MODERN ERP
SELECT, IMPLEMENT & USE TODAYS ADVANCED BUSINESS SYSTEMS
Second Edition
Chapter 1: Introduction to Enterprise Resource Planning Systems
ERP Background
Introduction of PC led to narrowly
focused information systems Duplicate data across the enterprise not shared between departments Mid late 1990s many large companies implemented Enterprise Resource Planning (ERP) which would integrate the data across the enterprise and replace outdated systems (legacy systems).
Legacy Systems: The case for not changing
The system works fine and the company sees no reason for
changing it. The costs of redesigning or replacing the system are prohibitive because it is large, monolithic, and/or complex. Retraining on a new system would be costly in lost time and money, compared to the anticipated appreciable benefits of replacing it (which may be zero). The system requires near-constant availability, so it cannot be taken out of service, and the cost of designing a new system with a similar availability level is high. Examples include systems to handle customers' accounts in banks, computer reservation systems, air traffic control, energy distribution (power grids), nuclear power plants, military defense installations, etc. The way that the system works is not well understood. Such a
What is ERP?
An ERP system is an integrated suite of
information technology applications that support the operations of an enterprise from a process perspective.
Cross-Functional serves many functions Process-Centered organized around
processes
Built upon relational database systems There is one data store, one source of the truth Sold in modules
Dont need to purchase/implement all modules More modules implemented leads to more integration
and ROI
Can cost millions of dollars and take years to
ERP-Supported Business Processes
* Core ERP Processes
Typical Modules in an ERP System
Operations (Core) Engineering Capacity Cost Management Inventory Product Configuration Quality Control Bills of Material Process Manu. Discrete Manu. Order Entry Supply Chain Planning Demand Management Financials (Core) Scheduling Quality Control Shop Floor Mgmt. Purchasing Supplier Scheduling Sourcing
General Ledger Accounts Receivable
Project Costing Activity Management Human Resources Time & Attendance Sales and Marketing Customer Contact
Cash Management Fixed Assets
Projects Project Billing Resource Availability Human Resources (Core) Payroll Benefits Commissions Call Center Support
Accounts Payable Controlling
Time and Expense Project Contracts Training Recruiting Service Analytics
Customer Relationship Management
Plus: Various Self-Service Interfaces for Customers, Suppliers, and Employees
Who Uses/Needs to know about ERP?
End User
Purchasing Manufacturing Sales Accounting/Finance Human Resources etc
Internal/external auditor
Verify that the ERP system is secure and maintains
privacy over individuals. Also has proper segregation of duties (SoD).
Consultant
Assist in implementation and or maintenance of ERP
systems
Developers
Customize the system
ERP Value Integration
The value of ERP is the opportunity to integrate an
entire organization by having a single point of entry and sharing of data across the enterprise. ERP becomes the authoritative data source: a recognized or official data production source with a designated mission statement to publish reliable and accurate data for subsequent use by users. Creates less need to reconcile data and rekey which causes inefficiencies and delays Inefficient business processes that were disjointed become much more efficient.
Before and After ERP
Legacy systems (islands of automation) may be connected with enterprise application integration (EAI) - the process of linking such applications within a single organization together in order to simplify and automate business processes to the greatest extent possible, while at the same time avoiding having to make sweeping changes to the existing applications or data structures. Not as optimal as having an integrated system, common database, and common technical infrastructure.
ERP Diffuses Best Practices
ERP systems are based on best practices For instance, SAP has thousands of best
practices embedded in their applications.
This means that any firm that installs has access to a
wide range of best practices.
Further, business practices are being added all
of the time. As new best practices are found and embedded in particular applications, they can become available for inclusion in new versions of software. As a result, there is a cycle of finding best practices, building them into the software and diffusing them out to new users.
Vertical solutions industry specific version of
ERP Facilitated Adoption of Client Server Computing
In the early 1990s ,client server computing became
available and offered many advantages over existing mainframe solutions. Client/server describes the relationship between two computer programs in which one program, the client, makes a service request from another program, the server, which fulfills the request. ERP became one of the dominant, initial corporate applications of client server computing.
Technical ERP System Benefits
Integrated processes and information systems More effective and efficient business processes
Enables organizational standardization
Eliminates information asymmetries Provides on-line and real-time information Facilitates intra- and inter-organization communication
and collaboration Can reduce complexity of application and technology portfolios
ERP System Benefits
Integrate financials Have one view of the customer Standardize manufacturing processes Reduce inventory/better visibility into
inventory Standardize information such as HR and Customer data there are othersdepends on company
ERP System Disadvantages
Standardized way of conducting business can be
a disadvantage too because levels the playing field somewhat between companies Lack of employee/user acceptance Complex solution Maintenance of hardware and software Costly and time consuming implementations
Implementation Issues
Employee resistance
They develop work arounds Sabotage implementation process Caused by lack of training (how) or understanding
of organizations motivation for adoption (why) Need Change Management to lower resistance
Technical Issues
Complex system to implement configuration
issues and possible customization issues Sometimes need expensive external consultants to assist implementation
ERP Evolution
Roots are in Manufacturing Requirements Planning
(MRP) & Manufacturing Resource Planning (MRP II)
Addressed needs of just the manufacturing environment
ERP manages resources for entire enterprise
With Y2K looming, companies began implemented
new state of the art systems (ERP) that ran on client server technology Now many companies outsource called Software as a Service (SaaS)
Multi-tenancy serve many clients from a single
instance via the Internet
Open Source ERP systems are evolving wheres
the help desk though!?
ERP Market
Billion dollar industry and growing
10% growth rate through 2012
Growth drivers
Globalization Centralization Competition Best practices etc Figure 1-2: ERP Application Revenue Estimate 2007-2012 in Billions
Source: AMR research
ERP Tiers
Tier 1 Vendor Enterprise Space -
multi-site, multinational corporations, government entities with 1000 or more employees
#1 SAP Stands for Systems, Applications and Products in Data
processing Formed by 5 former IBM engineers in 1972 in Walldorf Germany SAP AG, SAG UK, SAP North America etc Nearly 200,000 customers, over 50,000 employees Service over 20 different industries #2 Oracle More than 380,000 customersincluding 100 of the Fortune 100and with deployments across a wide variety of industries in more than 145 countries around the globe,
ERP Tiers
Tier 2 Vendors
Market towards medium sized companies, few sites, 100-999
employees Largest of all ERP tiers in number of potential customers Tier 1 vendors moving into this area and below by reducing prices and simplifying product Some vendors QAD and SSA
Tier 3 Vendors
Market towards small, single site, family run corporations, sales under
$40 million and less than 100 employees Vendors Microsoft Dynamics GP, NetSuite, Made-2-Manage, SAP Business by Design, SAP Business All in One
Tier 4 Vendors
Market towards small companies that can manage with basic
accounting software Vendors Peachtree, Accpac, Quickbooks, SAP Business One, SAP Business by Design
An Enterprise System - Reality
In reality, an ERP implementation is usually just one part of a more complex environment, including bolt-ons, legacy applications retained, possible data warehouse(s), enterprise application integration (EAI) solutions and connections to external business partners.
