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ERP Notes

ERP: “Enterprise Resource Planning” : industry term for the broad set of activities
that managers use to run the important parts of an organization such as purchasing,human
resources, accounting, production,and sales using an integrated suite of information
technology applications.
 ERP is cross functional(meaning people from different areas of an organization
work together as a team)
ERP is cross centered: the application is built around business processes.
An ERP system is an integrated (compatible, systems works together) suite of
information technology applications that support the operations of an enterprise from a
process perspective.
Built upon relational database systems
Sold in modules: groups of related programs
ERP has historically been seen as back office software
Core ERP includes Financials, HR and Operations.
Vendors also offer “bolt ons” such as CRM or SCM
ERP Market:
One of the fastest growing markets in software industry
34.5% of companies with revenues over $1 billion plan to purchase or upgrade
Types of business processes:
 plan the business
 market and sell
 provide customer support
 manage human resources
 manage finance and accounting
ERP Cost: between $50,000 and $100,000,000+
Variety of business justifications:
 Replace legacy systems
 Reduce cycle times
 Lower operating costs
 Enables better management decisions
 Real-time: Readily available to all users in the departments once
information is entered into the systems
 On-line
Variety of business justifications:
 Replace legacy systems
 Reduce cycle times
 Lower operating costs
 Enables better management decisions
Overall Business Benefits
o Maximizes information throughput
o Provides timely information
o Integrates information throughout supply chain
Minimizes response time
Pushes decision making down to lowest levels
Reduces costs
Cuts inventory
Improves operating performance
Department Benefits
 Sales
-Increased efficiency
-Lower quotes, reduced lead time, improved responsiveness
 Manufacturing
-Concurrent engineering
-Faster design and production
 Data Service
-Accurate customer service history and warranty information
 Accounts Payable
-Suppliers paid accurately
ERP modules supported by vendors:
- SAP: sales, material management, financial accounting, human resources
- ORACLE: marketing sales, human resources, manufacturing,
- PEOPLESOFT: supply chain management, financial management systems
Design Alternatives:
 Vanilla” implementation
 Complete vendor package
 Benefits
 Total integration across all functional areas
 Re-engineering of all business processes
 Deficits
 Expensive
 Time-consuming
 Selected ERP modules
 Benefits
 Less costly and time-consuming
 Deficits
 Lacks total integration of data
 Limited applicability and use
 Build in-house
 Can create system based on its needs
 Competitors will not have access to similar system
 Time- and resource-consuming
 Expensive
 Risky
 May not provide competitive advantage
 Maintain concurrent legacy systems
 Familiarity
 Deficits
 May be a competitive disadvantage
 The value of ERP is the opportunity to integrate an entire organization by having
a single point of entry and sharing of data across the enterprise.
 Creates less need to reconcile data and rekey.
 Inefficient business processes that were disjointed become much more efficient.
Legacy system layout: each dept, business unit might have their own systems (end user
computing etc), leads to inefficiencies and delays
Best Practices: certain techniques or processes and methodologies that have generally
recognized as more effected, efficient in an industry as it matures.
ERP tiers: erp vendors (one that sells erp systems) classify companies based on various
criteria to determine a fit.
Tier 1: software for companies with 1000+ , BIGGEST TIER for companies like
the bank,gov,etc that use (#1 VENDOR ..SAP “Systems application and products, or
Tier 2(Sme “Small to Med”): medium sized companies 100-999 use a lower cost
erp system
Tier 3(SME): family run business, less than 100 that use Microsoft, Peachtree,
Tier4: VERY small companies, uses Peachtree, accpac and quickbook
Maintaining Competitive Advantages:
 Implement ERP system better than competitors
 Migrate to new versions faster
 Use “vanilla” ERP for core systems and build customized modules for others
 Increase availability of operational data
 Better use of data for analysis
 Realization of benefits
 On-time, on-budget implementations
 Applying multi-stage approach
 Three phases: project, shakedown, and onward and upward phases
 Business results not achieved until last phase
Parr and Shanks
 Four phases: planning, re-engineering, design, and configuration
and testing phases
 Benefits not achieved until last two phases
Holland and Light
 Benefits occur after implementation of advanced modules
Two tier architecture/ Client server architecture: evolved to meet the demands of a
greater number of users accessing shared data over the LAN
LAN: Local area networks that linked computers to close proximity to share files among
Client: it accesses data stored on another computer
GUI: graphical user interface which is a highly interactive user interface with a
windowing metaphor that present info using text and images on the computer display
Database server: running on a dedicated computer which provides a standardized way
to store and retrieve data. Responsible for finding the right data, formatting it, returning
its results to the right user
3tier architecture: one or more applications are placed between the client and the
database server.
Application server: responsible for executing all of the business logic and interacting
with the client applications.
Fat clients: running applications directly on users pc’s offer the richest interfaces
interface is the point of interaction[vague] with software, or computer hardware, or
with peripheral devices such as a computer monitor or a keyboard.
Thin clients: offer a simpler interface and do not require any additional software to be
installed on the client ( use web browsers because they are widely available and work
identically on many diff computers)
 1990’s client server, three-tier
 Client – fat client/thin client
 Application (business logic)
 Database
Intranet: private network within the company
With ERP software, the GUI can take the form of a dashboard customized to suit the
needs and preferences of a set of users or a specific user.
Can include:
 Business process activity based on production or logistics information.
 Tasks, reminders and other notifications.
 Calendaring and scheduling resources.
 Messaging including email, instant messaging and telephone traffic.
 Official communications from designated sources.
Bolt ons: 3rd party software bolted on to ERP
 Back-office software (Core ERP) –HR, Financials, and Operations
 Front-office software integrates with customers and suppliers – supply chain
management and customer relationship management
 Bolt-ons are used to integrate more functionality to Core ERP
 Tables are relations
 Tables and forms (visuals of tables) show up on screens in ERP menus.
Database Tier:
Relational database: database that is stored in two dimensional tables or
Fields: columns
Attributes: entries in the columns
Records: rows
Each table has a primary key (ex:student id)that is the unique.
 Usually the primary key is some sort of code.
 Can not be null or empty
 Entity integrity rule
The primary key in one table becomes the foreign key in another table so the
tables can connect and querying can take place.
 Referential integrity rule : ensures that relationships between tables remain
valid and consistent. Must have corresponding, matched primary key
denoting a record in the linked table.
TABLE Relationships:
- ERDs are a type of system diagramming that show relationships between
o Relationships are rules that show how tables relate to one another.
- Types of relationships
o One-to-one: the primary key of one table is associated with only
one record in another table
o One-to-many, many-to-one: the primary key of one table is
associated with more than one record in another table
o Many-to-many: the primary key in one table is associated with
more than one record in a second table and the primary key in
the second table is associated with more than one record in the
first table
Database query
- SQL “ Structured query languae” : a declarative programming language, which
means that applications specify what the database should do NOT how the
database actually performs the request .
 Simple Query – returns a response without changing the database
 Update Query – changes records in a database
- Data Manipulation – operations alter the database
o Inserting new rows into tables
o Updating existing rows
o Deleting rows from tables
- Configuration: involves “setting switches” during implementation that
determine how the system will execute business processes.
- Configuration Tables: include options that enable a company to tailor a
particular aspect of the system to the way it chooses to do business.
o Vanilla : acceptance of all the defaults with which the erp package is
shipped,thereby eliminating all customization and configuration
requirements, relying explicity on the ERP software vendors prescribed
o Example of configuring: reporting relationships, options having to do with
how business processes work, auditing mechanisms, organizational
- Customization is changing code.
o This is expensive and time consuming.
o Only do this if really needed and you believe it will lead to a competitive
o Don’t customize because you feel your employees will resist a new way of
work….that is the point of ERP!
Business Process Reengineering: Created by Michael Hammer
 Business Process Reengineering is the fundamental, radical, redesign in business
processes to achieve dramatic improvements in key measures of performance
such as cost, quality, speed, and service
 The focus of BPR is not on how a process is done, but WHY it is done
Benefits vs. Challenges of BPR
• Cost Reductions
• Improved Customer Satisfaction
• Improved Agility
• Increased Profitability and Reputation
Resistance from employees
Job losses
Tradition and culture
Time requirements
Lack of management support
Risks to managers
Clean Slate Reengineering: Also referred to as “starting from scratch”
 Technology-Enabled Reengineering: A particular technology
(or portfolio of technologies) is chosen as a tool to facilitate
 The technology drives the reengineering
 Not constrained by a particular tool
 Not constrained to a limited set of processes
 Evolution is not limited by a particular technology
 Can result in unique processes (which gives a competitive advantage)
 Encourages a free flow of ideas Disadvantages:
 Costly
 Excess time and resources (makes it difficult for smaller companies in
an industry to afford)
Technology-Enabled Reengineering
 ERP provides the tool and structure to facilitate change
 Roadmaps lead to less time
 ERP bounds the design which eliminates difficult decisions
 Design is feasible and we know it works (it’s been proven)
 Less risk
 Designs likely can be implemented in a timely manner because they
are focused on specific processes
 Fewer overhead costs
 Constrained by a technology, evolution limited by that technology,
limited by certain best practices in that technology
 Not unique – no competitive value perhaps (which incidentally is why
orgs may customize); other companies have access to the design
A core competency is a company’s process that transforms generic inputs
into uniquely developed products or services that provide it with a
competitive advantage
Key Performance Indicators - allow the company to compare its
performance to industry best practices
High Volume, Low Margin Activities
High Defect, High Reward Activities
Quality Controls – reduce error rate, but can be costly
High Skill, Time Intensive Activities
High Complexity, Specialized Resource Activities
“KISS” or “keep it simple stupid”
Process Built around Obsolete or Changing Technology
 Resistance from employees
 Cost
 Job losses
 Tradition and culture
 Time requirements
 Lack of management support
 Risks to managers
 Retraining
Systems documentation:
 Basic Purposes for Systems Documentation
1. Describing business processes
2. Assessing internal control procedures
3. Evaluating, designing, or changing information systems
 Systems Diagram – a graphical representation of systems
1. Flowcharts
2. ER Diagrams
3. Other techniques
A process map, also known as a cross-functional flowchart, is used by
many organizations seeking to document, analyze, streamline, and redesign
business activities
Defining the “as is” business process and clarifying the changes
necessary to transform the present process into the “to be” process
Determining whether “as is” measures are appropriate
Promoting awareness of employees’ responsibilities
Showing the impact a certain role’s performance has on upstream and
downstream activities in the process
Highlighting workflow inefficiencies
Identifying opportunities to streamline and improve processes
Pinpointing internal controls that need to be tested during an audit
 ACTIVITIES: SQUARE BOX: series of steps or activities that
transform inputs and outputs
 Decision points (TRIANGLE LOOKING): yes/no (positive/negative)
outcome that depicts the alternatives
 Process flow lines: connect symbols and are labeled with the type of
information flowing into or out of the activities
 Data stores(OVALISH DENTED SQUARE): support the process
 Termination(OVAL CIRCLE): points at which the process ends
 On-page connector:(SMALL CIRCLE) reduce clutter on a page
 Off-page connector (PENTAGRAM): when processes span multiple