Enterprise Resource Planning (ERP)/ Enterprise Systems
Upcoming SlideShare
Loading in...5
×
 

Enterprise Resource Planning (ERP)/ Enterprise Systems

on

  • 3,525 views

 

Statistics

Views

Total Views
3,525
Views on SlideShare
3,525
Embed Views
0

Actions

Likes
1
Downloads
296
Comments
1

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Enterprise Resource Planning (ERP)/ Enterprise Systems Enterprise Resource Planning (ERP)/ Enterprise Systems Document Transcript

  • OUTLINE Enterprise Resource ERP Background What is ERP? Planning (ERP)/ Benefits & Risks of ERP Enterprise Systems ERP Implementation ERP Market and Vendors ERP Trends Jai-Yeol Son Credits: Yair Wand MIS Division, Sauder School of Business University of British Columbia Jai Son, Sauder School of Business, UBC 2 ERP Background ERP Background Toward ERP: Information Systems in Organizations Toward ERP: From MRP to ERP Inventory control systems 1960s Individual IS Integrating ISs MRP (Material requirement planning) Support individual Integrate various Inventory + purchasing + production scheduling functional units and information systems operational tasks 1960s, 1970s ERP MRP II MRP + finance, HR In-house Development Off-the-shelf Products ISs are developed by IT Ready-to-use information 1970s, 1980s people inside the systems purchased from organization the market ERP MRP II + other functions of mktg and sales 1980s, 1990s Jai Son, Sauder School of Business, UBC 3 Jai Son, Sauder School of Business, UBC 4 ERP Background ERP Background Toward ERP: The Role of ERP in BPR Business Process Reengineering ERP includes “best business practices in the form of a blueprint.” Choose the best business practices built into ERP BPR Common Approaches systems • Radical redesign of processes to exploit This blueprint equipped in ERP serves as a model for • Start from scratch and information redesign processes BPR. technology (IT) • “Abandon the outdated Therefore, it is essential to understand what ERP can do • Internal Staffs rules that underline before designing the business process. • Hire consultants current business processes.” • Adopt ERP Packages • Not just automation Jai Son, Sauder School of Business, UBC 5 Jai Son, Sauder School of Business, UBC 6
  • What is ERP? What is ERP? ERP – What is it? ERP – What is it? ERP is fully integrated off the s elf software! - - h A Business Software system that enables an facilitates the flow of information among all the organization to effectively and efficiently manage processes of an organization’s supply chain. its resources including material, people, plant and software solution that addresses that enterprise equipment across the entire enterprise. needs taking the process view of an organizational goals tightly integrating all functions (usually TPSs) of Source: ERP’s Second Wave. Deloitte Consulting an enterprise A set of applications to operate and manage most ERP allows aspects of an organization, based on an integrated data sharing b/w different systems (modules). database. joint execution of business processes among different systems (modules). Jai Son, Sauder School of Business, UBC 7 Jai Son, Sauder School of Business, UBC 8 What is ERP? What is ERP? ERP Process Example (Davenport p. 123) Examples of ERP Modules (SAP) Sales rep in Paris prepares a formal contract using the ERP system. Sales rep enters an order for computers into a ERP system. It triggers all Financials Operations & Logistics other activities in other part of the system such as: • A/R and A/P • Inventory management The system checks the customer’s credit limit. • Asset accounting • Material req’t planning The system schedules the shipment. • Cash management • Materials Management • General ledger • Production planning The system determines necessary parts. • Profitability analysis • Purchasing The system reserves the parts and orders parts from suppliers, if • Financial consolidation • Shipping necessary. • and more • and more The system schedules assembly in the company’s factory in Taiwan. The system updates sales and production forecasts. The system updates the sales rep’s payroll account with the correct commission. Sales & Marketing Human Resources • Order management • Human-resource time The system updates A/P and A/R ledgers. • Pricing accounting The system updates corporate cash levels. • Payroll • Sales management • Sales planning • Personnel planning Imagine that how long it would take to complete these activities with a • Travel Expense number of fragmented information systems throughout the company! Jai Son, Sauder School of Business, UBC 9 Jai Son, Sauder School of Business, UBC 10 What is ERP? What is ERP? SAP R/3 Applications Partitioned by the five functional areas ERP - How does it work? Modules Production Logistics Financial Human Marketing Based on a DBMS platform Res.mngt Res. Mngt & sales Eases exchange of information and data A/P and A/R PP Production Planning x among different corporate divisions QM Quality Management x Order Mgt Unites major business practices within a ERP MM Materials Management x x single group of software modules Production PM Plant Maintenance x Modules run on client/server planning FI Financial Accounting x environment Inventory Control IM Investment Management x Each module works separately, CO Controlling x DBMS Purchasing performing data processing functions HR Human Resources x SD Sales & distribution x x Payroll DB . . . Client/server environment Jai Son, Sauder School of Business, UBC 11 Jai Son, Sauder School of Business, UBC 12
  • Benefits and Risks of ERP Benefits and Risks of ERP 5 Major Reasons of ERP Projects Benefits of ERP Integrate financial information Integrate customer order information Standardize and speed up manufacturing Reduce inventory Standardize HR information Source: ERP’s Second Wave. Source: ERP Executive Summary – CIO Magazine Deloitte Consulting Jai Son, Sauder School of Business, UBC 13 Jai Son, Sauder School of Business, UBC 14 Benefits and Risks of ERP Benefits and Risks of ERP Benefits of ERP “Success” Stories Microsoft Spent ten months and $25 million installing SAP R/3 to replace more than 30 separated systems supporting the company’s financial, operations, and human resource groups in 26 subsidiaries. Resulted in annual savings of $18 millions and Bill Gates calls SAP “an incredible success story” Owens-Corning (building supplies manufacturer) Wanted to offer one-call shopping for all the exterior siding, insulation, pipes, and roofing material that builders need. Implement SAP R/3 and the sales staff was able to come up with a single product list and a single price list. Was able to track finished goods inventory more easily The estimated savings were more than $65 million annually Source: ERP’s Second Wave. Deloitte Consulting Jai Son, Sauder School of Business, UBC 15 Jai Son, Sauder School of Business, UBC 16 Benefits and Risks of ERP Benefits and Risks of ERP Risks of ERP Risks of ERP High initial investment Systems and strategy clash! $100M~200M for large companies is not uncommon It only provides “a generic solution” (Davenport, p. 125) Even small organizations may need to spend more than $1 million. Most common reason in ERP failure Consulting (30%); HW/Infrastructure (25%); Implementation Team Only some degree of customization possible … but the system’s (15%); Training (15%); Software (15%) complexity makes major modifications impracticable Technical difficulty in implementing ERP In the past, companies would first decide how they wanted to do Lengthy implementation time business and then choose a software package that would support their proprietary processes. They often rewrote large portions of Typically 1 to 4 years software code to ensure a tight fit. With ERP, the business must be If used by nearly all the companies in an industry, it may modified to fit the system. undermine a company’s sources of differentiation – competitive advantage. As a CEO says, “competitive advantage in this industry might just come from doing the best and cheapest job at implementing SAP.” (Davenport, p127) Jai Son, Sauder School of Business, UBC 17 Jai Son, Sauder School of Business, UBC 18
  • Benefits and Risks of ERP Benefits and Risks of ERP Issues/Obstacles of ERP Projects “Unsuccess” Stories SAP and Anderson consulting (contractor for installing SAP for FoxMeyer) faces a $500 million lawsuit from the trustee for bankrupt FoxMeyer Corp., charging that the failure of an SAP system led to the drug distributor's collapse--a charge SAP executives deny. Hershey’s reported a 19% drop in 3rd quarter net earnings in 1999, and they blamed that SAP software glitches impaired their ability to meet Halloween commitments with distributors and retailers. Updates: Hershey finally fixed the problems with a newly upgraded SAP R/3 4.6 in 2001. The $4.6 billion company is now able to track daily sales and shipments of classic Halloween candy. Source: ERP’s Second Wave. Jai Son, Sauder School of Business, UBC Deloitte Consulting 19 Jai Son, Sauder School of Business, UBC 20 Benefits and Risks of ERP ERP Implementation Minimizing the Risks of ERP Implementing an ERP Application Stress the enterprise, not the system (e.g. Elf Atochem, How can a “generic” ERP be adapted to the Davenport, p. 128) specific needs of an organization? Don’t be too ambitious! Make decisions on what processes should be supported by ERP, Customizing processes: configuration tables then install only the necessary modules Extension: Specialized programming language Redefine/rework processes so that they can be aligned with the requirements built into an ERP system to be User exits (to call other applications and custom implemented routines) Necessary to take full advantage of the new ERP system Code modification May need to establish a new position (e.g. demand manager at Elf Atochem, Davenport, p. 130) Jai Son, Sauder School of Business, UBC 21 Jai Son, Sauder School of Business, UBC 22 ERP Implementation ERP Market and Vendors ERP Implementation ERP Market and Vendor 1. Decide on which functions will be supported by a new ERP system 2. Decide on which modules to install 3. Customize (configure) the system to achieve the best possible fit with your company’s processes 4. Make a decision on implementation strategies 5. End user training Jai Son, Sauder School of Business, UBC 23 Jai Son, Sauder School of Business, UBC 24
  • ERP Market and Vendors ERP Market and Vendors ERP Vendors: SAP ERP Vendors: Oracle Country of origin: Germany Country of origin: USA Founded - 1972, by five former IBM employees in Germany Year: 1977 1979: R/2 (R- realtime) for mainframe applications Name of product: Applications 11i 1992: R/3 for Client Server environments Market Share: about 25% (2001) Market Share: 8% (2001) Translated into “Systems, Applications, and Products in Data Typical client: Fortune 1000 Processing” Particularly strong in service intensive environments Went public in 1988 like finance and banking industries Recognized as the leader of ERP market in the world Strong in Financials and Supply Chain Mgt Modules Acquired Kiefer&Veittinger, a leading German CRM vendor in 1998 Suitable for wide range of industries and organizations Leader in adding E-commerce capabilities such as Particularly strong in automotive, banking, consumer products industries CRM features (built own CRM) Jai Son, Sauder School of Business, UBC 25 Jai Son, Sauder School of Business, UBC 26 ERP Market and Vendors ERP Market and Vendors ERP Vendors: PeopleSoft ERP Market and Vendors Country of origin: USA Year: 1987 Moderate Growth after 1999 Name of product: Peoplesoft Market Share: 8% (2001) The revenue of major ERP companies will grow at a 14 Target the service sector with products designed to percent improving to $36 billion in 2005 from $21 billion help companies handle their intangible costs; in 2001, due to strong growth Has a powerful HR module, with additional packages in other products like CRM. However, ERP sales growth of varying quality. would slow, growing at only a 5 percent from $16.9 Billion in Strong in Service intensive environments 1999 to $21.4 Billion in 2004 Well suited for government, municipalities, and professional services Source: AMR Research Jai Son, Sauder School of Business, UBC 27 Jai Son, Sauder School of Business, UBC 28 ERP Market and Vendors ERP Market and Vendors ERP Vendor Comparison: ERP Market and Vendors ERP Packages for Manufacturing Firms Top 5 Worldwide ERP Software Application New License Revenue Market Share - In 2002, worldwide ERP new license software revenue totaled $5 billion, Continuous down from $5.5 billion in 2001. Process Batch 2002 2001 Company Market Share (%) Market Share (%) Repetitive SAP AG 25.1 24.7 Oracle 7.0 7.9 Make-to-Stock PeopleSoft 6.5 7.6 SAGE 5.4 4.6 Discrete Assemble-to- Microsoft Business Solutions 4.9 4.6 Order Others 51.1 50.3 Engineer-to- Total Market Share 100.0 100.0 Order <Source: Gartner Group: ERP Vendor Guide> Source: Gartner Dataquest (June 2003) Jai Son, Sauder School of Business, UBC 29 Jai Son, Sauder School of Business, UBC 30
  • ERP Market and Vendors ERP Trends ERP Vendor Comparison: ERP Packages for Manufacturing Firms ERP Trends and Future 8 8 7 7 Small to midsize companies are targeted. 6 6 The Accelerated ERP implementation approach E.g., SAP’s ASAP (accelerated SAP) methodology 5 5 4 4 Providing ERP services via ASP 3 3 Adding more decision support tools 2 2 Adding more functionalities such as CRM 1 1 and SCM 0 0 ERP II (named by Gartner Group) Continuous/ Batch/ Repetitive/ Assemble- Engineer Batch Repetitive Make-to-Stock to-Order -to-Order “Bolt-on” software SAP BaaN Oracle PeopleSoft Average <Source: Gartner Group: ERP Vendor Guide> Jai Son, Sauder School of Business, UBC 31 Jai Son, Sauder School of Business, UBC 32 ERP Trends ERP Trends ERP II Components ERP Trends and Future Toward more open, flexible Internet-based technologies (e.g., XML, HTTP) that makes a firm easier (1) to integrate with other systems in the company, and (2) to collaborate with its business partners Freestanding components, not interdependent modules, that enable firms to Choose different vendors for each of the components Manage the integration of components of multiple vendors A “single instance” ERP ERP Makeover <Source: Gartner Report> Jai Son, Sauder School of Business, UBC 33 Jai Son, Sauder School of Business, UBC 34 Questions/Comments Selected References “ERP’s Second Wave: Maximizing the Value of ERP-Enabled Processes,” Deloitte Consulting. James and Wolf, “A second wind for ERP,” The McKinsey Quarterly, 2000, Number 2. Kalakota and Robinson, e-business: Roadmap for Success, Addison Wesley, 1999. “ERP Executive Summary,” CIO Magazine. Davenport, T. H. “Putting the Enterprise into Enterprise Systems,” Harvard Business Review, July-August 1998, pp. 121-131. Mabert, V. A., Soni, A., and Venkataramanan, M. A. “Enterprise Resource Planning: Common Myths vs. Evolving Reality,” Business Horizons, May-June 2001, pp.69-76. Jai Son, Sauder School of Business, UBC 35 Jai Son, Sauder School of Business, UBC 36