ERP

Enterprise Resource Planning

D Lewis 10/02

Definitions

ERP is a process of managing all resources and their use in the entire enterprise in a coordinated manner

ERP is a set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order management

What is ERP?

Enterprise Resource Planning

Support business through optimizing, maintaining, and tracking business functions

Broken down into business processesHRM - DistributionFinancials - Manufacturing

What makes ERP different

Integrated modulesCommon definitionsCommon database

Update one module, automatically updates others

What makes ERP different (cont)

ERP systems reflect a specific way of doing business

Must look at your value chains, rather than functions

History of ERP

Departmentalized Systems1960’s: systems for each department

MRP Systems1970’s: integrated manufacturing

MRPII System1980’s: more functions included

ERP: 1990’s integrated all across

Trends in ERP

Use of the Internet for access

More customized solutions

Decision support capabilities

Data pulled to specific application

Linkage of multiple organizations together

Benefits of ERP

Common set of data

Help in integrating applications for decision making and planning

Allow departments to talk to each other

Easy to integrate by using processed built into ERP software

Benefits of ERP

A way to force BPR (reengineering)

Easy way to solve Y2K problem

Benefits of ERP

On 4 dimensionsFirm structureManagement processesTechnology platformBusiness capability

Firm structure

New structures

More disciplined cultureGlobally everyone uses same processes

and terminologyFreely flowing information

Management process

Unified reporting and decision making

Better data on performance

Determine which products are more desirable

Technology platform

Single unified all encompassing platform

Common data, common definitions and formats

Business capability

Form basis of customer driven organization

Better meet customers needs

Buy or Build

Pros buyBest practices from many organizations

includedVendor must keep up to dateSmaller staff required

Buy vs. Build (cont.)

Pros buildComplete control of featuresMore support requiredNot as much product supportMay not have best practices included

Why purchase ERP package?

Increasing flexibility and agilityBusiness benefits (competitive agility)Client/server IT architecture benefits

IT purchasing benefitsLower costs and higher reliability than

building from scratch

Why purchase ERP package?

Data integration Improving access to data across business units

New ways of doing business Moving to a process orientation Reduction in costs

Global capabilities Common processes and country specific

capabilities

Why purchase ERP package?

IT architecture cost reductionReduced costs for systems operations and

maintenance

Most important benefit?Data integration

Difficulty in implementation

Very difficult

Extremely costly and time intensiveTypical: over $10,000,000 and over a year

to implement

Common Pitfalls

Do not adequately benchmark current stateDid not plan for major transformationDid not have executive sponsorshipDid not adequately map out goals and objectivesHighly customized systems to look like old MRP systems

Leading vendors

SAP

Baan

J.D. Edwards

Oracle

Peoplesoft

Which way to go?

One vendorEasy integrationStandardization of processes

“Best of breed” approachEasy to adapt to own needsDecreased reliance on one vendor

How to implement

You will need an outside consultant

Potential benefitsBetter information for

Strategic decision makingGreater efficiencyGreater profitPotential for growth

Unintended consequences of ERP

Organizational changesCreating new work relationshipsShare informationMake new types of decisions

Reactions to changesResistanceConfusionErrors

Unintended consequences

50% of implementations failManagers underestimate the need for

change managementManagers focus on potential benefit, rather

than on impact on employeesEmotional fallout after employees given

greater responsibility

Implementation Issues

Company may implement only certain modules of entire ERP system

Readings

evaluation of ERP software

Getting Increased Value from ERP Systems