ERP: A STRATEGIC TOOL

The business environment today is complex with uncertainties, competition and change. To be competitive, an enterprise should have a good process and systems in place, which should be able to adjust to the changes in the business environment. The change can be of technological innovations, government policies, interest rates, competition, changing customer perception and many other fluctuating forces.

With the advent of globalisation, your enterprise should be geared to be globally competitive. In today’s environment, it is very important to achieve global standards to withstand the competition. Companies who stay focused and appear distinguished from other players would survive. Enterprise Resource Planning, ERP has proved to be an important tool to gain this competitive advantage.

Whichever industry you are in, whether manufacturing (made to order or made to stock) or service industry, the customer needs and requirements are changing in a very rapid way. Companies, who keep track of changes in the needs and requirement of the customers and adapt themselves effectively, are going to have an edge over others. But how will any company keep track of these changes - the needs and requirements of the customers? How will a company manage these bits of information (data) that is vulnerable to the business environment? These are few questions which a right ERP would provide answers.

To achieve competitive advantage, as explained earlier, companies should differentiate themselves from other players in the market. Keep in mind that when we say market it’s global market and those days are gone when companies used to target a segment of local market and then compete globally. Due to globalisation, even in your so-called local market there would be products flooded from all over the world that can be of superior quality and yet at a reasonable price.

There are so many ways to differentiate from other players in the market. It starts from sourcing the right raw material at the right time. For this, you should have a good system of managing your vendors, which includes parameters of quality, price and delivery schedules. To be a price leader in the market, sourcing from the right vendor, right quality material, right price and at the right time helps in achieving the first stage of cost reduction process. The products that are going to be produced should conform to the requirements of the market (end users) and the design should be such that it should forecast and accommodate customer’s future needs. The marketing department, which keeps an eye on the trends and needs of the market, should give relevant information to the production department so that they would make periodic and relevant changes to the products. The demand-supply factor in the market should be analysed for proper production planning and there should be some system that can assist management to take strategic decisions. All these are possible if your organisation has a strong ERP system in place.

ERP does not end here; in fact pre-sales is just a very small part of a very big concept. There are other modules, which would take care of post sales activities. Companies who keep their customers satisfied and aim to delight customers are going to be market leaders. There are modules that would take care customers in the ERP System and it is known to each one of us how a satisfied customer brings business to an organisation.

The sales and marketing department keep changing their requirements often with respect to changes in the market and production department will find it difficult to handle the schedules and deliverables. Production people are interested in optimising the capacity of the plant instead of meeting the delivery schedules committed to the customers by the marketing and sales department. Even though if they want to meet the delivery schedules, the information is not distributed and there would be lot of confusion between the departments. Like this, each department presents their own picture that is never in sync with other departments. The department heads will have to spend their valuable time to consolidate data to take tactical decisions instead of spending time for strategies for the growth of the organisation.

These situations are common in manufacturing sector since these organisations are complex where interactions between the various departmental functions like sales and marketing, Production, Purchase, Inventory, Finance and accounts, maintenance etc., have to be managed towards a common goal of the organisation. These departments work towards their own objectives rather than the organisational goals. These organisations will succumb to competition if decisions are not taken. These are the bottlenecks in the system, which can be overcome by implementing the right ERP System.

The competition in the market if forcing organisations to:

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