Chapter 12 - Integrating The Organization From The End To End - Enterprise Resource Planning
Enterprise Resource Planning (ERP)
· It serves as the organization’s backbone in providing fundamental decision making support.
· It enables people in different business areas to communicate.
· ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.
· The heart of an ERP system is a central database that collects information from and feeds information into all the ERP system’s individual application components (called modules), supporting diverse business function such as accounting, manufacturing, marketing, and human resources.
· ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it.
ERP Integration Data Flow
ERP Process Flow
Bringing the Organization Together
· ERP enables employees across the organization to share information across a single, centralized database.
· With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency.
Organization before ERP
ERP- Bringing the Organization Together
The Evolution of ERP
Although ERP solutions were developed to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw materials, inventory, order entry, and distribution, ERP was unable to extend to other functional areas of the company such as sales, marketing, and shipping. It could not tie to any CRM capabilities that would allow organizations to capture customer-specific information, nor did it work with websites or portals used for customer service or order fulfillment
Integrating SCM, CRM, and ERP
Integration of SCM, CRM, and ERP is the key to success for many companies. Integration allows the unlocking of information to make it available to any user, anywhere, anytime. 2 main competitors in ERP market:
Primary Users and Business Benefits of Strategic Initiatives.
· An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation.
· Integration are achieved using:
* Middleware- several different types of software that sit in the middle of and provide connectivity between two or more software applications. It translates information between disparate systems.
* Enterprise application integration (EAI) middleware- represents a new approach to middleware by packaging together commonly used functionality, such as providing prebuilt links to popular enterprise applications, which reduces the time necessary to develop solutions that integrate applications from multiple vendors.
Integration between SCM, CRM, and ERP Applications.
· Companies run on independent applications, such as SCM, CRM, and ERP. If one application performs poorly, the entire customer value delivery system is affected.
Enterprise Resource Planning’s Explosive Growth:
Reasons of ERP being proven to be such a powerful force:
· ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses.
· ERP addresses the need for global information sharing and reporting.
· ERP is used to avoid the pain and expense of fixing legacy systems
To qualify as a true ERP solution, the system not only must integrate various organization processes, but also must be:
· Flexible- an ERP system should be flexible in order to respond to the changing needs of an enterprise.
· Modular and open- an ERP system has to have open system architecture, meaning that any module can be interfaced with or detached whenever required without affecting the other modules. The system should support multiple hardware platforms for organizations that have a heterogeneous collection of systems. It must also support third- party add-on components.
· Comprehensive- an ERP system should be able to support a variety of organizational functions and must be suitable for a wide range of business organizations.
· Beyond the company- an ERP system must not be confined to organizational boundaries but rather support online connectivity to business partners or customers.
Everyone involved in sourcing, producing, delivering the company’s product works with the same information, which eliminates redundancies, cuts wasted time, and removes misinformation.