Transcript Document

INFORMATION SYSTEMS @ X
INTRODUCTION TO ERP
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X
Learning Objectives
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Provide an overview of how ERP systems help address issues caused
by functional systems.
Understand why business and IS students should learn about ERP
systems
Discuss the value ERP systems can provide
Review issues associated with implementing ERP systems.
Describe the key characteristics of ERP systems
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X
ERP Video
Questions:
 How does an ERP system change the way people work?
 Why do you think its important for top business managers to
have a sound understanding of ERP systems?
 What are some of the issues associated with implementing
an ERP system?
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X
Why Study ERP
 It affects most major business enterprises and many
small and medium businesses
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60% + of very large corporations use SAP (an ERP vendor)
Increasingly, smaller organizations are adopting
Its out there, and its very likely you will work with one in some
capacity
 It changes behavior of competitors and partners
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Competitors: adopt to survive?
Partners/Suppliers: adopt to keep business
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X
Why Study ERP
 It enforces best practices and aids reengineering
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Best practices built in (lots of choice)
don’t iterate, obliterate
 It changes the nature of consulting firms and IS
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HUGE portion of revenue from ERP consulting
 It is challenging to implement and cost is high
 Its growth has made it the predominant software
INFO102: Management Information Systems
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How does ERP create value?
 It integrates a broad range of business functions
 It allows diverse enterprises to standardize
 It stops data redundancy and synchronization
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Data stored in one place
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“One version of the truth”
 It provides simultaneous access to real-time data
 It facilitates communication inside and outside the
enterprise
 It provides a foundation for eBusiness
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INFORMATION SYSTEMS @ X
Disadvantages of ERP
 ERP implementation is very difficult. There is a change in
the way business is done. From a business function
approach to a process approach.
 ERP systems are very expensive to implement. Can take
years and cost 10’s of millions of dollars.
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X
Disadvantages of ERP
 It takes time to realize the benefits of an ERP system.
 Forces people to change and change = resistance:
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Share information that was once closely guarded
(i.e., “their information”).
Make decisions they were never required to make.
Do things they were never required to do before
INFO102: Management Information Systems
INFORMATION SYSTEMS @ X
Disadvantages of ERP
 ERP systems are strategic solutions. In essence some
companies are betting their future on a successful ERP
implementation.
 If the implementation fails, the consequences to the
company can be disastrous.
 Companies have gone out of business as a result of a
failed ERP implementation effort.
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“Hidden” Costs
 Training
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Critical, but effort and cost is often underestimated
 Integration and Testing
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Links between modules and between ERP software and
external systems
 Customization
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Expensive, complex, dangerous
 Data Conversion
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“Hidden” Costs
 Consultants
 Staffing
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Need ‘best and brightest’ from business – how to replace
them?
 Implementation team needs to stay in place
 Delayed ROI
 ‘Post-ERP Depression’
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All change and upheaval – impact on organization’s morale
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Colgate Case
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Colgate Brief History
 William Colgate established “Colgate” in 1806
 Mainly a starch, soap and candle business
 Merger with Palmolive in 1928; Colgate-Palmolive-Peet
 Corporate name changed to Colgate-Palmolive in 1956
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Colgate Brief History (cont)
 Continuous growth
 Today $9.9 Billion company (2003)
 Operations in more than 200 countries and territories
 Colgate is now recognized as one of the leading manufacturers
of oral care, dental care, household surface care, fabric care
and pet nutrition products
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Colgate
 Divergence of operating platform
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Dozens of platforms
 Low IT skills/knowledge
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No one understood all of the legacy systems
 Each CIO for each country – very decentralized IS
organization – no standards or best practices in place
 No centralized operation e.g. 80 CIO
 Decided to implement ERP software in 1999
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Integration of Processes – Some benefits
Activity
Before
After
Enter pricing data
5-80 days
5 min.
Customer credit check
15-20 min.
automatic
Enter customer order
30 min.
5 min.
Customer billing inquiry
15-20 min.
real-time
Ship evaluation unit
3-30 days
2 days
Ship replacement part
3-44 days
2 days
Credit returned item
1-5 months
5 days
Commit date for delivery
2 hrs.-3 wks.
real-time
Source: Hammer
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Outcomes for Colgate
 Availability of information in real time
 Decision making made easy because of availability of
accurate and up-to-date data
 Business process re-engineered and in some cases
different departments consolidated into one
 Improved efficiency: about 30% for the database
applications and about 50% reduction in processing time
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Outcomes for Colgate Cont’d
 SAP handles 95% of the company’s $9.9 billion annual
sales.
 Colgate saved $225 million where as target was $125
million.
 Datacenters shrinks to 1 (and one backup) from 75
 Inventory reduce by 10%
 Facilitated move to eCommerce.
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ERP in …. the Army?
 Why do you think the US army would want to implement an
ERP system?
 What kinds of challenges would the US army face in
implementing an ERP system?
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What’s the difference between a function and a
process?
 Business Function: Related sets of specialized activities
carried out by an organization
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For efficiency – keep people who do the same thing together
Often = department
Examples?
 Business Process: the way that work is organized and
coordinated in an organization to add value
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Process Oriented Application
Process-oriented Application: Order Processing
Marketing/Sales
Accounting
Manufacturing
ERP ‘module’
Integrated Database
ERP systems are composed of a series of ‘modules’ that
support end-to end business processes (which is how
value is added in an organization)
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Enterprise Resource Planning (ERP) Systems
 Enterprise Resource Planning Systems are enterprise systems
meant to integrate data and support many of the major
functions of organizations.
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Traditional focus: “back office” – mostly isolated from
customers (except sales)
 The goal of an ERP system is integrate data and to make the
information flow dynamic and immediate, therefore,
increasing its usefulness and value.
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Enterprise Resource Planning (ERP) Systems
(cont)
 Clients, employees and vendors all use the same system
 Major functions are integrated in a single software system
 Replace an assortment of systems and numerous databases
that typically existed in organizations.
 Integrate departments and functions across an organization
sharing a common database
 Integrated information available in real-time.
 Data flows seamlessly – no manual intervention and no
paper
Do you see any issues with sharing data with customers and
vendors?
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ERP Supported Functions
Financial
Human Resources
Operations &
Logistics
Sales & Marketing
Accts Receivable
Time Accounting
Inventory
Order Processing
Asset Account
Payroll
MRP
Pricing
Cash Forecast
Personnel Plan
Plant Maintenance
Sales Reporting
Cost Accounting
Travel Expense
Production Planning
Sales Planning
General Ledger
Benefits Mgmt
Manufacturing
Catalogue Mgmt
Profit Analysis
Purchasing
Standard Costing
Quality Mgmt.
Shipping
All of these functions…. One software package….
One database
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Factors in development of ERP
 Speed and power of computing
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Hardware (servers and disk) now cheap and fast – makes ERP
feasible
Happened in the 90s.
 Increasingly complex business environment
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Organizational complexity
Increasingly demanding customers
Globalization
Increased competition
 Increasingly sophisticated software needs
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‘Legacy’ systems break under the strain of….all of the above
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ERP Vendors
 Oracle - www.oracle.com
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Peoplesoft - www.peoplesoft.com
> J.D. Edwards - www.jdedwards.com
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SAP - www.sap.com
SSA Global - www.baan.com
Microsoft
Others – niche/specialty
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SYSPRO: Small manufacturers
Banner: Universities
Meditech: Hospitals
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ERP Vendors
 Consolidation is currently taking place in the ERP software
business
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PeopleSoft purchased ERP vendor J.D. Edwards in 2003
Oracle, after a long battle, acquired PeopleSoft in 2005
SAP and Oracle are now the two largest ERP vendors
Microsoft is challenging SAP and Oracle to sell ERP
systems to small- and medium-sized businesses
Other vendors …
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