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The practical assignment requires a report. The report will present your investigation the appropriateness of using an ERP system for a case-study business. The business should be a real business, and for a high distinction grade, a reasonable level of engagement with the actual business is necessary. The report should argue the benefits and drawbacks of using the ERP system, and also include in an appendix some examples of the ERP system being used (and as relevant to the business/organisation. Your reported investigation should be in the context of an evaluation of the ERP in relation to other possible systems on the market. The report should be around 3000 words, although variations may be negotiated with the teaching staff.
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ERP stands for Enterprise Resource Planning and is a highly advanced software solution that is meant for the integration of business functions business data and functions into one system that will be implemented in an Organization. (Orougi, 2015) The origin of ERP was mainly from production and manufacturing planning frameworks that were applicable in the manufacturing industries. Later in the 1990s, the scope of ERP was seen to other functions of “Back office” such as HR (Human Resources), production planning and finance. Also, it is important to note that ERP Systems have also included various other extensions related to business such as Customer Relationship Management (CRM) and Supply Chain Management (SCM). Figure – 1 shows the various extensions of an ERP System. (Seo, 2013)
Figure – 1 Various extensions of an ERP System
The main aim of ERP System is to effectively enhance the operating efficiency of a particular business by improving its business processes and reducing the cost investments. An important feature of ERP system is that it allows effective communication between various departments in an organization and share the necessary information in only one system. (Wu, Xu and He, 2009) Thus, it can be said that an ERP System enhances interaction and cooperation among all the units of business in an organization on the above mentioned basis. Also, standardization of data and processes within an organization is done by an ERP System by making use of best practices. (Sumner, 2005) Thus, due to the wide range of benefits offered by ERP Systems, it has been effectively regarded as backbone of business intelligence (BI) for all the organizations by providing managers and associated teams, an overall or integrated view of business – related processes. The design of ERP System is carried out in such a way that it easily gets adapted to the business demands. (Manjunatha, 2003)
The main aim of this report is to discuss the implementation of an ERP System in a real – time business. The business / company chosen is KFC fast food chain. Report covers an introduction to the company, discussion on the implementation of ERP System in KFC, benefits and drawbacks on the implementation of ERP system in KFC. Lastly comparison of ERP System with other systems in market is also included.
Introduction to the KFC Company
KFC has its headquarters in Louisville, Kentucky, is one among the leading and most popular chicken fast food restaurant chains having specializations in extra crispy, original recipe, honey BBQ wings, Kentucky grilled chicken and fresh home - made sandwiches. KFC restaurants have their franchise spread over in more than 109 countries and also territories across the globe. It is estimated that each day, more than 12 million customers are served at KFC restaurants. Alone in United States (U.S), KFC have about 5,200 franchises. (KFC: Finger Lickin’ Good, 2016)
KFC restaurants are a part of another fast food chain called Yum Brands Inc., and hence, is the world’s largest restaurant company and this said in terms of system fast food restaurants having locations of about more than 36, 000 around the world. (KFC: Finger Lickin’ Good, 2016)
Implementation of ERP System in KFC
As mentioned in the previous section, an ERP System is software solution that consists of various applications such as inventory control software, customer relationship management software, sales software, accounting applications, payroll and project management software and invoicing software etc. (Chakraborty and Sharma, 2007) By integrating all the above mentioned high – level applications into a single software suite, businesses can significantly reduce costs on maintenance and training, and ensure that all the data and important information is up – to – date and consistent, and hence, there is overall reduction of software costs. The main function of ERP system is to integrate information across the organization and hence exclude the complex links that exist between various computer systems. (Parry, 2005) An ERP System mainly includes data migration, business consulting, configuration and user training.
Following are some of the key functions of an ERP System –
Following are the objectives of implementing an ERP Software in KFC:
Before the implementation of an ERP system in KFC food chain, it was making use of various IT solutions in order to address the requirements of their business. Due to this, the integrity associated with the reports became extremely difficult validate and hence the management had a difficult time to track down their stocks. KFC became highly burdened by various sources of data that were not integrated. (The ERP project implementation procedure to KFC learn French fries, 2011) Thus, there was huge investment in money and as well as time and was lost from business processes and as well as duplication of order entries throughout their franchises and outlets. Huge numbers of hours were only spent every month to develop the business reports manually, track invoices and handle the payroll in order to provide the Head Office with their financial reports at the month end. Thus, considering all the points mentioned above, the reason behind all problems was quite predictable – which was the communication gap that existed between the systems. (Markham and Webb, 2012) In other words, the systems in KFC were not able to carry out an effective communication with each other. Thus, the IT Team of KFC, updated the enterprise IT structure of KFC with the system called as JD Edwards Enterprise One 8.10 so as to be capable of solving the KFC’s continuous problem of misinformation and also inaccurate generation of reports. (Nah, 2002)
The system of Enterprise Resource Planning (ERP) implemented at KFC is mainly designed to provide assistance with managing assets, suppliers, finance, projects, people and manufacturing processes. JD Edwards Enterprise One Version – 8.10 offers operational components and foundation that included – (1) Financial management, (2) Inventory Management (3) Technical Foundation (4) Asset Management (vehicles and equipment), Forecasting, (5) Procurement (6) Workforce Management (7) Expenses and Time Management. (Brady, Monk and Wagner, 2001) Benefits of JD Edwards Enterprise One 8.10 to the KFC Company include the following factors –
Following are some of the key features of JD Edwards Enterprise One – Version – 9.0:
After the implementation of ERP - JD Edwards Enterprise One Version – 9.0, in the year 2011, the KFC Restaurant chain took the decision of investing in an infrastructure that would not only address the complex problems associated with accounting, but also provide processes related to workflow that could be utilized by all HQ employees at any time, from any device and from anywhere. Thus, KFC Restaurant sought help of a Company named Acumatica, to update their ERP system and the processes associated with various complex business transactions. (Amini and Sadat Safavi, n.d.) This update required by KFC involved requirement challenges such as – (1) web – based application (2) highly extensible system (3) local support and (4) ability to handle huge number of transactions in the cloud – based environment
Benefits of ERP System to KFC
Implementation of ERP system in KFC helps in the connectivity of necessary software so as to carry out accurate forecasting. Also the feature of integration is available among various functional areas in a company to ensure efficiency, productivity and proper communication, tracking of orders starting from acceptance till fulfilment, maintaining the revenue cycle starting from invoice generation to the cash receipt etc. Yet another notable benefit of having an ERP system is the process of three – way match tracking among inventory receipts (that are arrived), purchase orders (what were ordered) and costing (invoice developed by the vendor). Also, there is significant reduction in the number of paper records and documents as online formats are available for quick entry and retrieval of information. (Holsapple and Sena, 2005) Information timeliness is highly enhanced by easily posting daily updates instead of every month. Also, Auditors are highly benefited with the ERP System as the accuracy of information is maintained high and is also detailed and hence, there is significant improvement in cost controls. Considering the customer – side application of an ERP system, it became quite easy to acquire customer responses and follow – up, also, the process of monitoring and resolving the queries of customers was also improved. Thus, it can be said that the entire business process was improved and ERP system helped KFC to achieve competitive advantage. (Leon, 2008)
The ERP System designed for KFC provided a unified database of customers that were applicable for all departments. Also, there was significant improvement in the supply – demand linkage having branches and remote locations in various countries. Apart from these, also there was significant improvement in International operations as the ERP system supported a wide variety of tax structures, multiple currencies, invoicing schemes, various languages and period accounting. Thus, overall access to information and process of management was enhanced at KFC by the implementation of an ERP system. (Leon, 2008)
Drawbacks of ERP System to KFC
There is a very limited possibility to modify the ERP software since it the ERP product belongs to an ERP vendor and is not built in house. Modifying the practices of business followed until now in order to be compatible with the industry standards defined by the ERP system might make it difficult to catch up with other competitors in the industry. It is a common observation that ERP systems lack the flexibility and ease to fit into the specific business processes set and followed by some companies. This is considered to be one of the most accepted drawbacks of ERP systems. There is a need for high precision in many of the integrated links for the system to work with other applications effectively. Hesitancy in sharing important internal information between departments can bring down the efficiency of the ERP software. There are few organizations which may have many departments with lot of teams and resources for every functionality, stream of work. Consolidation of such large number of teams in an organization might not be practical or might bring down the productivity of the organization. (Leon, 2008)
ERP System versus Stand – alone system
ERP system has a number of benefits over standalone software. The ERP systems are a collection of software for management of enterprise and since they are packaged together by one single vendor it is easy to maintain the applications. Unlike ERP systems the standalone software are individual software built in house or by different vendors thus making it difficult to maintain and manage such software. Since the ownership of different software might belong to different vendors it is impractical for huge organizations to use standalone software and it is wise to make use of ERP systems.
The new system for implementation will not be a new system but an upgrade of existing ERP system. After consideration of various ERP tools it is evident that up gradation from JD Edwards Enterprise 8.10 to JD Edwards Enterprise 9.0 would be the best choice. JD Edwards Enterprise 9.0 has major enhancements such as supply chain management, financial management, and human resource management and so on. The recent version has also included modules such as food and beverage, engineering and construction, industrial manufacturing, professional services and commercial real estate. The newer interface which is a web – based system generates sales and inventory reports as quickly as 20 minutes which currently takes more than an hour. This will help the management department of KFC in making quicker change and transformation in the demand for constant and quick changes in the market. This ERP system also has XML – based integration, centralized data repository and good compatibility with other software applications. The tool has an application named JD Edwards Enterprise One XML has the capability to print and format results in various popular formats thus saving extra license costs of tools meant to create these documents. This ERP system will help in automation of the inter –company invoicing between the head office in the US and rest of the KFC outlets all over the world. This will in turn help in increasing the operational efficiency and in making sure information is consistent all through the organization. This system will help automate the tasks performed by around 20 to 30 staff members in order to process and store all these transactions.
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