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The company Enterprise Resource Systems

Enterprise Resource Systems


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The company in question (hereinafter “the company”) is a medium-sized value-added manufacturer that assembles and fills more than 3,000 different sizes and types of aerosol cans. Flexibility and responsiveness have been the keys to the company’s success to date by concentrating on small production runs that do not require lengthy lead times in order to complete. The company purchases all of the aerosol can components from suppliers and the can ingredients are supplied by the customers. Some of the can components are fungible and can be obtained from more than one supplier, but while some of its product line share some components, others are unique to a specific aerosol can type. Following receipt of an order from a customer for a given due date, the company begins the manufacturing process based on a typical 6-week lead time. Because the company orders components in batch sizes in some cases, it can have some excess unfilled cans or part thereof left over in inventory from previous production runs, the first step in the business process is to determine if there are any of the required components already in stock. All other remaining components (which would be all of them if the requisite parts are not on hand) are then ordered from the company’s suppliers, some of which are located overseas and can-fill ingredients are received from the customer. The lead-time for this portion of the manufacturing represents fully two-thirds of the company’s lead-time for the entire production process. Only when all of the required components and ingredients are on hand is the company able to actually complete the entire assembly process, but it does not wait for everything that is needed because individual components are received on a daily basis and therefore batch assembles what is capable of being assembled on a day-to-day basis using what components and ingredients are available. Taken together, this approach introduces a number of opportunities for mistakes to be made, and the individual activities of order processing, production scheduling, stock control and purchasing are labor intensive. Moreover, the company maintains all of its ordering, production and processing data on paper only, and the aggregated information is only updated weekly. The constraints to efficient production results in a number of inefficiencies, including inordinately high levels of inventory for some can components, ineffective coordination between component/ingredient supply and ultimate production. The company’s business processes are clearly antiquated and are vulnerable to a number of disruptions in the supply chain that can adversely affect its ability to satisfy customer orders in a timely fashion. Not surprisingly, the company is seeking a superior alternative to its existing business model that eliminates the bottlenecks and provides more efficient ways of monitoring the flow of information and work. To this end, this study provides an analysis and design solutions for integration of enterprises information systems with an extended enterprise or supply chain context based on the business case. A description of the key functions as a part of the enterprise system for the given business case are followed by a summary of the research and salient findings in the conclusion.


Review and Analysis


Background and Overview.


By streamlining the disparate processes involved in its can assembly regimen using business process management techniques, the company can realize a number of benefits that will directly affect its profitability. In this regard, one authority emphasizes that, “Many organizations have never critically analyzed or mapped their business processes and do not fully understand them. Creating this efficiency reduces response time — an immediate gain. But this also enables quicker decision-making which results in infinite long-term benefits. Additionally, as processes are automated, quality and consistency typically improve” (“Language for Change,” 4).


Replacing the paper records and manual methods used by the company for inventory management and production tracking purposes with an automated approach just makes good sense. This approach is also congruent with the observation that, “Technology has long been used to improve organizational efficiency and to provide better ways to solve common business problems” (“Planning and Building an Architecture that Lasts” 2003, 3). By developing and using event-driven applications, the company could streamline its inventory management and ordering function and replace the current mistake-prone approach with one that provides users with the information they need when they need it (Quinn 2003). In this regard, one company that specializes in providing such it solutions notes that, “Vendors and enterprises alike are still utilizing applications that enable historical data analysis while becoming increasingly interested in tools that offer real-time data modeling and forecasting in order to ‘close the loop between analysis and action'” (“Business Intelligence & Enterprise Content Management” 2003, 4). The fuzzy logic that is built in to many applications today can provide organizations of all types with the ability to integrate automation with its core business functions.


Business intelligence applications can go a long way in helping the company integrate its information flow with the needs of its customers and the abilities of its suppliers, but it is not an end-all solution by any measure. As Vokura, Lummus and Krumwiede (2007) emphasize, “Manufacturing firms may undertake numerous improvement initiatives, both to gain flexibility and improve overall performance. Many possible initiatives can be implemented, and these change over time as new initiatives are found to be effective” (15). This observation suggests that what works best today may well be obsolete tomorrow but it is important for the company to achieve optimization of its business process now using the best tools available for the purpose. The fact that some of the company’s suppliers are located overseas means that there will be an inevitable delay in receiving parts ordered today, and that any optimum decision concerning the best approach to achieving improved production capabilities must take these factors into account. This point is also made by Davis (2006) who emphasizes, “In the BI arena, optimizing the decision cycle typically means shortening it, or compressing it. It doesn’t necessarily mean minimizing the time lag, or automatically assuming that every decision process must be completed in ‘realtime.’ The key is to define the ‘right’ time for each decision cycle, one that reflects business realities and the trade-offs between risk and cost” (3).


Given the razor-thin profit margins involved in the production of aerosol cans, it is unreasonable to expect the company to operate in a real-time fashion across the board because such an approach would likely bankrupt the company. Certainly, it would be possible for the company to spot-order just enough can components from its overseas suppliers to satisfy a special order, for example, and have the partial shipment sent by Federal Express at rush order rates; however, this approach would simply not be cost effective and batch orders that require a month for delivery provide the company with the ability to purchase its supplies in bulk, thereby minimizing the cost per unit involved. As Davis also points out, “It is extraordinarily expensive to create a completely real-time organization. Even if an organization can afford real-time decision-making, it may not be necessary or worth the cost” (3). To help the company better visualize its business process, the company needs to develop a graphic model of what takes place from start-to-finish as customer order are received, parts are ordered and received, and the production process is accomplished. In this regard, Hall (2002) recommends that organizations that are in the predicament that this company is facing should, “Assemble an overall view of how processes and systems are operating clear across the entire supply chain — from supplier, manufacturing and production to delivery and customer satisfaction” (7). Such an overall view that is comparable to the company’s operations is illustrated in Figure 1 below.


Figure 1. Comprehensive View of Supply Chain Management Factors.


Source: Carr 2000, 9.


According to Thierauf and Hoctor (2003), a number of software application have emerged in recent years that can help companies of all types enhance the performance of their operational systems that may rely on CRM (customer relationship management), SCM (supply chain management), and/or ERP (enterprise resource planning). These authors report that, “It extends the reach of these systems by adding analytics into the fabric of corporate operations. SAP has updated its business intelligence offerings, which include six new analytic applications for CRM, SCM, E-commerce, human resources, financials, and product life cycle” (114). Taken together, it is clear that the company needs such an enterprise resource planning solution for its antiquated business processes, and the relevant issues involved in this approach are discussed further below.


Analysis of the Relevant Issues.


The company is manufacturing a valuable 21st century product but it is using 19th century business process management techniques to do so. The recordation of inventory and production information on paper only introduces a number of constraints to the company’s ability to keep track of what products it has already assembled, what components and ingredients are on hand, which components have been ordered and which ingredients have been provided, and where production stands in relationship to unfilled orders.


Some manufacturers have sought to improve their profitability by becoming more horizontally integrated in their supply chain management operations, but it does not appear feasible for the company to acquire the vendors that supply its component parts so viable alternatives must be identified that can facilitate the supply chain management process vertically. As Choy, Lee and Lo (2003) point out, “Very few manufactures now own all the activities along the chain but integrate the supply network from various supplier networks and the ability to make fast and accurate decision often constitute a competitive advantage compared with the competitors or other networks” (87). It is clear that the company could benefit from an information technology solution to its current paper-driven approach to managing its supply chain operations. In this regard, Choy and his associates also note that, “The rapid advance in information technology is now deployed not only to improve existing operational effectiveness of a business, but also to build the new capability to meet today’s business environment and complexity” (87).


Business intelligence applications are well suited to helping the company improve its ability to respond to customer orders and better manage its inventory needs as these goals are congruent with the goals of business intelligence systems. For example, according to Imhoff (2006) “The goal of business intelligence (BI) is to provide the enterprise with a repository of ‘trusted’ data — data that can be used in a multitude of applications to answer the questions about customers, products, supply and demand chains, production inefficiencies, financial trends, fraud, and even employees” (2). The event-driven features that BI applications provide are precisely what the company needs to help it become more responsive and flexible to its customers’ needs, the very qualities that have fueled its success to date. In this regard, Imhoff notes that business intelligence “can be used to flag anomalies via alerts, provide visualization and statistical models, and understand the cause and effects of decisions upon the enterprise. Just about every aspect of an enterprise’s business can benefit from the insights garnered from BI” (2).


It is reasonable to posit that because some of the 3,000 different can types that the company assembles share the same type of parts, the demand for these parts would be greater than those that use components that are unique to their design. It should be possible to forecast with some degree of accuracy the on-going demand for those can configurations that require these sets of shared components and event-driven applications can trigger their reorder automatically. As Srinivasa and Saurabh (2001) point out, “Some products move much faster off the shelf than others. on-time replenishment orders are very critical for these products. Analyzing the movement of specific products – using business information tools – can help in predicting when there will be need for re-order” (5).


This type of forecasting and event-driven triggers can be achieved using enterprise resource planning tools such as Systems, Applications and Products (SAP) programs that use data warehouses to fully integrate the extended enterprise. According to Zeng, Chiang and Yen (2003), these tools deliver such benefits in several ways. For instance, “Data warehouses shrink the length of time between a business event’s occurrence and an executive alert with the summarized data or information obtained from online analytical processing (OLAP) and data-mining tools. Given this information delivery time shrinkage, business decision makers can make use of opportunities that otherwise they would miss” (115). Likewise, data warehouses can integrate information that is generated from within the company (i.e., inventory levels, leftover completed cans, status of unfilled orders etc.), it can also integrate data that is maintained by external sources such as its vendors and customers as well. In this regard, Zeng and his colleagues advise, “The data not only are integrated across different functional units of the organization (data from internal sources), but also include the external entities of the organization such as customers and suppliers (data from external sources)” (115). In addition, such business intelligence applications can help with the aforementioned forecasting needs of the company: “A data warehouse integrates data across time to provide views obtained from the trend analysis of its data” (115).


Likewise, one vendor of SAP application suites emphasizes that, “The amount of data flowing through an organization is growing exponentially. To take advantage of it, many companies have turned to data warehousing. The data warehousing approach pulls together data from disparate systems, giving companies a unified, consistent view of customers, operations, and other aspects of the business” (“Data Warehousing with mySAP” 2002, 5). Based on the needs of the company to improve its record-keeping and inventory management techniques, SAP appears to be the right tool for achieving these goals. For example, this vendor emphasizes that, “The SAP BW delivers an information model that forms the foundation for answering all relevant business questions. This ability is based largely on providing data that has the appropriate structure, degree of detail, and timeliness for a given analysis. The weight of these factors varies by situation and user base in a company” (“Data Warehousing with mySAP,” 10).


An SAP program would provide access to virtually real-time information as it was needed, as well as providing the ability for customers and suppliers to contribute and extract data as it was needed in ways that would improve the company’s supply chain management operations. Suppliers for example could monitor the company’s inventory levels for critical components matched against its pending orders and initiate shipments of these components without waiting for the company to place an order in the first place. As Smaros, Lehtonen, Appelqvist and Holmstrom (2003) point out, “One of the most common types of automatic replenishment programs is vendor-managed inventory or VMI. In VMI, the vendor is given access to its customer’s inventory and demand information. The vendor monitors the customer’s inventory level and has the authority and the responsibility to replenish the customer’s stock according to jointly agreed inventory control principles and objectives” (337).


In the SAP operating environment, this is termed an “operational data store.” The vendor of the SAP BW program states that unlike a strict data warehouse approach, “An operational data store is designed to enable numerous queries on small amounts of granular data that is updated frequently. It stores detailed data, and supports tactical, day-to-day decision making. . . . SAP views it as an almost real-time informational environment that supports operational reporting by interacting with existing transactional systems, data warehouses, or analytical applications” (17).


Figure 2. Operational Data Store and Data Warehouse.


Source: “Data Warehousing with mySAP,” 18.


As can be seen in Figure 2 above, SAP BW provides all users with flexible access to the data that is stored in the data warehouse, the operational data store, and the multidimensional model.


Design of Solution(s).


The company needs to completely overhaul its current business processes with an integrated approach that is capable of providing improved communications between all partners in the supply chain. In this regard, Boyson, Corsi and Verbraeck (2003) suggest that a portal, also termed a “gateway,” can provide part of the solution to the problems being experienced by the company in terms of its communications with its suppliers and customers. For instance, these authors point out that, “Information technology can help to overcome the uncertainties of the modern business environment. Electronic exchange of information leads to a reduction of errors and increased efficiency of the work processes” (176). According to Akram, Chohan, Wang, Yang and Allan (2005), “A portal is a Web-based application that acts as a gateway between users and a range of different high-level services. It provides personalisation, single sign-on (SSO), aggregation and customisation features. A so-called 2nd generation portal normally consists of different portlets to process consumer requests to these services and generate dynamic content from the responses” (1).


Because the company relies to some extent on vendors which are located overseas for some of its components, a portal can provide the means by which information can be shared in real time concerning order fulfillment and status. In this regard, Boyson et al. note that, “When one company can use the information of other companies in the supply chain, the negative effects of uncertainty (i.e., higher inventory levels, inaccurate forecasts, and unfulfilled orders) can be mitigated” (176). The company’s customers would also benefit from the use of a portal. For example, one authority advises that, “Accessing Web services from suppliers for product pricing, availability, and order management as well as exposing these same functions to customers can greatly increase the visibility and efficiency of an organization’s supply chain” (“Reduce Complexity and Costs of Web Services Integration” 2003, 2).


There are a number of constraints to an across-the-board approach that attempts to achieve such integrated levels, though, including incompatible information technology systems and a reluctance on the part of many companies to openly share information with others. The use of a portal, though, can help overcome these and other problems associated with the sharing of information between partners in a supply chain. As Boyson and his associates emphasize, “Standardized interactions with one portal are easier to manage than are many peer-to-peer relationships. The portal provides an organization with a single, unified database, linked across all functional systems, both within the organization and between the organization and its major supply chain partners” (176).


The other glaring need for the company is to replace its paper-driven approach with an automated one. According to Meng and Su, whatever automation approach is selected, it “needs to be able to modify a process model at run-time to adapt to dynamic business conditions and exception situations” (6). For the company’s purposes, a business process management application would provide these requirements. For instance, according to Silver (2003), “Today, business process management software represents a synthesis of workflow and enterprise application integration — a single software platform that automates and integrates both types of business processes, and optimizes them through real-time business activity monitoring” (1). The definition provided by the consultants at Hurwitz Group states that, “Business process management is the ability to have end-to-end visibility and control over all parts of a long-lived, multi-step information request or transaction that spans multiple applications and people in one or more companies” (1). The relevant tenets of business process management (BPM) therefore extend to all aspects of the business processes involved irrespective of their size, location and who is involved in accomplishing them (Business Process Management).


Table 1


Application of BPM Tenets to the Company’s Production Processes


BPM Tenet




Application to the Company




Graphically defining or building a business process representation that accounts for: all needed process assets, multiple steps, sub-processes, parallel processes, various process fulfillment paths, business rules for event processing, exception handling, and error handling.


The operational data store and data warehouse illustrated in Figure 2 above and the process map shown in Figure 3 below represent a good starting point for the company to model its business processes graphically.




Connecting the process assets so that they can exchange information to achieve the given business goal. For applications this means automating the data transactions and business rule processing for such business events as updating customer records or order price calculation. Application Programming Interfaces and messaging are the means to connect multiple applications and data sources involved in business process. This also means that data transformations and translations are necessary among the completing applications.


According to Gelinas and Bigras (2004), “Logistics integration consists in implementing mechanisms to ensure fluidity of physical and information flows, accuracy of information, and application of decisions within the supply chain” (263). The company can integrate its supply chain management operations by developing an SAP-powered Web-based portal and implementing an enterprise resource planning tool such as an off-the-shelf SAP program.




Providing a graphical administrative console that shows processes that are in progress, completed processes, and associated business metrics for each process.


The SAP program can provide the company’s staff and management alike with real-time graphical analyses that describe the current and projected status of a given order or an overall picture.




Analyzing, through a common user interface, the monitored processes to look for inefficiencies, coupled with the ability to act on or change processes in real-time to minimize inefficiencies. These four tenets of BPM should not be considered as separate from each other. They are symbiotically linked and represent a cohesive set of actions that deliver on the promise of BPM. Enterprises can employ a BPM solution to handle a variety of business processes, ranging from simple to complex.


SAP provides such a common user interface and the vendor-managed inventory approach would integrate link the four tenets of BPM in meaningful ways. The so-called “MiniApps” used by SAP push information to the users that need it when they need it rather than the users having to search for it. According to Duray (2001), SAP “pushes” information to users before they have to go looking for it. “Key performance indicators or time-critical alerts are pushed out to the individual’s computer. Using drag and relate technology, an individual can take those messages that are useful, relevant, or important and move them into an appropriate folder on his or her workplace” (57).


Source: Columns one and two: Business Process Management, Hurwitz Group Market Map; others as indicated.


Figure 3. Process map.


Source: Business Process Management, Hurwitz Group Market Map.


The process map shown in Figure 3 above is readily applicable to the operations of the company. For instance, step one might represent an order being received from a customer, and business rule R1 would represent the company’s policy to check existing inventory to determine if there are any supplies left over from previous production runs. The exception a would represent those instances where such supplies were found proceeding unto step 3 which could represent the daily production run for that type of can configuration, while exception B. would represent those instances where no leftover product was on hand and additional components would be required to be ordered. Business rule R2 could represent production runs that lacked sufficient components to complete the process, with the corresponding exception C. representing the waiting period required for delivery through to step 4 which would be the next step in the production process.


Discussion and Conclusion


The company’s needs are not all that difficult to model and improve, but the launching of a sophisticated SAP program will inevitably require some time, as well as some trial and error in resolving the bugs that will crop up. While many aspects of the SAP program are intuitive and will require little training and experience in order for users to become proficient in their use, other aspects, especially the developmental and programming phase, will require a significant amount of personnel training if accomplished in-house or a consideration amount of time and expense if it is outsourced.


Because the company’s success to date has been based on its focus on agile production runs for a wide range of products, it is vitally important for the company to remain productive during the implementation and testing phase. This would suggest that an incremental implementation approach would be best suited for the company’s needs, with some elements of the SAP program being implemented first, such as the SAP-powered portal that would provide improved communications between all partners in the company’s supply chain. Likewise, rather than implement a vendor-managed inventory approach in a wholesale fashion, the company would be well advised to select a highly trusted vendor with a reliable track record and experiment with this approach to determine how well it satisfies the company’s inventory requirements.


Despite these potential constraints and limitations, though, the company in question is a perfect candidate for the introduction of information technology solutions to its supply chain management problems in ways that will ultimately improve its ability to produce its entire range of aerosol cans more efficiently. The fact that the company has enjoyed some degree of success to date — indeed, the fact that it is still in business — by using a paper-driven business process model suggests that the company’s management is on the right track in delivering value-added manufacturing services to its customers. What remains to complete the picture and make the company even more profitable and successful is the adoption of an appropriate software application that can integrate all of the disparate parts into a cohesive whole. In this regard, the SAP solution has been proven time and again in a wide range of small- to- medium-sized enterprises competing in a wide range of industries and suitable best practices are available to help guide the company in its use. In the final analysis, the sooner the company gets started on this path the sooner it will be able to realize the improved productivity and flexibility that information technology provides.




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