Chapter 7 Enterprise Resource Planning (ERP)

Objectives After studying the chapter, students should be able to.. Explain definition of Enterprise Resource Planning (ERP) Identify potential benefits of ERP for businesses Describe characteristics of ERP Identify ERP implementation Explain how understanding of ERP contribute the businesses create management innovation.

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

5 What is ERP? Enterprise Resource Planning (ERP) systems: Large, integrated, computer-based business transaction processing and reporting systems. (Bozart ^ Handfield: 415) ERP systems pull together all of the classic business functions such as accounting, finance, sales, and operation into a single, tightly integrated package using a common database. “Integration” is the key word for ERP implementation.

6 What is ERP? ERP system model

7 Organization: Before & After ERP What is ERP?

8 ERP evolution What is ERP?

9 Characteristics of ERP Integration Packages Assembly Requirement Best Business Practice Evolving System What is ERP? ERP packages

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

11 ERP modules 1.Finance and accounting 2.Sales and marketing 3.Production and materials management 4.Human resources ERP Modules

12 Organizational data flows

13 Organizational data flows description

14 1. Finance and accounting - financial accounting, investment management, cost control,treasury management, asset management, etc - providing consistent financial data updated in real time - linking operational results with the financial effects of those result ERP Modules

15 2. Sales and marketing - supporting customer-related activities such as order processing, product configuration, delivery quotation - allowing for profitability analysis (sales module) - reserving inventory for specific customer - billing, invoicing, rebate processing, etc. ERP Modules

16 3. Production and materials management - handing all types of manufacturing processes– M2S, M2O - interfacing with CAD program - allocating resources - scheduling and monitoring production - material management refer to supply chain related activities i.e. purchasing, inventory and warehouse functions, JIT delivery. ERP Modules

17 4. Human Resources - covering all personnel management tasks; workforce planning, employee scheduling, training and development, etc. - providing database of personnel - maintaining salary and benefit structure ERP Modules

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

Potential Benefits of ERP Internal Benefits 1. Integration of a single source of data 2. Common data definition 3. A real-time system 4. Increased productivity 5. Reduced operating costs 6. Improved internal communication 7. Foundation for future improvement

Potential Benefits of ERP External Benefits 1. Improved customer service and order fulfillment 2. Improved communication with suppliers and customers 3. Enhanced competitive position 4. Increased sales and profits

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

ERP Implementation 1. Analysing business processes 2. Choosing the module to implement 3. Aligning the level of sophistication 4. Finalizing delivery and access 5. Linking with external partners

23 Major developers of ERP software

ERP Implementation Best-of-Breed Approach Company can pick and choose the modules from different vendors– the best-of-breed approach

ERP Implementation AreasImplementation Practices Project Management link implementation teams to both the technical (IS) and functional departments Change Management redesigned jobs call for higher levels of skills and accountability Technology Excellence rely heavily on the ERP package as the majority of their application configuration ERP Implementation areas (APQC Best-Practice Report)

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

New Developments in ERP Availability of web-based and wireless ERP systems or so called “On-Demand ERP” Adoption of easy-to-install ERP systems Linkage to other software systems, e.g., supply chain management system, e- commerce, customer relationship management system

28 ERP-SAP ERP-SAP: linkage to other software systems New Developments in ERP

29 ERP-Microsoft ERP-Microsoft: linkage to other software systems New Developments in ERP

30 ERP- ORACLE ERP-Oracle: linkage to other software systems New Developments in ERP

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary

Major Challenges to ERP Implementation (1) Limitations of ERP technical capabilities Inconsistency with existing business processes Costs - implementation (hardware, software, training, consulting) and maintenance Impact on organizational structure (front office vs. back office, product lines, etc.) Changes in employee responsibilities

Major Challenges to ERP Implementation (2) Flexibility of software system upgrades Implementation timelines Availability of internal technical knowledge and resources Education and training Implementation strategy and execution Resistance to change

Contents What is ERP? ERP Modules Potential Benefits of ERP ERP Implementation New Development in ERP Major Challenges to ERP Implementation Summary