Chapter Extension 9 Enterprise Resource Planning (ERP) Systems

Chapter Extension 9

Enterprise Resource Planning (ERP) Systems

Q1: What is the purpose of ERP systems?

Q2: What are the elements of an ERP solution?

Q3: How are ERP systems implemented?

Q4: What types of organizations use ERP?

Q5: How do the major ERP vendors compare?

Study Questions

CE12-2Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Enterprise Resource Planning (ERP): Suite of modules, a database, and set

of inherent processes for consolidating business operations into a single, consistent, computing platform.

Primary purpose: integration of purchasing, human resources, production, sales, and accounting data into a single system.Allows real time global updates whenever a transaction happens.

Critical business decisions can be made using latest data.

Q1: What Is the Purpose of ERP Systems?


Pre-ERP Information System: Bicycle Manufacturer


Does not include accounting Five non-integrated databases

ERP Information System


All activity processed by ERP application programs and consolidated data stored in centralized ERP

database

How does sales department determine an order is “large”? By dollars? By volume?

Who approves customer credit (and how)?

Who approves production capacity (and how)?

Who approves schedule and terms (and how)?

What actions need to be taken if customer modifies an order?

How does management obtain oversight on sales activity?

Many other questions must be answered as well.

Some Questions that Procedures Need to Answer or Resolve


Sales Dashboard


Almost no organization develops its own ERP software

Daunting and expensive:

Multi-year projects, millions of dollars, and hundreds of employees, consultants and vendor personnel

SAP ERP databases contain over 15,000 tables!

ERP Projects


ERP Application programs

ERP Databases

ERP Business process

procedures

ERP Training and

consulting

Q2: What Are the Elements of an ERP Solution?


ERP

Supply chain (procurement, sales order processing, inventory management, supplier management, and related activities)

Manufacturing (scheduling, capacity planning, quality control, bill of materials, and related activities)

CRM (sales prospecting, customer management, marketing, customer support, call center support)

Human resources (Payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities)

Accounting (General ledger, accounts receivable, accounts payable, cash management, fixed asset accounting)

ERP Include Applications that Integrate: (http://www.erpsoftware360.com/erp-101.htm)


• ERP vendor applications configurable so can alter without changing program code.

• Set configuration parameters specifying how ERP application programs will operate: Hourly payroll application configured to specify number of hours in standard work week, hourly wages for different job categories, wage adjustments for overtime and holiday work, etc.

ERP Applicatio

n Programs

•Trigger: Database program to keep database consistent when certain conditions arise.

•Stored procedure: Database program to enforce business rules.

ERP Database

s

ERP Solution Components


•Adapt to predefined, inherent processes and procedures, or design new ones?

ERP Business Processes

and Procedures •Training on how to implement

Obtaining top-level management support, preparing the organization for change, and dealing with inevitable resistance

•Training on how to use Super Users become in-house trainers;

train the trainers•Vendor and third-party consultants

ERP Training

and Consulting

ERP Solution Components (cont’d)


Inherent Processes: SAP Ordering Business Process (Process Blueprints)


Inherent Processes: SAP Ordering Business Process (cont’d)


Q3: How Are ERP Systems Implemented?


Major tasks in implementation of an ERP application

Model current

business processes “as

is”

Identify relevant

ERP blueprint processes

Compare as-is process

models with blueprints,

note differences

Find ways to

eliminate differences

Prepare detailed

plan

Train users processes, procedure

s, ERP features

and functions

Conduct simulation tests new system

Convert data,

procedures, personnel

to new system

Magnitude of ERP Implementation


SAP blueprint contains over a thousand process models

Industry-specific solutions

Industries

Manufacturing

Distribution

Mining, materials

extraction, petroleum

Medical careGovernmen

t and public service

Utilities

Retail

Education

Q4: What Types of Organizations Use ERP?


Small Market Midsize Enterprise

Annual Revenue

$5M–$100M $100M–$1 B Over $1B

Staff Fewer than 100 101–500 Over 500

ERP Users 5–30 users 31–250 Over 250

IT Staffing One or few Small group; often lack executive participation and long-term strategy

Full IT line of business staffing; with executive participation and CIO

IT Skills Very modest, often OJT

Generalist skills; generally lacking specialty skills

Portfolio of broad and specific skills

ERP by Organization Size (2010)


Source: http://www.erpsoftware360.com/software-markets.htm

Provide a worldwide consolidation of financial statements on a timely basis

Inherent ERP procedures must be adaptable to many cultures

Designed to work with multiple currencies, multiple languages, manage international transfers of goods in inventories, and work effectively with international supply chains

http://advice.Cio.Com/puneesh/deploy_erp_to_improve_globalization_efficiency_of_your_organization

International ERP


Q5: How Do the Major ERP Vendors Compare?


Epicore

MS Dynamic

s Infor Oracle SAP

Revenue

(2009)

$410M+

$1.3B ~$2B >$2B $11.9B

Market Share (2005)

1% 4% 2% 20% 42%

ERP Vendor Market Ranking


ERP Products


No true ERP product in the cloud in 2010

ERP industry entering a new phase

Vendors cannot ignore SOA, thin-client technology like HTML 5, Enterprise 2.0, social CRM, ERP on a cell phone, and other recent developments

SAP and Oracle maintain control of traditional ERP functionality; smaller vendors create complimentary products that incorporate newer technologies.

With SOA architecture, easier to integrate applications with ERP functionality and easier for specialty software vendors to connect their programs with ERP programs and data

The Future: ERP in the Cloud


Active Review

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Q1: What is the purpose of ERP systems?

Q2: What are the elements of an ERP solution?

Q3: How are ERP systems implemented?

Q4: What types of organizations use ERP?

Q5: How do the major ERP vendors compare?

CE12-24

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Chapter Extension 9 Enterprise Resource Planning (ERP) Systems