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Armand Faganel University of Primorska firstname.lastname@example.org Andreja Jesenko Alcan Tomos d.o.o email@example.com Benjamin Bukovec Omikron d.o.o. firstname.lastname@example.org Abstract International and global acting companies and corporations need appropriate information connections helping them to assure quick and reliable information flow which is crucial in business decision process. “Business to business” connections enable business processes simplifications on the border of business system. Activities related to transformation of business process (or system) outputs that are on the other hand inputs in another business process (or system) can be optimized using direct information connection between companies with following benefits: reduced manual working hours for this activities, less mistakes in data transition and higher data reliability, reduced information flow time and as final effect possibility for faster decision making. The issue presents real life case how to connect companies inside International Corporation using Baan information business support application, possible information connections with customers and suppliers, analyze economics effects and impact of such relations on business opportunities. Key words: ERP, Information connections, Information flow, Baan (SSA ERP LN) 1 Enterprise resource planning or ERP
Enterprise Resource Planning or ERP was born in the early 1960s. At that time Material Requirements Planning or MRP was the initial effort. Application software serves as the method for planning and scheduling materials for complex manufactured products. Enterprise resource planning is a term derived from material resource planning. ERP system is an integrated software package that unites several of the most important demands needed to run an enterprise. ERP software can aid in the control of many business activities, like sales, delivery, billing, production, inventory management, human resources management, strategic management. Enterprise resource planning systems are cross-functional and enterprise wide like business processes are. All functional departments that are involved in operations or production are integrated in one system. In case of a multinational company it makes possible connections and data
exchange also on a worldwide global scale. People from different parts of the world are connected and working together on multilingual platforms. This enterprise resource planning software is developed currently mainly by: Baan (the Netherlands) (renamed in SSA ERP LN), Oracle (USA), Peoplesoft (USA), SAP (Germany). ERP should be understood not just as software tools and implementations. ERP isn't like any other software project. It doesn't merely change employees' computer screens the way previous generations of software did; it changes the way they do their jobs. ERP project teams are not just installing software; they are reinventing how the company does business (Koch, 1999a). Actually it is a management system for continuous improvement. ERP implementation helps organizations set the stage for maximum effectiveness. It offers an opportunity for business processes reengineering. Most ERP systems are enhancing their products to become "Internet Enabled'' so that customers worldwide can have direct access to the supplier's ERP system. 2 ERP can improve a company's business performance
ERP's true ambition is the enterprise. It attempts to integrate all departments and functions across a company onto a single computer system that runs off a single database so that the various departments can more easily share information and communicate with each other, have an overall look and data for quick decision: for instance in sales they can follow manufacturing process or someone in finance can follow stock in warehouse. This way company is performing faster and more effective. Most ERP software is flexible enough that you can install some modules without buying the whole package it depends on company profile and structure. That integrated approach can have a tremendous payback if companies implement the software correctly (Koch, 2005). Where integration is not placed most paper based information are on the journey from in-basket to in-basket around the company causing delays, often being keyed and rekeyed what invites errors and new delays. In the company there is no truly data what is the current status of the process realisation. The worst result are lost orders. ERP’s modules structure is linked to business processes and follows process flow. For company success is the most important order fulfilment process. Improving the way company takes a customer order and processes it into an invoice and revenue is the management key task. ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. People in different departments all see the same information and can update it. Data are routed via the ERP system to the next process step and can be easily tracked down. Customers get their orders faster and with fewer errors than before. But there are still some “buts”. ERP discipline as in time and correct data input, regular check points control to discover possible obstacles in process flow are conditional. ERP itself is not the magic solution for improvements. Skilled personnel avared of importance of their role in processes and consequences in case their job is not done responsible and correct are one of the key success factors. People have to make decisions that have never had to make before, and the answers affect the customers and every other department in the company. ERP screen makes them businesspeople (Koch, 2005). Business processes in the company
are connected and output of one or more is input in another process. Responsibility, accountability, and communication are requirements for all employees. The opportunity ERP implementation brings is process reengineering. The software is less important than the changes companies make in the ways they do business (Koch, 2005). If you use ERP to improve the ways of doing the business you will see value from the software. If you simply install the software without changing the ways people do their jobs, you may not see any value at all—indeed, the new software could slow you down by simply replacing the old software that everyone knew with new software that no one does. This could be a trap on the project road map. People must be involved in improvements planning and be included in project team work as source of new ideas. 3 Hidria company profile
Slovenian global corporation Hidria consists of over 30 companies in Slovenia and in mostly all continents of the world. Five major companies of Hidria are located in Slovenia: AET, Hidria Perles, IMP Klima, Rotomatika and Tomos, with production facilities in Tolmin, Kranj, Godovič, Idrija, Spodnja Idrija, Jesenice and Koper and in towns of Epe in the Netherlands and Quito in Ecuador. Holding Hidria (now Hidria) was foundet in 1989. In 1997 AET Tolmin and Tomos were integrated into Hidria Corporation, in 2000 Iskra ERO (now Hidria Perles and 2001 IMP TIO. Hidria well thought vision of a successful development has been created through strategic thinking and in 2002 was founded the National Institute for Air-Conditioning, Heating and Ventilating, a development & technological centre, first in range of five development and technological centres Hidria is growing up in next years. In the beginning of 2005 Development & technological centre for ignition systems and electronics was founded in Tolmin. Participate in the global economy as a business group highly dedicated to a constant development with a focus on technology and business orientation. Hidria is dedicated to a creation of a strong international corporation, corporation of globally recognized and respected brands that plays an important role in global competition. Global economy is moving toward globalization and as a small nation we must think and act globally. Hidria's sales and distribution centre network is wide-spread from the USA, Ecuador, Columbia, Peru, Australia, Hong Kong to Great Britain, Portugal, the Netherlands, Poland, Germany, Switzerland, Croatia, Serbia and Bosnia and Herzegovina. 4 Introducing ERP in Hidria corporation
Strategic management is the way an organization maps the strategy of its future operations and includes three complementary activities: 1. long-range planning, 2. response management – as soon as a significant change occurs, the system becomes unstable and it is necessary to adjust some or all internal components, organization need to respond by critical response activities (long term strategies and daily business activities), 3. innovation – one of the most important business concepts, strongly related to information technologies (applications, reengineering, business intelligence).
Hidria corporation has a strong, visible and consistent ledership from the top and is customer focused. In order to achieve improvements keeping score is necessary. Hidria has defined the unique score card system for reporting business results. Processes need cross functional feedback to show how their behavior is affecting other business processes. Information system is providing this feedback. Decision about ERP system in Hidria was from the top strategic decision.
Bussiness pressures: Extenal environment, Social, Economics, Political, etc.
Organisation structure and the corporate culture
The organisation's strategy
Management and business processes
Individuals and roles
Fig.4.1: Framework for organizational and societal impacts of information technology (Source: Turban, 1999) 4.1 Baan in Hidria
The first truly integrated manufacturing planning and control system was IBM's Communications-Oriented Production Information Control System (COPICS) in the 1970s. The early systems built around MRP provided integrated Master Production Scheduling, Stock, Purchasing and WIP modules - in other words, the fundamental requirements for driving MRP - together with Sales Order Processing (a module which allowed customer orders to be entered and passed for picking, packing and despatch.) So these integrated systems were known variously as MRPII systems, or perhaps simply 'planning and control' or 'production and inventory management' systems. Tomos as one of Hidria Corporation companies has implemented COPICS in 1980s. Response time to customer’s demands was not in expected tolerances, inventory was rising up, there were almost no variety for individual Tomos’ needs and financial reporting was not on the
level to present quick and reliable performance data. Popularity of integrated standard software was steadily increasing the millennium accelerates searching for new solution. Tomos was forced to replace their outdated software before the year 2000 and migrate to the new generation software. Among different vendors in final two selections there were Baan IV and SAP R/3. Some important competitiveness strengths were on side Baan IV solution: project planning; flexibility and possibilities to reach the same goal choosing different ways; skilled consultants support (practice from previous implementation projects, people coming from industrial environment); training plan. Awareness that successful implementation depends on highly specialized project management skills leaded to strong project team structure. Top A importance of this project for the company was stressed out also with project leader, named on top level management. Project team has regular reviewing and reporting meetings, which were supervised by general manager and Hidria Corporation top management representatives. After only 9 months of implementation, Baan Tomos project was successfully implemented. On 01.01.2000 the new system Baan IV went live. Implementation took place also in other companies of Hidria Corporation starting to use as follows: • Rotomatika, 1.1.2001 • Tomos USA 1.7.2001 • HT USA, 1.1.2002 • Rotomatika Fans, 1.1.2003 • Hidria Perles, 1.6.2003 • Rotos, 1.1.2004 • Perles CH, 1.10.2004 • Hidria UK, 1.1.2005 • Tomos Nederland, 1.1.2005 • HT Beograd, 1.7.2005 • HT Dalmacija, 1.7.2005 • Perles Columbia, 1.10.2005 In Hidria team work is a value that brings people together. Individuals, who cooperate, help each other and work as a team, form teams that win in highly competitive markets. Trusting in employees is a key component of Hidria’s successful growth. Individuals with knowledge, high professional skills and strong will, accompanied with strategically oriented goals determine the success of products and technologies in the markets and also success on IT projects were internal skilled professionals and key users supported by Omikron d.o.o. consultant group organize and manage efficient and effective ERP software implementations all over the Hidria Corporation. 4.2 Hidria ERP structure
Most companies in Hidria Corporation have supplier-customer relations among each other. Three of the five daughter companies use Baan ERP (SSA ERP LN): - Tomos and Rotomatika have Baan IV - Hidria Perles has Baan V. To them other production and sales companies are related.
Tomos NL 850
HT USA 920
Perles CH 420
Hidria UK 430
TOMOS Baan IV 2xx
HIDRIA PERLES Baan V 400
ROTOMATIKA Baan IV 3xx
Fig.4.2.1: ERP infrastructure, VPN internet connections 4.3 Implementation project phases
• • • • • • • • • • • • • • •
Baan introduction First version of Business model concept Analyzing of crucial Business processes Business process – Baan module “DEM” enables company to design business processes models, interactions and connections Performing Simulation-1 Key users training Detailed analyzing of business processes Entering minimum operational data Making working instructions, included in TQM documentation management: processes definition, end users working instructions, forms and printouts Preparation and performing Simulation 2 End users training Final authorizations and menus Final data transfer Manual entering operational data Start in live
Fig.4.3.1: Implementation Phases The most important are business processes definition, data conversion and end users education and training. Implementation projects in subsidiary companies have some specifics: • only Piloting and Migration phase, • many different languages, • local country standards, • simplified procedures for small companies, • strong coordination with main company, • support from main company, • project group on more locations. Possible expected problems in the beginning of running live • First few days some technical difficulties – Printing, network communication problems • Incorrect master data • New users are making mistakes in procedures – Correction of such mistakes is very difficult (and time consuming) for new users • New procedures are in the beginning more time consuming than the old system, because users need to get practical experience
Project organization structure
Tasks define project goals monitor progress, quality and costs take GO or NO-GO decisions approve procedures and organizational changes approve project plan modifications • define members of working groups - key users and end users • define and allocate computer equipment for key users and end users • co-ordinate procedures in between business functions • resolve conflict situation between working groups/business functions • confirm proposed procedures from working groups • prepares essential documents for approval in Steering committee • monitors progressing of working groups toward milestones • solve organizational bottlenecks • propose procedures and processes • control migrated data • modules and procedures testing
• • • • •
Members • General manager • Internal project leader • External project leader • Key managers
• • • •
Internal project leader External project leader Baan consultant Key users
Key user End users
Fig.4.4.1: Project organization structure 4.5 Baan ERP Advantages in Hidria Corporation
Inter Company Communication • Internal Electronic Data Interchange – EDI – Is used for Purchase - Sales orders management between companies: Rotomatika and Hidria Perles; Rotomatika and Tomos, in Rotomatika and Tomos internal between SBU, • products traceability and individual material flow management for each produced vehicle according VIN numbers (international Vehicle Identification Number) – order, manufacturing, final inspection, warehouse stock, sales per part • Centralized logistic planning for inventory optimization between main company and a group of subsidiary (distribution) companies
Logistic management – corporation’s logistic center Hidria Trading receives electronic orders to arrange transport from suppliers or to customers • Sales forecast – long term for 3-12 months and short term for 1,5 to 6 weeks Other common information in Baan • Item descriptions – companies in the same supplier chain use the same data. Product description is responsibility of production companies, to other companies IT provides data transfer, – Tomos Tomos Nederland, HT USA – Hidria Perles Perles CH • Customers and suppliers data • Price policy - common price lists (spare parts) • Inventory – on line stock overview for each location • Planned transactions – Sales orders, purchase orders, production orders • Warranty claims, repairs … Reporting: • Common Hidria reporting standards • Subsidiary companies get assistance from main company • Common performance indicators (Ishikawa) IT infrastructure: • access via secure internet connection (VPN) to central Baan servers on main locations 5 Innovative challenges
Bussiness-to-business Some companies are already connected business to business with customers. There are more B2B possibilities on customers and suppliers sides. TQM module Hidria corporation skilled people supported by consultant group Omikron developed module for TQM consisting: - suppliers rating - quality claims management - customers satisfaction - corrective and preventive actions management. Documentation management module is new challenge to connect existing Baan production description data, products 2D designs and 3D models in R&D, manufacturing procedures and quality management system documentation based on business processes definition. Suppliers’ internet portal Suppliers may reach valid products design and internal norms & standards. Suppliers’ valuation data from TQM module as deliveries quality score card, claim reports available on line. 6 Conclusions
Using Baan ERP in an international corporation benefits time and money savings: • data input at one place reduce mistakes,
• • • • • • • •
the same data may be used at the same time in different companies, all companies use the same data format, for data conversion the same EDI translator can be used, EDI enables companies to send and receive large amount of routine transaction information quickly, there are very few errors in the transformed data, information can flow among companies consistently, received data may be used immediately, without retyping on line data enables quick information and decision possibilities: before using Baan in the supplier chain it took 2 - 3 weeks to collect inventory data (around 10.000 different code numbers, 7 locations) reducing delivery time to reduce stock in supply chain;
To avoid ERP project pitfalls and implement a project successfully helps: • company management involvement – active role in the project, regular project control, • making positive atmosphere, • encouraging (key) users, • general knowledge about critical procedures in the new system also by the top management, • ranking of problems: focus on important, non-critical can be on waiting list, • focus on manually checking all master data: items, price lists, BOMs, business partners, stock, accounts etc., • spending enough time for Simulation 3: (almost) real data, end users, • maintaining good communication in the project structure: Consultant Key user End user. Implementing new information system is an excellent opportunity to improve internal procedures, it does not guarantee the success, however – it depends on the project. Working on a project can be very interesting for all project participants. It is a fun, so it’s no problem to work extra hours. On the long term we got very positive feedback. It takes some months in which sceptics learned enough to feel comfortable with the new information system. Organizational improvements are much more important than technical. Technology is a basis (actually a set of tools) on which we can build effective organization. Enterprise resource planning (ERP) projects do not end. Not only does implementation take forever (many companies already have been at it for years), but once the software is installed, the enterprise will be operating in a totally new way. Everyone's job is going to change—radically. Order entry clerks who type will become business people who make decisions that affect the company's bottom line. Finance managers will have to know what warehouse managers are doing. At all times. In real-time. IS engineers will become business process leaders and owners. ERP team members, chosen from every part of the company, will never be able to go back to their old jobs. If the ERP project ever really ends, if the project team is broken up and sent home, so ends the potential for the company's growth, for change, for adding more value down the road (Koch, 1999b).
Hidria d.d. Companies. Available online: http://www.hidria.si/druzbe.asp [15.9.2005]. Koch, Christopher. 1999a. The most important team in history. CIO Magazine. October, 15. Available online: http://www.cio.com/archive/101599/erp1.html [15.9.2005]. Koch, Christopher. 1999b. ERP-Quake! CIO Magazine. October, 15. Available online: http://www.cio.com/archive/101599/intro.html [15.9.2005]. Koch, Christopher. 2005. The ABCs of ERP. CIO Magazine. Available online: http://www.cio.com/research/erp/edit/erpbasics.html [15.9.2005]. Turban, Effrain, Efrain MacLean, James Wetherbe, Ralph Westfall and Kelly Rainer. 1999. Information Technology for management. New York: John Wiley & Sons. Inc.
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