enterprise resource planning intro new.ppt

5
What is ERP?
 The practice of consolidating an enterprise’s
planning, manufacturing, sales and marketing
efforts into one management system.1
 Combines all databases across departments into
a single database that can be accessed by all
employees.2
 ERP automates the tasks involved in performing
a business process.1
Sources:
1. http://www.cio.com/summaries/enterprise/erp/index.html
2. CIO Enterprise Magazine, May 15, 1999.

11
Managers and
Stakeholders
How Do ERP Systems
Work?
Central
Database
Reporting
Applications
Human
Resource
Management
Applications
Financial
Applications
Applications
Inventory
And Supply
Applications
Human
Resource
Management
Applications
Service
Applications
Sales and
Delivery
Applications
Sales Force
And Customer
Service Reps
Customers
Manufacturing Back-office
Administrators
And Workers
Suppliers
Employees
Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business Review, July-Aug. 1998.

12
An ERP Example: Before ERP
Customers
Customer
Demographic
Files
Sales Dept.
V
endor
Orders
Parts
Accounting
Accounting
Files
Purchasing
Purchasing
Files
Order is placed
with Vendor
Invoices
accounting
Inventory
Files
Warehouse
Checks for Parts
Calls back “Not in stock”
“We ordered the parts”
“We Need parts #XX”
“We ordered the parts”
Sends report
Sends report
Sends report
Ships parts

13
An ERP Example: After ERP
Database
Customers Sales Dept.
Purchasing
Warehouse
Vendor
Inventory Data
If no parts,
order is placed
through DB
Orders
Parts
Order is submitted
to Purchasing.
Purchasing record
order in DB
Order is placed
with Vendor
Accounting
Financial Data
exchange; Books
invoice against PO
Books inventory
against PO
Ships parts
And invoices accounting

14
Why ERP?
3 Major Reasons:
To integrate financial data.
To standardize manufacturing
processes.
 To standardize HR information.
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

15
ERP Project and Time
 Real transformational ERP efforts will usually run
between 1 to 3 years, on average.
 Short implementations (3 to 6 months):
small companies,
implementation limited to a small area of the company, or
the company only used the financial pieces of the ERP
system.
 The important thing is not to focus on how long it will
take but to understand why you need ERP and how
you will use it to improve your business.
Source: http://www.cio.com/summaries/enterprise/erp/index.html

Configuration
16
 Configuration is the process of making standard
software fit your business. SAP, as an
example, has:
Over 8000 configuration decisions
Data structuring
 Sales divisions, distribution channels
Rewriting Code (Modifications)
 Not recommended because of compatibility problems
when updated versions of the software are installed.
Customization
 Writing code at SAP-specified user exits
Third-party software solutions

17
Total Cost of Ownership
of ERP
Total cost of ownership (TCO) is a model developed by
Gartner Group to analyze the direct and indirect costs of owning
and using hardware and software. TCO essentially helps a
company determine whether it wins or loses from specific
technology implementations.
 Metagroup study among 63 companies surveyed showed
that:
the average TCO was $15 million (the highest was $300
million and lowest was $400k),
the average TCO per user was $53,320.

18
Total Cost of Ownership
of ERP
 It also found that:
it took 8 months after the system was in to see any
benefits,
but that the median annual savings from the system
was $1.6 million per year.

19
Hidden Costs of ERP
 Training
 Integration and testing
 Data conversion
 Data analysis
 Consultants
 Replacing best and brightest staff after implementation
 Implementation teams can never stop
 Waiting for ROI
 Post-ERP depression

20
Benefits of ERP Systems
 Improving integration, flexibility
 Fewer errors
 Improved speed and efficiency
 More complete access to information
 Lower total costs in the complete supply chain
 Shorten throughput times
 Sustained involvement and commitment of the
top management

21
Benefits of ERP Systems
(cont’d)
 Reduce stock to a minimum
 Enlarge product assortment
 Improve product quality
 Provide more reliable delivery dates and
higher service to the customer
 Efficiently coordinate global demand, supply
and production

22
Risks with ERP
Implementation
 Expensive (can costs 100 thousands to
millions of dollars)
 Time-consuming (can take months to years)
 Great risk for the organization
 Transfer of Knowledge
 Acceptance with the company

Who are the main ERP
vendors?
 Oracle
 SAP

27
Nestlé Background
 Found in 1866, Switzerland.
 World's largest food company, # 50 in Fortune
magazine’s
Globe 500
 33 manufacturing facilities, 6 distribution centers and
17sales offices around the country, 17,300 employees
nationwide.
 “…America's most admired Food Company
Source: http://www.nestle.com/all_about/at_a_glance/index.html

28
refrige
Milk products,
dietetic foods,
infant foods,
chocolate and
confections,
rated and
frozen items, ice
brands
Source: Weller, Joe, “Introduction to Nestle in the USA”,

29
Business Challenges
tle USA
 After the brands were unified and reorganized into Nes
in 1991,. Divisions still had geographically dispersed.
For example, Nestle USA’s brands were paying 29 different
prices for vanilla - to the same vendor.¹
Nine different general ledgers and 28 points of customers entry.
 Years of autonomous operation provided an almost “insurmountable
hurdle”.
 “… Nestle was the world’s NO. 1 food and beverage company– but
Source:one of the least efficient ”²
1. Ben Worthen, “ Nestlé's ERP Odyssey”, May 15, 2002 Issue of CIO Magazine;
2. “Nestle: An Elephant Dances”, http://www.businessweek.com/2000/00_50/b3711064.htm, viewed October 20,

30
Project Scope – “BEST”
 Five SAP Modules – purchasing, financials, sales
and distribution, accounts payable and
accounts receivable and Manugistics’ supply chain
module
 From October 1997 to 1st Quarter of 2000.
 $210 million budget
Source: Wo5rth0en,tBoenp, “ Nbesutlés's EinRPeOdsyssseye”, Mxaye1c5,

31
Project Objectives -
“One Nestle, under SAP”
 Transforming the separate brands into
one highly integrated company.
 Internal aligned and united, establishing a
common business process architecture
 Standardizing master data
Source: Worthen, Ben, “ Nestlé's ERP Odyssey”, May 15, 2002 Issue of CIO Magazine.

32
Implementation
 The new business process confused
most of employees, then resistance grew into
rebellion in 2000.
 Reconstructed in June 2000 and completed
in 2001.

33
Conclusion of Nestlé Case
Changes and success
 Common database and business processes lead to
more trustworthy demand forecast.
A comprehensive account planning tool.
Nestle can now forecast down to the redistribution center
level.
Nestle has improved forecast accuracy by 2%
 Higher factories utilization
fewer factories = big gains in factories Utilization
Reduce inventory level

34
T h e f a v o r a b l e e v o l u t i o n o f C O G S c o n t i n u e s
400
300
200
100
0
5 0 0
6 0 0
7 0 0
1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4
A n n u a l I n c r e m e n t a l S a v i n g C u m m u l a t i v e A n n u a l S a v i n g s
58
6
37
1
Source: Weller, Joe, “Introduction to Nestle in the USA”,
Saved $$$
- With ERP in practice , $ 371 million has been saved until
$ U S D m
20
i n 01.

35
Lessons learned by Nestlé
Don’t start a project with a deadline in mind.
Update your budget projection at regular intervals.
ERP isn’t only about the software.
“No major software implementation is really about the software.”
Former Nestlé CIO Jeri Dunn says, “You are challenging their
principles, their beliefs and the way have done things for many
many years”
Keep the communication lines open.
Remember the integration points.

37
What is
Agilent
Technologies?
 Agilent Technologies is the world's leading
designer, developer, and manufacturer of
electronic and optical test, measurement and
monitoring systems.
 Separated from Hewlett Packard and became
a public company in 1999
 World HQ in Palo Alto, CA
Source: http://we.home.agilent.com,viewed, viewed November 3, 2002.

38
Around the World
 Agilent has facilities in more than 40 countries
and develops products at manufacturing sites
in the U.S., China, Germany, Japan, Malaysia,
Singapore, Australia and the U.K.
 Approximately 37,000 employees throughout
the world
Source: http://www.agilent.com/about/index.html, viewed November 3, 2002.

39
Products and Services
Agilent operates in three business groups:
Test and Measurement
Test instruments and systems, automated test equipment.
Semiconductor Products
Semiconductor solutions for wired and wireless
communications, information processing.
Chemical Analysis
Life sciences and analytical instrument systems.
Source: http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf, viewed November 3, 2002.

40
Agilent’s Customers
Served customers in more than120
countries around the world1
 Electronic component manufacturers
 Pharmaceutical companies
 Chemical companies
 Communication companies2

41
Project Scope
 Oracle’s li E-Business Suite software
 Started September 2000 till 2004
 Budget
 roughly 100 Oracle consultants to install the
program
Source: Songini, Marc L., “ERP effort sinks Agilent revenue” Computerworld, Framingham, August 26, 2002.

42
ERP Project Objective
 “One IT” organization
 Supply chain capability; for example,
- Suppliers
- Customers
 Migrating 2,200 legacy applications that it
inherited from HP to Oracle
Source: Gaither, Chris, “Watching Oracle For Signs Of Strength” Boston Globe, Boston, Mass., September 16, 2002.

43
One IT Project (Before)
 IT spend was 8-10% of sales
 80% for business operations
 20% maint. & upgrading legacy systems
 Further autonomy over the IT portfolio would
have led to 50% cost increase
Source: http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf

44
One IT Project
 Marty Chuck, CIO, developed a Vision for One
IT organization in August 2000
 Moved more than 2,500 IT professionals in the
different site, regional and divisional IT
organizations
Source:
http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf;

45
One IT Project Objective
 To consolidate a large number of independent
operating groups into a single worldwide IT
function
 To share information quickly and efficiently
 To drive the operational costs down by more
than 20%
 To combine all IT budgets
Source: http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf

46
Changes in Supply Chain Process:
Supplier
 Migrating from all existing ERP systems to a
single Oracle-based infrastructure system
 The use of bar code for materials received
from suppliers
 The use of Evaluated Receipt Settlement
(ERS)

47Source: http://www.agilent.com/supplier/generalinformation.shtml
The process of migrating ERP
systems to Oracle

Evaluated Receipt Settlement
(ERS)
 An automated invoice and payment system
 How does ERS work?
Source: http://www.agilent.com/supplier/downloads/ERS_supplier_guide.pdf

49
Changes in Supply Chain Process:
Customers
 Real-time information about inventory and
order status
 Easier to understand invoicing and pricing
 Improved visibility on product delivery lead
time

50
Troubles with Project Everest
Because of the consolidation of its 2,200 software
systems to under 20, confusion meant lost
order and revenue.
 An $88 million reduction in third-quarter orders
Of that, $38 million was lost and $50 million will
be pulled through the fourth quarter.
 $105 million in lost revenue and $70 million in
operating profit
Source: Shah, Jennifer B., “Agilent’s ERP Rollout Expensive Glitches” EBN; Manhasset, August 26, 2002.

51
CFO Adrian Dillon said the problem was
twofold:
 Software bug
“As we began to hit sort of a 50 percent ramp
of normal capacity, we began to get conflicts
in priorities of systems instructions. When we
system down.”
Source:
FD (Fair Disclo
h
sur
a
e)d
Wire
t,h
Au
o
gu
s
ste
19, 2
c
00
o
2 M
n
of
nd
la
iy
c
, t
Tr
s
anst
crh
ipta
08t
190
i2
n
ag
e
.73
v
5,iQ
t3
a
20
b
02
ly
Agile
s
nth
T
eu
chn
tolo
tg
h
ies
e
Shah,
Jennifer B., “Agilent’s ERP Rollout Expensive Glitches” EBN, Manhasset, August 26, 2002.

52
 Mistakes converting backlog.
“The other problem we had was converting
backlog from legacy to new systems,
especially for our highly configured products
in our test and measurement operation.”
 Extra $35 million to cover costs of ERP and
CRM rollout.
Source:
Shah, Jennifer B., “Agilent’s ERP Rollout Expensive Glitches” EBN; Manhasset, Aug 26, 2002, and

53
Lessons Learned by Agilent
 ERP implementations are a lot more than
software packages.
 People, processes, policies and culture are all
factors that should be taken into consideration
when implementing a major enterprise system.
 ERP disasters are often caused by a user
company itself.

54
Lessons Learned by Agilent
 Study ERP well before implementation
“The disruptions after going live were more
extensive than we expected” –CEO Ned
Barnholt

Best Practices and what ERP holds
for the Future

56
ERP Implementation
 Biggest IT project that most companies ever
handle,
 Changes the entire company, and
 Has repercussions in all departments and
divisions of the organization.
 It is essential that all the key players
understand the scope of the project.
 This is an IT-Related Project.
Source: http://www.integratedsolutionsmag.com/articles/2000_03/000309.htm

57
Best Practices of ERP
Implementation
 A Business Strategy aligned with Business
Processes
 Top-Down Project Support and commitment
 Change Management
 Extensive Education and Training
 Data Clean up and Data Integrity
 Implementation is viewed as an ongoing

58
Implementation
 A Business Strategy aligned with Business
Processes
Business strategy that will give you a competitive
advantage
Analyze and map your current business processes
Develop your objectives
Evaluate your business strategy and ERP plan before
you commit to software acquisition and installation.
Source: http://www.rmdonovan.com/pdf/perfor8.pdf

59
Implementation
 Top-Down Project Support and commitment
CEO1
 support implementation costs
 champion the project, and
 demand full integration and cooperation.
Most knowledgeable and valuable staff2
Sources:
1. M. Michael Umble, “Avoiding ERP Implementation Failure”, Industrial Management, Jan/Feb 2002;
2. http://www.integratedsolutinsmag.com/articles/2000_03/000309.htm

60
Implementation
 Change Management
Changes in business procedures, responsibilities,
work load.1
As a result, ERP implementations are times of high stress,
long hours, and uncertainty.1
Mid-level managers must2
 facilitate continual feedback from employees,
 provide honest answers to their questions, and
 help resolve their problems.
Sources:
1. Yakovlev, I.V., “An ERP Implementation and Business Process Reengineering at a Small University”, Educause Quarterly, 2002
2. Umble, M. Michael, “Avoiding ERP Implementation Failure”, Industrial Management, Jan/Feb 2002.

61
Implementation
 Extensive Education and Training
General education about the ERP system for
everyone.
Massive amount of end users training before and
during implementation.
Follow-up training after the implementation.
10 to 15% of total ERP implementation budget for
training will give an organization an 80% chance of a
successful implementation.
Source: Umble, M. Michael, “Avoiding ERP Implementation Failure”, Industrial Management, Jan/Feb 2002.

62
Implementation
 Data Clean up and Data Integrity
Clean-up data before cut-over.1
“Near enough is no longer good enough.”2
To command trust, the data in the system must be
sufficiently available and accurate.3
Eliminate the old systems, including all informal
systems.3
1. http://www.bpic.co.uk/checklst.htm
2. http://www.projectperfect.com.au/info_erp_imp.htm
3. M. Michael Umble, “Avoiding ERP Implementation Failure”, Industrial Management, Jan/Feb 2002.

63
Implementation
 Implementation is viewed as an ongoing
process
Ongoing need for training and software support
after implementation.
Ongoing need to keep in contact with all system
users and monitor the use of the new system.
Ongoing process of learning and adaptation that
Source: Umble,cMo. Mnichtaienl, “uAvaoidlinlgyEReP

64
ERP Implementation Phases
4 Major Phases:
 Concept/initiation
 Development
 Implementation
 Closeout/Operation and maintenance
Source: “ERP Implementation and Project Management, Production and Inventory Management
Journal, Alexandria, Third Quarter 2001, FC Weston Jr.

65
Conclusion
 The benefits of a properly selected and
implemented ERP system can be significant.
An average, 25 to 30% reduction on inventory costs; 25%
reduction on raw material costs.
Lead-time for customers, production time, and production
costs can be reduced.
 BUT cost of implementing can be quite high and
risks are great.

66
Conclusion
 To achieve competitive advantage in the global
economy, organizations are extending their ERP
system beyond the firm.
 Future growth of the industry lies in adding
extensions.
 Integration, scalability and flexibility issues.
Source:
http://www.intelligententerprise.com/020903/514feat2_1.shtml
Bartholomew, D., “Benefiting from the Boom”, Industry Week, Cleveland, July 2002.

enterprise resource planning intro new.ppt

More Related Content

Similar to enterprise resource planning intro new.ppt (20)

More from rajesshs31r (20)

Recently uploaded (20)

enterprise resource planning intro new.ppt