You will be required to conduct research on AIS/ERP Systems for your client. Your team is required to pick a case study in one of the areas mentioned below (not limited to). Then prepare a Business Report for the client detailing the processes of selecting an AIS/ERP to help them to make informed decision for investment in information system to take their business.
Due to the increased complexity of the business processes and pressure of automating the business processes and cost cutting, it becomes impossible for the organizations to run their business without using IT systems in today’s time of Globalization and digitalization. This report will highlight the case study of one such organization called Catapult Stores, which is using traditional legacy systems and now considering upgrading to modern ERP systems. A lot of investment is needed in the ERP projects which are often quite complex projects. Moreover, there are many case studies such as Nike, Hershey’s and FoxMeyer Drug describing how their ERP implementation project brought them on the verge of bankruptcy and proved to be a nightmare (Hustad, & Olsen, 2014). It is important to study the product before choosing the ERP vendor and often, multiple stakeholders are involved. To ensure the success of the project risk analysis and risk mitigation methods are also quite important. The objective of this report is to discuss the procedure that should be followed while selecting the ERP vendor and thus helped the Catapult Stores to make the right decision by throwing the light on common challenges for selecting ERP systems and also make sure its investments would reap the benefits.
Catapult Stores is Australia manufacturing conglomerate having offices in more than two countries. The company engineers wearable technology for elite sports. The company is headquartered in Melbourne, Australia, with offices in Leeds and Chicago. Let us discuss in detail about the important aspects and this organization’s business processes that will be helpful in making a correct decision about selection of appropriate ERP vendor.
Catapult Stores is a manufacturing company that converts the raw material into finished goods after carrying out various manufacturing operations like drilling, assembling and cutting after buying the raw materials from numerous suppliers from all over the world (Cereola & Wier, 2012). It operates in Business to business segment as its final products are used in other industries. The company follows some of the common business processes as follows:
a. Request for quotations from suppliers and procure to pay business process which consists of floating requirements. Once company gets the quotation, it can finalize the contract with the selected suppliers based on the cost and other parameters, like lead time, quality and freight conditions, and then places order. It receives the material which is then inspected by the quality department once the order is placed and accepted by the supplier. Once accepted, invoice is processed and payment is made to the suppliers. This entire transaction is posted to general ledger during end of the period. (Esteves, 2014).
Define business processes
Figure 1: Catapult Stores worldwide network of supplier
b. Make to order and Make to stock: Some of the products are manufactured based on the forecast of the demand as they have standard specifications. These products are then stored in the warehouse and customer orders are replenished from the warehouses. As each customer specifies their own requirements and specifications while placing order, some of the products are confirmed products (Cereola & Wier, 2012). Therefore, such orders will be manufactured only when the customer sales order is booked and processed. Various sub processes included in this process are scheduling of various jobs, issuing materials, creation of discrete jobs, carrying out of sequence of operations, detailed routing and BOM preparation.
c. Order to cash process: This considers of booking the orders and then processing of customer orders. These orders will be manufactured or directly replenish from the available quantity once booking date is confirmed and customer shipping date is promised. When material is shipped to the customers, account receivables are updated and entire transaction is paid to the general ledger of the company when the final invoice is received (Cereola & Wier, 2012).
d. Quality process: Quality processes are also very significant. Material is measured against the quality standards when it is received from the supplier. Also, their qualities are measured after critical operation to ensure that quality is maintained throughout during the work order creation and processing (Huang, Handfield, 2015).
e. Warehouse processes: The finished goods that have been manufactured are placed in the warehouses and the material received from the supplier, has also to be placed in the warehouse and in addition to that various warehouses processes like put away, picking are also needed to be performed.
Catapult Stores has filtered its requirement lists based on the above business processes, which are, must to be supported by the selected ERP products.
- Purchase orders are placed with suppliers in real time and ERP system must support e-procurement
- For forecasts to be shared with suppliers ERP systems must have supplier collaboration tool
- Sales order is booked using the sales order processing system, special instructions are captured and that can calculate the appropriate promising date by taking into account the various make and buy lead times of the product (Brown, Xu, & Stevenson, 2015).
- It has accounts reconciliation features and finance capability
- It also have Cycle counting, lot/serial tracking and ABC analysis of inventory
- It should have routing capturing information, BOM, ability to track which material is used in which finished good assembly and issued for which job
- For calculating the cost of the goods ability to rollup costs
- Reporting and dashboard features that helps management in decision making and could capture the key performance indicators
- Ability to enter quality results
- In case the company wishes to apply it for other sites, software should also have the ability to scale
Several system requirements are there. Most important thing is that customizations are quite expensive to maintain and also lost during upgrades so customization is not advisable in ERP systems. Thus, standard business requirements should be directly fit into the system without customizing any aspect of it. Also, appropriate role should access only the appropriate functions so there should be functional security in the systems (Shukla, MIshra, Jain, & Yadav, 2016). Another significant thing is that system supports data backup functions and it should also be secure. Also, system should be easy to maintain, easy to use, cost effective and user friendly. In addition to that, there are 2 important things, on the premise and cloud. This is the era of cloud computing. ERP vendor must have its product confirm to the latest standards which is also available on the cloud as on the premise version is quite expensive and takes time to implement. This implies Catapult Stores does not have to buy the server, storage or perform backup activities; it just wants subscription based system on cloud which is easy to scale up as well as scale down (Ahmad, & Cuenca, 2013). System should support integrative approach in the processes and also have the cross functional view of the business processes.
Develop business requirements
There are numerous ERP/AIS systems. Lets discuss some of the most popular and seasoned product:
- Oracle ERP: Oracle ERP acquired world’s best product like Siebel, People soft, Demantra and include all the functionalities of these products in its ERP program, it is a very famous ERP. It has many modules including manufacturing, Procurement, Account payables, account receivables, general ledger, and customer services and so on. Based on its business requirements Catapult Stores can buy any number of modules. It is easy to scale up as it also has a cloud based subscription. It will be easy to implement and easy to maintain however its licensing is quite expensive. It fulfills all the business requirements but high cost is the only downside for Oracle ERP.
- MYOB: MYOB is having a largest markets share and is one of the oldest accounting software in Australia but with the advent of the cloud, it began to lose its leadership status to Xero. Moreover, its approach is quite confused in Cloud. Apart from it, it is primarily accounting system which provides taxation features, account reconciliation; e-procurement features but lacks features in manufacturing operation like ability to maintain Bills of material and routing operation. It does not entirely fulfill the business requirement of Catapult Stores and thus is not recommended although it’s good software.
- XERO: Xero is largest cloud provider company in Australia, it is also the biggest beneficiary of advent of cloud computing and thus challenging the leadership position of MYOB. It is not complete ERP system but mainly an accounting system although it is growing very fast and has the inventory, procurement and finance features but it requires to be integrated to other tools and third party bolt on systems for achieving the complete equivalent ERP functionality. In this sense, it may require dealing with multiple vendors for finalizing deals and may be expensive also. Therefore, it is also not preferable because to fulfill its requirements Catapult Stores is looking for single ERP package (Bernaert & Poels, 2014).
- SAP Systems: SAP systems has been used by the competitors of Catapult Stores like Honeywell, Agilent, GE systems and are very popular ERP packages and it thus it makes sense for the company to invite vendor to showcase its features and shortlist the SAP. Not just that, SAP like oracle have all the supply chain, services, manufacturing and finance modules and company can buy any based on its requirements. It also has subscription based billing on the cloud. Its global currency support make it very useful for the global company like Catapult Stores that have plants in different locations as well as buy materials from suppliers located in different geographies and it is also cheaper than oracle (Bernaert & Poels, 2014).
As a conclusion, the best software that is aligned to the needs of the Catapult Stores and thus recommended is SAP. The after sales support from SAP is also good and this adds to the benefits of SAP.
- At present, business processes without worrying about the overall performance indicators are operating in silos and each department is looking to satisfy its own department performance indicators. But with ERP, cross functional have their indicators which mean each department has to contribute its bests so that the overall process is efficient. This will provide the ability to handle multiple times in multiple systems and reduce redundancy (Haddara, 2014). Currently customer data is maintained by account receivables team as well as by the sales team. There will be only one instance of customer data that will be maintained with ERP implementation.
- Company can reduce the inventory that it keeps with e-procurement as lead time of procurement to pay cycle will reduce. Less quantity of inventory means less obsolescence costs, less storage costs and less shrinkage costs.
- Organization will able to fulfill more customer order on time, which will improve on time order fulfillment rate with proper inventory quantity in place (Powell & Riezebos, 2013).
- Manufacturing processes like cost rollup helps in better pricing strategies and helps the company to understand the cost it is incurring on various products.
- There will be an improvement in the velocity, adaptability and visibility of the entire supply chain of the company with the implementation of the new systems.
Organization also needs to evaluate the implementation partner once the software is finalized. Many organizations like Deloitte, Accenture implements the ERP software for organizations. With clear cut mention of goals, requirements, expectations the proposals should be invited from both of them and it should be evaluated to find out the better proposal.
As they are actually the product experts who know the intricacies of the product implementation partner is very important for the efficient technology implementation. Accenture has huge experience and has served numerous manufacturing clients in SAP worldwide and also has respectable reviews. There has been failure of SAP implementation project at FoxMeyer which completely blames its implementation partner. Implementation can be measured as efficient if various milestones are on time, users are satisfied with the performance and the budget is under control (Nwankpa, 2015). The 360-degree view of the benefits or the efficiency that ERP brings into the system can be shown as:
The key potential risks are data theft and data leakage. Huge set of data comprising of personnel, confidential information of suppliers, customers and employees is contained by these ERPs. ERPs systems are quite susceptible for the data theft and data attack as there is payment information and various contracts information stored. Also, there are certain rules related to law that the confidential data in few of the countries should not be stored in the server which is not in the physical location of the country i.e. in a server situated in a foreign country. So as to handle any calamity and emergency data is often stored in servers which have multiple backups in various geographies with cloud. Therefore in order to avoid penalty such cases need to be evaluated.
One more thing that has to be taken care of by the company is the ability to make changes in the key data by super users.
There are various ways to handle these risks and most of them are inbuilt in the ERP systems and nothing extra is required. For instance, the risk of exposing confidential information to someone who is not supposed to do so is the biggest risk. This can be protected by the functional security. For example, person who is a receiver will able to see only that information in the systems, i.e. open purchase orders and quantity that is due for receiving. Therefore, such risks can be protected by the company to protect appropriate rights.
Determine the systems requirements
Moreover, to take care of various approvals ERP systems have proper workflows built in. For example, purchase orders often flows through various steps before it is approved and placed with suppliers. Workflows will provide the added benefit by taking care of any unauthorized approval. Also, company needs to ensure that key terms that will be responsible for what to protect itself from any miscarriage of data and mention the important business laws and conditions with the cloud providers (Vieru, 2015).
This case highlights various aspects of the selection of an Accounting systems or an ERP. Catapult Stores is a manufacturing conglomerate that is planning to replace its existing systems by modern IT systems. Thus, company has to make sure that software aligns with its business processes so it has treaded itself on the path of exploring the correct software. This case discusses what the important things are and attribute that should be looked into the EPR vendor and its product and the very first thing which is feasibility study of the business processes. Risk analysis should be required along with clear milestones and timelines to achieve the same, once these decisions are made.
The conclusion of this case study is to recommend Catapult Stores to use the SAP ERP to automate its business processes as this ERP is proven software and has used by the business giants in the world of manufacturing like Honeywell, GE, and ABB. SAP ERP is fulfilling also all the business requirements of the Catapult Stores. With the above discussion it can be said that the customized ERP from SAP would be the perfect solution for Catapult Stores to move forward. It is important that Catapult Stores should have a team of IT professions who can bring the change in the organization. The maximum benefits of ERP implementation could be achieved only when all the stakeholders support the ERP implementation.
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