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Provide an example of an information system that links the enterprise and discuss how it improves organizational performance? (Be specific with actual performance metrics!
An example of an information system that links the enterprise together is SAP ERP. SAP ERP is an enterprise resource planning information system that will link the enterprise and improves organizational performance. It links information from various groups within an organization including accounting, manufacturing, purchasing, distribution, logistics, material management, warehousing, and supply chain. Looking at SAP ERP as an end to end tool, I will start with some of the upstream activities and inputs into the system.
Purchasing and Procurement activities within SAP are usually guided by demand planning. Based on consumption and sales, the replenishment or purchasing quantities will be determined. This will allow for proper determination of purchase quantities and managing cash flow. It is important not to over purchase material for restricting cash flow and inventory holding cost, but also not “under purchase” material in which you will incur more inbound transportation cost and lose out on bulk purchasing discounts. The inputs in the stage are a critical piece to determine the COGS (Cost of goods sold) and understanding profitability within the company. The next stage within SAP ERP, will be the manufacturing module. In this module, efficiencies will be found in material management and campaigning like products to optimize the labor and materials. Some KPI’s that are determined in this stage are direct labor costs, waste (material waste), yield, and production efficiency. Labor, waste, and yield are also components of the COGS to be considered. The next stage, will be warehousing and inventory management. At this point the SAP ERP serves as the tool to manage finished goods within the warehouse. It will allow for sales to determine availability of various products, accounting to understand inventory holding cost and forecasting financial and for the warehouse team to manage the operation. These critical inputs into the ERP also will be considered in the COGS. An example is the inventory holding costs. These financials can be determined by what it cost to store inventory that remains unsold (warehouse space and overhead, labor, and waste). Lastly, The distribution and sales piece of the ERP. Upon a sale or purchase order, the ERP will trigger a shipment to final destination. This will deplete the inventory and thus trigger the demand required to backfill the material. Sales of the inventory will generate revenue in which the entire enterprise can plan accordingly for forecasting and future operations. These are just some of the examples that an information system like SAP ERP can do to link the enterprise together