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Erp Enterprise Resource Planning


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Erp Enterprise Resource Planning

  1. 1. What does a company’s strategy consist of ? Company strategies concern, • How to grow the business • How to satisfy customers • How to out compete rivals • How to respond to changing in market conditions • How to manage each functional piece of the business and develop needed organizational capabilities • How to achieve strategic and financial objectives
  2. 2. Introduction Manufacturing Organizations are complex `Systems' where the interactions between the various functions Sales, Distribution, Manufacturing, Materials, Finance, Human Resources, Maintenance have to be managed towards a common purpose of delivering the customers maximum value at the optimum price. However, since most of these organizations have a `Functional Structure', each function/department works towards their own goals and objectives, rather than the organizational goals. These are the issues addressed by `Enterprise Resource Planning' software solutions providing a common, consistent system to capture data organization wide, with minimum redundancy.
  3. 3. What is ERP? ERP integrates the information across functions, and provides a set of tools for planning and monitoring the various functions and processes and ensuring progress towards a common purpose A business management system that integrates all facets of the business, including planning, manufacturing, sales, and marketing. ERP helps business managers to implement ERP in business activities such as inventory control, order tracking, customer service, finance and human resources
  4. 4. MRP – the predecessor to and backbone of MRP II And ERP a joint effort between J.I. Case, a manufacturer of tractors and other construction machinery, in partnership with IBM. Initial MRP solutions were big, clumsy and expensive.(1960-1970)
  5. 5. How WIP could be improved by implementation of ERP (Work in Process ) Without using of any integrated system using of integrated system
  6. 6. Some Questions What are the major types of systems in a business? What role do they play? How do information systems support the major business functions? Why should managers pay attention to business processes?
  7. 7. Major Types of Systems • Executive Support Systems (Executive Support Systems (ESSESS)) • Decision Support Systems (Decision Support Systems (DSSDSS)) • Management Information Systems (Management Information Systems (MISMIS)) • Knowledge Work Systems (Knowledge Work Systems (KWSKWS)) • Office SystemsOffice Systems • Transaction Processing Systems (Transaction Processing Systems (TPSTPS))
  8. 8. Transaction Processing Systems (TPS):Transaction Processing Systems (TPS): • Basic business systems that serve the operationalBasic business systems that serve the operational levellevel • A computerized system that performs and recordsA computerized system that performs and records the daily routine transactions necessary to thethe daily routine transactions necessary to the conduct of the businessconduct of the business
  9. 9. Types of TPS Systems
  10. 10. Payroll TPS
  11. 11. Executive Support System (ESS): Strategic level Inputs: Aggregate data Processing: Interactive Outputs: Projections Users: Senior managers Example: 5-year operating plan
  12. 12. Management Information System (MIS): Management level Inputs: High volume data Processing: Simple models Outputs: Summary reports Users: Middle managers Example: Annual budgeting
  13. 13. Decision Support System (DSS): Management level Inputs: Low volume data Processing: Interactive Outputs: Decision analysis Users: Professionals, staff Example: Contract cost analysis
  14. 14. Knowledge Work Systems (KWS): Knowledge level Inputs: Design specs Processing: Modeling Outputs: Designs, graphics Users: Technical staff and professionals Example: Engineering work station
  15. 15. Decision Support System (DSS)
  16. 16. Decision Support System (DSS)
  17. 17. Relation Between 5 systems
  18. 18. (ESS)(ESS) (MIS)(MIS) (TPS)(TPS) (KWS)(KWS) With out any Integrated system
  19. 19. Using Integrated system
  20. 20. Supply Chain management 6 level of sys.(ESS,MIS,TPS,…) +MRPII Best Practice : Comparing your process with similar processes In higher companies Enterprise resources planning software ERP elements
  21. 21. ERP Software Companies & Marketshares SAP; 15,6 Peoplesoft; 4,9 Oracle ; 4,8 Baan; 3 CA; 3 JDE; 2,2 SSA; 2,1 GEAC; 2 IBM; 1,8 JBA; 1,7 Others ; 59 Software Market Share SAP 15.6 Peoplesoft 4.9 Oracle 4.8 Baan 3.0 CA 3.0 JDE 2.2 SSA 2.1 GEAC 2.0 IBM 1.8 JBA 1.7 Others 59.0
  22. 22. Business Functions Potentially Supported by ERP Financial Human Resources Operations and Logistics Sales and Marketing Accounts receivable and payable Time accounting Inventory management Order management Asset accounting Payroll Materials Requirement Planning (MRP) Pricing Cash forecasting Personnel planning Plant maintenance Sales management Cost accounting Travel expenses Production planning Sales planning Executive information systems Project management Financial consolidation Purchasing General ledger Quality management Profitability analysis Shipping Standard costing Vendor evaluation
  23. 23. Modules Offered by Leading Vendors Functional Description SAP Oracle People Soft JD Eswards Records sales orders and scheduled deliveries ,customer information SD( Sales and Distribution) Marketing Sales Supply Chain Supply chain management Order management Purchasing and raw materials inventory, work- in-process. customer information MM (Materials Management Procurement Supplier Relationship Management Inventory Management Procurement Production Planning and scheduling actual production PP (production planning ) Manufacturing Manufacturing Management Product inspections ,material certifications ,quality control QM (quality Management) Enterprise Performance Management Technical Foundation Preventive maintenance, resource management PM (plant Maintenance) Service Enterprise Service Automation Recruiting, hiring training ,payroll ,benefits HR (Human Resources Human Resources Human Capital Management Workforce Management
  24. 24. Reasons for Implementing ERP-Rating 1(Not Important) to 5(very Important) Reason United States Sweden Replace legacy systems 4.06 4.11 Simplify and standardize systems 3.85 3.67 Improve interactions with suppliers & customers 3.55 3.16 Gain strategic advantage 3.46 3.18 Link to global activities 3.17 2.85 Pressure to keep up with competitors 2.99 2.48 Ease of upgrading systems 2.91 2.96 Restructure organization 2.58 2.70
  25. 25. Functional Description SAP Oracle People Soft JD Eswards Internal management, cost analysis by cost center CO (Controlling) Time and Expense Management Fixed-asset purchase and depreciation AM (Asset Management) Asset Management Enterprise Asset Management R&D ,construction, marketing projects PS (Asset Management) Projects Project Management Contracts Subcontract Management Real Estate Management Automate system, task – flow analysis, Prompt actions WF (Workflow) Best practices IS (Industry Solutions) Modules Offered by Leading Vendors
  26. 26. Relative ERP Module Use Module Midwestern ERP Users Swedish ERP Users Financial and Accounting 91.5% 87.3% Materials management 89.2 91.8 Production planning 88.5 90.5 Order entry 87.7 92.4 Purchasing 86.9 93.0 Financial control 81.5 82.3 Distribution/logistics 75.4 84.8 Asset management 57.7 63.3 Quality management 44.6 47.5 Personnel/human resources 44.6 57.6 Maintenance 40.8 44.3 R&D management 30.8 34.2
  27. 27. Advantages and Disadvantages of Alternative ERP Development Methods Method Advantages Disadvantages Develop in-house Best fit with organizational needs Most difficult to develop Most expensive Slowest In-house system With vendor supplements Gain commercial advantages Combined with organizational fit Difficult to develop Expensive slow Best-of-breed Customized vendor system Theoretically while keeping Retain flexibility while keeping Vendor expertise Difficult to link modules Slow Slower Usually more expensive Selected vendor modules Less risk Relatively fast Least expensive If expand, long run time and cost higher Full vendor system Fast Less expensive Efficient Inflexible Application device provider Least risk Least cost Fastest Least subject to vendor change At the mercy of ASP provider No control Subject to price increases
  28. 28. Expected ERP Project Installation Time Requirements Installation Time United States Sweden 12 months or less 34% 38% 13 to 24 months 45 49 25 to 36 months 11 8 35 to 48 months 6 4 Over 48 months 2 1
  29. 29. ERP Installation Project Cost Proportions Installation Cost Proportion Project Installation Cost Proportion in United States Cost Proportion in Sweden Software 30% 24% Consulting 24 30 Hardware 18 19 Implementation team 14 12 Training 11 14 Other 3 1
  30. 30. A supply chain is characterized by the flow of materials and information both within and between business entities including suppliers, manufacturers and customers. The ultimate goal of supply chain management is to meet customer’s demand more efficiently. For a manufacturing company, it is to make the right product, for the right customer, in the right amount, at the right time.
  31. 31. ERP Implementation And Maintenance ERP Systems Are Adopted In The Hopes That They Will Improve The Performance Of An Organization On A Number Of Key Performance Indicators , Such As Profitability , Efficiency , And Accuracy In Information System Data And Reports . ERP Vendors Typically Promise Gains Of 10 To 15 Percent In Revenue , Customer Satisfaction , And Other Measures Of Value . The Effort Required To Build These Systems Is Significant . Meta Group found that the average ERP implementation takes 23 months with total Ownership cost of $15 million .
  32. 32. Business Intelligence Systems And ERP Enterprise Resource Planning Systems Offer Powerful Tools To Better Measure And Control Organizational Operations . Many Organizations Have Found That This Valuable Tool Can Be Enhanced To Provide Even Greater Value Though The Addition Of Powerful Business Intelligence Systems . Business Intelligence In This Context Is Supported By Sorting Data (Data Warehouse And Related Systems) And Conducting Studies Using This Data To Solve Business Problems ( One Means To Do This Though Data Mining ) . One Of The Most Popular Forms Of Data Mining In ERP Systems Is Support Of Customer Relationship Management (CRM). Data Warehouses Are One Of The Most Popular Extensions To ERP Systems , With Over Two-Thirds Of U.S. Manufacturers Adopting Or Planning Such Systems ( And Slightly Less Than Two – Thirds of Swedish Manufacturers doing the same ). There Has Been Tremendous Progress In Computer Storage Of Data . Many Applications Are Being Found For This new capacity . one major user of massive storage capacity is ERP systems, witch have large storage requirements due to their comprehensive nature .
  33. 33. Data Mining Overview Data Mining Overview Refers To The Analysis Of The Large Quantities Of Data Stored In Computers . For Example , Grocery Stores Have Large Amounts Of Data Generated By Purchases . Bar Coding Has Made Grocery Checkout Very Convenient . Grocery Stores And Other Retail Stores Are Able To Quickly Process Purchases , And Use Computers To Accurately Determine Product Prices . These Same Computers Help The Stores With Inventory Management By Instantaneously Determining The Quantity Of Items Of Each Product On Hand . Stores Can Also Apply Computer Technology To Contact Their Vendors So That They Do Not Run Out Of Items . Computers Allow The Store’s Accounting System To More Accurately Measure Costs And Determine The Profit That Store Stockholders Are Concerned About . All Of This Information Is Available Based Upon The Bar Coding Information Attached To Each Product . The Benefits Of Bar Coding Encompass For More Than Faster Checkout Service . The Entire Business Management Process Can Use The Information Generated .
  34. 34. ERP And Supply Chains Supply Chain Are Collections Of Organizations That Work Together To Provide Raw Materials That Are Converted Into Products And Delivered To Retail Outlets Where Customers Can Obtain Them . In The Past , Monopolies Would Sometimes Seek Vertical Integration So That They Could Control The Entire Supply Chain ( Standard Oil Went A Long Way Toward Total Vertical Integration ; Steel Companies Also Attained At Lest Something Approaching It ) . The Dutch East India Companies Are An Early Example Of A Global Supply Chain . Military Logistics Systems Are The Epitome Of Supply Chain Is Control And Efficiency . Today‘S Companies Gain Efficiency Through A Higher Degree Of Specialization . This Appears In Various Forms , Including Outsourcing . The Idea Behind Outsourcing Is That There Are Specialists Throughout The Supply Chain Who Can Do A Better Job Of The Specific Function They Perform .
  35. 35. In cr ea se d In cr ea se d D ec re as ed In In cr ea se d In cr ea se d
  36. 36. •The growing information needs of an enterprise make it imperative to improve or replace old systems. •Especially under the present business environment, where the globalization has been initiated, full convertibility is coined. •Infrastructure Projects are nearing completion, and it is expected that the whole business system will undergo a major shift. Conclusion •Implementation of ERP solutions is one of the largest drivers of growth in the consultancy business. •The introduction of such a large and complex software like ERP, enables an organization to integrate their manufacturing, finance and marketing operations at all levels, is in itself a challenge, since it calls for technical and functional skills and a change in user mindsets.
  37. 37. Enterprise Resource Planning (ERP)
  38. 38. Presentation - Flow ERP – General Concepts ERP based applications - Options Building ERP solutions using Internal Sources Adapting Tailor-made ERP Solutions Developing ERP applications using External Sources      Brainstorming on the Options
  39. 39. ERP General Concepts
  40. 40. ERP – General Concepts  What is ERP?  The Current Scenario  Why ERP?  Definition  Evolution  Expectations  BPR & ERP  BPR – The Steps EnterpriseResourcePlanning
  41. 41. What is ERP? facilitates company-wide integrated information systems, covering all functional areas performs core Corporate activities and increases customer service augmenting Corporate Image ERP is a solution, which EnterpriseResourcePlanning
  42. 42. The Current Scenario Islands of Information Difficult to get timely & accurate information Heterogeneous Hardware & Software platforms & practices Poor connectivity between different organizational locations Sticking with obsolete technology Resist to change Lack of proven man-power to develop integrated software EnterpriseResourcePlanning
  43. 43. Information Islands B
  44. 44. Why ERP? For Management – to know what is happening in the company One solution for better Management For cycle time reduction To achieve cost control & low working capital To marry latest technologies To shun the geographical gaps To satisfy the customers with high expectations To be Competitive & for survival EnterpriseResourcePlanning
  45. 45. ERP - Definition “Software solution that addresses the Enterprise needs, taking a process view of the overall organization to meet the goals, by tightly integrating all functions and under a common software platform” EnterpriseResourcePlanning
  46. 46. Evolution of ERP 1960’s - Systems Just for Inventory Control 1970’s - MRP – Material Requirement Planning (Inventory with material planning & procurement) 1980’s - MRP II – Manufacturing Resources Planning (Extended MRP to shop floor & distribution Mgnt.) Mid 1990’s - ERP – Enterprise Resource Planning (Covering all the activities of an Enterprise) 2000 onwards – ERP II – Collaborative Commerce (Extending ERP to external business entities) EnterpriseResourcePlanning
  47. 47. ERP – Expectations Integrating all the functions Integrating the systems running in all the locations Transparency of information using a single data source across the organization Software must be responsive Modular Flexible Easy to add functionalities Provide growth path EnterpriseResourcePlanning
  48. 48. BPR & ERP Just automating the existing business practices will not help ERP to achieve the anticipated results because, OO + NT = EOO Business Process Re-engineering [BPR] brings out the deficiencies of the existing setup BPR and ERP will give way to implement new systems and the long pending improvements in the existing systems BPR may be time consuming but the scope can be restricted & controlled by the Management BusinessProcessRe-engineering
  49. 49. BPR - Steps Step 1 Step 2 Step 3 Understand Simplify/Improve Automate Understand the existing systems associated with all the functionalities Draft & frame the possibilities & ways to simplify or Improve or eliminate the processes Implement with the help of ERP BusinessProcessRe-engineering
  50. 50. ERP – Options OPTION 1 – MAKE [Using Internal resources] Developing a custom-built ERP package, specific to the requirements of the organization, with the help of the in-house IT department OPTION 2 - BUY Going for Tailor-made ERP packages available in the market like SAP, Oracle applications, Baan, PeopleSoft etc. OPTION 3 – MAKE [using External resources] Developing a custom-built ERP package, specific to the requirements of the organization, with the help of a software solution provider EnterpriseResourcePlanning
  51. 51. Building ERP solutions using Internal Sources
  52. 52. ERP – Building using Internal resources – The Facts  Lack of adequate & qualified manpower  Not driven with clear focus on expectations, time & cost  Poor software project management  Lack of seriousness with the Management & the IT Team  High employee turnover  Lot of schedule gaps during Project execution  Normally project life is more  Frequent change in the scope with the approval of the Management
  53. 53. Tailor-made ERP Solutions
  54. 54. Tailor-made ERP solutions  About this option  Execution Phases  ERP product selection phase  Product selection - Parameters  Preparation Phase  ERP product acceptance - Options  Gap Analysis  Production Phase  Implementation Phase  Post-Implementation Phase  Pitfalls & Points of Concern  Critical Success factors Tailor-madeERPsolutions
  55. 55. About Generalized off the shelf application s/w packages Modules based on rich functionalities for all business functions User tested with lot of installations No lead time requirement for software development Tuned for more users/networks with adequate & in- built security Parameterized for flexibility Can sit on latest hardware & software platforms Upgradation of functionalities with version control Tailor-madeERPsolutions
  56. 56. Execution phases  ERP product selection  Preparations  Production  Implementation  Post-Implementation Tailor-madeERPsolutions
  57. 57. ERP Product selection Phase  ERP Team formation for selection  Appointment of Consultants [if needed]  Scoping study  Product selection  Implementation partners selection  Hardware/Communication cost estimation Tailor-madeERPsolutions
  58. 58. Product Selection - Parameters  Reputation of the ERP product  No.of installations in the geographical vicinity  % of the overall functional availability  Customization possibilities  After sales support  Your investment plan & budget  Implementation partner’s track record Tailor-madeERPsolutions
  59. 59. Technology Support Costs 5 Strategic5 Strategic RequirementRequirement LevelsLevels Functionality Goal:Goal: To select theTo select the Most Suitable SoftwareMost Suitable Software Package SolutionPackage Solution Vendor ERP Product selection Criteria
  60. 60. Preparation Phase  Framing ERP Implementation Strategies  Formation of Apex & Steering committees  Functional & IT team formation  Training on ERP functions & features  Scope finalization  GAP analysis  Action plan to resolve the gaps Tailor-madeERPsolutions
  61. 61. ERP product acceptance - options 1. Adapting directly, all the functions available in the ERP Product [Applicable for startup companies] 2. Change the way the firm does the business to fit the product [Compromising] 3. Customize the ERP product to suit the business Processes. [Customization] Tailor-madeERPsolutions
  62. 62. GAP Analysis This is the process to identity the gaps by mapping the expectations of the company with the capabilities of the ERP product Results of Gap Analysis Directly Supported Workaround suggested Extension required Change in business process – suggested Not full supported Manual – not under the scope of ERP Tailor-madeERPsolutions
  63. 63. Production Phase  Installing the software & hardware  Tuning the software to meet the customization needs  Master & Control data arrival as per the Product data structures  Location & people specific roles & rights allocation for module access & security Tailor-madeERPsolutions
  64. 64. Implementation Phase  Conference Room Pilot [Parallel run]  Resolving the Parallel run issues  Training the end users  Live run Tailor-madeERPsolutions
  65. 65. Post-Implementation Phase  Regular monitoring  Tuning [hardware/software] for patching the performance issues  Maintenance Tailor-madeERPsolutions
  66. 66. Pitfalls & Points of concern  Costly comparing to custom-built options  Lot of hidden costs  Chances of cost & time overrun are high  The Level of customization/Indianization  Compulsion to pay for redundant modules/features  Vigorous involvement of all during implementation  Non-availability of special practices like Customer Complaint, Logistics  Linking historical data – offline & painful  The requirement of Change Management is a must  Dependency on outsiders is high  IT department – Poor grip on the Implemented systems Tailor-madeERPsolutions
  67. 67. Critical Success Factors Tailor-madeERPsolutions  The firm & optimistic approach of the Management - on adapting the ERP product driven methodologies - on customization - on monetary commitments  The dedicated Team  Good Training  Strict adherence to the Project schedules  Right technical infra-structure  Change Management ?
  68. 68. Custom-built ERP Solutions using external resources
  69. 69. Building ERP using Ext.sources  About this option  The Principle!  The Steps  Why?  Points of Concern  Software Vendor selection  Critical Success factors
  70. 70. About Here the whole package is designed & built  by keeping a specific enterprise & its business Practices in mind  by incorporating the improvements/additions  with due integration  without compromising or changing the current way of doing the business and  providing flexibility to accommodate your business fluctuations Custom-BuiltERPsolutions
  71. 71. The Principle! Custom-BuiltERPsolutions The best as seen elsewhere, need not be the the best for you. What is your best is what can be successfully implemented
  72. 72. Custom-BuiltERPsolutions The Steps 1. Software vendor selection 2. Detailed study by the vendor 3. Scope & platform finalization 4. Freezing the commercials 5. Development 6. Hardware addition/upgradation 7. Old master/transaction data migration 8. Parallel run with Integration & connectivity check 9. Implementation 10. Maintenance
  73. 73. Custom-BuiltERPsolutions Why?  Very economical while comparing the cost of implementing tailor-made ERP solutions  Less prone for hidden-cost hits  The company can opt for its choice of Hardware, Software & communication platforms based on the skill availability  The company and the software vendor have the direct relationship during the project execution. The proximity would be high & convenient.  IT department has good control over the Project  What is required only would be considered under the scope – No redundancy
  74. 74. Why? - Cont.  The requisite flavor of E-Biz & work-flow components can be embraced towards value edition  The existing practices & applications can be tuned and linked with the proposed package  Maintenance & improvements are easy & less costlier. Even IT team can maintain the setup after getting the source code
  75. 75. Points of Concern  Software development vendor selection  Requirement/scope finalization [high chances of retaining the islands as it is]  Less chances of Value addition  Not time tested  Chances of Prolonged project duration
  76. 76. The following traits should be considered while selecting the software vendor for building the ERP application  Technical expertise  Domain knowledge  Adequate manpower  Project management skills  Long existence in the field  Extra skills [e-biz & workflow] Software Vendor Selection
  77. 77. Custom-BuiltERPsolutions The Critical Success Factors • Clear Vision & support of the Management • Capabilities of the software development vendor • Scope & Expectations finalization towards meeting the ERP concepts • Strict implementation schedules & periodical monitoring • The involvement of the IT & functional teams
  78. 78. Key Process Integration via ERP Key Process Integration via ERP Product Lifecycle Management Product Lifecycle Management Supply Chain Management Supply Chain Management Customer Management Customer Management Supplier Collaboration Supplier Collaboration Design Partners Design Partners Consumers and Channels Consumers and Channels Beyond ERP
  79. 79. Thank You