Enterprise Resource Planning Enterprise Resource Planning Systems is a computer system that integrates application programs in accounting, sales, manufacturing, and other functions in the firm This integration is accomplished through a database shared by all the application programs ERP can be considered an initiative launched to better manage business processes across the organization using a common, integrated database, shared data management applications and reporting tools.

Enterprise Resource Planning - Background An organization’s critical business processes often cut across many of its functional units. In most organizations, each process has its own data needs and applications that operate as distinct systems. The results of this approach: - Function-Centric view in the business units - Operational Inefficiencies Example: A customer order Sales AccountingPurchasingProduction Logistics

Enterprise Resource Planning - Background ERP evolved from MRP (Material Requirements Planning) and MRP II. Material requirements plan Inventory records Inventory transactions Bills of materials Routings Time standards MRPexplosion Master production schedule Manufacturing resource plan Cost and financial data Customer ordersForecasts

Enterprise Resource Planning - Background “Instead of having one set of numbers for the operating system in manufacturing and one set kept by the financial people – once the manufacturing people have numbers that are valid, the financial people can use these to get their numbers. Of course, whenever there are two systems – the numbers are bound to be different. With MRP II, everybody can be working with the same set of numbers, but that’s only the technical difference. The big difference comes in the way management uses these tools…MRP II becomes a company game plan for manufacturing, marketing, engineering, and finance.” Oliver Wright, The Executives Guide to Successful MRP II, 1982.

Enterprise Resource Planning – Background Timeline

SAP System Functional Components

Reasons for implementing ERP Desire to standardize and improve processes To improve the level of systems integration To improve information quality Integrate Financial Information Integrate Customer Order Information Standardize and Speed Up Manufacturing Processes Reduce Inventory Standardize Human Resources Information Global Outreach Avoid Redundancies

ERP Disadvantages Time-consuming Expensive Fit Vendor Dependence Too many features, too much complexity Process Rigor (Standardized)

The General ERP Process 1.Product Analysis 2.Module Selection 3.Process Analysis 4.Data Analysis 5.Applications Integration 6.Testing and Installation 7.Employee Training

How Much Does an ERP Implementation Cost? 1.The size and geographic distribution of the company. 2.The size of the ERP package. 3.Hardware 4.Software 5.Consultants and Analysts Fees 6.Time 7.Training

Successful ERP Implementation Criteria Top Management Support Good Cost Estimation Realistic Expectations ERP Implementation Cultural Impact Training Customization and Integration

Additional ERP Resources