ERP Design and Implementation Intro to ERP and SAP


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ERP Design and Implementation Intro to ERP and SAP

  1. 1. ERP Design and Implementation Intro to ERP and SAP 08/23/2006
  2. 2. SM&IS Movie Night SM&IS is showing the movie “Office Space” out on the lawn in front of Fulton Hall on THURSDAY, AUGUST 24 at 8:30 pm. Refreshments, T-shirts and the movie ARE ALL FREE. Please come and kick off the 06-07 year with some laughs. You’re Invited
  3. 3. Overview <ul><li>Roots of ERP </li></ul><ul><li>Future of ERP </li></ul><ul><li>SAP Products and Capabilities </li></ul><ul><li>SAP R/3 Modules </li></ul><ul><li>What, Who and How of Implementation </li></ul><ul><li>Advantages and disadvantages of SAP </li></ul>
  4. 4. Roots of ERP <ul><li>The concept of ERP has been around since 1960’s </li></ul><ul><li>It has its beginning in Materials Requirements Planning (MRP), and this later evolved into Manufacturing Resource Planning (MRP II) </li></ul>
  5. 5. Past - MRP <ul><li>Primary business systems installed in manufacturing companies </li></ul><ul><li>Introduced in the 1970’s </li></ul><ul><li>Computerized approach to planning and obtaining the required materials for manufacturing / production </li></ul><ul><li>Uses mainframes as the main source for input and processing. </li></ul>
  6. 6. MRP Issues <ul><li>Lead Time </li></ul><ul><li>Aggregating demand </li></ul><ul><li>Multiple locations – distances not accounted for </li></ul><ul><li>Capacity </li></ul>
  7. 7. Past - MRP II <ul><li>1980s </li></ul><ul><li>MRP + Personnel + Financial planning </li></ul><ul><ul><li>Address operational planning in units, financial planning in dollars, and has a simulation capability to answer &quot;what-if&quot; questions </li></ul></ul><ul><li>Issues - lead times to be fixed, the capacity to be infinite, the batch sizing concept </li></ul>
  8. 8. What is Enterprise Resource Planning (ERP)? ERP (Koch, 2002) The term enterprise resource planning (ERP) was coined by Gartner Group in the 1990’s. Enterprise resource planning (ERP) software places its focus on integrating an organizations departments (i.e., finance, HR, warehousing, etc.) and functions onto a single integrated computer system that aims to serve all those different departmental needs.
  9. 9. What is ERP <ul><li>Integration of Business Processes </li></ul><ul><li>Group of processes, applications and technology </li></ul><ul><ul><li>Network and Systems Infrastructure </li></ul></ul><ul><ul><li>Databases </li></ul></ul><ul><ul><li>Applications to support business processes like Manufacturing (Make), Procurement (Buy), Sales (Sell), Accounting (Track), Human Resources, Payroll </li></ul></ul><ul><ul><li>Middleware </li></ul></ul>
  10. 10. ERP System Characteristics <ul><li>Standardized processes </li></ul><ul><li>Reduces costs of production and inventory </li></ul><ul><li>Improves customer service </li></ul><ul><li>Materials management </li></ul><ul><li>Resource planning </li></ul>
  11. 11. What Goes into an ERP System? Integrated Enterprise Architecture Integrated database used by organizational departments for… Financial Data Human Resources Data Manufacturing and Logistics Data
  12. 12. ROI for an ERP System <ul><li>Reduce operating costs </li></ul><ul><li>Generate more accurate demand forecasts </li></ul><ul><li>Speed production cycles </li></ul><ul><li>Enhance customer service </li></ul>
  13. 13. Order Fulfillment – Before ERP
  14. 14. Order Fulfillment – After ERP
  15. 15. Functional Evolution
  16. 16. Future - ERP II <ul><li>ERP: Within the boundaries of the enterprise </li></ul><ul><li>ERP II: An application and deployment strategy to integrate all things enterprise centric (Gartner, 2001) </li></ul>Call Center ERP Technical systems PLM Market Analysis Trading SCM Document Mgmt e-Sales E-Procurement
  17. 17. ERP solution providers N/A Supply Chain Management N/A SMB Market, .Net platform N/A CRM 4. Merger with PeopleSoft Databases, Financials 3. Financials, Web Services, Small Business products HR 2. Web Services, Integrated environment, NetWeaver platform Logistics, Supply Chain Management, Sales and Distribution 1. Upcoming changes Traditional Strength Company
  18. 18. <ul><li>AMR Research Article on ERP Market </li></ul>
  19. 19. ERP Vendors Ranked by Growth (Worldwide)
  20. 20. Gartner Research on ERP Market <ul><li>The enterprise resource planning market will grow 7.7 percent worldwide and the supply chain management market will grow 6.8 percent worldwide through 2009. - Nov 11, 2005 </li></ul><ul><li>In 2005, total ERP applications grew 5.2 percent annually as the market deals with mergers, on-demand and technology advances. Financial applications and Europe were the largest segments with 42 percent and 44 percent market shares, respectively. - June 22, 2006 </li></ul><ul><li>Asia/Pacific is the fastest-growing region in the forecast period, with a compound annual growth rate of 9.2 percent from 2005 to 2010. New license revenue for ERP software will reach $721 million by 2010. - April 20, 2006 </li></ul><ul><li>Among consulting and solution implementation services, there are many areas in which certain skills, competencies and expertise are becoming increasingly difficult to find. </li></ul><ul><li>- June 15, 2006 </li></ul>
  21. 21. Birth of SAP <ul><li>Until 1972 ERP was just a concept that companies had to integrate all departments and functions to increase revenues and strengthen the business </li></ul><ul><li>In 1972, 5 IBM managers set out to start what is today known as SAP </li></ul><ul><li>SAP was the first to develop and implement ERP specific software and Applications </li></ul>
  22. 22. SAP: a corporate overview <ul><li>SAP: S ysteme, A nwendungen und P rodukte (in der Datenverarbeitung). </li></ul><ul><li>Fun facts </li></ul><ul><ul><li>Founded in 1972 by five IBM engineers </li></ul></ul><ul><ul><li>Third largest software vendor in the world, behind Microsoft and Oracle respectively. </li></ul></ul><ul><ul><li>22000 customers in 120 countries </li></ul></ul><ul><ul><ul><li>95% of the Fortune 1000 companies use SAP worldwide </li></ul></ul></ul><ul><ul><ul><li>8 of the top ten largest US corporations use SAP </li></ul></ul></ul><ul><ul><li>55% market share (July 2004) in the business software market compared to 51% in 2003. </li></ul></ul>
  23. 23. Financial Information <ul><li>Two Corporate Entities </li></ul><ul><ul><li>SAP AG (AktienGesselschaft) </li></ul></ul><ul><ul><ul><li>German Headquarters, based in Waldorf, Germany. </li></ul></ul></ul><ul><ul><li>SAP America Inc. </li></ul></ul><ul><ul><ul><li>American Headquarters, based in Newtown Square, Pa </li></ul></ul></ul><ul><li>Ticker symbol: NYSE: SAP, German: SAP </li></ul><ul><li>2003 Sales: $8,831.3 million, 13.4% growth from 2002 </li></ul><ul><li>2003 Net Income: $1,354.1 million, 153.5% growth from 2002 </li></ul>
  24. 24. SAP Business Suite (Product Life-Cycle Management) (Supply Chain Management) (Customer Relationship Management) (Supplier Relationship Management) (Application Infrastructure) Note: mySAP ERP is also called R/3 and was called R/2
  25. 25. SAP Product Offering mySAP All-in-One mySAP Business One Increasing Business Size Full functionality Full functionality, pre-configured, single database Necessary functionality up to 250 users
  26. 26. SAP Products Features <ul><li>World-wide usage </li></ul><ul><li>Designed to satisfy the information needs for all business sizes (international to local) </li></ul><ul><ul><li>Multi-lingual </li></ul></ul><ul><ul><li>Multi-currency </li></ul></ul><ul><li>Designed to satisfy the information needs for all industries (industry solutions) </li></ul>
  27. 27. SAP Products Features <ul><li>Enables a company to link it’s business processes </li></ul><ul><li>Ties together disparate business functions (integrated business solution) </li></ul><ul><li>Helps the organization run smoothly </li></ul><ul><li>Real-time environment </li></ul><ul><li>Scalable and flexible </li></ul>
  28. 28. SAP R/3 Modules 44,000 world-wide installations Open System Client/Server Architecture Integrated Solution Multi-national Comprehensive Functionality
  29. 29. R/3 Modules <ul><li>Financials </li></ul><ul><li>Human Resources </li></ul><ul><li>Logistics </li></ul>
  30. 30. Financial (FI) <ul><li>Complete picture of accounting </li></ul><ul><li>Extensive reporting facilities </li></ul><ul><li>Suitable for international corporations </li></ul><ul><li>Supports multiple currencies, languages </li></ul>
  31. 31. FI Modules <ul><li>Financial Accounting – external </li></ul><ul><li>Controlling – cost structures, internal </li></ul><ul><li>Enterprise Controlling – monitors critical success factors </li></ul><ul><li>Investment Management – plan and manage capital investment projects </li></ul><ul><li>Treasury – Cash management </li></ul>
  32. 32. Human Resources (HR) <ul><li>Includes all processes for efficient management of the organization </li></ul><ul><li>Country-specific module </li></ul><ul><ul><li>Includes different transactions, procedures for different countries </li></ul></ul>
  33. 33. Logistics <ul><li>Most extensive module </li></ul><ul><li>Manage all applications in the supply chain </li></ul><ul><li>Contain comprehensive business processes for manufacturing </li></ul><ul><li>Seamless integration </li></ul>
  34. 34. Relational Database <ul><li>Tables: Defines and links thousands of tables of information </li></ul><ul><li>Advantages </li></ul><ul><ul><li>Consistent and accurate data </li></ul></ul><ul><ul><li>Common definitions for terms </li></ul></ul><ul><ul><li>Shared, but restricted usage (e.g., profiles) </li></ul></ul><ul><ul><li>Eliminates data redundancy </li></ul></ul>
  35. 35. Architecture <ul><li>Central relational database (e.g., Oracle and many others) </li></ul><ul><li>Client/Server—three-tiered </li></ul><ul><li>ERP Component—Oriented towards common identifiable business modules (PP, MM, SD, FI, CO, HR) </li></ul>
  36. 36. What Does it Involve <ul><li>Database server </li></ul><ul><li>Application server </li></ul><ul><li>Presentation server </li></ul><ul><li>24,000 tables in R/3 Enterprise </li></ul><ul><ul><li>47,000 in ECC 6.0 </li></ul></ul><ul><li>12,000 separate relations </li></ul><ul><ul><li>22,000 in ECC 6.0 </li></ul></ul>
  37. 37. Who is Involved <ul><li>Consultants – installation, configuration, training </li></ul><ul><li>Individual employees </li></ul><ul><li>In-house implementation teams </li></ul><ul><li>Super users </li></ul><ul><li>SAP and in-house support teams </li></ul><ul><li>Hosting Centers </li></ul>
  38. 38. How Long Does it Take <ul><li>Large organizations spend 2-3 years implementing </li></ul><ul><li>Value SAP approach allows basic implementation in 6-9 months </li></ul><ul><li>Smaller organizations have implemented in 3-4 months </li></ul><ul><li>To implement </li></ul><ul><ul><li>Training </li></ul></ul><ul><ul><li>Prepare for change </li></ul></ul>
  39. 39. Advantages of SAP R/3 <ul><li>Integration </li></ul><ul><li>Business Process Re-Engineering </li></ul><ul><li>Non-redundant data </li></ul><ul><li>Automatic international conversions </li></ul><ul><li>Complete audit trail </li></ul><ul><li>Compliance with Sarbanes-Oxley </li></ul>
  40. 40. Advantages (contd.) <ul><li>Open system </li></ul><ul><li>Integrated development </li></ul><ul><li>Sophisticated management and monitoring capabilities </li></ul><ul><li>Workflow capabilities </li></ul>
  41. 41. Disadvantages of R/3 <ul><li>Expensive </li></ul><ul><li>Complex </li></ul><ul><li>Demands highly trained staff </li></ul><ul><li>Very lengthy implementation times </li></ul><ul><li>Inter-module functions least understood by business </li></ul><ul><li>Internal conflict in organizations </li></ul>
  42. 42. Research Paper <ul><li>Write a paper discussing the </li></ul><ul><ul><li>Product development history </li></ul></ul><ul><ul><li>technology path adopted by Oracle and SAP for the future development of their respective ERP product suites. Are they different? Discuss the pros and cons, if any. </li></ul></ul><ul><li>Paper details will be posted on blackboard </li></ul><ul><li>Submissions via digital drop box in blackboard </li></ul>