Enterprise Resource

Planing Systems
Enterprise Resource
Enterprise Resource
Planing Systems
Planing Systems
Traditional Silo View of Information Systems
Within the business:
Within the business:

There are functions, each having its uses of
There are functions, each having its uses of
information systems
information systems
Outside the organization
Outside the organization

s boundaries:
s boundaries:

There are customers and vendors
There are customers and vendors
Functions tend to work in isolation
Functions tend to work in isolation
Traditional View of Systems
Cross
Cross
-
-
Functional Business Processes:
Functional Business Processes:

Cut across boundaries between Sales, Marketing,
Cut across boundaries between Sales, Marketing,
Manufacturing, and Human Resource, etc.
Manufacturing, and Human Resource, etc.

Group employees from different functional specialties
Group employees from different functional specialties
to a complete piece of work
to a complete piece of work
Example: Order Fulfillment Process
Example: Order Fulfillment Process
The Order Fulfillment Process
Systems for Enterprise-Wide Process Integration
Enterprise applications:

Designed to support organization
Designed to support organization
-
-
wide process
wide process
coordination and integration
coordination and integration
Enterprise Systems
Consist of
Consist of :
Enterprise Resource Planning (ERP)
Supply chain management systems
Customer relationship management systems
Knowledge management systems
Systems for Enterprise-Wide Process Integration
(Continued)
Enterprise wide Systems

E
E
nterprise resource planning (ERP) systems:
nterprise resource planning (ERP) systems:

provide a single information system for
provide a single information system for
organization
organization
-
-
wide coordination and integration of
wide coordination and integration of
key business processes.
key business processes.
Enterprise Application Architecture
Integrated Systems Approach
Common set of applications
Usually requires re-engineering of business
processes
Better alignment
Limited customization
Easier upgrades
Overcomes inefficiencies of independent
systems
Integrated data supports multiple business
functions
Benefits of Enterprise Systems

Help to unify the firm
Help to unify the firm

s structure and organization:

s structure and organization:
One organization
One organization

Management:
Management:
Firm wide knowledge
Firm wide knowledge
-
-
based
based
management processes
management processes

Technology:
Technology:
Unified platform
Unified platform

Business:
Business:
More efficient operations & customer
More efficient operations & customer
-
-
driven business processes
driven business processes
Typical architectural components
E-business Platform
Tech Stack
Web
Internet
Mobile
Wireless
Dedicated
Client
Call Center
Telephony
Interaction
Channels
Common Data and Object Models, Security, Interface Common Data and Object Models, Security, Interface
Production Production
Sales Sales
eCommerce
Business
Applications
Marketing
Intelligence
Sales
Intelligence
Production
Intelligence
Call Center
Intelligence
Analytical
Applications
Finance HR
ERP Systems Vendors
Top 10 ERP vendors by total revenues
($ millions)
These revenues are for the vendors fiscal quarters that most closely correspond to calendar
year 2005. Vendor revenues calculated in currencies other than US dollars have been converted
to US dollars using the average daily exchange rates.
* Infor revenues based on vendor estimate following SSA Global acquisition announcement
$10,536
$4,651
$1,600
$1,414
$855
$747
$439
$319
$289
$289
SAP
Oracle
Infor*
Sage Group
Microsoft (MBS)
Lawson
Unit 4 Agresso
IBS
Epicor
IFS
The ERP market will see revitalized
growth
Vendors focus on different verticals
Vendor
Public
sector
Finance/
insurance
Utilities/
telecom Healthcare
Business
services
Retail/
wholesale
Manu-
facturing
SAP
Oracle
Sage Group
MBS
Lawson-Intentia
SSA Global
Infor
Unit 4 Agresso
IBS
Epicor
IFS
Exact
Capability
Low High
Next-generation architecture strategies
the road to SOA
Batch
On-line
midrange
Client/
server
Web
client
Service-
oriented
architectures
1970s 1980s 1990s 2000s 2010s
The final four: major middleware ecosystems
Vendor
IBM
WebSphere
Blue Stack
Microsoft
.NET
Oracle Fusion
Middleware
SAP
NetWeaver
SAP
Oracle
The Sage Group
MBS
Lawson-Intentia
SSA Global
Infor
Unit 4 Agresso
IBS
Epicor
IFS
Exact
(open source: J Boss)
ERP vendor competitive positioning
Large
enterprise
SAP
mySAP
Business
Suite
Oracle
EBS and
Enterprise
NetSuite
Lawson/I
ntentia
SAP
Business
One
MBS
AX
MBS
GP
MBS
NAV
MBS
SL
Oracle
E1
Epicor
Sage
Group
SSA
Infor
QAD
IFS
Exact
Unit 4
Agresso
Midmarket
Small
business
SAP R/3 Modules
Logistics SD Sales & Distribution
MM Materials Management MRP
PP Production Planning MRPII (with others)
QM Quality Management
PM Plant Maintenance
HR Human Resources
FINANCIAL FI Financial Accounting
CO Controlling
AM Asset Management
PS Project System
R/3 INTERNAL WF Workflow: prompt actions
ABAP 4GL Programmable interface
Comparative Modules
SAP Oracle PeopleSoft J.D. Edwards
SD Marketing, Sales Supply chain Order management
MM Procurement Supplier relationship Inventory, procurement
PP Manufacturing Manufacturing mgmt
QM Enterprise perform Technical foundation
PM Service Enterprise service
HR Human Resources Human capital mgmt Workforce
management
FI Financials Financial mgmt sol. Financial management
CO Time & Expense mgmt
AM Asset Management Enterprise asset mgmt
PS Projects Project management
WF Order Management
Contracts Subcontract, real
estate
Industry-Specific Focus
Some vendor has turned to customized
ERP products to serve industry-specific
needs
Examples given from BAAN, PeopleSoft
Microsoft also has entered the fray
BAAN Industry-Specific Variants
Discrete Manufacturing Process Manufacturing
Aerospace & Defense Chemicals
Automobile Food & Beverage
Industrial Machinery Pharmaceuticals
Electronics Cable & Wire
Telecommunications Pulp & Paper
Construction Metals
Logistics
PeopleSoft Industry Solutions
Communications Consumer Products Federal
Government
Financial Services Healthcare Higher Education
High Technology Industrial Products Public Sector
Professional
Services
Staffing
Utilities Wholesale
Distribution
Microsoft Great Plains Business Solutions
Accounting & Finance
Customer Relationship Management
E-Business
Human Resources & Payroll
Manufacturing
Project Accounting
Supply Chain Management
Relative ERP Module Use
(Mabert et al. 2000; Olhager & Selldin, 2003)
Module Use reported - US Use reported
Non US
Financial & Accounting 91.5% 87.3%
Materials Management 89.2% 91.8%
Production Planning 88.5% 90.5%
Order Entry 87.7% 92.4%
Purchasing 86.9% 93.0%
Financial Control 81.5% 82.3%
Distribution/Logistics 75.4% 84.8%
Asset Management 57.7% 63.3%
Quality Management 44.6% 47.5%
Personnel/HR 44.6% 57.6%
Maintenance 40.8% 44.3%
R&D Management 30.8% 34.2%
Challenges of Enterprise Systems

Difficult to build:
Difficult to build:
Require fundamental changes in the
Require fundamental changes in the
way the business operates
way the business operates

Technology:
Technology:
Require complex pieces of software and
Require complex pieces of software and
large investments of time, money, and expertise
large investments of time, money, and expertise

Centralized organizational coordination and decision
Centralized organizational coordination and decision
making:
making:
Not the best way for the firms to operate
Not the best way for the firms to operate
Enterprise Wide IT/ERP
Implementation Costs
Implementation Costs
Software Licenses
Computer Hardware
Professional Services
Data and System Migration
Internal Staff Cost
$15Million
Hidden Costs
Training, testing, data
conversion
Hidden Costs
Training
Most elusive budget item
Consistently underestimated
Integration and Testing
Run real data through the system instead of dummy data
Data Conversion
From old systems to ERP systems
Data Analysis
Costs related to external data warehouse
ERP Consultants
Hard to circumvent
Good practice to include performance metrics and time
schedules as part of the contracts.
EXAMPLES
ONGC
Raytheon Aircraft
Dell Computers
Chose to not adopt
Siemens Power Corporation
Implementation of selected modules
SAP at ONGC
Project:
Enterprise wide Implementation of ERP in
ONGC
through Project
ICE
(Information Consolidation for Efficiency)
Project Highlights
Annual turnover of ONGC is Rs. 32000 Cr
Operating cost is Rs. 6000 Cr
ONGCs capital outlay including projects and schemes is
around Rs. 10000 Cr
ONGC monitors the activities on daily, monthly, quarterly
& on annual basis at work center & at corporate level. It
required multi-process based data integrity.
Absence of integrated online databases, key executives
always had to face time lags between activity period &
data availability
Non availability of timely information cause slippages in
execution and thereby affects planned hydrocarbon
production targets.
A minimal improvement in information availability can
accrue much more benefits than implementation cost of
project
Additional objectives for ERP Implementation:
Optimization & standardization of business processes
Moving up the value chain
Higher productivity & cost reduction
Lowering inventories & increasing customer services
Selection of ERP software was of utmost
importance
Considering the requirement & performance,
ONGC used SAP R/3 platform.
Most of the top petroleum companies in world
use SAP, is also considered as one of the
criteria.
Implementation cost was Rs. 136 Cr
23 base modules of SAP R/3 were
implemented to cover all activities of
ONGC
State of the art datacenter consisting of
high end RISC servers, intel servers,
storage area networks, multi layer
firewalls, robotic tape library was
established
User base for project was 10000
Work centers scattered geographically
around India
ERP implementation completed in 30
months
Project completed exactly as per schedule
Implementation team size was 70% of the
original planned size.
Implementation strategy, scope as well as time
lines were clearly specified in project charter
document.
The whole project was implemented in 6 stages.
During implementation, various stake holders
were kept informed with latest developments
Top down approach was adopted for
Implementation, i.e. convincing first the
higher management and then people at
operational level
Initially, 150 executives were trained over
SAP, then those people were divided into
different groups depending on the module
in which they were trained.
Team structure
Steering committee Executive Committee
Project Manager (ONGC Project manager.. SAP)
Functional Project Managers Technical Project Managers
Business Analysts ABAP Leads
Training Managers Basis Teams
Integration Managers Lead Interfaces
Major implementation phases
Project Preparation
Business Blue Print
Realization
Final Preparation
Go-Live and Support
Major Modules
PP Business Information
PM warehouse
FI
CO
SD
MM
QM
ABAP
Results achieved:
Optimization and standardization of re-engineered
business processes
Eliminated duplicate activities across various processes
Availability of timely and accurate information
Integration of various business application on single
platform
Integrated supply chain management and optimization in
inventory holding
ERP & Raytheon Aircraft
$2.7 billion subsidiary of Raytheon Co.
Implemented SAP in just over 1 year.
Total cost of about $55 million.
Eliminated 30 legacy systems.
Integrated four manufacturing sites and
fifteen airport service stations.
Raytheons Training
$5.5 million went into training employees.
5,000 employees trained for 20
hours/week months before the go-live
date.
150 go-live managers worked full-time on
SAP before go live date.
Dell Computers
Evaluation of SAP R/3
Need to continue project
evaluation
Initial project adoption
1994 Dell began implementation of SAP R/3
enterprise software suite
Spent over 1 year selecting from 3,000
configuration tables
After 2 year effort ($20 million), revised
plan
Dell business model shifted from global focus
to segmented, regional focus
Rethinking
In 1996, revised the plan
Found SAP R/3 too inflexible for Dells
new make-to-order operation
Dell chose to develop a more flexible
system rather than rely on one integrated,
centralized system
Best-of-Breed
I2 Technologies software
Manage raw materials flow
Oracle software
Order management
Glovia software
Manufacturing control
Inventory control
Warehouse management
Materials management
SAP module
Human resources
Core Competencies
Glovia system interfaced with
Dells own shop floor system
I2 supply chain planning software
This retained a Dell core competency
Siemens ERP Implementation
Hirt & Swanson (2001)
Nuclear fuel assembly
manufacturer
Engineering-oriented
Siemens Power Corporation
1994 Began major reengineering effort
Reduced employees by 30%
1996 Adopted SAP R/3 system
Replacement of IS budgeted at $4 million
Some legacy systems retained
Siemens Modules
FI Finance
CO Controlling
AR Accounts receivable
AP Accounts payable
MM Materials management
PP Production planning
QC Quality control
Implementation
To be led by users
Project manager from User community
Consultant hired for IT support
IS group only marginally involved
Project Progress
Oct 1996 Installed FI module
Sep 1997 Installed other modules
On time, within budget
Training
End users became more proficient with
time
Average of 3 months to learn what needed
Management training took longer
Management didnt understand system well
Often made unrealistic requests
Operations
During first year
Major errors in ERP configuration
Evident that users needed additional training
New opportunities to change system scope
suggested
Two years after installation
R/3 system upgrade
Supply Chain Management (SCM)
Close linkage and coordination of activities involved in buying, Close linkage and coordination of activities involved in buying,
making, and moving a product making, and moving a product
Integrates supplier, manufacturer, distributor, and customer Integrates supplier, manufacturer, distributor, and customer
logistics time logistics time
Reduces time, redundant effort, and inventory costs Reduces time, redundant effort, and inventory costs
Network of organizations and business processes Network of organizations and business processes
Helps in procurement of materials, transformation of raw Helps in procurement of materials, transformation of raw
materials into intermediate and finished products materials into intermediate and finished products
Helps in distribution of the finished products to customers Helps in distribution of the finished products to customers
Includes reverse logistics Includes reverse logistics - - returned items flow in the reverse returned items flow in the reverse
direction from the buyer back to the seller direction from the buyer back to the seller
Supply Chain Management (SCM)
Tool to integrate enterprise across its
business functions as well as with
outside business partners to manage the
enterprise resources efficiently.
Vendors Enterprise
. Dept1
. Dept2.
Customers
Supply Chain Management Systems
Information from Supply Chain
Management Systems helps firms:
Decide when and what to produce, store, and move Decide when and what to produce, store, and move
Rapidly communicate orders Rapidly communicate orders
Track the status of orders Track the status of orders
Check inventory availability and monitor inventory levels Check inventory availability and monitor inventory levels
Information from Supply Chain
Management Systems helps firms:
(Continued)
Reduce inventory, transportation, and warehousing costs Reduce inventory, transportation, and warehousing costs
Track shipments Track shipments
Plan production based on actual customer demand Plan production based on actual customer demand
Rapidly communicate changes in product design Rapidly communicate changes in product design
Customer Relationship Management
(CRM)
Manages all ways used by firms to deal with existing and potenti Manages all ways used by firms to deal with existing and potenti al al
new customers new customers
Business and technology discipline Business and technology discipline
Uses information system to coordinate entire business processes Uses information system to coordinate entire business processes
of a firm of a firm
Customer Relationship Management (CRM)
(Continued)
Provides end Provides end- - to to- - end customer care end customer care
Provides a unified view of customer across the company Provides a unified view of customer across the company
Consolidates customer data from multiple sources and provides Consolidates customer data from multiple sources and provides
analytical tools for answering questions analytical tools for answering questions
Customer Relationship Management
(CRM)
Knowledge Management Systems
Collects relevant knowledge and make it available wherever and Collects relevant knowledge and make it available wherever and
whenever it is needed whenever it is needed
Support business processes and management decisions Support business processes and management decisions
Also link the firm to external sources of knowledge Also link the firm to external sources of knowledge
Support processes for acquiring, storing, distributing, and Support processes for acquiring, storing, distributing, and
applying knowledge applying knowledge