Business Applications:Cross Functional enterprise systems and Enterprise Resource planning.

5.1 Cross Functional enterprise systems

Business process

It is a set of logically related activities for accomplishing a specific business result. It is the manner in which work is organized, coordinated, and focused to produce a valuable product or service. It sets unique ways to coordinate work, information, and knowledge. Business processes represents the ways in which management chooses to coordinate work and shows the concrete work flows of material, information and knowledge in any organization.

Cross Functional Business Process

A business process, which cross functional areas and requires coordination across departments are called Cross functional business process. It requires group of employees from different functional specialties to complete a piece of work .For example Order fulfillment process. The first process in the order fulfillment is initiated by the sales department. The order received by the sales department is passed first to accounting department to ensure the customer can pay for the order either by credit verification or request for immediate payment prior to shipping. Once the customer credit is established, the production department pulls the raw materials from

inventory to produce the product .The product is shipped. A bill or invoice will then have to be generated by the accounting department and a notice is sent to the customer indicating that the product is shipped. Such systems which support the cross functional business processes are called cross functional business systems.

Figure 5.6

Cross-Functional Enterprise Systems

Information systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes all across the enterprise.

Figure 5.7

Fig 5.7 represents the new product development process in a manufacturing company. This is an example of a business process that must be supported by cross functional systems that cross the boundaries of several business functions.

There is a strong emphasis in many organizations to develop such composite or cross-functional information systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes. These organizations view cross-functional information systems as a strategic way to share information resources and improve the efficiency and effectiveness of a business, thus helping it attain its strategic objectives.

Many companies today are using information technology to develop integrated cross-functional enterprise systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes all across the enterprise. These organizations

view cross-functional enterprise systems as a strategic way to use IT to share information resources and improve the efficiency and effectiveness of business processes, and develop strategic relationships with customers, suppliers, and business partners.

Business firms are turning to Internet technologies to integrate the flow of information among their internal business functions and their customers and suppliers. Companies are using the World Wide Web and their intranets and extranets as the technology platform for their cross- functional and interorganizational information systems.

Enterprise Application Architecture

Figures 5.8 and 5.9 represents an Enterprise Application Architecture, which illustrates the interrelationships of the major cross-functional enterprise applications. This architecture spotlights the roles these business systems play in supporting the customers, suppliers, partners, and employees of a business.

Figure 5.8

Figure 5.9

Enterprise applications focus on accomplishing fundamental business processes in concert with a company’s customer, supplier, partner and employee stake holders. Thus ERP (Enterprise Resource Planning) concentrates on the efficiency of a firm’s internal production, distribution and financial processes. Customer Relationship Management (CRM) focuses on acquiring and retaining profitable customers via marketing, sales and service processes. Supply Chain management (SCM) focuses on developing the most efficient and effective sourcing and procurement processes with suppliers for the products and services that a business needs.

5.2 Enterprise Resource Planning(ERP)

Enterprise resource planning is a cross-functional enterprise system that integrates and automates many of the internal business processes of a company, particularly those within the manufacturing, logistics, distribution, accounting, finance, and human resource functions of the business. Thus, ERP serves as the vital backbone information system of the enterprise, helping a company achieve the efficiency, agility, and responsiveness required to succeed in a dynamic business environment. It collects data from different firm functions and stores data in single central data repository and also it helps in resolving problem of fragmented, redundant data sets and systems. It gives a company an integrated real-time view of its core business processes. ERP enables in,

• Coordination of daily activities

• Efficient response to customer orders (production, inventory)

• Provide valuable information for improving management decision making

Figure 5.12 illustrates some of the key cross-functional business process and supplier and customer information flows supported by ERP Systems.

ERP systems are a suite of integrated software modules and a common central database. The database collects data from many different divisions and departments in a firm, and from a large number of key business processes in manufacturing and production, finance and accounting, sales and marketing, and human resources, making the data available for applicants that support nearly all of an organisation’s internal business activities. When new information is entered by one process, the information is made immediately available to other business processes.

Characteristics of ERP software include:

• ERP software is a family of software modules that supports the business activities involved in vital back-office processes.

• ERP gives a company an integrated real-time view of its core business processes.

• ERP systems track business resources, and the status of commitments made by the business no matter what department has entered the data into the system.

• ERP software suites typically consist of integrated modules of manufacturing, distribution, sales, accounting, and human resource applications.

However, properly implementing ERP systems is a difficult and costly process that has caused serious business loses for some companies, who underestimated the planning, development, and training that were necessary to reengineer their business processes to accommodate their new ERP systems.

Benefits of ERP

• Quality and efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that result in significant improvements in the quality and efficiency of customer service, production, and distribution.

• Decreased costs – many companies report significant reductions in transaction processing costs and hardware, software, and IT support staff compared to the non-integrated legacy systems that were replaced by their new ERP systems.

• Decision support – ERP provides vital cross-functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner across the entire business enterprise.

• Enterprise agility – ERP can be used in breaking down many former departmental and functional walls, which results in more flexible organizational structures, managerial responsibility, and work roles. The result is a more agile and adaptive organization and workforce that can more easily capitalize on new business opportunities.

Challenges of ERP

• Difficult to build: Require fundamental changes in the way the business operates

• Technology: Require complex pieces of software and large investments of time, money, and expertise

The Cost of ERP

• Costs and risks involved in implementing ERP are considerable.

• Hardware and software costs are a small part of the total costs. The costs of developing new business processes (reengineering) and preparing employees for the new system (training and change management) make up the bulk of implementing a new ERP system.

• Converting data from previous legacy systems to the new cross-functional ERP system is another major category of ERP implementation costs.

Causes of ERP Failures

• Business managers and IT professionals underestimate the complexity of the planning, development, and training that are needed to prepare for a new ERP system that would radically change their business processes and information systems.

• Failure to involve affected employees in the planning and development phases and change management programs

• Trying to do too much too fast in the conversion process.

• Insufficient training in the new work tasks required by the ERP system.

• Failure to do enough data conversion and testing.

• Overreliance by company or IT management on claims of ERP software vendors or the assistance of prestigious consulting firms hired to lead the implementation.

Trends in ERP

Figure 5.14

Four major developments and trends that are evolving in ERP applications include,

• ERP software packages are gradually being modified into more flexible products.

• In relation to the growth of the Internet and corporate intranets and extranets prompted software companies to use Internet technologies to build Web interfaces and network capabilities into ERP systems.

• Development of interenterprise ERP systems that provide Web-enabled links between key business systems of a company and its customers, suppliers, distributors, and others.

• ERP software companies have developed modular, Web-enabled software suites that integrate customer relationship management, supply chain management, procurement, decision support, enterprise portals, and other business applications and functions.