ENTERPRISE RESOURCE PLANNING

Introduction
In any industry, some of the demands managers face is to be cost effective. In
addition to that, they are also faced with challenges such as to analyse costs and
profits on a product or consumer basis, to be flexible to face ever altering
business requirements, and to be informed of management decision making
processes and changes in ways of doing business.
However, some of the challenges holding managers back include the difficulty in
attaining accurate information, lack of applications that mimic existing business
practices and bad interfaces. When some challengers are holding a manager
back, that is where Enterprise Resource Planning (ERP) comes into play.
Enterprise resource planning (ERP) is a type of financial management and
accounting

software

which

integrates

information

concerning

financial,

manufacturing, sales, service, customer relations management, and other

business activities that impact revenue or liabilities into a single package.
With an integrated solution, different departments can easily share information
and communicate with one another.
Example:
Proton

Holding

Berhad

used

SAP

system

or

System

Application

Programming to connect and operate any operation involve in the

company. Proton used this system because it acts as one of the business
suite solution that compromise and integrate with all other system either
in management or production area.

The following diagram illustrates the differences between non-integrated

systems versus an integrated system for enterprise resource planning.
Benefit

ERP was an attractive solution for many large companies because it

offered so many potential uses.
For example, the same system could be used to forecast demand for a
product, order necesssary raw materials, establish production schedules,

track inventory, allocate costs, and project key financial measures.

ERP acts as a planning backbone for a companys core business process.
ERP is also able to share the data from these process with other corporate
software system.
For example, Since Proton mainly used the SAP system we can see that
the main SAP system which is situated in Shah Alam has to be integrate
the result or data wih the SAP from Casting Plant department which
situated at Glenmarie, Shah Alam and also combine with the SAP system
at Tanjung Malim. This structure shows to us how the integration happens
in the company using SAP PI.

Drawbacks

The early systems tended to be large, complicated, and expensive.

Implementation

required

an

enormous

time

commitment

from

companys information technology department or outside professionals.

They tended to create changes in many business process. Putting ERP in
place thus required new procedures, employee training, and both
managerial and technical support. As a result, many companies found the
changeover to ERP a slow and painful process. Once the implementation
phase was complete, some business had trouble quantifying the benefits
they gained from ERP.

Conclusion
While employing an ERP system may be expensive, it offers organizations a cost
efficient system in the long run.
ERP software works by integrating all the different departments in on
organization into one computer system allowing for efficient communication
between these departments and hence enhances productivity.

PARETO ANALYSIS
Introduction
Setting priorities is one of the main management functions of an organization. If
the managers do not prioritize their tasks and organizational objectives, the
organization will head towards the wrong direction and eventually collapse.
Therefore, management is required to prioritize their tasks and focus on the
priority items that will have a high impact on the organization.
Pareto Chart tool is one of the most effective tools that the management can use
when it comes to identifying the facts needed for setting priorities. Pareto charts
clearly illustrate the information in an organized and relative manner.
This way, the management can find out the relative importance of problems or
causes of the problems. When it comes to prioritizing the causes of the problem,
a Pareto chart can be used together with a cause-and-effect diagram.
Once the Pareto chart is created, it shows you a vertical bar chart with the
highest importance to the lowest. The importance of each parameter is
measured by several factors such as frequency, time, cost, etc.

History of Pareto Analysis.

Suggested by Joseph M. Juran, a Management consultant, Pareto Principle named
it after Italian economist Vilfredo Pareto.Pareto observed that 80% of land owned
by 20% of population. He developed the principles by observing that 20% of the
pea pods in his garden contained 80% of the peas.

Pareto principles
Pareto Analysis uses the Pareto Principle also known as the "80/20 Rule"
which is the idea that 20 percent of causes generate 80 percent of results. With
this tool, we're trying to find the 20 percent of work that will generate 80 percent
of the results that doing all of the work would deliver.
For example :

Project

effort
Sales & Marketing : 80% of sales come from 20% of your client

: 80% of value is achieved with the first 20% of

How to Use the Tool

Step 1: Identify and List Problems
Firstly, write a list of all of the problems that you need to resolve. Where
possible, talk to clients and team members to get their input, and draw on
surveys, helpdesk logs and suchlike, where these are available.
Step 2: Identify the Root Cause of Each Problem
For each problem, identify its fundamental cause. (Techniques such as
Brainstorming, the 5 Whys, Cause and Effect Analysis, and Root Cause
Analysis will help with this.)
Step 3: Score Problems
Now you need to score each problem. The scoring method you use
depends on the sort of problem you're trying to solve.
For example, if you're trying to improve profits, you might score problems
on the basis of how much they are costing you. Alternatively, if you're
trying to improve customer satisfaction, you might score them on the
basis of the number of complaints eliminated by solving the problem.
Step 4: Group Problems Together By Root Cause
Next, group problems together by cause. For example, if three of your
problems are caused by lack of staff, put these in the same group.
Step 5: Add up the Scores for Each Group

You can now add up the scores for each cause group. The group with the
top score is your highest priority, and the group with the lowest score is
your lowest priority.
Step 6: Take Action
Now you need to deal with the causes of your problems, dealing with your
top-priority problem, or group of problems, first.
Keep in mind that low scoring problems may not even be worth bothering
with - solving these problems may cost you more than the solutions are
worth.

Pareto Analysis Example

Jack has taken over a failing service centre, with a host of problems that need
resolving. His objective is to increase overall customer satisfaction.
He decides to score each problem by the number of complaints that the centre
has received for each one.
#

Problem (Step 1)

Cause (Step 2)

Score
(Step
3)

Phones

aren't

answered

quickly

enough.
2

Staff

Too few service centre

15

staff.

seem

distracted

and

under

Too few service centre

pressure.

staff.

Engineers don't appear to be well

Poor organization and

organized. They need second visits to

preparation.

bring extra parts.

4

Engineers
they'll

don't

arrive.

know
This

what

time

Poor organization and

means

that

preparation.

Problem (Step 1)

Cause (Step 2)

Score
(Step
3)

customers may have to be in all day

for an engineer to visit.
5

Service

centre

staff

don't

always

Lack of training.

30

Lack of training.

21

seem to know what they're doing.

6

When engineers visit, the customer

finds that the problem could have
been solved over the phone.

Jack

then

problems
(steps

groups
together

and

5).

He

scores each group by

the

number

complaints, and orders the list as follows:

1. Lack of training (items 5 and 6) 51 complaints.
2. Too few service centre staff (items 1 and 2) 21 complaints.
3. Poor organization and preparation (items 3 and 4) 6 complaints

of

As you can see from figure 1 above, Jack will get the biggest benefits by
providing staff with more training. Once this is done, it may be worth looking at
increasing the number of staff in the call centre. It's possible, however, that this
won't be necessary: the number of complaints may decline, and training should
help people to be more productive.
By carrying out a Pareto Analysis, Jack is able to focus on training as an issue,
rather than spreading his effort over training, taking on new staff members, and
possibly installing a new computer system to help engineers be more prepared.

Advantage

Organizational Efficiency
A pareto analysis requires that individuals list changes that are needed or
organizational problems. Companies operate efficiently when employees
identify the root causes of problems and spend time resolving the biggest
problems to yield the greatest organizational benefit.

Enhanced Problem-Solving Skills

Pareto analysis enables to organize work-related problems into cohesive
facts. Once facts have clearly outlined, you can begin the planning
necessary to solve the problems.

Improved Decision Making

Individuals who conduct a Pareto analysis can measure and compare the
impact of changes that take place in an organization. With a focus on
resolving problems, the procedures and process required to make the
changes

should

be

documented

during

pareto

analysis.

This

documentation will enable better preparation and improvements in

decision making for future changes.
Disadvantage

Easy to make but difficult to troubleshoot

Pareto is easy to make but it might provide no insight of the root cause. It
might show the causes but not the actual causes to the problems.

Multiple pareto chart may be needed

Pareto chart can show where the major problems are occurring. However,
one chart may not be enough. It might need more pareto chart in order to
trace out the problems and to get the best result.

Qualitative data versus Quantitative data

Pareto charts can only show qualitative data that can be observed. It
merely show the frequency of an attribute or measurement. Qualitative
data cannot be used to calculate the mean, the standard deviation or
other statistics needed. Therefore, pareto chart may show which problem
is the greatest, but it cannot be used to calculate how bad the problem is
or how far changes would bring a process back into specification.

Conclusion
Pareto analysis is a simple technique for prioritizing problem-solving work so that
the first piece of work you do resolved the greatest number of problems.