Advantages of the ERP System - Case Study Example

Case Study Analysis Executive Summary The study would be reflecting the issues related to the existing system within the business. It would be reflecting the background of the company and the way it faces the challenges in meeting the sales demand due to the problem in the existing business system. There are two strategic options which are provided. The first one includes extensive modification of the existing business system whereas the second one includes purchasing and implementing an entirely new ERP system so that the problems get eradicated from their origin. The study would be highlighting how the second option is more suitable for being implemented in the business processes. It would also highlight the advantages of purchasing and implementing a new ERP system followed by mentioning the challenges that would be faced by the business enterprise at the time of implementation of such a system. Finally, it would be concluding with an insight and the recommendations for overcoming such challenges and maintaining efficiency in the business performance. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Annotation 4 Advantages of the ERP System 7 The Challenges that would be faced while implementing new ERP System 9 Conclusion and Recommendation 10 Reference List 11 Introduction This paper would analyze the case study and help in determining the ultimate solution. The case study deals with discussions related to the recent issues in Peet’s organization. The existing system within the business has failed to meet the demands of the customers. There were several problems in the existing system that had been operating in inventory management, order management, procurement and other financial activities. It was a critical state when it had to be decided whether the existing system would be modified or a new ERP system had to be implemented. Thus, the company required important measures to choose any one of the aforementioned options. It also required providing appropriate reasons for choosing the option. Annotation As the existing system created various problems in the business operations resulting in the inability to meet the sales demand, modification of such a system would not be effective. The company requires implementation of a new ERP system which would recover it from the present scenario. It would help in effectively managing all the business processes. Extensive modification would definitely change the present system but it would not help in the elimination of all the loopholes in a complete manner. Thus, it is necessary to change the system from the root by purchase and implementation of a new ERP System which would enable maintenance of the sales demand in a successful manner. Cassidy, M. P., 1996. Streamlining TQM. The TQM Magazine, 8 (4), pp. 24-28. According to the author, Total quality management (TQM) requires successful implementation of Enterprise Resource Planning in order to ensure effectiveness in all the business procedures. The business processes in ERP system include: Product planning and product development Marketing Inventory management Order management Shipping ERP gives an integrated view related to the core business procedures by means of common databases that are controlled by the database management method. This system would help in keeping a record of all the business resources like, production capacity, cash, raw materials and also, maintaining the status of the business commitments like, the purchase orders, stakes orders and payrolls, thereby enhancing Total Quality Management. Chacko, G. K., 2005. Creating new corporate memories to reinvent IBM: Memory management disequilibria dimensions (MD) 2 Protocol. Management Research News, 28 (5), pp. 1-26. According to the author, Enterprise Resource Planning is a generic term for a series of activities that are supported by multi-module application software helping the organization in to manage its own resources. It has been found that this system provides remarkable improvement in form of increased productivity, efficacy, better service quality and maintenance of a cost effective structure for making appropriate decisions. It facilitates Total Quality management, where TQM is the comprehensive study encompassing all important dimensions of an organization. According to the author, the applications which ground the entire ERP system also, help in sharing the data across all the departments like, purchasing, manufacturing, accounting and sales. It facilitates the rapid flow of information within the business operations and controls the various associations with the external stakeholders. Pai, F., 2011. The ERP system impact on the role of accountants. Industrial Management & Data Systems, 112(1), pp. 83-101. According to the author, Enterprise Resources Planning would also help in the effective functioning of the accountant’s role as it is not merely a system for collecting accounting information. From the broader perspective, implementation of ERP system would better the situation of the accountants as well as the accounting department related to subjective cognition of the accountants. The accountants require thorough knowledge related to information technology, financial accounting and effective management after the implementation of the system. Most of the organizations consider this system as one of the significant organizational tool because it combines various organizational systems and helps in formulating error free results. Maditinos, D., Dimitrios, C. and Tsairidis, C., 2012. Factors affecting ERP system implementation effectiveness. Journal of Enterprise Information Management, 25(1), pp. 60-78. The author has found some of the key issues that are necessary to be considered in order to increase the efficacy of the ERP System. The findings of this study state that the assistance of the external consultants is very important during the implementation of the ERP process. Knowledge transfer is another significant factor responsible for the success of the ERP system. Knowledge transfer related to the technical aspects of the system is highly significant for effective communication within the business and solving conflicts between the organizational members. Shatat, A. S. and Udin, Z. M., 2012. The relationship between ERP system and supply chain management performance in Malaysian manufacturing Companies. Journal of Enterprise Information Management, 25(6), pp. 576-604. According to the authors, the successful implementation of ERP system helps in improving the performance of the supply chain management. There lies a direct relationship between the successful implementation of ERP and the enhancement of the performance of the supply chain management. According to the authors, the successful implementation as well as proper usage of the ERP system within the organization enhances the performance of the supply chain management by means of integration of all the internal business procedures, collaboration or coordination of the customers with the outsourcing suppliers, increased efficacy in the flow of information among different organizational departments and improvement of the relationship with the internal stakeholders as well. Haug, A., Pedersen, A. and Arlbjørn, J. S., 2010. ERP system strategies in parent-subsidiary supply chains. International Journal of Physical Distribution & Logistics Management, 40(4), pp. 298-314. According to the authors, a large number of companies remain a part of the parent-subsidiary supply chain where the parent corporation obtains product from its subsidiaries. This close association in the supply chain network facilitates the implementation of ERP system in such organizations. This paper has helped in highlighting different types of ERP system strategies within the parent-subsidiary supply chains, followed by the consequences of choosing these strategies. The research study has reflected on the impacts of selecting any one out of the four ERP system strategies in the parent-subsidiary supply chain. Qubein, N., 2009. Implementing Total Quality Management. [online] Available at: [Accessed 14 November 2013]. According to Qubein, Enterprise Resource Planning has several advantages. They help in the efficient functioning of all the departments in the organizations. They are mentioned as below: Advantages of the ERP System It helps in providing complete visibility in all the significant business processes across all the departments of the organization. It helps to maintain a coherent and automatic work-flow from any one department to another in order to ensure the smooth transition as well as completion of the business processes. As similar software is used throughout all the departments, it helps to avoid the purchase and maintenance of separate software for individual departments. This also helps in the appropriate management of all the departments. There are certain ERP vendors who also extend their ERP systems for providing Business Intelligence functionalities. OíLeary, D. E., 2004. Enterprise resource planning (ERP) systems: An empirical analysis of benefits. Journal of Emerging Technologies in Accounting, 1, pp. 63-72. According to the researcher, ERP also has additional facilities of providing centralized security procedures so that all the business transactions can be traced easily. It helps in the integration of the system with other systems in order to ensure transparency in all the business processes. ERP system is highly secured as the centralized security procedures can easily be applied in this system and all the transactions which take place by means of the ERP systems can easily be tracked. ERP system offers visibility and enables faster or increased collaboration within all the departments. ERP systems helps in inventory tracking, sales forecasting, revenue tracking, order tracking and other related activities. ERP systems provide advantage in the management of the globally disseminated enterprise companies. Brazel, J. F. and Dang, L., 2008. The effect of ERP system: Implementations on the management of earnings and earnings release dates. Journal of Information Systems, 22(2), pp. 1-21. According to Brazel and Dang (2008), there are several challenges faced by the organizations while implementing ERP in their business procedures. Such challenges might lead to failure in the business operations. The Challenges that would be faced while implementing new ERP System One of the challenging factors related to the adoption of ERP is the integration with other types of e-business software like, CRM (i.e. Customer Relationship management), BI (i.e. Business Intelligence), SCM (i.e. Supply Chain management) and IMS (i.e. Information Management System). The integration of this system with the rewarding framework is very difficult as compared to the integration of this system with the e-business applications. Most of the companies resist the implementation of ERP system within their business processes after becoming aware of the failures associated with the ERP implementation in some cases. It is due to this reason that it becomes very crucial to select the appropriate ERP system that is best suitable for the specific industry. It is also important to interact with such an ERP vendor who already possesses a successful track record as well as retention rate with the other business enterprises. Khalid, S., Irshad, M. J. and Mahmood, B., 2011. TQM Implementation in Textile Manufacturing Industry to Success: Review and Case Study. International Business Research, 4 (4), pp. 242-247. According to the authors, there are various other challenges faced by an organization while implementing the new ERP system in the business procedures. Such challenges include: The implementation of ERP system does not guarantee that there would be attainment of competitive benefit. The major issue rests in ensuring the fact that ERP would generate a positive return on investment. Thus, an in-depth analysis of the systems, objectives, goals expected return and software vendors are very necessary. The implementation of ERP within the business procedures of an organization is a time consuming procedure. A lot of effort as well as patience are required before it starts to yield successful results. Conclusion and Recommendation The existing system within the organization is seen to create various problems in the business operations resulting in the inability to meet the sales demand. It is due to this reason that the modification of the existing system would not be effective. The company needs to implement a new ERP system for its recovery from the present scenario. It would also help in effectively managing all the business processes. Although extensive modification would bring in changes in the existing system, yet it would not be eliminating all the loopholes in a complete manner. Business enterprises consider the ERP system as one of the most vital organizational tools as it integrates different organizational systems and helps in processing error-free transactions and production. Implementation of ERP system would help the business enterprise to overcome the present issues and to cope up with the sales demand for performing efficiently. Reference List Brazel, J. F. and Dang, L., 2008. The effect of ERP system: Implementations on the management of earnings and earnings release dates. Journal of Information Systems, 22(2), pp. 1-21. Cassidy, M. P., 1996. Streamlining TQM. The TQM Magazine, 8 (4), pp. 24-28. Chacko, G. K., 2005. Creating new corporate memories to reinvent IBM: Memory management disequilibria dimensions (MD) 2 Protocol. Management Research News, 28 (5), pp. 1-26. Haug, A., Pedersen, A. and Arlbjørn, J. S., 2010. ERP system strategies in parent-subsidiary supply chains. International Journal of Physical Distribution & Logistics Management, 40(4), pp. 298-314. Khalid, S., Irshad, M. J. and Mahmood, B., 2011. TQM Implementation in Textile Manufacturing Industry to Success: Review and Case Study. International Business Research, 4 (4), pp. 242-247. Maditinos, D., Dimitrios, C. and Tsairidis, C., 2012. Factors affecting ERP system implementation effectiveness. Journal of Enterprise Information Management, 25(1), pp. 60-78. OíLeary, D. E., 2004. Enterprise resource planning (ERP) systems: An empirical analysis of benefits. Journal of Emerging Technologies in Accounting, 1, pp. 63-72. Pai, F., 2011. The ERP system impact on the role of accountants. Industrial Management & Data Systems, 112(1), pp. 83-101. Qubein, N., 2009. Implementing Total Quality Management. [online] Available at: [Accessed 14 November 2013]. Shatat, A. S. and Udin, Z. M., 2012. The relationship between ERP system and supply chain management performance in Malaysian manufacturing Companies. Journal of Enterprise Information Management, 25(6), pp. 576-604. Read More