Importance of Enterprise Resource Planning for Companies Involved in Ecommerce - Essay Example

Running Head: Importance of Enterprise Resource Planning for companies involved in ecommerce al Affiliation Enterprise Resource Planning includes systems which provide integrated solutions to all the users of the business environment serving the entire range of business activities like Accounting, Budgeting, e-commerce, Human Resource Management and many others. The main point of advantage is that it serves all these departments through a single integrated database and has a single window data entry and retrieval system resultantly improvising the accuracy of the departmental activities. The history of Enterprise Resource Planning The modernization of the global business scenario and the ever increasing competition in the market has urged the enterprises to have improvisations in their organizational structure and optimization of technology use. In the past, business entities concentrated more on fetching benefits through supply of standardized products to a stable and wide consumer markets. The role technology involved here was to optimize the well defined, discretely functioning areas within the enterprise. This was limited to the development and maintenance of individual software aimed at automating certain business activities. However the expansion of the realms of business made entities to indulge in varied range of activities. The scope of ecommerce in fact widened the variety in the business activities Curran A, T. Ladd A (2006, p.17-18). With reference to these developments, for the companies to respond better to the market demands, they have to adopt a business process orientation and a global supply chain perspective. The essential prerequisite for the optimization of varied activities involved in modern business scenarios like e-commerce is the integration of information system. This would allow the clear cut exploration of the possible value additions within the company and would aid the design of business process that would minimize cost and maximize the profits. However this process of integration of the multitude of business activities involved a number of challenges. These challenges made the business engineers think of the possibility of a single database clustering the data from different departments within itself and providing a tailor made query system. This resulted in the development of Enterprise Resource Planning systems and it gradually evolved and expanded to serve as a single window solution for business data and process management. It served as a single interface for data entry for people involved in the company, despite the variation in department or geographic position. The data entry was to be made only once making the whole process more accurate and on the other side reducing labor and cost involved. Moreover the processes of analysis, reporting, planning and management was automated and integrated. Resultantly the policy makers were able to diverge more time and cost into innovation, crisis management and customer service rather than wasting time on inputting, processing, organizing and verifying the data. Curran A, T. Ladd A (2006, p.17-18) In totality Enterprise Resource Planning Systems evolved from the need of integrating the business functions involved in the modern complex business scenarios. Ecommerce and Enterprise Resource Planning In the case of ecommerce, it involves a wide range of activities overlapping different departments and even different geographic positions. The activities involved to major extend has a virtual mode and has to involve automated integration of different business activities. The departments would within each other depend for specific information and requires instant and automated access to the critical information. A number of activities will have to happen in row for an ecommerce deal to be complete. There has to be a logical sequence among these events and the integration among them also has to be ensured. A lack of this would lead to complications that would interrupt the effective functioning of the ecommerce activity resultantly leading to loss in profits and the productivity of the company. The role of internet Enterprise Resource Planning becomes of much relevance in this context. The Internet and World Wide Web has had substantial impact on the processes involved in enterprise computing. The fundamental and historic shift in the working of application software has made the terminology ‘Next Generation Enterprise’ much common in the business world. The effect of Enterprise Resource Planning in Next Generation Enterprises is basically marked as the ideal interaction of business and technology. The core elements of client-sever relation of Enterprise Resource Planning including scalability, messaging, application partitioning and partitioning is coupled with the enormous possibilities of The Internet and World Wide Web in ecommerce. Curran A, T. Ladd A (2006, p.354-364). This combination makes Enterprise Resource Planning systems an integral tool in modern day business especially in ecommerce. SAP as ERP system in ecommerce In the Enterprise Resource Planning System involved in ecommerce the three tier server client/server technology has gained much acceptance and popularity. This technological acceptance was triggered by the success of the products like R/3 SAP which is largely dependent on the three tier server client/server technology. It was in the early nineties that the chief architect and cofounder of SAP introduced a new processing concept in the enterprise software industry. The model involved a three tier system which included database management and storage, application logic and presentation logic. In other language, the model included the data management, data application in business activities and reporting. The scalability and the flexibility of this three tier system very well cater for the ecommerce business processes. Curran A, T. Ladd A (2006, p.354-364). Ecommerce and the technological foundations of the Next Generation Enterprise have been facilitated by the applications available on the Enterprise Resource Planning System platforms which are based on Internet and World Wide Web. SAP and other corporate enterprise computing software have included Web user interface or browser as a dominant feature. This has facilitated its utility in ecommerce activities. The involvement of Web user interface in particular, made the technologies like messaging, replication, application partitioning and communication protocols more easy to use. Curran A, T. Ladd A (2006, p.354-364). In totality the factor which makes SAP friendly for the ecommerce business processes is the combination of the three tier platform and internet friendliness. Security is another added advantage of this Enterprise Resource Planning System. Enterprise Resource Planning modeling and implementation The critical factor in the modeling of an Enterprise Resource Planning System is the customization of the system in accordance to the company conditions and situations. This process must include proper consultation with experts in Enterprise Resource Planning customization. The planning must include the minute business operations included in the ecommerce and other business activities of the organization. Proper backup plan and support should be ensured in the implementation of the software. The most important factor in Enterprise Resource Planning is the migration of data into the software. It should be ensured that the data migration process involves accuracy .The switching over process should be dealt carefully without affecting the normal functioning of the business operations. Culling of irrelevant data and the standardization of benchmarks according to the latest industry standards must be done during this process. The importance of Enterprise Resource Planning for a company doing ecommerce Companies doing ecommerce will have to have a redefined focus on the process orientation and event flow. They will have to redesign their organizational structure with relevance to the Enterprise Resource Planning System. However in the ever increasing competition in modern corporate world, the importance of Enterprise Resource Planning in ensuring the success of a company involved in ecommerce is vital. Robinson Phil (2006) has carried out a study on a number of companies that had implemented Enterprise Resource Planning in order to evaluate the efficacy of Enterprise Resource Planning System in improvising the performance of the company. The results of the study which compared the component wise response of the normal companies and better performing companies that had implemented Enterprise Resource Planning has been summarized in the following table Particulars Normal Companies Better companies Inventory reduction 30% 75% On time delivery (make to order) or stock availability (make to stock) To 95% To 99% Lead time reduction Down 50% Reduced to 1/10th. Manufacturing cost due to both more efficient use of people and equipment as well as improved productivity Down 10% Down 50% Purchased material costs by using greater visibility and vendor scheduling Down 3% Down 12% Reduced stock obsolescence 20% 50% Stock record accuracy Up to 95% Up to 99% Bill of material accuracy Up to 98% Up to 100% Stock turns Doubled Tenfold increase Source : Robinson Phil (2006) The implementation of the Enterprise Resource Planning System should include the customization of the allied software to deliver the desirable outputs of the ecommerce activity. E-banking, product sourcing, product deliverance and all the allied activities of ecommerce has to have priority while designing the model. While catering for the effectiveness and profitability of the operation it should also provide an easily accessible and user friendly ecommerce interface to the end user as well. In the success story published by ff-eCommerce, its SOAP/XML interface has been successfully implemented by many ecommerce business enterprises to have substantial improvisation in their business. Cancom IT Systeme AG, Europe’s largest Apple distributor has been stated to run its Web shop more effectively than before after the implementation of Enterprise Resource Planning System (Arcstyler, 2007). The importance of Enterprise Resource Planning in ecommerce can be analyzed under the following classifications. Business Intelligence The Enterprise Resource Planning System will help the strategy formulators to analyze the business performances of the ecommerce deals at an easy mode. It provides tailor made reporting on each every step involved in ecommerce. This would further help the policy formulation to help the improvisation in the performance of the company’s activities. The business intelligence with regard to ecommerce includes the security of the online transactions as well. The implementation of Enterprise Resource Planning System would include methodologies to track insecure pathways and undesired foreign interferences. The implementation of Enterprise Resource Planning System would help in the ”analysis of the of design engineering, streamlining purchasing functions, managing the basics and advanced functions of bill of materials, three-way matching of purchase orders, inventory, and costing, reports and all accounting function” (BoE, 2008). Companies looking forward to streamline the operational processes would be benefited by Enterprise Resource Planning System as it would help the bulk of events to get trimmed and faster. The increase in the speed of business events catalyzed by the Enterprise Resource Planning System which results in an increased productivity of the organization. The system helps to get rid of time consuming processes like multiple data entry, data verification and compilation. This results in the ability of the employees to concentrate more on innovations leading to an improvisation in the productivity of the company. The analysis of SAP ERP Solutions in TISCO (Tata Iron and steel company Limited) has proved the effectiveness of Enterprise Resource Planning Systems in improvising productivity. The implementation helped them to have a consumer oriented approach and was able to fetch benefits in all aspects of ecommerce and other business activities as well. Erpwire (2008) Decision Support The implementation of Enterprise Resource Planning System should ensure to support the possible policy decisions. Customization of the software in accordance with the change in policy decisions makes Enterprise Resource Planning System a viable solution for ecommerce business processes. Enterprise Resource Planning Systems like “SAP help to gain deep visibility into your organization with financial and management accounting functionality combined with business analytics. It helps to increase profitability, improve financial control, and manage risk. (SAP,2008). The software further helps to improve the alignment of business strategies and real time operations. The risks involved in strategic decisions can be predicted before implementation. On the other side the software facilities the active identification of business opportunities. The alignment of the corporate objectives and the vision of the workforce can be effectively streamlined and unified through proper implementation of such software (SAP, 2008). The role of Enterprise Resource Planning Systems in effectively managing the complexities and diversity in labor has been reiterated in the success story of Jada precisions Plastics co INC in the implementation of IQMS ERP software. It helped them to deliver ready made solutions to their labor related problems in the form of packaged solutions and also facilitated in creating an automatic system for data transfer.(Erpwire, 2008) Data Warehousing Enterprise Resource Planning System provides a single window interface for data storage and compilation. The possibility of customization of such software in accordance with the specific requirements of the ecommerce makes it a multi-user utility. The virtual mode of data storage makes data accessible from any corner of the world. This also makes possible the process of data entry from different geographic positions. This utility makes Enterprise Resource Planning System a viable solution for ecommerce considering the virtual mode of the business. Information access The effective implementation of Enterprise Resource Planning System would ensure the availability of data at a central point. In the case of ecommerce this central point would be accessible from any corner of the world. For example in the case of Wallmart, its global suppliers can have access to the information on the stock details from any part of the world and can have the sourcing and supply process accordingly. Incase of the airline industry, Enterprise Resource Planning System puts the customer at the ease of getting information on flights and allied charges being at their home. On the other hand, Enterprise Resource Planning System makes the information dissemination process much easy and scientifically scheduled. The logistical advantages of Enterprise Resource Planning System also make the flow of information from department to department, between internationally placed offices, company to customer easier. The added advantage is the cost effectiveness in the information dissemination. The smoothness and the timely deliverance in the information flow are also very well utilized by the ecommerce entities. Knowledge management and collaboration With the resources of Enterprise Resource Planning Systems the ecommerce companies will have to get across the functional limits and collaborate with other companies. Extensive collaboration with clients and others linked in the business is integral for the effectiveness of an ecommerce business. Enterprise Resource Planning System provides the possibility of extensive deliverance of information and also set forth an interactive interface for the clients to facilitate the collaboration process. However the open source of information runs the risk of security. Enterprise Resource Planning Systems are designed with security features to protect the data from espionage and other internal and external business related crime such as embezzlement. (Exforcys, 2007). Enterprise Resource Planning Systems also include internal controls protecting the data from getting tampered. Adding to the security advantage Enterprise Resource Planning Systems can integrate with other security features available in the market to provide additional security to the data. Data mining for relationship management The ecommerce enterprises rely much on the communication and relationship management with the clients and with their counterparts in business. The state of the art e-business models and ecommerce demand to the higher extend maintenance of relationships with other companies in the industry. Enterprise Resource Planning Systems play a vital role in maintenance of such relationships resultantly improvising the efficacy of the supply chain. Enterprise Resource Planning Systems like SAP R/3, People Soft, and J.D. Edwards offer e-Business solutions using tools like Web site developing, Intranet, and back-office sales. (Exforcys, 2007) These systems use the resources like Java, JSP, PHP, ASP, and HTML for the effectiveness of data mining and relationship management. In the case of SAP R/3 it uses tools like ITS (Internet Transaction Sever) which facilitates the communication process by linking between SAP R/3 system and the Web. (Exforcys, 2007) Other resources like BAPIs (Business Application Programming Interfaces) allow the clients and other parties linked in the business to integrate their system components with the Enterprise Resource Planning System. (Exforcys, 2007) “IACs (Internet Application Components) provide the logical Business design of the web site and RFCs (Remote Function Calls). The interface series is implanted like libraries, which allows for the communication with other software programs.” (Exforcys, 2007) References Arcstyler (2007) ff-eCommerce Software Completely Redesigns Complex ERP System with ArcStyler, ff-eCommerce success story, Retrieved December 20, 2008, from http://www.interactiveobjects.com/fileadmin/img/customers/success_stories/SuccessStor y_ff-eCommerce_final.pdf. Benefits of ERP, (2008) Planning your company’s ERP system, ERP planning, Retrieved December 20, 2008, from http://www.benefitsoferp.com/erpplanning.html Curran A, T. Ladd A (2006) Desktop ERP in Thomas A Curran & Andrew Ladd (Ed.) Understanding Enterprise Supply chain management (pp.17-18), Upper Saddle River, NJ: Prentice Hall Books Curran A, T. Ladd A (2006) Next Generation Enterprice in Thomas A Curran & Andrew Ladd (Ed.) Understanding Enterprise Supply chain management (pp.354-362), Upper Saddle River, NJ: Prentice Hall Books Erpwire (2008)Analyzing ERPs success in organizations, The right channel of ERP, Retrieved December 20, 2008, from http://www.erpwire.com/erp-articles/erp-success.htm Exforsys (2007), The Benefits Of Erp In Ecommerce, ERP & Ecommerce, , Retrieved December 20, 2008, from http://www.exforsys.com/tutorials/erp/erp-and-e- commerce.html Robinson P (2006), What benefits should you expect from a Business Excellence project?, BPIC, Retrieved December 20, 2008, from http://www.bpic.co.uk/faq/benefits.htm SAP (2008) SAP ERP Business benefits, SAP, Retrieved December 20, 2008, from http://www.sap.com/solutions/business-suite/erp/businessbenefits/index.epx Read More