Introduction to ERP Systems and SAP

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Introduction to ERP Systems and SAP

• MBA 8556
• Fall 2004
• Dr. Wagner

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What is ERP Anyway?

• Enterprise Resource Planning
• A set of integrated software modules for
  supporting all of an enterprises processes in
  real-time.
• Sales, Production, Logistics, Purchasing,
  Accounting, and Human Resources share relevant
  information with each other as needed.

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Your first business enterprise
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Think in terms of business processes

• What are the processes involved in running a
  lemonade stand?
• Assume one person
• Assume cash business

Inputs
Outputs
Process
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Sample Lemonade Processes
Get supplies together
Get OK From Mom
Make Sign(s)
Get OK From Mom
Make lemonade
Choose location
Make lemonade
Make lemonade
Set up table
Rake in The cash
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Sample Lemonade Processes
Get supplies together
Get OK From Mom
Make Sign(s)
Get OK From Mom
Make lemonade
Is it feasible?
How much do we make?
What supplies do I need?
How much to charge?
Choose location
Make lemonade
Make lemonade
Set up table
Rake in The cash
Who are my customers?
Is it worth continuing?
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Your enterprise partners
Customers
Friends
Mom/Dad
Grocery
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Lemonade Stand Exercise

• Point of this exercise?
• We can view everything we do, personal and
  professional as a set of processes.
• Start to think about how our decisions affect
  others and their processes

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Lemonade Stand Exercise

• Point of this exercise?
• We can view everything we do, personal and
  professional as a set of processes.
• Start to think about how our decisions affect
  others and their processes
• What would happen if all the partners in this
  process had access to each others information in
  real-time?

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Functional Silo View of an Organization
Production
Logistics
Sales
Accounting
Purchasing
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Functional Silo View of an Organization
Production
Logistics
Sales
Accounting
Purchasing
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Functional Silo View of an Organization
Production
Logistics
Sales
Accounting
Purchasing
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Functional Silo View of an Organization
Production
Logistics
Sales
Accounting
Purchasing
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Functional Silo View of an Organization
Production
Logistics
Sales
Accounting
Purchasing
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Functional Silo View of an Organization
Information?
Production
Logistics
Sales
Accounting
Purchasing
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Cross-Functional Nature of the Order Management
Process
Check Credit
Process
Quote
Commit
Produce
Deliver
Bill
Collect
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Cross-Functional Nature of the Order Management
Process
Check Credit
Process
Quote
Commit
Produce
Deliver
Bill
Collect
Sales Distribution
Production Planning
Financial
Materials Mgmt
Accounting
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Cross-Functional Nature of the Order Management
Process
Check Credit
Process
Quote
Commit
Produce
Deliver
Bill
Collect
Sales Distribution
Production Planning
Financial
Modules
Materials Mgmt
Accounting
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What if.

• You had Real Time information in your Job?
• Accurate inventory data
• Single point of data entry

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What if.

• You had Real Time information in your Job?
• Accurate inventory data
• Single point of data entry
• You could tap into information that other
  departments collect?
• Vendor selection data
• Vendor pricing data available

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What if.

• You had Real Time information in your Job?
• Accurate inventory data
• Single point of data entry
• You could tap into information that other
  departments collect?
• Vendor selection data
• Vendor pricing data available
• You had certain tasks and work processes
  automated?
• RFQ and contract processing
• No more reconciliations
• Automatic data transfer and update

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Thats what an ERP System Does

• It is a packaged business system that allows you
  to
• Automate and integrate many of the more tedious
  business practices.

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Thats what an ERP System Does

• It is a packaged business system that allows you
  to
• Automate and integrate many of the more tedious
  business practices.
• Share common data and practices across the entire
  enterprise.

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Thats what an ERP System Does

• It is a packaged business system that allows you
  to
• Automate and integrate many of the more tedious
  business practices.
• Share common data and practices across the entire
  enterprise.
• Update and access information in a real-time
  environment

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Why implement ERP?

• Technological reasons
• Business reasons

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Other Organizations implemented ERP for these
Technology Reasons
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Y2K
disparate systems
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poor quality of information
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systems not integrated
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difficulty integrating acquisitions
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obsolete systems
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unable to support growth
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Common Business Reasons for implementing ERP
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poor performance
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high costs
not responsive to customers
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complex processes
unable to support strategies
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globalization
inconsistent business processes
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Business Process Reengineering

• BPR is the creation of entirely new and more
  effective business processes, without regard for
  what has gone before.
• BPR is cross-functional by its very nature
• BPR involves questioning assumptions
• Text prefers Business Engineering term to
  describe redesign of entire process chains across
  functional and even organizational boundaries

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ERP Industry

• 80 of Fortune 1000 have implemented
• includes MSFT, IBM, and APPLE
• 30-40 annual revenue growth for 1995-2000 (SAP
  14 Q2 2004)
• partly attributable to Y2K re-engineering
• Major players
• SAP ---38 of market
• PeopleSoft
• JDEdwards, Baan/Invensys, Oracle, SCT, SGAI

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Some ERPMarket Figures

• 1998 worldwide revenues (only license sales)
  4.8 Billion

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ERPThe Competitive Arena
Source Gartner Group
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What is SAP?

• A series of integrated core business application
  modules for transaction processing
• A set of functions that implement best business
  practices
• Client/Server software that processes business
  transactions
• A methodology for implementing application
  software

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SAP and Market

• SAP (Pronounced Ess, Ay, Pee!) is industry
  standard in
• software, oil, chemicals, consumer goods,
  electronics
• Expanding into
• healthcare, government, pharmaceuticals,
  automotive, construction, retail, service

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Event-Driven Transaction Processing

• An EVENT is a condition that has business
  relevance
• customer order
• production order
• customer payment receipt
• Events trigger processing actions
• Events are fundamental activities in processing
  business transactions
• Behind SAPs EPC methodology
• (Event Driven Process Chain)

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3 Key ERP Concepts

1. Everyone works with real-time shared data and
   applications
2. Technology becomes transparent for users through
   open systems architecture
3. A Process View of the organization is required to
   make the project a success

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Key Concept Shared Data Applications

• Integrated Data and Applications
• Data sharing in common relational database
• SAP term Master Data ex. Material master
• 95 accurate data is no longer good enough

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Key Concept Shared Data Applications

• Integrated Data and Applications
• Data sharing in common relational database
• SAP term Master Data ex. Material master
• 95 accurate data is no longer good enough
• Different Application modules are responsible for
  maintaining master data
• Application modules should reflect process view
  of organization

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Name That Module. . .
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Key Concepts Technology becomes transparent for
Users through Open Systems Architecture

• Open systems architecture
• Generally entails a 3-tier Client/Server
  architecture
• May require connecting to a wide variety of
  databases and mainframes/servers
• SAP solves this problem through the use of
  various middleware technologies that make this
  transparent to the user

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Key Concepts A Process View of the Organization
is Required for the Project to be a Success

• Business Process Redesign (BPR) of the
  Organization...
• Often requires major changes. Why?
• May involve everyone in redesign of processes
• Creates entirely new and more effective business
  processes, without regard for what has gone
  before.
• Is Cross-functional by its very nature
• Involves questioning assumptions

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How will ERP affect our processes?

• Financial processes
• Real-time cost and performance analysis
• Across projects and divisions
• Better financial planning
• Logistics processes
• Supports all phases of procurement process
• Integrates transportation management across the
  supply chain
• Sales processes
• Complex pricing and profitability analysis
• Real-time inventory control

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Classification of Information Systems
DSS
MIS
TPS
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Classification of Information Systems
DSS
MIS
ERP
TPS
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Classification of Information Systems
Bolt-Ons
DSS
MIS
TPS
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Benefits of R/3 Reference Model

• Dont have to start from scratch
• Quick overview of application architecture
• Identifies key R/3 process elements
• Helps visualize processes
• Shows R/3 functionality
• Speeds up process
• Helps to define current processes
• maintains process documents

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SAP R/3 Basis System
Data General HP (Intel) IBM (Intel)
UNIX Systems
Hardware
ATT Bull/Zenith Compaq
Sequent SNI . . .
IBM SNI SUN
Bull Digital HP
IBM AS/400
AIX Digital UNIX HP-UX
Operating Systems
SINIX SOLARS
OS/400
Windows NT
ADABAS D DB2 for AIX INFORMIX-OnLine 7 ORACLE 7
ADABAS D MS SQL Server 6.0 ORACLE 7
Databases
Windows 3.11, Windows 95, Windows NT, OS/2-Warp
Dialog SAP-GUI
Windows 3.11, Windows 95, Windows NT, OSF/Motif,
OS/2-Warp, Macintosh
Languages
ABAP/4, C, C
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Future Challenges for SAP

• Based on late 1980s C/S technology
• not pure Object-Oriented design
• servers are treated as distributed m/f with
  desktop as almost a dumb terminal using function
  calls to application server
• Lack of flexibility
• difficult to modify business processes
• modifications done by configuration channels or
  tack on modules by external vendors--possible
  upgrade problems
• Complexity- frightens some customers
• Lack of strategic fit
• best for strong top-down type of organizations