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Enterprise Resource Planning (ERP)

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Title: Enterprise Resource Planning (ERP)


1
Enterprise Resource Planning (ERP)
  • Doug Anderson
  • William Hodge
  • Raj Vardhan

2
How ERP Affects Managers
  • Finance
  • Production
  • Human Relations
  • Customer relations
  • Sales
  • Warehousing/Inventory
  • Manufacturing
  • Purchasing

3
Definition
  • ERP (enterprise resource planning)
  • A business strategy that integrates
    manufacturing, financial and distribution
    functions to dynamically balance and optimize the
    enterprise's resources.
  • An integrated application software suite that
    balances manufacturing, distribution and
    financial business functions. ERP is the
    technological evolution of manufacturing
    requirements planning (MRP) II through the
    introduction of relational database management
    systems (RDBMSs), computer-aided software
    engineering (CASE), fourth-generation language
    (4GL) development tools and client/server
    architecture. When fully implemented, ERP can
    enable enterprises to optimize their business
    processes and allows for necessary management
    analysis and appropriate decision making in a
    quick and efficient manner. As more-robust
    technology is implemented, ERP improves an
    enterprise's ability to react to market changes.
    Gartner Group

Source www4.gartner.com/6_help/glossary/GlossaryM
ain.jsp, viewed 10/13/03
4
ERP Scope
MANUFACTURING
FINANCIAL
DISTRIBUTION
HUMAN RELATIONS
ERP
SALES
INVENTORY
WAREHOUSING
5
ERP Scope
Sources www.sap.com/businessmaps/pdf/Industrial_M
achinery__Components_Solution_Map.pdf , viewed
10/13/03
6
ERP Evolution
  • Manual records
  • Separate Inventory control Production control
  • 1960s Material Requirements Planning (MRP)
  • Use bill of material, inventory, and schedule to
    plan production
  • 1970s Closed loop MRP
  • Adds sales operations planning, master
    production scheduling, capacity requirements
    planning to MRP
  • 1980s Manufacturing Resource Planning (MRP II)
  • Business planning, production planning (sales
    operations planning), master production
    scheduling, MRP, capacity requirements planning,
    and the execution support systems for capacity
    and material
  • 1990s Enterprise Resource Planning (ERP)
  • MRP II with graphical user interface, relational
    database, use of fourth-generation language, and
    computer-assisted software engineering tools in
    development, client/server architecture, and
    open-system portability
  • Sources
  • Preston W. Blevins, Enterprise Resource Planning
    (ERP) An Executive PerspectiveAn Update, APICS
    2000 International Conference Proceedings, pp.
    208-216
  • George W. Plossl, Making ERP Systems Really
    Work, APICS 2000 International Conference
    Proceedings, pp. 122-125
  • APICS Online Dictionary, members.apics.org/Publica
    tions/dictionary Viewed 10/29/03

7
Sophistication Levels
  • Data Management System
  • Organization views ERP as a large repository for
    organizational data
  • Data printed on reports distributed
  • No analysis
  • Software Modules/Shared Database
  • All systems use same data
  • Most common perception
  • Manufacturing Philosophy
  • Collection of Rules Procedures for planning
    reporting

Source Karl M. Kapp, Maximizing Your ERP
System, APICS 2002 Conference Proceedings, Paper
B-02
8
Sophistication Levels
  • Business Philosophy
  • Upper Management sets parameters, thresholds,
    etc.
  • Organization relies on ERP for information and
    direction
  • Begins to provide a strategic advantage
  • Knowledge Management System
  • Use of information to make intelligent and timely
    decisions
  • Contains information, alerts, reports to
    provide decision makers with accurate, up-to-date
    information

Source Karl M. Kapp, Maximizing Your ERP
System, APICS 2002 Conference Proceedings, Paper
B-02
9
ERP Suppliers
  • SAP
  • PeopleSoft
  • J.D. Edwards (PeopleSoft)
  • Oracle
  • Baan (SSA Global)
  • Computer Associates
  • IFS
  • Microsoft (Axapta, Great Plains, Navision)
  • Manugistics
  • Agilisys
  • many others

10
ERP Market
  • Manufacturing Sector
  • 1999 15 B (Peak)
  • 2002 8.5 B
  • 2007 11.9 B (Proj.)
  • 5.8 growth

Sources David Kodama, Jump Starting ERP,
Managing Automation, March, 2002
www.arcweb.com/common/inc/news_win2.asp?ID328,
Viewed 10/18/03
11
ERP Market
  • Historical Market
  • Large manufacturing companies (Tier 1)
  • 15 B at peak (1999)
  • Driven by Y2K concerns
  • Historical Results
  • Incredibly risky for early adopters
  • bet-our-company type of failure
  • Heavy reliance on consultants significantly
    increased project costs

Sources www.arcweb.com/common/inc/news_win2.asp?I
D328, Viewed 10/18/03 Carol V. Brown, Iris
Vessey, Managing the Next Wave of Enterprise
Systems Leveraging Lessons from ERP, MIS
Quarterly Executive, Vol. 2, No. 1, March 2003
12
ERP Market
  • Future Market
  • Mid-size companies (Tier 2)
  • 2002 41 of total market, 6.3 growth
  • ERP Services
  • Tier 1 re-architecting solutions
  • Tier 2 68 of total revenue
  • Pre-packaged solutions
  • Portal solutions
  • Europe, Middle East, and Africa

Sources www.arcweb.com/common/inc/news_win2.asp?I
D328, Viewed 10/18/03
13
Points to Ponder
  • Structured Methodology Strategy
  • People
  • Process focused

14
ERP Points to ponder - II
  • 1) assess the risks of the change up front (the
    most serious are the changes needed in the
    business, not the changes in the technology),
  • (2) mitigate the causes of highest risk at the
    front end and as the project progresses,
  • (3) adjust the method of managing the project to
    minimize the remaining risks.

Sources www.misqe.org/jsp/showabstract.jsp?ob126
ob24
15
Selection Criteria
  • Functional Specs - what you want to do with the
    software and what the software will accomplish.
    (If you don't spend time and money every vendor
    in the market is a candidate in your list !)

16
ERP and Windows OS
  • Due to changes in Windows operating systems ERP
    companies are not able to use the same software
    to include the modern technological changes and
    hence they spend a fortune on developing new
    codes every 5 years.
  • This results in huge software budgets apart from
    the networking expenses and hence the total
    operating budgets are increasing year after year.

17
  • Case Study

18
Company Info
  • Index Membership SP 600 Small Cap
  • Sector Capital Goods
  • Industry Construction Services
  • Employees (last reported count)1,938

Source Jacob Thomas Interview, 10/29/03
19
Financial Results
  • Sales and Service Billings increased while the
    Profits were gradually decreasing.
  • Two companies were acquired within the same
    period.
  • New European operations started.

Source Jacob Thomas Interview, 10/29/03
20
Project
  • Project Sponsor
  • CFO
  • Project Manager
  • Project Director
  • Original Project Schedule
  • Duration 9 Months
  • Original Go Live Date September 30, 2001
  • Original Project Budget
  • 300,000
  • Conversion of Payroll Module from World to One
    World software of JD Edwards ERP.

Source Jacob Thomas Interview, 10/29/03
21
Selection
  • Selection Team
  • Business units
  • Insituform East (sister company)
  • IS Department
  • Proposals
  • J.D. Edwards selected since JD Edwards was the
    main vendor for all the other modules.

Source Jacob Thomas Interview, 10/29/03
22
Selection
  • Modules selected
  • Payroll
  • Human Resources
  • All other modules will reside on the World
    Software while the above two alone will be on the
    One World Software Such systems are called
    Co-existence systems They use the same DB2
    database while the front end programs are coded
    in C in the One World Software

Source Jacob Thomas Interview, 10/29/03
23
Implementation
  • Both the Payroll and HR to go live together.
  • 10 consultants were used.
  • Software customized to meet all requirements.
  • Couple of Project Directors were involved.
  • Target to go live was Sept 2001 Went live in
    Dec 2001.
  • Took 3 more months to iron out the rest of the
    issues.

Source Jacob Thomas Interview, 10/29/03
24
Project Results
  • Original Project Budget - 300,000
  • Final Project Cost - 600,000
  • Functionality - gt 85 of desired functionality
    within one year.
  • Future Projects To move all the other modules
    to One World. Target date to complete the
    project is June 2005.

Source Jacob Thomas Interview, 10/29/03
25
ERP Example
26
ERP Example
27
ERP Example
28
ERP Example
29
ERP Example
30
ERP Example
31
ERP Example
32
ERP Example
33
ERP Example
34
ERP Example
35
  • Case Study

36
Company Info
  • Privately held
  • Sector Services
  • Industry Printing and Distribution
  • Employees Around 500
  • Operations in US and UK

37
Financial Results
  • Sales for year 2002 330 Million
  • Budget for IS for 2002 20 Million
  • Sales for year 2001 - 343 Million
  • Budget for IS for 2001 18 Million
  • 2002 - Lost some major clients to competitors due
    to higher prices on warehousing and product
    distribution.

38
Project
  • Project Sponsor
  • CFO
  • Project Manager
  • IS Director
  • Original Project Schedule
  • Duration 15 Months
  • Original "Go Live" Date April 1999
  • Original Project Budget
  • 8 Million
  • Conversion of Legacy system to JD Edwards ERP

39
Selection
  • Selection Team
  • Business Units
  • IMS (Group Company until 2002)
  • IS Department
  • Proposals
  • JD Edwards World selected as the Hardware
  • AS/400 was already available and there
  • was no need to buy a system. The only
    ERP
  • with all functionalities to run on
    AS/400 at that
  • time.

40
Selection
  • Modules Selected
  • Sales Order
  • Accounts Receivables
  • Accounts Payables
  • Distribution/Logistics (Shipping)
  • Warehouse Inventory
  • Purchase Order

41
Implementation
  • All modules to go live together.
  • 25 consultants were used.
  • Software customized to meet all user needs.
  • Two Project Directors were involved.
  • Target to go live April 1999 Went live in
    October 1999 !
  • Took more than a year to iron out issues.

42
Project Results
  • Original Budget - 8 Million
  • Final Project Cost - 18 Million
  • Functionality - gt 90 within one year.
  • Future Projects Manufacturing and EDI
    (Electronic Data Interchange) enhancements for
    Bankers.

43
Comments
  • The users in the company realized the benefits
    after 2 years of implementation.
  • Orders were repeated for various warehouses with
    one single mouse click.
  • The total order processing time from start to
    finish improved almost 30 .
  • Financial Reports were produced by the users
    without any need of additional Programming.

44
Lessons Learned
  • Multi Currency module did not go live as it had
    several issues. Resulted in using excel
    spreadsheet for a couple of weeks !! Microsoft
    Products are useful !!
  • Let the Team Members decide as they know the
    actual requirements of the "users"

Source Bob Bradshaw Interview
45
  • Case Study

46
Background
  • Products
  • Equipment for public safety vehicles
  • Light bars, flashers, sirens, speakers, and push
    bumpers
  • Small Manufacturing Enterprise
  • Created 1974
  • Revenue 50 Million
  • Employees 270
  • 2 manufacturing sites (1 for sub assemblies)
  • Purchased by Britax Ltd. 1998
  • Source
  • www.code3pse.com/about.asp viewed 10/15/03
  • Ray Scott Interview, 10/15/03

47
Background
  • IS Department
  • Size 5, including Director
  • Budget 0.5 Million
  • Previous ERP Experience
  • Home Grown system
  • Not integrated
  • Not Y2K compatible

Source Ray Scott Interview, 10/15/03
48
Project
  • Project Sponsor
  • Vice President of Operations
  • Project Manager
  • CFO
  • Original Project Schedule
  • Duration 10 Months
  • Original Go Live Date September 30, 1999
  • Original Project Budget
  • 1.5 Million

Source Ray Scott Interview, 10/15/03
49
Selection
  • Selection Team
  • Business units
  • Code3
  • Kustom Signals (sister company)
  • IS Department
  • Proposals
  • J.D. Edwards selected

Source Ray Scott Interview, 10/15/03
50
Selection
  • Modules selected
  • Financial
  • Order entry
  • Product configuration
  • Product data management
  • Inventory control
  • Shop floor control
  • Shipping
  • Sales
  • Sales reporting

Source Ray Scott Interview, 10/15/03
51
Implementation
  • Financials installed first
  • Manufacturing modules installed together
  • ERP Vendor implemented system
  • 3 Consultants used throughout project
  • Pilot individual modules
  • No customized code
  • Changed business processes to match software

Source Ray Scott Interview, 10/15/03
52
Results
  • Initial results
  • Did not pilot Go Live
  • Quite a struggle for first 2 weeks
  • Duplicate Invoices Orders
  • CEO suggested going back to old system after 1
    month
  • Major problems worked out in 6 months
  • Really comfortable in 2 years
  • Project Manager (CFO) full time for 2 years

Source Ray Scott Interview, 10/15/03
53
Project Results
  • Actual Project Schedule
  • Go Live Date June 30, 1999 (ahead of schedule)
  • Original Project Budget
  • 1.5 Million (on budget)
  • Functionality
  • gt80 of desired functionality within 2 years

Source Ray Scott Interview, 10/15/03
54
Precision Pattern, Inc.
  • Case Study

55
Background
  • Products
  • Executive Aircraft Furniture
  • Small Manufacturing Enterprise
  • Founded 1972
  • Revenue 30 Million
  • Employees 300
  • 1 manufacturing site
  • Part of Cabin Management Group of Decrane
    Aircraft, Ltd.

Source Kate Keltz Interview, 10/16/03
56
Background
  • IS Department
  • Size 3
  • Previous ERP Experience
  • Home Grown Foxpro system
  • Inadequate for many uses
  • Written in late 1970s early 1980s

Source Kate Keltz Interview, 10/16/03
57
Project
  • Project Sponsor
  • President
  • Project Manager
  • IS Manager
  • Original Project Schedule
  • Original Go Live Date August 31, 2003
  • Original Project Budget
  • 1.2 Million

Source Kate Keltz Interview, 10/16/03
58
Selection
  • Selection Team
  • Business unit
  • IS Department
  • Characteristics
  • High Volume, Custom Order manufacturing
  • Very MRP-based
  • Proposals
  • Originally 5-6 vendors
  • Glovia selected

Source Kate Keltz Interview, 10/16/03
59
Selection
  • Modules selected
  • Financial (3 divisions)
  • Planning
  • Engineering
  • Purchasing
  • Sales
  • Inventory

Source Kate Keltz Interview, 10/16/03
60
Implementation
  • Financials installed first (May 2003)
  • Manufacturing modules installed together
  • ERP Vendor implemented system
  • No consultants used in project
  • No changes to business processes
  • Customized a fair amount
  • Software designed for automotive industry (High
    volume, Repetitive manufacturing)
  • Minimal training

Source Kate Keltz Interview, 10/16/03
61
Results
  • Initial results
  • Financials successfully implemented
  • Manufacturing modules still being implemented
  • Actual Project Schedule
  • Go Live Date November 2, 2003 (projected)

Source Kate Keltz Interview, 10/16/03
62
Five Success Factors
  • For Complex, Value-Chain-Spanning projects
  • 1. Top Management is engaged in the Project,
    not just involved.
  • 2. Project Leaders are veterans and team members
    are decision makers.
  • 3. Third parties fill gap in expertise and
    transfer their knowledge.
  • 4. Change management goes hand-in-hand with
    project management.
  • 5. A satisficing mindset prevails.

Source Carol V. Brown, Iris Vessey, Managing
the Next Wave of Enterprise Systems Leveraging
Lessons from ERP, MIS Quarterly Executive, Vol.
2, No. 1, March 2003
63
Success Factors
  • Engage Top Management, not just involve
  • Insituform CFO
  • Schwarz CFO
  • Code3 VP Operations
  • Precision Pattern President

64
Success Factors
  • Experienced Project Leaders other team members
    are decision makers
  • Insituform Leader Project Director
  • Schwarz Leader IS Director
  • Code3 Leader CFO
  • Precision Pattern Leader IS Manager

65
Success Factors
  • Third parties used to fill gaps in expertise and
    training
  • Insituform 10 consultants
  • Schwarz 25 consultants
  • Code3 Vendor used to install software,
    Consultants used to determine configuration rules
  • Precision Pattern Vendor used to install
    software, No consultants used

66
Success Factors
  • Change Management
  • Insituform Customized to meet all requirements
  • Schwarz Customized to meet all user needs
  • Code3 Very few changes to software Business
    processes changed to match software best
    practices
  • Precision Pattern Many changes to software
    Software changed to meet manufacturing style

67
Success Factors
  • Satisficing Mindset
  • Insituform
  • Schwarz
  • Code3 Very few changes to software
  • Precision Pattern Many changes to software

68
Standish Group CHAOS ReportIT Projects
classification
Type I Success on time, on budget, promised
functionality Type II Challenged over-budget,
over-time and or missing
functionality Type IIIFailed Severely
impaired projects cancelled projects
Source Lacity, Mary C., Course presentation
clserver.ppt, p. 10
69
Project Classifications
  • Insituform Type II (Over budget, Late
    completion)
  • Schwarz Type II (Over Budget, Late completion)
  • Code3 Type I (On Budget, On-time completion)
  • Precision Pattern Type II (Late completion

70
Lessons Learned
  • The commandments
  • 1. Thou Shalt Acquire and Sustain thy
    Managements Support.
  • 2. Thou Shalt Establish Accountabilities for the
    Accuracy of thy Data.
  • 3. Thou Shalt Set Objectives and Measure thy
    Performance Against Them.
  • 4. Thou Shalt not Place thy Least Experienced in
    thy Companys Most Critical Position.
  • 5. Thou Shalt not Economize on Educating thy
    People.
  • 6. Thou Shalt not Endeavor Implementation Without
    Experience.
  • 7. Thou Shalt not Duplicate the Informal System
    on thy Computer.
  • 8. Thou Shalt not Bear False Witness Declaring
    Extended ERP a Data Processing System.
  • 9. Thou Shalt not Omit Tasks in thy Haste nor
    Prolong Them for thy Comfort.
  • 10. Thou Shalt not Expect Extended ERP to
    Eliminate all thy Problems

Source Blevins, Preston W., Enterprise Resource
Planning (ERP) An Executive PerspectiveAn
Update, APICS 2000 International Conference
Proceedings, pp. 208-216
71
References
  • http//www.openitx.com/archives/archives.asp?i700
    94
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