Functional evaluation of enterprise information systems in co-operatives

Transcription

1 Functional evaluation of enterprise information systems in co-operatives Miklós Herdon a, and Tünde Rózsa b a University of Debrecen, Hungary, herdon@agr.unideb.hu b University of Debrecen, Hungary, rozsa@thor.agr.unideb.hu Abstract The new types of co-operatives give 21% of the Hungarian fruit and vegetable production. These cooperatives get more financial support and work more efficiently in marketing, logistics, production planning and controlling, bookkeeping and information services. For these tasks they need correct information in any time and anywhere. The best solution can be an integrated information system, an ERP system. The tendency is that these types of organisation introduce ERP system successfully. It can give a flexible solution, enabling us to meet and exceed our business requirements. We can apply an RFID solution, customer relationship management (CRM) system, Demand Driven Supply Network (DDSN) solution, or a financial management solution. The enterprise that wants to find its own way and wants to choose a suitable system on the ravelled market of software supply is in a difficult position. The first step of choice is to select a software product which can meet the current information claims. This involves the business management and processes in the ventures, which is the functional correspondence of the offered system. We are doing research for developing the rural SMEs and human resources. One part of our research work is to get information about the current situation and trend. Our survey consists of different question groups such as, information infrastructure, the organisation, the applied information system and its functionality, the applied selection methods of ERP and future development plan. Key words: information system, co-operatives, ERP, agro-logistic process, informatics support, 1 Introduction The farmers have problems in connection with marketing, sale and logistics in the agriculture sector. This task can t be sold individually that is why they establish new producer and trader co-operatives. This type of organisation can give chance to solve their task more economically and efficiently. The number of organizations promoting the marketing of locally produced, special agricultural and food-industry goods is small, their networks call for development. A similar situation can be seen in the field of services integrating market information and the production potentials of any given region. It is a result of the existing peculiarities of the agricultural sector that in the regions the several stakeholders involved in the material flow (SMEs, large companies and private entrepreneurs) are situated so scattered in space, in many cases they have hardly any contacts with each other, and thus are forced to operate with low levels of organizational cohesion. By linking up production, processing, warehousing and forwarding, agrilogistic have exercise positive influences on the establishment and operation of producer organizations (Procurement and Sales Partnerships, Production and Sales Partnerships, producer groups). Logistic solutions related to the handling of agricultural bulk products serve the quality-preserving storing of vegetable and fruit commodity funds, the moderation of the impacts of seasonality, the improvement of the safety of marketability, and thus in general the strengthening of competitiveness. Weaknesses of the logistics of the Hungarian agricultural sector: Transport infrastructure, warehousing and transportation capacities that can be operated economically even for special commodities, in the long run, and lack of proper, specialized means of transport.

2 2 Vertical integration, partnerships and co-operation of producers A fundamental factor of the competitiveness of agrarian economy is, to what extent it is capable of meeting the fast changing consumer requirements and the wide-ranging social expectations. The operation of processing integration systems is an efficient tool of improving the market situation. There are already a few established integrations, which may become competitive, in the field of winemaking, grape processing, feed production and the processing of honey. In addition to the Partnerships of Production and Sales (TÉSZ) representing 12% of the horticultural production output, the majority of sector production is provided by producers outside of the integration with weak bargaining position on the market, changing product quality and technologies requiring modernisation. A further enhancement of the role of processing integration is required also in the vegetable-fruit sector. Despite the strengthening of producer partnerships over the recent years, one of the greatest problems of the Hungarian food economy is a low level of organisation (weak market position) between the farmers, the lack of harmonised relationships between farmers, processors and merchants. Granting support to producer groups is also justified because the rate of organisation of the Hungarian farmers is low, compared to the relative EU figures. By the end of 2006 about 200 producer groups with state recognition, and a membership of about 12,000 to 15,000 will be established in Hungary. Further some 650 Procurement and Sales Partnerships (BÉSZ) will have been established in Hungary. The partnerships integrating forest owners get organised very slowly, therefore, they integrate forest operations in a relatively small area. TÉSZ partnerships provide only 12% of the output of the horticultural sector. The level of organisation and therefore the bargaining positions of the producers accounting for the vast majority of the production in the sector are rather poor (New Hungary Rural Development Programme , 2007). 3 Economic processes of co-operatives We can identify the following processes in TÉSZ (Co-operative):: Main processes Supply process Storing processes Production processes Sales processes Other complementary processes Financial Accounting The processes have close relation to each other (Figure 1). The transformation doesn t require long time, because it consists of wrapping up, repacking or sorting. The storage task is more complex. This feature comes from those facts that these co-operatives deal with different products which require different storing conditions. Supply Storage Processing Storage Sale Accounting, finance, controlling Figure 1: Economic processes relationship The ideal flow depends on the infrastructure facilities of the organisation. These co-operatives are usually very small, but some of them were growing in the past. In these cases the organisations had to expand their infrastructure. This means that they had to re-engineer their business processes. At the examined co-operative the situation is very similar. The organisation reached a size where strong informatics support necessary is for managing the business processes. The co-operative selected a costumer ordering based ERP system. These systems have to support e-commerce, CRM functions (Herdon at al., 2006)and in technologically the mobile solutions will be spread (Szilagyi and Herdon, 2006).

3 4 Survey on ERP functionality Our Department started a survey in 2006, which studies the usage of ERP in Small and Medium Size companies including co-operatives and other enterprises in the agri-food sector. Our main questions deal with the size of enterprise, the functions of used ERP, the selection criteria s, economic evaluation (Total Cost Ownership, Return of Investment, etc.), usability and most important modules (functions) (Rózsa and Salga, 2006). We are studying the advantages and disadvantages of the used ERPs (Botta-Genoulaz and Millet, 2005; Mertins and Jochem, 2005). We sent our questionnaires for 500 potential SMEs and we received 10% of our questionnaires back. 68% of these companies used Hungarian Developed system. The other part of this set is using international solution (SAP, Navision, ). One part of our survey is to exam the decision process, what are the key factors in decision of ERP selection. In the selection process the most important factor was the system functionality (60%), and the second factor was the user friendly feature (42%). The third factors was the price (21%). The offers have great importance in the decision phase. The system functionality has a strong relation to the system modules. The most frequently used modules are sales, stock management, finance and accounting. The Figure 2 shows the modules priorities of companies. Other applications Business Intelligence Marketing Accounting 60% 50% 40% 30% 20% 10% 0% Finance Investment instruments Human management Sales Production management Customer management Stock management Manufacture planning High priority Figure 2: Priority of ERP modules The year 2007 marks the beginning of the European Union s new seven year budgetary cycle, and with its new development plans and programmes it provides opportunities for ERP customers and partners to receive support and funding for new IT applications. For the four Central European countries, namely Poland, Hungary, Slovakia and the Czech Republic (alias the CE4 Market Unit in SAP terminology), EU funding is a way to attain double digit growth in the SME market to help us achieve our 2010 aspirations, said Magyari (2007), responsible for the EU programme at SAP Hungary. Central Europe (CE) is not an emerging market anymore, rather shows the symptoms of a mature marketplace; most of the top 200 companies in Hungary for example are already using SAP solutions. So an extra expansion force is important particularly for the SME market which SAP is targeting. The CE countries are currently the main beneficiaries of European Union s so called structural policy as the

4 respective Ministries of Economy position non-refundable grants in the SME segment to vitalize the local economies and boost competitiveness. 5 The studied ERP system used by farm co-operatives 5.1 The Infor:com At the Mórakert co-operative the selection was based on a tender and the selected system is the Infor.Com which gives support for the co-operative on two main domains. One is the production management (infor.com) and the other is the finance. The Infor offers its Customer-First Product Strategy- a comprehensive approach to delivering value to customers based on the three key objectives: enriching customers investments, extending the value of the Infor solutions, and evolving through innovation to produce next-generation value. The Infor solutions are designed to help our customers manage the end-to-end business processes that are critical to their success, and to enable rapid response to changing business drivers by delivering solutions on an open service-oriented architecture. Infor Open SOA enables businesses to derive SOA benefit without complexity. It can play a major role in helping companies of all sizes become more competitive. The main data and processes in the Infor.com can be seen on the. This co-operative is a very innovative organisation. It was established based on Danish and German models and they take part in more Hungarian and international projects. The co-operative gives experimental field for Living Lab works in the C@R FP6 project (Bilicki at al., 2007). 5.2 The Microsoft Dynamics add-on for co-operatives Microsoft Dynamics is the MS product family for Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) related solutions. These systems support small, medium and large organizations to automate their administrative tasks, improve their productivity and enable their business growth. The Microsoft Dynamics offers companies a complete solution to optimize their strategic business processes across financial management, analytics, human resource management, project management, customer relationship management, field service, supply chain management, e-commerce and manufacturing. The food industry is demand-driven with intense pressures to deliver the highest quality products and quickly (Kellea and Akbulutb, 2005). Industry standards are becoming sticker and consumers are more informed and critical than ever before. The Dynamics solution helps companies to handle in an easy way the HAACP compliance, lot tracking, correct cost calculation, proper inventory management and most important - reliable reports - both management and statutory. Microsoft Dynamics solutions offer a set of strong applications that deliver a powerful suite of technologies for food manufacturers. The Agricultural Logistics Institute developed an industry solution for vegetable and fruit products (agricultural field products). The logistic network (product chain) can be seen on Figure 3. This chain is multilayer system that can be managed by central organisation which can be a co-operative which integrates the farms and producers for joint sale. The ALIR system is the Microsoft Dynamics Nav system add-on solution, which manages the business process of Co-operative integrated mode (Figure 4). The ALIR (Agri-Logistic Integrated System) based on 3 main piers: Co-operative structure Co-operative based integration Flexible respond for market demands. The ALIR can give efficient solution for the following processes: Supply Sale Stocking.

5 Figure 3: Network structure for product chains The ALIR planned implementation places are the following: o Délalföldi Kertészek Szövetkezete o Délfruct Szövetkezet o HAVITA Tész o Kiskunsági Tész o Nyír-Kert Tész Figure 4: The business processes

6 7 Consequences According to our survey the most Co-operatives haven t used ERP system yet. The most used systems are used for book-keeping. But based on our experience of other sectors (for example in trade sector) the ERP solutions are expected to spread. In the future the ERP systems made for SMEs will be important resource (Schimitzek, 2004). That is why this systems are used in our education programmes. The agricultural informatics students have an ERP subject. In this subject based on their earlier studies (operating system, networking, database system, software development, information system development, etc) they work with ERP systems such as SAP and Infor:com. 8 References Bilicki, B., Kállai, T., Kasza, M Wireless mesh network for rural communities. Wireless mesh network for rural communities. International Conference on Agricultural Economics. Rural Development and Informatics. Conference proceedings. Botta-Genoulaz, V., Millet, P.-A A classification for better use of ERP systems Computers in Industry 56, pp Herdon, M., Fuzesi, I Quality control and product tracing in ERP systems, Computers in Agriculture and Natural Resources, Proceedings of the 4th World Congress, Orlando Florida. pp Herdon, M., Zimányi, K., Péntek, A e-factors in e-agribusiness. Information Systems in Agriculture and Forestry XII. European Conference. 16th and 17th May 2006 Prague, Conference Proceedings. pp Mertins, K., Jochem, R Architectures, methods and tools for enterprise engineering. International Journal of Production Economics 98 Elsevir, pp Magyari, D EU Funding available for SME customers in CE region. last accessed April New Hungary Rural Development Programme Hungarian Ministry of Agriculture and Rural Development. 19. February last accessed April Kellea, P., Akbulutb, A The role of ERP tools in supply chain information sharing, cooperation, and cost optimization. International Journal of Production Economics , pp Rózsa, T., Salga, P Evaluating of SME s ERP in agriculture and rural areas by different multi-factored procedures. XII. European Conference Information Systems in Agriculture and Forestry on Through scientific development to prosperity 16th and 17th May 2006 Prague. Schimitzek, P The efficient Enterprise. Increased Corporate Success with Industry-Specific Information Technology and Knowledge Management. St. Lucie Press, Boca Raton Florida. Szilagyi, R., Herdon, M Impact factors for mobile internet applications in the agri-food sectors, 4th World Congress On Computers In Agriculture, Orlando, July. Proceedings. Published by American Society of Agricultural and Biological Engineers. pp