M0254 - ERP
(Enterprise Resources Planning)
Session 1 - Background
Ir. Ekananta Manalif, MM, MKom (D2664)
Jurusan Sistem Informasi Universitas Bina Nusantara
ERP
Enterprise Resource Planning (ERP):
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An expanded effort to integrate marketing, financial,
manufacturing and human resources in a single
information system.
Standardized record-keeping permits information sharing
throughout the organization.
A computer-based system designed to process an
organization’s transactions and facilitate integrated and
real-time planning, production, and customer response.
M0254 Enterprise Resources Planning ©2004
Evolution of Information Systems
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Prior to 1960, all systems were paper-based
Data entry, storage, retrieval were slow, laborintensive processes
M0254 Enterprise Resources Planning ©2004
Computer Hardware and Software
Development
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The First Business Computers
Computers Smaller and Faster
Moore’s Law
Software Proliferates
M0254 Enterprise Resources Planning ©2004
M0254 Enterprise Resources Planning ©2004
Early Attempts to Share Data
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Client/Server
Scalability
M0254 Enterprise Resources Planning ©2004
ERP – The Evolution
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MRP
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MRPII
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Material Requirement Planning
Focus on stock reduction
Integration of logistic processes
Focus on stock reduction, decrease in number of stock-out, and more control
ERP (or MRPII plus)
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Evolution of MRPII thanks to:
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better package coverage: multi-plant, quality, customer service, tracking, etc.
technological development: client/server architecture , RDBMS
Focus on customer services rather than inventories
Pro-active approach looking for the best allocation of financial, production and
distribution resources
eMarkets (Extended-ERP)
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Pro-active resource allocation beyond the company’s boundaries: from enterprise
to inter-enterprise
cross-enterprise process automation
M0254 Enterprise Resources Planning ©2004
ERP – The Evolution
Extra-prize Collaboration
i.e.“The Networked Economy”
Degree of Collaboration/ Networking
High
Enterprise Integration
Computer Integrated
Manufacturing
(extended ERP)
ERP
MRP II
Islands of
Automation
Low
eMarkets
MRP
1970
1980
M0254 Enterprise Resources Planning ©2004
1990
2000
Why Implement ERP?
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Business Reasons
Technological Reasons
M0254 Enterprise Resources Planning ©2004
Common Business Reasons for
Implementing ERP
poor performance
27
high costs
not responsive
to customers
24
21
complex processes
20
unable to support
strategies
globalization
inconsistent
business processes
15
15
10
M0254 Enterprise Resources Planning ©2004
Technology Reasons for Implementing ERP
42
Y2K
disparate systems
37
poor quality of
information
26
systems not integrated
19
difficulty integrating
acquisitions
obsolete systems
unable to support
growth
12
11
6
M0254 Enterprise Resources Planning ©2004
Profitability
Profit
3,000
2,500
2,000
1,500
1,000
500
0
2000
2001
2002
2003
2004
2005
Time
You have Two Choices :
Increase in Sales
OR
Reduce Cost
- Say 30%
- Say by 5-10 %
M0254 Enterprise Resources Planning ©2004
Business Requirements
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Businesses exist to make a profit
Businesses strive to provide goods and
services faster and cheaper than competition
More efficient ways of accessing and sharing
information will increase customer service and
therefore profits
M0254 Enterprise Resources Planning ©2004
Industry Demands
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Better products at lower cost.
Tough competition.
Need to analyze costs/revenues on a product
or customer basis.
Flexibility to respond to changing business
requirements.
More informed management decision making.
M0254 Enterprise Resources Planning ©2004
Healthy Operation
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Integration of Systems across the Functional
Departments in a Company as well as across the
Enterprise as a Whole.
Better Customer Service.
Introduction of Latest Technologies as and when the
are ready for the Industry acceptance
M0254 Enterprise Resources Planning ©2004
What IT Department shall look?
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Automatic Identification System
Hardware & Networking
Software DBMS/RDBMS
Communication
ERP
Supply Chain Management
EDI
Intranet
Internet
Etc…
M0254 Enterprise Resources Planning ©2004
Typical Problems
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Unable to get accurate, timely information.
Applications not complete for existing business
practices.
Modification are time consuming or not
feasible.
M0254 Enterprise Resources Planning ©2004
Typical IT Stories
My growth
will be OK . No?
Manufacturing
Location 1
Finance
Corporate Office
Manufacturing
Location 2
Sales Group
M0254 Enterprise Resources Planning ©2004
ERP enables to
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Global integration
Eliminates updating and repairing separate
computer systems
Systematic Look into your Systems &
procedures.
Optimizing the processes.
Discipline across the functions.
Allows managers to manage, not just monitor
M0254 Enterprise Resources Planning ©2004
M0254 Enterprise Resources Planning ©2004
M0254 Enterprise Resources Planning ©2004
Benefits of Implementing ERP
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Integrated, real-time, business information and
control system.
Standardize and improve Processes.
Improve the level of Systems Integration.
Improve Information Quality.
Good information → Good Decisions
M0254 Enterprise Resources Planning ©2004
ERP Project Cost
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META Group (2000)
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Escalle, Cotteleer, and Austin (1999)
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Average cost of ownership is $15 Million
Typically at a cost of $ 53,320 per user
ERP cost can run as high as 2-3% of revenue
Average Implementation Time
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1-2 years for Medium Company
3-4 years for Big Company
M0254 Enterprise Resources Planning ©2004
Questions about ERP
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Is it for every company?
Is the software inflexible?
How much profit should you expect?
How long does it take to see an ROI?
Why do some have more success?
M0254 Enterprise Resources Planning ©2004
Summary
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Several factors led to development of ERP:
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speed and power of hardware increased, cost and size
decreased
client/server architecture
sophisticated software development
growth of business size, complexity, and competition
Purchasing ERP software is expensive, with
spectacular payoffs and challenging implementation
The future of ERP will focus on:
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managing customer relationships
improving planning and decision making
linking operations to the Internet
M0254 Enterprise Resources Planning ©2004