Inventory Management Using ERP System At PT.SALUYU MOTOR Bandung.
ABSTRACT
Untuk bersaing di pasar yang kompetitif, perusahaan dituntut untuk memberikan pelayanan yang lebih baik untuk pelanggan, karena itu perusahaan harus mempunyai sistem manajemen yang baik. Sistem manajemen suatu perusahaan biasanya terdiri dari manajemen pembelian, penjualan dan distribusi, keuangan, produksi, dan persediaan. Masalah yang paling sering muncul dalam perusahaan adalah masalah manajemen persediaan. Persediaan biasanya merupakan bagian terpenting dalam perusahaan dan mempengaruhi seluruh aspek bisnis perusahaan. Skripsi ini akan menerangkan bagaimana Enterprise Resource Planning (ERP) dapat membantu perusahaan dalam mengatasi masalah – masalah yang disebut diatas.
Dalam menulis skripsi ini, saya akan melakukan observasi pada salah satu perusahaan lokal yang telah berhasil mengimplementasikan ERP, yaitu PT SALUYU MOTOR. Untuk mendapatkan data-data yang mendukung untuk penulisan ini, saya menggunakan metode wawancara pada beberapa staff termasuk salah satu pemilik perusahaan dan juga metode perbandingan dengan membandingkan keadaan perusahaan sebelum dan sesudah mengimplementasi ERP.
Saya berharap skripsi ini dapat membantu perusahaan-perusahaan terutama perusahaan yang belum atau akan menggunakan system ERP untuk mengenal dan memahami konsep ERP dan belajar dari perusahaan yang telah berhasil mengimplementasikannya.
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TABLE OF CONTENT
Pages
APPROVAL PAGE ... i
ABSTRACT... ii
DECLARATION OF ORIGINALITY ... iii
PREFACE ……… iv
TABLE OF CONTENT ... v
I. INTRODUCTION 1.1. Background ... 1
1.2. Identification of Problems ... 5
1.3. Objectives ... 5
1.4. Limitations of Study ... 6
1.5. Layout of the Thesis ... 6 II. THEORETICAL REVIEW 2.1. Operation Management ……….. 8
2.2. Inventory Management ………9
2.3. Enterprise Resource Planning (ERP) ………. 11
2.4. Cost and Benefits of ERP ………. 14
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2.4.2. Cost of ERP ……… 16
III. CASE ANALYSIS 3.1. Company Profile ……… 17
3.2. Inventory System Problem (Before ERP) ……….. 19
3.3. Planning and Implementations of ERP ……….. 21
3.4. Inventory Management with ERP ………... 23
IV. CONCLUSION AND SUGGESTION 4.1. Conclusion ………...27
4.2. Suggestion ………...28
BIBLIOGRAPHY ………….………...29
APPENDICES ……….………...30
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CHAPTER 1
INTRODUCTION
1.1 Background
In today’s globalization era, companies have to compete with the competitive market, and thus they are required to give better service to the demanding market locally and internationally. In order to maintain and expand its market share, companies are required to give better services to their customers, deliver better quality products with lower cost. To do this, first of all, companies must have a good management system. With a good management system, companies will be able to work effectively and efficiently to provide a better customer service.
Maintaining a good management system is not easy. It requires integration in each department and discipline. A company management usually includes purchasing management, sales and distribution, financials, production, and inventory. One of the common management problems most companies face is managing inventory. “Inventory is a list of goods and materials, or those goods and materials themselves, held available in stock by a business.” (http://en.wikipedia.org/wiki/Inventory, 15/03/2007).
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To most companies such as retail industries, inventory is the backbone which affects the whole aspects of their business. For these companies, Inventory is their largest asset, therefore it must be properly managed. Good inventory management will reduce operating cost and time which leads to an increase in company’s cash flow. On the other hand, mismanagement of inventory may increase operation time and cost which will lead to declining cash flow and a loss in market share to competitors.
This inventory management problem was also faced by PT SALUYU Motor. PT SALUYU MOTOR BANDUNG is a local company located on Jalan Asia Afrika, Bandung, which focuses on distributing cars and spare parts. Established in 1974, PT SALUYU MOTOR BANDUNG started its business by importing cars from Australia. It now has four sister companies and five outlets spread in Bandung and is an authorized distributor of four automotive vendors, Mitsubishi (main dealer), Nissan (main dealer), Ford (main dealer), and Suzuki (sub dealer).
Based on the interview conducted in 2007, Mr. Satria, the managing director of PT SALUYU Motor, confirms that the company has been facing management problems. He admits that as the company grows, managing the company has become more and more difficult. “It was hard already with only one outlet, and now we have five outlets, and they are much harder to maintain,” he said.
Moreover, as the company’s early system was not integrated and computerized, it was impossible to create real time reports of the stock they had.
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With the old inventory system, they had difficulties in calculating their stock values. This had made them difficult to calculate their expenses and set the appropriate selling prices. The company’s 2003 annual reports alone said that they had lost almost 50 millions rupiahs from lost or broken inventory.
On the other hand, Mr Satria says that the company handles more than 100 orders per day. It means inaccurate inventory will make orders fall out. In papers, they run out of stock, but actually they have some stocks left. Bad inventory management also causes high level inventory which results in high maintenance cost, which will result in lower annual profits. For that reason, PT SALUYU MOTOR BANDUNG has been trying to fix those problems.
Problems stated above are what encouraged PT SALUYU MOTOR BANDUNG to turn to Enterprise Resource Planning (ERP). In early 2004, the company started implementing ERP and finished the project successfully in early 2005. And now, with ERP the company is able to perform better and faster. ERP has helped the company to increase their inventory accuracy from 20 percent to 90 percent. Moreover, it has also helped the company to cut operating time, reduced paper and data redundancy, increased customer satisfaction level, cut expenses and increased profits.
Moreover, Mr. Satria says that at first they consider ERP as a burden because it means adaptation to something new. But in the end, implementing ERP is all worth doing. ERP has helped them to work more effectively and efficiently. Managing the company has never been easier, according to Mr. Satria. For that reason, this paper will discuss how ERP has helped PT SALUYU
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MOTOR BANDUNG to fix their inventory management problems. But first it is important to understand the concept of ERP.
Whitten (2004: 33) describes ERP as a software application that fully integrates information systems that span most or all of the basic, core business functions (including transaction processing and management information for those business functions). ERP can also be described as
“an industry term for the broad set of activities supported by multi-module application software that helps a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources
aspects of a business “(http://searchsap.techtarget.com/sDefinition/0,290660,sid21_gci21394
6,00.html, 20/03/2007).
In short, ERP is a software application that can help business owners to manage their company more effectively and efficiently. In the early stage, ERP was designed to help manufacturing company manage their production. Later, ERP has been successfully implemented to various types of business from retail to service company.
Therefore, virtually, all organizations, large and small, may use ERP software to improve their businesses. A local system developer named Reynaldi who is experienced in ERP implementation says that, a successful implementation of ERP software will significantly reduce work time and operation cost, which results in increase of annual profit and better services to the customers. He also says that ERP organizes information in a centralized database and integrates most departments in the company. Therefore, business
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owners will have more control over their company, which will help them to make better business decisions.
In this case study I would like to observe the way PT SALUYU MOTOR BANDUNG manages their businesses, especially, their inventory before and after implementing ERP. I would also like to analyze the benefits PT SALUYU MOTOR BANDUNG has gained from the implementation of ERP.
1.2 Identification of the Problems
In this case study, I would discuss the problems listedbelow:
1. What inventory problems did PT SALUYU MOTOR BANDUNG have before implementing ERP?
2. How is implementingERP able to eliminate these problems?
3. What steps have the company taken in planning and implementing ERP successfully?
1.3 Objectives
My objectives in writing this case study are:
1. To collect information on problems that the company faced before implementing ERP.
2. Analyze and observe the way ERP eliminates these problems and improve the company's performance.
3. To collect information on what makes a successful ERP implementation. I hope this information may help companies to understand the steps they
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have to take before and after implementing ERP so that companies may experience full benefits of the implementation.
1.4 Limitation of Study
I would like to conduct research about PT SALUYU MOTOR BANDUNG management problems and analyze how ERP eliminates these problems mainly in the inventory sector. This thesis does not cover the following points:
• The technical aspect which are correlated with ERP technology, hardware, and software (for instance connection, database, data transfer and speed)
• The cost of ERP implementation (for instance consultant, software license and technical support)
• Other management problems outside Inventory.
• The company’s confidential information such as financial reports.
1.5 Layout of the Thesis
This thesis starts with the Abstract, a concise summary of the entire paper in Indonesian. This Abstract is followed by the Preface, in which acknowledgments are given to those contributing and involved in the work. After that is the Table of Contents and the Appendices followed by its four chapters
Chapter I : Introduction to the study.
Chapter II : Theoretical Review of basic theories or concepts related to the Case Study
Chapter III : Findings and Discussion of the study, including ways of
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collecting data, information or data gathered and discussion of important findings.
Chapter IV : Conclusion, in which major statements are made along with some suggestion or implication for further study is mentioned.
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CHAPTER 4
CONCLUSION & SUGGESTIONS
4.1 Conclusion
In this chapter I will present my conclusion. From the first chapter until the third chapter, we have seen some problems that PT SALUYU MOTOR BANDUNG has and how ERP is able to eliminate those problems. Based on the interviews and analysis that have been conducted, I have come to believe that ERP implementation is able improve the company management system, in this context is its inventory. The company significantly increases the accuracy of its inventory. By using ERP real time reports, the company is able to calculate how much time they need from the day customers make their orders until the time customers get their orders. This has increased on time deliveries. ERP is able to reduce cost and improve annual profits.
We have seen that PT SALUYU MOTOR BANDUNG has successfully implemented ERP, but we need to remember that not all ERP implementation turns to success. Based on my observation, I have drawn some key points of what makes ERP implementation in PT SALUYU MOTOR BANDUNG turn into success:
• Companies must commit to the projects, and willing to leave their old
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business process. Not many companies are willing to learn a new process.
• Good communication from the company with the ERP vendors.
I believe that if companies follow what PT SALUYU MOTOR BANDUNG has done to make the implementation worked out, it should worked out to most companies.
4.2 Suggestions
Most companies which are willing to go bigger should implement ERP. ERP helps a company’s management especially in the inventory management system. Not every ERP project turns into success, but a successful implementation will improve company’s performance. Therefore I suggest companies to consider implementing ERP because it has both sides of cost and benefits.
In the end, I hope all the information in this case study may help companies which have similar problems as PT SALUYU MOTOR BANDUNG in order to understand ERP and the benefits they may have from implementing it.
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BIBLIOGRAPHY
Books:
• Robbins and Barnwell. Organization Theory 4th Edition. Australia: Pearson Education Australia, 2002.
• Whitten, Bentley, and Dittman. System Analysis and Design. McGraw Hill, 2004
Internet Websites:
• BBC Website. <http://bbc.co.uk>
• EBZ Beratungszentrum Gmbh Website. <http://www.ebz-beratungszentrum.de>
• Find Articles Website. <http://findarticles.com>
• Linktionary On-line Dictionary. <http://www.linktionary.com>
• Marios Alexandrou Page. <http://www.mariosalexandrou.com>
• Michael Goldman Page. <http://www.michaelgoldman.com>
• SAP Technology. <hhtp://serachsap.techtarget.com>
• Wikipedia Online Encyclopedia. <http://www.wikipedia.org>
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owners will have more control over their company, which will help them to make better business decisions.
In this case study I would like to observe the way PT SALUYU MOTOR BANDUNG manages their businesses, especially, their inventory before and after implementing ERP. I would also like to analyze the benefits PT SALUYU MOTOR BANDUNG has gained from the implementation of ERP.
1.2 Identification of the Problems
In this case study, I would discuss the problems listedbelow:
1. What inventory problems did PT SALUYU MOTOR BANDUNG have before implementing ERP?
2. How is implementingERP able to eliminate these problems?
3. What steps have the company taken in planning and implementing ERP successfully?
1.3 Objectives
My objectives in writing this case study are:
1. To collect information on problems that the company faced before implementing ERP.
2. Analyze and observe the way ERP eliminates these problems and improve the company's performance.
3. To collect information on what makes a successful ERP implementation. I hope this information may help companies to understand the steps they
(2)
have to take before and after implementing ERP so that companies may experience full benefits of the implementation.
1.4 Limitation of Study
I would like to conduct research about PT SALUYU MOTOR BANDUNG management problems and analyze how ERP eliminates these problems mainly in the inventory sector. This thesis does not cover the following points:
• The technical aspect which are correlated with ERP technology, hardware, and software (for instance connection, database, data transfer and speed)
• The cost of ERP implementation (for instance consultant, software license and technical support)
• Other management problems outside Inventory.
• The company’s confidential information such as financial reports.
1.5 Layout of the Thesis
This thesis starts with the Abstract, a concise summary of the entire paper in Indonesian. This Abstract is followed by the Preface, in which acknowledgments are given to those contributing and involved in the work. After that is the Table of Contents and the Appendices followed by its four chapters
Chapter I : Introduction to the study.
Chapter II : Theoretical Review of basic theories or concepts related to the Case Study
Chapter III : Findings and Discussion of the study, including ways of
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collecting data, information or data gathered and discussion of important findings.
Chapter IV : Conclusion, in which major statements are made along with some suggestion or implication for further study is mentioned.
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CHAPTER 4
CONCLUSION & SUGGESTIONS
4.1 Conclusion
In this chapter I will present my conclusion. From the first chapter until the third chapter, we have seen some problems that PT SALUYU MOTOR BANDUNG has and how ERP is able to eliminate those problems. Based on the interviews and analysis that have been conducted, I have come to believe that ERP implementation is able improve the company management system, in this context is its inventory. The company significantly increases the accuracy of its inventory. By using ERP real time reports, the company is able to calculate how much time they need from the day customers make their orders until the time customers get their orders. This has increased on time deliveries. ERP is able to reduce cost and improve annual profits.
We have seen that PT SALUYU MOTOR BANDUNG has successfully implemented ERP, but we need to remember that not all ERP implementation turns to success. Based on my observation, I have drawn some key points of what makes ERP implementation in PT SALUYU MOTOR BANDUNG turn into success:
• Companies must commit to the projects, and willing to leave their old
(5)
business process. Not many companies are willing to learn a new process.
• Good communication from the company with the ERP vendors.
I believe that if companies follow what PT SALUYU MOTOR BANDUNG has done to make the implementation worked out, it should worked out to most companies.
4.2 Suggestions
Most companies which are willing to go bigger should implement ERP. ERP helps a company’s management especially in the inventory management system. Not every ERP project turns into success, but a successful implementation will improve company’s performance. Therefore I suggest companies to consider implementing ERP because it has both sides of cost and benefits.
In the end, I hope all the information in this case study may help companies which have similar problems as PT SALUYU MOTOR BANDUNG in order to understand ERP and the benefits they may have from implementing it.
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BIBLIOGRAPHY
Books:
• Robbins and Barnwell. Organization Theory 4th Edition. Australia: Pearson Education Australia, 2002.
• Whitten, Bentley, and Dittman. System Analysis and Design. McGraw Hill, 2004
Internet Websites:
• BBC Website. <http://bbc.co.uk>
• EBZ Beratungszentrum Gmbh Website. <http://www.ebz-beratungszentrum.de>
• Find Articles Website. <http://findarticles.com>
• Linktionary On-line Dictionary. <http://www.linktionary.com>
• Marios Alexandrou Page. <http://www.mariosalexandrou.com>
• Michael Goldman Page. <http://www.michaelgoldman.com>
• SAP Technology. <hhtp://serachsap.techtarget.com>
• Wikipedia Online Encyclopedia. <http://www.wikipedia.org>