Enterprise Performance Management

Enterprise Performance Management (EPM) is a management field of Business Performance Management which considers the visibility of operations in a closed-loop model across all facets of the enterprise. There are several emerging domains in the EPM field which are being driven by corporate initiatives, academic research, and commercial approaches. These include: 1. Strategy Formulation 2. Business Planning and Forecasting 3. Financial Management 4. Supply Chain Effectiveness Based on the mission and vision of an organization, different strategic needs may drive how EPM domains are leveraged and promoted within an organization. For example a professional services firm based in Canada may view the need to have effective and transparent supply chain operations much differently than a clothing manufacturer with operations throughout the world. What is common in the EPM approach is the closed-loop EPM process model advocated by Kaplan and Norton and their management approaches to strategy formulation including balanced scorecard and strategy map techniques. Four disciplines exist to define and cover the six stages of the closed-loop EPM process model. The four disciplines are: strategy formulation, business planning and forecasting, financial management, and supply chain effectiveness. The six stages of the closed-loop EPM process model are: strategy development, strategy translation, organization alignment, operations planning, learning and monitoring, and finally testing and adaptation.

Strategy Formulation
Strategy formulation refers to activities of an organization which determine the direction of its agenda. This is generally constructed of the mission, vision, and strategic goals and objectives of an organization. Once the direction is established, an organization monitors its progress against those activities and takes corrective actions to reach a particular target state. While execution is the key to any operational objective, the strategy formulation surrounding why execution should occur and the context by which execution should be performed is also important. In recent years, organizations embed formal approaches to risk management to address market opportunities that organizations pursue. In this way strategy is aligned, performance is predictable, and executives can make better business decisions. Executives live in a financially driven environment, where operational processes are traditionally a means of organizing resources inside the company and its value chain and employees are the responsible actors to execute those processes. The strategy gap that some industry watchdogs have noted is real and growing. Innovative technologies provide one approach to collapsing this gap and allowing corporate strategic outcomes to be fully realized and risk management programs to be fully described. The first two steps of the closed-loop EPM process model involve developing the strategy and then to translate the strategy into particular actions that the organization can undertake. Strategy development as a subset of strategy formulation represents the articulation of the key components of strategy: mission, vision, strategic goals, and strategic objectives. There are several approaches to strategy development which may be considered. However this may occur the executive leadership of the organization approve the strategy and typically review this strategy every 35 years based upon a 10-20 year horizon. Some business and national cultures may consider a longer-range strategy horizon. Strategy translation then takes the often obscure direction and statements defined in the first step and considers how to make these directions actionable. In the case of strategic goals, these are lofty targets given generally 35 years to achieve. Strategic objectives then identify specific progress against goals in a given time period. For example, "product ABC will achieve a market share of x% over the next two fiscal years"

would be a strategic objective. Key performance indicators assigned to these goals are determined which can monitor the organization progress towards achieving goals and objectives.

Business Planning and Forecasting

Business Planning and Forecasting refers to the set of activities where business is planned against the strategy and what forecast activities or results of the organization may occur from operational execution during a particular time period. This discipline corresponds to the third and sixth steps of the closed-loop EPM process model.

Enterprise Resource Planning

Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. Their purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. ERP systems can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information. Characteristics ERP (Enterprise Resource Planning) systems typically include the following characteristics:

An integrated system that operates in real time (or next to real time), without relying on periodic updates.[citation needed] A common database, which supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the Information Technology (IT) department

Finance/Accounting General ledger, payables, cash management, fixed assets, receivables, budgeting, consolidation Human resources payroll, training, benefits, 401K, recruiting, diversity management Manufacturing Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow, activity based costing, product lifecycle management Supply chain management Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commissions Project management Costing, billing, time and expense, performance units, activity management Customer relationship management Sales and marketing, commissions, service, customer contact, call center support

Data services Various "selfservice" interfaces for customers, suppliers and/or employees Access control Management of user privileges for various processes

History
Origin of "ERP" In 1990 Gartner Group first employed the acronym ERP[4] as an extension of material requirements planning (MRP), later manufacturing resource planning[5][6] and computer-integrated manufacturing. Without supplanting these terms, ERP came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing.[7] Not all ERP packages were developed from a manufacturing core. Vendors variously began with accounting, maintenance and human resources. By the mid1990s ERP systems addressed all core functions of an enterprise. Beyond corporations, governments and nonprofit organizations also began to employ ERP systems.[8]

Expansion
ERP systems experienced rapid growth in the 1990s because the year 2000 problem and introduction of the Euro disrupted legacy systems. Many companies took this opportunity to replace such systems with ERP. This rapid growth in sales was followed by a slump in 1999 after these issues had been addressed.[9] ERP systems initially focused on automating back office functions that did not directly affect customers and the general public. Front office functions such as customer relationship management (CRM) dealt directly with customers, or ebusiness systems such as ecommerce, egovernment, etelecom, and efinance, or supplier relationship management (SRM) became integrated later, when the Internet simplified communicating with external parties.[citation needed] "ERP II" was coined in the early 2000s. It describes webbased software that allows both employees and partners (such as suppliers and customers) realtime access to the systems. "Enterprise application suite" is an alternate name for such systems.[citation needed]

Components

Transactional database Management portal/dashboard Business intelligence system Customizable reporting External access via technology such as web services Search Document management Messaging/chat/wiki Workflow management