The Essay Explores ERP's Role In Organizations And SCM, Highlighting Its Impact On Supply Chains. (70 Characters)

This essay assesses a student’s ability to assess information,
formulate arguments, and critically evaluate different alternatives to
issues or problems.

1. How do enterprise systems contribute to organisational performance, and how do we measure such contributions?
2. What are the principal drivers behind businesses adopting a supply chain management system?
3. What are the organisational change management considerations necessary for successful adoption of an enterprise system?

What is an Enterprise System and ERP software?

An enterprise system is commonly known as enterprise resource planning which is defined as cross-functional information system. It aims at providing a wide coordination and integration of all the major processes of business and also aims at planning and controlling the overall resources of the organization. An enterprise system helps to make a proper flow of the information through different process such as sales and distribution, production and manufacturing, logistics department and human resource department as well.

Every ERP system is driven by a software. ERP software is a collection or a set of integrated software modules along with a common database which is centralized. All the modules helps the business to run all the functional areas and by collecting data and supporting all the internal activities of the business. There are many examples related to business processes which are highly supported by ERP software are accounts payable, general ledger, cash management. Forecasting, personnel administration, payroll management, time management, inventory management, product pricing and billings and many more. At very early stage, ERP software was designed to automate a business internal back office plans and its process but these days it is also used in communicating and creating relationships with customers, suppliers and many business partners as well.

In order to implement ERP systems, an organization must identify all the process involved in a business to automate and then map all the process which has been provided by ERP systems. It need a huge effort and hard work to implement such systems in an organization. In addition to this, an organization may analyze that all the business process of the system fails to support the exact way in which a business process actually work. In addition to this, the software may be customized in order to satisfy the needs of the firms. It may affect the performance of the system. So in order to gain the maximum benefits from the ERP software a business must change the way of working.

ERP systems was first evolved in 1960s. Those days, customized software packages were developed in manufacturing organizations. Later in 1970s, it was more focused on planning and controlling of the plans. MRP (Material Requirement Planning) system was introduced those days which helped in translating the master production schedule into time phased net requirements. In addition to this, many changes were seen in the organization process as the years passed on. Thus, an ERP system is a well packaged business software system which helps an organization to manage all the resources in a best way by providing the best solution to identify the information processing needs. In the year 2000s, ERP systems were involved in upgrading technology like internet and they are built and designed to help organization to function across the supply chain management. ERP systems helps to generate accuracy of the information and analyze the expected decision. It also helps to minimize the operating costs involved in an organization which creates an additional burden (Management study, 2018).

How do ERP systems automate and support business processes?

The performance measurement of the organization includes two main phases. The very first phase helps to describe the uses and functions of primarily financial measures. It analyze how an industry faced the declining stage because of the poor customer satisfaction and increasing number of competitors in early days. So, in order to overcome such problems, integrated performance measurement system was introduced. Likewise, the second phase includes performance measurement. It was said that the most visited PMSs were SMART system, performance Management Matrix, and balanced scorecard. In addition to this, integrated dynamic PMS is also widely used these days.

There are many ways to measure and evaluate the performance of the organization and the most common used is ERP performance measurement. It basically focuses on the financial as well as nom financial impact. The most commonly used proposed systems are ES benefit framework, ERPS performance measurement model and ERP score card. While deciding the ERP measurement system, there are decision criteria which must be considered are mentioned below.

• The system must be connected to measurements that is related to business goals, objectives and its strategy.
• The system must be comprised of financial and non-financial measurements which also must be internally and externally focused.
• The system must be easy to use and enable improvements that has to be monitored daily.

Today every company is highly involved in supply chain management. It is one of the most powerful strategies which helps an organization to manage the cost effectiveness, reduce the unnecessary costs, trace and visualize operations and increase the “time to customer” factor. It also helps to optimize the entire operations of the business. Let it be very clear that SCM do not involve inventory management, logistics management, distribution management, procurement management, and shipping strategies.

Ellram and Cooper has defined SCM as “supply chain management is the oversight of materials, information, and finances as they travel through the supply chain from supplier to manufacturer, wholesaler, retailer, and customer.”   In addition to this, it can also be stated that SCM helps in integrating all the business activities and interconnect people with one another by providing products and services. It also involves processes which constantly flows back and forth i.e. from suppliers to manufacturer to distributor and finally to customers.

It helps organization to optimize the three major flows in the chain i.e. product flow, information flow and financial flow by using strong SCM solutions.

• Enhance product and flow of materials

Time allotted to customer is one of the crucial indicator in product flow. The product flow channel will be more efficient when it takes very minimal time for goods to reach its potential customers. Likewise, there are also other factors which affect the product flow such as quality, the balance between demand and supply, shipments options and costs and inventories. Supply chain management helps organization to enhance the product flow with the help of forecasting the demands and sales of the inventory. It also aim at improving inventory in order to avoid bullwhip effect and excess production.

• Seamless information flow

Evolution of ERP systems from the 1960s to the 2000s

The SCM do not only involve material flows but it also helps in the integration of information flows. In today’s generation, the customers are more focused for real time response and they want an easy access to the product they buy. The customers’ demands every information to be well known to them that will help them to choose the product very wisely. Sometimes, the organization has to suffer huge costs because of the fragmented supply chain management and intermittent information. There are many companies who follows effective supply chain management by removing the bottlenecks. SCM helps those companies to evaluate the quality of information and then fill the gaps by implementing best solutions. It also helps to avoid risks by providing accurate, complete and timely flow of information.

Effective and seamless information flow helps to identify the distortion and miscommunication that takes place in an organization. Seamless information flow helps to promote collaboration and value the relationships among its stakeholders. It also helps to improve visibility in the transactions and also helps to analyze the demands based on the past reports.

• Enhance financial cash flow

In order to improve cash flow in the supply chain, the employees must work hard to increase the payments and invoices. The supply chain flow can be more complex when there is variability in financial inflows and outflows. Some of the challenges faced by the organization in terms of finance are lower processing because of manual and silo processes, lack of timely source and information, lack of employee empowerment, high DSO and suboptimal decisions based on credits.

Implementing supply chain helps an organization to face the challenges related to cash flows and helps to evaluate all those challenges by eliminating the weakest flows. With the help of this, the organization can easily capture new market and create business opportunities.

Every ERP projects needs organizational change management. There are few organizations which feels that change management is not at all necessary but it is just an expense for the firm. Change management is very important for the implementation of ERP. The approach must rely on the objectives of the organization along with several factors like culture, language, religion, and experiences.

• Implementation of ERP affects the whole organization system. Thus, organizational change management aims at preparing the employees to impend transformation.
• Employees gets to know the need of the new ERP application and how will it be beneficial for the organization.
• Organizational change management helps employees to know about the changes and learning curves which needs to be well planned and executed as well.

The several components of organizational change management are core team buy-in, accept cultural considerations, constant employee engagement, communication, and training strategy (Deva Nathan, 2017).

Conclusion

Thus, from the above report, it can be concluded that ERP plays a crucial role in any organization. It helps in the sequential flow of the information and also aims at maintaining healthy relationships between the employees. In addition to this, SCM also aims at creating strategies by optimal utilization of resources. In addition to this, organizational change management is also an important factor for the successful implementation of ERP applications.

References

Deva Nathan. 2017. Organizational Change Management Strategies for a Successful ERP Implementation (online). Available from: https://3i-infotech.com/content/organisational-change-management-strategies-successful-erp-implementation/ [Accessed on: 27^th March, 2018]

Management study. 2018. Enterprise System (ERP) (online). Available from: https://www.managementstudyhq.com/enterprise-systems.html [Accessed on: 27^th March, 2018]