Enterprise Business Processes and Applications (IS 6006) Masters in Business Information Systems 2008 / 2009 Fergal Carton Business Information Systems

Last week Feedback on process mapping exercise –Process map tells you what is being done, by whom, in what order –Differentiates between flow of physical goods and virtual information –Visual presentation is flexible, allows identification of bottlenecks Operational versus informational –ERP captures transactions (SO, PO) at most granular level –Managers need aggregated information (MIS) to support decision making –Comparing plan to actual is critical to decision making –Purchase Price Variance example ERP hardwires processes Ownership of data (as dear to you as your leave days)

This week Discussion of Dearden / Vizard Plan, Buy, Make, Deliver model ERP is single instance Who does ERP benefit? Effect of changes to the business model on process Reality and ERP diverge Resources to address the gap are scarce Integration downsides Virtualisation (Rayport & Sviokla) Monk Wagner Ch. 4

What does integration mean? Dearden 72 –As computer use expands, control is vital –Single group of experts design a completely integrated supersystem = absurd –Specialist expertise is functional by nature –Finance, logistics, sales = different expertise –Centralisation of control of systems = dangerous –Examine the interfaces Vizard 06 –Data used to be in disparate databases –Data now in databases, file systems, applications, … –“One truth” concerning the state of a business process –Interdependent business processes (eg. sales & service) –Meta-data structures –Enterprise Application Integration vs. BI tools

Why is “one truth” so hard? Eg. Up to date picture of revenue? –Easy bit: all product shipped to date –Hard bit: Spares, loaners, replacement machines, … Deduct any current credit notes Add any outstanding debts from previous invoices Apportion revenue from service contract (12 months) Allow for discount to be applied if paid on time Currency exchange rate fluctuations … … –Revenue recognition “rules”

Process map example PlanningPlan ProcurementBuy ManufacturingMake Order fulfilmentDeliver

Deliver CustomerMakeSupplier Plan, Buy, Make, Deliver Raw materials Finished goods Plan, buy Bill of materials

Why Buy an ERP system? Companies must track vital information to manage their operations. They track: Customers Money (Cash Flow) Material Assets Labor Utilization Etc.

ERP is often single instance Single point of data entry (PO’s, SO’s, …) Inventory control Opportunity to re-design processes Single technical platform (support) Common language, common pool of data SalesShippingCollect cashProduction Customer information (ship-to, bill-to, install-at, …)

ERP : it’s about control RevenuesSales Orders CostsPurchase Orders ProfitabilityP&L

Who benefits? Finance gain greater visibility Manufacturing? –Demand may be too unstable for MRP –Production planning needs more “nuance” –ERP is too literal –Much planning still done on Spreadsheets Sales: need of integration

But business models evolve High margin to high volume Hardware to software & service Manufacturing becomes logistics Gap opens between ERP & reality

Reality and ERP diverge inevitably Reality Systems ERP Impact of gap? Responsiveness € (FTE and s/w) Stress BI tools Workarounds

Post go-live example “There was an awful lot of resources thrown at go-live, most of those resources were gone after go-live. Trying to get something fixed, it wouldn’t happen.” “In order to actually utilize it in a way that actually improves our lot, took, is still taking, quite a long time, and if you can’t do it yourself, it’s even worse, because you can’t get IS available, at times to do the work.“

Integration downsides Response times Vulnerability: single point of failure Limitations on expansion Dependence on single vendor Flexibility to change system … Access to basic information is complicated

PCB exercise