An organization operating in a competitive environment needs to have competitive advantage over others to attract and retain business. This can happen when different organizational functions develop strategies that complement the corporate strategy. An organization's competitive advantage can be defined by service quality, responsiveness and ability to satisfy customers' needs and wants.
Exhibit
ERP Implementation Problems
The problems encountered during a typical ERP implementation process are given below:
Poorly defined business process: ERP implementation in an organization with poorly defined processes may not yield the desired results. In order to improve the performance of the ERP system, the business processes should be well-defined and consistent throughout the organization.
Rushed deadlines: The time span for implementing ERP is long as it requires comprehensive information gathering about the present processes. Therefore, the implementation process should not be hurried just to meet a specified deadline.
Many complex tasks: ERP implementation involves many complex tasks. So proper planning is needed to execute all these tasks. According to the IT consulting firm Clarkson-Potomac, these tasks can be divided into four sub-parts - overall project management that includes setting goals and budgets, managing resources and people, creating and selling vision, and managing change.
Only one major milestone: As the duration for the implementation of a typical ERP project exceeds one year, many experts suggest setting up several "deliverables" or milestones. Organizations should implement the project in a phased manner.
Silence from upper management: ERP system though beneficial may not go down well with all the employees as it involves drastic changes in their job profiles. In order to convince employees of the benefits of the ERP project, the top management people should endorse the project and educate the employees regarding its benefits.
The wrong team members: While selecting the team members for the implementation, organizations should ensure the personnel selected are technically competent and understand the company's business requirements.
Unmotivated teams: As the implementation process takes time, the key to success lies in keeping the team members motivated throughout the project lifecycle. One of the ways to motivate the team members during the implementation process is to provide monetary rewards.
Communication breakdown: Keeping an open communication channel is important throughout the implementation process. The employees should be kept informed about the changes, the reasons for the changes and how the changes are going to affect the organization.
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To gain competitive advantage, organizations should understand the scope of a particular market and identify the various inherent differences between various markets. They need to understand what is required to become qualifiers and order-winners. Qualifiers are the most basic attributes that an organization must possess before any customers will decide to deal with them. For instance, ISO standards have become one of the key qualifiers for any organization with global markets. Qualifiers provide the initial impetus to customers to deal with an organization but, in order to close a deal, organizations must have order-winners. The order-winners could be price advantage, quality, etc. ERP enables the organization to optimize and organize different qualifiers and order-winners so as to gain competitive advantage in the market.
Some of the order-winners and qualifiers, which apply to most companies, are discussed below:
Price
As price is one of the key order-winners in most markets, the ERP package can help identify the cost centers and assist in devising plans to reduce production costs. Setting up tough cost targets and putting in place a rigorous monitoring system can help a company become cost-efficient. Therefore, ERP implementation should focus on the areas in which significant costs are involved so that appropriate resource allocations can be made and management attention can be focused on them.
When a company uses price reduction as an order-winner, it should also change its corporate strategy accordingly. It needs to assess changes in lead-times, investment implications and cost-reduction potential in several areas. Without assessing these factors, the changes in the strategy will be inappropriate.
Delivery Reliability and Speed
Delivery reliability has also become one of the criteria on which customers judge an organization's competitiveness. ERP can streamline procurement and distribution activities and reduce the lead-time involved in purchasing raw materials and distribution of finished products. ERP helps to coordinate activities among all the entities of the supply chain through the smooth flow of information between them. With the help of ERP, the lead-time required to process an order is reduced significantly. The need to provide information to customers and suppliers has forced ERP vendors to integrate their applications with e-commerce. Exhibit illustrates the issues involved in integrating ERP with e-commerce.
Exhibit:
ERP and E-Commerce
The E-Commerce revolution took ERP vendors by surprise. The notion that ERP packages are complex and the only users would be well-trained employees of organizations, is changing. The increasing demand from customers and suppliers for access to information has forced ERP vendors to rethink their approach. As a result, many ERP vendors are integrating e-commerce applications with their packages and providing an interface for customers and suppliers to gather information through the Internet.
ERP systems provide information at two levels. They are business-to-consumer and business-to-business interfaces. The business-to-consumer interface provides information like order status and billing information to customers. The business-to-business interface provides comprehensive operational information to the suppliers.
Integrating ERP with the web is a complex process. ERP applications are large and complex. As a result, they require regular maintenance. Websites are shut down periodically for maintenance. Most ERP players are making the links between ERP and e-commerce flexible so that e-commerce applications keep running when the ERP application is shut down for maintenance.
Because of the problems involved in integrating ERP with e-commerce applications, many organizations are using middleware and EAI software. These software packages act as an interface between ERP and e-commerce applications. They gather information from the ERP application and then transform it into a form that can be used by the e-commerce application.
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Quality
The concept of quality no longer denotes just a state of being free from defects. Today, quality encapsulates many dimensions like performance, features, reliability, conformance, durability, serviceability and aesthetics. Table lists the dimensions of quality and the functions typically responsible for their provision. ERP by bridging the gap between the existing process and the best process can help an organization achieve its quality objectives.
Table : The Dimensions of Quality and the
Functions Typically Responsible for their Provision
| Dimensions of Quality |
Description |
Functions |
| Performance |
A product's primary operating characteristics |
Design/manufacturing |
| Features |
Secondary characteristics, the 'bells and whistles' |
Design |
| Reliability |
The probability of a product malfunctioning within a given period |
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| Conformance |
The degree to which a product is manufactured to the agreed specification |
Manufacturing |
| Durability |
A measure of a product's life in terms of both its technical and economic dimensions |
Design |
| Serviceability |
The ease of servicing (planned or breakdown) to include the speed |
Design and after sales service |
| Aesthetics |
How the final product looks |
Design |
| Perceived quality |
How a customer views the product |
Marketing and design |
Product Range
In today's competitive world, organizations need to provide products in different shapes and sizes that satisfy the requirements of the different segments of the market. They need a variety of products in their product line. But as the product range increases, the cost and time of production increases due to the modification of production process to accommodate the changes required for each product range. ERP, through integrated functionality and a common database, enhances the capabilities that assist organizations in this direction.
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