LECTURE 7-Enterprise Resource Planning

7/31/2019 LECTURE 7-Enterprise Resource Planning

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Lecture 7ENTERPRISE RESOURCE PLANNING

Principles of Supply ChainManagement: A Balanced Approach

Outline

ERP General Concepts

ERP based applications - Options

Building ERP solutions using Internal Sources

Adapting Tailor-made ERP Solutions

Developing ERP applications using External Sources

Brainstorming on the Options


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ERP

General Concepts

ERP General Concepts

What is ERP?

The Current Scenario

Why ERP?

Definition

Evolution

Expectations

BPR & ERP

BPR The StepsEnter

priseResourcePlanning


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What is ERP?

facilitates company-wide integratedinformation systems, covering all functionalareas

performs core Corporate activities andincreases customer service augmenting

Corporate Image

ERP is a solution, which

EnterpriseResourcePlanning

The Current Scenario

Islands of InformationDifficult to get timely & accurate informationHeterogeneous Hardware & Software

platforms & practicesPoor connectivity between different

organizational locationsSticking with obsolete technologyResist to changeLack of proven man-power to develop

integrated softwareEnter



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Information Islands

Why ERP?

For Management to know what is happeningin the companyOne solution for better ManagementFor cycle time reductionTo achieve cost control & low working capitalTo marry latest technologiesTo shun the geographical gaps

To satisfy the customers with high expectationsTo be Competitive & for survivalEn

ter



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ERP - Definition

Software solution that addresses theEnterprise needs, taking a process view ofthe overall organization to meet the goals, bytightly integrating all functions andunder a common software platform

EnterpriseResourcePlanning

How ERP Systems Works?

A typical ERP system would use multiplecomponent of computer software andhardware to achieve integration

ERP delivers a single database thatcontains all data for the software module


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Evolution of ERP

1960s - Systems Just for Inventory Control

1970s - MRP Material Requirement Planning(Inventory with material planning & procurement)

1980s - MRP II Manufacturing Resources Planning(Extended MRP to shop floor & distribution Management)

Mid 1990s - ERP Enterprise Resource Planning(Covering all the activities of an Enterprise)

2000 onwards ERP II Collaborative Commerce(Extending ERP to external business entities)EnterpriseResourcePlanning

ERP Expectations

Integrating all the functions

Integrating the systems running in all the locations

Transparency of information using a singledata source across the organization

Software must be responsive

ModularFlexibleEasy to add functionalitiesProvide growth path

Enter



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BPR & ERP

Just automating the existing business practices will nothelp ERP to achieve the anticipated results

Business Process Re-engineering [BPR] brings out thedeficiencies of the existing setup

BPR and ERP will give way to implement new systemsand the long pending improvements in theexisting systems

BPR may be time consuming but the scope can berestricted & controlled by the Management

Busines

sProcessRe-engineering

BPR - Steps

Step 1 Step 2 Step 3

Understand Simplify/Improve Automate

Understand theexistingsystemsassociated with

all thefunctionalities

Draft & frame thepossibilities & waysto simplify orImprove or eliminate

the processes

Implementwith the helpof ERP

Business

ProcessRe-engineering


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ERP Options

OPTION 1 MAKE [Using Internal resources]Developing a custom-built ERP package, specific to therequirements of the organization, with the help of thein-house IT department

OPTION 2 - BUYGoing for Tailor-made ERP packages available in the marketlike SAP, Oracle applications, Baan, PeopleSoft etc.

OPTION 3 MAKE [using External resources]Developing a custom-built ERP package, specific to the

requirements of the organization, with the help of a softwaresolution providerEnterpriseResourcePlanning

Building ERP solutions usingInternal Sources


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ERP Building using Internal resources The Facts

Lack of adequate & qualified manpower Not driven with clear focus on expectations,

time & cost Poor software project management Lack of seriousness with the Management & the

IT Team High employee turnover Lot of schedule gaps during Project execution Normally project life is more Frequent change in the scope with the approval

of the Management

Tailor-made

ERP Solutions


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Tailor-made ERP solutions

About Tailor-Made ERP option Execution Phases ERP product selection phase Product selection - Parameters Preparation Phase ERP product acceptance - Options Gap Analysis Production Phase

Implementation Phase Post-Implementation Phase Pitfalls & Points of Concern Critical Success factors

Tailor-madeERPsolutions

AboutGeneralized off the shelf application software

packagesModules based on rich functionalities for all

business functionsUser tested with lot of installationsNo lead time requirement for software

developmentTuned for more users/networks with adequate

& in- built security

Customized for flexibilityCan sit on latest hardware & software platformsT

ailo

r-madeERPsolutions


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Execution phases

ERP product selection

Preparations

Production

Implementation

Post-ImplementationTailor-madeERPsolutions

ERP Product selection Phase

ERP Team formation for selection

Appointment of Consultants [if needed]

Scoping study

Product selection

Implementation partners selection

Hardware/Communication cost estimation

Tailo

r-madeERPsolutions


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Product Selection - Parameters

Reputation of the ERP product

No. of installations in the geographical vicinity

% of the overall functional availability

Customization possibilities

After sales support

Your investment plan & budget

Implementation partners track record


Technology

Support

Costs

5 Strategic5 Strategic

RequirementRequirement

LevelsLevels

FunctionalityGoal:Goal:

To select theTo select the

Most Suitable SoftwareMost Suitable Software

Package SolutionPackage Solution

Vendor

ERP Product selection Criteria


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Preparation Phase

Framing ERP Implementation Strategies

Formation of Apex & Steering committees

Functional & IT team formation

Training on ERP functions & features

Scope finalization

GAP analysis

Action plan to resolve the gapsTailor-madeERPsolutions

ERP product acceptance - options

1. Adapting directly, all the functions available inthe ERP Product [Applicable for startup companies]

2. Change the way the firm does the business to fitthe product [Compromising]

3. Customize the ERP product to suit the businessProcesses. [Customization]

Tailo

r-madeERPsolutions


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GAP Analysis

This is the process to identity the gaps by mappingthe expectations of the company with thecapabilities of the ERP product

Results of Gap Analysis

Directly SupportedWorkaround suggestedExtension required

Change in business process suggestedNot full supportedManual not under the scope of ERP


Production Phase

Installing the software & hardware

Tuning the software to meet thecustomization needs

Master & Control data arrival as per theProduct data structures

Location & people specific roles & rightsallocation for module access & security

Tailo

r-madeERPsolutions


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Implementation Phase

Conference Room Pilot [Parallel run]

Resolving the Parallel run issues

Training the end users

Live run


Post-Implementation Phase

Regular monitoring

Tuning [hardware/software] for patchingthe performance issues

Maintenance

Tailo

r-madeERPsolutions


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Pitfalls & Points of concern

Costly comparing to custom-built options Lot of hidden costs Chances of cost & time overrun are high The Level of customization Compulsion to pay for redundant modules/features Vigorous involvement of all during implementation Non-availability of special practices like CustomerComplaint, Logistics Linking historical data offline & painful

The requirement of Change Management is a must Dependency on outsiders is high IT department Poor grip on the Implementedsystems


Critical Success Factors

Tailo

r-madeERPsolutions The firm & optimistic approach of the Management

- on adapting the ERP product driven methodologies- on customization- on monetary commitments

The dedicated Team Good Training Strict adherence to the Project schedules Right technical infra-structure

Change Management

?


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Custom-built

ERP

Solutions using external resources

Building ERP using External sources

The Principle!

The Steps

Why?

Points of Concern

Software Vendor selection

Critical Success factors


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About Custom Built ERP

Here the whole package is designed & built

by keeping a specific enterprise & its businessPractices in mind

by incorporating the improvements/additions with due integration without compromising or changing the currentway of doing the business and

providing flexibility to accommodate yourbusiness fluctuationsCus

tom-BuiltERPsolutions

The Principle!

Custom-BuiltERPsolutions

The best as seen elsewhere, need not be the thebest for you.

What is your best is what can be successfullyimplemented


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Cus

tom-BuiltERPsolutions

The Steps

1. Software vendor selection2. Detailed study by the vendor3. Scope & platform finalization4. Freezing the commercials5. Development6. Hardware addition/upgrade7. Old master/transaction data migration8. Parallel run with Integration & connectivity

check

9. Implementation10.Maintenance

Custom-BuiltERPsolutions

Why Custom Built ERP?

Very economical while comparing the cost ofimplementing tailor-made ERP solutions

Less prone for hidden-cost hits

The company can opt for its choice of Hardware,Software & communication platforms based on the skillavailability

The company and the software vendor have the directrelationship during the project execution. The proximitymust be high & convenient.

IT department has good control over the Project

What is required only would be considered under thescope No redundancy


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The requisite flavor of E-Biz & work-flow componentscan be embraced towards value edition

The existing practices & applications can be tuned and

linked with the proposed package

Maintenance & improvements are easy & less costlier.

Even IT team can maintain the setup after getting the

source code

Why Custom Built ERP?

Points of Concern

Software development vendor selection

Requirement/scope finalization [high chances ofretaining the islands as it is]

Less chances of Value addition

Not time tested

Chances of Prolonged project duration


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Key ProcessIntegration

via ERP

Key ProcessIntegrationvia ERP

ProductLifecycle

Management

ProductLifecycleManagement

Supply ChainManagement

Supply ChainManagement

CustomerManagement

CustomerManagement

SupplierCollaboration

SupplierCollaboration

DesignPartners

DesignPartners

Consumersand Channels

Consumersand Channels

Beyond ERP

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Advantages & Disadvantages Of ERP Systems

Advantages Added visibility reduce supply chain

inventories

Helps to standardize manufacturing processes

Measure performance & communicate via astandardized method

Disadvantages Substantial time & capital investment

Complexity Firms adapt processes to meet ERP system


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Remarks or Questions ?!?Remarks or Questions ?!?

Documents

LECTURE 7-Enterprise Resource Planning