Ch 14 ERP Systems

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Copyright 2011 The McGrawCopyright 2011 The McGraw--Hill Companies, All Rights ReservedHill Companies, All Rights Reserved

Chapter 14

Enterprise Resource PlanningSystems


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Learning Objectives

1. Understand the scope of enterprise resource

planning (ERP) systems.

2. Recognize the client/server structure of ERP

systems.3. Relate the value of integrated information in a

complex firm.

4. Identify the challenges associated with

implementing ERP systems.


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Enterprise Resource Planning (ERP)

y Enterprise resource planning (ERP) system:computer system that links all the areas of thebusiness

Manufacturing knows about new orders as soon asthey are entered

Sales knows the exact status of a customer order

Purchasing knows what manufacturing needs to

the minute The accounting system is updated as all the relevant transactions

occur


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Major Developers of Enterprise

Resource Planning Software


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SAP

y SAP AG is the world leader in providing ERP software

Flagship product is R/3

y Software designed to operate in a three-tier

client/server configurationy Cost is a high-speed network of database servers

y Application consists of software modules

y Applications are fully integrated and share data

y Firms wishing to use SAP may need to change their

practices to those implemented by SAP


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Three-Tier Client/Server

Configuration


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SAP Application Modules

y Software is built around a set of application modules:

Financials

Human capital management Operations

Corporate services

DuetMicrosoft Office integration

y Can be used either alone or in combination


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Financials

y Financial application provides functionality to runthe financial accounts for the company

y The application is divided into three areas:1. Financial and management accounting module:

includes general ledger, accounts payable, accountsreceivable, capital investments and closing the books

2. Corporate governance: internal control and auditfunctions needed to adhere to corporate governancestandards, documentation of internal controls, and audits

that comply with current requirements3. Financial supply chain management: handles the

money flow related to supply chain activities


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Human Capital Management

y This application contain the full set of capabilities needed tomanage, schedule, pay, and hire the people who make acompany run

y It includes:

Payroll

Benefits administration

Application data administration

Personnel development planning

Workforce planning

Schedule and shift planning

Time management

Travel expense accounting


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Human Capital ManagementContinued

y The talent management functions are designed to

help align employee goals with corporate goals by

maximizing the impact of training

y Workforce deployment applications are to aid in

deploying the right people with the right skills to

positions in the firm

y Managing project teams, monitoring the progress

of projects, and tracking time are supported


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Operations

y Materials management covers all tasks within the

supply chain

It also includes inventory and warehouse

management

y Plant maintenance supports the activities

associated with planning and performing repairs

and preventive maintenance

y Quality management plans and implementsprocedures for inspection and quality assurance

and is built around the ISO 9001 specifications.


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Operations Continued

y Production planning and control supports both

discrete and process manufacturing processes

y Sales order management, configuration

management, distribution export control, and

shipping and transportation management are

handled as well


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Corporate ServicesCorporate Services

y The corporate services applications are designedto manage both centralized and decentralizedservices

y This includes managing the firms real estateportfolio, including:

Property acquisition and disposal

Property management

Building operations and maintenance

Investment reporting

y Another major aspect of the corporate services istravel management


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Implementing ERP Systems

y SAP has strong competition

Oracle

i2 Technologies

PeopleSoft

y Implementation of ERP is costly

Cost of the software typically one-third or less of

the total cost

y ERP implementation does not always work out


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Reasons to Implement ERP

y Desire to standardize and improve processes

y

To improve systems integration

y Improve information quality

Ch 14 ERP Systems

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