Secil Akdemir - Why ERP? Book Notes

WHY ERP?
ERP systems are large computer systems that tie separate application programs of different business functions. ERP systems work in real-time so exact status of everything is always available. Moreover, ERP systems are generally global so they enable working in different languages and in different currencies.
Billy is currently working as manufacturing manager in McDougle Furniture Company in North Carolina. The owner of the Company, Mr. McDougle, was considering acquiring the furniture company of his brother in Ohio. Company in Ohio has implemented a new ERP system – SAP R/3. Therefore, Mr. McDougle wanted to analyze the pros and cons of implementing an ERP system in North Carolina in order to integrate two companies each other and he appointed Billy for this mission.
The reason behind ERP implementation is important so as to analyze the costs and benefits of it. Some companies implements to solve the Year2000 problem which is non-sense. Some other firms will implement ERP to integrate the various functions of the business or to force a badly needed organizational change. McDougle wanted to implement ERP in order to get common information, common management systems, common data and common reports from the system in order to use the same kind of management in both places.
Billy had participated to an SAP seminar and he gained a general knowledge of SAP R/3. R/3 is an SAP product which ties the information throughout an organization and therefore it provides benefits of single data entry, immediate access and common data. In this system, all processes are integrated with the same data.
With the help of ERP systems, duplication of information is eliminated therefore efficiency of operations can be improved with time savings. Moreover, the quality of the data could be increased due to decrease in errors in data entries. Another benefit of ERP is that it assures that all divisions of the company are dealing with current and identical data.
The main issue in using R/3 is configuration which is the process of matching the system to the organization. This system also enables to creating your own menus and sub-menus that are in line with the organization.
R/3 system works in line with the contemporary business practices which are referred as best practices.
In SAP seminar, instructor mentioned to ASAP – Accelerated SAP, which can be used as a guide before the implementation especially for the smaller firms that do not want to re-engineer their processes. ASAP is formed from 5 major steps which are Project Preparation, Business Blueprint, Realization, Final Preparation and Go Live stages. One of the most important features of ASAP is that it can be used for solving the open issues related to the implementation since the data related to the issue, parties involved are all documented.
SAP also gave high importance to organizing the computers to run R/3 applications. Database computer is placed at the heart of the system since all of the data are stored in that database. Therefore, the reliability of the database is very important for the health of the system. There are also 2 other layers which are called application and presentation layer. Application layer is formed from computers which run the software. Presentation layer consists of end-user computers. This system is called “three-tier client-server system”.
System configuration is one of the most important parts of the system because system administrator has to authorize users for the usage of the system.
After the SAP seminar, the owner of the company also sent Billy to the factory in Ohio to understand the processes there and the benefits of SAP. When Billy went there, he realized that the two factories are very different from each other and the same system with the same configuration is very hard to implement in North Carolina.
Conclusion
ERP systems could be very beneficial for some firms but in others it cannot be as beneficial as others. In the case of this book the main reason behind this is the need for flexibility in the production process. ERP will certainly change the business processes and this will lead to negative results in this firm since they generally produced tailor made products in line with the consumer needs.
In general, companies within the same sector have similar workflows but in this case factories did not have similar workflows. They were totally different therefore using the same configuration without having consultancy from experts will lead to negative results.
Moreover, top management should also consider the psychological effects of this kind of a big change. They have to be transparent to their employees in order to prevent bad rumors within and outside the company. Rumors will decrease the motivation of workers. People will certainly resist to big changes so implementation team and top management are responsible for explaining the main aim and the results of this project in order to decrease the retention from workers.