Case Study 7.1.: ERP Helps Productivity at Northern Digital Inc.
1. For a small company like NDI, why is an ERP better than SCM applications? Answer:
ERP supports internal supply chain within an enterprise, while SCM applications support just certain part of internal supply chain. Therefore, for small companies like NDI, it’s more efficient and effective to implement one system, namely ERP, instead of more SCM systems.
Further, ERP software support several functionalities for supply chain management, and small companies like NDI could choose which functionalities they would like to implement, i.e. to support by IT advantages.
Also, unlike SCM applications, ERP system of new generation provides new opportunities for enterprises in (near) future: to connect to their business partners, to integrate new functionalities (open ERP), to use Internet capabilities, to integrate with CRM solutions, etc.
In practical sense, maintenance/servicing and training for one –ERP- software instead of several –SCMs- is better for NDI in financial and time sense.
Finally, kind of industry (high-tech) within NDI operate demands efficient supply chain management, with high turnover of assets and inventory, so as precise and efficient production and inventory planning.
2. Identify the supply chain segments that the ERP supports; be specific. Answer:
In the case of NDI enterprise, implemented ERP system would support those activities which produced greatest costs in previous period, putting customer satisfaction at risk and making internal moral decreasing.
Also, the ERP supports the segments in NDI as well as its environment. First, ERP optimizes the production processes in NDI; including taking into account the needs of its employees. Second, ERP contributes to better forecasting of demands and, additionally, better processing of their orders. Third, ERP efficiently coordinates upstream activities between NDI and suppliers.
In the company, the implementation the ERP results decrease of costs and increase of revenue. In detail, using the ERP software improves the efficiency of NDI. Providing information for the demand forecasts of the products helps to decrease inventory. Therefore, in NDI case, revenue increased from 10 to 20 million with little increase in inventory value. Additionally, managing the processes of the company more efficiently increases order capacity. Result is an increase of revenue due higher ordered quantities. The better planning doubles the turnover of inventory, i.e. NDI’s automated inventory management achieved instead of 2 now 4 turnovers of inventory per year.
At the side of the customer, having the opportunity for a better forecast of the demand and increasing the efficiency of the company, results to reduce the order cycle. This ensures the customers better and quicker service connected with reducing lead times and on-time deliveries. Therefore, supported by ERP production control system, NDI reduced its order cycle time for flagships product from 4 months to 4 weeks. This also contributes to improvement of customers relationships.
At the side of the suppliers, knowing the demand of customers helps NDI to forecast its own demand for material. ERP allows them to make orders to the suppliers on time and to avoid bottleneck caused by material lack. Additionally, optimization of the processes in the company makes it possible to forecast the need for labour.
Implementing ERP decreases the costs in the company and increases its profitability. Additionally, it improves the relationship between the firm and it customers and suppliers. This ensures loyalty in the future relations.
3. Relates this case to Porter’s value chain and to its competitive model (Appendix 1A). Show the ERP contribution. Answer:
The Porter’s Competitive Model describes five factors, which endanger the profitability of NDI:
The first factor is threat of entry of new...
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