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Operations ManagementMSOM 306.001
Lecture 11 – Enterprise Solutions for Managing Operations
Al Baharmast, Ph.D.
Some lecture content courtesy of Prentice Hall, Rights Reserved
Enterprise Resource Planning (ERP) Fundamentals
• ERP Fundamentals:
Not just another business software system…, ERPs are -
• Packaged business solutions comprised of multiple components, that, when implemented in tandem, automate, integrate and optimize extended business processes across organizational value chains
• They enable sharing of common data and business practices both within the enterprise and across supply chains
• Also referred to as “Packaged Software,” “Standard Software,” and “Best Practices Software”
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What Compels the Adoption of Best Practices Software Solutions?
ERP Solution Drivers
ERP Standards Software (COTS) applications - Deliver a lower Total Cost of Ownership (TCO) over an extended lifecycle:
Development, Implementation, Integration and Support/Maintenance Costs Longer Life Cycles than custom applications
Provide proven methodologies (Embedded resources) for implementation, testing, training, documentation
Limit financial risks (vendor/systems knowledge dissolution) Provide scalability Allow businesses to focus on their core competencies (unless you are a software
development firm …) Ultimately, ERP implementations are driven by the desire to -
Obtain better information on process performance Improve operational efficiency & implement system-enforced controls Support process transformation, product innovation and partner integration
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ERP’s Manufacturing RootsMaterial Requirements Planning (MRP)Material Resource Planning (MRP II)
Enterprise IntegrationERP (Back-office – Human Resources, Financials, Supply Chain)Industry Vertical Solutions
Expanding Enterprise IntegrationERP (Services Offerings), Supply Chain Management (SCM), Supplier Relationship
Management (SRM) and Customer Relationship Management (CRM)
The Newest WaveERP II (Lehman, 2001) – “C-commerce and collaborative business models are
beginning to replace standard strategies focused on operational efficiency and value chain management.” Collaborative Commerce – Sharing business processes across the enterprise bounds within
“communities of interest” – automating process interactions with customers/clients and third parties.
ERP Evolution
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The Financial Picture (from FY 2010) –
SAP Revenues – $12.5 Billion R&D Expenditures – $1.7 Billion Net Income – $2.6 Billion
Oracle*
Revenues – $26.8 Billion R&D Expenditures – $3.3 Billion Net Income – $9.0 Billion
* Includes Oracle Database and other non-ERP product/service lines
Big market players – SAP and Oracle
ERP Vendors
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Seven ERP Concepts –
• Best Practices Software – Embedded Business Processes
• Reference Models• Process Orientation• Enterprise-Level Standards• Single Source of Data• Broad Scope of Integrated Solutions•Implementation Methodologies and Toolsets
ERP Concepts
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Best Practices SoftwareEmbedded Business Processes
ERP Concepts
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ERP as “Best Practices Software” – All ERP applications execute extended business processes either as explicitly represented or implicitly understood (increasingly becoming explicit)
Embedded business processes are those developed from years of research and synthesis into “best practices”
Allows you to map your business processes to those executed in the system (solution reference models)
Thousands of ways to configure the embedded business processes to better suit your needs
May require modification of business processes If neither configuration nor adaptation is possible, other
alternatives may be sought (i.e., bolt-ons and extensions; customization is seldom recommended)
If all else fails, only then seek alternative (bolt-on/extension) solutions
Best Practices SoftwareERP Concepts
Configuration – GoodCustomization – Bad
Some lecture content courtesy of Prentice Hall, Rights ReservedSource: SAP
With hundreds of best practices
incorporated into the SAP
system, organizations have a
ready-made facility for adopting
proven processes without the
burdens of trial-and-error
operational design and of
benchmarking themselves
against another organization
[Curran, 1997]
SAP Supply Chain CollaborationProcess Model (High Level)
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Reengineering, as some have conceptualized it, calls for “clean slate” process redesign prior to searching for technology solutions.
A standard software solution is implemented in an opposite fashion:• A set of “reference” process, data, and function models are purchased.• Internal processes are aligned with the standard software solution reference
processes.• Through configuration analysis, many options exist for finding the most
suitable variant of a reference process.
Standard software-based Business Process Management (BPM)• Anticipates alignment to reference business processes and the systems
configuration that will build a process variant that is most suitable for the adopting organization.
The Antithesis of “Clean-Slate” Business Process Reengineering
Business Process Management
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Reference Models
ERP Concepts
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SAP Reference Model
Depiction of Process Execution
Using SAP Reference Objects
Electronic Bill Presentment
And
Payment
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Plan Source Make Market Sell Support
Enterprise Management
Aligning with Supply Chain Operational Reference Model (SCOR)
Oracle Industry Model: Process Manufacturing
Supply Chain Back OfficeCRM
Project to Profit
People to Paycheck
Accounting to Financial
Reports
Concept to Release
(Process)
Contact to Resolution
Campaign to Lead
Contract to Renewal
Forecast to Plan
Procure to Pay
Demand to Build
(Process)
Order to Cash
Inventory to
Fulfillment
Problem toPrevention
Lead to Order
Source - Oracle
SolutionSpotlight
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A reference model provides a pre-engineered set of abstracted views. • One type of reference model might depict a standard for business process
execution, another might depict standard data flows.
• Recall that ERPs either implicitly or explicitly execute pre-defined business processes; applicable reference models represent the underlying business processes being driven by the ERP.
• This affords several benefits to the organization contemplating ERP implementation –
– A ready-made basis for gap analysis
– A basis or “reference” point for configuration/extension
• Allows all implementing organizations to design and develop once, and then replicate many times.
• The reference model will have to be tailored for the implementing organization; this effort is significantly less than approaching each implementation as one might a new software development project.
Reference Models
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Process Orientation
ERP Concepts
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Output
Domain “A”Acquisition
(Purchasing)
Domain “C”Finance
(Payables)
Domain “B”Logistics
(Receiving)
VerticalProcesses
A
B
C
D
E
1
2
3
4
5
α
β
γ
δ
ε
Input
Acq.IS
Log.IS
Fin.IS
Vertical,Non-Integrated
Systems“Stovepipes”
Functionally-Oriented Operations Management
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OutputProcess
Variant 1
Input
A
B
C
D
Functions
E
1
2
3
4
5
α
β
γ
δ
ε
Domain “A”Acquisition
(Purchasing)
Domain “C”Finance
(Payables)
Domain “B”Logistics
(Receiving)
ProcessVariant 2
ProcessVariant 3
ProcessVariant 4
Process-Oriented Operations Management – Driven by ERP
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Oracle - Maintenance Plan to Schedule Process
Schedule to MaintainSignal to ReplenishmentAssess to ProgressStrategic Staffing to HirePayroll to PaymentPlan to Project Budget
Asset to Maintenance PlanSignal to ReplenishmentAssess to ProgressStrategic Staffing to HirePayroll to PaymentPlan to Project BudgetSchedule to Maintain
AM7513
Determine Asset
Availability
AM7513
Determine Asset
Availability
• Review production orders, property usage/hours, shutdown/holidays etc. in order to determine asset availability.
AM7527
Manage Work Request
Process
AM7527
Manage Work Request
Process
• Create a work request, approve the work request, and associate the work request to a work order.
AM7515
Schedule and Resource
Asset
AM7515
Schedule and Resource
Asset
• Perform constraint based scheduling, what-if analysis, and adjustment of variables (overtime, contract labour, deferrals, etc.)
AM7516
Create Maintenance
Schedule
AM7516
Create Maintenance
Schedule
• Schedule work orders, identify dependencies, and identify resources (People/ Equipment/ Parts)
Enterprise Roles
Maintenance Supervisor
Maintenance Planner
Source: Oracle
SolutionSpotlight
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Enterprise-Level Standards
ERP Concepts
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Business Process Standardization• Results in significant reduction in or elimination of the different ways of doing
the same job.
Configuration Standardization & Management• Embeds process standardization in the ERP system.• Requires a pre-defined configuration control process to avoid constant change
and/or the development of process variances.
User Roles Standardization• Identifies logical groups of users based on common activities and
organizations. System functions and data visibility are constrained (or enabled) by user role.
User Training Standardization• Provides the discrete information to user groups necessary to enable process
standardization.
Enterprise-Level Standards
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Single Source of Data
ERP Concepts
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Define Product Quality Characteristics and Leverage One Set of Master Data
that to Manage Inspections
Source: SAP
One of the central tenets of ERP is the consolidated
and centralized management of all the instances of
identical data (both Master Data and Transactional
Data)
… based on the foundational efficiency principle of
data reutilization
Process 1
Requisition
ERP Database
Vendor A
Data
SAP - Quality
Inspection
Example
Process 2
P.O. Issuance
Process 3
Receiving
Process 4
A.P.
Single Source of Data
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Broad Scope ofIntegrated Solutions
ERP Concepts
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R/3R/3Client / ServerClient / Server
ABAP/4ABAP/4
FIFIFinancialFinancial
AccountingAccounting
COCOControllingControlling
AMAMFixed AssetsFixed Assets
Mgmt.Mgmt.
PSPSProjectProjectSystemSystem
WFWFWorkflowWorkflow
ISISIndustryIndustry
SolutionsSolutions
MMMMMaterialsMaterials
Mgmt.Mgmt.
HRHRHumanHuman
ResourcesResources
SDSDSales &Sales &
DistributionDistribution
PPPPProductionProductionPlanningPlanning
QMQMQualityQuality
Manage-Manage-mentment PMPM
Plant Main-Plant Main-tenancetenance
Business process
solutions
Open systems
Client / serverarchitecture
Comprehensive implementation support:
Business Engineering Workbench
Designed for all typesof business
Multinational
Comprehensivefunctionality
Over 25,000 installations around
the world
SAP Modules
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mySAP Business Suite
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Oracle E-Business Suite
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Source: Oracle
• Collaborative Planning• Demand Planning• Supply Planning• Inventory Optimization• Advanced Scheduling• Order Promising
Planning
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DocumentManagement
•File Management •Workspaces •Complex Search•Categories •Versioning •Review Process •Edit-in-Place •File Synchronization
Source: Oracle
EngineeringPlans Mgmt
•Multi-format CAD Rendering and Markup•Collaboration•Structure hierarchy• Parts lists• Part attributes• Query of attribute data
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Implementation MethodologiesAnd Toolsets
ERP Concepts
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SAP Solution Manager Roadmap
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Oracle ApplicationImplementation Methodology (AIM)
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Definition - Plan the project, review client business objectives, understand the business processes, and evaluate the feasibility of meeting those objectives under time, resource, and budget constraints.
Operations Analysis - The project team develops the Business Requirements Scenarios based on deliverables from the Definition phase. A model for the application architecture is created and the technical architecture is designed. Finally, a Transition Strategy is developed for migrating the client organization from the current system to the new production system.
Oracle ApplicationImplementation Methodology (AIM)
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Solution Design - Project team members create detailed Business Procedure Documentation. Supporting business requirements may require building application extensions to standard features. While new system designs are being finalized, the application and technical architecture begins to take form. The technical staff designs a technical architecture that can support the standard application configuration and customization.
Build - Test the business system as a formal conference room pilot (CRP). The business system test validates the configuration of the new system and is performed in an environment that closely resembles production.
Oracle ApplicationImplementation Methodology (AIM)
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Transition - The project team deploys the new system into the client organization. The project team trains the users while the technical team configures the Production Environment and converts data. During Transition, users perform an acceptance test of the new system. The Transition phase ends with the switch-over to production, when users start performing their job duties using the new system.
Production - The client compares actual results to project objectives and determines if improvements can be made. Finally, the client starts preliminary planning of the future business and technical direction of the organization.
Oracle ApplicationImplementation Methodology (AIM)
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Source:
ValueSAP
More Implementation Tools
Some lecture content courtesy of Prentice Hall, Rights Reserved
Source:
ValueSAP
More Implementation Tools
Some lecture content courtesy of Prentice Hall, Rights Reserved
Tools to Support System Testing
Source:
ValueSAP
More Implementation Tools