NOT long ago, physical resources or assets were more focused than human resources but, of late, it has been established that human resource, a moving force behind other assets, is no less important. In order to produce quality goods and services, new ideas and inventions are coming up and are being applied to access markets and maximize profits.
Information technology (IT) is playing a key role in providing business a competitive edge. Earlier, “IT” performed mainly financial functions but over time it has evolved and its reporting capabilities have become awesome with its computing power.
Reduction of processing time together with the proliferation of “IT” beyond financial functions like sales, marketing and manufacturing have pushed it from the strict business reporting tool to the much larger realm of business “planning”.
In other words, the more the information is accurate, regarding the core areas of business, the better way we can plan our strategies and make business decisions more productive.
Computer or “IT” will now no longer live in its kingdom of “data processing”, it has become a business processing and business emulation tool. “IT” is in the midst of another change and we are fast approaching the era of enterprise knowledge system, the combination of on line/real time information, internal and external links between all activities, e-commerce.
Advanced planning and scheduling system are causing a revolution in transforming a reporting and planning tool into an intelligent “business execution tool”.
A new concept in computer application (IT) has gained much importance and is known as “enterprise resource planning” (ERP) which refers to an integrated software solution to manage a company’s resources.
Manufacturing and planning in business systems have been evolving for decades and ERP is of the current generation. Prior to application of ‘ERP’, ‘material requirements planning’ (MRP) and ‘manufacturing resources planning-II (MRP-II) targeted mainly on managing the manufacturing and accounting resources of an enterprise.
While MRP and MRP-11 mainly focus on manufacturing resources of an enterprise, “ERP” integrates business management functions including planning, materials (inventory) management, engineering, order processing, manufacturing, purchasing, accounting and finance, human resources and more.
In short, ERP is a software solution to manage an enterprise resources. ERP comprises of a commercial software package that promises seamless of all the information flowing through a company—- financial, accounting, human resources, supply chain and customer information. It is first and foremost a business tool and provides information to management and analysis to organizations.
ERP is an opportunity for business and e-engineering like any machine or tool re-engineering. Through this you get chance to reorganize human resources in order to face competition.
Information is a strategic factor along with quality, cost and customer’s satisfaction in order to stay competitive. The software is tested and used in different situations, in most cases failure of the system is due to incorrect data; poor understanding and incorrect application of the package.
Once the system is set, it will furnish the right information at all levels. It is this consistency of information that is one of the greatest advantages of ERP. There is a possibility of using this package in three broad business segments like manufacturing, finance and distribution.
Because of their wide application within a business, ERP involves programmers, analysts and users besides multi- million amounts. To implement this system, we need two levels of consulting namely technical and business. Business consulting involves studying an organization’s current business process and matching them to the process in the ERP system and technical consulting involves programming. In this system, all functional departments are integrated into one system be it manufacturing, shipping, warehousing, marketing or human resources, accounting and strategic management.
Any system be it computer application, process change (in manufacturing) inventory up-keep has its own teething problem. Similarly, in the application of ERP there is bound to occur many and varied teething problems. Teething problems can be due to lack of training and orientation, lack of commitment and interest by management especially top management, poor absorption of technical knowledge, lack of right environment, absence of administrative and technical infrastructure to absorb the system and above all, any defect in the software itself.
Such teething problems should better be foreseen, documented, discussed by all concerned and a check list of possible solutions should be available to overcome them. Many ERP applications have failed or have taken longer time to implement because problems could not be foreseen and enough preparation was not made. There was no solution to these teething problems resulting into disastrous cost consequences.
Failure in implementing and installing an ERP system is not uncommon and the reason can be the incompetence of vendors, lack of proper planning, lack of management interest and commitment to implement the system, technical drawbacks or lacuna in the ERP system itself, absence of any consultant to oversee the hiring of vendors and implementation of the system.
The consultant should be made responsible for appointment of a suitable vendor and also successful implementation of the ERP system purchased within a given time frame. Vendors role, duties and responsibilities should be duly documented in the form of an agreement. The agreement should contain clauses on pricing, training of staff and payment mechanism, possibly be linked with implementation of each component of the system itself. Consultants, vendors and management should work in unison for successful installation and working of the system.
Prior to installing any ERP system, a cost/ benefit analyses is advisable for correct management decision. Preferably an implementation committee be constituted by management consisting of heads of concerned departments, “IT” department and consultant’s representative. Reasons of failure can be external and internal.
A major hindrance to the success of the system are the persons who feel threatened with the introduction of any new system. It is a human psyche to resist change because they think it will reduce their importance or they may not adjust themselves to the change or find themselves unfit or redundant. Therefore this hindrance should be eliminated through training, persuasion, assurance and removal of fear.
All levels of management especially the senior management must be fully involved with commitment and determination. In advanced countries, there is a wide and varied application of ERP system which is growing fast in countries such as India Indonesia, Malaysia etc.
In Pakistan its application is limited to few organizations but realization is growing amongst Pakistani entrepreneurs to reap its benefits.
