For its acronym in English: Enterprise Resource Planning, which means in Spanish Business Resource Planning Applications. Going a little more in detail we can say that it is a software that allows a company to automate and integrate most of its business processes, share data, produce and access information in real time.
ERP systems provide business integration, because as mentioned, they manage the information of the different transactions and operations, which was designed to improve the flow of data between the different departments of an organization. These systems support the multiple activities or processes of the company due to their modular design, including production planning, purchasing, inventories, suppliers, etc. The tendency to adopt this type of systems has dominated since the early 1990s and ERPs have generally been conceptualized since their inception as platforms that require a large financial investment and require, most of the time, an organizational restructuring or reengineering of company processes.Currently it is known that practically any company of considerable size (large) relies on an ERP to carry out its daily operations, even those that originate in our country, however today small and medium-sized companies are also focusing their efforts However, to acquire these systems, there is a general prejudice on the part of SMEs that systems with these characteristics are beyond their reach.
Considering that more than 90% of companies in Mexico correspond to the classification of SMEs (Small and Medium-sized Companies), we can affirm that this is a great market for ERP providers in the country, among which we find some such as SAP, BaaN, PeopleSoft, Oracle, Platinum, Solomon, generally oriented to the medium-large company and others such as Micro SIP, Computing in Action and Aspel that have developed systems that adapt to the possibilities and needs of practically any small or medium-sized company. The solutions offered by the first mentioned group are generally in very high price ranges, although they also offer their minor versions for the small company, which are to some extent accessible to them; on the other hand,the cost of the systems produced by the second group is more within the reach of the companies in question, ranging in price from $ 9,000- $ 23,000, depending on the type and scope of the solution purchased, there are even proposals for implementation in Linux, which represent even lower costs.
With the above, it is intended to show that the cost of the system, by itself, allows the company to think about carrying out an ERP implementation project, however it must be taken into account that this is not the only expense that is carried out since In addition to the system, it requires the appropriate technological infrastructure, training users, in some cases the consultation of an expert will be necessary, among other aspects that must be considered, which is why it is important to make an estimate of the relationship that exists between the economic investment and reduction in costs or increase in profits. For this, there are different financial tools that allow establishing whether an investment of this type will be beneficial or not for the company, among them we will mention: ROI (return of investment), VPN (net present value),EVA (economic value added), among others.
The objective of this document will be to show SMEs that ERP systems are not out of reach in economic terms, since there are accessible solutions. In addition, the importance of the methods of economic valuation of the projects will be described and emphasis will be placed on socio-cultural factors, such as leadership, communication, etc. indispensable for their success.
DEVELOPING
As previously mentioned, the main objective of ERP is to satisfy the different information requirements of the company, both internal and external, to achieve better business management, efficient, accurate, timely and truthful data that is easy to understand and manipulate; allowing executives and information analysts to make decisions to carry out the pertinent actions and define the strategies to be implemented in the future.
Currently ERP systems are not only for corporations that are capable of absorbing millionaire investments since SMEs can also take advantage of it if they have adequate planning and a little patience; We can say that today ERP systems are for everyone, there are already different companies that are specialized in trying to satisfy the needs of small and medium industries where they have specific applications for each industrial branch where only a few adjustments are needed. to make it almost perfect for the company, in addition to having affordable financing plans and providing all advisory and customer support services.
Among the main reasons that justify why companies should invest in an ERP system we can find (1):
- Uncertainty regarding the veracity of the information is reduced, that is, all the areas of the company handle the same integrated information, there are no different departmental systems that make it possible to have corrupt data and that call into question the veracity of the information and therefore they jeopardize decision-making. Significant improvement in interdepartmental communication allowing greater knowledge of what is happening in the company. Duplication of information is eliminated, more robust data is available, producing more reliable information. streamlines business process integration Access to world-class technology Increased productivity is imminent through process automation and business integration
The above points are advantages considered when purchasing an ERP system, however, the implementation of such systems is not an easy task. Many considerations must be taken and factors that generally go unnoticed must be taken into account, which is why some of the most important aspects are mentioned below, as a recommendation for Small and Medium Enterprises:
Human factors:
- In one of the points where SMEs must work hard, it is to increase and Technological Culture in all areas of the company, since the implementation of a system depends on its success and good operation. Continuous training of various topics, to all the personnel involved in the decision.Focusing on human factors or social enablers, essential for the ERP project to be successful, deficiencies in this area have proven to be the cause of a large number of implementation failures. Among these elements are mainly:Committed leadership Open and honest communication Balanced and empowered implementation team The project manager must be a leader who has both technical and business knowledge and credibility with his subordinates and with senior management, who in turn must support him unconditionally, being a sponsor of the project. It is necessary to clearly define the objective and vision of the business project and carry out a well-defined work plan, including the methodology and the estimated time for the achievement of each of the processes to be followed to The correct implementation The implementation of this type of technology constitutes an important organizational change, so it is important to observe and take into account the type of organizational culture of the company.
Technological Factors:
- For those companies that are a little behind in relation to Information Technology, improvement options can be offered, such as implementing pre-installed business solutions on servers in which he is not responsible for maintenance, using only Internet search engines, allowing him to work in any place and equipment (ASP), adopt applications that work on open platforms (Linux) or some other solution according to your needs and possibilities. You should look for special software that offers real integration between applications such as: CRM, EAM, E-Business and incorporate WEB-based applications into your business strategies, so that it allows the company to sell its products through this medium.
The following figure shows four critical factors considered to be successful for any technology-related project:
Critical Success Factors for ERP projects
In it, we can see that technological hardware and software tools are only part of the aspects to be taken into account in the ERP project, with overall factors related to the human and social aspect having greater weight.
ALTERNATIVES FOR THE ADOPTION OF THE ERP SYSTEM FOR SMEs
There are several alternatives in the direction of making the adoption of an ERP by an SME economically viable:
- The acquisition on credit of a preconfigured ERP. The use of solutions supported by Open Software, such as those arising from the alliance of IBM and Linux. The subcontracting of the ERP service through an ASP (Application Server Provider) Application Integration of the Company, using middleware instead of ERP.
Option number one is the one that is traditionally carried out and the one with the most documentation, so the three other proposals that may be of interest to small and medium-sized companies are described below, as an alternative to acquiring a expensive ERP from a provider.
Solutions based on Open Source
Within systems other than Windows platforms, we find that Linux is the operating system that has evolved the most in the last two years. The number of installations has increased since 1999, and it is predicted that it will continue to increase until 2004. In 2000 alone, 25% of the new servers were installed, of which 48% are within small and medium-sized enterprises (SMEs)..
EAI vs. integration Traditional Integration
Figure 3 EAI vs. integration Traditional Integration (2) The most important positive aspect of EAI in comparison to ERP is that the implementation of the latter is considered as “push-oriented”, that is, the system forces the company to adapt to the standards established by the ERP, which implies that the individuals in the company cannot choose the way in which they will carry out their internal processes. This is the source of much of the resistance to change that occurs during ERP implementation projects, one of the main problems encountered. EAI's approach is “pull-oriented”, that is, it starts from existing processes and applications to map and integrate functions that are currently disaggregated, which occurs in a more flexible way for the company, in this way an SME,and any company in general, achieves that the information stored in its systems can flow freely between them, without affecting business processes as drastically, as in the case of ERP (See Table 1).
Table 1: Technical and cultural characteristics of ERP and EAI (3)
| ERP | EAI | ||
| Technical | Reengineering Degree | Medium / High | Low / Medium |
| Integration method | Process Integration | Process mapping | |
| Implementation Period | Long | Medium | |
| Cultural | Resistance grade | Tall | Low |
| Business processes | Centralized | Decentralized |
FINANCIAL EVALUATION TOOLS
A very important aspect for companies, especially for those that do not have many resources, such as Mexican SMEs, is to carry out a valuation prior to the implementation of a system to see if any real benefit will be obtained from it. There are some techniques to measure the financial viability of any sizeable project, such as the case of ERPs. These techniques include the following:
Present value
During the definition phase of a project, several activities are carried out that culminate in the estimation of the type, quantity and cost of the resources to be used, however, these estimations are usually based on the information obtained from the suppliers, which They quote their goods and services at current prices. Unfortunately, in most projects, these resources will be used months or years after the estimates have been made and the budget has been approved. Unless the organization has a flexible project-oriented budgeting system, the above situation will create a distortion in the actual amount of resources used. In sum, the budget will tend to be exceeded by the inflationary phenomenon.
One of the ways to reduce the probability of errors in the budget estimation of a project is that the managers and administrators in charge of the initial estimation of resources use a variant of the present value calculation technique. This technique is based on the concept of the displacement or variation that the value of money has over time.
Return of investment
In financial departments, a parameter is used that allows evaluating the benefits that any investment brings to the organization. This measure is the rate of return on investment, known by its Anglo-Saxon acronym: ROI. ROI is increasingly being used to also analyze technology investments.
This rate is the most common measure to judge the attractiveness of an investment, examining how an investment affects the income statement of the organization. This rate is calculated as follows:
BIBLIOGRAPHY
Digital library:
- Jinyoul Lee, Keng Siau, Soongoo Hong. (2003). Enterprise integration with ERP and EAI. The ACM Digital Library. Yvonne van Everdingen, Jos van Hillegersberg, Eric Waarts. (2000). ERP adoption by European midsize companies The ACM Digital Library..Allen S. Lee, Suprateek Sarker. (2002). Using a case study to test the role of three key social enablers in ERP implementation. The ACM Digital Library..Uche Ogbuji. (1999). Linux for Enterprise-Resource Planning. The ACM Digital Library. Robert Davison (2002). Technical opinion: Cultural complications of ERP. The ACM Digital Library..Tracey Sutherland (2002). The ABCs of ERP. ProQuest Direct..Peng S. Chan, Carl Land. (1999). Implementing reengineering using information technology. ProQuest Direct. Yongjean John, Ki-Heung Yim (2001) A study on an environment of ERP introduction. IEEE Xplore..Jarrar YF, Al-Mudimigh A., Zairi, M. (2000) ERP implementation critical success factors-the role and impact of business process management IEEE Xplore..Dibbern J., Brehm L., Heinzl A. (2002) Rethinking ERP-outsourcing decisions for leveraging technological and preserving business knowledge. IEEE Xplore..
INTERNET:
- Brian McDonnell. (2001). ERP and the SME. Sunday Business Post Online. Taken from: http://archives.tcm.ie/businesspost/2001/08/21/story303669.aspMónica Mistretta (July 2003). SAP underlines application integration. Informationweek Mexico. Taken from: http://www.netmedia.info/informationweek/articulos.php?id_sec=6&id_art=4314 Juan García Konieczny (March 2002) Is Linux the key for SMEs? Informationweek Mexico. Taken from: http://www.netmedia.info/informationweek/articulos.php (requires login) Cinthia Ramos (September 2001) New approach for the SME Netmedia Info. Taken from: http://www.netmedia.info/netmedia /articulos.php?id_sec=32&id_art=2259Fernando Bautista Jiménez (2001) Current Situation and perspectives of ERP Systems in Mexican and Latin American SMEs. Enterprise Solutions. Taken from: http: //www.claveempresarial.com / solutions / notes / note010716b.shtmlAurelia Alonso Ibarra (2001) ERP systems a reality for SMEs. Enterprise Solutions. Taken from: http://www.claveempresarial.com/soluciones/notas/nota010702b.shtmlSamuel Soto PYMES: ERP or ASP? Gestiopolis.com Taken from: http://www.gestiopolis.com/canales/gerencial/articulos/59/pymeerpasp.htmHENRY CUBAQUE, Universidad Nacional de Colombia. (2002) PES, a new alternative in SMEs. LatinAmericanJobs.com Taken from: http://www.latinamericanjobs.com/contener/espanol/comun/tips_y_tendencia/Articulos/tips-s-27080204-lospsa.htmEduardo Rosado (2001) Towards the integration of SMEs in e-economy. Clave Empresarial.com Taken from: http://www.claveempresarial.com/economia/notas/nota010702a.shtmlIvonne A. Romero M. (2001) ASP and Pymes in México Softrent Taken from: http://www.softrent.com.mx / news / aspypymesmx.pdfScholl (2002) “Are SMBs Ready to Outsource Back Office Applications?” Gartner Channel Media Taken from:
ERP REACHED BY SMEs
Contributed by: Jaime Guerrero Varela
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