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Enterprise Resource Planning and its Competitive Advantage

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Will Enterprise Resource Planning (ERP) provide a competitive advantage for ... Austria -- Learn why this designer jewelry producer decided to implement mySAP ... – PowerPoint PPT presentation

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Title: Enterprise Resource Planning and its Competitive Advantage


1
Enterprise Resource Planningand itsCompetitive
Advantage
  • Boone, Begley, Selander, Sturbaum, Sumner,
    Wommack and Wiley
  • April 10, 2006

2
Will Enterprise Resource Planning (ERP) provide a
competitive advantage for Global Companies?
Myth or Fact?
3
Threats
  • Rapid expansion through growth and globalization
  • Ability to manage business strategies real time
  • Multiple Information Systems
  • Legacy Systems that companies still use
  • Standardization of alternative products
  • Communication between various departments and
    offices around the world

4
Opportunities
  • Order entry, tracking and fulfillment
  • Automated customer notification of shipping dates
  • Customer follow up email communications
  • New distribution channels
  • Financial Growth improvement
  • Materials planning and allotment
  • Improved Production line management
  • Increased Quality/TQM management

5
Two Different Approaches to ERP
  • Problems-Based Approach
  • Over come current disadvantage from competition
  • Achieve single unrelated business targets
  • Providing self service to employee benefit
  • Remove constraints (manufacturing, accounting,
    etc.)
  • Innovation-Based Approach
  • Create new online sales channel
  • Allowing customer to pay invoices online
  • Track the status of orders and shipments
  • Collect and analyze data to better meet the needs
    of customers

Peppard, J. Ward, J. 2005. Unlocking
Sustained Business Value from IT investments,
California Management Review, 48 (1) p52-70.
6
Customer Loyalty and Satisfying Demands
  • Customers generally place significant value on
    the quality and speed of interactions, the
    quicker and easier the enterprise can make it for
    the customer, the more likely he or she will
    remain a loyal consumer (Levitan, 2004).
  • ERP initiatives are the backbone that help
    enable the business processes to respond to the
    needs of this demand driven environment
    (Eggelston, 2005).

7
Using ERP to gain a Competitive Advantage
  • ERP technology can provide higher customer
    satisfaction if it improves the customers
    experience with your company. When these results
    become reproducible customer loyalty can be
    achieved.
  • Global companies must have the ability to change
    or create rules inside the software to adjust to
    the changing environment.
  • Data mine in order to find customer trends and
    business trends.
  • Use the technology to be innovative in areas of
    TQM, MRP management, ABC accounting methods and
    financial reporting.
  • Lack of a ERP system puts a competitor at a
    disadvantage.

8
ERP Model
Global Managers data mine MTBF Run program to
replace old units.
Website allows for customer to upgrade online
with promo and place order
Marketing
Tracks failures and makes improved instrument
Quality notified
RD
Sales
New Online Global Customer Channel
Customer logins in to site places service call
for broken instrument
Finance Accounting
Service
Accounting sends trade-in cert. to current
customers Finance adjusts COGS model
Customer Care
First available service engineer dispatched
customer advised
CC tracks service progress notifies sales of
problems
9
ERP Successes
  • Advance Transformer Co. United States -- This
    lighting products manufacturer upgraded its IT
    landscape cost effectively and without business
    disruption using SAP solutions -- and saved an
    estimated US500,000 in project costs.
  • Heads and Threads International United States --
    Consider how this wholesale distributor uses the
    mySAP ERP solution to track supply and demand of
    customers and vendors, and adjust prices rapidly
    to benefit from changing market conditions
    reduced inventory cycle times 50.
  • Great Wall Broadband Network China -- See how
    this provider of Internet access and other
    services improved data quality and accuracy,
    business processes, and decision-making with
    mySAP ERP in a six-month installation.
  • Pierre Lang Austria -- Learn why this designer
    jewelry producer decided to implement mySAP ERP
    to help deliver more dependable system
    performance plus increased accuracy and
    reliability of customer, sales, and financial
    information.
  • (http//www.sap.com/usa/solutions/business-sui
    te/erp/customersuccess/index.epx, 2006)

10
Why does ERP Technology Fail?
  • Technology is used to solve business and
    organizational problems
  • No Strategic vision
  • Measure unobtainable or unrealistic goals.
    Chasing ghosts
  • No base-line measurements taken.
  • End users failed to see the new vision poor
    change management
  • Lack of change initiative implementation
  • Failure to add upgrades or poor customization
  • No global implementation of system

89 of new ERP measured a success
...only 25 of those had any affect on business
strategy
11
Balanced Scorecard for ERP
Financial
Customer Satisfaction
Objective Metrics
Objective Metrics
Short term growth Revenue growth from ERP based
project overall cost reduction from
implementation Long term growth EVA SFGR
Quality improvements reduction of time per
customer inquiry reduction of customer
complaints Customer Loyalty of frequent
customers
Internal process
Learning Growth
Objective Metrics
Objective Metrics
Change Management number of days to complete
new processes Development of ERP
invested Skills Knowledge number of certified
employees
Manufacturing Efficiency reduction of
inventory reduction in overall time to
produce products saved from ERP
Organizational Efficiency accuracy of forecasts
Epstein, M.J Rejc, A. 2005. How to Measure
and Improve the value of IT. Strategic Finance.
12
Direction of ERP and needs of Global Manufacturing
  • Simulation Tools
  • Exception based projections
  • Service Oriented Architectures
  • Grid Computing
  • Linux (mission critical)
  • On-Demand ERP computing
  • Intermodal link between various plants
  • SuperBOM management between facilities
  • Strategic sourcing initiatives (i.e. linear
    pricing)
  • Application of Lean manufacturing
  • Reduced inventory on hand
  • Internal customer pull scheduling
  • ERP creates a wider business model
  • Software as a service provider
  • Optimization of Hardware packages
  • Program off-site Deployment
  • Enterprise Operating System enhancements done off
    site and on-demand.

13
Proposed Business Organizational Strategies
  • As a subsection of the ERP Implementation these
    items should be considered
  • How can improvements to current processes improve
    customer experience?
  • Through the technology can we reach new
    customers?
  • How can the technology enable the organization to
    make faster better qualified decisions?
  • How can it help measure external forces?

14
ERP Competitive Advantage Sustainable advantage
  • Innovative approach using technology to execute
    new strategies (business organizational).
  • ERP are successful when they become business
    change projects rather then technology projects.
  • Flexible software engines to keep up with
    changing strategies.
  • Good process management
  • Setting concise goals
  • Measure the base-line set goals based business
    and organizational strategies.
  • ERP is technology, it will not create business
    strategies or organizational strategies. It
    merely bridges the two allowing senior management
    to make decisions in real time.
  • A comprehensive set of functions for procurement
    and logistics execution, product development and
    manufacturing, and sales and service helps
    streamline business cycles, such as
    purchase-to-pay and make-to-order.
  • Customer focus strategies to create
    differentiation
  • The data mining of marketing for new product
    introduction

15
Myth or Fact
  • ERP Technology provides a competitive advantage.
  • Implementing good change management
  • Utilizing the technology to find innovative ways
    to touch your customers
  • ABC accounting and financial reporting accuracy
  • Increased customer satisfaction customer loyalty

PROVEN FACT
16
Questions????
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