Lecturer: Ellis E. Confer

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Enterprise Resource Planning IS 560 Winter 2003

• Lecturer Ellis E. Confer
• E-mail econfer_at_cs.depaul.edu
• Office Hours Monday 415 545 pm

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Session Number 1

• Session Date January 6, 2002
• Session Objectives
• Introductions Administrative Items
• Course Overview
• Initial Course Topics
• Assignments
• Session Topics Introduction to ERP
• Course Administration Overview
• Historical Perspective on ERP
• ERP Overview  

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IS 560 Course Objectives

• Study the planning and implementation of
  enterprise systems in the context of enterprise
  resource planning (ERP). The course will examine
  the evolution of ERP, the ERP framework,
  assessing organizational readiness, business
  process engineering, organizational alignment,
  ERP extensions (SCM, CRM, CPFR, etc.), current
  trends, and future opportunities.

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Prerequisites Text and Supplementary Reading
Materials

• Prerequisites Prerequisite IS 422 or IS
  483 or consent of instructor.
• ERP Tools, Techniques, and Applications for
  Integrating the Supply Chain by Carol A. Ptak
  with Eli Schragenheim, The St. Lucie Press/APICS
  Series on Resource Management. ISBN
  1-57444-270-8.
• Why ERP? by F. Robert Jacobs and D. Clay Whybark,
  Irwin McGraw-Hill ISBN 0-07-240089-7.

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Grading Procedure

• The students final grade will be based on a
  weighted average of the individual assignments,
  team assignments, and class participation.
  Weights are as follows
• Weight
• Individual Assignments 50
• Team Assignments 40
• Participation 10
• Class attendance, in-class participation, group
  project participation, and in-class discussion
  represent 10 of overall grade and is highly
  considered.
• Grades will be determined as follows
• 90 - 100 A 87 - 89 A-
• 80 - 86 B 77 - 79 B-
• 70 - 76 C 67 - 69 C-
• 60 - 66 D 0 - 60 F

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Procedures and policies

• 1. No makeup exams will be given.
• 2. Homework assignments must be turned in on
  time.
• Late homework assignments will not be accepted.
• Turning in a hard copy version of an
  assignment is the most reliable way to ensure
  that assignments are received on time. When
  transmitting a soft copy of an assignment via
  email, make sure to give yourself adequate time
  for the mail to be delivered by no later than the
  day when the assignment is due. Email delivery
  problems do occur, please ask for a receipt of
  delivery.

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ECT 581 Tentative Schedule of Discussions

• January 6 Course Administration ERP
  Overview
• January 13 ERP Overview (continued)
  ERP System Technology Background
•  
• January 20 ERP System Technology
  (continued)
• January 27 ERP Support for Business
  Processes
• 1st
  Individual Assignment Due  
• February 3 ERP Support for Business
  Processes (continued)
• February 10 ERP e-Business Implications
  (continued)
•         
• February 17 ERP e-Business Implications
• 1st Team Assignment Due
  

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ECT 581 Tentative Schedule of Discussions
(continued)
February 24 ERP Life Cycle Considerations Ma
rch 3 ERP Life Cycle Considerations
(continued) Future Trends Emerging Techniques
and Technology 2nd Individual
Assignment Due March 10 Future Trends
Emerging Techniques and Technology
(continued) March 17 2nd Team
Assignment Due
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Instructor background

• Professional experience
• 20 years experience as consultant and
  entrepreneur
• Stints with Accenture, IBM, Sybase, Tandem, CNA
  Financial
• Presently senior executive with consultancy
  software development firms
• Educational training
• BSEE from University of Michigan
• Concentration in digital design and solid state
  physics
• MBA from Indiana University
• Concentration in finance operations research
• One Favorite site www.allmusic.com (one of many)
• Leisure interests/hobbies gardening, music
  creation, fine dining, motorcycling, reading
  (non-fiction)

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Logistics

• Class time Tuesday evenings from 545 pm to
  900 pm.
• Class location Loop Campus (TBD)
• Rest periods (two options to choose from)
• Option 1 One thirty (30) minute break _at_ 715 pm
• Option 2 Two fifteen (15) minute breaks _at_ 700
  pm 815 pm
• Office hours - Tuesday, 415 pm 545 pm in room
  TBD
• Email address econfer_at_cti.depaul.edu

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Class Roster Info Sheets

• Send a note to the instructors email address
  including the following
• Your Name
• Your Major
• Profession (student or other)
• Favorite site (with url, if available)
• Favorite leisure interest or hobby (movies,
  music, dining, live entertainment, gardening,
  sport, etc.)
• Objectives for taking the course.

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Enterprise Resource Planning

• What is Enterprise Resource Planning?
• Attempts to integrate enterprise through one
  computer system.
• Expected benefit more focused efficient
  business operations.
• Provides centralized repository for daily
  transactional detail.
• Systems are typically accounting-oriented.
• ERP Software Package providers include
• BAAN
• SAP
• Oracle
• PeopleSoft
• J. D. Edwards

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Enterprise Resource Planning (continued)

• What is the connection between ERP and B2B
  Ecommerce extranet systems?
• ERP systems provide points of integration between
  B2B extranets and an enterprises core business
  information systems.
• Inside-out system integration approach.
• ERP vendors extend their systems capabilities
  outward by providing a B2B web presence.
• Typically outside-in system integration approach.
• Uses application server.
• May be better suited for highly complex
  e-businesses.
• Interesting metrics
• TCO (total cost of ownership) averaging 15
  million.
• Avg. implementation timeframe 24 months.
• Benefits begin to accrue 8 months after
  implementation.

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Some Historical Context of ERP Systems

• Outgrowth of mainframe-based MRP software
• Material Requirements Planning (MRP) - early
  1970s
• APICS-driven (American Production and Inventory
  Control Society)
• From manual to computer-based inventory planning
• Manufacturing Resource Planning (MRP II) - early
  1980s
• Closed loop with financial, sales and operations
  planning .
• Examples are COPICS, MAPICS, MANMAN, MM II.
• Just in Time (JIT) - late 1980s / early 1990s
• Delivering products to customers when, where and
  how they wanted them beginning of mass
  customization.
• Focus shifts from improving labor productivity to
  optimizing material flows.
• MRP II software functionality expanded to include
  JIT capabilities.

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ERP Historical Context (continued)

• Enterprise Resource Planning (ERP) - late 1980s
• Beyond manufacturing to other industries
• Broader spectrum of business processes than MRP
  II
• Runs on client/server technology in addition to
  host-based systems
• Prompted by complaints about MRP II software
  packages
• Poor user interface
• Non-RDMS
• Host orientation
• Hardware dependence
• Lack of integration with synergistic packages
• Boosted by 3 emergent trends
• Re-engineering
• Buy vs. Build
• Assumed death of mainframes

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Anatomy of an ERP system
Managers and stakeholders
Reporting applications
Sales and Delivery applications
Financial applications
Manufacturing applications
Sales force and customer service reps
Back-office Administrators And workers
Central Database
Suppliers
Customers
Service applications
Inventory and supply applications
Human resource management applications
Employees
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What is an ERP System? Some Major Characteristics

• Integration in Real-time
• seamless integration of all the information
  flowing through a company.
• Process an organizations transactions using a
  single database.
• Commercial Packages
• Implications for IS life cycle.
• configuring more than programming.
• mapping to best-of-breed practices.
• Long-term relationships with software vendors
  required.

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How ERP Works

• ERP systems envision business cross-functionally.
  
• Support for data consolidation processes
• Example calculates monthly financial figures at
  a company comprising multiple locations
  worldwide.
• ERP packages usually provide a collection of
  applications covering six primary business
  functions
• Accounting and controlling.
• HR management.
• Production and materials management.
• Project management.
• Quality management and plant maintenance.
• Sales and distribution.
• ERP packages are branching into new areas (SCM,
  Decision support, SFA, CRM, etc).

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Reasons for Adopting ERP Systems

• Five simple reasons
• Integration of financial info.
• Integration of customer order info.
• Standardization and speed-up of manufacturing
  process. Improvement of key SCM component
• Reduction in inventory.
• Standardization of HR info.

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Reasons for Adopting ERP Systems (continued)
Large Companies /Complex Structures
Small Companies / Simple Structures

• Integrate applications cross-functionally.
• Replace hard-to-maintain interfaces.
• Reduce software maintenance burden through
  outsourcing.
• Eliminate redundant data entry and concomitant
  errors and difficulty in analyzing data.
• Improve IT architecture.
• Ease technology capacity constraints.
• Decrease computer operating costs.

• Most small / simple companies reasons plus
• Consolidate multiple different systems of the
  same type (e.g.., general ledger packages).

Technical Motivations
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Reasons for Adopting ERP Systems (continued)

Small Companies / Simple Structures
Large Companies /Complex Structures

• Accommodate business growth.
• Acquire multi-language and multi-currency
  support.
• Improve informal and/or inefficient business
  processes.
• Clean up data and records through
  standardization.
• Reduce business operating and administrative
  expenses.
• Reduce inventory carrying costs and stockouts.
• Eliminate delays and errors in filling customers
  orders for merged businesses.

• Most small / simple companies reasons plus
• Provide integrated IT support.
• Standardize different numbering, naming and
  coding schemes.
• Standardize procedures across different
  locations.
• Present a single face to the customer.
• Acquire worldwide available to promise
  capability.
• Streamline financial consolidations.
• Improve company-wide decision support.

Business Motivation
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Reasons for Adopting ERP Systems Anticipated
Benefits

• Tangible Benefits achieved
• Reduction in inventory and personnel
• Reduction in IT, procurement, and logistics costs
• Increased productivity, revenue and profits
• Improved order / cash management and on-time
  delivery performance
• More rapid closing of financial cycles
• Intangible Benefits achieved
• Increased visibility of corporate data and into
  SCM processes
• New or improved business processes
• Improved responsiveness to customers
• Improved business performance
• Tighter integration between systems, and
  standardization of computing platforms
• Global sharing of information
• Y2K compliance (remember this issue?)
• (Source Benchmarking Partners, 1998)

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Challenges Associated with ERP Implementation

• Select appropriate ERP software provider
• Specifically suited to industry
• Type of support
• Financial stability and long-term viability
• Software performance, functions and features
• Meets business requirements
• Customizing the software vs. default settings
• Projects are lengthy, involve large teams of
  people and encompass all major parts of the
  business
• Detailing of all business processes to understand
  integration
• Re-engineering of business processes

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The Costs and Hidden Costs of ERP

• Expensive ERP software licenses.
• Must include hardware, databases,
  telecommunications and ongoing support.
• Consultancy costs.
• ratio of consulting costs to software costs can
  reach up to 31.
• In-house project team costs.
• System integration costs.
• End-user training and change management costs.
• Gartner suggests 15 of total ERP budgets.

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Some Criticisms of ERP Systems

• Inflexibility
• ERP is like cement highly flexible in the
  beginning but very rigid later.
• Trade-off between comprehensiveness and breadth
  of an ERP package and the ease with which it can
  be configured and modified.
• Long implementation periods
• True, but building ones own system from scratch
  would take longer.
• Overly hierarchical organizations
• Command and control perspective.
• Each business unit in a large decentralized
  organization to have its own choice of ERP
  system?

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ERP Market Overview

• Tier 1 - includes the five JBOPS (J D
  Edwards, Baan, Oracle, PeopleSoft, SAP)
  companies. This group often sells to companies
  with annual revenues of above US250 million.
• Tier 2 - includes ERP software vendors
  (e.g.. QAD, Intentia, Ramco, etc) that
  generally sell to companies with annual revenues
  of approx. US10m to US500m.
• Tier 3 - includes ERP software vendors (e.g..
  AccPac for Windows, SunSystems, etc) that
  generally sell to companies with annual revenues
  of less than US10m.
• Above are loosely defined categories that
  overlap. Tier 1 vendors are now aggressively
  pursuing companies in the mid-range market and
  even SMEs. Likewise, many Tier 2 vendors sell
  to independent divisions of very large companies.
  

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Major ERP Vendors

• J D Edwards
• Historically, JDE has been leading supplier of
  AS/400 systems
• OneWorld now runs on Windows NT, Unix and AS/400
• Oracle
• Best known for database system --- ERP reputation
  is catching up
• First to promote Internet orientation of ERP
  software
• Baan
• Initial focus was on manufacturing software
• Boeing deal thrust Baan into the spotlight in
  1994
• PeopleSoft
• Traditional strength is in HR software
  functionality
• Later built its own financial / manufacturing
  software and bought over Red Pepper logistics
  software
• SAP
• Fourth largest supplier of software (in general),
  after Microsoft, Oracle and CA

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ERP Market Share by Vendor
Percentage of Market Share
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Why is ERP a particularly important issue today?

• Globalization
• Overcapacity and reengineering
• Laying the foundation for electronic commerce
• Need for operational flexibility

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Next Session Highlights

• ERP Overview (continued) ERP System Technology
  Background
• Reading Assignment covering first 2 sessions
• Begin reading Why ERP? by Jacobs Whybark
  (completion target of week 3).
• Read Chapters 1, 2, 11 of ERP Tools,
  Techniques, and Applications by Ptak and
  Schragenheim.
• Recommended Article Best-of-breed vs. ERP/SCM
  Which way to go for Supply Chain Collaboration