Enterprise Resource Planning and it’s Competitive Advantage

1. Enterprise Resource Planningand it’sCompetitive Advantage Boone, Begley, Selander, Sturbaum, Sumner, Wommack and Wiley April 10, 2006

2. Will Enterprise Resource Planning (ERP) provide a competitive advantage for Global Companies? Myth or Fact?

3. Threats • Rapid expansion through growth and globalization • Ability to manage business strategies real time • Multiple Information Systems • Legacy Systems that companies still use • Standardization of alternative products • Communication between various departments and offices around the world

4. Opportunities • Order entry, tracking and fulfillment • Automated customer notification of shipping dates • Customer follow up – email communications • New distribution channels • Financial Growth improvement • Materials planning and allotment • Improved Production line management • Increased Quality/TQM management

5. Two Different Approaches to ERP Problems-Based Approach • Over come current disadvantage from competition • Achieve single unrelated business targets • Providing self service to employee benefit • Remove constraints (manufacturing, accounting, etc.) Innovation-Based Approach • Create new online sales channel • Allowing customer to pay invoices online • Track the status of orders and shipments • Collect 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.

6. Customer Loyalty and Satisfying Demands • “Customers generally place significant value on the quality and speed of interactions, the quicker and easier the enterprise can make it for the customer, the more likely he or she will remain a loyal consumer” (Levitan, 2004). • “ERP initiatives are the backbone that help enable the business processes to respond to the needs of this demand driven environment” (Eggelston, 2005).

7. Using ERP to gain a Competitive Advantage • ERP technology can provide higher customer satisfaction if it improves the customers experience with your company. When these results become reproducible customer loyalty can be achieved. • Global companies must have the ability to change or create rules inside the software to adjust to the changing environment. • Data mine in order to find customer trends and business trends. • Use the technology to be innovative in areas of TQM, MRP management, ABC accounting methods and financial reporting. • Lack of a ERP system puts a competitor at a disadvantage.

8. ERP Model Global Managers data mine MTBF – Run program to replace old units. Website allows for customer to upgrade online with promo and place order Marketing Tracks failures and makes improved instrument; Quality notified R&D Sales New Online Global Customer Channel Customer logins in to site places service call for broken instrument Finance & Accounting Service Accounting sends trade-in cert. to current customers Finance adjusts COGS model Customer Care First available service engineer dispatched; customer advised CC tracks service progress – notifies sales of problems

9. ERP Successes • Advance Transformer Co. United States -- This lighting products manufacturer upgraded its IT landscape cost effectively and without business disruption using SAP solutions -- and saved an estimated US$500,000 in project costs. • Heads and Threads International United States -- Consider how this wholesale distributor uses the mySAP ERP solution to track supply and demand of customers and vendors, and adjust prices rapidly to benefit from changing market conditions – reduced inventory cycle times 50%. • Great Wall Broadband Network China -- See how this provider of Internet access and other services improved data quality and accuracy, business processes, and decision-making with mySAP ERP – in a six-month installation. • Pierre Lang Austria -- Learn why this designer jewelry producer decided to implement mySAP ERP to help deliver more dependable system performance plus increased accuracy and reliability of customer, sales, and financial information. (http://www.sap.com/usa/solutions/business-suite/erp/customersuccess/index.epx, 2006)

10. Why does ERP Technology Fail? • Technology is used to solve business and organizational problems • No Strategic vision • Measure unobtainable or unrealistic goals. Chasing ghosts • No base-line measurements taken. • End users failed to see the new vision – poor change management • Lack of change initiative implementation • Failure to add upgrades or poor customization • No global implementation of system …89% of new ERP measured a success ...only 25% of those had any affect on business strategy

11. Balanced Scorecard for ERP Financial Customer Satisfaction Objective Metrics Objective Metrics Short term growth Revenue growth from ERP based project % overall cost reduction from implementation Long term growth EVA & SFGR Quality improvements % reduction of time per customer inquiry % reduction of customer complaints Customer Loyalty % of frequent customers Internal process Learning & Growth Objective Metrics Objective Metrics Change Management number of days to complete new processes Development of ERP $ invested Skills & Knowledge number of certified employees Manufacturing Efficiency % reduction of inventory % reduction in overall time to produce products $ saved from ERP Organizational Efficiency accuracy of forecasts Epstein, M.J & Rejc, A. 2005. How to Measure and Improve the value of IT. Strategic Finance.

12. Simulation Tools Exception based projections Service Oriented Architectures Grid Computing Linux (mission critical) On-Demand ERP computing Intermodal link between various plants SuperBOM management between facilities Strategic sourcing initiatives (i.e. linear pricing) Application of Lean manufacturing Reduced inventory on hand Internal customer pull scheduling ERP creates a wider business model Software as a service provider Optimization of Hardware packages Program off-site Deployment Enterprise Operating System enhancements done off site and on-demand. Direction of ERP and needs of Global Manufacturing

13. Proposed Business & Organizational Strategies As a subsection of the ERP Implementation these items should be considered: • How can improvements to current processes improve customer experience? • Through the technology can we reach new customers? • How can the technology enable the organization to make faster better qualified decisions? • How can it help measure external forces?

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

15. Myth or Fact • ERP Technology provides a competitive advantage. • Implementing good change management • Utilizing the technology to find innovative ways to touch your customers • ABC accounting and financial reporting accuracy • Increased customer satisfaction – customer loyalty PROVEN FACT

16. Questions????