The way MRP works in UAE enterprises
MRP is usually associated with the management while it is more applicable to resources and manufacturing rather than to areas of business that deal with providing services. In this respect, it is necessary to analyse the integration of MRP system in the United Arab Emirates enterprises such as UAE Enterprises, the company that deals with constructions materials (UAE Enterprises n. p., home). For instance, Newlands and Hooper suggest a definition of the MRP system as a computer-based program used by suppliers and manufacturers who have “mature and reliable” supply in terms go the manufacturing of products, delivery of products to customers on different levels, and management of resources with regard to the availability of those for effective operation of the company (152). So, every company
That deals with manufacturing and/or delivery of the products should implement the MRP system for more effective operation to ensure that all resources are properly managed.
Purchasing and manufacturing are integral parts of the companies that operate in the area of deliveries and trading. For instance, the company UAE Enterprises is one of the leading ones in the industry of construction materials and trading. One of the key activities of this company includes “Import of building material, from original manufacturers and suppliers across the globe” (UAE Enterprises n. p., services) it should use the MRP to ensure that all materials are available at the moment because this operation cannot be performed in hand.
Consequently, management of resources is fulfilled through a software-based program that counts and arranges deliveries and makes sure every customer receives the materials in a timely manner. The more the company is eager to contribute to the effective operation of the databases and data storages, the more it can benefit from updates made in time and being one of the main competitive advantages of companies that operate in the area of delivery and trading.
As soon as the company implements the MRP system into operation, it can succeed in all activities that require data collection and data management. One of the reasons of the system’s success is that it operates with a free access to its databases and has a free access to all storages of information in the company. It is of high importance for the company UAE Enterprises located in the United Arab Emirates because its operation is performed on the international level and products are delivered as well as services provided. Besides, another key activity of the company under analysis includes “Logistics and warehousing of all material procured” (UAE Enterprises n. p., services).
So, “Logistics should be seen as an advantage that no other competitor has access to and should constantly be improved and updated” (Qudrat-Ullah 8). Management of resources with the help of the software-based program enables the company to arrange everything with regard to the changes in pricing, demand and supply expectations and planning, and other aspects that seem to be challenging.
Finished products and delivery should be closely connected in terms of the company’s operation in the UAE market with regard to the international trading and delivery and rivals that can become more successful in the same market while using the MRP system. If a company does not have an MRP system implemented in its databases, it should fulfil updates in hand every time some delays occur. So, implementation of MRP system is highly beneficial for the company UAE Enterprises. Besides, it is possible to see the way the MRP works in an enterprise in the United Arab Emirates on the example of this company because it deals in the area of delivery and trading of the construction materials.
As the company can successfully implement the MRP system to perform all its usual functions without delays and making the range of products more varied, it should apply the automation of the whole system of information databases to ensure that all products are available and can be delivered in different places because the company is involved into “Distributing the material to local contractors, wholesalers and end-users… [and] re-export of material to GCC, neighbouring countries and East Africa” (UAE Enterprises n. p., services).
The company UAE Enterprises is a representative of the international market and should take into account the tendencies in the business of construction materials, delivery, and trading. In other words, outsourcing is one of the most appropriate strategies that can be used by this company to make the operation of the MRP system more effective because it can make agreements with other companies that deal in the same business in other countries and operate effectively with the help of the MRP system. As Qudrat-Ullah indicated benefits and disadvantages of outsourcing (4), it is possible to use outsourcing without experiencing difficulties in arrangement of deliveries and storage of materials in different warehouses. In other words, though there are some challenges for implementation of the MRP system into operation in the UAE market, it is necessary to weigh up all pros and cons to make adequate decision.
Challenges of implementation in the local business context
Having considered the problem of how MRP works in the U.A.E. Enterprises, it is possible to state the challenges the company faces in implementing MRP. MRP is “a set of techniques which uses bill of materials data, inventory data and the Master Production Schedule (MPS) to calculate requirements for materials” (Bell 89). Being a supplier of building and construction materials, U.A.E. Enterprises needs MRP system as an advisor for releasing replenishment orders for material (Bell 89). Still, being a convenient system for the company, it, still, has some challenges which may cause a number of problems for the company.
Getting down to the discussion of the challenges the company may face, it is possible to note that “uncertain product demand, highly diversified inventory, strict product pricing, and intricate supplier selection in managing their supply chain” (Qudrat-Ullah 2) are the main ones. The main idea of MRP is to create the stock of the materials in the warehouses. This may cause a problem of uncertain product demand, as MRP system is unresponsive to the short term change in the demand at the market. The company should try to minimize the stock of products in the warehouses to eliminate the problem of lying too long with finding no market.
Highly diversified inventory may be a problem as tastes differ and some people may have problems with the choice of goods offered by the U.A.E. Enterprises. Offering mostly wooden products, the company does not have a wide range of products for choice in the warehouses. Furthermore, having small rooms for stock the companies want to limit the desire to replenish the warehouses and reduce the stock. At the same time, it is a challenge to overcome in the relation to small range of products (Qudrat-Ullah 3). The problem of warehousing in advance creates the problem of strict product pricing. Having bought the materials at a set price, the company is unable to sell those cheaper. Unstable economics in the world with constantly changing prices and rate of exchange ay create a number of problems for the U.A.E. Enterprises in case of price abatement.
Having an “intricate supplier selection in managing their supply chain” (Qudrat-Ullah 2), the enterprise works not only with the local manufacturers, wholesalers and end-users, but also with neighboring countries and even South Africa. The logistics chain is rather complicated that may cause huge problems in case the mistake takes place. Moreover, the company not only imports the building materials from original companies-manufacturers, but also buys those from the suppliers across the whole world. The problems on the customs and other transportation difficulties may cause the problems with the delivery what may lead to the deficit of some specific products and the problems in the supply chain.
There are more challenges the company faces in the relation of using MRP system. Significant amount of computation and data preprocessing leads to the increase of the experiences staff that leads to the increase of the stages the company has to accomplish before the order is delivered to the final destination. Moreover, the project management should work better as the risk of making a mistake in calculations increases. As it has been mentioned above, the company tries to reduce the stock of the products and to make it rational. This leads to the increase of the costs on the transportation and logistics in the whole. All these hazards and challenges the company faces make it possible to conclude that the MRP system should be connected with the project management to increase the company profitability and income.
There are not many companies in UAE which deal with the same problem, so it is possible to plan the demand and prices, even though that here are a number of hazards. Thus, the problem is connected with the project management. There are a lot of definitions of the product management. Focusing on one of them, it is possible to say that project management “has evolve to plan, coordinate and control the complex and diverse activities of modern industrial, commercial and management change and IT projects” (Lock 1). Having a purpose to predict the possible problems which may exist in the company, the project management should be connected with MRP system as the system which aims at “calculating requirements for materials” (Bell 89) which should be stored. These two systems may limit the number of possible problems if to organize the working process accordingly.
The main idea of the project management presupposes an attentive research in the sphere of demand in order to make the stock of the products in the company warehouses effective. Project management should consider the problem of balancing the demand and supply in the company warehouses to increase the customers in the company and make it more competitive. The competition in the sphere of the building and construction materials in the UAE is not high, and U.A.E. Enterprises wins by its strategy of pushing management.
Integration of the ERP system in the UAE
In today’s globalized world, there are many company are inclined to use Enterprise Resource Planning (ERP) system, a popular, software-based tool for increasing company’s performance and productivity, which specifically concerns good and services enterprises in UAE. It is worth saying that this software system provides successful functionality for more than two systems. Therefore, the leading company in Arab Emirates as UAE Enterprises, a company specializing in trading, building, and constructing materials (UAE Enterprises). Due to the fact that the Companies’ primary services include import and export activities, warehousing materials, and distribution of the materials to wholesalers, the introduction of ERP system has considerable contributed to a more successful performance of the above-presented operations.
ERP system integrates all information in a common database where it is connected with the existing data sources by means of staging table. Plant floor systems supply the pertinent information to the database and, in its turn, ERP system removes this data from the table (Glenn 53). Therefore, the major advantage of using common databases is that ERP users should be necessarily knowledgeable in the process of data accumulation, because all information is automatically sorted out (Glenn 54).
Using ERP systems, the company is aware of all benefits of this software. In particular, it provides an integrated solution to its information database system needs. The program also allows people to handle all operations in the company and integrate them into the entire business process. The created possibility widens a wide-enterprise view on important corporate data. Therefore, utilizing ERP software, UAE Enterprises cannot only gain a competitive advantage, but also provide better database administration and operation.
ERP software provides UAE Enterprises with a number of integrated applications that regulate such functions as accounting, project management, production, controlling, Human Resource (HR), materials management, distributions, and sales. All these applications are connected to an integrated database allowing to share data. A closer examination of ERP functions, the company has introduced the improvement in the sphere of knowledge management, database management, IT management, and online communication (Ibrahim n. p.).
To begin with the program allow the company members to have a common access to the data because the main function of ERP system implies the presence of a set of information about all business operations within the company. Second, the software permits to get the standardized definitions of all processed taking place within the company. Third, the company operations has become more efficient due to the flexibility of ERP that enables the company members to look for information via company’s various databases. Finally, ERP system also allows to encourage online communication beyond the organization’s boundaries.
It should be stressed that ERP integration into UAE market has contributed to the internalization of the company that have gained a strong competitive advantage and valuable experience because ERP has allow the company to adjust to the oncoming changes in a today’s rapidly developed society. In addition, the implementation of ERP solutions is a necessary condition for entering the international market.
As it has been mentioned previously, ERP system is in high demand among the agents of UAE market. In this regard, the company has implemented a full package of ERP modules to be able to regulate all departments and operations within the company. Due to the fact, that company’s functions involve a set of tasks that cannot be fulfilled without this software. In this regard, the company has received many benefits. Among them are:
- Production advancement and optimization;
- Faster and more efficient reporting on finance and accounting;
- Better control of the working team;
- Gaining valuable experience through the ERP implementation.
Indeed, ERP system solutions assist managers in better managing raw materials, warehousing, inventory and order processing, which results in faster production, lower costs and high competitiveness. The company’s management team is able to provide consolidated report on key performances and annual costs and revenues, which provides greater transparency of all financial operations. In addition, ERP system allows each member of the company to keep abreast of slightest changes occurred within the organization to be able to react to those changes. Finally, the ERP implementation provides more flexibility to the production process.
ERP implementation can also valuable in supply chain management that relates to distribution network, which includes location of supplies, warehouses, distribution channels and customers. Due to the fact that material planning is the leading factor, ERP system enables managers to forecast delivery terms and various contingencies that might occur.
In conclusion, ERP system is considered to be a very efficient software tool in the company’s operations, particularly in the sphere of supply chain management. It allows UAE Enterprises to sustain a vigorous competition and conform to the international standards. Besides, it also contributes to the optimization of small business operations both inside and outside the company. Nevertheless, this program meets a number of challenges and difficulties that need to be overcome to continue the UAE market. These obstacles should be carefully tackled to avoid misconceptions in future.
Challenges of implementation of the ERP in the UAE
The UAE companies, which try to implement an ERP application, may encounter several challenges; one of them is the necessity to customize this system so that it could better suit the structure of the organization (Krosrow-Pour 672). The thing is that it is very difficult to purchase a turnkey ERP solution that would be able to correspond to the company’s supply chain, manufacturing process, document management and so forth. Thus, in many cases, it is necessary to rewrite parts of the program code so that the program could better suit the needs of the organization. Overall, customization is both expensive and time-consuming. In fact, lack of time can force the management to believe that it is better to buy separate ready-made programs, though usually they cannot surpass a well-developed ERP system.
Furthermore, if some UAE company intends to introduce an ERP system, this enterprise may have to use new equipment since ERP system usually rather high performance requirements (Hamilton 46). Very often such enterprises have to buy new network equipment for servers, and for many of them these expenses can be unaffordable. The problem is that the existing technologies may not be consistent with the new software application, and they may be rendered useless, when the company introduces a new ERP system.
Another reason why many UAE enterprises are struggling with the implementation of an ERP application is security problems. As a rule, they are not able to develop such a system on their own, and they have to use the services of external IT developers. The involvement of the third parties can pose a great threat to the confidential information of this company, for example, bank accounts, financial documentation, some trade secrets, etc.
Many UAE enterprises are very concerned about the safety of their confidential information, and they decide against the adoption of ERP since there is a risk that an outsider or any other unwanted person can get access to the information about the clients of this enterprise, its production methods, and its financial transactions. Due to these factors, many local businesses prefer to acquire a separate programs rather than an ERP system, even the despite the fact that ERP is much more effective. The management of UAE enterprises should remember that this task cannot be done without extensive research that would include employee and customer surveys, the analysis of case studies, and numerous testing procedures.
ERP system is crucial for the effective project management in the organization. Yet, many companies, located in the United Arab Emirates, find it difficult to adopt this application because they need to migrate data to the system. In particular, they need to transfer information about the suppliers, budgeting estimations, performance units, and so forth. Additionally, one should bear in mind that various departments of the company may use different project management techniques such as event chain methodology, PRINCE2 (Projects in Controlled Environments), process-based management etc.
The new ERP application must be compatible with each of these techniques. In turn, this creates extra difficulties for the developers of this system. The employees of these departments have already got accustomed to some project management programs, and they may be reluctant to accept a new one. There is great variety of project management software, allowing the management to work out schedules, estimate costs, create diagrams, and share information with one another. In theory, the new ERP system should be able to substitute them and perform their functions. Yet, one would have to spend at least half a year to develop such a system. The employees in many UAE companies find it increasingly difficult to switch from one software solution to another.
Under some circumstances, an ERP system cannot be implemented because many employees resist this change. Some of the employees may not be able to use this system, and the company has to spend a considerable amount of money on employee training (Grabot, Mayere, and Bazet 195). On the whole, the adoption of ERP inevitably entails dramatic organizational changes, usually as merges of different departments. Such members of the personnel resist such changes. It is possible to argue that the difficulties, met by many UAE companies are connected not only technologies, but also with people’s attitudes.
This discussion shows that the design and implementation of an ERP system requires much time and effort. At first, it is vital to outline the IT needs of the company and determine if an ERP application is the only solution. Secondly, the company will have to find a reliable vendor or the company would undertake that would develop the system, and this may pose some difficulties since they are few local firms specializing in the development of ERP systems. Secondly, the management will have to make sure that the employees are ready for this innovation, by providing on-the-job training to them. In the majority of cases, the adoption of ERP does not yield the expected results only because the management did not pay much attention to its design.
Bell, Steve. Lean Enterprise Systems: Using IT for Continuous Improvement. New York: John Wiley and Sons, 2006. Print.
Glenn, Godfrey. ERP 100 Success Secrets: Enterprise Resource Planning 100 Success Secrets – 100 Most Asked Questions: The Missing ERP Software, Systems, Solutions, Applications, and Implementations Guide. US: Lulu.com, 2008. Print.
Grabot, Bernard, Anne Mayere, and Isabelle Bazet. ERP Systems and Organizational Change: A Socio-Technical Insight. NY: Springer, 2008. Print.
Hamilton, Scott. Maximizing Your ERP System: A Practical Guide for Managers. NY: McGraw-Hill Professional, 2003. Print.
Ibrahim, Almahdi M. S. What Organizations Should Know about Enterprise Resource Planning (ERP) System. European, Mediterranean and Middle Eastern Conference on Information Systems 2010. 2010. Print.
Krosrow-Pour, Mehdi. Emerging Trends and Challenges in Information Technology Management. London: Idea Group Inc. 2006. Print.
Lock, Dennis. Project Management. Farnham: Gower Publishing, Ltd., 2007. Print.
Newlands, David J., and Mark J. Hooper (Eds.). The Global Business Handbook: The Eight Dimensions of International Management. Farnham: Gower Publishing, Ltd., 2009. Print.
Qudrat-Ullah, Hassan. Outsourcing Logistics for Profitability: The Case of Apparel and Clothing Industry. EMCIS2010 12-13 April (2009): 1-11. Print.
UAE Enterprises. Official Website. 2008. Web.