INFORMATION SYSTEMS @ X INFO102: Management Information Systems INTRODUCTION TO ERP.

INFORMATION SYSTEMS @ X

INFO102: Management Information Systems

INTRODUCTION TO ERPINTRODUCTION TO ERP



Learning Objectives

1.1. Provide an overview of how ERP systems help address issues caused Provide an overview of how ERP systems help address issues caused by functional systems. by functional systems.

2.2. Understand why business and IS students should learn about ERP Understand why business and IS students should learn about ERP systemssystems

3.3. Discuss the value ERP systems can provide Discuss the value ERP systems can provide 4.4. Review issues associated with implementing ERP systems. Review issues associated with implementing ERP systems. 5.5. Describe the key characteristics of ERP systemsDescribe the key characteristics of ERP systems



ERP Video

Questions:Questions: How does an ERP system change the way people work?How does an ERP system change the way people work? Why do you think its important for top business managers to Why do you think its important for top business managers to

have a sound understanding of ERP systems?have a sound understanding of ERP systems? What are some of the issues associated with implementing What are some of the issues associated with implementing

an ERP system?an ERP system?



It affects most major business enterprises and many It affects most major business enterprises and many small and medium businessessmall and medium businesses

60% + of very large corporations use SAP (an ERP vendor)60% + of very large corporations use SAP (an ERP vendor) Increasingly, smaller organizations are adoptingIncreasingly, smaller organizations are adopting Its out there, and its very likely you will work with one in some Its out there, and its very likely you will work with one in some

capacitycapacity

It changes behavior of competitors and partnersIt changes behavior of competitors and partners Competitors: adopt to survive?Competitors: adopt to survive? Partners/Suppliers: adopt to keep businessPartners/Suppliers: adopt to keep business

Why Study ERP



It enforces best practices and aids reengineeringIt enforces best practices and aids reengineering Best practices built in (lots of choice)Best practices built in (lots of choice) don’t iterate, obliteratedon’t iterate, obliterate

It changes the nature of consulting firms and ISIt changes the nature of consulting firms and IS HUGE portion of revenue from ERP consultingHUGE portion of revenue from ERP consulting

It is challenging to implement and cost is highIt is challenging to implement and cost is high Its growth has made it the predominant softwareIts growth has made it the predominant software

Why Study ERP



How does ERP create value?How does ERP create value?

It integrates a broad range of business functionsIt integrates a broad range of business functions It allows diverse enterprises to standardizeIt allows diverse enterprises to standardize It stops data redundancy and synchronization It stops data redundancy and synchronization

Data stored in one placeData stored in one place ““One version of the truth”One version of the truth”

It provides simultaneous access to real-time dataIt provides simultaneous access to real-time data It facilitates communication inside and outside the It facilitates communication inside and outside the

enterpriseenterprise It provides a foundation for eBusinessIt provides a foundation for eBusiness



Disadvantages of ERP

ERP implementation is very difficult. There is a change in ERP implementation is very difficult. There is a change in the way business is done. From a business function the way business is done. From a business function approach to a process approach.approach to a process approach.

ERP systems are very expensive to implement. Can take ERP systems are very expensive to implement. Can take years and cost 10’s of millions of dollars.years and cost 10’s of millions of dollars.




It takes time to realize the benefits of an ERP system.It takes time to realize the benefits of an ERP system. Forces people to change andForces people to change and change = resistance change = resistance::

Share information that was once closely guarded Share information that was once closely guarded (i.e., “their information”).(i.e., “their information”).

Make decisions they were never required to make.Make decisions they were never required to make. Do things they were never required to do beforeDo things they were never required to do before




ERP systems are strategic solutions. In essence some ERP systems are strategic solutions. In essence some companies are betting their future on a successful ERP companies are betting their future on a successful ERP implementation. implementation.

If the implementation fails, the consequences to the If the implementation fails, the consequences to the company can be disastrous.company can be disastrous.

Companies have gone out of business as a result of a Companies have gone out of business as a result of a failed ERP implementation effort.failed ERP implementation effort.



“Hidden” Costs

Training Critical, but effort and cost is often underestimated

Integration and Testing Links between modules and between ERP software and

external systems Customization

Expensive, complex, dangerous Data Conversion



“Hidden” Costs

ConsultantsConsultants Staffing Staffing

Need ‘best and brightest’ from business – how to replace Need ‘best and brightest’ from business – how to replace them?them?

Implementation team needs to stay in placeImplementation team needs to stay in place Delayed ROIDelayed ROI ‘‘Post-ERP Depression’ Post-ERP Depression’

All change and upheaval – impact on organization’s moraleAll change and upheaval – impact on organization’s morale



Colgate CaseColgate Case



Colgate Brief History William Colgate established “Colgate” in 1806William Colgate established “Colgate” in 1806 Mainly a starch, soap and candle business Mainly a starch, soap and candle business Merger with Palmolive in 1928; Colgate-Palmolive-PeetMerger with Palmolive in 1928; Colgate-Palmolive-Peet Corporate name changed to Colgate-Palmolive in 1956Corporate name changed to Colgate-Palmolive in 1956



Colgate Brief History (cont) Continuous growthContinuous growth Today $9.9 Billion company (2003)Today $9.9 Billion company (2003) Operations in more than 200 countries and territoriesOperations in more than 200 countries and territories Colgate is now recognized as one of the leading manufacturers Colgate is now recognized as one of the leading manufacturers

of oral care, dental care, household surface care, fabric care of oral care, dental care, household surface care, fabric care and pet nutrition productsand pet nutrition products



Colgate

Divergence of operating platformDivergence of operating platform Dozens of platformsDozens of platforms

Low IT skills/knowledgeLow IT skills/knowledge No one understood all of the legacy systemsNo one understood all of the legacy systems

Each CIO for each country – very decentralized IS Each CIO for each country – very decentralized IS organization – no standards or best practices in placeorganization – no standards or best practices in place

No centralized operation e.g. 80 CIONo centralized operation e.g. 80 CIO Decided to implement ERP software in 1999Decided to implement ERP software in 1999



Integration of Processes – Some benefits

Enter pricing dataEnter pricing data 5-80 days5-80 days 5 min.5 min.Customer credit checkCustomer credit check 15-20 min.15-20 min. automaticautomatic

Enter customer orderEnter customer order 30 min.30 min. 5 min.5 min.

Customer billing inquiryCustomer billing inquiry 15-20 min.15-20 min. real-timereal-time

Ship evaluation unitShip evaluation unit 3-30 days3-30 days 2 days2 days

Ship replacement partShip replacement part 3-44 days3-44 days 2 days2 days

Credit returned itemCredit returned item 1-5 months1-5 months 5 days5 days

Commit date for deliveryCommit date for delivery 2 hrs.-3 wks.2 hrs.-3 wks. real-timereal-time

Before AfterActivity

Source: Hammer



Outcomes for Colgate

Availability of information in real timeAvailability of information in real time Decision making made easy because of availability of Decision making made easy because of availability of

accurate and up-to-date dataaccurate and up-to-date data Business process re-engineered and in some cases Business process re-engineered and in some cases

different departments consolidated into onedifferent departments consolidated into one Improved efficiency: about 30% for the database Improved efficiency: about 30% for the database

applications and about 50% reduction in processing timeapplications and about 50% reduction in processing time



Outcomes for Colgate Cont’d

SAP handles 95% of the company’s $9.9 billion annual SAP handles 95% of the company’s $9.9 billion annual sales.sales.

Colgate saved $225 million where as target was $125 Colgate saved $225 million where as target was $125 million.million.

Datacenters shrinks to 1 (and one backup) from 75Datacenters shrinks to 1 (and one backup) from 75 Inventory reduce by 10%Inventory reduce by 10% Facilitated move to eCommerce.Facilitated move to eCommerce.



ERP in …. the Army?

Why do you think the US army would want to implement an Why do you think the US army would want to implement an ERP system? ERP system?

What kinds of challenges would the US army face in What kinds of challenges would the US army face in implementing an ERP system?implementing an ERP system?



Business FunctionBusiness Function:: Related sets of specialized activities Related sets of specialized activities carried out by an organization carried out by an organization

For efficiency – keep people who do the same thing togetherFor efficiency – keep people who do the same thing together Often = departmentOften = department Examples?Examples?

Business ProcessBusiness Process:: the way that work is organized and the way that work is organized and coordinated in an organization to add value coordinated in an organization to add value

What’s the difference between a function and a process?



Process Oriented Application

ERP systems are composed of a series of ‘modules’ that ERP systems are composed of a series of ‘modules’ that support end-to end business processes (which is how support end-to end business processes (which is how

value is added in an organization)value is added in an organization)

Process-oriented Application: Order Processing

Marketing/Sales Accounting Manufacturing

ERP ‘module’

Integrated Database



Enterprise Resource Planning (ERP) Systems Enterprise Resource Planning Systems are enterprise systems Enterprise Resource Planning Systems are enterprise systems

meant to meant to integrate dataintegrate data and support many of the and support many of the major major functionsfunctions of organizations. of organizations.

Traditional focus: “back office” – mostly isolated from Traditional focus: “back office” – mostly isolated from customers (except sales)customers (except sales)

The goal of an ERP system is integrate data and to make the The goal of an ERP system is integrate data and to make the information flow dynamic and immediate, therefore, information flow dynamic and immediate, therefore, increasing its usefulness and value.increasing its usefulness and value.



Enterprise Resource Planning (ERP) Systems (cont)

Clients, employees and vendors all use the same systemClients, employees and vendors all use the same system Major functions are integrated in a single software systemMajor functions are integrated in a single software system Replace an assortment of systems and numerous databases Replace an assortment of systems and numerous databases

that typically existed in organizations. that typically existed in organizations. Integrate departments and functions across an organization Integrate departments and functions across an organization

sharing a sharing a common databasecommon database IntegratedIntegrated information available in information available in real-timereal-time. . Data flows Data flows seamlessly – seamlessly – no manual intervention and no no manual intervention and no

paperpaper

Do you see any issues with sharing data with customers and Do you see any issues with sharing data with customers and vendors? vendors?



ERP Supported Functions

Financial Human Resources Operations & Logistics Sales & Marketing

Accts Receivable Time Accounting Inventory Order Processing

Asset Account Payroll MRP Pricing

Cash Forecast Personnel Plan Plant Maintenance Sales Reporting

Cost Accounting Travel Expense Production Planning Sales Planning

General Ledger Benefits Mgmt Manufacturing Catalogue Mgmt

Profit Analysis Purchasing

Standard Costing Quality Mgmt.

Shipping

All of these functions…. One software package…. All of these functions…. One software package…. One databaseOne database



Speed and power of computingSpeed and power of computing Hardware (servers and disk) now cheap and fast – makes ERP Hardware (servers and disk) now cheap and fast – makes ERP

feasiblefeasible Happened in the 90s.Happened in the 90s.

Increasingly complex business environmentIncreasingly complex business environment Organizational complexityOrganizational complexity Increasingly demanding customersIncreasingly demanding customers GlobalizationGlobalization Increased competition Increased competition

Increasingly sophisticated software needsIncreasingly sophisticated software needs ‘‘Legacy’ systems break under the strain of….all of the aboveLegacy’ systems break under the strain of….all of the above

Factors in development of ERPFactors in development of ERP



ERP Vendors

Oracle - Oracle - www.oracle.comwww.oracle.com Peoplesoft - Peoplesoft - www.peoplesoft.comwww.peoplesoft.com

> J.D. Edwards - J.D. Edwards - www.jdedwards.comwww.jdedwards.com SAP - SAP - www.sap.comwww.sap.com SSA Global - SSA Global - www.baan.comwww.baan.com MicrosoftMicrosoft Others – niche/specialtyOthers – niche/specialty

SYSPRO: Small manufacturersSYSPRO: Small manufacturers Banner: UniversitiesBanner: Universities Meditech: HospitalsMeditech: Hospitals



ERP Vendors

Consolidation is currently taking place in the ERP software Consolidation is currently taking place in the ERP software businessbusiness

PeopleSoft purchased ERP vendor J.D. Edwards in 2003PeopleSoft purchased ERP vendor J.D. Edwards in 2003 Oracle, after a long battle, acquired PeopleSoft in 2005Oracle, after a long battle, acquired PeopleSoft in 2005 SAP and Oracle are now the two largest ERP vendorsSAP and Oracle are now the two largest ERP vendors Microsoft is challenging SAP and Oracle to sell ERP Microsoft is challenging SAP and Oracle to sell ERP

systems to small- and medium-sized businessessystems to small- and medium-sized businesses Other vendors …Other vendors …

INFORMATION SYSTEMS @ X INFO102: Management Information Systems INTRODUCTION TO ERP.

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