Enterprise Resource Planning

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Enterprise Resource Planning
Need, Usage and Advantage
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ERP Enterprise Resource Planning

• PLANNING the RESOURCES of an ENTERPRISE
• ERP is a way to integrate the data and processes
  of an organization into one single system with
  modules that support core business areas such as
  manufacturing, distribution, financials and human
  resources.
• ERP allows managers from most or all departments
  to look vertically and horizontally across the
  organization to see what they must see
  (information) to be productive in their
  managerial roles.
• ERP captures data from historical activity and
  current operations . That data can be transformed
  into information that, along with external
  information, is useful in planning and
  controlling operations, and in developing
  business strategies.
• ERP is evolving into a Multi-Module Application
  Software Package that automates
  inter-organizational business processes across
  the supply chain which involve business partners,
  suppliers, customers, and more.

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BEFORE ERP
Problems Delays, Lost Orders, Keying into
different computer systems invites errors
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AFTER ERP
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EVOLUTION OF ERP

• 1960s Inventory Control
• 1970s MRP (Material Requirement Planning).
• This system helped in translating the master
  production schedule into requirements for
  individual units like sub assemblies, components
  and raw materials. MRP systems helped determine
  what to order, how much to order, when to order
  and when to schedule delivery.
• 1980s MRPII (Manufacturing Resource Planning)
• MRPII supported efforts to optimize the entire
  plant production system by supporting capacity
  planning, shop floor control, and distribution
  management activities. MRPII was further extended
  to support areas like Finance, Human Resources,
  Engineering, Project Management etc. As MRPII
  like systems were adopted by non manufacturing
  enterprises like banks and airlines to support
  cross-functional coordination and integration of
  business processes, the M no longer fit, thus
  the name ERP was coined.
• 1990s ERP
• Today, ERP is the foundation system for domestic
  and global business operations, supporting most
  or all functional areas in their daily
  operations. For some organizations, ERP is a
  source of competitive advantage.
• 21st century ERPII
• ERPII is the name some now use to describe ERP
  like systems that are evolving to support
  inter-organizational business processes across
  the supply chain.

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The Evolution of ERP
System Primary Business Need (s) Scope Enabling Technology
MRP Efficiency Inventory Management and Production planning and control. Mainframe computers, batch processing, traditional file systems.
MRPII Efficiency, Effectiveness and integration of manufacturing systems Extending to the entire manufacturing firm (becoming cross functional). Mainframes and Mini computers, real-time (time sharing) processing ,database management systems (relational)
ERP Efficiency (primarily back office), Effectiveness and integration of all organizational systems. Entire organization (increasingly cross functional), both manufacturing and non-manufacturing operations Mainframes, Mini and micro Computers, Client server networks with distributed processing and distributed databases, Data warehousing, and mining, knowledge management.
ERPII Efficiency, Effectiveness and integration within and among enterprises. Entire organization extending to other organizations (cross functional and cross enterprise--partners, suppliers, customers, etc.) Mainframes, Client Server systems, distributed computing, knowledge management, internet technology (includes intranets and extranets).
IRP Enterprise Suite, or whatever label gains common acceptance Efficiency, Effectiveness and Integration within and among all relevant constituents on a global scale. Entire organization and its constituents (increasingly global) comprising supply chain from beginning to end as well as other industry and government constituents Internet, Web Service Architecture, wireless networking, mobile wireless, knowledge management, grid computing, artificial intelligence.
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ERP TODAY

• Todays focus seem more to be external as
  organizations look for ways to support and
  improve relationships and interactions with
  customers, suppliers, partners and other
  stakeholders.
• The focus of ERP in increasingly on Front-Office
  Applications and inter-organizational business
  processes, thus making it visible to OUTSIDERS
• The increasing importance of E-Commerce and
  Globalization of business makes support of
  inter-organizational processes more important.
• ERP Vendors
• SAP
• PeopleSoft
• Oracle
• Microsoft Business Solutions
• SSA Global
• ERP vendor products reflect the evolving business
  needs of clients and the capabilities of IT,
  perhaps most notably internet related
  technologies.
• ERP helps Organization to
• improve competitiveness
• increase profits
• prosper in the global economy.

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ERPIIThe Future of ERP

• ERPII is a business strategy and a set of
  collaborative operational and financial processes
  internally and beyond the enterprise
• New multi-enterprise business models like Value
  Collaboration Networks, customer-centric networks
  that coordinate all players in the supply chain,
  are becoming popular as we enter the 21st century
• These new business models reflect an increased
  business focus on external integration
• There is movement away from Client-Server System
  to Internet Based Architecture

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New Technologies in ERPII

• E-Commerce (Electronic Commerce)
• M-Commerce (Mobile Wireless Technologies)
• C-Commerce (Collaborative Commerce)
• Middleware
• Enterprise Portal Technologies
• Web Services
• RFID
• Analytical Capabilities (Data Warehousing Data
  Mining)
• CRM, SCM, SRM
• Knowledge Management
• Business Intelligence

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Difference Between ERP ERPII
Six key differences between ERP and ERP II Systems
Keys ERP ERPII
Role Traditional ERP was concerned with optimizing an enterprise, Internal optimization. ERP II systems are about optimizing the supply chain through collaboration with trading partners.
Domain ERP systems focused on manufacturing and distribution. ERP II systems will cross all sectors and segments of business.
Function As ERP systems cross sectors and segments, they will no longer be able to present all things to all people. ERP II vendors to pick the industries in which theyre going to play, and focus on providing deep functionality for those users.
Process In ERP systems, the processes were focused on the four walls of the enterprise. ERP II systems will connect with trading partners, to take those processes beyond the boundaries of the enterprise.
Architecture Old ERP systems were monolithic and closed. ERP II systems will be Web-based, open to integrate and interoperate with other systems that allow users to choose just the functionality they need.
Data Information in ERP systems is generated and consumed within the enterprise. In an ERP II system, that same information will be available across the supply chain to authorized participants.
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ERP Characteristics
Real Time
Integrated System
Customizing (Configuration)
Best Practice
Process Oriented
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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
• Generally complex systems involving high cost
• Flexible and offer best business practices
• Require time-consuming tailoring and
  configuration setups for integrating with the
  companys business functions
• Work in real time with online and batch
  processing capabilities
• They are Internet-enabled

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Core ERP Modules

• Accounting management
• Financial management
• Manufacturing management
• Production management
• Transportation management
• Sales distribution management
• Human resources management
• Supply chain management
• Customer relationship management
• E-Business

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Advantages Disadvantages of ERP

• Advantages
• Centralized database common software
  infrastructure
• Communicates with supply chain members
• Helps reduce supply chain inventories. Supply
  chain visibility leads to reductions of the
  bullwhip effect (buildup of supply chain safety
  stock inventories)
• Standardizes processes eliminates redundant
  resources while increasing productivity
• Tracks employees time performance
• Integrates financial, production, supply,
  customer information.

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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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Advantages Disadvantages of ERP- Cont.

• Disadvantages
• Substantial capital investment is needed to
  implement the system. The average total cost of
  ERP ownership was 15 million.
• Software is designed around a specific business
  model based on specific business processes. The
  adopting firm must change its business model
  associated processes to fit the built-in business
  model designed into the ERP system.

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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 RD, long-term commitment to product and services, consider Internet-enabled systems
Extended ERP Capability Consider middle-ware and extended modules SCM.
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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

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CONCLUSION

• Enterprise systems are evolving because
  organizations are changing.
• To know what the future of ERP holds, one must
  look to the changing environment of business and
  changing business needs.
• Systems will evolve to meet the business needs.
  Based on current trends, these will be
  increasingly inter-organizational and global.
• Inter-organizational systems (ERPII) will pose
  challenges beyond the ones faced with ERP because
  of the need to integrate the diverse systems of
  different organizations.
• Global supply chains mean inter-organizational
  systems that span different cultures and
  countries. That will bring even greater
  challenges due to cultural differences, legal
  issues, and more.