ERP

1
ERP

• Enterprise Resource Planning
• D Lewis 10/02

2
Definitions

• ERP is a process of managing all resources and
  their use in the entire enterprise in a
  coordinated manner
• ERP is a set of integrated business applications,
  or modules which carry out common business
  functions such as general ledger, accounting, or
  order management

3
What is ERP?

• Enterprise Resource Planning
• Support business through optimizing, maintaining,
  and tracking business functions
• Broken down into business processes
• HRM - Distribution
• Financials - Manufacturing

4
What makes ERP different

• Integrated modules
• Common definitions
• Common database
• Update one module, automatically updates others

5
What makes ERP different (cont)

• ERP systems reflect a specific way of doing
  business
• Must look at your value chains, rather than
  functions

6
History of ERP

• Departmentalized Systems
• 1960s systems for each department
• MRP Systems
• 1970s integrated manufacturing
• MRPII System
• 1980s more functions included
• ERP 1990s integrated all across

7
Trends in ERP

• Use of the Internet for access
• More customized solutions
• Decision support capabilities
• Data pulled to specific application
• Linkage of multiple organizations together

8
Benefits of ERP

• Common set of data
• Help in integrating applications for decision
  making and planning
• Allow departments to talk to each other
• Easy to integrate by using processed built into
  ERP software

9
Benefits of ERP

• A way to force BPR (reengineering)
• Easy way to solve Y2K problem

10
Benefits of ERP

• On 4 dimensions
• Firm structure
• Management processes
• Technology platform
• Business capability

11
Firm structure

• New structures
• More disciplined culture
• Globally everyone uses same processes and
  terminology
• Freely flowing information

12
Management process

• Unified reporting and decision making
• Better data on performance
• Determine which products are more desirable

13
Technology platform

• Single unified all encompassing platform
• Common data, common definitions and formats

14
Business capability

• Form basis of customer driven organization
• Better meet customers needs

15
Buy or Build

• Pros buy
• Best practices from many organizations included
• Vendor must keep up to date
• Smaller staff required

16
Buy vs. Build (cont.)

• Pros build
• Complete control of features
• More support required
• Not as much product support
• May not have best practices included

17
Why purchase ERP package?

• Increasing flexibility and agility
• Business benefits (competitive agility)
• Client/server IT architecture benefits
• IT purchasing benefits
• Lower costs and higher reliability than building
  from scratch

18
Why purchase ERP package?

• Data integration
• Improving access to data across business units
• New ways of doing business
• Moving to a process orientation
• Reduction in costs
• Global capabilities
• Common processes and country specific
  capabilities

19
Why purchase ERP package?

• IT architecture cost reduction
• Reduced costs for systems operations and
  maintenance
• Most important benefit?
• Data integration

20
Difficulty in implementation

• Very difficult
• Extremely costly and time intensive
• Typical over 10,000,000 and over a year to
  implement

21
Common Pitfalls

• Do not adequately benchmark current state
• Did not plan for major transformation
• Did not have executive sponsorship
• Did not adequately map out goals and objectives
• Highly customized systems to look like old MRP
  systems

22
Leading vendors

• SAP
• Baan
• J.D. Edwards
• Oracle
• Peoplesoft

23
Which way to go?

• One vendor
• Easy integration
• Standardization of processes
• Best of breed approach
• Easy to adapt to own needs
• Decreased reliance on one vendor

24
How to implement

• You will need an outside consultant
• Potential benefits
• Better information for
• Strategic decision making
• Greater efficiency
• Greater profit
• Potential for growth

25
Unintended consequences of ERP

• Organizational changes
• Creating new work relationships
• Share information
• Make new types of decisions
• Reactions to changes
• Resistance
• Confusion
• Errors

26
Unintended consequences

• 50 of implementations fail
• Managers underestimate the need for change
  management
• Managers focus on potential benefit, rather than
  on impact on employees
• Emotional fallout after employees given greater
  responsibility

27
Implementation Issues

• Company may implement only certain modules of
  entire ERP system

28
Readings

• evaluation of ERP software
• Getting Increased Value from ERP Systems