Integrating the data is time and money consuming.Numerous disparate information systems created individually over time which are difficult to maintain.Some Major problems with the decentralized system are – These are just a few of many problems with decentralized systems. The finance department defaults the payment deadline set by the vendor causing the company loss of its reputation and even inviting a possible legal action.
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The production planning department fails to update the finance department on the materials they have purchased. They approach the HR, who in turn hire temporary employees at higher than market rates. Once the raw material is available, the shop floor department suddenly realizes they are short of workers. Thus, material, as well as inventory cost, goes up. So, they go ahead and buy the raw material. When sales team check a particular raw material required to manufacture the product, it shows the raw material is available as per the inventory, but as per the database of the production planning team, the raw material is out of stock. The raw material information is available in two different departments Inventory as well as Production Planning. Thus, data maintenance cost (in this case, Raw Material) goes up. In a decentralized system, raw material information is stored separately by Production Planning as well as the Inventory Department. Production Planning Team checks the availability of the raw materials required. Now, suppose the product is out of stock, and the Sales Team approaches the Production Planning team to manufacture the product for future use. This process takes time, and the customer chooses another vendor leading to loss of revenue and customer dissatisfaction. So they approach the Inventory department to check the availability of the product. Since it is a decentralized process, the Sales Team do not have any real-time information access to the product availability. The customer approaches the sales team for a product, but this time around, he needs the product, on an urgent basis. To identify issues arising due to decentralized Enterprise management system lets look at the same business process again. Departments do not have access to information or data from other departments.Data is maintained locally at the individual departments.Let’s look at Decentralized system first, in a company with Decentralized System of Data Management. Enterprise systems can be broadly classified asĢ) Centralized System which is also called as ERP. The success of any organization lies in effective communication, and data exchange, within these departments, as well as associated third party such as vendors, outsourcers, and customers.īased on the manner in which communication and data exchanged is managed.These departments or business units continuously communicate and exchange data with each other.It has many departments or business units.Some key inferences one could derive from the scenario would be. That is a typical business process for any manufacturing company. All departments approach the HR for any Human Resource related issue.Production planning team update the finance with payments to be made to different vendors for raw materials. The sales team updates the finance with revenue generated by the sale of the product.Sales Team who in turn deliver it to the client.Once ready, the Shop Floor Team sends the goods to the Sales Team.Then Production Planning forwards the raw materials to the Shop Floor Execution for actual production.If the raw material is not available with inventory, the Production Planning team buys the raw material from the Vendors.The production planning team checks with inventory department for availability of raw material.In case the product is out of stock, the sales team approaches the Production Planning Department to manufacture the product.Sales team approaches the Inventory department to check for the availability of the product.Client contacts the sales team to check the availability of the product.Here is the whole process that is followed by any business unit. So next time this doesn’t happen, they have to introduce an SAP ERP tool.īefore we actually see in detail, what ERP is and how ERP can help in your business process, we will understand how different departments are involved in the whole business process, right from the ordering of the raw material – to manufacturing goods – to delivering final products to the customer. To their surprise, the sales team found out that the product is out of stock. The sales team contacts the inventory department to check the availability of the product. Suppose a client approaches a sales team asking for a particular product. The very fundamental question for any beginners is why Enterprise Resource Planning also called ERP, is required? To answer this, let’s examine this typical business scenario.
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