Enterprise Resource Planning ERP Systems Integrating the Organization from End to End

ERP: Enterprise Resource Planning ERP – integrates all departments and functions throughout an organization into a single IT system (or integrated set of IT systems) so that employees can make enterprise wide decisions by viewing enterprise wide information on all business operations (consistent enterprise wide information) An ERP system provides a method for effective planning and controlling of all the resources required to take, make, ship, and account for customer orders in a manufacturing, distribution, or service organization. What happens when sales and marketing departments are working from two different sets of customer information and product information? Would the marketing campaigns be accurate? Would sales be able to deliver the products it sells to its customers? Enterprise resource planning systems provide organizations with consistency. The key word in enterprise resource planning is enterprise. SCM systems focus specifically on suppliers CRM systems focus specifically on customers ERP systems focus on everything, all processes, departments, and operations for an enterprise ERP systems encompass everything, including SCM and CRM. ERP enables employees across the organization to share information across a single, centralized database. With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency One database that supports the entire organization could eliminate many of the issues mentioned on the previous slide However, there are also issues could be caused by having one database that supports the entire organization? Not as flexible and far more difficult to change Might not meet all department needs as well as an individual specific system Multiple access levels increases security issues Ethical dilemmas from accessing different department information – such as payroll Keyword in ERP is “enterprise” ERP systems focus on integrating all processes, departments and operations for the entire enterprise

Enterprise Resource Planning ERP systems collect data from across an organization and correlates the data generating an enterprise wide view that is consistent and real-time. Everyone involved in sourcing, producing and delivering a company’s product works with the same information. Common database Complete Data entry required Real time Consistent One true picture The true benefit of an ERP system is its ability take the many different forms of data from across the different organizational systems and correlate, aggregate, and provide an enterprise wide view of organizational information. The two previous spreadsheets display examples of differences in data that can be fixed by using an ERP system. Without understanding how all of the different divisions, products, departments, etc. are operating you cannot run the business

Components of ERP Software Three most common core components focus on internal operations (accounting/finance, production/materials management and HR) Extended components typically focus on external operations and require interactions with customers, suppliers and business partners outside of the organization. Typically Internet enabled. Core ERP components – traditional components included in most ERP systems and they primarily focus on internal operations Extended ERP components – extra components that meet the organizational needs not covered by the core components and primarily focus on external operations Make sure that you know what each component typically handles. Skipped details slides follow

Enterprise Resource Planning (ERP) At the heart of all ERP systems is a database, when a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system: ERP systems automate business processes Why do organizations need integrations, if an ERP system contains one database that connects all applications together? Most organizations operate functional “silos”, and each department typically has its own systems A company might purchase an ERP and then all of the functional silos would be on one system, however, this doesn’t happen very often in the real world Most organizations require anywhere from 10 to 100 to 1,000 different systems to run their business Finding one system that could meet all the needs of an entire organization from billing to sales is almost impossible, “sort of a utopia” An organization can purchase an ERP and still have other applications running parts of its business (for example, taxation packages) that are not supported, or not supported well, by the ERP system

ERP Benefits Having integrated systems helps eliminate the mess of incompatible applications that many businesses had previously started to use (also didn’t have to fix those old legacy systems) Integrate financial information and customer order information Everyone working with the same information eliminates redundancies, reduces wasted time and removes misinformation Standardize and speed up manufacturing processes, as well as reduce inventory ERP addresses the need for global information sharing and reporting. One of the greatest benefits of an ERP system is helping people understand how the organization is performing from an enterprise perspective. Provides organizations with information that was previously difficult (if not impossible) to obtain, allowing the organization to perform more efficiently and effectively. 1. Integrate financial information: To understand an organization’s overall performance, managers must have a single financial view. 2. Integrate customer order information: With all customer order information in a single system it is easier to coordinate manufacturing, inventory, and shipping to send a common message to customers regarding order status. 3. Standardize and speed up manufacturing processes: ERP systems provide standard methods for manufacturing companies to use when automating steps in the manufacturing process. Standardizing manufacturing processes across an organization saves time, increases production, and reduces head count. 4. Reduce inventory: With improved visibility in the order fulfillment process, an organization can reduce inventories and streamline deliveries to its customers. 5. Standardize human resource information: ERPs provide a unified method for tracking employees’ time, as well as communicating HR benefits and services.

ERP Risks (Costs) Employees resist new way of doing things. Difficult to integrate new ERP system with existing systems. Employees resist new way of doing things. Although there are great benefits to be realized from ERP systems, there are also failure stories. ERP systems are very expensive in terms of resources, such as time, money, and effort. Although they can help introduce good business processes, many companies implementing ERP software must change their business processes to match the software, which can cause employee resistance. Costly in terms of money, time, amount of training required, and effort to implement. One vendor risks: too costly to simply switch to another system. Company essentially held hostage.

ERP Vendors SAP: #1 in market share (leader) Oracle: #2 in market share Gains in market share through acquisition of smaller competitors PeopleSoft The ERP system that powers KSIS (K-State Student Information System) PeopleSoft is owned by Oracle

#1 market share Oracle: #2 market share iSIS runs PeopleSoft SAP: market leader: #1 Oracle: #2 in market share. Has grown, in part, through acquisition 2005: Oracle acquired PeopleSoft 2003: PeopleSoft acquired JD Edwards Oracle has enhanced their ERP product by acquiring the product’s of other companies and then integrating their products with the Oracle product. 2008: Oracle acquired BEA Systems 2007: Oracle acquired Hyperion Solutions 2005: Oracle acquired Siebel Systems In June 2003, Baan was sold to SSA Global Technologies. In May 2006, SSA was acquired by Infor Global Solutions of Atlanta, which was a major ERP consolidator in the market. In 2002, Microsoft acquired Great Plains Dynamics. Its products has gone under the name of Microsoft Business Solutions Great Plains Dynamics, as well as Microsoft Dynamics Microsoft Business Solutions Great Plains Dynamics