In this section, let’s summarize some important challenges and opportunities that you will have to face if you want to succeed in a rapidly changing production environment. In this customer-focused business world, companies must be able to meet customer demands for low cost, customized products within a very short order cycle. This means that the IPP must be flexible, fast, and cost-efficient. In addition, more and more customers expect to be able to track their order from the time it is placed until the time it is delivered to them. Many of these challenges require complex manufacturing processes linked to information-rich systems. Enterprise systems and supply chain management software have become a way of doing business. Successful companies will connect their customers to order information throughout the enterprise system, effectively becoming a part of the customer’s supply chain.
TECHNOLOGY APPLICATION 13.3
Enterprise Resource Planning Systems Implementations
Wolf Organization, a leading distributor of building materials, began implementation of an ERP system using the modular implementation approach. Initial module implementation focused on support of financial, materials management, sales, and distribution functions. A second phase of implementation will focus on human resources, payroll, and warehousing functions. The initial modules are anticipated to help Wolf in improving the performance of its distribution network, supply chain, and customer service. Primarily, the system will speed up the identification of inventory locations for inner-transfers of goods and provide more stable electronic commerce capabilities. The second phaseshould enhance human resources management and planning. Wolf worked with an ERP partner firm, Arthur Andersen, LLP (now Accenture), which specializes in SAP implementations.
One particular problem in enterprise systems implementation has been the complexities of currency translation for multinational corporations. In October 1997, Mitsubishi Corporation became one of the first Asian companies to successfully implement an enterprise system capable of handling its vast currency translation requirements for information processing. The system supports consolidation of financial information using both Japanese and American accounting standards. The magnitude of the organization-wide implementation was immense, as 30 business divisions and 600 related companies were brought online.
Land O’Lakes, recognizing the need to overhaul its supply chain and warehousing system, took advantage of the situation to also solve a looming calendar problem by implementing an Oracle-based ERP solution. Land O’Lakes legacy systems were not prepared to function once the computer’s clocks rolled over into the year 2000, but by implementing a broad-based Oracle system, most of the systems were year-2000 compliant by mid-1999. At the same time, the ERP implementation helps the company meet the increasing just-in-time inventory demands of its customers.
Sources: “The Wolf Organization Adopts SAP R/3 for Competitive Advantage,” www.sap.com (April 13, 1998) press release; “SAP Japan Has Begun Shipment of the R/3 Release 4.0 Japanese Version which Enables the Entire Value Chain from Point of Sale to Point of Production,” www.sap.com (April 8, 1998) press release; Blaise Zerega, “Land O’Lakes Divides and Conquers Y2K,” Infoworld(April 13, 1998): 88.
Managers of these processes need to learn new ways of evaluating the costs and benefits of implementing IPP and supply chain technologies. Traditional tools such as return on investment (ROI) and net present value analyses have proved inadequate for making decisions about major commitments of resources to enterprise systems technology. The traditional cost justification methods must be supplemented with an analysis of enterprise systems’ intangible benefits, including items such as improved shop floor flexibility, reduced manufacturing lead time, faster delivery of product to market, improved product quality, improved product design, better customer service, and similar factors Companies must also focus more on cost management (as opposed to cost accounting). To do so, companies must encourage cost accountants to take an active role in the early stages of product development by providing advice, not only during development, but also throughout the entire manufacturing process. Some people have even suggested that cost accountants should spend most of their time out on the factory floor performing value analysis to prevent variances from occurring in the first place. Managers also need to adopt nontraditional measurements that can help in managing the business. Various measures, called critical success factors in Business Intelligence and Knowledge Management Systems, have been proposed. These might include such factors as employee morale, product quality, disaggregated production and scrap data by machine or by work center, schedule and delivery attainment, throughput time, and space devoted to value-added versus nonvalue-added activities.
One final thought about how companies can improve their production processes concerns that of designing simplified processes. Much of what we have learned from the Japanese is epitomized by a focus on simplicity. Part of simplification involves making the data we capture in information systems easier to access electronically.
What technologyenabled challenges and opportunities were presented in the chapter?