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  1. 1. Outline Some ERP Vendors n What is ERP n Baan (www.baan.com) n ERP components n J.D. Edwards (www.jdedwards.com) n Oracle (www.oracle.com) n ERP Issues n PeopleSoft (www.peoplesoft.com) n ERP benchmarking studies n SAP (www.sap.com) - has approximately 60% of local market share and 35% of international Definition of ERP Partners n “An outgrowth of MRP initiated in the 1970’s as a new n Many ERP vendors do not do all of the computer-based approach to planning and scheduling implementation. of material requirements and inventory, featuring time- n Example: SAP phased order point” -- Rockford Consulting Group. n alliance partner - professional services firm (e.g. Accenture) n “Integrating the enterprise through the internet. n platform partner - provides hardware Extending the enterprise to the Internet” -- IBM. n technology partner - provides operating systems and database systems n “Computer-based systems designed to process an organization’s transactions and facilitate integrated and n complementary - tools that run with SAP product real-time planning, production, and customer response” -- O’Leary 2000. Some ERP Characteristics Functions represented in ERP n Packaged software n Example SAP R/3: n Integrate the majority of a business’s processes n SD: Sales and Distribution MM: Materials Management Process the majority of an organizations n n PP: Production Planning transactions n n QM: Quality Management n Use a data warehouse n PM: Plant Maintenance HR: Human Resources Allow access to data in “real time” n n n FI: Financial Accounting n Integrate transaction processing and planning n CO: Controlling activities n AM: Asset Management n PS: Project System n WF: Workflows n IS: Industry Solutions 1
  2. 2. Sample ERP Modules Enterprise Process Flow n mySAP example: SUPPLIERS ENTERPRISE CUSTOMERS n customer relationship management Production mtrls Delivered orders n e-procurement Mfg processes Order fullfillment n enterprise portals n financials Forecast reqmts Planning Processes Customer forecast n human resources n mobile business Purchase reqmts Procurement Order capture Returns/repairs n marketplace Customer orders n supply chain management Design reqmts Design reqmts Support Processes settlements settlements ERP MAPs How Do ERP Systems Work? n Three important components of ERP configuration n Consider the U.S. Company - International Sneaker Company (ISC) with worldwide sales using SAP R/3: n Models - represent the “world” encompassed by the Ordering - a sales representative from ISC takes and order from a system such as organizational structure. n retailer in Brazil. Entering the data on her personal computer, the n Artifacts - an interface between an “inner” environment sales representative accesses R/3’s sales module. The system ch ecks and an “outer” environment such as an invoice the price as well as the discounts that the retailer is eligible for. The system also checks the retailer’s credit history to make sure that the document, vendor list, product list, etc. firm wants to make the sale n Processes - the activity and information flows n Availability - R/3 software next checks the inventory. It finds that necessary to accomplish a particular task (or set of half the order is available from a warehouse in Brazil and so that tasks) portion of the order can be filled immediately. R/3 finds that the other half of the order will need to be delivered from ISC’s factory. From Edmondson et al., 1998 SAP R/3 Order Management Process Example Continued n Production - R/3 alerts the warehouse to ship the portion of the order Process Commit- Configur- Credit Collec- that is in stock to the retailer. In addition, R/3’s manufacturing Proposal Delivery Billing ment ation Check tion software schedules the production of the remainder of the order. An invoice is printed up in Portuguese. n Labor - When scheduling production, R/3 notes that there is a Process maps into multiple integrated SAP modules (in function-based legacy shortage of workers to handle the order. It alerts the personnel systems, these would not have been integrated and information exchanged manually): manager of the requirement to hire temporary workers n Purchasing - R/3’s materials planning module notifies the purchasing Sales & Sales & Sales & Distrb. manager that it is time to order new raw materials and also of the Distrb. Distrb. amounts that need to be ordered. SAP Module Product. n Order Tracking and More Ordering - The Brazilian retailer logs onto Mtrls Planning ISC’s R/3 system through the Internet and sees that a portion of the Mgmt order has been completed. In addition, the retailer uses this a n an opportunity to place yet another order. Financials Financials 2
  3. 3. Integration of ERP systems ERP Manufacturing Components n Horizontal integration: integration of ERP to systems n Advanced Planning and Scheduling on the shop floor often via a manufacturing execution n Customer Relationship Management system (MES) n Portals n Functional integration: integration with other n Enterprise Application Integration functions like engineering, marketing, human resources n Business Intelligence n External integration: integration within an inter- organizational system, e.g. relationships to customers and suppliers ERP technologies Advanced Planning and Scheduling (APS) n Existing ERP systems of the client server era n APS tools offer fast, feasible and optimal solutions for planning and scheduling problems. comprise 3 areas: n With APS cycle times, throughput times and inventory can be reduced. Forecasts are more accurate and n Database Systems transportation is optimized. n Communication Protocols n APS is often build on finite capacity scheduling. While n User Interface Framework ERP systems based on MRP methods do not consider actual availability of production resources (e.g. it is assumed that material can be obtained in the specified lead-time), with finite capacity scheduling many constraints from the recources, processes and materials can be included. Internet Technology Advanced Planning and Scheduling (APS) n Internet computing: n Many ERP vendors (e.g. Oracle Corp., J. D. Edwards, Peoplesoft) are buying APS software companies and n Web server integrate APS engines in their ERP solutions. n Accessible via Internet with a browser; no code resists on the client n APS technology replaces former MRP methods. n Accessible form any web-enabled device (includes handhelds and cell phones) n The integration of APS and ERP is important: APS relies n Advantage: Maintenance is less expensive for on data from ERP (bill of materials, inventory accuracy, internet architectures than for common client/server routing data). architectures. 3
  4. 4. ERP/APS Integration Customer Relationship Management (CRM) Customer order Sales/Customer service (history, forecast, orders) Example: IBM [26] ERP IBM reorganized its customer service with CRM software from Siebel Systems. Every salesperson can now access a centralized Safety Customer customer history database. IBM is also about to connect its CRM Stock Forecasted Routings orders with its SAP R/3 ERP, so that customers can access data, such as level orders (end item) order history or shipment status, via an internet portal. In 2000 the Planned portal, the IBM.com site received 99 million visits for self-service orders and support. With that IBM could avoid approximately 2 billion in costs. ASAP Capacity APS Promise Date “What if” Schedules Capacity analysis Reports Source: Symix Systems Customer Relationship Management (CRM) Portals / Enterprise Information Portals (EIP) n CRM manages the customer relationship from the first n Portals are personalized user interfaces, which enable contact to servicing after the purchase, thus improving employees, customers and suppliers to access the information the quality of customer services. they need for decision-making. n Sometimes it is called enterprise information portal (EIP) to n CRM connects the different systems for sales, emphasize the use of a portal for an enterprise in contrast to marketing, customer service, warranty departments and consumer-side portals, such as Yahoo.com. provides employee with a complete view of customer data. n Portals are web-based and are accessed with a browser. This makes it easy to deploy portals to a large number of users. n Integrating CRM with ERP allows additional benefits, such as providing real-time information on order status. Customer Relationship Management (CRM) Portals / Enterprise Information Portals (EIP) n CRM applications can be divided into: n While graphical user interfaces (GUI) were organized by product functions, portals are organized by the role of their n Front office applications , such as user, i.e. a CFO accessing a portal is shown different n Sales force automation n Prospect information information than an employee working in quality assurance. n Customer profiles n Campaign management for direct mailing and special promotions n Outward-facing portals offer information access to a company´s trading partners. These portals can contain n Back office applications , such as storefront components as well as service information. n Call center management n Integration with manufacturing, warehousing, transportation n Service and repair n Warranty management 4
  5. 5. Portals / Enterprise Information Portals (EIP) Enterprise Application Integration (EAI) n The functions of a portal are complex. It shows its users data n Compared to internally developed middleware, EAI packages from structured (databases, ERP) and unstructured provide more flexibilty in adding data sources or supporting (webpages, e-mails) sources. It also includes a search engine business process changes. and might include groupware products as well as business intelligence tools. n EAI packages are often faster implemented, cheaper and better functioning than point -to-point solutions. n Some companies allow customers to use portals to access information, such as bills of material, performance data of n They also allow for real time data sharing, thus providing production processes and quality system data. good system integration. n ERP vendors are starting to implement portals into their ERP n They often make use of XML (extensible markup language) systems. data exchange and messaging. Portals / Enterprise Information Portals (EIP) Enterprise Application Integration (EAI) n Pros and cons of portals n EAI products can be divided into 3 categories: n Pros: n Application integration: n Streamlines information access and dissemination Integration at the data level; applications exchange n Enables improved decision-making information using some type of data transport layer n Saves time and money by improving resource availability n Business Process Integration: n Cons: Supports business processes with application n Expensive integration n No portal standards n Solutions often lack administration functions n Business Community integration: Links enterprises with suppliers and customers Enterprise Application Integration (EAI) Enterprise Application Integration (EAI) n Enterprise application integration packages are used to tie n Connecting applications with those of suppliers and ERP systems to internal and external applications. customers is more complicated than those within the firm, because of business issues like: n They comprise applications and the underlying messaging and data transformation tools to link the applications. n Which internal systems have to be linked with which supplier? n EAI is used to connect: n How soon needs a company to respond to the partner´s n ERP and plantfloor purchase order? n ERP systems that are used at specific facilities to the corporate ERP system n What security is needed? How can it be guaranteed? n ERP or applications of one company to those of another company (B2B connectivity) 5
  6. 6. Business Intelligence (BI) Data Warehouse n Business intelligence (BI) is a decision support tool that n “A data warehouse ... collects, organizes and processes enables the user to access and analyze information captured data from all sorts of transactional systems for reporting by the company´s information systems. purposes.” n BI allows a rearranging of the data and its analysis for n DW databases are running parallel to and separate from correlations and patterns. operational databases. n DW have a different structure than databases that are It is based on data of the ERP system. Newer ERP system used in transactional systems: n sometimes include BI solutions. n Normalized data in transactional systems: good for transaction processing, but slow for analysis and collecting management information n De-normalized data in DW: built around subject, good for multidimensional analysis and reporting Business Intelligence (BI) Application Service Provider (ASP) n BI consists of 3 components: An application service provider offers enterprise applications. The company that chooses to use an ASP outsources its applications: The applications n Data warehouse are run on the server of the ASP and accessed by n BI reporting tools the company with a web browser via the internet n Analytical tools BI Systems Application Service Provider (ASP) n Advantages of outsourcing applications: n Less money needed than for in-house ERP implementation ERP n Good if company itself has not expertise for ERP implementation Business Call Intelligence center n Disadvantages of outsourcing: Data Metadata Business Warehousing Solutions n ASP often offers one-size-fits-all appraoch, which might Legacy Analytical Solutions not always fit the business scenario n ASP might discontinue product features one relies on Web site n ASP might inadvertently disclose sensitive business information of one´s company Source: SAS 6
  7. 7. Application Service Provider (ASP) ERP for SMEs n Now ASP offer applications that can be integrated with an n With a saturated market for ERP in big companies, now existing ERP system ERP vendors target small and medium-sized companies (SME). n This partially outsourced model n Important market: n reduces the dependency on the ASP n allows more flexibility in choosing a mix of applications n 96% of all manufacturers in the U.S. have less than that fit the bussiness scenario 250 employees. n keeps the control over sensitive data in-house n Requires often less money than a pure in-house ERP n The European ERP mid-market was over $4 billion in system 2000. Application Service Provider (ASP) ERP for SMEs n The integraion between ASP application and the in -house n Reasons for midsize companies to consider ERP technology include: ERP is critical and might cause problems. n Pressure from suppliers or customers n Business process reengineering n Computer platform changes n Software that analyzes the system, maps the applications and discovers missing data links is available. n Midsize companies wish systems that match their business processes (most important criterion for ERP selection), have a low price a nd are flexible and easy to implement. n Some vendors offer “accelerated” implementation methods that are priced low, but often offer only a minimal fit with existing business processes. n Outsourcing ERP functions to an ASP might also be a solution for SME. Partially Outsourced ERP Model Main Issues of ERP As long as integration issues are Corporate Integrating custom and outsourced applications Resolved, you can use ASPs to Host outsourced applications ASP n Implementation Headquarters requires Internet- Regardless of the vendor. n Selecting the right package savvy middleware that can work across n Customizing the package to fit the needs of the enterprise firewalls Legacy Legacy E-procurement application n Training employees Financial HR application application n May take a long time to complete the implementation process Internet n Integration between different aspects of the enterprise Multiple company ASP n The ERP system has to be able to integrate all areas including suppliers, sales, marketing, customer service, etc. locations reduce the Corporate risk of a single data center failure Regional n Costs Office but also CRM application n Cost of software purchase and implementation increase the complexity Legacy Legacy n 75% costs contributed by the implementation process of the system Inv Mgmt order entry application application Source: Barbante, Infoworld 7
  8. 8. Internal Focus of ERP Extended Supply Chain ERP Using third party portals: Finances Manufacturing Third Party Human Knowledge E-Buy ERP E-Sell Resourcesmanagement Logistics Sales & Mkgt E-Buy ERP E-Sell From Norris et. al, PWC 2000 Implementation Problems ERP Future n 70% of ERP implementations fail to achieve their corporate n With the development of technology, some believe that goals. demand for ERP services is decreasing and many ERP specialists are more interested in CRM and e-commerce projects. n The ERP market is evolving rapidly, but the core ERP functions are still in very high demand. n The key is to learn about ERP outside of its core functionalities, which means exploring new methods of implementation, establishing skills in programming languages and developing a strong business focus. n AMR Research presentation! External E-Business Focus AMR Research Report on SCM Suites R&D ERP n Survey was of 60 manufacturers (representing Customers $100B in aggregated revenue) Outsourcing Finances Manufacturing Service n About 85% or respondents have implemented or are Providers in the process of implementing only one or two modules Human Knowledge Resourcesmanagement n Only 25% of users reported that they were Suppliers Logistics operational with more than one module (also, little Business correlation between number of modules Partners Sales & Mkgt implemented and overall satisfaction) n Only 9% or participants have committed to purchasing additional modules, while 28% definitely Advisors Distributors will not. Internet Survey from August 2001 8
  9. 9. Survey Continued ERP Issues n Basic SCP modules are the most widely n Why do it? implemented (demand planning 62%, supply n Depends on who you ask! planning 56%, plant scheduling 31%) n What will it cost? Depends on size Collaboration is oversold (i.e. supply chain n n n How long to implement? applications remain within the four walls of the What are the actual enterprise) n benefits realized? n Only 12% of customers had over 5% of their suppliers or customers feeding data into their systems n But, on average, 78% of a company’s products were being planned using the software (i.e. pervasiveness The following slides are taken from three different benchmarking studies and organized within the four walls is impressive) by Dr. Stratman in the College of Management at Georgia Tech Other Findings Motivation for ERP Implementation n No demand for an SCP suite Company Motivation n Users will upgrade, but aren’t buying the suite Replace legacy system 4.06 Simplify and standardize systems 3.85 n 35% of respondents plan to add additional sites Improve communication with suppliers and customers 3.55 and 38% additional products Gain strategic advantage 3.46 Link to global activities 3.17 n 60% of users report that expectations were met SolveY2Kproblem 3.08 during installation Pressure to keep up with competitors 2.99 Ease of upgrading systems 2.91 Restructuring company organization 2.58 Scale where 1 is “not important” and 5 is “very important” Mabert et al., 1999 study of 479 U.S. manufacturing firms ERP Implementation Motivation for ERP Implementation Technology Program Motivation The company has installed a 44.1% Systems not Y2K compliant 43 packaged ERP system Disparate systems 37 The company is installing a 18.8% Poor quality/visibility of information 26 packaged ERP system Business processes or systems not integrated 21 The company plans to install Obsolete systems 15 10.3% a packaged ERP system Difficult to integrate acquisitions 10 Unable to support growth 6 No packaged ERP system planned 26.8% % respondents Mabert et al., 1999 study of 479 U.S. manufacturing firms Mabert et al., 1999 study of 479 U.S. manufacturing firms 9
  10. 10. Motivation for ERP Implementation Costs Operational Program Motivation Poor/uncompetitive performance 28 Complex, ineffective business practices 22 Cost structures too high 21 Not responsive enough to customers 18 Hardware (12%) Business becoming global 14 Software (15%) Unable to implement new business strategies 12 Training (15%) Inconsistent processes 11 Data Conversions (15%) Comply with regulatory requirements 1 Reengineering (43%) % respondents Mabert et al., 1999 study of 479 U.S. manufacturing firms AMR Research Cost Example - SAP Implementation Timeline 1000 SAP Expenditures (US$ Millions) 6 months or less 9.1% 7 to 12 months 25.2% 100 13 to 18 months 24.1% 19 to 24 months 21.3% 25 to 36 months 11.3% 10 37 to 48 months 6% More than 48 months 2.1 1 <1 1-10 10-25 >25 % respondents Company Sales (US$ billions) Conference Board study of 186 SAP implementations Mabert et al., 1999 study of 479 U.S. manufacturing firms Costs Usefulness of Consultants Training (8%) Responsible for sizeable overrun 11% Other (9%) Responsible for moderate overrun 28% Hardware (11%) No effect 24% Software (13%) Responsible for moderate underrun 31% Internal Resources Responsible for sizeable underrun 6% (21%) Consulting Services (38%) % respondents Benchmarking Partners study of 500 executives from 300 firms Conference Board study of 186 SAP implementations 10
  11. 11. Consultant Usefulness Importance of Aptitudes n For those organizations that had positive n The relative importance of organizational aptitudes experiences with consultants, reasons given on ERP competence: included: n ERP training (.83) n Higher acceptance of the system by line and n IT Skills (.82) production workers n Business Process Skills (.82) n Quality of their planning efforts was better n Executive Commitment (.76) n Extent of support was greater n Project Management (.74) n Better at resolving conflicts n Learning (.7) n Strategic IT Planning (.66) Stratman and Roth, 2000 study of 68 firms Benefit Timeline by Provider ERP Benefits Average Time to Benefit Upon Completion of ERP Implementation n Inventory Levels reduced 33% Peoplesoft 10 n Forecast error rate cut from 52% to 29% Oracle 9 n Transportation costs reduced by 25% Order fulfillment time reduced from 80 to 28 days JD Edwards 9 n Supply leadtime reduced from 42 to 14 days SAP 7 n Baan 5 Time in Months Break even points occur on average 40 months after implementation completion Benchmarking Partners study of 500 executives from 300 firms Benchmarking Partners study of 500 executives from 300 firms Implementation Strategy and Duration ERP Benefits 9 Phased by module and site 2.3% Phased by site 22.7% Decrease time for credit authorization 92 Phased by module 17.3% 7 Reduction in financial close time 63 Mini Big Bang 16.6% Reduction in order full time 46 5 Headcount reduction 36 Big Bang 41.4% 9 IT cost reductions 34 % respondents Phased by module and site 24.8 Distribution cost reductions 31 30 Inventory reductions 27 Phased by site Increase in on -time deliveries 20 Phased by module 22.1 7 Procurement acquisition cost reductions 17 Mini Big Bang 16.8 5 Increase in inventory turnover 15 Big Bang 14.9 Average % improvement Time in Months Mabert et al., 1999 study of 479 U.S. manufacturing firms AMR Research, Gartner Group 11