INFO245: Introduction to Enterprise Resource Planning ERP Chapter 3: ERP Systems Background

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INFO245Introduction to Enterprise Resource
Planning (ERP)Chapter 3 ERP Systems Background
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Chapter Objectives

• What is an ERP system?
• Who are the ERP vendors?
• What are ERP partners?
• What are some sample ERP modules?
• What does it mean to talk of best of breed
• What are add-ons to ERP?
• What are ERP MAPs?
• How do ERP systems work?

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• What is an ERP system?
• Packaged software designed for client/server
• Integrate the majority of business processes
• Process the majority of business transactions
• Uses a single, enterprise-wide database
• Allows access to data on a real-time basis
• Allows integration between process and planning
• Support multiple currencies, languages, etc.
• Can be modified without programming

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• What about Add-Ons?
• Add-Ons are software packages that
• are written by third-party developers
• are written to work with specific ERP systems
• enable functionality not in the ERP system
• are encouraged and certified by the ERP vendor
• Provided by ERP Software Partners
• These partners provide complete, technically
  verified turnkey software solutions that extend
  and add value to SAP solutions. In addition,
  third-party software vendors can develop
  applications based on SAP's standard,
  release-stable interfaces. www.sap.com
• Example IBM Datastage provides the ability to
  input data into SAP R/3 database during data
  conversion.

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• ERP Evolution
• Material Requirement Planning (MRP)
• Inventory reordering tool
• Manufacturing Resource Planning (MRP II)
• Extended to managing manufacturing process
• Enterprise Resource Planning (ERP)
• Complete back office
• Web Enabled Supply Chain
• Extending the capabilities of ERP to customers,
  suppliers, distributors etc.
• SOA plays a big role here

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Supply Chain Management and Collaborative Commerce
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Industry Life Cycle Stages
ERP software industry is here
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ERP Vendors

• Oracle - www.oracle.com
• Peoplesoft - www.peoplesoft.com
• J.D. Edwards - www.jdedwards.com
• SAP - www.sap.com
• SSA Global - www.baan.com
• Others niche/specialty
• SYSPRO Small manufacturers
• Banner Universities
• Meditech Hospitals

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ERP Vendors

• Consolidation is currently taking place in the
  ERP software business
• PeopleSoft purchased ERP vendor J.D. Edwards in
  2003
• Oracle, after a long battle, acquired PeopleSoft
  in 2005
• SAP and Oracle are now the two largest ERP
  vendors
• Microsoft is challenging SAP and Oracle to sell
  ERP systems to small- and medium-sized businesses
• Other vendors

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The Current Players

• Founded 1972 in Waldorf, Germany
• Largest market share (30 - 60)
• Revenues exceed 5 Billion
• Used by approx. 60 of multinationals
• Fourth largest supplier of software trailing
  Microsoft, Oracle and Computer Associates
• Over 2.5 million users
• Over 9,000 implementations of R/3 at over 6,000
  companies

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The Current Players

• Founded 1978 in the Netherlands
• Revenues of over 750 million
• Approximately 3000 clients.
• Boeing put them in the spotlight in 94
• Now SSA Global

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The Current Players

• Founded 1977
• Second largest software provider in the world
• Known for their DBMS, not ERP
• ERP Revenues exceed 2.5 Billion
• Data warehousing
• Designed to accommodate over 1000 users
• Meshed with PeopleSoft/JD Edwards
• Also a strong player in the CRM market with
  acquisition of Siebel
• Why is this important?

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The Current Players

• Oracle acquired Peoplesoft in 2004
• Third largest ERP vendor
• Revenues exceed 1.5 Billion
• Known for its broad HR Capabilities
• Designed to accommodate between 10 - 500 users

• PeopleSoft acquired all remaining shares of J.D
  Edwards in August 2003
• ERP product OneWorld
• ERP Revenues exceed 979 million
• Has been leading supplier of AS/400 applications
• Designed for between 5 and 500 users

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• What are ERP Partners?
• ERP vendors dont implement the majority of what
  they sell
• Why not?
• SAP uses four types
• Alliance
• Platform
• Technology
• Complimentary software
• ERP provides nearly 50 of Big 5 revenue
• Accenture (Anderson Consulting)
• PriceWaterhouse Coopers (IBM)
• Deloitte Touche
• Ernst Young
• KPMG (Bearing Point)

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What is SAP?

• A series of integrated core business application
  modules for transaction processing
• A set of functions that implement best business
  practices
• Client/Server software that processes business
  transactions
• A methodology for implementing application
  software
• Industry-specific applications

From SAPs website
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R/3 Core Business Processes
Sales Distribution MaterialManagement Productio
nPlanning QualityManagement PlantMaintenance Hu
manResources
Financial Accounting Controlling Fixed
AssetManagement ProjectSystem Workflow Industry
Solutions
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SAP Industry Solutions - example
Banking
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Best-of-Breed

• Buy the best application software for
  individual functions/processes in the
  organization.
• Integrate yourself to provide same functionality
  as ERP
• Issues?

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Best-of-Breed

• Dangerous and expensive to try to piece together
  best-of-breed applications
• The more systems a company has the more break
  points exist
• Best-of-breed is fine as long you have some kind
  of backbone system
• Instead of having all apps interconnect, they
  connect to the same single backbone which
  simplifies the integration process

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• ERP MAPs
• Configuring an ERP system means making choices
  about the models, artifacts and process that will
  be used.
• Models Representation of reality e.g.
  Organization Structure
• Artifacts Electronic documents for input or
  output, lists and reports
• Processes Flexible ways to accomplish -
• Buying
• Selling
• Making
• Accounting / Reporting

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Example Organizational Structures Model
Models of reality. Example how inventory
levels can be tracked. Other
Models Products/Bill of Materials Chart of
Accounts (G/L) Clients Q what might the model
for a client look like?
Corporation
Company 2
Company 1
PurchasingOrg. 1
Sales Org. 1
Plant 2
Plant 1
Warehouse 1
Warehouse 2
Storage Bin 1
Storage Bin 2
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Example Artifacts

• Invoices
• Shipping documents
• Management reports
• ERP systems delivers a standard set
• Artifacts can be tailored to organizations
  requirements
• What might some artifacts be in banking industry
  solution?

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Example Order Management Process for a
Manufacturer
Collection
Proposal
Commit- ment
Delivery
Billing
Credit Check
Configur- ation
PROCESS ERP MODULE
Do you think this process is the same across
industries?
Sales Distribution
Sales Distribution
Sales Distribution
Materials management
Production Planning
Financials
Financials
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Example of How ERP Works

• Step 1 Brazilian retailer orders, via the
  Internet, 1,000 shoes from International Shoe Co.
  A sales rep takes the order, routes it to ERPs
  ordering module, ERP checks the retailer credit,
  price, etc. The order is approved.
• Step 2 Simultaneously ERPs inventory module
  checks the stocks and notifies the rep that half
  the order can be filled immediately from stock.
  The other half will be manufactured and delivered
  in 5 days directly from the factory in Taiwan.

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Example of How ERP Works

• Step 3 ERPs manufacturing module schedules the
  production in Taiwan and instructs the warehouse
  (in Chinese) to ship the shoes to Brazil and
  print up an invoice (in Portuguese).
• Step 4 ERPs human resources module calculates
  labor requirements. Due to a shortage, the
  personnel manager in Taiwan is instructed to get
  temporary workers.
• Step 5 ERPs material planning module notifies
  the purchasing manager about a shortage of purple
  dye. A purchase order is automatically issued.

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Example of How ERP Works

• Step 6 The customer logs on via the extranet to
  the companys sneakers division. He can see that
  500 shoes were shipped from the regional
  warehouse. This is done with ERP tracing
  capabilities.
• Step 7 Based on data from ERPs forecasting and
  financial modules, the CEO can determine both
  demand and profitability per product. The
  financial module also converts all foreign moneys
  to U.S., whenever needed

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Geneva

• ALL
• What are the major factors that drove Geneva to
  implement SAP (think about both internal and
  external factors)?
• (My) right side of class
• Do you think SAP can meet Genevas expectations?
  What expectations do think can be met? Which
  will prove difficult to meet?
• (My) left side of class
• Geneva plans to use SAP to change the culture at
  Geneva. What are the advantages and
  disadvantages of this approach to culture change?