ILP: PART 3 – ERP - TESLA 1
Integrated Learning Project: Part 3 – Tesla
Enterprise Resource Planning
Melissa Ruk
School of Business, Liberty University
BUSI615: Logistics
Professor Jonathan Wilson
November 12, 2023
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Enterprise Resource Planning
Enterprise Resource Planning (ERP) systems are software solutions that rely on computer
technology to enhance the efficiency and organization of business activities (Nawaz &
Channakeshavalu, 2013). ERP systems can be characterized as a central hub that integrates
various business functions, such as finance, human resources, supply chain management, and
customer relationship management, all within one software platform (Al Muhayfith & Shaiti,
2020). ERP systems are beneficial tools because they can offer organizations numerous benefits.
According to Nawaz and Channakeshavalu, some benefits are improved operational efficiency,
streamlined processes, reduced duplication, improved productivity, increased real-time data, and
improved decision-making.
Software Selection Criteria
In today's business landscape, the integration of automation and information technology
is increasingly pivotal, playing a crucial role in enhancing the competitive advantage of
organizations (Tong et al., 2022). Companies use various computer systems to ensure optimal
functioning. One of these systems is ERP systems, which stands out as a business management
software that oversees day-to-day operations like accounting, purchasing, and supply chain
management (Kirmizi & Kocaoglu, 2021).
Implementing an ERP system can be one of the most challenging investment plans an
organization can undertake due to the task's complex nature involving high costs and
compatibility risks (Yusuf et al., 2004). Companies allocate substantial financial resources and
considerable work hours to ensure the correct ERP software systems have been chosen or
developed. Selecting the right ERP software package from the various software developers is a
critical decision that requires a thorough and well-organized evaluation of the systems available
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in the marketplace. Choosing an appropriate ERP system for an organization involves
consideration of various parameters and factors. Failure to adequately assess these factors can
result in significant challenges during ERP implementation, potentially leading to failure (Asl et
al., 2012). As Asl et al. stated, organizations must define criteria and critical factors to optimize
the search for ERP software. Defining criteria ensures that focused analysis of systems is aligned
with the organization's requirements, minimizing both time and costs linked to system
implementation. According to Rao Siriginidi (2000), possible key factors that organizations
should look at are the stability and track record of the ERP supplier, examining the last 12
months of ERP sales performance, assessing supplier support during implementation, and
scrutinizing enhancements made to ERP packages.
For large multinational companies like Tesla, they must ensure they choose an ERP
system that fits the company's needs. Because of this, there are several criteria Tesla should
consider and analyze before selecting and implementing an ERP system. The first criteria Tesla
should consider is the industry in which they operate. While a generic ERP system can be
helpful, selecting a system that corresponds to the industry means the software is tailored to the
specific needs of that industry (Salimi et al., 2006). Tesla will want to focus on ERP systems that
specialize in manufacturing. This criteria will ensure that the software packages have additional
features such as material requirement planning, quality management, inventory management, and
planning and scheduling capabilities. A second criteria Tesla should consider is the ERP system's
ability to be integrated globally. Tesla has multiple Gigafactoies worldwide that are responsible
for manufacturing finished automobiles and various components needed to manufacture their
automobiles. Because of this, Tesla must utilize a software system that integrates all Gigafactoies
under one roof. Each facility needs to understand what is being produced at another to ensure
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production can continue smoothing. A third criteria Tesla should consider when picking an ERP
system is the implementation of the system. Before making a final selection, Tesla needs to
understand how the system will be implemented, the necessary training and technological
requirements, and support from the vendor during the implementation process. Other criteria
Tesla should consider are the initial cost, recurring monthly costs, scalability, and customization
ability. Based on the above criteria, the software systems chosen as a potential fit for Tesla are
SAP S/4HANA Cloud, Oracle NetSuite, and Odoo.
Analysis of ERP Systems
SAP S/4HANA Cloud
According to SoftwareAdvice.com (2023), SAP S/4HANA Cloud is a cloud-based
integrated ERP system developed by SAP. It was designed to streamline business processes and
enhance efficiency for small to large businesses in various industries such as automotive,
engineering, construction, mining, retail, wholesale, and more. SAP S/4HANA Cloud is a cloud-
based solution that makes it easy for all users to access the system and company data through
any internet connection worldwide (SAP, 2023). According to SAP, their software offers
flexibility and scalability, which allows an organization to adapt quickly to changing needs. SAP
also notes that software leverages in-memory computing, which can provide customers with
accurate real-time data and analytics, enhancing the decision-making process. According to
SoftwareAdvice.com (2023), the software package includes compliance reporting, production
planning, material requirement planning, and product life cycle management. Additionally,
according to SoftwareAdvice.com (2023a), SAP S/4HANA Cloud offers 24/7 live rep and chat
support, along with various platforms for training. Based on consumer reviews, users have rated
the software high, with a score of 4.4 out of 5. However, based on consumer reviews, drawbacks
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can be the cost of implementing, as there are known to be substantial costs associated with
acquiring the system and training staff to use it. In addition, customers felt the system needed to
be simpler to customize, the system needed to be more convenient, and the cloud-based software
could be slow.
Oracle NetSuite
Oracle NetSuite is a cloud-based ERP system that caters to businesses of various sizes
and industries. According to SoftwareAdvice.com (2023b), Oracle NetSuite is used by over
37,000 organizations in 219 countries, as it offers a comprehensive suite of applications,
including inventory management, supply chain management, financial management, and more.
Because Oracle NetSuite is cloud-based, users can access all information through any internet
connection. According to the developer's website, Oracle NetSuite allows users to have increased
data accessibility and integrity and offers customized ERP systems that fit the needs of various
industries (NetSuite.com, 2023). Oracle NetSuite, additionally, gets high marks for its support
and training. Organizations can get support through various forms, such as FAQs, Forums, phone
support, or chat (SoftwareAdvice.com, 2023a). Additionally, the developers offer various types
of training through in-person webinars and videos. Based on consumer reviews, users have rated
the software high, with a score of 4.1 out of 5. However, based on consumer reviews, drawbacks
can be the cost of using Oracle NetSuite, the cost of customizations, and some felt integrating the
new system was challenging.
Odoo
Odoo is an open-source business management software suite encompassing various
applications, including CRM, accounting, inventory management, human resources, e-
commerce, and more (SoftwareAdvice, 2023c). Oddo was developed and designed for
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businesses of all sizes and aims to streamline operations with its integrated platform (Odoo,
2023). According to the developers, one of the significant advantages of Odoo is its modularity,
allowing users to select and implement specific applications based on their business needs. Odoo
can be implemented either physically at the company or cloud-based. Based on consumer
reviews, users have rated the software high, with a score of 4.2 out of 5 (SoftwareAdvice,
2023a). Just like Oracle NetSuite, the developers of Odoo offer various ways for users to get
support and training information. However, based on consumer reviews, a drawback can be the
cost of using Odoo, which can be expensive to implement, there can be a learning curve for new
users to ERP systems, and the cloud-based options are not as optimal as other platforms.
Internet connectivity is an essential item that needs to be considered regardless of the
chosen platform. Tesla needs a cloud-based platform to connect its various facilities. Because of
this, Tesla’s ERP system will rely on internet connectivity at each location. This can be a
limitation depending on the infrastructure surrounding each factory. Operating a business with
unreliable or slow internet access can be a potential issue for Tesla.
Ancillary Data Capture Equipment
Ancillary data capture equipment consists of tools and devices to collect supplementary
information associated with a primary process or system (Xu et al., 2020). Manufacturing
operations generate extensive data as items move through the production line. When the data is
gathered, companies can gain a better insight into the production process, allowing them to
analyze the current process better and create new processes that can produce time and cost-
saving results. These tools play a vital role in acquiring data beyond the main operation's
fundamental functions for logistics and manufacturing. This additional information is often
essential for tracking, monitoring, and enhancing efficiency (Kumar & Hillegersberg, 2000). An
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example of possible information that can be gathered is the average time specific tasks take to
complete.
Ancillary data capture equipment that Tesla could implement are scanners, barcodes,
magnetic strip readers, and print capture devices. These devices are used to track processes on
the production line, time spent in different stages of the production line, monitor personnel
movement within production facilities, and gather data related to the production of vehicle parts.
The data collected by these tools can be utilized in various ways. Time data can be used to
understand how to break down tasks for a more efficient use of time on the production line.
Scanning barcodes as items are used can help improve inventory management as procurement
staff has reliable data to know when items are used, when they have low stock, and when
reorders need to happen. Should Tesla track each vehicle through the production process, it
allows the company to have accurate data on how many vehicles are in production and at what
stage, and possibly for what order or customer. Because customers can wait months for their new
vehicle, being able to give customers updates as their car moves through the production process
can increase the customer service offered to clients, along with giving them a peak into the
production process.
Functional Areas
ERP system comprises various modules integrated into one platform (Liberty University
Custom, 2021). According to the text, each module uses a common database and has a standard
user interface, making it easier for users to switch between the modules. Even though each
vendor will create their user interface and might organize features differently, they all typically
have modules focusing on these four major areas: finance, manufacturing and logistics, sales and
marketing, and human resources.
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Regarding the function area of finance, all three platforms have models that would aid
Tesla in its financial management. When evaluating ERP systems, Tesla needs to ensure that the
chosen ERP system has a robust financial model to track the company’s income and expenses, as
effective financial management plays a central role in evaluating Tesla's overall performance.
Oracle NetSuite has one of the best platforms for the functional area of finance as its platform
not only has accounting software but also integrates financial management software
(NetSuite.com, 2023). These integrated modules allow for a simplified process of recording
transactions, managing payables and receivables, and statement generation that complies with
governmental regulations. Because Oracle NetSuite has integrated data collection, it allows
managers to have real-time financial performance for the business at any time. SAP S/4HANA
Cloud also has a specialized model that helps companies understand the impact of the economy’s
high inflation and how it affects the bottom line (SAP, 2023).
After the financial module, the next most important one is the manufacturing and
logistics. This module is most complex because of all the data and management that happens
here (Liberty University Custom, 2021). According to the text, this functional area must manage
all aspects of the production process, including planning, material management, inventory
management, quality management, and plant maintenance, while coordinating with sales and
financial management departments. Odoo offers a manufacturing system that can significantly
benefit companies like Tesla because their platforms integrate materialJrequirements planning,
manufacturing execution systems, quality management, and maintenance in one place (Odoo,
2023). In addition, Odoo also incorporates ancillary data capture equipment such as barcodes and
tablet-based apps to create a paperless production line and organize workers better.
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The marketing and sales area is also important for Tesla to consider when evaluating ERP
systems because this is where the company would track sales data, customer experiences, target
audiences, and advertisement efforts. Tesla must use an ERP system with a marketing and sales
module, as this data will be used to generate forecasts and future production schedules. Without
this module, Tesla can be working off inaccurate or incomplete information. This means Tesla’s
sales data and forecasts could be incorrect and waste company resources. Each perspective
platform has marketing and sales built into its ERP systems.
Cost Associated with ERP Systems
Because various ERP systems are available in the marketplace, most organizations should
be able to find one that meets all their needs. If not, an organization can hire software developers
to create a custom ERP system that fits every organizational need. One of the most significant
constraints on whether an organization will decide on a system is its associated costs.
SAP S/4HANA Cloud has costs associated with one-time setup and reoccurring monthly
charges (ERPResearch.com, 2023). For an on-premises system, these charges can cost a
company anywhere from $100,000 to multi-millions for an initial basic licensing fee, depending
on the number of modules selected, the number of administrative and basic users, and more.
Various additional costs are dependent on the needs of the organization. For the cloud-based
system, SAP S/4HANA does charge a monthly subscription fee based on multiple factors, such
as a reoccurring license fee, the number of locations, the number of users, and the amount of
memory needed. These monthly fees can easily cost a large company like Tesla over $1 million.
Oracle NetSuite follows the same pricing structure as SAP S/4HANA Cloud. The cost of
Oracle NetSuite will depend on the number of user licenses needed, company size, number of
add-on modules chosen, customization charges, implementation charges, and recurring support
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and training (SCSCloud.com, 2023). Once again, Oracle NetSuite would cost Tesla multi-
millions of dollars to implement the new system, plus the monthly recurring charges to use the
system.
Odoo, just like SAP S/4HANA Cloud and Oracle NetSuite, would have a high price tag
for Tesla. Odoo works off the same monthly subscription model that the other systems do. The
monthly or yearly subscription prices depend on the selected packages, any add-ons, and the
number of monthly users (Odoo, 2023a). To get an idea of the cost, the standard custom package
with 2500 users would again be over $1 million per year plus the original implementation costs.
Because of the hefty price tag for Tesla to implement any of these systems already on the
market, Tesla should also consider the costs of developing and maintaining a private internal
ERP system before making a final decision. While the initial cost to develop a custom system
would be more than the implementation of any system above, the monthly costs will be
significantly lower. It is also important to note that the cost of each system is so costly because
of the size of Tesla. For large multinational companies that need to store large amounts of data,
have multiple add-on modules, and need access to thousands of users, ERP systems are a costly
yet necessary endeavor.
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