1. Enterprise Resource Planning (ERP)
정 석 화
Department of Computer Information Systems College of Business Eastern Michigan University

2. Agenda What is ERP? Why ERP? ERP Vendors SAP R/3 & Modules ERP Trends
Questions/Answers

3. ERP
A collection of software systems that help to manage business processes for an entire organization
Designed to integrate all information processing support for an entire organization

4. Organization
A group of people engaged in purposeful activity over extended time
A tool used to coordinate in order to obtain Value for organizational goals

5. How an Organization Creates Value

6. Business Process
Work activities across time and place, with a beginning, an end, and clearly identified inputs and outputs (Davenport, 1993)
Has sequence, purpose, interaction

7. Example – ERP HR Module HR processes IT resources
PAYROLL
BENEFITS
RECRUITING
TRAINING
payroll programs, personnel files, health plan documents, recruiting, Servers & networks, etc.
IT resources

8. Theme of ERP Reflects assumptions about the way companies operate
Provides the integration of all the information flowing through a company
i.e.,
Financial/accounting information
HR information
Customer information

9. An Organization with ERP
A process-oriented organization
Data at the core of the enterprise
ERP as a major part of the enterprise architecture

10. Differences between Function & Process
Focus on “What”
Focus on “How”
Vertical
Horizontal
Static
Dynamic
Task-centered
Customer-oriented
Individual/Specialist
Team/Generalist
Parochial
Holistic

11. Cross-functional Processes i.e., Product Development
competitor analysis
market research
new product
prototype
MARKETING
R & D
PRODUCTION
needs analysis
research
market test
component design
product test
product release
process design
equipment design
production start

12. ERP for Organizational Value Chain
Support:
Profit Margin
Infrastructure, HR, R&D, Procurement
Primary:
Inbound
logistics
Operations
Outbound
logistics
Marketing
& Sales
Service
Stream of activities
Applies to both products and services

13. Business Process Reengineering (BPR)
An organization fundamentally and radically
redesigns its business process to achieve
dramatic improvement
From the restructuring of an organization
To the redesigning of individual processes

14. BPR Example - Loan processing Desk-to-desk approach
credit
reporting
Origination of loan
pre-
qualification
document
generation
application
processing
credit analysis
& underwriting
approval
& closing
Servicing of loan
payment
processing
escrow
management
customer
service
collections
& foreclosures
Follow-up processing
valuation &
risk analysis
transfer to
secondary mkt

15. BPR example - Loan processing Team approach
origination
team
Regional
production
center
Field rep
laptop
Loan
servicing
team

16. ERP Strategic Issues Compelling reasons - efficiencies
Organization change - better than current
Strategic advantage - gaining an advantage

17. ERP Tactical Issues Functional /Cross-functional integration
Supply chain integration
Decision support

18. Operational Issues – ERP Implementation
Configuration – Methodology & Processes
Plan vanilla to start
Populating the data with integrity
Modifications made
Cut over or Phased rollout
Add-ons

19. ERP Benefits – Eli Lilly SAP R/3 Implementation
Process Improvements
Eliminate redundant transactions
More efficient staff and succession planning IT
Reduced support costs
Reduced infrastructure costs
Strategic Direction
Improved resource allocation
More flexible organization
Better future decision making
Highlights:
45 global sites
Implementation by 2002 – delayed to 2004
Single client, servers in Indianapolis
Approx. 70 person implementation – now over 100 involved

20. ERP Vendors Over 100 vendors globally 5 major vendors
Lawson Healthcare
JDEdwards Internet
Oracle Database
PeopleSoft HRM originally
SAP German, pioneer of ERP

21. ERP Market (META Group, 2003)
$15B globally in 2002 and growing at 12%-15% annually
Satisfied at least 75% of the overall business application requirements
Mission-critical functionality
ERP regarded as core IT investments

22. Key Findings about ERP Market
Mature and concentrated
The five vendors - more than 80% of the investment
ERP purchases year commitments
Vendor size does not guarantee high performance, and the smaller ones perform to the leaders for specific criteria
Vendors must be compared to that of best-of-breed vendors (e.g., Siebel for CRM, i2 for SCM)

23. 01/26/98
SAP R/3 Overview 1 1 1 1 1

24. About SAP AG from www.sap.com
Founded in W. Germany in 1972
World's largest enterprise software and third-largest software supplier
SAP R/3 - Collaborative business solutions for all types of industries
12 million users, 88,700 installations, and over 1,500 partners
$7.5B revenue in 2004, More than 32,000 employees in over 50 countries

25. Partial SAP Client List
Spacenet

27. R/3 Integrated Solution Logical Architecture FI CO PS WF IS MM HR SD
Financial
Accounting CO
Controlling PS
Project
System WF
Workflow IS
Industry
Solutions MM
Materials
Mgmt. HR
Human
Resources SD
Sales &
Distribution PP
Production
Planning QM
Quality
Management PM
Plant Maintenance SM
Service
Manage-
ment
Integrated Solution
Logical Architecture EC
Enterprise AM
Fixed Assets

28. Client Highest hierarchical level in an SAP system
A complete database with all the tables necessary for an integrated system
Master records per client

29. Organizational Elements
Structures that represent the and/or organizational views of an enterprise
Company structure based on business processes
A framework that supports all business activities 2

30. Master Data
Centrally and available to all applications and all authorized users
In the database over an extended period of time

31. Transactions Application programs that execute business processes
Whenever a transaction is executed, a document is created
The document contains all of the relevant information from the master data and organizational elements

32. Financial Accounting (FI) & Controlling (CO) Modules1 1

33. Reports by cost centers and
FI and CO Comparison CO FI
Legal or external reporting
Reports by accounts
Balance Sheet
Income Statement
Internal management
reporting
Reports by cost centers and
cost elements
Cost Center Reports

34. FI/CO Organizational Structures
Client
Company
Chart of Accounts
Company Code
Business Area

35. Company
Consolidated financial statements are created at the company level
A company can include one or more company codes
All company codes must use the same chart of accounts and fiscal year

36. Chart of Accounts The chart of accounts contains:
A complete listing of G/L accounts in FI
Cost and revenue elements in CO
Each company code is assigned to one chart of accounts

37. General Ledger Accounts
Every account to be posted in FI must be defined as a G/L account master record
Each G/L account master record contains information that specifies the function of that account
e.g., balance sheet vs. P&L account

38. Materials Management (MM) Module1 1

39. Procurement Process Order Purchase Requisition Demand Vendor Accounts
Goods Receipt
& Inventory Mgmt.
Accounts
Payable

40. Organizational Elements for the Procurement Process
Client
Company Code
Plant
Storage Location
Purchasing Organization
Purchasing Group 3

41. Company Code A company code represents an independent accounting unit
Balance sheets and Profit/Loss statements, required by law, are created at the company code level 4

42. Plant
A plant is an organizational unit within a company to produces goods, renders services, or distributes goods
A plant can be one of the following types of locations:
Manufacturing facility
Warehouse distribution center
Regional sales office
Corporate headquarters 5

43. Storage Location An organizational unit for the differentiation
of material stocks within a plant 6

44. Purchasing Organization and Groups
Groups can be a further division of purchasing responsibility and/or structure
Centralized or Decentralized
Hybrid - multiple organizations buy for multiple plants 7

45. Vendor Master
For processing business transactions and corresponding with vendors
Shared between the accounting and purchasing departments
Data is grouped into three categories:
General data
Accounting data
Purchasing data 9

46. Production Planning & Execution (PP) Module

47. Material Requirements Planning (MRP)
A set of techniques utilizing
Bills of materials (BOM)
Inventory data
Master production schedule for material requirements
A time-phased planning tool for quantity and capacity by a given
Day
Week
Month

48. Master Data - BOM
BOMs are created as relationships between one parent material and one or more sub-component materials. i.e.,
shirt
pants
emblem - 2
uniform
hat
box
cover

49. Production Process Schedule/Release Goods Issue Shop Floor
Order Settlement
Goods Receipt

50. Scheduling Techniques
Forward scheduling
Starts when the order is received
Results in completion before the due date
Backward scheduling
The last operation on the routing is scheduled first
Previous operations are scheduled back from the last one

51. Sales and Distribution (SD) Module1 1

52. Organizational Unit

53. SD Master Data Customer - Sale organization Material - Plant
Various relationship
Customer account (i.e, credit, invoice payment)
Material - Plant
Sales status, Material type, etc.
Pricing
A technique for prices to be executed in the order

54. SD Processes

55. Human Resources (HR) Management Module

56. SAP HR Processes Employee Self-Service Course Credit Recruitment
Hiring
Cost
Planning
&
Reporting
Training and Personnel Development
Employee Self-Service
Travel Planning
Managing Work Time
Payroll Administration
Compensation & Benefits
The SAP Human Resources Processes include:
Recruitment
Hiring
Training and Personnel Development
Managing Work Time
Compensation and Benefits
Payroll Administration
Travel Planning
Personnel cost planning and Reporting
Employee Self-Services
Instructor Notes:
Discuss that the SAP HR system manages all of the HR business processes noted.

57. Identifying Qualified Candidates
The Recruitment functionality can be used to find applicants with specific qualifications, or skill sets. Additionally, you can specify the exact proficiencies required for each qualification, and define criteria to restrict the search to fewer objects.
The system outputs a list of people who fulfill the selection criteria specified. You may then, examine individuals’ data records in detail, in helping to decide which applicants would be suitable candidates for the vacancy.
Instructor Notes:
Demo – Select all applicants who have the qualifications: HR Management Skills, and Verbal, written communication skills.
Menu Path: Human Resources\Personnel Management\Recruitment\Selection Procedure\Applicant Pool\Via Qualifications\All Applicants
Select Qualification from Find by field – upper left.
Enter ‘ HR’ in With Name field, and select Find (green check).
Double-click on HR Management Skills from Selection box - lower left.
Repeat preceding steps to also select Verbal, written communication skills qualification.
Execute (clock button).
Double-click on employee Moira Hunt, to view her qualifications profile.
Discuss

58. The Hiring Action – Creating Infotypes

59. Travel Requesting and Planning

60. Travel Expense Accounting
Travel Expenses: Henry Miller, Trip
Travel
General trip data
Expense receipts
1001 Henry Miller
08/08/1999 Atlanta
01/06/1998Heilbro
01/04/1998 Munic
01/01/1998 Boston
Date
Time
Trip beginning
Trip end
Trip destination
Trip country
00:00
DE Region Germany
Reason for trip
Itinerary
Trip advance
Alternative cost assignment for entire trip, if other than master CA
Mileage and per diem reimbursement on
Exp. receipts
001
Amount
Currency of the unified Uni
Input tax
Additional info
Remarks
Expense receipt cost assignment, alternative to master data
Add to table
Comments
Travel Expense Accounting

61. Benefits Plans Infotypes

62. Administering Compensation Awards
On Compensation Administration overview screen, employees can be selected and individual compensation adjustments can be made, or an adjustment can be effected for the entire organizational unit. Adjustments can be percentage increases, or finite amounts.
Compensation administrators and managers have information at their fingertips that help them to make decisions for individuals, such as; organizational assignment, salary data and history, salary survey data and job evaluation results, and appraisal results.
Proposed adjustments go through an approval process. When the adjustments are activated, the system updates the employees' master data records, creating new compensation infotypes.
Instructor Notes:
Demonstration of the Compensation Administration Process:
Menu Path: Human Resources\Personnel Management\Compensation Management\Administration\Adjustments\Change
Select Find By User View (upper left).
Accept Line Manager by selecting Find. This function will allow the system to determine what department you – the user – manage.
The names of those reporting to the user (you) will appear in the selection box (lower left).
Double-click on an employee to select them for processing in the review screen on the right.
From here you may chose from a Performance Review or Bonus Plan from the Type box – top and center.
Choose Performance review, and play, by entering amounts in the Amount or percentage increase boxes below. Hit the Enter key to update the page.
Select the Employee data button top to the left (looks like a jig-saw piece) to view information pertinent to awarding comp to the people in your department (E.g. Performance Appraisal).
You may repeat this process for another employee in the list. Exit this process without saving.

63. Running Payroll
During the payroll run, no master data or time data affecting the payroll past or payroll present can be changed.
The remuneration elements for an employee are formed from individual wage and salary types that are used during a payroll period.
Both the remuneration elements and the statutory and voluntary deductions consist of individual payments and deductions, which are calculated for an employee during a payroll period. These payments and deductions are included in the payment calculation by means of different wage types.
The employee is usually paid by bank transfer and the payment amount is printed in a form for the employee.
If Employee Self Services is implemented, employees may view their remuneration statements (pay stubs) online, and print them out if they choose.

64. HR Integration SAP HR Logistics Financial Accounting Controlling
Sales and
Distribution
Workflow
Human Resources Management supports nearly every application area.
Logistics (PP, PM) - for time management and shift planning
Sales and Distribution (SD) - for sales personnel commission-related data
Financial Accounting and Controlling (FI, CO) - for payroll and cost accounting, time reporting and travel expenses
Workflow (WF) - as a process enabler for routing tasks and information to the proper staff

65. ERP Trends Further integration of suppliers & customers
Focus on ERP system flexibility
Mass customization
Standard interfaces across chain

66. Extended ERP

67. ERP Motivations Original ERP Design - Internal
Supply chain relationships requirements
Improved interactions & communications
Opportunities with suppliers & customers
Manufacturers surveyed had supply chain extensions to ERP
More planned to have extensions
Open systems for supply chains

68. ERP Vendor Response
mySAP.com - open, collaborative system for SAP & non-SAP software
SAP APO - forecasting, scheduling, other logistics activities
PeopleSoft - enterprise performance management
JDEdwards - planning & execution
Oracle’s 11i - Planning & Scheduling

70. email me at schung1@emich.edu
Questions/Answers or
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