INFORMATION SYSTEMS @ X
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
1.
Provide an overview of how ERP systems help address issues caused by functional systems.
2.
Understand why business and IS students should learn about ERP systems
3.
Discuss the value ERP systems can provide
4.
Review issues associated with implementing ERP systems.
5.
Describe the key characteristics of ERP systems
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
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?
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 It affects most major business enterprises and many small and medium businesses
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60% + of very large corporations use SAP (an ERP vendor)
Increasingly, smaller organizations are adopting
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Its out there, and its very likely you will work with one in some capacity
 It changes behavior of competitors and partners
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Competitors: adopt to survive?
Partners/Suppliers: adopt to keep business
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 It enforces best practices and aids reengineering
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Best practices built in (lots of choice) don’t iterate, obliterate
 It changes the nature of consulting firms and IS
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HUGE portion of revenue from ERP consulting
 It is challenging to implement and cost is high
 Its growth has made it the predominant software
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 It integrates a broad range of business functions
 It allows diverse enterprises to standardize
 It stops data redundancy and synchronization
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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
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 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 10’s of millions of dollars.
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
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Share information that was once closely guarded
(i.e., “their information”).
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Make decisions they were never required to make.
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Do things they were never required to do before
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 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.
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 Training
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Critical, but effort and cost is often underestimated
 Integration and Testing
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Links between modules and between ERP software and external systems
 Customization
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Expensive, complex, dangerous
 Data Conversion
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 Consultants
 Staffing
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Need ‘best and brightest’ from business – how to replace them?
 Implementation team needs to stay in place
 Delayed ROI
 ‘Post-ERP Depression’
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All change and upheaval – impact on organization’s morale
INFO102: Management Information Systems

INFO102: Management Information Systems
Colgate Case
INFORMATION SYSTEMS @ X

INFORMATION SYSTEMS @ X
 William Colgate established “Colgate” in 1806
 Mainly a starch, soap and candle business
 Merger with Palmolive in 1928; Colgate-Palmolive-Peet
 Corporate name changed to Colgate-Palmolive in 1956
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 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
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 Divergence of operating platform
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Dozens of platforms
 Low IT skills/knowledge
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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
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
Activity
Enter pricing data
Customer credit check
Enter customer order
Customer billing inquiry
Ship evaluation unit
Ship replacement part
Credit returned item
Commit date for delivery
Before
5-80 days
15-20 min.
30 min.
15-20 min.
3-30 days
3-44 days
1-5 months
2 hrs.-3 wks.
After
5 min.
automatic
5 min.
real-time
2 days
2 days
5 days real-time
Source: Hammer
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 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
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 SAP handles 95% of the company’s $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.
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 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?
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 Business Function: Related sets of specialized activities carried out by an organization
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For efficiency – keep people who do the same thing together
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Often = department
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Examples?
 Business Process: the way that work is organized and coordinated in an organization to add value
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
Process-oriented Application: Order Processing
Marketing/Sales Accounting
ERP ‘module’
Integrated Database
Manufacturing
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)
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 Enterprise Resource Planning Systems are enterprise systems meant to integrate data and support many of the major functions of organizations.
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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.
INFO102: Management Information Systems

 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?
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X

INFORMATION SYSTEMS @ X
Financial
Accts Receivable
Asset Account
Cash Forecast
Cost Accounting
General Ledger
Profit Analysis
Standard Costing
Human Resources
Time Accounting
Payroll
Personnel Plan
Travel Expense
Benefits Mgmt
Operations &
Logistics
Inventory
MRP
Plant Maintenance
Production Planning
Manufacturing
Purchasing
Quality Mgmt.
Shipping
Sales & Marketing
Order Processing
Pricing
Sales Reporting
Sales Planning
Catalogue Mgmt
All of these functions…. One software package….
One database
INFO102: Management Information Systems

INFORMATION SYSTEMS @ X
 Speed and power of computing
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Hardware (servers and disk) now cheap and fast – makes ERP feasible
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Happened in the 90s.
 Increasingly complex business environment
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Organizational complexity
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Increasingly demanding customers
Globalization
Increased competition
 Increasingly sophisticated software needs
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‘Legacy’ systems break under the strain of….all of the above
INFO102: Management Information Systems

 Oracle www.oracle.com
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Peoplesoft www.peoplesoft.com
> J.D. Edwards www.jdedwards.com
 SAP www.sap.com
 SSA Global www.baan.com
 Microsoft
 Others – niche/specialty
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SYSPRO: Small manufacturers
Banner: Universities
Meditech: Hospitals
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X

INFORMATION SYSTEMS @ X
 Consolidation is currently taking place in the ERP software business
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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
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Microsoft is challenging SAP and Oracle to sell ERP systems to small- and medium-sized businesses
Other vendors …
INFO102: Management Information Systems