Q2. Discuss the rationale (justification) for implementing an ERP system. Which characteristics suggest that a firm could benefit from an ERP system? How can this investment pay off?
As it is stated in the text book, “An ERP system is most appropriate for company seeking the benefits of data and process integration supported by its information system. Benefit is gain from elimination of redundant process; increase accuracy in information, superior processes and improve speed in responding to customer requirements”. In addition, ERP system collects and distributes information across functional boundaries and helps break down information silo’s, those barriers that stand in the way of full corporation between production, materials, planning, engineering, finance, and sales/marketing. Let’s take a closer look and evaluate how a business can reap the benefits of ERP system.
ERP system improves Inventory control by offering real-time information on finish good inventory allowing manufacturing and planning to evaluate customer demand. Moreover, ERP system provides data which can further be analyzed to gain more grip on high-moving vs. slow-moving products to minimize the stocked inventories.
ERP system improves Material control by providing updated prices on materials which can be leveraged to negotiate better pricing from vendor, therefore directly impacting the company’s bottom line. Moreover, ERP provides more visibility on DOH on storage of raw materials, where this information can be utilize to deploy VIM process to reduce DOH for raw materials. Enabling business to reduce cash-to-cash cycle time.
Improve customer experience by giving more traction on product lead time leading to higher customer satisfaction. Additionally, ERP improves managing customer information to meet customer requirements and delivery promises. ERP system also provides the ability to react to changes in forecast which helps with decision making process without impacting...