TRY & TRY U WILL BE SUCCESS
ERP SORT QUESTION
SANJAY HIRANI
Semester: 1st
Branch:MCA
ENTERPRISE RESOURCE MANAGEMENT
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Chapter 2 – ERP Implementation: Life Cycle, Methodologies
and Strategy
ERP LIFE CYCLE
There are six phases of ERP life cycle:
1. Pre-implementation Phase
Brief Description of Activities:
1. Having a Team in Place
2.
3.
4.
5.
6.
Feasibility study/ROI Analysis/Business Case
Getting Budget
High Level Requirement Definition, Prioritisation of Requirements
High Level Scope Definition
RFP for Selection of Implementation Partner and Evaluation and
Selection of Consulting Partner
7. RFP for Evaluation and Selection of ERP Package
8. Number of Activities and their Sequence can Change Depending on the
Type of Project
2. Project Preparation Phase
Brief Description of Activities:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Project Team Selection (Core Team and Consultants)
Detailed Project Scoping
Project Vision/Mission Statement Creation
Deciding Implementation Strategy, Methodology to Follow
Finalizing Project Methods, Standards and Governance
Technical Preparation
Project Planning, Resource Planning, and Training Planning
Project Charter Preparation
Conducting Project Kick off Meeting
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10. ERP Overview Training to Senior Management, ERP Process Training to Core
Team
3. Business Blueprinting Phase
Brief Description of Activities:
1.
2.
3.
4.
5.
6.
7.
8.
9.
High Level Process Modelling of AS IS Process
Developing Detailed Requirement Definition
Business Process Reengineering
Detailed Process Modelling of TO BE Process, Design Process Steps
Gap Identification and Analysis, and Strategy to Bridge the Gap
User Authorisation, Roles and Security Planning
Blueprint Audit by External Team
Getting Blueprint Signed Off
ERP Configuration Training to the Core Team
4. Realisation Phase
Brief Description of Activities:
1.
2.
3.
4.
5.
Configuration/Customisation
Unit and Integration Testing
Developments for Gaps
End user Training Plan
Integration Test Sign Off
5. Final Preparation and Go Live Phase
Brief Description of Activities:
1.
2.
3.
4.
5.
6.
Stress and Volume Testing
User Acceptance Testing and User Sign Off
Conducting End user Training
Data Migration – Migrating Open Items
Cut over Planning – Preparing Go Live Checklist
Help Desk Support Finalisation
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7. Closing Open Project Issues
8. Pre Go Live Audit by External Team
9. Going Live
6. Support Phase
Brief Description of Activities:
1.
2.
3.
4.
5.
Knowledge Transfer to Support Team
Transition of Project Documents and Open Issues
Regular Supoort, Monitoring Service Level Agreements (SLAs)
Measuring Performance Improvement
Upgrading to Next Version of ERP
METHODOLOGY FOR IMPLEMENTATION
One Example of Methodology from ERP Vendor: ASAP from SAP
Objectives of ASAP:
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

Implement SAP solutions in a quick and cost effective manner.
Maximise the utilisation of resources.
Incorporate a process-oriented approach to implementation.
Involve the user community.
Use it as a repeatable “model” with other implementations of SAP.
Phases in ASAP:
1. Project Preparation
2. Business Blueprint
3. Realisation
4. Final Preparation
5. Go Live and Support
Tools in ASAP:
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1. Implementation Assistant
 Roadmaps – Steps to complete project
 Knowledge corner – Comprehensive library of reference material that
helps implementation
2. Q&A Database: This helps in
 Setting the project scope
 Document business requirement in detail
 Helps in creating the business blueprint
3. Project IMG – Helps in quick customising of the application
4. Transports – Helps in moving the configurations from one landscape to another
(Say, development to quality).
5. BC sets – Helps in recording configurations so that these can be reused in other
implementation (say, another business division of the company).
One Example of Methodology from Consulting Company: Ascendant from PWC
IBM
It focuses on six key areas (domains):


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

Project management
Business
Organisation
Application
Architecture
Operations
Phases in Ascendant:
1.
2.
3.
4.
5.
6.
7.
Evaluation
Project Preparation
Business Blueprint
Realisation
Final Preparation
Go Live
Sustain
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Different types of ERP Projects
1.
2.
3.
4.
5.
ERP implementation projects
ERP upgrade projects
ERP global rollout projects
ERP migration projects
ERP harmonisation/consolidation projects
ERP Implementation Methodology for Small and Medium Business:
The implementation approach that works fine for large companies may not be suitable
for small organisations for reasons like:
 Small companies may not afford the implementation approach that spans across
24-36 months and costs a few hundred million dollars.
 These companies have fairly few senior management officials whom they cannot
send as project core team members for a long duration.
 In many cases, their business requirements as as complex as large companies.
 Like large organisations they cannot spend money on a BPR project prior to
implementation.
Keeping in view the above shoetcomings, both ERP package vendors and
implementation consultancy companies have come up with the solutions like:
1. Pre-configured Template
2. Separate Solutions for SMB Segment
3. Fast Forward Implementation Methodologies
Different ERP Implementation Strategies:
1.
2.
3.
4.
Big bang (All locations, all modules)
Rollout (Selected locations, all modules)
Big bang and Modular (All locations, selected modules)
Rollout and Modular (Selected locations, selected modules)
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Chapter 5 – ERP Package Selection
ERP SELECTION – A TWO-STEP PROCESS
A company can look at a set of criteria for ERP package screening i.e. for selecting 3-5
packages from hundreds of ERP packages available in the market.
Criteria for Initial Package Screening:
1.
2.
3.
4.
Product Strategy, Vision and Investment in Innovation
Financial Viability of the Application Vendor
Installed Base and Local Presence
Partnerships
 Implementation partnerships with consulting companies
 Application partnership with other third party applications
5. Technology Maturity
6. Vendor’s Customer Services
7. Cost of the Software
Initial Package Shortlisting:
Based on the above criteria, packages are given different weightage (as mentioned in
Table below). Packeges (top two or three packages) scoring highest in this method are
shortlisted.
Weightage and Criteria for Shortlisting Packages
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Key to weightage:





5 – Very good
4 – Good
3 – Average
2 – Bad
1 – Very Bad
Packages 1, 2 and 4 are taken for the next level of evaluation, based on the total
weightage given to packages.
Final Package Selection:
 Top three packages shortlisted through the earlier exercise are taken up in this
round for detailed functionality evaluation against the business requirements of
the company.
 There can be hundreds of such requirements which can be assesses as follows:
 FM: The application meets the business requirement directly (fully).
 PM: The application partially meets the requirement.
 NM: The application does not meet the business requirement.
 In the following example, the company has 300 such requirements, out of which
only five are evaluated.
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How the business requirements are met, based on that individual vendor is given a
point against a particular functionality and the point distribution is as follows:
Now based on this, different package vendors are evaluated:
in this example, both Package 1 and Package 2 come pretty close in terms of
functionality. Choices between the two will be mostly driven by cost and service quality.
This is an example of how scientifically packages can be evaluated and selection can be
made in favour of one.
Deviations in Package Selection Process:
 A company tells its main supplier to implement a particular ERP so that both can
be on the same platform and interaction between them would be easier.
 A group company wants to implement the same ERP what the mother company
has.
 For a small company, the ERP decision can be driven a lot by the ERP price.
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 For certain industries one ERP may be very popular as it offers lot of industryspecific functionalities. Retek for Retail industry, Mincom for Mining industry,
AspenTech for Oil and Gas industry are examples of such ERPs.
RFP Process for ERP Package Selection:
A typical RFP document can have different sections detailing with:
 Details on the date and time by which the bid needs to be submitted, bid security
amount to be deposited, bid validity period, etc.
 Overview of company’s business, current operations, locations from where it
operates, etc.
 Current IT systems the company is using and which of them need interface with
ERP systems
 High level scope of the project
 Benefits the company is expecting from the implementation
 Detailed scope of the work
 The details of payment schedule
RFP document can specify in detail on what date what is expected out of the ERP
package vendor. Table below is an abstract from a government RFP for ERP
package selection:
Package Selection Calendar (RFP based)
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Finalising the Contract with ERP Package Vendor:
Contract is a legal obligation for both the parties. Generally, for the package vendor
there will be standard contract clauses covering the following things:








Payment term
Intellectual property or copyright clauses
List of deliverables along with software
How training for the software will be handled
How the software manitenance will be handled
How future upgrades for the software wil be provided and at what cost
Software installation help to be provided
Prerequisite to install the software – the hardware specification, OS needed,
database needed etc.
 Any audir or review by the package vendor during package implementation
 Licence cancellation costs
Chapter 9 – Business Process Reengineering
PROS AND CONS OF BPR:
Pros:
1.
2.
3.
4.
5.
6.
7.
8.
Enterprise integration
Empowered employee
No handoff
Simplified process
Less coordination, reconciliation
Reduce NVA (No Value Added), eliminata waste
Case manager as SPOC (Single Point Of Contact)
Effective use of IT
Cons:
1. High failure rate
2. Can take long time
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3. Can consume lot of organisational resource (cost, executive time)
4. Can make existing jobs reduntant
5. High resistance to change
BPR/PROCESS REDESIGN - REASONS FOR FAILURE AND KEYS TO
SUCCESS
Reasons for Failure:
1. No focus on processes
2. Spending a lot of time for analysing the current situation – It does not make
sense as anyway you are going to throw it out
3. Proceeding without strong executive leadership
4. Going directly from conceptual design to implementation and avoiding
prototyping
5. Ignoring the concerns of people
6. Poor scoping – 100% improvement to a 1% value-adding process is only 2% value
addition
7. Looking for recipes
8. Fading top management commitment
9. Tweaking the process instead of radically redesigning it
10. Assigning less-than-best people to reengineering
Keys to Success:
1. Commited leadership and top management commitment in the project
2. Prototyping every process before large-scale implementation
3. Showing early success within first three to six months. Even if the success is a
small one, this interests everyone in the organisation in the project
4. Communicating effectively. This helps in managing change. If people are not
aware of what the project is all about, this can result in fear or issues related to
acceptance of the project.
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REENGINEERING PHASES:
1.
2.
3.
4.
5.
6.
Have the reengineering team in place
Selection of process to be redesigned
Process diagnosis/Understanding the existing processes
Process redesign
Prototyping – Design and build a prototype of the new process
Full-scale implementation
Reengineering or Redesign principles:
1. Maximise value adding (VA) steps, minimize non-value adding (NVA) steps and
eliminate waste
2. Parallelise work
3. Try to simplify process
4. Multiple versions of the same process
5. Enable workers to make decisions
6. Reduce audits, checks and controls
7. Provide single point of contact for the process
8. Combine several jobs into one
9. Organise around processes (exit departments, enter process teams)
10. Enabling bosses – “coaches”
11. Adopt customer perspective
12. Automate appropriately
13. Organisational structure should support business process
Levers of Process Redesign:
1.
2.
3.
4.
5.
Roles and responsibilities
Measurement and incentives
Organisational structure
Information Technology
Skills
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Difference between Process Improvement and Process Redesign Approaches:
Parameter
Process
Improvement/TQM
Process Redesign/BPR
Level of change
Starting point
Frequency of change
Time required
Participation
Typical scope
Risk
Primary enabler
Type of change
Incremental
Existing process
Continuous
Short term
Bottom up
Narrow
Moderate
Statistical control
Cultural
Radical
Clean slate
One-time
Long term
Top bottom
Broad
High
IT
Cultural/structural
Types of Benchmarking:
1. Process benchmarking
2. Financial benchmarking
3. Performance benchmarking
4. Product benchmarking
5. Functional benchmarking
Steps of Benchmarking:
1. Identify problem areas
2. Identify targets (leaders in the similar industry or other industries that have
similar processes)
3. Identify measures and best practices in the target company
4. Implement new and improved business practices
Chapter 13 – Managing ERP Security
TYPES OF ERP SECURITY ISSUES
1. Network security
2. System access security – Role and Authorisation
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3. Data security
SYSTEM ACCESS SECURITY – AUTHORISATIONS
1. Activity-Based Authorisations:
Steps for Activity-Based Authorisations:
1.
2.
3.
4.
Identify the activities that a particular process may involve
Prepare a ‘set’ of transaction codes for each identified activity
Prepare an authorisation role for each set of transactions
Assign the user the specific authorisation role
2. Role-Based Authorisations:
Steps for Role-Based Authorisations:
1. Identify the transaction codes that each role in the organisation require
2. Prepare an authorisation role for the list of transactions identified
3. Assign the user the specific authorisation role
DATA MASKING:
Benefits of data masking:
1. It meets regulatory compliance requirements such as HIPAA.
2. It enhances data security for outsourcing application and development.
Data Masking Algorithms:
1.
2.
3.
4.
5.
6.
7.
Shuffling/Reorder
Random value
Hashing
Date aging
Value changes in increments or decrements/Numeric alternation
Custom
Substitution with a random value
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Chapter 18 – Success or Failure of ERP Implementation
REASONS FOR FAILURE OF AN ERP IMPLEMENTATION
1. Poor ERP Package Selection
2. Inadequate Requirement Definition and Unrealistic Expectations, Scope
3. Investment without ROI Justification
4. Not Able to Support Changing Business Needs
5. Top Management Support Lacking
6. ERP Core Team do not have Right Resource
7. User Acceptance Issues
8. Employees Resist ERP Implementation
9. Training Issues for the Team
10. Poor Communication
11. Project Viewed as an IT Project
12. Customising the Software too Much
13. Too Tight Project Schedule, Miscalculation of Time and Effort
14. High Turnover Rate of Project Team Members
REASONS FOR SUCCESS OF AN ERP IMPLEMENTATION
1. How You Define A Success – Define Measures
2. Managing Project Scope
3. Requirements Prioritisation
4. Have Early Success and Pilots
5. Have Good Relationship with ERP Vendor and Consulting Partner
6. Good Project Management
7. Having Clean Data in the System
8. Quick Decisions
9. Test the Solution Thoroughly
10. Ensure that Project has Sufficient Budget till the End
11. Efficient Risk Management
12. Process Owner’s Involvement
13. Who Owns Business Benefits
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Chapter 20 – Human Capital Management
HUMAN RESOURCE MANAGEMENT MODULES:
1. Recriutment Management Module
2. Time, Attendance and Leave Management Module
3. Workforce Scheduling Module
4. Compensation Management Module
5. Benefits and Payroll Module
6. Talent Management/Performance Management Module
7. Learning Management Module
8. Personnel Management Module
9. Employee Relationship Management and Employee Self-service
10. Human Capital Management Analytics
STEPS IN RECRUITMENT CYCLE OR ACTIVITIES IN RECRUITMENT
MANAGEMENT PROCESS:
1.
2.
3.
4.
5.
6.
7.
8.
Labour forecasting and workforce planning
Position management/creating requisitions for new positions
Candidate sourcing
Screening and application tracking
Interviewing
Selection
Job offer
On boarding/Orientation
CAPABILITIES OF WORKFORCE SCHEDULING MODULE:
1. Generating optimised scheduling and shift planning
2. Employee assignment to schedules
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3. Labour tracking
4. Dynamic rescheduling
CAPABILITIES OF COMPENSATION MANAGEMENT MODULE:
1.
2.
3.
4.
5.
6.
7.
Compensation planning and analysis
Compensation structures
Compensation workflow and approvals
Incentive and reward pay
Commission-based pay
Pay for performance
Compliance
CAPABILITIES OF BENEFITS AND PAYROLL MODULE:
1. Payroll administration
2. Payroll processing
3. Supporting multi-country localisation and taxes
CAPABILITIES OF TALENT/PERFORMANCE MANAGEMENT MODULE:
1.
2.
3.
4.
5.
Performance management
Competency management
Career development planning
Succession planning
Goal alignment of organisation and individual
CAPABILITIES (DIFFERENT AREAS) OF LEARNING MANAGEMENT
MODULE:
1.
2.
3.
4.
5.
Registration
Course catalogue
Scheduling instructor-led training (ILT) courses
Supporting training financials
Tracking
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6.
7.
8.
9.
Content management
Learner assessment
Collaboration
Reports
CAPABILITIES OF PERSONNEL MANAGEMENT MODULE:
1. Labour relations
2. Non-employee administration
3. Maintaining detailed employee records
CAPABILITIES OF EMPLOYEE RELATIONSHIP MANAGEMENT (ERM) AND
EMPLOYEE SELF-SERVICE MODULE:
1. Employee portal
2. Employee self-service
STRATEGIC/CORE HR PROCESSES:
1.
2.
3.
4.
5.
6.
7.
Performance management process design
Compensation and reward planning
Planning job roles
Recruitment process design
Workforce planning
Learning management
Employee satisfaction measurement, designing employee motivation schemes
OPERATIONAL HR PROCESSES:
1.
2.
3.
4.
5.
6.
Employee record management
Leave and absence management
Time and labour management
Tax and compliance services
Payroll
Background checking and reference check before recruiting
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7. Health and welfare benefits administration
8. Retirement benefits (Like managing Provident fund, Gratuity, etc.)
EMPLOYEE HEALTH AND SAFETY
SAP has two EHS modules to support employee health and safety concerns:
1. Industrial Hygiene and Safety
2. Occupational Health
Chapter 21 – Financial Management
ERP FINANCIAL APPLICATION
ERP financial applications broadly have offerings as mentioned below:

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Accounts Payable
Accounts Receivable/Collection Management
Accounting
Costing and Profitability
Reporting different expenses
Budgeting
Consolidation
Financial reporting
Internal control and audits
Tax planning
Treasury and cash management
FINANCIAL MODULES IN DETAIL
Traditional ERP financial applications can be broadly classified in four categories as
follows:
1. Financial Accounting
This helps in managing following processes:
 General Ledger (GL)
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Accounts Receivable (AR)
Accounts Payable (AP)
Assets Accounting
Contract Accounting
Bank Accounting
Cash Journal Accounting
Inventory Accounting
Tax Accounting
Creation of different Financial Statements
2. Management Accounting
Management Accounting helps in all type of cost and valuation related
accounting such as:





Profit Centre Accounting
Cost Centre Accounting and Budgeting
Project Accounting and Budgeting
Product Cost Accounting
Transfer Pricing
3. Financial Supply Chain Management
This helps in following processes:




Self-service Portals for Customers
Collections Management
Credit Management
Dispute management
4. Treasury Applications
Treasury module focuses mainly in the areas of:
 Cash and Liquidity Management
 Financial Risk Management
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 Managing Bank Interactions
EMERGING AREAS IN FINANCIAL MANAGEMENT
1. Budgeting/Planning
2. Consolidation
3. Business Performance Management
4. Activity-based Costing (ABC)
Corporate Performance Management (CPM)/Enterprise Performance
Management (EPM):
The four sets of applications (BPM, ABC, Budgeting, Consolidation) together are
known as Corporate Performance Management (CPM) or Enterprise Performance
Management (EPM). These solutions typically help in the areas of:




Performance Scorecarding
Business Modelling
Planning, Budgeting and Forecasting
Financial Consolidation and Reporting
Leading CPM/EPM vendors and solutions are:
 SAP SEM (Strategic Enterprise Management)
 Oracle budgeting solution
 Specialised vendors like Brio, Hyperion, SAS (Strategic Vision) etc.
Chapter 22 – Procurement and Inventory Management
Through ERP
PROCUREMENT
Procurement Process:
1. Determining what to buy and how much – Procurement planning
2. Determination of the source of supply and selecting vendor
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3. Purchase order creation
4. Goods receipt
5. Processing vendor payment and invoice verification
How ERPs support Procurement Process:
1.
2.
3.
4.
Determining what to buy and how much – Procurement planning
Determination of the source of supply and selecting vendor
Purchase order creation
Goods receipt
 Quality inspection and shelf life expiration check
 Under-delivery and over-delivery
5. Processing vendor payment and invoice verification
 Invoice entry
 Three-way matching and invoice variances
 Invoice Blocking
 Parking of invoice
 Credit/Debit memos
 Reports on aging invoices
Some Important Functionality of the ERP System to Support Procurement
Process:
1. Purchase requisition (PR)
2. Contracts
3.
4.
5.
6.
7.
8.
 Central contract and plany specific contract
 Quantity contract
 Value contract
Quota arrangement
Forecast delivery schedule and detailed delivery schedule (Firm schedule)
Source list
RFQ (Request For Quotation) and Quotation
Converting PR to Purchase Order
Purchase Order
 Blanket Purchase Order
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Procurement Process Variants for Different Types of Procurement:
Procurement of Materials and Services:
Procurement of materials and services is different from differernt dimensions. Table
below explains this.
Material Procurement vs. Service Procurement
Material Procurement
Materials can be inventotised.
Specifications are clearly defined during
material procurement.
For a given specification price comparison
is simple.
Service Procurement
Services cannot be inventorised.
Sometimes it is difficult to define a service
specification during procurement.
For a given specification service price
comparison is difficult – price may differ by
time of purchase (early booking vs. late
booking in airlines), ambience (same food
in a five star hotel and in a normal hotel
may be priced very differently).
Typical Challenges for Service Procurement in ERP:
1.
2.
3.
4.
Service cannot be inventorised.
It is difficult to define a service specification.
Price comparison for service is complex.
Goods receipt is replaced by service entry and acceptance for service
procurement.
Procurement of Direct and Indirect Items
Commodity Procurement:
 Commodities are the items which are not branded and can see wide price
variations depending on demand and supply.
 These can be items like steel, iron ore, coal, oil, etc.
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 Commodity procurement is a specialised procurement process and ERPs
provide special procurement tools for managing this. Some examples are:
1. E-Procurement/Auctions
2. Hedging
Government/Public Sector Procurement:
Public sector procurement is a specialised type of procurement as it needs to follow
separate set of guidelines of different government bodies.
For example, any procurement need at least three supporting quotations to release the
order. Any tender news item need to be published in popular daily newspaper, etc.
Procurement Maturity Model:
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Master Data for ERP Procurement:
1.
2.
3.
4.
Material master record
Vendor master record
Terms and conditions master
Service master record and service catalog
INVENTORY MANAGEMENT
Inventory Management Process in ERP:
A. Inventory Transaction Processes
1.
2.
3.
4.
Goods receipt
Goods issue
Reservations
Stock transfer
B. Inventory Control Processes
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1. Quality control
 Physical inventory
 Cycle counting
 Stock overview
2. Value control/Stock valuation
C. Inventory Planning Processes
1. Designing better process of inventory replenishment
2. Supporting process of managing different inventory exceptions
3. Taking scientific decision on when to order and how much to order: To decide
how much to order and when, ERP supports a set of inventory models like:
 EOQ or Q Model
 P Model
 Min-Max Models
 Two-Bin Models
D. Strategic Inventory Management Processes
1.
2.
3.
4.
Process of inventory collaboration
Deciding inventory based on service levels
Best practice processes of inventory management like Cross docking
Lean inventory management
Chapter 26 – Sales and Service
SALES AND DISTRIBITION PROCESSES AND HOW ERP SUPPORTS THAT
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 While most of the leading ERPs support all the steps in the sales order cycle,
today’s organisations expect more advanced order management capabilities like:
 Order receiving capability through multiple customer touch points like internet,
e-mail, phone, SMS, etc.
 Capability of handling rush orders
 Order communication: Ability to communicate order status to customers on
regular basis.
 Order promising capability: It includes capabilities like:
◦
Profitable to promise
◦
Available to promise
◦
Capable to promise
How ERP Supports Sales and Distribution Processes
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1. Managing Pre-sales Activities
2. Material Availability Date Check
3. Sales Order Processing:
 Standard order normally contains:
◦
Customer and material information
◦
Pricing conditions for each item
◦
Delivery dates and quantities
◦
Shipping information
◦
Billing information
4. Inventory Sourcing:
 For inventory sourcing, ERP can trigger different set of actions like:
◦
Trigger make-to-order production (Production)
◦
Create purchase requisition from external suppliers (Purchase)
◦
Organise the outbound delivery from another warehouse (Stock transfer)
5. Shipping
 This includes all the processes needed to make delivery of items and may
involve activities like:
◦
Creating outbound deliveries
◦
Picking in the warehouse
◦
Packing in the warehouse
◦
Planning and monitoring of transport
◦
Posting the goods issue
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 An ERP transportation order can have variety of information like:
◦
Means of transport
◦
Shipping type
◦
Special processing indicator
 When finally goods issues are posted, the system automatically:
◦
Updates the quantities in inventory
◦
Updates the value change in balance sheet accounts for inventory
accounting
◦
Generates additional documents for accounting
◦
Generates the billing due list
◦
Updates the status in all relevant ssales documents
6. Billing
 Billing supports
◦
Creating invoices for products and services
◦
Creating credit and debit memos
◦
Automatically transferring billing document data to accounting
7. Payment
 Payment process supports
◦
Receiving payments from customer
◦
Making entry in the system i.e. Posting payment against invoices
◦
Reviewing differences
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Sales and Distribution Documents
SALES AND DISTRIBUTION MASTER DATA
 ERP systems need few master data relared to sales and distribution functions
and these are:
 Customer master data
 Material master data
 Condition master data
 Route master for transportation
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 Customer Master
 Material Master
 Material master includes following data:
 Basic data: Include data fields like Material number, material description, basic
unit of measure, etc.
 Sales Org 1: Include data fields like delivering plant, material group, tax
classification, etc.
 Sales Org 2: Include data fields like material pricing group, volume rebate
group, product hierarchy, etc.
 Sales: General/Plant: Include data fields like availability check, transportation
group, loading group, etc.
 Foreign trade – Export: Include data fields like export/import group, region of
origin, etc.
 Sales text: Item text for sales.
 Condition Master
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 There can be different terms and conditions for delivery to different customers.
 There can be also complex calculations related to prices, surcharges, discounts,
freights, taxes, etc.
 Route Master
 The route is the transport channel of an outbound delivery from the deliverying
plant to the customer.
 It has a beginning point and an end point.
 The route can also be used to define the actual transit time.
THE CONCEPT OF PERFECT ORDER
 The concept of perfect order is designed to measure the effectiveness of the
order management process.
 Each step in the order management process must go smoothly for the order to
be considered perfect.
 Companies have began to measure the % of order that meet the criteria of
perfect order.
 And finding to their surprise that less tahn 10% orders are perfect, they are
reengineering their OMP.
 Figure below explains how perfect order requires coordination of different
supply chain functions.
 Perfect Order Fulfillment Requires Coordination of All Functions
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 Perfect order-list of problems:













Order-entry error
Missing information
Ordered item is unavailable
Inability to meet ship date
Picking error
Late shipment
Late arrival
Incomplete paperwork
Early arrival
Damaged shipment
Invoice errors
Split shipments
Follow up required by customer
Table below shows a list of measures that can be used to check the effectiveness of
order management process.
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MANAGING GLOBAL TRADE (EXPORT AND IMPORT)
 Challenges of Global Trade:
 Long lead time leading to high transit inventoty, higher safety stock and slower
cash to cash cycle time
 Poor visibility into the process as lots of entities (customs, shipping, insurance,
bank, etc.) are involved
 Generally poor service as supplier can not fulfill rush order or can accommodate
last minute changes in schedule
 Complexity of global trade – a typical cross border shipment may involve more
than 25 parties, 35 documents, 600 laws and 500 trade agreements to be
considered. A single error can result in costly delay.
 Disputes take longer time to resolve
 Risk of global trade, especially after 9/11.
 Crtitical Success Factors for Global Trade:
 Mitigate financial risk of trading globally, managing currency fluctuations
effectively.
 Improve reputation with enforcing agencies
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 Start dealing with government agencies electronically
 SOX compliance require stringent record keeping and audit trial
 Reducing risk of business disruptions through a strong mitigation strategy for
non-compliance
 Abide by trade compliance and documentation standards
 How ERP Systems Support Global Trade
A. Custom’s management
 Product classification
 Custom duty calculation
 Management of different customs master data
B. Sanctioned party list screening –screening of suppliers
C. Preference processing
D. Embargo check
E. Managing import and export licences
F. Managing import/export documentation
G. Import and export processing
H. Electronic communication with customs authorities/trade systems
 How ERP Systems Manages Global Trade Challenges
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MANAGING CUSTOMER SERVICE










Assembly of technical objects on site at the customer
Despatching of spare parts to the customer
Repair of customer devices by field service technicians on site at the customer
Repair of customer devicesin the service centre
Regular inspection and preventive maintenance of customer devices in the
service centre or at the customer site
Managing warranty
Helpdesk: This is used for recording, processing and forwarding of incoming
customer requests.
Having ready solution database
Managing returns
Managing service contracts (AMC and maintenance contracts)
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Chapter 29 – Quality Management
QUALITY MANAGEMENT BASICS
There are few terms which are frequently used in quality management world which are
listed as below:
1. Material Specification
2. Inspection Plans and Quality Inspection
3. Sampling Procedure
4. Statistical Process Controls and Control Charts
5. Quality Certificates
6. Quality Notification
7. Quality Manual and ISO 9000
8. Batch Management and Traceability
9. Quality Audits
10. Quality Costs
11. Calibration
12. Laboratory Information Management Systems (LIMS)
13. Electronic Signature
ERP QM PROCESSES FOR PROCUREMENT, PRODUCTION, SALES AND
SERVICE
QM During Procurement and Goods Receipt from Vendor
Following quality management processes are relevant while procuring and receiving
materials from vendors:
1. Quality inspection at Goods Receipt
2. Quality Certificate at Goods Receipt
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3.
4.
5.
6.
Vendor Evaluation
Blocking of Invoices/Vendors Based on Quality Inspection
Appraisal Cost Calculation
QM Standard Reports
QM in Sales and Service
Following quality management processes are relevant for sales and service:
1.
2.
3.
4.
5.
6.
Delivering Material as per Customer’s Quality Specification
Quality Certificate
Batch Tracking
Batch Determination
Quality Inspection for Delivery
Returns and Complaint Handling
QM in Sales and Service
Following quality management processes are relevant for production:
1. Inspection During Production
2. Statistical Process Control (SPC)
3. Test Equipment Calibration
Quality Management Master Data
1.
2.
3.
4.
5.
InspectionmMethod
Material specification
Master inspection characteristic
Catalogues
Sampling procedure and sample scheme
Chapter 33 – Data Warehousing, Data Mining, Business
Intelligence and Analytics
DATA WAREHOUSING
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Data warehouse sources data from various operational systems, organises and stores it
in a form that is standardised, structured, consistent, clean and integrated.
Four Important Characteristics of Data Warehouse
1. Subject-oriented
2. Integrated
3. Time-variant
4. Nonvolatile
Advantages and Disadvantages of Data Warehousing
Advantages:
1. Common data model
2. Clean data
3. Can store data for longer time and operational system’s performance do not get
hampered
4. Facilitate BI, EIS, MIS, DSS and Analytics systems by providing right data
Disadvantages
1. Latency factor
2. Storing unstructured data
Data Warehouse Components
Star Schema, Fact and Dimension Tables, Attributes:
 The classic star schema, as illustrated in the figure below is the frequently-used
multi-dimensional model for relational databases.
 This database schema classifies two groups of data: facts (sales or quantity, for
example) and dimension attributes (customer, material, time, for example).
 Star schema is optimised for OLAP.
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Facts:
 These are numeric measurements (values) that represent a specific business
aspect or activity.
 These are stored in a fact table at the centre of the star schema and contain facts
that are linked through their dimensions.
Dimension:
 These are qualifying characteristics that provide additional perspectives to a
given fact.
 Dimensions are normally stored in dimension tables.
 These are joined to fact table by a foreign key.
Attributes:
 Attributes provide additional information for a dimension.
 For example, customer name, city and region can be attribute for the dimension
customer.
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Advantages of Star Schema:
 Storing data in the form of the classic star schema is optimised for reporting.
 It allows the user to view facts from a variety of perspectives (dimensions).
DATA MART
This is a subset of a data warehouse that supports the requirements of particular
department or business function.
Advantages of Data Mart:
 To give users access to the data they need to analyse most often.
 To provide data in a form that matches need of users in a department or business
function.
 To improve end-user response time due to the reduction in the volume of data to
be accessed.
 Normally use less data so tasks such as data cleansing, loading, transformation,
and integration are far easier and hemce implementing and setting up a data
mart is simpler than establishing a corporate data warehouse.
 The cost of implementing data marts is normally less than that required to
establish a data warehouse.
Figure below explains how a data warehouse can source data from different data store
and can be a source of data for multiple datamarts:
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Operational Data Store (ODS)
 An operational data store (ODS) consolidates data from multiple source systems
and provides a near real time integrated view of current data.
 Its purpose is to provide integrated data for operational purpose and it has add,
change or delete functionality.
 Like data warehouse, its source also include legacy systems, but in contrast to a
data warehouse, an ODS may contain 30 to 60 days of information, while a data
warehouse typically contains years of data.
Advantages of ODS




Overwrite function – This is the greatest advantage of ODS
Save data at a document level
Consolidated or overwritten
ODS can be used for reporting and drilldown.
Data Warehousing Tool Capabilities




Data storage capabilities
Database integration capabilities
Supporting different data types
Application and middleware integration capabilities
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 Software platform integration capabilities
 Scalability and performance
 Security features like authentication, authorisation, access control, permission
management, data encryption, security monitoring, alerting, auditing, etc.
 High availability and reliability features like redundancy, fault tolerance, data
protection, data backup, recovery, etc.
 Supporting different industry standards like SQL, SOA (web services, XML), etc.
 Capabilities like Metadata management, data modelling, hierarchy management,
etc.
Data Warehousing Architecture
Storing Data in Warehouse – Some Related Topics
Data Granularity – At which Level to Store Data in Warehouse:
This is always a trade-off decision, i.e. whether to store data at the most detailed level
or to store it at the summarised level. Both have their own advantages and
disadvantages.
Data stored at summarised level has advantages like:
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 Reduced storage costs and reduced CPU usage
 Increased performance since smaller number of records are processed
 Better performance in reporting, etc.
But disadvantage is that summarised level data can not answer transaction level
questions like whether Mr. A had called Mr. Blast month (for a telecom company).
Advantages of storing data at detailed, i.e. storing each transaction, is obtaining details
of every transaction. However, the problem of storing at this level is the huge volume of
data.
Data Refreshing – At What Frequency to Refresh Data in Warehouse:
There can be different options of refreshing data in data warehouse like:
 Periodically (e.g., every night, every week)
 After every significant event, say after each month-end financial closing
 On every update, i.e. as soon as there is a change in data.
There can be different refresh techniques like:
 Full refresh from base tables: This reads entire source table. It is expensive and
time-consuming and typically done when the data warehousing project goes live
for the first time. It is not done on regular basis.
 Incremental or Delta refresh: It detect changes on base table and refreshes only
the delta records (i.e. changes from last refresh).
Data Partitioning:
This means breaking data into several physical units that can be handled separately.
Typically data can be partitioned by date, line of business, geography, organisational
unit or any combination of the above.
Partitioning provides flexibility in managing data and allows:
 Easy restructuring
 Free indexing
 Easy reorganisation
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 Easy recovery
 Easy monitoring
DATA EXTRACTION, TRANSFORMATION – CLEANING AND DATA
LOADING
Clean Data/Quality Data
Some of the critical attributes of this data are as follows:


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
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
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
Accuracy
Completeness
Integrity
Timeliness
Consistency and standardisation
Accuracy of hierarchical relationship
Uniqueness
Data enrichments by third parties
Data Cleansing Tools
Extraction, Transformation and Loading (ETL) Tools
 Extract: Batch extraction of high volumes of data from one or more sources.
 Transform: After extraction, the data need to be transformed or modified
depending on specific business logic involved so that it can be sent to the target
repository.
 Load: Loading of data to specified target systems (data warehouse, data mart,
ODS, etc.)
Areas of Usage for ETL Tools
 Data migrations
 Masater data management
 Data warehousing and reporting
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 Compliance
ETL Vendors: ETL vendors come from variety of backgrounds like:
 Pure-play ETL vendors like Ascential Software (Ascential Data Stage), Informatica
(Informatica PowerCenter), etc.
 Database vendors like IBM, Microsoft (Microsoft Pervasive), Oracle (Oracle
Warehouse Builder - OWB), etc.
 Business intelligence (BI) vendors like Business Objects, Cognos, Hummingbird,
SAS, etc.
ONLINE TRANSACTION PROCESSING (OLTP) AND ONLINE ANALYTICAL
PROCESSING (OLAP)
Online Transaction Processing (OLTP)
OLTP refers to a class of systems that facilitate and manage transaction-oriented
applications, typically for data entry and retrieval transaction processing.
OLTP data is always on-line, and is fast and efficient for querying.
Some of the characteristics of OLTP are:
 Operational data that is the ongoing transactional data related to business
operations like production data, sales data, etc.
 OLTP is the source of the data origin. Every data of the business is stored in the
OLTP system.
 OLTP database design is highly normalised in nature.
 Follows entity relationship diagram and uses data modelling.
 Involves relational database management system (RDBMS).
 Tables form relations between each other.
 The data reveals a typical snapshot of the ongoing business activity.
Online Transaction Processing (OLTP)
OLAP enables a user to easily and selectively extract and view data from different points
of view.
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OLAP is a part of the broader category of business intelligence and data mining tools.
Some of the characteristics of OLAP are:
 Data is consolidated for a period of time.
 OLAP database is formed from various databases which are OLTP in nature.
 OLAP provides decision-making information, build analysis, problem-solving
activities over the business data.
 Database design is typically de-normalised with limited tables.
 Follows star schema with a single fact and multiple dimensional tables. Example:
Sales Fact table with customer dimension, sales dimension, location dimension
and time dimension.
 The data reveals multi dimensional views of various kinds of business activities.
Types of Analysis Possible in OLAP
There are different type of analysis possible in OLAP. For example:
 Aggregation: Total sales, percent-to-total .
 Comparison: Budget vs. actual, sales for each product line YTD (Year-To-Date)
this year vs. last year, sales of a product line to new vs. existing customers.
 Ranking: Top 10, Bottom 5, Top 5 product contributors to margin.
 Find the customers that have had negative sales growth.
OLAP functionalities:





Roll up and roll down (drill up and drill down)
Slice and dice
Multi-dimensional data cube
Pivot
Sort
Strengths of an OLAP Tool




It is a powerful visulalisation tool.
It provides fast, interactive response times.
It is good for analysing time series.
It can be useful to find some clusters and outliers.
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Three Types of OLAP
 ROLAP (Relational Online Analytical Processing): uses an RDBMS to
implement an OLAP environment and typically involves a star schema to
provide the multi-dimensional capabilities.
 MOLAP (Multi-dimension Online Analytical Processing): uses a
multidimensional OLAP and multi-dimensional database to store and access
data. It provides exceptionally fast response times.
 HOLAP (Hybrid Online Analytical Processing): stores detailed data in RDBMS.
Stores agrregated data in MDBMS. User access via MOLAP tools.
Difference of OLTP and OLAP
OLTP System
OLAP System
Holds current data.
Stores detailed data.
Holds historical data.
Can store both detailed and highly
summarised data.
Data is largely static.
Data is dynamic, i.e. changes with every
transaction.
Transaction driven
Supports day to day transactions/decisions
A large number of operational users uses
the system.
High number of transactions in the system.
Analysis driven
Supports strategic decisions
Low number of managerial users uses the
system.
Medium to low level of transactions.
DATA MINING
Data mining id the process of extracting patterns from data.
It is told that data warehousing provides the enterprise with a memory and data mining
provides the enterprise with intelligence.
The parameters of the patterns identified by data mining are as follows:
1. Valid: The pattern identified based on sample analysis, is valid (i.e. holds true)
for the entire data set.
2. Novel: Non-obvious to the system. This pattern was known beforehand.
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3. Useful: Should be possible to act on the item. We can device actions from the
pattern. If there is a pattern discovered, but nothing can be done with that,
then it is not much use.
4. Understandable: The pattern should be interpretable.
Uses and Applications of Data Mining
Uses in Customer Relationship Management
1. Customer analysis: Identify the customers who are likely to leave for a
competitor and the ones which are likely to be the most loyal.
2. Targeted marketing: Identify likely responders to promotions.
3. Cross-selling: Based on earlier buying trends, the tool can recommend what
other products they may be interested in and trying to sell them.
4. Segmenting or grouping customers: Data clustering can also be used to
automatically discover the segments or groups within a customer data set.
Uses in Market Basket Analysis
Market basket analysis uses data mining in retail sales. If a clothing store records the
purchases of customers, a data-mining system can identify those customers who
favour jeans over cotton.
Market basket analysis tries to answer the questions like:
 Who makes purchases?
 What do customers buy together?
 In what order do customers purchase items?
Other Uses of Data Mining
1. Banking: Predict good customers based on old transactions.
2. Credit rating: Given a database of 100,000 names, which persons are the least
likely to default on their credit cards.
3. Fraud detection: From an online stream of event, identify fraudulent events.
4. Medicine/Disease outcome: Analyse patient disease history.
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Data Mining Steps
1. Data Preparation
2. Data mining model construction
3. Results Validation
Data Mining Cautions
1. Pattern True for Sample may not be True for Whole Dataset
2. Privacy Concerns and Ethics
Data Mining Vendors
 Major players: Clementine, IBM’s Intelligent Miner, SGI’s MineSet, SAS’s
Enterprise Miner
 Other Data Mining Products are: DataMind (NeurOagent), Information Discovery
(IDIS), SAS Institute (SAS/Neuronets).
ANALYTICS
 Analytics comprise all specialised programmings that analyse data about a
particular field like marketing, sales, HR, etc.
 Presently, there are many analytics available in the market such as CRM analytics,
supply chain analytics, sales analytics, customer analytics, product and service
analytics, finance analytics, etc.
BI Versus Analytics
Business intelligence is sometimes called analytics though there are distinctions
between them.
BI is a full set of technologies and programmes whereas analytics comprise all
specialised programmings that analyse data about a particular field like marketing, sales,
HR, etc.
Analytics can be divided to two major categories such as:
 Descriptive analytics that focuses on history (say, historical customer patterns)
and
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 Prescriptive analytics that focuses on trends to predict (say, customer’s future
behaviour).
Different Analytics Segments
The three different segments of analytics applications are:
1. Financial and Business Performance Management Analytic Applications
2. Customer Relationship Management Analytic
3. Operations and Production Analytic Applications.
BUSINESS INTELLIGENCE
Business intelligence tools mainly help in reporting as per the end user requirement.
OLAP, analytics, data mining, etc. is a part of business intelligence suite.
BI tools also provide following functionalities:

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




Alerts
Scorecards
Dashboards
Ad hoc query
Workflow
Data delivery
Customisation of reports based on user profile
Predictive modelling and data mining using advanced mathematical techniques
Slice and dice of data
Leading Business Intelligence Vendors
 Business Objects (taken over by SAP recently)
 Cognos (taken over by IBM recently)




SAP
Brio
Oracle
SAS Institute
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 Hyperion.
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