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  1. 1. Enterprise Resource Planning (ERP) And Integration
  2. 2. ERP: What Is It? “ Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget about planning—it doesn't do that—and forget about resource, a throwaway term. But remember the enterprise part. This is ERP's true ambition. It attempts to integrate all departments and functions across a company onto a single computed system…” Darwin’s “Executive Guide”
  3. 3. <ul><li>The Basic Idea </li></ul>Deliver value added product and services in shortest possible time. Optimizing the resources available. Integration of specialized modules; all under one Roof. Real time management. Automatic discovery, pre configured control panels, and automatic alerts . The Basic Idea
  4. 4. Characteristics An ERP system should be flexible to respond to the changing needs of an enterprise. The client server technology enables ERP to run across various data base back ends through Open Data Base Connectivity (ODBC). ERP system has to have an open system architecture. This means that any module can be interfaced or detached whenever required without affecting the other modules. It should support multiple hardware platforms for the companies having heterogeneous collection of systems. It must support some third party add-ons also. Flexibility Modular & Open
  5. 5. Beyond The Company Characteristics ( Contd…) It should not be confined to the organizational boundaries, rather support the on-line connectivity to the other business entities of the organization. It must have a collection of the best business processes applicable world-wide. Last but not the least, it must simulate the reality of business processes on the computers. In no way it should have the control beyond the business processes and it must be able to assign accountabilities to the users controlling the system. Best Business Practices Simulation of Reality
  6. 6. Major Suppliers
  7. 7. Some of the Modules Sales and Distribution Human Resource Finance and Costing Time and labour Reporting Material Management Supply Chain Management Asset Management
  8. 8. Implementation Complex process of configuration of fit business Entering rules and preferences Loading and standardizing existing data Hooking up to remaining applications Writing custom code where needed Also human parts Retraining users Redesigning business processes
  9. 9. Benefits : Operational Efficiency Lower cost Better customer service Allows management of processes across organizational boundaries Data entered only once, used by all processes and Departments Current data accessible to all participants. E.g. customer service rep can see stock levels in other divisions, progress on order, etc.
  10. 10. Benefit: Lower IT cost ERP is very expensive Future maintenance and upgrades cheaper Biggest saving in integration Spread costs over a large base But expect long term savings from Elimination of legacy systems Upgrades, maintenance and licensing costs Huge costs for ad-hoc integration of aging applications
  11. 11. Benefit: Standard Process ERP is managerial means to force global standardization in processes Centralization of control over procedures Technological enforcement coded into software Local variation, workarounds eliminated May bring efficiency Will sacrifice flexibility
  12. 12. Benefit: Managerial Data Standardizing processes requires standardization of Product codes Accounting methods And Human Resources systems This allows comparisons between divisions Especially using financial measures of effectiveness –e.g. Economic Value Added (EVA) analysis and On global basis
  13. 13. Issue: Cost Project cost is 2 to 10 times software price High profile implementation failures
  14. 14. Issue: Complexity Inherent complexity of global project ERP team is permanent fixture <ul><li>Training costs for users easy to underestimate </li></ul><ul><li>Existing data often in worse shape than admit </li></ul><ul><li>Rely on to keep business running </li></ul><ul><li>Will need further work on analysis to deliver promised benefits </li></ul>New system gives short-term efficiency slump <ul><li>Like any major reorganization </li></ul><ul><li>But may afflict whole business at once </li></ul>
  15. 15. Issue: Inflexibility ERP standardizes business processes Possible Problems non-standard modules <ul><li>Will be running business the same way as competitors </li></ul><ul><li>Sees its processes as core competence </li></ul><ul><li>Can’t find better ways to do things </li></ul><ul><li>Tied to capabilities of software </li></ul><ul><li>Limits scope for reengineering, etc except as software requires and supports </li></ul>
  16. 16. Issue: Dependence ERP is not just a new program, it’s a new way of doing business” How to deal with things it won’t support? Long-term commitment <ul><li>Can users lobby for new features? </li></ul><ul><li>What if supplier is taken over? </li></ul><ul><li>What if supplier raises prices? </li></ul><ul><li>What if supplier shifts direction of product? </li></ul>
  17. 17. Issue: Integration When doesn’t work well in one area Problems in integrating into other systems <ul><li>Can try to patch the ERP software </li></ul><ul><li>Can rely on external application and links </li></ul><ul><li>Can alter business to fit the software </li></ul><ul><li>Create & maintain custom interfaces </li></ul><ul><li>Not well suited for data warehouses </li></ul>
  18. 18. Issue: Upgrades Like all software, frequent new releases Can be a year long project, cost 30% of original installation price Can cause major disruption Users resent having to upgrade just because vendor is pulling support Likely to break custom code & interfaces to other applications
  19. 19. Trends in ERP <ul><li>Increased modularization of suites </li></ul><ul><li>Reduces scale of commitment </li></ul><ul><li>Supposed to work better with other applications </li></ul><ul><li>Shift to web based front ends </li></ul>
  20. 20. Consolidation of suppliers People Soft buys J.D. Edwards Succeeds, just in time SAP profits from chaos Market share continues to rise Oracle tries to buy People Soft Initially to prevent merger with J.D. Edwards Announces customers will have to migrate to Oracle applications Still trying to acquire merged firm
  21. 21. CRM Customer Relationship Management Idea: centralize all processes and data related to interaction with customers Often offered by ERP suppliers Sold as “next big thing”, though problems set Hit by slump in IT spending from 2001