Chp08 Building Erp

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  • Chp08 Building Erp

    1. 1. Chapter Eight Building The E-Business Backbone: Enterprise Resource Planning
    2. 2. ERP: The Technological Backbone of E-Business <ul><li>Typical corporate computing environment today of mainframe-based apps is antiquated </li></ul><ul><ul><li>Cannot meet demands of new economy and must be replaced </li></ul></ul><ul><li>ERP integrated app suite </li></ul><ul><ul><li>Framework to automate back-office functions: Financial, Manufacturing and Distribution, HR, Administrative </li></ul></ul><ul><ul><li>Unites major business processes within single family of modules: production, order processing, inventory mgmt and warehousing, A/P and A/R, general ledger, and payroll </li></ul></ul><ul><li>ERP phenomenon also catching fire among dot-coms </li></ul><ul><ul><li>Managing customer relationships key for the newer online firms </li></ul></ul><ul><ul><li>ERP offers customers efficient, high-quality service </li></ul></ul><ul><ul><ul><li>Ability to order online; inquire about product pricing and order status </li></ul></ul></ul><ul><ul><li>ERP prices dropping and rental ASP model becoming prevalent </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    3. 3. ERP: The Technological Backbone of E-Business <ul><li>ERP is the technological backbone of e-business </li></ul><ul><ul><li>Enterprise-wide transaction framework with links into </li></ul></ul><ul><ul><ul><li>sales order processing; inventory mgmt and control; production and distribution planning; finance </li></ul></ul></ul><ul><ul><li>In early 1990s, only large manufacturers saw benefits of ERP </li></ul></ul><ul><ul><li>Today, medium-size and dot-com firms also recognize necessity of integrating back-office processes for front-office success in e-commerce world </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    4. 4. Who Really Uses ERP Suites? <ul><li>Large corporations that want to gain control over disparate groups of core business apps </li></ul><ul><ul><li>3Com, Chevron Products Company, GM </li></ul></ul><ul><li>3 primary categories of ERP implementations </li></ul><ul><ul><li>Single to few products in single industry: eToys </li></ul></ul><ul><ul><li>Single SBU firms, selling only few products in a single industry: Delta Airlines, Dell, Microsoft, Nike </li></ul></ul><ul><ul><li>Large corporate conglomerates or multiple-SBU firms, selling many products in multiple industries: GE, IBM, Colgate-Palmolive, and Nabisco </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    5. 5. The Basics of ERP <ul><li>These apps are themselves built from smaller s/w modules that perform specific business processes within a given functional area </li></ul>www.ebstrategy.com <ul><li> - </li></ul>Integrated Logistics Accounting & Financials Human Resources Sales Distributions (Order only) Production Planning Customer/ Employee Enterprise Architecture
    6. 6. ERP 之源起 Wave 1 <ul><li>ERP 之源起在於 1960 年代之庫存管理與控制的套裝軟體 </li></ul><ul><li>70 年代即有 material requirement planning (MRP) 與 distribution resource planning (DRP) 之出現 , 各自將“ production master scheduling” 與“ centralized inventory planning” 工作加以自動化 </li></ul><ul><li>到了 80 年代 , 一個誤用的名稱“ MRP II” 出現 , 將傳統 MRP 專注於 production process 之焦點 , 延伸到其他的營運功能 , 包括 order processing,manufacturing, 及 distribution. </li></ul><ul><li>由於 MRP 藉由技術連接不同營運功能對企業之貢獻日益明顯 , 經理人開始將公司其他的功能 , 如財務 , 人力資源 , 專案管理等漸次整合 . 由於 MRP II 之名稱並不適當 , 便改名為 ERP. </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    7. 7. Evolution of ERP www.ebstrategy.com <ul><li> - </li></ul>Manufacturing Integration (MRP) Enterprise Integration (ERP) Customer-Centric Integration (CRP) Interenterprise Integration (XRP) Wave 1 Wave 2 Wave 3 Wave 4
    8. 8. Evolution of ERP www.ebstrategy.com <ul><li> - </li></ul><ul><li>1960s </li></ul><ul><li>Automation of all aspects of production master scheduling </li></ul><ul><li>Showed technology could link disconnected business functions </li></ul>Manufacturing Integration (MRP) Enterprise Integration (ERP) Customer-Centric Integration (CRP) Interenterprise Integration (XRP) Wave 1 Wave 2 Wave 3 Wave 4
    9. 9. Evolution of ERP www.ebstrategy.com <ul><li> - </li></ul>Manufacturing Integration (MRP) Enterprise Integration (ERP) Customer-Centric Integration (CRP) Interenterprise Integration (XRP) Wave 1 Wave 2 Wave 3 Wave 4 <ul><li>Began in 1980s as MRP II as execs sought for similar benefits as MRP by integrating other functions </li></ul><ul><li>Business drivers of ERP: replacing legacy systems, greater control, globalization, regulatory change, integration of decisions across enterprise </li></ul><ul><li>Y2K preparation in 1999 a significant factor </li></ul>
    10. 10. Evolution of ERP www.ebstrategy.com <ul><li> - </li></ul>Manufacturing Integration (MRP) Enterprise Integration (ERP) Customer-Centric Integration (CRP) Interenterprise Integration (XRP) Wave 1 Wave 2 Wave 3 Wave 4 <ul><li>ERP evolving into CRP to integrate “brick” with “click” </li></ul><ul><li>Using middleware has drawbacks </li></ul><ul><li>Traditional ERP build for make-to-stock business models; but this is no longer the case; customer value, effectiveness, enhanced service delivery key today </li></ul><ul><li>Continuous planning vs. long planning cycle of ERP </li></ul><ul><li>Ericsson </li></ul>
    11. 11. Evolution of ERP www.ebstrategy.com <ul><li> - </li></ul>Manufacturing Integration (MRP) Enterprise Integration (ERP) Customer-Centric Integration (CRP) Interenterprise Integration (XRP) Wave 1 Wave 2 Wave 3 Wave 4 <ul><li>A company’s partners benefit from the same seamless integration as the company itself </li></ul><ul><li>Extends beyond four walls of the enterprise to customer, suppliers and trading partners </li></ul><ul><li>B2B marketplaces </li></ul><ul><li>ERP does not support continuous-planning requirements of SCP </li></ul><ul><li>Collaborate or perish </li></ul>
    12. 12. Benefits of ERP <ul><li>Critical business need: Enterprise-wide shared services </li></ul><ul><ul><li>Replace old, autonomous departmental, or divisional services with single, streamlined, corporate-level process </li></ul></ul><ul><li>Shared-services standardize the processes for routine, non-core functions for all business units to use (Porter’s value chain next 3 pages) </li></ul><ul><ul><li>Accounting </li></ul></ul><ul><li>With processes defined, an ERP-based IT infrastructure can be established to manage them efficiently </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    13. 13. www.ebstrategy.com <ul><li> - </li></ul>
    14. 14. Generic Value Chain -Primary Activities <ul><li>Inbound logistics : receiving, storing and disseminating inputs to the product. </li></ul><ul><li>Operations : transforming inputs into the final product. </li></ul><ul><li>Outbound logistics :collecting, storing and physically distributing the product to customers. </li></ul><ul><li>Marketing and sales : identifying markets and how customers buy the company’s products or services. </li></ul><ul><li>Service : dealing with customer support and repair service. </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    15. 15. Generic Value Chain -Support Activities <ul><li>Procurement of inputs used in the firm’s value chain. </li></ul><ul><li>Technology development in every facet of the operation but not limited to information technology. </li></ul><ul><li>Human resource management involving the recruiting, hiring, training, development and compensation of employees. </li></ul><ul><li>Firm infrastructure includes planning, accounting and finance, legal, community affairs, government relations and quality management. </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    16. 16. ERP Decision = Enterprise Architecture Planning <ul><li>Management must resolve enterprise architecture issues before selecting an ERP suite of products </li></ul><ul><ul><li>“ What kind of company do we want to be?” </li></ul></ul><ul><ul><li>Not, “What are each application’s features?” </li></ul></ul><ul><li>Inability to find the right fit between ERP apps and their business causing corporate frustration </li></ul><ul><ul><li>FoxMeyer </li></ul></ul><ul><li>Problem not with ERP concept but in management’s demands for quick fixes and rapid cures to underlying structural problems </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    17. 17. ERP Decision = Enterprise Architecture Planning <ul><li>Selecting and installing a new ERP solution one of the most important and most expensive endeavors </li></ul><ul><ul><li>Also most likely to go wrong </li></ul></ul><ul><ul><li>Lack of alignment between ERP, business processes and e-commerce objectives can derail best of firms </li></ul></ul><ul><ul><li>Managers must understand core functionality, not abdicate responsibility to IT dept </li></ul></ul><ul><li>Successful organizational change is gradual </li></ul><ul><ul><li>Enterprise apps require moving decades of corporate knowledge and information to a new technology platform </li></ul></ul><ul><ul><li>Technology is not the only challenge in managing transformation </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    18. 18. ERP Decision = Enterprise Architecture Planning <ul><li>Cannot lose sight of customers </li></ul><ul><ul><li>“ Is this something our customers will recognize as valuable?” </li></ul></ul><ul><ul><li>“ Will it shorten order-to-delivery cycle?” </li></ul></ul><ul><ul><li>“ Will this improve our product and performance?” </li></ul></ul><ul><li>ERP impacts not just s/w </li></ul><ul><ul><li>Corporate culture, business processes, staff, and day-to-day procedures are all affected </li></ul></ul><ul><li>Executive mgmt must understand technical basis for business change and e-commerce functionality, besides ROI of new technology </li></ul><ul><ul><li>“ What business are we in?” </li></ul></ul><ul><ul><li>“ What are the key issues facing us today?” </li></ul></ul><ul><ul><li>“ What issues will be important tomorrow?” </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    19. 19. ERP Decision: Build Vs Buy Vs Rent <ul><li>Important decision: whether to build or buy or rent </li></ul><ul><ul><li>ERP apps define overall corporate architecture </li></ul></ul><ul><ul><li>Enterprise-wide implementations </li></ul></ul><ul><li>Custom design app that meets specific requirements of an organization has several drawbacks </li></ul><ul><ul><li>Highly complex </li></ul></ul><ul><ul><li>Lengthy design, development and implementation efforts </li></ul></ul><ul><ul><li>Limited flexibility to support diverse and changing operations or to respond effectively to evolving business demands and technologies </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    20. 20. ERP Decision: Build Vs Buy Vs Rent <ul><li>COTS apps address limitations of custom built apps </li></ul><ul><ul><li>Provide broad functionality, better integration with existing legacy systems, greater flexibility to change and upgrade, and a lower TCO </li></ul></ul><ul><li>Downside of COTS apps </li></ul><ul><ul><li>Reengineer estbd. business practices </li></ul></ul><ul><ul><li>Customize apps </li></ul></ul><ul><ul><li>Hire consultants to make s/w work </li></ul></ul><ul><ul><li>No competitive edge </li></ul></ul><ul><li>Mgmt must view COTS apps within the context of overall business strategy </li></ul><ul><ul><li>“ What business processes bring us our identity and our competitive advantage?” </li></ul></ul><ul><ul><li>“ How can we ensure that we enhance these with COTS solution?” </li></ul></ul><ul><ul><li>“ How can we support our ecommerce initiatives with COTS?” </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    21. 21. Capabilities of COTS ERP Solutions <ul><li>Consolidation of back office </li></ul><ul><li>Creation of single back office that supports multiple distribution channels </li></ul><ul><li>Facilitation of changes in business practices </li></ul><ul><li>Facilitation of changes in technology </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    22. 22. Microsoft <ul><li>Spent 10 months and $25 million installing SAP R/3 to replace a tangle of 33 financial-tracking systems in 26 subsidiaries </li></ul><ul><li>$18 million annual savings </li></ul><ul><li>Growth rate was straining company’s systems </li></ul><ul><ul><li>50 subsidiaries worldwide; continues to grow every day </li></ul></ul><ul><ul><li>More than 30 systems implemented in a piecemeal fashion over time supported financial, operations and HR groups alone </li></ul></ul><ul><ul><li>Batch processes to move information between systems </li></ul></ul><ul><ul><ul><li>Run time grew to more than 12 hours </li></ul></ul></ul><ul><ul><ul><li>90% of the more than 20,000 batch robs that ran each month retrieved and processes same information </li></ul></ul></ul><ul><li>Mgmt realized it needed a global and integrated solution to support its core business </li></ul>www.ebstrategy.com <ul><li> - </li></ul>
    23. 23. ERP Implementation: Catching the Bull by the Horns <ul><li>Installation of ERP packages unique </li></ul><ul><ul><li>Each ERP app suite has own architecture, customization features, installation procedures, and level of complexity </li></ul></ul><ul><li>Implementation strategies for SAP </li></ul><ul><ul><li>Step-by-step </li></ul></ul><ul><ul><ul><li>One module at a time </li></ul></ul></ul><ul><ul><li>Big bang </li></ul></ul><ul><ul><ul><li>Replacing all old systems at once </li></ul></ul></ul><ul><ul><li>Modified big bang </li></ul></ul><ul><ul><ul><li>Various modules at once, but pilot first </li></ul></ul></ul><ul><ul><ul><li>Very common </li></ul></ul></ul><ul><li>Even if implementation strategy is right, setting up the solution not easy </li></ul><ul><ul><li>Brother Industries </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    24. 24. Roadmap to Rapid Implementation: Accelerated ERP Approach <ul><li>Today’s intense competitive pressures require fast response </li></ul><ul><ul><li>ERP app suites can’t keep up </li></ul></ul><ul><li>But successful companies understand business processes, simplify them, and then introduce automation </li></ul><ul><ul><li>Automating complex or non-value-adding processes will not increase productivity or provide measurable improvements in performance </li></ul></ul><ul><ul><li>Automation without simplification immortalizes ineffective processes </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    25. 25. Roadmap to New Leadership Skills <ul><li>Effective coordination mgmt encompasses a combination of four capabilities </li></ul><ul><ul><li>Strategic thinking </li></ul></ul><ul><ul><ul><li>How well does your ERP selection, implementation, and evolution strategy align with your business strategy? </li></ul></ul></ul><ul><ul><li>Process reengineering </li></ul></ul><ul><ul><li>Managing implementation complexity </li></ul></ul><ul><ul><li>Transition management </li></ul></ul>www.ebstrategy.com <ul><li> - </li></ul>
    26. 26. E-Business Strategies, Inc. www.ebstrategy.com [email_address] 678-339-1236 x201 Fax - 678-339-9793

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