IT alignment with business strategy of SME manufacturing Enterprise in the Middle

East

Dr. Adel Ghannam

Industrial Systems and Global Enterprise ,
No.1 ,bank misr street,town center, Cairo, Egypt
Tel: +2012 3109156,
Email: adel.ghannam@isg-egypt.com.eg
URL: www.isg-egypt.com.eg

Abstract: The paper presents a practical approach that has been used to develop the
functional specifications of ERP-ICT system for 48 manufacturing firms. The
concept as well as the methodology is given . A summary for these quantitative
results is also given . The methodology is valid for any enterprise system like EAM,
CRM, MES, SCM…etc.

Keywords: ICT ,Business Process , Enterprise system, Enterprise ICT , Align ICT,
Competitiveness, ICT in Business

1. Introduction
The ICT is a leverage for the business, only if it is aligned to the high-priority-added-value
business processes , problems and strategic objectives . Before developing the ICT
architecture , the questions are:

1. What are the problems facing the business , and what are the strategic (3-5 years)
business objectives .
2. What are the added value business processes, and what are their priorities for the
company, that will reduce the strategic-management gap.
3. What are the business functions that implement the identified business processes .
4. What will be the ICT ‘s system features of the defined business functions, to secure
reliable and scalable set of functional specifications

Starting with the above questions , is different from the conventional data-driven approach
which considers the Enterprise-ICT as a system to automate data transactions, which is not
enough to help acquiring new competitive business edges , which is a prime concern for
SMEs . Automating the data transactions should be considered as a by-product . The
Enterprise – ICT is a set of processes, functions, sub-functions and IT controls . The
traditional ICT-approach produces a set of specifications biased to specific vendors. This
traditional approach is a “Shopping list” perspective , not convenient for business
management systems.

This paper presents a practical structured methodology that has been applied in 48
manufacturing firms in Egypt , to answer the above questions. This work is part of a
project funded by the Egyptian –Industrial-Modernization-Center, over the period 2005-
2008. The scope of the project was identifying functional specifications of Enterprise-
Resources- Planning –ICT (ERP) systems to increase the companies’ competitiveness.
The scope involves the tasks of specification, procurement , and monitor the
implementation.

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 2. Methodology of Alignment
The alignment methodology is described with reference to the case of the
Enterprise-Resources-Planning systems. It can be, however, applied to any
enterprise system like EAM, CRM, SCM . Before going into the details of the
methodology, the conceptual boundary for answering the question “ what is the
strategic –management-gap “ is first described. This conceptual boundary is based
on the sequence defined by the concept of a Business-strategic –map as defined by
the Balanced Score card (Kaplan and Norton, The Balanced Scorecard: Translating
Strategy into Action, Harvard Business School Press, Boston ,1996). Strategy –map
can be described as a series of cause and effect relationships to provide a “line of
sight” from strategic to operational activity. The concept is illustrated in Fig.1

Fig.1-Strategic Map Concept

In our ERP-business alignment methodology we decided to focus first on the upper two
levels. These levels are those directly related to the ICT and can be defined globally at a
community level. The lower two levels are infrastructure components that will be handled
for each company, depending on its maturity level.

In what follows we describe the methodology using the same sequence of the above
questions

2.1 - What are the problems facing the business , and what are the strategic business
objectives?

Business cause –effect profile is developed in this step to correlate the problems to the
targets expected from the Enterprise-ICT application. To create a structure for the exercise,
we arrange the problems and targets in the form of a matrix. A typical partial sample for the
correlation-matrix , in the case of the ERP , is shown in table-1 .

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Table-1 A partial sample of the cause-effect analysis matrix for the ERP case

Initial Set of Identified Strategic Objectives

Problems

Improve total quality

Reduced Inventory

Reduced Obsolescence
service
Improved customer
productivity
Improved labor
costs

time

numbers

numbers
Reduced Purchase
Reduced Purchase

Reduced Overtime

Produce performance

Produce financial
Improve the product
Late delivery
Insufficient
commitment of
suppliers
Excessive overall
stocks & inaccurate
materials planning
Inaccurate material
planning

For each column the relevant impeding problems , from the first column of the predefined
problems , are identified through a cause -effect analysis . The weight of a problem is
calculated based on its contribution as an impeding factor for the objective

2.2 - What are the added value business processes, and what are their priorities for the
company?

The model used to guide our approach is shown in fig.2. It is consistent with the new
hierarchical Enterprise –ICT model specified by the ebXML standards [1] and given in
Fig.3.

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 Input Output
A Value added
ERP Process

Mapping/Roll up
Evaluation

LEVEL-1

Function

Sub Sub Sub

LEVEL-2 Function Function Function
Mapping/Rollup

Transaction Transaction
LEVEL-3

Module-A Module-M
LEVEL-4

Fig.2 - the structured model used to guide the development of the alignment specifications

EAI
© Copyright IONA Technologies 2002

Fig.3- The new Multilayer Integrated IT business Model

EAI= Enterprise Application integration

Reference Fig.2, the top level is the internationally recognized ERP standards processes
[2][3]. These processes are :
1- Business Planning
2- Master Production Schedule (MPS)
3- Material Requirements Planning (MRP)

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 4- Purchase Order Processing (POP)
5- Sales Order Processing (SOP)
6- Lot Tracing
7- Shop Floor Feedback
8- Product Quality Planning

The processes should be defined accurately in terms of its expected outputs , as shown in
table.2. Specially designed scorecards are then used to evaluate the priority of these
processes. Typical results are shown in the results section of this paper.

Table-2 The Definitions of Value added –Processes in ERP Systems

Business Planning The process of identifying the annual target sales volume and
roughly validate the resources capability (production capacity
,material ,labour ,cash)
MPS The process to generate the Master Production Schedule
MRP The process of material planning and management, to generate
planned work orders, planned purchase orders, and planned
customer deliveries.
POP The purchase order processing to control the delivery of raw
material
SOP The sales orders processing, to control the customers deliveries
Shop floor The process of generating feedback data from the shop floor to the
Feedback and control planning ,production ,sales ,purchasing and accounting entities
Lot The process of tracing the origin of the material used in the
Tracing manufacturing
Product The process of planning for product metrics, according to the
Quality planning process and generate plan for product quality check
Plan points loading
B2C The process of getting customer accessible to their orders
information through the Internet, and fulfil payment on the internet
B2B The process of performing the purchasing transaction on the
Internet and fulfil payment on the internet

2.3 - What are the business functions that implement the identified business processes ? and
,What will be the ICT ‘s system features of the defined business functions, to secure
reliable and scalable set of functional specifications?.

In any enterprise system ,the defined value-added-processes are usually implemented

through the interaction of different organization’s functions. To eliminate the effect of the
organization variable, intrinsic functions should be defined, irrespective of which
department is performing the function. These intrinsic functions are then arranged in a
matrix form with the processes as shown in table-3, for the case of the ERP system.

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 Table-3 The Operation Matrix

Functions Business MPS MRP POP SOP Product Shop floor Lot
Planning Quality feedback
Planning Tracing
Scheduling
Process Eng.
Maintenance
Production Control
Product design
Specs.Documents
Material control

Erection
Project Mgt.
Foreign Purch.
Warehousing
Local Purchasing
Cost centers
accounting
Financial
accounting
Product costing
HR
Sales
Marketing
Quality Control
Total quality
assurance

Each cell represents the role of the function in implementing the process.
Before developing the operation map two steps are needed:

1. Eventually function’s definitions should be established , as well as the features of

each functions ( the sub-functions in Fig.2 above) . In case of the ERP please refer
to [6]
2. We highly recommend using published Best-Practice standards . Identifying Best-
Practice standards will set a focus through the rule “ We spend our time doing the
work to reach the predefined target , rather than spending the time trying to identify
the target “. In many enterprise systems , there are know Best-Practice models
[1][2[[4][5].
The result of this step is:
1) A complete Process-Integration specifications mapped to the enterprise Functions. The
mapping of Functions to the Departments can then be easily identified for each
enterprise independently
2) Quantitative scorecards are filled during the exercise to identify the relative weight of
importance for the functions for the process

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 3. Results and Conclusions
The results of this approach are :
1. A full set of functional specifications that should be realized by the ICT system and
aligned to the strategic objectives
2. A full description of the Integration specifications for the value-added processes.
Integration is usually a prime target from applying Enterprise’s systems.
3. A full set of graphs that define the business priorities . A typical sample is given in
Figures 4,5,6,7.

The procurement phase is now concerned with :

1. What will be the transaction level specification, see Fig.2 above , that the system-
provider offer to satisfy the integration specifications , given at the business
processes : functions matrix.
2. Can the system provider secure the implementation that addresses the priorities
given in Figures 4,5,6,7.
It is worth to mention that the step “Identifying the value-added processes “ is a major
trigger to all successive steps. With the current availability of Best-Practice business
processes models, the methodology will improve the company’s competitiveness capability
to address the global market.
Gap weight to improve the integration of functions

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Pr n C nce
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at um n

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FUNCTIONS

Fig.4. Relative Weight of Improvement-Expectations from the ERP Impact on the

Functions

7
 35

30
Expectations from the ERP

25

20
Series1
15

10

0
Business MPS MRP POP SOP Product shop floor lot tracing B2B B2C
quality
Processes

Fig.5. Relative Weight of Expectations from the ERP Impact on the Processes

250

200
Relative importance weight

150

Series1

100

50

0
lity or
y ce ice ity ts e e rs rs ty
ua nt en rv c tiv c os rtim tim be be u ali
q e c e e e m m
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d
fo Fi he
Im u e e c u er e T
d ov ov du d p c e
Re pr pr Re Re e du ov
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Targets

Fig.6-The Importance Weights of the Next 3 years target objectives

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 120

100

80

60 S eri es 1

40

20

Fig.7- the percentage capability of the ERP to solve the beneficiary problems

References
[1] www.ebXML.org

[2] www.apics.org

[3] www.isg-egypt.com.eg

[4] www.Rosettanet.org

[5]www.openapplications.org

[6] http://www.isg-egypt.com.eg/Functions%20dictionaryrelease.htm