ERP can help boost business efficiency<\/p>\n
By Zatni Arbi<\/p>\n
JAKARTA (JP): You are the CEO of a very large company. Your
\nannual sales topped US$2 billion last year. You have invested
\nmillions of dollars in computers and network infrastructure. You
\nhave trained all your employees to use the latest software.<\/p>\n
So how come you have not seen the productivity boost you
\nexpected from such a huge investment?<\/p>\n
How come there are so many complaints from your customers
\nbecause they did not receive the shipment of their orders by the
\ndate promised by your sales department? Why can't you pinpoint
\nthe source of the delay in the production, as one division keeps
\npointing their fingers at other divisions over the delay?<\/p>\n
Why can't you cut down on waste in the production chain and
\noperations? Why are inventories of finished products in the
\nwarehouses so huge and yet customers still have to wait a long
\ntime for deliveries?<\/p>\n
In short, why does it seem you are losing control of your
\ncompany?<\/p>\n
The answer is that you need a software system that integrates
\nall the processes in your organization. Over the years it has
\nbecome clear that computerization alone is not enough to
\nstreamline operations and turn an organization into a competitive
\nbeast. Your accounting department may be using the latest
\ncomputer-based general ledger. Your production lines are perhaps
\nalready fully computer operated, with robots doing most of the
\njobs. Your staff talks to one another with e-mail through your
\nIntranet. Your purchasing department orders supplies through the
\nExtranet and your suppliers confirm orders through the same
\nroute.<\/p>\n
Your sales department receives orders through the Internet.
\nHowever, as long as what you have is a number of \"islands of
\nautomation\", you will not be seeing the magnitude of productivity
\nboost that you would like to have as the result of the painful
\nand expensive automation exercise.<\/p>\n
Enter ERP, or Enterprise Resource Planning. In a nutshell, it
\nis a collection of seamlessly knitted software programs that
\nenable all your islands not only to talk to each other but also
\nto coordinate operation, thereby maximizing efficiency.<\/p>\n
Chain reaction<\/p>\n
There is a short list of vendors that provides ERP solutions
\nto companies all over the world. Industry analysts sometimes call
\ntheir products \"enterprise applications\", although the vendors
\nthemselves may not use this term or even \"ERP\" itself.<\/p>\n
Nonetheless, the five biggest ERP vendors are said to be SAP,
\nOracle, Baan, Peoplesoft, and JD Edwards. The German-based
\nsoftware house SAP is by far the biggest of all. Its product,
\nR\/3, which was first introduced in 1992, is reportedly used by
\nhalf of the largest 500 companies in the world.<\/p>\n
An article in the Nov. 3, 1997, issue of Business Week
\nprovides an excellent example of how this enterprise application
\nsystem works: A salesperson in the field uses his notebook to log
\non his company's R\/3 system and check the latest price of the
\nproduct that his customer wants to purchase.<\/p>\n
At the same time, he checks the discount that he can offer to
\nthis customer because he is buying 1,000 units. Then, if the
\ncustomer agrees with the price, an order of the product is
\nplaced. This will trigger a chain of events. As the order is
\nbeing recorded, product availability is checked in order to
\ndetermine delivery dates.<\/p>\n
Perhaps a portion of the order can be delivered immediately
\nfrom other parts of the world where the company also has
\nproduction plants while the rest will have to be produced first.<\/p>\n
Then the R\/3 manufacturing module will instruct the warehouses
\nthat have the inventory to start shipping the products to the
\ncustomers. It will also schedule the production of the rest of
\nthe order. In order to meet the promised delivery date, perhaps
\nadditional manpower will be needed. The human resource module
\nwill then alert the personnel manager that an X number of
\ntemporary workers will be required in the factory.<\/p>\n
For production, fresh supplies of parts may be necessary. The
\nmaterials planning module will then alert the purchasing manager
\nthat he needs to reorder these parts from respective suppliers.<\/p>\n
In the meantime, the customer can also log on the company's
\nR\/3 to track the progress of his order. He can then make plans
\nfor the promotion of the incoming product in his local stores in
\ntime. He can even place another order if he wants to. Everything
\nis streamlined, transparent and efficient.<\/p>\n
An ERP, as Dataquest aptly puts it, \"is an enterprise-wide
\nmanagement system\". It helps managers plan the four Ms -- Man,
\nMoney, Materials and Machines -- to obtain their highest
\n\"synergistic value\". It helps them meet deadlines, reduce waste,
\ncut down on other costs, ensure just-in-time delivery from their
\nsuppliers, etc.<\/p>\n
Needless to say, the key to an ERP's success is flexibility.
\nBecause they are mostly written in object-oriented language, the
\npackages can be customized to suit the need of individual
\norganizations. SAP's R\/3, for example, is used by Intel Corp. and
\nMicrosoft, each with different operations and requirements.<\/p>\n
In a perfect world, everybody would welcome a boost in a
\ncompany's efficiency, which will definitely bring about higher
\ncompetitiveness and profits. However, just as there are people
\nwho are not happy with the reform that has started to take place
\nin Indonesia, there will be people who resist changes that will
\nbe caused by implementation of an ERP system.<\/p>\n
However, when implemented correctly and successfully, an ERP
\nsuch as SAP's R\/3 can totally transform an organization into a
\nmoney-making machine. As SAP correctly says it on its Web site,
\n\"It's more than software. It's a strategic solution\". It is not
\nsurprising ERP is becoming an absolutely necessary investment to
\nmake for today's companies.<\/p>",
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