ERP – Expensive Reporting Programme

www.csntechnologies.co.za

Colin Pillay

GUEST LECTURE PRESENTED DURING RABELANI DAGADA'S TECHNOLOGY & INFORMATION MANAGEMENT

AT THE WITS BUSINESS SCHOOL, 17 FEBRUARY 2011

What is ERP?

ERP is a packaged business software system that processes transactions on a

single software platform and a single database

What does an ERP system do? (1)

• Integrates information across all departments• Facilitates the flow of information among the

different functions and processes of an enterprise• functions: manufacturing, finance, HR

• processes: order entry

• Tracks a wide range of events in the enterprise in an integrated fashion

• Plans future activities based on these events• Supports analysis of trends in these events, to

improve the performance of the enterprise.

2. What does an ERP system do? (2)

• Allows users to • input data in one location, that can be processed with

other data and accessed as informational reports in a real-time environment

• share common data and practices across the entire enterprise

• reengineer the majority of its processes

3. Drivers of an ERP investment

• Technology• Business processes• Strategy• Competition

3. Drivers of an ERP investment3.1. Technology

• Need for an infrastructure that will provide information across all functions and locations within the organization

• Difficulty maintaining existing legacy systems

• Difficulty integrating acquisitions• Obsolete hardware

3. Drivers of an ERP investment3.2. Business processes

• Complex, ineffective business processes• Business processes are not integrated• Need for a set of tools for planning and

monitoring the various functions and processes in a company

• Opportunity to reengineer business processes

3. Drivers of an ERP investment3.3. Strategy

• Globalization• New products, new services• Need to be more responsive to customers• Cost structures too high• Poor quality or visibility of information• Foundation for e-business

3. Drivers of an ERP investment3.4. Competition

• Competitors have an ERP system

4. Evolution of enterprise software

- the applications typically come from multiple vendors and run on multiple platforms- companies are managed along functional lines- task oriented applications

Before 1980

1980s- functional applications

- some integration

- cross-functional applications

- integrated applications

- versions for the client-server architecture

1990s

5. Evolution of ERP systems

• ERP has its origin in the manufacturing industry

MRP

MRP II

ERP

Extended ERP

InventoryControl1960s

1970s

1980s

1990s

2000

5. Evolution of ERP systems 5.1. Inventory Control

• Most common approach: • If the inventory drops below a minimum quantity, it is

replenished with the Economic Order Quantity (EOQ)• Disadvantages

• very large inventory investment

• unreliable with a highly varying demand rate

• large investment in safety stock

• requires forecasts for all items

• based on past demand data

• material obsolescence is more likely

5. Evolution of ERP systems 5.2. MRP

• Material Requirements Planning• Calculates component requirements based on the

Master Production Schedule (MPS), Bill of Material (BOM) and inventory data

• Determines batch sizes for purchasing and manufacturing, and sends out purchasing / manufacturing orders for them at the appropriate times

5. Evolution of ERP systems 5.3. Closed-loop MRP

• Considers material and capacity requirements

• Prior to releasing production orders to shopfloor, it adds the planned workload to existing workload, and compares it with the available capacity

• Assesses whether work should be rescheduled in order to smooth out any peaks in capacity utilization (CRP)

5. Evolution of ERP systems 5.4. MRP II

• Manufacturing resource planning• closes the loop with sales, financial and

operations planning• includes the allocation of production equipment

and labor• can manage changes in the production plan• includes JIT capabilities

5. Evolution of ERP systems 5.5. ERP

• Enterprise resource planning• ERP systems go beyond the barrier of

manufacturing organizations• Data are generated as a result of diverse

transactions and integrated to be used by multiple users, for multiple purposes and at multiple places

6. ERP components

• Financials• Human resources• Sales and Distribution• Manufacturing• Materials management• Logistics• Reporting

6. ERP components6.1. Financials

• General ledger• Accounts receivable• Accounts payable• Asset management• Treasury management• Controlling

6. ERP components6.2. Human Resources

• Human resources administration• Payroll• Self-service• Planning

• personnel development• workforce• shift

6. ERP components6.3. Sales and Distribution

• Prospect and customer management• Sales order management• Billing, invoicing and dispatch• Sales history

6. ERP components6.4. Manufacturing

• Bills of materials, routings• Different planning functions

• production planning• capacity planning• shop floor control• production scheduling

• Project management• Plant maintenance• Quality management

6. ERP components6.4. Manufacturing (2)

• Multi-mode manufacturing functionalities• make-to-stock• make-to-order• assemble-to-order• engineer-to-order• JIT

• Industry-specific solutions• discrete manufacturing: automotive, high tech• process industries: chemicals, oil & gas • services: public services, banking, insurance

6. ERP components6.5. Materials management

• Procurement• generate purchase orders

• know the prices

• measure vendor performance

• receive goods into inventory

• pass invoices to accounts payables

• Inventory management• where is all stock• what is it worth• stock movement tracking

6. ERP components6.6. Logistics

• Warehouse management• maintains records of warehoused goods• process movement of products through

warehouses

• Transportation management• manages delivery of products to customers• produces legal documents for tax, customs,

shipping agents

6. ERP components6.7. Reporting

• Information is made available to particular users in the form of specific reports.

• In addition, there are other approaches to generating data from the system, including database queries.

• Recently, ERP reporting capabilities have begun to evolve as ERP vendors have tried to increase the accessibility and ease of use of the ERP software.

7. ERP implementation7.1. Challenge

Moving away from functional silos and creating effective cross-functional

processes that are truly integrated via an ERP system

7. ERP implementation7.2. Preparation (1)

• Develop a clear business case• costs versus benefits• operational outcomes

• Set company goals and commitments• Build understanding and commitment,

enabling continuous improvement (change management)

• Examine current state• Reengineer business processes

7. ERP implementation7.2. Preparation (2)

• Make decisions about the IT infrastructure (hardware, network, telecommunications, support)

• Estimate project resources, costs and duration of each activity

• Break the implementation effort into manageable and measurable work phases

• Perform a risk assessment: proactive process to reduce uncertainty

7. ERP implementation7.3. Software selection

• Vendors criteria• financial stability• long-term viability• implementation services• life cycle services (support, maintenance)

• Software criteria• industry specific• functionalities must meet business requirements• performance• default settings versus customizing

• Costs

7. ERP implementation7.4. Implementation steps (1)

• Installation• Big Bang

• Implementing all targeted functionality at the same time.• A certain efficiency and effectiveness is achieved by

implementing all modules as a single project.• Phased

• Implementing targeted functionality in phases– by module– by geography– by business unit

• Company expects to grow into ERP

7. ERP implementation7.4. Implementation steps (2)

• Project management• tracking, measuring and rechecking of milestones to

ensure that scheduled changes are made on time and on budget

• Training• provide training to everyone involved in the project

• Go Live• Improvement

7. ERP implementation7.5. Key factors for successful implementation

• Keep top management involved• Select the right project manager• Set-up cross functional implementation

teams• Obtain a good implementation partner• Ensure that the OEM/Vendor is held

accountable for QA on the project.

7. ERP implementation7.6. Review

• ERP project• on time, within budget, expected scope

• Business operations• user performance• system performance• business process performance

• Organization• competitive advantage/disadvantage• process visibility and continuous improvement• sound IT architecture • adaptability for mergers, reorganizations

8. Costs

• Acquisition costs• Implementation costs• Life cycle costs• Training Costs

8. Costs8.1. Acquisition costs

• Acquisition costs• selecting the ERP system

• education• consulting

• software licenses• IT infrastructure

• hardware• telecommunications

8. Costs8.2. Implementation costs

• Implementation costs• people: consultants, project team, trainers• travel• administrative: support, supplies, office space• integration with other applications

8. Costs8.3. Life cycle costs

• Life cycle costs• maximizing the value of the ERP system

ownership• maintenance • support• Upgrades• Ongoing Training

9. Benefits

• Improved integration• Improved efficiency• Improved information quality• Improved worldwide communication• Improved customer service

9. Benefits (1)

• Improved integration• Seamless integration of all the information

flowing through a company• financial and accounting information• human resource information• supply chain information• customer information

• Single database• Corporate functions are linked together

• elimination of functional silos

9. Benefits (2)

• Improved efficiency• Quickly entering and retrieving of information• Information entered once into the system

• Improved information quality• Greater accuracy of information• Improved access to information

• Improved worldwide communication• Multi lingual and multi currency capacity

9. Benefits (3)

• Improved customer service• Reduced errors in ordering, billing, shipping• Decreased lead time• Increased quality• Improved on-time delivery performance

10. The Future of ERP (1)

• Move from client/server applications to Internet-based applications (cloud computing)

• Enterprise systems will connect to suppliers and customers.• supply chain management• customer relationship management• E-Business• self-service applications (ex. Order entry)

• Information will increasingly be seen and managed as an asset

Extended ERP

MA

E (M)-Commerce

CRM SCC

SFA CSS CPFRE-

HubsECEP

BasicERP

Planning Execution

HRFIN…..

LocalAPS

MESWHMTM

Internal focus External focus

Business Intelligence

User Interface: Personalized Portal

10. The Future of ERPExtended ERP abbreviations

• CRM: Customer Relationship Management• MA: Marketing automation• SFA: Sales Force Automation• CSS: Customer Service and Support

• SCC: Supply Chain Collaboration• CPFR: Collaborative Planning, Forecasting, Replenishment

• APS: Advanced Planning and Scheduling• MES: Manufacturing Execution Systems• WHM: Warehouse Management Systems• TM: Transportation Management Systems• EP: E-Procurement• EC: E-Commerce

11. Summary (1)

• ERP systems are fast replacing legacy systems• ERP can integrate all of your business units• Proper implementation will help the business

function better• ERP affects many key business processes and

employees profoundly: change management and training are important

• Move to mid-size companies and internet-based collaborative applications

11. Summary (2)

• Necessary actions before acquiring an ERP system• In-depth study of existing systems and processes• Development of a clear business case

• costs versus benefits• operational outcomes• risks

The end

Please feel free to give any comments to

colin@csntechnologies.co.za