Enterprise-wide automation has already transformed the relations among suppliers, purchasers, producers, and customers. Conventional ERP helps only to automate individual departments. It could neither integrate its back-office benefits into the front-office, nor could it establish consistent control of all business processes. Competitive pressures and globalization stresses the need for more effective, total enterprise solutions. The world class competition, modern business environment, and the availability of the Internet are the premises which stress the need for ERP. The salient features of ERP II are presented in addition to describing some of the disruptive technologies which will help reengineer ERP systems rapidly. The results of an international survey pertaining to the embedding of intelligence in the modern day ERP shows an evolutionary trend. The order placement over the Internet by a sales clerk from a remote location forms a part of this chapter to benefit the readers in understanding the functioning of an ERP system.
Enterprise is a group of people and associated resources to achieve a common goal. Enterprise Resource Planning (ERP) System is an enterprise wide system which encompasses corporate mission, objectives, attitudes, beliefs, values, operating style and people who make the organization. It is a software solution that addresses the Enterprise needs, taking a process view of the overall organization to meet the goals, by tightly integrating all functions under a common software platform. In other words, ERP systems are computer based systems designed to process an organization’s transactions. It facilitates integrated and real-time planning, production and customer response. ERP has multilingual capability, multi-currency handling ability, and can recognize legal and tax reporting needs of various nations across the world.
The real need for such an integrated system has emerged with the onset of Supply Chain Management, e-business and global operations which calls for exchange of information with other companies and customers directly (Krajewski et al., 2000). A world-class competitor means being successful against any competitor on quality, lead time, flexibility, cost/price, customer service and innovation (Figure 1). It needs transforming relations among suppliers, purchasers, producers and customers. This can be achieved only through enterprise automation which assists innovators to achieve their market share and at the same time operate at peak efficiency to satisfy customer needs. The world in which we do business is shrinking, and virtually every enterprise is either marketing or selling to customers in other countries, or simply using parts or materials that are produced elsewhere. Internet has overcome time and distance to a great extent. It has become the need of the hour to think globally and to include the same in plans, processes and strategies.
Key success factors for achieving World-Class status
Globalization and Web commerce riding on the development of the Internet have changed traditional business behaviors and practices. Leveraging the Internet by the business has become a need to quickly establish a virtual presence. They must use collaborative technology in order to respond to customer’s requirements better and faster. When the operations are scattered through multiple locations around the world, the need is to gain visibility across all sites. This enhanced visibility can lead to more negotiating power for purchasing parts and more efficient centralized accounts payable and receivable thereby improving overall performance. Solutions like ERP, supply chain management or CRM solutions provide tools to manage the information that is essential to growing business value.
The need to achieve world class status, rapid development in Internet and related technologies, and the evolving business trends are the premises which accelerates the evolution of ERP systems. Virtually every enterprise is either marketing or selling to customers in other countries, or simply buying parts or materials that are produced elsewhere. It has become a necessity for businesses to embrace Internet to quickly establish virtual presence through web commerce.
Enterprise wide automation alone can address transforming relations among suppliers, purchasers, producers and customers. ERP has fallen short in the following areas that are critical to today’s business needs (www.exactamerica.com): Scope of conventional ERP is limited; conventional ERP helps automate individual departments and did not integrate its back-office benefits into the front-office to help businesses manage people, workloads and supply-chain issues; it could not establish consistent control of all the processes of the business. Competitive pressures and globalization have made it clear that the business world is still in need of more effective, total enterprise solutions. Figure 2 shows the typical ERP architecture.
Key Terms in this Chapter
Integrated data model: The integrated management of information leads to Integrated Data Model which supports a centralized data repository. This data repository gives up to date status of the organization at any point of time without data redundancy and assuring total integrity.
Enterprise Resource Planning (ERP) System: ERP system is an enterprise wide system which encompasses corporate mission, objectives, attitudes, beliefs, values, operating style and people who make the organization.
ERP II: The most apparent change from ERP to ERP II is a change in focus from one that is totally enterprise-centric and preoccupied with internal resource optimization and transactional processing to a new focus on process integration and external collaboration. ERP II application deployment strategies relates to information that is exchanged between two or more businesses over the Internet.
Manufacturing Resources Planning (MRP II) System: MRP II incorporated financial accounting, human resource management and distribution in addition to material requirements planning. It provides information regarding staffing levels and overtime needs through detailed capacity requirements planning.
Digital Firm: Digital firm is a digitally enabled environment for the interaction and processing of information among customers, employees, employer and the stakeholders.
c-Commerce: The B2B exchange of information electronically via the Internet for enabling ERP II is known as collaborative commerce or c-commerce.
Enterprise: Enterprise is a group of people and associated resources to achieve a common goal.
Material Requirements Planning (MRP) System: MRP was used in the 1970s for raw material ordering based on order at hand.