Introduction to ERP

History of organizational systems

• Calculation systems• Functional systems• Integrated systems

Calculation systems

• 1950-80• Single purpose• Eliminate tedious human work• Examples: Payroll, General ledger,

Inventory• Technology used: Mainframes,

magnetic tapes, batch processing

A System/370 Model 145 (1970’s)

removable-disk hard drives

Hard drives

A very nice-looking magtape-drive

Magtapes

Batch processing

Printer 800 lines/minute with 48 character train, 136 columns with 6 or 8 lines per inch spacing

Stack of Computer Printout Paper

Functional systems

• 1975-20??• Use computers to improve operations• Applications: Human resources, order

entry, manufacturing resource planning

• Technologies: Mainframes, PC’s, LAN’s

Minicomputer

Functional systems

• Typically contained within a department

• Islands of automation• Applications independently

developed and deployed• Driving force: availability of mini-

computers

Functional system applications

• Human resources System• Accounting and finance systems• Sales and marketing System• Operations management System• Manufacturing Systems

Human Resources

• Recruiting• Compensation• Assessment• Development and Training• Planning

Accounting and Finance

• General Ledger• Financial Reporting• Costing• Budgeting• Accounts Payable• Accounts receivables

Sales and Marketing

• Lead tracking• Sales forecasting• Customer management

Operations

• Order management• Inventory management• Customer service

Manufacturing

• Inventory• Planning

Types of Organizational information Systems

• Administrative systems• Scheduling / Transaction systems• Value oriented systems• Reporting and controlling systems• Analysis and information systems• Planning and decision support

systems(From Business Process Engineering by

A.W. Scheer)

Problems with function based application

• Sharing of data between systems• Data duplication• Data inconsistency• Applications that don’t talk to one another• Limited or lack of integrated information• Isolated decisions lead to overall

inefficiencies• Increased expenses

Solution to disparate systems?

• Integration• Consolidation• Right-sizing• Business Process Redesign• Enterprise wide system

Integrated systems or

Enterprise Resource Planning System

ERP - Definition

• ERP is a process of managing all resources and their use in the entire enterprise in a coordinated manner

ERP system: Definition

• ERP is a set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order management

What is ERP?

• Enterprise Resource Planning• Support business through optimizing,

maintaining, and tracking business functions

• Broken down into business processes– HRM– Distribution– Financials– Manufacturing

What makes ERP different

• Integrated modules• Common definitions• Common database• Update one module, automatically

updates others• ERP systems reflect a specific way of

doing business• Must look at your value chains,

rather than functions

Benefits of ERP

• 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

Vendors

Difficulty in implementation

• Very difficult• Extremely costly and time intensive• Typical: over $10,000,000 and over a

year to implement• Company may implement only

certain modules of entire ERP system• You will need an outside consultant

Common Pitfalls

• Do not adequately benchmark current state

• Did not plan for major transformation• Did not have executive sponsorship• Did not adequately map out goals

and objectives• Highly customized systems to look

like old MRP systems

Survey of ERP implementations

Done by ittoolbox.com in 2004

Overview

• 375 IT and business professionals • 52% anticipate budget increases for new

ERP implementations/new modules • SAP and PeopleSoft/J.D. Edwards were

cited as the most popular ERP packages • 46% indicated that the main challenge to

successful ERP implementations was inadequate definition of requirements and resistance to change

How would you characterize your budget for new ERP implementations/new modules deployments for 2004

compared to your budget in 2003?

Who is directly responsible for determining your ERP

implementations/new modules deployments?

Who are the other key decision-makers/influencers in decisions to add

new ERP packages/new modules?

Do you currently have an ERP package?

If your answer is "Yes", which ERP package(s) do you currently use?

Are you considering adding new modules to your existing ERP package?

If your answer is "Yes", which modules are you planning to add?

If you plan to deploy a new ERP package and/or add modules to your existing packages, when would this

implementation take place?

Who do you partner with for new ERP implementations and additions of new

modules?

What do you see as the main challenges to successful ERP implementations within your

organization?

For more details…

• http://projectmanagement.ittoolbox.com/documents/research/