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ENTERPRISE SYSTEMS FOR MANAGEMENT PDF

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Enterprise Systems For Management Pdf

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Enterprise Systems for Management 2rd Edition Luvai Motiwalla, Jeffrey Thompson Test Bank - Free download as PDF File .pdf), Text File .txt) or read online. enterprise systems for management - Free download as Powerpoint Presentation .ppt), PDF File .pdf), Text File .txt) or view presentation slides online. Downloads PDF Enterprise Systems for Management (2nd Edition), PDF Downloads Enterprise Systems for Management (2nd Edition).

Configuration tables. A configuration table enables a company to tailor a particular aspect of the system to the way it chooses to do business. An organization can select, for example, what kind of inventory accounting—FIFO or LIFO—it will employ or whether it wants to recognize product revenue by geographical unit, product line, or distribution channel. Going through all of them can take a long time. Dell Computer, for example, spent more than a year on the task. Although modules and configuration tables let you customize the system to some degree, your options will be limited.

If you have an idiosyncratic way of doing business, you will likely find that it is not supported by an ES. One company, for example, had long had a practice of giving preferential treatment to its most important customers by occasionally shipping them products that had already been allocated to other accounts. It found that its ES did not allow it the flexibility required to expedite orders in this way.

Another company had always kept track of revenues by both product and geography, but its ES would allow it to track revenue in only one way. A company has two choices, neither of them ideal. Both of these routes add time and cost to the implementation effort. The more customized an enterprise system becomes, the less able it will be to communicate seamlessly with the systems of suppliers and customers.

enterprise systems for management

Imagine, for example, an industrial products manufacturer that has built its strategy around its ability to provide extraordinary customer service in filling orders for spare parts. If, after installing an ES, the company has to follow a more rational but less flexible process for filling orders, its core source of advantage may be at risk. The company may integrate its data and improve its processes only to lose its service edge and, in turn, its customers.

This danger becomes all the more pressing in light of the increasing ubiquity of enterprise systems. It is now common for a single ES package to be used by virtually every company in an industry. Such convergence around a single software package should raise a sobering question in the minds of chief executives: How similar can our information flows and our processes be to those of our competitors before we begin to undermine our own sources of differentiation in the market?

Apple Computer, for example, has many problems, but the loss of competitive differentiation because of its ES is not one of them. With a strong brand and a unique operating system, its computers still differ dramatically from competing offerings.

But Apple is an unusual case. Among most makers of personal computers, differentiation is based more on service and price than on product. For those companies, there is a very real risk that an enterprise system could dissolve their sources of advantage.

Compaq Computer is a good example of a company that carefully thought through the strategic implications of implementing an enterprise system. Like many personal-computer companies, Compaq had decided to shift from a build-to-stock to a build-to-order business model.

Because the success of a build-to-order model hinges on the speed with which information flows through a company, Compaq believed that a fully integrated enterprise system was essential.

At the same time, however, Compaq saw the danger in adopting processes indistinguishable from those of its competitors. It realized, in particular, that in a build-to-order environment an important advantage would accrue to any company with superior capabilities for forecasting demand and processing orders.

Compaq therefore decided to invest in writing its own proprietary applications to support its forecasting and order-management processes. To ensure that those applications would be compatible with its ES, Compaq wrote them in the computer language used by its ES vendor.

It cost the company considerably more to develop the proprietary application modules than it would have to use the modules offered by the ES vendor. And using customized applications meant forgoing some of the integration benefits of a pure enterprise system. But Compaq saw the decision as a strategic necessity: it was the only way to protect a potentially critical source of advantage.

For companies that compete on cost rather than on distinctive products or superior customer service, enterprise systems raise different strategic issues. In some cases, companies may find that by forgoing an ES they can actually gain a cost advantage over competitors that are embracing the systems.

They may not have the most elegant computer system or the most integrated information flows and processes, but if customers are concerned only with price, that may not matter.

Air Products and Chemicals, for example, saw that many of its competitors were installing large, complex enterprise systems. After a thorough evaluation, it decided not to follow their lead. Its managers reasoned that the cost of an ES might force the company to raise its prices, leading to lost sales in some of the commodity gas markets in which it competes.

Of course, the long-term productivity and connectivity gains created by enterprise systems are often so compelling that not adopting one is out of the question. In the petrochemicals industry, for example, enterprise systems have improved the flow of information through the supply chain to such a degree that they have become a de facto operating standard. Because participants in the industry routinely share information electronically, it would today be hard for a company to survive in the business without an ES.

Still, the cost of implementation should be a primary concern. The alternative—customizing the system to fit the processes or writing proprietary application modules—will simply be too expensive to justify. On the one hand, by providing universal, real-time access to operating and financial data, the systems allow companies to streamline their management structures, creating flatter, more flexible, and more democratic organizations.

On the other hand, they also involve the centralization of control over information and the standardization of processes, which are qualities more consistent with hierarchical, command-and-control organizations with uniform cultures. In fact, it can be argued that the reason enterprise systems first emerged in Europe is that European companies tend to have more rigid, centralized organizational structures than their U. Some executives, particularly those in fast-growing high-tech companies, have used enterprise systems to inject more discipline into their organizations.

They see the systems as a lever for exerting more management control and imposing more-uniform processes on freewheeling, highly entrepreneurial cultures. They want to use their enterprise systems to break down hierarchical structures, freeing their people to be more innovative and more flexible.

Take Union Carbide.

Like most companies implementing enterprise systems, Union Carbide is standardizing its basic business transactions. Unlike many other companies, however, the leaders of its ES project are already thinking in depth about how the company will be managed differently when the project is completed.

They plan to give low-level managers, workers, and even customers and suppliers much broader access to operating information. Standardizing transactions will make Union Carbide more efficient; sharing real-time information will make it more creative. For a multinational corporation, enterprise systems raise another important organizational question: How much uniformity should exist in the way it does business in different regions or countries?

Some big companies have used their enterprise systems to introduce more consistent operating practices across their geographically dispersed units.

Dow Chemical, for instance, became an early convert to enterprise systems because it saw them as a way to cut costs by streamlining global financial and administrative processes. A good idea in principle, although it became much more expensive to achieve than Dow had anticipated. Some large manufacturers have been even more ambitious, using the systems as the basis for introducing a global lean-production model. By imposing common operating processes on all units, they are able to achieve tight coordination throughout their businesses.

They can rapidly shift sourcing, manufacturing, and distribution functions worldwide in response to changing patterns of supply and demand. This capability allows them to minimize excess manufacturing capacity and reduce both component and finished-goods inventory. Owens Corning, for example, adopted an ES to replace legacy systems. For the company to grow internationally, its chief executive, Glen Hiner, felt it was critical to coordinate order-management, financial-reporting, and supply chain processes across the world.

Having implemented the system and established a new global-procurement organization, the company is now able to enter into larger, more advantageous international contracts for supplies. For most companies, however, differences in regional markets remain so profound that strict process uniformity would be counterproductive. To preserve local autonomy while maintaining a degree of corporate control—what might be called a federalist operating model—a very different approach to enterprise systems needs to be taken.

Rather than implement a single, global ES, these companies need to roll out different versions of the same system in each regional unit, tailored to support local operating practices. They establish a core of common information—financial, say—that all units share, but they allow other information—on customers, say—to be collected, stored, and controlled locally.

Enterprise Systems Benefits: How Should They Be Assessed?

This method of implementation trades off some of the purity and simplicity of the enterprise system for greater market responsiveness. The federalist model raises what is perhaps the most difficult challenge for a manager implementing an ES: determining what should be common throughout the organization and what should be allowed to vary. Corporate and business-unit managers will need to sit down together—well before system implementation begins—to think through each major type of information and each major process in the company.

Difficult questions need to be raised: How important is it for us to process orders in a consistent manner worldwide? Answering such questions is essential to making an ES successful.

Different companies will, of course, reach very different decisions about the right balance between commonality and variability. Consider the starkly different approaches taken by Monsanto and Hewlett-Packard. Nevertheless, they placed a high priority on achieving the greatest possible degree of commonality.

The company went from using 24 coding schemes for suppliers to using just one, and it standardized all data about materials using a new set of substance identification codes. Each divisional ES has had to be implemented separately, with little sharing of resources.

Managers estimate that well over a billion dollars will be spent across the corporation before the various projects are completed. In fact, having now studied more than 50 businesses with enterprise systems, I can say with some confidence that the companies deriving the greatest benefits from their systems are those that, from the start, viewed them primarily in strategic and organizational terms.

They stressed the enterprise, not the system. Those companies that stressed the enterprise, not the system, gained the greatest benefits. Following a series of mergers in the early s, Elf Atochem found itself hampered by the fragmentation of critical information systems among its 12 business units.

Ordering systems were not integrated with production systems. Sales forecasts were not tied to budgeting systems or to performance-measurement systems. Each unit was tracking and reporting its financial data independently. As a result of the many incompatible systems, operating data were not flowing smoothly through the organization, and top management was not getting the information it needed to make sound and timely business decisions. But they never labeled the ES project as simply a technology initiative.

Although the 12 business units shared many of the same customers, each unit was managed autonomously. To place a single order, a customer would frequently have to make many different phone calls to many different units. Its managers reasoned that the cost of an ES might force the company to raise its prices, leading to lost sales in some of the commodity gas markets in which it competes.

Of course, the long-term productivity and connectivity gains created by enterprise systems are often so compelling that not adopting one is out of the question. In the petrochemicals industry, for example, enterprise systems have improved the flow of information through the supply chain to such a degree that they have become a de facto operating standard.

Because participants in the industry routinely share information electronically, it would today be hard for a company to survive in the business without an ES. Still, the cost of implementation should be a primary concern. The alternative—customizing the system to fit the processes or writing proprietary application modules—will simply be too expensive to justify. On the one hand, by providing universal, real-time access to operating and financial data, the systems allow companies to streamline their management structures, creating flatter, more flexible, and more democratic organizations.

On the other hand, they also involve the centralization of control over information and the standardization of processes, which are qualities more consistent with hierarchical, command-and-control organizations with uniform cultures. In fact, it can be argued that the reason enterprise systems first emerged in Europe is that European companies tend to have more rigid, centralized organizational structures than their U. Some executives, particularly those in fast-growing high-tech companies, have used enterprise systems to inject more discipline into their organizations.

They see the systems as a lever for exerting more management control and imposing more-uniform processes on freewheeling, highly entrepreneurial cultures. They want to use their enterprise systems to break down hierarchical structures, freeing their people to be more innovative and more flexible.

Take Union Carbide. Like most companies implementing enterprise systems, Union Carbide is standardizing its basic business transactions. Unlike many other companies, however, the leaders of its ES project are already thinking in depth about how the company will be managed differently when the project is completed.

They plan to give low-level managers, workers, and even customers and suppliers much broader access to operating information. Standardizing transactions will make Union Carbide more efficient; sharing real-time information will make it more creative.

For a multinational corporation, enterprise systems raise another important organizational question: How much uniformity should exist in the way it does business in different regions or countries? Some big companies have used their enterprise systems to introduce more consistent operating practices across their geographically dispersed units.

Dow Chemical, for instance, became an early convert to enterprise systems because it saw them as a way to cut costs by streamlining global financial and administrative processes. A good idea in principle, although it became much more expensive to achieve than Dow had anticipated. Some large manufacturers have been even more ambitious, using the systems as the basis for introducing a global lean-production model. By imposing common operating processes on all units, they are able to achieve tight coordination throughout their businesses.

They can rapidly shift sourcing, manufacturing, and distribution functions worldwide in response to changing patterns of supply and demand. This capability allows them to minimize excess manufacturing capacity and reduce both component and finished-goods inventory. Owens Corning, for example, adopted an ES to replace legacy systems.

For the company to grow internationally, its chief executive, Glen Hiner, felt it was critical to coordinate order-management, financial-reporting, and supply chain processes across the world. Having implemented the system and established a new global-procurement organization, the company is now able to enter into larger, more advantageous international contracts for supplies.

For most companies, however, differences in regional markets remain so profound that strict process uniformity would be counterproductive. To preserve local autonomy while maintaining a degree of corporate control—what might be called a federalist operating model—a very different approach to enterprise systems needs to be taken. Rather than implement a single, global ES, these companies need to roll out different versions of the same system in each regional unit, tailored to support local operating practices.

They establish a core of common information—financial, say—that all units share, but they allow other information—on customers, say—to be collected, stored, and controlled locally. This method of implementation trades off some of the purity and simplicity of the enterprise system for greater market responsiveness.

The federalist model raises what is perhaps the most difficult challenge for a manager implementing an ES: determining what should be common throughout the organization and what should be allowed to vary.

Corporate and business-unit managers will need to sit down together—well before system implementation begins—to think through each major type of information and each major process in the company.

Difficult questions need to be raised: How important is it for us to process orders in a consistent manner worldwide? Answering such questions is essential to making an ES successful. Different companies will, of course, reach very different decisions about the right balance between commonality and variability.

Consider the starkly different approaches taken by Monsanto and Hewlett-Packard. Nevertheless, they placed a high priority on achieving the greatest possible degree of commonality.

The company went from using 24 coding schemes for suppliers to using just one, and it standardized all data about materials using a new set of substance identification codes.

Each divisional ES has had to be implemented separately, with little sharing of resources. Managers estimate that well over a billion dollars will be spent across the corporation before the various projects are completed. In fact, having now studied more than 50 businesses with enterprise systems, I can say with some confidence that the companies deriving the greatest benefits from their systems are those that, from the start, viewed them primarily in strategic and organizational terms.

They stressed the enterprise, not the system. Those companies that stressed the enterprise, not the system, gained the greatest benefits. Following a series of mergers in the early s, Elf Atochem found itself hampered by the fragmentation of critical information systems among its 12 business units. Ordering systems were not integrated with production systems.

Sales forecasts were not tied to budgeting systems or to performance-measurement systems. Each unit was tracking and reporting its financial data independently. As a result of the many incompatible systems, operating data were not flowing smoothly through the organization, and top management was not getting the information it needed to make sound and timely business decisions.

But they never labeled the ES project as simply a technology initiative.

ACCOUNTING

Although the 12 business units shared many of the same customers, each unit was managed autonomously. To place a single order, a customer would frequently have to make many different phone calls to many different units. And to pay for the order, the customer would have to process a series of invoices.

Inside the company, things were equally confused. It took four days—and seven handoffs between departments—to process an order, even though only four hours of actual work were involved. Because each unit managed inventory and scheduled production independently, the company was unable to consolidate inventory or coordinate manufacturing at the corporate level.

Management knew that in the petrochemicals business, where many products are commodities, the company that can offer the best customer service often wins the order.

Enterprise Systems for Management 2rd Edition Luvai Motiwalla, Jeffrey Thompson Test Bank

So it structured the implementation of its ES in a way that would enable it to radically improve its service levels. Its goal was to transform itself from an industry laggard into an industry leader. The company decided to focus its efforts on four key processes: materials management, production planning, order management, and financial reporting. These cross-unit processes were the ones most distorted by the fragmented organizational structure.

Layers of information middlemen—once necessary for transferring information across incompatible unit and corporate systems—were eliminated in order to speed the flow of work and reduce the likelihood of errors. It did not, for example, install the modules for human resource management or plant maintenance.

Those functions did not have a direct impact on customers, and the existing information systems that supported them were considered adequate. Elf Atochem also made fundamental changes to its organizational structure. It also allowed the company to monitor and manage overall customer profitability—something that had been impossible to do when orders were fragmented across units.

Perhaps most important, the system gave Elf Atochem the real-time information it needed to connect sales and production planning—demand and supply—for the first time. As orders are entered or changed, the system automatically updates forecasts and factory schedules, which enables the company to quickly alter its production runs in response to customers needs. Only one other company in the industry had this capability, which meant that Elf Atochem gained an important edge over most competitors.

It therefore established a new position—demand manager—to be the focal point for the integrated sales and production-planning process. Drawing on the enterprise system, the demand manager creates the initial sales forecast, updates it with each new order, assesses plant capacity and account profitability, and develops detailed production plans. Previously, production could be allocated to individual orders no more than a week in advance.

The way Elf Atochem is managing the implementation effort also reflects the breadth of its goals. The team includes both business analysts and information technologists, and is assisted by a set of so-called super users, representing the business units and corporate functions.

They also play a crucial role in explaining the new system to their respective departments and training people in its use.

The team is installing the ES one business unit at a time, with each unit implementing the same system configuration and set of procedures for order processing, supplier management, and financial reporting.

The unit-by-unit process ensures that the effort is manageable, and it also helps the team refine the system and the processes as it proceeds. The first unit uses package shipping for all its orders. The system was then modified to support bulk as well as package shipping, and the new configuration became the new standard.

Using the large and broadly representative implementation team, together with the unit-by-unit rollout, Elf Atochem has been able to staff the effort mainly with its own people. It has had to engage only nine outside consultants to assist in the project—far fewer than is usually the case.

In addition to the service enhancements, the company is operating more efficiently. Inventory levels, receivables, and labor and distribution expenditures have all been cut, and the company expects the system will ultimately reduce annual operating costs by tens of millions of dollars.

But the companies that have the biggest problems—the kind of problems that can lead to an outright disaster—are those that install an ES without thinking through its full business implications.

Managers may well have good reasons to move fast. They may, for example, have struggled for years with incompatible information systems and may view an ES as a silver bullet. They may be looking for a quick fix to the Year problem enterprise systems are not infected with the much-feared millennium bug. Or they may be trying to keep pace with a competitor that has already implemented an ES.

The danger is that while an enterprise system may help them meet their immediate challenge, the very act of implementing it may create even larger problems. A speedy implementation of an ES may be a wise business move; a rash implementation is not. A speedy implementation of an enterprise system may be a wise business move, but a rash implementation is not.When System and Strategy Clash Clearly, enterprise systems offer the potential of big benefits.

They want to use their enterprise systems to break down hierarchical structures, freeing their people to be more innovative and more flexible. WordPress Shortcode. Ife Afolayan. Still, the cost of implementation should be a primary concern. The way Elf Atochem is managing the implementation effort also reflects the breadth of its goals.

The company decided to focus its efforts on four key processes: materials management, production planning, order management, and financial reporting.

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