Introduction to ERP systems
Introduction to Enterprise Resource Planning (ERP)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
1
Introduction to ERP systems
Objective of this session
•
•
•
•
•
What is ERP ?
How ERP can help company to improve performance?
Functional Areas and Business Processes of Business
ERP solutions in detail
ERP implementation
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
2
Introduction to ERP systems
What is Enterprise Resource Planning (ERP) ?
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
3
Introduction to ERP systems
Definition of ERP
“ Software solution that addresses the enterprise needs taking the
process view of an organization to meet the organizational goals
tightly integrating all functions of an enterprise”
(Source: erpfans.com)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
4
Introduction to ERP systems
In other words…
An ERP system is a packaged business software that allows a
company to:
• Automate and integrate the majority of its business processes
• Share common data and practices across the entire enterprise
• Produce and access information in a “real-time” environment
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
5
Introduction to ERP systems
What’s the difference?
Conventional IT Architecture
Interfaces
PPC
SD
FI/CO
DB
DB
DB
Different Databases
19-Mar-05 rev.
ERP IT Architecture
SD
PPC
FI/CO
Single
DB
Shared, Integrated Database
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
6
Introduction to ERP systems
How can ERP improve a company‘s business
performance ?
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
7
Introduction to ERP systems
There are three major reasons why companies
undertake ERP
• To integrate financial data
Common problem: Finance Department has its own set of
revenue numbers, Sales has another version, and the different
business units may each have their own versions of how much
they contributed to revenues
• To standardize manufacturing processes
Common problem: Multiple business units across the company
using different methods and computer systems
• To standardize HR information
Common problem: Tracking of employee time and
communicating with them about benefits and services
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
8
Introduction to ERP systems
ERP enables optimization of business process
Sales Order
Inventory
Management
Customer
Support
Sales
19-Mar-05 rev.
Inventory
Distribution
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
Production
9
Introduction to ERP systems
ERP is designed to solve the fragmentation of
information in large organizations
• Reduces storing redundant data
• Avoids re-keying and reformatting data from one system for use
in another
• Reduces updating and debugging obsolete software code
• Improves communication links between systems to automate
data transfer
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
10
Introduction to ERP systems
Other benefits of ERP
•
•
•
•
•
•
Has multi-currencies feature - excellent for global corporations
Streamlines a company’s business processes
Direct access to real-time operating information
Help Reduce Operating cost
Help Optimizing customer support
Improve abilities for strategic decision making
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
11
Introduction to ERP systems
Functional Areas and Business Processes of
(a very small) Business
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
12
Introduction to ERP systems
Lemonindo
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
13
Introduction to ERP systems
Lemonindo: Marketing and Sales
• Developing products
• Determining pricing
• Promoting products
• Taking customer orders
• Sales Forecast
• “Charge” purchases and credit balance
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
14
Introduction to ERP systems
Lemonindo: Production and Materials Management
• Making the Lemonade according to standard receipt
• Buying Raw Material
• Coordination with Sales Forecast
• Calculate estimated cost
• Record actual cost
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
15
Introduction to ERP systems
Lemonindo: Accounting and Finance
• Record of all transactions
• Monitor cash flow
• Analyze Profitability
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
16
Introduction to ERP systems
Lemonindo: Human Resources
• Recruit new employees
• Train and evaluate employees
• Compensate employees
• Evaluate HR environment
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
17
Introduction to ERP systems
Functional Areas: Summary
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
18
Introduction to ERP systems
Marketing and Sales
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
19
Introduction to ERP systems
Production and Materials Management
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
20
Introduction to ERP systems
Accounting and Finance
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
21
Introduction to ERP systems
Human Resources
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
22
Introduction to ERP systems
ERP solutions in detail
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
23
Introduction to ERP systems
“ERP is not a software, it is a way of doing business”
ERP solutions need to cover the following aspects:
• Business Functions
What are the business processes of the ERP
• Information Technology
What kind of IT Architecture is necessary to support this
• Organization (Implementation and Support)
How needs the company and/or ERP software be customized
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
24
Introduction to ERP systems
Information Technology
Hardware:
• Mainframe Computer
• Client/Server Technology
– Database Server
– Application Server (Scalable)
– PC as client
Software:
• Operating System + Supporting Tools
• Relational Database
• Application Server (Container)
• Data and Program Logic
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
25
Introduction to ERP systems
ERP Software Requirements
• Flexibility
User oriented, easy to adopt to specific requirements
• Modular and Open System
Modular platform that allows to implement only the required
functionality
• Comprehensive
Suitable for a wide range of industries
• Beyond the company
Not limited to the organizational boundary
• Best business practice
collection of best business practice scenarios
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
26
Introduction to ERP systems
Major ERP vendors
•
•
•
•
•
•
•
•
•
•
19-Mar-05 rev.
SAP
Oracle
(BAAN)
(JD-Edwards)
(PeopleSoft)
IFS
proALPHA
(Marcam Solution) infor
Intentia
Microsoft (Axapta)
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
27
Introduction to ERP systems
FI
SD
Financial
Accounting
Sales &
Distribution
MM
PP
Materials
Mgmt
Production
Planning
QM
Quality
Mgmt
PM
Controlling
R/3
ERP
Business Functions
SAP R/3
Plant
Maintenance
WF
HR
Human
Resources
19-Mar-05 rev.
CO
IS
AM
Fixed Assets
Mgmt
PS
Project
System
Workflow
Industry
Solutions
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
28
Introduction to ERP systems
proALPHA Presentation
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
29
Introduction to ERP systems
proALPHA Demo
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
30
Introduction to ERP systems
ERP Implementation
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
31
Introduction to ERP systems
ERP is not a software installation effort, rather, it is
"a massive, multi-dimensional, complex business
change effort!"
(Source: Dr. Michael Hammer)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
32
Introduction to ERP systems
Implementation and Support
Implementation of ERP consists of three major parts:
• Business Process Reengineering (BPR)
Optimize the way your company is doing business
• Customization and Modification
Configure and/or modify the ERP software and IT systems to fit to your
companies specific requirements
• Organizational Changes
Change the organization, structure, and role of the enterprise
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
33
Introduction to ERP systems
Company’s Experience with ERP
• Unsuccessful
– FoxMeyer Drug -> bankruptcy
– Mobil Europe -> abandon after
spending $$$$$$
– Dell Computer -> ERP does not fit
its decentralized management
– Applied Materials -> overwhelmed
by organization changes
– Dow Chemical -> after 7 years,
change to client-server version
19-Mar-05 rev.
• Successful
– Autodesk -> ships 98% within 24
hrs (vs. 2 weeks)
– IBM’s Storage Systems Division ->
re-prices all its products in 5
minutes ( vs. 5 days), ships
replacement parts in 3 days (vs.
22 days), completed credit check
in 3 seconds (vs. 20 minutes)
– Fujitsu Microelectronics reduced
cycle time for filing orders to one
day (vs. 18); and close it financial
books in 4 days (vs. 8 days)
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
34
Introduction to ERP systems
Typical Performance of organizations implementing ERP
Design
19-Mar-05 rev.
Implementation
Stabilization
Continuous
Improvement
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
Transformation
35
Introduction to ERP systems
Stage 1 - Design
• Business Process and Organization:
– Fast implementation: change organization to follow
software
– Full implementation: change software to optimize
existing business processes
• Implementation Methodology:
– Big Bang vs. Phased Approach
• Select divisions, business units, departments which shall
implement ERP
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
36
Introduction to ERP systems
Stage 2 - Implementation
Drop of performance because:
•
•
•
•
•
ERP technical problems
Bad master data (Garbage Out, Garbage In approach)
Lack in end-user training
Organizational changes
Inadequate understanding of ERP software’s business
processes
“ This ERP package is a dinosaur that should have been killed
million years ago!” (Frustrated IT Manager of Multinational Corp.)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
37
Introduction to ERP systems
Stage 3 - Stabilization
Back to pre-implementation performance
• Analyzing bottlenecks and improve performance
• Understanding of ERP software
• Typically it takes from 4 – 12 months to “get back” to the
starting point
“I’m an IT professional for more than 20 years, but using this
ERP package is a different world.”
(Frustrated IT Manager getting some hope)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
38
Introduction to ERP systems
Stage 4 – Continuous Improvement
Generating benefits from ERP implementation
• Generating benefits from optimized operations
• Adding functionality and integrate other business units
• continuously redesigning processes and organizational
structures to optimize result
“If you understand how this ERP package works, it is not too
bad at all!”
(The same IT Manager)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
39
Introduction to ERP systems
Stage 5 – Transformation
Creating unknown opportunities from ERP
• redefining managerial decision making processes
• leveraging organizational visibility for agility
• unknown opportunities for strategic planning
“This ERP package is a great piece of code. How could I work
without a Software like this for the last 20 years?”
(The same, happy IT Manager)
19-Mar-05 rev.
Markus A. Straub / Introduction to Enterprise Resource Planning (ERP)
40