Enterprise Resource Planing

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Introduction

Enterprise Resource Planning (ERP) is considered as useful tool in integrating all activities of enterprises through computer and Internet. This tool integrates many different functional areas such as Sales and Distributions (SD), Material Managements (MM), production Planning (PP), Financial Accounting (FA), Controlling (CO), Human Resource Management (HR), etc. In this report, there will be some points concerned such as the definition and benefit of ERP, three ERP system products.

To reflect the benefit of ERP bringing to enterprises, there are some recommendations for the sales and distributions and accounting system of TVK Group Ltd (TVKGL). TVKGL is the leading provider or distributor of semi-conductor in Singapore. It has expanded its operation to many regions all over the world such as Hong Kong, Taiwan, China, the US, Europe and is continuously expanding its wing in some countries of Asia Pacific region. But it has faced many problems in sales and distributions and accounting system. Using one suitable ERP products will be the way of achieving its dream.

Introduction to ERP systems and its benefit

There are many definitions of ERP. According to Rockford Consulting Group, ‘ERP (Enterprise Resources Planning is an outgrowth of Materials Requirements Planning (MRP) initiated in the 1970’sas a new computer-based approach to planning and scheduling of material requirements and inventory, featuring the time-phased order point. IBM’s definition of ERP is ‘integrating the enterprise through the Internet and extending the enterprise to the Internet’. Or according to O’leary 2000, ERP is ‘computer-based systems designed to process an organization’s transaction and facilitate integrated and real-time planning, production, and customer response.’

ERP benefits are divided into direct benefit and indirect benefit. There are some direct benefits such as ‘improved efficiency, information integration for better decision making, faster response time to customer queries, etc.’ Besides that, ERP also brings some indirect benefits such as better corporate image (if customers are impressive about the short time from ordering to receiving products of the company using ERP, they will have a good image in their minds and come back again), ‘improved customer goodwill, customer satisfaction and so on’. There are 4 important benefits brought by ERP such as reduction of lead time, on-time shipment, improved supplier performance and better customer satisfaction.

The first benefit is reduction of lead time. For example, in the reality, many companies always face with the lead-time which is not as they expected. ‘The lead-time is the elapsed time between placing an order and receiving it’. If these companies did not have purchasing and inventory control, the ordered products will be non-available for customers. The consequences for this problem are ‘missing the delivery schedules, losing customers to the competition. Hence, to avoid this problem, the company must ensure the lead time which will be as minimum as possible by having an effective inventory management system through ERP system.

The second benefit is on-time shipment. According to businesses not using ERP system, they just choose the best method or combination of the best methods for each product at each stage through its life cycle while businesses using ERP system cannot be limited to a single manufacturing method such as make-to-stock’ or ‘make-to-order’. Hence, businesses using ERP will always ensure that they can deliver goods to customer on time.

Improved supplier performance is the third benefit of ERP because ‘The ERP systems contain features which support supplier management and control processes that help organization in managing the supplier relations, monitoring the vendor activities and managing the supplier quality.’

One more benefit of ERP is to have better customer satisfaction. In the situation of web-based ERP systems introduction, easily customers can place their orders and make their payment when sitting at home. Moreover, by accessing the company’s technical support knowledge base (help desk), customers will be served well. Hence, ERP can improve customer satisfaction.

In the 2013 report of Panorama Consulting, there are some other benefits from ERP as the following chart

Chart 1: Reasons for Implementing ERP

‘Source: 2013 ERP Report’

A short review of ERP system products

Top 5 ERP system products are Epicor, Infor, Microsoft, Oracle and SAP.

Chart 2: Percentage of Times Vendor is Selected When on Short List

‘Source: 2013 ERP Report’

For example, ‘Microsoft has become the ERP darling for SMB (small and midsize business)’ or ‘Epicor and Infor offer strong ERP software for Middle Market ERP Leaders’ while ‘SAP is the largest and most recognized Fortune 1000, Global 5000 and enterprise market share leader’ and ‘Oracle is the world’s second largest business applications maker.’. Hence, there will be 3 products concerned in this report which are small, middle and large corporation such as Microsoft, Epicor and SAP.

SAP

• ‘SAP is the world leader in enterprise applications in terms of software and software-related service revenue’
• There are some impressive information and facts about SAP as followed

+ ‘More than 232,000 customers in 188 countries’

+ ‘More than 65,667 employees – and locations in more than130 countries’

+ ‘A 41-year history of innovation and growth as a true industry leader’

+ ‘Annual revenue (IFRS) of € 16,22 billion’

+ Price is at high end

+ Technology: Net weaver, SQL and a chasm of technologies

• ‘SAP is the largest and most recognized Fortune 1000, Global 5000 and enterprise market share leader.’ SAP successes come from its accounting and distribution software combined with the software management system of integrated financials, manufacturing, human resource, payroll and customer relationship.
• Here is the most popular module of SAP which has been applied for most enterprises

Chart 3: R/3 Core Business Processes

Epicor

Some impressive information and facts of Epicor

• ‘Having more than 20,000 customers, in over 150 countries, 30 languages’
• ‘Having nearly 40 years of experience in delivering innovative, award-winning solutions to our customers’
• Epicor provides its solutions with the low to moderately priced
• ‘As a middle market ERP Leader, Epicor offers strong ERP software functionality along with several impressive Industry solutions for Professional Services Automation (PSA), financial services, hospitality management, retail, distribution, manufacturing, pharma and not for profit.
• Technology: ‘MS/SQL/SOA technology’

Here is the example of typical approach to two-tier ERP of Epicor

Chart 4: Typical Approach to 2 – tier ERP

Epicor can offer its products and services for manufacturers from small to large

Chart 5: Epicor’s Unique Solution Position

Microsoft

• Having Over 83,000 ERP customers using Microsoft Dynamics
• ‘Strong SMB/mid-market solution’
• ‘Very strong partner channel’: If enterprises want to buy this product, they man purchase through a Microsoft partner who can help enterprises make up the global network of professional to determine their specific ERP needs.
• ‘Solutions often vary by global region’:  basing on the real needs, Microsoft partner who enterprises choose to work with will offer them suitable ERP software.
• ‘Using MS/.Net/SQL technology’
• Low to moderately priced

Recommendation functions and features of the ERP system for TVK Group Ltd

The reason why TVKGL use SAP R/3

‘TVK Group Ltd is one of the leading players in the high tech semi – conductor components distribution industry in Singapore’. Its market segments are Singapore, Hong Kong, Thailand, and Taiwan, China and US and many countries in Europe. Moreover, TCKGL still used Microsoft Excel spreadsheet excel to maintain sale orders and accounting function. TVKGL has faced some difficulties such as

• Distributing goods all over the world causes the orders with different languages.
• In sales and distribution, TVK can face complex pricing schemes from difference kinds of product, special promotions, etc.
• Purchasing, orders and logistics don’t have any relationship. Hence, TVKGL easily faces difficulty in the shortage of products, stock, lead-time, etc.

Using SAP R/3 will solve the above problems

• Multilingual: In this software, there are several languages which can be used. Especially, ‘conversion between currencies is automatic and connecting to SAP’s real-time currency rate database.’
• Pricing Flexibility: ‘In sales and distribution model which use SAP R/3, TVKGL can create complex pricing schemes that are dependent on customers, goods sold, special promotions etc. Rebate processing options are also very sophisticated and comprehensive.’
• Simple Order Entry: Customers who want to order products can create basic order which is available in just one window. Moreover, they can easily access to any level of this order.
• ‘Comprehensive Reporting: The Sales Information System (SIS) allows date to be stores, consolidated and reported by the user in the variety of formats.’

How to apply for TVKGL

For example, TVKGL will distribute its products to the China and apply SAP R/3 as ERP system with the following steps

The first step is ORDERING. Customers in China will take and order from a retailer of TVKGL in China. After entering the date on his personal computer, he can approach R3’s sales module which can check the price and the discounts of the retailer. This system also checks the ability of making the order from TVKGL basing on checking the retailer’s credit history.

Continuously, R/3 will check the availability of products orders by checking the inventory. In the situation retailer’s stock can satisfy 80% of customer’s order and so that this part of the order will be filled right away. The other part will need to be delivered from TVKGL based on Singapore.

Then, R/3 will alert the warehouse of retailer to ship 80% of the order which is available in retailer’s stock to the customer. R/3 will schedule for the remainder of the order from TVKGL in Singapore.

In the situation of TVKGL’s inability of distributing the remainder of the order immediately, R/3’s will check and schedule to purchase from supplier. If TVKGL can distribute right away, R/3 can easily schedule the time of delivering this part of the order to the customer.

If TVKGL uses SAP R/3 as the above explanation, it will not need one software of managing purchasing and one of managing logistics. Moreover, it also doesn’t need the Microsoft EXCEL for order and accounting management. SAP R/3 can replace all software TVKGL used and makes sure that customers can receive right goods at the right time with the high satisfaction.

Conclusion

In conclusion, there are many ways of defining what ERP is. But all definitions stated that ERP is the useful tool which can help enterprises integrate all activities with the highest and most effective result. In this report, benefits of ERP has been found out such as reduction of lead time, on-time shipment, improved supplier performance and better customer satisfaction, etc. Especially, through solving some problems of TVK Group Ltd, SAP R/3 which is one of the most popular ERP system products all over the world prove its importance in managing enterprise effectively and efficiently nowadays and in the future.

References

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11. SAP’s website http://www.sap.com/
12. Microsoft ERP website http://www.microsoft.com/en-us/dynamics/erp.aspx