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Keyur D Vasava
Pharmacy+MBA
Dist.Narmada
"ACCEPT EVERYTHING ABOUT YOURSELF -- I MEAN EVERYTHING, YOU ARE YOU AND THAT IS THE BEGINNING AND THE END -- NO APOLOGIES, NO REGRETS." ( 14/03/12)
(ERP)-SEM-IV (GTU)
Enterprise Resource Planning 26-03-2012
Module I…!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1. ERP INTRODUCTION, BENEFITS, ORIGIN
Enterprise resource planning (ERP) systems integrate internal and
external management information across an entire organization,
embracing finance/accounting, manufacturing, sales and service,
customer relationship management, etc
ERP systems automate this activity with an integrated software
application.
Their purpose is to facilitate the flow of information between all
business functions inside the boundaries of the organization and manage
the connections to outside stakeholders.
Characteristics
ERP (Enterprise Resource Planning) systems typically include the
following characteristics:
An integrated system that operates in real time (or next to real time), without relying
on periodic updates.
A common database, which supports all applications.
A consistent look and feel throughout each module.
Installation of the system without elaborate application/data integration by the
Information Technology (IT) department
Origin of "ERP"
In 1990 Gartner Group first employed the acronym ERP[ as an
extension of material requirements planning (MRP), later planning and
computer-integrated manufacturing. Without supplanting these terms,
ERP came to represent a larger whole, reflecting the evolution of
application integration beyond manufacturing. Not all ERP packages were
developed from a manufacturing core. Vendors variously began with
accounting, maintenance and human resources. By the mid–1990s ERP
systems addressed all core functions of an enterprise. Beyond
corporations, governments and non–profit organizations also began to
employ ERP systems.
Components
Transactional database
Management portal/dashboard
Business intelligence system
Customizable reporting
External access via technology such as web services
Search
Document management
Messaging/chat/wiki
Workflow management
Implementation
Process of Implementing
Step 1. The Strategic Plan – Providing the Rationale and Making the Business Case
Step 2. Assess the “Readiness” of the Institution
– Determining “preparedness” & Achieving Organizational Understanding
Step 3. Prepare for Vendor Selection –
-Determining your Software Requirements and Documenting your Business Practices
Step 4. Select your ERP Vendors –
-Choosing Your Technology Partners
Step 5. Plan the Implementation –
-Preparing for Success
Step 6. Implement the ERP solution-
Working the plan
Step 7. post implementation –
-Where are we Now
ERP's scope usually implies significant changes to staff work processes
and practices. Generally, three types of services are available to help
implement such changes—consulting, customization, and support.
Implementation time depends on business size, number of modules,
customization, the scope of process changes, and the readiness of the
customer to take ownership for the project. Modular ERP systems can
be implemented in stages. The typical project for a large enterprise
consumes about 14 months and requires around 150 consultants. Small
projects can require months; multinational and other large
implementations can take years. Customization can substantially increase
implementation times
Three most common mistakes of ERP Implementation
Focusing on Technology There is no evidence anywhere in the history
of IT that software alone will solve a business problem.
Ignoring the importance of requirement definition many companies
try to adopt ERP system which doesn’t fit to business requirement which
generally lead to project failure.
Jumping from the Requirement definition to the development
phase Most of projects have to deliver the system in the timeline, thus
they may skip some important implementation steps. For example,
Project manager may skip the change manage process which may create
users’ resistance to new system and lead to project failure.
Benefits
Benefits & Challenges of ERP:
As the example of Colgate-Palmolive has just shown ERP systems can
generate significant business benefits for a company. Many other
companies have found major business value in their use of ERP in several
basis ways.
Quality & Efficiency: ERP creates a framework for integrating
and improving a company’s internal business processes that
results in significant improvements in the quality and efficiency
of customer service, production, and distribution.
Decreased Costs: Many companies report significant reductions
in transaction processing costs and hardware, software, and IT
support staff compared to the nonintegrated legacy systems
that were replaced by their new ERP systems.
Decision Support: ERP provides vital cross-functional information
on business performance quickly to managers to significantly
improve their ability to make better decisions in a timely manner
across the entire business enterprise.
Implementing ERP systems breaks down many former departmental and
functional walls of business processes, information systems, and
information resources. This results in more flexible organizational
structures, managerial responsibilities, and work roles, and therefore a
more agile and adaptive organization and workforce that can more easily
capitalize on new business opportunities.
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
A way to force BPR (reengineering)
Easy way to solve Y2K problem
Advantages
Better corporation
Improve customer goodwill
Customer satisfaction
Business Integration
Flexibility
Better Analysis and Planning Capability
Use of Latest Technology
The fundamental advantage of ERP is that integrating the myriad processes by which
businesses operate saves time and expense. Decisions can be made more quickly and with
fewer errors. Data becomes visible across the organization. Tasks that benefit from this
integration include:
Sales forecasting, which allows inventory optimization
Chronological history of every transaction through relevant data compilation in every
area of operation.
Order tracking, from acceptance through fulfillment
Revenue tracking, from invoice through cash receipt
Matching purchase orders (what was ordered), inventory receipts (what arrived), and
costing (what the vendor invoiced)
ERP delivers a single database that contains all data for the software modules across
an entire company. People in different departments all see the same information and
can update it.
Computer security is included within an ERP system to protect against both outsider
and insider crime
ERP systems tie together varied processes using data from across the company. For
instance, a typical ERP system manages functions and activities as different as the
bills of materials, order entry, purchasing, accounts payable, human resources, and
inventory control, to name just a few of the modules.
ERP software combined the data of formerly separate applications. This made the
worry of keeping information in synchronization across multiple systems disappears. It
standardized and reduced the number of software specialties previously required.
ERP systems allow companies to replace multiple complex computer applications with a
single integrated system.
ERP systems replace two or more independent applications and eliminate the need for
external interfaces previously required between systems and provide additional benefits
that range from standardization and lower maintenance to make reporting capabilities
easier.
ERP systems centralize business data, bringing the following benefits:
They eliminate the need to synchronize changes between multiple systems—consolidation
of finance, marketing and sales, human resource, and manufacturing applications
They bring legitimacy and transparency in each bit of statistical data.
They enable standard product naming/coding.
They provide a comprehensive enterprise view (no "islands of information"). They make
real–time information available to management anywhere, any time to make proper
decisions.
They protect sensitive data by consolidating multiple security systems into a single
structure
Disadvantages
Customization is problematic.
Re–engineering business processes to fit the ERP system may damage competitiveness
and/or divert focus from other critical activities
ERP can cost more than less integrated and/or less comprehensive solutions.
High switching costs associated with ERP can increase the ERP vendor's negotiating
power which can result in higher support, maintenance, and upgrade expenses.
Overcoming resistance to sharing sensitive information between departments can divert
management attention.
Integration of truly independent businesses can create unnecessary dependencies.
Extensive training requirements take resources from daily operations.
Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not
well suited for production planning and supply chain management (SCM)
Reasons for the Growth of ERP
Improved business performance.
Support business growth requirement
To provide flexible, integrated, real-time decision support
To eliminate limitation in legacy systems
2. EVOLUTION AND STRUCTURE:
Evolution of ERP
The history of ERP can be traced back to the 1960’s, when the focus of systems was mainly
towards inventory control. Most of the systems software were designed to handle inventory
based in traditional inventory concepts. The 1970’s witnessed a shift of focus towards MRP
(Material Requirement Planning).
This system helped in translating the master production schedule into requirements for
individual units like sub assemblies, components and other raw material planning and
procurement. This system was involved mainly in planning the raw material requirements.
Then, in 1980’s came the concept of MRP-II i.e. the Manufacturing Resource Planning which
involved optimizing the entire plant production process. Though MRP-II, in the beginning was
an extension of MRP to include shop floor and distribution management activities, during later
years, MRP-II was further extended to include areas like Finance, Human Resource,
Engineering, Project Management etc.
This gave birth to ERP (Enterprise Resource Planning) which covered the cross-functional
coordination and integration in support of the production process. The ERP as compared to its
ancestors included the entire range of a company’s activities. ERP addresses both system
requirements and technology aspects including client/server distributed architecture, RDBMS,
object oriented programming etc.
Evaluation Criteria
1. Some important points to be kept in mind while evaluating ERP software include
2. Functional fit with the Company’s business processes.
3. Degree of integration between the various components of the ERP system
4. Flexibility and scalability
5. User friendliness
6. Ease of implementation
7. Ability to support multi-site planning and control
8. Technology - client/server capabilities, database independence, security
9. Availability of regular upgrades
10. Amount of customization required
11. Local support infrastructure
12. Reputation and sustainability of the ERP vendor
13. Total costs, including cost of license, training, implementation, maintenance,
customization and hardware requirements.
ERP is a method for effective planning and control of all resources needed to
take, make, ship and account for customer orders in a manufacturing,
distribution or Service Company.
ERP is a way to integrate the data and processes of an organization into one single
system.
ERP systems will have many components including hardware and software, in order to
achieve integration
ERP systems use a unified database to store data for various functions found
throughout the organization.
An ERP system has a service-oriented architecture with modular hardware and
software units or "services" that communicate on a local area network.
The modular design allows a business to add or reconfigure modules (perhaps from
different vendors) while preserving data integrity in one shared database that may be
centralized or distributed
EVOLUTION OF ERP
OR
The Evolution of Information Systems
ERP system was not feasible until the 1990’s
Evolved as a result of
Development of hardware and software technology needed to support
the system
Computers have gotten smaller and faster
Moore’s Law
- Performance doubled with each new generation of computers
- Every 18-24 months the # of transistors on a computer chip
doubled
Proliferation of personal productivity software
Development of a vision of integrated information systems
As PC’s gained popularity, managers became aware that
important business information was being stored on individual
PC/s, but there was no easy way to share the information
electronically.
Servers became more powerful and less expensive and provided
scalability
Possible to view ERP systems as an extension of MRP II (Manufacturing
Resource Planning)
ERP Software Emerges
SAP
Formed in 1972 by five former IBM systems analysts
System analyze und Programmentwicklung
Systems Analysis and Program Development
R/3
Released in 1992
Designed using an open-architecture
Allows all business areas to access the same database, eliminating
redundant data and communication s lags
The Significance and Benefits of ERP Software and Systems
Allows easier global integration
Barriers of currency exchange rates, language and culture can
be bridged automatically
Eliminates updating and repairing many separate computer systems
Allows management to manage operations, not just monitor them
Makes the organization more responsive when change is required
ERP INVOLVES
• Project Planning
• Business & Operational Analysis, including Gap Analysis
• Business Process Re-engineering (BPR)
• Installation & Configuration
• Project Team Training
• Business Requirements Mapping to Software
• Module Configuration
• System Modification and Interfaces
• Data Conversion
• Custom Documentation
• End User Training
• Conference Room Pilot
• Acceptance Testing
• Production
• Post-Implementation Audit/Support
Reasons for Failure
Cultural
Lack of commitment of top management
Political
Failure to follow “proper” system selection methodology
Lack of sufficient implementation planning/ project Management
3. CONCEPTUAL MODEL OF ERP
4. SCENARIO AND JUSTIFICATION OF ERP IN INDIA
ERP in India
Until recently Indian organizations were in a sellers market and
operating in a regulated environment. They grew by managing the
environment, rather than innovating and improving internal efficiencies.
The customer was taken for granted and quality was available only at a
premium. With globalization and gradual lifting of regulation, there is a
paradigm shift in running the business.
Indian companies now need to increase customer focus, improve speed
of delivery, be cost competitive and provide value for money (improved
quality at lower price). Indian companies therefore need to implement
ERP systems for improving their business processes and becoming more
competitive in the global environment. Though ERP implementation is
costly and time consuming, it has several benefits which will help
recover these costs in the long run.
According to NASSCOM, during the year 1998-99, the Indian ERP
market has been estimated at R5200mn compared to Rs2800mn in the
previous year i.e. a growth of 85%yoy. The growth in the export
market was far higher and more than doubled during the same time
period. According to the NASSCOM, by the end of FY2001-02, the
total Indian ERP market is expected to multiply by nearly 4 times and
reach Rs65bn compared to Rs13.4bn in 1998-99.
5. VARIOUS MODULES OF ERP
I.HUMAN RESOURCE MODULE
Human resource management is an essential factor of any successful business.
The various subsystems under HR module are:
Personnel management: (HR master data, Personnel administration, information
systems, recruitment, travel management, benefits administration, salary
administration) Organizational management: (Organizational structure, staffing, schedules, job
descriptions, planning scenarios, personnel cost planning) Payroll Accounting: (Gross/net accounting, history function dialogue capability, multi
currency capability, international solutions) Time management: (Shift planning, work schedules, time recording, absence
determination) Personnel development: Career and succession planning, profile comparisons,
qualifications assessments, additional training determination. Training and event
management.)
A.PERSONNEL MANAGEMENT
Personnel management includes numerous software components, which allow you to
deal with human resources tasks more quickly, accurately and efficiently. You can use
these components not only as part of the company wide ERP solution but also as
standalone systems.
i. Personnel Administration
Information is no longer owned by specific departments, but is shared by multiple
entities across an organization. This eliminates duplicate entries reduces the chance
for error and improves data accuracy.
ii. Employee master data
Human resource module has a centralized database with integration to multiple
components for processing employee information.
The system provides tools to save time and help you tailor the system to fit your
needs.
The HR module contains features for storing any desired information about your
employees.
Most systems have the facility to scan the original documents for optical Storage.
The HR Information system displays graphical information such as organization charts
or employee data.
The system can produce charts and reports-both standard and customer defined.
iii. Recruitment management
This function helps in hiring the right people with the right skills.
Reducing the cost of recruiting and hiring new employees is a challenge for the HR
professional, who is responsible for placing people in the right job, at the right time,
and with the right skills and education.
These requirements are fulfilled only through effective automation of the entire
recruitment process.
The recruitment component is designed to help meet every facet of this challenge like
managing open positions/requisitions, applicant screening, selection and hiring,
correspondence, reporting and cost analysis.
iv.Travel Management
This module helps you in processing the travel expenses effortlessly, in several
currencies and formants.
HR Travel management allows you to process a business trip from start to finish-from
the initial travel request right through to posting in financial accounting and controlling.
This includes any subsequent corrections and all retroactive accounting requirements.
Travel management automatically calculates the tax.
It automatically processes credit card transactions for a particular trip.
You reimburse costs incurred during a trip through a payroll accounting, accounts
payable accounting or by data medium exchange.
In addition, Travel management provides multiple report formats.
You can enter receipts in any currency and then print reports in your native currency.
B.ORGANIZATIONAL MANAGEMENT
This module will assist you in maintaining an accurate picture of your organizations
structure, no matter how fast it changes. In many cases, graphical environments make
it easy to review any moves, additions, or changes in employee positions.
C. PAYROLL ACCOUNTING
The payroll accounting system can fulfill the payroll requirements and provide you with
the flexibility to respond to your changing needs.
Payroll accounting should address payroll functions from a global point of view.
You should be able to centralize your payroll processing, or decentralize the data
based on country or legal entities.
Most payroll accounting systems give you the options and capabilities to establish
business rules without modifying the existing payroll.
Many systems have the features to remind you when transactions are due for
processing.
With payroll accounting, you have the ability to tailor the system to your organization
requirement.
With country specific versions of payroll accounting, you can fulfill language, currency
and regulatory requirements.
D. TIME MANAGEMENT
It is a flexible tool designed to handle complicated evaluation rules to fulfill regulatory
requirements and determine overtime and other time related data.
The time evaluation component stores your organizations business rules and
automatically validates hours worked and wage types.
Shift Planning
Shift planning module helps you to plan your workforce requirements quickly and
accurately.
You can plan your shifts according to your requirements taking into consideration all
criteria, including absences due to leave or sickness, and employee requests for time
off.
Shift planning keeps you informed at all times of any staff excess or deficit.
Another advantage of shift planning is that it enables you to temporarily assign an
employee or employees to another organizational unit where they are needed, allowing
for a temporary change of cost centre.
E. PERSONNEL DEVELOPMENT
Effective personnel development planning ensures that the goals of the organization and
the goals of the employee are in harmony. The benefits of such planning include
improvements in employee performance, employee potential, staff quality, working
climate and employee morale.
i. Training and Event Management
A good HR system will have scheduled seminars, training courses and business events.
On completion of a training course, appraisal forms can be automatically issued.
Appraisals can be carried out for instructors, attendees, business events and training
courses.
II.PLANT MAINTAINENCE MODULE
The achievement of world class performance demands delivery of quality products
expeditiously and economically.
Organizations simply cannot achieve excellence with unreliable equipment.
Machine breakdown and idle time for repair was once an accepted practice. Times have
changed.
Today when a machine breaks down, it can shut down the production line and the
customer's entire plant.
The Preventive Maintenance module provides an integrated solution for supporting the
operational needs of an enterprise wide system.
The Plant maintenance module includes an entire family of product covering all aspects
of plant/ equipment maintenance and becomes, integral to the achievement of process
improvement.
The major subsystems of a maintenance module are :
Preventive Maintenance Control.
Equipment Tracking.
Component Tracking.
Plant Maintenance Calibration Tracking.
Plant Maintenance Warranty Claims Tracking.
C.QUALITY MANAGEMENT MODULE
The quality management module supports the essential elements of a system.
It penetrates all processes within an organization.
The task priorities, according to the quality loop, shift from production (implementation
phase) to production planning
and product development (planning phase), to procurement and sales and distribution, as
well as through the entire usage phase.
It handles the traditional tasks of quality planning, quality inspection and quality
control.
The quality management module’s internal functions do not directly interact with the
data or processes of other modules.
QUALITY MANAGEMENT MODULE – FUNCTIONS:
The quality management module fulfills the following functions:
QUALITY PLANNING: Management of basic data for quality planning and inspection
planning, material specifications, etc. QUALITY INSPECTION: Trigger inspections, inspection processing with inspection
plan selection and sample calculation etc. QUALITY CONTROL. Dynamic sample determination on the basis of the quality level
history, quality management information system for inspections and inspection results
and quality notifications, etc.
D.MATERIAL MANAGEMENT MODULE:
The material management module optimizes all purchasing processes with workflow-
driven processing functions, enables
automated supplier evaluation, lowers procurement and warehousing costs with accurate
inventory and warehouse management and integrates invoice verification.
The main module of material management are as follows:
i. Pre- Purchasing Activity.
ii. Purchasing.
iii. Vendor Evaluation.
iv. Inventory management.
v. Invoice verification and material inspection.
E.MANUFACTURING MODULE:
A good manufacturing system should provide for multi mode manufacturing applications
that encompass full integration of resource management.
These manufacturing applications should allow an easier exchange of information
throughout the entire global enterprise, or at a single site within a company.
The manufacturing module should enable an enterprise to marry technology with
business processes to create an integrated solution.
It must provide the information base upon which the entire operation should be run.
It should contain the necessary business rules to manage the entire supply chain
process whether within a facility, btwn facilities or across the entire supply chain.
Major subsystem of the manufacturing module –
Materials and capacity planning
Shop floor control
Quality management
JIT/repetitive manufacturing
Cost management
Engineering change control
Engineering data management
Configuration management
Tooling
Serialization/lot control
6. ADVANTAGE OF ERP.
The advantages of ERP
Installing an ERP system has many advantages -both direct and indirect.
The direct advantages include improved efficiency, information integration for better decision
making, faster response time to customer queries, etc. The indirect benefits include better
corporate image, improved customer goodwill, customer satisfaction, and so on.
The following are some of the direct benefits of an ERP system:
1. Business Integration
2. Flexibility
3. Better Analysis and Planning Capabilities
4. Use of Latest Technology.
1. Business Integration: The first and most important advantage lies in the promotion of
integration. The reason why ERP packages are considered to the integrated, is the automatic
data updating (automatic data exchange among applications) that is possible among the related
business components.
Since conventional company information systems were aimed at the optimization of independent
business functions in business units, almost all were weak in terms of the communication and
integration of information that transcended the different business functions.
In the case of large companies in particular, the timing of system construction and directives
differs for each product and department/ function and sometimes, they are disconnected. For
this reason, it has become an obstacle in the shift to new product and business classification.
In the case of ERP packages, the data of related business functions is also automatically
updated at the time a transaction occurs. For this reason, one is able to grasp business
details in real time, and carry out various types of management decisions in a timely manner,
based on that information.
2. Flexibility: The second advantage of the ERP packages is their flexibility. Different
languages, currencies, accounting standards and so on can be covered in one system, and
functions that comprehensively manage multiple locations of a company can be packaged and
implemented automatically. To cope with company globalization and system unification, this
flexibility is essential and one can say that it has major advantages, not simply for
development and maintenance, but also in terms of management.
3. Better Analysis and planning Capabilities: Yet another advantage is the boost to the
planning functions. By enabling the comprehensive and unified management of related business
and its data, it becomes possible to fully utilize many types of decision support systems and
simulation functions. Furthermore, since it becomes possible to carry out, flexible and in real
time, the filing and analysis of data from a variety of dimensions, one is able to give the
decision-makers the information they want; thus enabling them to make better and informed
decisions.
4. Use of Latest Technology: the fourth advantage is the utilization of the latest
development in information Technology (IT). The ERP vendors were quick to realize that in
order to grow and to sustain that growth; they had to embrace the latest developments in the
field of information technology. Therefore, they quickly adapted their systems to take
advantage of the latest technologies like open systems, client/ server technology,
Internet/Intranet, CALS (Computer- Aided Acquisition and Logistics Support), electronic-
commerce, etc.
It is this quick adaptation to the latest changes in the Information Technology that makes
the flexible adaptation to changes in future business environments possible. It is this
flexibility that makes the incorporation of the latest technology possible during system
customization, maintenance and expansion phases.
Module II…!!!
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1. BUSINESS PROCESS RE ENGINEERING
What is Business Process Reengineering?
• An organizational change method used to redesign an organization to drive improved
efficiency, effectiveness, and economy.
• Reengineering is the fundamental rethinking and redesign of business processes to
achieve dramatic improvements in critical, contemporary measures of performance,
such as cost, quality, service and speed.
BPR is not?
• Automation
• Downsizing
• Outsourcing
Business process re-engineering (BPR) began as a private sector technique to help
organizations fundamentally rethink how they do their work in order to dramatically improve
customer service, cut operational costs, and become world-class competitors. A key stimulus
for re-engineering has been the continuing development and deployment of sophisticated
information systems and networks. Leading organizations are becoming bolder in using this
technology to support innovative business processes, rather than refining current ways of doing
work
Business Process Re-engineering (BPR) is basically the fundamental re-thinking and radical
re-design, made to an organization's existing resources. It is more than just business
improvising.
Types of Business Process
Business processes are sequences and combinations of business activities. They break
into:
External Process: (Operational)
Customer facing processes that deliver products and services of Value to
the Customer examples:
Get Order
Develop Product
Fulfill Order
Support Product
Management Process:
Processes controlling and coordinating the organization's activities to
ensure that business objectives are delivered.
o Examples:
Make Strategy
Set Direction
Manage
Support Processes:
Processes provide infrastructural and other assistance to business
processes.
o Examples:
IT
Financial Systems
HR Systems
Basic elements of business process:
Motivation to perform
Data gathering, processing and storing
Information processing
Checking, validating and control
Decision making
Communication
Five Areas of Improvement by BPR
a. Strategy and Business Plans
b. Organization Structure
c. Business Process
d. Business Information Technology
e. Organization Culture
BPR Targets
Customer Friendly:
One of the main goals of introducing BPR is to get a Competitive Edge and that can only
be gained by providing the customers more than what the others in the market are asking
for.
Effectiveness:
How effective is the product or service that the business or manufacturing company
providing the customer?
Efficiency:
How efficient is the company that is manufacturing the product before introducing it to
the market to maximize costs? This is one of the key categories that is believed to be
more important than any others.
The Principles of Business Reengineering
Process point of View
Externally, focus on end customers and the generation of greater value for
customers.
Give customers and users a single and accessible point of contact through which they
can use whatever resources and people are relevant to their needs and interests.
Internally, focus on activities which deliver value to customers.
Encourage learning and development by building creative working environments.
Concentrate on flows and processes (including communication) through the
organization.
Remove non-value added activities
Undertake parallel activities
Speed up response and development times
Concentrate on outputs rather than inputs
Give priority to the delivery of value rather than the maintenance of management
control.
Keep the number of core processes to a minimum (approx. 12).
They all should be directed to external customers.
Ensure that continuous improvement is built into implemented solutions.
Human & Organizational Point View
Network related people and activities. Virtual corporations are becoming
commonplace in some business sectors.
Implement work teams and case managers extensively throughout the organization.
Move discretion and authority closer to the customer,
Re-allocate responsibilities between the organization, its suppliers and customers.
Encourage involvement and participation. This requires error-tolerant leadership.
Ensure people are equipped, motivated and empowered to do what is expected of
them.
Where ever possible, people should assume full responsibility for managing and
controlling themselves. This requires planning skills.
Work should be broadened without sacrificing depth of expertise in strategic areas.
Avoid over-sophistication. Don't replace creative thinking with software tools.
Build learning, renewal, and short feedback loops into business processes.
Organizational change tools may include:
– Activity based costing analysis
– Base lining and benchmarking studies
– Business case analysis
– Functionality assessment
– Industrial engineering techniques
– Organization analysis
– Productivity assessment
– Workforce analysis
Others, as needed (e.g., human capital tools)
BPR Flowchart
Difference & Similarity between BPR and TQM
Both TQM and BPR share a cross-functional orientation.
TQM focuses on incremental change and gradual improvement of work processes and
outputs over an open-ended period of time. BPR seeks radical redesign and drastic
improvement of processes a bounded time frame.
Process Improvement (TQM) versus Process Innovation (BPR) From Davenport
Process Improvement
TQM
Process Innovation BPR
Level of Change Incremental Radical
Starting Point Existing Process Clean Slate
Frequency of Change One-time/Continuous One-time
Time Required Short Long
Participation Bottom-Up Top-Down
Typical Scope Narrow, within functions Broad, cross-functional
Risk Moderate High
Primary Enabler Statistical Control Information Technology
Type of Change Cultural Cultural/Structural
Problems
The biggest problem that businesses usually face with BPR is overzealous expectations. BPR is
a business tool with a high price and gradual returns. BPR is quoted as having a 30% success
rate due to the time and cost involved.
BPR has been used by corporations as an excuse for job cuts which has tarnished the name
with employees. Specifically, in 1995, Pacific Bell called for 10,000 job cuts, followed by
Apple Computer Incorporated. Both used the word reengineering to explain the job cuts.
In addition, Michael Hammer and James Champy have admitted that in their book they did not
take into account the human constituent of the business process. In late 1996, Dr. Hammer
made a confession on the Wall Street Journal where the article read: "Dr. Hammer points out
a flaw: He and the other leaders of the $4.7 billion re-engineering industry forgot about
people. ‘I wasn't smart enough about that,' he says. ‘I was reflecting my engineering
background and was insufficient appreciative of the human dimension. I've learned that's
critical. Sometimes BPR implementation was based on generic best practices by a business, not
specific to a particular company. One example of using a generic idea to a particular company
would be the implementation of a $28,000.00 voicemail system at Winguth, Dohahue and Co.,
which was later scrapped because of the computer generated voice which sounded a little too
cold and clients were tired of going through all the menu prompts to reach the desired person.
BPR is also time sensitive. In the case of Metropolitan Life, some claim that their bankruptcy
was caused by their failure to switch from filing cabinets of customer files and records to a
database system. With every new process implementation there is a security issue, like in the
case of Equifax, where people's identities were stolen. eBay was down for 15-hours because
the company decided to test a new system, which was a part of the eBay reengineering
process, that they had hoped would help the company be more efficient and also provide
quality service to the customers.
The future
Six Sigma and Total Quality Management (TQM) are terms often confused with BPR, and are
not its replacements. All are change initiatives, with the main difference being BPR is focused
on radical, "big bang" change, and Six Sigma and TQM both focused on continuous,
incremental improvement.
In order to reanalyze BPR, it is being replaced by Business Process Management (BPM). BPM is
presently taking a similar road toward many failures by focusing too heavily on automation and
failing to consider people in processes.
Process of BPR Exercise:
o Recast people organization into process organization
o Segregate process by customer type-internal and external
o Identify process by:
o Impact on customer
o High decision incidence
o High information exchange
o High incidence of checks, control and validations
o High knowledge base
o Determine the value to the customer in terms of:
o Price/Cost
o Quality
o Service
o Delivery
o Identify the enablers of redesigning
o Set a benchmark for achievement
o Rank the process by:
o Feasibility
o Cost
o Impact on value to the customer
o Appoint the team for each process
o Monitor the process of re-engineering
Reengineering Recommendations
BPR must be accompanied by strategic planning, which must address leveraging IT as a
competitive tool.
Place the customer at the center of the reengineering effort -- concentrate on
reengineering fragmented processes that lead to delays or other negative impacts on
customer service.
BPR must be "owned" throughout the organization, not driven by a group of outside
consultants.
Case teams must be comprised of both managers as well as those will actually do the
work.
The IT group should be an integral part of the reengineering team from the start.
BPR must be sponsored by top executives, who are not about to leave or retire.
BPR projects must have a timetable, ideally between three to six months, so that the
organization is not in a state of "limbo".
BPR must not ignore corporate culture and must emphasize constant communication and
feedback.
Common Problems with BPR
Process under review too big or too small
Reliance on existing process too strong
The Costs of the Change Seem Too Large
BPR Isolated Activity not Aligned to the Business Objectives
Allocation of Resources
Poor Timing and Planning
Keeping the Team and Organization on Target
2. DATA WARE HOUSING AND DATA MINING
What is Data Warehousing?
A single, complete and consistent store of data obtained from a variety of different
sources made available to end users in a they can understand and use in a business
context.
A process of transforming data into information and making it available to users in a
timely enough manner to make a difference
Evolution
60’s: Batch reports
hard to find and analyze information
inflexible and expensive, reprogram every new request
70’s: Terminal-based DSS and EIS (executive information systems)
still inflexible, not integrated with desktop tools
80’s: Desktop data access and analysis tools
query tools, spreadsheets, GUIs
easier to use, but only access operational databases
90’s: Data warehousing with integrated OLAP engines and tools
Data Warehouse: a centralized data repository which can be queried for business
benefit.
Data Warehousing makes it possible to
– extract archived operational data
– overcome inconsistencies between different legacy data formats
– integrate data throughout an enterprise, regardless of location, format, or
communication requirements
– incorporate additional or expert information
Very Large Data Bases
o Terabytes -- 10^12 bytes Wal-Mart -- 24 Terabytes
o Pet bytes -- 10^15 bytes Geographic Information Systems
o Exabytes -- 10^18 bytes National Medical Records
o Zettabytes -- 10^21 bytes Weather images
o Zottabytes -- 10^24 bytes Intelligence Agency Videos
Data Warehousing -- It is a process
Technique for assembling and managing data from various sources for the purpose of
answering business questions. Thus making decisions that were not previous possible
A decision support database maintained separately from the organization’s operational
database
A data warehouse is a
subject-oriented
integrated
time-varying
non-volatile
Collection of data that is used primarily in organizational decision making.
Data Warehouse Architecture
Data Warehouse for Decision Support & OLAP
Putting Information technology to help the knowledge worker make faster and better
decisions
Which of my customers are most likely to go to the competition?
What product promotions have the biggest impact on revenue?
How did the share price of software companies correlate with profits over last
10 years?
Decision Support
Used to manage and control business
Data is historical or point-in-time
Optimized for inquiry rather than update
Use of the system is loosely defined and can be ad-hoc
Used by managers and end-users to understand the business and make judgements
Application Areas
Why Separate Data Warehouse?
High performance for both systems
DBMS— tuned for OLTP
access methods, indexing, concurrency control, recovery
Warehouse—tuned for OLAP
Complex OLAP queries, multidimensional view, consolidation.
Different functions and different data
Missing data: Decision support requires historical data which operational DBs do
not typically maintain
Data consolidation: DS requires consolidation (aggregation, summarization) of
data from heterogeneous sources
Data quality: different sources typically use inconsistent data representations,
codes and formats which have to be reconciled
12 Rules of a Data Warehouse
Data Warehouse and Operational Environments are Separated
Data is integrated
Contains historical data over a long period of time
Data is a snapshot data captured at a given point in time
Data is subject-oriented
Mainly read-only with periodic batch updates
Development Life Cycle has a data driven approach versus the traditional process-
driven approach
Data contains several levels of detail
Environment is characterized by Read-only transactions to very large data sets
System that traces data sources, transformations, and storage
Metadata is a critical component
Source, transformation, integration, storage, relationships, history, etc
Contains a chargeback mechanism for resource usage that enforces optimal use of data
by end users
Data Warehouse Design Process
Top-down, bottom-up approaches or a combination of both
Top-down: Starts with overall design and planning (mature)
Bottom-up: Starts with experiments and prototypes (rapid)
From software engineering point of view
Waterfall: structured and systematic analysis at each step before proceeding
to the next
Spiral: rapid generation of increasingly functional systems, short turn around
time, quick turn around
Typical data warehouse design process
Choose a business process to model, e.g., orders, invoices, etc.
Choose the grain (atomic level of data) of the business process
Choose the dimensions that will apply to each fact table record
Choose the measure that will populate each fact table record
Three Data Warehouse Models
Enterprise warehouse
collects all of the information about subjects spanning the entire organization
Data Mart
a subset of corporate-wide data that is of value to a specific groups of users.
Its scope is confined to specific, selected groups, such as marketing data mart
Independent vs. dependent (directly from warehouse) data mart
Virtual warehouse
A set of views over operational databases
Only some of the possible summary views may be materialized
Data Mining
Generally, data mining (sometimes called data or knowledge discovery) is the process of
analyzing data from different perspectives and summarizing it into useful information -
information that can be used to increase revenue, cuts costs, or both. Data mining
software is one of a number of analytical tools for analyzing data. It allows users to
analyze data from many different dimensions or angles, categorize it, and summarize
the relationships identified. Technically, data mining is the process of finding
correlations or patterns among dozens of fields in large relational databases.
Data, Information, and Knowledge
Data
Data are any facts, numbers, or text that can be processed by a computer. Today,
organizations are accumulating vast and growing amounts of data in different formats and
different databases. This includes:
operational or transactional data such as, sales, cost, inventory, payroll, and
accounting
nonoperational data, such as industry sales, forecast data, and macro economic data
meta data - data about the data itself, such as logical database design or data
dictionary definitions
Information
The patterns, associations, or relationships among all this data can provide information. For
example, analysis of retail point of sale transaction data can yield information on which
products are selling and when.
Knowledge
Information can be converted into knowledge about historical patterns and future trends. For example, summary information on retail supermarket sales can be analyzed in light of
promotional efforts to provide knowledge of consumer buying behavior. Thus, a manufacturer
or retailer could determine which items are most susceptible to promotional efforts.
Four Phases of Data Mining
Data Preparation
– Identify the main data sets to be used by the data mining operation (usually
the data warehouse)
Data Analysis and Classification
– Study the data to identify common data characteristics or patterns
Data groupings, classifications, clusters, sequences
Data dependencies, links, or relationships
Data patterns, trends, deviation
Knowledge Acquisition
– Uses the Results of the Data Analysis and Classification phase
– Data mining tool selects the appropriate modeling or knowledge-acquisition
algorithms
Neural Networks
Decision Trees
Rules Induction
Genetic algorithms
Memory-Based Reasoning
Prognosis
– Predict Future Behavior
– Forecast Business Outcomes
65% of customers who did not use a particular credit card in the last 6
months are 88% likely to cancel the account.
What can data mining do?
Data mining is primarily used today by companies with a strong consumer focus -
retail, financial, communication, and marketing organizations. It enables these
companies to determine relationships among "internal" factors such as price, product
positioning, or staff skills, and "external" factors such as economic indicators,
competition, and customer demographics. And, it enables them to determine the impact
on sales, customer satisfaction, and corporate profits. Finally, it enables them to "drill
down" into summary information to view detail transactional data.
With data mining, a retailer could use point-of-sale records of customer purchases to
send targeted promotions based on an individual's purchase history. By mining
demographic data from comment or warranty cards, the retailer could develop products
and promotions to appeal to specific customer segments.
For example, Blockbuster Entertainment mines its video rental history database to
recommend rentals to individual customers. American Express can suggest products to
its cardholders based on analysis of their monthly expenditures.
WalMart is pioneering massive data mining to transform its supplier relationships.
WalMart captures point-of-sale transactions from over 2,900 stores in 6 countries and
continuously transmits this data to its massive 7.5 terabyte Teradata data warehouse.
WalMart allows more than 3,500 suppliers, to access data on their products and
perform data analyses. These suppliers use this data to identify customer buying
patterns at the store display level. They use this information to manage local store
inventory and identify new merchandising opportunities. In 1995, WalMart computers
processed over 1 million complex data queries.
The National Basketball Association (NBA) is exploring a data mining application that
can be used in conjunction with image recordings of basketball games. The Advanced
Scout software analyzes the movements of players to help coaches orchestrate plays
and strategies. For example, an analysis of the play-by-play sheet of the game played
between the New York Knicks and the Cleveland Cavaliers on January 6, 1995 reveals
that when Mark Price played the Guard position, John Williams attempted four jump
shots and made each one! Advanced Scout not only finds this pattern, but explains that
it is interesting because it differs considerably from the average shooting percentage
of 49.30% for the Cavaliers during that game.
By using the NBA universal clock, a coach can automatically bring up the video clips
showing each of the jump shots attempted by Williams with Price on the floor, without
needing to comb through hours of video footage. Those clips show a very successful
pick-and-roll play in which Price draws the Knick's defense and then finds Williams for
an open jump shot.
How does data mining work?
While large-scale information technology has been evolving separate transaction and analytical
systems, data mining provides the link between the two. Data mining software analyzes
relationships and patterns in stored transaction data based on open-ended user queries.
Several types of analytical software are available: statistical, machine learning, and neural
networks. Generally, any of four types of relationships are sought:
Classes: Stored data is used to locate data in predetermined groups. For example, a
restaurant chain could mine customer purchase data to determine when customers visit
and what they typically order. This information could be used to increase traffic by
having daily specials.
Clusters: Data items are grouped according to logical relationships or consumer
preferences. For example, data can be mined to identify market segments or consumer
affinities.
Associations: Data can be mined to identify associations. The beer-diaper example is
an example of associative mining.
Sequential patterns: Data is mined to anticipate behavior patterns and trends. For
example, an outdoor equipment retailer could predict the likelihood of a backpack being
purchased based on a consumer's purchase of sleeping bags and hiking shoes.
Data mining consists of five major elements:
Extract, transform, and load transaction data onto the data warehouse system.
Store and manage the data in a multidimensional database system.
Provide data access to business analysts and information technology professionals.
Analyze the data by application software.
Present the data in a useful format, such as a graph or table.
Different levels of analysis are available:
Artificial neural networks: Non-linear predictive models that learn through training
and resemble biological neural networks in structure.
Genetic algorithms: Optimization techniques that use processes such as genetic
combination, mutation, and natural selection in a design based on the concepts of
natural evolution.
Decision trees: Tree-shaped structures that represent sets of decisions. These
decisions generate rules for the classification of a dataset. Specific decision tree
methods include Classification and Regression Trees (CART) and Chi Square Automatic
Interaction Detection (CHAID) . CART and CHAID are decision tree techniques used
for classification of a dataset. They provide a set of rules that you can apply to a new
(unclassified) dataset to predict which records will have a given outcome. CART
segments a dataset by creating 2-way splits while CHAID segments using chi square
tests to create multi-way splits. CART typically requires less data preparation than
CHAID.
Nearest neighbor method: A technique that classifies each record in a dataset based
on a combination of the classes of the k record(s) most similar to it in a historical
dataset (where k 1). Sometimes called the k-nearest neighbor technique.
Rule induction: The extraction of useful if-then rules from data based on statistical
significance.
Data visualization: The visual interpretation of complex relationships in
multidimensional data. Graphics tools are used to illustrate data relationships.
Data-mining techniques
The following list describes many data-mining techniques in use today. Each of these
techniques exists in several variations and can be applied to one or more of the categories
above.
Regression modeling—this technique applies standard statistics to data to prove or
disprove a hypothesis. One example of this is linear regression, in which variables are
measured against a standard or target variable path over time. A second example is
logistic regression, where the probability of an event is predicted based on known
values in correlation with the occurrence of prior similar events.
Visualization—this technique builds multidimensional graphs to allow a data analyst to
decipher trends, patterns, or relationships.
Correlation—this technique identifies relationships between two or more variables in a
data group.
Variance analysis—this is a statistical technique to identify differences in mean
values between a target or known variable and nondependent variables or variable
groups.
Discriminate analysis—this is a classification technique used to identify or
“discriminate” the factors leading to membership within a grouping.
Forecasting—forecasting techniques predict variable outcomes based on the known
outcomes of past events.
Cluster analysis—this technique reduces data instances to cluster groupings and then
analyzes the attributes displayed by each group.
Decision trees—Decision trees separate data based on sets of rules that can be
described in “if-then-else” language.
Neural networks—neural networks are data models that are meant to simulate
cognitive functions. These techniques “learn” with each iteration through the data,
allowing for greater flexibility in the discovery of patterns and trends.
Major Issues in Data Warehousing and Mining
• Mining methodology and user interaction
– Mining different kinds of knowledge in databases
– Interactive mining of knowledge at multiple levels of abstraction
– Incorporation of background knowledge
– Data mining query languages and ad-hoc data mining
– Expression and visualization of data mining results
– Handling noise and incomplete data
– Pattern evaluation: the interestingness problem
• Performance and scalability
– Efficiency and scalability of data mining algorithms
– Parallel, distributed and incremental mining methods
• Issues relating to the diversity of data types
– Handling relational and complex types of data
– Mining information from heterogeneous databases and global information
systems (WWW)
• Issues related to applications and social impacts
– Application of discovered knowledge
• Domain-specific data mining tools
• Intelligent query answering
• Process control and decision making
– Integration of the discovered knowledge with existing knowledge: A knowledge
fusion problem
– Protection of data security, integrity, and privacy
3. ONLINE ANALYTIC PROCESSING (OLAP)
What Is OLAP?
Online Analytical Processing - coined by
EF Codd in 1994 paper contracted by
Arbor Software*
Generally synonymous with earlier terms such as Decisions Support, Business
Intelligence, Executive Information System
OLAP = Multidimensional Database
MOLAP: Multidimensional OLAP (Arbor Essbase, Oracle Express)
ROLAP: Relational OLAP (Informix MetaCube, Microstrategy DSS Agent)
The OLAP Market
Rapid growth in the enterprise market
1995: $700 Million
1997: $2.1 Billion
Significant consolidation activity among major DBMS vendors
10/94: Sybase acquires ExpressWay
7/95: Oracle acquires Express
11/95: Informix acquires Metacube
1/97: Arbor partners up with IBM
10/96: Microsoft acquires Panorama
Result: OLAP shifted from small vertical niche to mainstream DBMS category
Strengths of OLAP
It is a powerful visualization paradigm
It provides fast, interactive response times
It is good for analyzing time series
It can be useful to find some clusters and outliers
Many vendors offer OLAP tools
OLAP Is FASMI
Fast
Analysis
Shared
Multidimensional
Information
Online Analytical Processing Tools
DSS tools that use multidimensional data analysis techniques
– Support for a DSS data store
– Data extraction and integration filter
– Specialized presentation interface
Need for More Intensive Decision Support
4 Main Characteristics
– Multidimensional data analysis
– Advanced Database Support
– Easy-to-use end-user interfaces
– Support Client/Server architecture
Relational OLAP
Relational Online Analytical Processing
– OLAP functionality using relational database and familiar query tools to store
and analyze multidimensional data
Multidimensional data schema support
Data access language & query performance for multidimensional data
Support for Very Large Databases
Typical OLAP Operations
Roll up (drill-up): summarize data
by climbing up hierarchy or by dimension reduction
Drill down (roll down): reverse of roll-up
from higher level summary to lower level summary or detailed data, or
introducing new dimensions
Slice and dice
project and select
Pivot (rotate)
Reorient the cube, visualization, 3D to series of 2D planes.
Other operations
drill across: involving (across) more than one fact table
drill through: through the bottom level of the cube to its back-end relational
tables (using SQL)
OLAP Server Architectures
Relational OLAP (ROLAP)
Use relational or extended-relational DBMS to store and manage warehouse
data and OLAP middle ware to support missing pieces
Include optimization of DBMS backend, implementation of aggregation navigation
logic, and additional tools and services
greater scalability
Multidimensional OLAP (MOLAP)
Array-based multidimensional storage engine (sparse matrix techniques)
fast indexing to pre-computed summarized data
Hybrid OLAP (HOLAP)
User flexibility, e.g., low level: relational, high-level: array
Specialized SQL servers
specialized support for SQL queries over star/snowflake schemas
4. PRODUCT LIFE CYCLE MANAGEMENT(PLM)
INTRODUCTION
All products and services have certain life cycles. The life cycle refers to the period
from the product’s first launch into the market until its final withdrawal and it is split
up in phases. During this period significant changes are made in the way that the
product is behaving into the market i.e. its reflection in respect of sales to the
company that introduced it into the market. Since an increase in profits is the major
goal of a company that introduces a product into a market, the product’s life cycle
management is very important. Some companies use strategic planning and others follow
the basic rules of the different life cycle phase that are analyzed later.
The understanding of a product’s life cycle, can help a company to understand and
realize when it is time to introduce and withdraw a product from a market, its position
in the market compared to competitors, and the product’s success or failure.
PART 1: PRODUCT LIFE CYCLE MODEL DESCRIPTION
The product’s life cycle - period usually consists of five major steps or phases:
Product development, Product introduction, Product growth, Product maturity and
finally Product decline. These phases exist and are applicable to all products or
services from a certain make of automobile to a multimillion-dollar lithography tool to a
one-cent capacitor. These phases can be split up into smaller ones depending on the
product and must be considered when a new product is to be introduced into a market
since they dictate the product’s sales performance.
1. PRODUCT DEVELOPMENT PHASE
Product development phase begins when a company finds and develops a new product
idea. This involves translating various pieces of information and incorporating them into
a new product. A product is usually undergoing several changes involving a lot of money
and time during development, before it is exposed to target customers via test
markets. Those products that survive the test market are then introduced into a real
marketplace and the introduction phase of the product begins. During the product
development phase, sales are zero and revenues are negative. It is the time of
spending with absolute no return.
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements
to getting it launch in such a way so that it will have maximum impact at the moment
of sale. A good example of such a launch is the launch of “Windows XP” by Microsoft
Corporation.
This period can be described as a money sinkhole compared to the maturity phase of a
product. Large expenditure on promotion and advertising is common, and quick but
costly service requirements are introduced. A company must be prepared to spent a lot
of money and get only a small proportion of that back. In this phase distribution
arrangements are introduced. Having the product in every counter is very important
and is regarded as an impossible challenge. Some companies avoid this stress by hiring
external contractors or outsourcing the entire distribution arrangement. This has the
benefit of testing an important marketing tool such as outsourcing.
Pricing is something else for a company to consider during this phase. Product pricing
usually follows one or two well structured strategies. Early customers will pay a lot for
something new and this will help a bit to minimize that sinkhole that was mentioned
earlier. Later the pricing policy should be more aggressive so that the product can
become competitive. Another strategy is that of a pre-set price believed to be the
right one to maximize sales. This however demands a very good knowledge of the
market and of what a customer is willing to pay for a newly introduced product.
A successful product introduction phase may also result from actions taken by the
company prior to the introduction of the product to the market. These actions are
included in the formulation of the marketing strategy. This is accomplished during
product development by the use of market research. Customer requirements on design,
pricing, servicing and packaging are invaluable to the formation of a product design. A
customer can tell a company what features of the product are appealing and what are
the characteristics that should not appear on the product. He will describe the ways
of how the product will become handy and useful. So in this way a company will know
before its product is introduced to a market what to expect from the customers and
competitors. A marketing mix may also help in terms of defining the targeted audience
during promotion and advertising of the product in the introduction phase.
3. GROWTH PHASE
The growth phase offers the satisfaction of seeing the product take-off in the
marketplace. This is the appropriate timing to focus on increasing the market share. If
the product has been introduced first into the market, (introduction into a “virgin”1
market or into an existing market) then it is in a position to gain market share
relatively easily. A new growing market alerts the competition’s attention.
The company must show all the products offerings and try to differentiate them from
the competitor’s ones. A frequent modification process of the product is an effective
policy to discourage competitors from gaining market share by copying or offering
similar products. Other barriers are licenses and copyrights, product complexity and
low availability of product components.
Promotion and advertising continues, but not in the extent that was in the introductory
phase and it is oriented to the task of market leadership and not in raising product
awareness. A good practice is the use of external promotional contractors. This period
is the time to develop efficiencies and improve product availability and service. Cost
efficiency and time-to-market and pricing and discount policy are major factors in
gaining customer confidence. Good coverage in all marketplaces is worthwhile goal
throughout the growth phase.
Managing the growth stage is essential. Companies sometimes are consuming much more
effort into the production process, overestimating their market position. Accurate
estimations in forecasting customer needs will provide essential input into production
planning process. It is pointless to increase customer expectations and product demand
without having arranged for relative production capacity. A company must not make the
mistake of over committing. This will result into losing customers not finding the
product “on the self”.
4. MATURITY PHASE
When the market becomes saturated with variations of the basic product, and all
competitors are represented in terms of an alternative product, the maturity phase
arrives. In this phase market share growth is at the expense of someone else’s
business, rather than the growth of the market itself. This period is the period of the
highest returns from the product. A company that has achieved its market share goal
enjoys the most profitable period, while a company that falls behind its market share
goal, must reconsider its marketing positioning into the marketplace.
During this period new brands are introduced even when they compete with the
company’s existing product and model changes are more frequent (product, brand, and
model). This is the time to extend the product’s life.
Pricing and discount policies are often changed in relation to the competition policies
i.e. pricing moves up and down accordingly with the competitor’s one and sales and
coupons are introduced in the case of consumer products. Promotion and advertising
relocates from the scope of getting new customers, to the scope of product
differentiation in terms of quality and reliability.
The battle of distribution continues using multi distribution channels2. A successful
product maturity phase is extended beyond anyone’s timely expectations. A good
example of this is “Tide” washing powder, which has grown old, and it is still growing.
5. DECLINE PHASE
The decision for withdrawing a product seems to be a complex task and there a lot of
issues to be resolved before with decide to move it out of the market. Dilemmas such
as maintenance, spare part availability, service competitions reaction in filling the
market gap are some issues that increase the complexity of the decision process to
withdraw a product from the market. Often companies retain a high price policy for
the declining products that increase the profit margin and gradually discourage the
“few” loyal remaining customers from buying it. Such an example is telegraph
submission over facsimile or email. Dr. M. Avlonitis from the Economic University of
Athens has developed a methodology, rather complex one that takes under
consideration all the attributes and the subsequences of product withdrawal process.
Sometimes it is difficult for a company to conceptualize the decline signals of a
product. Usually a product decline is accompanied with a decline of market sales. Its
recognition is sometimes hard to be realized, since marketing departments are usually
too optimistic due to big product success coming from the maturity phase.
This is the time to start withdrawing variations of the product from the market that
are weak in their market position. This must be done carefully since it is not often
apparent which product variation brings in the revenues.
The prices must be kept competitive and promotion should be pulled back at a level
that will make the product presence visible and at the same time retain the “loyal”
customer. Distribution is narrowed. The basic channel is should be kept efficient but
alternative channels should be abandoned. For an example, a 0800 telephone line with
shipment by a reliable delivery company, paid by the customer is worth keeping.
PART 2: ANALYSIS OF PRODUCT LIFE CYCLE MODEL
There are some major product life cycle management techniques that can be used to
optimize a product’s revenues in respect to its position into a market and its life cycle.
These techniques are mainly marketing or management strategies that are used by
most companies worldwide and include the know-how of product upgrade, replacement
and termination. To comprehend these strategies one must first make a theoretical
analysis of the model of product life cycle.
In the mid 70’s the model of product life cycle described in “Part 1”, was under heavy
criticism by numerous authors. The reasons behind this criticism are described below:
o The shift changes in the demand of a product along a period of time makes the
distinction of the product life cycle phase very difficult, the duration of those
almost impossible to predict and the level of sales of the product somewhat in
the realm of the imagination.
o There are many products that do not follow the usual shape of the product life
cycle graph as shown in fig.
o The product life cycle does not entirely depend on time as shown in fig. 1. It
also depends on other parameters such as management policy, company strategic
decisions and market trends. These parameters are difficult to be pinpointed
and so are not included in the product life cycle as described in “Part 1”.
The model of product life cycle also depends on the particular product. There would be
different models and so different marketing approaches. There are basically three
different types of products: a product class (such as cars), a product form (such as a
station wagon, coupe, family car etc of a particular industry) and a product brand of
that particular industry (such as Ford Escort). The life cycle of the product class
reflects changes in market trend and lasts longer than the life cycle of the product
form or brand. In the other hand the life cycle of a product form or brand reflects
the competitiveness of a company (i.e. sales, profits) and therefore follows more
closely the product life cycle model.
PART 3: PRODUCT LIFE CYCLE TECHNIQUE EXAMPLE : PRODUCT
CANNIBALISM
Product cannibalization occurs when a company decides to replace an existing product
and introduce a new one in its place, regardless of its position in the market (i.e. the
product’s life cycle phase does not come into account). This is due to newly introduced
technologies and it is most common in high tech companies. As all things in life there is
negative and positive cannibalization.
In the normal case of cannibalization, an improved version of a product replaces an
existing product as the existing product reaches its sales peak in the market. The new
product is sold at a high price to sustain the sales, as the old product approaches the
end of its life cycle. Nevertheless there are times that companies have introduced a
new version of a product, when the existing product is only start to grow. In this way
the company sustains peak sales all the time and does not wait for the existing product
to enter its maturity phase. The trick in cannibalization is to know when and why to
implement it, since bad, late or early cannibalization can lead to bad results for
company sales.
1. UNFAVORABLE CANNIBALIZATION
Cannibalization should be approached cautiously when there are hints that it may have an
unfavorable economic effect to the company, such as lower sales and profits, higher technical
skills and great retooling. The causes of such economic problems are given bellow.
• The new product contributes less to profit than the old one: When the new product is sold
at a lower price, with a resulting lower profit than the old one, then it does not sufficiently
increase the company’s market share or market size.
• The economics of the new product might not be favorable: Technology changes can force a
product to be cannibalized by a completely new one. But in some cases the loss of profits due
to the cannibalization is too great. For example a company that produced ready business
forms in paper was forced to change into electronic forms for use in personal computers.
Although the resulting software was a success and yield great profits, the sales of the paper
forms declined so fast that the combined profit from both products, compared to the profits
if the company did not cannibalize the original product showed a great loss in profits.
The new product requires significant retooling: When a new product requires a different
manufacturing process, profit is lower due to the investment in that process and due to the
write-offs linked to retooling the old manufacturing process.
• The new product has greater risks: The new product may be profitable but it may have
greater risks than the old one. A company cannot cannibalize its market share using a failed
or failing product. This can happen in high-tech companies that do not understand enough of a
new technology so that to turn it into a successful and working product. As a result a
unreliable product emerges and replaces a reliable one, that can increase service costs and as
a result decrease expected profits.
2. OFFENSIVE CANNIBALIZATION STRATEGIES
Cannibalization favors the attacker and always hurts the market leader. For companies
that are trying to gain market share or establish themselves into a market,
cannibalization is the way to do it5. Also cannibalization is a good way to defend
market share or size. A usual practice is the market leader to wait and do not
cannibalize a product unless it has to. It is thought that a company should acquire and
develop a new technology that will produce a newer and better product than an existing
one and then wait. Then as competitor’s surface and attack market share,
cannibalization of a product is ripe. Then and only then quick introduction of a new
product into the market will deter competition, increase profits and keep market
share. But this strategy does not always work since delays will allow the competition to
grab a substantial piece of the market before the market leader can react.
3. DEFENSIVE CANNIBALIZATION STRATEGIES
Controlled cannibalization can be a good way to repel attackers as deforesting can repel fire.
A market leader has many defensive cannibalization strategies that are discussed bellow.
• Cannibalize before competitors do: Cannibalization of a company’s product(s) before a
competitor does, is a defensive strategy to keep the competitor of being successful. Timing is
the key in this strategy. Do it too soon and profits will drop, do it to late and market share
is gone.
• Introduction of cannibalization as a means of keeping technology edge over competition: A
good strategy is for a company that is the market leader, to cannibalize its products as
competitors start to catch up in terms of technology advancements. (For example “Intel
Corporation” cannibalized its 8088 processor in favor of the 80286 after 2 ½ years, the
80286 in favor of the 386 after 3 years, the 386 in favor of the 486 after 4 years, the 486
in favor with the Pentium after another 4 ½ and so on). So the market leader dictates the
pace and length of a product’s life cycle. (In the case on Intel the replacement of 486 to
Pentium took so long because competitors had not been able to catch up).
• Management of cannibalization rate through pricing: When cannibalization of a product is
decided, the rate at which this will happen depends on pricing. The price of the new product
should be at a level that encourages a particular mix of sales of the old and new product. If
the price of the new product is lower than the price of the old then cannibalization rate slows
down. If the opposite happens then the cannibalization rate is increased. Higher prices in new
products can reflect their superiority over the old ones.
• Minimization of cannibalization by introducing of the new product to certain market
segments: Some market segments are less vulnerable to cannibalization to others. This is
because there is more or less to lose or gain for each of them. By choosing the right segment
to perform the cannibalization of a product a company can gain benefits without loses and
acquire experience on product behavior.
PART 4: PRODUCT LIFE CYCLE IN RESPECT TO THE TECHNOLOGY
LIFE CYCLE
As a new technology matures so is the product or service that uses this technology. The
change that occurs during a technology life cycle has a unique reflection on the customers and
so on the product life cycle.
In the early days of a new technology, early adopters and technology enthusiasts drive a
market since they demand just technology. This drive and demand is translated as the
introduction phase of a new product by many companies. As technology grows old, customers
become more conservative and demand quick solutions and convenience. In this case a product
usually enters in the realm of its growth and as time passes its maturity.
Fig. 2: Change in customers as technology matures
The “chasm” shown in the graph above depicts the difference between the early and late
adopters. Each needs different marketing strategies and each is translated to a product’s
different phase of its life cycle. One should note that the late adopters hold the greatest
percentage of customers in a market. This is why most products begin their life cycle as
technology driven and change into customer driven as time passes by. A good example of this
is the computer market. In one hand customers ask for ease of use, convenience, short
documentation and good design. On the other hand customers rush out to purchase anything
new regardless of its complexity. This is why companies6 in the computer industry withdraw
their products long before they reach their maturity phase. This is the moment that a
product reaches its peak i.e. the time that both early and late adopters buy the product.
PART 5: USE OF PRODUCT MANAGEMENT FOR SUCCESSFUL
PRODUCT LIFE CYCLE
Product management is a middle level management function that can be used to manage a
products life cycle and enables a company to take all the decisions needed during each phase
of a product’s life cycle. The moment of introduction and of withdrawal of a product is
defined by the use of product management by a Product Manager.
A Product Manager exists for three basic reasons. For starters he manages the revenue,
profits, forecasting, marketing and developing activities related to a product during its life
cycle. Secondly, since to win a market requires deep understanding of the customer, he
identifies unfulfilled customer needs and so he makes the decision for the development of
certain products that match the customers and so the markets needs. Finally he provides
directions to internal organization of the company since he can be the eyes and ears of the
products path during its life cycle. To improve a product success during each of its phase of
its life cycle (development - introduction – growth – maturity – decline), a product manager
must uphold the following three fundamentals.
• Understand how product management works: When responsible for a given new product, a
product manager is required to know about the product, the market, the customers and the
competitors, so that he can give directions that will lead to a successful product. He must be
capable of managing the manufacturing line as well as the marketing of the product. When the
product manager has no specific authority over those that are involved in a new product, he
needs to gather the resources required for the organization to meet product goals. He needs
to know where to look and how to get the necessary expertise for the success of the product.
• Maintain a product / market balance: The product manager as the person that will make a
new product to work, needs to understand and have a strong grasp of the needs of the
customer / market and therefore make the right decisions on market introduction, product life
cycle and product cannibalization. To achieve the above he must balance the needs of the
customers with the company’s capabilities. Also he needs to balance product goals with
company objectives. The way a product’s success is measured depends on where the product is
in its life cycle. So the product manager must understand the strategic company direction and
translate that into product strategy and product life cycle position.
• Consider product management as a discipline: Managing a product must not be taken as a
part time job or function. It requires continuous monitoring and review. Having said that, it is
not clear why many companies do not consider product management as a discipline. The answer
lies in the fact that product management is not taught as engineering or accounting i.e. does
not have formalized training.
The Benefit of PLM
It is a common production system, with common computer technology for information
storage and retrieval. In theory any employee, in any department can look at data
created by another department or group. The information is archived and valid for
the life of the product
It is a concept that should induce ethical behavior in terms of up graded products and
hopefully will drive social responsibility in the areas of innovation, design,
manufacturing, quality, and disposal
The Scope of PLM
Module III…!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
ERP MARKETPLACE AND MARKETPLACE DYNAMICS
1. MARKET OVERVIEW
Enterprise Resource Planning or ERP is an industry term for
integrated, multi-module application software packages that are
designed to serve and support multiple business functions. An ERP
system can include software for manufacturing, order entry,
accounts receivable and payable, general ledger, purchasing,
warehousing, transportation and human resources. Evolving out of
the manufacturing industry, ERP implies the use of packaged
software rather than proprietary software written by or for one
customer. ERP modules may be able to interface with an
organization's own software with varying degrees of effort, and,
depending on the software, ERP modules may be alterable via the
vendor's proprietary tools as well as proprietary or standard
programming languages.
Some of the top-tier ERP vendors are SAP-AG, BAAN, PeopleSoft, Oracle
Application and J.D.Edwards. These companies are covering the major ERP market
revenue. SAP (System Applications & Products in data processing). SAP is the world’s leading
provider of business software, SAP delivers products and services that help accelerate
business innovation for their customers. Today, more than 82,000 customers in more than 120
countries run SAP applications – from distinct solutions addressing the needs of small
businesses and midsize companies to suite offerings for global organizations.
SAP defines business software as comprising enterprise resource planning
and related applications such as supply chain management, customer
relationship management, and supplier relationship management
• SAP AG was founded in 1972 by five German engineers with IBM in Mannheim,
Germany; and is one of the top most ERP vendors providing the client server business
application solutions.
• SAP serves as a standard in the industries like chemicals, customer products, oil &
high technology. The SAP group has offices in more than 50 countries worldwide &
employs a workforce of over 19300.
• SAP’s ERP package comes in 2 versions i.e. mainframe version (SAP R/2) & client
server version (SAP R/3).(R-Real)
• With SAP, customers can install the core system & one or more of the fundamental
components, or purchase the software as a complete package.
PRODUCTS & TECHNOLOGY
• SAP has developed extensive library of more than 800 predefined business processes.
• These processes may be selected from SAP library & can be included within installed
SAP application solution to suit the user exact requirements.
• SAP software has special features like, linking a company’s business processes &
applications, & supporting immediate responses to change throughout different
organizational levels & real time integration.
• Also, the new technologies are available regularly to cop-up with the changes of the
new business trends.
• The international standards have been considered while designing the software like
support of multiple currencies simultaneously, automatically handles the country specific
import/export requirements
• The modules of R/3 can be used individually as well as user can expand it in stages to
meet specific requirement's
BAAN: - Company profile
• Baan company was founded in Netherlands in 1978 by brothers Jan and Paul Baan..
• The BAAN Company is the leading global provider of enterprise business software.
• The BAAN company products reduce complexity and cost, improve core business
processes, are faster to implement and use, are more flexible in adapting to business
changes.
• The products offered by the company supports several business tools. The tools are
based on multi-tier architecture.
TECHNOLOGY AND PRODUCTS
1. The BAAN products are having open component architecture.
2. The special feature of BAAN product is the use of BAAN DEM (Dynamic Enterprise
Modeling).
3. Baan DEM provides a business view via a graphical process/model based views.
4. BAAN products has multi-tiered architecture for maximum and flexible configuration.
5. The application supports the new hardware, OS, networks and user interfaces w/o any
modification to the application code.
6. The Baan series based products include :
- BAAN Enterprise Resource Planning.
- BAAN Front Office.
- BAAN Corporate Office Solutions.
- BAAN Supply Chain Solutions.
7. The main advantages of Baan series-based family of products are the best in class
components version independent integration and evergreen delivery.
BAAN ERP MODULES
• BAAN ERP is a proven enterprise resource planning s/w application.
• It is fully integrated and provides all the functionality which is required across the
enterprise.
• BAAN ERP consists of a number of interdependent components that can be deployed to
meet business needs.
• The flexibility with BAAN ERP allows customers to maximize the benefits of both best
in class solution and a fully integrated high performance system.
• BAAN ERP includes the following components –
Manufacturing Module:
This includes bills of material, cost price calculation, shop floor control,
material requirement planning, etc.
Finance Module:
This includes accounts payable, accounts receivable, cash
management, fixed assets, etc
Project Module:
This includes project budget, project definition, project
estimation, project planning, etc
Distribution Module:
This includes sales management, purchase management and warehouse
management
BAAN ERP TOOLS
• BAAN ERP Tools can be described as a computing platform that provides independent,
flexible, open and distributed computing and development environment.
• The open architecture of the BAAN ERP Tools make it possible to –
– Quickly react to the changes that take place in the market, in-turn change the
s/w configuration.
– Develop the BAAN product in such a way that it is independent of third party
product such as hardware, OS and DB.
– Easily integrated with third party product.
– Gives customer specific solutions.
ORCALE CORPORATION:-Company profile
• Oracle Corporation was founded in the year 1977 and is the world’s largest s/w
company and the leading supplier for enterprise information management.
• This is the first s/w company to implement internet computing model for using the
enterprise s/w across the entire product line.
• It provides databases and relational servers, application development, decision support
tools and enterprise business applications.
TECHNOLOGY
• ORACLE software runs on the network computers, work stations & micro computers,
mini computers, etc.
• ORACLE 8i is the leading database for internet computing.
• ORACLE database ALLOWS the corporation to access on any data, on any service,
over any network, from any client device.
• ORACLE Warehouse Technology Initiative (WIT) is one of the fastest flowing &
comprehensive programs in the data warehousing industry which provides the customers
a complete data warehousing solution.
• ORACLE’s integrated Business Intelligence Solutions provides us with a solution to
deliver powerful processing capabilities to the user anywhere in the enterprise at
anytime. Oracle business intelligence family product includes:
– Oracle report
– Oracle enterprise reporting tools
– Oracle discoverer
– Ad-Hoc Queries and analysis tools
– Oracle online analytical processing engine, etc.
MODULES OF ORCALE APPLICATIONS:
Oracle application consists of 45 plus software modules which are divided
into following categories
– Oracle Financials
– Oracle Human Resource
– Oracle Projects
– Oracle Manufacturing
– Oracle Supply Chain
– Oracle Front Office
ORACLE FINANCIAL
– This application transforms a finance organization into a strategic force and
also helps to access the financial management functions.
– By working with these applications the companies can work globally, lower the
administrative cost & improve the cash management.
– It also provides strategic information to make timely & accurate decisions.
ORACLE PROJECTS
- These applications improve operational efficiency by providing an
integrated project management environment that supports the
full lifecycle of a project and increases the revenue growth and
profitability.
ORACLE SUPPLY CHAIN
– This application manages the supply chain process by providing a single
integrated environment.
– It helps in effective partner collaboration & supply chain optimization
capabilities.
– It helps in increasing market share while improving customer service &
minimizing the cost.
–
ORACLE FRONT OFFICE
– These applications provide a better understanding for customer relationships,
their values & profitability
– These applications increase top line revenues & maintain customer satisfaction &
retention
– It also helps to attract and retain profitable customers through deployment
channels including mobile & call centre.
ORACLE HUMAN RESOURCE
– This application helps in managing the human resources which directly improve
profitability and contribute to competitive advantage
– It also helps in the ability to hire motivate & retain the most capable working
force and also helps in providing comprehensive and up-to-date information.
ORACLE MANUFACTURING
― Oracle manufacturing application enables the companies to achieve market
leadership by becoming more CUSTOMERS responsive & efficient.
― This module also supports the companies to increase revenue, profitability &
customer loyalty by capturing the demand & planning the manufacturing process
in an efficient way
PEOPLESOFT: - Company profile
• PeopleSoft Inc. was established in 1987 to provide innovative software solutions that
meet the changing business demands of enterprises worldwide.
• It employs more than 7000 people worldwide.& the annual revenue for the year 1998
was $ 1.3 million.
• PeopleSoft’s mission is to provide innovative software solutions that meet the changing
business demands of organizations worldwide.
• PeopleSoft develops markets and supports enterprise-wide software solutions to handle
core business functions including human resources management, accounting and control,
project management, treasury management performance measurement and supply chain
management.
• PeopleSoft provides industry-specific enterprise solutions to customers in select
markets, including communications, finance services, healthcare, manufacturing, higher
• PeopleSoft products support clients running, Microsoft Windows and popular Web
browsers, as well as a range of mainframe, midrange and LAN relational database
server platforms.
• PeopleSoft solutions run on a variety of leading hardware and database platforms,
including Compaq, Hew let-Packard, IBM, Sun Microsystems, Informix, Microsoft SQL
Server, Sybase, DB2 and others.
• PeopleSoft delivers Web-enabled applications, workflow, online analytical processing
(OLAP) etc.
• The PeopleSoft application serves the whole business management solutions, commercial
solutions & industry solutions.
• The PeopleSoft’s business management solutions are in the areas given below:-
– Human Resources Management
– Accounting and Control
– Treasury Management
– Performance Measurement
– Project Management
– Sales and Logistics
– Materials Management
– Supply Chain Planning
– Service Revenue Management
– Procurement
JD EDWARDS: COMPANY PROFILE:
• On March 17, 1977 J.D. Edwards was formed, by Jack Thompson, Dan Gregery & Ed-
Mc Vaney.
• In early years J.D. Edwards designed software for small & medium sized computers.
• In 1980’s it focused on IBM system/38.
• As the company began to outgrow, its headquarter in Denver, opened branch offices in
Dallas & Newport Beach, California, Houston, San Francisco & Bakenfield. And then
internationally expanded its Europe headquarters in Brussels & Belgium.
• As it grew it became obvious that servicing a large number of customers was creating a
challenge
• By the mid of 1980’s, J.D Edwards was being recognizes as an Industry-leading
supplier of application software for the highly successful IBM AS/400 computer.
• Today J.D Edwards is a publicly traded company that has more than 4700 customers
with sites in over 100 countries & more than 4200 employees.
J.D Edwards emphasizes on the following three matters:
– Solution: JD Edwards offers a balance of technology & service options tailored
by the unique industry & its processes. This allows JD Edward to ensure timely
implementation & outgoing quality of the solution. – Relationships: With JD Edwards, you have a partner committed to ushering
you through changes in the business & technology.
– Value: JD Edwards provides with an appreciating software asset – one with the
potential to increase in value over the lift of your business.
TECHNOLOGY
• As the business grew company adapted new technology & instead for small computer
application; it started to design enterprise-wise software.
• JD Edwards is a leading provider of integrated software for distribution, human
resource, finance, and manufacturing & SCM.
• These software's are operated in multiple computing environments & also JAVA &
HTML enabled.
QAD: -Company Profile
• It was found in 1979.
• The company’s products include MFG/PRO, service/support management and decision
support.
• QAD offers a variety of supply chain and enterprise resource planning s/w products to
manufacturing industries.
• It optimizes the enterprise by increasing the speed of internet processes and
synchronizing the business operations.
– It is available in 26 languages and supports multiple currencies.
– It has an easy-to-understand graphical interface.
• The MFG\PRO is one of the software, product offered by QAD, which provides
multinational organization with integrated Global Supply Chain Management Solution.
• It helps the organization to achieve and maintain competitive advantage and
synchronizes the distributed operation which balances the supply and demand across
multiple sites.
SSA:-COMPANY PROFILE:
• System Software Associates, Inc. (SSA) was founded in 1981.
• It has branches in more than 91 countries & more than 2000 employees.
• SSA has BPCS client/server V6 technology is implemented in more than 1000 industrial
sector firms in over 4000 sites worldwide.
• SSA’s vision is to be the best global partner to the world’s industrial companies.
• To achieve competitive advantage for clients through ERP system, SSA’s follows its
Mission Statement 1981.
The statement has six key goals.
They are:
– Best client satisfaction: this means that the company wants their clients to
achieve the greatest possible business benefits from their relationship with
SSA.
– Single image worldwide: this means that the client gets the same high level of
support & expertise all around the world.
– Enterprise Solution Leadership: it means that the company is focused on
building & delivering solutions, which bring together the entire enterprise.
– Proven leading Technology: this means that every piece of technology applied by
SSA will already be proven for high transaction volume enterprise-wide
applications.
– Highly skilled & motivated professional: it means that SSA is committed on
having the best professionals & resources in the application software business.
– Strong financial results: this means that SSA can continue to invest in the
improvements of its software & professionals & will be a stable partner in the
long run.
1. MARKETPLACE DYNAMICS
Marketplace Dynamics
2. THE CHANGING ERP MARKET.
Changing Indian ERP scenario
SOME of the first Indian companies to have adopted ERP practices are HLL, ONGC,
ESSAR, Godrej Soaps, Cadburys, BASF, Telco, Maruti Udyog Ltd., Century Rayon,
Citibank, ACC, ANZ Grindlays, German Remedies, Blue Star, Mahindra & Mahindra,
Rallis India, Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford Motors, Kirloskar, Knoll
Pharmaceuticals, and Glaxo.
First tier companies (those with a turnover greater than Rs.10 billion) implement ERP
to increase internal efficiency and external competitiveness. Once ERP is established
at this level, these large companies begin to desire similarly increased efficiency from
their suppliers. Hence, second tier companies are pressured to implement ERP, and a
trickle-down effect ensues. Powered by the axiom that a chain is only as strong as its
weakest link, Indian industry quickly has recognized that in order to work at maximum
efficiency, ERP must be implemented at all levels.
Initially, the majority of ERP solutions have been marketed to companies with greater
than Rs. 2 billion, and generally, according to industry reports, the total cost of
deploying ERP has ranged between 1 and 2 percent of companies' gross sales. Lower
cost solutions are available for comparatively smaller sized companies.
Though the market seems to be very encouraging for ERP implementation, the time-
frame for deployment may be an issue. However, since many companies that have not
yet implemented ERP are leaders in their markets, it reasonably can be assumed that
they will go for it within next five years. In fact, the ERP market should grow at a
rate somewhere near the industrial growth rate.
Some industry categories, such as Automotive, Steel, Consumer Durables, Engineering,
and Textiles have shown a very high ERP penetration. This means that these categories
represent the greatest potential markets in next two years - other industries will
follow. Figure 1 illustrates the market across various industries.
Survey of Industry ERP Implementations
ERP implementations completed between 1995 and 1998 in India can give a sense of
specific hurdles that companies may encounter in ERP deployment. Several companies
were surveyed, and numerous ERP professionals were interviewed in order to assess the
state of ERP in India.
The results indicate that Indian companies are moving forward with ERP implementation
primarily in response to thrusts from parent collaborators, to revamp in order to meet
increased load, or to reduce lead times and inventory levels, and improve customer
satisfaction.
Resistance to change - in the form of fear of the unknown, reluctance to learn new
techniques, or IT department reluctance to change due to attachment to its product -
was a major hurdle faced during many ERP implementations. Additionally, the
duplication required in the initial stage, and the intense pressure exerted on manpower
proved to be problematic, as did the level of customization necessitated by disparities
between company requirements and solutions offered by ERP software. This problem is
diminishing due to advances in the software facility models.
Cost overruns also proved to be a pervasive problem with ERP implementations. Since
most consultants charge on a man-hour basis, project time overruns substantially
inflate incurred costs. To avoid this problem, top management must develop the
necessary commitment to ERP, and all employees should be prepared for the change
before the ERP implementation process is started. This model should help to eliminate
needless project time and cost ballooning.
ERP in the Service Sector
Transportation, medical care, hospitality, courier service, telecommunication, banking
and financial services, and entertainment represent the major components of India's
service sector, and on probing into the various needs of these groups, it becomes
apparent that the courier, transportation, and entertainment industries do not have
specific current needs for ERP. Banking and telecommunication each have very
specialized requirements that the manufacturing-inclined software solutions on the
market would not effectively address. The same holds true for the medical care and
hospitality industries. The service sector has the potential to become an important ERP
market within a few years. At this time ERP implementation in the services sector is
very limited - only a few hospitals and banks have done small-scale experiments. New
software and processes will need to be developed to meet the specific demands of the
service industries, so ERP players should begin now to prepare themselves for the
tremendous potential of this future market.
*ERP- FUNCTIONAL MODULES:
3. INTRODUCTION, FUNCTIONAL MODULES OF ERP SOFTWARE
Organizations are implementing Enterprise Resource planning system to
streamline their internal business process and for smooth flow of data
between the different functional departments like inventory, purchase,
production, accounts, etc. The different functional modules of the ERP
software look after the respective functional department.
Some of the functional modules in the ERP are as follows:
1. Production Planning Module: The Enterprise Resource Planning
system has evolved from Material Resource Planning which was used
for the manufacturing requirements of the companies. ERP is more
robust software for production planning as it optimizes the
utilization of the manufacturing capacity, material resources and
the parts using production data and sales forecasting.
2. Purchasing Module: This module aids in streamlining the
procurement of required raw materials. It is integrated with the
inventory control and production planning modules and often with the
supply chain management software. This module automates the
process of identifying potential suppliers, supplier evaluation. It is
used for automation and management of purchasing
.
3. Inventory Control Module: This module aids in managing the
company's resource inventory and the product inventory. It helps in
handling the replenishment of the product and maintenance of the
stock levels of the products. The inventory control module monitors
the inventory stock present at the different locations like at the
warehouse, office and stores. The module can manage the inventory
of raw materials used for product planning. It enables the company
to plan the future production and keep a stock of products which go
below critical level.
4. Sales Modules: This module automates the sales tasks,
customer orders, invoicing and shipping of products. It is integrated
with the company's ecommerce websites and many vendors provide
with online storefront as a part of this module. The sales
department is an important area for the organization.
5. Accounting and Finance Modules: Accounting and finance are
the core areas of an organization. This module interacts with the
other functional modules to collect the financial data for the
general ledger and other financial statements of the company.
6. Human Resource Module: This can be used as an independent
module. It is used for integrating the recruitment process, payroll,
training and the performance evaluation process. The module
handles the history of the employee, tracks the employees laid off
and aids in rehiring of the employees.
7. Manufacturing Module: This module includes product designing,
bills of material, cost management, workflow, etc.
8. Marketing Module: The ERP marketing module supports lead
generation and the promotional activities.
Each of these above functional modules of ERP software plays
an important role. The organizations can choose to implement some
of the modules or all according to their requirements. The
companies opt for the modules which are technically and
economically feasible to them. These modules streamline the flow of
the communication across the company by integrating the various
functional departments. The enterprise resource system is bound
with all these functional modules. These distinct yet seamlessly
integrated modules cover most of the functional needs of an
organization. The functional modules of ERP software help to
achieve efficiency of operations, cost savings and help to maximize
the profits.
OR
Functional Modules:
1. FI/CO (Finance & Controlling )
2. HR (Human Resource)
3. PP (Production Planning)
4. MM (Material Management )
5. SD (Sales & Distribution )
6. PM (Plant Maintenance)
7. PS (Project System)
8. QM (Quality Management)
9. BIW (Business Information Warehousing)
New Dimension:
1. CRM (Customer Relationship Management)
2. SCM (Supply Chain Management)
3. SEM (Strategic Enhanced Management)
4. APO (Advanced Planner Optimizer)
5. EP (Enterprise Portal)
6. SRM (Supplier Relationship Management)
7. XI (Exchange Infrastructure)
Techno-Functional Modules :-
1. ABAP + HR
2. ABAP + SD
3. BIW (Business Information Warehouse)
Dual Modules: -
1. SD + CRM
2. PP + MM
3. FICO +SD
4. HR + SD
5. HR + CRM
4. INTEGRATION OF ERP
What Is ERP Integration?
ERP stands for Enterprise Resource Planning. It is a complete business software
solution and a software product that can be implemented across the company
incorporating all aspects of the enterprise. During the last twenty years, ERP has been
implemented by a large number of Fortune 500 companies.
There are two components which form an important part of the concept of ERP system
integration. They are “compatibility” and “compliance”. An ERP solution should be
capable of integrating in the current information technology infrastructure of the
organization. If a solution requires massive upgrades, then it is not the right solution
intended.
An organization which is supposed to be deployed with ERP solutions should already
possess a base level information technology infrastructure. For example, the production
monitoring solutions, inventory keeping etc. are all the base level information
technology infrastructures. When the ERP solution is deployed in the organization, it
should have the capability to interface with the already existing solutions. If this
integration does not take place, then there is no point to engaging in the entire
process of ERP deployment. They should have the capacity to communicate with each
other and should function as one solution instead of two different ones. This ability of
the system to interface with the different solutions is known as compatibility.
If there is no proper compatibility, it is the end of the ERP implementation. A proper
compatible system is the secret for a successful ERP implementation. Only when the
system integrates with the current infrastructure, would it be able to understand what
is happening. When the ERP system integration takes place in the right manner, it is
very possible to monitor the status of every component of the work flow.
If there is no proper ERP integration, the data would have to be exchanged manually
between the ERP system and the current infrastructure in place. This would lead to
numerous problems due to data not being properly exchanged between the two
solutions. If there is mutilation or loss of data during the time of export, it would lead
to too many complications and as a result, the organization would undergo severe loss.
It is a major challenge for many companies to get their applications to work with each
other. Unless there is seamless integration of ERP with other systems, the benefits of
an ERP application is limited. In the present day, it is an undeniable fact that the
performances of many organizations have been enhanced due to the application of ERP
software packages.
When an ERP software package is developed, adequate care is taken to ensure that
maximum level of ERP integration takes place. To ensure that the ERP integration
takes place in the right manner, it is vital that proper testing is carried out before
deployment.
An Enterprise Resource Planning software product is capable of integrating multiple
business applications with each application representing a specific business area. It is a
product capable of great depth in a specific application or area while still being part of
the overall bigger picture. These applications update transactions and process them in
real time. Due to this, effortless integration and communication between areas of a
business is achieved. For example, a sales order can be created and the update order
value in a sales information structure can be viewed immediately without having the
necessity to wait till the end of the day or the end of month processing to take place.
The cornerstone of an ERP product is its ability to be configured to meet the specific
needs of any business. This can be achieved by customizing or adapting the system as
per the business requirements, and this involves the process of mapping the ERP to
business process. A business process, for example, would be a sales order creation or
creation of delivery etc. The process of mapping ERP to a business process is normally
time-consuming and expensive. It requires full understanding of the business process
procedures, finding a solution in ERP that would meet these requirements and then
customizing the solution within the system.
5. SUPPLY CHAIN AND CUSTOMER RELATIONSHIP
APPLICATIONS.
Supply chain management (SCM)
Supply chain management (SCM) is the oversight of materials, information, and finances as
they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
Supply chain management involves coordinating and integrating these flows both within and
among companies. It is said that the ultimate goal of any effective supply chain management
system is to reduce inventory (with the assumption that products are available when needed).
As a solution for successful supply chain management, sophisticated software systems with
Web interfaces are competing with Web-based application service providers (ASP) who promise
to provide part or all of the SCM service for companies who rent their service.
Supply chain management flows can be divided into three main flows:
The product flow
The information flow
The finances flow
The product flow includes the movement of goods from a supplier to a customer, as well as
any customer returns or service needs. The information flow involves transmitting orders and
updating the status of delivery. The financial flow consists of credit terms, payment
schedules, and consignment and title ownership arrangements.
There are two main types of SCM software: planning applications and execution applications.
Planning applications use advanced algorithms to determine the best way to fill an order.
Execution applications track the physical status of goods, the management of materials, and
financial information involving all parties.
Some SCM applications are based on open data models that support the sharing of data both
inside and outside the enterprise (this is called the extended enterprise, and includes key
suppliers, manufacturers, and end customers of a specific company). This shared data may
reside in diverse database systems, or data warehouses, at several different sites and
companies.
By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a
company's clients), SCM applications have the potential to improve the time-to-market of
products, reduce costs, and allow all parties in the supply chain to better manage current
resources and plan for future needs.
Increasing numbers of companies are turning to Web sites and Web-based applications as part
of the SCM solution. A number of major Web sites offer e-procurement marketplaces where
manufacturers can trade and even make auction bids with suppliers.
Customer Relationship
A Customer Relationship Management system may be chosen because it is thought to provide
the following advantages:
Quality and efficiency
Decrease in overall costs
Decision support
Enterprise ability
Customer Attentions
Increase profitability.
Customer Relationship Management Applications
Gives you a complete information of customer data and interactions
Enhances customer satisfaction and maximizes profits
Continuous and consistent customer dialogue based on real-time information
Manages present and prospective customers equally and effectively
Facilitates sales team to take orders from the customers
Availability of the complete purchase history for the customers
Availability of features like automatic up-sell and cross-sell capabilities
Automatic and accurate tracking of commissions
Provides accurate forecasts
Can view the ROI and true marketing effectiveness
While strong vendors are present in certain segments of the CRM market, no one vendor
offers a complete, best-of-breed CRM package providing all functions, for all channels, for
every industry. One of the myths is that the technology is complete says Julie Fitzpatrick,
senior vice president of marketing for Chicago-based loyalty. companies need to understand
how they are going to do what the technology can’t do, such as having a data model to store
information about the relationship - actionable data about the relationship’s The upshot: you
will probably need to acquire your CRM applications piece by piece out of sheer necessity,
although multi-function software suites are a popular choice to get started.
To make sense of the bewildering array of vendors, applications, and technologies, start by
thinking about the users of the CRM application:
Employees -this is where client/server-based CRM solutions started in the mid-
1990s, focused on automating internal sales, service, and marketing processes.
Customers -If customers want to serve (or sell) themselves via the Web, why not?
The flood of business applications is testimony to this hot trend.
Partners - often overlooked in the ecommerce hype, indirect sales channels are still
vital. Partner Relationship Management (PRM) applications serve these users. Next,
consider the functions or processes involved in the customer relationship lifecycle:
Marketing- targeting prospects and acquiring new customers through data mining,
campaign management and lead distribution.
Sales - closing business with effective selling processes, using proposal generators,
configurations, knowledge management tools, contact managers, and forecasting aids.
Ecommerce - in the Internet age, selling processes should transfer seamlessly into purchasing transactions, done quickly, conveniently, and at the
lowest cost.
Service - handling post-sales service and support issues with sophisticated call center
applications or Web-based customer self-service products.
Module IV…!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1. ERP IMPLEMENTATION BASICS
Why implement an ERP System?
• To support business goals
– Integrated, on-line, secure, self-service processes for business
– Eliminate costly mainframe/fragmented technologies
• Improved Integration of Systems and Processes
• Lower Costs
• Empower Employees
• Enable Partners, Customers and Suppliers
How should we implement ERP Systems?
• People
– Project Structure
– Should be aligned to processes
• Process
– Implementation Process (outlined in detail)
– Adapt your processes to those of the ERP.
• Technology
– Hardware
– Software
– Integrated Systems
Process
1. Definition and Analysis
• Hold discussions with various functional personnel to establish the actual number of
systems operating at client site, what they are used for, why and how often
• Produce the Project Scoping Document outlining current situation, proposed solution and
budgeted time
Challenge: REQUISITE EXPERTISE - No two clients are the same
2. Design
• Prepare various functional reports - specifies current scenario and wish list
• Prepare Design document which specifies how the system is going to work
• Prepare test scripts to be followed on system testing
• Map out the interface paths to various modules
Challenge: INFORMATION SHARING - Availability of staff
3. Build
• Configure system as per set up document specifications i.e. transfer conceptual model
into reality
• Test system to verify accuracy (preliminary tests)
Challenge: TECHNICAL ENVIRONMENT - System functionality
4. Transition
• Train users on their specific areas
• Assist in test data compilation and system testing by users
• Finalise the Live system and captured opening balances
Challenge: USER RESISTANCE Understanding and acceptance
data preparation
5. Production
• Official hand holding
• Effectiveness assessment
• Business and Technical Direction recommendations
• ERP systems provide a mechanism for implementing systems where a high degree of
integration between applications is required • The Business Case or Value Proposition for implementation must be outlined
• To successfully implement a proper mix of people, processes and technology should be
maintained
The normal steps involved in implementation of an ERP are as below:
-Project Planning
-Business & Operational analysis including Gap analysis
-Business Process Reengineering
-Installation and configuration
-Project team training
-Business Requirement mapping
-Module configuration
-System interfaces
-Data conversion
-Custom Documentation
-End user training
-Acceptance testing
-Post implementation/Audit support
The above steps are grouped and sub-divided into four
major phases namely
1) detailed discussions,
2) Design & Customization,
3) Implementation and
4) Production.
The phases of implementation vis-à-vis their tasks and
respective deliverables are as below:
Detailed Discussion Phase: Task: - Project initialization,
Evaluation of current processes, business practices, Set-up
project organization Deliverables:- Accepted norms and
Conditions, Project Organization chart, Identity work teams
Design and customization Phase: Task: - Map organization, Map business process,
Define functions and processes, ERP software configuration and Build ERP system
modifications. Deliverables: - Organization structure, Design specification, Process
Flow Diagrams, Function Model, Configuration recording and system modification.
Implementation Phase: Task: - Create go-live plan and documentation, Integrate
applications; Test the ERP customization, Train users Deliverables: - Testing
environment report, Customization Test Report and Implementation report
Production Phase: Task: - Run Trial Production, Maintain Systems Deliverables:-
Reconciliation reports, Conversion Plan Execution
2. ERP IMPLEMENTATION LIFE CYCLE
ERP covers the technique and concepts employed for the integrated management of
business as a whole, ERP packages are integrated software packages that support the
above ERP concepts.
ERP lifecycle is in which highlights the different stages in implementation of An ERP.
Different phases of ERP
Pre evaluation Screening
Evaluation Package
Project Planning
GAP analysis
Reengineering
Team training
Testing
Post implementation
Pre evaluation screening
Decision for perfect package
Number of ERP vendors
Screening eliminates the packages that are not at all suitable for the company’s
business processes.
Selection is done on best few PACKAGES available.
Package Evaluation
Package is selected on the basis of different parameter.
Test and certify the package and also check the coordination with different
department
Selected package will determine the success or failure of the project.
Package must be user friendly
Regular up gradation should available.
Cost
Project planning
Designs the implementation process.
Resources are identified.
Implementation team is selected and task allocated.
Special arrangement for contingencies.
Gap analysis
Most crucial phase.
Process through which company can create a model of where they are standing now and
where they want to go.
Model help the company to cover the functional gap
Configuration
• IMPORTANCE OF CONFIGURATION
– This is the main functional area of the ERP implementation.
– Business processes have to be understood & mapped in such a way that they
arrived solution matches with the overall goals of the company.
Reengineering
Implementation is going to involve a significant change in number of employees and
their job responsibilities.
Process BECOMES more automated and efficient.
Team Training
Takes place along with the process of implementation.
Company trains its employees to implement and later, run the system.
Employee become self sufficient to implement the software after the vendors and
consultant have left.
Testing
This phase is performed to find the weak link so that it can be rectified before its
implementation.
Going Live
The work is complete, data conversion is done, databases are up and running, the
configuration is complete & testing is done.
The system is officially proclaimed.
Once the system is live the old system is removed
End User Training
The employee who is going to use the system are identified and trained.
Post Implementation
This is the maintenance phase.
Employees who are trained enough to handle problems those crops up time to time.
The post implementation will need a different set of roles and skills than those with
less integrated kind of systems.
An organization can get the maximum value of these inputs if it successfully adopts and
effectively uses the system.
3. ROLE OF SDLC/SSAD
System Development Life cycle (SDLC)
What is a SDLC and why do we need that?
System - an organized collection of independent tasks and processes that is designed to work
together in order to accomplish specific objectives.
The processes and tasks typically receive input(s) from and provide output(s) to other
processes and tasks and even other systems. The tasks and processes may or may not be
supported by automation
SDLC refers to a methodology for developing systems. It provides a consistent framework of
tasks and deliverables needed to develop systems.
The SDLC methodology may be condensed to include only those activities appropriate for a
particular project, whether the system is automated or manual, whether it is a new system,
or an enhancement to existing systems.
The SDLC methodology tracks a project from an idea developed by the user, through a
feasibility study, systems analysis and design, programming, pilot testing, implementation, and
post-implementation analysis.
Documentation developed during the project development is used in the future when the
system is reassessed for its continuation, modification, or deletion.
SDLC Phases
Phases in SDLC are Planning, Analysis, Design, Implementation, and
Maintenance/Sustainment/Staging
Project planning, feasibility study: Establishes a high-level view of the intended
project and determines its goals.
©© 2005 by Prentice Hall2005 by Prentice Hall1-11
SDLC Planning Phase
Identify, analyze,
prioritize, and
arrange IS needs
Systems analysis, requirements definition: Refines project goals into defined functions and operation of the intended application. Analyzes end-user information
needs.
©© 2005 by Prentice Hall2005 by Prentice Hall1-12
SDLC Analysis Phase
Study and
structure system
requirements
Systems design: Describes desired features and operations in detail, including screen
layouts, business rules, process diagrams, pseudo code and other documentation.
Implementation (Development): The real code is written here.
Integration and testing: Brings all the pieces together into a special testing environment, then checks for errors, bugs and interoperability.
Acceptance, installation, deployment: The final stage of initial development, where
the software is put into production and runs actual business.
Maintenance: What happens during the rest of the software's life: changes,
correction, additions, and moves to a different computing platform and more.
Types of SDLC models
Once upon a time, software development consisted of a programmer writing code to
solve a problem or automate a procedure. Nowadays, systems are so big and complex
that teams of architects, analysts, programmers, testers and users must work
together to create the millions of lines of custom-written code that drive our
enterprises.
The oldest of these, and the best known, is the waterfall: a sequence of stages in which the
output of each stage becomes the input for the next. These stages can be characterized and
divided up in different ways, including the following:
But It Doesn't Work!
The waterfall model is well understood, but it's not as useful as it once was. The problem is
that the waterfall model assumes that the only role for users is in specifying requirements,
and that all requirements can be specified in advance. Unfortunately, requirements grow and
change throughout the process and beyond, calling for considerable feedback and iterative
consultation. Thus many other SDLC models have been developed.
To manage this, a number of system development life cycle (SDLC) models have been created:
waterfall, spiral, rapid prototyping, RUP (Rational Unified Process) and incremental
etc.
6/3/2005 Page 4
Life Cycle Models
One description of a product life cycle may not be
adequate. Therefore, the organization may define a set
of approved product life-cycle models.
Waterfall
Prel
Dsgn
Rqts
DefnImpl I&T O&S
Dtl
DsgnSystem A
Determine
objectives,
alternatives,
constraints.
Plan
next
phase.
Risk/Analysis
Prototype
O&SAT
I&T
Unit Test
Build
Spiral
Develop, verify
next level
product.
Incremental
System
Rqts
Defn
Prel
Dsgn
Rqts
DefnImpl I&T O&S
Dtl
Dsgn
Prel
Dsgn
Rqts
DefnImpl I&T O&S
Dtl
Dsgn
Prel
Dsgn
Rqts
DefnImpl I&T O&S
Dtl
Dsgn
Part 1
Part 2 (+Part 1)
System AO&SFinal
Sys I&T
Part 3 (+Part 1
+ Part 2)
Spiral model - The spiral model emphasizes the need to go back and reiterate earlier stages
a number of times as the project progresses.
It's actually a series of short waterfall cycles, each producing an early prototype
representing a part of the entire project.
This approach helps demonstrate a proof of concept early in the cycle, and it more accurately
reflects the disorderly, even chaotic evolution of technology.
Rapid Prototyping - In the rapid prototyping (sometimes called rapid application development)
model, initial emphasis is on creating a prototype that looks and acts like the desired product
in order to test its usefulness.
The prototype is an essential part of the requirements determination phase, and may be
created using tools different from those used for the final product.
Once the prototype is approved, it is discarded and the "real" software is written.
Incremental - The incremental model divides the product into builds, where sections
of the project are created and tested separately. This approach will likely find errors
in user requirements quickly, since user feedback is solicited for each stage and
because code is tested sooner after it's written.
Iterative models - by definition have an iterative component to the systems development. It
allows the developer to take a small segment of the application and develop it in a fashion
that, at each recursion, the application is improved. Each of the three main sections:
requirements definition, system design, and coding and testing are improved with each cycle
through the process.
Rational Unified Process
In its simplest form, RUP consists of some fundamental workflows:
Business Engineering: Understanding the needs of the business.
Requirements: Translating business need into the behaviors of an automated system.
Analysis and Design: Translating requirements into software architecture.
Implementation: Creating software that fits within the architecture and has the
required behaviors.
Test: Ensuring that the required behaviors are correct, and that all required behaviors
are present.
Configuration and change management: Keeping track of all the different versions of all
the work products.
Project Management: Managing schedules and resources.
Environment: Setting up and maintaining the development environment.
Deployment: Everything needed to roll out the project.
Role of Testing in SDLC
Let us take (RUP) SDLC model developed by IBM to understand the role of testing in depth.
Rational Unified Process (RUP) has 4 different phases viz. inception, elaboration, construction
and transition phases. When we compare RUP with the traditional SDLC model, inception phase
is similar to analysis phase, elaboration is same as design phase, construction phase is similar
to implementation and transition phase is similar to deployment and maintenance. In most of
the industries, as part of the RUP process, JAD (Joint application Development) sessions are
conducted. These sessions give an opportunity for all teams to present their ideas and
document them. Testing team generally gets involved in the inception phase, depending on the
schedule. As you see the figure above, Test shows different inclination and declination.
Inclination emphasizes the increased role of the testing team and declination emphasizes the
decreasing role.
Inception phase: In this phase, a tester will get a chance to understand the purpose of this
project. Generally the information is documented by the architecture team in the ARF
(Architectural reference document). Data architects, Information architects, System
architects are the key players in this phase.
Elaboration phase: In this phase, a tester will get a chance to understand how the project is
designed and what all the systems are getting upgraded or downgraded based on this project.
This is a major phase, where the entire design of the project is documented in the JAD
sessions in the Business Requirement document (BRD), System requirement document (SRD),
Product requirement document (PRD), Business use cases (BUC) and System Use cases (SUC).
Architects, Business analysts, Project management, Development, Testing, Production support
teams etc attend the JAD sessions to give sign-off on these documents, once they are
completely documented. Business use cases describe the business process of the project.
System use cases describe about a system, which is impacted by the project.
Construction phase: In this phase, developers have a major role of constructing the system
based on the design accepted during the JAD sessions. A tester has to follow closely with the
development team to understand different changes considered by the development. There is
always a possibility that the development can miss, misinterpret the design documents, in this
case, a tester can always escalate the issue to the concerning developers to resolve the issue.
Technical design documents (TDD), Interface specification documents (ISD), Software
architecture documents (SAD) etc are generated in this phase to document the development
process. During the same phase, testing team needs to develop the high level scenarios (HLS)
based on the BRD, SRD, TDD, PRD, BUC, SUC, SAD, ISD. Each high level scenario can have
one or more test cases. A tester must make sure that all the requirements are traced to a
test case thru a QA matrix. Though it’s not compulsory to write test cases based only on
these documents and there is always a possibility of missing some of the functionality, so we
have to write test cases based on all possible sources of the latest updated information
(latest signed-off updated documents). In many of the projects I have worked, sometimes I
had to write test cases based on the verbal information given the development, sometimes on
viewing the data flow diagrams and process flow diagrams. In this, phase, testing will have a
major role for performing System testing, integrated system testing.
Transition phase: In this phase, the system/software whatever it is designed is ready to roll
out for production. In most of the industries, IT always rolls out the product slowly like 5%
every week for a certain period until the 100% is in production. In this, phase, testing will
have a major role for performing regression testing. Roll out is done by moving the newly
written code into a staging environment, where we test the product and raise the defects.
Once the entire code is in the staging environment and it is stable. This code will be moved
into production. However, there is always a chance of defects/bugs arising in this stage.
Regression testing will identify any defects occurring due to the already existing code.
ROLE OF SSAD
Structured Systems Analysis and Design: an organizational process used to develop and maintain computer-based information systems (both business and systems
professionals participate in SSAD).
4. OBJECT ORIENTED ARCHITECTURE
Object-oriented architecture is a design paradigm based on the division of responsibilities for an application or system into individual reusable and self-sufficient
objects, each containing the data and the behavior relevant to the object. An object-oriented
design views a system as a series of cooperating objects, instead of a set of routines or
procedural instructions. Objects are discrete, independent, and loosely coupled; they
communicate through interfaces, by calling methods or accessing properties in other objects,
and by sending and receiving messages. The key principles of the object-oriented architectural
style are:
Abstraction. This allows you to reduce a complex operation into a generalization that
retains the base characteristics of the operation. For example, an abstract interface
can be a well-known definition that supports data access operations using simple
methods such as Get and Update. Another form of abstraction could be metadata used
to provide a mapping between two formats that hold structured data.
Composition. Objects can be assembled from other objects, and can choose to hide
these internal objects from other classes or expose them as simple interfaces.
Inheritance. Objects can inherit from other objects, and use functionality in the base
object or override it to implement new behavior. Moreover, inheritance makes
maintenance and updates easier, as changes to the base object are propagated
automatically to the inheriting objects.
Encapsulation. Objects expose functionality only through methods, properties, and
events, and hide the internal details such as state and variables from other objects.
This makes it easier to update or replace objects, as long as their interfaces are
compatible, without affecting other objects and code.
Polymorphism. This allows you to override the behavior of a base type that supports
operations in your application by implementing new types that are interchangeable with
the existing object.
Decoupling. Objects can be decoupled from the consumer by defining an abstract
interface that the object implements and the consumer can understand. This allows you
to provide alternative implementations without affecting consumers of the interface.
Common uses of the object-oriented style include defining an object model that supports
complex scientific or financial operations, and defining objects that represent real world
artifacts within a business domain (such as a customer or an order). The latter is a process
commonly implemented using the more specialized domain driven design style, which takes
advantage of the principles of the object-oriented style. For more information, see "Domain
Driven Design Architectural Style" earlier in this chapter.
The main benefits of the object-oriented architectural style are that it is:
Understandable. It maps the application more closely to the real world objects,
making it more understandable.
Reusable. It provides for reusability through polymorphism and abstraction.
Testable. It provides for improved testability through encapsulation.
Extensible. Encapsulation, polymorphism, and abstraction ensure that a change in the
representation of data does not affect the interfaces that the object exposes, which
would limit the capability to communicate and interact with other objects.
Highly Cohesive. By locating only related methods and features in an object, and using
different objects for different sets of features, you can achieve a high level of
cohesion.
Consider the object-oriented architectural style if you want to model your application based
on real world objects and actions, or you already have suitable objects and classes that match
the design and operational requirements.
The object-oriented style is also suitable if you must encapsulate logic and data together in
reusable components or you have complex business logic that requires abstraction and dynamic
behavior.
5. CONSULTANTS
DEFINITION:
Business consultants are professional people who develop the different methods
& techniques to deal with the implementation process & with the various problems that
will crop up during implementation.
They are experts in the area of the administration, management & control activities.
They have experience of implementation & various methods that ensures successful
implementation.
The only limitation with consultant is they are very expensive.
They consultants have to make the ERP implementation for an organization as their own
business.
They have to make a plan to carry the activities in the right direction during the
implementation process.
Since they are expensive the company should formulate a plan regarding best optimum
utilization of the money spent on consultants.
ROLE OF CONSULTANTS
The consultants are involved in the implementation process of the organization.
They consultant should guarantee the success of the project and should be able
to show the results such as reduction in cycle time, increased response time,
improved productivity, etc to the satisfaction of the customer.
They are responsible for the administration of all the phases of the
implementation so that the activities occur at the scheduled time and at the
desired level of quality with effective participation with all those who must
participate.
They add value to the project as they provide knowledge about the packages &
the implementation process which gives the employees the practical experience
ERP Consultancy
VARs, business partners, consultants
The emergence of third parties to interface between a software developer and clients
is not new. The ‘bureau’ of the 1970s and 1980s ran specific applications on their
systems on behalf of clients. Payroll was a common application. During the 1990s, as
more and more clients acquired their own computing facilities, a new breed of third
party emerged – the Facilities Manager.
They took over the running of all or part of the client’s IT function. This was called
‘out-sourcing’. The perceived advantage of this was that it reduced the cost of owning
and running IT equipment. Although the client owned the equipment, the Facilities
Manager had the pool of expertise that could be called upon as required. As well as
allowing the client to concentrate on his business, it averted growth in the number of
expensive IT personnel.
Around 1998, the phrase ‘Application Service Provider’ (ASP) emerged. ASP is a term
that appears to accommodate any third party who is involved in one or more activity
relating to the marketing, selling, installation, customization, implementation, running,
maintenance and support of an application and the infrastructure upon which it runs.
Whilst some provide the full service, others are more focused.
These include System Integrators (SIs) and Value Added Resellers (VARs). When
dealing with a SI or VAR, the client would purchase the software license from the
application software developer and purchase implementation and post implementation
support from the SI or VAR. In practice, many SIs or VARs act as a one-stop-shop,
providing hardware, software, implementation, training, customization and support.
The main distinction between a SI and a VAR is that the latter adds value primarily
through software customization activities. However, this raises the question of who has
ownership of the customized portion of the software?
It is not uncommon to find both SIs and VARs in partnership with ERP software
developers. The advantage is that it provides the developer with additional
implementation capacity as well as allowing the developer to gain access to markets
that are geographically beyond his reach. They have played a significant role in the
growth of a number of ERP vendors including SAP.
The danger, from a client’s perspective, is that the partner may not have the requisite
expertise of the vendor’s application or technology. In this situation, the nature of the
relationship between the developer and the third party is important. This relationship
can vary from weak ‘agreements’ to strong partnerships and needs to be investigated
during the selection process. If problems arise, then their resolution may be slowed
while they decide who is responsible for dealing with them.
An alternative option open to the client is to use an independent consultancy to
assist with the implementation. Whilst the consultants may have valuable business
and implementation experience, the Consultant may be unfamiliar with the application.
A relatively new concept is that of the data centre. Reminiscent of the bureau, this
provider owns both application and infrastructure. The client, instead of experiencing
the up-front costs traditionally associated with an application, pays a monthly rent for
use of specific functionality. This can be accessed through a dumb terminal. As well as
bringing the cost of an ERP application within the reach of smaller businesses, this
approach is viewed as ‘the future of business computing’.23 However, various concerns
have been voiced. These include security, data ownership, service reliability and
responsiveness. Whilst still a very immature market, as it develops, these issues should
be addressed.
One third parties who provide a specialized service is the Enterprise Application
Integrator (EAI). Unlike the SI and VAR, the EAI is unlikely to support the
implementation itself. Instead, the EAI provides integration tools (middleware) that
ease the integration of different systems. The technology is relatively immature and
there are questions about how this sector will develop.
The introduction of a third party into the equation introduces another variable to be
managed. However, it can be argued that the use of a Service Level Agreement (SLA)
can reduce the likelihood of dispute. A SLA defines the acceptable levels of
performance and responsibilities for the key activities provided by the service
provider. Issues likely to be included are responsiveness, reliability and the meeting of
deadlines. Where penalty clauses are attached then compensation may be obtained if
performance is not attained. Sample SLAs can be found at the website
www.techrepublic.com.
6. VENDORS AND EMPLOYEES.
DEFINITION:
Vendors are the people to develop the ERP packages, they spent a huge amount
of time & effort in research & development to create the package solution that is
flexible, efficient and easy to use.
Now, these days the ERP have all features & function which can satisfy the
need of all the business data. The ERP vendors spent a large amount of money so that
they can become experts, to develop a flexible, efficient & easy to use ERP package.
ROLES OF VENDORS:
The vendor should supply the product & its documentation as soon as the contract is
signed.
The vendor is responsible to fix the errors which are found during the implementation
process, so it becomes necessary that the vendor should be constantly touched with
the implementation team.
The vendor also has to provide the training to the company’s user & also to the people
who are involved in the implementation process of the s/w.
The vendors training should explain how the package works, what are major
components, how the data & information flows across the system, etc.
The vendor gives the project support function & also takes care of the quality control
factor with respect to how the product is implemented.
The vendors participate in all the phases of an implementation in which he gives
advices, answers to technical questions about the product & technology.
In case, there is gap between the package & the actual business process then it is the
job of a vendor to customize the s/w & make necessary modifications.
Roles & Responsibilities of Employees
1.Do Early Homework: Every employee is responsible for understanding the work allotted and
determining if it is appropriate for him. He/she should make sure whether he/she has
mastered the skills required to perform the task completely.
If he/she is not sure about how to handle the work allotted to them they should talk with
their superiors and get suggestions and directions in fulfilling the work allotted to him/her.
This will help the employee in building good relations with not only their superiors also with
their colleagues.
2. Plan with the Manager: Having a proper work schedule or time table for the work allotted
to the employee helps the employee in Time Management and reaching the deadlines in time
Also, when a new work is allotted
3. Use Available Resources and take responsibility: The employees should have sense of
responsibility towards the resources of the Organization. As a part of the Organization every
employee is equally responsible for the long life of the existing resources, for which smooth
usage and suggestions for usage is required, which in case is not provided should be requested
for.
4. Participation: Active listening and participation in teams will ensure that all employees
become good team players and work with unity towards common goals of the Organization.
Whenever a new work is being allotted all the Employees should be eager enough to take the
initiative rather than trying to avoid newer tasks. This will facilitate in employees learning new
skills and reaching the Organizational goals with much effectiveness.
5. Be Punctual And Regular: The Prime responsibilities of every
employee must be Punctuality and Regularity. You can be better
organized by being punctual and regular. Unwanted and unexpected work
delays can be dealt effectively.
6. Cleanliness is Next To Godliness: One should maintain the cleanliness of their desk, and
also premises of the Organization. If you and your premises are clean you will find it more
encouraging to work and also it is convenient to work for other employees.
7. Washroom: Please use the washrooms bearing in mind that you are not the only person who
is using it. See to it you don’t spill the water across the wash basin when you are using it
same with the premises of wash room. Health and Hygiene of you and others should be your
prime concern.
8. Cost Effectiveness: The employees should develop the habit of cost saving work style and
put stress on waste control methods with maximum output.
9. Creative Thinking and Suggestions: The employee should always think upon the
improvement of work efficiency and organizational development
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!The end!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Keyur D vasava……….