1. Introduction to ERP Systems and SAP MBA 8556 Fall 2004 Dr. Wagner

3. What is ERP Anyway? n “Enterprise Resource Planning” n A set of integrated software modules for supporting all of an enterprise’s processes in real-time. –Sales, Production, Logistics, Purchasing, Accounting, and Human Resources share relevant information with each other as needed.

4. Your first business enterprise…

5. Think in terms of business processes… n What are the processes involved in running a lemonade stand? –Assume one person –Assume cash business InputsOutputsProcess

6. Sample Lemonade Processes Get OK From Mom Get supplies together Get OK From Mom Make lemonade Make Sign(s) Choose location Make lemonade Make lemonade Set up table Rake in The cash

7. Sample Lemonade Processes Get OK From Mom Get supplies together Get OK From Mom Make lemonade Make Sign(s) Choose location Make lemonade Make lemonade Set up table Rake in The cash Is it feasible? What supplies do I need? How much do we make? How much to charge? Who are my customers? Is it worth continuing?

8. Your enterprise partners… Customers Mom/Dad Grocery Friends

9. Lemonade Stand Exercise n Point of this exercise? –We can view everything we do, personal and professional as a set of processes. –Start to think about how our decisions affect others and their processes

10. Lemonade Stand Exercise n Point of this exercise? –We can view everything we do, personal and professional as a set of processes. –Start to think about how our decisions affect others and their processes What would happen if all the partners in this process had access to each other’s information in real-time?

11. Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

12. Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

13. Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

14. Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

15. Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

16. Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics Information?

17. Cross-Functional Nature of the Order Management Process QuoteCommitProduce Check Credit DeliverBillCollect

18. Cross-Functional Nature of the Order Management Process QuoteCommitProduce Check Credit DeliverBillCollect Sales & Distribution Production Planning Financial Accounting Materials Mgmt

19. Cross-Functional Nature of the Order Management Process QuoteCommitProduce Check Credit DeliverBillCollect Sales & Distribution Production Planning Financial Accounting Materials Mgmt

20. What if…. n You had Real Time information in your Job? –Accurate inventory data –Single point of data entry

21. What if…. n You had Real Time information in your Job? –Accurate inventory data –Single point of data entry n You could tap into information that other departments collect? –Vendor selection data –Vendor pricing data available

22. What if…. n You had Real Time information in your Job? –Accurate inventory data –Single point of data entry n You could tap into information that other departments collect? –Vendor selection data –Vendor pricing data available n You had certain tasks and work processes automated? –RFQ and contract processing –No more reconciliations –Automatic data transfer and update

23. That’s what an ERP System Does It is a packaged business system that allows you to: n Automate and integrate many of the more tedious business practices.

24. That’s what an ERP System Does It is a packaged business system that allows you to: n Automate and integrate many of the more tedious business practices. n Share common data and practices across the entire enterprise.

25. That’s what an ERP System Does It is a packaged business system that allows you to: n Automate and integrate many of the more tedious business practices. n Share common data and practices across the entire enterprise. n Update and access information in a real-time environment

26. Why implement ERP? n Technological reasons n Business reasons

27. Other Organizations implemented ERP for these Technology Reasons 6 11 12 19 26 37 42 Y2K unable to support growth obsolete systems difficulty integrating acquisitions systems not integrated poor quality of information disparate systems

28. Common Business Reasons for implementing ERP 10 15 20 21 24 27 poor performance inconsistent business processes globalization unable to support strategies complex processes not responsive to customers high costs

29. Business Process Reengineering n BPR is the creation of entirely new and more effective business processes, without regard for what has gone before. n BPR is cross-functional by its very nature n BPR involves questioning assumptions n Text prefers “Business Engineering” term to describe redesign of entire process chains across functional and even organizational boundaries

30. ERP Industry n 80% of Fortune 1000 have implemented –includes MSFT, IBM, and APPLE n 30-40%+ annual revenue growth for 1995- 2000 (SAP +14% Q2 2004) –partly attributable to Y2K re-engineering n Major players –SAP ---38% of market –PeopleSoft –JDEdwards, Baan/Invensys, Oracle, SCT, SGAI

31. Some ERP M arket Figures n 1998 worldwide revenues (only license sales): $4.8 Billion

32. Source: Gartner Group ERP: T he Competitive Arena

33. What is SAP? n A series of integrated core business application modules for transaction processing n A set of functions that implement best business practices n Client/Server software that processes business transactions n A methodology for implementing application software

34. SAP and Market n SAP (Pronounced “Ess, Ay, Pee”!) is industry standard in: –software, oil, chemicals, consumer goods, electronics n Expanding into: –healthcare, government, pharmaceuticals, automotive, construction, retail, service

35. Event-Driven Transaction Processing n An EVENT is a condition that has business relevance –customer order –production order –customer payment receipt n Events trigger processing actions n Events are fundamental activities in processing business transactions n Behind SAP’s EPC methodology –(Event Driven Process Chain)

36. 3 Key ERP Concepts 1. Everyone works with real-time shared data and applications 2. Technology becomes transparent for users through open systems architecture 3. A Process View of the organization is required to make the project a success

37. K ey Concept: Shared Data & Applications 1. Integrated Data and Applications –Data sharing in common relational database n SAP term “Master Data” ex. Material master n 95% accurate data is no longer good enough

38. K ey Concept: Shared Data & Applications 1. Integrated Data and Applications –Data sharing in common relational database n SAP term “Master Data” ex. Material master n 95% accurate data is no longer good enough –Different Application modules are responsible for maintaining master data n Application modules should reflect “process view” of organization

39. Name That Module... R/3 Client / Server FIFinancialAccounting COControlling AM Fixed Assets Mgmt. PSProjectSystem WFWorkflow ISIndustrySolutions MMMaterialsMgmt. HRHumanResources SD Sales & Distribution PPProductionPlanning QMQuality Manage- ment PM Plant Main- tenance

40. Key Concepts: Technology becomes transparent for Users through Open Systems Architecture 2. Open systems architecture nGenerally entails a 3-tier Client/Server architecture nMay require connecting to a wide variety of databases and mainframes/servers n SAP solves this problem through the use of various middleware technologies that make this transparent to the user

42. Key Concepts: A Process View of the Organization is Required for the Project to be a Success 3. Business Process Redesign (BPR) of the Organization... –Often requires major changes. Why? –May involve everyone in redesign of processes –Creates entirely new and more effective business processes, without regard for what has gone before. –Is Cross-functional by its very nature –Involves questioning assumptions

43. How will ERP affect our processes? n Financial processes –Real-time cost and performance analysis n Across projects and divisions –Better financial planning n Logistics processes –Supports all phases of procurement process –Integrates transportation management across the supply chain n Sales processes –Complex pricing and profitability analysis –Real-time inventory control

48. Classification of Information Systems DSS MIS TPS

49. Classification of Information Systems DSS MIS TPS

50. Classification of Information Systems DSS MIS TPS

53. Benefits of R/3 Reference Model n Don’t have to start from scratch n Quick overview of application architecture n Identifies key R/3 process elements n Helps visualize processes n Shows R/3 functionality n Speeds up process n Helps to define current processes –maintains process documents

63. SAP R/3 Basis System

65. Future Challenges for SAP n Based on late 1980’s C/S technology –not pure Object-Oriented design –servers are treated as distributed m/f with desktop as almost a dumb terminal using function calls to application server n Lack of flexibility –difficult to modify business processes –modifications done by configuration channels or tack on modules by external vendors--possible upgrade problems n Complexity- frightens some customers n Lack of strategic fit –best for strong top-down type of organizations