ERP
Unit I
Introduction
Introduction
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Overview of enterprise systems
Evolution
Risks and benefits
Fundamental Technology
Issues-planning design & implementation of
cross functional integrated ERP systems
Enterprise : Overview
Enterprise :
- Group of people
- Common goal
- Resources
Video Case : Stonewall Kitchen
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Flexible & Customizable
Eliminating waste costs
Driving growth
Greater productivity
Multi-channel retailing
Traditional Approach
- Grouped based on function.
- Every department have their
own goals and objectives.
- Department function in
isolation.
- Every dept have their own
systems of data collection and
analysis.
Enterprise Approach
- Entire organisation considered
as a system.
- All department are subsystems.
- Integrates information system
Transparency & information
access
Automating business
process and functions
ERP Myths
• ERP means More Work and Procedures
• ERP will make many employees redundant and
jobless
• ERP is the sole responsibility of the management
• ERP is just for the managers/decision makers
• ERP is just for manufacturing organization
• ERP is just for the ERP implementation team
• ERP slows down the organization
• ERP is just to impress customers
• ERP package will take care of everything
• One ERP package will suit everybody
• ERP is very expensive
Evolution of ERP
1960s
Inventory Management & Control
1970s
MRP I – Scheduling production process
1980s
MRP II – Coordinating manufacturing process
1990s
ERP
Risks of ERP
I People Issues
• -Change Management
• -Internal Staff Adequacy
• -Project Team
• -Training
• -Employee Re-location and
Re-training
• -Staffing (includes turnover)
• -Top Management Support
• -Consultants
• -Discipline
• -Resistance to change
IV Implementation Issues
• -Project size
• -Lengthy implementation time
• -High Initial investment
• -Unreasonable Deadlines
• -Insufficient funding
• -Interface
• -Organizational Politics
• -Scope Creep
• -Unexpected Gaps
• -Configuration difficulties
Risks of ERP contd.,
III Technological Risks
• -Software Functionality
• -Technological Obsolescence
• -Application Portfolio
Management
• -Enhancement and Upgrades
V Operation and
Maintenance Issues
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• II Process Risks
• -Program Management
• -Business Process
Reengineering
• -Stage Transition
• -Benefit Realization
ERP Benefits
• Information Integration
• Increased flexibility
• Reduction of lead time
• Reduced Quality costs
• On-time shipment
• Better analysis and planning
• Reduction in cycle time
• Improved resource utilization
capabilities
• Improved information
• Better Customer Satisfaction
accuracy and decision making
• Improved supplier
capability
performance
• Use of latest technology
ERP Limitations
• Custom reports
• Provides only current status
• Does not include external intelligence
Overcome… ERP Limitations.. Technologies
1. Business process Reengineering (BPR)
2. Data warehouse and data marts
3. Data Mining
4. OLAP
5. Product life cycle management (PLM)
6. Supply chain management
7. Customer relationship management
8. Geographical Information systems (GIS)
9. Intranets & Extranets
10. Electronic data interchange (EDI)
11. Electronic funds transfer (EFT)
12. Cryptography
Business process reengineering(BPR)
• Analysis and redesign of workflow within and
between enterprises
• To reduce cost and increase quality of service
XEROX : Case study BPR
The problem
Non-Production Procurement (NPP)
- Covers purchases other than supplies used for
production.
- All office supplies, From desk, personal
computers to pencils and stationary.
- Spent $4.3 billion dollars a year on NPP.
The Redesign
• BPR Team – Managers, Supervisor & Clerical
personnel from various organisations.
• Different groups
- Expensive items
- Complex items
- Routine items
- Specialists (Exceptions & Rush orders)
• Contracted with outside consulting group study best procurement practices
• Contracts to vendors to supply items at a set
price
• Credit cards to managers for unique, rush
purchases.
• American Express report - Credit card summary.
• Negotiate mega-purchasing deals with large
suppliers
• Replaced numerous small contracts.
• Automated access between Xerox managers and
suppliers to eliminate paper work.
• Departmental limits and constraints handled by
computer system (without accounting
personnel).
The solution
Hundreds of activities had been reduced to dozens
and numerous redundant sub-processes were
now combined in to three major sub-processes.
• Reduced to four suppliers
• Emergency purchases delegated – Credit cards.
• NPP software system – Online handling and
eliminated paper forms.
Seven principles of BPR – By Hammer
and Champy
• Organise round outcomes, not tasks
• Identify all the process in an organization and
prioritize.
• Integrate information processing work into the real
work that produces the information
• Treat geographically dispersed resources as though
they were centralized.
• Link parallel activities in the workflow instead of
just integrating the result.
• Put the decision point where the work in performed,
and build control into process.
• Capture information once at and at the source
Data warehousing
• Designed to support decision making in orgn.
• Separating data from operational systems
• Effectively accessed
• Queries performed without disturbing
production systems
• Combines databases across enterprise
Data Marts
• Database or collection of databases
• Focus on particular subject or department
• Designed to help managers make strategic
decisions about business.
Data Mining
• Science of extracting useful information from
large sets or databases.
• Extraction of implicit, previously unknown, and
potentially useful information from data.
• Sorting through data to identify patterns and
establish relationships.
Data Mining parameters ..
• Association – looking for patterns where one event is
connected to another event
• Sequence of path analysis – looking for patterns where
one event leads to another later event.
• Classification – looking for new pattern
• Clustering – finding and visually documenting groups of
facts not previously known.
• Forecasting – Predictive analytics
On-line analytical processing (OLAP)
• Process of converting raw data into business
information through multi-dimensional
analysis.
• - Multi-dimensional views of data
• - Complex calculations
• - Time Intelligence
Product lifecycle management (PLM)
• PLC refers to the succession of stages a product
goes through.
• PLM is the succession of strategies used by
management as product goes through its life
cycle
• PLM software solution
Supply chain management (SCM)
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Spans all movement & storage of
Raw materials
Work in process Inventory
Finished goods
• Coordinating and integrating flows both within
and among companies.
• Goal – To reduce inventory
Customer relationship management
(CRM)
• Methods and technologies used by companies to
manage relationship with clients
• Information stored on existing customers &
potential customers is analyesed
CRM Components
I Operational CRM
- Sales force automation (SFA)
- Customer service and support (CSS)
- Enterprise marketing automation (EMA)
II Analytical CRM
- Acquisition
- Retention
- Information
CRM Components contd.,
III Collaborative CRM
Focuses on interaction with customers.
- Efficient communication with customers across
channels
- Access to customer information while
interacting with customers
- Provide on-line services to reduce customer
service costs.
Geographical Information System (GIS)
• Mapping and analyzing things that exists and
events happen on earth
• Geographically referenced (Geo coded)
Other Technologies..
• Intranet & Extranet
• EFT
• Cryptography
Issues: Planning, design and
implementation of cross functional
integrated ERP systems
1. Top Management Commitment
- Not changing software systems
- Repositioning company & transforming business
practices
- Consider strategic implications
Competitive position
Organizational culture & structure
Scope of ERP implementation
Globally or regional units or functional units
• Funding
• Change Management
• Monitor progress and provide direction
2. Reengineering
• Best business process
• All process must conform to ERP model
• Customize product to specific needs of company
Research shows that even a best application
package can meet only 70 percent of the
organizational needs.
3. Integration
• Integration of home grown systems with ERP
- Third party software – Middleware
- Organisation develop own interfaces
- Integration problems – Changes in IT-patchwork
• Understand nature of integration & how it affects
entire businesses.
- Ripple effect of mistakes
- Potential risk of the errors
- Monitor transactions & steps to solve
• Information across supply chain – Automation
- Sharing & control of information
4. ERP Consultants
• Competent consultants – with specific industry
knowledge
• Functional, technical & interpersonal skills
• Managing consulting firm
5. Implementation Time
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Length of implementation
No. of modules implemented
Scope of implementation
Most follow : Phase-in approach
Most common modules : Sales & Distribution,
Materials, Production & Planning, Finance and
controlling modules.
6. ERP Vendors
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Top Management Input
Market focus ( Mid size or large size)
Track record of customer
Vision
For global rollout : Availability of software
across countries, Evaluation of vendor staff in
those countries.
7. Selecting right employee
• Choose internal employee with right skill set.
• Aware of best business practices
• Ability to understand overall needs of company
8. Training employees
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Hidden cost
Understand how their data affects company
Demand rigorous training
Front line people – make decisions
9. Employee Morale
• Long hours of work
• Stress of implementation
• Leadership from top management, support &
caring from project leaders
• Other strategies – Field visit.