Internal Controls and ERP Systems Research Paper

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Implicit in the use of these internal controls is keeping strategic plans and initiatives on track. This focus on continual alignment of strategies to their objectives through the use of internal controls is what separates those organizations attaining success with their supply chains or not.

One of the more successful organizations globally in orchestrating their supply chains through the use of internal ERP controls is PC and laptop manufacturer Lenovo (Barrett, et.al.). According to studies of their supply chain completed by AMR Research, Lenovo has been able to attain a 37% reduction in supply chain costs over three years (Barrett, et.al.). In addition Lenovo has been able to stay profitable while experiencing 42% growth during the 4th quarter of 2009, a time when many of its competitors were facing financial losses. Compare their growth to the overall market growth of 17% and the value of supply chain-based internal controls becomes clear. Experiencing this high rate of growth Lenovo also attained the highest customer satisfaction ratings in their segment of the market. All of these accomplishments occurred due to the tight integration of their supply chain, manufacturing operations and heavy reliance within Lenovo on internal controls from their global ERP system (Barrett, et.al.).

Contrast this success with the failures in China surrounding production and quality assurance management (Enderwick, et.al.). The lack of knowledge transfer within Mattel for example is a case in point, where no ERP system was used to unify quality management, manufacturing quality standards and worst of all, minimum acceptable quality levels for paint and components (Bapuji, Beamish, et.al.). The lack of internal controls as defined by key performance indicators or metrics on Balanced Scorecards (BSC) within Mattel and for that matter with many of the manufactures outsourcing segments of their operations to China (Enderwick, et.al.) led to a disaster of credibility and quality for manufacturing outsourced operations in this nation.

Conclusion

There are measurable and significant financial results attainable through the use of internal controls to manage supply chains when they are captured, analyzed and reported by ERPO systems. The intent of this analysis has been to show how the hierarchy of supply chain metrics, when tracked and analyzed by ERP systems, can make significant contributions to the profitability and efficiency of organizations. The example of how Lenovo has been able to increase their market share even in the midst of a recession, attain the highest customer satisfaction ratings in their chosen markets, while staying profitable provides evidence of how internal controls that are supply chain focused are paying off. ERP systems are in the midst of a major transition right now, away from being systems of record to being catalysts or hubs of data intelligence and information. The use of ERP systems as a catalyst of strategy is now occurring much more often as a result.

References

Hari Bapuji, and Paul W. Beamish. "Mattel and the Toy Recalls (A). " Richard Ivey School of Business Case Collection: 9B08M010: Mattel and the Toy Recalls (A) 21 December 2009

Barrett, Jane . " Lenovo: The Journey of a Supply Chain Leader ." AMR Research . AMR Research, 12 March 2010. Web. 8 Apr 2010. .

Barrett, J.. "Demand-Driven is an Operational Strategy. " Industrial Management 1 Nov. 2007

Bhagwat, R., and M. Sharma. "Performance measurement of supply chain management using the analytical hierarchy process. " Production Planning & Control 18.8 (2007): 666.

Peter Enderwick. "Avoiding quality fade in Chinese global supply chains: Designing appropriate governance structures. " Business Process Management Journal 15.6 (2009): 876..

Helena Forslund. "ERP systems' capabilities for supply chain performance management. " Industrial Management + Data Systems 110.3 (2010): 351.

Meade, D., S. Kumar, and B. White. "Analysing the impact of the implementation of lean manufacturing strategies on profitability. " The Journal of the Operational Research Society 61.5 (2010): 858-871.

Su, Y., and C. Yang. "Why are enterprise resource planning systems indispensable to supply chain management? " European Journal of Operational Research 203.1 (2010): 81.

Charles A. Watts, Vincent A. Mabert, and Nathan Hartman. "Supply chain bolt-ons: investment and usage by manufacturers. " International Journal of Operations & Production Management 28.12…[continue]

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