INTRODUCTION TO ERP

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INTRODUCTION TO ERP
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Learning Objectives

• Provide an overview of how ERP systems help
  address issues caused by functional systems.
• Understand why business and IS students should
  learn about ERP systems
• Discuss the value ERP systems can provide
• Review issues associated with implementing ERP
  systems.
• Describe the key characteristics of ERP systems

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ERP Video

• Questions
• How does an ERP system change the way people
  work?
• Why do you think its important for top business
  managers to have a sound understanding of ERP
  systems?
• What are some of the issues associated with
  implementing an ERP system?

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Why Study ERP

• It affects most major business enterprises and
  many small and medium businesses
• 60 of very large corporations use SAP (an ERP
  vendor)
• Increasingly, smaller organizations are adopting
• Its out there, and its very likely you will work
  with one in some capacity
• It changes behavior of competitors and partners
• Competitors adopt to survive?
• Partners/Suppliers adopt to keep business

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Why Study ERP

• It enforces best practices and aids reengineering
• Best practices built in (lots of choice)
• dont iterate, obliterate
• It changes the nature of consulting firms and IS
• HUGE portion of revenue from ERP consulting
• It is challenging to implement and cost is high
• Its growth has made it the predominant software

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• How does ERP create value?
• It integrates a broad range of business functions
• It allows diverse enterprises to standardize
• It stops data redundancy and synchronization
• Data stored in one place
• One version of the truth
• It provides simultaneous access to real-time data
• It facilitates communication inside and outside
  the enterprise
• It provides a foundation for eBusiness

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Disadvantages of ERP

• ERP implementation is very difficult. There is a
  change in the way business is done. From a
  business function approach to a process approach.
• ERP systems are very expensive to implement. Can
  take years and cost 10s of millions of dollars.

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Disadvantages of ERP

• It takes time to realize the benefits of an ERP
  system.
• Forces people to change and change resistance
• Share information that was once closely guarded
  (i.e., their information).
• Make decisions they were never required to make.
• Do things they were never required to do before

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Disadvantages of ERP

• ERP systems are strategic solutions. In essence
  some companies are betting their future on a
  successful ERP implementation.
• If the implementation fails, the consequences to
  the company can be disastrous.
• Companies have gone out of business as a result
  of a failed ERP implementation effort.

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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

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Hidden Costs

• Consultants
• Staffing
• Need best and brightest from business how to
  replace them?
• Implementation team needs to stay in place
• Delayed ROI
• Post-ERP Depression
• All change and upheaval impact on
  organizations morale

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• Colgate Case

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Colgate Brief History

• William Colgate established Colgate in 1806
• Mainly a starch, soap and candle business
• Merger with Palmolive in 1928 Colgate-Palmolive-P
  eet
• Corporate name changed to Colgate-Palmolive in
  1956

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Colgate Brief History (cont)

• Continuous growth
• Today 9.9 Billion company (2003)
• Operations in more than 200 countries and
  territories
• Colgate is now recognized as one of the leading
  manufacturers of oral care, dental care,
  household surface care, fabric care and pet
  nutrition products

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Colgate

• Divergence of operating platform
• Dozens of platforms
• Low IT skills/knowledge
• No one understood all of the legacy systems
• Each CIO for each country very decentralized IS
  organization no standards or best practices in
  place
• No centralized operation e.g. 80 CIO
• Decided to implement ERP software in 1999

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Integration of Processes Some benefits
Before
Activity
After
Source Hammer
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Outcomes for Colgate

• Availability of information in real time
• Decision making made easy because of availability
  of accurate and up-to-date data
• Business process re-engineered and in some cases
  different departments consolidated into one
• Improved efficiency about 30 for the database
  applications and about 50 reduction in
  processing time

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Outcomes for Colgate Contd

• SAP handles 95 of the companys 9.9 billion
  annual sales.
• Colgate saved 225 million where as target was
  125 million.
• Datacenters shrinks to 1 (and one backup) from 75
• Inventory reduce by 10
• Facilitated move to eCommerce.

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ERP in . the Army?

• Why do you think the US army would want to
  implement an ERP system?
• What kinds of challenges would the US army face
  in implementing an ERP system?

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Whats the difference between a function and a
process?

• Business Function Related sets of specialized
  activities carried out by an organization
• For efficiency keep people who do the same
  thing together
• Often department
• Examples?
• Business Process the way that work is organized
  and coordinated in an organization to add value

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Process Oriented Application
ERP systems are composed of a series of modules
that support end-to end business processes (which
is how value is added in an organization)
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Enterprise Resource Planning (ERP) Systems

• Enterprise Resource Planning Systems are
  enterprise systems meant to integrate data and
  support many of the major functions of
  organizations.
• Traditional focus back office mostly
  isolated from customers (except sales)
• The goal of an ERP system is integrate data and
  to make the information flow dynamic and
  immediate, therefore, increasing its usefulness
  and value.

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Enterprise Resource Planning (ERP) Systems (cont)

• Clients, employees and vendors all use the same
  system
• Major functions are integrated in a single
  software system
• Replace an assortment of systems and numerous
  databases that typically existed in
  organizations.
• Integrate departments and functions across an
  organization sharing a common database
• Integrated information available in real-time.
• Data flows seamlessly no manual intervention
  and no paper

Do you see any issues with sharing data with
customers and vendors?
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ERP Supported Functions
All of these functions. One software package.
One database
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Factors in development of ERP

• Speed and power of computing
• Hardware (servers and disk) now cheap and fast
  makes ERP feasible
• Happened in the 90s.
• Increasingly complex business environment
• Organizational complexity
• Increasingly demanding customers
• Globalization
• Increased competition
• Increasingly sophisticated software needs
• Legacy systems break under the strain of.all
  of the above

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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
• Microsoft
• 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