Enterprise Resource Planning -1-
Enterprise Resource Planning
ERP applications are the information backbone for contemporary manufacturing enterprises. This
paper identifies current trends in the ERP market that we believe businesses that are both current and
potential ERP users should be cognizant of in order to appropriately manage their expectations. We
will look at the basics of ERP and the key attributes. Many companies implement ERP because of some
major advantages in ERP, which we will discuss in this paper. This paper will give an in-depth
overview of ERP as a whole. The pros and cons are discussed with real life examples. SAP R/3 is one of
the major ERP packages used in the industry. SAP is suitable for asset intensive environments, public
sector and real time environments. This is the example ERP package that we will discuss in this paper.
Introduction implementing ERP one can expect all these
things to proceed smoothly and in an orderly
What is ERP? fashion. Tracking an order at any time is easy
once this is done. There are many more
Enterprise resource planning software, or ERP, advantages which we will see as we go ahead in
doesn't live up to its acronym. Forget about this paper.
planning—it doesn't do that—and forget about
resource, a throwaway term. But remember the
enterprise part. This is ERP's true ambition. It What is an enterprise system?
attempts to integrate all departments and
functions across a company to create a single Enterprise systems include ERP software and
software program that runs off one database. It related packages as advanced planning and
is basically business software that enables an scheduling, sales force automation, sales
organization to effectively and efficiently forecasting, customer relationship management,
manage its resources including material, product configuration, etc.) . Enterprise
people, plant and equipment across the entire systems come into play when the situation is
enterprise. It is about creating one database for really complex and ERP package cannot handle
the entire firm. ERP relates to the software it. That’s when a firm goes for an extra package
infrastructure that holds the entire company like APS (Advanced Planning and Scheduling).
together internally, on the one hand, and This does not happen often. Most of the time
supports the external business processes the ERP software itself will support all the
company engages in, on the other. requirements of a firm.
That's a tall order. Each of those departments,
like finance or human resources, typically has Key Attributes of ERP:
its own computer system, each optimized for
the particular department. Typically, when a There are three key attributes to ERP, which
customer places an order, the order begins a are as follows:
mostly paper-based journey from in-basket to
in-basket around the company, often being 1 Automate and integrate the majority
keyed and re-keyed into different computer of an organization’s process – An
systems along the way. All that lounging ERP software automates all the
around in in-baskets causes delays and lost business processes such as order
orders, and all the keying into different fulfillment and attempts to integrate all
computer systems invites errors. Meanwhile, no departments and functions across a
one truly knows the order status. After
Enterprise Resource Planning -2-
company onto a single computer system Hawaii will be able to see the
that can serve all those different transactions at once and forecast the
departments' particular needs. future sooner and more accurate than
before. So this is the advantage when a
2 Share common data and best firm implements ERP.
practices across the enterprise – This What’s the change imperative?
is a very important feature of ERP. For
example Johnson & Johnson has two There are five major reasons why companies
sites, one in Scotland and one in undertake ERP projects.
California. Both these sites purchase
rubber from one vendor but with 1. Integrate Financial Information - As
different names. They didn’t realize the CEO tries to understand the
that they would get discounts if they company's overall performance, he may
buy under the same name. Recently find many different versions of the
they have implemented J.D.Edwards truth. Finance has its own set of
package, which is an ERP software, revenue numbers, sales have another
which shared the data across both the version, and the different business units
sites and purchased rubber from the may each have their own version of
same vendor with the same name. Now how much they contributed to revenues.
they save a lot of money because of ERP creates a single version of the
this. truth that cannot be questioned because
everyone is using the same system.
“Best Practices” is a widely used term
in ERP context. These two sites, which 2. Integrate customer order information
we saw now, follow different practices - ERP systems can become the place
and it becomes tough for a person who where the customer order lives from the
goes from one site to another site to time a customer service representative
learn the new process and get receives it until the loading dock ships
accustomed to it. So they compared the the merchandise and finance sends an
processes and chose the one that is the invoice. By having this information in
best out of the two. one software system, rather than
scattered among many different
3 Produce and access information in a systems that can't communicate with
real-time environment – Accessing one another, companies can keep track
information in a real time environment of orders more easily, and coordinate
helps in a big way to predict the future manufacturing, inventory and shipping
as one gets immediate information. For among many different locations at the
example a pineapple producer based in same time.
Hawaii and distributing pineapples all
over the USA would like to get real 3. Standardize and speed up
time information as to how many manufacturing processes-
pineapples were sold in each state. manufacturing companies —especially
Usually the person in Hawaii will send those with an appetite for mergers and
information to each sales representative acquisitions—often find that multiple
in each of the state and each of the business units across the company
sales representatives will send make the same widget using different
information at the end of each day. This methods and computer systems. ERP
will not help the person in Hawaii to systems come with standard methods
forecast the future. So after for automating some of the steps of a
implementing ERP all the transactions manufacturing process. Standardizing
can be done through a PDA and all the those processes and using a single,
transactions will be updated once the integrated computer system can save
transaction is done. So the person in time, increase productivity and reduce
Enterprise Resource Planning -3-
1. Poor/uncompetitive performance -
4. Reduce inventory - ERP helps the This term is self-explanatory. When
manufacturing process flow more your company is lagging behind in the
smoothly, and it improves visibility of business world and losing out on
the order fulfillment process inside the customers then you have to implement
company. That can lead to reduce ERP.
inventories of the stuff used to make
products (work-in-progress inventory), 2. Inconsistent reporting - This is a
and it can help users better plan normal thing in companies that do now
deliveries to customers, reducing the have ERP. For example a particular
finished good inventory at the products shipping may have been done
warehouses and shipping docks. To and may not have been updated in the
really improve the flow of your supply inventory system. This inconsistent
chain, you need supply chain software, updating or reporting will result in lots
but ERP helps too. of problems and eventually dissatisfy
5. Standardize HR information - 3. Current systems unable to support
especially in companies with multiple growth - ERP supports growth in
business units, HR may not have a company. ERP software is not like any
unified, simple method for tracking other stand-alone application. It grows
employees' time and communicating with your company and any technology
with them about benefits and services. growth is also supported by ERP
ERP can fix that. software. ERP helps to implement new
business strategies too.
The reason to integrate data is it offers many
advantages to the firm as a whole. Sometimes 4. Customer responsiveness not
you wonder why you have two names John optimal- Satisfying customer is the
Smith and Bob Smith with the same address. major criterion for achieving success in
This is just a small confusion that happens in business. When a customer is not
daily business. The solution for this problem is satisfied you automatically lose
to integrate all the information into one business. ERP helps in making the
database. If a firm has only one database, then customer responsiveness optimal.
data needs to be entered only once at a single Eventually helps in winning more
place. This reduces data entry errors to a great customers.
extent. Data that results from very different
disconnected applications is inconsistent. 5. Business becoming global - When a
Integrating information into one pool helps firm has plans to globalize its
ERP software’s to provide intelligent operations implementing ERP is a
information by correlating data from different must. ERP can help manage multiple
modules. All business processes, all employees international sites, global sourcing of
who touch the application, and all the parts.
executives who make decisions for the
company see the same version of reality, in real 6. Recent mergers or acquisitions -
time, all the time. Manufacturing companies, which have
an appetite for mergers and
acquisitions, are helped as said earlier
Signs: in this paper.
There are a few danger signs that indicate that 7. Business processes or systems not
your company needs ERP implementation. They integrated – When different systems in
are as follows: a firm are not integrated together the
Enterprise Resource Planning -4-
problem of inconsistent data and around in in-baskets causes delays and lost
inconsistent reporting arises. To solve orders, and all the keying into different
this problem it is a must to implement computer systems invites errors. All this while
ERP. the sales and marketing departments try to
forecast the future sales and predict the future,
which is very difficult with rough figures.
Potential Modules of ERP: Meanwhile, no one in the company truly knows
what the status of the order is at any given
There are many potential modules in ERP. point because there is no way for the finance
Some modules are Equipment maintenance, department, for example, to get into the
Payroll, sales force automation, Human warehouse's computer system to see whether
resources, Customer Relationship management, the item has been shipped. "You'll have to call
Procurement, Order Management, Supply Chain the warehouse" is the familiar refrain heard by
management. It is not a must that all companies frustrated customers. Finally the customer is
who implement ERP should go for all these not satisfied and you lose that customer. This is
modules. It depends on the extensiveness of the what happens in a company that has separate
company and what all modules it has in it. All computer systems.
these modules are linked together and one need
not develop these modules using any software Scenario 2:
like Jdeveloper. All these modules already exist In a company, which has implemented ERP,
and the job is to integrate these modules everything goes on smoothly and well planned.
together and make it work in a synchronized When a customer places an order for a
manner. computer, the system first sends
acknowledgement e-mail to the customer
saying that his order has been received. If the
customer had used a credit or debit card, the
Order processing: system checks whether the credit limit is good.
If it finds that the credit limit is not good, it
An example that we are going to see in this rejects the order and sends out an email to the
section is Order Processing. We will see two customer saying that he has a problem with the
scenarios. The first is where this takes place in credit or debit card. If the credit limit is good,
a firm that has not implemented ERP and the then the system goes ahead and generates a
next is a firm that has ERP implemented in it. Customer number, an Order number, Estimated
This is the scenario where ERP is not After doing this system sends out an email to
implemented in the firm. Typically, when a the customer giving all these details. It does a
customer places an order, that order begins a whole lot of things after this. It starts with
mostly paper-based journey from in-basket to scheduling the shipping and then reserves the
in-basket around the company, often being materials and orders parts from suppliers. The
keyed and rekeyed into different departments' next job for the system is to schedule the
computer systems along the way. At the first assembly and to update the sales and forecast
step, the customer representative enters the data database. MRP (Material Requirements
into the customer database and then outputs this Planning) and BOM (Bill’s of Materials) are
data to the warehouse database where the generated next. MRP is an acronym for
inventory is set-aside for the customer. Then material requirement planning, a process used
updated data has to be entered into the shipping to calculate the amount of raw materials
system and then into the inventory system. necessary to manufacture a specified number of
products. MRP uses the bill of materials from
After this is done, then again the data has to be the engineering drawings or CAD techniques
entered into the billing system, which may or such as attribute assignments. MRP has evolved
may not be integrated with the corporate into material resource planning, which includes
financial database. If these two do not tally the both materials and financing. Bill Of Materials
there is lot of confusion. All this lounging
Enterprise Resource Planning -5-
(BOM) is a complete list of the components, 7. ERP applications include a company’s
which make up the finished goods. The BOM reach beyond its walls — to its
should include part number, quantity, and suppliers, customers, and partners
description. An indented Bill of Materials
includes descriptions of sub assemblies and
how they relate to the finished goods. The Disadvantages of ERP:
BOM is an essential part of the logistics
management process. And finally the system 1. One cannot install ERP and sit back
calculates product cost and profitability and and relax saying that ERP will take the
updates the accounting, financial records. As business to the top. A firm has to
we can see all the process go ahead smoothly change its entire business process to
and well planned. So there is no scope for suit the needs of ERP implementation.
confusion in this process.
2. An ERP will not resolve failures or
weaknesses in the underlying business
Benefits of ERP: model.
1. Scalability - ERP solutions are 3. Don’t expect instant gains!
designed to grow with your company.
Unlike some stand-alone applications, 4. Try not to change the base software!
they do not “top out” without transition
paths to other solutions, leaving you to 5. Don’t fail to train the staff! The firm,
start over from scratch with a new and which is implementing ERP, will have
different application. to take effort and spend lots of money
to train the people to help them use the
2. Vendor management – When you have system.
plethora of vendors, say 800 vendors, it
is very difficult to handle all of them. 6. An ERP will not necessarily make pure
An integrated suite gives you one data entry faster. GIGO – you can only
solution supplier to work with. report and use the data you capture.
3. Functionality - Access to the 7. Enforce acceptance of change in your
functionality required to run the organization.
business over time at an affordable
price point. It may not be the cheapest 8. It will not necessarily make pure data
choice at first. But it will usually be the entry faster. GIGO – you can only
most economical in the long run as report and use the data you capture.
your business needs grow and change.
9. It will not necessarily be simpler to
4. Reliable service and support - The use. More capabilities…more
ability to access affordable service and complexities.
support is critical. It is easier to
support an integrated ERP environment 10. ERP will not single-handedly transform
than a hodgepodge of different you into an “e-business”.
11. Don’t underestimate the cost! The
5. Saves time move to ERP is a project of
breathtaking scope, and the price tags
6. There are lots of potential savings for a on the front end are enough to make
firm when it implements ERP. Cisco even the most placid CFO a little
claims $1.3B from their ERP twitchy. In addition to budgeting for
implementation. software costs, financial executives
should plan to write checks to cover
Enterprise Resource Planning -6-
consulting, process rework, integration major differences, R/3 goes beyond material,
testing and a long list of other expenses labor, and production-centered manufacturing
before the benefits of ERP appear. systems to integrate all functions of the
Underestimating the price of teaching business, whatever they care called. From
users their new job processes can lead hiring, training, and firing decisions to running
to a rude shock, and so can failure to the sales campaign to tracking the portfolio of
consider data warehouse integration assets owned by a company, R/3 provides
requirements and the cost of extra integrated software support. R/3 can be viewed
software to duplicate the old report as a software image of the major business
formats. Oversights in financial processes of an organization.
planning can send the costs of an ERP
project spiraling out of control. The As we’ve discussed, SAP R/3 can support the
impact will be far greater than any operation of multiple international sites, global
other systems project you have sourcing of parts and services, global
undertaken. distribution, and provide appropriate
performance metrics for operation around the
There are many major ERP players in the world. For instance, a company’s US sales
business market. Some of the major ERP office may be charge of marketing, selling and
players in the market are Oracle, SAP, servicing a product assembled in Germany and
Navision, BAAN, I2, People Soft, Sage, IFS, Singapore. We have gone through a short trip
SYMIX, Lawson, and JD Edwards. There are of the world. But this is what SAP R/3 is
many more in the market. This wide variety capable of. R/3 enables the company to
creates a problem for a firm that wants to understand and manage the demand places on
implement ERP. Since they have so many any of these facilities. It allows a global
options, it is very difficult to choose a enterprise to use the most suitable metrics for
particular ERP package. This is where measuring efficiency in its operations.
consultants come in to play a major role in
helping these firms choosing the right ERP SAP R/3 that is implemented in a global multi-
package for them. plant enterprise Is very different from a single
shop in Indiana, which is trying to tie its
Which is the best ERP for your firm? This is accounting department and distribution
the million-dollar question. But the answer is together. We can use the R/3 system for both of
very simple; the software that best fits your these, but will need to scale the program to the
organization and its business requirements. The match the real world needs of the enterprise.
key is to prioritize the needs and the One of the big jobs in using R/3, then, is to
requirement of the firm and then decide on an match the system to the organization. That
ERP package that suits the requirements. In this effort is called configuration.
paper we will look at SAP R/3, which is one of
the major players in the ERP market. There is also a spatial dimension in managing
the resources. They can be anywhere in the
world. Products specific to unique local
SAP R/3: markets, production facilities tailored to special
products and people working within different
SAP stands for Systems, Applications, and countries and time zones must tall be managed.
Products in Data Processing. R/3 is a SAP This global dimension is possibly the most
product that integrates the information striking feature of R/3. Due to the extensive
throughout an organization, providing the global deployment of the system, business
benefits of single data entry, immediate access practices unique to the USA, Europe and Japan
and common data. Many experts view R/3 as a are built into the system. Accounting practices,
turbo- charged version of manufacturing government tax requirements, human resource
resource planning – MRP in short – modified management practices, and even manufacturing
and strengthened to help manufacturers face the practices that are unique to different regions
challenges of the new millennium. But there are around the world are incorporated in this single
Enterprise Resource Planning -7-
system. Functions tend to be the way we organize the
people. We have people who work for the Vice
Consider the switch to the Euro currency in President of Sales, for example. SAP has
parts of Europe. To handle the new currency, chosen some names like sales, product
new conversion rules, as established by the development/marketing, supply chain
European Union, were integrated into the management, production and human resources
software. These conversion rules covered the and has even changed them from time to time.
different European currencies that were ready If a firm has other names for these SAP can
to adopt the euro on January 1, 1999. At that also support these too. SAP R/3 is designed
time the system automatically could maintain around business processes. Some major ones
accounts in the new Euro currency. are Sales order handling, quality management,
material requirements planning, and
There is still a complication, though. For a recruitment. These processes are usually not
period of time, there will be a dual currency, how people are Organized and they cut across
which the software must accommodate. During functional areas.
this unique period, customers will be able to
perform certain tasks, such as generating price Some of the key strengths of SAP R/3 is that it
lists or submitting official reports to authorities is traditionally strong in a large market. It is
in the public sector, both in Euro and their designed in such a way that it is suited for
local currency. US users see costs and process discrete manufacturing, real time environments,
in dollars, German users see this amount in asset intensive environments and public sector.
deutche marks and system handles all these An example for asset intensive environment is a
conversions automatically. SAP R/3 is also a rental car company. All cars owned by the
multi lingual package. company are its assets. Difference between an
asset and a non-asset is that an asset goes into
SAP R/3 provides efficiencies and increases in the balance sheet while a non-asset goes into
productivity through integration of information, the income statement. SAP release updates very
across the entire firm. Information that a frequently to stay in par with all the
company deals with, such as client data and technology. It is not a must for a firm that
manufacturing data, enters the system at one implements SAP to go for all the updates
time and in one place. This strategy cuts down released. It depends on the firm and how much
on the number of times information enters the it wants to spend. This is the reason why any
system, as well as on the error rates associated firm that is implementing SAP is advised not to
with multiples entries, and assures that all change the base software. If the base software
divisions of the company are dealing with is changed, then it becomes very difficult to
current and identical data. make these updates. So it is advisable not to
change the base software.
Now let’s see what integration of data and
immediacy of data means. Suppose a
production order is just completed in Germany ASAP:
and posted to the finished goods inventory.
Immediately the sales office in LA could see ASAP stands for Accelerated SAP and is SAP’s
that the item was available, the accounting approach to implementing R/3 software. It is a
department in Chicago would see it go from way of helping firms to describe them to the
work-in-process to finished goods, and so forth. system. It systematically guides you through
Now that is global integration, both from single the tasks involved in getting R/3 up and
piece of information and from a process running in your company.
viewpoint. There is no redundant information,
the data are kept in one place and made ASAP is a standard approach to implementing
available for everyone in the company to use. R/3. It carries your company through a
sequence of steps built around several pre-
When people think about their organization, structured activities that SAP has developed
they usually think in terms of functions. based on their experience in thousands of firms.
Enterprise Resource Planning -8-
They sequence these activities along what they questions about the way you do business that
call the Roadmap in five major phases. Each the project team answers. Their answers guide
phase is completed in turn on the road to R/3 the software in suggesting the processes that
implementation. SAP calls these major five your company should use to conduct business
phases: and configuring them to fit the work you do.
Project Preparation Phase: Most questions require a simple yes/no,
true/false, or select from the list kinds of
The major activity in this first phase is to answers. Some others may need details that
organize teams. The project team should be require the project team to do some research
assembled with representatives from each major and interviews to obtain the correct descriptive
function in the company. These team members information. Once the questions are answered,
should be knowledgeable about their function ASAP generates a detailed description of how
and the company. They should be individuals R/3 might be configured. It is certain that you
who should be committed to the project and will have final control over which R/3’s
will be there for the long term to carry it out. processes your firm will use, but ASAP
The project team should be given special space suggestions are a very useful part of the
to work. business blueprinting activity.
The heart of ASAP is a predefined project Another clever feature built into the ASAP
network based in SAP’s experience in software is a means for resolving issues. What
implementing systems. All the activities this feature does is, whenever something that
required to install R/3 are included in the requires a decision surfaces during the project,
software along with suggested times for their the issue is documented within ASAP. Data
completion. In the project preparation phase associated with the issue, the parties involved,
this standard project template is evaluated and etc. are all documented. The system gives the
modifications can be made based on the parties involved 36 hours to make a decision.
specific needs of the company. It is always The idea is to keep the project on track, by
recommended, as said earlier, that the standard requiring that the decision be made.
template is used. This is a way of getting the
project going without stalling at the start over The business blue print phase activities
what changes to make. represent about 20% of the total time.
Many firms rely on a consultant to install the Realization Phase:
system for them. It is a good practice to do this.
But it is important to remember three things. Phase three of the ASAP is realization phase.
First, make sure your consultant knows about During this phase the actual R/3 configuration
R/3. That is where you want the expertise. is completed, data from the legacy system are
Second, you cannot delegate management converted, and the full system is tested. It is in
issues to the consultant. Finally the consultant this phase that the system is tested under full
should also be on the project team. load conditions; similar to the way it will be
used. It is the best if people who will be
This phase takes about 10 percent of the project actually using R/3 are also involved in this
time. phase. This is also an early opportunity to get
them directly involved in the testing and
Business Blueprint Phase: implementation of the new system. This phase
takes 45% of the project time.
The second phase is the business blueprint
phase. Business blueprinting is the means by Final Preparation phase:
which the parts of the software appropriate to
your company are configured. ASAP This phase involves end-user training. SAP
incorporates an innovative tool to help in this offers courses appropriate for this level of
activity. SAP has developed a series of training, but it is best if the users themselves,
Enterprise Resource Planning -9-
helped by the trainers, actually run these is tuning the system. Incidentally, when things
training programs. The training should be go wrong, like when one of the servers gets
completed as close to the actual ‘go live’ date overloaded, it’s often because the system isn’t
as possible. In this phase the users themselves tuned correctly.
should document the procedures for use,
provide any special instructions that are needed
to fit your organization, and organize a help
desk. This phase takes 25 % of the project time.
Go Live and Support
The final phase is Go Live and Support. This is
where the starter’s gun is fired. Going live with
the system is just the beginning of an
ongoing process of continuous training,
learning and improvement. This is the phase
where one learns the tricks to use the system
more effectively. It opens new ways of working
inside the company and relating to customers
and vendors. This is not the end of the road for
the implementation. After this phase also the
firm has to continue training people and sharing
SAP R/3 Architecture:
In order to make changes to the system you will
need the proprietary programming language
ABAP/4. Here is a diagram that represents the
major components of the system. Keep in mind
that you have to do all these things no matter
how the S/w and h/w is organized. In fact you
are doing all this now with paper slips, s/w and
process. The figure on the next page shows the
SAP R/3 architecture. There are many
components in the SAP R/3 architecture. We
will look at each of these in detail.
Computer center management system is a group
of programs that assist the system administrator System administrator also needs to authorize
in running R/3. One task this performs is the users for the system and assign each user to
assignment of the different application specific privileges. This ensures that users have
programs to individual servers available for proper authority to access certain applications.
R/3. For example the programs that support The Computer Center Management System has
materials management and HR can be run on the programs that handle these authorizations.
the same systems or different computers.
Implementation Management guide is the place
Since each server will have multiple programs where R/3 programs are configured prior to the
running on it the system admin has to assign use. A simple example would be the default
programs to the available computers and set currency used for accounting reports, setting
priorities for running these programs. This countries. Another example might be the
allocation of resources and setting of priorities definition of the group of users who can
Enterprise Resource Planning - 10
schedule rooms in a particular area. The final group is the backup and archive
processor. These programs automate the
Configuring the system by specifying the 8000 process of creating backup copies of the
options in the configuration tables allows R/3 database. This is one of the ways that we
to be tailored to the needs of an enterprise. This enhance system recovery in the unlikely event
task of system configuration required of a problem. In addition, old transactions data
considerable knowledge about system and the that represents the history of the firm are
business process in the firm. archived after the information is no longer
needed by the system. The system has the
Dispatcher shown in the middle of the slide ability to trace past transactions for correcting
performs the actual assignment of the mistakes and for auditing purposes.
applications to the server computers. It is
programmed to balance the load on the system
by moving applications between computers and SAP R/3 views of a firm:
adjusting program priorities according to the
parameters supplied by the Administrator. Remember that SAP R/3 programs are general
so they can apply to all kinds of organizations.
The Dispatcher is managing two types of That means they are developed around generic
programs, the programs that support the users processes that must be performed in any
filling out screens and the programs that run business. Second, even after configuring for
the applications. The system administrator your firm, remember that you may need to
would normally give user screens the highest change some people’s jobs to fit the new
priority since this impacts their productivity. At processes.
night, priorities might be significantly different
and long report programs might be run. The One thing that may be difficult in learning
dispatcher automates the process of making the about R/3 is understanding the jargon. R/3 uses
R/3 system run efficiently. the terms ‘organizational elements’ to describe
things in the company. Examples of these are
The Dialog Manager coordinates the factories, sales organizations, purchase
communication between R/3 and user. In a organizations and warehouses. These elements
traditional real-time system, the user would enable the system to construct legal,
have to wait at the screen for the database to organizational, operational and other views of
update before being able to do any further the enterprise.
interactions with the system. R/3 separates the
screen support from the actual updating to
allow quicker response time. The Applications
and Queued Processes are the programs that
perform the actual work within R/3. This is an
example where the system can grow with the
The next program is the Update Processor.R/3
is structured so that the users, using application
programs, create transactions whenever data
needs to be changed, added or deleted in the
database. These transactions are queued in a
transaction file in the sequence received. The
update processor prioritizes these transactions
and updates the master database. Many
problems associated with updating the database
are solved with this simple mechanism for The diagram is an overview of the way SAP has
queuing and prioritizing data transactions. structured some of the important organizational
elements. They are collected in three areas. For
Enterprise Resource Planning - 11
example, some of the elements associated with Reference:
the organizational views of the company are in
business areas. In sales area we have elements 1. Why ERP? A Primer on SAP Implementation –
like distribution channels, sales organization F.Robert Jacobs and D.Clay Whybark
2. Christopher Koch, “The ABC’s of ERP”, March 07 2002,
Control areas contain elements that allow profit pp 9, www.cio.com/research/erp/edit/erpbasics.html
and/or cost to be viewed, for example, by
divisions in the enterprise. Next is the client, 3. Caroline Chia, “ERP’s 10 danger zones “, December 2004,
who is the highest level of integration in any pp8, www.misweb.com/magarticle.asp?doc_id=15318
implementation. R/3 is designed so that &rgid=5&listed_months=-2
multiple clients can be handled within a single
system. This might happen, for example, if 4. Peter Pille, “Enterprise Resource Planning”, June 22 2000,
each of the divisions has their own version of pp 21, www.ryerson.ca/~ppille/sap/index.htm
R/3. Each division or client is independent.
When a user logs on the system, the user logs 5. Josh Mills, “ERP Overview”, January 15 2001,
on with a particular client and user code. www.erp.ittoolbox.com
ERP is the Future! It is very clear that firms
cannot withstand the pressure from competitors
in this ultra modern world without
implementing ERP. Implementing ERP is one
big challenge that all firms should undertake.
Though reaping all that a firm sowed in
implementing ERP will take some time,
patience is the key to this. All firms that
implement ERP will have to remember that
other than installation, lots of hidden charges
are there. But in the long run, it will be
worthwhile to take this risk.
“If you weren’t concerned with how the
business ran, you could probably install the
ERP software in 18 to 24 months. Then you
would probably stay in the unemployment line
for 18 to 25 months.
-Jeri Dunn, CIO for Nestle USA
What he meant by this was not that a firm
should take a long time to install ERP. He
wanted to say that selection of the right
software and implementation should be done
carefully and very cautiously. Planning and
staffing are also very important. It is critical to
remember that you cannot find a system that
that matches your business requirements 100%.
There will always be gaps. The key is to
prioritize requirements and benefits and make
the implementation of ERP a success in a big