THE ERP HYPE IS FAST GETTING OVER
(by Dr. Kaushik Sahu)
[This article (minus the visuals) featured in TOI (New Delhi Edition) dated 26th August 1999]
From MRP through ERP to SCP:
Material Requirements Planning
(MRP) systems are computer programs that have evolved over the last 30 years into advanced systems known as Enterprise Resource Planning (ERP) Systems. In the original form the MRP system comprised of a software program that was used for avoiding unnecessary inventory build-up. Production schedule revisions due to capacity considerations were done external to the program. Thus, the MRP system only plans the material requirements by exploding the master production schedule. The planning of capacity requirements (i.e., the needs for all other types of resources, such as staffing, facilities, or tools) is done externally to the MRP system.
Later refinements to the MRP system resulted in closed-loop MRP systems, which have information feedback loops necessary for frequent plan revisions. Once the plans are accepted as realistic and attainable, the execution functions come into play and orders are released into the production system. The feedback from the execution functions is used in the revision of future plans. Thus the planning is kept valid at all times. Figure 1 shows a closed-loop MRP system.
A logical extension of these concepts led to the inclusion of other portions of the productive system, such as the purchasing function along with shop floor control, dispatching and detailed scheduling. The name MRP II (manufacturing resource planning) was given to differentiate it from the previous MRP (material requirements planning) systems. The initial objective was to plan and monitor all the resources of a manufacturing firm, such as manufacturing, finance, marketing and engineering. Today, MRP II systems simulate the entire manufacturing system, where customers, marketing staff, production and accounting interact to achieve common business goals. An example of an MRP II system is IBM’s MAPICS (Manufacturing Accounting & Production Control System). It comprises of nineteen interrelated modules, such as, accounts payable, accounts receivable, CRP, cross application support, data collection system support, financial analysis, forecasting, general ledger, inventory management for process, inventory management, location management, master production schedule, MRP, order entry & invoicing, payroll, product data management, production control & costing, purchasing and sales analysis.
Further developments brought in advanced MRP type systems, which are called Enterprise Resource Planning (ERP) Systems. These systems are made to face the business requirements in a changing world with intense global competition, multi-plant international sites, wide global product demand, varying currency markets and international subcontracting. These systems provide instant access to information on customer needs and which plants will be able to satisfy these needs. They also provide a company-wide inventory and capacity status. They use distributed application for planning, scheduling and costing to multiple layers (e.g.: work centers, sites, divisions etc.) in multiple languages and currencies. They use client/server architecture, multiple database support, graphical user interface (GUI), front-end DSS, automated EDI, inter-operability between platforms and standard application programming interface.
Manufacturing systems that are driven by customer interactions offer a highly responsive system to satisfy changing customer needs. A customer synchronized manufacturing resource-planning system creates such an advantage. Such advanced MRP type systems link the customer information with the manufacturing planning and production functions. Typically most customer information is isolated from the main production planning and control system. Figure 2 shows the various customer related information, which reside elsewhere (within separate functions), that need to be linked to the main production system so as to orient it towards the customer. When properly integrated, these systems help manufacture products to customers’ specifications while delivering personalized services and anticipating customer needs. They facilitate partnering with suppliers to strengthen the supply chain. Modern concepts on supply chain management are supported by newer supply chain planning (SCP) software. Unlike ERP, which is a transaction-processing tool, SCP is a decision support tool that helps in optimizing the supply chain.
WHAT KIND OF TRAINING WOULD BE NEEDED?
As you can see, technology has made rapid strides. Unfortunately our socioeconomic conditions are such that our Industry finds it difficult to absorb such technology fast enough to give the young generation a challenging career in their own soil. Our students have to look for career options far away from home. Due to a worldwide shortage of well-trained ERP professionals, leading ERP vendors (such as SAP, BAAN, PeopleSoft and others) have opened up training shops in India. The small training shops have also tried to make some quick profits by selling promises to the young aspirants through a "general product exposure" kind of training. Parents are confused with all the media hype and feel that the hefty training fees invested now will earn them dividends when their wards start getting handsome salary. Unfortunately, though, they are all headed for a frustrating experience. Students are not able to develop strong skills to fetch them a rewarding career, which finally results in such shops ultimately winding up operations. Coupled with this we have our Industry struggling with their ERP implementation programs. Lately there have been several failure stories that are due to various different reasons. All this has led to the ERP hype fast getting over. I hope the SCP vendors, such as i2 Technologies and Manugistics, will be spared such hype.
Just because the hype is over, it does not mean such tools have lost their significance. It is time now for serious professionals, institutes and organizations to drive home the concepts that are behind these tools. We need appropriate sociotechnical systems catering to our requirements. Our industry, therefore, needs to effectively customize and adapt such tools for enhancing its productivity. Thus, instead of a "general product exposure" kind of training we need more effective action-based training to be delivered to our young aspirants. Students have to be exposed to a live organization so as to study the "as-is" system and develop the "to-be" system using these tools. This way they can construct their models around a real life situation, which would then enhance their learning. To begin with we can realize a lot of benefits if we focused on the Small and Medium Enterprises (SME). We have large population of Industries in this segment. Realizing this market potential many ERP vendors have started customizing their products to cater to this segment. We also have our own homegrown ERP products, such as Marshall, Makess and Evolus, to name a few that are worth watching.
PRE-REQUISITES:
ERP training calls for a lot of cross-functional exposure. Students intending to take up training in this line need to apply their computer and analytical skills on underlying business processes. An engineering background along with an exposure to the core courses of management would help the students in understanding a firm better. An effective training process would need the students to develop the templates relating to a live organization on which they would like to apply the concepts.
CAREER OPPORTUNITIES:
Students undergoing such training will find challenges in consulting firms engaged in developing IT-based manufacturing solutions for the Industry. Those going abroad may find lucrative (may not be challenging) jobs compared to their counterparts trying to make a career in India. Those wanting to apply these concepts in India may find their jobs rather challenging (may not be lucrative in the short run). If they can identify the opportunities they will have a lot more chance to develop themselves to handle the needs of the industry that is facing competition under the liberalized scenario. However, in the absence of active consulting outfits, students have to be enterprising in terms of identifying opportunities themselves. Opportunity lies in finding out all those areas where one can apply IT-oriented tools and techniques. Figure 2 shows the need for integrating IT for supporting customer needs. Thus, it also indicates where all we can have the IT professional helping the organization (i.e., the production distribution system) develop systems to enhance productivity. If we look closely at any of these points in an organization we can highlight the existing gap that is prevailing between the "as-is" system and the desired globally competitive "to-be" system. This signifies the scope that is available to our young aspirants wanting to make a career in this line. The problem is that such assignments are not lucrative in the short run. Our industry here is not in a position to afford the kind of salaries demanded by the IT-professional/companies. This is partly because they do not realize the value of these IT-based systems for supporting their immediate business needs. What is needed therefore is to develop systems at an affordable price to first get the industry hooked on to its benefits. As one example, I came across one incident where I was advising a group of students in some project-related matter. This group did apply some of the concepts on a real life organization. They got permission to study the existing system of this organization. Then they went on to use their spare time for developing an IT-based measurement system for this company. However, they wanted to give it to the company for not less than Rs. 15000/=. The company wanted to pay only Rs. 6000/= for it. So the deal was called off. In my opinion, it was all a wasted effort. For the students, no doubt, it was a challenging assignment. However, the monetary value associated with it being small, the team preferred to dump the whole thing rather than part with it. Had they accepted the Company's offer of Rs. 6000/= and allowed the company to get hooked on to their system, who knows they would have got the opportunity to rake in more rupees in the long run. If not anything, at the least a satisfaction of seeing their hard work put to real use by the local industry. I wish the younger generation would see a lot of scope in such assignments where they can make small profits by showing their skills.
Expecting companies to give full-time jobs is becoming more and more difficult. I urge my young friends to show to the companies what value they can give them (apart from their certificates) that would assist these organizations in orienting themselves toward the customers. Thereafter, go on enhancing this value as long as you can. If you can stick on to this career, in the long run it will be lucrative to you in your very own soil. The following paragraph gives an indication of all the scope that is available out there.
Where the industry is positioned: The 1998 figures quoted in the web pages of STP Bhubaneswar indicated about 50,000 small units and some 300 medium and large industries in Orissa. Today most of them are facing problems as related to a highly competitive environment. Many of the smaller units may not even be existing today. However, in general, the industries having problems can be categorized as industries failing to understand and meet their customers’ needs properly. At the same time we have important large customers failing to develop their suppliers properly. It is primarily due to this that we have a long list of problems faced by both the customers and the suppliers. It is due to this the industry as whole suffers. Most of this can be attributed to a lack of scientific approach to decision making and failure in using the right kind of technology for supporting the information needs of an organization. For example we have several industries which do not even have a basic material requirement planning (MRP) system in place. There are many that do not adopt a scientific approach to production planning and control. As a result they find it difficult to meet the low cost requirements of their customers. In general, we have industries, some of which are traditional, some advanced, and some hardly adopting a scientific approach. The industry has failed to evolve proper information systems to support its activities in the highly competitive environment of today. It is time now we made good use of the positive indicators given to us in the form of the various policies of the government. Our primary focus should be in using IT as a productivity multiplier.
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