Enterprise Resource PlanningEnterprise Resource Planningand it’sand it’s

Competitive AdvantageCompetitive Advantage

Boone, Begley, Selander, Sturbaum, Boone, Begley, Selander, Sturbaum, Sumner, Wommack and WileySumner, Wommack and Wiley

April 10, 2006April 10, 2006

Will Enterprise Resource Planning (ERP) provide a Will Enterprise Resource Planning (ERP) provide a competitive advantage for Global Companies? competitive advantage for Global Companies?

Myth or Fact?

ThreatsThreats

Rapid expansion through growth and Rapid expansion through growth and globalizationglobalization

Ability to manage business strategies real Ability to manage business strategies real timetime

Multiple Information SystemsMultiple Information Systems

Legacy Systems that companies still useLegacy Systems that companies still use

Standardization of alternative productsStandardization of alternative products

Communication between various Communication between various departments and offices around the worlddepartments and offices around the world

OpportunitiesOpportunities

Order entry, tracking and fulfillment Order entry, tracking and fulfillment Automated customer notification of shipping Automated customer notification of shipping datesdatesCustomer follow up – email communications Customer follow up – email communications New distribution channels New distribution channels Financial Growth improvementFinancial Growth improvementMaterials planning and allotmentMaterials planning and allotmentImproved Production line managementImproved Production line managementIncreased Quality/TQM managementIncreased Quality/TQM management

Two Different Approaches to ERPTwo Different Approaches to ERP

Problems-Based Approach Problems-Based Approach

Over come current disadvantage from competitionOver come current disadvantage from competition

Achieve single unrelated business targets Achieve single unrelated business targets

Providing self service to employee benefitProviding self service to employee benefit

Remove constraints (manufacturing, accounting, etc.) Remove constraints (manufacturing, accounting, etc.)

Innovation-Based ApproachInnovation-Based Approach

Create new online sales channelCreate new online sales channel

Allowing customer to pay invoices onlineAllowing customer to pay invoices online

Track the status of orders and shipmentsTrack the status of orders and shipments

Collect and analyze data to better meet the needs of customersCollect and analyze data to better meet the needs of customers

Peppard, J. & Ward, J. 2005. Unlocking Sustained Business Value from IT investments, California Management Review, 48 (1) p52-70.

Customer Loyalty and Satisfying DemandsCustomer Loyalty and Satisfying Demands

““Customers generally place significant value on Customers generally place significant value on the quality and speed of interactions, the quicker the quality and speed of interactions, the quicker and easier the enterprise can make it for the and easier the enterprise can make it for the customer, the more likely he or she will remain a customer, the more likely he or she will remain a loyal consumer” (Levitan, 2004). loyal consumer” (Levitan, 2004).

““ERP initiatives are the backbone that help ERP initiatives are the backbone that help enable the business processes to respond to the enable the business processes to respond to the needs of this demand driven environment” needs of this demand driven environment” (Eggelston, 2005). (Eggelston, 2005).

Using ERP to gain a Competitive AdvantageUsing ERP to gain a Competitive Advantage

ERP technology can provide higher customer satisfaction if it ERP technology can provide higher customer satisfaction if it improves the customers experience with your company. When improves the customers experience with your company. When these results become reproducible customer loyalty can be these results become reproducible customer loyalty can be achieved.achieved.

Global companies must have the ability to change or create rules Global companies must have the ability to change or create rules inside the software to adjust to the changing environment.inside the software to adjust to the changing environment.

Data mine in order to find customer trends and business trends.Data mine in order to find customer trends and business trends.

Use the technology to be innovative in areas of TQM, MRP Use the technology to be innovative in areas of TQM, MRP management, ABC accounting methods and financial reporting.management, ABC accounting methods and financial reporting.

Lack of a ERP system puts a competitor at a disadvantage.Lack of a ERP system puts a competitor at a disadvantage.

Marketing

R&

DSale

s

Customer Care

Fin

ance

&

Acc

ounti

ng S

erviceNew Online

Global CustomerChannel

ERP Model

Customer logins in to site places service call for broken instrument

First available service engineer dispatched; customer advisedCC tracks service

progress – notifies sales of problems

Global Managers data mine MTBF – Run program to replace old units.

Accounting sends trade-in cert. to current customers

Finance adjusts COGS model

Website allows for customer to upgrade online with promo and place order

Tracks failures and makes improved instrument; Quality notified

ERP SuccessesERP Successes

Advance Transformer Co.Advance Transformer Co. United States -- This lighting products United States -- This lighting products manufacturer upgraded its IT landscape cost effectively and without manufacturer upgraded its IT landscape cost effectively and without business disruption using SAP solutions -- and saved an estimated business disruption using SAP solutions -- and saved an estimated US$500,000 in project costs. US$500,000 in project costs. Heads and Threads InternationalHeads and Threads International United States -- Consider how this United States -- Consider how this wholesale distributor uses the mySAP ERP solution to track supply and wholesale distributor uses the mySAP ERP solution to track supply and demand of customers and vendors, and adjust prices rapidly to benefit from demand of customers and vendors, and adjust prices rapidly to benefit from changing market conditions – reduced inventory cycle times 50%.changing market conditions – reduced inventory cycle times 50%.Great Wall Broadband NetworkGreat Wall Broadband Network China -- See how this provider of Internet China -- See how this provider of Internet access and other services improved data quality and accuracy, business access and other services improved data quality and accuracy, business processes, and decision-making with mySAP ERP – in a six-month processes, and decision-making with mySAP ERP – in a six-month installation.installation.Pierre LangPierre Lang Austria -- Learn why this designer jewelry producer decided to Austria -- Learn why this designer jewelry producer decided to implement mySAP ERP to help deliver more dependable system implement mySAP ERP to help deliver more dependable system performance plus increased accuracy and reliability of customer, sales, and performance plus increased accuracy and reliability of customer, sales, and financial information. financial information.

((http://www.sap.com/usa/solutions/business-suite/erp/customersuccess/index.epxhttp://www.sap.com/usa/solutions/business-suite/erp/customersuccess/index.epx, 2006), 2006)

Why does ERP Technology Fail?Why does ERP Technology Fail?

Technology is used to solve business Technology is used to solve business and organizational problemsand organizational problemsNo Strategic vision No Strategic vision Measure unobtainable or unrealistic Measure unobtainable or unrealistic goals. Chasing ghostsgoals. Chasing ghostsNo base-line measurements taken.No base-line measurements taken.End users failed to see the new vision End users failed to see the new vision – poor change management– poor change managementLack of change initiative Lack of change initiative implementationimplementationFailure to add upgrades or poor Failure to add upgrades or poor customizationcustomizationNo global implementation of systemNo global implementation of system

…89% of new ERP measured a success

...only 25% of those had any affect on business strategy

Balanced Scorecard for ERPBalanced Scorecard for ERP

Financial Customer Satisfaction

Internal process Learning & Growth

Objective Metrics

Short term growth Revenue growth from ERP based project

% overall cost reduction from implementation

Long term growth EVA & SFGR

Objective Metrics

Objective MetricsObjective Metrics

Quality improvements % reduction of time per customer inquiry

% reduction of customer complaints

Customer Loyalty % of frequent customers

Manufacturing Efficiency % reduction of inventory

% reduction in overall time to produce products

$ saved from ERP

Organizational Efficiency accuracy of forecasts

Change Management number of days to complete new processes

Development of ERP $ invested

Skills & Knowledge number of certified

employees

Epstein, M.J & Rejc, A. 2005. How to Measure and Improve the value of IT. Strategic Finance.

Direction of ERP and needs of Global Direction of ERP and needs of Global ManufacturingManufacturing

Simulation ToolsSimulation Tools

Exception based Exception based projectionsprojections

Service Oriented Service Oriented ArchitecturesArchitectures

Grid ComputingGrid Computing

Linux (mission critical)Linux (mission critical)

On-Demand ERP On-Demand ERP computingcomputing

Intermodal link between various plantsIntermodal link between various plants

SuperBOM management between SuperBOM management between facilitiesfacilities

Strategic sourcing initiatives (i.e. linear Strategic sourcing initiatives (i.e. linear pricing)pricing)

Application of Lean manufacturingApplication of Lean manufacturing

Reduced inventory on handReduced inventory on hand

Internal customer pull schedulingInternal customer pull scheduling

ERP creates a wider business modelERP creates a wider business model

Software as a service providerSoftware as a service provider

Optimization of Hardware packagesOptimization of Hardware packages

Program off-site DeploymentProgram off-site Deployment

Enterprise Operating System Enterprise Operating System enhancements done off site and on-enhancements done off site and on-demand.demand.

Proposed Business & Organizational StrategiesProposed Business & Organizational Strategies

As a subsection of the ERP Implementation these items As a subsection of the ERP Implementation these items should be considered:should be considered:

How can improvements to current processes improve How can improvements to current processes improve customer experience?customer experience?

Through the technology can we reach new customers?Through the technology can we reach new customers?

How can the technology enable the organization to make How can the technology enable the organization to make faster better qualified decisions?faster better qualified decisions?

How can it help measure external forces?How can it help measure external forces?

ERP Competitive Advantage – ERP Competitive Advantage – Sustainable advantageSustainable advantage

Innovative approach – using technology to execute new strategies Innovative approach – using technology to execute new strategies (business & organizational).(business & organizational).ERP are successful when they become business change projects rather ERP are successful when they become business change projects rather then technology projects.then technology projects.Flexible software engines to keep up with changing strategies.Flexible software engines to keep up with changing strategies.Good process managementGood process managementSetting concise goalsSetting concise goalsMeasure the base-line & set goals based business and organizational Measure the base-line & set goals based business and organizational strategies.strategies.ERP is technology, it will not create business strategies or organizational ERP is technology, it will not create business strategies or organizational strategies. It merely bridges the two allowing senior management to make strategies. It merely bridges the two allowing senior management to make decisions in real time.decisions in real time.A comprehensive set of functions for procurement and logistics execution, A comprehensive set of functions for procurement and logistics execution, product development and manufacturing, and sales and service helps product development and manufacturing, and sales and service helps streamline business cycles, such as purchase-to-pay and make-to-order. streamline business cycles, such as purchase-to-pay and make-to-order. Customer focus strategies to create differentiationCustomer focus strategies to create differentiationThe data mining of marketing for new product introduction The data mining of marketing for new product introduction

Myth or FactMyth or Fact

ERP Technology provides a competitive advantage.ERP Technology provides a competitive advantage.– Implementing good change managementImplementing good change management– Utilizing the technology to find innovative ways to touch your customersUtilizing the technology to find innovative ways to touch your customers– ABC accounting and financial reporting accuracyABC accounting and financial reporting accuracy– Increased customer satisfaction – customer loyaltyIncreased customer satisfaction – customer loyalty

PROVEN FACT

Questions????Questions????