Its all about Integration Paul Hawking

SAP University Alliance Program (UAP) SAP Academic Program Director Research Industry Reports Best selling author ERP Systems and Business Intelligence Visiting Professor University Background SAP Mentor 22 SAP million users 2.5 million SAP Community Network members 6,000 active contributors 100 SAP Mentors 1 academic Teach Academics Develop curriculum Top 10 Most Influential SAP People SAP Presenter Design Events Advisor Past Chairperson SAP User Group

Who? What? Why? Tim Berners Lee INTEGRATION

Journey Business Basics Information Systems ERP Systems Supply Chain Management Business Network Transformation SAP

Strategy and Business Processes

Business Process Examples Sales Procurement

Business Process Elements Organisational Units Sales Area Distribution Channel Transactions Sales Order Creation Goods Issue Data Master Data Customer Material Transactional Data Sales Quantity Sales Price Process Indicator

Journey Business Basics Information Systems ERP Systems Supply Chain Management Business Network Transformation SAP

Executive Management Middle Management Operational Management Operations Finance Sales & Distribution Production Human Resources Traditional Business Landscape

Executive Management Middle Management Operational Management Operations Finance Sales & Distribution Production Human Resources Traditional Business Landscape

Intel (1995) CUSTOMER INFRASTRUCTURE RCC SECURITY STAR JASTAR ESTAR PNA PRICE AGREEMENTS CWS EUC EXTRACTS JAPAN FORECAST JAPAN DAISY PGS A / P PMS EDI G / L A / R PRODUCT CODE DEMAND FORECAST GPS II MPS AMAPS MAX RST DPA NIMS EUC EXTRACTS DATA WAREHOUSE EUC EXTRACTS Configurator PRICE BOOK MDS NOVA AVAILABILITY WMS JAPAN PRICE BOOK HELP DAISY ELECTRONIC TRANSFER DARE EDI PRICE BOOK COMPONENTS COST ISET GIMS CLS EUC EXTRACTS DPA OEM QUOTE SARP

Executive Management Middle Management Operational Management Operations Finance Sales & Distribution Production Human Resources Traditional Business Landscape

Integration Problems Data 9/11/2011 Last name Subject vs Course Process Weekly vs Fortnightly Workflow (goods receipt) People Application Screens Information

Executive Management Middle Management Operational Management Operations Finance Sales & Distribution Production Human Resources Traditional Business Landscape

Public Sector Procurement Process? - Complexity

Journey Business Basics Information Systems ERP Systems Supply Chain Management Business Network Transformation SAP

Why ERP? Note: Based on multiple answers per respondent Source: Deloitte Consulting and Benchmarking Partners (Based on a study of 62 companies that have gone live with an ERP system)

ERP Evolution 1970s Accounts Receivable Accounts Payable General Ledger Payroll Financial Management Information System Human Resources MRP11 Distribution Scheduling Planning MRP EDI ERP SCM e-Commerce SFA CRM e-business ERP s 1990s 2000s

What is an Enterprise Resource Planning System? An ERP System can be defined as a “modularised, integrated, real time information system with broad functional scope responsible for the processing and management of business transactions” (Hawking 2005)

Executive Management Middle Management Operational Management Operations Finance Sales & Distribution Production Human Resources ERP System Enterprise Resource Planning System

ERP Characteristics Links all business processes automatically Reduce inter-processing time (transactions occur one time at the source) Maintain an audit trail of all transactions Utilises a common database Perform internal conversions automatically (tax, foreign currency, legal rules for payroll) Empowers employees by putting data at the fingertips of employees Involve employees in the entire functional cycle

Raytheon’s Goals Replace thirty year old non-integrated legacy systems Obtain benefits of business process re-engineering Use ERP to drive integration One time entry and access to information Facilitate achievement of Raytheon Aircraft Company five year plan $19.8 billion in revenues More than 100,000 employees worldwide

ERP Example 5,500 SAP users 6 countries 8 major business units Over 40 key systems replaced, including primary manufacturing support system, corporate and field financial and purchasing systems, marketing expense control systems, and project management systems 7,500+ SAP transactions, 100+ reports, 150+ forms, 50+ interfaces to existing systems

Benefits Achieved Davenport 2003

SAP R/3 Order Entry IBM Storage Benchmarks days after production Enter pricing data into system Check customer credit upon order Enter customer order in system % Manual order/ship to total # of orders/ships Generate customer invoice after ship Respond to customer billing inquiry Ship evaluation unit from customer request Ship repair/replacement part Credit returned drive Obtain commit date for customer order Unconstrained SJ manufactured drives Allocated; non-SJ manufactured drives Focus Area 9/1/93 Cycle Time Days Minutes 30 Minutes 75% Days Minutes Days Days Months 2 Hrs - 3 Weeks Reengineered Target 10/1/93 SAP Performance 01/20/95 5 Minutes Automatic 5 Minutes 0% 1 Day Real Time 2 Days 5 Days Real Time 5 Minutes Automatic 15 Minutes 0% 8 Hours Real Time 2 Days 3 Days 10 Days Real Time 2 Hrs- 3 Weeks

Toyota’s Benefits  Current Future TOPS POST EXCEL Systems ERP POST ERP POST ERPERP ALC ERP POST BSS VTS VOS BSS ALC VTS BSS VTS VTS VTS MSA MSAVTS Benefits Lead- time Flexi- bility Cost  Lean Org.                                Create Sales /Prod’n Plan Final Prod'n Schedule Create Sales Order Complete Finished Vehicle Enquiry on Vehicle Status Complete Delivery to Dealer Create Invoice to Finance Company Payment From Finance Company Create Retail Delivery Record  = No Change  = Improvement X = Detriment

ERP Systems and Value Creation IntegrateOptimiseInformate

ERP Evolution

Journey Business Basics Information Systems ERP Systems Supply Chain Management Business Network Transformation SAP

Supply Chain

Supply Chain Challenges

Globalization Worldwide reach is not a competitive advantage but a necessity Forces Driving the Evolution of the SCM Cost Leadership Cost targets and industry consolidation Innovation Suppliers need to be involved earlier in product development Forces of Change Outsourcing Focus on core activities, trusted partnership

Forces Driving the Evolution of the SCM Retailer Time to Market Traditional Clothing Retailer 36 weeks Zara 4 weeks

Forces Driving the Evolution of the SCM North American Glass Suppliers 2001 Owens-Illinois Corning Consumers Anchor Hocking 2006 Owens-Illinois

Software Company Consolidation

Forces Driving the Evolution of the SCM Date Entry Price May 2002Coca Cola $2.87/6-pack ‘Vanilla Cola’ May 2003Sam’s Choice $1.00/6-pack ‘Vanilla Cola’ August 2003Pepsi $1.99/6-pack ‘Vanilla Cola’

Key Industry Trends Quick Copying Erodes Price and Market Share ProductDate Price Proctor &Gamble introducesSwiffer1999$9.62 Pledge 1999$7.32 Grabber Magic 2001$7.09 Sweeper kit Clorox2002$6.69 Ready Mop 37% Price Decline

Forces Driving the Evolution of the SCM Focusing on Core (Moore) Core: Processes that create unique competitive differentiation Source of growth in revenues and profits Context: All other processes No prize for doing these well But there are penalties for doing them poorly This is not the same as your core competence This is not the same as your core business

Journey Business Basics Information Systems ERP Systems Supply Chain Management Business Network Transformation SAP

Business Network (Moore) Business networks are core/context ecosystems Each member contributes a unique core—their “claim to fame” Every other member supplies the context to support that core Business network create higher returns Differentiating spend is greater, duplicated spend is less Higher differentiation creates higher returns on capital for all Business networks are competitive weapons Silicon Valley, New York, Milan, Bangalore, Shanghai The Internet has made this a “virtual” phenomenon

Dell Business Network

Business Networks: A Dell Laptop for Thomas Friedman Total order lead time was 13 days. The order was delayed 9 days because of a Wireless card “control issue”. Total supply chain estimated at 400 companies in North America, Europe, & Asia Laptop was designed 2.Order was taken by phone 3.Order hit the Dell factory 4.Intel microprocessor* 5.Memory * 6.Graphics card* 7.Cooling Fan* 8.Motherboard* 9.Keyboard* 10.LCD* 11.Wireless card* 12.Modem* 13.Battery* 14.Hard Drive* 15.CD/DVD drive* 16.Notebook bag* 17.Power adapter* 18.Power Cord* 19.Memory stick* 20.Repackaged 21.Sent to Tom Friedman

Dell Laptop Story 1.Laptop was designed jointly in Austin, TX and Taiwan 2.Order was taken by Mutjeba Naqvi over Dell’s 800 number 3.Order hit the Dell Factory in Penang, Malaysia 4.Intel microprocessor came from either Phillipines, Costa Rica, Malaysia, or China 5.Memory from either Samsung in Korea, Nanya in Taiwan, Infineon in Germany, or Elpida in Japan 6.Graphics card from MSI or Foxcom both in China 7.Cooling Fan from CCI or Auras both in Taiwan 8.Motherboard from Samsung or Quanta, both in Shanghai, or Compal or Wistron in Taiwan 9.Keyboard from Alps, Sunrex, or Darfon, all in China 10.LCD from Korea, Japan, or Taiwan 11.Wireless card from Malaysia, Taiwan or China 12.Modem from China 13.Battery from Mexico, Maylasia, China, Taiwan, or Korea 14.Hard Drive from Singapore, Thailand, or Phillipines 15.CD/DVD drive from Indonesia, Philippines, China, or Malaysia 16.Notebook bag from China 17.Power adapter from Thailand, Taiwan, Korea, or China 18.Power Cord from India, China, or Malaysia 19.Memory stick from Israel or Malaysia 20.Repackaged w/ external options in Nashville, TN 21.Sent to Tom Friedman in Maryland

Apple

And companies must employ new strategies to survive in the new SCM reality Cost Focus Outsource everything Cut Spending Squeeze Suppliers Sell to “best” customers Eliminate headcount Value Focus Partner Strategically Spend Wisely Collaborative/Win-win Acquire “non” customers Increase productivity It is all about INTEGRATION

ERP Systems and Business Network

Journey Business Basics Information Systems ERP Systems Supply Chain Management Business Network Transformation SAP

Summary ERP/Enterprise systems are the second most important technology of the last decade (after the Internet) Considered essential infrastructure Immense investment (time, money and attention) by businesses Support global business networks NOT all companies realize the benefits of these systems Corporate Strategy

Paul Hawking SAP Academic Programs Director School of Management and Information systems Telephone: Mobile: Thankyou