ERP and E-Business- An

Overview
Based on the book Enterprise Resource Planning Solutions and Management by Flona Fui-Hoon Nah, Idea Group Publishing 2001

Contents
1.
2. 3. 4.

5.
6. 7. 8.

9.
10. 11.

What is ERP? The Evolution of ERP SystemsA Historical Perspective ERP System Architecture Extended ERP Towards an ERP Life-Cycle Costs Model Advantages and Disadvantages of ERP Systems ERP From E-BUSINESS Perspective Are You Ready for ERP? E-BUSINESS Pushes ERP To The Network Edge Common ERP? E-Business Platform (Oracle & SAP) Web Services and XML

Topic 1: What Is ERP?

ERP = Enterprise Resource Planning

A software solution that addresses enterprise needs taking the process view of an organization to meet the organization goals. -- It integrates all the departments and functions across a company into a single computer system that can serve all those different departments particular needs.

What Is ERP?
An ERP system is analogous to the internal technological hub of a company. it can be thought of as a company's central repository. The five major processes in a typical ERP system are: finance, logistics, manufacturing, human resources and sales/marketing (refer to Figure next slide). The focus of ERP systems is on the efficiency and effectiveness of the internal process . It offers a way to streamline and align business processes, increase operational efficiencies and bring order out of chaos.

ERP Systems Concept

What Is ERP?

ERP Combines various department systems into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.
The best part of ERP is the way in which it improves the order fulfillment process that is taking the customer order and process it into an invoice and revenue. It doesnt handle the front-end that is handled by CRM (Customer Relationship Management).

What Is ERP?

When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order such as customers credit rating and order history from the finance module, the companys inventory levels from the warehouse module and the shipping docks trucking schedule from the logistics module.
How its being done: It integrates the financial information and customer order information . It does so by integrating the following: Database Application Interfaces Tools

What Is ERP?

It standardizes and speeds up the manufacturing process. This saves time, increases productivity and reduces head count.
It reduces the inventory. Due to the information available about all the orders it helps to maintain the right level of stock and smoothes the manufacturing process.

Topic 2: The Evolution of ERP SystemsA Historical Perspective

The phenomenal growth of computing power and the Internet is bringing ever more challenges for the ERP vendors and the customers to redesign ERP products breaking the barrier of proprietorship and customization, and embracing the collaborative business over the Intranet, Extranet and the Internet in a seamless manner. The vendors already promise many "add-on" modules, some of which are already in the market as a sign of acceptance of these challenges by the ERP vendors. It is a never-ending process of reengineering and development bringing new products and solutions to the ERP market. ERP vendors and customers have recognized the need for packages that follow open architecture, provide interchangeable modules and allow easy customization and user interfacing.

ERP Applications Take Hold

The 1990s saw, for the first time, many companies embrace product offerings from companies such as SAP AG, Peoplesoft, and Oracle that provided (or at least intended to provide) a single integrated package framework upon which most or all of a company's core business processes could be implemented, deployed, and used throughout the enterprise.

ERP Applications Take Hold

For example, supply chain automation applications began appearing, and business-to-business (B2B) e-commerce applications such as electronic procurement (eprocurement) and buyer-to-seller electronic marketplaces are directly descended from these first-generation cross-enterprise supply chain applications, which in turn owe a large portion of their growth to the tenacity of ERP proponents who persevered throughout the decade and made successful largescale, complex distributed computing systems a reality.

Topic 3: ERP Systems Architecture

An ERP system is required to have the following characteristics:

Modular design comprising many distinct business modules such as financial, manufacturing, accounting, distribution etc. Use centralized common database management system (DBMS) The modules are integrated and provide seamless dataflow among the modules increasing operational transparency through standard interfaces. They are generally complex systems involving high cost They are flexible and offer best business practices The modules work in real-time with on-line and batch processing capabilities

ERP Systems Architecture

The modules of an ERP system can either work as stand-alone units or several modules can be combined together to form an integrated system. The systems are usually designed to operate under several operating platforms such as UNIX, MS Windows NT, Windows 2000, IBM AIX, HP UX systems. SAP AG, the largest ERP vendor provides a number of modules shown in the next slide with its famous R/3 ERP system. New modules are introduced by SAP and other vendors in response to the market and technological demand such as the Internet technology.

Three-Tier ERP Systems Architecture

Topic 4: Extended ERP

The proliferation of the Internet has shown tremendous impact on every aspect of the IT sector including the ERP systems becoming more and more Internet-enabled (Lawton, 2000). This environment of accessing systems resources from anywhere anytime has helped ERP vendors extend their legacy ERP systems to integrate with newer external business modules such as supply-chain management, customer-relationship management, sales force automation (SFA), advanced planning and scheduling (APS), business intelligence (BI), and e-business capabilities. In fact ERP is becoming E-business backbone for organizations doing on-line business transactions over the Internet. Internet-based solutions are destined to improve customer satisfaction, increase marketing and sales opportunities, expand distribution channels, provide more cost-effective billing and payment methods.

Extended ERP

E-commerce is the conduct of business transactions among organizations with the support of networked information and communication technologies, especially utilizing Internet applications such as the Web and e-mail effectively reaching the global customers. Adoption of e-commerce and e-business solutions, especially business-to-business (B2B) solutions, are seen by many as the wave of current and future extensions of traditional ERP systems of most small, medium and large vendors. The front-end web-based Internet-business applications are integrated with the back-office ERP-based applications enabling business transactions such as order placement, purchasing, inventory updates, employee benefits etc. to take place between the customers, suppliers and the enterprise based on reliable, relevant data and applications instantly in a border-less domain.

Extended ERP

The legacy ERP systems designed to integrate enterprise functions within the four walls of the enterprise have introduced software solutions with Web-interface essentially extending to Internet enabled CRM, SCM and other Internetbusiness models. Examples of such extended ERPs are available from most of the ERP vendors. Thus SAP's Internetenabled integrated ERP system called http://mySAP.COM (SAP, 2001) is a suite of ERP, CRM and other products that can be linked together using Internet portals. The concept of the Internet-enabled extended ERP system is shown in Figure 1 and Figure 2(next two slides).

Extended ERP

Figure 1: Web-enabled extended ERP system

Extended ERP
Customer

Supplier

ERP

CRM SCM Data Warehouse

Figure 2: Developments in e-ERP and Business Practice for Doing e-Business

Topic 5: Towards an ERP Life-Cycle Costs Model

To define the life-cycle model we use a simplified version of the model proposed by Esteves and Pastor (1999a, 1999b). This model is structured in phases and dimensions. Here, we only make reference to the phases as the different stages of the life-cycle of an ERP system in an organization. Next, we describe each phase, i.e., adoption, acquisition, implementation, usage and maintenance, evolution and retirement.

Adoption decision phase Acquisition phase Implementation phase Use and maintenance phase Evolution phase Retirement phase

Adoption Decision Phase

During this phase managers examine the need for a new ERP system while selecting the general information system approach that will best address the critical business challenges and improve the organizational strategy. This decision phase includes the definition of system requirements, its goals and benefits, and an analysis of the impact of adoption at a business and organizational level.

Acquisition Phase

This phase consists on the selection of a ERP product that best fits the requirements of the organization, thus minimizing the need for customization. A consulting company is also selected to help in the next phases of the ERP life-cycle especially in the implementation phase. Factors such as price, training and maintenance services are analyzed and, the contractual agreement is defined. In this phase, it is also important to make an analysis of the return on investment of the selected product.

Implementation Phase

This phase include the customization or parameterization and adaptation of the ERP package to the needs of the organization. Usually this task is made with the help of consultants who provide implementation methodologies, know-how and training.

Use and Maintenance Phase

This phase covers the personal of time where the ERP product is selected in a way that returns benefits and minimizes disruption. During this phase, one must be aware of the aspects related to functionality, usability and adequacy to the organizational and business processes. Once a system is implemented, it must be maintained, because malfunctions have to be corrected, special optimization requests have to be met, and general systems improvements have to be made.

Evolution Phase

This phase corresponds to the integration of more capabilities into the ERP system, providing new benefits, such as advanced planning and scheduling, supply-chain management, customer relationship management, workflow, and expanding the frontiers to external collaboration with other partners.

Retirement Phase

This phase corresponds to the stage when, with the appearance of new technologies or the inadequacy of the ERP system or approach to the business needs, managers decide if they will substitute the ERP software with other information system approach more adequate to the organizational needs of the moment.

Topic 6: Advantage of ERP Systems

What benefit Reliable information access

Avoid data and operations redundancy Delivery and Cycle time reduction Cost reduction Easy adaptability

How Common DBMS, Consistent and accurate data, improved reports. Modules access same data from the central database, avoids multiple data input and update operations. Minimizes retrieving and reporting delays

Time savings, improved control by enterprise-wide analysis of organizational decisions. Changes in business processes easy to adapt and restructure.

Advantage of ERP Systems

Improved scalability
Improved maintenance

Structured and modular design with "add-ons"

Vendor supported long term contract as part of the system procurement. Extended modules such as CRM and SCM Internet Commerce, Collaborative culture.

Global Outreach E-Commerce, EBusiness

Disadvantages of ERP Systems

Disadvantages

How to overcome

Time consuming
Expensive

Minimize sensitive issues, internal politics and raise general consensus.

Cost may vary from thousands of dollars to millions. Business process re-engineering cost may be extremely high. The architecture and components of the selected system should conform to the business processes, culture and strategic goals of the organization. Single vendor vs multi-vendor consideration, options for "best of breeds", long term committed support.

Conformity of the modules

Vendor dependence

Disadvantages of ERP Systems

Disadvantages

How to overcome

Feature and complexity

ERP system may have too many features and modules that the user needs to consider carefully and implement the needful only.
Look for vendor investment in R&D, long term commitment to product and services, consider Internet-enabled systems.

Scalability and global outreach

Extended ERP capability

Consider middle-ware "add-on" facilities and extended modules such as CRM and SCM.

ERP Benefits

IBM has used ERP to reduce the processing time for updating pricing data from 80 days to five minutes.
Chevron has used ERP to decrease its annual purchasing cost by 15%.

Topic 7: ERP From E-BUSINESS Perspective

E-business stands for "electronic business," which involves communications and doing business electronically through the Internet. E-business is defined as "the use of electronically enabled communication networks that allow business enterprises to transmit and receive information" (Fellenstein and Wood, 2000).

ERP and E-BUSINESS

It can significantly improve business performance by strengthening the linkages in the value chain between businesses (B2B) and consumers (B2C). Besides increasing efficiency in selling, marketing and purchasing, e-business achieves effectiveness through improved customer service, reduced costs and streamlined business processes. Furthermore, e-business creates a strategic, customer-focused business environment for shared business improvements, mutual benefits and joint rewards.

Complete E-Business Suite

Marketing Financials Order Mgt Human Resources Web Services SUPPLY Chain MFG One Database Procurement Sales

ERP And E-BUSINESS

Nantucket Nectars, a juice manufacturer with 40% growth and $70 million in annual sales revenue, sells its organic juices through 150 distributors nationwide as well as general stores and juice bars in Nantucket. By using Oracle's ERP system and e-business platform, the salespersons can track sales and promotions through the Internet, and are provided assistance and suggestions to enhance their performance. The salespersons and distributors have access to commission reports, and they can track and adjust sales orders. Through consolidating its financial, compensation, sales and depletion data into a single report, Nantucket prevents out-of-stock and partial shipments. The forecasted need for 50% more labor force to handle customer service issues in the past was eradicated by integrating ERP system with e-business (Oracle, 2000).

ERP And E-BUSINESS

By definitions and by their respective functions, traditional ERP systems take care of internal value chain (i.e., within a company) whereas e-businesses establish the value chain across the market and the industries. More and more companies construct their systems' architectures by integrating ERP systems with e-business. They use Webbased interface (corporate portals) with outside entities plus add-on modules such as CRM, SCM, etc. in the integration.

Topic 8: Are You Ready For ERP?

A good management Enough financial funds Core project team members from all functional areas in place Get the approval from the management Get feedback from employees for the plan

Metrics You Can Use to Gauge your ERP Readiness

Check the hardware configuration details Analyze the existing process Fine turn the process to be inline with those of ERD defined Prototype it and present it Refine the prototype and freeze the specifications

ERP Selection

Check whether all functional aspects of the business are duly covered.
Check whether all the business functions and procedures are fully integrated. Check whether all latest IT tends are covered. Check whether the vendor has customizing and implementing capabilities. Calculate ROI.

E-BUSINESS Pushes ERP To The Network Edge Figure 1

E-BUSINESS Pushes ERP To The Network Edge

You can't improve what you don't measure. Performance measurement is vital for the long-term success of any endeavor. In our complex world, everyone has multiple goals and mechanisms for reaching them. For example, in addition to financial performance goals, many firms place great importance on employee satisfaction and community contribution. Good performance measures are:

Relevant-- Related to the strategic and tactical goals of the company Balanced-- Balanced between short-term and long-term goals Understandable-- Easily comprehended by those it affects Objective-- Measurable without significant bias Consistent-- Used on a regular basis Actionable-- Affected by actions of employees

Topic 10: Common ERP/E-BUSINESS Platform (ORACLE & SAP)

Today, customers expect more than ever before. To meet these expectations, companies need to reach out and bring customers closer to their information systems and have them engage in product configuration, selection and Internet selfservice (Economist, 1999, p.32). Also, it is essential for the vendors to set up a compatible e-business platform for system integration. Some major ERP vendors launched their Webenabled ERP in the early part of the year 2000 to create the B2B and B2C solutions. Both Oracle and SAP set up Internet portal (hub) and use eXtensible Markup Language (XML) to manipulate data from internal ERP and push information flow across the value chain (refer to Figure 3).

SAP (SAP, 2000)

Established in Germany in 1972, SAP possesses 33% market share worldwide. With more than 20,000 employees and an increase in revenue of 60% per year, SAP is another major ERP provider in the world. SAP uses the front-office market with a number of new Webbased applications covering B2B procurement, B2C selling and B2B sellingall designed to integrate with its market-leading R/3 suite. SAP believes this will be the key to extending its franchise into ebusiness. R/3 is a client/server architecture product that uses the "best" enterprise business practices and supports immediate response to change throughout the organization on a global scale. R/3 currently contains modules for more than 1,000 business processes that may be selected from the SAP library and included within installed SAP applications, tailoring the application solution to the customer.

SAP Contains the Following Functions

End-to-end Web business processes

The XML has been used to allow the exchange of structured business documents over the Internet to provide a common standard for different applications and IT systems to communicate and exchange business data. XML provides the bridge between different systems, companies and users. It provides an easy way to put flexible end-to-end business processes in place.

SAP Contains the Following Functions

Open business document exchange over the Internet

The SAP Business Connector is based on open Internet communication standards. It uses the widely available hypertext transfer protocol (HTTP) to exchange XML-based business documents over the Internet. XML defines common business semantics to business documents such as orders, invoices, etc. With XML, the lingua franca of the Internet, business documents exchange across applications and systems are easily available.

SAP Contains the Following Functions

XML-enabled SAP solution

The SAP Business Connector makes all SAP solutions accessible via XML-based business documents. It supports all major existing interfaces provided by SAP and empowers SAP customers to instantly benefit from SAP functionality over the Internet. This makes SAP solutions an integral part of their ebusiness solution. With the availability of Business Applications Programming Interfaces (BAPIs), customers can jump-start into the Internet age with their individual solutions by using R/3 with more than 1,000 BAPIs. The SAP's Application Link Enabling (ALE) capabilities are supported. Fully cooperative business solutions now require only a widely available and cost-effective Internet connection.

SAP Contains the Following Functions

Web automation

The SAP Business Connector makes it easy to leverage the information and processes available at a company's Web site. For example, companies can use the SAP Business Connector to retrieve catalog information from a supplier's Web site and integrate the information with internal applications automatically and in real time.

Topic 11: Web Services and XML

Web services are units of application logic that provide data and services to other applications represent black box functionality that can be reused without worrying about how the service is implemented

The online store example Authentication Personalization Credit card processing Sales tax calculation Package tracking from shipping companies In house catalog connected to an internal inventory application

Web Services Generic Architecture

Web Service
Service Request

Business Facade

Business Logic

Service Response

Data Access

Listener

Data

Why Use Web Services?

Web services are powerful

Provide a simple, flexible, standards-based model that takes advantage of existing infrastructure and applications Easily assembled components with locally developed services and existing services, regardless of the platform or the development language Facilitate communication and integration between intra- and inter-company applications