Page 239 - Operations Strategy

214 CHAPTER 6 • PRoCEss TECHnology sTRATEgy
held for the benefit of other parts of the business, thereby improving both the com-
munication and the effectiveness of the systems as a whole. However, this obvious and
seemingly straightforward idea is, in practice, hugely complex and expensive to adopt.
And that is what ERP has become known for: its high cost and difficult implementa-
tion. Some large corporations are reported as having spent hundreds of millions of
Euros on their ERP systems. Even medium-sized companies can easily spend hundreds
of thousands of Euros. And although some authorities claim that even successfully
implemented ERP systems will never offer any significant return on their investment,
others argue that ERP was simply one of those things that any large company had to
invest in simply to keep pace with its customers, suppliers and competitors. 6

What is ERP?
One of the most important issues in resource planning and control is managing the,
sometimes vast, amounts of information generated from all functions of the business.
So, unless all relevant information is brought together and integrated it is difficult to
make informed planning and control decisions. This is what ERP is about. It is often
described as a complete enterprise-wide business solution that integrates the planning,
resource allocation and control activities of all parts of the business. The intent is that
all transaction information is entered into the system at its source and done only once.
Consider, for instance, a manufacturing firm receiving an order for a product. The trans-
action is entered into the system and the data is then sent to the master database, which
accesses and updates the other business processes. For example, the finance process is
instructed to raise an invoice, the sales and marketing processes are advised of sales
and customer information and the production process triggers the manufacturing etc.
If the system does not have its own scheduling software, it can (to varying degrees) be
integrated with pre-existing packages (see Figure 6.9).
Arguably the most significant issue in many company’s decision to buy an off-the-shelf
ERP system is that of its compatibility with the company’s current business processes
and practices. Experience of ERP installation suggests that it is extremely important
to make sure that the current way of doing business will fit (or can be changed to fit)

Figure 6.9 the erP structure for the sandwich company

Senior management and stakeholders
Strategic
Financial
applications reporting
applications Sales and
marketing
Operations applications
applications
Back-oce database applications Front-oce
distribution
Suppliers sta Integrated Delivery and sta Customers
Purchasing
and supply
applications Service
Human applications
resources
applications
Employees

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