What is ERP?
Enterprise Resource Planning (ERP) is a business process management software that permits the business organization to use a system of cohesive applications with the motive of managing the business and automating other back office operations related to know-how, services, and human resources. The ERP software incorporates all sides of an operation that includes- product scheduling, expansion, manufacturing, trades and publicizing, in a single database and user interface. ERP eases the flow of information among all the business functions and further helps in managing the connections to external stakeholders.
Why use ERP software?
Following are some of the reasons that explain the need of using ERP software:
- Increase Efficiency
Accounting, sales, production etc. are some of the business processes that are assimilated in a single ERP platform. It is easier to gather and access the data across the organization. ERP automates the day to day tasks of the organization that further helps in generating reports.
- Make Exact Forecasts
It is very important for business organizations to get the real picture of their strategies. By making use of the database, ERP lends a standardized process to an organization’s business solutions, that ultimately enhances the data integrity.
- Lower Operational Costs
ERP system can also be used to cut down the costs of the company. When the processes are rationalized and the key points are closely monitored, disruptions, delays are managed or its impact is better managed.
Have you heard about NIKE, Inc.? This multinational corporation had an ERP failure.
Nike, Inc. is an American Multinational Corporation that is involved in designing, development, manufacturing, and marketing of footwear, apparel, equipment, accessories, and services. The company was originated on January 25, 1964, as Blue Ribbon Sports by Bill Bower man and Phil Knight and then it officially became, Nike, Inc. on May 30, 1971.
ERP Implementation of NIKE
Nike is a multinational company that is well-known for manufacturing sports shoes for football, athletics, volleyball etc. This company in 1957, began manufacturing the fitness and sports equipment. The main aim of the company is to modernize the sports products according to the needs of the customers all over the globe. In the year 2000, the company decided to make certain predictions about the market demands, so that the implementation of the supply chain can be managed in an effective manner.
SAP ERP software was used by Nike, but it felt as if it is not getting a sufficient amount of data according to the market needs. Observing this, it was decided to shift the information system I2 to meet customer and market needs. The major aim of the company is to meet the following objectives:
- Timely meet the market needs
- Make a planned manufacturing process in a week instead of the complete month
- To convert the production process into a unique one to meet the customer demands
It has been observed that I2 system could have been more fruitful because it could help the organization to eradicate the unwanted products from the company production plan and inventory or other costs could have also been decreased up to some extent. But, the new information system didn’t turn out to be a successful one because:
- The new Software I2 was so small to meet the needs of the market
- The company had the whole supply chain system in order to study the market analysis of the product
- The planners were unable to understand the market demand, which became a major reason for the ERP failure.
Because of improper management of the ERP plan in the company, Nike, had to bear a loss of 100 million dollars and additionally decreased by 20% in the market. Another 5 years, the company took to invest in with an investment of 400 million dollars to overcome the problem and to work efficiently on the software.
This case study cannot be actually considered as a study of the failure of ERP but, it is a case of hit and trial in which a recognized company failed but again succeeded by executing the ERP software effectively. Another thing, that is clear from this case study is that a company should properly research the business and market needs before the actual implementation of ERP.