ICS321 – Management Information Systems Dr. Ken Cosh

Recap Systems for particular functions or units Marketing Department Production / Operation Systems HRMS Accounting Systems Financial Systems Cross Functional Systems Enterprise Application Architecture

Employees KMS, Collaboration, Decision Support Partners PRM Selling / Distribution Suppliers Customers CRM Marketing, Sales, Service SCM Sourcing, Procurement ERP Internal Business Process

ERP Enterprise Resource Planning “ERP is the technological backbone of e- business, an enterprise-wide transaction framework with links into sales order processing, inventory management and control, production and distribution planning and finance” (Kalakota) A cross functional system supporting the basic internal business of an organisation.

Remember the Value Chain R & DProcurementProduction Marketing & Sales After Sales Services Core Operating Activities Infrastructure Facilities & Equipment Technology People Information Data Information Knowledge ERP

ERP ERP gives a company an integrated real-time view of its core business processes, such as production, order processing and inventory management, tied together by the ERP application software and a common database maintained by a database management system. ERP systems track business resources (such as people, cash, raw materials etc.), and the status of commitments made by the business (such as customer orders, employee payroll) no matter which functional department has entered the data into the system. (Sawhney & Zabin).

Business Processes Supported by ERP Financial & Accounting General Ledger, Accounts Payable, Accounts Receivable, Fixed Assets, Cash Management and Forecasting, Product-cost Accounting, Cost Center Accounting, Asset Accounting, Tax Accounting, Credit Management, Financial Reporting. Human Resource Personnel Administration, Time Accounting, Payroll, Personnel Planning & Development, Benefits Accounting, Application Tracking, Time Management, Compensation, Workforce Planning, Performance Management, Travel Expense Reporting

Business Processes Supported by ERP Manufacturing & Production Procurement, Inventory Management, Purchasing, Shipping, Production Planning, Production Scheduling, Material Requirements Planning, Quality Control, Distribution, Transportation Execution, Plant & Equipment Maintenance. Sales & Marketing Order Processing, Quotations, Contracts, Product Configuration, Pricing, Billing, Credit Checking, Incentive & Commission Management, Sales Planning

ERP Benefits Quality and Efficiency Framework for integrating and improving a company’s internal business process that results in significant improvements in the quality and efficiency of customer service, production and distribution. Decreased Costs Many company report reductions in transaction processing costs, and the IS costs are reduced from traditional legacy systems (Hardware, Software and People)

ERP Benefits 2 Decision Support ERP provides cross functional information on business performance, real time, for manager to improve their decision making capabilities. Enterprise Agility ERP results in more flexible organisation structures, with functions able to work more closely together

ERP Costs Huge risk of failure. Implementing an ERP system requires radical changes and implementations across the entire organisation. Most organisations have had successful ERP implementations, but a number have experienced ‘spectacular’ losses that damaged their entire business. Normally due to underestimation of the complexity of the planning, development and training involved in the implementation of an ERP system

Supply Chain Management Supply Chain Network of organisations and business processes for procuring raw materials, transforming these materials into finished products and distributing the finished products to customers. Goods flow through the supply chain from raw materials to components to finished goods. Returned goods also flow backwards through the supply chain.

Supply Chain FirmDistributorRetailer Customer Supplier Tier 1Tier 3Tier 2 Upstream Downstream Goods Returns

Supply Chain Inefficiency Parts Shortage Underutilised Plant Capacity Excessive Goods Inventory High Transportation Costs Caused by inaccurate or untimely information. Manufacturers keep too much stock because they don’t know when their suppliers will deliver. Suppliers order too few raw materials as they don’t know their customer’s demands. 25% of a companies operating costs.

Just In Time (JIT) When maufacturers have perfect information. How many does the customer want? When do they want them?

Uncertainty Late delivery Uncertain demand Defective parts Process breakdowns == Safety Stock as a buffer. Excess inventory is expensive, but low fill rates are arguably worse.

Bullwhip Effect Information about demand gets distorted as it is passed along the supply chain. A small increase in demand leads to large increases in demand earlier in the supply chain, resulting in excessive inventory. E.g. Proctor and Gamble diapers.

SCM Software Supply Chain Planning Systems Forecast Demands Optimise sourcing and manufacturing plans Supply Chain Execution Systems Manage flow of products Track (physical) status of goods Manage transportation operations

Global Supply Chains Since the Internet, SCM software has extended beyond the organisation. Manufacturers insist their suppliers integrate with their systems Wallmart achieved low cost strategies through innovative supply chain management.

From Push to Pull Manufacturing Supplier Manu- facturer DistributorRetailerCustomer Supplier Manu- facturer DistributorRetailerCustomer “Make what we sell, not sell what we make!”