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How the ERP System Improves the Business

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Abstract

The use of Enterprise Resource Planning (ERP) has become one of the popular business management tools that businesses employ in the recent past. ERP systems allow companies to achieve a real-time capability and seamless communication during their business operations. Nonetheless, not all businesses that have implemented ERP systems are able to benefit from such investment in technology. The reasons for this are varied from poor implementation approaches to non-synchronized functions that may become a burden to the business rather than a benefit. The ERP system implementation can affect the way the organization does its business throughout. It means it is likely to encounter challenges as it is implemented. Nonetheless, on overall, ERP systems are helping many businesses across the world to improve their businesses in terms of managing their finances, production and manufacturing, sales and procurement, human resource, as well as customer relations. These functions are achieved through reduced cost and time, thus, allowing the company to reap maximum benefits from the investment in ERP. The purpose of the study is to understand how the ERP system Oracle can improve the business of Al Futtaim, which operates from Dubai, the United Arab Emirates.

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Key words: enterprise resource planning, business performance, information systems

How the ERP System Improve the Business

In a world where a competition for customers is high and technology changes the way business is done, organizations must be innovative in such a way they approach their customers. Apart from providing high quality services and products, businesses must employ different technological innovations in order to attain a high competitive advantage in their operations. One of the technological innovations that could be undertaken in an organization is the use of Enterprise Resource Planning (ERP) tools as a means of achieving a better competitive edge and continuing being relevant on the market (Abugabah & Sanzogni, 2010). ERP is a suite of software solutions that assist a company to link its data and information from different departments in a real time update.
Since the ERP is a suite, an organization must identify the most applicable modules that address the needs of the business and even have an option of further improving them as new needs emerge. However, the addition or improvement on ERP can be challenging since the needs are dynamic and the resources to keep up with them are limited. Some organizations may not have experienced employees to help with implementing ERP modules that adequately address the needs of the organization (Allen, Kern, & Havenhand, 2002). For this reason, some companies can have the ERP system in their operations and fail to derive maximum benefits and instead become a burden to the company. The purpose of the study is to understand how the ERP system Oracle can improve the business of Al Futtaim, which operates from Dubai, the United Arab Emirates.

Objectives of the Project

In order to understand how ERP can improve the business of Al Futtain, the study will pursue the following objectives;
To evaluate some ways through which ERP facilitates the integration of information systems at Al Futtaim in the areas such as sales and distribution, accounts, inventory, and human resources among others.

To describe processes through which ERP can be integrated and automated in business activities and allow sharing of information concurrently at Al Futtaim and improve a corporate image and customer service at the company.
To establish some methods through which ERP can effectively be integrated across all departments and across the subsidiary companies that make up Al Futtaim Group.

To determine some ways through which ERP can be used to close the information gap across departments at the company and improve productivity, management of finance, and quality control among other operations.
To highlight on the essential business intelligence tools including reporting, data-mining, decision support systems, among others which improve business operations at Al Futtaim.

Review of Literature on how ERP Systems Improve Business Operations

According to Al-Mashari, Al-Mudimigh, and Zairi (2003), ERP systems are software modules that provide any company with the capacity to implement tasks that improve the efficiency of doing business. The modules are applicable to almost all types of operations that take place in a business environment. Therefore, they are allowing the company to have a centralized place where data and information can be stored and retrieved easily and quickly when a need arises. ERP can be instrumental in facilitating an access to information by developing a single database that holds the information required by others in the organization. Al-Mashari, Al-Mudimigh, and Zairi (2003) further observe that the ERP system also assists in routing information and data from various departments to where it is needed. The system facilitates tracking of this information by anyone being able to gain an entry through login. Therefore, it allows for a faster and easier distribution of any message to those people who require it. The system is advantageous since there are few possibilities of making errors in the entry and where such errors are made. They are easy to be identified since the system detects information or data which has errors.

In their research, Bajwa, Garcia, and Mooney (2004) have found that an effective implementation of the ERP system is essential to ensuring maximum benefits in business operations. The properly implemented ERP system can enable an organization to improve its business. One way of implementing an effective ERP system is through demand management functionality which is based on a master schedule. The researchers have noted that the aim is to achieve reliable delivery promises, thereby boosting the on-time delivery of information and data. The result should be an increased availability of information and data to different departments and subsequent availability of business-related information to the people who need it.

Dillard and Yuthas (2006), in their study, have commended that the implementation of the ERP system should also be done in terms of the capacity to plan components and materials and match them to necessary sets in pursuit of the potential and actual customer needs. Therefore, it will have the service’s quality improved as well as improving how efficient the production process can be. One of the major impediments to achieve efficiency in companies that offer services or products to customers is a lack of information required to make deals. Dillard and Yuthas (2006) have argued that the ERP system facilitates the availability of crucial information by ensuring that such information is available when it is needed. Additionally, ERP systems are accredited with allowing employees of the organization to plan requirements in advance and, therefore, achieve better efficiency in managing the resources used in business operations. ERP systems also facilitate the process of planning which is needed in a business environment that is heavily reliant on inventories and other resources to achieve a better performance and delivery of services.

On their part, Ehie and Madsen (2005) have noted in research findings that the implementation of the ERP system is contingent on the needs of the organization. Since businesses normally have an internal and external environment through which they work, it is important to have the ERP system implemented within the characteristics of the two environments. The effectively implemented ERP system must, therefore, incorporate the practical systems. They are used in the business such as systems to manage the commercial aspects of the business. In this regard, commercial areas like material management, inventory and purchasing, human resource planning, marketing and sales, and accounting among others should be considered in the system. As a result, the business should achieve a better movement of information and data within the internal departments that deal with these areas. Hanafizadeh and Ravasan (2011), however, have noted that the implemented ERP system must retain a robust connection or link with the outside world including customers and suppliers of materials.

Huang, Chang, Li, and Lin (2004) have suggested that in order to achieve the link between internal and external users of the ERP system, the computing and network configurations must be designed with this in mind. The implementation process should consider processes like client server interactions and software tools that specifically address this necessity. In most cases, the ERP system is implemented through a common database that contains the information from different departments in the business organization that allows the accessibility of that particular information to the people who may need it. Huang et al. (2004) have further noted that using the integrated database as a means of controlling the way business solutions are achieved at various points of interaction should be implemented as a primary role of ERP. The ERP system, therefore, allows a business organization with some limited information and technology resources and duplicated databases to have a single application used across all business activities. The result is a reduced total cost of ownership which makes the overall cost of doing business to decrease while increasing efficiency and enhancing the profitability of the business.

The role of ERP is to ensure that companies attain high levels of service delivery in terms of customer satisfaction as well as achieve efficiency in operations. Through ERP, businesses are able to manage effectively the supply chains. The implementation of ERP to improve business performance and achieve efficiency must be done with this idea in mind (Hanafizadeh & Ravasan, 2011). For this purpose, the ERP system should allow the business organization to replace disparate systems of operations into single integrated systems that serve the purpose initially served by various systems. Light (2001) has observed that the replacement of legacy systems with ERP ensures not only improved business operations but also delivers security features through data security features. The business aspect of ERP is evident in the automation and re-engineering of business operations. It also ensures improved accessibility of information, efficient operations, and effective management of the company resources. ERP resources also have the capacity to deliver cooperation and teamwork between the staff. Furthermore, the business is able to achieve benefits in the areas of reduced costs, less operation time, integrated information, high quality information, and general improvement in the satisfaction level of customers.

In most cases, the benefits of implementing the ERP system are usually perceived since the system improves a process of production by making it more efficient. This process normally utilizes the information from related departments like procurement and sales, which in disparate systems are not in communication (Leon, 2005). To this end, it is important that the measurement standards for an implemented system are aligned with the reasons that the ERP system is implemented to achieve. In this way, it will be modified to be unique to every business organization.

The effective implementation of ERP to achieve the stated goals is done through projects. Several researchers have developed the conceptual framework that could be used to understand the process of implementing the ERP system in a business organization. One of the models suggested in the research by Ehie and Madsen (2005) is a five-stage process that starts with preparing for the project to the final implementation. The other stages have included in the model are business blueprint, realization, and support. The first stage involves a comprehensive planning which entails the creation of a team, setting some budget targets, and defining an objective and plan. The business blueprint stage is characterized by an analysis of the overall business needs with a view of selecting the most appropriate ERP system to implement (Maddison, 2007).

It also includes the formation of a project team with the mandate to facilitate the functions and configurations have already suggested for ERP. The realization stage is normally focused on the implementation of the actual ERP. It is characterized by the process of developing interfaces, modifying them to reflect the business needs, and converting the data into formats. These ones are applicable to the attainment of the set objectives. The final stage integrates and tests the operation of the ERP in terms of the business needs and the training of users as well as providing support to stabilize the system and leverage on the competitive advantage acquired from having the ERP (Papadopoulos & Wojtkowski, 2009).

There are a number of challenges that can impact on the successful implementation of ERP in a business organization. The first challenge, according to Papadopoulos and Wojtkowski (2009), is a need to have an ERP system that incorporates best business practices into the industry. It is a common feature for business organizations to have unique structures which define the business processes that the organization adopts. The organization culture may adversely affect the use of the ERP system in the business. ERP systems are normally implemented in a business-oriented environment. Hence, some of the activities like human resource management may not fit in well within the ERP system (Altekar, 2004).

According to Altekar (2004), it can occur regardless of the fact that such activities are crucial to the eventual success of any business. Where the organizational culture is deeply entrenched in the practices of an organization, ERP systems are likely to encounter resistance. The process does not just involve adoption of new ways of managing and accessing information. It involves the entire change in the culture of the organization. In addition, in a business organization with hierarchical management, the ERP system can easily reinforce one arm of an organization while leaving the others deprived. However, it is likely to happen in the company that previously relied on distinct departments or entities both internally and externally (Altekar, 2004).

From a corporate perspective, ERP systems can said to be generic solutions with high risk potentials. It is because of the limited choices that the staff and other stakeholders are left with. In some way, ERP systems are technically integrated into suited solutions that depend on the dynamic nature of business processes. Therefore, the whole process of implementing ERP in a business organization can present problems to IT and management staff in a form of overlapping of roles and responsibilities (Abugabah & Sanzogni, 2010). In many cases, business organizations usually have a wide range of systems some of which may have competing roles in a given need. Furthermore, business organizations normally focus on their core business and implementing a new ERP system may be costly in terms of getting relevant professionals to do the work. The last challenge, according to Singh and Waddell (2004), is that integration and standardization of business operations, even as the two ones are major aspects of ERP systems, usually present a limit to the flexibility of using the system at the company. Thus, it is possible that the staff can experience workarounds. They try to carry own with the previous work and therefore increase the workload and introduce information gaps between the functioning of the system and the reality on the ground (Phillips, 2012).

From the literature review, it is evident that ERP systems have the capacity to improve the business performance of an organization. The ERP system presents an opportunity for the business to have its activities controlled from one central place. Therefore, it gets more power to shape the distribution and consumption of information among its stakeholders. Some of the important areas in the operations of the organization include inventory and supply management, procurement, human resource, financial and customer care as well as manufacturing and production. The level of success of the ERP system is much depended on an objective and goal that is being addressed. Without having the goal in mind, the implemented ERP system can fail to achieve the intended function; hence, it becomes a burden to the organization. It is important to consider the relevant steps and include internal and external stakeholders in the implementation process to achieve the intended results. In order to prevent resistance or workarounds after the ERP system has been implemented, internal users can be trained on how to use the system with a view of avoiding duplication of work. The latter one could be costly to the organization. The departments include; sales, manufacturing, procurement, and customer care. Organizational culture as well as employee behaviors can affect the way ERP system is used in pursuit of objectives of the business. In most cases, the ERP system affects everything in the organization and may involve a complete overhaul in the structure and chain of command at the business organization. Thus, staff members need to be prepared for the changes that will be brought about as a result of implementing the ERP system in advance. When it is finally implemented they support it.

Data Analysis

In an effort to execute the project, a number of data sources were contacted to determine the level of ERP use at the organization and the processes that were being undertaken to improve the business performance. The primary source of information for this project is the Al Futtaim Group of companies that operate from Dubai with branches and subsidiaries spread in the UAE and the rest of the world. The secondary sources from databases and research organizations are also used to evaluate the extent of ERP integration in companies operating in the UAE. They have implemented ERP systems as a way of improving their business performance. With Al Futtaim, an interview session was organized with the director of IT at the company. He has provided information on the role that the ERP system plays in the local and global business activities of the company. Specifically, the interview session was biased towards the business side. It was meant to establish how business improved since the ERP system was implemented at the company (Allen, Kern, & Havenhand, 2002).

It has also focused on the key areas like sales and marketing, production, human resource, and financial accounting. They have dramatically improved due to the use of the common ERP system; thus, enabling the company to have a central management of crucial activities. From the researched databases and the journals published on how businesses are done in the UAE, a number of areas became evident as highly influenced by the use of ERP systems in the companies operating in the region. The same was also evident from the interview with the representative of Al Futtaim Group. The first area that is highly mentioned in journals and other research findings about the use of ERP systems in companies operating in the UAE is a manufacturing and production management aspect. For instance, Al Futtaim uses ERP to streamline its manufacturing and production arm of the group. The company also uses the system in other areas like order processing, trading and logistics, job costing, contracting business managers, as well as retail service to the customers both at the local and international levels (Al-Mashari, Al-Mudimigh, & Zairi, 2003).

The research from the published resources and online materials indicates that the level of ERP integration as a means to improving business performance in the UAE is high. From the business perspective, ERP systems are increasingly being used by the companies in the UAE including Al Futtaim. It has integrated an organization-wide system of managing business operations. ERP systems are also used at the company to enhance both internal and external communication. As the international company with customers from different parts of the world, Al Futtaim is able to tailor its communication from different parts of the world. It may direct them to the relevant department s depending on some predetermined features. Majority of companies in the UAE have managed to eliminate manual processes by using ERP systems. As a result, they have gained better decision making and planning capacities in their business operations. They have also gained control over their data analyses as well as an integrated workflow and best practice in all the sectors of their business.

The data used in this project has been analyzed from the Arab scientific publications that were retrieved from different databases as well as business reports of different organizations. The findings of the analysis on the impact that ERP systems have on business activities of an organization can be applied to the business operations of Al Futtaim. Even though the Arab world is not leading in publications on ERP systems, in particular, and other disciplines, in general, several scientific publications have addressed the subject of ERP systems in the Arab world. Some of the areas that have come out strongly in research as having been impacted through ERP systems include the financial management functions, customer relationship management, management of supply chain, human resource management, and manufacturing resource planning.

Recommendations

Meanwhile there are signs that international companies in the UAE are increasingly implementing ERP systems to leverage on their competitiveness in the market. It is essential that they consider the specific objectives for these ERP systems in order to have maximum business benefits. The UAE based companies such as Al Futtaim are fast acquiring international customers who are not traditionally exposed to the business practices in the Arab world. The ERP systems should be implemented fully with the correct modules to leverage on the good customer relationship with international customers and ensure a better service delivery of the UAE based companies. It is also recommended that ERP systems integrate the aspect of human resource management as an important tool in the management of the diverse cultural and social aspects of workers who work for international companies in the Arab world.

Through having a well performing human resource module, the UAE-based companies can appropriately use the international human resource power and achieve a better business performance even in markets being not traditionally conversant with the culture and practice of Arab based countries. In terms of the research, more researchers from the UAE need to come up and carry out the research on how ERP systems can impact their business or companies in different markets across the world. Much of the information available on ERP is mostly based on companies from Western countries. Although the concept is the same one, there are possible variations due to differences in business practice and organizational culture between the UAE based companies and Western based business organizations.

Conclusion

In conclusion, the aim of the project was to study how the ERP system can improve the business of Al Futtaim in the United Arab Emirates. The study has revealed that it can be integrated in areas like sales and distribution, accounts and finance, and human resources management among many others to improve the efficiency of service delivery in these areas. It also shows that the ERP system is usually integrated in the business activities to facilitate a faster and easier sharing of information between departments with a view of enhancing a corporate image. Moreover, it improves the delivery of services to customers. ERP systems are implemented through distinctive stages and processes with a view of ensuring that they address the business’ needs of the company such as closing the information gaps between the organization, on the one side, and customers and suppliers, on the other one. The challenges experienced in implementing the ERP system may range from a lack of definite business needs to a difficulty in its implementation due to a lack of necessary skills and experiences in using ERP. The findings from the research have indicated that more still needs to be done in the area of ERP systems’ implementation to allow UAE based companies to leverage on the benefits presented by use of ERP systems in their businesses.

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