|Type of paper:||Case study|
|Categories:||Software Supply chain management Information systems|
Companies use a variety of software to maximize the effectiveness and efficiency of their logistics and supply chains. The implementation of most software helps companies improve planning and purchasing, but implementing a particular one known as Enterprise Resource Planning (ERP) can help a company integrate all aspects of its supply chain (Li, Wu, Zong & Li, 2017). Most remarkably, SAP ERP has been widely implemented by numerous companies across the globe to create more value for the supply chains by enabling majestic integration, improving the communication process within the internal and the external context of the business, which in turn enhances the enterprise's decision-making process chain (Kumar & Kumar Singh, 2017). Although many organizations have acquired substantial positive impacts and improvement after implementing the software, the scope of the field of logistics and supply chains, which has broadened consistently over the past few decades, has brought about new challenges that make it difficult for some companies to align SAP with other business activities, practices, and systems (Li, Wu, Zong & Li, 2017). Therefore, this research project aims to investigate the current status of ERP SAP implementation, and its benefits in logistics and supply chains and the future direction of its application to ensure it maximizes the effectiveness and the productivity of business enterprises.
The concept of supply chain involves value creation in the entire network that consists of individual and collective institutions devoted to providing information and other resources necessary to achieve the common goal of an enterprise (Li, Wu, Zong & Li, 2017). In the past, logistics and supply chains management used to be an independent department in large organizations, but today, even small and medium-sized enterprises are making it a distinct department to add value to their processes.
Supply chain management involves management of a network of integrated businesses that provide products and services needed by the customers, who are the end users of the chain (Li, Wu, Zong & Li, 2017). SCM controls all activities including the movement of products and services, storage of raw materials, WIP inventory, and the finished products and services from the point of origin to where the consumption takes place (Li, Wu, Zong & Li, 2017). This, therefore, means that SCM is a vital part of a business and any enterprise that wants to remain relevant in a highly competitive business environment needs to acquire the best software to maximize its effectiveness and efficiency (Li, Wu, Zong & Li, 2017). Also, logistics, which is a part of the supply chain process, is a vital part of a business because it controls the effective and efficient forward and reverses the movement of products and services as well as relevant information from the point of origin to the consumption point and vice versa to meet customer requirements (Naqvi, 2018). Thus, a trusted ERP like SAP could be a good idea to improve the productivity of the entire chain.
An ERP system is a program that integrates all features of a business organization including marketing, human resources, logistics and supply chains among others to manage and supervise the company from one database chain (Kumar & Kumar Singh, 2017). ERP technologies such as SAP, are designed to integrate information within a business enterprise to improve the performance of its supply chain. For instance, business enterprises that adopt SAP can improve their logistics by exchanging information with its distributors in different geographical locations in a variety of ways, thereby improving the efficiency of forward and reverse movement of products, and services from the point of origin to the end of consumption, which in turn ensures that consumer requirements are met (Naqvi, 2018). For example, SAP contains an integration tool known as BLi that masters price lists and other essential data, which could help the distributor meet customer requirements more conveniently (Naqvi, 2018). Besides, dashboards and crystal reports contained in SAP can help an organization provide more instinctive reports across the supply chain in matters regarding accuracy and timeliness.
Additionally, each part of ERP SAP software is connected, and the information is linked to a single database to avoid data duplication. Consequently, SAP helps optimize the delivery routes used by retailers, thereby improving the processes of an enterprise as well as managing more businesses without increasing the number of resources needed for logistics (Naqvi, 2018). This, in turn, optimizes production. SAP also makes route planning easier as it helps an enterprise make more precise schedules while managing constraints, scale, and the anticipated seasonal fluctuations within its operations. SAP focusses on optimizing the future planning of an enterprise as well as scheduling of critical material flow processes and activities such as logistics and the entire supply chain (Naqvi, 2018). SAP employs linear programming, constraint-based programming and genetic programming among other forms of technology to manage high data loads.
According to Al-Mashari & Zairi (2000), millions of enterprises in all sectors have implemented ERP software in the last two decades. The software allows companies to use a shared database as well as real-time processing to react to situations and problems in logistics and supply chain that would otherwise be uncontrollable. The SAP is the best and the market chief in ERP software (Al-Mashari & Zairi, 2000). Companies that have successfully improved their logistics and supply chain maximize SAP's component of integrating business elements. They also automate various tasks of the supply chain including an order- to cash processes, planning processes, invoicing, and other business processes, which in turn leads to increased productivity through savings made in sourcing activities, production management, quality analysis, and control as well as logistics and transportation (Al-Mashari & Zairi, 2000).
However, an enterprise should not rely on ERP software such as SAP only in managing its logistics and supply chain (Kumar & Kumar Singh, 2017). Due to the rigid scope and design of logistics and the supply chain, it is incapable of dealing with uncertainty. Thus, other technologies such as wireless technology and RFID should be incorporated into the plan to improve the supply chain. Research shows that most companies that use ERP software such as SAP alone are unable to improve the effectiveness and efficiency of their supply chain altogether. (Al-Mashari & Zairi, 2000). Using the software alongside other forms of technology is more likely to reduce uncertainty problems because they enhance accuracy in updating the progress of the flow of orders across the supply chain, therefore attaining effective and efficient production. In light of this, Kumar & Kumar Singh (2017) proposed a knowledge management system to be used in conjunction with an ERP software like SAP to help reduce uncertainty problems in the supply chain.
Additionally, the consistently broadening scope of logistics and supply chain has made it impossible for some companies to benefit from the competitiveness brought about by some ERP software, especially SAP (Kumar & Kumar Singh, 2017). Only the large enterprises can afford an ERP SAP system because its implementation could cost up to four million dollars. Smalls and medium-sized enterprises cannot provide such expensive ERP software, which means they do not enjoy the benefits that come with the software including gaining a competitive advantage in a seemingly highly competitive business environment.
Analysis and discussion
From the above literature, information technology innovations began back in the 1990s where a range of software applications focused on consolidating information flow throughout the organization (Denolf, Trienekens, Wognum, van der Vorst & Omta, 2015). The software packages were referred to as enterprise systems. ERP was the first enterprise system to attract some of the world's biggest companies, and it has been among the most popular and most effective enterprise systems up to date. Research shows that companies across the world use over ten billion dollars on ERP systems every year.
The main aim of ERP is to integrate all the business processes, an activity that is supported by a computer information system. ERP also allows an enterprise to integrate all its functional systems including finance, human resources, and procurement among others Saeed, S., Shaikh, A., & (Naqvi, 2018). ERP uses specific software such as SAP to integrate the flow of information from the external business function such as suppliers and customers as well as internal services. SAP uses a system that manages a relative database within a server network to interpret valuable data that can be used in management. The central idea of SAP is to enter data from following applications only once to avoid duplication. Once this data is stored in a specific database, it updates all the related information across the entire system. Therefore, the system becomes more effective by being able to virtually support all aspects of an organization including different business units and departments.
Denolf,. Et al (2015) argue that enterprises that use ERP software like SAP gain a competitive advantage over companies that do not use them. Companies that have adopted the software have better market agility than those that do not follow the benefits accrued to the software. The three primary benefits accrued to such companies include timeliness regarding access to critical management information, automation of key business processes and improvement of an enterprise's logistics and supply chain through better use of e-commerce and effective e-communication.
Rolls-Royce is the best example of the most successful companies that have benefited from ERP software SAP. Before acquiring ERP, Rolls-Royce used more than 500 systems, which were expensive and difficult to maintain. Besides, the networks did not provide consistent, accessible, rational and precise data required for timely decision making as well as the assessment of performance (Yusuf, Gunasekaran & Abthorpe, 2004). Additionally, some departments in Rolls-Royce worked in segregation.
Since the company has nine key business processes that define everything that company does, it decided to adopt SAP as the leading ERP software despite its side backs, which included cost, administrative problems, and technical problems among others (Yusuf, Gunasekaran & Abthorpe, 2004). Since its implementation, Rolls-Royce has been on the lead in the production of a range of quality and excellent turbine engines. Consequently, the company has gained a competitive advantage over its competitors because the software ensures that there is the integration of accurate information between the internal and external functions of the business (Yusuf, Gunasekaran & Abthorpe, 2004). The software also improves the efficiency of logistics and supply chain by ensuring that there is direct communication between the management, the suppliers and the customers, which in turn provides that customer requirements are met adequately (Yusuf, Gunasekaran & Abthorpe, 2004).
This paper aimed at investigating the current status of ERP SAP implementation in logistics and supply chains, as well as its benefits to business organizations, and the future direction of its application to ensure it maximizes the effectiveness and the productivity of the business enterprise.
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