Business Process and ERP New

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3 Chapter

Information

Systems in the

Enterprise



Business Processes and Information Systems

Business processes:• Is a set of logically related activities for accomplishing a

specific business results.

• Manner in which work is organized, coordinated, andfocused to produce a valuable product or service

• Unique ways to coordinate work, information, andknowledge

• Ways in which management chooses to coordinate work

• Concrete work flows of material, information, andknowledge—sets of activities

• Performance of a firm depends on how well the businessprocesses are designed and coordinated



Examples of Business Processes

Manufacturing and production:

• Assembling product, checking quality, producingbills of materials

Sales and marketing:

• Identifying customers, creating customerawareness, selling

Table 2.6



Finance & accounting:

• Paying creditors, creating financial statements,managing cash accounts

Human resources: • Hiring employees, evaluating performance,

enrolling employees in benefits plans

Examples of Business Processes (Continued)

Table 2.6 continued



Functional area Business process

Manu& Pro Assembling the product,checking for quality,producing bills of materials

Sales & Mktg Identifying the customers,making customers aware ofthe product

Fin and accounting Paying creditors, creatingfinancial statements

Human resources Hiring employees, evaluatingemployees job performance




Cross-Functional Business Processes:

• cross boundary between sales, marketing,manufacturing, and research and development

• Group employees from different functionalspecialties to complete a piece of work

Example: Order Fulfillment Process



The Order Fulfillment Process

Figure 2-12




• Purpose of IS is to enable highly efficient

business processes• Information systems help organizations

achieve great efficiencies by automating partsof processes

• IS also contributes to completely rethinkingprocesses.



HOW INFORMATION TECHNOLOGYENHANCES BUSINESS PROCESSES:EFFICIENCY AND TRANSFORMATION

Information systems enhance business

processes in two ways:•Increasing the efficiency of existingprocesses.

•Enabling entirely new processes that arecapable of transforming the business.



• Analyzing the customer request for serviceprocess ,how many steps involved ,howmany people involved, how much it costs.



Traditional “Silo” View of Information Systems

Within the business:

• There are functions, each having its uses ofinformation systems

Outside the organization’s boundaries:

• There are customers and vendors

Functions tend to work in isolation



Traditional View of Systems

Figure 2-14



Systems for Enterprise-Wide Process Integration

Enterprise applications:

• Designed to support organization-wide processcoordination and integration



Consist of :

• Enterprise systems• Supply chain management systems

• Customer relationship management systems

• Knowledge management systems

All these enterprise applications integrates arelated set of functions and businessprocesses to enhance the performance of the

organization as a whole.

Systems for Enterprise-Wide Process Integration(Continued)



Information Islands

B



Enterprise Application Architecture

Figure 2-13

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:Introduction to Enterprise Applications



Enterprise Systems

• Enterprise systems, also known as enterpriseresource planning (ERP) systems, provide a

single information system for organization-widecoordination and integration of key businessprocesses.

• Information that was previously fragmented indifferent systems can seamlessly flow throughoutthe firm so that it can be shared by businessprocesses in manufacturing, accounting, human

resources, and other areas.



Enterprise Systems

Figure 2-15




What Are Enterprise Systems?

ENTERPRISE SYSTEMS

Enterprise System Architecture

Figure 11-1

Management Information Systems



How Enterprise Systems Work

• Enterprise Resource Planning (ERP) systems

• Interdependent software modules with a common

central database that support basic internal business

processes for finance and accounting, humanresources, manufacturing and production, and sales

and marketing

Enterprise Systems:



• Enables data to be used by multiple functions and

business processes for precise organizationalcoordination and control.

• Serves as a cross-functional enterprise backbone thatintegrates & automates many internal business processes

and information systems

• Helps companies gain the efficiency, agility, &responsiveness needed to succeed today

How Enterprise Systems Work (Continued)

Enterprise Systems: (Continued)



• Gives a company an integrated real-time view of itscore business processes

• ERP software suites typically consist of integrated

modules of… ManufacturingDistributionSales

AccountingHuman Resource Management



REASONS FOR THE GROWTHOF ERP MARKET

• To enable improved business performance

– Cycle time reduction

– Inventory reduction

– Order fulfillment improvement

• To support business growth requirements

– New product/product lines, new customers

– Global requirements including multiplelanguages and currencies



Contd…

• To provide flexible, integrated, real timedecision support

• To take advantage of untapped mid-market



Selection of ERP

• ERP procurement & successfulimplementation are very costly affairs

• Implementation involves risk, risk is due tochanges, benefits are not immediate

• Investment ?

• Is a strategic decision- long term decision,difficult to get reversed



ERP SELECTION

• Vendor Evaluation

– Factors

1. Business strength of the vendor

2. Product share in total business of the vendor

3. R & D investment in the product

4. Future plans of the vendor

5. Market reach & resource strength of the vendor

ERP Market and



ERP Market and Vendor ERP Market andvendors

ERP Market and



Top 10 ERP vendors by 2006 total

Revenue Share:

ERP Market andvendors



SAPFounded in 1972, SAP is the largest European software

enterprise, headquartered in Walldorf, Germany. SAP is anacronym for Systems, Applications And Products in DataProcessing. It is the largest ERP solution software providerin terms of revenue. SAP products focus on ERP systems.

Its main product is SAP R/3. R stands for real-time dataprocessing, and the number 3 relates to the three-tierapplication architecture of its database, application serverand client. There are over 91,500 SAP installations at morethan 28,000 companies. Over 12 million people in more

than 120 countries use SAP products.

ERP Market and



Example of ERP modules (SAP) ERP Market andvendors

ERP Market and



BAAN

• Baan was a vendor of popular enterprise resource planning (ERP)software that is now owned by Infor Global Solutions

• The Baan Corporation was created by Jan Baan in 1978 in Barneveld,Netherlands, to provide financial and administrative consulting services

• Upon acquiring the Baan software, SSA renamed Baan as SSA ERP

• In May 2006, SSA was acquired by Infor Global Solutions of Atlanta.

• Baan is still one of the best ERP product for discrete manufacturing

industries, especially for Make to Order and Engineering to order market.Nowadays, still thousands of manufacturers are running on Baan software,including Boeing, Ferrari


ERP Market and



The Sage Group

• The Sage Group plc is a UK based supplier ofaccounting, payroll, CRM and businessmanagement software (including manufacturing andconstruction-specific ranges) as well as relatedservices to small and medium-sized enterprises

• The company is focusing on Vertical market

software and has recently purchased severalindustry-focused groups.


ERP Market and



Microsoft Dynamics

Is a line of software for business made by Microsoft• Microsoft Dynamics AX is Microsoft’s flagship enterprise resource planning software

system.

• Microsoft Retail Management System: (RMS) is an electronic point-of-sale (EPOS)software solution for retailers.

• Microsoft Dynamics GP is a mid-market business accounting software package thatruns on top of a Microsoft SQL Server database.

• Microsoft Dynamics NAV: The product is part of the Microsoft Dynamics family, andintended to assist with finance, manufacturing, customer relationship management,supply chains, analytics and electronic commerce for small and medium-sizedenterprises.

• Microsoft Dynamics SL : Microsoft Dynamics SL provides businesses functionality infinance, project accounting, manufacturing, field service, supply chains, analytics, andelectronic commerce and is primarily targeted for Small and Medium-sized Enterprises.


ERP Market and



QAD

• QAD produces Enterprise Resource Planningsoftware. The software is targeted to 6 mainindustries: Automotive, Consumer Products,Electronics, Food and Beverage, IndustrialProducts, and Life Sciences.

• QAD Enterprise Application provides single-site

companies and multinational organizations with afully integrated, core enterprise solution.


ERP Market and



ERP Market and VendorsERP Market andvendors



Indian ERP Market

03rd Aug, 2007 Company Revenue (Rs crore)

SAP 415 Oracle 195 Tally 98 Microsoft 59 Ramco 54 3i Infotech 37 SSA Global (Infor) 29 QAD 18 Intentia 8 Cognos 5 Others 138 Total 1,056

Source: DQ estimates CyberMedia



Contd…

• Technology evaluation – Client server architecture & its implementation

– two tier or three tier

– Front end tools & back end data basedmanagement system tools for the data,process & presentation management

– Interface mechanism; data transfer, real time

access – Use of case tools, screen generators, report

writers & screen painter



Contd…

• Technology evaluation (contd…)

– Support system technologies like bar coding,EDI, imaging, communication & network

– Downloading to PC based package, MS-office, etc

– Hardware - Software configuration

management



Difficulty in selecting ERP

• Selection is difficult by an internal, betterto approach the external consultants

• ERP package may be cheaper, but maynot fulfill the requirement

• Some take a lot of time in implementation

• Validated information on the vendor

• Objective of the organization may not beclear



ERP IMPLEMENTATION

• Typical costs ofimplementing a newERP System

15%

15%

43%

12%

15%

Software

Training &ChangeManagement

Re-engineering

Hardware

Data conversions



Methodologies

• The Big Bang

• Modular Implementation

• Process-Oriented Implementation

ERP implementation issues



ERP implementation issues

Technical and Business issues:Implementation effort will be bigger than ever talked about or even

imagined. We are yet to hear from an organization who have implementedahead of schedule and under budget.

Users need to become more computer literate.

The word "Enterprise" in ERP means that whatever happens in one area hasa ripple effect in other areas. Understanding the implications of actions of one area, on other areas of the company, is not something that happensovernight.

Data integrity becomes critical.

The computer cannot make human judgments.



Corporate CultureMost managers who have been through an ERP

implementation, tells, is the biggest impact is on"Corporate Culture". It is alwaysunderestimated and never overestimated.

Corporate Culture is a combination of twothings.The type of people who are employed by acompany. Their personal values, skills, habitsetc.

The way the organization works. The focus,decision making process, attitude to staff,stability, etc.



Change Management

Change Management is

about setting expectationsthat lessen the pain of

change. People involved ina change expect to go fromA to B. Perhaps where theyare actually going is to C.Change Management isabout getting them used tothe idea that C is the realdestination.



Other experience:

A survey of organizations that have implemented ERP's was carried outrecently. It identified “9 Common issues for ERP implementation".

• Change Management and Training

• To BPR or not to BPR

• Planning

• Estimating IT skills

• Project Management



Other experience: Continued..

• Technology Trials

• Executive Buy-in

• Estimating Resources

• Software Evaluation



Critical success factors for

ERP implementation•Status of legacy systems

•Impact of new ERP system on their business processes

•Whether all the business processes are well defined and could be

delivered thro’ ERP system

•Whether to go for a complete integrated system or to implementany one ERP module for the time being

•Duration of the ERP project and expected service from the ERPsystem to the customers.

•Level of cooperation from the top management throughout theproject.

•Resource availability

•Project scheduling and Change management.



Benefits of Enterprise Systems

• Help to unify the firm’s structure and

organization: One organization

• Management: Firm wide knowledge-basedmanagement processes

• Technology: Unified platform

• Business: More efficient operations & customer-driven business processes




Benefits (conti)•Quality and efficiency---Helps improve the quality andefficiency of customer service, production, & distributionby creating a framework for integrating and improving

internal business processes•Decreased Costs---Reductions in transactionprocessing costs and hardware, software, and ITsupport staff•Decision support---Provides cross-functionalinformation on business performance to assistmanagers in making better decisions•Enterprise agility----Results in more flexibleorganizational structures, managerial responsibilities,

and work roles



BENEFITS OF ERP

• Business integration

• Flexibility

• Better Analysis & planning capabilities

• Use of latest technology• Better management of resources reducing the

cost

• Customer satisfaction increase due to shorter

delivery cycle• Business operations transparency between

business partners & customers



Contd…

• Intelligent ERP download the decision making atlower level, releasing the burden on the middlemanagement

• Due to the support technologies like EDI, E-mail,office automation, paperless office is a newpossibility as communication is faster andsystems get connected directly



Contd…

• The ERP scope can be enlarged throughthe Internet/Intranet access, making theERP sensitive to the latest events in the

business, market & technology



Challenges of Enterprise Systems

• Difficult to build: Require fundamental changes inthe way the business operates

• Technology: Require complex pieces of softwareand large investments of time, money, andexpertise




Causes of ERP failures•Underestimating the complexity of the planning,development, and training required•Failure to involve affected employees in the planning

& development phases and change managementprograms•Trying to do too much, too fast

•Insufficient training

•Believing everything the software vendors and/orconsultants say



Potential risks

• Difficult to implement

• Inflexible

• Where to buy

• What to buy

• How to implement

Hidd t



Hidden cost

• Training

• Integration and testing

• Data conversion

• Data analysis

• Implementation



•Colgate took 1 to 5 days to acquirean order,2 days to process the order

Now, order acquisition and processing

takes 4 hrs•Distribution planning and pickingused to take 4 days-------now it is 14

hrs•Order to delivery time has been cut inhalf



•On time deliveries used to occur only 91.5percent of time and order deliveredcorrectly 97.5 percent of the time------now97.5 and 99% respectively

•Inventories have dropped by one-third

•Total delivered cost per case has beenreduced nearly10 percent



• Network of organizations and business processes for

procuring raw materials, transforming into products,

and distributing them to customers

A cross-functional inter enterprise system that uses ITto help support & manage the links between some ofcompany’s key business processes and those of its

suppliers, customers, & business partners.

• Materials, information, and payments flow through

the supply chain in both directions.

Goal is to create a fast, efficient, & low-cost networkof business relationships.

The Supply Chain

Supply chain:



Supply Chain Management (SCM)

• Close linkage and coordination of activities involvedin buying, making, and moving a product

• Integrates supplier, manufacturer, distributorcustomer

• Reduces time, redundant effort, and inventory costs

• Network of organizations and business processes




• Helps in procurement of materials, transformation of rawmaterials into intermediate and finished products

• Helps in distribution of the finished products to customers• Includes reverse logistics - returned items flow in the

reverse direction from the buyer back to the seller

• Coordination of business processes to speed information,

product, and fund flows up and down a supply chain toreduce time, redundant effort, and inventory costs

Supply Chain Management (SCM)




A Supply Chain

SUPPLY CHAIN MANAGEMENT SYSTEMS

Figure 11-3



• Plan: Balancing demand and supply to meet sourcing,

production, and delivery requirements

• Source: Procurement of goods and services neededto create a product or service

Supply Chain Processes

SCOR (Chain Operations Reference Model)-crossindustry process reference model for SCM.

•Defines a common set of SC processes to help

companies better understand SCM issues and set goalsfor SC improvement.• identifies five major supply chain processes:




• Make: Processes that transform a product into a

finished state

• Deliver: Processes to manage order transportation and

distribution

• Return: Processes associated with product returns and

post delivery customer support

Supply Chain Processes (Continued)




• Planning and control of all factors that have an

impact on the supply chain

Logistics:

Supply Chain Processes (Continued)



Key Supply Chain Management Processes


Figure 11-4

BUSINESS PROCESS IN SUPPLY



BUSINESS PROCESS IN SUPPLYCHAIN LIFE CYCLE



Role of SCM




• Scheduling system for minimizing inventory by having

components arrive exactly at the moment they are

needed and finished goods shipped as soon as they

leave the assembly line

Just-in-time strategy :

Information and Supply Chain Management

Inaccurate or untimely information causes inefficiencies in

supply chain, such as shortages, excessive inventory




• Distortion of information about the demand for a

product as it passes from one entity to the next across

the supply chain

Bullwhip effect:

Information and Supply Chain Management (Continued)



The Bullwhip Effect


Figure 11-5



Information from Supply Chain ManagementSystems helps firms:

• Decide when and what to produce, store,

and move

• Rapidly communicate orders

• Track the status of orders

• Check inventory availability and monitorinventory levels




Information from Supply Chain ManagementSystems helps firms: (Continued)

• Decide when and what to produce ,store and move

• Reduce inventory, transportation, andwarehousing costs

• Track shipments

• Plan production based on actual customer

demand• Rapidly communicate changes in product design




Supply chain management systems: Automate flow ofinformation between company and supply chain partners


Supply Chain Management Applications

Supply chain planning systems: Generate demandforecasts for a product (demand planning) and help

develop sourcing and manufacturing plans for that product




Supply chain execution systems:

• Manage the flow of products through distribution

centers and warehouses to ensure that products are

delivered to the right locations in the most efficient

manner

Supply Chain Management Applications (Continued)




Metrics for measuring supply chain performance:

Supply Chain Performance Measurement

• Fill rate (the ability to fill orders by the due date)

• Average time from order to delivery

• The number of days of supply in inventory

• Forecast accuracy

• The cycle time for sourcing and making a product



Supply Chain Management and the InternetIntranets and Extranets for Supply Chain Management


Figure 11-6




Internet-based supply chain management applications:

• Provide standard set of tools

• Facilitate global supply chains

• Reduce costs

• Enable efficient customer response

• Allow concurrent supply chains




Push-based model:

• Production master schedules based on forecasts of

demand for products, and products are “pushed” tocustomers

Pull-based model:

• Supply chain driven by actual customer orders or

purchases



Push- versus Pull-Based Supply Chain Models


Figure 11-7



The Future Internet-Driven Supply Chain


Figure 11-8




Business Value of Supply Chain Management Systems

• Improved customer service and responsiveness

• Cost reduction

• Cash utilization



• Benefits – Can provide faster, more accurate order

processing, reductions in inventory levels,

quicker time to market, lower transaction andmaterials costs, & strategic relationships withsuppliers

Ch ll



Challenges

PROBLEMS



PROBLEMS

• A lack of proper demand planning knowledge

• Inaccurate or overoptimistic demand forecast

• Lack of adequate collaboration among

marketing, production & inventory managementdepartments within a company & with suppliers,distributors & others

• Even the software of SCM is immature,

incomplete & hard to implement

(Trends) STAGES IN THE USE OF



(Trends) STAGES IN THE USE OFSCM



Customer Relationship Management and PartnerRelationship Management

Customer Relationship Management (CRM):

• Business and technology discipline for managing

customer relationships to optimize revenue,

profitability, customer satisfaction, and customerretention

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS



Customer Relationship Management (CRM)

• Focuses on coordinating all of the businessprocess surrounding the firms interactions withits customers in sales, marketing and service to

optimize revenue, customer satisfaction andcustomer retention.

• Manages all ways used by firms to deal withexisting and potential new customers

• Business and technology discipline• Uses information system to coordinate entire

business processes of a firm




Customer Relationship Management (CRM)(Continued)

• Provides end- to- end customer care

• Provides a unified view of customer across thecompany

• Consolidates customer data from multiplesources and provides analytical tools foranswering questions like what is the value of aparticular customer to the firm over his or her

lifetime• Helps by integrating the processes and

consolidating customer information from multipleinformation channels-telephone ,e-mail etc



Customer Relationship Management Applications

CRM systems:

• Capture and integrate customer data from allover the organization

• Consolidate and analyze the data

• Distribute results to various systems andcustomer touch points across the enterprise




Touch point:

• A method of interaction with a customer, such as

telephone, e-mail, customer service desk,

conventional mail, Web site, or retail store


Customer Relationship Management Applications(Continued)



Customer Relationship Management (CRM) Software

• Can range from niche tools to large-scale enterprise

applications

• Can link to other major enterprise applications, such

as supply chain management




o Sales Force Automation (SFA)

o Customer service

o Marketing


• Typically include capabilities for

Customer Relationship Management (CRM) Software(Continued)



Figure 11-9

CRM Software Capabilities




Customer Loyalty Management Process Map

Figure 11-10




Operational and Analytical CRM

Operational CRM:

• Customer-facing applications, such as sales

force automation, call center and customerservice support, and marketing automation

• Examples: Campaign management, e-marketing,

account and contact management, lead

management, telemarketing, teleselling, e-

selling, field sales





Analytical CRM:

• Applications that analyze customer data

generated by operational CRM applications to

provide information for improving business

performance

• Examples: Develop customer segmentation

strategies and customer profiles; analyzecustomer or product profitability; identify trends

in sales length cycle; analyze leads generated

and conversion rates




Analytical CRM Data Warehouse

Figure 11-11



Business Value of Customer RelationshipManagement Systems

• Increased customer satisfaction

• More effective marketing and reduced directmarketing costs

• Lower costs for customer acquisition andretention




Reduce churn rate:

• Increased revenue from identifying most profitable

customers and segments for marketing, cross-

selling, up-selling


• Number of customers who stop using or purchasing

products or services from a company

Business Value of Customer RelationshipManagement Systems (Continued)



The Importance of CRM Performance Measurement

Metrics for CRM may include:


Successful CRM implementations require that financial

and operation goals, and metric for evaluation, are clearly

defined at outset of project

• Cost per lead

• Cost per sale



Customer Relationship Management (CRM)

Figure 2-17




Knowledge Management Systems

• Collects relevant knowledge and make it available

wherever and whenever it is needed

• Support business processes and management

decisions

• Also link the firm to external sources of

knowledge

• Support processes for acquiring, storing,distributing, and applying knowledge for creating

new knowledge and integrating it into the

organization



• Support processes for acquiring ,storing,

distributing and applying knowledge, as well as

processes for creating new knowledge and

integrating it into the organisation.

• Include enterprise wide systems for managing

and distributing documents ,graphics and other

digital graphics for creating corporate knowledgedirectories of employees with special areas of

expertise, office systems for distributing

knowledge and information.



• KM applications are expert systems that codify

the knowledge of experts in information systems

that can be used by other members of theorganisation and tools for knowledge discovery

that recognise patterns and important

relationships in large pools of data.



MANAGEMENT OPPORTUNITIES, CHALLENGES, ANDSOLUTIONS

Business Process and ERP New

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