Illustration of the development of ERP in the organization
Statement of scope & objectives
Company Name: LVMH Moët Hennessy – Louis Vuitton
Line of Business: It sells a variety of luxury products such as wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewelry, etc.
The initiation of Enterprise Resource Planning System Project
The LVMH operated for several years and merged with several companies leading to the formation of the present LVMH Corporation. After the merger, the company had a growth and expansion strategy. Now, the LVMH has more than 2,500 stores worldwide. As its retail network is all over the world, the control of information is very important to the company.
The Enterprise Resource Planning System may help the company to have a better control of the information so that the company may have more competitive advantages (Funding universe 2011).
Problems
The distribution and maintenance of inventory: As the fact that the company sells luxury products, the distribution and maintenance of inventory is very important to the company. Every year, the company has lots of cost for the damage and the loss of the inventory. A company should take actions to reduce this cost (Funding universe 2011).
Meet customer’s desires in time: Things like fashion can change rapidly. The company needs to know what the trend is now and what the customers’ wants are. As the retails are all over the world, different fashion trend exists in different countries. The company should be able to adjust the change of customers’ desires in time (Funding universe 2011).
The negative influences of economic downturn: Nowadays, the economy is getting worse. Less people are willing to buy luxury products. This may hit the company harshly. Customers and suppliers may be bankrupted suddenly without informing the company. The company should keep their information updated to know the change of its economic environment (Funding universe 2011).
Monitoring of employees: The Company now has more than 80,000 employees, 77% of whom are based outside France, share Group’s values. The company is aiming to be creative and innovate and aim for product excellence. This requires that the employee of the company should be creative.
The employee of product design must have a high sense of fashion trend. Managers must be sure that they are using a qualified person for the job. The company also aims to build a good image of the company. This also requires that employees must be integral and moral. Behaviours like stealing or fraud are highly restricted (Funding universe 2011).
Opportunity
Reducing costs of damage or loss of inventory: The Enterprise Resource Planning Systems may help the company to keep track of each product. Managers may be able to keep track of their transactions. Fraud may be reduced. Problems of distributing products may be revealed so that managers may take actions to solve problems (Smith and Raspin 2007).
Better customer satisfaction: The Enterprise Resource Planning Systems may help the company to acknowledge the change of the fashion trend in time. Designers of the products may be able to make changes of their design in time to meet customers’ desires. The customer satisfaction would be increased. Customers may choose the company over its competitors. Potential customers may become their customers and existed customers may be more loyal to the company (Porter 1985).
Get prepared for the impact of the economic downturn: The Enterprise Resource Planning Systems may help the company to get ready for the economic downturn. The systems may help the company to develop closer relationships between the company and its customers and suppliers. Sometimes, customers may use the instalment plan to buy products. If they go bankrupt, the company will not get the money.
With the ERP System, the company may see this situation in advance and negotiate with the customer to find a way to get the money. And the company must develop close relationships with suppliers as well. Luxury products require high quality materials. It would be difficult for companies to find substitutes in a short time if a supplier told them that he went bankrupt. The ERP Systems may help the company to get prepared for this situation (Smith and Raspin 2007).
Better monitoring and controlling of employee: The Enterprise Systems Planning Systems may help the company to get a better internal control of the company. Employees’ performances may be monitored and evaluated easily with the ERP Systems (Funding universe 2011).
Business benefits
The Enterprise Resource Planning Systems may help the company to get a better internal and external control.
Managers may know what is happening within the company with the ERP Systems. Communications between different departments may become more efficient and direct. The ERP Systems enable the company to keep track of its products. Fraud may be reduced. The costs of damage and loss of inventory may be reduced. Problems of distributing products may be revealed and solved. The ERP Systems also help managers to monitor and evaluate employees’ performances (Birkholz 2004).
The Enterprise Resource Planning Systems may help the company to get more competitive advantages. It may help the company to get more customers and increase customer satisfaction. Customers may choose the company over its competitor. The company may also have track of the materials.
They may be able to pay their suppliers. In long-term business, this may help the company to develop a better relationship between them and its suppliers. They may be able to get materials with lower price. It also helps the company to reduce its costs (Birkholz 2004).
System Capabilities
The Enterprise Resource Planning Systems aim to reduce and eliminate the wastage of labor and costs during the manufacturing and selling based on the market’s and customer’s needs so that the internal and external resources can be optimized (Porter 1985).
To managers, the ERP Systems enable them to make responds to any emergencies more efficiently. It also helps managers to make the right decisions and forecast the irregular situations. Managers may be able to communicate with their customers and suppliers more efficiently (Angwin and Smith 2007).
To material purchase department, the EPR Systems can help them to make right purchase plans. They are able to purchase right quantity and quality of materials at the right places and time with right price. This may reduce the costs of the products. The information on the materials can be tracked (Smith and Raspin 2007).
To inventory storage, the inventory turnover may be increased. Overstock may be reduced or eliminated. The information of the stock can be tracked as well. Managers may be aware of the situation of inventory clearly, directly and easily. Disposal of expired goods can be made in time (Angwin and Smith 2007).
To sale department, the ERP Systems may help them to establish customers’ files so that the company may develop close relationships with its customer and get feedbacks from them. This may also help to increase company’s customer service. The management of selling may be easier and more efficient for the managers.
With the internal sharing of information within the company, other department managers such as manufacturing and product design department can make plans based on customers’ needs. The company may know whether their customers are able to pay the money as well (Angwin and Smith 2007).
The ERP Systems enable the company to allocate its resources such as human resources, financial resources, equipments and information to the right department. In this way, the supply chain may be more efficient. The productivity may be increased. The costs may be reduced (Angwin and Smith 2007).
Company information
The company was established in 1987. Now, it has over 2,500 stores all over the world. The revenue of the company is primarily from Europe, United State and Asia (Funding universe 2011).
Business transaction types:
The LVMH sells a variety of luxury products. It sells wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewellery, selective retailing. According to the financial documents of LVMH, in 2011, they sold 174.9 million bottles of wines and spirits (including 55.5million bottles of champagne, 63.5million bottles of cognac, 41.8million bottles of still and sparkling wines and 14.1million bottles of other spirits). They also got 8,712million euro for selling fashion and leather goods, 3,195million euro for selling perfumes and cosmetics, 1,949million euro for selling watches and jewellery, and 6,436million euro for selling selective retailing (Funding universe 2011).
Objectives
Improving the communication between departments
The Enterprise Resource Planning Systems centralize company’s information. All departments share the information. This improves the communication of departments. For example, the LVMH focus on luxury products. Sensing the change of fashion trend is very important to the company.
The customer service department can get customers’ feedbacks by establishing customers’ profiles. They can know what customers like and what they do not like. They are close to the customers. If the fashion trend has changed, or the products do not please customers, customer service department would know. They can share this information within the company (Angwin and Smith 2007).
The product design department would see this information and have a meeting to decide if they should change the design and how to change the design. They make plans and managers decide whether to take the plans or not.
Once the new product is sold, customer service can wait and get feedbacks from customers again. This may help the company to gain customer satisfaction and being the leader of new fashion. High efficiency communication between departments enables the company to make response to the changes rapidly (Freeman 2010).
Improving financial management and cost management
In the downturn of the economy, many people go bankrupt including those people who used to be very rich. The LVMH sells luxury products. Part of its customers uses mortgages to buy products. If customers go bankrupt, the company would have lots of bad debts. They cannot get the money.
This would make a big loss of the company (Funding universe 2011). Although customer service department has customers’ profile to see if they can pay the money, they may not inform the financial department in time. So the company lost the best chance to reclaim the money. Using the Enterprise Resource Planning Systems, the financial department is able to monitor customers’ pay back as well. This may enable them to take action to deal with those debts in advance (Freeman 2010).
The ERP Systems may also improve the company’s cost management. For example, the manufacturing department can decide the quantity of products they are going to produce based on the information shared by the customer service. As the fact that the LVMH produce luxury products, the cost of products is higher than other regular products.
And due to the reason that the products which are out of fashion are not easily selling and they may end up with being sold at a very low price which make a loss for the company, the company must strictly control the quantity of products they plan to produce. The ERP Systems may help the company avoid purchasing surplus materials. The cost of material may be reduced (Freeman 2010).
Establishing a high efficient supply chain
The supply chain includes the material supply, product design, manufacturing, products distributing and selling. The ERP Systems centralize all the information from all the departments. One change from the part of the supply chain can be informed to other parts (Angwin and Smith 2007). This enables other parts to make response rapid. The manufacturing and selling of the products can be more efficient than before. The improvement and maintenance of equipments can be reported to the directors directly (Freeman 2010).
Feasibility report and relevant to business strategy
Technical feasibility
ERP system may be effective in the company due to several reasons, for instance, integration of functions. ERP system enables integration of both departmental and individual functions. It also enhances easy tracking of work flow among departments and branches of the respective organization.
This is effective in reduction in cost of operation hence increases profit level. Furthermore, it also establishes a unified reporting system within an organization. It can also further be developed and used in the provision of business intelligence services or functions (Angwin and Smith 2007).
Therefore, the organization should adopt and effectively implement the system to gain competitive advantage over other companies in the industry and achieve its growth strategy at reduced costs. The ERP system is a technological system. This system has been used by other organizations in the past especially those that respond to technological developments and advancements. Since LVMH had effectively implemented website selling, and increased its efficiency. The company can easily implement ERP system and enhance operation.
Technology is basically tested before being approved for use. Similarly, ERP system has been tested by developers, and like website selling ERP is workable. Therefore, considering the ERP system is cost effective because it will assist LVMH reduce operation costs, it will be easy to implement it. Furthermore, it is efficient because it increases efficiency in operation (Angwin and Smith 2007).
Economical feasibility
The ERP system is based on technology. Its implementation requires finances like any other project that an organization may initiate. However, implementation costs may differ due to differentials in the nature of projects. LVMH has implemented technological strategy in the past, for instance, a website selling.
This is an indication that the company is aware of the nature and requirements of implementing a technological system. Furthermore, the company has an overview of the expected costs and time in implementation of such projects because it had implemented a technological system in the past, website selling (Funding universe 2011). Therefore, ERP system may be effectively implemented by LVMH and made operational in the organization.
This is because the management of the company may apply procedures they used in implementation of websites selling in implementing ERP systems. Website selling and ERP system are related because they are technological systems hence can be implemented similarly. Moreover, the company may implement the ERP system at lower costs because the company already has a technological system in operation hence implementation of ERP system may only require few updates of the existing website selling system.
Considering the financial status of the company and the cost of implementing an ERP system, the system can be implemented by the company. This is because it requires limited finances to implement while the company has adequate finances, which it can use in implementing the system without strain or affecting its operations (Koontz and Weihrich 2007).
Operational feasibility
ERP systems are among the systems that developed in operations due to technological advancements. The system greatly increases efficiency in operation due to several reasons. The system involves control of different departments and coordination of different branches or offices in different geographical locations. This will assist the company reduce its cost of operation and management.
The company has a strategy of enhancing operation and ensuring it maintains its profit level in the industry. This system can easily be implemented in the operation of the organization due to several reasons apart from the strategies developed by the company. The system can be easily introduced and implemented in the company considering customers’, employees’, management and suppliers’ willingness in embracing technological use (Smith and Raspin 2008).
In the recent past, technological development and use have greatly increased and most customers prefer services offered technological. This is because most consumers have subscribed to internet services and are well versed with technological use. The ERP system is a technological system and uses several technological concepts. Considering increased knowledge of technological services and use by most consumers (Funding universe 2011).
This system can be easily introduced and implemented. This is because consumers can easily adapt to the new system considering they are well versed with technological applications. It will also be easier to introduce the system among consumers. Furthermore, since most consumers are well versed with technological applications, it will be easy for the company to easily introduce the system and start using it efficiently (Smith and Raspin 2008).
LVMH has in the past embraced technological use in operations. It is also among the first companies to introduce online selling through the company website.
Technological applications are basically approved by the management team. Furthermore, introduction of online selling through the company website was introduced by the management of the company. This is a clear indication that the management of the company may easily enhance implementation of the system considering they had implemented a technological application in operation.
Moreover, the management is in charge of operations in an organization, and introduction of any change in the organization must require their approval (Funding universe 2011). Management of LVMH has also portrayed willingness in implementation of strategies that can enhance the performance of the organization.
Therefore, the management may easily approve implementation of the system in the company. Additionally, the management is in charge of overseeing the achievement of organizational goals and objectives, and adoption or implementation of ERP system may enable the company to achieve its goal of gaining competitive advantage in the industry where it operates. This is because ERP enhances service delivery to customers (Angwin and Smith 2007).
In an organization, human resources are considered the most important resource. Implementation of ERP at LVMH requires an employees’ willingness because the introduction of the new system directly affects their operation in the business entity. LVMH frequently and consistently responds to technological developments and advancements.
This is because it offers updated services technologically. Therefore, its employees are well versed with technological advancements and introduction of new operational methods. Since its employees have always embraced these changes and increased quality of services to customers, it is evident that LVMH employees can effectively enhance implementation of ERP in the organization (Angwin and Smith 2007).
This is because the employees are flexible and easily adapts to changes in operation. Therefore, considering the flexible nature of LVMH employees in operation, it is evident that they can easily adapt to the new system and enhance its implementation in operations in the organization.
This can enhance operations in the company because employees are willing to implement the system. Basically, LVMH employees will enhance the implementation of ERP system because strategies of the company embrace technological developments and advancements incorporation in operation to increase efficiency (Angwin and Smith 2007).
Organizational strategies especially long term are applicable to both employees and suppliers. Therefore, suppliers are adequately informed and trained by organizations when necessary in case it intends to introduce changes in operation.
This is because suppliers are also part of an organization hence contributes to achievement of goals and objectives. LVMH adequately informs their suppliers and keeps them updated on changes that may affect operations in the organization (Angwin and Smith 2007). Furthermore, its suppliers supported the introduction of website selling, which is a technological selling technique.
This is an indicator that its suppliers also embrace technological application in operation. Therefore, since its suppliers supported website selling and are adequately informed on technological changes and advancements, they might easily support implementation of ERP.
Furthermore, suppliers operate in line with organizational goals and objectives, and strictly adhere to organizational strategies. Therefore, since its suppliers adhere by its strategies, they will enhance the implementation of ERP because it is part of the LVMH strategy of enhancing service delivery through technological developments (Angwin and Smith 2007).
List of References
Angwin, D and Smith, C 2007, The Strategy Pathfinder: Core Concepts and Micro – Cases. New York: Blackwell Publishing.
Birkholz, A 2004, Business Analysis and Enterprise Resource Planning. Germany: GRIN Verlag.
Freeman, E 2010, Strategic Management: A Stakeholder Approach. Cambridge: Cambridge University Press.
Funding universe, 2011, LVMH Moet Hennessy Louis Vuitton SA. Indiana: Pearson Education.
Koontz, H and Weihrich, H 2007, Essentials of Management. New Delhi: Tata McGraw-Hill Publishing Company Limited.
Porter, M 1985, Competitive Advantage: Creating And Sustaining Superior Performance. New Jersey: Simon & Schuster, Inc.
Smith, B and Raspin, P 2008, Creating Market Insight: How Firms Create Value From Market Understanding. London: John Wiley & Sons Ltd.