Introduction to ERP.PPT

Agenda
 Introduction
 History of organizational systems
 Functional systems
 ERP – Definition
 Value Chain
 ERP Vendors
 Core ERP Modules
 ERP Disadvantages
 Conclusion

History of organizational systems
 Calculation systems
 Functional systems
 Integrated systems

Calculation systems
 1950-80
 Single purpose
 Eliminate tedious human work
 Examples: Payroll, General ledger,
Inventory
 Technology used: Mainframes,
magnetic tapes, batch processing

A System/370 Model 145 (1970’s)

A very nice-looking magtape-
drive

Printer
800 lines/minute with 48 character
train, 136 columns with 6 or 8 lines
per inch spacing

Stack of Computer Printout Paper

Functional systems
 1975-20??
 Use computers to improve operations
 Applications: Human resources, order
entry, manufacturing resource planning
 Technologies: Mainframes, PC’s, LAN’s

Functional systems
 Typically contained within a department
 Islands of automation
 Applications independently developed
and deployed
 Driving force: availability of mini-
computers

Functional system applications
 Human resources System
 Accounting and finance systems
 Sales and marketing System
 Operations management System
 Manufacturing Systems

Human Resources
 Recruiting
 Compensation
 Assessment
 Development and Training
 Planning

Accounting and Finance
 General Ledger
 Financial Reporting
 Costing
 Budgeting
 Accounts Payable
 Accounts receivables

Sales and Marketing
 Lead tracking
 Sales forecasting
 Customer management

Operations
 Order management
 Inventory management
 Customer service

Manufacturing
 Inventory
 Planning

Types of Organizational
information Systems
 Administrative systems
 Scheduling / Transaction systems
 Value oriented systems
 Reporting and controlling systems
 Analysis and information systems
 Planning and decision support systems
(From Business Process Engineering by
A.W. Scheer)

Problems with function based
application
 Sharing of data between systems
 Data duplication
 Data inconsistency
 Applications that don’t talk to one another
 Limited or lack of integrated information
 Isolated decisions lead to overall inefficiencies
 Increased expenses

Solution to disparate systems?
 Integration
 Consolidation
 Right-sizing
 Business Process Redesign
 Enterprise wide system

Legacy Systems
 Each department has its own system
 Infrastructure specific
 Inefficient processes
 Potential for inaccuracies

Limitations of Legacy Systems
 Legacy systems used in large enterprises of
the 1970s and 1980s have limitations.
 They were developed in-house or by different
vendors using several different DBMSs,
languages and packages
 Difficult to increase the capacity of such
systems or unable to upgrade them with the
organization’s business changes, strategic
goals and new information technologies
32

Internally focused systems
 Support functional areas, business processes
and decision-making within an organization
 New information (value) is added at every step
34

Externally Focused Systems
 Coordinate business activities with customers,
suppliers, business partners and others who
operate outside the organization

The Need for Integrated Enterprise
Systems
 Advantages of integrated systems
 Centralized point of access
 Conversion needed
 Enterprise Resource Planning (ERP) vendors
offer different modules
 Components that can be selectively implemented
 E.g., modules of mySAP business suite

The Rise of Enterprise Systems
 Packaged applications
 Written by third-party vendors
 Used by many different organizations
 Useful for standardized, repetitive tasks
 Cost effective
 E.g., Microsoft Money and Quicken
 Custom applications
 Developed exclusively for a specific organization
 Designed for particular business needs
 Higher development costs

Integrated systems
or
Enterprise Resource Planning
System

Introduction
 Enterprise Resource Planning: a process
of planning and managing all resources and
their use in the entire enterprise
 ERP System is an enterprise-wide
information system designed to coordinate all
the resources, information, and activities
needed to complete business processes such
as order fulfilment or billing.

ERP - Definition
 ERP is a process of managing all
resources and their use in the entire
enterprise in a coordinated manner

ERP Systems Defined
 Enterprise resource planning systems or
enterprise systems are software systems
for:
 business management, encompassing modules
supporting functional areas such as planning,
manufacturing, sales, marketing, distribution,
accounting, financial, human resource
management, project management, inventory
management, service and maintenance,
transportation and e-business.
41

ERP Systems Defined (cont.)
 The architecture of the software facilitates
transparent integration of modules, providing flow
of information between all functions within the
enterprise in a consistently visible manner
 American Production and Inventory Control
Society (2001) has defined ERP systems as
“a method for the effective planning and
controlling of all the resources needed to take,
make, ship and account for customer orders in a
manufacturing, distribution or service company”.
42

ERP Systems Defined (cont.)
 “ERP (enterprise resource planning systems) comprises of a
commercial software package that promises the seamless
integration of all the information flowing through the
company–financial, accounting, human resources, supply
chain and customer information” (Davenport, 1998).
 “ERP systems are configurable information systems packages
that integrate information and information-based processes
within and across functional areas in an organization” (Kumar
& Van Hillsgersberg, 2000).
43

 “One database, one application and a unified interface
across the entire enterprise” (Tadjer, 1998).
 “ERP systems are computer-based systems designed to
process an organization’s transactions and facilitate
integrated and real-time planning, production, and
customer response” (O’Leary, 2001).

ERP system: Definition
 ERP is a set of integrated business
applications, or modules which carry
out common business functions such as
general ledger, accounting, or order
management

Enterprise Resource Planning (1990s)
 First appeared in the late 1980s and the beginning
of the 1990s with the power of enterprise-wide
inter-functional coordination and integration.
 Based on MRP and MRP II, ERP systems integrate
business processes including manufacturing,
distribution, accounting, financial, human resource
management, project management, inventory
management, service and maintenance, and
transportation, providing accessibility, visibility and
consistency across the enterprise.
46

Extended ERPs (1990s)
 During the 1990s ERP vendors added
more modules and functions as “add-
ons” to the core modules giving birth to
the “extended ERPs.”
 These ERP extensions include advanced
planning and scheduling (APS), e-
business solutions such as customer
relationship management (CRM) and
supply chain management (SCM).
ITEC6620 47

ERP Objective
 To integrate all departments and functions across
a company onto a single computer system that can
serve all of the enterprise’s needs
 For example, improved order entry allows
immediate access to inventory, product data,
customer credit history, and prior order
information
 This availability of information raises productivity
and increases customer satisfaction
50

Best Practices-Based Software
 Most ERP vendors build best practices into
their ERP systems
 Identify business processes in need of change
 Future updates are smoother if businesses change
their business processes to fit with ERP systems
 Is following the best practices always the best
strategy?
 If companies have competitive advantage from
unique business processes
51

Value Chain
53
• Flow of information through a set of business activities
– Core activities – functional areas that process inputs and
produce outputs
– Support activities – enable core activities to take place

Core Activities
 Inbound logistics activities
 Receiving and stocking raw materials, parts and products
 Cisco – delivery of electronic components from suppliers
 Operations and manufacturing activities
 Order processing and/or manufacturing of end products
 Dell – component parts assembled to make products
 Outbound logistics activities
 Distribution of end products
 Amazon.com – delivery of books to customers
54

Core Activities (cont.)
 Marketing and Sales activities
 Presale marketing activities (e.g., creating
marketing brochures)
 Amtrak – use of IS to update prices and
schedules
 Customer service activities
 Postsale activities
 HP – downloads related to purchased products
55

Support Activities
 Administrative activities
 Support of day-to-day operations (for all functional areas)
 Infrastructure activities
 Implement hardware and software needed
 Human resource activities
 Employee management
 Technology development activities
 Design and development of applications to support the
primary activities
 Procurement activities
 Purchasing of goods and services (inputs into the primary
activities)
56

What is ERP?
 Enterprise Resource Planning
 Support business through optimizing,
maintaining, and tracking business
functions
 Broken down into business processes
 HRM
 Distribution
 Financials
 Manufacturing

What makes ERP different
 Integrated modules
 Common definitions
 Common database
 Update one module, automatically
updates others
 ERP systems reflect a specific way of
doing business
 Must look at your value chains, rather
than functions

Benefits of ERP
 Common set of data
 Help in integrating applications for
decision making and planning
 Allow departments to talk to each other
 Easy to integrate by using processed
built into ERP software
 A way to force BPR (reengineering)
 Easy way to solve Y2K problem

ERP Vendors
 There were five dominating ERP software
suppliers: SAP, Oracle, PeopleSoft, Baan and J.D.
Edwards.
 They controlled more than 60% of the multi- billion
dollar global market.
 Each vendor had a specialty in one particular
module area such as
 Baan in manufacturing,
 PeopleSoft in human resources management,
 SAP in logistics, and
 Oracle in financials
61

SAP AG
 SAP AG (“Systeme, Anwendungen, und Produkte in
Datenverarbeitung”), or Systems, Applications and Products in Data
Processing
 In 1979, SAP launched SAP R/2, a mainframe-based ERP
 In 1992 SAP R/3 was launched based on client/server
 By 1999 SAP became the third largest software vendor in the world
and the largest in the ERP sector with a market share of about 36%
serving over 17,000 customers in over 100 countries.
 In 1999 SAP extended the ERP functions by adding CRM, SCM,
sales-force automation and data warehousing.
 SAP’s Internet-enabled ERP solutions are provided by the recently
launched ERP product called mySAP.COM
62

Oracle Corporation
 founded in 1977 in the USA, is best-known for its
database software and related applications and is the
second largest software company in the world after
Microsoft.
 second to SAP in the enterprise systems category
with over 5,000 customers in 140 countries.
 Oracles ERP system is known as Oracle
Applications, having more than 50 different
modules in six major categories: finance, accounts
payable, human resources, manufacturing, supply
chain, projects and front office.
 Now taken over PeopleSoft and JD Edwards 63

PeopleSoft Inc.
 Started in 1987 in California, with specialization in
human resource management and financial
services modules.
 Enterprise solutions from PeopleSoft include modules
for manufacturing, materials management, distribution,
finance, human resources and supply chain planning.
 One of the strengths of PeopleSoft is the recognition by
its customers that it is flexible and collaborative
 In 2005 PeopleSoft became a part of Oracle offering
PeopleSoft 9
64

J.D.Edwards
 founded in 1977 in Denver (cofounded by Jack Thompson, Dan
Gregory and C. Edward McVaney) with long experience of
supplying software for the AS/400 market.
 Its ERP product called OneWorld is “capable of running on multiple
platforms and with multiple databases, ... [and] revolutionizes
enterprise software by liberating users from inflexible, static
technologies
 The product includes modules for finance, manufacturing,
distribution/logistics and human resources, quality management,
maintenance management, data warehousing, customer support and
after-sales service
 Now a part of Oracle offering JD Edwards EnterpriseOne and JD
Edwards World
65

Baan
 Found in 1978 with expertise in software for
the manufacturing industry
 ERP solution areas that Baan covers include
finance, procurement, manufacturing,
distribution, integration and implementation,
planning, sales, service and maintenance,
business portals, collaborative commerce and
business intelligence.
 Bought by Infor in 2006
66

Current Situation
 JD Edwards was merged with PeopleSoft
 Then PeopleSoft was merged with Oracle in 2005
 Baan was bought by Invensys (in 2000), then SSA
Global Technologies (in 2003) and changed the
name to SSA ERP
 SSA ERP was acquired by Infor in 2006
 Now 3 largest ERP companies:
 SAP : logistics
 Oracle : financial, HRM
 Infor: manufacturing 67

Difficulty in implementation
 Very difficult
 Extremely costly and time intensive
 Typical: over $10,000,000 and over a
year to implement
 Company may implement only certain
modules of entire ERP system
 You will need an outside consultant

Core and Extended ERP Components
 Core components – support primary internal activities
 Extended components – support primary external
activities
69

ERP Systems and Organizations
 Generally a misleading perception that ERP
system can improve organizations’ functionalities
overnight.
 Achieving all-round cost savings and service
improvements is very much dependent on:
 how good the chosen ERP system fits to the
organizational functionalities and
 how well the tailoring and configuration process of the
system matched with the business culture, strategy and
structure of the organization.
 ERP system is expected to improve both backbone
and front-end functions simultaneously. 70

ERP Characteristics
71
Integrated System
Real Time
Best Practice
Customizing
(Configuration)
Process Oriented

ERP Characteristics (cont.)
 Modular design comprising many distinct business
modules such as financial, manufacturing, accounting,
distribution, etc.
 Use centralized common DBMS
 Integrated modules provide seamless data flow among
the modules, increasing operational transparency through
standard interfaces
72

 Generally complex systems involving high cost
 Flexible and offer best business practices
 Require time-consuming tailoring and configuration
setups for integrating with the company’s business
functions
 Work in real time with online and batch processing
capabilities
 They are Internet-enabled
ERP Characteristics (cont.)

Core ERP Modules
 Accounting management
 Financial management
 Manufacturing management
 Production management
 Transportation management
 Sales & distribution management
 Human resources management
 Supply chain management
 Customer relationship management
 E-Business 74

ERP Advantages
What benefits How
Reliable information
access
Common DBMS, consistent and accurate data,
improved reports.
Avoid data and
operations redundancy
Modules access same data from the central
database, avoids multiple data input and update
operations.
Delivery and cycle time
reduction
Minimizes retrieving and reporting delays.
Cost reduction Time savings, improved control by enterprise-wide
analysis of organizational decisions
Easy adaptability Changes in business processes easy to adapt and
restructure.
Improved scalability Structured and modular design with
Improved maintenance Vendor-supported long-term contract as part of the
system procurement
Global outreach Extended modules such as CRM and SCM
E-Commerce, e-business Internet commerce, collaborative culture
75

ERP Disadvantages
Disadvantages How to overcome
Time-consuming Minimize sensitive issues, internal politics and raise
general consensus
Expensive Cost may vary from thousands of dollars to millions.
Business process reengineering cost may be
extremely high
Conformity of the
modules
The architecture and components of the selected
system should conform to the business processes,
culture and strategic goals of the organization
Vendor dependence Single vendor vs. multi-vendor consideration, options
for “best of breeds,” long-term committed support.
Features and
complexity
ERP system may have too many features and
modules so the user needs to consider carefully and
implement the needful only
Scalability and global
outreach
Look for vendor investment in R&D, long-term
commitment to product and services, consider
Internet-enabled systems
76

Introduction to ERP.PPT

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