ERP and Systems Integration Best

ERP and Systems Integration

Best Practices in Enterprise Resource Planning and Systems Integration

Enterprise Resource Planning (ERP) systems are used for managing the many diverse processes and workflows that companies rely on to coordinate suppliers, manage production and inventory, better control costs and ultimately satisfy customers (Malhotra, Temponi, 2010). The baseline level of functionality that many ERP systems deliver however cannot scale over the long-term to what is needed by many companies. Integrating best-of-breed applications to legacy or installed ERP systems has become commonplace as a result (Sharif, Irani, Love, 2005). The continued growth of Software-as-a-Service (SaaS) as a platform of choice for new ERP implementations poses an entirely different series of challenges for companies upgrading, replacing or installing new systems (Gartner, 2011). The intent of this analysis is to evaluate how companies are managing the integration of their ERP systems to other enterprise applications including Customer Relationship Management (CRM), Supply Chain Management (SCM), Warehouse Management Systems (WMS) and several others mentioned in the Background and Analysis sections.

Background of Best Practices in Enterprise Resource Planning and Systems Integration

The success or failure of any ERP system is measured by the extent to which it contributes to a company's goals or not (Malhotra, Temponi, 2010). Often companies will rely on their legacy ERP systems well beyond their useful lives, which over time can degradate the value of information provided by these systems by up to 20% or more (Gartner, 2010)(a). As businesses choose to gain greater insight, intelligence and ultimately control over key strategic areas, additional applications are added to their enterprise systems platform. When these enterprise applications are added, they often must be integrated to the company's ERP systems in order to gain accounting, financial, supply chain, and services costs. Examples of applications most often integrated to ERP systems include CRM, SCM, WMS and Manufacturing Execution Systems (MES). These systems act to coordinate customer information, supply chain pricing, forecasts, supplier quality management levels, production efficiency and services costs. In short the ERP system acts as the centralized hub of the value chain of a business and the add-on applications serve to focus the efforts of the company towards its key goals and objectives in specific areas.

For example, integrating CRM applications to an ERP system can deliver much greater control of selling and service strategies, leading to more precise and accurate product forecasts (Gartner, 2010)(b). The integration strategies that companies most typically rely on have a Business Intelligence (BI) component within them so the performance of the strategies can be measured over time and reporting on dashboards and scorecards company-wide (Griffin, 2007). CRM systems are often relied on for tracking the lifetime customer value by integrating customer records to the financials of given products and service, further adding insight and intelligence for decision making (Gartner, 2010)(b). The integration of the distributed order management (DOM) module of ERP systems to CRM systems is heavily relied on for the quote-to-cash and quote-to-order processes of capturing the unique product or service requirements, especially in build-to-order, configure-to-order and engineer-to-order production workflows. These workflows make it possible for companies to sell highly customized products that align precisely to the needs of customers. Examples in the business-to-business (B2B) market include Dell Corporation creating enterprise-class servers for their Fortune 1,000 customers, production of customized emergency vehicles for national, state and local governments, or the custom production of medical products equipment. In the Business-to-Consumer (B2C) industries, the reliance on quote-to-order and quote-to-cash can be seen in how effective the strategy is for ordering variations in car options within the Toyota Scion line. The Toyota CRM and dealer management systems are tightly integrated to the ERP systems the company relies on to plan and produce their Scion vehicle line. This tight integration of the dealer management systems, integrated with real-time links to the company's production scheduling and logistics systems, make it possible for Toyota to deliver a customized Scion in 4 weeks or less. The quote-to-order and quote-to-cash processes that Toyota relies on for the successful and profitable sales of their Scion product line are entirely dependent on the accuracy and reliability of their CRM and ERP systems integrations. For Toyota to meet or exceed customer expectations, its critical the links are real-time, which are often the most expensive to initiate and maintain yet the most reliable over time (Sharif, Irani, Love, 2005).

Analysis of Best Practices in Enterprise Resource Planning and Systems Integration

Integration is a strategic advantage when done well, significantly increasing the accuracy, speed and reliability of responses of companies to their customers. Integration predicated on unifying business processes that are aligned on the customer and their needs with defined levels of performance as measured with key performance indicators (KPIs) and metrics have a significantly higher probability of success (Sharif, Irani, Love, 2005). The technology related to integration is secondary to the business benefits that these technologies provide across ERP instances, all aimed at attaining a strategic objective (Gartner, 2010)(a).