Business

Enterprise Resource Planning (ERP) refers to an amalgamation of practices in business management and information technology designed to achieve set business objectives.  ERP facilitates the smooth flow of information within a company (ERP) and is widely used in industrial and manufacturing companies that have a need for distribution, warehouse, inventory, and order management.

Dell Computer adopted the use of an ERP system quite early in its establishment. (Kirton and Furstenberg, 43). The adoption of ERP at Dell can be viewed as both a success and failure story due to the various opportunities and challenges that were experienced. Initially, Dell adopted an ERP software package that did not meet the objectives of the company. The estimated cost for this project had initially been estimated at 150 million. However, when it came to actual implementation, the ERP system acquired from software vendor SAP actually cost the company more than 200 million. It took two years (1994-1996) to implement this project before the company decided to terminate the ERP contract. This is because the software proved to be too rigid for the needs of Dell Corporation. Dell Executives were not pleased with the vendor-supplied software so they pulled the plug on it, intending to replace it with a hybrid approach a best of breed strategy (Carroll, 42 Kashef et al, 5).

The best-of-breed ERP approach utilized by Dell was a multivendor plan that aimed to integrate into Dells functionalities.  The software vendors that were part of this multivendor plan included i2 Technologies Inc, Oracle and Glovia International. i2 Technologies was responsible for managing raw materials procurement and logistics, while Oracle was used to manage order management, and Glovia International was used for warehouse management, materials management and inventory control (Stein). The strategy adopted by Dell e-Enterprise model is a pilot approach as demonstrated by the value proposition shown in the One2One relationship created by Dell together with LSI (Khowsrowpour, 556).

Lessons learnt from Dell ERP implementation
Dell ERP implementation is a story of initial failure and subsequent success. The initial ERP strategy adopted by Dell was through use of a single all-encompassing ERP software, the R3 enterprise software suite from SAP. However, this software proved too monolithic and inflexible to meet other needs of Dell. Companies should be well advised to ensure that if they adopt the use of a single software, that it will cover all the different business needs and objectives. In the case of Dell, the initial ERP software implemented was not customizable to their unique needs. As a result Dell resorted to adopt a multivendor approach whereby different software vendors catered to different business functions. This not only enhanced functionality of the specific departments but also improved profitability. The Glovia software was divided into smaller components and fitted well with Dell hardware (Stein).

Dell points out that relying on the companys ability to innovate is better than relying on vendor supplied software. In 1999, Dells Chief Information Officer pointed out that large ERP packages lead to complacency and instead of assisting the company in achieving its objectives, it actually creates obstacles. It is important for technology to be flexible to a rapidly changing IT world. A successful IT strategy should possess applications that are easy to use by the end user and should be tailored to meet the unique requirements of each end user. This is why Dell does not have a single monolithic website. In its place, there are three different web sites that meet different business lines as well as different constituencies. Consumers as well as small businesses have their own website through which people can place orders through their credit cards. For the larger corporate there is an extranet web server referred to as premium pages which are used to by companies to negotiate prices. Furthermore, there is another website referred to as gigabuys.com whose purpose is to sell software as well as peripherals to business customers along with other consumers (Finney Network World 69).

For many companies, committing to one particular vendor seems like an attractive proposition, but it is quite risky as well. When one vendor runs all the enterprise systems, there is a risk that some of the vendors solutions may not really fit in well with the companys objectives. This approach might be considered lazy, in that it is easier to deal with one vendor, rather than adopt a multi-vendor approach which obviously needs more time and effort to deal with all the suppliers.  While Dells strategy of using different systems from different vendors to deal with specific functionalities worked for them, it may not necessarily work for another company (Kashef et al, 5).

The success of Dell is largely based on their ERP value chain approach and management of the supply chain. Dell has a direct selling model which eliminates intermediaries from the value chain. As such, Dell has direct dealings with both retail and wholesale consumers. Dell no longer deals with mass production but rather, is more concerned with mass customization. As opposed to assuming what the customers want, the customers are given the leeway to customize the software, hardware and features that want in the product they are ordering. This has definitely given Dell an advantage over its competitors, as Dell is able to satisfy the needs of individual consumers, large or small. This flexibility as well as receiving order commitment online from the customers assists Dell in inventory management (Madu and Kuei, 72).

While Dell was successful at implementing its multi-vendor ERP system, one must observe other factors required to enable a successful ERP implementation. First, it is important to consider the cost vis--vis the need and the manpower available to take care of the job. Implementing an ERP system can be a really expensive, difficult and a time consuming task. However, once it has been successfully implemented, it can greatly enhance a companys profitability. In order for the implementation to be successful, companies need to discuss the benefits that it will bring into the business. They need to agree on how to improve these processes and also plan meticulously on the implementation. It is also important that companies do not rush blindly into adopting ERP systems, but rather, first do a thorough audit of what current processes are working, and those that can be improved by implementing and ERP. If it is felt that the ERP strategy will not really enhance the overall business performance then it is best left unimplemented. Not all companies need an ERP and if a company fails to make a case for the implementation of this system, then it is highly likely that even if implemented, it will not be beneficial to them (Kashef et al, 5).

Secondly, the choice of the vendor is extremely important. Consideration should be give to software(s) supported by the vendor, reputation of the vendor, and more. There is a tendency for businesses to contract vendors who are very popular, or have big brand names. However, it is quite possible that while the vendor may enjoy a good reputation in the industry, their solution may not be the right one for the business. In Dells case, the initially selected the services of SAP, a very popular ERP provider but found that their solution did not work for them, despite the fact that SAP is an industry brand. Dell instead chose to implement ERP software from Glovia International, a little known company whose solutions fitted the needs of Dell better than the SAP solutions. Why this worked for them is because they were able to adapt and innovate using the ERP solutions provided, hence, practice continuous improvement in their manufacturing operations. Dell is clearly a model ERP story and other companies will be well advised to emulate its strategies (Kashef et al, 5).