CONCEPT OF ENTERPRISE SYSTEMS TEXT BOOK: ENTERPRISE RESOURCE P L A N N I N G B Y R A J E S H R AY AY
LEARNING LEARNI NG OBJ OBJECT ECTIVE IVES S Presentations A. To understand about Enterprise system and the Class Discussion conc concep eptt of Busi Busine ness ss Proc Proces esss Case Analysis B. To be aware about its benefits and issues in the organiza organizatio tions ns in today’s Global Global scenar scenarios ios KEY CON CONTEN TENT T: Concepts of Enterprise Systems and Business Processes a. Evol Evolut utio ion n and and Eme Emergi rging ng Tren Trends ds b. Bene Benefi fits ts and and Con Conce cern rnss c. Func Functi tion onal al Sil Silos os vs. vs. Integr Integrati ation on Con Conce cept pt
Essential Readings: a. Chapte Chapterr 1 and Chap Chapter ter 3 from from Enter Enterpris prise e Reso Resourc urce e Planning by Ray of McGraw Hill
Case: Opening with UPS Corp. Article : Successful ERP Implementation the First Time
SITUATION
BUSINESS NEEDS
Global Operations
Heterogeneous Solutions
Different
Business Processes
locations
Different countries Different languages Different Central
time zones
vs. distributed
BUSINESS NEEDS CONTD.
Global Operations
Heterogeneous Solutions
Different
Business Processes
applications
Different technologies Different vendors Point-to-point
integration
Custom-made
solutions
BUSINESS NEEDS CONTD.
Global Operations
Heterogeneous Solutions
Business Processes
Anatomy of a Traditional (Non-Integrated) Architecture
Interface Order Entry
Interface
Inventory Mgmt.
Interface Billing
Interface Others
Finance
ERP (ENTERPRISE RESOURCE PLANNING) HISTORY:
ERP is an integrated system that allows information to enter at a single point in the process and updates a single shared database for all functions that directly or indirectly depend on this information. ERP attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments particular need.
1990’S : BACK -OFFICE INTEGRATION Accounting & Finance
Human Resources
Deliver
Supplier
Customer
Make
Plan Sell
Buy
MRP
MRP II
ERP
9
2000’S : THE EXTENDED ENTERPRISE SCM
Accounting & Finance
Human Resources
CRM
Deliver
Supplier
Customer
Make
Plan Sell
Buy
MRP
MRP II
ERP
10
Service
WHAT’S NEXT? SCM
Accounting & Finance
Human Resources
CRM
Deliver
Supplier
Customer
Make ERP II
Plan Design
Buy
MRP
Sell
MRP II
ERP
11
Service
ENTERPRISE RESOURCE PLANNING-II
Before ERP Information
After ERP
Stand-alone systems
Integrated systems
Lack of coordination among
Supports coordination across
business functions
business functions
Databases
Non-integrated & inconsistent data
Integrated data
Maintenance
costly to maintain separate legacy
Uniform maintenance
systems Coordination
systems Interfaces Information
Difficult to manage interfaces
Common interfaces across
between systems
systems
Redundant & inconsistent
Consistent real-time information
information System
May not be state of the art
architecture
Relies on a client-server model / SOA
Processes
Incompatible processes
Consistent business processes
Applications
Disparate applications
Single applications
BEFORE AND AFTER ERP : BUSINESS STANDPOINT
Before ERP
With ERP
Cycle time
Costly bottlenecks
Time and cost reduction
Transactions
Multiple transactions use multiple
Faster transactions, suing common
processing
data files
data.
Financial
Increased cost of excess inventory
Improves operational performance
Fragmented processes
Re-engineering around a business
management Business processes
model that conforms with “best practices”
Productivity Supply chain
Lack of responsiveness to customers Improvements in financial management and suppliers
and customer service
Lack of integration
Linkages with suppliers and customers
Lack of tactical information for
Allows cross-functional access to the
effective monitoring and control of
same data for planning and control.
management Information
organizational resources Communications Lack of effective communications
Facilitates organizational communications
BUSINESS BENEFITS OF ERP ERP Performance Outcomes
Quickened information
Examples
response time
Responses to customer billing inquiries occurred in real-time as opposed to 15-20 minute response time at IBM Storage Products Company (Jensen and Johnson, 1999)
Increased interaction
across the enterprise
Simplification of processes at Boeing (Jensen and Johnson, 1999)
Growth in interfacility coordination at Owens Corning (Palaniswamy and Frank, 2000)
Real-time access to data across the organization at Diebold (Palaniswamy and Frank, 2000)
Improved order
management/ order cycle
90% reduction in cycle time for quotations from 20 to 2 days at Fijitsu (Jensen and Johnson, 1999)
Faster, more accurate order processing at Valenite (Palaniswamy and Frank, 2000)
Time for checking credit upon receiving an order was reduced from 15-20 minutes to instantaneous at IBM Storage Products Company (Jensen and Johnson, 1999)
Decreased financial close
50% reduction in financial closing time from 10 days to 5 days
BUSINESS BENEFITS OF ERP ERP Performance Outcomes
Improved on-time delivery
Examples
On-time product delivery rate increased to 90% at Earthgrains (Bingi, Sharma, and Godla, 1999)
Delivery performance improved from 80% on-time to more than 90% on-time at Par Industries (Bingi, Sharma, and Godla, 1999)
Reduced direct operating
costs Lowered inventory levels
Operating margins improved from 2.4% to 3.9% at Earthgrains (Bingi, Sharma, and Godla, 1999)
Inventory levels were reduced significantly at Owens Corning (Palaniswamy and Frank, 2000)
Lower levels of inventory at Valenite (Palaniswamy and Frank, 2000)
Work-in process inventory dropped almost 60% at Par Industries (Bingi, Sharma, and Godla, 1999)
Improved interaction with customers
Lead times to customers were reduced from 6 weeks to 2 weeks at Par Industries (Bingi, Sharma, and Godla, 1999)
Tangible Benefits with ERP . According to a survey of 62 Fortune 500 companies by Benchmarking Partners, Inc., for Deloitte Consulting, the most important tangible benefit realized after the ERP system went live was inventory reduction (Fryer, 1999). The survey results in Table 10 showed these tangible benefits: Tangible Benefits Inventory reduction Personnel reduction Productivity improvement Order management improvement Financial close cycle reduction IT cost reduction Procurement cost reduction Cash management improvement Revenue / profit increase Transportation / logistics cost reduction Maintenance reduction
% of Companies
32 27 26 20 19 14 12 11 11 9 7 6
On-line delivery improvement Source : Fryer, Bronwyn, “The ROI Challenge,” CFO,
Intangible Benefits with ERP Tangible Benefits Information / visibility New / improved processes Customer responsiveness Integration Standardization Flexibility Globalization Y2K Business performance Supply/demand chain
% of Companies
55 24 22 13 12 9 9 8 7 5
Source : Fryer, Bronwyn, “The ROI Challenge,” CFO, September, 1999, p.90.
TECHNOLOGY FACTORS TO CONSIDER IN SELECTING AN ERP SYSTEM
Technology Factors
Questions
What are the start-up and recurring costs? What consulting assistance is offered (time, Installation cost)? User interfaces What interfaces are supported? Upgradability Computing environment What is the frequency of upgrades? Personnel requirements What is the computing environment? What expertise is needed for design and implementation (business analysts, consultants)? Cost of technology
HOW SHOULD WE IMPLEMENT ERP SYSTEMS
Obtain the right mix of people, processes and technology!!
ERP CHALLENGES Managing People Change Team work Relocation Top Management Support
Implementation Challenges Scope Budget Timeline Process Redesign Support/Maintenance Challenges Unrealistic expectation Right people Complex Interface Vendors
Up gradations Managing transition Benefits Realization
CAUSES OF FAILURES OF ERP
Underestimation and Incorrect expectations
•
Failure to involve affected employees in planning and development phases
•
Poor IT Infrastructure
•
Poor Knowledge transfer
•
Change Management
•
Failure to do the data conversion and testing
•
Inability to accurately map the business processes
•
Finally it’s a mix of
People, Process and Technology
COMMON MYTHS ERP means more WORK and PROCEDURES ERP will makes Employee's JOBLESS ERP is just for the DECISION-MAKERS ERP is just for MANUFACTURING ORGANIZATION ERP package will take care of EVERYTHING One ERP Package will suit EVERYBODY
EMERGING TRENDS CRM
is the first and the foremost priority
Cloud
computing
Increasing Mobile More
focus on Business Intelligence
ERP
ERP choices, more ERP decisions
Data is
the new competitive advantage
Security
moves beyond the perimeter
Consumer
quality interfaces: Consumers spend tons of time using mobile apps
that are beautifully and intuitively designed. People want the same from enterprise apps.
TO DO Research and learn about the implementation of ERP. Use trade publications and on-line library databases (e.g., ABI Inform, ProQuest, First Search, Wilson Select Plus, available through your library) to conduct a search for articles. a. Find a success story of ERP implementation. What factors contributed to the success of this implementation? b. Find a story of problems encountered with an ERP implementation. What factors contributed to the encountered obstacles?
