The role of Enterprise Resource Planning systems in organiza

Abstract

Confronting the arrival of the information age, standing on furious tides of a high speed development, we seize the information technology as the most important arms to gain us a leading position in the information war. Every enterprise is the economical organization which pursues for interests and benefits normally. Especially, once one organization owns a big structure, its information management would become necessary for the need of development in the information era. In fact, the outcome of one enterprise information management has already been regarded as the key factor to adjust whether or not the undertaking could grow faster and more efficiently than ever. Regarded as the advanced methodology which is complied with a modern management philosophy in the comparative environment, ERP (Enterprise Resource Planning) is considered as the most powerful weapon which can help an enterprise to accomplish the revolution of its development.

Another of those buzzwords that everyone talks of but no one seems to know much about. ERP        (Enterprise Resource Planning) is not just about planning your resources more about how the various divisions in your Enterprise function. An ERP solution aims to provide single software which will integrate all the divisions in your organization planning, manufacturing, sales, marketing, finance, HR and yet fulfill each division information and planning needs.
                                                                   (Appssolutions, 2005)

The research mainly answers questions on what ERP is, why it can be important in the sociality nowadays, what kind of position it takes in the enterprise; moreover, which role ERP plays?

Key words: MRPII、ERP、Case Study

What is ERP?

There are various explanations from different people on ERP. Regardless the traditional angle of the functional management, it would reach a common agreement on the perspective of management characters of the Knowledge Economy Era. ERP is the initials of Enterprise Resource Planning. Confronting with the supply chain, It is the tool of management which can utilize information technologies in order to apply for features of the modern information economy era—Clients, Competition and Change; moreover, it can integrate all resources within and outside enterprises. ERP has remarkable features of this information age and re-defines the business processes of the undertaking. In the economic times it uses the new concept of Process to take the place of the bureaucracy management model in the old economic era, in order that it creates the management idea which put customers and staff on the core position.

Thanks for the information technologies; the big amount of enterprises’ data can be shared. Using information to replace the stock, it decreases warehouse’s cost and risk; moreover, by means of computer, these basic data could be searched and analyzed so as to improve the speed and accuracy of decisions. It embodies the idea that can predict and plan in advance, control during the process, and calculate & analyze afterwards. In the knowledge economy times, ERP system emphasizes its Open Resources characters mostly. Therefore, it could increase the employment effectiveness of Human Resources and Time Resources, solve the problem of information overflow, and improve the precision of the decision-making.

An ERP system basic includes:
• Supply chain management
• Customer relations management
• Supplier relate the management
• Product production cycle management
• Commercial intelligence
• Financial control
• Human resources management
• Profession solution
• Motion commerce
• And so on.  ( Scott Hamilton,2003,p97)                                                               

ERP has been created from the concept developed by Gartner Group which described manufacture business system and material requirement planning (MRP II) ( San Jin,2005 ). It will include client/sever structure, using graphic user interface and applying for opening system design. Besides the standard function set up already, it covers other characters: such as quality, process operation management, and reports adjustment, etc.. Especially, the basic technology adopted by ERP provides users independence both in software and hardware which could be upgraded more easily than ever (Stedman, C. 2005,p54 p55). The key factor of ERP is that it could tailor to all customers’ requirements and boast for its easy usage. 
There are four standard functions of ERP carried by Gartner Group: ( Khalid Sheikh, 2003,p80 )
1. The Strong Integration function which exceeds to the range of MRP II.
It contains the quality control, the laboratory management, the process management, the formulation management, the product data management, the maintenance management, the control report and the stock management.
2. Supporting Hybrid Manufacture Environment & Configuration
It includes either discrete or continuous process making environment, ability to combine service procedures according to the objected-oriented service models and to apply them internationally (Asokan Anandarajan, Cadambi A Srinivasan, Murugan Anandarajan, 2004,p143).
3. Supporting motivated monitoring ability and improving business performance
It covers the adaptation of the controlling and engineering methods, simulation function, decision-making support and graphic ability of production and analysis.
4. Supporting opening C/S computing environment
It embraces c/s architecture, Graphic User Interface (GUI), Computer-Aided Design Engineering (CASE); object-oriented techniques; SQL querying to relational database; internal integration engineering system, business system, electronic data interchange (EDI). ( Wu Hong,2002,p23-33 )

Hence, functions and techniques of ERP system have greatly surpassed the traditional MRPII. It is the enterprise resource planning which is customer-oriented, timing based, opening to the whole supply chain.
Thoughts of ERP system management

The core of ERP system management thoughts is to realize its effective supervision of the entire supply chain. Three parts followed are contributed to this idea:

1. Managing the total supply chain resources.  ( Carol A.Ptak, Eli Schragenheim, 2004，p212 )

It would compete ineffectually within the market if one undertaking relies on its own resources alone. They should put all participants, such as supplier, manufactories, distribution network and clients, into a close-linked supply chain in the business process. This enables to arrange efficiently actives of produce, supply and sale; and to meet the requirements of enterprise, ability to utilize all marketing resources of the whole society in order to produce and manage fast and effectively. Moreover, it will help increasing the efficiency, achieving the leading position on the market. Applying ERP system into the management of the entire enterprise’s supply chain is the call from the marketing competition in the knowledge economy era.

2. Lean Production, Synchronous Engineering and Agile Manufacturing

ERP system supports to the management of hybrid manufacture. It is presented as the following two parts:

 The Lean Production (LP).  ( Ni Ming,2005 )
It is the enterprise business strategy structure introduced by Massachusetts Institute Technology (MIT). Specifically, it indicates that an enterprise brings clients, sales representatives, suppliers and other collaborative units into production structure. Relationships among the undertaking and its sales representatives, clients and suppliers have not the simple link of Business Transactions but the co-operational partners shared with common interests. Then, this co-operational relationship set up one enterprise supply chain. Therefore, all of these are contributed to the center of the Lean Production.

 Agile Manufacturing Thought
Whenever the market starts to change as well as an enterprise encounters specific market segment, the ordinary cooperation partners would not meet the requirements of new products development sometimes. Consequently, the undertaking will organize one supply chain which structures ‘the virtual facture’, constructed by special supplier and sales channels in a short term or once a time. It regards suppliers and co-operational partners all together as one component in the enterprise. Then it exercises Synchronous Engineering, and manufactures collaboratively in order to launch the new product into the market within the shortest term, and to hold the product in the stage of high quality, variety and flexibility as well. Therefore, what we mentioned above is the core of the Agile Manufacturing Though. #p#

3. Embodying the thoughts of pre-planning and controlling during the process
　
The planning structure in ERP system includes: main production planning, material requirement planning,
capability planning, purchasing planning, selling execution planning, interests planning, finance budget and
human resources planning, etc.. Furthermore, all of planning and value controlling functions have already
integrated into the entire supply chain. ( Avraham Shtub ,1999,p239 )

In conclusion, ERP system enables many advanced management thoughts into computer software systems which can be implemented and applied in the reality by the development and adoption of IT techniques in incredible speed.

The relationship between ERP system and an enterprise & ERP’s role in the enterprise.

ERP is based on the advanced and effective management thoughts and methods. It makes use of new management mode to rebuild old one in one enterprise. The relationship between ERP and the enterprise is supplementary to each other.

1．The implementation of ERP system is the revolution of an enterprise from all orientations.

　Conductors of an enterprise should be trainees at first. The second comes others who are responsible to carry out and implement. It should be motivated activities for conductors, the leaders’ level and stuff to regulate the management of the undertaking and other relevant sectors. Therefore, it helps modern management consciousness being planted into enterprise and becomes one part of company culture finally.

2．The manage mental level should reach the common sense on the ERP implementation

It is important to notice and exercise fundamental works in the matters of one enterprise management. Applications and software suppliers can not offer any kinds of services on this, only can be obtained by hard-workings of the company itself gradually. The implementation of ERP has been regarded as ‘The Engineering of CEO’, which indicates that the company’s decision maker plays a special role during the implementation stage. ERP is the system on management which leads and supervises the entire enterprise. It would have not been effective if the CEO has not approved and authorized the system.

3．The investment of ERP system is the systematical engineering

Compared with the investment and outcome of capital asserts and equipment, the investment of ERP system could not be redounded soon. The ERP system adoption is the systematical engineering process which needs time to realize benefits step by step. What it carries out is the thought of enterprise management which is the red line of the undertaking management. It acts and creates profits in the long turn; moreover, it can achieve benefits and profits form the result of effective management more and more (Chen Jian, 2002 August 7 ).

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Furthermore, the investment of ERP system is nothing done once and for ever. Due to the fast developed technologies, the further implementation the system has been done, the tighter resources the company would be aware of. Therefore, the annually investment will be required accordingly in order that the system could ensure for operating healthily.

4．The application of ERP system requires supports of inter-disciplinary talents of the company

The personnel not only have a good knowledge of computer science, but also understand enterprises management. It takes times and procedures to train the inter-disciplinary talents. Managers of enterprises should respect them as a big fortune which has been deserved difficultly. These talents would be the forerunners who will lead companies to implement ERP system into organizations ( Daniel Edmund O'Leary,2002,p92).

In the age of information, ERP system has played significant role in the enterprise nowadays. Therefore, ERP is generally regarded as:
 The bridge linking all departments and sectors
 The core of the enterprise
 The brain controlling daily operations of the enterprise
 The linkage between supply chains of different enterprise.
 The key to succeed in furious competitions with other undertakings
   
But I have to say is the ERP is not a management; it can not replace the real management. The ERP can’t resolve the management problem of the business enterprise. The management problem of the business enterprise only is resolved by enterprise governor themselves. The ERP just is a kind of tool for help the enterprise governor manages the enterprise.
Case study
A properly implemented ERP system can result in significant cost savings and increased efficiency.
                                                                  (Appssolutions, 2005)
Until now, not only .COM Corporation, but also many traditional corporations realize the important of information. If you want get success in intense competition, you have to have a powerful ERP system as your back support, help you to manage your enterprise information and plan your enterprise resource.

Now let us see how the ERP system helps the YANXIANG Ltd. obtains success. YANXIANG Ltd is one of biggest manufacture group in north of China.

In 2001, The YANXIANG Ltd. production sale begins to take shape, output value hundred million, 17000 kinds of materials are needed, the office distributes in the China mainland and the southeast Asia, but enterprise information always delay, the information delay can cause lots of serious problem, this already become the  biggest  hindrance. Synthesizes each kind of situation, the YANXIANG Ltd. Management team decide use ERP system to manage the enterprise information and plan the enterprise resource. Although met lots of hindrance in implementation process, but the YANXIANG ERP persists finally and obtains success. The new ERP system helps the YANXIANG Ltd a lot. The output value turns double, and the stock reduces 20%, the operation efficiency obtained the very big enhancement, for example, the time of processing the order reduce from 6 hours to 1 hour. As a result of data sharing and planning, the ERP system makes sure the production can accord to the order strictly from stock to material plan, manufacture project, the warehouse, has avoided lots of artificial mistake.

Following four points showed the ERP success in the YANXIANG Ltd.
1. System movement integration
This is the most basic performance that ERP apply successfully. The ERP system is an entire system and controls all different parts of the enterprise, especially on the supply chain management. So it is not just only in the internal of the enterprise, but also in the whole supply chain. YANXIANG management team staff and copartner they all give the biggest support in the ERP implementation. This is a major reason why the implementation time could be so short and so successful.
2. Service flow rationalization
In the ERP implementation, YANXIANG changed lots of unreasonable habit. The enterprise competitive ability, the market response ability and customer satisfaction obtains greatest improvement.
3. Achievements monitoring dynamic
The ERP system provides the rich management information for the enterprise. So the enterprise management team needs use these information effectively, makes these information obtain the biggest effect. ERP and the enterprise is one whole group. Each one can not lack.
4. The management improvement will continue
Along with the ERP system and the enterprise rationalization, business management will be able obviously to enhance. And it will help enterprise establish a self-appraisal management mechanism make the enterprise may unceasingly carry on and unceasingly improve.
   
As a word, the ERP system success implementation caused to the YANXIANG Ltd. production manufacture management, the production flows and the inventory control, and the market demand all had the remarkable enhancement.  ( SAP 2005 )

Based on statistics of APICS the Association for Operations Management, the application ERP system would obtain the following economic benefits averagely:

（1）To lower the stock 30%~50%
（2）To reduce the possibilities of delivery postponed 80%
（3）To shorten the time of pre-purchasing 50%
（4）Decrease the possibilities that work has been held up for lack of materials 60%
（5）To lower manufacture costs 12%
（6）To improve management level ( Gary A Langenwalter , 2000, p147 ).
ERP streamlines processes within your organization and helps you meet business needs more efficiently and quickly. ERP leads to a revolution in management thoughts and technologies all around the world. It is remarkable that the new management methods and means have been adopted and developed enthusiastically by the incredible speed. The application of ERP infuses a fresh blood and a great passion into thousands of enterprises on the raging tides of the marketing economy, and establishes a sound foundation for the undertakings on which they could stride towards the success finally.

Reference

Wu Hong ,(2002) .The ERP principle - design – implements. Beijing: Publishing House of Electronics Industry.

Appssolutions. Retrieved November 3,2005 from http://www.appssolutions.com/techshowcase/erp.asp

Carol A.Ptak, Eli Schragenheim, (2004). ERP Tools, Techniques and Applications for Integrating the supply chain. The united states of American: CRC press LLC.

San Jin,(2005 July 21). eNET Silicon valley power. Retrieved November 15, 2005 from http://www.enet.com.cn/article/2005/0721/A20050721437209.shtml

SAP,(2005 May 5). SAP Customer Success Stories. Retrieved November 8,2005 from http://www.sap.com/solutions/business-suite/erp/customersuccess/index.epx

Ni Ming,(2005 April 12). IT168 solution. Retrieved November 14, 2005 from http://publish.it168.com/2005/0412/20050412506601.shtml

Scott Hamilton,(2003). Maximizing Your ERP SYSTEM. The united states of American: The McGraw-Hill Companies, Inc.

Avraham Shtub ,(1999). Enterprise Resource Planning (Erp): The Dynamics of Operations Management. The united states of American: The Kluwer Academic Publishers.

Khalid Sheikh, (2003). Manufacturing Resource Planning (MRP II) with Introduction to ERP, SCM, and CRM. The united states of American: The McGraw-Hill Companies, Inc.

Daniel Edmund O'Leary,(2002). Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk. Cambridge, united kingdom: Cambridge University Press

Chen Jian,(2002 August 7 ). How can we defined what is success of ERP. Economic daily, Retrieved November 11, 2005 from http://past.people.com.cn/GB/it/48/297/20020807/794343.html

Stedman, C. (2005). Gartner Reviews Ross Systems:High Marks for Overall Functionality, Service and Support . Retrieved November 7, 2005 from  http://www.interface.ru/ross/gartner.htm

Gary A Langenwalter , (2000). Enterprise Resources Planning and Beyond. The united states of American: CRC press LLC.

Asokan Anandarajan, Cadambi A Srinivasan, Murugan Anandarajan, (2004). Business Intelligence Techniques. The united states of American: Springer-Verlag Berlin Heidelberg New York.