Enterprise Resource Planning December 4, 2006

1
Enterprise Resource PlanningDecember 4, 2006

• Jun Han
• Rongbi Liu
• Brandon Swanner
• Shicheng Yang

2
Overview
3
What is ERP?

• Outline
• Definition
• Understanding ERP
• Framework Modules
• History of ERP

4
Definition of ERP

• A software that attempts to integrate
• all departments and functions across
• a company onto a single computer system that
  can serve all those departments particular needs.

Source Christopher Koch The ABCs of ERP
http// www.CIO.com
5
Before
Sales representative
Demand Planner
Financial system
Sales/Marketing system
Accountant
Operations
Service representative
Logistics/Manufacturing system
Customer service
Source David Simchi-Levi, etc designing and
Managing the Supply Chain, first edition
6
An example---Order fulfillment
Source http//webprofesores.iese.edu/Valor/Docs/E
MBA/Intro20ERPs.pdf
7
After
Sales representative
Demand Planning
Financing
Single-point- of-contact
Procurement
Controlling
Manufacturing
Service representative
Distribution
Source David Simchi-Levi, etc designing and
Managing the Supply Chain, first edition
8
An example---Order fulfillment
Source T. Davenport putting the enterprise into
the enterprise system HBR 1998
9
ERP Philosophy
sales
Pur.
Mfg.
Log.
10
Core Components of ERP

• Sales and marketing
• Master scheduling
• Purchasing
• Bill of materials
• Materials requirements planning
• Capacity requirements planning
• Accounts payable/receivable
• Distribution

11
Interface of Modules
Source http//www.crisoft.ro/Engleza/prodserv/cr
os.html
12
Enterprise Applications Interface Landscape
Application analytical tools
ERP Intra-organization
CRM Inter-organization
SCM Inter-organization
Back office system
Front office system
Front office system
13
Enterprise Applications Architecture
Business Excellence
DSS
BI
E-C
DSS
BI


ERP Infrastructure
14
IT system goals
Collect
Access
Analyze
Goals
Standardization / Integration
E-Commerce
Analytical Tools
Infrastructure
Means
Source David Simchi-Levi, etc designing and
Managing the Supply Chain first edition
15
Expansion
ERP
MRP?
MRP
IC
1990s
1970s
1980s
1960s
16
ERP
17
Why ERP?

• ERP enabler
• Benefit
• Current status
• Metrics to success
• Solution

18

• To Keep Ahead Of Competition!
• To make use of the advantages of
  ERP!
• To enhance the core
  competency!

19
How can ERP help you ?---Integration of
Information Systems

• Headquarter
• Information
• systems
• Project Mgmt
• Inventory
• Purchasing
• Sales
• Budget
• Cash Management

• Manufacturing
• Local purchasing, invoice verification
• Inventory management
• Internal sales, shipping and billing
• Profit/loss
• Capacity utilization

• Marketing/Sales
• Sales, shipping and billing
• Purchasing of trading goods
• Inventory Management
• Customer service

http//www.kraansys.com/downl
oad/New-ERP.ppt
20
How can ERP help you ?---Streamline or
Reengineering Process
Source Gargeya, Vidyaranya, Brady, Cydnee
(2005). Success and failure factors of adopting
SAP in ERP system implementation, Business
Process Management Journal, 11(5), pp. 501-516.
21
Metrics Tied to Success
SampleNgt500
Source http//www.aberdeen.com/summary/report/be
nchmark/RA_ERP_CJ_3361.asp
22
The Percentage and Age of ERP Implementations

• 91 of the sample (ngt500) have implemented
  ERP(including MRP)
• 24 of them still had the first ERP system
  implemented
• 42 of their current ERP had replaced home-grown
  or custom developed applications
• Only 34 of their current implementation as a
  replacement of another ERP.

Source http//www.aberdeen.com/summary/report/ben
chmark/RA_ERP_CJ_3361.asp
23
The Number of ERP Packages Implemented
(Total sample ngt500,large company 9,mid-size51)

• As ERP implementations have been aging ,they also
  been proliferating
• 71 of large companies have two or more ERP
  packages implemented across the enterprise and
  26 with four or more.
• (large company is the revenue over 1b,small
  company with revenues less than 50M.).

Sourcehttp//www.aberdeen.com/summary/report/benc
hmark/RA_ERP_CJ_3361.asp
24
Current Release Status
Sample ngt500

• 77 of respondents were not currently implemented
  on the latest release
• Only 23 of respondents were currently
  implemented on the latest release.
• Sourcehttp//www.aberdeen.com/summary/report/benc
  hmark/RA_ERP_CJ_3361.asp

25
Versions Plan of Action
Total sample ngt500,lt2yrs9,25yrs18,510yrs33
,1015yrs18,gt15yrs13

• In the aggregate 40 anticipate keeping current
  versions of existing
• implementations
• 14 across all companies have a replacement
  strategy
• Almost 45 plan to upgrade to latest release.
• Sourcehttp//www.aberdeen.com/summary/report/ben
  chmark/RA_ERP_CJ_3361.asp

26
The Factors Impacting ERP Strategies
Ngt500
For the aging and proliferation of ERP and its
consolidating market,what business drivers are
impacting the formulation of ERP
strategies? Sourcehttp//www.aberdeen.com/summar
y/report/benchmark/RA_ERP_CJ_3361.asp
27
ERP
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Do We Make or Buy
In house development ERP package
Time consuming Ready made projects Needs only customization
Documentation is difficult Documentation is part of system
Maintenance depends on individuals Company takes care of
EDI modification to be taken of EDI compatible
Each unit follows different software option The package itself is designed as enterprise package
Latest developments to be studied before implementation Constant updates assured
Source http//www.erpfans.com
29
ERP Implementation Challenges and Responses
Source AberdeenGroup 2006,www.aberdeen.com
30
ERP Implementation - Considerations

• Important factors Success or Failure?
• Definitions, spectrum?
• Needs of the company
• Complexity of the ERP
• Phased vs Big Bang
• Scope Creep

Source Gargeya, Vidyaranya, Brady, Cydnee
(2005). Success and failure factors of adopting
SAP in ERP system implementation, Business
Process Management Journal, 11(5), pp. 501-516.
31
ERP Implementation 6 Factors

• Six factors SAP study

Source Gargeya, Vidyaranya, Brady, Cydnee
(2005). Success and failure factors of adopting
SAP in ERP system implementation, Business
Process Management Journal, 11(5), pp. 501-516.
32
Top 5 in revenue

• Y1999, account for 59
• J.D. Edwards
• Baan
• Oracle
• PeopleSoft
• SAP

• Y2005, account for 72
• SAP
• Oracle
• Sage Group
• Microsoft
• SSA Global

Source http//www.networkworld.com/news/2005/0615
05-sap-erp.html
33
Top 5 Revenue Share
Source http//www.amrresearch.com/Content/view.as
p?pmillid19840
34
- Just the Facts

• Founded 1977
• 55,000 employees
• Used in 98 of the Fortune 100 companies
• Market share
• Innovation
• 100 Internet
• Acquisition of PeopleSoft

http//www.oracle.com/corporate
/story.html?_template/ocom/printocom
35
- Choices

• Oracle e-Business suite - City of Memphis
• PeopleSoft Enterprise
• JD Edwards Enterprise One
• JD Edwards World
• Siebel

http//www.oracle.com/applications/apps_product_li
st.html Accessed 11/30/06
http//www.oracle.com/customers/index.html
Accessed 12/1/06
36
- Just the Facts

• Systems, Applications, Products in Data
  Processing
• Founded 1972
• Based in Germany
• 38,400 employees in 50 countries
• 36,200 customers
• 12 million users
• 100,600 installations

• Market share 29

http//www.sap.com/usa/company/index.epx
Accessed 11/30/06
SAP, Annual report http//www.sap.com/company/inv
estor/reports/ annualreport/2005/pdf/2005_SAP_Annu
al_Report.pdf
37
- Choices

• Powered by NetWeaver
• mySAP Business Suite/All-in-One
• mySAP Business One
• Duet
• Joint effort SAP and Microsoft
• SAP xApps Composite Applications
• Demo - http//www.sap.com/usa/solutions/xapps/inde
  x.epx
• Other companies
• PepsiCo, Tyson Foods, U.S. Department of the
  Interior

38
SAP Business Modules
The best-run businesses run SAP!
Source ttp//www.cbe.wwu.edu/misclasses/mis320S06
lab/erp/intro_files/intro.htm
39
? Hey Big Vendor...? - What is the Difference?

• Started as individual, specific applications
• SAP is the leader superior marketing?
• Unique products?
• SAP integration
• Acquire vs. expand

Source Hill, Sidney (2004). The Big Three
market powers, distinctly different, MSI. Vol
22(5), p 46
40
? Hey Big Vendor...? - What is the Difference?

• ERP Customer Survey - http//www.180systems.com/E
  RPcustomersurvey.php
• Mid-market better scores
• Why?
• Small better scores

41
ERP
42
Case Studies

• Few companies are making full use of their
  enterprise resource planning systems, despite the
  high cost of the software and the length of time
  an implementation can take
• In a survey of 100 global or panEuropean
  companies by PMP Research, just 5 of those
  polled said they were using their ERP software to
  its full extent.
• Most users customise the software, with only 12
  installing ERP packages "out of the box". Once
  installed, more than 50 of companies said it was
  hard to make changes to ERP software in order to
  meet any changes in business processes or
  requirements.
• more than 50 of the companies surveyed did not
  measure their return on investment from business
  applications,

Arif Mohamed. Firms failing to fully exploit ERP
systems  Computer Weekly. Sutton Jan 17,
2006. pg. 8, 1 pgs
43
Case 1 The Hershey Company

• History and Background
• Founded in 1893 largest chocolate producer in US
• Revenue 4 Billion
• Employees 13,000 in 90 countries
• First ERP attempt in 1999
• Cost 120 Million
• Malfunction

Source http//www.thehersheycompany.com/
Failed ERP gamble haunts Hershey, Computerworld
Framingham Nov 1, 1999 Craig Stedman
44
ERP Software SAP, Siebel, and Manugistics

• In 1999 Hershey deployed a 112 million dollar
  ERP system made up of parts from SAP, Siebel, and
  Manugistics.
• SAP - main components of the system
• Siebel Customer relationship management (CRM)
• Manugistics - Supply chain management (SCM)

Failed ERP gamble haunts Hershey, Computerworld
Framingham Nov 1, 1999 Craig Stedman
45
What Went Wrong?

• Mistakes
• Scheduled for 4 years reduced to 30 months
• Decided to go live in July for Halloween,
• Big Bang implementation
• Outcomes
• Could not deliver all orders on time
• 19 sales loss for Halloween Christmas seasons
• 12 revenue loss for 1999
• Stock price fell 8 due to reduced investor
  confidence
• Reduced analyst confidence

Failed ERP gamble haunts Hershey, Computerworld
Framingham Nov 1, 1999 Craig Stedman
46
Lessons Learned

• Hershey didnt seem to need this ERP system
  implemented so quickly, and certainly didnt plan
  accordingly.
• Dont rollout an ERP system before a critical
  business season.
• The system provided by 3 different vendors should
  be rolled out in a more staggered fashion.
• One rollout at a time
• Time needed for training
• Successful upgrade 3 years later in 2002

Source http//www.erpchannel.com/archives/erp-gon
e-wrong/lessons-from-hershey/ Accessed on
November 25, 2006.
47
Case 2 - KV

• History Background
• Started more than six decades ago.
• Offers 15 drug delivery technologies, in four
  principal areas, used in most of the company's
  more than 130 generic and non-branded drugs and
  14 branded drugs that are sold today.
• Net revenue (2006) approx. 400 Million

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IT and Business Department

• There are about 50 employees in IT department.
• There are about 8.6 million budget.
• There are about 1100 computers
• Today KV has more than 1,000,000 square feet of
  predominantly owned facility space located in 15
  different locations.
• Vice president (CIO) in Business Technology (IT)
  directly report to senior vice president and/or
  CEO

49
JD Edwards World at KV

• Implementation began 2000
• Implementation finished 2003
• Implementation fees approx. 3 Million
• License fees approx. 1 Million
• Ongoing cost of approx. 1 Million
• Updated from A7.1 service pack to A8.1 service
  pack in 2006
• About 900 users in 15 locations

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JD Edwards at KV
51
ERP at KV

• JD Edwards World was built for the IBM iSeries
  (AS/400) platform,
• JD Edwards Worlds includes Financials,
  Purchasing, Manufacturing, SalesDistribution,
  Inventory, Fixed Assets, Human Resources and
  Returns
• ACOM, Varsity, Ingas, Kronos,

52
JD Edwards World A8.1

• Distribution / Logistics
• Repetitive, Process, Improved Enablement of
  Lean Manufacturing Distribution
• Load Delivery Management / Bulk Processing
• Electronic Commerce
• Financial Consolidations

53
Outcomes

• With ERP to automate processes, the benefits are
  as follows
• Increase inventory turns
• Increase inventory accuracy rate
• Reduce inventory costs
• Improve customer service
• Reduce setup times
• Reduce paper work reduced.
• Provide a unified customer database usable by all
  applications
• Provide greater and effective control on account.
• Faster response and follow ups to customers
• Improves supply demand linkage with remote
  locations and branches in different locations

54
Case 3 - ALMAB

• History Background
• Almab, a pseudo-name, is a leading newspaper
  company that operates in one of the Asian
  countries.
• Headquartered in the Capital with 52 offices in
  more than eleven major cities.
• Publishes more than 67 publications nationwide
  and has the highest number of readers among the
  English publications in the country.
• Over 80 of Almab's revenue is generated from
  advertising.

Source Business Transformation Through ERP A
Case Study of an Asian Company Alemayehu Molla,
Arjun Bhalla. Journal of Information Technology
Case and Application Research. Marietta 2006.
Vol. 8, Iss. 1 p. 34 (21 pages)
55
Research Questions

• Research questions addressed in this paper
  are
• (1) What are important contextual characteristics
  that influence transformation?
• (2) What are organizational dynamics that are key
  indicators that transformation is happening?
• (3) What key lessons can be drawn in terms of
  achieving and sustaining Information Technology
  (IT)-enabled organizational transformation?

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THE SEVEN "S" FRAMEWORK

• The role of IT in organizational transformation
  can be captured in terms of its influence on key
  organizational dimensions outlined as Seven "S"s
  - strategy, structure, systems, staff, skill,
  style, and shared values.
• The Seven S framework stresses that
  organizational effectiveness depends on the
  interaction between all the Ss of an
  organization. These elements are interconnected
  and must be coordinated properly to avoid
  conflicts and bottlenecks.

57
ERP Implementation

• SAP implementation began in the first quarter of
  2000.
• The main departments to be integrated via the
  implementation were the Classifieds, Display,
  Finance, Production and Print departments
• An implementation team comprised of senior
  managers, heads of various departments.
• Users from various departments were brought to
  the head office to test the system and
  participate in the training of trainers.
• The system went live on time after 14 months in
  the 2nd quarter of 2001.

58
Data Collection and Analysis

• The data were collected using
• Retrospective participant observation
• Based on experiences at ALMAB over 3 years
• Unstructured interview and
• Document analysis Seven S
• Strategy
• Structure
• System
• Staff
• Skill
• Style
• Shared value

59
Pre-ERP Data Transfer
60
Post-ERP Data Transfer
61
Pre and Post-ERP Comparison
62
Pre and Post-ERP Comparison -Continued
63
Practical Implications - Six Practical Lessons

• Mustering the momentum for transformation
• Effective managerial coordination
• Investing in human resources development
• Building mutual relationship within and with
  partner organizations and understanding of the
  organizational processes
• Assimilation of ERP
• Emphasis placed on organizational learning

64
Conclusion

• It might be difficult to put a dollar value on
  the benefits that can be derived from ERP.
• The business transformation of Almab is greatly
  enabled by ERP but its cause might not
  necessarily be attributed to ERP only.
• The Seven S dimensions provide an effective
  utility to conduct such observations.
• As a result, Almab's senior mangers believe that
  the ERP system has provided them with significant
  competitive gains in terms of "speed, efficiency
  and turnaround time".

65
Case Comparisons
Case 1 - Hershey Case 2 -KV Case 3 - Almab
Revenue 4 billion 400 million 1 billion
Reason for ERP Not clear. Replace legacy systems to provide global business processes Replace legacy systems to provide integration processes Replace legacy systems to provide business processes
Cost of ERP 112 million 3 - 5 million N/A
Time Scheduled 4 years Actually 30 months 2 years 14 month
Outcomes Malfunction Cause order-processing problems Success Provide a unified customer database usable by all applications Faster response and follow ups to customers Improves supply demand linkage Increase in inventory turns Reduction in administration costs Better order fulfillment rates Success Increase in inventory turns Reduction in administration costs Better order fulfillment rates
Business Transformation N/A N/A Significant
66
The Future of ERP
Sourcehttp//itmanagement.earthweb.com/erp/articl
e.php/11072_3643966_1 Accessed on December 2,
2006.
67
The Future

• Ultimate goal All for one
• Open one application and get whatever information
  you need.
• Big vendors fishing in smaller ponds
• Creativity and innovation rather than current
  product

Sourcehttp//itmanagement.earthweb.com/erp/articl
e.php/11072_3643966_1 Accessed on December 2,
2006.