Adoption of ERP Software by Companies-Free-Samples for Students

Question: Discuss why ERP software is increasingly being adopted by medium to large Companies. In your discussion focus on which type of industries are making increasing use of ERP software. Answer: Introduction This report discusses about the Enterprise resource planning (ERP) and its function. It further analyses why the business organization are adopting the ERP software and how they are utilizing in their business. The report discusses about the Reasons for the usage of ERP in industries which includes the operational efficiency, accuracy and consistency, mobility and the customer relationship satisfaction. The report presents the demand of the ERP software with the support of various statics about its development. The report discusses about the sarbanes Oxley act which was implemented in the year 2002 by the U.S congress to protect the investors from the possibility of fraudulent accounting activities by corporations. It discusses how the company SAP has modifies it business with the act. The report finally discusses about two companies who have successfully implanted the ERP software and the company who has failed in implanting the software and the respective for the success and failure of the software. The chosen company is the Cadbury which has successfully implanted the ERP and Hersheys which has failed to implement the ERP software in the year 2000. ERP The full form of ERP is the Enterprise resource planning. There are various sectors in the business which include finance, accounts, customer relationship management and manufacturing. In order to carry out the operations efficiently for the business there has to be efficient communication between them (Nazemi, Tarokh and Djavanshir, 2012). For example if there is shortage of the raw materials the manufacturing department has to contact the finance department for the funds and finance department will contact with the accounts department for the requirement of the raw materials (May, Dhillon and Caldeira 2013). Figure 1: The basic function of the ERP software (Source: Beheshti et al 2014 pp.357-375.) Thus from the example it can be implied all the department of the company is involve for the single operation, in order to integrate all the department under one software for efficient exchange of data is the major and principle function of the ERP software. ERP function can be used in various application of the business. Various reason can be enlisted which is responsible for the usage of ERP applications. Reasons for the usage of ERP in industries The operational efficiency If an organization is small with approx 30-50 employees then it is easy to manage the operations, control and monitor the various operations, but in the case of company which has over thousands of employee there will be thousands of operation which will be implemented simultaneously, in order to track and maintain records of all these operation and it is the huge challenge for the company, if there is mismanagement of even a single operation all other operation of the company will be effected which will affect the productivity of the company (Ram, Corkindale, and Wu 2013). Therefore to overcome such situation, ERP software is used as it has the ability to monitor them and track the operations. As the result it reduces the overhead and operating expenses. The accuracy and consistency The ERP software not only manages the operation but also stores them in consistent and accurate form. In large and medium scale industry where over hundreds are working in a single department, it might happen that each of them have different views thus providing different solution to the common problem to the mange ( Beheshti et al. 2014).As the results confusion can be created which can lead to the wrong decision for the operation. Therefore installing ERP will ensure that all the solution of the respective employees are store in accurate and consistent way so that each solution can be monitored to implement. The concept of the mobility The concept of the mobility means that to carry out the business operation from anywhere. Nowadays mobility in the business is on the high demand with the increasing competition (Bradford 2015). Figure 2: The mobility function of the ERP (Source: Ruivo, Oliveira and Neto 2014 pp.166-184) The executives do not want their employees to restrict their office work only to their offices, in order to increase the productivity they should also work apart from the office residence. The ERP software has the mobility feature which enables to access to their companies related information and to implement them without a corporate network system provides significant improvements to productivity service quality and an increased competitive advantage. Enables better customer satisfaction The application of the ERP can be used for better customer satisfaction if the customer has certain queries (Ruivo, Oliveira and Neto 2014) as discussed above that ERP system helps in better management of the data, thus it will help in better management of the customer queries as the customer representatives have access to the updated and better managed data which can help them to deal with the customers queries efficiently. Statics related to ERM usage in the Industry The ERP software was first used in 1990 by the company named as the Gartner Group where it was used for the purposed of the material requirement planning (MRP) (Hsu, Yen and Chung 2015).It application expanded rapidly in 1990. According to the panorama consulting solutions the 2015 ERP solution report shows that in 2014 over eighty percent of the total company in the world is using the ERP applications in carrying out their business transactions. SAP (system application product) is the company whose ERP software is used in most of the organization. Figure 3: Graph related to the usage of the ERP (Source: Hsu,Yen and Chung 2015 pp.925-942) The implementation of the ERP is also nominal as on an average the implementation of the ERP cost 6.5 percent of the companys annual revenue. In the year 2015 the top ten companies who manufactures ERP reports that the market of ERP has grown by 1 percent accounting over 83 billion in the maintenance revenues. Figure 4: Total annual revenue of the ERP (Source: May, Dhillon and Caldeira 2013 pp.98-109.) The SAP is the leader in this market with over Six percent of the market share. The statics shows that the enterprise applications market graph with respect to the functional area (Ahmad and Cuenca 2013). The maximum growth is seen in market like ecommerce, Enterprise Management, Sales and Treasury and Risk (Antero 2015). According to the panorama report the major reason for implementing the ERP software is to replace the old ERP system with over 17 percent. The report shows in 2015 over 58 percent of the company is successful in implementing the ERP project and over 21 percent reports that their ERP project as the failure. With over 14 percent of the total company realized that the main benefit of using the ERP software is the efficient availability of the information. Figure 5: Data summary by the year (Source: Hepner and Dickson 2013 pp.309) Thus the report statics suggests that most of the company consider it advantageous in implementing the ERP software as it has huge application. Sarbanes-Oxley Act The SOX (Sarbanes-Oxley Act) is an act which was passed in the year 2002 by the U.S congress to protect the investors from the possibility of fraudulent accounting activities by corporations. The SOX is designed to mandate strict reforms on the cooperations financial accounts and to prevent the accounting fraud (Hostak et al 2013). Figure 6: The overview of the SOX act (Source: Hostak et al 2013 pp.522-559) the act was made after the when public scandals such asEnron Corporation, Tyco International plc, andWorldComshook investor confidence infinancial statementsand demanded an overhaul of regulatory standards. Implication The main motive behind the implication of the SOX for the public company to make a better audit committee which looks the financial reporting and disclosure of the company (Zhang, Zhu and Ding 2013). The act encourages performing the internal control tests, making the directors and officers responsible to bring accuracy in the financial statements of the company (Calderon, Wang and Conrad 2012). If any company is accounted for the mishandling on the accounts statements then there are strict criminal penalties on the following company on the fraudulent charge against the company. Implication of SOX on the SAP The implication of the Sarbanes-Oxley Act is also adopted by the SAP software which makes its customer to approach the company from both the perspective of business and technology (Dapkut? 2013). The main goal of the SOX act is to bring transparency and accuracy and also enhances the speed for having trusted financial statements and ensures trusted accounting. The SAP company is made up with various in built controls which, when utilized properly, will provide the tools which is required to aid the executives assistance for the data processing and the internal controls (Badua, Sharifi and Watkins 2012). The SAP contains the modules like Management of Internal Controls, Enhanced Audit tools and Whistle-Blowing functionality to comply with SOX rules and regulation. In the purchasing world it is the key factor of the software named my SAP which stands for the Supplier Relationship Management (my SAP SRM) which will provide the key areas of support (Blount et al . 2016). Below is the few ways how SAP can work for better security in the presence of SOX rules: To provide the information access to the user on what is there need to do and need to know To secure all the transaction which takes place, programs and tables The access to the SAP R/3 should be authorized and approved properly There should be the segregation of the work which maintains all the confidential business transactions. There should be the proper documentation for all the controls and business processes An Anti-fraud preventive rules should be implemented to stop and detect any fraud before the audit is presented The employee profile and his respective roles should be secured in the SAP and design in such way to meet the business requirement The Strategic capabilities of my SAP can assist c other companies in agreement under Sarbanes-Oxley and other regulatory legislation. Moreover in 2015 the ERP Scan Security Monitoring Suite for SAP has been awarded as best Solution for SOX Compliance at Hot Companies and Best Products Awards 2015 (Poranki, Perwej and Akhtar). Thus the SAP achievement in 2015 shows that it has well adapted to the SOX act and its rules. Moreover the my SAP is also helping other companies by assisting to adapt the Sarbanes-Oxley regulatory legislation. Company successfully implementing the SAP case study SAP application is well known from the above described statics as it says that over eighty percent of the companies are using the ERP software and the SAP is leading in the ERP market with over six percent of the market share in the ERP market. An example of the company who has successfully implemented the SAP application is the Cadbury Company Figure 7: Cadbury implementation (Source: Hsu, Yen and Chung 2015 pp.925-942) Cadbury is the British international confectionary company which is owned by the Mondale international and founded in the year 1824. Cadbury is considered to be the second largest confectionary brand. The Cadbury brand is fully owned by the Kraft food Inc (Dwivedi et al . 2015). The company Kraft food Inc is currently using the sixth version of the SAP software which the SAP considers it as one of the largest global ERP implementations. According to the company Kraft the ERP software has reduced the operational cost. Various reasons are enlisted through which the Cadbury has successfully used the ERP system: There was much inefficiency in the carrying out the business operation of the Cadbury which it as unable to keep up the pace with as its business was in the fast paced growth. Using ERP software brought efficiency in its system. Using the ERP software helped the company to bring a different way of the warehouse management system and provide better structure to the offices and depositories. The ERP system has overshadowed the past weakness of the company and grows on its strength to remain in the competitive market. Failure case study of the SAP While there has been various success stories relating to the implementation of the SAP. HERSHYS an American company has failed implement the SAP. HERSHYS is an American company which was founded in 1876 which is considered to be a largest chocolate manufacturer. To enhance the customer service in the competitive market Hersheys installed software named Enterprise21 which include SAP R/3, IBM global service and Siebels CRM software (Moalagh and Ravasan 2013). The overall budget of the software was over ten million which would be applicable to 2.5 years. Instead of going with the phased approach in which the entire project is divided into smaller principle steps, the company went with the big bang approach which means to int2egrate all the model of the machine and testing it as a whole. Problems related to ERP in the company The first problem started with the company was related to the completing orders, shipment, processing of the products as the company was facing difficulty in managing the product As the result the distributors of the Hersheys was not able to deliver them to the retailers on the given time thus loosing the credibility in the market. The affect on the credibility was seen in the product inventory which started to pile up and was 25 percent more than the previous year. The stock market price of the Hersheys went down dramatically and the company lost over 150 million dollars in the sales, the profit declined by 12 percent and the sale declined by 19 percent. Reasons behind the failure Various failure reasons can be enlisted for the company in ERP software: One of the major reasons for the failure of ERP software can be the big bang approach over the phased approach (Hepner and Dickson 2013). The company may not be able to utilize the big bang approach efficiently thus underutilizing the ERP services The ERP software focused the implementation in the unreasonable timeline which ignore them the critical issues Ghosh 2012). The testing phase of the software should be treated seriously and should be given ample time to analyze the application of the software. Conclusion From the report it can be concluded that the application of the ERP in the various sector of the business has huge impact in the processing f he company. Over eighty percent of the total company in the world is using the ERP applications in carrying out their business transactions. SAP (system application product) is the company whose ERP software is used in most of the organization. The ERP market has grown by 1 percent accounting over 83 billion in the maintenance revenues in the year 2014 and it is going to increase in the coming days. The SOX (Sarbanes-Oxley Act) has been implemented to protect the investors from the possibility of fraudulent accounting activities by corporations and the SAP has modified its business according to its rules. Every company should follow the Cadbury way of utilizing the ERP software as it has gained huge advantage in terms of market share and efficiency in the carrying out the business. 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