Pradeep Sharma

Information Technology(GCET) ( 03/05/12)

(ERP)-SEM VI (EIT-602) Enterprise Resource Planning 03-05-2012

Module I…!!!

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1. ERP INTRODUCTION, BENEFITS, ORIGIN

Enterprise resource planning (ERP) systems integrate internal and

external management information across an entire organization,

embracing finance/accounting, manufacturing, sales and service,

customer relationship management, etc

ERP systems automate this activity with an integrated software

application.

Their purpose is to facilitate the flow of information between all

business functions inside the boundaries of the organization and manage

the connections to outside stakeholders.

Characteristics

ERP (Enterprise Resource Planning) systems typically include the

following characteristics:

An integrated system that operates in real time (or next to real time), without relying

on periodic updates.

A common database, which supports all applications.

A consistent look and feel throughout each module.

Installation of the system without elaborate application/data integration by the

Information Technology (IT) department

Origin of "ERP"

In 1990 Gartner Group first employed the acronym ERP[ as an

extension of material requirements planning (MRP), later planning and

computer-integrated manufacturing. Without supplanting these terms,

ERP came to represent a larger whole, reflecting the evolution of

application integration beyond manufacturing. Not all ERP packages were

developed from a manufacturing core. Vendors variously began with

accounting, maintenance and human resources. By the mid–1990s ERP

systems addressed all core functions of an enterprise. Beyond

corporations, governments and non–profit organizations also began to

employ ERP systems.

Components

Transactional database

Management portal/dashboard

Business intelligence system

Customizable reporting

External access via technology such as web services

Search

Document management

Messaging/chat/wiki

Workflow management

Implementation

Process of Implementing

Step 1. The Strategic Plan – Providing the Rationale and Making the Business Case

Step 2. Assess the “Readiness” of the Institution

– Determining “preparedness” & Achieving Organizational Understanding

Step 3. Prepare for Vendor Selection –

-Determining your Software Requirements and Documenting your Business Practices

Step 4. Select your ERP Vendors –

-Choosing Your Technology Partners

Step 5. Plan the Implementation –

-Preparing for Success

Step 6. Implement the ERP solution-

Working the plan

Step 7. post implementation –

-Where are we Now

ERP's scope usually implies significant changes to staff work processes

and practices. Generally, three types of services are available to help

implement such changes—consulting, customization, and support.

Implementation time depends on business size, number of modules,

customization, the scope of process changes, and the readiness of the

customer to take ownership for the project. Modular ERP systems can

be implemented in stages. The typical project for a large enterprise

consumes about 14 months and requires around 150 consultants. Small

projects can require months; multinational and other large

implementations can take years. Customization can substantially increase

implementation times

Three most common mistakes of ERP Implementation

Focusing on Technology There is no evidence anywhere in the history

of IT that software alone will solve a business problem.

Ignoring the importance of requirement definition many companies

try to adopt ERP system which doesn’t fit to business requirement which

generally lead to project failure.

Jumping from the Requirement definition to the development

phase Most of projects have to deliver the system in the timeline, thus

they may skip some important implementation steps. For example,

Project manager may skip the change manage process which may create

users’ resistance to new system and lead to project failure.

Benefits

Benefits & Challenges of ERP:

As the example of Colgate-Palmolive has just shown ERP systems can

generate significant business benefits for a company. Many other

companies have found major business value in their use of ERP in several

basis ways.

Quality & Efficiency: ERP creates a framework for integrating

and improving a company’s internal business processes that

results in significant improvements in the quality and efficiency

of customer service, production, and distribution.

Decreased Costs: Many companies report significant reductions

in transaction processing costs and hardware, software, and IT

support staff compared to the nonintegrated legacy systems

that were replaced by their new ERP systems.

Decision Support: ERP provides vital cross-functional information

on business performance quickly to managers to significantly

improve their ability to make better decisions in a timely manner

across the entire business enterprise.

Implementing ERP systems breaks down many former departmental and

functional walls of business processes, information systems, and

information resources. This results in more flexible organizational

structures, managerial responsibilities, and work roles, and therefore a

more agile and adaptive organization and workforce that can more easily

capitalize on new business opportunities.

Common set of data

Help in integrating applications for decision making and planning

Allow departments to talk to each other

Easy to integrate by using processed built into ERP software

A way to force BPR (reengineering)

Easy way to solve Y2K problem

Advantages

Better corporation

Improve customer goodwill

Customer satisfaction

Business Integration

Flexibility

Better Analysis and Planning Capability

Use of Latest Technology

The fundamental advantage of ERP is that integrating the myriad processes by which

businesses operate saves time and expense. Decisions can be made more quickly and with

fewer errors. Data becomes visible across the organization. Tasks that benefit from this

integration include:

Sales forecasting, which allows inventory optimization

Chronological history of every transaction through relevant data compilation in every

area of operation.

Order tracking, from acceptance through fulfillment

Revenue tracking, from invoice through cash receipt

Matching purchase orders (what was ordered), inventory receipts (what arrived), and

costing (what the vendor invoiced)

ERP delivers a single database that contains all data for the software modules across

an entire company. People in different departments all see the same information and

can update it.

Computer security is included within an ERP system to protect against both outsider

and insider crime

ERP systems tie together varied processes using data from across the company. For

instance, a typical ERP system manages functions and activities as different as the

bills of materials, order entry, purchasing, accounts payable, human resources, and

inventory control, to name just a few of the modules.

ERP software combined the data of formerly separate applications. This made the

worry of keeping information in synchronization across multiple systems disappears. It

standardized and reduced the number of software specialties previously required.

ERP systems allow companies to replace multiple complex computer applications with a

single integrated system.

ERP systems replace two or more independent applications and eliminate the need for

external interfaces previously required between systems and provide additional benefits

that range from standardization and lower maintenance to make reporting capabilities

easier.

ERP systems centralize business data, bringing the following benefits:

They eliminate the need to synchronize changes between multiple systems—consolidation

of finance, marketing and sales, human resource, and manufacturing applications

They bring legitimacy and transparency in each bit of statistical data.

They enable standard product naming/coding.

They provide a comprehensive enterprise view (no "islands of information"). They make

real–time information available to management anywhere, any time to make proper

decisions.

They protect sensitive data by consolidating multiple security systems into a single

structure

Disadvantages

Customization is problematic.

Re–engineering business processes to fit the ERP system may damage competitiveness

and/or divert focus from other critical activities

ERP can cost more than less integrated and/or less comprehensive solutions.

High switching costs associated with ERP can increase the ERP vendor's negotiating

power which can result in higher support, maintenance, and upgrade expenses.

Overcoming resistance to sharing sensitive information between departments can divert

management attention.

Integration of truly independent businesses can create unnecessary dependencies.

Extensive training requirements take resources from daily operations.

Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not

well suited for production planning and supply chain management (SCM)

Reasons for the Growth of ERP

Improved business performance.

Support business growth requirement

To provide flexible, integrated, real-time decision support

To eliminate limitation in legacy systems

2. EVOLUTION AND STRUCTURE:

Evolution of ERP

The history of ERP can be traced back to the 1960’s, when the focus of systems was mainly

towards inventory control. Most of the systems software were designed to handle inventory

based in traditional inventory concepts. The 1970’s witnessed a shift of focus towards MRP

(Material Requirement Planning).

This system helped in translating the master production schedule into requirements for

individual units like sub assemblies, components and other raw material planning and

procurement. This system was involved mainly in planning the raw material requirements.

Then, in 1980’s came the concept of MRP-II i.e. the Manufacturing Resource Planning which

involved optimizing the entire plant production process. Though MRP-II, in the beginning was

an extension of MRP to include shop floor and distribution management activities, during later

years, MRP-II was further extended to include areas like Finance, Human Resource,

Engineering, Project Management etc.

This gave birth to ERP (Enterprise Resource Planning) which covered the cross-functional

coordination and integration in support of the production process. The ERP as compared to its

ancestors included the entire range of a company’s activities. ERP addresses both system

requirements and technology aspects including client/server distributed architecture, RDBMS,

object oriented programming etc.

Evaluation Criteria

1. Some important points to be kept in mind while evaluating ERP software include

2. Functional fit with the Company’s business processes.

3. Degree of integration between the various components of the ERP system

4. Flexibility and scalability

5. User friendliness

6. Ease of implementation

7. Ability to support multi-site planning and control

8. Technology - client/server capabilities, database independence, security

9. Availability of regular upgrades

10. Amount of customization required

11. Local support infrastructure

12. Reputation and sustainability of the ERP vendor

13. Total costs, including cost of license, training, implementation, maintenance,

customization and hardware requirements.

ERP is a method for effective planning and control of all resources needed to

take, make, ship and account for customer orders in a manufacturing,

distribution or Service Company.

ERP is a way to integrate the data and processes of an organization into one single

system.

ERP systems will have many components including hardware and software, in order to

achieve integration

ERP systems use a unified database to store data for various functions found

throughout the organization.

An ERP system has a service-oriented architecture with modular hardware and

software units or "services" that communicate on a local area network.

The modular design allows a business to add or reconfigure modules (perhaps from

different vendors) while preserving data integrity in one shared database that may be

centralized or distributed

EVOLUTION OF ERP

OR

The Evolution of Information Systems

ERP system was not feasible until the 1990’s

Evolved as a result of

Development of hardware and software technology needed to support

the system

Computers have gotten smaller and faster

Moore’s Law

- Performance doubled with each new generation of computers

- Every 18-24 months the # of transistors on a computer chip

doubled

Proliferation of personal productivity software

Development of a vision of integrated information systems

As PC’s gained popularity, managers became aware that

important business information was being stored on individual

PC/s, but there was no easy way to share the information

electronically.

Servers became more powerful and less expensive and provided

scalability

Possible to view ERP systems as an extension of MRP II (Manufacturing

Resource Planning)

ERP Software Emerges

SAP

Formed in 1972 by five former IBM systems analysts

System analyze und Programmentwicklung

Systems Analysis and Program Development

R/3

Released in 1992

Designed using an open-architecture

Allows all business areas to access the same database, eliminating

redundant data and communication s lags

The Significance and Benefits of ERP Software and Systems

Allows easier global integration

Barriers of currency exchange rates, language and culture can

be bridged automatically

Eliminates updating and repairing many separate computer systems

Allows management to manage operations, not just monitor them

Makes the organization more responsive when change is required

ERP INVOLVES

• Project Planning

• Business & Operational Analysis, including Gap Analysis

• Business Process Re-engineering (BPR)

• Installation & Configuration

• Project Team Training

• Business Requirements Mapping to Software

• Module Configuration

• System Modification and Interfaces

• Data Conversion

• Custom Documentation

• End User Training

• Conference Room Pilot

• Acceptance Testing

• Production

• Post-Implementation Audit/Support

Reasons for Failure

Cultural

Lack of commitment of top management

Political

Failure to follow “proper” system selection methodology

Lack of sufficient implementation planning/ project Management

3. CONCEPTUAL MODEL OF ERP

4. SCENARIO AND JUSTIFICATION OF ERP IN INDIA

ERP in India

Until recently Indian organizations were in a sellers market and

operating in a regulated environment. They grew by managing the

environment, rather than innovating and improving internal efficiencies.

The customer was taken for granted and quality was available only at a

premium. With globalization and gradual lifting of regulation, there is a

paradigm shift in running the business.

Indian companies now need to increase customer focus, improve speed

of delivery, be cost competitive and provide value for money (improved

quality at lower price). Indian companies therefore need to implement

ERP systems for improving their business processes and becoming more

competitive in the global environment. Though ERP implementation is

costly and time consuming, it has several benefits which will help

recover these costs in the long run.

According to NASSCOM, during the year 1998-99, the Indian ERP

market has been estimated at R5200mn compared to Rs2800mn in the

previous year i.e. a growth of 85%yoy. The growth in the export

market was far higher and more than doubled during the same time

period. According to the NASSCOM, by the end of FY2001-02, the

total Indian ERP market is expected to multiply by nearly 4 times and

reach Rs65bn compared to Rs13.4bn in 1998-99.

5. VARIOUS MODULES OF ERP

I.HUMAN RESOURCE MODULE

Human resource management is an essential factor of any successful business.

The various subsystems under HR module are:

Personnel management: (HR master data, Personnel administration, information

systems, recruitment, travel management, benefits administration, salary

administration) Organizational management: (Organizational structure, staffing, schedules, job

descriptions, planning scenarios, personnel cost planning) Payroll Accounting: (Gross/net accounting, history function dialogue capability, multi

currency capability, international solutions) Time management: (Shift planning, work schedules, time recording, absence

determination) Personnel development: Career and succession planning, profile comparisons,

qualifications assessments, additional training determination. Training and event

management.)

A.PERSONNEL MANAGEMENT

Personnel management includes numerous software components, which allow you to

deal with human resources tasks more quickly, accurately and efficiently. You can use

these components not only as part of the company wide ERP solution but also as

standalone systems.

i. Personnel Administration

Information is no longer owned by specific departments, but is shared by multiple

entities across an organization. This eliminates duplicate entries reduces the chance

for error and improves data accuracy.

ii. Employee master data

Human resource module has a centralized database with integration to multiple

components for processing employee information.

The system provides tools to save time and help you tailor the system to fit your

needs.

The HR module contains features for storing any desired information about your

employees.

Most systems have the facility to scan the original documents for optical Storage.

The HR Information system displays graphical information such as organization charts

or employee data.

The system can produce charts and reports-both standard and customer defined.

iii. Recruitment management

This function helps in hiring the right people with the right skills.

Reducing the cost of recruiting and hiring new employees is a challenge for the HR

professional, who is responsible for placing people in the right job, at the right time,

and with the right skills and education.

These requirements are fulfilled only through effective automation of the entire

recruitment process.

The recruitment component is designed to help meet every facet of this challenge like

managing open positions/requisitions, applicant screening, selection and hiring,

correspondence, reporting and cost analysis.

iv.Travel Management

This module helps you in processing the travel expenses effortlessly, in several

currencies and formants.

HR Travel management allows you to process a business trip from start to finish-from

the initial travel request right through to posting in financial accounting and controlling.

This includes any subsequent corrections and all retroactive accounting requirements.

Travel management automatically calculates the tax.

It automatically processes credit card transactions for a particular trip.

You reimburse costs incurred during a trip through a payroll accounting, accounts

payable accounting or by data medium exchange.

In addition, Travel management provides multiple report formats.

You can enter receipts in any currency and then print reports in your native currency.

B.ORGANIZATIONAL MANAGEMENT

This module will assist you in maintaining an accurate picture of your organizations

structure, no matter how fast it changes. In many cases, graphical environments make

it easy to review any moves, additions, or changes in employee positions.

C. PAYROLL ACCOUNTING

The payroll accounting system can fulfill the payroll requirements and provide you with

the flexibility to respond to your changing needs.

Payroll accounting should address payroll functions from a global point of view.

You should be able to centralize your payroll processing, or decentralize the data

based on country or legal entities.

Most payroll accounting systems give you the options and capabilities to establish

business rules without modifying the existing payroll.

Many systems have the features to remind you when transactions are due for

processing.

With payroll accounting, you have the ability to tailor the system to your organization

requirement.

With country specific versions of payroll accounting, you can fulfill language, currency

and regulatory requirements.

D. TIME MANAGEMENT

It is a flexible tool designed to handle complicated evaluation rules to fulfill regulatory

requirements and determine overtime and other time related data.

The time evaluation component stores your organizations business rules and

automatically validates hours worked and wage types.

Shift Planning

Shift planning module helps you to plan your workforce requirements quickly and

accurately.

You can plan your shifts according to your requirements taking into consideration all

criteria, including absences due to leave or sickness, and employee requests for time

off.

Shift planning keeps you informed at all times of any staff excess or deficit.

Another advantage of shift planning is that it enables you to temporarily assign an

employee or employees to another organizational unit where they are needed, allowing

for a temporary change of cost centre.

E. PERSONNEL DEVELOPMENT

Effective personnel development planning ensures that the goals of the organization and

the goals of the employee are in harmony. The benefits of such planning include

improvements in employee performance, employee potential, staff quality, working

climate and employee morale.

i. Training and Event Management

A good HR system will have scheduled seminars, training courses and business events.

On completion of a training course, appraisal forms can be automatically issued.

Appraisals can be carried out for instructors, attendees, business events and training

courses.

II.PLANT MAINTAINENCE MODULE

The achievement of world class performance demands delivery of quality products

expeditiously and economically.

Organizations simply cannot achieve excellence with unreliable equipment.

Machine breakdown and idle time for repair was once an accepted practice. Times have

changed.

Today when a machine breaks down, it can shut down the production line and the

customer's entire plant.

The Preventive Maintenance module provides an integrated solution for supporting the

operational needs of an enterprise wide system.

The Plant maintenance module includes an entire family of product covering all aspects

of plant/ equipment maintenance and becomes, integral to the achievement of process

improvement.

The major subsystems of a maintenance module are :

Preventive Maintenance Control.

Equipment Tracking.

Component Tracking.

Plant Maintenance Calibration Tracking.

Plant Maintenance Warranty Claims Tracking.

C.QUALITY MANAGEMENT MODULE

The quality management module supports the essential elements of a system.

It penetrates all processes within an organization.

The task priorities, according to the quality loop, shift from production (implementation

phase) to production planning

and product development (planning phase), to procurement and sales and distribution, as

well as through the entire usage phase.

It handles the traditional tasks of quality planning, quality inspection and quality

control.

The quality management module’s internal functions do not directly interact with the

data or processes of other modules.

QUALITY MANAGEMENT MODULE – FUNCTIONS:

The quality management module fulfills the following functions:

QUALITY PLANNING: Management of basic data for quality planning and inspection

planning, material specifications, etc. QUALITY INSPECTION: Trigger inspections, inspection processing with inspection

plan selection and sample calculation etc. QUALITY CONTROL. Dynamic sample determination on the basis of the quality level

history, quality management information system for inspections and inspection results

and quality notifications, etc.

D.MATERIAL MANAGEMENT MODULE:

The material management module optimizes all purchasing processes with workflow-

driven processing functions, enables

automated supplier evaluation, lowers procurement and warehousing costs with accurate

inventory and warehouse management and integrates invoice verification.

The main module of material management are as follows:

i. Pre- Purchasing Activity.

ii. Purchasing.

iii. Vendor Evaluation.

iv. Inventory management.

v. Invoice verification and material inspection.

E.MANUFACTURING MODULE:

A good manufacturing system should provide for multi mode manufacturing applications

that encompass full integration of resource management.

These manufacturing applications should allow an easier exchange of information

throughout the entire global enterprise, or at a single site within a company.

The manufacturing module should enable an enterprise to marry technology with

business processes to create an integrated solution.

It must provide the information base upon which the entire operation should be run.

It should contain the necessary business rules to manage the entire supply chain

process whether within a facility, btwn facilities or across the entire supply chain.

Major subsystem of the manufacturing module –

Materials and capacity planning

Shop floor control

Quality management

JIT/repetitive manufacturing

Cost management

Engineering change control

Engineering data management

Configuration management

Tooling

Serialization/lot control

6. ADVANTAGE OF ERP.

The advantages of ERP

Installing an ERP system has many advantages -both direct and indirect.

The direct advantages include improved efficiency, information integration for better decision

making, faster response time to customer queries, etc. The indirect benefits include better

corporate image, improved customer goodwill, customer satisfaction, and so on.

The following are some of the direct benefits of an ERP system:

1. Business Integration

2. Flexibility

3. Better Analysis and Planning Capabilities

4. Use of Latest Technology.

1. Business Integration: The first and most important advantage lies in the promotion of

integration. The reason why ERP packages are considered to the integrated, is the automatic

data updating (automatic data exchange among applications) that is possible among the related

business components.

Since conventional company information systems were aimed at the optimization of independent

business functions in business units, almost all were weak in terms of the communication and

integration of information that transcended the different business functions.

In the case of large companies in particular, the timing of system construction and directives

differs for each product and department/ function and sometimes, they are disconnected. For

this reason, it has become an obstacle in the shift to new product and business classification.

In the case of ERP packages, the data of related business functions is also automatically

updated at the time a transaction occurs. For this reason, one is able to grasp business

details in real time, and carry out various types of management decisions in a timely manner,

based on that information.

2. Flexibility: The second advantage of the ERP packages is their flexibility. Different

languages, currencies, accounting standards and so on can be covered in one system, and

functions that comprehensively manage multiple locations of a company can be packaged and

implemented automatically. To cope with company globalization and system unification, this

flexibility is essential and one can say that it has major advantages, not simply for

development and maintenance, but also in terms of management.

3. Better Analysis and planning Capabilities: Yet another advantage is the boost to the

planning functions. By enabling the comprehensive and unified management of related business

and its data, it becomes possible to fully utilize many types of decision support systems and

simulation functions. Furthermore, since it becomes possible to carry out, flexible and in real

time, the filing and analysis of data from a variety of dimensions, one is able to give the

decision-makers the information they want; thus enabling them to make better and informed

decisions.

4. Use of Latest Technology: the fourth advantage is the utilization of the latest

development in information Technology (IT). The ERP vendors were quick to realize that in

order to grow and to sustain that growth; they had to embrace the latest developments in the

field of information technology. Therefore, they quickly adapted their systems to take

advantage of the latest technologies like open systems, client/ server technology,

Internet/Intranet, CALS (Computer- Aided Acquisition and Logistics Support), electronic-

commerce, etc.

It is this quick adaptation to the latest changes in the Information Technology that makes

the flexible adaptation to changes in future business environments possible. It is this

flexibility that makes the incorporation of the latest technology possible during system

customization, maintenance and expansion phases.

Module II…!!!

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1. BUSINESS PROCESS RE ENGINEERING

What is Business Process Reengineering?

• An organizational change method used to redesign an organization to drive improved

efficiency, effectiveness, and economy.

• Reengineering is the fundamental rethinking and redesign of business processes to

achieve dramatic improvements in critical, contemporary measures of performance,

such as cost, quality, service and speed.

BPR is not?

• Automation

• Downsizing

• Outsourcing

Business process re-engineering (BPR) began as a private sector technique to help

organizations fundamentally rethink how they do their work in order to dramatically improve

customer service, cut operational costs, and become world-class competitors. A key stimulus

for re-engineering has been the continuing development and deployment of sophisticated

information systems and networks. Leading organizations are becoming bolder in using this

technology to support innovative business processes, rather than refining current ways of doing

work

Business Process Re-engineering (BPR) is basically the fundamental re-thinking and radical

re-design, made to an organization's existing resources. It is more than just business

improvising.

Types of Business Process

Business processes are sequences and combinations of business activities. They break

into:

External Process: (Operational)

Customer facing processes that deliver products and services of Value to

the Customer examples:

Get Order

Develop Product

Fulfill Order

Support Product

Management Process:

Processes controlling and coordinating the organization's activities to

ensure that business objectives are delivered.

o Examples:

Make Strategy

Set Direction

Manage

Support Processes:

Processes provide infrastructural and other assistance to business

processes.

o Examples:

IT

Financial Systems

HR Systems

Basic elements of business process:

Motivation to perform

Data gathering, processing and storing

Information processing

Checking, validating and control

Decision making

Communication

Five Areas of Improvement by BPR

a. Strategy and Business Plans

b. Organization Structure

c. Business Process

d. Business Information Technology

e. Organization Culture

BPR Targets

Customer Friendly:

One of the main goals of introducing BPR is to get a Competitive Edge and that can only

be gained by providing the customers more than what the others in the market are asking

for.

Effectiveness:

How effective is the product or service that the business or manufacturing company

providing the customer?

Efficiency:

How efficient is the company that is manufacturing the product before introducing it to

the market to maximize costs? This is one of the key categories that is believed to be

more important than any others.

The Principles of Business Reengineering

Process point of View

Externally, focus on end customers and the generation of greater value for

customers.

Give customers and users a single and accessible point of contact through which they

can use whatever resources and people are relevant to their needs and interests.

Internally, focus on activities which deliver value to customers.

Encourage learning and development by building creative working environments.

Concentrate on flows and processes (including communication) through the

organization.

Remove non-value added activities

Undertake parallel activities

Speed up response and development times

Concentrate on outputs rather than inputs

Give priority to the delivery of value rather than the maintenance of management

control.

Keep the number of core processes to a minimum (approx. 12).

They all should be directed to external customers.

Ensure that continuous improvement is built into implemented solutions.

Human & Organizational Point View

Network related people and activities. Virtual corporations are becoming

commonplace in some business sectors.

Implement work teams and case managers extensively throughout the organization.

Move discretion and authority closer to the customer,

Re-allocate responsibilities between the organization, its suppliers and customers.

Encourage involvement and participation. This requires error-tolerant leadership.

Ensure people are equipped, motivated and empowered to do what is expected of

them.

Where ever possible, people should assume full responsibility for managing and

controlling themselves. This requires planning skills.

Work should be broadened without sacrificing depth of expertise in strategic areas.

Avoid over-sophistication. Don't replace creative thinking with software tools.

Build learning, renewal, and short feedback loops into business processes.

Organizational change tools may include:

– Activity based costing analysis

– Base lining and benchmarking studies

– Business case analysis

– Functionality assessment

– Industrial engineering techniques

– Organization analysis

– Productivity assessment

– Workforce analysis

Others, as needed (e.g., human capital tools)

BPR Flowchart

Difference & Similarity between BPR and TQM

Both TQM and BPR share a cross-functional orientation.

TQM focuses on incremental change and gradual improvement of work processes and

outputs over an open-ended period of time. BPR seeks radical redesign and drastic

improvement of processes a bounded time frame.

Process Improvement (TQM) versus Process Innovation (BPR) From Davenport

Process Improvement

TQM

Process Innovation BPR

Level of Change Incremental Radical

Starting Point Existing Process Clean Slate

Frequency of Change One-time/Continuous One-time

Time Required Short Long

Participation Bottom-Up Top-Down

Typical Scope Narrow, within functions Broad, cross-functional

Risk Moderate High

Primary Enabler Statistical Control Information Technology

Type of Change Cultural Cultural/Structural

Problems

The biggest problem that businesses usually face with BPR is overzealous expectations. BPR is

a business tool with a high price and gradual returns. BPR is quoted as having a 30% success

rate due to the time and cost involved.

BPR has been used by corporations as an excuse for job cuts which has tarnished the name

with employees. Specifically, in 1995, Pacific Bell called for 10,000 job cuts, followed by

Apple Computer Incorporated. Both used the word reengineering to explain the job cuts.

In addition, Michael Hammer and James Champy have admitted that in their book they did not

take into account the human constituent of the business process. In late 1996, Dr. Hammer

made a confession on the Wall Street Journal where the article read: "Dr. Hammer points out

a flaw: He and the other leaders of the $4.7 billion re-engineering industry forgot about

people. ‘I wasn't smart enough about that,' he says. ‘I was reflecting my engineering

background and was insufficient appreciative of the human dimension. I've learned that's

critical. Sometimes BPR implementation was based on generic best practices by a business, not

specific to a particular company. One example of using a generic idea to a particular company

would be the implementation of a $28,000.00 voicemail system at Winguth, Dohahue and Co.,

which was later scrapped because of the computer generated voice which sounded a little too

cold and clients were tired of going through all the menu prompts to reach the desired person.

BPR is also time sensitive. In the case of Metropolitan Life, some claim that their bankruptcy

was caused by their failure to switch from filing cabinets of customer files and records to a

database system. With every new process implementation there is a security issue, like in the

case of Equifax, where people's identities were stolen. eBay was down for 15-hours because

the company decided to test a new system, which was a part of the eBay reengineering

process, that they had hoped would help the company be more efficient and also provide

quality service to the customers.

The future

Six Sigma and Total Quality Management (TQM) are terms often confused with BPR, and are

not its replacements. All are change initiatives, with the main difference being BPR is focused

on radical, "big bang" change, and Six Sigma and TQM both focused on continuous,

incremental improvement.

In order to reanalyze BPR, it is being replaced by Business Process Management (BPM). BPM is

presently taking a similar road toward many failures by focusing too heavily on automation and

failing to consider people in processes.

Process of BPR Exercise:

o Recast people organization into process organization

o Segregate process by customer type-internal and external

o Identify process by:

o Impact on customer

o High decision incidence

o High information exchange

o High incidence of checks, control and validations

o High knowledge base

o Determine the value to the customer in terms of:

o Price/Cost

o Quality

o Service

o Delivery

o Identify the enablers of redesigning

o Set a benchmark for achievement

o Rank the process by:

o Feasibility

o Cost

o Impact on value to the customer

o Appoint the team for each process

o Monitor the process of re-engineering

Reengineering Recommendations

BPR must be accompanied by strategic planning, which must address leveraging IT as a

competitive tool.

Place the customer at the center of the reengineering effort -- concentrate on

reengineering fragmented processes that lead to delays or other negative impacts on

customer service.

BPR must be "owned" throughout the organization, not driven by a group of outside

consultants.

Case teams must be comprised of both managers as well as those will actually do the

work.

The IT group should be an integral part of the reengineering team from the start.

BPR must be sponsored by top executives, who are not about to leave or retire.

BPR projects must have a timetable, ideally between three to six months, so that the

organization is not in a state of "limbo".

BPR must not ignore corporate culture and must emphasize constant communication and

feedback.

Common Problems with BPR

Process under review too big or too small

Reliance on existing process too strong

The Costs of the Change Seem Too Large

BPR Isolated Activity not Aligned to the Business Objectives

Allocation of Resources

Poor Timing and Planning

Keeping the Team and Organization on Target

2. DATA WARE HOUSING AND DATA MINING

What is Data Warehousing?

A single, complete and consistent store of data obtained from a variety of different

sources made available to end users in a they can understand and use in a business

context.

A process of transforming data into information and making it available to users in a

timely enough manner to make a difference

Evolution

60’s: Batch reports

hard to find and analyze information

inflexible and expensive, reprogram every new request

70’s: Terminal-based DSS and EIS (executive information systems)

still inflexible, not integrated with desktop tools

80’s: Desktop data access and analysis tools

query tools, spreadsheets, GUIs

easier to use, but only access operational databases

90’s: Data warehousing with integrated OLAP engines and tools

Data Warehouse: a centralized data repository which can be queried for business

benefit.

Data Warehousing makes it possible to

– extract archived operational data

– overcome inconsistencies between different legacy data formats

– integrate data throughout an enterprise, regardless of location, format, or

communication requirements

– incorporate additional or expert information

Very Large Data Bases

o Terabytes -- 10^12 bytes Wal-Mart -- 24 Terabytes

o Pet bytes -- 10^15 bytes Geographic Information Systems

o Exabytes -- 10^18 bytes National Medical Records

o Zettabytes -- 10^21 bytes Weather images

o Zottabytes -- 10^24 bytes Intelligence Agency Videos

Data Warehousing -- It is a process

Technique for assembling and managing data from various sources for the purpose of

answering business questions. Thus making decisions that were not previous possible

A decision support database maintained separately from the organization’s operational

database

A data warehouse is a

subject-oriented

integrated

time-varying

non-volatile

Collection of data that is used primarily in organizational decision making.

Data Warehouse Architecture

Data Warehouse for Decision Support & OLAP

Putting Information technology to help the knowledge worker make faster and better

decisions

Which of my customers are most likely to go to the competition?

What product promotions have the biggest impact on revenue?

How did the share price of software companies correlate with profits over last

10 years?

Decision Support

Used to manage and control business

Data is historical or point-in-time

Optimized for inquiry rather than update

Use of the system is loosely defined and can be ad-hoc

Used by managers and end-users to understand the business and make judgements

Application Areas

Why Separate Data Warehouse?

High performance for both systems

DBMS— tuned for OLTP

access methods, indexing, concurrency control, recovery

Warehouse—tuned for OLAP

Complex OLAP queries, multidimensional view, consolidation.

Different functions and different data

Missing data: Decision support requires historical data which operational DBs do

not typically maintain

Data consolidation: DS requires consolidation (aggregation, summarization) of

data from heterogeneous sources

Data quality: different sources typically use inconsistent data representations,

codes and formats which have to be reconciled

12 Rules of a Data Warehouse

Data Warehouse and Operational Environments are Separated

Data is integrated

Contains historical data over a long period of time

Data is a snapshot data captured at a given point in time

Data is subject-oriented

Mainly read-only with periodic batch updates

Development Life Cycle has a data driven approach versus the traditional process-

driven approach

Data contains several levels of detail

Environment is characterized by Read-only transactions to very large data sets

System that traces data sources, transformations, and storage

Metadata is a critical component

Source, transformation, integration, storage, relationships, history, etc

Contains a chargeback mechanism for resource usage that enforces optimal use of data

by end users

Data Warehouse Design Process

Top-down, bottom-up approaches or a combination of both

Top-down: Starts with overall design and planning (mature)

Bottom-up: Starts with experiments and prototypes (rapid)

From software engineering point of view

Waterfall: structured and systematic analysis at each step before proceeding

to the next

Spiral: rapid generation of increasingly functional systems, short turn around

time, quick turn around

Typical data warehouse design process

Choose a business process to model, e.g., orders, invoices, etc.

Choose the grain (atomic level of data) of the business process

Choose the dimensions that will apply to each fact table record

Choose the measure that will populate each fact table record

Three Data Warehouse Models

Enterprise warehouse

collects all of the information about subjects spanning the entire organization

Data Mart

a subset of corporate-wide data that is of value to a specific groups of users.

Its scope is confined to specific, selected groups, such as marketing data mart

Independent vs. dependent (directly from warehouse) data mart

Virtual warehouse

A set of views over operational databases

Only some of the possible summary views may be materialized

Data Mining

Generally, data mining (sometimes called data or knowledge discovery) is the process of

analyzing data from different perspectives and summarizing it into useful information -

information that can be used to increase revenue, cuts costs, or both. Data mining

software is one of a number of analytical tools for analyzing data. It allows users to

analyze data from many different dimensions or angles, categorize it, and summarize

the relationships identified. Technically, data mining is the process of finding

correlations or patterns among dozens of fields in large relational databases.

Data, Information, and Knowledge

Data

Data are any facts, numbers, or text that can be processed by a computer. Today,

organizations are accumulating vast and growing amounts of data in different formats and

different databases. This includes:

operational or transactional data such as, sales, cost, inventory, payroll, and

accounting

nonoperational data, such as industry sales, forecast data, and macro economic data

meta data - data about the data itself, such as logical database design or data

dictionary definitions

Information

The patterns, associations, or relationships among all this data can provide information. For

example, analysis of retail point of sale transaction data can yield information on which

products are selling and when.

Knowledge

Information can be converted into knowledge about historical patterns and future trends. For example, summary information on retail supermarket sales can be analyzed in light of

promotional efforts to provide knowledge of consumer buying behavior. Thus, a manufacturer

or retailer could determine which items are most susceptible to promotional efforts.

Four Phases of Data Mining

Data Preparation

– Identify the main data sets to be used by the data mining operation (usually

the data warehouse)

Data Analysis and Classification

– Study the data to identify common data characteristics or patterns

Data groupings, classifications, clusters, sequences

Data dependencies, links, or relationships

Data patterns, trends, deviation

Knowledge Acquisition

– Uses the Results of the Data Analysis and Classification phase

– Data mining tool selects the appropriate modeling or knowledge-acquisition

algorithms

Neural Networks

Decision Trees

Rules Induction

Genetic algorithms

Memory-Based Reasoning

Prognosis

– Predict Future Behavior

– Forecast Business Outcomes

65% of customers who did not use a particular credit card in the last 6

months are 88% likely to cancel the account.

What can data mining do?

Data mining is primarily used today by companies with a strong consumer focus -

retail, financial, communication, and marketing organizations. It enables these

companies to determine relationships among "internal" factors such as price, product

positioning, or staff skills, and "external" factors such as economic indicators,

competition, and customer demographics. And, it enables them to determine the impact

on sales, customer satisfaction, and corporate profits. Finally, it enables them to "drill

down" into summary information to view detail transactional data.

With data mining, a retailer could use point-of-sale records of customer purchases to

send targeted promotions based on an individual's purchase history. By mining

demographic data from comment or warranty cards, the retailer could develop products

and promotions to appeal to specific customer segments.

For example, Blockbuster Entertainment mines its video rental history database to

recommend rentals to individual customers. American Express can suggest products to

its cardholders based on analysis of their monthly expenditures.

WalMart is pioneering massive data mining to transform its supplier relationships.

WalMart captures point-of-sale transactions from over 2,900 stores in 6 countries and

continuously transmits this data to its massive 7.5 terabyte Teradata data warehouse.

WalMart allows more than 3,500 suppliers, to access data on their products and

perform data analyses. These suppliers use this data to identify customer buying

patterns at the store display level. They use this information to manage local store

inventory and identify new merchandising opportunities. In 1995, WalMart computers

processed over 1 million complex data queries.

The National Basketball Association (NBA) is exploring a data mining application that

can be used in conjunction with image recordings of basketball games. The Advanced

Scout software analyzes the movements of players to help coaches orchestrate plays

and strategies. For example, an analysis of the play-by-play sheet of the game played

between the New York Knicks and the Cleveland Cavaliers on January 6, 1995 reveals

that when Mark Price played the Guard position, John Williams attempted four jump

shots and made each one! Advanced Scout not only finds this pattern, but explains that

it is interesting because it differs considerably from the average shooting percentage

of 49.30% for the Cavaliers during that game.

By using the NBA universal clock, a coach can automatically bring up the video clips

showing each of the jump shots attempted by Williams with Price on the floor, without

needing to comb through hours of video footage. Those clips show a very successful

pick-and-roll play in which Price draws the Knick's defense and then finds Williams for

an open jump shot.

How does data mining work?

While large-scale information technology has been evolving separate transaction and analytical

systems, data mining provides the link between the two. Data mining software analyzes

relationships and patterns in stored transaction data based on open-ended user queries.

Several types of analytical software are available: statistical, machine learning, and neural

networks. Generally, any of four types of relationships are sought:

Classes: Stored data is used to locate data in predetermined groups. For example, a

restaurant chain could mine customer purchase data to determine when customers visit

and what they typically order. This information could be used to increase traffic by

having daily specials.

Clusters: Data items are grouped according to logical relationships or consumer

preferences. For example, data can be mined to identify market segments or consumer

affinities.

Associations: Data can be mined to identify associations. The beer-diaper example is

an example of associative mining.

Sequential patterns: Data is mined to anticipate behavior patterns and trends. For

example, an outdoor equipment retailer could predict the likelihood of a backpack being

purchased based on a consumer's purchase of sleeping bags and hiking shoes.

Data mining consists of five major elements:

Extract, transform, and load transaction data onto the data warehouse system.

Store and manage the data in a multidimensional database system.

Provide data access to business analysts and information technology professionals.

Analyze the data by application software.

Present the data in a useful format, such as a graph or table.

Different levels of analysis are available:

Artificial neural networks: Non-linear predictive models that learn through training

and resemble biological neural networks in structure.

Genetic algorithms: Optimization techniques that use processes such as genetic

combination, mutation, and natural selection in a design based on the concepts of

natural evolution.

Decision trees: Tree-shaped structures that represent sets of decisions. These

decisions generate rules for the classification of a dataset. Specific decision tree

methods include Classification and Regression Trees (CART) and Chi Square Automatic

Interaction Detection (CHAID) . CART and CHAID are decision tree techniques used

for classification of a dataset. They provide a set of rules that you can apply to a new

(unclassified) dataset to predict which records will have a given outcome. CART

segments a dataset by creating 2-way splits while CHAID segments using chi square

tests to create multi-way splits. CART typically requires less data preparation than

CHAID.

Nearest neighbor method: A technique that classifies each record in a dataset based

on a combination of the classes of the k record(s) most similar to it in a historical

dataset (where k 1). Sometimes called the k-nearest neighbor technique.

Rule induction: The extraction of useful if-then rules from data based on statistical

significance.

Data visualization: The visual interpretation of complex relationships in

multidimensional data. Graphics tools are used to illustrate data relationships.

Data-mining techniques

The following list describes many data-mining techniques in use today. Each of these

techniques exists in several variations and can be applied to one or more of the categories

above.

Regression modeling—this technique applies standard statistics to data to prove or

disprove a hypothesis. One example of this is linear regression, in which variables are

measured against a standard or target variable path over time. A second example is

logistic regression, where the probability of an event is predicted based on known

values in correlation with the occurrence of prior similar events.

Visualization—this technique builds multidimensional graphs to allow a data analyst to

decipher trends, patterns, or relationships.

Correlation—this technique identifies relationships between two or more variables in a

data group.

Variance analysis—this is a statistical technique to identify differences in mean

values between a target or known variable and nondependent variables or variable

groups.

Discriminate analysis—this is a classification technique used to identify or

“discriminate” the factors leading to membership within a grouping.

Forecasting—forecasting techniques predict variable outcomes based on the known

outcomes of past events.

Cluster analysis—this technique reduces data instances to cluster groupings and then

analyzes the attributes displayed by each group.

Decision trees—Decision trees separate data based on sets of rules that can be

described in “if-then-else” language.

Neural networks—neural networks are data models that are meant to simulate

cognitive functions. These techniques “learn” with each iteration through the data,

allowing for greater flexibility in the discovery of patterns and trends.

Major Issues in Data Warehousing and Mining

• Mining methodology and user interaction

– Mining different kinds of knowledge in databases

– Interactive mining of knowledge at multiple levels of abstraction

– Incorporation of background knowledge

– Data mining query languages and ad-hoc data mining

– Expression and visualization of data mining results

– Handling noise and incomplete data

– Pattern evaluation: the interestingness problem

• Performance and scalability

– Efficiency and scalability of data mining algorithms

– Parallel, distributed and incremental mining methods

• Issues relating to the diversity of data types

– Handling relational and complex types of data

– Mining information from heterogeneous databases and global information

systems (WWW)

• Issues related to applications and social impacts

– Application of discovered knowledge

• Domain-specific data mining tools

• Intelligent query answering

• Process control and decision making

– Integration of the discovered knowledge with existing knowledge: A knowledge

fusion problem

– Protection of data security, integrity, and privacy

3. ONLINE ANALYTIC PROCESSING (OLAP)

What Is OLAP?

Online Analytical Processing - coined by

EF Codd in 1994 paper contracted by

Arbor Software*

Generally synonymous with earlier terms such as Decisions Support, Business

Intelligence, Executive Information System

OLAP = Multidimensional Database

MOLAP: Multidimensional OLAP (Arbor Essbase, Oracle Express)

ROLAP: Relational OLAP (Informix MetaCube, Microstrategy DSS Agent)

The OLAP Market

Rapid growth in the enterprise market

1995: $700 Million

1997: $2.1 Billion

Significant consolidation activity among major DBMS vendors

10/94: Sybase acquires ExpressWay

7/95: Oracle acquires Express

11/95: Informix acquires Metacube

1/97: Arbor partners up with IBM

10/96: Microsoft acquires Panorama

Result: OLAP shifted from small vertical niche to mainstream DBMS category

Strengths of OLAP

It is a powerful visualization paradigm

It provides fast, interactive response times

It is good for analyzing time series

It can be useful to find some clusters and outliers

Many vendors offer OLAP tools

OLAP Is FASMI

Fast

Analysis

Shared

Multidimensional

Information

Online Analytical Processing Tools

DSS tools that use multidimensional data analysis techniques

– Support for a DSS data store

– Data extraction and integration filter

– Specialized presentation interface

Need for More Intensive Decision Support

4 Main Characteristics

– Multidimensional data analysis

– Advanced Database Support

– Easy-to-use end-user interfaces

– Support Client/Server architecture

Relational OLAP

Relational Online Analytical Processing

– OLAP functionality using relational database and familiar query tools to store

and analyze multidimensional data

Multidimensional data schema support

Data access language & query performance for multidimensional data

Support for Very Large Databases

Typical OLAP Operations

Roll up (drill-up): summarize data

by climbing up hierarchy or by dimension reduction

Drill down (roll down): reverse of roll-up

from higher level summary to lower level summary or detailed data, or

introducing new dimensions

Slice and dice

project and select

Pivot (rotate)

Reorient the cube, visualization, 3D to series of 2D planes.

Other operations

drill across: involving (across) more than one fact table

drill through: through the bottom level of the cube to its back-end relational

tables (using SQL)

OLAP Server Architectures

Relational OLAP (ROLAP)

Use relational or extended-relational DBMS to store and manage warehouse

data and OLAP middle ware to support missing pieces

Include optimization of DBMS backend, implementation of aggregation navigation

logic, and additional tools and services

greater scalability

Multidimensional OLAP (MOLAP)

Array-based multidimensional storage engine (sparse matrix techniques)

fast indexing to pre-computed summarized data

Hybrid OLAP (HOLAP)

User flexibility, e.g., low level: relational, high-level: array

Specialized SQL servers

specialized support for SQL queries over star/snowflake schemas

4. PRODUCT LIFE CYCLE MANAGEMENT(PLM)

INTRODUCTION

All products and services have certain life cycles. The life cycle refers to the period

from the product’s first launch into the market until its final withdrawal and it is split

up in phases. During this period significant changes are made in the way that the

product is behaving into the market i.e. its reflection in respect of sales to the

company that introduced it into the market. Since an increase in profits is the major

goal of a company that introduces a product into a market, the product’s life cycle

management is very important. Some companies use strategic planning and others follow

the basic rules of the different life cycle phase that are analyzed later.

The understanding of a product’s life cycle, can help a company to understand and

realize when it is time to introduce and withdraw a product from a market, its position

in the market compared to competitors, and the product’s success or failure.

PART 1: PRODUCT LIFE CYCLE MODEL DESCRIPTION

The product’s life cycle - period usually consists of five major steps or phases:

Product development, Product introduction, Product growth, Product maturity and

finally Product decline. These phases exist and are applicable to all products or

services from a certain make of automobile to a multimillion-dollar lithography tool to a

one-cent capacitor. These phases can be split up into smaller ones depending on the

product and must be considered when a new product is to be introduced into a market

since they dictate the product’s sales performance.

1. PRODUCT DEVELOPMENT PHASE

Product development phase begins when a company finds and develops a new product

idea. This involves translating various pieces of information and incorporating them into

a new product. A product is usually undergoing several changes involving a lot of money

and time during development, before it is exposed to target customers via test

markets. Those products that survive the test market are then introduced into a real

marketplace and the introduction phase of the product begins. During the product

development phase, sales are zero and revenues are negative. It is the time of

spending with absolute no return.

2. INTRODUCTION PHASE

The introduction phase of a product includes the product launch with its requirements

to getting it launch in such a way so that it will have maximum impact at the moment

of sale. A good example of such a launch is the launch of “Windows XP” by Microsoft

Corporation.

This period can be described as a money sinkhole compared to the maturity phase of a

product. Large expenditure on promotion and advertising is common, and quick but

costly service requirements are introduced. A company must be prepared to spent a lot

of money and get only a small proportion of that back. In this phase distribution

arrangements are introduced. Having the product in every counter is very important

and is regarded as an impossible challenge. Some companies avoid this stress by hiring

external contractors or outsourcing the entire distribution arrangement. This has the

benefit of testing an important marketing tool such as outsourcing.

Pricing is something else for a company to consider during this phase. Product pricing

usually follows one or two well structured strategies. Early customers will pay a lot for

something new and this will help a bit to minimize that sinkhole that was mentioned

earlier. Later the pricing policy should be more aggressive so that the product can

become competitive. Another strategy is that of a pre-set price believed to be the

right one to maximize sales. This however demands a very good knowledge of the

market and of what a customer is willing to pay for a newly introduced product.

A successful product introduction phase may also result from actions taken by the

company prior to the introduction of the product to the market. These actions are

included in the formulation of the marketing strategy. This is accomplished during

product development by the use of market research. Customer requirements on design,

pricing, servicing and packaging are invaluable to the formation of a product design. A

customer can tell a company what features of the product are appealing and what are

the characteristics that should not appear on the product. He will describe the ways

of how the product will become handy and useful. So in this way a company will know

before its product is introduced to a market what to expect from the customers and

competitors. A marketing mix may also help in terms of defining the targeted audience

during promotion and advertising of the product in the introduction phase.

3. GROWTH PHASE

The growth phase offers the satisfaction of seeing the product take-off in the

marketplace. This is the appropriate timing to focus on increasing the market share. If

the product has been introduced first into the market, (introduction into a “virgin”1

market or into an existing market) then it is in a position to gain market share

relatively easily. A new growing market alerts the competition’s attention.

The company must show all the products offerings and try to differentiate them from

the competitor’s ones. A frequent modification process of the product is an effective

policy to discourage competitors from gaining market share by copying or offering

similar products. Other barriers are licenses and copyrights, product complexity and

low availability of product components.

Promotion and advertising continues, but not in the extent that was in the introductory

phase and it is oriented to the task of market leadership and not in raising product

awareness. A good practice is the use of external promotional contractors. This period

is the time to develop efficiencies and improve product availability and service. Cost

efficiency and time-to-market and pricing and discount policy are major factors in

gaining customer confidence. Good coverage in all marketplaces is worthwhile goal

throughout the growth phase.

Managing the growth stage is essential. Companies sometimes are consuming much more

effort into the production process, overestimating their market position. Accurate

estimations in forecasting customer needs will provide essential input into production

planning process. It is pointless to increase customer expectations and product demand

without having arranged for relative production capacity. A company must not make the

mistake of over committing. This will result into losing customers not finding the

product “on the self”.

4. MATURITY PHASE

When the market becomes saturated with variations of the basic product, and all

competitors are represented in terms of an alternative product, the maturity phase

arrives. In this phase market share growth is at the expense of someone else’s

business, rather than the growth of the market itself. This period is the period of the

highest returns from the product. A company that has achieved its market share goal

enjoys the most profitable period, while a company that falls behind its market share

goal, must reconsider its marketing positioning into the marketplace.

During this period new brands are introduced even when they compete with the

company’s existing product and model changes are more frequent (product, brand, and

model). This is the time to extend the product’s life.

Pricing and discount policies are often changed in relation to the competition policies

i.e. pricing moves up and down accordingly with the competitor’s one and sales and

coupons are introduced in the case of consumer products. Promotion and advertising

relocates from the scope of getting new customers, to the scope of product

differentiation in terms of quality and reliability.

The battle of distribution continues using multi distribution channels2. A successful

product maturity phase is extended beyond anyone’s timely expectations. A good

example of this is “Tide” washing powder, which has grown old, and it is still growing.

5. DECLINE PHASE

The decision for withdrawing a product seems to be a complex task and there a lot of

issues to be resolved before with decide to move it out of the market. Dilemmas such

as maintenance, spare part availability, service competitions reaction in filling the

market gap are some issues that increase the complexity of the decision process to

withdraw a product from the market. Often companies retain a high price policy for

the declining products that increase the profit margin and gradually discourage the

“few” loyal remaining customers from buying it. Such an example is telegraph

submission over facsimile or email. Dr. M. Avlonitis from the Economic University of

Athens has developed a methodology, rather complex one that takes under

consideration all the attributes and the subsequences of product withdrawal process.

Sometimes it is difficult for a company to conceptualize the decline signals of a

product. Usually a product decline is accompanied with a decline of market sales. Its

recognition is sometimes hard to be realized, since marketing departments are usually

too optimistic due to big product success coming from the maturity phase.

This is the time to start withdrawing variations of the product from the market that

are weak in their market position. This must be done carefully since it is not often

apparent which product variation brings in the revenues.

The prices must be kept competitive and promotion should be pulled back at a level

that will make the product presence visible and at the same time retain the “loyal”

customer. Distribution is narrowed. The basic channel is should be kept efficient but

alternative channels should be abandoned. For an example, a 0800 telephone line with

shipment by a reliable delivery company, paid by the customer is worth keeping.

PART 2: ANALYSIS OF PRODUCT LIFE CYCLE MODEL

There are some major product life cycle management techniques that can be used to

optimize a product’s revenues in respect to its position into a market and its life cycle.

These techniques are mainly marketing or management strategies that are used by

most companies worldwide and include the know-how of product upgrade, replacement

and termination. To comprehend these strategies one must first make a theoretical

analysis of the model of product life cycle.

In the mid 70’s the model of product life cycle described in “Part 1”, was under heavy

criticism by numerous authors. The reasons behind this criticism are described below:

o The shift changes in the demand of a product along a period of time makes the

distinction of the product life cycle phase very difficult, the duration of those

almost impossible to predict and the level of sales of the product somewhat in

the realm of the imagination.

o There are many products that do not follow the usual shape of the product life

cycle graph as shown in fig.

o The product life cycle does not entirely depend on time as shown in fig. 1. It

also depends on other parameters such as management policy, company strategic

decisions and market trends. These parameters are difficult to be pinpointed

and so are not included in the product life cycle as described in “Part 1”.

The model of product life cycle also depends on the particular product. There would be

different models and so different marketing approaches. There are basically three

different types of products: a product class (such as cars), a product form (such as a

station wagon, coupe, family car etc of a particular industry) and a product brand of

that particular industry (such as Ford Escort). The life cycle of the product class

reflects changes in market trend and lasts longer than the life cycle of the product

form or brand. In the other hand the life cycle of a product form or brand reflects

the competitiveness of a company (i.e. sales, profits) and therefore follows more

closely the product life cycle model.

PART 3: PRODUCT LIFE CYCLE TECHNIQUE EXAMPLE : PRODUCT

CANNIBALISM

Product cannibalization occurs when a company decides to replace an existing product

and introduce a new one in its place, regardless of its position in the market (i.e. the

product’s life cycle phase does not come into account). This is due to newly introduced

technologies and it is most common in high tech companies. As all things in life there is

negative and positive cannibalization.

In the normal case of cannibalization, an improved version of a product replaces an

existing product as the existing product reaches its sales peak in the market. The new

product is sold at a high price to sustain the sales, as the old product approaches the

end of its life cycle. Nevertheless there are times that companies have introduced a

new version of a product, when the existing product is only start to grow. In this way

the company sustains peak sales all the time and does not wait for the existing product

to enter its maturity phase. The trick in cannibalization is to know when and why to

implement it, since bad, late or early cannibalization can lead to bad results for

company sales.

1. UNFAVORABLE CANNIBALIZATION

Cannibalization should be approached cautiously when there are hints that it may have an

unfavorable economic effect to the company, such as lower sales and profits, higher technical

skills and great retooling. The causes of such economic problems are given bellow.

• The new product contributes less to profit than the old one: When the new product is sold

at a lower price, with a resulting lower profit than the old one, then it does not sufficiently

increase the company’s market share or market size.

• The economics of the new product might not be favorable: Technology changes can force a

product to be cannibalized by a completely new one. But in some cases the loss of profits due

to the cannibalization is too great. For example a company that produced ready business

forms in paper was forced to change into electronic forms for use in personal computers.

Although the resulting software was a success and yield great profits, the sales of the paper

forms declined so fast that the combined profit from both products, compared to the profits

if the company did not cannibalize the original product showed a great loss in profits.

The new product requires significant retooling: When a new product requires a different

manufacturing process, profit is lower due to the investment in that process and due to the

write-offs linked to retooling the old manufacturing process.

• The new product has greater risks: The new product may be profitable but it may have

greater risks than the old one. A company cannot cannibalize its market share using a failed

or failing product. This can happen in high-tech companies that do not understand enough of a

new technology so that to turn it into a successful and working product. As a result a

unreliable product emerges and replaces a reliable one, that can increase service costs and as

a result decrease expected profits.

2. OFFENSIVE CANNIBALIZATION STRATEGIES

Cannibalization favors the attacker and always hurts the market leader. For companies

that are trying to gain market share or establish themselves into a market,

cannibalization is the way to do it5. Also cannibalization is a good way to defend

market share or size. A usual practice is the market leader to wait and do not

cannibalize a product unless it has to. It is thought that a company should acquire and

develop a new technology that will produce a newer and better product than an existing

one and then wait. Then as competitor’s surface and attack market share,

cannibalization of a product is ripe. Then and only then quick introduction of a new

product into the market will deter competition, increase profits and keep market

share. But this strategy does not always work since delays will allow the competition to

grab a substantial piece of the market before the market leader can react.

3. DEFENSIVE CANNIBALIZATION STRATEGIES

Controlled cannibalization can be a good way to repel attackers as deforesting can repel fire.

A market leader has many defensive cannibalization strategies that are discussed bellow.

• Cannibalize before competitors do: Cannibalization of a company’s product(s) before a

competitor does, is a defensive strategy to keep the competitor of being successful. Timing is

the key in this strategy. Do it too soon and profits will drop, do it to late and market share

is gone.

• Introduction of cannibalization as a means of keeping technology edge over competition: A

good strategy is for a company that is the market leader, to cannibalize its products as

competitors start to catch up in terms of technology advancements. (For example “Intel

Corporation” cannibalized its 8088 processor in favor of the 80286 after 2 ½ years, the

80286 in favor of the 386 after 3 years, the 386 in favor of the 486 after 4 years, the 486

in favor with the Pentium after another 4 ½ and so on). So the market leader dictates the

pace and length of a product’s life cycle. (In the case on Intel the replacement of 486 to

Pentium took so long because competitors had not been able to catch up).

• Management of cannibalization rate through pricing: When cannibalization of a product is

decided, the rate at which this will happen depends on pricing. The price of the new product

should be at a level that encourages a particular mix of sales of the old and new product. If

the price of the new product is lower than the price of the old then cannibalization rate slows

down. If the opposite happens then the cannibalization rate is increased. Higher prices in new

products can reflect their superiority over the old ones.

• Minimization of cannibalization by introducing of the new product to certain market

segments: Some market segments are less vulnerable to cannibalization to others. This is

because there is more or less to lose or gain for each of them. By choosing the right segment

to perform the cannibalization of a product a company can gain benefits without loses and

acquire experience on product behavior.

PART 4: PRODUCT LIFE CYCLE IN RESPECT TO THE TECHNOLOGY

LIFE CYCLE

As a new technology matures so is the product or service that uses this technology. The

change that occurs during a technology life cycle has a unique reflection on the customers and

so on the product life cycle.

In the early days of a new technology, early adopters and technology enthusiasts drive a

market since they demand just technology. This drive and demand is translated as the

introduction phase of a new product by many companies. As technology grows old, customers

become more conservative and demand quick solutions and convenience. In this case a product

usually enters in the realm of its growth and as time passes its maturity.

Fig. 2: Change in customers as technology matures

The “chasm” shown in the graph above depicts the difference between the early and late

adopters. Each needs different marketing strategies and each is translated to a product’s

different phase of its life cycle. One should note that the late adopters hold the greatest

percentage of customers in a market. This is why most products begin their life cycle as

technology driven and change into customer driven as time passes by. A good example of this

is the computer market. In one hand customers ask for ease of use, convenience, short

documentation and good design. On the other hand customers rush out to purchase anything

new regardless of its complexity. This is why companies6 in the computer industry withdraw

their products long before they reach their maturity phase. This is the moment that a

product reaches its peak i.e. the time that both early and late adopters buy the product.

PART 5: USE OF PRODUCT MANAGEMENT FOR SUCCESSFUL

PRODUCT LIFE CYCLE

Product management is a middle level management function that can be used to manage a

products life cycle and enables a company to take all the decisions needed during each phase

of a product’s life cycle. The moment of introduction and of withdrawal of a product is

defined by the use of product management by a Product Manager.

A Product Manager exists for three basic reasons. For starters he manages the revenue,

profits, forecasting, marketing and developing activities related to a product during its life

cycle. Secondly, since to win a market requires deep understanding of the customer, he

identifies unfulfilled customer needs and so he makes the decision for the development of

certain products that match the customers and so the markets needs. Finally he provides

directions to internal organization of the company since he can be the eyes and ears of the

products path during its life cycle. To improve a product success during each of its phase of

its life cycle (development - introduction – growth – maturity – decline), a product manager

must uphold the following three fundamentals.

• Understand how product management works: When responsible for a given new product, a

product manager is required to know about the product, the market, the customers and the

competitors, so that he can give directions that will lead to a successful product. He must be

capable of managing the manufacturing line as well as the marketing of the product. When the

product manager has no specific authority over those that are involved in a new product, he

needs to gather the resources required for the organization to meet product goals. He needs

to know where to look and how to get the necessary expertise for the success of the product.

• Maintain a product / market balance: The product manager as the person that will make a

new product to work, needs to understand and have a strong grasp of the needs of the

customer / market and therefore make the right decisions on market introduction, product life

cycle and product cannibalization. To achieve the above he must balance the needs of the

customers with the company’s capabilities. Also he needs to balance product goals with

company objectives. The way a product’s success is measured depends on where the product is

in its life cycle. So the product manager must understand the strategic company direction and

translate that into product strategy and product life cycle position.

• Consider product management as a discipline: Managing a product must not be taken as a

part time job or function. It requires continuous monitoring and review. Having said that, it is

not clear why many companies do not consider product management as a discipline. The answer

lies in the fact that product management is not taught as engineering or accounting i.e. does

not have formalized training.

The Benefit of PLM

It is a common production system, with common computer technology for information

storage and retrieval. In theory any employee, in any department can look at data

created by another department or group. The information is archived and valid for

the life of the product

It is a concept that should induce ethical behavior in terms of up graded products and

hopefully will drive social responsibility in the areas of innovation, design,

manufacturing, quality, and disposal

The Scope of PLM

Module III…!!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

ERP MARKETPLACE AND MARKETPLACE DYNAMICS

1. MARKET OVERVIEW

Enterprise Resource Planning or ERP is an industry term for

integrated, multi-module application software packages that are

designed to serve and support multiple business functions. An ERP

system can include software for manufacturing, order entry,

accounts receivable and payable, general ledger, purchasing,

warehousing, transportation and human resources. Evolving out of

the manufacturing industry, ERP implies the use of packaged

software rather than proprietary software written by or for one

customer. ERP modules may be able to interface with an

organization's own software with varying degrees of effort, and,

depending on the software, ERP modules may be alterable via the

vendor's proprietary tools as well as proprietary or standard

programming languages.

Some of the top-tier ERP vendors are SAP-AG, BAAN, PeopleSoft, Oracle

Application and J.D.Edwards. These companies are covering the major ERP market

revenue. SAP (System Applications & Products in data processing). SAP is the world’s leading

provider of business software, SAP delivers products and services that help accelerate

business innovation for their customers. Today, more than 82,000 customers in more than 120

countries run SAP applications – from distinct solutions addressing the needs of small

businesses and midsize companies to suite offerings for global organizations.

SAP defines business software as comprising enterprise resource planning

and related applications such as supply chain management, customer

relationship management, and supplier relationship management

• SAP AG was founded in 1972 by five German engineers with IBM in Mannheim,

Germany; and is one of the top most ERP vendors providing the client server business

application solutions.

• SAP serves as a standard in the industries like chemicals, customer products, oil &

high technology. The SAP group has offices in more than 50 countries worldwide &

employs a workforce of over 19300.

• SAP’s ERP package comes in 2 versions i.e. mainframe version (SAP R/2) & client

server version (SAP R/3).(R-Real)

• With SAP, customers can install the core system & one or more of the fundamental

components, or purchase the software as a complete package.

PRODUCTS & TECHNOLOGY

• SAP has developed extensive library of more than 800 predefined business processes.

• These processes may be selected from SAP library & can be included within installed

SAP application solution to suit the user exact requirements.

• SAP software has special features like, linking a company’s business processes &

applications, & supporting immediate responses to change throughout different

organizational levels & real time integration.

• Also, the new technologies are available regularly to cop-up with the changes of the

new business trends.

• The international standards have been considered while designing the software like

support of multiple currencies simultaneously, automatically handles the country specific

import/export requirements

• The modules of R/3 can be used individually as well as user can expand it in stages to

meet specific requirement's

BAAN: - Company profile

• Baan company was founded in Netherlands in 1978 by brothers Jan and Paul Baan..

• The BAAN Company is the leading global provider of enterprise business software.

• The BAAN company products reduce complexity and cost, improve core business

processes, are faster to implement and use, are more flexible in adapting to business

changes.

• The products offered by the company supports several business tools. The tools are

based on multi-tier architecture.

TECHNOLOGY AND PRODUCTS

1. The BAAN products are having open component architecture.

2. The special feature of BAAN product is the use of BAAN DEM (Dynamic Enterprise

Modeling).

3. Baan DEM provides a business view via a graphical process/model based views.

4. BAAN products has multi-tiered architecture for maximum and flexible configuration.

5. The application supports the new hardware, OS, networks and user interfaces w/o any

modification to the application code.

6. The Baan series based products include :

- BAAN Enterprise Resource Planning.

- BAAN Front Office.

- BAAN Corporate Office Solutions.

- BAAN Supply Chain Solutions.

7. The main advantages of Baan series-based family of products are the best in class

components version independent integration and evergreen delivery.

BAAN ERP MODULES

• BAAN ERP is a proven enterprise resource planning s/w application.

• It is fully integrated and provides all the functionality which is required across the

enterprise.

• BAAN ERP consists of a number of interdependent components that can be deployed to

meet business needs.

• The flexibility with BAAN ERP allows customers to maximize the benefits of both best

in class solution and a fully integrated high performance system.

• BAAN ERP includes the following components –

Manufacturing Module:

This includes bills of material, cost price calculation, shop floor control,

material requirement planning, etc.

Finance Module:

This includes accounts payable, accounts receivable, cash

management, fixed assets, etc

Project Module:

This includes project budget, project definition, project

estimation, project planning, etc

Distribution Module:

This includes sales management, purchase management and warehouse

management

BAAN ERP TOOLS

• BAAN ERP Tools can be described as a computing platform that provides independent,

flexible, open and distributed computing and development environment.

• The open architecture of the BAAN ERP Tools make it possible to –

– Quickly react to the changes that take place in the market, in-turn change the

s/w configuration.

– Develop the BAAN product in such a way that it is independent of third party

product such as hardware, OS and DB.

– Easily integrated with third party product.

– Gives customer specific solutions.

ORCALE CORPORATION:-Company profile

• Oracle Corporation was founded in the year 1977 and is the world’s largest s/w

company and the leading supplier for enterprise information management.

• This is the first s/w company to implement internet computing model for using the

enterprise s/w across the entire product line.

• It provides databases and relational servers, application development, decision support

tools and enterprise business applications.

TECHNOLOGY

• ORACLE software runs on the network computers, work stations & micro computers,

mini computers, etc.

• ORACLE 8i is the leading database for internet computing.

• ORACLE database ALLOWS the corporation to access on any data, on any service,

over any network, from any client device.

• ORACLE Warehouse Technology Initiative (WIT) is one of the fastest flowing &

comprehensive programs in the data warehousing industry which provides the customers

a complete data warehousing solution.

• ORACLE’s integrated Business Intelligence Solutions provides us with a solution to

deliver powerful processing capabilities to the user anywhere in the enterprise at

anytime. Oracle business intelligence family product includes:

– Oracle report

– Oracle enterprise reporting tools

– Oracle discoverer

– Ad-Hoc Queries and analysis tools

– Oracle online analytical processing engine, etc.

MODULES OF ORCALE APPLICATIONS:

Oracle application consists of 45 plus software modules which are divided

into following categories

– Oracle Financials

– Oracle Human Resource

– Oracle Projects

– Oracle Manufacturing

– Oracle Supply Chain

– Oracle Front Office

ORACLE FINANCIAL

– This application transforms a finance organization into a strategic force and

also helps to access the financial management functions.

– By working with these applications the companies can work globally, lower the

administrative cost & improve the cash management.

– It also provides strategic information to make timely & accurate decisions.

ORACLE PROJECTS

- These applications improve operational efficiency by providing an

integrated project management environment that supports the

full lifecycle of a project and increases the revenue growth and

profitability.

ORACLE SUPPLY CHAIN

– This application manages the supply chain process by providing a single

integrated environment.

– It helps in effective partner collaboration & supply chain optimization

capabilities.

– It helps in increasing market share while improving customer service &

minimizing the cost.

–

ORACLE FRONT OFFICE

– These applications provide a better understanding for customer relationships,

their values & profitability

– These applications increase top line revenues & maintain customer satisfaction &

retention

– It also helps to attract and retain profitable customers through deployment

channels including mobile & call centre.

ORACLE HUMAN RESOURCE

– This application helps in managing the human resources which directly improve

profitability and contribute to competitive advantage

– It also helps in the ability to hire motivate & retain the most capable working

force and also helps in providing comprehensive and up-to-date information.

ORACLE MANUFACTURING

― Oracle manufacturing application enables the companies to achieve market

leadership by becoming more CUSTOMERS responsive & efficient.

― This module also supports the companies to increase revenue, profitability &

customer loyalty by capturing the demand & planning the manufacturing process

in an efficient way

PEOPLESOFT: - Company profile

• PeopleSoft Inc. was established in 1987 to provide innovative software solutions that

meet the changing business demands of enterprises worldwide.

• It employs more than 7000 people worldwide.& the annual revenue for the year 1998

was $ 1.3 million.

• PeopleSoft’s mission is to provide innovative software solutions that meet the changing

business demands of organizations worldwide.

• PeopleSoft develops markets and supports enterprise-wide software solutions to handle

core business functions including human resources management, accounting and control,

project management, treasury management performance measurement and supply chain

management.

• PeopleSoft provides industry-specific enterprise solutions to customers in select

markets, including communications, finance services, healthcare, manufacturing, higher

• PeopleSoft products support clients running, Microsoft Windows and popular Web

browsers, as well as a range of mainframe, midrange and LAN relational database

server platforms.

• PeopleSoft solutions run on a variety of leading hardware and database platforms,

including Compaq, Hew let-Packard, IBM, Sun Microsystems, Informix, Microsoft SQL

Server, Sybase, DB2 and others.

• PeopleSoft delivers Web-enabled applications, workflow, online analytical processing

(OLAP) etc.

• The PeopleSoft application serves the whole business management solutions, commercial

solutions & industry solutions.

• The PeopleSoft’s business management solutions are in the areas given below:-

– Human Resources Management

– Accounting and Control

– Treasury Management

– Performance Measurement

– Project Management

– Sales and Logistics

– Materials Management

– Supply Chain Planning

– Service Revenue Management

– Procurement

JD EDWARDS: COMPANY PROFILE:

• On March 17, 1977 J.D. Edwards was formed, by Jack Thompson, Dan Gregery & Ed-

Mc Vaney.

• In early years J.D. Edwards designed software for small & medium sized computers.

• In 1980’s it focused on IBM system/38.

• As the company began to outgrow, its headquarter in Denver, opened branch offices in

Dallas & Newport Beach, California, Houston, San Francisco & Bakenfield. And then

internationally expanded its Europe headquarters in Brussels & Belgium.

• As it grew it became obvious that servicing a large number of customers was creating a

challenge

• By the mid of 1980’s, J.D Edwards was being recognizes as an Industry-leading

supplier of application software for the highly successful IBM AS/400 computer.

• Today J.D Edwards is a publicly traded company that has more than 4700 customers

with sites in over 100 countries & more than 4200 employees.

J.D Edwards emphasizes on the following three matters:

– Solution: JD Edwards offers a balance of technology & service options tailored

by the unique industry & its processes. This allows JD Edward to ensure timely

implementation & outgoing quality of the solution. – Relationships: With JD Edwards, you have a partner committed to ushering

you through changes in the business & technology.

– Value: JD Edwards provides with an appreciating software asset – one with the

potential to increase in value over the lift of your business.

TECHNOLOGY

• As the business grew company adapted new technology & instead for small computer

application; it started to design enterprise-wise software.

• JD Edwards is a leading provider of integrated software for distribution, human

resource, finance, and manufacturing & SCM.

• These software's are operated in multiple computing environments & also JAVA &

HTML enabled.

QAD: -Company Profile

• It was found in 1979.

• The company’s products include MFG/PRO, service/support management and decision

support.

• QAD offers a variety of supply chain and enterprise resource planning s/w products to

manufacturing industries.

• It optimizes the enterprise by increasing the speed of internet processes and

synchronizing the business operations.

– It is available in 26 languages and supports multiple currencies.

– It has an easy-to-understand graphical interface.

• The MFG\PRO is one of the software, product offered by QAD, which provides

multinational organization with integrated Global Supply Chain Management Solution.

• It helps the organization to achieve and maintain competitive advantage and

synchronizes the distributed operation which balances the supply and demand across

multiple sites.

SSA:-COMPANY PROFILE:

• System Software Associates, Inc. (SSA) was founded in 1981.

• It has branches in more than 91 countries & more than 2000 employees.

• SSA has BPCS client/server V6 technology is implemented in more than 1000 industrial

sector firms in over 4000 sites worldwide.

• SSA’s vision is to be the best global partner to the world’s industrial companies.

• To achieve competitive advantage for clients through ERP system, SSA’s follows its

Mission Statement 1981.

The statement has six key goals.

They are:

– Best client satisfaction: this means that the company wants their clients to

achieve the greatest possible business benefits from their relationship with

SSA.

– Single image worldwide: this means that the client gets the same high level of

support & expertise all around the world.

– Enterprise Solution Leadership: it means that the company is focused on

building & delivering solutions, which bring together the entire enterprise.

– Proven leading Technology: this means that every piece of technology applied by

SSA will already be proven for high transaction volume enterprise-wide

applications.

– Highly skilled & motivated professional: it means that SSA is committed on

having the best professionals & resources in the application software business.

– Strong financial results: this means that SSA can continue to invest in the

improvements of its software & professionals & will be a stable partner in the

long run.

1. MARKETPLACE DYNAMICS

Marketplace Dynamics

2. THE CHANGING ERP MARKET.

Changing Indian ERP scenario

SOME of the first Indian companies to have adopted ERP practices are HLL, ONGC,

ESSAR, Godrej Soaps, Cadburys, BASF, Telco, Maruti Udyog Ltd., Century Rayon,

Citibank, ACC, ANZ Grindlays, German Remedies, Blue Star, Mahindra & Mahindra,

Rallis India, Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford Motors, Kirloskar, Knoll

Pharmaceuticals, and Glaxo.

First tier companies (those with a turnover greater than Rs.10 billion) implement ERP

to increase internal efficiency and external competitiveness. Once ERP is established

at this level, these large companies begin to desire similarly increased efficiency from

their suppliers. Hence, second tier companies are pressured to implement ERP, and a

trickle-down effect ensues. Powered by the axiom that a chain is only as strong as its

weakest link, Indian industry quickly has recognized that in order to work at maximum

efficiency, ERP must be implemented at all levels.

Initially, the majority of ERP solutions have been marketed to companies with greater

than Rs. 2 billion, and generally, according to industry reports, the total cost of

deploying ERP has ranged between 1 and 2 percent of companies' gross sales. Lower

cost solutions are available for comparatively smaller sized companies.

Though the market seems to be very encouraging for ERP implementation, the time-

frame for deployment may be an issue. However, since many companies that have not

yet implemented ERP are leaders in their markets, it reasonably can be assumed that

they will go for it within next five years. In fact, the ERP market should grow at a

rate somewhere near the industrial growth rate.

Some industry categories, such as Automotive, Steel, Consumer Durables, Engineering,

and Textiles have shown a very high ERP penetration. This means that these categories

represent the greatest potential markets in next two years - other industries will

follow. Figure 1 illustrates the market across various industries.

Survey of Industry ERP Implementations

ERP implementations completed between 1995 and 1998 in India can give a sense of

specific hurdles that companies may encounter in ERP deployment. Several companies

were surveyed, and numerous ERP professionals were interviewed in order to assess the

state of ERP in India.

The results indicate that Indian companies are moving forward with ERP implementation

primarily in response to thrusts from parent collaborators, to revamp in order to meet

increased load, or to reduce lead times and inventory levels, and improve customer

satisfaction.

Resistance to change - in the form of fear of the unknown, reluctance to learn new

techniques, or IT department reluctance to change due to attachment to its product -

was a major hurdle faced during many ERP implementations. Additionally, the

duplication required in the initial stage, and the intense pressure exerted on manpower

proved to be problematic, as did the level of customization necessitated by disparities

between company requirements and solutions offered by ERP software. This problem is

diminishing due to advances in the software facility models.

Cost overruns also proved to be a pervasive problem with ERP implementations. Since

most consultants charge on a man-hour basis, project time overruns substantially

inflate incurred costs. To avoid this problem, top management must develop the

necessary commitment to ERP, and all employees should be prepared for the change

before the ERP implementation process is started. This model should help to eliminate

needless project time and cost ballooning.

ERP in the Service Sector

Transportation, medical care, hospitality, courier service, telecommunication, banking

and financial services, and entertainment represent the major components of India's

service sector, and on probing into the various needs of these groups, it becomes

apparent that the courier, transportation, and entertainment industries do not have

specific current needs for ERP. Banking and telecommunication each have very

specialized requirements that the manufacturing-inclined software solutions on the

market would not effectively address. The same holds true for the medical care and

hospitality industries. The service sector has the potential to become an important ERP

market within a few years. At this time ERP implementation in the services sector is

very limited - only a few hospitals and banks have done small-scale experiments. New

software and processes will need to be developed to meet the specific demands of the

service industries, so ERP players should begin now to prepare themselves for the

tremendous potential of this future market.

*ERP- FUNCTIONAL MODULES:

3. INTRODUCTION, FUNCTIONAL MODULES OF ERP SOFTWARE

Organizations are implementing Enterprise Resource planning system to

streamline their internal business process and for smooth flow of data

between the different functional departments like inventory, purchase,

production, accounts, etc. The different functional modules of the ERP

software look after the respective functional department.

Some of the functional modules in the ERP are as follows:

1. Production Planning Module: The Enterprise Resource Planning

system has evolved from Material Resource Planning which was used

for the manufacturing requirements of the companies. ERP is more

robust software for production planning as it optimizes the

utilization of the manufacturing capacity, material resources and

the parts using production data and sales forecasting.

2. Purchasing Module: This module aids in streamlining the

procurement of required raw materials. It is integrated with the

inventory control and production planning modules and often with the

supply chain management software. This module automates the

process of identifying potential suppliers, supplier evaluation. It is

used for automation and management of purchasing

.

3. Inventory Control Module: This module aids in managing the

company's resource inventory and the product inventory. It helps in

handling the replenishment of the product and maintenance of the

stock levels of the products. The inventory control module monitors

the inventory stock present at the different locations like at the

warehouse, office and stores. The module can manage the inventory

of raw materials used for product planning. It enables the company

to plan the future production and keep a stock of products which go

below critical level.

4. Sales Modules: This module automates the sales tasks,

customer orders, invoicing and shipping of products. It is integrated

with the company's ecommerce websites and many vendors provide

with online storefront as a part of this module. The sales

department is an important area for the organization.

5. Accounting and Finance Modules: Accounting and finance are

the core areas of an organization. This module interacts with the

other functional modules to collect the financial data for the

general ledger and other financial statements of the company.

6. Human Resource Module: This can be used as an independent

module. It is used for integrating the recruitment process, payroll,

training and the performance evaluation process. The module

handles the history of the employee, tracks the employees laid off

and aids in rehiring of the employees.

7. Manufacturing Module: This module includes product designing,

bills of material, cost management, workflow, etc.

8. Marketing Module: The ERP marketing module supports lead

generation and the promotional activities.

Each of these above functional modules of ERP software plays

an important role. The organizations can choose to implement some

of the modules or all according to their requirements. The

companies opt for the modules which are technically and

economically feasible to them. These modules streamline the flow of

the communication across the company by integrating the various

functional departments. The enterprise resource system is bound

with all these functional modules. These distinct yet seamlessly

integrated modules cover most of the functional needs of an

organization. The functional modules of ERP software help to

achieve efficiency of operations, cost savings and help to maximize

the profits.

OR

Functional Modules:

1. FI/CO (Finance & Controlling )

2. HR (Human Resource)

3. PP (Production Planning)

4. MM (Material Management )

5. SD (Sales & Distribution )

6. PM (Plant Maintenance)

7. PS (Project System)

8. QM (Quality Management)

9. BIW (Business Information Warehousing)

New Dimension:

1. CRM (Customer Relationship Management)

2. SCM (Supply Chain Management)

3. SEM (Strategic Enhanced Management)

4. APO (Advanced Planner Optimizer)

5. EP (Enterprise Portal)

6. SRM (Supplier Relationship Management)

7. XI (Exchange Infrastructure)

Techno-Functional Modules :-

1. ABAP + HR

2. ABAP + SD

3. BIW (Business Information Warehouse)

Dual Modules: -

1. SD + CRM

2. PP + MM

3. FICO +SD

4. HR + SD

5. HR + CRM

4. INTEGRATION OF ERP

What Is ERP Integration?

ERP stands for Enterprise Resource Planning. It is a complete business software

solution and a software product that can be implemented across the company

incorporating all aspects of the enterprise. During the last twenty years, ERP has been

implemented by a large number of Fortune 500 companies.

There are two components which form an important part of the concept of ERP system

integration. They are “compatibility” and “compliance”. An ERP solution should be

capable of integrating in the current information technology infrastructure of the

organization. If a solution requires massive upgrades, then it is not the right solution

intended.

An organization which is supposed to be deployed with ERP solutions should already

possess a base level information technology infrastructure. For example, the production

monitoring solutions, inventory keeping etc. are all the base level information

technology infrastructures. When the ERP solution is deployed in the organization, it

should have the capability to interface with the already existing solutions. If this

integration does not take place, then there is no point to engaging in the entire

process of ERP deployment. They should have the capacity to communicate with each

other and should function as one solution instead of two different ones. This ability of

the system to interface with the different solutions is known as compatibility.

If there is no proper compatibility, it is the end of the ERP implementation. A proper

compatible system is the secret for a successful ERP implementation. Only when the

system integrates with the current infrastructure, would it be able to understand what

is happening. When the ERP system integration takes place in the right manner, it is

very possible to monitor the status of every component of the work flow.

If there is no proper ERP integration, the data would have to be exchanged manually

between the ERP system and the current infrastructure in place. This would lead to

numerous problems due to data not being properly exchanged between the two

solutions. If there is mutilation or loss of data during the time of export, it would lead

to too many complications and as a result, the organization would undergo severe loss.

It is a major challenge for many companies to get their applications to work with each

other. Unless there is seamless integration of ERP with other systems, the benefits of

an ERP application is limited. In the present day, it is an undeniable fact that the

performances of many organizations have been enhanced due to the application of ERP

software packages.

When an ERP software package is developed, adequate care is taken to ensure that

maximum level of ERP integration takes place. To ensure that the ERP integration

takes place in the right manner, it is vital that proper testing is carried out before

deployment.

An Enterprise Resource Planning software product is capable of integrating multiple

business applications with each application representing a specific business area. It is a

product capable of great depth in a specific application or area while still being part of

the overall bigger picture. These applications update transactions and process them in

real time. Due to this, effortless integration and communication between areas of a

business is achieved. For example, a sales order can be created and the update order

value in a sales information structure can be viewed immediately without having the

necessity to wait till the end of the day or the end of month processing to take place.

The cornerstone of an ERP product is its ability to be configured to meet the specific

needs of any business. This can be achieved by customizing or adapting the system as

per the business requirements, and this involves the process of mapping the ERP to

business process. A business process, for example, would be a sales order creation or

creation of delivery etc. The process of mapping ERP to a business process is normally

time-consuming and expensive. It requires full understanding of the business process

procedures, finding a solution in ERP that would meet these requirements and then

customizing the solution within the system.

5. SUPPLY CHAIN AND CUSTOMER RELATIONSHIP

APPLICATIONS.

Supply chain management (SCM)

Supply chain management (SCM) is the oversight of materials, information, and finances as

they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.

Supply chain management involves coordinating and integrating these flows both within and

among companies. It is said that the ultimate goal of any effective supply chain management

system is to reduce inventory (with the assumption that products are available when needed).

As a solution for successful supply chain management, sophisticated software systems with

Web interfaces are competing with Web-based application service providers (ASP) who promise

to provide part or all of the SCM service for companies who rent their service.

Supply chain management flows can be divided into three main flows:

The product flow

The information flow

The finances flow

The product flow includes the movement of goods from a supplier to a customer, as well as

any customer returns or service needs. The information flow involves transmitting orders and

updating the status of delivery. The financial flow consists of credit terms, payment

schedules, and consignment and title ownership arrangements.

There are two main types of SCM software: planning applications and execution applications.

Planning applications use advanced algorithms to determine the best way to fill an order.

Execution applications track the physical status of goods, the management of materials, and

financial information involving all parties.

Some SCM applications are based on open data models that support the sharing of data both

inside and outside the enterprise (this is called the extended enterprise, and includes key

suppliers, manufacturers, and end customers of a specific company). This shared data may

reside in diverse database systems, or data warehouses, at several different sites and

companies.

By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a

company's clients), SCM applications have the potential to improve the time-to-market of

products, reduce costs, and allow all parties in the supply chain to better manage current

resources and plan for future needs.

Increasing numbers of companies are turning to Web sites and Web-based applications as part

of the SCM solution. A number of major Web sites offer e-procurement marketplaces where

manufacturers can trade and even make auction bids with suppliers.

Customer Relationship

A Customer Relationship Management system may be chosen because it is thought to provide

the following advantages:

Quality and efficiency

Decrease in overall costs

Decision support

Enterprise ability

Customer Attentions

Increase profitability.

Customer Relationship Management Applications

Gives you a complete information of customer data and interactions

Enhances customer satisfaction and maximizes profits

Continuous and consistent customer dialogue based on real-time information

Manages present and prospective customers equally and effectively

Facilitates sales team to take orders from the customers

Availability of the complete purchase history for the customers

Availability of features like automatic up-sell and cross-sell capabilities

Automatic and accurate tracking of commissions

Provides accurate forecasts

Can view the ROI and true marketing effectiveness

While strong vendors are present in certain segments of the CRM market, no one vendor

offers a complete, best-of-breed CRM package providing all functions, for all channels, for

every industry. One of the myths is that the technology is complete says Julie Fitzpatrick,

senior vice president of marketing for Chicago-based loyalty. companies need to understand

how they are going to do what the technology can’t do, such as having a data model to store

information about the relationship - actionable data about the relationship’s The upshot: you

will probably need to acquire your CRM applications piece by piece out of sheer necessity,

although multi-function software suites are a popular choice to get started.

To make sense of the bewildering array of vendors, applications, and technologies, start by

thinking about the users of the CRM application:

Employees -this is where client/server-based CRM solutions started in the mid-

1990s, focused on automating internal sales, service, and marketing processes.

Customers -If customers want to serve (or sell) themselves via the Web, why not?

The flood of business applications is testimony to this hot trend.

Partners - often overlooked in the ecommerce hype, indirect sales channels are still

vital. Partner Relationship Management (PRM) applications serve these users. Next,

consider the functions or processes involved in the customer relationship lifecycle:

Marketing- targeting prospects and acquiring new customers through data mining,

campaign management and lead distribution.

Sales - closing business with effective selling processes, using proposal generators,

configurations, knowledge management tools, contact managers, and forecasting aids.

Ecommerce - in the Internet age, selling processes should transfer seamlessly into purchasing transactions, done quickly, conveniently, and at the

lowest cost.

Service - handling post-sales service and support issues with sophisticated call center

applications or Web-based customer self-service products.

Module IV…!!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

1. ERP IMPLEMENTATION BASICS

Why implement an ERP System?

• To support business goals

– Integrated, on-line, secure, self-service processes for business

– Eliminate costly mainframe/fragmented technologies

• Improved Integration of Systems and Processes

• Lower Costs

• Empower Employees

• Enable Partners, Customers and Suppliers

How should we implement ERP Systems?

• People

– Project Structure

– Should be aligned to processes

• Process

– Implementation Process (outlined in detail)

– Adapt your processes to those of the ERP.

• Technology

– Hardware

– Software

– Integrated Systems

Process

1. Definition and Analysis

• Hold discussions with various functional personnel to establish the actual number of

systems operating at client site, what they are used for, why and how often

• Produce the Project Scoping Document outlining current situation, proposed solution and

budgeted time

Challenge: REQUISITE EXPERTISE - No two clients are the same

2. Design

• Prepare various functional reports - specifies current scenario and wish list

• Prepare Design document which specifies how the system is going to work

• Prepare test scripts to be followed on system testing

• Map out the interface paths to various modules

Challenge: INFORMATION SHARING - Availability of staff

3. Build

• Configure system as per set up document specifications i.e. transfer conceptual model

into reality

• Test system to verify accuracy (preliminary tests)

Challenge: TECHNICAL ENVIRONMENT - System functionality

4. Transition

• Train users on their specific areas

• Assist in test data compilation and system testing by users

• Finalise the Live system and captured opening balances

Challenge: USER RESISTANCE Understanding and acceptance

data preparation

5. Production

• Official hand holding

• Effectiveness assessment

• Business and Technical Direction recommendations

• ERP systems provide a mechanism for implementing systems where a high degree of

integration between applications is required • The Business Case or Value Proposition for implementation must be outlined

• To successfully implement a proper mix of people, processes and technology should be

maintained

The normal steps involved in implementation of an ERP are as below:

-Project Planning

-Business & Operational analysis including Gap analysis

-Business Process Reengineering

-Installation and configuration

-Project team training

-Business Requirement mapping

-Module configuration

-System interfaces

-Data conversion

-Custom Documentation

-End user training

-Acceptance testing

-Post implementation/Audit support

The above steps are grouped and sub-divided into four

major phases namely

1) detailed discussions,

2) Design & Customization,

3) Implementation and

4) Production.

The phases of implementation vis-à-vis their tasks and

respective deliverables are as below:

Detailed Discussion Phase: Task: - Project initialization,

Evaluation of current processes, business practices, Set-up

project organization Deliverables:- Accepted norms and

Conditions, Project Organization chart, Identity work teams

Design and customization Phase: Task: - Map organization, Map business process,

Define functions and processes, ERP software configuration and Build ERP system

modifications. Deliverables: - Organization structure, Design specification, Process

Flow Diagrams, Function Model, Configuration recording and system modification.

Implementation Phase: Task: - Create go-live plan and documentation, Integrate

applications; Test the ERP customization, Train users Deliverables: - Testing

environment report, Customization Test Report and Implementation report

Production Phase: Task: - Run Trial Production, Maintain Systems Deliverables:-

Reconciliation reports, Conversion Plan Execution

2. ERP IMPLEMENTATION LIFE CYCLE

ERP covers the technique and concepts employed for the integrated management of

business as a whole, ERP packages are integrated software packages that support the

above ERP concepts.

ERP lifecycle is in which highlights the different stages in implementation of An ERP.

Different phases of ERP

Pre evaluation Screening

Evaluation Package

Project Planning

GAP analysis

Reengineering

Team training

Testing

Post implementation

Pre evaluation screening

Decision for perfect package

Number of ERP vendors

Screening eliminates the packages that are not at all suitable for the company’s

business processes.

Selection is done on best few PACKAGES available.

Package Evaluation

Package is selected on the basis of different parameter.

Test and certify the package and also check the coordination with different

department

Selected package will determine the success or failure of the project.

Package must be user friendly

Regular up gradation should available.

Cost

Project planning

Designs the implementation process.

Resources are identified.

Implementation team is selected and task allocated.

Special arrangement for contingencies.

Gap analysis

Most crucial phase.

Process through which company can create a model of where they are standing now and

where they want to go.

Model help the company to cover the functional gap

Configuration

• IMPORTANCE OF CONFIGURATION

– This is the main functional area of the ERP implementation.

– Business processes have to be understood & mapped in such a way that they

arrived solution matches with the overall goals of the company.

Reengineering

Implementation is going to involve a significant change in number of employees and

their job responsibilities.

Process BECOMES more automated and efficient.

Team Training

Takes place along with the process of implementation.

Company trains its employees to implement and later, run the system.

Employee become self sufficient to implement the software after the vendors and

consultant have left.

Testing

This phase is performed to find the weak link so that it can be rectified before its

implementation.

Going Live

The work is complete, data conversion is done, databases are up and running, the

configuration is complete & testing is done.

The system is officially proclaimed.

Once the system is live the old system is removed

End User Training

The employee who is going to use the system are identified and trained.

Post Implementation

This is the maintenance phase.

Employees who are trained enough to handle problems those crops up time to time.

The post implementation will need a different set of roles and skills than those with

less integrated kind of systems.

An organization can get the maximum value of these inputs if it successfully adopts and

effectively uses the system.

3. ROLE OF SDLC/SSAD

System Development Life cycle (SDLC)

What is a SDLC and why do we need that?

System - an organized collection of independent tasks and processes that is designed to work

together in order to accomplish specific objectives.

The processes and tasks typically receive input(s) from and provide output(s) to other

processes and tasks and even other systems. The tasks and processes may or may not be

supported by automation

SDLC refers to a methodology for developing systems. It provides a consistent framework of

tasks and deliverables needed to develop systems.

The SDLC methodology may be condensed to include only those activities appropriate for a

particular project, whether the system is automated or manual, whether it is a new system,

or an enhancement to existing systems.

The SDLC methodology tracks a project from an idea developed by the user, through a

feasibility study, systems analysis and design, programming, pilot testing, implementation, and

post-implementation analysis.

Documentation developed during the project development is used in the future when the

system is reassessed for its continuation, modification, or deletion.

SDLC Phases

Phases in SDLC are Planning, Analysis, Design, Implementation, and

Maintenance/Sustainment/Staging

Project planning, feasibility study: Establishes a high-level view of the intended

project and determines its goals.

©© 2005 by Prentice Hall2005 by Prentice Hall1-11

SDLC Planning Phase

Identify, analyze,

prioritize, and

arrange IS needs

Systems analysis, requirements definition: Refines project goals into defined functions and operation of the intended application. Analyzes end-user information

needs.

©© 2005 by Prentice Hall2005 by Prentice Hall1-12

SDLC Analysis Phase

Study and

structure system

requirements

Systems design: Describes desired features and operations in detail, including screen

layouts, business rules, process diagrams, pseudo code and other documentation.

Implementation (Development): The real code is written here.

Integration and testing: Brings all the pieces together into a special testing environment, then checks for errors, bugs and interoperability.

Acceptance, installation, deployment: The final stage of initial development, where

the software is put into production and runs actual business.

Maintenance: What happens during the rest of the software's life: changes,

correction, additions, and moves to a different computing platform and more.

Types of SDLC models

Once upon a time, software development consisted of a programmer writing code to

solve a problem or automate a procedure. Nowadays, systems are so big and complex

that teams of architects, analysts, programmers, testers and users must work

together to create the millions of lines of custom-written code that drive our

enterprises.

The oldest of these, and the best known, is the waterfall: a sequence of stages in which the

output of each stage becomes the input for the next. These stages can be characterized and

divided up in different ways, including the following:

But It Doesn't Work!

The waterfall model is well understood, but it's not as useful as it once was. The problem is

that the waterfall model assumes that the only role for users is in specifying requirements,

and that all requirements can be specified in advance. Unfortunately, requirements grow and

change throughout the process and beyond, calling for considerable feedback and iterative

consultation. Thus many other SDLC models have been developed.

To manage this, a number of system development life cycle (SDLC) models have been created:

waterfall, spiral, rapid prototyping, RUP (Rational Unified Process) and incremental

etc.

6/3/2005 Page 4

Life Cycle Models

One description of a product life cycle may not be

adequate. Therefore, the organization may define a set

of approved product life-cycle models.

Waterfall

Prel

Dsgn

Rqts

DefnImpl I&T O&S

Dtl

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Determine

objectives,

alternatives,

constraints.

Plan

next

phase.

Risk/Analysis

Prototype

O&SAT

I&T

Unit Test

Build

Spiral

Develop, verify

next level

product.

Incremental

System

Rqts

Defn

Prel

Dsgn

Rqts

DefnImpl I&T O&S

Dtl

Dsgn

Prel

Dsgn

Rqts

DefnImpl I&T O&S

Dtl

Dsgn

Prel

Dsgn

Rqts

DefnImpl I&T O&S

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Part 1

Part 2 (+Part 1)

System AO&SFinal

Sys I&T

Part 3 (+Part 1

+ Part 2)

Spiral model - The spiral model emphasizes the need to go back and reiterate earlier stages

a number of times as the project progresses.

It's actually a series of short waterfall cycles, each producing an early prototype

representing a part of the entire project.

This approach helps demonstrate a proof of concept early in the cycle, and it more accurately

reflects the disorderly, even chaotic evolution of technology.

Rapid Prototyping - In the rapid prototyping (sometimes called rapid application development)

model, initial emphasis is on creating a prototype that looks and acts like the desired product

in order to test its usefulness.

The prototype is an essential part of the requirements determination phase, and may be

created using tools different from those used for the final product.

Once the prototype is approved, it is discarded and the "real" software is written.

Incremental - The incremental model divides the product into builds, where sections

of the project are created and tested separately. This approach will likely find errors

in user requirements quickly, since user feedback is solicited for each stage and

because code is tested sooner after it's written.

Iterative models - by definition have an iterative component to the systems development. It

allows the developer to take a small segment of the application and develop it in a fashion

that, at each recursion, the application is improved. Each of the three main sections:

requirements definition, system design, and coding and testing are improved with each cycle

through the process.

Rational Unified Process

In its simplest form, RUP consists of some fundamental workflows:

Business Engineering: Understanding the needs of the business.

Requirements: Translating business need into the behaviors of an automated system.

Analysis and Design: Translating requirements into software architecture.

Implementation: Creating software that fits within the architecture and has the

required behaviors.

Test: Ensuring that the required behaviors are correct, and that all required behaviors

are present.

Configuration and change management: Keeping track of all the different versions of all

the work products.

Project Management: Managing schedules and resources.

Environment: Setting up and maintaining the development environment.

Deployment: Everything needed to roll out the project.

Role of Testing in SDLC

Let us take (RUP) SDLC model developed by IBM to understand the role of testing in depth.

Rational Unified Process (RUP) has 4 different phases viz. inception, elaboration, construction

and transition phases. When we compare RUP with the traditional SDLC model, inception phase

is similar to analysis phase, elaboration is same as design phase, construction phase is similar

to implementation and transition phase is similar to deployment and maintenance. In most of

the industries, as part of the RUP process, JAD (Joint application Development) sessions are

conducted. These sessions give an opportunity for all teams to present their ideas and

document them. Testing team generally gets involved in the inception phase, depending on the

schedule. As you see the figure above, Test shows different inclination and declination.

Inclination emphasizes the increased role of the testing team and declination emphasizes the

decreasing role.

Inception phase: In this phase, a tester will get a chance to understand the purpose of this

project. Generally the information is documented by the architecture team in the ARF

(Architectural reference document). Data architects, Information architects, System

architects are the key players in this phase.

Elaboration phase: In this phase, a tester will get a chance to understand how the project is

designed and what all the systems are getting upgraded or downgraded based on this project.

This is a major phase, where the entire design of the project is documented in the JAD

sessions in the Business Requirement document (BRD), System requirement document (SRD),

Product requirement document (PRD), Business use cases (BUC) and System Use cases (SUC).

Architects, Business analysts, Project management, Development, Testing, Production support

teams etc attend the JAD sessions to give sign-off on these documents, once they are

completely documented. Business use cases describe the business process of the project.

System use cases describe about a system, which is impacted by the project.

Construction phase: In this phase, developers have a major role of constructing the system

based on the design accepted during the JAD sessions. A tester has to follow closely with the

development team to understand different changes considered by the development. There is

always a possibility that the development can miss, misinterpret the design documents, in this

case, a tester can always escalate the issue to the concerning developers to resolve the issue.

Technical design documents (TDD), Interface specification documents (ISD), Software

architecture documents (SAD) etc are generated in this phase to document the development

process. During the same phase, testing team needs to develop the high level scenarios (HLS)

based on the BRD, SRD, TDD, PRD, BUC, SUC, SAD, ISD. Each high level scenario can have

one or more test cases. A tester must make sure that all the requirements are traced to a

test case thru a QA matrix. Though it’s not compulsory to write test cases based only on

these documents and there is always a possibility of missing some of the functionality, so we

have to write test cases based on all possible sources of the latest updated information

(latest signed-off updated documents). In many of the projects I have worked, sometimes I

had to write test cases based on the verbal information given the development, sometimes on

viewing the data flow diagrams and process flow diagrams. In this, phase, testing will have a

major role for performing System testing, integrated system testing.

Transition phase: In this phase, the system/software whatever it is designed is ready to roll

out for production. In most of the industries, IT always rolls out the product slowly like 5%

every week for a certain period until the 100% is in production. In this, phase, testing will

have a major role for performing regression testing. Roll out is done by moving the newly

written code into a staging environment, where we test the product and raise the defects.

Once the entire code is in the staging environment and it is stable. This code will be moved

into production. However, there is always a chance of defects/bugs arising in this stage.

Regression testing will identify any defects occurring due to the already existing code.

ROLE OF SSAD

Structured Systems Analysis and Design: an organizational process used to develop and maintain computer-based information systems (both business and systems

professionals participate in SSAD).

4. OBJECT ORIENTED ARCHITECTURE

Object-oriented architecture is a design paradigm based on the division of responsibilities for an application or system into individual reusable and self-sufficient

objects, each containing the data and the behavior relevant to the object. An object-oriented

design views a system as a series of cooperating objects, instead of a set of routines or

procedural instructions. Objects are discrete, independent, and loosely coupled; they

communicate through interfaces, by calling methods or accessing properties in other objects,

and by sending and receiving messages. The key principles of the object-oriented architectural

style are:

Abstraction. This allows you to reduce a complex operation into a generalization that

retains the base characteristics of the operation. For example, an abstract interface

can be a well-known definition that supports data access operations using simple

methods such as Get and Update. Another form of abstraction could be metadata used

to provide a mapping between two formats that hold structured data.

Composition. Objects can be assembled from other objects, and can choose to hide

these internal objects from other classes or expose them as simple interfaces.

Inheritance. Objects can inherit from other objects, and use functionality in the base

object or override it to implement new behavior. Moreover, inheritance makes

maintenance and updates easier, as changes to the base object are propagated

automatically to the inheriting objects.

Encapsulation. Objects expose functionality only through methods, properties, and

events, and hide the internal details such as state and variables from other objects.

This makes it easier to update or replace objects, as long as their interfaces are

compatible, without affecting other objects and code.

Polymorphism. This allows you to override the behavior of a base type that supports

operations in your application by implementing new types that are interchangeable with

the existing object.

Decoupling. Objects can be decoupled from the consumer by defining an abstract

interface that the object implements and the consumer can understand. This allows you

to provide alternative implementations without affecting consumers of the interface.

Common uses of the object-oriented style include defining an object model that supports

complex scientific or financial operations, and defining objects that represent real world

artifacts within a business domain (such as a customer or an order). The latter is a process

commonly implemented using the more specialized domain driven design style, which takes

advantage of the principles of the object-oriented style. For more information, see "Domain

Driven Design Architectural Style" earlier in this chapter.

The main benefits of the object-oriented architectural style are that it is:

Understandable. It maps the application more closely to the real world objects,

making it more understandable.

Reusable. It provides for reusability through polymorphism and abstraction.

Testable. It provides for improved testability through encapsulation.

Extensible. Encapsulation, polymorphism, and abstraction ensure that a change in the

representation of data does not affect the interfaces that the object exposes, which

would limit the capability to communicate and interact with other objects.

Highly Cohesive. By locating only related methods and features in an object, and using

different objects for different sets of features, you can achieve a high level of

cohesion.

Consider the object-oriented architectural style if you want to model your application based

on real world objects and actions, or you already have suitable objects and classes that match

the design and operational requirements.

The object-oriented style is also suitable if you must encapsulate logic and data together in

reusable components or you have complex business logic that requires abstraction and dynamic

behavior.

5. CONSULTANTS

DEFINITION:

Business consultants are professional people who develop the different methods

& techniques to deal with the implementation process & with the various problems that

will crop up during implementation.

They are experts in the area of the administration, management & control activities.

They have experience of implementation & various methods that ensures successful

implementation.

The only limitation with consultant is they are very expensive.

They consultants have to make the ERP implementation for an organization as their own

business.

They have to make a plan to carry the activities in the right direction during the

implementation process.

Since they are expensive the company should formulate a plan regarding best optimum

utilization of the money spent on consultants.

ROLE OF CONSULTANTS

The consultants are involved in the implementation process of the organization.

They consultant should guarantee the success of the project and should be able

to show the results such as reduction in cycle time, increased response time,

improved productivity, etc to the satisfaction of the customer.

They are responsible for the administration of all the phases of the

implementation so that the activities occur at the scheduled time and at the

desired level of quality with effective participation with all those who must

participate.

They add value to the project as they provide knowledge about the packages &

the implementation process which gives the employees the practical experience

ERP Consultancy

VARs, business partners, consultants

The emergence of third parties to interface between a software developer and clients

is not new. The ‘bureau’ of the 1970s and 1980s ran specific applications on their

systems on behalf of clients. Payroll was a common application. During the 1990s, as

more and more clients acquired their own computing facilities, a new breed of third

party emerged – the Facilities Manager.

They took over the running of all or part of the client’s IT function. This was called

‘out-sourcing’. The perceived advantage of this was that it reduced the cost of owning

and running IT equipment. Although the client owned the equipment, the Facilities

Manager had the pool of expertise that could be called upon as required. As well as

allowing the client to concentrate on his business, it averted growth in the number of

expensive IT personnel.

Around 1998, the phrase ‘Application Service Provider’ (ASP) emerged. ASP is a term

that appears to accommodate any third party who is involved in one or more activity

relating to the marketing, selling, installation, customization, implementation, running,

maintenance and support of an application and the infrastructure upon which it runs.

Whilst some provide the full service, others are more focused.

These include System Integrators (SIs) and Value Added Resellers (VARs). When

dealing with a SI or VAR, the client would purchase the software license from the

application software developer and purchase implementation and post implementation

support from the SI or VAR. In practice, many SIs or VARs act as a one-stop-shop,

providing hardware, software, implementation, training, customization and support.

The main distinction between a SI and a VAR is that the latter adds value primarily

through software customization activities. However, this raises the question of who has

ownership of the customized portion of the software?

It is not uncommon to find both SIs and VARs in partnership with ERP software

developers. The advantage is that it provides the developer with additional

implementation capacity as well as allowing the developer to gain access to markets

that are geographically beyond his reach. They have played a significant role in the

growth of a number of ERP vendors including SAP.

The danger, from a client’s perspective, is that the partner may not have the requisite

expertise of the vendor’s application or technology. In this situation, the nature of the

relationship between the developer and the third party is important. This relationship

can vary from weak ‘agreements’ to strong partnerships and needs to be investigated

during the selection process. If problems arise, then their resolution may be slowed

while they decide who is responsible for dealing with them.

An alternative option open to the client is to use an independent consultancy to

assist with the implementation. Whilst the consultants may have valuable business

and implementation experience, the Consultant may be unfamiliar with the application.

A relatively new concept is that of the data centre. Reminiscent of the bureau, this

provider owns both application and infrastructure. The client, instead of experiencing

the up-front costs traditionally associated with an application, pays a monthly rent for

use of specific functionality. This can be accessed through a dumb terminal. As well as

bringing the cost of an ERP application within the reach of smaller businesses, this

approach is viewed as ‘the future of business computing’.23 However, various concerns

have been voiced. These include security, data ownership, service reliability and

responsiveness. Whilst still a very immature market, as it develops, these issues should

be addressed.

One third parties who provide a specialized service is the Enterprise Application

Integrator (EAI). Unlike the SI and VAR, the EAI is unlikely to support the

implementation itself. Instead, the EAI provides integration tools (middleware) that

ease the integration of different systems. The technology is relatively immature and

there are questions about how this sector will develop.

The introduction of a third party into the equation introduces another variable to be

managed. However, it can be argued that the use of a Service Level Agreement (SLA)

can reduce the likelihood of dispute. A SLA defines the acceptable levels of

performance and responsibilities for the key activities provided by the service

provider. Issues likely to be included are responsiveness, reliability and the meeting of

deadlines. Where penalty clauses are attached then compensation may be obtained if

performance is not attained. Sample SLAs can be found at the website

www.techrepublic.com.

6. VENDORS AND EMPLOYEES.

DEFINITION:

Vendors are the people to develop the ERP packages, they spent a huge amount

of time & effort in research & development to create the package solution that is

flexible, efficient and easy to use.

Now, these days the ERP have all features & function which can satisfy the

need of all the business data. The ERP vendors spent a large amount of money so that

they can become experts, to develop a flexible, efficient & easy to use ERP package.

ROLES OF VENDORS:

The vendor should supply the product & its documentation as soon as the contract is

signed.

The vendor is responsible to fix the errors which are found during the implementation

process, so it becomes necessary that the vendor should be constantly touched with

the implementation team.

The vendor also has to provide the training to the company’s user & also to the people

who are involved in the implementation process of the s/w.

The vendors training should explain how the package works, what are major

components, how the data & information flows across the system, etc.

The vendor gives the project support function & also takes care of the quality control

factor with respect to how the product is implemented.

The vendors participate in all the phases of an implementation in which he gives

advices, answers to technical questions about the product & technology.

In case, there is gap between the package & the actual business process then it is the

job of a vendor to customize the s/w & make necessary modifications.

Roles & Responsibilities of Employees

1.Do Early Homework: Every employee is responsible for understanding the work allotted and

determining if it is appropriate for him. He/she should make sure whether he/she has

mastered the skills required to perform the task completely.

If he/she is not sure about how to handle the work allotted to them they should talk with

their superiors and get suggestions and directions in fulfilling the work allotted to him/her.

This will help the employee in building good relations with not only their superiors also with

their colleagues.

2. Plan with the Manager: Having a proper work schedule or time table for the work allotted

to the employee helps the employee in Time Management and reaching the deadlines in time

Also, when a new work is allotted

3. Use Available Resources and take responsibility: The employees should have sense of

responsibility towards the resources of the Organization. As a part of the Organization every

employee is equally responsible for the long life of the existing resources, for which smooth

usage and suggestions for usage is required, which in case is not provided should be requested

for.

4. Participation: Active listening and participation in teams will ensure that all employees

become good team players and work with unity towards common goals of the Organization.

Whenever a new work is being allotted all the Employees should be eager enough to take the

initiative rather than trying to avoid newer tasks. This will facilitate in employees learning new

skills and reaching the Organizational goals with much effectiveness.

5. Be Punctual And Regular: The Prime responsibilities of every

employee must be Punctuality and Regularity. You can be better

organized by being punctual and regular. Unwanted and unexpected work

delays can be dealt effectively.

6. Cleanliness is Next To Godliness: One should maintain the cleanliness of their desk, and

also premises of the Organization. If you and your premises are clean you will find it more

encouraging to work and also it is convenient to work for other employees.

7. Washroom: Please use the washrooms bearing in mind that you are not the only person who

is using it. See to it you don’t spill the water across the wash basin when you are using it

same with the premises of wash room. Health and Hygiene of you and others should be your

prime concern.

8. Cost Effectiveness: The employees should develop the habit of cost saving work style and

put stress on waste control methods with maximum output.

9. Creative Thinking and Suggestions: The employee should always think upon the

improvement of work efficiency and organizational development

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!The end!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

GALGOTIAS EDUCATIONAL INSTITUTION