ERP Design and Implementation Intro to ERP and SAP

ERP Design and ImplementationERP Design and Implementation

Intro to ERP and SAPIntro to ERP and SAP08/23/200608/23/2006

IST 346 - Sundar Srinivasan, FS 2006

SM&IS Movie NightSM&IS Movie Night

SM&IS is showing the movie “Office Space” out on the lawn

in front of Fulton Hall on THURSDAY, AUGUST 24 at 8:30 pm. Refreshments, T-

shirts and the movie ARE ALL FREE. Please come and kick off the 06-07 year with some

laughs.

You’re Invited


OverviewOverview

Roots of ERPRoots of ERP Future of ERPFuture of ERP SAP Products and CapabilitiesSAP Products and Capabilities SAP R/3 ModulesSAP R/3 Modules What, Who and How of ImplementationWhat, Who and How of Implementation Advantages and disadvantages of SAPAdvantages and disadvantages of SAP


Roots of ERP

The concept of ERP has been around The concept of ERP has been around since 1960’ssince 1960’s

It has its beginning in Materials It has its beginning in Materials Requirements Planning (MRP), and this Requirements Planning (MRP), and this later evolved into Manufacturing Resource later evolved into Manufacturing Resource Planning (MRP II)Planning (MRP II)


Past - MRP Primary business systems installed in Primary business systems installed in

manufacturing companies manufacturing companies Introduced in the 1970’s Introduced in the 1970’s Computerized approach to planning and Computerized approach to planning and

obtaining the required materials for obtaining the required materials for manufacturing / productionmanufacturing / production

Uses mainframes as the main source Uses mainframes as the main source for input and processing.for input and processing.


MRP IssuesMRP Issues

Lead Time Lead Time Aggregating demand Aggregating demand Multiple locations – distances not Multiple locations – distances not

accounted foraccounted for CapacityCapacity


Past - MRP II 1980s1980s MRP + Personnel + Financial planningMRP + Personnel + Financial planning

Address operational planning in units, Address operational planning in units, financial planning in dollars, and has a financial planning in dollars, and has a simulation capability to answer "what-if" simulation capability to answer "what-if" questions questions

Issues - lead times to be fixed, the Issues - lead times to be fixed, the capacity to be infinite, the batch sizing capacity to be infinite, the batch sizing conceptconcept


What is Enterprise What is Enterprise Resource Planning (ERP)?Resource Planning (ERP)?

ERP (Koch, 2002) The term enterprise resource planning (ERP) was coined by Gartner Group in the 1990’s.

Enterprise resource planning (ERP) software places its focus on integrating an organizations departments (i.e., finance, HR, warehousing, etc.) and functions onto a single integrated computer system that aims to serve all those different departmental needs.


What is ERPWhat is ERP

Integration of Business ProcessesIntegration of Business Processes Group of processes, applications and technologyGroup of processes, applications and technology

Network and Systems InfrastructureNetwork and Systems Infrastructure DatabasesDatabases Applications to support business processes like Applications to support business processes like

Manufacturing (Make), Procurement (Buy), Sales Manufacturing (Make), Procurement (Buy), Sales (Sell), Accounting (Track), Human Resources, Payroll(Sell), Accounting (Track), Human Resources, Payroll

MiddlewareMiddleware


ERP System Characteristics

Standardized processes Reduces costs of production and inventory Improves customer service Materials management Resource planning


Integrated Enterprise Architecture

Integrated database used by organizational departments for…

Financial Data

Human Resources Data

Manufacturing and Logistics Data

What Goes into an ERP System?


ROI for an ERP System

Reduce operating costs Generate more accurate demand

forecasts Speed production cycles Enhance customer service


Order Fulfillment – Before ERPOrder Fulfillment – Before ERP


Order Fulfillment – After ERPOrder Fulfillment – After ERP


Functional EvolutionFunctional Evolution


Future - ERP IIFuture - ERP II

ERP: Within the ERP: Within the boundaries of the boundaries of the enterpriseenterprise

ERP II: An application ERP II: An application and deployment and deployment strategy to integrate all strategy to integrate all things enterprise centric things enterprise centric (Gartner, 2001)(Gartner, 2001)

CallCenter

ERP

Technical systems

PLM

Market Analysis

Trading

SCM

Document Mgmt

e-Sales

E-Procurement


ERP solution providersERP solution providers

CompanyCompany Traditional StrengthTraditional Strength Upcoming changesUpcoming changes

1.1.Logistics, Supply Chain Logistics, Supply Chain Management, Sales and Management, Sales and DistributionDistribution

Web Services, Integrated Web Services, Integrated environment, NetWeaver environment, NetWeaver platformplatform

2.2. HRHRFinancials, Web Financials, Web Services, Small Business Services, Small Business productsproducts

3.3. Databases, FinancialsDatabases, Financials Merger with PeopleSoftMerger with PeopleSoft

4.4. CRMCRM N/AN/A

SMB Market, .Net platformSMB Market, .Net platform N/AN/A

Supply Chain ManagementSupply Chain Management N/AN/A


AMR Research Article on ERP MarketAMR Research Article on ERP Market


ERP Vendors Ranked by Growth ERP Vendors Ranked by Growth (Worldwide)(Worldwide)


Gartner Research on ERP Gartner Research on ERP MarketMarket

The enterprise resource planning market will grow 7.7 percent The enterprise resource planning market will grow 7.7 percent worldwide and the supply chain management market will grow 6.8 worldwide and the supply chain management market will grow 6.8 percent worldwide through 2009.percent worldwide through 2009.- Nov 11, 2005- Nov 11, 2005

In 2005, total ERP applications grew 5.2 percent annually as the In 2005, total ERP applications grew 5.2 percent annually as the market deals with mergers, on-demand and technology advances. market deals with mergers, on-demand and technology advances. Financial applications and Europe were the largest segments with Financial applications and Europe were the largest segments with 42 percent and 44 percent market shares, respectively.42 percent and 44 percent market shares, respectively.- June 22, 2006- June 22, 2006

Asia/Pacific is the fastest-growing region in the forecast period, with Asia/Pacific is the fastest-growing region in the forecast period, with a compound annual growth rate of 9.2 percent from 2005 to 2010. a compound annual growth rate of 9.2 percent from 2005 to 2010. New license revenue for ERP software will reach $721 million by New license revenue for ERP software will reach $721 million by 2010.2010.- April 20, 2006- April 20, 2006

Among consulting and solution implementation services, there are Among consulting and solution implementation services, there are many areas in which certain skills, competencies and expertise are many areas in which certain skills, competencies and expertise are becoming increasingly difficult to find. becoming increasingly difficult to find. - June 15, 2006- June 15, 2006


Birth of SAP Until 1972 ERP was just a concept that Until 1972 ERP was just a concept that

companies had to integrate all companies had to integrate all departments and functions to increase departments and functions to increase revenues and strengthen the businessrevenues and strengthen the business

In 1972, 5 IBM managers set out to start In 1972, 5 IBM managers set out to start what is today known as SAPwhat is today known as SAP

SAP was the first to develop and SAP was the first to develop and implement ERP specific software and implement ERP specific software and ApplicationsApplications


SAP: a corporate overviewSAP: a corporate overview

SAP: SAP: SSysteme, ysteme, AAnwendungen und nwendungen und PProdukte (in rodukte (in der Datenverarbeitung).der Datenverarbeitung).

Fun factsFun facts Founded in 1972 by five IBM engineersFounded in 1972 by five IBM engineers Third largest software vendor in the world, behind Third largest software vendor in the world, behind

Microsoft and Oracle respectively. Microsoft and Oracle respectively. 22000 customers in 120 countries22000 customers in 120 countries

95% of the Fortune 1000 companies use SAP worldwide95% of the Fortune 1000 companies use SAP worldwide 8 of the top ten largest US corporations use SAP8 of the top ten largest US corporations use SAP

55% market share (July 2004) in the business 55% market share (July 2004) in the business software market compared to 51% in 2003. software market compared to 51% in 2003.


Financial InformationFinancial Information

Two Corporate EntitiesTwo Corporate Entities SAP AG (AktienGesselschaft)SAP AG (AktienGesselschaft)

German Headquarters, based in Waldorf, Germany.German Headquarters, based in Waldorf, Germany. SAP America Inc.SAP America Inc.

American Headquarters, based in Newtown Square, PaAmerican Headquarters, based in Newtown Square, Pa

Ticker symbol: NYSE: SAP, German: SAPTicker symbol: NYSE: SAP, German: SAP 2003 Sales: $8,831.3 million, 13.4% growth from 2003 Sales: $8,831.3 million, 13.4% growth from

20022002 2003 Net Income: $1,354.1 million, 153.5% 2003 Net Income: $1,354.1 million, 153.5%

growth from 2002growth from 2002


SAP Business SuiteSAP Business Suite

(Product Life-Cycle Management)

(Supply Chain Management)

(Customer Relationship

Management)

(Supplier Relationship

Management)

(Application Infrastructure)

Note: mySAP ERP is also called R/3 and was called R/2


SAP Product OfferingSAP Product Offering

mySAP.com

mySAP All-in-One

mySAP Business One

IncreasingBusiness Size

Full functionality

Full functionality, pre-configured, single database

Necessary functionality up to 250 users


SAP Products FeaturesSAP Products Features

World-wide usage World-wide usage Designed to satisfy the information needs Designed to satisfy the information needs

for all business sizes (international to for all business sizes (international to local)local) Multi-lingualMulti-lingual Multi-currencyMulti-currency

Designed to satisfy the information needs Designed to satisfy the information needs for all industries (industry solutions)for all industries (industry solutions)


SAP Products FeaturesSAP Products Features

Enables a company to link it’s business Enables a company to link it’s business processesprocesses

Ties together disparate business functions Ties together disparate business functions (integrated business solution)(integrated business solution)

Helps the organization run smoothlyHelps the organization run smoothly Real-time environmentReal-time environment Scalable and flexibleScalable and flexible


SAP R/3 ModulesSAP R/3 Modules

44,000 world-wide installations

Open System

Client/Server Architecture

Integrated Solution

Multi-national

ComprehensiveFunctionality


R/3 ModulesR/3 Modules

FinancialsFinancials Human ResourcesHuman Resources LogisticsLogistics


Financial (FI)Financial (FI)

Complete picture of accountingComplete picture of accounting Extensive reporting facilitiesExtensive reporting facilities Suitable for international corporationsSuitable for international corporations Supports multiple currencies, languagesSupports multiple currencies, languages


FI ModulesFI Modules

Financial Accounting – externalFinancial Accounting – external Controlling – cost structures, internalControlling – cost structures, internal Enterprise Controlling – monitors critical Enterprise Controlling – monitors critical

success factorssuccess factors Investment Management – plan and Investment Management – plan and

manage capital investment projectsmanage capital investment projects Treasury – Cash managementTreasury – Cash management


Human Resources (HR)Human Resources (HR)

Includes all processes for efficient Includes all processes for efficient management of the organizationmanagement of the organization

Country-specific moduleCountry-specific module Includes different transactions, procedures for Includes different transactions, procedures for

different countriesdifferent countries


LogisticsLogistics

Most extensive moduleMost extensive module Manage all applications in the supply Manage all applications in the supply

chainchain Contain comprehensive business Contain comprehensive business

processes for manufacturingprocesses for manufacturing Seamless integrationSeamless integration


Relational DatabaseRelational Database

Tables: Defines and links thousands of Tables: Defines and links thousands of tables of informationtables of information

AdvantagesAdvantages Consistent and accurate dataConsistent and accurate data Common definitions for termsCommon definitions for terms Shared, but restricted usage (e.g., profiles)Shared, but restricted usage (e.g., profiles) Eliminates data redundancyEliminates data redundancy


ArchitectureArchitecture Central relational database (e.g., Oracle Central relational database (e.g., Oracle

and many others) and many others) Client/Server—three-tiered Client/Server—three-tiered ERP Component—Oriented towards ERP Component—Oriented towards

common identifiable business modules common identifiable business modules (PP, MM, SD, FI, CO, HR)(PP, MM, SD, FI, CO, HR)


What Does it InvolveWhat Does it Involve

Database serverDatabase server Application serverApplication server Presentation serverPresentation server 24,000 tables in R/3 Enterprise24,000 tables in R/3 Enterprise

47,000 in ECC 6.047,000 in ECC 6.0 12,000 separate relations12,000 separate relations

22,000 in ECC 6.022,000 in ECC 6.0


Who is InvolvedWho is Involved

Consultants – installation, configuration, Consultants – installation, configuration, trainingtraining

Individual employeesIndividual employees In-house implementation teamsIn-house implementation teams Super usersSuper users SAP and in-house support teamsSAP and in-house support teams Hosting CentersHosting Centers


How Long Does it TakeHow Long Does it Take

Large organizations spend 2-3 years Large organizations spend 2-3 years implementingimplementing

Value SAP approach allows basic Value SAP approach allows basic implementation in 6-9 monthsimplementation in 6-9 months

Smaller organizations have implemented Smaller organizations have implemented in 3-4 monthsin 3-4 months

To implementTo implement TrainingTraining Prepare for changePrepare for change


Advantages of SAP R/3Advantages of SAP R/3

IntegrationIntegration Business Process Re-EngineeringBusiness Process Re-Engineering Non-redundant dataNon-redundant data Automatic international conversionsAutomatic international conversions Complete audit trailComplete audit trail Compliance with Sarbanes-OxleyCompliance with Sarbanes-Oxley


Advantages (contd.)Advantages (contd.)

Open systemOpen system Integrated developmentIntegrated development Sophisticated management and Sophisticated management and

monitoring capabilitiesmonitoring capabilities Workflow capabilitiesWorkflow capabilities


Disadvantages of R/3Disadvantages of R/3

ExpensiveExpensive ComplexComplex Demands highly trained staffDemands highly trained staff Very lengthy implementation timesVery lengthy implementation times Inter-module functions least understood by Inter-module functions least understood by

businessbusiness Internal conflict in organizationsInternal conflict in organizations


Research PaperResearch Paper

Write a paper discussing the Write a paper discussing the Product development historyProduct development history technology path adopted by Oracle and SAP technology path adopted by Oracle and SAP

for the future development of their respective for the future development of their respective ERP product suites. Are they different? ERP product suites. Are they different? Discuss the pros and cons, if any.Discuss the pros and cons, if any.

Paper details will be posted on blackboardPaper details will be posted on blackboard Submissions via digital drop box in Submissions via digital drop box in

blackboardblackboard

ERP Design and Implementation Intro to ERP and SAP

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