COMM 226 Enterprise Resource Planning (ERP) and SAP Chitu Okoli Associate Professor in Business Technology Management John Molson School of Business, Concordia University, Montréal

Challenges that ERP tries to resolve Delayed data sharing Disconnected processes Insufficient information for managers Information silos within departments of an organization Information silos within organizations--supply chain challenges

Enterprise Application Integration (EAI): A partial solution Helps databases talk to each other, but: Still multiple databases Separate processes This diagram demonstrates how EAI works. As you can see in section (a), we have information silos. We can use the EAI software to act as an interface between the information silos so they can communicate and share data. Copyright © 2015 Pearson Education, Inc.

Enterprise Application Integration (EAI): A partial solution EAI helps to resolve: Delayed data sharing: all databases can share data easily Insufficient information for managers: greater visibility of data Information silos within departments of an organization: all databases can talk to each other easily But EAI does not resolve: Disconnected processes some of the greatest benefits could potentially lie here Information silos within organizations —supply chain challenges: other potential benefits available This diagram demonstrates how EAI works. As you can see in section (a), we have information silos. We can use the EAI software to act as an interface between the information silos so they can communicate and share data. Copyright © 2015 Pearson Education, Inc.

What Are the Benefits of an ERP System? Addresses all of the major challenges: Delayed data sharing Disconnected processes Insufficient information for managers Information silos within departments of an organization Information silos within organizations—supply chain challenges There are several benefits of using an ERP solution, as we can see in this diagram. One benefit of an ERP system is that real-time data sharing allows managers to see trends as they occur and respond to them appropriately. A second benefit of an ERP system for the organization is converting its processes to the well-integrated, inherent, best-practice processes of the ERP vendor. A third benefit for the organization is that an effective ERP system can lead to better management, as more managers have visibility to more data. Fourth, as was discussed earlier, another significant benefit of an ERP system is solving the information silo problem. Finally, ERP systems make it easier to exchange data with supply chain partners. Sharing data throughout a supply chain can reduce costs and create efficiencies for every business in the chain. For this reason, some customers and suppliers will not want to do business with an organization that does not use an ERP system. Copyright © 2015 Pearson Education, Inc.

What Are the Challenges of Implementing an ERP System? Decision-Making Challenges As we mentioned in the previous slide, there are a number of challenges in implementing an ERP system. One of them lies in the details of implementation decisions. Organizations implementing ERP systems first must decide on a vendor. The vendor selection is an important step in moving forward. Once a vendor is selected, a gap analysis is performed to help make determination of how to handle gaps in what they would like the ERP system to do for them. They could decide to write custom code to handle these gaps, or try to find a solution outside of the ERP system. Configuration is the next decision. There are over 8,000 possible configuration decisions in an ERP system. Once organizations get past the configuration decisions, they then have to start thinking about data issues. An example of a decision regarding data is the format used for different types of data, like master data. Finally, a decision has to be made regarding the transition from the current system to the ERP system. Copyright © 2015 Pearson Education, Inc.

What Are the Challenges of Implementing an ERP System? People Challenges The other area of concern during implementation is people issues. In the previous slide, we mentioned that sometimes an organization needs to configure the ERP system to meet their processes. People issues occur when the ERP system dictates changes in processes for the organization. When that happens, work is changed and is often not well-received by the people in the organization. As you can see here, many of the challenges involve management. Management can move away from the implementation prematurely, thinking their role will end once the decision to implement has been made. Management may also oversell the product, promising more than can be delivered. In addition to the above two, managers may also fail to anticipate the impact this will have on people within the organization. Beyond management, teams and individuals offer challenges to implementing an ERP system. Because of the extent of work required during implementation, it’s possible that collaboration within teams breaks down. Individuals who are considered users of the system whose work has changed often receive no benefit from the change; they get the pain but no gain. The benefits occur for the organization. Copyright © 2015 Pearson Education, Inc.

What Are the Challenges of Implementing an ERP System? ERP Upgrades Decision-making and people challenges are generally experienced during the implementation process. ERP upgrades pose a challenge after implementation. First, discussions about upgrades may need to occur within a year or two after the original implementation. This may come as a disappointing surprise to some in the organization, getting things off to a bad start. Second, it may be more challenging to justify upgrades than an original implementation. An original implementation creates unique opportunities, and the contrast of the new ERP system with the old non-ERP system is both stark and encouraging. With an upgrade, these opportunities and the contrast between new and newer are not so vivid. A third problem with upgrades is sometimes referred to as version lock. To understand version lock, recall that during implementation, the client firm may decide to write custom software to enable the system to do things unique to that client. However, when the ERP vendor upgrades their system to a new version, the new ERP software may not be compatible with the customization done by client firms. Finally, upgrades are challenging if the client firm has not developed a long-term strategy for ERP updates. Copyright © 2015 Pearson Education, Inc.

What Are the Fundamentals of a Procurement Process? Linking the Fundamentals of the Procurement Process with Inbound Logistics in the Value Chain When we link the fundamentals of the procurement process with the inbound logistics in the value chain, we see how the process becomes more robust. In this example from CBI, we see the roles from the process (Order, Receive, and Pay), as well as the sub-activities required in the processes to support the inbound logistics in the value chain. Here, Wally has qualified various suppliers as being able to supply the enterprise with goods (raw materials) needed by the Assembly Manager for production. The suppliers will provide him with quotes on these materials so he can make an informed decision as to which supplier will be selected to supply the needed goods (raw materials). Once this decision has been made, Wally then creates a Purchase Order and sends it to the selected supplier. When the supplier delivers the raw materials, Wally then begins inbound processing by receiving the goods (raw materials) into inventory, where the quantity available is updated. Ann then assumes the next fundamental step in the procurement process by receiving the Bill (invoice) from the supplier. She then uses the Bill (invoice) as a basis for submitting payment to the supplier, completing the fundamental steps in this procurement process. As you can also see, the procurement of the goods (raw materials) is needed to provide an adequate supply of raw materials on inventory to support the Production process. The result of the Production process will thus lead to an increase in Finished Goods Inventory. Copyright © 2015 Pearson Education, Inc.

CBI procurement process before and after SAP When we look at this diagram of the process before SAP, we see those six roles previously mentioned. We also see information system silos that we discussed in earlier chapters. We talk more about that in the next slide. Copyright © 2015 Pearson Education, Inc.

Benefits of switching to SAP for the CBI procurement process When we look at this diagram of the process before SAP, we see those six roles previously mentioned. We also see information system silos that we discussed in earlier chapters. We talk more about that in the next slide. Copyright © 2015 Pearson Education, Inc.

What New IS IT Will Affect the Procurement Process by 2024? SAP is just one IS that has an impact on procurement processes. Other ISs just now emerging will have a significant impact on procurement over the next 10 years. The impact of these technologies will vary by company and industry, but the IS technologies listed in this slide will drive the next generation of procurement process improvements. With augmented reality (AR), computer data or graphics are overlaid onto the physical environment. Radio-frequency identification (RFID) technology can be used to identify and track items in the supply chain. Sensors and tracking devices make the transportation activity of the procurement process more efficient. Robots can reduce inventory costs markedly for CBI and other firms. Finally, three-dimensional (3D) printing technologies will also affect CBI’s procurement process. With 3D printing, also called additive manufacturing, objects are manufactured through the deposition of successive layers of material. Copyright © 2015 Pearson Education, Inc.

Radio Frequency ID (RFID) http://youtu.be/gEQJxNDSKAE

Security and privacy issues with RFID RFID tags are still readable even after leaving the supply chain RFID tags are difficult to remove RFID tags can be read without your knowledge RFID tags with unique serial numbers could be used to identify individuals E.g. the serial number can be linked to an individual credit card number Sources: Technovelgy.com: Problems With RFID Image: RFID Journal

The replicator http://youtu.be/eEez9lNh8Uw

3-D printing (the real thing) https://www.youtube.com/watch?v=8aghzpO_UZE

The dark side of 3-D printing 3D printers are energy hogs Unhealthy air emissions Reliance on plastics Intellectual property and licensing deals Gun control loopholes Responsibility of manufacturers Bioprinting ethics and regulation Possibility of 3D printed drugs National security risks Safety of items that come into contact with food Source: http://www.techrepublic.com/article/the-dark-side-of-3d-printing-10-things-to-watch/

Sources Most of the slides are adapted from COMM 226 Business Technology Management by David M. Kroenke, Andrew Gemino, Peter Tingling, and Earl H. McKinney, Jr. 2nd Custom Edition for Concordia University (2014) published by Pearson Canada. ISBN 13: 978-1-269-96956-7 Other sources are noted on the slides themselves