Enterprise Resource Planning (ERP) Systems Chapter Extension 9 Enterprise Resource Planning (ERP) Systems

Study Questions Q1: What is the purpose of ERP systems? Q2: What are the elements of an ERP solution? Q3: How are ERP systems implemented? Q4: What types of organizations use ERP? Q5: How do the major ERP vendors compare? Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Q1: What Is the Purpose of ERP Systems? Enterprise Resource Planning (ERP): Suite of modules, a database, and set of inherent processes for consolidating business operations into a single, consistent, computing platform. Primary purpose: integration of purchasing, human resources, production, sales, and accounting data into a single system. Allows real time global updates whenever a transaction happens. Critical business decisions can be made using latest data. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Pre-ERP Information System: Bicycle Manufacturer Does not include accounting Five non-integrated databases Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP Information System All activity processed by ERP application programs and consolidated data stored in centralized ERP database Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Some Questions that Procedures Need to Answer or Resolve How does sales department determine an order is “large”? By dollars? By volume? Who approves customer credit (and how)? Who approves production capacity (and how)? Who approves schedule and terms (and how)? What actions need to be taken if customer modifies an order? How does management obtain oversight on sales activity? Many other questions must be answered as well. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Sales Dashboard Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Almost no organization develops its own ERP software ERP Projects Almost no organization develops its own ERP software Daunting and expensive: Multi-year projects, millions of dollars, and hundreds of employees, consultants and vendor personnel SAP ERP databases contain over 15,000 tables! Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Q2: What Are the Elements of an ERP Solution? ERP Application programs ERP Databases ERP Business process procedures ERP Training and consulting ERP Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP Include Applications that Integrate: (http://www. erpsoftware360 Supply chain (procurement, sales order processing, inventory management, supplier management, and related activities) Manufacturing (scheduling, capacity planning, quality control, bill of materials, and related activities) CRM (sales prospecting, customer management, marketing, customer support, call center support) Human resources (Payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities) Accounting (General ledger, accounts receivable, accounts payable, cash management, fixed asset accounting) Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP Solution Components ERP vendor applications configurable so can alter without changing program code. Set configuration parameters specifying how ERP application programs will operate: Hourly payroll application configured to specify number of hours in standard work week, hourly wages for different job categories, wage adjustments for overtime and holiday work, etc. ERP Application Programs Trigger: Database program to keep database consistent when certain conditions arise. Stored procedure: Database program to enforce business rules. ERP Databases Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP Solution Components (cont’d) Adapt to predefined, inherent processes and procedures, or design new ones? ERP Business Processes and Procedures Training on how to implement Obtaining top-level management support, preparing the organization for change, and dealing with inevitable resistance Training on how to use Super Users become in-house trainers; train the trainers Vendor and third-party consultants ERP Training and Consulting Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Inherent Processes: SAP Ordering Business Process (Process Blueprints) Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Inherent Processes: SAP Ordering Business Process (cont’d) Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Q3: How Are ERP Systems Implemented? Major tasks in implementation of an ERP application Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Magnitude of ERP Implementation SAP blueprint contains over a thousand process models Model current business processes “as is” Identify relevant ERP blueprint processes Compare as-is process models with blueprints, note differences Find ways to eliminate differences Prepare detailed plan Train users processes, procedures, ERP features and functions Conduct simulation tests new system Convert data, procedures, personnel to new system Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Q4: What Types of Organizations Use ERP? Industry-specific solutions Industries Manufacturing Distribution Mining, materials extraction, petroleum Medical care Government and public service Utilities Retail Education Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP by Organization Size (2010) Small Market Midsize Enterprise Annual Revenue $5M–$100M $100M–$1 B Over $1B Staff Fewer than 100 101–500 Over 500 ERP Users 5–30 users 31–250 Over 250 IT Staffing One or few Small group; often lack executive participation and long-term strategy Full IT line of business staffing; with executive participation and CIO IT Skills Very modest, often OJT Generalist skills; generally lacking specialty skills Portfolio of broad and specific skills Source: http://www.erpsoftware360.com/software-markets.htm Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

International ERP Provide a worldwide consolidation of financial statements on a timely basis Inherent ERP procedures must be adaptable to many cultures Designed to work with multiple currencies, multiple languages, manage international transfers of goods in inventories, and work effectively with international supply chains http://advice.Cio.Com/puneesh/deploy_erp_to_improve_globalization_efficiency_of_your_organization Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Q5: How Do the Major ERP Vendors Compare? Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP Vendor Market Ranking Epicore MS Dynamics Infor Oracle SAP Revenue (2009) $410M+ $1.3B ~$2B >$2B $11.9B Market Share (2005) 1% 4% 2% 20% 42% Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

ERP Products Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

The Future: ERP in the Cloud No true ERP product in the cloud in 2010 ERP industry entering a new phase Vendors cannot ignore SOA, thin-client technology like HTML 5, Enterprise 2.0, social CRM, ERP on a cell phone, and other recent developments SAP and Oracle maintain control of traditional ERP functionality; smaller vendors create complimentary products that incorporate newer technologies. With SOA architecture, easier to integrate applications with ERP functionality and easier for specialty software vendors to connect their programs with ERP programs and data Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Active Review Q1: What is the purpose of ERP systems? Q2: What are the elements of an ERP solution? Q3: How are ERP systems implemented? Q4: What types of organizations use ERP? Q5: How do the major ERP vendors compare? Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

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