ERP Business Functions

The Enterprise Resource Planning (ERP) system is a unified set of programs and applications that provides support for core organizational activities such as supplychain, operations, manufacturing, distribution, finance and accounting, sales and marketing and human resources (Prasad Bingi, 1999). In a nutshell, an ERP systemhelps the different corporate functions of the organization share data and knowledge,reduce costs and improve management of business processes. An ERP applicationstreamlines the entire business flow of an organization so that it is automated and there is less scope for human error. Business functions like inventory management, order management, MRP, finance, supply chain management, customer relationship management and human resources among others are taken care of by the ERP system.What we need to understand here is that Enterprise Resource Planning (ERP) is not software. Improper terminologies such as enterprise-wide transaction processing software systems are being labeled as ERP.Software Packages such as these help in efficient resource planning and cannot be completely depended upon for accuracy. These packages not only contain resource planning but also contain other business processes. As a matter of fact, they do not come as a complete package which helps in streamlining its operations entirety unlike ERP packages. Therefore, we need to coin another acronym that does refer to software: ES. This stands for Enterprise System or Enterprise Software. In the book “Mission Critical” (Davenport, 2000) author Thomas H. Davenport describes enterprise systems as “packages of computer applications that support many, even most, aspects of a company’s information needs.” This is more relevant to today’s business scenario. Another distinctive feature is that: Not all ERP business functions are contained in the typical Enterprise Software (ES) Suite. ERP packages address the entire range of business processes that are required for operating an organization. Figure 1.1 represents this in totality:

As the above figure graphically shows, the typical Enterprise System contains software support and components for business processes that are not a part of ERP. There are three areas on the above diagram. The circular figure to the right shows the
operations that are not a part of ERP; the circular figure to the left is not part of the Enterprise System and supports ERP functions; the intersecting area between the two refers to those ERP functions typically supported by Enterprise Software. The above
diagram therefore shows that Enterprise Systems do not cover all the areas that ERP takes care of and hence one should not get confused with the terminologies.  As we have a clear understanding of the difference between ES and ERP, it is necessary to further understand what ERP is all about. Enterprise Resource Planning (ERP)—and its predecessor, Manufacturing Resource Planning—are helping transform our business landscape in way that’s helping organizations manage their business processes better. Enterprise Resource Planning (ERP) as the name suggests, is a system that encompasses the basic processes existing in an organization. It started
with the need to capture the processes in an organization and map it into the system for smoother transaction and it eliminates the hassles and the chances of error drastically comes down.

]]> http://www.erpdeals.com/blog/?feed=rss2&p=143 0 http://www.erpdeals.com/blog/?p=140 http://www.erpdeals.com/blog/?p=140#comments Thu, 04 Feb 2010 07:12:48 +0000 erpdeals http://www.erpdeals.com/blog/?p=140

Every year, according to the Project Management Institute (PMI), nearly 70-80% of all Enterprise Resource Planning implementation projects fail, go over-budget or go live past the original deadline (A. Roman, 2005). There are various reasons attributed to the success or failure of ERP Implementations. One of the reasons is resistance to change and top management comes across a feeling of apprehension from potential users who have certain reservations for the new application. The fundamental causes of failure are of a wide-range and are often discovered late in the process, if they are discovered at all. Highly skilled and experienced implementation consultants are the better choice because they have the capacity to provide an unbiased analysis that gives consideration to the big picture. Having a clear view with wider aspects is important to successful implementation. Using a method of survey through questionnaire, a study was conducted to find out the factors that really matter when it comes to successful ERP implementations. Varying results were drawn from the survey. It showed various reasons that ultimately result in the success or failure of an ERP implementation and showed that these factors were manageable. In the subsequent blog posts an attempt will be made to find the real answer to problems being faced in ERP implementations and what really makes an ERP implementation successful.

Introduction

Failure has been common among ERP implementations are not new to the business world. The business world has seen ERP implementations fail in big companies like Hershey and the result of it being lawsuits against ERP software vendors (Kimberling,2006). So, how can we increase the possibility of an ERP implementation being successful and realize its benefits? The success or failure of ERP implementations is assumed to be the fault of the software a company purchases, but in reality, 95% of a project’s success or failure depends on the company implementing the software rather that the software vendor. (Kimberling, 2006). It is not always that the ERP package vendor or the consulting company is to be blamed for the ERP implementation failure. If the organization implementing the ERP fails to document their business requirements properly then the entire implementation project may fail.

Market analysis reports show that the high percentage of ERP implementation failures are due to many reasons and are sometimes discovered very late during the implementation phase. ERP implementations require highly skilled consultants who have worked on a number of projects and are familiar with mapping of various business processes or an organization to the ERP package. The key is to understand the big picture and align the ERP implementation to the vision, goals and objectives of the organization. Every ERP implementation project should ideally have some consultants with prior experience.

ERP has become the latest buzzword in the IT industry and almost every company is trying to follow the trend but not without reason. An ERP package can be of great benefit in implemented properly (Henderson, 2007). Earlier, organizations used to have heterogeneous legacy systems that were complex and difficult to incorporate but with ERP all the business functions and processes can be integrated to function in sync. But companies need to understand and accept the fact that ERP does not work miracles by taking away all the defects in business processes.

If companies continue to follow their old business processes post implementation, then they are bound to fail. ERP is all about re-engineering the business processes and mapping them to the ERP application to streamline the operations (Gould, 2007). Some organizations have issues and apprehensions about end-of-living their legacy
application which is understandable. It should be understood that it is not easy for the employees of an organization to suddenly adapt to a new application. This might prove to be a disaster for organizations as legacy systems have critical data. Hence, it is the responsibility of the ERP vendor or the consultants to build confidence in the staff to using ERP applications.

There have been a lot of discussions around Best-of-the-breed Business Soft wares and ERP Packages.

Best of the Breed Business Softwares are suited to manage specific business functions whereas a fully integrated software or ERP Package comes with a number of Integrated Modules that can handle business functions across different departments, verticals and industries.

Rather than comparing the two approaches, it is more beneficial to understand the business scenarios under which the approaches are applicable.

There are some business functions like Material Planning, Advanced scheduling, Demand Scheduling, Order Management, Warehouse Management etc. which ERP Packages handle excellently. Whereas there are other functions like Collaborative Messaging Systems, Computer Aided Designs, Content Management, Transportation Tracking, Online Sales Tracking/Forecasting etc. which can be handled better by Best of the Breed Software. For small Businesses where the business requirements are less it can be more beneficial by implementing best of the breed soft wares. For large Organizations spread over multiple business sites, where scope for integration across functions is more, it is more beneficial to implement an erp suite.

The Time and Resources required to Implement the Best of the Breed Soft wares required will be more as Individual Software packages has to implemented and designed to ‘talk’ to each other. Moreover the implementation of individual Softwares will have to done department wise and then integrated. For an ERP Package the total time spent in integration would be lesser as the Package itself comes as a Fully Integrated Suite. Once Business Processes are clearly documented, the time taken for Implementation will be less.

ERP Packages may not deliver all Business functions to satisfactory levels. A package may be known for its excellent Order Management functions, but may be poor in financial. Best of the breed software are designed to meet specific business requirements. Hence they provide excellent functionality in those areas. Also the ease of use for these soft wares will be very high with excellent UI.

Maintaining the Best of the Breed Soft wares can be very costly. For Instance if an ERP package needs to be upgraded, and then all the modules catering to different functions can be upgraded in one go. However upgrading a System using best of the breed software can be a very complex affair consisting of isolated upgrades. Also it is always advantageous to deal with a single vendor for Support and Maintenance than dealing with Multiple Software Vendors.

Overall, the decision to use the best of the breed software against an ERP package depends on the business requirement. Using a Hybrid model using the best features of the two approaches can be beneficial.

Centralized Procurement can be defined as the strategic Sourcing of Commodities or Raw Materials from a centralized source or Supplier. The traditional method of procurement was to source the same material from different suppliers in different business units of an organization. For Example, for a Company having two manufacturing units in two geographically distant cities of the same country used to source the same raw material from two different suppliers or vendors. However, with centralized procurement the raw materials would be sourced from a Single Vendor for all the manufacturing units. This helps the buying unit to leverage on costs, avail discounts on volumes and achieve uniformity of quality. However, the implementation of Centralized Procurement is also dependent on many factors apart from Cost and Quality.

Recently, we had a chance to discuss about Centralized Procurement with some of the Industries top Supply Chain Management gurus. Below are some of the key points that were a takeaway from the discussions:

If the buying is with in the country, concept of centralization is most appropriate. In this case one can negotiate to have single manufacturing location and multiple delivery location (Warehouses or second factory) in order to have control on quality and price.

Centralized purchasing helps a lot in reducing cost in manufacturing environment.

Product transportation cost and Landed Cost Management must be Handled Effectively to ensure optimum results.

Lower number of suppliers results in improved quality, cost and delivery results.

All Stake Holders of the Organization must be involved in a Centralized Procurement Decision. This includes (but not limited to) Quality, Program Management, Warehousing, Logistics etc.)

C-Proc helps reduce cost, but it is imperative that the process of Vendor Selection is stringent so as to ensure Quality, Timeliness and Cost Reduction.

Apart from that that there are other Factors which effects the Decision to go for Centralized Procurement like: IT / facility structures, culture of the organization, legal / fiscal requirements, stakeholder buy in / assessment, types of material purchased, RM cost and availability of RM in the country. Etc.

Systems – it’s very hard to have a centralized operation if you have disparate systems that hold information in multiple places and multiple formats.

This concept helps in achieving the overall cost benefit to the corporation, but at times fails to achieve breakeven for the particular cost center.

This also helps in overcome the communication problem and delay in implementation of critical parts.

To Sum Up -‘Centralize what makes sense, leave alone what doesn’t make sense, and systems are key’

Enterprise Resource Planning or ERP Software Market in India has emerged in the last decade as a one of the major contributors to ERP Sales in the Global Market. Some Experts believe that the ERP Sales in North American and European Continents has seen a decline in terms of Implementation Projects. Most ERP Project uptakes have been on Upgrades, Add On Modules, Enhancements and Roll Outs across different business areas.

The ERP market has picked up tremendously in the Indian Domestic sector. Interest of the SMEs or SMBs to uptake ERP products for their operations has seen gradual increase in ERP Sales in India. ERP majors like SAP, Oracle, Microsoft, Sage and Inform has been continuously innovating new products keeping India Localization into view. ERP Licensing cost has been trimmed across product lines, which makes it easier for SMEs to uptake the product. Also a lot of funds are allocated for marketing these products across Industries in India. Companies have started to educate the Indian IT Buyers about the Benefits of the ERP Products.

Foreign Investment in the Indian Market across different industries has helped create inroads of ERP into India. The parent foreign company running its business on an ERP system sometimes mandates the usage for ERP for the Indian Subsidiary as well. The increasing number of Financial Organizations in India has seen increase in sales of CRM and Business Intelligence Tools.

Another reason for Popularity of ERP in India is the number of ERP Consulting Companies that have emerged in the past few years. The focus of these consulting companies is no longer on the Northern American or the West European Countries alone. ERP Sales and Consulting in India has allowed these companies to create revenue pockets in the Domestic Market as well.

The Recession of this year has seen such companies approaching the Public or the Government Sector to increase ERP Sales.

The Indian ERP Market has been a lot of changes in the past decade. It has become a major contributor to world ERP Sales. A lot of potential still exists for ERP Vendors to close sales and make new deals with Indian IT Buyers. ERP in India is here to stay and reach more growth in the coming years.

In the current times allocating huge funds and planning to execute an ERP Implementation is out of practice. These are the times of Instant Business Solutions, low cost consulting and quicker ROI realization. Despite the economic down slide, ERP is still very much Alive & kicking.

ERP has become all the more important in the field of e-commerce which has ushered a new hope and positivity that might not been seen in other IT product segments. Complex and small transactions across geographically diverse areas has made it imperative for e-commerce firms to implement Enterprise Applications to streamline their business process and achieve strategic growth.

For enterprises, which are on a growth path, it is the right time to go ahead with ERP Implementation as the cost of ownership for ERP software have gone down in the past one-year. Hourly billing rates for consultants have also decreased when compared to past year.

ERP Software are no more associated with large organizations spreading across multiple sites or geographic areas. Product uptakes among SMEs have achieved significant growth in the past few years. Also Software companies have come up with innovative schemes for SMEs to invest in ERP Systems so that they can expect to realize the benefits of implementation in a shorter time span. Large companies which are already running on ERP Systems have the option of Upgrading to new versions /releases of the software and add on new functionality which can help them cut costs, analyze expenditure and save time and resources.

Benefits of Outsourcing have helped companies focus on strategic IT initiatives while the software installation, customization, support, upgrade etc. is taken care of by the Outsourcing Company.

However the ERP Vendors have to remember that there are lot of competition is ever increasing in the ERP Market and one is not likely to succeed until and unless the best product is offered keeping in mind the ever changing requirement and striding forward with the time.

ERP Implementation outsourcing has been become very popular with time. This is an effort to look into some of the benefits that can be directly achieved by outsourcing ERP Implementations.

1. Buy Expertise

ERP Systems are meant to assist in running of the day-to-day business. Also it is suppose to help the management in terms of reporting business progress. Implementing ERP Systems in any industry can be a very complex and technically challenging task. Such tasks may include many customizations or localizations based on the nature of the Business. Such work may demand great technical expertise and knowledge with the ability to understand the complex business functionalities.

Outsourcing companies have the required expertise, talent and knowledge pool in ERP Implementations to deal with such complexities. Moreover, experienced companies, which have dealt with multiple implementation projects in the past, are better equipped to handle complexities and implement best practices of the industry.

2. Save Time to focus on strategic initiatives

The IT management team can focus on strategic initiatives. Focus can be changed from managing routine IT work to creation of new strategies for scaling up operations, cost savings etc. The external team can handle the routine support; maintenance or customization work. Especially in the case of midsize companies, it may become impossible to gather the IT Talent/Resources needed to install an ERP system and keep supporting it on an ongoing basis. The risk associated in operational downtime and loss of valuable data can be reduced through expert support function of the external party.

3. Save Cost:

Acquisition, training and retention of IT resources for the purpose of an implementation can very costly and time consuming. Irrespective of the project size, outsourcing enables to gain the benefits of expertise whenever it is needed.

Trying to develop and implement an ERP Solution ‘In House’ can be costly and time consuming. Lack of Expert technical knowledge group and complex business functionalities across multiple business sites can increase the chance of failure.

4. Improve Business Processes

There are several instances of Business Process Re-Engineering where the experts have helped companies to sync business processes to system capabilities and result in positive business growth. Good Outsourcing companies can help improve business processes. Also, expertise from multiple projects enables them to showcase industry best practices.

The Brand of a software that surfaces above others has to be backed up with success in delivering its promises and the expectations that are set to the customers.

The word ‘ERP’ forces us to recall brands like SAP, Oracle, SAP, Microsoft (which has done a wonderful job in positioning its ERP to SMEs), SAGE, and IFS etc. Quality, Innovation, Credibility in market, solid support function, new releases with additional features, constant interaction with customers etc. are some of the positive aspects which are evoked while recalling such brands. It is not the brand that influences the software purchase but it is the level of confidence and credibility associated with the brand that helps the buyer in making his decisions.

On the other hand if a Brand over promises and under delivers than a negative brand image will be created and the software buyers may not have any intentions of using such products.

Software Marketers must understand the relation between the brand and the buyers in order to efficiently position and advertise it. It may take years to build a brand- but the hard work will definitely result in benefits.

White papers are an effective medium that educate and inform and, most importantly, influence a prospective customer in decision making and implementing solutions. It is a document used to highlight business or industry specific issues or introduce technology innovations and products.

This paper will guide you to develop effective white papers though three simple steps.

Step1- Identify Target Audience

Target audience needs to be defined first so that the contents can be tailored to meet their expectations and the arguments positioned towards their needs. The Basic Question that needs to be asked is “Whom do you want to read this paper?”

Step2- Set the Objective

Determine the objective that you would like to meet by publishing the white paper. The objectives may be promoting new products, highlighting buyer pain points and a solution to them, showcasing core competency in a specific area of service etc.

Step3- Set the format right

Suggested format for writing white papers

Abstract:

The abstract should be a small and simple paragraph that tells the reader about what the white paper is about. It should have the keypoints so that the user knows what you are going to tell them.

Introduction

The introduction should set the stage from where the reader can proceed. You can begin with an overview of industry issues or business processes and then narrow down to specific points of interest. Using data from market research, quotes or statistical analysis from reliable sources helps to build credibility and avoids the possibility of skepticism in the minds of the readers.

The Problem

This section describes the customer issues and problems that you are addressing. It should also demonstrate the fact that you have comprehensively researched on these issues. The language should be simple and easy to understand. The usage of technical acronyms and other difficult terminology should be avoided. It is important to be precise and avoid any hidden assumptions or obfuscatory language.

The Solution

Solution to the problems or issues faced by the client must be specified in this section. . If the white paper is on your product, then specify the details of your product like design, ease of use, quality specifications, integration areas etc. Avoid explaining the benefits of the solution, as the reader should first understand how the product or service applies to the problem.

The Benefits

This section should be used to provide evidence of how your offering solves a specific problem and adds value to the user. Customer success stories, case studies and testimonials can be used while showcasing the product or service. Proven benefits like increase in ROI, reduced costs, scalability etc help to establish a strong case.

Conclusion

The conclusion should summarize the main contents of your white paper and briefly restate the problem, solution and the benefits offered. The white paper should conclude with confidence and credibility.

Complexity of ERP Implementations in Current times

ERP implementations are today have become increasingly complex. Adopting new operating models, Mergers and Acquisitions are perhaps reasons which add to this complexity in implementation. An good example to take would be system requirements of cross-enterprise collaboration to have a ‘globally lean’ organization. With the advent of globalization manufacturing assets are more distributed in current operational models. Organizations today run on multiple business units decentralized organization structures. These changes impact the Financial Structure and Operating Procedures. Smart Business Processes management which can handle strategic changes has become increasingly important. The off-the-shelve functionality of Enterprise Products is critical not only for suitability to current processes but also adaptability to Organizational Process changes.

Traditionally, ERP systems integrate data across key Business and Management functions, particularly in the areas of manufacturing,

finance and human capital management. Although, the boundaries of ERP are continually stretching to several areas in an Organization. Integration with auxiliary areas like CRM, Business Intelligence (BI) and Third Parties like Vendors and Customers are important. Organizational demands to unify the processes in the system directly affect the implementation strategy of the Enterprise Product. Also, Additionally commitment to scale to map these changes and future strategy map is a key.

ERP Investments

The strategic part of IT spend would be diverted to ERP Systems. This will lead to new ERP implementations to support necessary changes in the business and the application landscape.

Another noticeable trend is that businesses are finding increasing interest in solutions which bring together time tested and locally matured applications. These are attractive options despite higher system integration costs. While conventional vendors like SAP and Oracle continue to dominate, modular adoption of niche solutions is beginning to show results in Total cost of ownership and flexibility. With these factors the process of selecting an ERP package becomes more complex.

ERP has to meet the functional requirements that are unique to the business and be adaptable to business changes on the technology roadmap.