Enterprise Resource Planning

An ERP system is an integrated solution, with a central database and the luxury of updating it at a click of a button through a single entry. Data, in an ERP system has to be entered once; there are security controls for such entries too, a person can enter but cannot post to the system unless it has been approved by a supervisor, thereby, reducing errors, time and manipulation of accounts. Generating reports is more of “a walk in the park” than those laborious hours trying to import data in to spreadsheets (like Excel) processing them and then printing them for reporting purposes. Analysis, planning and management can be done off-screen through ‘mouse-clicks.’

Ultimately, time and resources are shifted to innovation, problem solving and effective customer service rather than spending hours entering data, processing, verifying them.

I am not going to talk about ERP history, or how it came in to being, you have Wikipedia for that

ERP help reduce operating costs


There are two primary cost reductions a company can benefit from, being:


1) Aligned processes

The ERP attempts to integrate business processes across departments in to a single enterprise-wide information system with the sole aim of having uniform processes across the organization; which in turn helps in having fewer, yet common processes, thereby, making work flow faster through the processes.

An organization that flows on a uniform processes set (or tries to operate as close to bringing them to uniformity as possible) wastes lesser time, effectively manages process quality far better than those that work haphazardly and on a “as-and-when-required” attitude.

Job rotation is then easy, unlike, traditional organizations where companies come to a standstill if the relevant person is not available.

2) Paperless environment

Going ERP is almost as good as going Green. It’s like going paper-less. From your paper purchases to printer cartridges to the millions of trees, you will feel the difference (at least the earth will).

ERP help facilitate day-to-day operations

One point of entry and the data can then be processed in different ways to convey different information to different stakeholders. A sales entry can mean increase in revenue for the sales and accounting manager but will also mean a rise in the accounts receivables for the later as well as it will also mean target achieved during the period for the sales manager. Credit controller also now has to add another name to his list if the collections are not in time. The salesmen can log in to see how much commission they will be earning for the period.

Over and above, sales then can be broken up, in to product, category, location, margins and even on a sales man basis; enabling learned decision-making.

ERP provide Real-time online updated records

When companies work across geographical locations, they need to know exactly what is happening on a real time basis. This is more important for a trading/retail company. If it has a real time availability of its inventory stored in warehouses 100 miles from the sales office, it is still in a position to bid for the order aggressively unlike any other that would have a stores within its vicinity but no updated real time records.

ERP enable strategic planning

• Reduce risk
• Optimize IT spending
• Retain top performers
• Improve productivity and insight
• Support changing industry requirements
• Reduce costs through increased flexibility
• Improve alignment of strategies and operations
• Provide immediate access to enterprise information
• Improve financial management and corporate governance

The ERP Perfection


ERPs come from different vendors with different variations, some may be good for a trading enterprise, where as another may suit a manufacturer better, likewise, one may suit a services provider better than the other two.


Which ERP would suit you better is something that would come up after a thorough analysis of the business and its needs.


Some companies buy the ERP software, whereas, some develop it in-house with the supervision of experienced consultants.


Like in my first blog (right at the bottom of this page) you would notice I have talked of an ERP in supply chain management. Aligning your SCM to almost perfection is just one example of having a well implemented ERP.

 Below is a list of few modules of an ERP to help ascertain the strengths and benefits of an ERP to the business.

1. Treasury
2. Human Resource
3. Plant Maintenance
4. Production Planning
5. Quality Management
6. Financial Accounting
7. Sales and Distribution
8. Materials Management
9. CRM (Customer Service)
10. Logistics Information System
11. (Project Management Systems)
12. Supplier Relationship Management
13. SCM (SAP Supply Chain Management)

Would you have any queries please feel free to write to me and/or my friend, Mr. John McGrann, CEO of Drive ERP, we would appreciate the opportunity to help you.

Change Management

Change management is an ability in which managers need to be proficient. It is more or less like Exodus where you are playing Moses and the people following you through the water walls in to the Promised Land. People Management is the key.

We will talk of this walk and how to manage people and their reactions to changes they want and what they are actually getting.

Always keep in mind that:

1. Different people will certainly react differently to change
2. Everyone has perceived needs that have to be met
3. Change often involves a loss
4. Expectations have to be managed
5. Fears have to be dealt with

Different people react differently to change

Change can be presented on a continuum like:

Different people have different preferences for where they like to be on this continuum. Some people like to be at the stability end of the continuum - they like things to be the way they have always been.

Then there are those who like to be at the change end - they are always looking for something different, new and challenging.

Problems arise when the individual's preferences differ from the situation they are put in. Meaning to say that, where :

• a stability-oriented person finds that circumstances are changing quite rapidly, or
• a change-oriented person finds that everything is the same and there is nothing new

In these situations, the individuals involved usually experience:

• strong dissatisfaction even to the point that it evolves in to frustration
• stress
• negative attitudes towards individuals, work and the management in general
• resistance to change
• de-motivation

People tend to resist.

 Everyone has fundamental needs that have to be met

Psychologist, Will Schutz identified three basic needs that people have in interpersonal relations. These basic needs are also of fundamental importance in people's reaction to change:

• The need for control
• The need for inclusion
• The need for openness

Every human being processes his needs and wants through his frame of references; these references pour from the individual’s likes and dislikes to which his brain has been tuned over years. On the other hand, a person’s attitude towards change is also a very important factor. Therefore, when you have look at a person’s attitude towards change you would have almost solved the change management issue, as I said earlier, attitudes are behavioral patterns that are exhaustively dominated by an individual’s frame of reference. In any change process there is always some degree of need for control over one's environment, even participation in the events leading to the change, expectation of clear and precise information of the change and its processes otherwise, it is likely to run into an array of negative reactions, ranging from anxiety, stress, frustration through resistance to partial resentment.

Change often involves a loss

The relevance of the "loss curve" to a change mature and extent of the change. If someone is promoted to a senior position, the change is rarely an issue because it has been replaced by something better. But if someone is made redundant with little prospect of getting a new job, there are many losses (income, security, working relationships) that can have a devastating effect.


Expectations need to be managed

The relationship between expectations and reality is very important. You can see this in customer relations - if a supplier fails to meet expectations then the customer is unhappy; if the supplier exceeds expectations then the customer is happy the same applies to change. If their expectations are not met, they are unhappy. If their expectations are exceeded, they are happy.

What managers have to do, however, is make sure they don't over-promise. Expectations have to be set at a realistic level, and then exceeded. The wiser thing to do.

This also reminds me of one of my clients, I was reviewing their cost budgets and their actual performance all round was just excellent, they had been phenomenal. I tried to learn the secret of their success and I did, their budgets set goals too low, therefore, under normal production they were able to beat their budgets and a little effort helped their cause. I brought this point to light in the board meeting and tore off the budget sheets, since then the CFO and COO never spoke to me, although the CIA and CEO have become very good buddies of mine.

Fears have to be dealt with

Where significant change rational thought is not clearly understood nor absorbed people often fear the worst - in fact, they fear far more than really required, their subconscious minds suddenly become illogical and see irrational consequences which just goes on to add on the anxiety and stress:

• Our company is reducing staff, which means...
• They will make people redundant, and...
• I'll be the first to be kicked out, and...
• I'll have no hope of getting another job, and...
• I won't be able to pay the mortgage, so...
• I'll lose the house, so...
• My family won't have anywhere to live, and...
• My wife won't be able to cope, etc.

Such fears (primarily negative thoughts) should be addressed, eg by helping people to know what is happening and that one individual is being made redundant will find a better job with better pay and have a huge lump sum in their pocket.

Always:

• Give people information - be open and honest about the facts, do not promise that cannot be delivered.
• For large groups, produce a communication strategy that ensures information is disseminated efficiently and comprehensively to everyone. This, however, should be followed up with individual interviews to produce a personal strategy for dealing with the change. This helps to deal appropriately with individual reaction to change.
• Give people choices to make, and be honest about the possible consequences of those choices. 
• Give people time to express their views and support their decisions, providing coaching, counseling or information as appropriate.
• Where the change involves a loss, identify what will or might replace that loss - loss is easier to cope with if there is something to replace it. This will help alleviate potential fears. Also give individuals opportunity to express their concerns and provide reassurances - also to help assuage potential FEARS.

Where you are embarking on a large change programs, you should treat it as a project and bring about all the functions of project management.

How Interest Rates Affect Our Purchasing Power

Before we see how interest rates affect our purchasing decisions, we need to talk about the Messengers of Death and understand how they affect us. Yes I am referring to interest rates and inflation.

What is interest?

An interest rate is the percentage of the debt that is charged as interest. Every loan, mortgage, credit card etc. that you ever will receive will have an interest rate associated with it. These can vary wildly between financial products, and also between consumers based on their credit histories.

What is Inflation?

Inflation is a constant increase in the prices of all goods and services produced in an economy. Money loses purchasing power during inflation periods since each unit of currency buys progressively fewer goods.

Suppose the overall price index increased by 3% during the past 12 months. If a typical household spent AED 4,000.00 during the first month for all household expenses, then they must budget AED 4,120.00 during the last month for exactly the same quantity of goods and services.

In simpler terms, it can be said like

3 Liters of milk cost AED 10 earlier now costs AED 15 or you can now buy 1 Liter only for AED 10 This is often described as "too much money chasing too few goods.”

The interest rate is a monetary policy tool used to achieve price stability and sustainable growth. Changing the interest rate influences the money supply, beginning with banks and eventually trickling down to consumers.

Governments and Central Banks in particular lower interest rates in order to stimulate economic growth. Lower financing costs can encourage borrowing and investing. However, when rates are too low they can spur excessive growth and eventually inflation as has happened during the 1990s to 2006. Inflation eats away at purchasing power and could undermine the sustainability of the desired economic expansion plans set forth by countries. Meaning to say many countries draw 20 year economic targets and in order to achieve them they design and develop fiscal and monetary policies; if forecasting and subsequently economic planning had been poor, anything can go wrong: inflation, deflation, stagnation all of this in a nation.

On the other hand, when there is too much growth Central Banks raise interest rates. Rate increases are used to slow inflation and return growth to more sustainable levels.

Lower interest rates allow more people to buy and more people to purchase more expensive commodities like homes, cars etc. The negative about low interest rates is that it has a tendency to push prices of commodities higher because there are simply more buyers. It is a "supply and demand" thing.

A consumer's purchase power is seen here in the graph between QQ/SS/YY/XX the shaded area. As long as the interest rates are with the consumers'/firms' reach there is tendency to spend as it appears on QQXX but the moment RR goes above the purchase budgets B, at SSYY, the spending comes to a halt, here then, the Indifference curves and the Budget Lines re-align themselves for the consumer to adjust his optimal utility derieved from various combinations of available commodities from his newer and scarce resources.When interest rates are changed, demand can be affected in various ways.

 

1. Income = Expenses + Saving
2. Quantity of money
3. Exchange rates

Income = Expenses + Saving

Against a certain level of income, for firm or a consumer an increase in interest rates will attract saving and should theoretically reduce borrowing.

This will tend to reduce current spending, by both consumers and firms; this includes spending by consumers in the shops and spending by firms on new equipment, ie investment in newer assets or expansion in to newer markets. Conversely, a reduction in interest rates will tend to increase spending by consumers and firms.

Quantity of money

A change in interest rates will affect consumers' and firms' cash flow, ie the amount of cash they have available. For savers, a rise in interest rates will increase the money received from banks and co-operative society deposits. But it will also mean higher interest payments for people and firms with loans - debtors - who are being charged variable interest rates. These include many consumers with mortgages on their homes.

Exchange rates

In practice, the exchange rate will be influenced both by expectations about future interest rates and any unexpected changes in interest rates. That is because if investors expect interest rates to rise, they may increase the amount they invest in a currency before interest rates actually rise.

"If something will cost far more than it is worth because you do not have the money to buy it, then you should wait until you can afford it and stay out of debt."