Enterprise Resource Planning (ERP)
Enterprise Systems (ES)
BCIS 485
College of Business
New Mexico State University
Knowledge workers
 Thomas Davenport, Harvard University, says this is the skill
set people should have to be effective using today's
technologies in the business environment.
 Technical skills.
 Knowledge of enterprise software and software tools for analysis and presentation.
 Analytical skills.
 Understand statistical models, assumptions and constraints in order to interpret
analyses.
 Knowledge of data.
 What data are available and how to get it.
 Knowledge of business.
 What the business' goals are.
 How data analysis may help achieve goals.
 Communication/partnering skills.
 Coordinate and work with others to combine knowledge and skills.
 Communicate effectively.
Timeline of software development
IT & ERP
 History of information technology (IT) and its impact on the
development of ERP systems
 Some engineers for IBM started SAP in the early 1970s.
 They didn’t have a computer. They used their client’s
mainframe to begin developing software.
 1983: The company I worked for rented mainframe
processing time. One PC was used by two departments:
transportation and marketing. Computer-generated reports
were distributed weekly and monthly. No one had a
computer on his/her desk, only a terminal linked to a
mainframe computer (which would fill this room).
 Computer hardware has gotten cheaper and more powerful
every year since the 1950s but it wasn’t until the early
1990s that IT could provide the processing and storage
capacity an ERP system needs.
 Database management systems have also evolved since the
1970s.
MRP & MRP II
 Manufacturers invested a lot of money in
developing software to help handle the
complexities of material requirements
planning (MRP) and to integrate different
production activities.
 Before a company can produce a product it must
procure the raw materials for manufacturing this
product.
 MRP takes into consideration raw materials already
on hand and what is planned for production then
generates a list of materials required (what needs to
be purchased and when).
 MRP II added production planning and
scheduling.
ERP took integration further
 ERP took the integration concept further.
 Data is stored in a central database that enables
each functional area to work with current, up-todate data.
 Historically, business functional areas tend to be
isolated; sometimes referred to as functional
silos. People sometimes take action without
being aware of the impact on other parts of the
business. ERP enables information to flow
between functional areas, providing horizontal
integration.
Impetus for ERP Implementation
 IT now offers the computing resources needed at a
reasonable cost.
 During the 1990s the “Y2K problem” gave
companies the opportunity to implement ERP while
fixing the Y2K problem.
 Y2K problem = Legacy (old) programs and databases
stored years in a two-digit format.
 Sarbanes-Oxley Act of 2002
 Tighter control of accounting and financial records and
reports.
 Multinational corporations
 Currency differences
 Regulation differences
ERP Implementation Costs
 Summary taken from article in CIO (see full article) about a survey
about ERP software
 Total cost of the average ERP implementation?
 SAP = $16.8 million
 Oracle = $12.6 million
 Microsoft = $2.6 million
 Tier II average: $3.5 million (Tier II includes companies
besides the industry leaders.)
 How long did it take?


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SAP = 20 months
Oracle = 18.6 months
Microsoft = 18 months
Tier II average: 17.8 months
 Satisfied with the result?
 SAP = 73%
 Oracle = 62%
 Microsoft = 69%
 Tier II average: 70%
Benefits of information integration
 Lack of integration creates problems
 Inefficiencies
 Time spent trying to get information
 Time spent storing duplicate data
 Inconsistent data
 Keeping the same data in more than one location
makes data accuracy more difficult
 Inability to access data in a timely manner
Integration across functional areas
 Information is centralized and available to
each functional area.
Accounting
/Finance
VENDORS/SUPPLIERS
SRM = supplier
relationship management
CUSTOMERS
CRM = customer
relationship management
Sales/
Marketing
Supply
Chain
Mgt
Information System/Central Database
Human
Resources
ERP Implementation
 Business process re-engineering
 This can be an opportunity to change processes
and become more efficient.
 This can create tension and resistance from
employees.
 Good change management is necessary.
 SAP’s best practices approach
 Though there are hundreds of customization
settings in SAP, this is different from what
“customization” has typically meant to software
companies.
 SAP modules built on “best of breed” practices.
Overview of modules in ERP/ES
 Business functions




Accounting/Finance
Human Resources
Sales/Marketing
Supply Chain Management
 Procurement
 Production
 Distribution
 Business processes




Forecasting demand/planning
Procurement
Production
Sales order processing
 Integration
 An ERP system you have used: Banner
ERP supports business functions –
Sales & Marketing
 Sales/Marketing
 Market products
 Take sales orders
 Customer relationship management
 Sales forecasting
 Advertising
ERP supports business functions –
Supply Chain Management
 Supply Chain Management
 Purchase goods and raw materials
 Receive goods and raw materials
 Logistics (moving products and raw
materials)
 Production scheduling
 Manufacture
 Plant maintenance
ERP supports business functions –
Accounting & Finance
 Accounting/Finance
 Financial accounting
 Cost allocation and control
 Planning and budgeting
 Cash flow management
 Financial analysis
ERP supports business functions –
Human Resources
 Human Resources
 Recruit and hire
 Training
 Payroll
 Benefits
 Government/regulation compliance
ERP – Data input/output
Technology evolution:
Client/server architecture
Remote access to centralized data on the database server.
Browser-based applications.
SAP R/3 and mySAP
 R/3 = 3-tiered architecture
 mySAP
 NetWeaver/Application Server introduced in
2003
 More browser-based functionality
 Business Warehouse (BW), Customer
Relationship Management (CRM) and other new
modules offered
Now and the future…
 Internet and browser-based interfaces
 Database technology now provides the
capacity for vast amounts of data to be
stored.
 Business intelligence / data analytics
 Organizations want to take advantage of their
data to help identify patterns or relationships
and to aid decision-makers.
SAP Modules
 Sales and Distribution (SD)
 Records sales orders, schedules deliveries and holds
information about pricing, how and where to ship
products, how the customer is to be billed.
 Materials Management (MM)
 Tracks acquisition of raw materials from suppliers
(purchasing or procurement)
 Movement of inventory
 Goods received
 Materials moved to the shop floor
 Finished goods moved from shop floor to inventory
 Production Planning (PP)
 Production is planned, scheduled, released for
execution, and confirmed (completed).
SAP Modules
 Quality Management (QM)
 Helps to plan and record quality-control activities, such
as product inspections and material certifications
 Plant Maintenance (PM)
 Management of resources such as preventive
maintenance of plant machinery
 Asset Management (AM)
 Helps in managing fixed-asset purchases (plant and
machinery) and the related depreciation.
 Human Resources (HR)
 Tracks employee recruiting, hiring, training, payroll and
benefits.
 Financial Accounting (FI)
 Records transactions in the general ledger accounts.
 Used to generate financial statements for external
reporting purpose
SAP Modules
 Controlling (CO)
 Used for internal management purposes. The
company’s manufacturing costs are assigned to
products and to cost centers, so that the profitability of
the company’s activities can be analyzed
 Project System (PS)
 Provides tools for planning and control of special
projects like Research and Development or Marketing
Campaigns or low-volume, highly complex projects like
aircraft or ship construction
 Workflow (WF)
 A set of tools that can be used to automate any of the
activities in R/3. For example, a work flow can be
created so that when a shipment is received at the
warehouse both the production manager and accounts
receivable receive a notice from within SAP.
Videos about ERP and SAP
 Introduction to ERP & SAP
 http://www.youtube.com/watch?v=EO2Df1p_tcw
 Introduction to SAP
 http://www.youtube.com/watch?v=I1fAcjEIEEM&p=1A70F57584
733F6C&playnext=1&index=30
 SAP Business One (ERP for small to medium-size
companies)
 http://www.youtube.com/watch?v=zE9tmAcDaH4
 http://www.youtube.com/watch?v=WEcWutvYg5A
 Tips for selecting ERP software for a business
 http://www.youtube.com/watch?v=BCucG-1jUBY