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ERP’s Impact on Information Use and Business Strategy-ERP系
  
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摘要:ERP对于公司是一个重要的信息化解决方案。通过整合信息流和企业内部信息共享,提高了业务流程,企业内部整合不同的功能,使跨部门之间的沟通方便。ERP is an important information solution to firms. By integrating the information flow and sharing information inside the firm, it improves the business process, integrate different function within a company, and make communication between and across departments conveniently.
 
ERP’s Impact on Information Use and Business strategy
ERP系统对信息的使用和经营战略的影响
 
Executive Summary
执行摘要
 
With the development of information and network technology, more and more companies are adopting the advanced technology in their management to improve their efficiency and enhance the profitability. Enterprise Resource Plan (ERP) is one of the most important information technologies and it has been widely implemented by many famous companies over the world. As a company grows, they may face problems in managing their resources like human resources, fixed assets, products, inventory, and orders etc. If the company can not deal with these problems properly, then they would face more severe troubles in quick response to their customer, in cost reduction etc. At this time ERP is a good solution to these companies. At present, there are quite a lot of literatures about ERP. In this report, we will make a summary about how ERP has impacts on the information use in an organization and how ERP has impacts on the business strategy, based on the present literatures. Meanwhile, ERP system brings about benefits only if it is successfully implemented. As we know, failure in implementing ERP is normal. So we also cover some issues in ERP implementation and give suggestions for the implementation through a case study of China’s company.
 
随着信息技术和网络技术的发展,越来越多的公司采用先进的技术在他们的管理中,提高效率,增强盈利能力。企业信息管理系统( ERP)是最重要的信息技术之一,它已广泛被许多著名公司在世界各地实施。随着公司的成长,他们可能面临在管理他们的资源,如人力资源,固定资产,产品,库存和订单等,如果该公司这些问题处理不当,那么很快将面临更加严峻的问题困扰他们的客户,降低成本等。这时ERP是很好的解决了这些企业的问题。目前,有相当多的关于ERP的文献。在这份报告中,我们将研究ERP对一个组织的信息的使用有什么影响,以及基于目前的文献,ERP对企业战略的影响的总结。同时, ERP系统带来当它成功实施的好处。我们知道,在实施ERP失败是正常的。所以我们也涵盖了ERP实施的一些问题,并通过中国的公司为例给出了实施建议。
 
Introduction
引言
 
In different literatures, ERP has different definition. But we could know the essence of ERP from them. ERP is not just software that helps to manage the company, but also reflects improvement in business process, better practice implementation, internal integration within a company and the integration with other companies. Furthermore, successful ERP could be the backbone of a company in business intelligence(A. Parr, 2000). Hayes et al. (2001) give evidence that the capital market put more and more value on firms that adopted ERP systems, because the investors reacts positively to ERP implementation announcements.Robin Poston (2001) find out significant improvement has achieved in firm performance resulting from a decrease in the ration of cost of goods after the ERP system implementation (but not in the first or second year after adoption). Further, there was a significant reduction in the ratio of employees to revenues for each of the 3 years examined following the ERP implementation. Their studies show us the adoption of ERP could be a good IT solution to the firms. In current context, three aspects are addressed in detail. From the aspects of technology, ERP impacts information use in the main three ways. In the first place, it improves the information processing way. And then, it provides a more fluent information flow so that the information could deliver from one department to another very quickly. In the end, it makes the information shared by the entire employee in a company, which keeps the consistency of information. From the perspective of business strategy, it benefits the company who implement ERP in three aspects. Firstly, it helps the planners work out more accurate production schedule. Secondly, it lowers the cost of inventory and helps the inventory manager make wiser inventory level. Thirdly, it helps the manager in decision-making. On the other hand, ERP implementation sometimes fails, and unfortunately this would make the company cost a lot of money but get meager results. Therefore, it seems important to learn the factors that have relations with successful implementation of ERP. The third aspect is about ERP implementation. We will research a company’s ERP implementation journey and find out some tips for ERP implementation.
在不同的文献中, ERP系统有不同的定义。但我们可以从他们那里了解ERP的精髓。 ERP不仅仅是软件,帮助管理公司,也体现在改善业务流程,更好的做法和实施,公司内部的整合和与其他公司的整合。此外,成功的ERP可以是公司在商业智能的骨干( A.帕尔,2000),Hayes等。 (2001)给出的证据表明,资本市场越来越多的价值是通过ERP系统,因为投资者积极反应, ERP的实施announcements.Robin波斯顿( 2001)发现显著的改善已在公司业绩由下降导致增加货品成本的ERP系统实施(但不是在收养后的第一年或第二年)。此外,有一个显著减少员工的比例为收入三个年度各年的研究之后的ERP实施。他们的研究表明,我们通过ERP系统可能是一个很好的IT解决方案的公司。在目前情况下,三个方面都详细讨论。从技术方面, ERP系统影响的信息在主三种方式使用。首先,它提高了信息处理的方式。然后,它提供了更流畅的信息流,使信息可以提供从一个部门到另一个非常快。最后,它使在一个公司,这使信息的一致性全体员工共享的信息。从企业战略的角度来看,它有利于谁在三个方面实施ERP的公司。首先,它有助于规划者制定出更准确的生产计划。其次,它降低了库存成本,并帮助库存管理员做出更明智的存货水平。第三,它有助于决策的经理。在另一方面, ERP的实施有时会失败,不幸的是这将使该公司花费了很多钱,但得到微薄的结果。因此,得知有成功实施ERP的关系的因素似乎很重要。第三个方面是关于ERP的实施。我们将研究一个公司的ERP实施旅程,找出ERP实施的一些技巧。
 
 
ERP’s Impact on Information Use
 
Review to ERP’S history
 
 
From the aspect of technology, ERP is defined as technology of integrating all sectors and utilizing all resources across a company into a single computer system that can meet with all those different sectors’ particular needs. For an enterprise, the goal of managers is to make good use of all kinds of resources and create values for company. At that time, management, resource allocation and value-creating processes are always made by traditional ways. As the development of enterprise’s scale and serious competitive market, it requires to enhance reflection rapid, decrease the errors etc. Under this circumstance, the utilization of rapidly changing information technology has been the common needs of enterprise management. It has important significances to combine the customers’ needs and internal activities, to integrate the manufacturing resources together to form a complete enterprise supply chain and all aspects of the supply chain such as orders, purchase, inventory, planning, manufacturing, quality control, transportation, distribution, service and maintenance, financial management, personnel management, laboratory management, project management, formula management, effective management and so on. This is what ERP can do and help you realize the goals. ERP is using advanced computer and network tools to achieve highly efficient, real-time, highly integrated results, and then provide more guidance for enterprise management. Nowadays, large amount of enterprises operate ERP system and there are ERP brands such as ORALE, SAP all over the world.
 
 
ERP was firstly proposed by Gartner Group Inc in 1990s. At that time, the definition of ERP is only based on technology development and supply chain management to infer various manufacturing in the information management system. The history of ERP has experienced several stages. Firstly, in 1960s, it is defined as a stock purchasing plan, in another word; it is in the period of materials requirements planning (short for MRP). Secondly, in 1970s, based on the MRP, it develops to be production and control stage. Thirdly, enterprises operate as a production management information system-MRP2 stage. However, production management is only one part of enterprise; there are capital low, logistic low and information low. Fourthly, with the development and wide use of internet, ERP has its deeper meaning, which includes the following points. In the first place, ERP is an integrated information management oriented supply chain management. In addition, with the internet and computers, the ERP system can achieve supply chain management information integration. In the end, ERP are closely related to business process reengineering, which accelerate the speed of transmitting information and real-time, expand the coverage of business and exchange of information. After that, this provides favorable conditions for enterprises to make real-time processing and decision-making policy.
 
 
 
ERP’s Impact to Information Flow in Organization
 
As we know that definition and development of ERP, ERP is the modern integration technology which refers to aspects such as logistics, information use, user satisfaction, information quality etc. At first, we introduce how ERP influence the information flow (John, Ben-Arieh, 2002). The dual cores of ERP system are management ideas and information technology. Information technology means utilizing the information technology to efficiently integrate the funding low, logistics low and information low, and then makes them work in coordination in order to achieve optimal performance.
 
 
 
Information flow is the neural network enterprise system (MacMAnus, 2004). There are three directions in company’s technology: upward information flow, which is a way to the middle, and then to high-level. This is the process of accumulating information. Secondly, this is a way of flowing from upward level to middle, and then to downward level. It is a decomposition process of enterprise’s strategy, objectives and the directions. Thirdly, it is the horizontal information low, which is the communication and coordination process between different departments. Under this condition, the information must be true, accurate and timely, and then guarantee the effectiveness of organizations.
 
 
 
Nowadays, with the development of technology and widespread of internet, more and more enterprises can not develop in competitive market. In order to make enterprises manage more efficiently and deal with information quicker, it is necessary for enterprises to choose ERP to help them. Firstly, ERP has the format standardization of information, fixed transmission channels and warning remind function, accordingly, it makes sure that information transfer smoothly and can not be distorted. Secondly, ERP is the best way of optimizing the enterprises’ business process, and then make great effect on the business process. It can automatically remove a part of manual work in order to prevent employees from amending the information. Thirdly, the application of ERP requires enterprises change the formal process order or realize the parallel process, which will help monitors closely watch the process. In this process, ERP will help enterprises delete the useless step or simplify the complex step of information low. The basic management of information flow will be highly effective, comprehensive, standardized and accurate. After that, enterprises will have more room to coordinate the process, integrate the information and analyze the decision information. In a word, ERP is a way of make information transfer more smoothly, increase the transfer speed and improve the information quality.
 
ERP’s Impact to Information Sharing
 
We know that ERP has greatly influenced the information flow, capital flow and logistics flow, and then it is better for enterprises to realize the importance of information sharing. There are two kinds of information sharing: one is at the data level and another is at the business-process level (SCOR, 1999). Within the ERP system, the middleware serves as an information backbone to transfer and convert data among disparate ERP subsystems. In this way, the distributor attempts to implement distributed transactions and integrated manager must process the whole business. With the compressive and clear infrastructure, the information sharing in enterprises are more effective. For data level sharing, while ERP has its own database, it is helpful to manage the distributed data sources by the way of sharing one database. Furthermore, it is easy for enterprises to implement since application changes are not required (C. Britton, 2001). Therefore, the business process of ERP can simplify the information sharing, and then make the information sharing more effectively. On the other hand, while ERP provides the standardized and uniform management from purchasing to manufacturing. Therefore, for all business in enterprise, there is one common process, which is the base of information sharing. For example, as known to all, marketing department correlates to financial department. Furthermore, in current environment, purchasing department can also be collected to financial department as marketing department does. Procurement management focuses on purchase order, and then realizes the information sharing of related departments. Procurement task can be reflected in purchase orders; accordingly, all executions situation of procurement task can be recorded by information sharing. Once procurement order has been through examination and approval, the task is clear. At this time, all related departments can see the purchase orders, furthermore, they can directly use the data in purchasing department such as supplier, brand, quantity, price and so on. This information can not got by manual, which is why ERP is able to improve the efficiency of enterprises. Thanks to ERP, the enterprises can share information in all departments smoothly and enhance the manufacturing efficiency.
 
ERP’s Impact to Information Processing
 
The information flow and information sharing have been discussed in the above sections; it is going to introduce the information processing. Information processing involves gathering and representing information, recording and holding information, getting information when needed. With the help of ERP, all departments share information, so information gathering and information recording will be very convenient and quick, and the data gathered and recorded will be more accurate. On the other hand, many operations on data can be done by the system automatically, such as different kinds of queries, some statistics on orders or inventory, financial reports etc.
 
In the process of information processing, there is always uncertainty in the environment. Therefore, the more accurate information will cope with the uncertainty environment stronger, and then make more good decisions (Gattiker, & Goodhue, 2004). ERP related to two big fields of management knowledge and computer technology. What’s more, computer technology includes computer technology and information process technology. For example, more manufacturing companies often find that multiple businesses bothered them and reduce the manufacturing speed. However, with the help of ERP in information processing, it can save time, increases productivity and reduce number of workers for the companies.
 
ERP’s Impact to Business Strategies
 
The Successful and Failed Implementation of ERP
 
According to the literatures reviewed, many of them are about the implementation of ERP System. Some of the articles address the critical factors which are important to utilize ERP packages and give case study of several big companies from different industries (Jaideep Motwani, Ram Subramanian, 2005). From their analysis, we know that not all implementations will end up with success. As we all know, only the success ones can attain huge benefits from application of ERP system and the failed would bear loss more or less, depending on their cost on implementation. To be clear, in current context, it will limit the impact of implementation to be successful, not the failed. Furthermore, after discussing the case study, we attend to propose some good suggestions on how to implement ERP successfully.
 
Overviews about benefits from ERP System
 
As we all know, ERP System is software that integrate all the information processing functions across a company such as production, order management, inventory management, procurement, financial reports. It is obviously the companies that have utilized the system would have many benefits from it. The intangible ones are more fluent information process, internal integration, and better customer service. While the tangible ones covers lowering cost in order management, human resources management, purchasing management and inventory management. In a word, the overall profitability improves a lot. And the next several paragraphs will give more details on how all this happen, from the point view of the information flow changes.
 
Impacts to Production Schedule Strategy
 
Production schedule are quite important to the manufacturing companies. And they always have to make production schedules before producing. When they do not use ERP system, the planners can not get the customer’s demand amounts on time. The traditional way of demand information flow is much longer, because the customers tell the retailers at first. After that, the retailers pass the information to direct agents; and at last the information reaches the manufacture. The demand information sometimes magnifies in the flowing process, which is called bullwhip effect in some articles, which results to magnified production schedule. And sometimes they predict demand based on the demand in the last few years or months. But with the ERP system’s help, the case is quite different now. The customers could input their demand account into the company’s ERP system directly. This does not only reduce the time of information access but also make the information more accurate. Meanwhile ERP system has the function of MRP (Material Requirement Planning), so the production schedule can be particular to every parts or materials that are needed. This is quite helpful to production and procurement departments. All in all all,or the information flow changes brought by ERP system, the managers could more accurate business strategy on production schedule and reduce the production cycle.
 
Impacts to Inventory Strategy
 
Inventory management may be the most widely talked subject in enterprise management. Most of the manufacturing companies pay highly attention to it, because it affects the cost of production and sales. Inventory in a company usually includes the materials purchased for production, products stored for customer’s order and some semi-products for machining. So reducing the amount of inventory refers to the three. Firstly, ERP system help material supplier to attain the manufacture’s production schedule information in a short time, then they can prepare and deliver the demanded material to the manufacture in time, so that the manufacture could decrease the material inventory spared for production. The old way of the information flow might be through fax, telephone etc. Secondly, ERP system help the manufactures get the customers’ order information much faster and more accurate than before (the detail has addressed in last paragraphs), so the manufacture could response to the need more quickly. In another word, they do not need as much product inventory as before. Thirdly, for the sake of shorter production cycle, the semi-production inventory could be reduced. Meanwhile the ERP system also include inventory management function, and this help the inventory manager get the inventory amount of any material or product very quickly, so they could make wise decision about the inventory level. In the days without ERP system, it would take a long time to get the accurate inventory of a product, because the worker needs great effort to work out the accurate account from many bills by hand. The information flow among the suppliers, manufacture and customers is integrated very well in the manufacture’s ERP system. Not only could the manufacture benefit from the integrated information flow but also the participated suppliers and customers. Many companies even begin to adopt VMI (Vendor Manage Inventory) solution, according to some reports. Anyway with the ERP system’s support, the business strategy of inventory management is changed and improved.
 
Impacts to Decision-Making
 
Decision-Making mostly connects with the high level managers in a company. They make decisions on all aspects within the company. Sometimes they make decision only with their courage and insight. But at most of the time they need information to support and help them, because it is believed that the data tells truth.The information could be the data about sales in recent months or years, the data about cost of inventory, the data about cost on research work etc. ERP system has all information they need, and could show in the format on their special needs. So the manager could make decision in a short time. This adds flexibility to a firm. According to literatures on Decision Support System (DSS), ERP system constitutes a wide variety of information that provides a perfect basis for decision making. In the way, ERP system itself can do some help to decision-making and it can also provide large amount o f basic data for the DSS which is professional in decision-making. In recent years, more and more ERP providers are trying to realize the function of decision making in their systems, and this will make ERP more useful in helping the high level managers with the business strategies.
 
Case analysis in Successful ERP Implementation
 
Company A is one of China’s largest manufactures in communication industry, founded in 1984. Company A is a Joint venture, locates in Shanghai (one of China’s big city). Its annual sale reached 1080 million dollars in 2000. Company A always pays high priority to information. And in 1994, they began to adopt MRPⅡsystem. But the functions of MRPⅡsystem are limited to material management without the information about finance and sale. As the competition are more and more fierce, MRPⅡsystem can not well support business process and management within the company. So the leaders decide to adopt ERP in October 1998. As the leaders have realized that ERP implementation is a huge project, they built up a special group to devote on this project. The implementation journey goes through fourteen months. During the journey, there are three things the leaders think are important to the success.
 
At first, they use method of business process reengineering (BPR) to improve their business process. ERP system integrates all the function including production, sale, finance and HR etc. however, the management system they used before did not cover functions except for material management. Thus, they need to assemble all the processes seamlessly in order to make the information flow in the ERP system fluently. At the same time of assembling processes, they also make some improvement to the inappropriate processes. It is obvious that the business process definition is a critical part of a management system, including the ERP system. If succeed in the first step, we achieve a half.
 
After that, they prepare all the basic data that the system needs from departments across the company. They basic data cover data items about suppliers, customers, material, sale, finance and HR etc. They take great efforts to get all data prepared for the ERP system. Only with the well prepared and accurate input data, the ERP system can output appropriate information the enterprise wants.
 
In the end, they invite ERP Consultant Company to train their employee on the new adopted ERP system. Training is quite necessary because it is difficult for the employee to operate the complicated ERP system. Without training, the employee may do not know the right way to input data or the shortcut of some operations, and then they would react negatively to use the system. Nowadays, there are many ERP consultant companies that provide the service.
 
Conclusion
 
ERP is an important information solution to firms. By integrating the information flow and sharing information inside the firm, it improves the business process, integrate different function within a company, and make communication between and across departments conveniently. According to the case study, we get three suggestions on implementing ERP including: business process reengineering, comprehensive preparation, accurate and basic data, and employee training.
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