Transcript Intro To IT ERP Need, Usage, Advantage

Enterprise
Resource Planning
Need, Usage and Advantage
ERP – Enterprise Resource Planning
PLANNING the RESOURCES of an ENTERPRISE
• ERP is a way to integrate the data and processes of an organization into
one single system with modules that support core business areas such as
manufacturing, distribution, financials and human resources.
• ERP allows managers from most or all departments to look vertically and
horizontally across the organization to see what they must see
(information) to be productive in their managerial roles.
• ERP captures data from historical activity and current operations . That
data can be transformed into information that, along with external
information, is useful in planning and controlling operations, and in
developing business strategies.
• ERP is evolving into a Multi-Module Application Software Package that
automates inter-organizational business processes across the supply chain
which involve business partners, suppliers, customers, and more.
BEFORE ERP
Problems:
Delays, Lost Orders, Keying into different computer systems invites errors
AFTER ERP
EVOLUTION OF ERP
• 1960s – Inventory Control
• 1970s – MRP (Material Requirement Planning).
– This system helped in translating the master production schedule into
requirements for individual units like sub assemblies, components and raw
materials. MRP systems helped determine what to order, how much to order,
when to order and when to schedule delivery.
• 1980s – MRPII (Manufacturing Resource Planning)
– MRPII supported efforts to optimize the entire plant production system by
supporting capacity planning, shop floor control, and distribution management
activities. MRPII was further extended to support areas like Finance, Human
Resources, Engineering, Project Management etc. As MRPII like systems were
adopted by non manufacturing enterprises like banks and airlines to support
cross-functional coordination and integration of business processes, the “M” no
longer fit, thus the name ERP was coined.
• 1990s – ERP
– Today, ERP is the foundation system for domestic and global business
operations, supporting most or all functional areas in their daily operations. For
some organizations, ERP is a source of competitive advantage.
• 21st century – ERPII
– ERPII is the name some now use to describe ERP like systems that are
evolving to support inter-organizational business processes across the supply
chain.
The Evolution of ERP
System
Primary Business Need (s)
Scope
Enabling Technology
MRP
Efficiency
Inventory Management and
Production planning and
control.
Mainframe computers, batch
processing, traditional file
systems.
MRPII
Efficiency, Effectiveness and
integration of manufacturing
systems
Extending to the entire
manufacturing firm
(becoming cross
functional).
Mainframes and Mini computers,
real-time (time sharing)
processing ,database management
systems (relational)
Entire organization
(increasingly cross
functional), both
manufacturing and nonmanufacturing operations
Mainframes, Mini and micro
Computers, Client server
networks with distributed
processing and distributed
databases, Data warehousing, and
mining, knowledge management.
ERP
Efficiency (primarily back
office), Effectiveness and
integration of all organizational
systems.
ERPII
Efficiency, Effectiveness and
integration within and among
enterprises.
Entire organization
extending to other
organizations (cross
functional and cross
enterprise--partners,
suppliers, customers, etc.)
Mainframes, Client Server
systems, distributed computing,
knowledge management, internet
technology (includes intranets
and extranets).
IRP
Efficiency, Effectiveness and
Integration within and among all
relevant constituents on a global
scale.
Entire organization and its
constituents (increasingly
global) comprising supply
chain from beginning to
end as well as other
industry and government
constituents
Internet, Web Service
Architecture, wireless
networking, mobile wireless,
knowledge management, grid
computing, artificial intelligence.
Enterprise Suite,
or whatever label
gains common
acceptance
ERP TODAY
• Today’s focus seem more to be external as organizations look for ways to
support and improve relationships and interactions with customers,
suppliers, partners and other stakeholders.
• The focus of ERP in increasingly on Front-Office Applications and interorganizational business processes, thus making it visible to
“OUTSIDERS”
• The increasing importance of E-Commerce and Globalization of business
makes support of inter-organizational processes more important.
• ERP Vendors
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SAP
PeopleSoft
Oracle
Microsoft Business Solutions
SSA Global
• ERP vendor products reflect the evolving business needs of clients and
the capabilities of IT, perhaps most notably internet related technologies.
• ERP helps Organization to
– improve competitiveness
– increase profits
– prosper in the global economy.
ERPII—The Future of ERP
• ERPII is a business strategy and a set of collaborative operational
and financial processes internally and beyond the enterprise
• New multi-enterprise business models like Value Collaboration
Networks, customer-centric networks that coordinate all players in
the supply chain, are becoming popular as we enter the 21st century
• These new business models reflect an increased business focus on
external integration
• There is movement away from Client-Server System to Internet
Based Architecture
New Technologies in ERPII
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E-Commerce (Electronic Commerce)
M-Commerce (Mobile & Wireless Technologies)
C-Commerce (Collaborative Commerce)
Middleware
Enterprise Portal Technologies
Web Services
RFID
Analytical Capabilities (Data Warehousing & Data Mining)
CRM, SCM, SRM
Knowledge Management
Business Intelligence
Difference Between ERP & ERPII
Six key differences between ERP and ERP II Systems
Keys
ERP
ERPII
Role
Traditional ERP was concerned with
optimizing an enterprise, Internal
optimization.
ERP II systems are about optimizing the
supply chain through collaboration with
trading partners.
Domain
ERP systems focused on manufacturing
and distribution.
ERP II systems will cross all sectors and
segments of business.
As ERP systems cross sectors and
segments, they will no longer be able to
present all things to all people.
ERP II vendors to pick the industries in
which they’re going to play, and focus on
providing deep functionality for those users.
In ERP systems, the processes were
focused on the four walls of the
enterprise.
ERP II systems will connect with trading
partners, to take those processes beyond
the boundaries of the enterprise.
Old ERP systems were monolithic and
closed.
ERP II systems will be Web-based, open to
integrate and interoperate with other
systems that allow users to choose just the
functionality they need.
Information in ERP systems is
generated and consumed within the
enterprise.
In an ERP II system, that same information
will be available across the supply chain to
authorized participants.
Function
Process
Architecture
Data
ERP Characteristics
Real Time
Integrated System
Best Practice
Customizing
(Configuration)
Process Oriented
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ERP Characteristics (cont.)
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Modular design comprising many distinct business modules such as
financial, manufacturing, accounting, distribution, etc.
Use centralized common DBMS
Integrated modules provide seamless data flow among the modules,
increasing operational transparency through standard interfaces
Generally complex systems involving high cost
Flexible and offer best business practices
Require time-consuming tailoring and configuration setups for integrating
with the company’s business functions
Work in real time with online and batch processing capabilities
They are Internet-enabled
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Core ERP Modules
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Accounting management
Financial management
Manufacturing management
Production management
Transportation management
Sales & distribution management
Human resources management
Supply chain management
Customer relationship management
E-Business
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Advantages & Disadvantages of ERP
Advantages
• Centralized database & common
software infrastructure
• Communicates with supply chain
members
• Helps reduce supply chain inventories.
Supply chain visibility leads to
reductions of the bullwhip effect
(buildup of supply chain safety stock
inventories)
• Standardizes processes & eliminates
redundant resources while increasing
productivity
• Tracks employees’ time & performance
• Integrates financial, production, supply,
& customer information.
ERP Advantages
What benefits
How
Reliable information access
Common DBMS, consistent and accurate data, improved reports.
Avoid data and operations
redundancy
Modules access same data from the central database, avoids
multiple data input and update operations.
Delivery and cycle time
reduction
Minimizes retrieving and reporting delays.
Cost reduction
Time savings, improved control by enterprise-wide
analysis of organizational decisions
Easy adaptability
Changes in business processes easy to adapt and restructure.
Improved scalability
Structured and modular design with
Improved maintenance
Vendor-supported long-term contract as part of the system
procurement
Global outreach
Extended modules such as CRM and SCM
E-Commerce, e-business
Internet commerce, collaborative culture
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Advantages & Disadvantages of ERPCont.
Disadvantages
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Substantial capital investment is needed to implement the system.
The average total cost of ERP ownership was $15 million.
Software is designed around a specific business model based on
specific business processes. The adopting firm must change its
business model & associated processes to fit the built-in business
model designed into the ERP system.
ERP Disadvantages
Disadvantages
How to overcome
Time-consuming
Minimize sensitive issues, internal politics and raise general consensus
Expensive
Cost may vary from thousands of dollars to millions.
Business process reengineering cost may be extremely high
Conformity of the modules
The architecture and components of the selected system should
conform to the business processes, culture and strategic goals of the
organization
Vendor dependence
Single vendor vs. multi-vendor consideration, options for “best of
breeds,” long-term committed support.
Features and complexity
ERP system may have too many features and modules so the user
needs to consider carefully and implement the needful only
Scalability and global outreach
Look for vendor investment in R&D, long-term commitment to product
and services, consider Internet-enabled systems
Extended ERP Capability
Consider middle-ware and extended modules SCM.
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ERP Vendors
• There were five dominating ERP software suppliers: SAP, Oracle,
PeopleSoft, Baan and J.D. Edwards.
• They controlled more than 60% of the multi- billion dollar global
market.
• Each vendor had a specialty in one particular module area such as
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Baan in manufacturing,
PeopleSoft in human resources management,
SAP in logistics, and
Oracle in financials
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CONCLUSION
• Enterprise systems are evolving because organizations are
changing.
• To know what the future of ERP holds, one must look to the
changing environment of business and changing business needs.
• Systems will evolve to meet the business needs. Based on current
trends, these will be increasingly inter-organizational and global.
• Inter-organizational systems (ERPII) will pose challenges beyond
the ones faced with ERP because of the need to integrate the
diverse systems of different organizations.
• Global supply chains mean inter-organizational systems that span
different cultures and countries. That will bring even greater
challenges due to cultural differences, legal issues, and more.