A systems approach to developing and implementing an ERP financial subsystem.(enterprise resource planning)

INTRODUCTION

In the traditional MRP (Material Resource Plan) II or the burgeoning ERP systems, financial management is always the core function or module, while other modules either offer services or provide it with data. For an enterprise, the focus of financial management is its capital flow. Financial management reflects an enterprise's business performance and managerial efficiency. Therefore, the financial subsystem has been the focal point that enterprises of different industry sectors have paid close attention to while implementing ERP systems all the time.

With the rapid pace of the global economy and the development of information technology, enterprises are facing unprecedented opportunities as well as challenges (Chaudhry et al., 2005; Li, 2000a, 2000b). Facing such competitions, and with the support of the industrial policy, many Chinese enterprises have introduced ERP system to various degree to accelerate the informationisation process (Wang et al., 2005). During the course of implementing financial subsystem as a part of ERP, some problems have been exposed: the internal functions of the financial system have not been fully realized yet, as well as the integration of the financial system with other systems. Tracing its cause, a great deal of issues, such as development, software, personnel, management, etc., are hidden behind these phenomena, which make the developing and implementing financial subsystem with great difficulty.

As for the difficulties in implementing financial subsystem, the shortage of guidance of the modern scientific method is an important reason. An enterprise's financial activity reflects three major systems of material flow, energy flow and system flow; at the same time, it has its own subsystems of several levels as well. The control of the financial activity is a kind of control mechanism with deep penetration into business operation, which can be seen as playing a chain reaction role in production and operation. As a type of concrete representation of material flow, capital flow is actually a comprehensive financial information flow. Therefore, the research on financial management is closely related to the discipline called systems science. This paper attempts to explore a systematic way of implementing ERP financial subsystem, from the angle of systems research, using the data on ERP implementation in Chinese enterprises.

The rest of the paper is organized as follows. In Section 2, the current status of ERP financial system implementation in Chinese enterprises are introduced and discussed. In Section 3, some effective alternatives of implementing ERP financial subsystem are proposed, on the basis of the systems concept. The conclusion is provided in the final section.

IMPLEMENTING ERP FINANCIAL SUBSYSTEMS: CURRENT STATUS

In the traditional MRP II or the burgeoning ERP, financial management is always the core function (Zhou et al., 2005). The target of financial management is an enterprise's capital flow, which reflects an enterprise's business performance and management efficiency. Therefore, the financial subsystem has been the focal point that enterprises of different industry sectors have paid close attention to while implementing ERP systems. With the constant changes in enterprises' external environment and internal management, the financial subsystem is facing new challenges too.

Implementing ERP Financial Subsystem: Current Situation

An Analysis of Implementing ERP in China

In China, support from national industry policy is always desirable for initiating and implementing large scale ERP projects. One of the main reasons is that ERP is still relatively immature; however, its speedy development is urgently needed. As a new endeavour that can promote modernizing Chinese industry, ERP industry is seeking industry policy support from the government.

Industrialization Promotes Informationization. With the economic development strategy of so-called 'informationization promoting industrialization' set forth by Chinese government, large-scale programmes such as the 'Informationization of Manufacturing Industry' (sponsored by the Ministry Science and Technology) and the 'Informationization of Business Enterprises' (sponsored by the Economic and Trade Commission) have been put forward and implemented. ERP is one of the main topics in these programmes. In recent years, ERP systems have been implemented in thousands of Chinese enterprises. Many enterprises that implemented MRP II earlier are upgrading their systems to ERP systems, more applications have been integrated, system function is stronger, and the degree of integration is getting higher and higher (Li, 2000b).

ERP can make an enterprise more competitive and profitable in market. The enormous ERP market has stimulated the rise of domestic ERP products and the rapid development of ERP software industry in China. Nowadays, there are dozens of domestic ERP software vendors in the market. On the other side, the 863 Project (863 Advanced Technology Project) has supported and promoted the research of ERP system in a more cost-effective manner too, which has a greater influence and impact on ERP implementation and industry development. 863 Project was initially launched in the mid-1980s under the late leader Deng Xiaoping (Xu, 1999).

The upsurge of ERP implementation is fully under way in the provinces and cities all over China, and is playing an active role in the informationization project of manufacturing industry.

863 Project and ERP Research and Applications. The CIMS programme within the 863 Project has offered long-term support to the ERP technological research and product development and application. During China's Seventh 5-Year Plan and Eighth 5-Year Plan (middle 1980s-middle 1990s), the CIMS programme within the 863 Project mainly supported the technological research and development of MRP II/ERP management style and system. Also, during this period, good experience has been accumulated in the course of exploring the application of ERP in Chinese enterprises through a series of CIMS projects. During the Ninth 5-Year Plan (late 1990s), the CIMS programme within the 863 Project paid great attention on domestic ERP software product and ERP application on the basis of continuing supporting ERP technical research. On one hand, the programme has supported the research and development of five domestic ERP products especially including Lima CAPMS, CASE, JS-ERP, JW-ERP and EMIS. On the other hand, through supporting more than 200 enterprises implementing CIMS, the programme has further enhanced the application of MRP II/ERP system to a new level. At the same time, the programme has set up a domestic software application project, assisting the implementation of CIMS software including domestic ERP. All the work has gained obvious economic benefits, and laid a good foundation for Chinese ERP industry.

After entering the period of China's Tenth 5-Year Plan since 2001, it has been further clarified by the CIMS programme within the 863 Project that the research, development and implementation of domestic ERP software should be emphasized. And in 2001 and 2002, the programme initiated priority research, development and application of ten model ERP products manufactured by domestic vendors. The goal is that: based on the demand for the informationization project of Chinese manufacturing industry, to carry on innovative research on China's advanced management style and ERP key technology, emphasizing on developing several ERP management software systems based on Chinese advanced management style, to form the software product series of ERP products with China's own intellectual property right; to extensively use the ERP software while coordinating the informationization project of Chinese manufacturing industry with the projects of CIMS application in typical industry sectors, and to drive and promote the development of Chinese ERP industry while promoting the reform and informationization in Chinese enterprises, making the ERP software product with Chinese independent intellectual property right to take certain share in ERP market.

The basic supporting policies initiated by Chinese government and the national attention to the software industry have accelerated the growth of ERP industry greatly, offering strong support for the development of Chinese software …