2 Information Systems in the Enterprise - Main Web

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TABLE 2-8 Business Processes Supported by Enterprise Systems Manufacturing processes, including inventory management, purchasing, shipping, production planning, material requirements planning, and plant and equipment maintenance Financial and accounting processes, including accounts payable, accounts receivable, cash management and forecasting, product-cost accounting, cost-center accounting, asset accounting, general ledger, and financial reporting Sales and marketing processes, including order processing, pricing, shipping, billing, sales management, and sales planning Human resource processes, including personnel administration, time accounting, payroll, personnel planning and development, benefits accounting, applicant tracking, and travel expense reporting, Benefits and Challenges of Enterprise Systems Enterprise systems promise to integrate the diverse business processes of a firm into a single integrated information architecture. Chapter 2 ❙ INFORMATION SYSTEMS IN THE ENTERPRISE 23 Benefits of Enterprise Systems Enterprise systems promise to greatly change four dimensions of business: firm structure, management process, technology platform, and business capability. Firm Structure and Organization: One Organization Companies can use enterprise systems to support organizational structures that were not previously possible or to create a more disciplined organizational culture. For example, they might use enterprise systems to integrate the corporation across geographic or business unit boundaries or to create a more uniform organizational culture in which everyone uses similar processes and information. An enterprise-enabled organization does business the same way worldwide, with functional boundaries deemphasized in favor of cross-functional coordination and information flowing freely across business functions. Management: Firmwide Knowledge-based Management Processes In addition to automating many essential business transactions, such as taking orders, paying suppliers, or changing employee benefits status, enterprise systems can also improve management reporting and decision making. Information supplied by an enterprise system is structured around Management Decision Problem ANALYZING ENTERPRISE PROCESS INTEGRATION Management at your agricultural chemicals corporation has been dissatisfied with production planning. Production plans are created using best guesses of demand for each product which are based on how much of each product has been ordered in the past. If a customer places an unexpected order or requests a change to an existing order after it has been placed, there is no way to adjust the production plans. The company may have to tell customers it can’t fill their orders or may run up extra costs maintaining additional inventory to prevent stock-outs. At the end of each month, orders are totaled and manually keyed into the company’s production planning system. Data from the past month’s production and inventory systems are manually entered into the firm’s order management system. Analysts from the sales department and from the production department analyze the data from their respective systems to determine what the sales targets and what the production targets should be for the next month. These estimates are usually different. The analysts then get together at a high-level planning meeting, to revise the production and sales targets to take into account senior management’s goals for market share, revenues, and profits. The outcome of the meeting is a finalized production master schedule. The entire production planning process takes 17 business days to complete. Nine of these days are required to enter and validate the data. The remaining days are spent developing and reconciling the production and sales targets and finalizing the production master schedule. 1. Draw a diagram of the production planning process. 2. Analyze the problems this process creates for the company. 3. How could an enterprise system solve these problems? Diagram what this process might look like if the company implemented enterprise software.
24 Part I ❙ ORGANIZATIONS, MANAGEMENT, AND THE NETWORKED ENTERPRISE cross-functional business processes and it can be obtained rapidly. For example, an enterprise system might help management more easily determine which products are most or least profitable. No longer would general managers be stuck without any hard data on firm performance, or data that applies only to their own immediate department. An enterprise system could supply management with better data about business processes and overall organizational performance. Technology: Unified Platform Enterprise systems promise to provide firms with a single, unified, and all-encompassing information system technology platform and environment. Enterprise systems promise to create a single, integrated repository that gathers data on all the key business processes. The data have common, standardized definitions and formats that are accepted by the entire organization. You will learn more about the importance of standardizing organizational data in Chapter 7. Business: More Efficient Operations and Customer-driven Business Processes Enterprise systems can help create the foundation for a customer-driven or demand organization. By integrating discrete business processes such as sales, production, finance, and logistics, the entire organization can efficiently respond to customer requests for products or information, forecast new products, and build and deliver them as demand requires. Manufacturing has better information to produce only what customers have ordered, to procure exactly the right amount of components or raw materials to fill actual orders, to stage production, and to minimize the time that components or finished products are in inventory. Using enterprise systems to capture unit cost and quality data, firms can improve the quality of their products and services. The Challenge of Enterprise Systems Although enterprise systems can improve organizational coordination, efficiency, and decision making, they have proven very difficult to build. They require not only large technology investments but also fundamental changes in the way the business operates. Companies need to rework their business processes to make information flow smoothly between them. Employees must take on new job functions and responsibilities. Enterprise systems require complex pieces of software and large investments of time, money, and expertise. Enterprise systems raise serious challenges for firms: a daunting implementation process, surviving a cost/benefit analysis, inflexibility, and realizing strategic value. Daunting Implementation Enterprise systems bring dramatic changes to business. They require not only deep-seated technological changes but also fundamental changes in the way the business operates. Business processes change dramatically, as do organizational structure and culture. Firms implementing enterprise systems have to come up with organization-wide definitions of data, retrain thousands of workers, and redesign their fundamental business processes, all at once, while carrying on business as usual. It might take a large company three to five years to fully implement all of the organizational and technology changes required by an enterprise system. Organizations that do not understand that such changes will be required or are unable to make them will have problems implementing enterprise systems, or they may not be able to achieve a higher level of functional and business process integration. High Up-front Costs and Future Benefits The costs of enterprise systems are large, upfront, highly visible, and often politically charged. Although the costs to build the system are obvious, the benefits often cannot be precisely quantified at the beginning of an enterprise project. One reason is that the benefits often accrue from employees using the system after it is completed and gaining the knowledge of business operations heretofore impossible to learn. Inflexibility Enterprise system software tends to be complex, difficult to master, with a worldwide shortage in people with the expertise to install and maintain it. The software is deeply intertwined with corporate business processes. If companies need to make major changes, the system will have to be changed. And because enterprise systems are integrated, it is difficult to make a change in only one part of the business without affecting other parts as well. There is the prospect that the new enterprise systems could eventually prove as brittle and hard to change as the old systems they replaced–a new kind of “digital concrete” that could, over time, bind firms to outdated business processes and systems.
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