Erp System Case

Now using this wonderful concept of complex linkage how can we gain more profits by reducing purchase cost taking information from ERP system, for example landed cost of compressor from Thailand to Malaysia is 3% lower than Germany to Malaysia and this information available to both Thailand and Germany Office,ERP would suggest Germany to procure their compressor from Thailand or negotiate their purchase price with their local supplier, which might have complications of having rivalry with their local suppliers but this can be overcome by giving them an offer of becoming preferred vendors of Maytag and locking their prices with Maytag for longer period of time. By using this strategy Maytag shall not lose their market share and at the same time local suppliers are not been annoyed. Maytag can overcome the cost of complex linkage by applying this strategy to their local vendors by procuring the components needed to manufacture the product at lower cost and at the same time developing stronger relation with their vendors. Cost of Production shall be lowered which shall generate more revenue for profit center.

Due to ERP system distributed sourcing activity has come under one platform through which all executives can compare the procurement cost of component and still take their decision considering their existing operation is not being disturbed should they continue buying from their local suppliers even though they are little higher than suppliers in other part of globe, Taking this decision is very tricky I would suggest Maytag and its Profit Center to consider importance of each local supplier before they replace them with someone in other part of globe. Keeping under consideration, how much it is going to affect their existing operations if they change local supplier, how can Maytag compensate local supplier if they stop buying from them or Maytag has no fear from local supplier at all in getting their market share. All this decisions are taken after having deep analysis of local market and local supplier hold in that market and taking reports from ERP system. Reports such as last 3 years of procurement from local supplier, comparing their prices with other local suppliers around the globe, considering logistics cost and comparing with other suppliers around globe. All this analysis shall give proper numbers to all centers around the globe and then decision can be taken by each profit center executives about the procurement of components considering the fact of local supplier's presence in local market. Now we discussed above how we can control cost of production via complex linkage in which all departments are connected. Another aspect to be considered is having centralized information but allowing decentralized decision making power to individual profit center can benefit Maytag.

I would say it's a trade-off are you ready to loose local suppliers and save cost of manufacturing which in turn can generate such a bigger profit to your center which has capacity to eat all rivalry erupting in local market due to loss of local supplier then executive should take decision accordingly. So using centralized information in ERP system and having decentralized decisions making power can benefit company to climb a step towards growth.

Since ERP has connected all department of company including individual profit center, information is flowing from one end of world to other end and corporate office gets all information about individual profit center in terms of what are their Sales Price to their clients ,what is their market share, revenue generation every year and growth of profit center every year. This information if used in a proper manner can benefit company but if this information is used to compare all profit center and then decision is being taken by corporate to control all profit center Sales Price, Preferred Vendors List their might be a back fall on this decision. Reason is all individual profit center knows their market very well. Executive who are managing individual profit center are much more experienced in taking right decision due to their knowledge about individual market they are servicing so long. I would recommend Maytag to have a Pyramid action in which information is flowing from bottom to top and decision are taken from bottom to top considering precious inputs which are being given by all individual profit center and by doing so the problem

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