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What ERP Really Does

ERP allows us to look atour company and objectively assess its competitive capability. ERP is based on time tested good business practice and represents a model of such. Since ERP touches virtually every department within a company, the implementation of it provides an opportunity to examine current and new methods, approaches, habits and perspectives. When someone discovers a better way of managing or doing something and that discovery of a "new way" is known among associates, it is difficult to maintain the non-productive status-quo. Put another way ERP is a catalyst for change. A few examples of new approaches are the use of modular Bills-of-Materials and Master Production Scheduling (MPS).

Many companies today create and maintain a Bill-of-Material for each end item shippable unit. This method of configuration management fosters the creation of large expensive to maintain databases. For a luncheon menu with choices needed on five variables, the main protein component, bread, condiment, salad and drink. A customer order is secured and the choice is chicken salad, fiber bread, butter, baked potato and beer. A new BOM to maintain! Another customer order is booked, this time the BOM consists of club, bread (again), butter (again), baked potato (again) and coffee (new). Another BOM to maintain! Which of these two menu possibilities is easier to maintain a database on, forecast, plan and dedicate time to problem solving on? Need I say more?

Another example of new (but time tested) approaches is Vendor Scheduling, an innovation from the automotive industry. If we simulated the activity of a new purchase part requirement being identified with one change during the planning cycle and the securing of it, we have a lot of non-value added time (hence added lead-time and cost). The wasteful cycle: planner communicates requirement to buyer, buyer selects vendor and communicates to their sales/order entry function, this group communicates with their planning department who confirms schedule. Sales communicates to client buyer, who then confirms this with their planner.

Let's now introduce a change on the clients/buying side and you get a sense of how convoluted and wasteful the "traditional" method is. What if the planner on the customer side could communicate directly with the planner on the sup-

plier side? Would that not cut out this inefficient cycle? Yes it would, and that's what Vendor Scheduling is all about. Vendor Scheduling has some prerequisites. You must reduce the number of suppliers to a small group of trusted ones with whom you feel a win-win relationship can or already exists. Both parties must understand the obligation this relationship brings with it to be absolutely reliable and honest. You must have the systems and legal framework in place to accommodate this new way of doing business The two examples given are just the "tip of the iceberg" relative to the new approaches embedded in the ERP model.

Once in place this new model is also better suited to monitoring performance to management's policies and strategies than the previous one. Additionally, in an era of intense marketplace competition, anything that is known to improve corporate survivability has the potential to act as a morale booster for the associates/employees of that organization.

In summary, ERP is a descendent of MRP, Closed Loop MRP and MRPII. Also it reflects the influences of JIT and CIM as well as taking advantage of the latest IT technologies. Since it is based on proven good business practice, its implementation is an opportunity to reexamine and compare an enterprise in terms of competitiveness and world class performance. Let's move on to some specifics on the benefits of implementing ERP.

The Benefits of ERP

The benefits of ERP are multi-dimensional and compelling. In covering the benefits we will discuss the results of the APICS/University of Minnesota and Clemson University studies on MRP/MRPII and "how to" calculate/estimate the benefits of implementing ERP in advance. We will review the intangible benefits and how they might be viewed in economic terms. The benefits discussion will conclude with a look at the defined body of knowledge on resource management and the its value in the era of the "knowledge worker."

To be Continued


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