Chapter02 ERP Development

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Chapter TwoThe Development of Enterprise

Resource Planning Systems

BUSINESSPROCESS

MANAGEMENT


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Concepts in Enterprise Resource Planning, Third EditionConcepts in Enterprise Resource Planning, Third Edition

O!"ecti#es

A$ter co%pleting this chapter, &ou 'ill !e a!le to(

) Identi$& the $actors that led to the de#elop%ent o$

Enterprise Resource Planning *ERP+ s&ste%s

) escri!e the distinguishing %odular characteristicso$ ERP so$t'are

) iscuss the pros and cons o$ i%ple%enting an ERP

s&ste%

) Su%%ari-e ongoing de#elop%ents in ERP


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Concepts in Enterprise Resource Planning, Third EditionConcepts in Enterprise Resource Planning, Third Edition .

Introduction

) E$$icient, integrated in$or%ation s&ste%s are #er&

i%portant $or co%panies to !e co%petiti#e

) An Enterprise Resource Planning *ERP+ s&ste%

can help integrate a co%pan&/s operations0Acts as a co%pan&1'ide co%puting en#iron%ent

0 Includes a data!ase that is shared !& all $unctional

areas

0 Can deli#er consistent data across all !usiness$unctions in real ti%e


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Concepts in Enterprise Resource Planning, Third Edition

The E#olution o$ In$or%ation S&ste%s

) Silos

0 In$or%ation s&ste%s con$iguration used until recentl&

0 Co%panies had unintegrated in$or%ation s&ste%s

that supported onl& the acti#ities o$ indi#idual!usiness $unctional areas

) Current ERP s&ste%s e#ol#ed as a result o$(

0Ad#ance%ent o$ hard'are and so$t'are technolog&

0 e#elop%ent o$ a #ision o$ integrated in$or%ations&ste%s

0 Reengineering o$ co%panies to shi$t $ro% a

$unctional $ocus to a !usiness process $ocus

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Co%puter 3ard'are and So$t'are

e#elop%ent

) Co%puter hard'are and so$t'are de#eloped

rapidl& in the 4567s and 4587s

) 9irst practical !usiness co%puters 'ere the

%ain$ra%e co%puters o$ the 4567s) O#er ti%e, co%puters got $aster, s%aller, and

cheaper

) Moore/s :a'

0 Nu%!er o$ transistors that could !e !uilt into a

co%puter chip dou!led e#er& 4; %onths


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Co%puter 3ard'are and So$t'are

e#elop%ent *cont/d=+

) Ad#ance%ents in co%puter so$t'are

0 4587s( relational data!ase so$t'are de#eloped

) Pro#ide !usinesses the a!ilit& to store, retrie#e, and

anal&-e large #olu%es o$ data0 45;7s( spreadsheet so$t'are !eca%e popular

) Managers can easil& per$or% co%ple> !usiness

anal&ses

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Earl& Atte%pts to Share Resources

) B& the %id145;7s, teleco%%unications

de#elop%ents allo'ed users to share data and

peripherals on local net'or?s

0 Client-server architecture) B& the end o$ the 45;7s, the hard'are needed to

support de#elop%ent o$ ERP s&ste%s 'as in place

) B& the %id145;7s, database management

system *DBMS+ re@uired to %anage de#elop%ento$ co%ple> ERP so$t'are e>isted

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The Manu$acturing Roots o$ ERP

) Manu$acturing so$t'are de#eloped during the

4567s and 4587s

0 E#ol#ed $ro% si%ple in#entor&1trac?ing s&ste%s to

material requirements planning (MRP) so$t'are) lectronic data interchange (D!)

0 irect co%puter1to1co%puter e>change o$ standard

!usiness docu%ents

0Allo'ed co%panies to handle the purchasingprocess electronicall&

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Manage%ent/s I%petus to Adopt ERP

) 3ard econo%ic ti%es o$ the late 45;7s and earl&

4557s caused %an& co%panies to do'nsi-e and

reorgani-e

0 Sti%ulus to ERP de#elop%ent) Ine$$iciencies caused !& the $unctional %odel o$

!usiness organi-ation

0 Silos o$ in$or%ation

0 :i%its the e>change o$ in$or%ation !et'een the

lo'er operating le#els

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*cont/d=+

) 9unctional %odel led to top1hea#& and o#ersta$$ed

organi-ations incapa!le o$ reacting @uic?l& to

change

) Process !usiness %odel0 In$or%ation $lo's !et'een the operating le#els

'ithout top %anage%ent/s in#ol#e%ent

) 9urther i%petus $or adopting ERP s&ste%s has

co%e $ro% co%pliance 'ith the Sar!anes1O>le&Act o$ 77

0 Re@uires co%panies to su!stantiate internal controls

on all in$or%ation47


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*cont/d=+

9igure 1. In$or%ation and %aterial $lo's in a process !usiness %odel

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ERP So$t'are E%erges( SAP and R.

) 458( $i#e $or%er IBM s&ste%s anal&sts in

Mannhei%, Ger%an& $or%ed Systemanalyse und

Programmentwicklung *S&ste%s Anal&sis and

Progra% e#elop%ent, or SAP+) SAP/s goals(

0 e#elop a standard so$t'are product that could !e

con$igured to %eet the needs o$ each co%pan&

0 ata a#aila!le in real ti%e0 Users 'or?ing on co%puter screens, rather than 'ith

#olu%inous printed output

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SAP Begins e#eloping So$t'are

Modules

) uring their 'or? $or Ger%an che%ical co%pan&

ICI, Plattner and 3opp had de#eloped the idea o$

%odular so$t'are de#elop%ent

) So$t'are modules(indi#idual progra%s that can !epurchased, installed, and run separatel&, !ut that

all e>tract data $ro% the co%%on data!ase

) 45;( SAP released its R %ain$ra%e ERP

so$t'are pac?age

4.


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SAP Begins e#eloping So$t'are

Modules *cont/d=+

) 45;7s( sales gre' rapidl& SAP e>tended its

so$t'are/s capa!ilities and e>panded into

international %ar?ets

) B& 45;;, SAP had esta!lished su!sidiaries innu%erous $oreign countries

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SAP R.

) 45;;( SAP !egan de#elop%ent o$ its R"# s&ste% to

ta?e ad#antage o$ client1ser#er technolog&

) 455( $irst #ersion o$ SAP R. released

) SAP R. s&ste% 'as designed using an openarchitecture approach

) $pen architecture( third1part& so$t'are co%panies

encouraged to de#elop add1on so$t'are products

that can !e integrated 'ith e>isting so$t'are

4i!leH

) Fhat return can a co%pan& e>pect $ro% its ERPin#est%entH

) 3o' long does it ta?e to see a return on an ERP

in#est%entH

) Fh& do so%e co%panies ha#e %ore success 'ith

ERP than othersH

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3o' Much oes an ERP S&ste%

CostH

) Si-e o$ the ERP so$t'are

0 Corresponds to the si-e o$ the co%pan& it ser#es

) Need $or ne' hard'are that is capa!le o$ running

co%ple> ERP so$t'are) Consultants/ and anal&sts/ $ees

) Ti%e $or i%ple%entation

0 Causes disruption o$ !usiness

) Training

0 Costs !oth ti%e and %one&

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Should E#er& Business Bu& an ERP

Pac?ageH

) So%e o$ a !usiness/s operations, and so%e

seg%ents o$ its operations, %ight not !e a good

%atch 'ith the constraints o$ ERP

) So%eti%es, a co%pan& is not read& $or ERP) ERP i%ple%entation di$$iculties result 'hen

%anage%ent does not $ull& understand its current

!usiness processes and cannot %a?e

i%ple%entation decisions in a ti%el& %anner

..


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Is ERP So$t'are In$le>i!leH

) Man& people clai% that ERP s&ste%s, especiall&

the SAP ERP s&ste%, are rigid

) Options $or custo%i-ation o$$ered !& SAP ERP

0 Nu%erous con$iguration options that help!usinesses custo%i-e the so$t'are to $it their needs

0 Progra%%ers can 'rite speci$ic routines using

%dvanced Business %pplication Programming

(%B%P)) Once an ERP s&ste% is in place, tr&ing to

recon$igure it 'hile retaining data integrit& is

e>pensi#e and ti%e1consu%ing

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Fhat Return Can a Co%pan& E>pect

$ro% Its ERP In#est%entH

) ERP eli%inates redundant e$$orts and duplicated

data can generate sa#ings in operations e>pense

) ERP s&ste% can help produce goods and ser#ices

%ore @uic?l&) Co%pan& that doesn/t i%ple%ent an ERP s&ste%

%ight !e $orced out o$ !usiness !& co%petitors that

ha#e an ERP s&ste%

) S%oothl& running ERP s&ste% can sa#e aco%pan&/s personnel, suppliers, distri!utors, and

custo%ers %uch $rustration

.pect

$ro% Its ERP In#est%entH *cont/d=+

) Cost sa#ings and increased re#enues occur o#er

%an& &ears

0 i$$icult to put an e>act dollar $igure to the a%ount

accrued $ro% the original ERP in#est%ent) ERP i%ple%entations ta?e ti%e

0 Other !usiness $actors %a& !e a$$ecting the

co%pan&/s costs and pro$ita!ilit&

0 i$$icult to isolate the i%pact o$ the ERP s&ste%alone

) ERP s&ste%s pro#ide real1ti%e data

0 I%pro#e e>ternal custo%er co%%unications.6


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3o' :ong oes It Ta?e to See a

Return on an ERP In#est%entH

) Return on investment (R$!)(assess%ent o$ an

in#est%ent pro"ect/s #alue

0 Calculated !& di#iding the #alue o$ the pro"ect/s

!ene$its !& the pro"ect/s cost) ERP s&ste%/s ROI can !e di$$icult to calculate

) Peerstone Research stud&

0 6. percent o$ co%panies that per$or%ed the

calculation reported a positi#e ROI $or ERP0 Most co%panies $elt that non$inancial goals 'ere the

reason !ehind their ERP installations

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Fh& o So%e Co%panies 3a#e More

Success 'ith ERP Than OthersH

) Usuall&, a !u%p& rollout and lo' ROI are caused

!&people pro!le%s and %isguided e>pectations,

not co%puter %al$unctions

0 E>ecuti#es !lindl& hoping that ne' so$t'are 'ill cure$unda%ental !usiness pro!le%s that are not cura!le

!& an& so$t'are

0 E>ecuti#es and IT %anagers not ta?ing enough ti%e

$or a proper anal&sis during planning andi%ple%entation phase

0 E>ecuti#es and IT %anagers s?i%ping on e%plo&ee

education and training

.;

Fh S C i 3 M


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*cont/d=+) Usuall&, a !u%p& rollout and lo' ROI are caused

!&people pro!le%s and %isguided e>pectations,

not co%puter %al$unctions *cont/d=+

0 Co%panies not placing o'nership or accounta!ilit&

$or the i%ple%entation pro"ect on the personnel 'ho

'ill operate the s&ste%

0 Unless a large pro"ect such as an ERP installation is

pro%oted $ro% the top do'n, it is doo%ed to $ail

0 ERP i%ple%entation !rings a tre%endous a%ount o$

change $or users

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Fh S C i 3 M


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*cont/d=+) 9or %an& users, it ta?es &ears !e$ore the& can ta?e

ad#antage o$ %an& o$ an ERP s&ste%/s capa!ilities

) Most ERP installations do generate returns

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The Continuing E#olution o$ ERP

) Understanding the social and !usiness i%plications

o$ ne' technologies is not eas&

) ERP s&ste%s ha#e !een in co%%on use onl& since

the %id14557s) ERP #endors are 'or?ing to sol#e adapta!ilit&

pro!le%s that plague custo%ers

) e%and $or ne' ERP installations is still going

strong

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Additional Capa!ilities 'ithin ERP

) Sales production

0 Custo%er Relationship Manage%ent *CRM+

applications

) Increase the e$$icienc& o$ the sales $orce) ata anal&sis

0 Data mining(statistical and logical anal&sis o$ large

sets o$ transaction data, loo?ing $or patterns that can

aid decision %a?ing) Internet connecti#it&

0 Fe! ser#ices

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The Internet

) No', users o$ten need to access that central

data!ase directl& $ro% the Internet

) ERP de#elopers ha#e !een incorporating Fe!1

!ased s&ste%s 'ith their ERP products) lectronic commerce *or e-commerce+

0 Conduct !usiness o#er the Internet

0Another acti#it& that ERP s&ste%s can help %anage

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The Internet *cont/d=+

) &eb services, or service-oriented architecture

(S$%)

0 Fe! ser#ices( so$t'are that ena!les s&ste%s to

e>change data 'ithout co%plicated so$t'are lin?s0 Fe! ser#ices %a?e ERP s&ste%s easier to %anage,

especiall& 'hen inter$acing 'ith other applications

and the Fe!

0 Shi$t $ro% traditional ERP client1ser#er s&ste% toser#ice1oriented architecture is gaining %o%entu%

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Su%%ar&

) Speed and po'er o$ co%puting hard'are

increased e>ponentiall&, 'hile cost and si-e

decreased

) Earl& client1ser#er architecture pro#ided theconceptual $ra%e'or? $or %ultiple users sharing

co%%on data

) Increasingl& sophisticated so$t'are $acilitated

integration, especiall& in t'o areas( A9 and%anu$acturing resource planning

2pensi#e to purchase and ti%e1

consu%ing to i%ple%ent, and it re@uires signi$icant

e%plo&ee training!ut the pa&o$$s can !e

spectacular0 9or so%e co%panies, ROI %a& not !e i%%ediate ore#en calcula!le

) E>perts anticipate that ERP/s $uture $ocus 'ill !e

on %anaging custo%er relationships, i%pro#ingplanning and decision %a?ing, and lin?ing

operations to the Internet and other applications

through ser#ice1oriented architecture

Documents

Chapter02 ERP Development