Reference no: EM13128863 , Length: 1118 words

Written essay with almost 1100 words to be reviewed from English point of view ( grammar, style, etc.) 

ERP & Profitable Firms

Profitable firms have similarities among them, they meet customer demands on service (on time delivery), quality and customer's technical specifications, and it's not easy to achieve high standards on the market where competition is the common denominator for every kind of industry and company.  In today's business world, firms pursue to achieve customer's demand for goods, and services as efficient as possible, faster and meeting quality specification at the right cost versus their competitors.

How do they do it? One key piece of this puzzle for success is to have an efficient, integrated information system, thus, increasing the efficiency of information system results in more efficient management of business process.

Enterprise Resources Planning (ERP) coordinates and groups all the information for all areas of a firm, ERP system, facilitates the management of company-wide business process by sharing a common a database and reporting tools (Magal, Word 2012), in other words, an Enterprise Resources Planning system supports to integrate a firm's operations by performing as a company-wide computing environment which includes a database shared (Magal, Word 2012) by functional areas, which are linked by common business process in real time; thus, management is running the business in real time as SAP HANA does.  (SAP web page 1)

Business process is a group of tasks or activities that capture inputs to generate an output such as a purchase order or inventory report, which are essential for the customer. ERP system supports the efficiency of the operation of business process by integrating business activities for sales, marketing, manufacturing, supply chain, accounting and staffing.

ERP works as the company does, in other words, company business process are "mirrored" within the ERP system, those business process are interconnected with the functional areas. There are four key functional areas, of operation marketing & sales, supply chain management, accounting and finance and human resources, those functional areas of operation have different business process as mentioned previously, such as taking orders by marketing & sales, or purchasing goods and raw material by supply chain management (SAP web page 2), or financial accounting of payments from customers and to the supplier by accounting and finance (SAP web page3), or payroll by human resources (SAP web page 4), among many other more by these four functional business areas.

We know that Enterprise Resources Planning system (ERP) is not perfect, business process are based upon global best practices (Bradford, Marianne 2008) which are on continuous improvement; thus, not all the ERP implementations are a success project completely...Why? Business process play the key role here, firms must have map out their business process step by step, highlighting key inputs and outputs in order to meet customer's needs; an example, for the Engineering to order business,  sales and marketing must enter the whole customer's order in a extremely detailed matter, which includes all technical specifications and terms and conditions for the order, this information goes to the design area in which the design engineers translate all customer's specification into technical drawings and list of materials (purchased and made), drawings and list of materials go to procurement area to purchase materials, other drawings go to the manufacturing area for the production process, other set of drawings go to the quality area for quality inspection and final product validation, general business process described, are reflected on the ERP system.  Working for this kind of business, I saw two scenarios, the first one in which current process doesn't reflect what the ERP system does, resulting on several reworks, material expedite (premium cost), labor over time and the lack of ability to charge change order extra cost to the customer for not having the right data to support it.  Second scenario, after a ERP system upgrade, in which business process were revisited, all inputs and outputs validated and fixed, execution performance improved significantly,  design drawings and material list reflect what the sales order captured from customer, all critical to quality (CTQs) were indicated to be manufactured accordingly, labor force allocated to the particular job, material purchased the customized material by each project while creating a safety stock for consumables and standard items, at the end of the order on final inspection, if the customer wanted a change order, the business quoted it, charging a premium for it. I have several cases that I saw over twenty years on operations, and five times of either ERP system upgraded, or full implementations for a different kind of business, I just described one for Engineering to order product in which sales order entry and design area are the key business process for it, for make to stock product bill of materials and inventory management are the focus factors to pay attention, make to order is a hybrid between the first two mentioned. Out of the five ERP experience I can say that 80% of them were a success cases, remaining 20% was a tremendously valuable lesson of how silo mentality and lack of business process definition could damage a company completely.

As a conclusion, my personal viewpoint, ERP system are highly valuable to any efficient business to keep having current market base and pursue to increase it; however, company's success doesn't depend upon ERP system only, ERP implementation plays a critical role, in which the ERP company provider needs the full support by the upper management and the entire organization to get all business process map out correctly, inputs and outputs validated, the entire organization or key functional areas must work as partners for the same company, silo operation or mentality not allowed, company's personnel has to be trained on the ERP system (ERP companies provide a Company Test, in which employees can "play" with to get the experience enough with the new software).  As examples of how firms become efficient and profitable by using ERP,  we can visit SAP.com to take a look to all different customer testimonials (SAP web page 5) in which there is no doubt that having an ERP system is one key piece for the profitable puzzle.