ERP Solution for Arkwright.docx
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ERPSolutionforArkwright
Arkwright’sERPSolution
EnterpriseResourcePlanning
TheconsultancyteamhasbeenhiredbyUnitedHoldingstoproduceamanagementreport,whichwillprovidetoadviceonhowArkwright’sperformancemightbesignificantlyenhancedthroughtheintroductionofaSAPpackage.
5/16/2012
Contents
Introduction3
SituationAnalysis4
Companybackground4
Internalproblems4
FinanceResourceManagement4
MaterialResourcesPlanning4
CustomerRelationshipManagement5
HumanResourceManagement5
SupplyChainManagement6
Externalenvironment6
Competitorsinthetabletindustry7
Treatsofthenewentrants7
Treatsofsubstitutes7
Thebargingpowerofcustomers7
Thebargainingpowerofsuppliers7
ProjectGoals7
Decreaseinventorycosts8
Increasevisibility8
Improvecontrollabilityofsupplychain8
Increaseflexibility8
Decreaseoperationcost8
Increasecustomersatisfaction8
Increaseavailabilityofinformation8
Increaseprofit8
BenefitsofERP8
Improvedsupplychainmanagement(SAPSCM)9
Systematicproductionplanning9
Optimizedinventorymanagement9
Moreefficientpurchasing10
Improvedmaterialresourcesplanning(SAPMRP)10
BetterCRM,FRM,HRM10
PrioritiesforComputerisation11
ProductionPlanning(PP)11
Creatingroutingandproductionorders11
Productcosting12
Displayautomaticgoodsmovementandrelevantaccountingdocuments12
MaterialManagement(MM)13
VendorMasterRecords13
Purchasinginforecords14
Controlling(CO)14
Creatingcostcentre15
Creatingactivitytypes16
CreatingCostCentreGroupfortheTabletAssessment16
Costcentrereport16
Salesanddistributions(SD)17
Customermasterrecord18
Salesprice18
Salesorder19
Remainingtargetsforcomputerisation19
FinancialAccounting19
WarehouseManagement(WM)19
Customerrelationshipmanagement(CRM)20
HumanResourceManagement(HRM)20
ProjectPlan20
Establishmentofknowledgemanagement20
Changeinbusinessprocess21
Training22
OtherkeyfactorstosuccessfulERPsystemimplementation22
Conclusion23
References25
Introduction
OurconsultancyteamhasbeenentrustedbyUnitedHoldingstohelpArkwrightimprovingitsperformancethroughthereplacementofallexistingsystemswithafullyintegratedenterpriseresourceplanning(ERP)system.ERPisdefinedas“amethodfortheeffectiveplanningandcontrolofallresourcesneededtotake,make,ship,andaccountforcustomerordersinamanufacturing,distribution,orservicecompany”(Khalid,2003:
494).AfullyintegratedandglobalERPsystemwascreatedbythecompanynamedSAP(SimhaandWord,2009).Thesoftware,developedbySAP,isnowwidelyusedbyover50,000oftheworld’sbest-managedcompanies(SimhaandWord,2009).
Inthecurrentcompetitivebusinessworld,companiesdoeverythingpossibletosatisfycustomersfasterandlessexpensivelythantheircompetitors.Todoso,thekeyistohaveadvancedandefficientinformationsystems.Effectiveinformationsystemscansignificantlyimprovemanagementofbusinessprocesses.Oncecompanieshaveefficientbusinessprocesses,theycancompetesuccessfullywithotherpracticesinthemarketplace.ERPhasatremendousimpactonacompany’smanagementbyservingasacompany-widecomputingenvironmentthatincludesadatabasethatissharedbyallfunctionaldepartments(MonkandWagner,2009).Itoffersprocessefficient,technological,strategic,financial,andorganisationalbenefitsoverdifferentandvariouscomputingsystems(David,2004).
Inpractice,themostcommonERPmodulesincludeFinanceResourceManagement(FRM),MaterialResourcePlanning(MRP),CustomerRelationshipManagement(CRM),HumanResourcemanagement(HRM),andSupplyChainManagement,asshowninFigure1.
Figure1:
CriticalComponentsofanERPSystem
However,ERPpackagesindicateacertainwayofdoingbusiness,andtheusersarerequiredtofollowthatwayofdoingthings.DuetotheconstraintsinherentinERP,someofabusiness’soperationsandsomesegmentsofitsoperationsmightnotbeagoodmatchwithit.Therefore,itisnecessaryforanorganisationtoinvestigateitsownbusinessstrategy,organisationalstructure,corporateculture,andoperationbeforechoosinganERPapproach.Actually,mostcompaniesstudytheirrealneedsandthenentrustanexternalteamofsoftwareconsultantstohelpselecttherightsoftwaresuppliersandthebestwaytoimplementingERP(MonkandWagner,2009).
SituationAnalysis
Accordingtothetheoriesthatmentionedabove,itisimportanttoanalysistheinternalproblemsandexternalmarketenvironmentthatJoshuaArkwright&Sonsiscurrentlyexperiencing.Thus,wecanprovideamorecompletesolutionforthecompany.
Companybackground
JoshuaArkwright&Sons,amediumsized,familyrunandBritish-basedmanufactureroftabletcomputer,wasacquiredbyUnitedHoldingsPLCinSeptemberoflastyear.ItwasinitiallyfoundedbyJoshuaArkwrightandhissonsin1980.Afternearlytwentyyearsdevelopment,JoshuaArkwright&SonshasbuiltasolidreputationintabletPCindustry,basedlargelyonitsfashionabledesignandhighqualityproducts.ItisworthmentioningthatArkwrightfirstintroducethetouchscreentechnologyintotabletPC.Bytheendof2011,Arkwrighthad200full-timeemployees,twoplantsandthreedirect-salestoreslocatedinLondon,BirminghamandManchester.Theaverageturnoverofthecompanyisapproximately25millionpounds.
Internalproblems
Currently,thecompany’smanagementhasarangeofissuessuchastheaccountsreceivableprobleminfinancialmanagement;poorcommunicationbetweendifferentdepartments;inefficientproductionplanandsoon.However,oneofthebiggestproblemsisthemanagementofsupplychain.
FinanceResourceManagement
Actually,Arkwright’sproductsarestillmuchindemandinthemarketplaceowedtotheirhighquality.However,thefinancesofthecompanyhadbeendegradinginthepastfiveyears.Anurgentneedinvolvedaseverecashflowproblem.Thecompanyhaddevelopedaseriousaccountsreceivablecollectionproblemduelargelytoweakcontroloncredits.Arkwrightusuallyallowsthesellingtosmallormediumsizedcorporateclientsoncredits.However,someofthecompanieswilldefaultonpaymentsbecauseoftheirownfinancialmatters.Andastheinefficientexchangeofinformationbetweenthesalesdepartmentandaccountingdepartment,thesecustomersstillcangettheproductsoncredits.Continuouslyforalongtimehence,thesebaddebtswillaffectcompany’sdailyoperation.Moreover,thecompanyhasbeenunabletoeffectivelycontrolcosts,primarilybecausetheirinvoicingprocedures,budgetplanninganddebtorcontrolhaveallbeenineffective.
MaterialResourcesPlanning
Thebillofmaterials(BOM)forArkwright’stabletPCisillustratedinFigure2.ItcanbeseenthatthemaincomponentsofonefinishedtabletPCincludeatouchscreenandanintegratedmotherboardwhichcontainsagraphicscardandawirelessnetworkcard.AlthoughArkwrighthadmadethecompleteroutingtowardscomputerisation,mostoftheirsystemshavebeenassignedandbuiltinapiecemealfashion,andmanyarenowinefficientandout-dated.Therefore,theconfiguredworkingplanofthecompanyisbackwardandineffectual.Morespecifically,theyhavebeenunabletosufficientlyflexibletorespond,atshortnotice,toadjusttheirproductionplans,eitherintermsofthemixofproductsrequiredorthelevelofproductionforanorder.Indeed,theproductioncontrollersofArkwrighthavefoundthatitisdifficulttochangetheproductionmix,asitrequiresaswitchfromonesetofdesigndocuments/billofmaterials/productionprocesses,toanother,atveryshortnotice.Poorcommunicationandcoordinationamongfunctionsthatfrequentlycharacterizesinamanualenvironment,maketheprocessmoreproblematicifBOMchanges.
Figure2:
TheBillofMaterialsofTabletPC
CustomerRelationshipManagement
Inpractice,muchofthefocusandattentionofArkwrighthasbeenrelatedtothetopicofproductflow,withsignificantconcernformatterssuchasdesign,technologyandquality.Itssupplychainstypicallybeginatthepointofmanufactureandendwiththesaleofproducttoconsumers.Thus,Arkwright&Sonsis,tosomedegree,themanufacturer–whoisfarawayfromcustomermarketortheenduser(Coyleetal,2003).Briefly,thecompanyhadapoorperformanceincustomerrelationshipmanagementandneglectedtheimportanceofcustomerservice.
HumanResourceManagement
Generally,HRneedsdetailedinformationordatafromtheotherdepartmentstodoitsjobaccurately(MonkandWagner,2009).However,theHRdepartmentofArkwrightalwayslackofaccurateandtimelydataformanagementuseduetotheout-datedandinefficientcomputersystem.Particularly,theyhavenotbeenableestablishadatabaseofskillsrequiredtodoparticularjobsandtheprevailingpayrates.Sometimes,theydonotknowwhatskillsareneededtoperformaparticularjobandhowmuchthecompanycanaffordtopayemployees.Also,thecompanyhasahigheremployeeturnoverbecauseofaloweremployeesatisfactionrate.Theyrarelyconcernstaffs’needs.
SupplyChainManagement
ProductionPlanning
Ingeneral,theaimofaproductionplanistoarrangeproductioneconomically,sothatthecompanycandelivermerchandisestocustomersbythepromisedshipmentdatesinamostcostefficientway(MonkandWagner,2009).However,therearesomecommunicationbreakdownsexistbetweenArkwright'ssalesdepartmentandproductiondepartmentforalongtime.Ononehand,Arkwright’smarketingandsalespersonneldonotshareinformationwithproductionpersonnel;ontheotherhand,thecompany’sdailyprod