4. Calculation systems
1950-80
Single purpose
Eliminate tedious human work
Examples: Payroll, General ledger,
Inventory
Technology used: Mainframes,
magnetic tapes, batch processing
13. Functional systems
1975-20??
Use computers to improve operations
Applications: Human resources, order
entry, manufacturing resource planning
Technologies: Mainframes, PC’s, LAN’s
15. Functional systems
Typically contained within a department
Islands of automation
Applications independently developed
and deployed
Driving force: availability of mini-
computers
16. Functional system applications
Human resources System
Accounting and finance systems
Sales and marketing System
Operations management System
Manufacturing Systems
27. Types of Organizational
information Systems
Administrative systems
Scheduling / Transaction systems
Value oriented systems
Reporting and controlling systems
Analysis and information systems
Planning and decision support systems
(From Business Process Engineering by
A.W. Scheer)
28.
29. Problems with function based
application
Sharing of data between systems
Data duplication
Data inconsistency
Applications that don’t talk to one another
Limited or lack of integrated information
Isolated decisions lead to overall inefficiencies
Increased expenses
30. Solution to disparate systems?
Integration
Consolidation
Right-sizing
Business Process Redesign
Enterprise wide system
31. Legacy Systems
Each department has its own system
Infrastructure specific
Inefficient processes
Potential for inaccuracies
32. Limitations of Legacy Systems
Legacy systems used in large enterprises of
the 1970s and 1980s have limitations.
They were developed in-house or by different
vendors using several different DBMSs,
languages and packages
Difficult to increase the capacity of such
systems or unable to upgrade them with the
organization’s business changes, strategic
goals and new information technologies
32
34. Internally focused systems
Support functional areas, business processes
and decision-making within an organization
New information (value) is added at every step
34
35. Externally Focused Systems
Coordinate business activities with customers,
suppliers, business partners and others who
operate outside the organization
36. The Need for Integrated Enterprise
Systems
Advantages of integrated systems
Centralized point of access
Conversion needed
Enterprise Resource Planning (ERP) vendors
offer different modules
Components that can be selectively implemented
E.g., modules of mySAP business suite
37. The Rise of Enterprise Systems
Packaged applications
Written by third-party vendors
Used by many different organizations
Useful for standardized, repetitive tasks
Cost effective
E.g., Microsoft Money and Quicken
Custom applications
Developed exclusively for a specific organization
Designed for particular business needs
Higher development costs
39. Introduction
Enterprise Resource Planning: a process
of planning and managing all resources and
their use in the entire enterprise
ERP System is an enterprise-wide
information system designed to coordinate all
the resources, information, and activities
needed to complete business processes such
as order fulfilment or billing.
40. ERP - Definition
ERP is a process of managing all
resources and their use in the entire
enterprise in a coordinated manner
41. ERP Systems Defined
Enterprise resource planning systems or
enterprise systems are software systems
for:
business management, encompassing modules
supporting functional areas such as planning,
manufacturing, sales, marketing, distribution,
accounting, financial, human resource
management, project management, inventory
management, service and maintenance,
transportation and e-business.
41
42. ERP Systems Defined (cont.)
The architecture of the software facilitates
transparent integration of modules, providing flow
of information between all functions within the
enterprise in a consistently visible manner
American Production and Inventory Control
Society (2001) has defined ERP systems as
“a method for the effective planning and
controlling of all the resources needed to take,
make, ship and account for customer orders in a
manufacturing, distribution or service company”.
42
43. ERP Systems Defined (cont.)
“ERP (enterprise resource planning systems) comprises of a
commercial software package that promises the seamless
integration of all the information flowing through the
company–financial, accounting, human resources, supply
chain and customer information” (Davenport, 1998).
“ERP systems are configurable information systems packages
that integrate information and information-based processes
within and across functional areas in an organization” (Kumar
& Van Hillsgersberg, 2000).
43
44. “One database, one application and a unified interface
across the entire enterprise” (Tadjer, 1998).
“ERP systems are computer-based systems designed to
process an organization’s transactions and facilitate
integrated and real-time planning, production, and
customer response” (O’Leary, 2001).
45. ERP system: Definition
ERP is a set of integrated business
applications, or modules which carry
out common business functions such as
general ledger, accounting, or order
management
46. Enterprise Resource Planning (1990s)
First appeared in the late 1980s and the beginning
of the 1990s with the power of enterprise-wide
inter-functional coordination and integration.
Based on MRP and MRP II, ERP systems integrate
business processes including manufacturing,
distribution, accounting, financial, human resource
management, project management, inventory
management, service and maintenance, and
transportation, providing accessibility, visibility and
consistency across the enterprise.
46
47. Extended ERPs (1990s)
During the 1990s ERP vendors added
more modules and functions as “add-
ons” to the core modules giving birth to
the “extended ERPs.”
These ERP extensions include advanced
planning and scheduling (APS), e-
business solutions such as customer
relationship management (CRM) and
supply chain management (SCM).
ITEC6620 47
50. ERP Objective
To integrate all departments and functions across
a company onto a single computer system that can
serve all of the enterprise’s needs
For example, improved order entry allows
immediate access to inventory, product data,
customer credit history, and prior order
information
This availability of information raises productivity
and increases customer satisfaction
50
51. Best Practices-Based Software
Most ERP vendors build best practices into
their ERP systems
Identify business processes in need of change
Future updates are smoother if businesses change
their business processes to fit with ERP systems
Is following the best practices always the best
strategy?
If companies have competitive advantage from
unique business processes
51
53. Value Chain
53
• Flow of information through a set of business activities
– Core activities – functional areas that process inputs and
produce outputs
– Support activities – enable core activities to take place
54. Core Activities
Inbound logistics activities
Receiving and stocking raw materials, parts and products
Cisco – delivery of electronic components from suppliers
Operations and manufacturing activities
Order processing and/or manufacturing of end products
Dell – component parts assembled to make products
Outbound logistics activities
Distribution of end products
Amazon.com – delivery of books to customers
54
55. Core Activities (cont.)
Marketing and Sales activities
Presale marketing activities (e.g., creating
marketing brochures)
Amtrak – use of IS to update prices and
schedules
Customer service activities
Postsale activities
HP – downloads related to purchased products
55
56. Support Activities
Administrative activities
Support of day-to-day operations (for all functional areas)
Infrastructure activities
Implement hardware and software needed
Human resource activities
Employee management
Technology development activities
Design and development of applications to support the
primary activities
Procurement activities
Purchasing of goods and services (inputs into the primary
activities)
56
57. What is ERP?
Enterprise Resource Planning
Support business through optimizing,
maintaining, and tracking business
functions
Broken down into business processes
HRM
Distribution
Financials
Manufacturing
58. What makes ERP different
Integrated modules
Common definitions
Common database
Update one module, automatically
updates others
ERP systems reflect a specific way of
doing business
Must look at your value chains, rather
than functions
59. Benefits of ERP
Common set of data
Help in integrating applications for
decision making and planning
Allow departments to talk to each other
Easy to integrate by using processed
built into ERP software
A way to force BPR (reengineering)
Easy way to solve Y2K problem
61. ERP Vendors
There were five dominating ERP software
suppliers: SAP, Oracle, PeopleSoft, Baan and J.D.
Edwards.
They controlled more than 60% of the multi- billion
dollar global market.
Each vendor had a specialty in one particular
module area such as
Baan in manufacturing,
PeopleSoft in human resources management,
SAP in logistics, and
Oracle in financials
61
62. SAP AG
SAP AG (“Systeme, Anwendungen, und Produkte in
Datenverarbeitung”), or Systems, Applications and Products in Data
Processing
In 1979, SAP launched SAP R/2, a mainframe-based ERP
In 1992 SAP R/3 was launched based on client/server
By 1999 SAP became the third largest software vendor in the world
and the largest in the ERP sector with a market share of about 36%
serving over 17,000 customers in over 100 countries.
In 1999 SAP extended the ERP functions by adding CRM, SCM,
sales-force automation and data warehousing.
SAP’s Internet-enabled ERP solutions are provided by the recently
launched ERP product called mySAP.COM
62
63. Oracle Corporation
founded in 1977 in the USA, is best-known for its
database software and related applications and is the
second largest software company in the world after
Microsoft.
second to SAP in the enterprise systems category
with over 5,000 customers in 140 countries.
Oracles ERP system is known as Oracle
Applications, having more than 50 different
modules in six major categories: finance, accounts
payable, human resources, manufacturing, supply
chain, projects and front office.
Now taken over PeopleSoft and JD Edwards 63
64. PeopleSoft Inc.
Started in 1987 in California, with specialization in
human resource management and financial
services modules.
Enterprise solutions from PeopleSoft include modules
for manufacturing, materials management, distribution,
finance, human resources and supply chain planning.
One of the strengths of PeopleSoft is the recognition by
its customers that it is flexible and collaborative
In 2005 PeopleSoft became a part of Oracle offering
PeopleSoft 9
64
65. J.D.Edwards
founded in 1977 in Denver (cofounded by Jack Thompson, Dan
Gregory and C. Edward McVaney) with long experience of
supplying software for the AS/400 market.
Its ERP product called OneWorld is “capable of running on multiple
platforms and with multiple databases, ... [and] revolutionizes
enterprise software by liberating users from inflexible, static
technologies
The product includes modules for finance, manufacturing,
distribution/logistics and human resources, quality management,
maintenance management, data warehousing, customer support and
after-sales service
Now a part of Oracle offering JD Edwards EnterpriseOne and JD
Edwards World
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66. Baan
Found in 1978 with expertise in software for
the manufacturing industry
ERP solution areas that Baan covers include
finance, procurement, manufacturing,
distribution, integration and implementation,
planning, sales, service and maintenance,
business portals, collaborative commerce and
business intelligence.
Bought by Infor in 2006
66
67. Current Situation
JD Edwards was merged with PeopleSoft
Then PeopleSoft was merged with Oracle in 2005
Baan was bought by Invensys (in 2000), then SSA
Global Technologies (in 2003) and changed the
name to SSA ERP
SSA ERP was acquired by Infor in 2006
Now 3 largest ERP companies:
SAP : logistics
Oracle : financial, HRM
Infor: manufacturing 67
68. Difficulty in implementation
Very difficult
Extremely costly and time intensive
Typical: over $10,000,000 and over a
year to implement
Company may implement only certain
modules of entire ERP system
You will need an outside consultant
69. Core and Extended ERP Components
Core components – support primary internal activities
Extended components – support primary external
activities
69
70. ERP Systems and Organizations
Generally a misleading perception that ERP
system can improve organizations’ functionalities
overnight.
Achieving all-round cost savings and service
improvements is very much dependent on:
how good the chosen ERP system fits to the
organizational functionalities and
how well the tailoring and configuration process of the
system matched with the business culture, strategy and
structure of the organization.
ERP system is expected to improve both backbone
and front-end functions simultaneously. 70
72. ERP Characteristics (cont.)
Modular design comprising many distinct business
modules such as financial, manufacturing, accounting,
distribution, etc.
Use centralized common DBMS
Integrated modules provide seamless data flow among
the modules, increasing operational transparency through
standard interfaces
72
73. Generally complex systems involving high cost
Flexible and offer best business practices
Require time-consuming tailoring and configuration
setups for integrating with the company’s business
functions
Work in real time with online and batch processing
capabilities
They are Internet-enabled
ERP Characteristics (cont.)
75. ERP Advantages
What benefits How
Reliable information
access
Common DBMS, consistent and accurate data,
improved reports.
Avoid data and
operations redundancy
Modules access same data from the central
database, avoids multiple data input and update
operations.
Delivery and cycle time
reduction
Minimizes retrieving and reporting delays.
Cost reduction Time savings, improved control by enterprise-wide
analysis of organizational decisions
Easy adaptability Changes in business processes easy to adapt and
restructure.
Improved scalability Structured and modular design with
Improved maintenance Vendor-supported long-term contract as part of the
system procurement
Global outreach Extended modules such as CRM and SCM
E-Commerce, e-business Internet commerce, collaborative culture
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76. ERP Disadvantages
Disadvantages How to overcome
Time-consuming Minimize sensitive issues, internal politics and raise
general consensus
Expensive Cost may vary from thousands of dollars to millions.
Business process reengineering cost may be
extremely high
Conformity of the
modules
The architecture and components of the selected
system should conform to the business processes,
culture and strategic goals of the organization
Vendor dependence Single vendor vs. multi-vendor consideration, options
for “best of breeds,” long-term committed support.
Features and
complexity
ERP system may have too many features and
modules so the user needs to consider carefully and
implement the needful only
Scalability and global
outreach
Look for vendor investment in R&D, long-term
commitment to product and services, consider
Internet-enabled systems
76