Enterprise Resource Planning

EXECUTIVE SUMMARY

In the following case study of E.A.Cakes, we have discussed transition phase from MTO to MTS (Made to Order to Made to Stock) production strategy as well as shifting consumer trends, in particular, consumers' changing expectation in relation to "speed-to-market". This entails maintaining an adequate level of inventory in medium to long-term frozen foods to meet the demand for shorter order-to-delivery time in relation to production planning and supply chain management system.

For E.A.Cakes, not only does the examination of these determinants exposes its competitive position and consequentially determines what part of value it can capture within the industry, it also facilitates identification of the necessary strategic adjustments needed to influence these factors in favor for the firm.

Depending on the product feature and industry's lifecycle we have studied different aspects of food industry and have proposed possible generic strategies that a firm can undertake to acquire such a competitive advantage over its rivals, including product differentiation, product-focus and cost-leadership.

We propose to implement ERP system, which would help the company to move swiftly from the existing MTO to MTS, by which it would reduce cost to a larger extent and then help the company to achieve its targets. Obviously there are different phases the company has to undergo before finally switching over to ERP system. While doing that, there is always a tussle between operational and the implementation side of the system such as IT professionals and consultants. Both of them have their own way of thinking and are looking at implementing the system from their own way. This has created confusing or rather conflicting situation which has brought E.A.Cakes at crossroads.

The food industry is demand-driven with intense pressures to deliver the highest quality products and quickly. Industry standards are becoming stricter and consumers are more informed and critical than ever before. This is especially true when it comes to frozen and fresh produce.

To streamline the process, we have studied different parameters such as

a. adapting the organization to fit the ERP system requirements and substitute its business processes with generic "best practice" processes assumed in the system;

b. or to tailor the ERP system to meet the needs of the organization; or it could just live with the problems and concede to its failure in implementation and realizing the full gains of the system.

However, the existing information technology (IT) systems are not capable and equipped to gain maximum benefit from their planning process. We have come up with our own suggestions and recommendations after thoroughly studying the process, requirements, information systems and all parameters a company could think of in bringing operations (production planning and supply chain management ) back on track such as;

1. The new process should support new management processes, such as customer relationship management (CRM) and statistical analysis using online analytical processing (OLAP).

2. Carry out a phased implementation, since they needed time to fine-tune the central database, and to tailor the product completely to their needs, as well as give users time to get used to the system before it went fully live.

INTRODUCTION

1.1 Background on ERP

In the early 1990s, the term ERP (Enterprise Resource Planning) was coined. At that time, ERP was a group of cross-functional applications with focus on integrating multiple systems into one single system that permitted information sharing throughout the enterprise. In other words, Enterprise resource planning system was a management information system that integrated different function departments, such as marketing, financial, manufacturing and human resources in a single information system. ERP was mainly used for manufacturing and production planning (Wikipedia, 2005).

Enterprise Resource Planning solutions were applied to many more other areas in the mid 1990s, such as ordering systems, financial and accounting systems, asset management and human resource management systems (Wikipedia, 2005).

At present, ERP solutions have been used in Universities and other governmental entities to streamline business process and increase operational efficiency.

ERP systems unite all of the divisions and functions of a company onto a single computer system that serve all departmental needs, that is the biggest benefit of ERP. These are the major beneficial reasons why companies undertake ERPs: to integrate financial information; to integrate customer order information; to standardize and speed. Enterprise Systems (ES) tie all of an organization's information flows from its business processes and functional areas into an integrated system that is manageable and provides greater efficiency to the organization with more timely dissemination of information.

1.2 Purpose and Scope of Report

EA Cakes is a successful food manufacturing company with a major share of the market in New Zealand and the Asia Pacific region. It manufactures three different types of production:

1. Shelf stable and frozen foods with practically infinite shelf life.

2. Chilled products with a medium shelf life.

3. Short shelf life products.

For years, EA Cakes Ltd built a reputable brand name and had enjoyed a stable market, resulting in to a dominant production strategy of made to order products (MTO) for a variety of customers such as supermarkets, restaurants etc. However, after 1990, EA Cakes Ltd began to observe a decline of it's market share in many of the traditional markets, mainly because of increase in prices. This was mainly due to high production costs. In spite of competing on low retail price, company observed a slight improvement in sales volume, but decreased profit margins. This forced the company to decide upon it's sales and production strategy and a stable and effective supply chain management system especially shifting major policy from MTO (Made to Order) to MTS (Made to stock). However this decision to change the strategy involved huge investment in inventory in raw material and finished products and required complete redesign of its production planning. This production planning system was an integral part of the ERP system, which would help the company to decide upon