Enterprise Systems

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Enterprise Systems

• ES

Enterprise Resource Planning (ERP) Enterprise
Resource Management (ERM)
P.Pille, Ryerson Polytechnic University School of
Information Technology Management
2
Enterprise Systems

• Early Automation
• What is ERP
• ERP Implementation
• Beyond ERP
• ERM
• SAP
• Electronic Marketplace

3
Early Automation

• Automation of tasks within departments
• Therefore, each dept had its own system(s)
• Functionality for tasks for that department only
• Systems werent powerful enough to attempt
  broader range of tasks
• Usually single vendor for all parts of system
  (e.g. IBM)
• All hardware and network components
• All operating system and application software
• Result Generally communication between
  departments remained largely manual
• IS/IT was often at the mercy of single vendors

Antony Upward,CGI
4

• Open Systems
• Application vendors built applications to support
  the tasks in specific departments (Finance,
  Billing, Workforce Management, HR etc.) -- Best
  of breed
• Better technology allowed automated interfaces
  between systems
• But Interfaces
• Have difficulty with different data definitions
• Often dont eliminate re-keying
• Are expense to build and maintain
• Are visible and get in the way of the end-users
• Result Functional organizations systems
  landscape are usually a mess and cant support
  end-to-end processes

Antony Upward,CGI
5
Business Processes

• Cross functional boundaries
• simple example
• Customer orders a product
• deals with salesperson
• warehouse picking
• out of stock?
• purchase order to vendor
• manufacturing order
• shipping
• accounts receivable
• effect on demand forecasting (marketing, manuf.)

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Business Processes

• In Classical / Functional / Hierarchical
  organizations business processes exist but
• No single point of accountability
• No single source of consistent, timely,
  information about a process
• Multiple incompatible systems poorly connected
  via multiple expensive interfaces
• Result In a functional organization a process
• is very hard to change
• is very hard to e-enable

Antony Upward,CGI
7
ERP - What is it?

• Process view of business vs. functional silos
• Integration of systems, one database
• Support most of co.s info needs
• Transaction oriented systems (OLTP)
• Accounting, payroll, invoicing, supply chain
  optimization, sales force automation, customer
  service,

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ERP - What is it?

• Leads to improved performance, better decision
  making, competitive advantage
• Lays foundation for electronic commerce
• Replaces a multiplicity of different systems and
  databases
• one integrated system

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Evolution to ERP

• MRP - Material Requirements Planning
• what material needed?
• when how purchased?
• how managed?
• maximize efficiency of physical, financial assets
• MRP 1960's
• master production schedule
• material requirements planning
• capacity requirements planning

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• MRPII 1970's
• sales operations planning
• simulation
• forecasting

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• ERP 1990's
• sales and distribution
• material management
• plant maintenance
• quality management
• financial accounting
• controlling
• investment management
• human resource management
• ...

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ERP Requires

• Strong executive support to implement
• Process approach rather than silos
• Change in business procedures (BPR)
• Change in organizational structure, culture,
  strategy
• Technology change

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ERP

• Difficult to install
• Very large and complex software
• Provides info about all aspects of the business
  -- worldwide
• Reduces inventory, waste
• Easy communication with customers, suppliers

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Before ERP

• Multiple systems, different interfaces, difficult
  to extract info about customers, sales,...
• Hard to maintain, many languages, databases,
  inconsistencies
• Can take weeks or months to obtain info about
  customers, or where systems changes are needed

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After ERP

• Integrated systems
• Consistent interface
• One database
• Access to current data
• Improved planning capabilities
• Multinational capabilities

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Example Order Processing

• Salesperson generates a quote for computer
  equipment overseas
• System immediately creates product configuration,
  price, delivery date, shipping method,...
• Customer accepts quote over Internet

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System automatically

• Schedules shipping
• Reserves material
• Orders parts from suppliers
• Schedules assembly
• Checks customer credit limit
• Updates sales production forecasts
• Creates MRP bill-of-material lists

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System automatically

• Updates salesperson's payroll
• commission
• travel account
• Calculates product cost profitability
• Updates accounting, financial records

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ERP Implementation

• Need business exec in charge, not IT
• Make a business case
• long term benefits
• inventory reduction, customer service,.
• Costs
• software
• hardware
• people (by far the most expensive)

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ERP Implementation

• Software
• ERP, database licenses
• maintenance
• support fees
• add-on packages
• Hardware
• new client/server architecture
• network capability
• backup
• multiple servers -operations, testing

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ERP Implementation

• People - for system configuration
• internal, consultants
• Managers
• can require time commitment for several years
• Continual support from senior execs
• Change management
• almost all personnel will be affected

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ERP Implementation

• ERP system configuration
• thousands of parameters to set
• Need stability, but business constantly changes
• Difficult to implement, difficult to change
• but is a non ERP collection of poorly integrated
  systems databases any easier?
• Change is never ending

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ERP Implementation

• Training needed
• technical staff
• business staff
• 20-50 of project budget on educational and
  skills development
• Results in less people needed, but more skills,
  understanding of the organization
• 4 months to 5 years to implement

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ERP Implementation

• Options
• add-on systems where ERP is lacking?
• keep good legacy systems, build interfaces to
  good legacy systems?
• more than one ERP instance?
• different divisions, subsidiaries
• but more than one increases complexity, reduces
  benefits
• interconnect consistent, distributed ERP systems
  (one logical system)

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ES Implementation

• DOW Chemical
• global SAP implementation
• great transformation of DOW
• common processes, info in finance, admin
• substantial customer service improvements
• info support - better management decisions
• more integrated organizational structure
• 15 ROI

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CEO Survey - why ERP?

• 67 Improve info accuracy, availability
• 61 Improve management decision making
• 51 Reduce cost/improve efficiency
• 38 Upgrade technology
• 31 Resolve tactical issue (e.g. Y2k)
• 24 Grow revenue
• 15 Havent done it yet
• 4 Other

Davenport,T.H., Mission Critical
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ERP Package Selection

• Major packages are similar
• Some packages suited to specific industries
• e.g. JDA, Richter Systems for retail
• PeopleSoft - strong in HR
• SAP - financial, supply chain
• Baan - flexible manufacturing software

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ERP Package Selection

• ERP appropriate for 25 US million and up
• Mid-tier 25 to 1 billion
• SAP - typically largest global firms
• (but can be done for smaller co. also)
• J.D.Edwards - smaller firms
• Oracle, PeopleSoft, - middle
• Baan - mostly middle customers

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ERP Market

• 15 US billion ERP hardware, software worldwide
  market
• Plus professional services 10 billion
• High growth rate
• Large co. e.g. Intel expect to spend 1 billion
  on ERP (can never finish)

Davenport,T.H., Mission Critical
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SAP R/3 ERP

• Market leading ERP product
• Extensive functionality
• Used by mid to large companies
• International features
• Can be run over internet/intranet
• 10 million users, 30,000 installations
• 13,000 companies, gt 100 countries
• SAP AG 5 billion, 5,000 developers, 15-20 on
  research

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SAP R/3

• SAPs core transaction system
• Logistics
• Financials
• Human Resources

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Accounting
Logistics
Human Resources
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R/3 Logistics

• Sales and Distribution
• Production Planning
• Materials Management
• Plant Maintenance
• Quality Management
• Procurement

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R/3 Financials

• Financial Accounting
• general ledger, accounts receivable, payable,...
• Controlling
• costing, profitability, planning,
• Treasury
• Cash, funds management,
• Capital Investments

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R/3 Human Resources

• Administration
• Payroll accounting
• Shift management
• Employee attendance
• Trip costs
• Training
• Recruitment
• Personal management

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Industry Specific R/3 Solutions

• Aerospace Defense
• Automotive
• Banking
• Chemicals
• Consumer Products
• Engineering Construction
• Healthcare
• High Tech Electronics
• Higher Education Research
• Insurance

• Media
• Mill Products
• Mining
• Oil Gas
• Pharmaceuticals
• Project Oriented Manufacturing
• Public Sector
• Retail
• Service Provider
• Telecommunications
• Utilities

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SAP R/3 Architecture

• Processes written in ABAP/4 language
• 1000s of switches for package configuration
• Multiple platforms
• Client server - multi tier
• database server (multiple servers, distributed
  database )
• application server (multiple servers, distributed
  )
• Internet server
• presentation level (browsers)
• User exits - Java, C,...
• Communication interfaces with other packages

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Multi tier client / server architecture
Layers

• Presentation
• Internet / intranet
• Application
• Database

Multiple database, application servers
Technology Infrastructure 4.0 at
http//emedia.sap.com/usa/default.asp
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SAP R/3 Platforms

• OS
• NT
• AS/400
• UNIX
• OS/390
• Database 20-30GB initially
• Oracle
• Informix
• AS/400
• DB2
• MS/SQL

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Ryerson Academic R/3 Configuration

• SAP R/3 version 4.6B
• IBM Netfinity 8500R server equipped with
• 4Gb RAM
• P!!! Xeon 550Mhz processor
• 20 - 9.1 Gb HDDs in a Raid 5 array
• 40/80 DLT tape drive
• CD-ROM
• APC smart UPS 5000
• NT 4
• Oracle 8.0 database
• 100 GB in use for NT, R/3, IDES-TS training
  database

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Implementation Options

• Hosted solutions
• hardware software outsourced to an Application
  Service Provider (ASP)
• minor configuration, no license
• major configuration, need license
• user access through Web browser
• In house
• hardware software on site
• optional maintenance by SAP partners
• user access through Web browser

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The Alpha NZ Case

• Larsen,M.A., Myers, M.D., 1999. When success
  turns into failure a package-driven business
  process re-engineering project in the financial
  services industry. Strategic Information Systems,
  8 (1999) 395-417.

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The Alpha NZ Case

• 9 New Zealand banks merged, same core financial
  services
• BPR project to centralize Accounting at head
  office
• re-engineer recording reporting
• automate routine accounting
• improve access to financial info
• create new corporate accounting team - highly
  skilled, motivated
• Timeline
• July 1993 - preliminary report - goal to
  integrate the banks
• Dec 1993 - key areas identified for improvement
• Aug 1994 - consultant appointed
• Feb 1995 - contract with SAP, hardware, software
  installed, training
• Jan 1996 - go live

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The Alpha NZ Case

• Accounting staff reduced from 75 to 24
• Consultants consider system a great success
• No original project team members remained
• All in-house expertise disappeared, low skills
  remain
• Management reporting deficiencies in the system
• no skills to enable implementation of needed
  reports
• lack of expertise in the system
• low moral, poor management
• Users consider the system a failure
• Oct 1996 Alpha merges with Beta Ltd.
• Alpha SAP system to be scrapped, Beta Oracle
  Financials system to be implemented

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OLTP e.g. SAP R/3

• Highly normalized data
• Many tables represent an object and are connected
  with foreign key relationships to one another
• Database tuned for writing records
• Problems
• Reporting
• Difficult to combine data from different
  applications
• Performance issues with reporting
• SAP R/3 Includes Limited Operational Reporting,
  updated in Real-time from the transactional data
• Integrating external data

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ERP and beyond
ES or ERM

• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• Data Warehouse
• Electronic Marketplace

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ERP and beyond

• Supply Chain Management
• planning and optimization
• supply planning, demand planning, plant
  scheduling, transportation warehouse management
• more integration with trading partners
• Customer Relationship Management (CRM)
• marketing, sales, service
• Data Warehouse
• On line Analytical Processing (OLAP)
• Internet access
• for employees, customers, suppliers

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ERP and beyond
Electronic (Internet) Marketplace

• Buy, sell products and services on-line
• Collaborate with suppliers
• planning, forecasting, customer demand needs
  (collaborative forecasting)
• Collaborate with distributors and resellers
• Auction off excess inventory
• Publish or bid on requests for proposals
• .

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mySAP.com
E-business platform for inter-enterprise
collaboration between a company, its suppliers
and customers.

• R/3 ERP
• Supply Chain Management (SCM)
• Business to Business Procurement (BBP)
• Strategic Enterprise Management (SEM)
• Customer Relationship Management (CRM)
• Business Information (Data) Warehouse (BW)
• .

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SAP AG mySAP
Internet / Intranet
Business Information (Data) Warehouse
R/3 Industry Solutions
Environment, Health Safety
Strategic Enterprise Management
R/3 Applications
Consumer
R/3 Basis Database
Business to Business
Knowledge Warehouse
Corporate Finance Management
Logistics HR Accounting
Business to Business Procurement
Customer Relationship Management
Automotive, ...Utilities,...
Logistics Advanced Planner Optimizer
Employee
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mySAP Workplace

• Single point of access to all applications
• SAP
• non SAP
• Customized for each employee
• Roles on left
• Applications on right

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SAP Components Beyond R/3

• Supply Chain Management (SCM)
• planning, optimizing, scheduling
• suppliers, agents, production planners,
  purchasers, customers

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SCM -APO Solvers
APO - Advanced Planning Optimization

• Demand Planning
• Supply Network Planning
• Production Planning Scheduling
• Heuristic Methods
• Linear Programming /Mixed Integer Linear
  Programming
• Genetic Algorithms
• Constraint- based Programming
• Exponential Smoothing
• Holt Winters
• Multiple Linear Regression

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Business to Business Procurement

• Requisitions
• Purchase orders
• Approval, rejection
• Payments
• Status
• By end users from the desk top
• Internet, EDI, ALE

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CRM Roles

• Sales
• Sales Manager
• Global Account Manager
• Sales Representative
• Sales Assistant
• ...
• Service
• Service Manager
• Hotline Specialist
• External Service Engineer
• Contact Center Agent

• Marketing
• Marketing Manager
• Marketing Analyst
• Product/Brand Manager
• ...

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SAP Business Warehouse (BW)

• On-line Analytical Processing (OLAP)
• De-normalized data
• Diverse data is combined into large aggregated
  data sets
• Logistics Information System,...
• Used for decision support and investigation
• Future
• SAP is using BW as the base for many analysis
  products
• SAP will likely move from batch to on-line
  updates of BW in future releases (small scale
  this is already in place with current release)

Antony Upward, CGI.
60
Strategic Enterprise Management (SEM)

• Integration of strategic, financial and
  operational information
• Internal external business information sourcing
• Financial and non-financial Key Performance
  Indicators (KPI)
• Business Planning and Simulation
• Business simulation
• Operational Planning

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Knowledge Management

• SAP Knowledge Warehouse
• All standard SAP training courses
• 20 languages
• Glossary
• Can be modified by customer

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Integration Also Means...Linking Transactions,
Analysis and Planning
Act
Transaction
Transaction
Transaction
Operational Process (OLTP)
Management Process(OLAP)
63
ERM Systems

• Trust the vendor to embed and continually improve
  their support for best business practices into
  their product
• Leverage vendors RD spending via upgrades
• But only if no modifications to core code
• Actively work with vendor to identify
  opportunities for improvement
• User Groups (ASUG, T-SIG)
• SAP Industry Business Units (IBUs)
• Joint development of industry specific
  functionality
• SAP Account Executives

Antony Upward,CGI
64
ERM Systems

• Assume vendor solutions embed best business
  practices and you will change business practices,
  not vendors core code
• Leverage package to gain lowest total cost of
  ownership advantages - maximize use of product
  before considering alternatives

Antony Upward,CGI
65
ERM Systems

• Within organizations -greatest strength - ability
  to facilitate end-to-end business processes
  through integration
• Shared Database for all Users
• On-line Real Time
• Shared, Integrated Functionality and Process
  Designs
• Web based Portal to allow access anywhere anytime
• Roles Based, to focus Functionality and Security
  for Users

Antony Upward,CGI
66
ERM Systems

• Between organizations ERMs greatest strength is
  their ability to facilitate end-to-end business
  processes using the Internet
• Database Shared via Marketplaces
• Shared, Integrated Functionality and Process
  Designs
• Portal to allow access to Business Partners
  (Customers, Vendors, etc.)
• Roles Based to focus Functionality and Security
  for Users
• Gartner calls this Collaborative Commerce or
  c-Commerce

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Collaborative-Commerce

• c-Commerce achieves the dynamic collaboration of
  people, applications, and corporations in all
  aspects of business
• Customers, employees, suppliers, and business
  partners work together as if they were all one
  company
• Examples
• Collaborative buying and selling
• Public bidding
• Collaborative forecasting
• Collaborative planning
• Collaborative engineering
• Collaborative invoicing/billing

68
c- Commerce Marketplaces

• The Old World
• Individual connection to each business partner
• Different technologies (EDI, Edifact, FAX, XML,
  cXML, )
• Constant maintenance
• Need to buy the technology

Seller
Buyer

• The New World
• Only one connection to the marketplace to connect
  to all business partners
• The marketplace deals with issues like
  technology, security, search tools, catalog, etc.
• Enables ad-hoc buying from all participants in
  the marketplace.

Seller
Buyer
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c-Commerce Example Buying and Selling
Buyer
Seller
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Kinds of Marketplaces
Regional (USA, France, ..)
Oil Gas, Chem/Pharma
Vertical (industry-specific)
Content
Community

• Business-oriented communities/forums

• General content
• Business-specific content

• Interaction
• Communication
• Discussion

Collaboration

• Specialized inter-enterprise applications
  services

Commerce

• Buying/selling goods and services

Horizontal (Cross industry)
Infrastructure
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Likely End-point Federations of Marketplaces
Marketplace as a Product
www.mySAP.com Marketplace
Joint Venture Marketplaces
Seller
Vertical Marketplace
Horizontal Marketplace
Horizontal Marketplace
Buyer
Vertical Marketplace
Local/vertical Marketplace
Horizontal Marketplace
e.g. Chemical Marketplace
72
ERM Implementation

• Very Little Analysis / Design / Programming
  Required
• Typically 10-20 of Total Effort
• Interfaces
• Conversions
• Bolt-ons (via Published User Exits)
• Configuration Replaces Programming
• Table Driven
• Master Data
• Enables substantially automated upgrades

Antony Upward,CGI
73
ERM Implementation

• Business People Normally Configure (with some
  Training)
• Largely removes non-value added activity of
  translating business requirements to technology
  requirements
• Result
• Implementation focuses on realizing business
  value not getting the technology to work

74
ERM Implementation

• ERM makes technology less visible during
  implementation allowing project teams to focus
  simultaneously on all aspects of delivering
  business value
• Business Process Design Organization Design
  Application Configuration
• This is a good thing!
• Typical ERM implementation project teams are
  cross functional
• End-users 50-75, frequently including project
  leadership
• ERM configurators (usually ex-business people)
  15-30,
• ERM and legacy technicians / programmers 5-25

Antony Upward,CGI
75
ERM Implementation

• Typical ERM implementation projects have a
  different mix of tasks
• Delivering business value requires significant
  focus on Business Change Management, typically
  10-30 of team tasks
• Technology is no longer the prime driver of ERM
  implementations (only 10-40 of team tasks)
• Less program specifications and programming
• Little or no data design
• ERM Specific Implementation Methodologies
  Required
• Still learning how to do ERM implementations well

Antony Upward,CGI
76
ERM Re-engineering

• Re-engineering typically started with a blank
  sheet of paper for the process designs
• Equivalent to asking What are the requirements?
• Numerous re-engineering efforts failed
• Analysis paralysis
• Huge software projects
• Customizing ERP systems
• Today ERM packages can support so much of so many
  processes can now ask
• Not what do you want, but
• Which process designs can the ERM system support
• Leverages the massive RD spending of ERM vendors
• SAP spends 15-20 of Revenues on RD
• Need to do regular upgrades to get benefit of
  this RD

Antony Upward,CGI
77
Implications of ERM for IT Strategy

• Can no longer ask the question of the end-users
• What is your requirement?
• This question was fundamental to I.T. strategy
  from the 1970s to the mid-1990s
• I.T. practitioners made the following assumptions
  that
• The business knew what they needed
• Requirements would stay still long enough for
  I.T. to build systems to support them
• I.T. could use open systems to make each
  departments systems work together without a lot
  of effort or expense
• Recent business trends, particularly the
  increasing pace of change, have made all these
  assumptions false
• Now we must ask what business process designs can
  a package support out of the box
• Assumes ERM vendor has done their home work

Antony Upward,CGI
78
ERM Job Opportunities

• Account executive - SAP support
• Business consultant - system solutions
• Sales manager - ERP solutions
• Instructor - SAP products
• Software developer - ABAP/4, C,...
• Systems analyst
• MIS manager
• SAP administration.
• SAP installation, support
• OS, database, SAP Basis knowledge

79
Sources

• Antony Upward, Director, Business Architecture,
  CGI Group Inc.
• Davenport ,T.H., 2000, Mission Critical -
  Realizing the Promise of Enterprise Systems,
  Harvard Business School Press
• Watson, E., Schneider, H., 1999, Using ERP
  Systems in Education, Communications of AIS
  Volume 1, Article 9
• The AMR Research SAP Advisory Alert for June 15,
  2000 http//wwwext03.sap.com/usa/press/2000/amrr
  eport.aspcom1
• SAP info and links http//www.ryerson.ca/ppille/
  sap/
• SAP www.sap.com www.mySAP.com
• SAP USA home site http//wwwext03.sap.com/usa/
• SAP emedia file Technology Infrastructure 4.0 at
  http//emedia.sap.com/usa/default.asp
• SAP emedia file mySAP Frequently Asked Questions
  at http//emedia.sap.com/usa/default.asp

80
Sources

• SAP R/3 Functionality Overview, Wednesday,
  September 15, 1999, Jim Kelly, Curriculum
  Development Manager - ERP, SAP America
  http//wwwext03.sap.com/usa/education/alliance/wha
  tsnew.asp
• Central Michigan University http//sap.mis.cmich.
  edu/
• International Demo and Education System (IDES)
• www.sap.com/ides
• Go to site and register for a user id and
  password
• Can trial pretty much the whole SAP product over
  the internet (HTML GUI)
• Americas SAP User Group (ASUG) - www.asug.com
• Other Web Sources - www.sapinfo.net