A Second Wind for ERP

A second wind for ERP Implementing enterprise resource-planning systems can be intensely painful, and once you have them up and running they may seem to interfere with the speed and nimbleness required for electronic business. Are they a waste? No, but the real benefits aren’t always obvious. MAY 2000 • DORIEN JAMES AND MALCOLM L. WOLF

Throughout the 1990s, most large industrial companies installed enterprise resource-planning (ERP) systems—that is, massive computer applications allowing a business to manage all of its operations (finance, requirements planning, human resources, and order fulfillment) on the basis of a single, integrated set of corporate data. ERP promised huge improvements in efficiency—for example, shorter intervals between orders and payments, lower back-office staff requirements, reduced inventory, and improved customer service. Encouraged by these possibilities, businesses around the world invested some $300 billion in ERP during the decade. What most attracted many a chief information officer was the opportunity to replace a tangle of complex, disparate, and obsolescent applications with a single Y2K-compliant system from a reputable and stable vendor; one major oil company, for example, managed to switch off 350 old systems when ERP went live. By entering customer and sales data in an ERP system, a manufacturer can generate the next cycle’s demand forecast, which in turn generates orders for raw materials, production schedules, timetables for shifts, and financial projections while keeping close track of inventory. For many businesses, installing ERP was traumatic. Following long, painful, and expensive implementations, some companies had difficulty identifying any measurable benefits. Those companies that were able to point to them thought they could have been achieved without the help of the computer system. One chief information officer concluded that "80 percent of the benefit that we get from our ERP system comes from changes, such as inventory optimization, which we could have achieved without making the IT investment." Today, as the information technology spotlight shifts to electronic

business, where "nimbleness" and "Web speed" are the buzzwords, monolithic ERP systems look more and more like cumbersome relics of an older IT world. Yet companies shouldn’t bemoan the cost of their investment: the hard-won skills and capabilities they acquired during the ERP installation process will permit them to improve their ERP applications incrementally, and these improvements collectively add considerable value. ERP can also accommodate technologies that facilitate promising developments, such as electronic commerce and continuousrelationship marketing (CRM), that didn’t exist when ERP systems were first installed.

Back-door gains "What we bought was sustainability," said one ERP director. "Many of the benefits that we are able to achieve today could not have been predicted at the time that we started work on ERP." In fact, in hindsight it appears that much of the value of these large systems lay in the infrastructure foundation they created for future growth based on information technology. The first element of this foundation is common data. To make an ERP system work in an enterprise or business unit, everyone must agree to enter information using the same vocabulary and format. This discipline renders the data both transparent and easy to compare, exposing anomalies—for instance, the use of different exchange rates to calculate the financial results of different plants—that must be resolved. Standardized business processes are the second part of the foundation. ERP demands standardization to reduce the number of process variants that must be supported. Painful changes in even the best local traditions may be needed so that orders can be fulfilled consistently throughout a business. When customers demand consistent global quality, globally consistent processes become essential. At least the new processes resulting from ERP are a consequence of design rather than evolution. The third and last part of the foundation is an organization that has been built to change continually. The implementation of ERP gives many people their first experience of an IT project that truly changes the way a business works. Companies learn—sometimes the hard way—the need for

business leadership of IT initiatives and for operating in project rather than line structures. The ability to execute such business initiatives is a valuable asset at a time when fast and flexible IT deployment has become a major success factor in almost all industries.

Ascending the value staircase For companies that already have ERP systems in place, the key problem is translating this infrastructure into bottom-line value. Think of such companies as standing at the foot of a "staircase of value" (Exhibit 1). In most cases, the initial implementation will have generated IT cost savings and process efficiencies. Ascending the lower steps of the staircase requires many small adjustments that will cut IT costs and improve business processes further. Reaching the summit means placing applications that can support new initiatives such as e-commerce and CRM on top of ERP.

The bottom steps At the beginning of the ascent, you have to revisit the business case for ERP—or develop one for the first time—to see where further efficiencies and savings can be realized. You must also introduce a continuous-improvement mindset, which may not be popular with employees. One implementation consultant compared installing ERP to running a marathon; few teams that have flogged themselves to complete the initial systems,

reengineering, and change management work on time and on budget are keen to revisit the course. Still, the push to deliver the original implementation punctually is likely to have left value on the table, and that value can be captured through incremental initiatives. The key to continued success is pushing responsibility for change outward by appointing a network of "initiative owners," from different functions and sites, who understand the ERP system. Their task should be to find the best ways to implement and sustain each of the improvements locally and to discover new opportunities for improvement. Refining the system. One such initiative involves refining the ERP system’s technical and commercial operation in order to drive out costs. For example, service functions, such as accounts payable or IT operations, that are duplicated in different locations can be consolidated. "Nice-to-have" features. Deadline pressures probably forced the original ERP implementation team to jettison inessential but useful functions. Look for add-ons, such as electronic-ordering and -payment systems, whose payback times could be very short. Captured data. ERP systems capture reams of information on customers, suppliers, and internal processes. By analyzing all this, businesses can find opportunities to sell more or spend less. Information from a payment database, for example, may show that a company buys comparable products from a number of suppliers. Placing orders with just a few could win a substantial discount. Extending uniformity. Sometimes the desire to optimize local operations exacts a global price. One manufacturer, finding that its different distribution processes interfered with its ability to manage its stock-control system in a number of European countries, unified the distribution process. "It was obvious in hindsight," a manager said, but employees "needed the experience to understand why we all had to do it the same way." The top steps With these initiatives in hand, you can start mounting the top steps, which build on the ERP infrastructure, to achieve competitive advantage. A range of technologies, many of

which emerged after ERP began to be implemented, can extend and enhance the capabilities of the original system. The four examples given here by no means exhaust the possibilities. Sell-side e-commerce. It is easy to build a World Wide Web site to advertise products and accept credit card numbers. But to become an industrial-strength, high-volume on-line retailer, a company must have world-class order fulfillment and distribution—one of the biggest challenges for electronic retailers. Whatever advantages nimble new on-line entrants may enjoy, there is tremendous value in having a system that can handle not only order fulfillment but also returns, partial shipments, and refunds. Internet commerce applications such as BroadVision, INTERSHOP, and InterWorld can build on existing ERP systems to offer customers high-quality service through the Internet channel. Electronic procurement. On the buy side, attaching an eprocurement module to an ERP system can restrict purchases to preferred suppliers and cut out maverick spending by employees who have too little time to go through required procedures. Say an accountant needs a new computer. An eprocurement module allows that person to choose "computer supplies" from the procurement folder appearing on everyone’s desktop and to select the desired model from the company’s preferred supplier. If the price exceeds the limit, the order automatically circulates to all designated approvers, and once they sign off, it goes to the supplier for fulfillment. The clincher is that the ERP system also receives and pays the invoice electronically, cutting out liaison with the accounts organization. E-procurement specialists such as Ariba and Commerce One have developed such systems, as have established ERP systems vendors, including SAP and Oracle. Continuous-relationship marketing. Electronic orders yield far more information about customers than over-thecounter sales do—not only who those customers are, but also what else they looked at and even, if you care to track this, how much time they spent on each screen. An add-on application can combine customer data obtained from ecommerce with information in the existing ERP system, helping you cater to individual tastes and create lifelong

relationships with customers. Such tools—supplied, for example, by the specialists Siebel Systems and Vantive—and by the major ERP vendors, make it possible to track customer interactions across all sales channels. Supply chain optimization. Suppose that a toy manufacturer must buy lots of plastic. Applications from companies like i2 Technologies and SAP can take production schedules generated by the manufacturer’s ERP system and compare them with information about current raw-materials costs. These applications can then automatically place orders with the supplier offering the best price in the right volume at the right time.

Roads to ERP The vision of snapping leading-edge functions onto ERP like Lego bricks is seductive, but the reality is complex. Standard ERP systems use a single logical database shared by all ERP modules to provide a common view of an organization’s data. In the early ’90s, this was a farsighted way to overcome inconsistency and fragmentation; today it seems monolithic and inflexible. But a number of technologies, collectively known as middleware, are eliminating the requirement that all ERP modules share the same database. Middleware allows application components to communicate through standardized messages, which simplify the coupling between systems. As a result, the integration of disparate applications becomes increasingly flexible and manageable; indeed, middleware can integrate applications running not only within but also beyond a company’s boundaries, so it is particularly useful in fast-moving environments where alliances, mergers, and acquisitions are routine. Such technical advances mean that companies enhancing their old ERP systems or buying new ones will gradually come to feel less need to get all of the elements from a single vendor (see sidebar, "What next for the big vendors?"). Fast-changing businesses that use middleware to manage the integration of components are likely to choose different best-of-breed vendors for each of them (Exhibit 2).

But an organization that has already made a big commitment to a major ERP vendor should think hard before moving toward the best of breed. SAP, the ERP market leader, and Oracle, the number-two player, have consistently extended their product ranges to compete against emerging products in "hot" functional areas. Companies that build on existing ERP systems can stick with their original vendors, an approach that lowers their exposure to risk but leaves them lagging, to a certain extent, behind the state of the art. Alternatively, they can use third-party products to extend their ERP systems, with the original vendors controlling the overall architecture. Or they can take the bull by the horns and combine products from a number of different vendors into a suite of heterogeneous applications linked by messaging middleware. Although the third approach frees a business from dependence on a single vendor, it is more expensive. ERP systems may feel like an albatross to companies that have expensively and painfully installed them. Nonetheless, they constitute a valuable foundation for a wide range of new valueenhancing applications. And the emergence of middleware will give companies seeking distinctive solutions greater flexibility and choice.

What next for the big vendors? Unlike the early 1990s, when the use of ERP systems increased explosively, 1999 was a slow year for vendors (Exhibit 3). Saturation of these companies’ core industrial-market sectors—consumer products, energy, manufacturing, and pharmaceuticals—as well as the reluctance of many of the companies to implement big systems before the start of the new millennium, put a crimp in sales. ERP vendors are now pursuing three major routes to renewed growth.

The first is expansion into service-sector industries. Although the major vendors compete in all of the main branches of business, they have much more experience in heavy industry than in services. Because it is hard to find much similarity between a manufacturer’s planning system and, say, that of a bank, expansion here may be difficult. Expansion into new functional areas—such as sales-side electronic commerce, continuous- relationship marketing (CRM), and electronic procurement—is a second possible growth strategy for ERP vendors. Pursuing it would require them either to develop proprietary offerings or to acquire companies that have complementary products, much as the major vendor PeopleSoft did when it bought CRM specialist Vantive. The third potential growth strategy is to address the needs of small to midsize businesses. The vendors could tackle this segment by serving as application service providers (ASPs), which offer companies (on a pay-per-use basis) ERP applications running on vendor-owned and vendor-maintained computer systems. Systems supplied by ASPs are particularly attractive to start-up companies that can’t reliably predict their future business volumes, can’t afford to pay for first-tier ERP systems, and don’t want to be continually replacing cheaper, less capable systems as their businesses grow.

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ailoring IT to global operations Nov. 2011 | by Enrico Benni, Kenitiro Muto, and Kevin Wei Wang

Complex enterprise-resource-planning systems often fail because of the local-versus-global conundrum. By focusing on a handful of agreedupon business priorities, IT executives can break the impasse. Global operating models are showing signs of strain at many companies. Research by our colleagues suggests that globalization can

take its toll on organizational health: high-performing global companies often struggle to set their direction or to coordinate and control operations effectively.(1) Part of the problem is the fine line that organizations must toe between driving common processes across regions to promote efficiency and allowing tailored offerings that match the needs of local business units and functions. That push–pull can lead to unwieldy operating models as leaders strive to manage diverse business interests and competing priorities. IT should help companies strike that balance, but the same tug of war between standardization and customization often plagues IT leaders. Organizations have lost hundreds of millions of dollars, for example, trying to build the right enterprise-resource-planning (ERP) model to support global operations. While ERP has been used successfully to run management tasks, such as finance and accounting, on a functional or regional basis, cross-functional integration on a global scale has proved far more elusive. Data from Financial Executive International, an association of corporate-finance executives, show that more than 50 percent of ERP implementations do not provide the expected benefits and that more than 80 percent end up over budget struggling to support the expanding demands of corporate global operating models. Contributing to the problem is the scale and inherent complexity of change. ERP functions like an organization’s circulatory system, connecting and running core operations, such as finance, procurement, and supply chains. Refining such deeply embedded technology is a massive undertaking made all the more slippery by the near-constant shifting of global business conditions. One large electronics company in Asia, for example, spent more than $100 million on a global ERP implementation, taking five years to define the requirements and another five to roll out the new system. By the time the project team was ready to pilot the program, the initial assumptions that drove the planning, such as the product set and the underlying R&D, were no longer valid, forcing the team to rework the original specs. Complicating the issue is the outmoded presumption that technology implementations remain within the exclusive purview of IT. Although the scale of many new ERP efforts means that they require board-level approval, once such a project is green-lighted, senior management often lets IT run the show independently rather than engage directly—despite the minefield of business issues involved and the value at stake. IT hasn’t helped its cause either. Many ERP projects are managed like traditional systems integration efforts, with teams opting either for a ―one size fits all,‖ globally standard approach or for a heavily customized, decentralized one. Neither has worked terribly well in

practice. Our experience suggests that a more business-driven approach to ERP delivers the best results. Instead of wasting management and staff time detailing a set of IT specifications across global business processes, leaders should focus on a handful of agreed-upon management priorities and use them to define a target operating model. This more calibrated approach requires IT to step out of the trenches and lead with traditional senior-management skill sets, from planning to governance, to secure buy-in from business units and to negotiate the inevitable trade-offs. Many IT leaders have yet to master that role. We believe that organizations can sharply improve their prospects for success by treating ERP as a focused change-management process, but IT needs to take the lead in shaping that understanding and in choreographing the design and implementation.

Sources of failure While ERP implementations often involve a wide array of software, hardware, and databases, most failures tend to occur because of management shortcomings rather than technological ones.

‘Either/or’ IT structures Over the last few decades, many organizations have fluctuated between heavily customized ERP systems localized for different markets and sales channels, on the one hand, and globally standardized platforms meant to be used without variance, on the other. Both approaches create problems. Working from the ground up to pool local user requirements and regulatory needs often takes considerable time and money, especially in view of the frequent updates such systems require. Moreover, the complexity of managing so many different variants can dilute the desired productivity gains. The alternative—trying to ram through one standard, globally coordinated ERP platform—often produces lowest-common-denominator systems that satisfy no one, generating sunk costs with little value to show for them. Frustration can lead some business units to cobble together their own solutions, adding to the disarray. One European company, for instance, deployed a uniform ERP system across its global operations. To speed adoption, the company’s units in all countries were asked to use the system ―as is.‖ The planners, however, failed to consider the fact that in China and other emerging markets, many day-to-day operating practices (such as sales and customer management) did not conform to the preset processes defined in the standard global model. To make the system work, managers in China had to redeploy staff to make manual adjustments to the system

so it would be better aligned with local business requirements.

Business on the sidelines IT has struggled to influence effective collaboration with its business counterparts and to eliminate the perception that proposed changes are pure technology issues. A health care company, for instance, decided to consolidate its ERP to bring cohesion across its regional operating processes. IT spearheaded the effort, interviewing users from different countries to formulate a list of requirements related, for example, to sales commissions, inventory management, and activity-based costing. With no business leadership mandate on what to keep standard and what to localize, the list quickly ballooned as each location stipulated different must-have features. With few elements left for standardization, the global system was locked into a fairly narrow design. Corporate management, which became engaged when the rollout failed to deliver the expected synergies, expressed dismay that $10 million of sunk costs had been invested in a project that now had to be reworked.

Changing the dynamic IT leaders will need to change their approach in two broad areas to manage the issues that have bogged down global ERP implementations. They involve shifting the role of IT: maintaining high levels of technical expertise, while simultaneously seeking a closer partnership with business at both the global and local levels.

Making IT dovetail with business priorities Many ERP systems start with a desired structure, such as a globally standard system, and define the program objectives around that. An outcome-based approach allows the strategic endgame to dictate the framework. It involves focusing the supporting ERP systems on a handful of priorities that leaders believe will deliver the biggest impact to the greatest number of customers—for instance, pricing, supply chain management, and demand forecasting. In cases we have seen, organizations that take an outcome-based approach to their global operating models and underlying IT are the most successful. From a structural point of view, such fine-tuning usually results in a hybrid model that balances the need for standard elements at the core with the freedom to customize some features in controlled settings, such as specialized orders and discounted pricing for certain local markets. Implicit in that balance are trade-offs. Negotiating them requires IT managers to master the game and to put a much greater emphasis on management skill than they did in the past. The CIO of a global technology company, for instance, made a point of establishing clear ground rules with the business before beginning a

global ERP reorganization. Chief among them was letting the business partners know that the IT team would not be able to satisfy everybody’s wish list. In a series of coordinated meetings and communications, the CIO laid out the operating mandate, approved by the company’s senior leadership. The CIO emphasized that the new ERP system’s primary purpose was to boost capabilities in highlighted areas, such as order fulfillment and inventory turnover, to help the company achieve its critical strategic goals. Only when these capabilities were in place and the initial objectives had been met would the ERP team consider adding additional features. Similar discussions in the past might have focused on the choice of architecture or platform, but the CIO recognized that it would be more effective to stay focused on the goals of the business and on IT’s role in enabling them. By clearly enunciating the planned ERP outcomes, the CIO helped to define the project’s scope and in this way managed expectations and built cooperation.

Managing change at the local level With the framework set, the larger hurdle is implementing it. As companies refine their operating models, the key is translating bigpicture priorities into the mix of systems, architecture choices, user requirements, and features that can most quickly, cost-effectively, and efficiently deliver them.

Sidebar A CIO checklist: Sharpening three essential management skills

To succeed, you need not only a high degree of management skill and experience in implementing technical aspects of new systems but also diplomatic skills—in particular, sensitivity to local needs when changing processes, to soften the natural cultural resistance (see sidebar, ―A CIO checklist: Sharpening three essential management skills‖). One large high-tech company learned about this requirement the hard way. It planned to globalize a swath of functions, from finance to procurement, while keeping logistics, factory management, and customer relationship management in local hands. Top management agreed that this was the right vision and tasked IT with implementing it. IT treated the initiative as it would any other system change and worked with technology teams in different countries to define what processes they needed to transfer. But that approach soon ground to a halt: local leaders, largely left out of the process, were slow to assign the needed resources. They felt that the redesign was an attempt by the corporate head office to seize more operating control.

Eventually, the IT team broke the gridlock by stepping back, staging meetings with individual leaders to assuage their concerns, and sharpening the benefits of the proposed changes for local offices. That shift altered the dynamic. By appealing to the business leaders and empowering them to take direct ownership of the effort, IT got country and regional managers to sign on. Once engaged, those leaders leveraged their peer relationships to speed up the process of deciding which functions to shift to the global platform. IT could then focus on designing the overall system, on laying out the architecture for the standard application set, and on vetting external vendors to assist the implementation. To keep pace with the demands that global operating models generate, IT leaders must have the skill sets and the stomach to manage largescale change: they should shift from blunt-edged approaches that require adherence to strict structural dogmas to an outcome-based approach that sculpts ERP to a handful of defined business priorities. That transition puts the onus on communication, negotiation, and strategy. Where IT can negotiate it successfully, we have seen a 90 percent improvement in order-fulfillment days, 80 to 90 percent faster turnaround of sales quotes and custom products, and a 75 percent reduction in the time needed to resolve customer service issues. Those statistics can transform an ERP implementation from a weighty technical project that takes years to roll out into a rapid, businessfocused engine for growth. 3333

At present, pharmaceutical companies are at a crossroads. Price discounts, shrinking margins, reductions in market exclusivity, product commoditization − as well as Part 11 validation compliance11 − represent new challenges for pharmaceutical companies of all sizes. Equally daunting are pressures on the manufacturing, supply chain Process Analytical Technology (PAT)5. ERP systems are used to integrate and optimize an organization’s internal manufacturing, financial, distribution and human resource functions6. In contrast, ERP II addresses the integration of business processes that extend across an enterprise and its trading partners. ERP II forms the basis of Internet-

enabled e-business and collaborative commerce. It provides benefits such as improved information visibility, personnel and inventory reduction, productivity improvement and new improved processes. However, since ERP II software has been a new evolution, and many firms have realized benefits such as those listed, it is argued that ERP II software is an unlikely source of competitive advantage either through opportunities for strategic positioning or through gains in operational effectiveness21.

Introduction The IT companies had recently introduced an ERP II product for handling the complex requirements of the pharmaceutical industry encompassing both bulk drugs and formulation18 business. Solution providers had kept in mind the nuances of the business as well as the unique information requirements of a sensitive business segments such as pharma19. As by adopting such IT-enabled business practices, not only they have modified the infrastructure but also the SMEs will benefit Aspects such as batch traceability, expiry date control, environment requirements for storage and other such considerations need to be fully supported. Quality assurance processes, extensive documentation capabilities would all be considered as basic requirements for acceptance.

ERP II over ERP Enterprise Resource Planning (ERP) is mainly based on resource planning as well as visibility beyond the plant and throughout the manufacturing enterprise, including man, machine and money resources24. The quintessence of ERP II to improve enterprise competitiveness, by setting strategies and deploying applications that enable the enterprise to share information and thereby collaborate in communities of

interest to participate in collaborative commerce (ccommerce)33. In this sense ERP II is an expansion beyond enterprise-centric optimization and transaction processing and thereby breaks down the barriers of traditional ERP, forcing solutions to offer functionality that extends beyond the four walls of an organization34. In comparison to the web-aware, closed and monolithic architecture of ERP, ERP II is a web-based, open, and most importantly, components based architecture. ERP II enables an organization to extend itself to communicate directly to its vendors and customers to create an external enterprise2. Transactions generated from outside the traditional enterprise can be received and processed by the enterprise and similarly transactions received can be directly sent out to impact the customer’s systems after due authentication. ERP II thus extends transaction processing beyond the traditional boundaries of the conventional ERP. ERP II uses a broad-based approach that integrates business processes across suppliers, partners, employees and customers to create a more effective organization.

Characteristics of ERP II ERP II product that is an integrated enterprise solution system that meets the enterprise solution requirements of diverse market segments such as manufacturing, distribution, contracting and retail. The salient features14 of ERP II are: • It supports multi-company, multi division/ profit centres, and multi-department/ cost centre kind of organization structures. • Its flexible design and extensive parameterization permits it to evolve to cater to changing business dynamics.

• It is designed to accommodate diverse and dynamic business needs. • It offers virtualized solutions that require very little customization thereby ensuring a shorter implementation time. For pharmaceutical industry, it offers specific solutions like batch tracking including expiry date tracking17, quality control tracking, recipe management, credit control, logistics control, sales promotions and discounts, purchase-sales-inventory analysis and consignment sales tracking38. While in retail, it offers making informed merchandising, stocking and logistics, decisions that are based on analysis of data across the retail store locations42. Integrates and centralizes customer, sales and merchandising information across multiple channels and locations.

Scope of ERP II for Small Manufacturing Enterprises (SMEs) For SMEs involved in similar pharma businesses, there are a lot of commonalities in business practices. However, practically, each SME reinvents the wheel since little attention is initially given to business processes and made sure they are followed51. ERP provides a repeatable, scalable framework where best business practices are made available to the business to work with. Far from having to modify the infrastructure, the SMEs will benefit greatly by adopting such business practices. Initially there would also be some learning and unlearning in terms of how to do what they do but the basic essence of what they do does not change. ERP II delivers as a pre-mapped solution for specific verticals, such as pharma, chemical, auto ancillary and retail provides the SMEs21, benefits of rich industry expertise without the related costs and time

of high end consulting. It also provides information, infrastructure and process definition required to adapt to changing business requirements, and scales rapidly or desegregates the part of the business say by outsourcing some part of the business and yet retains overall control effectively on the business. The affordability is brought in with pre-mapped solution and rapid implementation that makes the solution faster to go live and lighter on the purse. The model for deployment for SMEs enables the organization leave IT to the experts and focus on fine tuning its business processes and take maximum advantage of ERP implementation in the shortest possible time. This utility model of computing where user organization can install the PC/client, connect it to the data centre that is remotely located and get benefits of the full ERP is truly a plug and play solution that provides best business practice to SMEs without the pain of hardware selection, infrastructure creation and other related issues of setting up IT infrastructure46. The financial modules not only permits the transaction based on a fixed fee single cheque payment on a monthly basis which goes to the expense line and does not burden the organization with the kind of one time investment that traditional ERP modules require in hardware and infrastructure as well as the repetitive in house cost of qualified professionals who are difficult to retain52.

ERP II functionalities for fragmented information in companies ERP II transaction processing is designed based on the source document being generated by the system and the data flowing from the original document that captures the data to all related transaction. Data from the quotation to the customer could go all the way to

the customer order, the packing list, delivery note, invoice that flows through transaction processing47. Fragmented data is a thing of the past once an endto-end solution is implemented in the organization. ERP II is designed to meet the requirements of pharma organization across the value-chain both within and outside of the enterprise encompassing its suppliers and clients36. The ERP II collaboration corporate will also support data flow between distribution chain and the organization and provide infrastructure required for end to end transaction processing across the ‘buy’, ‘sell’, ‘insides’ of the business40. Thereby it is a single contract cover applications in all the activities of the organization, namely, production, QA/QC39, supply chain, stores, retailing, distribution etc.

Security level For the in house implementation, operating system, database and user level security ensures that authorized users have access to specified information, so there is no question of information being given to anyone outside of the company. In the hosted model, since security of the data stored at the data centre is a basic factor for success, it have invested in highly sophisticated security tools (which would normally be done by large organizations) and provide this benefit to the SMEs. With constant monitoring of the environment by administrators and the usage of other tools such as those for intrusion detection, the data centre provides the SMEs the benefit of a high security data environment18, normally available to large organizations at very high investments.

Conclusion The existence of ERP II in pharma SMEs was the need to look at a way to give customers and partners

access to scheduling, delivery, inventory, manufacturing, invoicing, and planning information28. ERP II needs an open architecture and a verticalspecific functionality. Its main emphasis is to integrate departments and functions throughout a company into a single system that can serve every department's needs. ERP II forms an integral part of most manufacturing organizations13. It is an application/system that both small and large pharma manufacturing companies are using today in order to streamline and integrate operation processes. And now with the growth of the pharma SME segment, a lot of ERP implementations are also happening27. Though ERP II systems are supposed to facilitate transactions between external entities, organizations should implement it with caution. One should not migrate to ERP II systems without first addressing current systems issues that may run the risk of adding to existing problems. ERP II developers incorporate a single package of condensed granular versions to suit the SME market along with their regular ERP solution portfolio6. Industry specific solutions/vertical solutions with rapid implementation methodologies are being offered now. Most of the bigger ERP vendors have recognized the need of the pharma SME segment and are now offering condensed granular versions to suit the SME market49. As the implementation of the software for SMEs are more complicated it raises the implementation costs. To summarize by adopting ERP II pharma SMEs can be globally competent enough to fulfill organization needs to open and reach out to its collaborative partners enabling businesses to compete by providing information online and adding real value to businesses of all types and sizes26.

Acknowledgement

Authors are very thankful to librarian of British library and JNU library, New Delhi and KIET School of Management for their kind support during literature survey