Enterprise Resource Planning

Aroop Mukherjee

Overview of Talk
Historical Context of ERP Earlier System What is ERP? Characteristics of Enterprise System Benefits of ERP What is ERP offering? What is driving the ERP Movement? Technology involved in ERP ERP Implementation Concepts and Methodology ERP Failure ,Success and Factors of Success

Historical Context of ERP

Historically, companies created islands of automation. A hodgepodge of various systems that operated or managed various divergent business processes. Sometimes these systems were integrated with each other and sometimes they werent. Sometimes they were loosely interfaced and sometimes they were more tightly interfaced.

Historical Context of ERP

The total organizational costs of maintaining a patchwork of redundant and overlapping systems has grown over the years to the point where the cost of maintaining these systems is greater than installing a new system.

Historical Context of ERP

Analysts have speculated that widespread adoption of the same ERP package by the firms in a single industry (an observed phenomenon for semi-conductor manufacturers) might lead to the elimination of process innovation-based competitive advantage .

Historical Context of ERP

Most companies have failed to implement ERP packages successfully or to realize the hoped-for financial returns on their ERP investment. Companies have had similar difficulties with each new wave of information technology since the first mainframe systems. It takes years to realize some envisioned IT-enabled changes in organizational processes and performance, and there are many ways to fail along the way.

Earlier System
The Manufacturing Roots of ERP Materials Requirements Planning (MRP) Electronic Data Interchange (EDI) Manufacturing Resource Planning (MRP-II)

What is ERP?
The notion that a company can and ought to have an expert (or a group of experts) create for it a single, completely integrated supersystem an MIS to help it govern every aspect of its activity is absurd.

ERP Definition
Enterprise systems are commercial software packages that enable the integration of transactions-oriented data and business processes throughout an organization (and perhaps eventually throughout the entire inter-organizational supply chain). Enterprise systems include ERP software and related packages as advanced planning and scheduling, sales force automation, customer relationship management, product configuration, etc.)

Characteristics of Enterprise Systems

Integration: seamless integration of all the information flowing through a company financial and accounting, human resource information, supply chain information, and customer information.

Characteristics of Enterprise Systems

Packages: Enterprise systems are not developed in house. IS life cycle is different: 1)mapping organizational requirements to the processes and terminology employed by the vendor and 2) making informed choices about the parameter setting. Organizations that purchase enterprise systems enter into long-term relationships with vendors. Organizations no longer control their own destiny.

Characteristics of Enterprise Systems

Best Practices: ERP vendors talk to many different businesses within a given industry as well as academics to determine the best and most efficient way of accounting for various transactions and managing different processes. The result is claimed to be industry best practices. The general consensus is that business process change adds considerably to the expense and risk of an enterprise systems implementation. Some organizations rebel against the inflexibility of these imposed business practices.

Characteristics of Enterprise Systems

Some Assembly Required: Only the software is integrated, not the computing platform on which it runs. Most companies have great difficulty integrating their enterprise software with a package of hardware, operating systems, database management systems software, and telecommunications suited to their specific needs. Interfaces to legacy systems Third-party bolt-on applications

Characteristics of Enterprise Systems

Evolving: Enterprise Systems are changing rapidly. Architecturally: Mainframe, Client/Server, Webenabled, Object-oriented, Componentization (Baan). Functionally: front-office (ie. sales management), supply chain (advanced planning and scheduling), data warehousing, specialized vertical industry solutions, etc.

Benefits of ERP ERP brings together people who

work on shared tasks within the same enterprise or in their dealings with suppliers and customer . Enterprises have to ensure a smoother flow of information at all levels and between all parts of their organization, to access up to date information. Some of the tangible benefits reported by industry are

Benefits of ERP

Reduction of lead time by 60 percent 99 percent on-time shipments Doubled business Cycle time cut to 80 percent

Benefits of ERP There are some intangible benefits like

Better customer satisfaction Improved vendor performance Increased flexibility Improved resource utility Improved information accuracy Improved decision making capability

What is ERP offering?

ERP is business process infrastructure
ERP is a software mirror image of the major business processes of a firm, such as customer order fulfillment and manufacturing. ERP software automates and integrates the basic processes of a firm, from finance to the shop floor, and eliminate complex, expensive links between computer systems that were never meant to talk to each other.

What is ERP offering?

ERP is business process infrastructure
ERP provides enterprise wide business process, information and data management stream-line and standard business processes and operating procedures provide interorganizational collaboration intraorganizational information sharing

What is ERP offering?

ERP Business Technology architecture
Business Process Workflow Management Functional Information Management
Marketing, Operations, HRM, etc.

Decision Support Models and Tools Data Management

What is ERP Offering?

ERP Functional Architecture
Information Systems Modules
Human Resources Management Manufacturing Management Financial Management Accounting Marketing Management Workflow Management

Examples of ERP High End Packages

ERP Packages BAAN www.baan.com JD Edwards www.jdedwards.com Oracle www.oracle.com PeopleSoft www.peoplesoft.com SAP www.mysap.com

Motivation for Implementing ERP

Achieving and maintaining competitive advantage requires better information management
Information Quality Information Reliability Information Access Information Sharing

Motivation for Implementing ERP

Firms View ERP As A System:
to provide better information management to transform the competitive space to transform relationships between
their customers their suppliers their competitors

Motivation for Implementing ERP

FIRMS ACHIEVE COMPETITIVE ADVANTAGE BY
Locking in customer and suppliers Locking out the competition Attracting away competitors customers by
product functionality cost performance service, reliability and flexibility quality and innovation response time/ time-to-market

Motivation for Implementing ERP(inter-organizational efficiency)

Better Supply Chain Management Inbound Logistics Operations Outbound Logistics Marketing And Sales Service Market Research Online Store Front Internet Banking Allows an organization to Reengineer all their processes.

Technology
Early Attempts to Share Data
Client/Server

Phases of ERP Implementation

The Chartering Phase Comprises the decisions leading up to the funding of an enterprise system. Key Players: Vendors, Consultants, Company Executives, IT specialists. Key Activities: Build a business case for ERP, Select a software package, Identify a project manager, Approve a budget and schedule.

Phases of ERP Implementation

The Project Phase Comprises the activities performed to get the system up and running in one or more organizational units. Key Players: Project Manager, Project team members, Internal IT specialists, Vendors, and Consultants. Key Activities: Software configuration, system integration, testing, data conversion, training, and rollout.

Phases of ERP Implementation

The Shakedown Phase
The organizations coming to grips with the ERP System. Ends when normal operations have been achieved. (Or they give up and pull the plug on the system) Key Players: Project Manager, Project team members, Operational Managers, and End users. Key Activities: Bug fixing and rework, system performance tuning, retraining, staffing up to handle temporary inefficiencies. This is the phase in which the errors of prior phases are felt. New errors can arise in this phase also.

Phases of ERP Implementation

The Onward and Upward Phase Continues from normal operation until the system is replaced with an upgrade or a different system. This is where the organization is able to ascertain the benefits (if any) of its investment. Key Players: Operational Managers, End-users, IT support personnel (Vendors and consultants may be involved upgrades) Key Activities: Continuous business improvement, additional user skill building, post implementation benefit assessment. Most of these activities are not performed.

Phases of ERP Implementation

There are several possible outcomes for each phase of the implementation. Unresolved problems from one phase are inherited by the next phase. Just like the SDLC, the longer problems go undetected and unresolved, the more expensive it is to fix them.

ERP Implementation Concepts and Methodology

ERP Implementation Methodology Identification of the needs for implementing an ERP package Evaluating the as-is situation of your business Deciding upon the desired would -be situation for your business Reengineering of the business processes to achieve the desired results

ERP Implementation Concepts and Methodology

ERP Implementation Methodology Evaluation of the various ERP packages Finalizing of the ERP package Installing the requisite hardware and networks Finalizing the implementation consultants Implementation of the ERP package

ERP Implementation Concepts and Methodology

Identification of the needs for implementing an ERP package Why should I implement an ERP package ? Will it significantly improve my profitability ? Will it lead to reduce d delivery times for my products ? Will it help reduce the costs of my products ? Will it enable me to reengineer my business process ? Effective MIS for quick decision making Elimination of manual preparation of various statutory statements

ERP Implementation Concepts and Methodology

Evaluating the as-is situation of your business

One needs to thoroughly understand what existing business process the organization is following to transact its business. For example, Procurement, production, sales etc. The process map should give you the following details for any business process. The total time the business process takes to complete The total number of decision points involved the flow of information the number of reporting points

The Different Business Modules In ERP Package

Finance Production Human Resources Materials Management Sales And Distribution

Finance
Financial Accounting
General Ledger, Accounts Receivable/Payable, Special Ledger,Fixed Asset Accounting, Legal Consolidation.

Investment Management
Investment Planning/Budgeting/Controlling, Depreciation, Forecast/Stimulation/Calculation.

Controlling
Overhead cost controlling, Activity-Based Costing , Product cost accounting, Profitability analysis.

Manufacturing
Material and capacity planning Shop floor control Quality management JIT \ Repetitive manufacturing Cost management Engineering data control Engineering change control Configuration management Serialization \ lot management Tooling

MATERIAL MANAGEMENT
Pre-purchasing activities Purchasing Vendor evaluation Inventory management Invoice verification and material inspection.

HUMAN RESOURCES
Personal management
HR master data, personnel administration, information system, recruitment, travel management, benefits administration, salary administration.

Organizational management
Organizational structure, staffing schedules, job descriptions, planning scenarios, personnel cost planning.

Payroll accounting
Gross \ net accounting , history function, dialog capability, multi- currency capability, international solution.

SALES AND DISTRIBUTION

Sales queries , such as inquiries and quotations Sales orders Outline agreements, such as contracts and scheduling agreements Delivery\ Shipment Invoicing\ Billing After sales support

following basic functions are carried out

Inquiry handling Quotation preparation and processing Contracts and contracts management (order management) Monitoring and sales transactions Checking for availability Transferring requirement to material planning Scheduling the delivery Calculating Pricing and taxes Checking credit limits Invoicing\ Billing

Why Implementations Fail

1. People Dont want the systems to succeed or change 2. People are comfortable and dont see the need for the new system. 3. People have unrealistic expectations of the new system. 4. People dont understand the basic concepts of the system. 5. The basic data is inaccurate. 6. The system has technical difficulties.