The ERP Industry

Shefaria Enterprises Inc Phone: 647-468-4976 E-mail:ykalra@shefaria.comwww.shefaria.com
ENTERPRISE
RESOURCE
PLANNING
1

2
AGENDA
❖ ENTERPRISE RESOURCE PLANNING
❖ HOW LEGACY AND CUSTOMIZED SOFTWARE SOLUTIONS WORK
❖ DEFICIENCIES OF DECENTRALIZED SYSTEMS
❖ HOW ERP WORKS
❖ BENEFITS OF AN ERP
❖ EVOLUTION OF ERP
❖ COMPONENTS OF A TYPICAL ERP
❖ DISADVANTAGES OF AN ERP SYSTEM
❖ PUTTING DISADVANTAGES OF ERP IN PERSPECTIVE
❖ HOW TO DECIDE IF YOU NEED AN ERP
❖ THE MAJOR ERP COMPANIES
❖ 10,000 FEET VIEW OF FINANCE, PURCHASING AND SALES IN AN ERP
❖ QUESTION AND ANSWER

Enterprise resource planning is the process of managing
the resources of the different business functions of
company on an integrated platform where every area of
the organization has a window into the data of the other
areas subject to authorizations.
The different areas of the company continue
operating the way they need to in the ERP system
which, in real time is able to provide data for
transactions and reporting to cut costs, plan
resources better and take advantage of the
organization as a whole instead of as silos
ERP works based on business processes in an
organization replicating by them in the software.
ENTERPRISE RESOURCE PLANNING
Enterprise: The Organization
Resources: Materials,
Machinery, Manpower,
Money, Methods
Planning: Utilization and
effective application of the
resources by the organization
3

HOW LEGACY AND CUSTOMIZED SOFTWARE SOLUTIONS WORK
Customer
Orderparts
Shipparts
Sales dept
Demographic Files
Vendor
Place
order
Warehouse
InventoryFiles
Purchasingdept
PurchasingFiles
Sends report
Accountingdept
AccountingFiles
Sends report
“Weorderedparts”
“Weneedparts”
Weorderedparts
Callback“notinstock”
Checkforparts
4

Duplication of work to load data
into multiple systems for reporting
Chances of errors and
gaps/duplication when
integrating data
Disparate and unconnected
systems don’t give a true real
time picture
Costly maintenance as one needs resources of
different skill sets to maintain different systems
Scalability is limited
Issues relating to access of
data by various employees
DEFICIENCIES OF DECENTRALIZED SYSTEMS:
5

HOW ERP WORKS
Customer
Sales dept
Accounting
Purchasing dept
DATABASE
Vendor
Warehouse
Order is placed
Invoice Accounting
Ship parts
6

Regulation: Better financial compliance thereby
reducing risks
Data integrity: One centralized system replicates the business
functions in an organization
Data availability: Online, real time information eliminating
redundancy and duplication/gaps in data. A one stop shop
for everything.
Data accessibility: Accessible by anyone subject to
authorizations via a single sign on
Uniformity and Homogeneity: A single platform using
the same machine language in which the entire coding
is done thereby reducing disparity
Easier decision Making: Tighter control over inventories,
orders, receivables etc. through real time information – this
itself often pays off for the costs relating to an ERP through
better customer service and lower financial and inventory
carrying costs
Reducing Complexity: Interconnectedness and workflow is
far superior with everything in one place
BENEFITS OF AN ERP
Automation: Makes automation a lot easier as all the
required data is in one repository from where it can be
retrieved and worked on as needed, reducing manual
intervention and thereby minimizing errors
Integration where needed: Most ERPs integrate well with
external systems also thereby providing flexibility of
retaining any specialized system parallelly if required
Scalability: It is fairly easy to expand an ERP either
laterally by including more business areas or vertically by
enhancing functionality in a certain area
Discipline: One of the often forgotten but critical benefits
is the discipline it introduces in the organization – no
more adhoc and ‘on the fly’ – one has to, necessarily
follow the process one sets forth in the ERP.
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7

EVOLUTION OF ERP
1960’s
1965
-1975
1975
-1990
1970
-1980
1990’s 2010’s
Inventory/
Accounting
management
software
Material
Requirements
Planning
Production and
planning
ERP – incipient
with PP and
Manufacturing
Advanced ERPs
with more
integration with
Finance/Sales/HR
ERP in the cloud
Till the 1990’s ERP’s strengths were well known and accepted but the industry didn’t take off. 3 changes made this growth
possible:
1. Companies moved away from the functional model to the managerial model in which information and action, rather
than merely activity, became more important. This led to a hunger for data and information, aided by the internet enabling
real time data
2. Integrated systems became a norm than a rarity with many ERPs joining the industry
3. Hardware improvements relating to memory and computing power enabled data processing at a much faster pace.
8

COMPONENTS OF A TYPICAL ERP (1/3)
An ERP package usually mirrors the business functions like Financial Accounting, Fixed Assets Accounting,
Sales & Distribution, Logistics, Production Planning, Human Resources etc.
Typically, all ERPs are modular i.e. the company can choose to use a certain module and not implement any
specific one/s. It is not uncommon to have implementations with e.g. only Finance, Sales, Production
modules but no HR or no Plant maintenance – those continue to get transacted offline or on other systems
and on demand, feed final data into a centralized ERP system for purpose of reporting or analysis
Compared to a customized legacy system which are usually bespoke, an ERP module is a lot more generic
and comes with (almost) all possible ways of doing business in that particular business function. The
system is then ‘configured’ or ‘customized’ to the company’s requirements based on how it conducts its
own
Time to time changes are made to add/modify functionality as required. Since ERP is an integrated system
wherein data flows from one business function to another, a good part of the setup is done with other
business functions in mind and the up/downstream effect of the changes being done
9

Every module has ‘sub-modules’ based on their relative relevance, importance and size in terms of functionality. These sub modules
may be further divided into more narrow business areas or functions – the implementation team will make its focus then main
areas the company does business in.
General ledger
Accounts Payables
Accounts Receivables
Banking
Treasury
Credit Management
Finance
Order Management
Pricing
Warranties
Delivery & Shipment
Foreign Trade
Billing
Sales & Distribution
Purchasing
Inventory
Warehousing
Vendor Invoice Management
Materials Management
10

Interfacing with an ERP
Not uncommon for a company to perform some functions on a satellite or external software that may have
specialized, or better functionality e.g. Concur for T&E, Vertex for Taxation etc. The primary ERP system is connected to
this external system via custom interfaces to import or export relevant data e.g. an ERP system may send all details of
a sales order to Vertex to get the GST/HST/PST amounts and percentages to apply to the order within the ERP
Validation of this data is
done in the ERP system
Application of this tax
amount to the line items
of the sales order
Posting of these tax
amounts to the general
ledger in the ERP system
Sending the entire data back to
the external Vertex system for
subsequent retrieval and
reporting
01.
02.
03.
04.
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DISADVANTAGES OF AN ERP SYSTEM
Buy in from users who are wedded to their legacy
systems can be a rough area especially if not
backed up by the management
Change control is one major element of a
successful ERP implementation
Changes are difficult and involve 360 degree view
of almost everything leading to occasional
redundancies
06
07
To function effectively, an ERP system can require a
lot more data than the legacy can provide
08
01 Upfront cost of development, customization and
configuration can be daunting
Due to its integrative nature, it involves constant
testing leading to long project cycles
Cost benefit analysis can be difficult to measure
especially as the benefit realization can take some
time
02
03
Fine balance of too little vs too much
customization is difficult to obtain – the former will
not provide the optimum functionality possible
while the latter can choke up the processes by
slowing them down
04
05
09
10Is heavily dependent on master data and can be
very unforgiving when not set up properly
Knowledge that an implementation vendor acquires
while implementing an ERP can often lock up the
organization with that vendor to its own detriment.
12

PUTTING DISADVANTAGES
OF ERP IN PERSPECTIVE
While implementation is expensive, it is more than offset by
the advantages an ERP offers in terms of rationalization and
democratization of information for better decision making
Most ERP implementations are hugely successful when change
management is done well
Buy in and involvement of Business is paramount to the
success of an ERP as it is not only about IT but about Business
processes
A high-level documentation of customized areas is necessary to
avoid post implementation and long-term challenges of
maintaining an ERP
Buy in and involvement of Business is paramount to the
success of an ERP as it is not only about IT but about Business
processes
Implementation time can be cut down significantly by adopting
Agile related methodologies where possible e.g. Activate in
SAP
13

HOW TO DECIDE IF YOU NEED AN ERP
1 Do you need to interactwith multiplesystems
to getall your information?
2 Is this informationdelayedbeyondreasonable
time?
3 Too muchpapertrailor manual work
performedoutsidethe system
4 Inabilityto scaleeasilyand haveto necessarily
make majorchanges to accommodatethe
required functionality
5 Functionalityis unachievable in the current
system
6 Needbetter connectivitywith vendors and
customers who mayhave their own ERPs
7 Automation is limitedleadingto repetitiveand
redundantmanual work
8 Is the currentsystemproprietarywith
resourcesnot availableto augmentor
maintainit
9 Needmore visibilityto activities across
departmentsand geography?
Requirebetter customerservice
Is the companyin a growth mode
6 Reportingis inaccurateor inadequate
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11
Is the currentsystemslow and outdated12
Apart from the costs, many other factors also need to be considered before any company can take this major
decision:
14

THE MAJOR ERP COMPANIES
The industry has grown exponentially in the last
12-15 years with literally hundreds of companies
calling themselves ERPs
Depending on who you talk to, their definitions
differ – some companies specializing primarily in
one area like Finance or Customer service or
Manufacturing (Suites) but with very light or non-
existent other modules also call themselves ERPs
while some are best of industry breeds with most if
not all modules well integrated
There are ERPs focused on certain sectors
(Verticals) only like Real Estate, Retail, Mining,
Utilities and Exploration etc. while many others are
more generic and offer customizable solutions all
can use
Among the top few ERP companies/packages are:
1. SAP (ECC/HANA, Concur, SuccessFactors)
2. Oracle (include JDE, Peoplesoft Financial
Management, e-Business suite)
3. Infor
4. Syspro
5. Epicor
6. Microsoft Dynamics
7. Deltek
8. Acumatica
9. Netsuite
15

CHART OF ACCOUNTS
(General Ledger Postings)
AP Sub-ledger
(vendors)
Fixed Assets Sub-
Ledger
AR Sub-ledger
(customers)
Finished
Goods
Inventory
Post Goods Issue
(Relieve Inventory &
Book COGS)
Perform Billing
(Record Revenue &
Receivable)
Invoice
Sales Order
Create Delivery
(Pick, Pack & Shio)
Customer
CustomerPlacesOrder
Shipment
Customer Payment
Receipt of Fixed
Asset
Purchase Order
(Fixed Assets)
Vendor
Shipment
VendorInvoice
Payment
Purchase Order
(Expense &
Inventory
Goods Receipt
(Expense Items &
Inventory)
Raw Material
Inventory
HR/Payroll
Finance
General Ledger
Accounts
Banking
Master Data
Customer
Master Vendor Master Fixed Assets
Master Data
Material
Master
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10,000 FEET VIEW OF FINANCE, PURCHASING AND SALES IN AN ERP

Topics for Next Meeting
• RISK MITIGATION IN AN ERP IMPLEMENTATION
• CHOOSING THE RIGHT ERP
• MYTHS ABOUT ERPs
• MAIN STEPS IN AN ERP IMPLEMENTATION
• THE PROCESS OF ERP IMPLEMENTATION
• A GUIDE TO A SUCCESSFUL IMPLEMENTATION
• A DEEPER DIVE INTO HOW SAP FUNCTIONS – FUNCTIONAL, TECHNICAL, MAINTENANCE
• 1,000 FEET VIEW OF ORDER TO CASH, PURCHASE TO PAY AND RECORD TO REPORT PROCESSES
• DEMOS
17

THANK
YOU
18

Question and Answer
19

The ERP Industry

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