Question

Case No 2

At times when “everybody’s doing ERP”, users say they can still gain a competitive advantage from implementing ERP systems. Users of ERP can have competitive advantage from the way they implement the systems and can best make use of resulting data. Also, users say the system can make them more nimble in the marketplace than companies with hard to change custom programs.

ERP users can identify the biggest gain is that they force a company to institute a proven set of business processes, rather than reinvent the system. One of the big advantages of packed applications is that as the state of the art moves you move with it. With this kind of packaged application users can concentrate on the business at hand. Meanwhile, the company’s ERP software keep the user outfitted with the latest technology.

ERP systems also allow users to turn on and off functionality as needed to adapt quickly to changes in their business, in contrast to a customized application that has to be rebuilt. ERP software like Baan’s and R/3 from SAP America are business tools and what these applications do is capture data about historical activity, current operations, and future plans, and organize that in a way people can use. Simply having the system is a competitive advantage because it gives a company a foundation to run its business and then concentrate on grabbing market share.

When you look at the flexibility in big ERP systems, once implemented, they can look entirely different from one organisation to another. If SAP is considered as a set of building blocks, and it’s how you put those building blocks together that gives you an advantage.

If set up properly, enterprise application systems can save millions of dollars and can be of greater competitive advantage to organization. ERP has helped Steelcase company in reducing eighty-million-dollar operating expenses from eliminating redundant processes and making data more usable. Likewise the CIO of Colgate Palmolive also appreciated their ERP, saying, the day we started using, we dropped two days out of our order-to-delivery cycle. Process can be streamlined and data become more usable using the packaged enterprise application systems. It alsoease the linking of systems with software across the firm and with key business partners. More over the software whichmakes up these systems is, tested, bug free and properly documented with an industrial accuracy that may be difficultto match with proprietary software developed in-house.

But for all those promises of packaged applications solutions for standard business functions, enterprise software installations have proven to be difficult and unrealistic. When business processes are standardised and others can also buy it, then it would means that those functions are easy for competitors to match and the vision of a single monolithic system that delivers up unbelievable efficiencies has been difficult to achieve for many.

The average large company spends roughly $15-20 million on ERP software, with some installations running into the hundreds of millions of dollars. And many of these efforts have failed disastrously. Talk about FoxMeyer, a once a six-billion-dollar multi- drug distributor company, but a failed ERP installation led to a series of losses that bankrupted the firm, is an example to be kept in mind. The collapse was so fast and so comprehensive that just a year after launching the system, the carcass of what remained of the firm was sold to a rival for less than $80 million. Hershey Foods attributed a $466 million revenue shortfall on glitches in the firm’s ERP rollout. The failed implementation prevented the candy maker from getting product to retail stores during the crucial period before Halloween. Nike’s first SCM and ERP implementation was labelled a “disaster”; their systems were blamed for over $110 million in lost sales.

Both questions carries 5 marks: Minimum No. of Words per Question - 150

2a. Evaluate how implementing ERP software gives the competitive advantage to the business organizations?

2b. Compare the benefits and drawback of Customised ERP to Packaged ERP system. What do you think about the reason behind the documented failure of ERP installation at large number of organisations?

Answer 1

ANS 2a: ERP gives a competitive advantage to the organisations by:

• the way the install the system that provide them the required correct and valid data. like Baan’s and R/3 from SAP America are business tools and what these applications do is capture data about historical activity, current operations, and future plans, and organize that in a way people can use.
• ERP users can identify the biggest gain is that they force a company to institute a proven set of business processes, rather than reinvent the system.
• making the best use of the data generated the companies can be advantageous
• in case of customised systems, companies become more active in the marketplace
• gives a company a foundation to run its business and concentrate on grabbing market share by making best use of data.
• provides enough flexibility to make changes as per the requirement
• If set up properly, can save millions of dollars for e.g.Steelcase company reduces eighty-million-dollar operating expenses from eliminating redundant processes

ANS 2b Comparison between customised and packaged ERP softwares:

• One of the big advantages of packed applications is that the companies can concentrate on the business. Meanwhile, the company’s ERP software keep the user outfitted with the latest technology.
• ERP systems also allow users to turn on and off functionality as needed to adapt quickly to changes in their business, in contrast to a customized application that has to be rebuilt.
• If set up properly, enterprise application systems can save millions of dollars and can be of greater competitive advantage to organization.
• Process can be streamlined and data become more usable using the packaged enterprise application systems. It alsoease the linking of systems with software across the firm and with key business partners.
• More over the packaged software is, tested, bug free and properly documented with an industrial accuracy that may be difficult to match with proprietary software developed in-house.
• In case of packaged ERP softwares, others can also buy it, then it would means that those functions are easy for competitors to match and the vision of a single monolithic system that delivers up unbelievable efficiencies has been difficult to achieve for many. So in this case customised softwares become an advantage.

Reason behind the documented failure of ERP installation at large number of organisations:

If the goals are poorly defined for the ERP softwares, it can fail. Another factor can be lack of expertise for handling the software or the management commitment is not enough. Underestimating data migration and lack of communication and interpretation of data can be reasons also.