivery status, and in that way, the volume and capability of production was much augmented and inventory cost was declined. By using two significant modules, planning and material management, of ERP, the company’s yield was enhanced. With a production planning module, the company was better able to organize and control the whole production process. The renewed data regarding the quantity and worth of inventory, and organized orders and their delivery were automatically recorded and updated even on balance sheet too. This better enabled the company to meet the customer’s requirements for production and delivery. Transparent operations support strategic planning and controlling Through execution of ERP system, the company achieved proficiency and clarity among all the operations, processes and management with the help of updated information offered by Finance module and Control Module. It enabled the company to have the comprehensive information and the best analysis regarding the manufacturing expenses for each product by a single customer. The decision making process was rationalized by having accurate and stable information. Not only the operations were optimized, rather, the new system had a strategic effect over the progress of the company by enhancing the planning and monitoring capabilities. Aligning management to ICT systems This ERP system provided stable and updated statistics regarding all the production processes that assisted the company to present the work flows and other management applies. Such information could be better used by the company’s management with comprehensive interpretation and according to that one could advance its decision making process. Moreover, OZS implemented the system quite successfully and integrated all the processes. Task Number 2 Without a doubt, information technology has turned out to be a critical component of the business organizations. In addition, the majority of organizations completely relies on information technology in order to complete their daily tasks. It is believed that information technology is an integral part of the supply chain re-engineering process. This section discusses the role of information technology in the supply chain. This section also discusses a case where an organization achieved its supply chain goals by making use of information technology. Supply Chain Re-engineering Supply chain performance can be enhanced by the process of re-engineering that is comprised over four phases; re-engineering, assessment, planning and then execution. After analyzing inside and outside environment within which company operates, the substitutes for possible developments are estimated, and after planning out the development process, the plan is executed. The major reasons for restructuring any process is to gain a competitive edge, quality and value enhancement of the product, and contentment of customers. Many companies are considered to be the best at their practices and other companies try to make a replica of their methods that seems to be a wrong approach. As every company is different in terms of products, suppliers, processes, culture, people, systems and customer beliefs, so one must consider its own uniqueness during the re-engineering processes (Sweeney, 2007; ANANDAYAH, 2011). Role of IT in Supply Chain Basically, in a supply chain process, products, goods or services, come as raw materials and developed through an organization’s logistics and manufacturing system until they are delivered to the end customers. To deal with the supply chain, an organization attempts to get rid of impediments and engrave the amount of resources engaged along the way. This can be carried out by streamlining the organizations inside operations or by plummeting inventory costs by getting information from the suppliers to put of release of goods and their payments until the instant they are required. Information Technology makes well-organized supply chain management promising by incorporating demand planning, predicting, materials demand, and order handing out, inventory allotment, order accomplishment, shipping services, in receipt of, proofs of purchase, and payment. Enterprise resource planning systems, which are based on internal business activities, can be comprehensive outside the organization to combine organizations which supply chain partners. Supply chain management systems can not only help out in decreasing the inventory costs, on the other hand, they can also distribute the products or services more speedily to the consumers. Supply chain management can also be utilized to generate knowledgeable customer response systems that act in response to customer demands more proficiently. The expediency and ease of using these information systems elevate switching costs (the expenditure of moving from one product to opposing product) which puts off customers from going to competitors. For instance, by charging less costs and shelves well stocked, Wal-Mart has turned out to be the most important retail business in the USA. Wal-Mart’s unremitting replacement is an instance of competent supply chain management (Laudon & Laudon, 1999, p. 55; Turban, et al., 2004; Ray, 2004). The ICT’s positive effects over the companies’ supply chain procedures are sometimes disbelieved, as it has failed often in supporting the higher level of collaborations in supply chain process. But there are appropriate reasons behind such failures. Mostly, the failure caused because of fractional attitude displayed during the planning and execution of ICT and strategic approach towards supply chain amalgamation is usually ignored. Such problems are not actually related to technology rather the success depends upon the adoption of such a system that cannot be copied thus it can give a viable competitive edge. Thus to achieve a more viable competitive advantage, it will be more important to develop and execute some innovative and inimitable ICT approaches in the near future. There is a need to change the focal point from the systems towards people and procedures to enhance more value (Sweeney, 2007). Information technology is considered to be the key aspect regarding the supply chain re-engineering process by investigating the current flow processes and recognizing the gaps to enhance the quality. Many researches have shown a positive relationship between IT and SC re-engineering process. The E-business solution has much potential to affect the means through which the businesses function. Supply chain management is much operational when it centers on integrating the whole chain from manufacturing of good towards its delivery to the customer. Such supply chains have shared information regarding all processes, shared risk and returns, shared cooperation and trust, shared planning, and lower level of stock. Such shared processes can better enable the companies to take better decisions and achieve maximum performance. Companies can have this by using IT to connect the supply chain processes. In this scenario, IT can play a significant role throughout the supply chain process (Lin, 2006). Information Technology can be better implemented and have extraordinary effects if all the partners, vendors, suppliers and customers are also using the same IT software for collaboration. Such systems can bring major improvements in customer satisfaction and accurate demand estimations. Companies must go for such integrated initiatives for effective supply chain. This will enhance the visibility of orders and responsiveness towards customers that is the essence of efficient supply chain management (ANANDAYAH, 2011). A case of Supply chain re-engineering Blédina is one of the prominent French company that produces baby foods. The company, that owns Bledina Company, restructured its distribution network that affected the Bledina’s customer services to drop. It had a market share of 45 percent in France that is leading baby food consumer. It reorganized its supply chain process by a SCM software that is based on SAP® R/3® ERP system1. The reason for this reorganization was a strategic approach of enhancing the customer service level to 99 percent, while supply chain costs were being controlled by magnifying the supply chain processes. Although the company was using quite different approach for collaborating its production, sale and finance from its benchmark companies, but there were some breaks among the processes that were filled with manual methods. Further, this was affecting other areas in Bledina company, such as wrong demand estimations regarding seasonal abnormalities in purchase department, improper scheduling of workers and outdated information regarding customer needs and preferences in the production department, and inaccurate info about promotional activities and forecasts regarding time-to-market in marketing department. Then the company started to analyze the need for reorganizing the supply chain processes. They made some requirements that must be fulfilled by new system such as customer satisfaction by accurate order fulfillment, lower inventory, material requirements being more observable by suppliers, and smooth industrial events. Majorly, the company needed a system to collaborate its already available ERP system and its legacy system, and to join the planning areas from one to the end. In May 2000, it chose SAP APO that was the part of mySAP SCM. The system was executed and became operational in July 2001 and in the middle of 2002. After the execution of system in Jun, 2001, the company recognized some other foremost developments. The delivery side was sustained its level of 99 percent and stocked inventory were being much less than before about half of the previous numbers. It was attained by accurate estimations that enhanced the production to delivery process. The system was deployed only to the one product line and it was successful. The second stage was related to the application of the system to other lines of product. Thus Bledina achieved the integration of its supply chain that successfully streamlined the processes. The main outcomes and impacts of integrating IT into Supply chain re-engineering process The new system had enabled the company to estimate the supply and demand for two years in advance. It was much progressed because of reliable methods of production planning were possible, such as seasonal changes could also be taken into account with the new system. Demand plannings could be made for different customers differently and for exact retailers. For supply side of planning, the company was able to measure the exact needs for goods to be produced by using the measure of definite objected days of supply of a single product or a product line with different time. It could make many plans for the goods distribution and evaluate them by using simulation methods to choose the best plan. Earlier, the company had a policy of maintaining an average level of the stocked inventory that was changed with the new system. It enabled the company to assign least level of inventory that is customized to all distribution sites. The system was also used to monitor the specific level of inventory targeted to different distribution sites that guaranteed the maintenance of safety stocks in the centers in case of any urgent delivery or shortages. Moreover, it could track the actual selling of products on the outlets that helped in modifying the inventory level and production quantities consequently. Bledina made a successful progress by the execution of new IT system and achieved the strategic objective of ensuring the 99 percent of customer service level. Any company’s success lies in the customer satisfaction. There were some other objectives achieved by the new SCM system, such as accuracy in estimations are enhanced by 6 percent, production capabilities were enhanced by 19 percent, effects over the connections with suppliers and customers were progressed, Inventory level declined by 25 percent, and inventory days in supply declined by 20 percent. Blédina has now some new objectives, for that purpose, the new system’s capabilities will be enhanced to embrace the economical limits as well that will operate in the supply chain planning. To get the minimum price of the material, it has planned to procure milk on the basis of seasonal changes in prices. Supply chain of Bledina will be more effective with more cooperation with its customers and suppliers by involving them in its supply and demand planning and decision making. Lastly, through the employment of the new IT system, Blédina will be able to implement the standardized operation system like its parent company, Danone (e-Business W@tch, 2006). References ANANDAYAH, S., 2011. A CASE STUDY of e-SUPPLY CHAIN & BUSINESS PROCESS REENGINEERING of A SEMICONDUCTOR COMPANY IN MALAYSIA, s.l.: Universiti Sains Malaysia. e-Business W@tch, 2006. CASE STUDY: SCM OPTIMISES DELIVERIES AT BLÉDINA, FRANCE, France: e-Business W@tch. e-Business Watch, 2008. Enterprise resource planning at Śrem iron foundry, Poland. Bonn, Germany: Sectoral e-Business Watch. Laudon, K. C. & Laudon, J., 1999. Management Information Systems: Organisation and Technology in the Networked Enterprise, 6th Edition. New York: Pearson. Lin, Y. C. E., 2006. IMPLEMENTATION OF SUPPLY CHAIN LOGISTICS PROCESS REENGINEERING AND E-BUSINESS SOLUTION FOR A CHAIN STORE BUSINESS. International Journal of Electronic Business Management, 4(5), pp. 357-367. Ray, R., 2004. Technology Solutions for Growing Businesses. New York: American Management Association (AMACOM). Sweeney, E., 2007. Re-engineering the Supply Chain: Making SCM Work for You. In: Perspectives on Supply Chain Management and Logistics - Creating Competitive Organisations in the 21st Century. Dublin: Blackhall Publishers, pp. 295-306. Turban, E., Rainer, R. K. & Potter, R. E., 2004. Introduction to Information Technology,3rd Edition. New York: Wiley. Read More