McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved Chapter 12 Integrating the Organization from End to End – Enterprise Resource Planning

12-2 Learning Outcomes 12.1 Describe the role information plays in enterprise resource planning systems 12.2 Identify the primary forces driving the explosive growth of enterprise resource planning systems 12.3 Explain the business value of integrating supply chain management, customer relationship management, and enterprise resource planning systems

12-3 Traditional view of systems

12-4 Traditional View of the Systems Within the business: There are functions, each having its uses of information systems Outside the organization’s boundaries: There are customers and vendors Functions tend to work in isolation CRM and SCM and ERP are steps forward in solving this problem

12-5 INTRODUCTION Enterprise Resource Planning [ERP] integrates all departments and functions throughout an organization into a single IT system (or integrated set of IT systems) so that employees can make enterprisewide decisions by viewing enterprisewide information on all business operations

12-6 Enterprise Systems - ERP

12-7 Enterprise Resource Planning (ERP) At the heart of all ERP systems is a database, when a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system

12-8 Enterprise Resource Planning (ERP) ERP systems automate business processes

12-9 Bringing the Organization Together ERP – The organization before ERP

12-10 Bringing the Organization Together ERP – bringing the organization together

12-11 Major Problems of Isolated Functional Systems

12-12 Major ERP vendors  is the largest ERP vendor in the world. It is second largest software company after Microsoft.  Oracle PeopleSoft

12-13 SAP ERP Demo 1 SAP ERP: Delivering Employee and Manager Self-Services SAP ERP Demo

12-14 The Evolution of ERP

12-15 Integrating SCM, CRM, and ERP SCM, CRM, and ERP are the backbone of e- business Integration of these applications is the key to success for many companies Integration allows the unlocking of information to make it available to any user, anywhere, anytime Many ERP vendors offer SCM and CRM components

12-16 Integrating SCM, CRM, and ERP General audience and purpose of SCM, CRM and ERP

12-17 Integration Tools Many companies purchase modules from an ERP vendor, an SCM vendor, and a CRM vendor and must integrate the different modules together –Middleware – several different types of software which sit in the middle of and provide connectivity between two or more software applications –Enterprise application integration (EAI) middleware – packages together commonly used functionality which reduce the time necessary to develop solutions that integrate applications from multiple vendors

12-18 EAI improves connectivity If integration is applied without following a structured EAI approach, point-to-point connections grow across an organization resulting in a tangled mess that is difficult to maintain. This is commonly referred to as spaghetti. For example: The number of connections needed to have a fully meshed point-to-point connections, with n points, is given by n((n-1)/2. Thus, for ten applications to be fully integrated point-to-point, 10X9/2, or 45 point-to-point connections are needed.

12-19 SAP ERP Demo 2 SAP ERP: Improving Accounts Payable Invoice Management SAP ERP Demo

12-20 Enterprise Resource Planning’s Explosive Growth –There are an estimated 70,000 ERP installations worldwide with over 35 million users ERP solutions are growing because: –ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses –ERP addresses the need for global information sharing and reporting –ERP is used to avoid the pain and expense of fixing legacy systems

12-21 Characteristics of ERP

12-22 Benefits and Problems of ERP Benefits –Processes effective and efficient –Organizations do not need to reinvent processes Built-in process based on Industry best practices –Reduce lead time –No data inconsistency problem –Lower costs – in Long Run –Higher profitability Problems –Costly – Initial implemenation

12-23 ERP Benefits and Risks (Costs)

12-24 Challenges of Enterprise Systems Difficult to build: Require fundamental changes in the way the business operates Technology: Require complex pieces of software and large investments of time, money, and expertise Inflexibility: because ERPs are integrated it is difficult to make a change in only one part of the business without affecting other parts Decision making: Not the best way for the firms to operate, ERP software may prevent the firm from following their successful business model Change is challenging: employees resistance

12-25 Core and Extended ERP Components Core ERP component – traditional components included in most ERP systems and they primarily focus on internal operations Extended ERP component – extra components that meet the organizational needs not covered by the core components and primarily focus on external operations

12-26 Core and Extended ERP Components

12-27 CORE ERP COMPONENTS Three most common core ERP components 1.Accounting and finance 2.Production and materials management 3.Human resource

12-28 CORE ERP COMPONENTS Accounting and finance component – manages accounting data and financial processes within the enterprise with functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management

12-29 CORE ERP COMPONENTS Production and materials management component – handles the various aspects of production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control

12-30 CORE ERP COMPONENTS Human resource component – tracks employee information including payroll, benefits, compensation, performance assessment, and assumes compliance with the legal requirements of multiple jurisdictions and tax authorities

12-31 Extended ERP Components Extended ERP components include: –Business intelligence –Customer relationship management –Supply chain management –E-business

12-32 Extended ERP Components E-business components include e- logistics and e-procurement –E-logistics – manages the transportation and storage of goods –E-procurement – the business-to-business (B2B) purchase and sale of supplies and services over the Internet