Enterprise Resource Planning

Question 1:
There is no linkage with ERP, BPR and IT of the system. Do you agree with the system? Justify the answer.

Answer:
Overview: Enterprise Resource Planning (ERP) and Business Process Re-engineering (BPR) evolved almost at the same time i.e. 1st half of 1990. Both relates to radical redesign of an organization at a relatively short period. Both are having the primary intend to optimize workflow and improve productivity. But, the chicken and egg question remained, whether an organization reengineer business process before implementing ERP or directly implement ERP and reengineer by adopting standard business process, included in the ERP package.

What is Business Process Re-engineering (BPR) ? BPR means not only change but radical change within a short period. This change is achieved by complete revamp of organizational structure, business process workflow, job description, performance measurement and adoption of information technology. Some of Basic characteristics of BPR are:

View business as a set of customer (both internal and external) oriented processes rather than a set of departmental functions. Processes must have clear cut ownership. Non value adding activities within a process should be eliminated.. Gather information only once at the point of origin.

A successful BPR implementation brings significant improvement to productivity, customer service and bottom-line. There are pain and difficulties during implementation and instances where BPR efforts did not achieve desired result. Notwithstanding, the risk is worth taking. Otherwise, there will be grater risk of being overtaken by competitors who develop and progress rapidly through BPR.

Implementation phases Project kick off: Project goal, project team and communication standards are agreed upon. A number of workshops are held where project scope, sponsors commitment, project risk, milestones and deliverables are discussed. A SWOT (strength, weakness, opportunities and threat) analysis is carried out with active participation of all. Process identification and data gathering: As is processes are assembled through flow charts. Current practice of Interfacing with business partners is gathered. Bottlenecks, delays, complexity, internal blame games, idle assets etc. are brought forward. Use of existing technologies is comprehended. Major and strategic business processes to be reengineered, are identified. Stakeholders categorize the processes to be reengineered and agreed upon on the timeline of implementation. Process Reengineering: In this phase, actual reengineering begins. A number of brain storming sessions are held with project team and other stakeholders, where current business processes are critically analyzed to determine non value adding activities and identify excess control and check, always with customer value as a focal point. Impact of new technologies on process improvement is also evaluated. New process ideas with reduced check and control and enabling technologies such as Workflow automation and ERP, are envisaged. Benchmarking is also done with best of breed industrial peers. Blueprint of new system: Blueprinting involves modeling workflow and information requirement, of new business processes. To be processes are modeled using various modeling tools. New organization structures, human resource need, performance monitoring and compensation, technological needs, are also outlined. Normally, a first cut redesign scheme is produced which is modified after gathering actionable feedback from the stakeholders.

Transformation: A migration strategy and a migration plan is the first step of transformation. Migration strategy may decided as a pilot, phased or big bang implementation. The migration plan would include establishment of new organizational structure, detailed training and reallocation of workforce, and cut off dates for implementation. Change management and introduction of new technologies will form an important part and may need engagement of outside consultants for this specific purpose. There should be provision on the plan to tweak the implemented system so as to get maximum value out of it.

BPR or ERP: For successful of BPR implementation, Information Technology plays the role of a key enabler. Therefore, a question is raised whether it is logical to directly implement ERP and re-engineer business processes by adopting world class practices, contained in ERP packages. This approach would avoid embarking on BPR which is expensive, time consuming and often risky. Also reengineered process arising out of BPR exercise may not be best of class. On the other hand, there is a grave risk in this approach if a proper ERP package is not chosen. Process orientation and ownership will be lacking from employees which may lead to major implementation difficulties.

Enterprise Resource Planning (ERP) There are various ways in defining an Enterprise resource Planning System. This is how it has been defined by American Inventory and Production Control System (APICS) dictionary: Enterprise Resource Planning: An accounting oriented information system for identifying and planning the enterprise-wide resources to make, ship and account for customer orders. Again in Internet encyclopedia, it has defined as: An enterprise planning system is an integrated computer based application used to manage internal and external resources, including tangible assets, financial resources, material and human resources. Basically, an ERP combines several traditional management functions into a logical integrated system and facilitate flow of information across these functions. It is designed to model and automate basic processes across the organization over a centralized database and eliminates the need of disparate systems maintained by various units of the organization. Figure below shows how information is integrated in a typical organization using a ERP system.

ERP system is thus a mirror image of the major business processes of an organization.

Need for Enterprise Resource Planning - Why ERP ? Separate systems were being maintained during 1960/70 for traditional business functions like Sales & Marketing, Finance, Human Resources, Manufacturing, and Supply Chain Management. These systems were often incongruent, hosted in different databases and required batch updates. It was difficult to manage business processes across business functions e.g. procurement to pay and sales to cash functions. ERP system grew to replace the islands of information by integrating these traditional business functions.

The successful implementation of an ERP system will have many advantages, as indicated below:

Business integration and Improved Data Accuracy: ERP system is composed of various modules/ sub modules where a module represents a particular business component. If data is entered in one module such as receiving, it automatically updates other related modules such as accounts payable and inventory. This updating occurs at real time i.e. at the time a transaction occurs. Since, data needs to be entered only once at the origin of transaction, the need of multiple entries of the same data is eliminated. Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized structure of the data base also enable better administration and security provisions, which minimizes loss of sensitive data.

Planning and MIS: The various decision support tools like planning engines and simulations functions, form integral part of an ERP system which helps in proper utilization of resources like materials, human resources and tools. Constrained based planning help in drawing appropriate production schedules, thereby improving operation of plant and equipment. As a part of MIS, an ERP system, contains many inbuilt

standard reports and also a report writer which produce ad hoc reports, as and when needed. Improved Efficiency and Productivity: In addition to provision of improved planning, ERP system provides a tremendous boost to the efficiency of day to day and routine transactions such as order fulfillment, on time shipment, vendor performance, quality management, invoice reconciliation, sales realization, and cash management. Cycle time is reduced for sales to cash and procurement to pay sequences. Establishment of Standardized Procedures: ERP system is based on processes of international best practices, which are adopted by the organizations during implementation. Department silos are purged and maverick practices are done away with. Because of top down view available to management, chances of theft, fraud and obsolescence are minimized. Flexibility and technology: Due to globalized environment, where production units, distribution centers and corporate offices reside in different countries, organizations need multi currency, multi language and multi accounting modes, in an integrated manner. These provisions are available in most of the ERP systems, particularly in products offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest technologies, from mainframe to client server to internet. Unlike a bespoke system, Upgrading to latest technology for a running ERP system is uncomplicated, involving mostly adoption of service packs and patches.

ERP enabled Business Process Reengineering (BPR) Although ERP provides many advantages; its implementation is a strategic decision, involving significant resources (both financial and human), proper evaluation and business process reengineering. There must be commitment from all levels. A failed implementation may lead to bankruptcy of an organization. Business Process Reengineering (BPR) is the fundamental rethinking and radical redesign of business processes of an organization to achieve dramatic improvement in critical contemporary measures of performance such as cost, quality, service and speed. In simple terms, the process

of examining current processes and redesigning those processes to increase the efficiency and effectiveness of an organization is called BPR.

More precisely, BPR means the rapid and radical redesign of strategic, value-added business processes and system, policies and organizational structure that support them to optimize workflow and productivity in an organization.

BPR concurrently pursued breakthrough improvements in quality, speed, service and cost by leveraging the potential of information technology while addressing the issues of organizational strategies and vision for change. Breakthrough improvement means quantum gains of 5 to 10 times compared to incremental improvements of 20-30 per cent. These improvements are generally characterized in terms of improvement of product and service quality at low cost and less time lag between product designs to marketing.

Question 3:
(a) What is business engineering? Explain the process of business engineering? (b) Elaborate the future trends and directions in ERP in the light of new markets and new technologies?

Answer: Business Engineering Business Engineering is an interdisciplinary field of engineering that focuses on how complex businesses should be designed and managed.

Overview Business engineering circumscribes the domain of designing new business fields. Unlike business development, business engineering does not only include marketing related tasks, but also most of the other business administration tasks. Financial and operational tasks are of equal importance, for example. Business engineering includes all activities that are necessary to develop and maintain an independent line of business. It is comparable with starting a business, but includes the novel component. That means that there is no core market yet and market

opportunities need to be created. Most likely, the output of business engineering substitutes known forms of supply, in existing markets. Therefore business engineering aims to establish new, future oriented forms of businesses but with reference to existing or emerging needs. Business engineering is most likely related with the area of future technology. To abstract it, business engineering combines the establishment of a completely new business in a prospect business environment.

Business Engineering Process Requirements for market success are changing Survive in a increasingly competitive market Business engineering = business reengineering + business improvements Using of the business modeling Information systems are part of the solution Development of business and supporting IS converge Migration from legacy system must be taken into account

Continuous Improvement

Future trends in ERP The technological changes that have altered the commercial world in the past few years have shown no signs of letting up, no matter what state the economy is in. This means that it can be difficult to judge which direction certain important business resources are going. Fortunately, enterprise resource planning is relatively easy to project and can be predicted with some measure of clarity. Thats because the basic tenets of ERP systems are well-established and only need to be converted to other kinds of devices to keep up with advances in technology. In fact, while the underlying science behind ERP systems might be above the heads of most of the population,

the concept is relatively simple the more information that companies have at their disposal, the more educated their decisions in the future will be. Here are some of the ways that data recording and prediction will improve going forward. Customization Some organizations might be champing at the bit to have their systems customized in great detail down to the font their information will be entered in. However, the type of customization thats on the horizon isnt necessarily of the capabilities of enterprise resource planning applications, but of the scope of the systems. What that means is that no matter what the size and shape of a company is, it will be able to affordably record whatever data is important for its operations. It is already possible for many small and medium sized businesses to get a better handle on the materials that make them function, but soon almost any company might be able to log important information. Social media integration It seems easy enough to apply the term social media to any field and inspire confidence in companies, but in the case of ERP systems it is very important. Companies at which employees arent often face-to-face or familiar with one another might have trouble sharing information and being more collaborative, the way that the additional data ERP systems provide might require. However, when live chat, video conferencing and business intranets are combined, it becomes a simple matter for different departments to work together to use the data that ERP programs provide to improve company operations. Private clouds At the moment, many companies are mulling a conversion to cloud enterprise resource planning. Not all of them will go forward with such plans anytime soon, but there will come a time when almost all information is remotely stored. There is a point of diminishing returns at which local storage becomes impractical and needlessly expensive, so it isnt just ERP technology that will exist in the cloud it will be almost all of it.

The Next Evolution of ERP: Adaptive ERP With the initial release of ERP, one of the key game changers was the ability of business users to access data and generates reports without direct IT involvement. This empowerment of the business user had a significant impact on business agility. Today, we continue to see ERP vendors focus on providing business-friendly tools for reporting and analysis. Yet, I can see a new evolution brewing in the ERP industry what I like to call Adaptive ERP where business users can perform on-demand actions to meet business changes real-time. In the next sections we discuss the key capabilities of Adaptive ERP and a practical assessment of where the ERP industry is today.

What is Adaptive ERP? Adaptive ERP would enable business users to configure, simulate, test, and implement business technology changes with limited traditional IT services (ex. software development). Predictive analysis will become a reality. Logical thinking and search methods will be more valuable than technical syntax. Information will become context and even transactional specific. Following is an illustration of the major domains that Adaptive ERP should address: