Februari 12, 2011

Business Process Reengineering through ERP Implementation

The electrical utility industry is a major provider of energy in most countries. It is indispensable to factories, commercial establishments, homes, and even most recreational facilities. They have special character that made them regulated by local and national authorities.

In Indonesia, the electrical utilities is run by a state-owned integrated electricity company to serve million customers households, industry, business and others. In this condition they need to use information technology not only to reduce costs and streamline business processes, but also to build competitive advantage and customer satisfaction. This why Accenture suggest to implement an ERP system to this state owned integrity electricity company.


An Old Fashioned Business Process
I work at a state owned enterprise (SOE) and I know that the "old business process" is still a common issue in most of these companies. Incuding in the state-owned integrated electricity company that serves over 37 million customers (households, industry, business and others) with a total asset of USD 35 billion (December 2009). This company as analyzed by Accenture has been operating throughout the country with non-integrated systems and non standardized business processes. The company's major issues, as the other SOE were that it's business processes are not standardized and consolidated financial reports were not produced on a timely basis, lacking important decision-making information.

Another issue related to the business process in this company is they are lack of integrated knowledge and control of inventories and assets led to underutilization of assets. This is also based on Accenture analyses. With respect to Talent Management, the company's processes concentrated on basic record keeping and un-integrated payroll systems, making it difficult to introduce training plans, career management, succession plans, transparent performance evaluation, and other requirements of a modern Human Resource Management area.

How Accenture Helped
Accenture implemented an integrated Enterprise Resource Planning (ERP) that covers Financial Management, Material Management and Human Resource Management areas, using SAP

ERP is an integrated application that is computer-based for the internal and external management of assets and resources involved in a business. It includes management of all tangible assets and materials, financial and human resources to facilitate easy information flow between all the services of an organization. It is an acronym for the term, “Enterprise Resource Planning” (Wikipedia)

The ERP system is an integrated software system that is used widely across many businesses and industries. It is built on a centralised database that uses a single common platform to consolidate all the business operations into a unified environment. With data collected and stored in a single repository, it allows for easier management across different modules of the organization without the need for multiple storage systems. They integrate many functional components of a system like sales & marketing, production planning, inventory management, finance, human resources, etc (1)

Considering the large scale of ERP Implementation and considering the company's first experience with an integrated system, Accenture decided that major change management effort is required. To minimize implementation risk, Accenture selected a multiple phase approach. Combinations of rollout sites were carefully picked to ensure minimal business disruption and yet breadth of functionalities is covered. Lessons learnt from earlier roll out was studied and immediately applied to the next one

A total of over 500 training classes were held and a total of over 10,000 training days were consumed by users to learn the ERP system. Appropriate management sponsorship was maintained throughout the implementation, including training which resulted in over 95% training attendance rate.

Throughout the implementation journey, Accenture managed to help the company build ERP template that consists of standard policies, business process, chart of accounts and reports to be used at other company's business units.

Business Process Reengineering through ERP
Basically a "Business Process Reengineering" (BPR) is the fundamental rethinking and radical re-design, made to an organizations existing resources. So we can say that it is more than just business improvising. It is an approach for redesigning the way work is done to better support the organization's mission and reduce costs. Reengineering starts with a high-level assessment of the organization's mission, strategic goals, and customer needs.

Reengineering identifies, analyzes, and redesigns an organization's core business processes with the aim of achieving dramatic improvements in critical performance measures, such as cost, quality, service, and speed.

Based on this definition Business Process Re-engineering (BPR) simply implies eliminating tasks that does not add value to a business process while reorganization the value adding tasks. It can also be perceived as a restructuring of redundant dependent tasks or work order. It involves a re-thinking and consequently a re-moulding. In appreciating this concept, it is expedient to view a process as a "chain of tasks". The truth is that in a typical business process, you can have some redundant tasks that if not present does not really have any impact. Such tasks can be eliminated thus streamlining business process. This is what ERP implementation can help not just to simplify to business process but also to redesign the organization core business process.

During ERP implementation, before a business process can be re-engineered, excellent understanding of the defective process is key. This is why it is important to first carry out a critical and objective business process definition and analysis before system design. At this juncture, it is important to state that when restructuring a business process, adherence to best practices is encouraged. This allows the client to be able to leverage the redefined business process externally and not only internally.

Speeding-up the Process
Business processes can be linked to ERP to gain significant advantages and to achieve specific goals. A complete understanding of the traditional method in conjunction with the ERP method of business processing will help in opting for the right method to achieve success.

An ERP implementation can help to speed up the business process in which it involves in channelling power and resources through various departments involved in the business like accounting, finance, inventory management, etc. This ensures that the main focus is on the business process and not on the functional departments, like the traditional business process.

Implementing an ERP system in more broad term is also mean redefining an organization's business processes. ERP implementation, like what Accenture do in this state owned integrity enterprise can be used not just to streamlining the business process but also to enhance and optimize the existing business process. This is the journey that the state owned integrity company doing with the help from Accenture.

Refference

(1)ERP Implementation and Business Process Re-engineering, http://it.toolbox.com/blogs/sap-library/erp-implementation-and-business-process-reengineering-11537
Accenture
Wikipedia
What are the benefits of an ERP System? http://www.erpwire.com/erp-articles/erp-benefits.htm


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