Manufacturing Management Experts Gather at UA to Discuss Future of Enterprise Resource Planning

  • April 4th, 2000

TUSCALOOSA, Ala. ‚ Manufacturing management experts from across the country will gather at The University of Alabama April 6 and 7 to take part in a major conference called “ERP 2000: Manufacturing and the Supply Chain.”

The conference is sponsored by the National Science Foundation, the Manufacturing IT Center of the Alabama Institute for Manufacturing Excellence at UA, the Center for Operations and Technology Management of the University of California at Los Angeles and the Virtual Factory Laboratory of the Georgia Institute of Technology.

“This is the first time this conference has been held,” said Dr. Mark L. Spearman, University Chair of Manufacturing Management at the Culverhouse College of Commerce and Business Administration at UA. “This is a major step in enterprise resource planning, or ERP. For most of this decade, ERP has been one of the hottest areas of business software. But the Internet and its many applications are causing business leaders to take a second look at ERP, which has essentially been used as a way to tie a company’s operational parts together. The major players in ERP ‚ SAP, Oracle, BAAN and Peoplesoft — have become huge software success stories, but the Internet has made ERP software accessible to almost everyone at much lower cost.”

Spearman said the conference would address a number of issues involving ERP. They include:

Integrating material and capacity planning
The effect of supply chain structures
Integrating web-based ERP with central data warehouses
Cross-functional integration with marketing and finance
Scalability issues
Lead-time and inventory reduction
Remanufacturing and process industry ERP

The two-day conference will take place at the Culverhouse College of Commerce and Business Administration.. The first day will involve presentations followed by brainstorming sessions to define the issues. The second day will be used to set a research agenda for the next several years. Next year’s conference will be held at UCLA. The results of the conference will be published in a special issue of “Production and Operations Management.”

Spearman said that while the potential of the Internet was being proven, Enterprise Resources Planning software was taking industry by storm. “ERP is the continuation of the development of computer software for managing operations that began in the 1960s with Manufacturing Requirements Planning (MRP). MRP represented a very simple model that could perform elementary inventory planning functions but which is not suited to a capacitated manufacturing environment. Consequently, several generations of computer-aided production planning have followed. These included Manufacturing Resources Planning (MRP II), Closed-Loop MRP, Business Resources Planning (BRP) and, most recently, Enterprise Resources Planning (ERP),” he said.

Spearman said ERP systems are huge, costing hundreds of millions of dollars and taking years to implement. “Recently they have become so complex that corporations have been willing to modify their business practices to fit the software in order to speed installation. While ERP has seen some success, the overall picture has been disappointing,” he said.

“A recent survey of 63 companies revealed a return on investment of a negative $1.5 million. There are two reasons for this. One, ERP performs basic logistical functions using exactly the same logic of the MRP of the 1960s. While simple processing was required given the computing resources of the 1960s, it is inexcusable today. Instead of re-engineering the entire paradigm, ERP vendors have provided multiple add-ons in the form of what are called “Advanced Planning Systems,” he said.

“Secondly, the ERP systems are based on monolithic, database-centric architectures where the database models have become extremely complex to accommodate diverse uses of data in an enterprise-wide system. This architecture becomes a barrier as the ERP vendors attempt to “componentize” their systems and scale and distribute them across the World Wide Web. Worse, there are no fundamental principles for enterprise control that guide the vendors in where to break the system into components that can integrate as a seamless whole.”

Nonetheless, Spearman said, the growth of ERP sales indicates the degree of its acceptance. His research shows that in 1989, total sales for MRP II at $1.2 billion accounted for just under one third of the total software sales in the United States. Worldwide sales for just the top 10 vendors of ERP were at $2.8 billion in 1995, $4.2 billion in 1996, and $5.8 billion in 1997. One company, SAP, alone sold more than $3.2 billion in ERP software in 1997.

The UA business school, founded in 1919, has been recognized repeatedly during the 1990s for offering a high-quality, cost-effective education. Its undergraduate school is ranked 45th by U.S. News and World Report, the MBA program is ranked 21st by Forbes for return on investment among regional universities and the Techno-MBA program is ranked 4th by ComputerWorld.

Contact

Bill Gerdes, UA Business Writer, 205/348-8318

The University of Alabama, part of The University of Alabama System, is the state’s flagship university. UA shapes a better world through its teaching, research and service. With a global reputation for excellence, UA provides an inclusive, forward-thinking environment and nearly 200 degree programs on a beautiful, student-centered campus. A leader in cutting-edge research, UA advances discovery, creative inquiry and knowledge through more than 30 research centers. As the state’s largest higher education institution, UA drives economic growth in Alabama and beyond.