TEB1073 - ENTERPRISE RESOURCE

PLANNING
INDIVIDUAL ASSIGNMENT

Decision 2.0: How ERP can make difference?

Name Student ID Course

Business
NURFARRAH HANNI BINTI MAHMOOD 20001556
Management
Table of content

Abstract………………………………………………………………. 1
Introduction…………………………………………………………... 1-3
i. About ERP systems…………………………………………..1
ii. Characteristics of ERP systems………………………………1
iii. Components of ERP………………………………………… 2
Decision Making Process In ERP……………………………………..3
Advantages and Disadvantages of ERP implementation…………….. 4-5
i. Advantages………………………………………………….. 4
ii. Disadvantages………………………………………………. 5
ERP Network Infrastructure…………………………………………. 5
ERP Case Study on Hershey’s and Cadbury………………………….. 8-10
i. Cadbury Company Overview.………………………………. 8
- Benefits of ERP…………………………………………… 9
ii. Hershey’s Company Overview……………………………… 9
- ERP Implementation at Hershey’s……………………….. 9
- Impact of ERP failure on Hershey’s…………………….. 10
Problems on the industry in ERP implementation………………….... 10
Discussion……………………………………………………………. 11
Recommendation…………………………………………………….. 12
References………………………………………………………….… 14
 Abstract
Enterprise Resource Planning (ERP) systems are advanced software applications
that connect data and business operations. Although ERP installations have been
plagued by failure, the technology is still being embraced and spreading into new
sectors. Using two companies comparison in one case study, this paper identifies
generally how ERP system changes decision-making processes and presents them in
the context of supporting data, and compares discovered variables to real practice.
Successful ERP implementations begin with learning, which needs businesses to
identify their business processes and connect them to a fully integrated ERP system.
The focus should be on improving an organization's business processes by utilizing
ERP's capabilities and appreciating the mobility of a change-driven enterprise
initiative.

Introduction
1. About ERP Systems
ERP (Enterprise Resource Planning) systems are essentially the backbone of any
big organization's infrastructure. They have made several significant advances in the
companies, most notably with their unique database, which avoids data duplication,
and their process orientation, which integrates all of the organization's tasks, and best
practices they employ.
The ERP system has been developed to meet the specific needs of various
industrial sectors by adding more functionality to the system management processes
(Hyvönen, 2003). ERP systems, including system management workflows, are
becoming more adaptive, dynamic, intuitive, and successful in carrying out supply
chain processes. According to Lecic and Kupusinac (2018), advanced alternative ERP
systems, in particular, are those that are linked to system management workflows in
real-world applications, such that changes to the system management workflows
immediately affect the present system functionalities.

2. Characteristics of ERP Systems

The ERP characteristics have been regrouped into three dimensions based on their
classifications, namely technical, organizational, and information.

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  The technical dimension encompasses the flexibility, complexity, and
openness of ERP systems in comparison to older systems, and it relates to the
capabilities for application development given by ERP systems.
 The organizational dimension includes integration, best practices,
completeness, and change process. It refers to the system's implementation in
the company that perfectly represents the system's influence on the
organization.
 In the informational dimension, the software package pertains to the quality
and usefulness of the information given by the system.

To discuss more detail, the strategic decision-making process necessitates

flexibility. As a result, organizations customize and configure ERP systems to achieve
goals and increase profitability. Other than that, ERP is known to be a complex
software because it generally consists of one program that may be used independently
of other organizational apps and has a user-friendly interface (Zughoul et al., 2016).

3. Components of ERP
The components of the ERP package include Financial Management, Human
Resources, Supply Chain Management, Inventory Management, Customer
Relationship Management and, Business Intelligence.
Firstly, financial information such as accounts receivable, accounts payable,
budgets, and costs are analyzed and tracked by the financial management component.
Data analysis can reveal spending patterns, allowing management to understand how
their profit is calculated and identify areas in which the company can cut costs. Other
than that, financial forecasts with data analysis are also available, helping companies
to improve profits in the future.
The second component is Human Resources. Payments, including tax and benefits
deductions, are automated by the HR component. Payments to the hourly workers
may also be automated using an integrated timekeeping function, so that the
company will not have to manually enter their timesheets.
Moving forward onto the third component, supply chain management (SCM)
helps in increasing profitability by determining which inventory products are
frequently purchased together and then utilizing that knowledge to determine the
optimal location for goods on the loading dock. When SCM and CRM are integrated,

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it is important to keep customers informed about the status of their order during the
distribution process and anticipate a delivery date.
Fourthly, manufacturers and organizations with distribution centers benefit from
inventory management because it improves the profitability and efficiency of
inventory operations. An integrated system might notify your company's website that
an item is out of supply, preventing orders for goods the company does not have in
stock. Managing order fulfillment and maintaining a warehouse's stocking activities
are two of these component's key aspects.
Next, in customer relationship management (CRM) components, it will help in
tracking customers' buying habits. With this information, the company can determine
which items should upsell and when is the best time to do so. The company may also
use a CRM to keep track of previous conversations with customers. This way, the
company can see who from the company sales team has spoken with a customer,
when they spoke, and what they spoke about. Other than that, CRM can reduce sales
redundancy, reduce client dissatisfaction, and assure a successful sale.
Lastly, the business intelligence (BI) component of ERP gathers data and analyzes
it to give significant information into company operations. As organizations become
more reliant on data-driven choices, BI becomes increasingly important. When
companies utilize an integrated system, a business can leverage this useful
information to influence business decisions across departments and processes.

Decision Making Process in ERP

From the standpoint of application integration, ERP systems' decision-making
skills are integrated (Linthicum, 2003). According to Peksa and Grabis (2018), from
this vantage point, the company may make the following distinctions: 1)
decision-making functionality as an internal component of ERP systems; 2)
decision-making functionality as an external component integrated through data
exchange, and 3) decision-making functionality provided by external components
forming an integrated process in conjunction with ERP data processing capabilities.
Many decision-making processes are included in packaged ERP systems, including
features for inventory replenishment, production planning, and forecasting. Aslan et al.
(2012) stated that the assessment on the capacity of ERP systems can satisfy the needs
of make-to-order companies. This involves evaluating planning and other
decision-making capabilities as well.

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 ERP systems are commonly incorporated with Advanced Planning Systems
(APS), data analytical systems such as data warehouses and business intelligence, and
specific purposed modeling tools such as simulation tools, to enhance the existing
decision-making capabilities. During the planning phase, decision-making
preparations are generally made. Organizing the decision-making group, performing
self-evaluation, establishing goals, adopting a decision-making method, and analyzing
decisions are the five key activities that are included for the decision-making process
to be finished.
Advantages and Disadvantages of ERP implementation
1. Advantages of ERP Implementation
ERP systems is becoming more known among midsize companies. Therefore, it is
indeed important to understand why company eager in implementing an ERP system
into their company. ERP system (Gefen & Ragowsky, 2005). ERP systems may help
an organization gain a competitiveness against competitiors. For example, by
integrating supply chain management, receiving, inventory management, customer
orders management, production planning and management, shipping, accounting, and
human resource management. This is because many parties will benefit if an ERP
system is successfully implemented in an organization that includes: suppliers,
operations and logistics, finance, human resource, sales and marketing and customers.
Moreover, organizations can cut compliance and administrative expenses by
designing adaptable systems that combine global expectations with local needs and
can be swiftly adjusted when the system changes. Integrated global financial reports
may be created quickly thanks to the comprehensive financial and reporting features.
Internal controls are supported to enhance the organization’s financial management
and reduce the risk of noncompliance.
According to Mishra (2008), during the re-engineering process in early 1997,
most multinational companies saw the following benefits of using an ERP system:
• Centralized operations
• Uniform data processes
• Capabilities in several languages and currencies
• Improved inventory tracking
• Increased raw material utilization
• Tighter integration of production with sales and distribution
• Tax benefits from improved asset management

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 • Elimination of several legacy systems
• Improved development and support environment
• Real-time functional system enhancement capability

2. Disadvantages of ERP Implementation

Despite the widespread acknowledgment and adoption of ERP systems in
businesses, certain criticisms have been leveled against them, whether from a
technical or a commercial aspect (Davenport, 2000). On the one hand, organizations
that deploy these systems wind up with processes that are built in a standard format
simply because the system needs it. However, this only occurs when businesses want
a less expensive ERP System solution with a shorter installation duration and, as a
result, lower dimensionality.
The long installation period that ERP systems need is one of the key challenges in
their deployment. In large businesses, implementation can take 3 to 5 years, which
critics claim is too lengthy in today's ever-changing economic environment. Other
than that, the criticism receive was the use of outdated technology in ERP system.
However some recent efforts have been made, such as Business By Design (SAP) and
SaaS systems giving Web 2.0 features (SAP, Oracle, etc.). In reality, some ERP
systems do not provide users with the visual and contemporary interfaces that they
desire. However, in this circumstance, there are no realistic options.
Object-oriented solutions do not provide the benefit of integration that ERP
systems provide. According to Davenport (2000), the fact that this technology is
dependent on individual users, necessitating individual licensing payments for ERP
system use.
ERP systems have also been criticized for their rigidity and centralization of
control and management. All of the informations in the systems should be managed
centrally, so that the companies' structures are clearly defined.
ERP Network Infrastructure
Client-server infrastructure is used by most ERP systems, and the parts of ERP
integration include databases, application software, user interfaces, tools, and business
processes. The effectiveness of the system's implementation process is directly
determined by its structure, which necessitates a proper strategic, tactical, and
operational approach to the planning of all segments of information systems hardware
and software (Lecic and Kupusinac, 2018). These are based on a comparison of

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information systems before and after the development of integrated information
systems to determine the structure, functionality, and performance. Flexibility and
adaptability are the two most prominent fundamental characteristics of integrated
information systems.
ERP system investments are quite often strategic and operative, with the primary
objective of helping an organization in increasing sales, reducing industrial
production time, and improving customer service. In general, there are two types of
architecture for ERP systems: logical architecture and physical (or tiered) architecture
(Markus et al., 2000). The logical architecture, shown in Figure 1, shows how the
system is structured to serve the functional business needs and end-users. The lowest
levels are the hardware infrastructure and database systems, followed by the primary
business intelligence, which encodes real-world business rules and restrictions in the
next layer. The fourth layer contains information on the ERP system's functional
business applications. The customer user interface sits between end-users and
business applications.

Figure 1: Logical Architecture of ERP system.

The physical architecture illustrated in Figure 2 on the other hand, displays the
composition of distinct physical components of the system in such a way that the
entire system may offer the greatest performance whilst reducing costs. An ERP
system component is arranged in layers or tiers in this model to better manage the

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complexity of the system's functionality and to provide scalability and flexibility for
the organization's business needs. The tiered architecture also allows designers to
divide resources into many levels, which increases security and reduces the chance of
system failure.

Figure 2: The physical architecture of ERP systems. (a) Two-tier (b) Three-tier

In the recent decade, ERP infrastructure has traditionally gone the same way as
software architecture. Client-server interaction was used in the early days of ERP
systems, which had a two-tier design (Hall & Hall, 1994). The ERP system
components are divided into two levels in this architecture: servers and clients
(Fig.2-a). The servers are usually responsible for handling database requests and the
customers. The two-tier structure has several advantages, including easy access to
information, cheap infrastructure costs, and excellent performance for a small number
of workstations. However, this approach is inflexible when it comes to adding new
customers, and expensive middleware is required to integrate the system with other
features.
ERP manufacturers moved to a more efficient three-tier design as a result of the
need to deliver more efficient and effective features while giving ease of access for
more end-users in the organization (Fowler 2002, Rashid et al. 2002). The data tier,
business logic /intelligence tier, and presentation/ web tier are the three levels of this
design (Figure 2-b). The following are the descriptions of the tiers:

 Business functions can utilize data repositories and database servers at the
data tier to store and retrieve their necessary information. This layer defines
the structure of all organizational data as well as its interactions with both
internal and external systems. The data is usually kept in relational databases
that can handle queries.

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  The business logic of the system consists of several modules is implemented
at the application tier. Business process rules are implemented at this layer as
reusable components that may be reassembled into a variety of functional
applications. The application layer's servers respond to user requests, get data
from the database tier, and process data as needed.
 The presentation tier is in charge of delivering information in the most
relevant forms and offering integration tools to let customers engage with the
content. This layer provides a customizable graphical user interface (GUI)
via which users may interact with the application tier's components and
obtain the services they require. End-users can utilize web client applications
to access the business functional modules from outside the company.

The three-tier design of ERP systems has several advantages over the traditional
client-server structure for companies. For organizational applications, the three-tier
design can provide scalability, dependability, flexibility, maintainability, reusability,
and security. Another advantage of this design is that if the management decides to
outsource ERP maintenance, the transition will be easier and more manageable.

ERP Case Study on Hershey’s and Cadbury

Two companies were discussed on this specific segment to analyze the ERP
implementation on both companies. The ERP system used by both companies was
mostly SAP. Cadbury shows success in its implementation but differs from Hershey's.
Therefore, it will be further discussing the factor of success and the cause of failure.

1. Cadbury Company Overview

Mondelez International owns Cadbury, a British global chocolate company. After
Wrigley's, it is the world's second-largest candy brand. Cadbury was founded by John
Cadbury. It was formed in Birmingham, United Kingdom, in 1824. As stated earlier,
Cadbury is a worldwide business with activities in more than fifty countries, as
previously indicated. Cadbury has a foothold in several markets, including Malaysia.
Cadbury makes Dairy Milk chocolate, Crème Eggs, Roses selection boxes, crunchies,
munchies, and more. Cadbury is well-known in Malaysia for its Dairy Milk products,
such as chocolate bars and drinks. In Malaysia, Cadbury made a tremendous profit.

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 Cadbury has implemented SAP ERP 6.0 which is a system analysis and
program development. Cadbury used SAP because it had an excess of chocolate
goods resulting in an overstock of chocolate bars. The new computer system is part of
Cadbury Schweppes five-year IT transformation effort, which seeks to integrate the
company's supply chain, purchasing, manufacturing, distribution, sales, and marketing
processes on a global SAP-based ERP platform.

Benefits of ERP
The introduction of ERP launched a new warehouse management system as well
as structure to branch offices and depots. The company has built open the historical
strengths of the company while integrating the ERP systems, ensuring that it does not
lose its competitive edge. The original implementation required time, but subsequent
implementations took less time and expense, and there is a significant benefit in
saving money throughout the implementation phase. The company has also
implemented a comprehensive frequent feedback mechanism to track changes and
ensure that they are carried out according to the original plan. Because the whole
implementation is cross-functional, a significant gain in efficiency is critical.
Aside from that, the system has been made available to manufacturers. They have
a tool called Vendor Connect that allows them to track inventories and make plans
accordingly. As a result, the reorganization occurs not only internally but also across
the supply chain, enhancing the benefits gained. It was believed to be a low-cost,
high-result implementation, which in and of itself demonstrates the effectiveness and
advantages.

2. Hershey’s Company Overview

Hershey's is the world's largest chocolate producer in North America. The founder
of the company was Mr. Milton S. Hershey. Hershey's goods are available in more
than sixty countries in the world. Approximately 80% of Hershey's revenues are
chocolate products and 20% are non-chocolate products.

ERP Implementation at Hershey’s

Hershey has chose SAP's R/3 ERP software to be implemented in the company.
Aside from that, Hershey's sought to improve the company's sales and enhacing their
customer service, so they implemented it. Hershey's spent a total of ten million dollars

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on the endeavor. The project's recommended implementation time was 4 years, but
Hershey's insisted on 2.5 years. Hershey's chose the Big Bang Method over the
phased approach.

Impact of ERP failure on Hershey’s

Hershey’s started to face problem in fullfilling the order processing, delivery and
shipping because the company was not abble to commit on the date of delivery.
Among Hershey’s supplier are not able to supply the finished product to the retailers.
Therefore, Hershey’s has lose their credibility in the market. Other than that,
Hershey’s inventories was overstocked , 25% more than the what they had to
anticipate.
After Hershey’s announced that they faced a problem in the newly integrated
computer system, their market stock price decreases by 8%. The downfall of
Hershey’s ERP implementation has cost the company 150 million USD.

Problems on the industry in ERP implementation

In reality, ERP software has shown to be beneficial in assisting food

manufacturing companies in improving overall performance and maintaining the
operating system's stability. Over 95% of companies feel that utilizing an ERP system
improves the efficiency of their production process. Furthermore, ERP software
reduced manufacturing costs by 11% when compared to conventional management
methods. However, despite the benefits, some limitations have been put trouble in the
food manufacturing industry.
Since the food and beverage sector deals in products with a short lifespan,
companies have had to deal with inventory management issues to maximize
utilization and minimize waste. Organic food manufacturers would have to contend
with stricter food preservation requirements. An ERP system integrated with
inventory management software may be a powerful weapon in the fight against
spoiling by tracking expiry dates and informing users of stock conditions in real-time.
The customers retain the right to trace the status of all products and the
manufacturers who are accountable for providing such information. Product
packaging often includes extensive ingredient labeling. End-to-end traceability, on the
other hand, will be the full answer for supply data across the value chain as

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technology advances. With IT help, businesses may expect to keep their data records
in better shape.
There's one more hurdle for ERP systems that food manufacturers must overcome,
and it's one that MRP (Materials Requirements Planning) systems should solve as
well. The majority of manufacturers combine a variety of goods or components to
make a completed product. Take, for example, dairies companies that accept raw milk
and process it to make full fat, semi-skimmed, and skimmed milk, as well as butter
and yogurt. Dairies face two additional challenges: the first is that the fat content of
milk varies from batch to batch, and the second is that they are contractually obligated
to accept all that the farmer delivers, which varies day today.
Controlling the expiration dates of products and ingredients is crucial, just as it is
in other industries. The system should not enable the allocation or dispatch of
products that have passed their expiration date, and all full-featured ERP systems will
include this feature. However, it's easy to forget that most foods have two important
dates: a sell-by date and a use-by date. Both of these are not supported by those
systems. Another complication is that many customers expect products to have a
minimum shelf life remaining when they receive them; as a result, companies that
deliver products with a sell-by date of 'tomorrow' or something similar is likely to get
limited attention, and the minimum shelf life remaining can vary from customer to
customer.
Lastly, the challenge that food manufacturers will face is traceability. If a finished
product is found to be damaged, the first step is to figure out where the rest of that
batch went so that it may be recalled; this could imply a variety of different shops or
stores. It must be able to identify which batches of ingredients went into processed
goods, as well as which other products and batches those ingredients were utilized in,
and it must be able to do so at many levels of the recipe or bill of material. Some
components, for example, may have been used to make a batch of sauce that was later
used in a variety of products. All of those batches will be questionable, and they must
be removed off shop shelves and recalled as soon as possible: the industry prioritizes
customer safety, and speed of response is critical.
Discussion

Decision-makers use ERP to combine diverse types of information (both implicit

and explicit) that are available in various forms within the company. The goal of this

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research was to highlight knowledge management as a critical component in
evaluating ERP's contribution to the decision-making process.
Two food manufacturing companies were evaluated in this context. One of them
has succeeded in using the same ERP to make decisions, while the other has failed.
The importance of knowledge management can determined the success or failure on
the ERP implementation. Indeed, the findings show that effective knowledge
management methods lead to proper ERP implementation and, as a result, an obvious
improvement in the decision-making process. Harmful behaviors, on the other hand,
result in inappropriate ERP use, preventing any input to the decision-making process.
As a result, the research's major theoretical contribution is a better understanding
of the connection between ERP, decision-making, and knowledge management. When
adopting ERP, the managerial implications consist of attracting attention to
knowledge management. Without the basic knowledge of how ERP works, companies
will likely suffer loss and would not make benefits on the ERP system. An example
we can retrieve from the case study was when Hershey's push forward the
implementation time and it has caused the failure. Therefore, thorough knowledge
regarding the system is essential, to fully utilize it in the company and make it much
easier for the decision-making process.
Reccommendation
There are a few recommendations that a company may follow towards a successful
implementation of ERP because this will help the company improves its
decision-making capability.

a) Selecting an appropriate ERP system

Before considering choosing an ERP system supplier, a thorough examination of the
company's objectives, company’s performances, expectations, and consideration of
future problems should be looked upon. It is advised that short-listed applicants map
their solutions to corporate needs to determine whether they can provide what the
company requires.

b) Preparing employees for the change

Employee resistance frequently happens whenever a company is installing ERP. As a
result, preparing individuals to face the change is strongly advised.

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c) Company’s ERP implementation team
Acompany should form an ERP implementation team to help manage the system. The
team should comprised all of essential competencies from all business departments.

d) Testing the system

Before intergrating the system through the company’s management, it is advisable to
run a test on the newly implemented system for all the employess to be familiar with
it. This includes different testing methods such as integration testing.

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Hall, C.L., & Hall, C.L. (1994). Technical Foundations of Client/Server Systems.
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Hyvönen, T. (2003). Management accounting and information systems: ERP versus

BoB, European Accounting Review, 12(1), 155-173.

Lecic, D. & Kupusinac, A. (2013). The Impact of ERP Systems on Business

Decision-Making, TEM Journal, 2(4), 323-326.
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Mishra, A. (2008). Achieving Business Benefits from ERP Systems. 78-81

Pekša, J. & Grabis, J. (2018). Integration of Decision-Making Components in ERP

Systems. 20th International Conference on Enterprise Information Systems.
183-187

Tingting, H. (2018). Decision-making to switch your ERP system: empirical Japanese

evidence. International Journal of Information Systems and Project Management,
22-36. www.sciencesphere.org/ijispm

Zughoul, B., El-Omari, N. K. T. & Refai. M. (2016). Evolution Characteristics of

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