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Introduction: Enterprise Systems for Management
 

Introduction: Enterprise Systems for Management

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    Introduction: Enterprise Systems for Management Introduction: Enterprise Systems for Management Presentation Transcript

    • Learning Objectives • Understand the information systems evolution and its historical role in the organization leading to systems integration and Enterprise Resource Planning (ERP). • Learn about ERP systems and evolution, components, and architecture; understand the benefits and drawbacks of implementing ERP systems and how they CHAPTER 1 can help an organization improve its efficiency and worker productivity. • Gain an overview of the implementation process (e.g., Introduction to the ERP life cycle, business process reengineering Enterprise Systems for project management, and change management). Management Understand the role of people, vendors, consultants, and the organization in making the ERP implementation process successful. • Comprehend the ethical, global, and security challenges while implementing an ERP system, and look at the ERP vendors and industry trends. 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Preview Information Systems in Organizations• In the early days of ERP implementation most management did not understand the magnitude of • Information Systems are a critical component of a successful organization today. issues an organization has to consider before, during, and after implementation. • Information Systems provide a high level of computer automation to support business functions such as:• ERP systems are very different from conventional - Accounting - Finance packaged software, such as Microsoft Office and others. - Marketing - Customer Service• There are no shortcuts when it comes to implementing - Human Resource Management - Operations an enterprise system. • Information Systems play a major role in primary and secondary activities of an organization s value chain 3 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 4 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Information Systems in Organizations (Cont’d) Information Systems in Organizations (Cont’d)• Information systems include hardware, software, data • Information Technology is thus a component of processes, and people. Information Systems.• Information Technology includes only the hardware and • Information systems generally use a three-phased software components. model of input, process, and output.• The role of an information system is to process data into information using information technology, business processes, and people resources. 5 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 6 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure 1-1 Information System Components Figure 1-2 Phases of an Information System 7 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Figure 1-3 Management Pyramid with Information Role of Information Systems in the Enterprise Requirements • Business organizations have become more complex due to increased layer of management hierarchy and increased level of coordination across departments. - Each department has different information needs. • No single information system can support all the business needs of an organization. • Management is generally categorized into three levels- Strategic, Middle, and Operational. - Each management level has different information requirements. 9 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 10 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Current Scenario Information Silos and Systems Integration• Over time, Information Systems create a hodgepodge of independent nonintegrated systems ultimately creating • Islands of Information bottlenecks and interfering with productivity. • Difficult to get timely & accurate information • Heterogeneous Hardware & Software platforms & practices• Organizations need to be agile and flexible and will • Poor connectivity between different organizational locations require their information systems to have integrated • Sticking with obsolete technology data, applications, and resources from across the organization. • Resist to change • Lack of proven man-power to develop integrated software• To compete effectively, organizations have to be customer focused. - This requires cross-functional integration among the accounting, marketing and other departments of the organization. 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • WHAT IS AN ERP SYSTEM? Enterprise Resource Planning (ERP) SystemsWHAT IS AN ERP SYSTEM?• Enterprise Resource Planning Systems are the first generation of enterprise systems meant to integrate data and support all the major functions of organizations.• ERP systems integrate various functional aspects of the organization as well as systems within the organization of its partners and suppliers.• The goal of an ERP system is to make the information flow dynamic and immediate, therefore, increasing its usefulness and value. 13 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Integrated Data Model Figure 1-4 Integrated Systems - ERP • The heart of any ERP exercise is to create an integrated data model • The ERP application must be capable to provide true integration capability over the entire enterprise system to provide data for employees, suppliers and customers • General accounting to provide for multiple ledgers/sub- ledgers on a division by division basis. Online management summaries and consolidation eliminate extensive paperwork handling • Ability to drill down through successive levels of data provided • ERP and execution model and its flexible sets of integrated applications will keep the operations flowing efficiently • ERP should be looked upon as the acquisition of an asset and not as an expenditure 15 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16
    • Enterprise Resource Planning (ERP) Systems (Cont’d) Why ERP ?• Another goal of ERP is to integrate departments and functions across an organization into a single • For Management - to know what is happening in the infrastructure sharing a common database and serving company the needs of each department. • One solution for better Management • For cycle time reduction• ERP systems replace an assortment of systems that • To achieve cost control & low working capital typically existed in organizations. Moreover, ERP solves • To marry latest technologies critical problem of integrating information from different • To shun the geographical gaps sources and makes it available in real-time. • To satisfy the customers with high expectations • To be Competitive & for survival 17 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 18 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall What are some of the Enterprise ERP Characteristics system drivers?• Systems Not Y2K Compliant• Disparate Systems • Links all business processes automatically• Poor/Uncompetitive Performance • Reduces the number of legacy systems• Poor Quality/Visibility of Info • Reduces inter-processing time (transactions occur one• Cost Structure Too High time at the source)• Not Responsive Enough to Customers • Maintains an audit trail of all transactions• Complex, Ineffective Business Processes • Utilizes a common database• Business Processes or Systems Not Integrated • Performs internal conversions automatically• Unable to Implement New Business Strategies • (tax, foreign currency, legal rules for payroll)• Business Becoming Global • Improves customer service by putting data at the• Difficult to Integrate Acquisitions fingertips of employees• Obsolete Systems • Involves employees in the entire functional cycle• Inconsistent Processes• Unable to Support Growth 19 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 20 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Evolution of ERP EvolutionTimeline System Platform1960s Inventory Management Mainframe legacy systems using third & Control generation software-(Cobol, Fortran)1970s Materials Requirements Mainframe legacy systems using third Planning (MRP) generation software-(Cobol, Fortran)1980s Materials Requirements Mainframe legacy systems using fourth Planning (MRP-II) generation database software and manufacturing applications.1990s Enterprise Resource Mainframe client-server systems using fourth Planning generation database software and package software.2000s Extended ERP or ERP- Client-server systems using Web platform, II open source with integration to fifth generation applications like SCM, CRM, SFA. 21 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 22 Core and Extended ERP Components Figure 1-5 ERP Components23 24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • ERP Systems Components Figure 1-6 ERP Components Integration • An ERP system consists of: Hardware Servers and peripherals Software Process Operating systems and database Information Organizational data from internal and external sources Process Business processes, procedures, and policies People End users and IT staff 25 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 26 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure 1-7 Example of Architecture of ERP at Large ERP Architecture University• The architecture of an ERP system influences the cost, maintenance, and the use of the system.• The ERP architecture helps the implementation team build the ERP system for the organization.• If purchased, ERP architecture is often driven by the vendor (Package-Driven Architecture).• There are two types of architectures. - Logical focuses on the supporting needs of the end users. - Physical focuses on the efficiency of the system. 27 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 28 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Figure 1-9 Tiered Architecture Example of ERP Figure 1-8 Logical Architecture of an ERP System System 29 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 30 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall System Benefits of an ERP System System Limitations of an ERP System• Integration of data and applications across functional areas (i.e., data can be entered once and used by all applications; thus improving accuracy and quality of the • Complexity of installing, configuring, and maintaining the data). system increases, thus requiring specialized IT staff, hardware, and network facilities.• Improvements in maintenance and support as IT staff is centralized. • Consolidation of IT hardware, software, and people resources can be cumbersome and difficult to attain.• Consistency of the user interface across various applications means less employee training, better • Data conversion and transformation from an old system productivity, and cross-functional job movements. to a new one can be tedious and complex process.• Security of data and applications is enhanced due to • Retraining of IT staff and end users of the new system better controls and centralization of hardware. can produce resistance and reduce productivity 31 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 32 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Business Benefits of an ERP System Business Limitations of an ERP System• Agility of the organization in terms of responding to • Better customer service due to quicker information flow across departments. changes in environment for growth and maintaining market share • Efficiency of business processes are enhanced due to the re-engineering of business processes.• Sharing of information across functional areas helps collaboration between employees. • Retraining of all employees with the new system can be costly and time consuming.• Linking and exchanging information in real-time with • Change of business roles and department boundaries supply-chain partners improves efficiency leading to can create upheaval and resistance to the new system. lower costs. 33 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 34 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall ERP and Business Processes ERP and Business Processes ERP and Cross-Functional Business Processes Cross-Functional Business Processes35 36
    • ERP and Business Processes ERP Implementation • Before implementing ERP, an organization has to plan and understand the life cycle of these systems. • The key to a successful implementation is to use a proven methodology, take it one step at a time, and begin with an understanding of the ERP life cycle. • ERP system implementations are very risky, and using a well-defined project plan with a proven methodology will assist in managing those risks. ERP and Business Process Change • There must be a strong well-communicated need to make the change from the existing information systems/applications to an ERP system. 38 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall37 Figure 1-11 ERP Life Cycle Figure 1-12 ERP Implementation Methodology 39 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 40 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Software and Vendor Selection Vendor Evaluation • Business functions or modules supported by their software • It is best for an organization that does not have the • Features and integration capabilities of the software experience in developing ERP systems to purchase one • Financial viability of the vendor as well as length of time on the market. they have been in business • Licensing and upgrade policies • Before selecting a vendor, the organization must • Customer service and help desk support carefully evaluate its current and future needs in • Total cost of ownership enterprise management systems. • IT infrastructure requirements • Third-party software integration • Review the organization’s existing hardware, network, • Legacy systems support and integration and software infrastructure, and the resources available for the implementation. • Consulting and training services • Future goals and plans for the short and long term 41 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 42 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Operations and Post-Implementation Figure 1-14 Project Management• Going live (“Go-live”) is one of the most critical points in a project’s success.• It is vital to focus the efforts of all project teams to ensure that task and activities are completed before going live.Five areas of stabilization are important:• Training for end-users• Reactive support (i.e., help desk for troubleshooting)• Auditing support to make sure data quality is not compromised by new system• Data fix to resolve data migration and errors revealed by audits• New features and functionalities to support the evolving needs of the organization 43 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 44 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • ERP Implementation Budget People and Organization Project Management For an ERP system to be implemented successfully, project management must provide strong leadership, a clear and understood implementation plan, and close monitoring of the budget. Consultants It is often the case for organizations without much ERP implementation experience to use implementation Hammer 2000 partners such as consultants. 45 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 46 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall People and Organization (Cont’d) ERP VendorsChange Management SAP SAP is the recognized global leader among ERP vendors Role is essential because it prepares for changes to with over 12 million users. Its solutions are for all types of how business is done. In implementing new systems, industries and for every major market. www.sap.com communicating, preparing, and setting expectations is as important as providing training and support. Oracle/PeoplesoftBusiness Process Re-engineering As the second largest ERP vendor, Oracle provides Business processes will need to be changed, solutions divided by industry category and promises long- adjusted, or adapted to the new system to use the term support for customers of PeopleSoft- (acquired in functionality of an ERP system fully. 2004). www.oracle.comGlobal, Ethical and Security Management Infor Outsourcing overseas, ethical issues, and problems The world’s third largest provider of enterprise software. It with system security have also attracted a lot of delivers integrated enterprise solutions in supply chain, attention in ERP implementation customer relationship and suppliers management 47 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 48 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • ERP Vendors (Cont’d) Implications for ManagementMicrosoft Dynamics Formerly Microsoft Business Solutions or Great Plains, • ERP systems implementation is a complex Microsoft Dynamics is a comprehensive business- organizational activity. management solution built on the Microsoft platform. - It is important to evaluate and learn from the successes and failures.Lawson Industry-tailored software solutions that include • ERP systems implementation requires strong project enterprise performance management, distribution, management oversight. financials, human resources, procurement, and retail operations. www.Lawson.com • ERP systems provide improved and added functionalitySSA Global for an organization. Acquired Baan in 2004.They claim to offer solutions that accomplish specific goals in shorter time frames and are more efficient with time. 49 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 50 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Summary Summary (Cont’d) • ERP components consist of hardware, software,• Whereas the risks for implementing an ERP are greater, information, process, and people to perform the the payoff is very high for organizations. fundamental phases of an information system: input, process, and output. • ERP system architecture is a blueprint of the actual ERP• The integration of data helps an organization to better system. There are two types of architecture: physical meet the demands of a fast and dynamic business and logical. world. • The selection of a system must be based on these needs and how well a vendor meets those needs now or• The use of ERP systems provides for integrated data in the future. and business processes, thereby creating opportunities • To be successful in implementing an ERP system, an for organizations to expand and change as their organization and its management must clearly business changes. understand the implementation process. 51 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 52 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
    • Review Questions1. How is the role of ERP system different from traditional TPS, MIS, DSS, and others? Can an ERP system support all levels of management?2. Discuss the role of ERP in organizations. Are ERP tools used for business process reengineering (BPR) or does BPR occur due to ERP implementation?3. Why is the design and selection of ERP architecture crucial for the implementation project? What are the long-term implications of selecting a wrong architecture?4. Discuss the criteria for selecting ERP vendors. Which is the most important criteria and why?5. What are the critical steps of the ERP project cycle? Discuss the critical success factors? 53 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall