ERP

Version 22 October 2012

© Maurizio Morisio, Marco Torchiano, 2012

Enterprise Resource Planning

Definition

Integrated suite of modules supporting (core) business processes

3

ERP

ERP

SCM CRM

Drawing by Dinesh Pratap Singh

4

ERP modules

5

ERP - modules

Cross industry modules

Industry modules

Specific to automotive, chemical, ..

Extended modules

On the boundary company – companies or company customer (CRM, SCM, ..)

(very wide view of ERP becomes ES)

ERP - levels

Suite

Set of software applications sharing one or more DB

Supports set of business processes

Module

Software application

Supports business process

Made of functions

Function

Supports simple operation/activity

6

7

Diffusion

Major players, world

SAP, Oracle

Oligopoly in large companies, multinationals

SMEs, Italy

Local producers, products

Diffusion (2005)

8

Vendor Market share

SAP 30%

Oracle 21%

Sage group 17%

Microsoft 14%

SSA 7%

Diffusion (2012)

9

10

The ERP model

Data sharing

No data replication

Modularity

Independent modules

Prescriptivity

The approach is the same for all companies (pro and con)

Data replication: legacy islands

• Same data in several (legacy) systems

• Dedicated interfaces to synchrronize (point to point)

•Cost

•Delays

•Unfeasibility (of overnight synchronization)

•Company must become system integrator

ORDER ENTRY

CUSTOMER DATA + MISCELLANEOUS

DATA

RECEIVABLES

CUSTOMER DATA + MISCELLANEOUS

DATA

SHIPMENT

CUSTOMER DATA + MISCELLANEOUS

DATA

INTERFACE

•ORDER DATA •CUSTOMER CHANGES

INTERFACE

DATA ON SHIPMENTS

INTERFACE

PAYMENT DATA

CUSTOMER CHANGES

SHIPMENT

12

Data replication

Same data in several (legacy) systems

Dedicated interfaces to synchronize (point to point)

Cost

Delays

Unfeasibility (of overnight synchronization)

Company must become system integrator

ERP: data sharing

13

MANAGEMENT SUPPORT APPLICATIONS

MANAGEMENT DATA

WAREHOUSE

INFORMATION

TRANSFORMATION

OPERATIONAL DATA

BASE

OPERATIONAL SUPPORT APPLICATIONS

14

ERP: data sharing

One DB or replicas with automatic synchronization

One data model

Horizontal integrity of data

All applications/modules share same data, with same data model

Vertical integrity

From operation level to management level (aggregates of data)

From functions to processes

15

Funzione A Funzione B Funzione C

DG

PIANIF/PROG&

CONTROLLO

PERS&ORG FIN S&RMRK LOGPROD SI

16

Modularity

Ex.: SAP R/3 for Manufacturing SD Sales And Distribution

MM Materials Management

PP Production Planning

QM Quality Management

PM Plant Management

HR Human Resource

FI Finance

CO Controlling

AM Asset Management

PS Project

WF Work Flow

IS Information System (summary data)

DB ERP

17

Modularity

Smoother transition, extensibility

Rich module offer

One stop shopping

All modules from same vendor, ease of integration

Best of breed

Modules from different vendors

18

Prescriptivity

ERP modules contain a business logic

Ex.: Supply part can be accepted only of related order has been issued

Ex.: Supply can be ordered only if authorized role needs it

Current business process in company may or may not comply

19

Approaches

Traditional:

Understand business process,

Develop software supporting it

ERP:

Adapt business process to ERP

Actually ERP software can be parameterized and customized

Gap analysis Activity Current ERP Process

Actions Software Actions

Receive materials

Only recording, no control vs. order

Control on order: entering materials must have been ordered

Adapt process to ERP prescription

-

Quality Control

Driven by predefined rules

Result recording (no rules within system)

- Adaptation of ERP software

Storage

IS drives selection of warehouse location

Only recording of completed storage

- Adaptation of ERP software

Retrieve from storage

IS suggest location where to retrieve

Only recording of completed retrieval

- Adaptation of ERP software

Inventory change

Change values in db (overwrite)

Values are corrected through correction transactions

Adapt process to ERP prescription

21

Transition to ERP in company

Cost of licenses + personalization

Especially for SMEs

Delay

Changes to business processes

Acceptance, human factors

Heavy solution?

Especially for SMEs

22

Options

Large company (turn over > 50MEuro)

ERP (Sap, Oracle, ..) + BPR activity

– Core modules + industry modules

– Transition risks

– Delay (>12 months)

– Cost (0,5 - 10 M)

Same as for SME

23

SAP

1972 foundation

1980 – SAP R/2 multilanguage multicurrency

1990 – SAP R/3 client server

2000 - CRM

24

Oracle

1977 – only DB

1995 enters ERP market with buyout of

PeopleSoft, JD Edwards (ERP)

Siebel (CRM)

Hyperion (management)

25

Options

SMEs

Package for accounting

Package specific to domain

ERP light

ERP in ASP mode

26

Packages for accounting

‘gestionale’: Esatto, Zucchetti, Buffetti

Sometimes rigid (data: like bill of materials, processes)

Reduced cost: ~ 50K

Hard to scale up

27

Vertical packages

Often used by SMEs

On open (Unix, MS) or closed platform (AS/400)

Specific to domain

Sometimes with different vendors

Cost: ~100K

28

ERP light

Reduced, precustomized versions of SAP, Oracle, etc

Inherit complexity of parent product

Cost: ~150K

New products of traditional local vendors (ESA, Formula)

Good coverage of processes

Less impact for customization

Cost: ~100K

29

ASP modes

Pay service and not product

Pay per client, per transaction

Access through Internet/Browser

Ex.: BtoBiscom - RDS, SEMA, EDS, AONet - Formula,

ERP OSS

30

Over 400 ERP Open Source projects (February 2009 www.sourceforge.net)

Assessment parameters:

Functional Fitness: coverage of business processes

Flexibility: ability to bridge the gap between “out-of-the-box” and required features

Support: transfer of required knowledge for deployment and operation

ERP OSS

Compiere Is the richest suite in terms of features with some CRM functionality

Hipergate Appears like a CRM suite with some ERP features

Oratio Designed explicitly for the EU market

ERP5 Relatively new project with good accounting, procurement, and sales

features

webERP Focuses mostly on finance features

OFBIZ Promising project, supported by the Apache foundation

Evolution appears slow and not comparable to commercial suites

31

32

ERP OSS

Compiere Hipergate OfBiz Oratio ERP5 webERP

HR and accounting

Financials and accounting OK no OK OK OK OK

Quote generation OK no no no no no

Invoice management OK OK OK OK OK OK

Sales Order Management/Order Management

no Partial Partial OK OK OK

HR management OK no no no OK no

Reporting

Supporto a diversi formati OK Partial no no no no

Funzionalità analitiche Partial no no Partial no no

Supporto ai report personalizzati Partial no no no no no

Report preimpostati OK OK no OK OK Partial

Altre caratteristiche

Calendario OK OK OK no no no

Portale Web OK Partial no no no no

Enterprise asset management (EAM) no no no Partial OK no

Project tracker/manager no OK OK Partial OK no

Workflow manager OK no OK no OK no

33

SAP - architecture

Database Information storage services

Kernel Low-level predefined operations

– DB access – Simple transactions execution – Communication with other sw suite – Monitoring and system administration – User and permission management

Package Set of consistent and customizable features

(e.g. accounting) Leverage kernel functions

34

SAP - Database

64.000 Tables Schema are ready and non-modifiable by

programmers It is possible to add new tables

Including System configuration tables (name T*), e,g.:

– Countries – Type of materials – Currencies

Organization manegement data, e.g.: – Suppliers – Materials – Customers – Customer orders

SAP – a transaction Steps:

1. Call transaction

2. Program compilation;

3. Compiled code loading on client

4. Data from client to server

5. Processing of next screen

6. Communication to client of new screen

At the end of the transaction the system stores the data from all completed screens

SAP - Parameterization

Kernel

Database

V

V

V

X

X

X

X

Selection Parameter

Definition

The predefined package features are customized on the organization’s needs through parameterization

Parameterization includes Feature selection: identify relevant

features. Definition of parameters for the

selected features: – localization (currency, taxes, etc...), – Applied sale conditions – Storage management strategy – Etc.

ERP in summary

Cover the core processes of an organization

Process oriented

Modular and based on a single database

Prescriptive

Complex