Why we need ERP in Automotive Industry ?

 

 

Why we need ERP in Automotive

 Industry ?

The very basic question comes in our mind, is why Enterprise resource planning? Which called ERP. To answer this question, let's examine this typical business scenario. A client approaches the sales team to buy a car of a particular model. The sales team approaches the Delivery yard to to Check the availability of the required product. In this case the product is out of stock the sales team approaches the production planning Department to manufacture the product the production planning team checks with the Material Handling department for availability of CKD KIT, local parts, raw material, and consumables. If the required raw material and parts are not available within the inventory the production planning team buys the raw material from the vendors/suppliers. Then production planning forwards the raw materials to the shop floor for the execution of actual . Quality Department check the quality of the product during the production execution. Once the product is ready, the [shop] floor team forwards the goods to the sales team who in turn deliver it to the client via dealer. The sales Team updates the finance Department with revenue generated [by] the sale of the car. The production planning team updates the finance department with payments to be made to different vendors for raw materials. Plant maintenance department ensure the availability of machines and perform periodic maintenance to avoid any machine breakdown. All departments approach HR for any human resource related issues.

 

That is the typical business process of any manufacturing company. To summaries we can say Enterprise has many departments or business units to achieve a common goal to produce a product at right time, right quantity in right cost and deliver it timely to earn profit.

To achieve this common goal, these departments or business units continuously communicate and exchange data with each other. The success of any organization lies in its effective communication and Data exchange within these departments as well as associated business partner such as vendors and customers.

Based on the Manners in which communication and data exchange is managed Enterprise software systems can be broadly classified as

 

1.     Ddecentralized systems

2.     Centralized systems

Decentralized systems

 

It is very old concept and lies before or early age of computer systems, in this system, each department is the owner of its data and share this data with other department on request. It was called as decentralized system of Data Management. There are lot of problem with this system, Departments do not have access to information or data of other departments.

to identify the problems arising from Decentralized Enterprise management systems let's look at the same business process again the customer approaches the sales team for a product But this time he needs the product on an urgent basis The sales team do not have real-time information access to the products inventory so they approach the inventory Department to check the availability of the product This process takes time and the customer chooses another vendor, leading to loss of revenue and customer dissatisfaction.

 Now suppose the product is out of stock and the sales team approaches the production planning team to manufacture the product for future use. The production planning team checks the availability of the raw materials required. Raw material information is separately stored by production planning as well as the inventory department. Thus the data maintenance cost goes up. A particular raw material required to manufacture the product is available in the inventory but according to the database of the production planning team, the raw material is out of stock, so they go ahead and buy the raw material. Thus material as well as inventory costs go up. Once the raw material is available the shop floor department suddenly realizes, they are short of workers, they approach the HR department, who in turn hire temporary employees and higher than market rates. Thus labour cost increases The production planning department fails to update the Finance Department on the materials they have purchased. The Finance Department Defaults the payment deadline set by the vendor causing the company loss of its reputation and even inventing a possible legal action. These are just a few of the many problems with decentralized systems.

Some major problems with the decentralized system are Numerous disparate information systems that are developed individually over time and are difficult to maintain Integrating the data. It is time and money consuming, inconsistencies and duplication of data, lack of timely information leads to customer dissatisfaction, loss of revenue and reputation. High inventory  and human resource . These are just some of the major drawback for which we need a solution

Centralized System

 

Well, the solution lies in Centralized systems that is ERP in a company with a centralized system of information and Data Management. The data is maintained at a central location and is shared with various departments? Departments have access to information or data of other departments.

Let's look at the same business process again to understand how a centralized enterprise system helps overcome problems posed by a decentralized Enterprise system. In this case all departments update a central information system. When a customer approaches the sales team to buy a product on an urgent basis the sales team has real-time information access to the products in inventory, which is updated by the inventory department in the centralized system.

The sales team responds on time leading to increased revenue and customer delight. In case manufacturing is required, the sales team updates the demand in centralized database and Production planning Department is aware about the new demand. The production planning team checks the availability of the raw materials required via central database, which is updated by the inventory department? Thus, data duplication is avoided, and accurate data is available for timely decision. The shop floor team updates their manpower status regularly in the central database which can be accessed by the HR Department. In case of a shortage of workforce, the HR Team starts recruitment process with considerable lead time to hire a suitable candidate at market price. Thus labor costs go down. Vendors can directly submit their invoices to the centralized Enterprise system Which can be accessed by the finance department? Thus, payments are made on time and possible legal actions are avoided. It eliminates the duplication which is the key benefit of ERP. Hence a centralized Enterprise management system is required to streamline business process. This is one of many business process, there are many process in an Enterprise which have many complexity. There are many centralized Enterprise management system in the market which help organizations to automate and streamline their business process. These centralized Enterprise Systems commonly known as ERP (Enterprise Resource Planning) System. SAP is widely used ERP system around the world.