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Its all about Integration
Paul Hawking
SAP University Alliance Program (UAP)
SAP Academic Program Director
Research Industry Reports Best selling author ERP Systems and
Business Intelligence Visiting Professor
University
Background
SAP Mentor22 SAP million users2.5 million SAP Community Network members 6,000 active contributors100 SAP Mentors1 academic
Teach Academics Develop curriculum 2009 + 2010 Top 10 Most
Influential SAP People
SAP Presenter Design Events Advisor Past Chairperson
SAP User Group
Who? What? Why?
Tim Berners Lee
INTEGRATION
Journey
Business Basics
Information Systems ERP Systems
Supply Chain Management
Business Network
TransformationSAP
Strategy and Business Processes
Business Process Examples
Accounting
RecievePayment
Create & SendInvoice
Warehouse
SendShipment
(Ship)
Receive Customer
Purchase Order
PrepareShipment
(Pick & Pack)
Create Sales Order
Sales
Accounting
SendPayment
ReceiveInvoice
Warehouse
ReceiveShipment
Create & Send Purchase
Order
$
$ $
PurchasingWarehouse
CreateRequisition
Sales
Procurement
Business Process Elements
Organisational UnitsSales AreaDistribution Channel
TransactionsSales Order CreationGoods Issue
Data
Master DataCustomerMaterial
Transactional DataSales QuantitySales Price
Process Indicator
Journey
Business Basics
Information Systems ERP Systems
Supply Chain Management
Business Network
TransformationSAP
Executive Management
MiddleManagement
OperationalManagement
Operations
FinanceSales&Distribution
Production HumanResources
Traditional Business Landscape
Executive Management
MiddleManagement
OperationalManagement
Operations
FinanceSales&Distribution
Production HumanResources
Traditional Business Landscape
Intel (1995)
CUSTOMER
INFRASTRUCTURE
RCC
SECURITY
STARJASTAR ESTAR
PNA PRICE
AGREEMENTS
CWS
EUCEXTRACTS
JAPAN FORECAST
JAPAN DAISY
PGS
A / P
PMSEDI
G / LA / R PRODUCTCODE
DEMANDFORECAST
GPS II
MPS
AMAPS
MAXRST
DPA
NIMS
EUCEXTRACTS
DATAWAREHOUSE
EUCEXTRACTS
Configurator
PRICEBOOK
MDS
NOVA
AVAILABILITY
WMS
JAPANPRICEBOOK
HELPDAISY
ELECTRONICTRANSFER
DARE EDI
PRICEBOOK
COMPONENTSCOST
ISET GIMS
CLS
EUCEXTRACTSDPA
OEMQUOTE
SARP
Executive Management
MiddleManagement
OperationalManagement
Operations
FinanceSales&Distribution
Production HumanResources
Traditional Business Landscape
Integration Problems
Data• 9/11/2011• Last name• Subject vs Course
Process• Weekly vs Fortnightly• Workflow (goods receipt)
People• Application Screens• Information
Executive Management
MiddleManagement
OperationalManagement
Operations
FinanceSales&Distribution
Production HumanResources
Traditional Business Landscape
Public Sector Procurement Process? - Complexity
Journey
Business Basics
Information Systems ERP Systems
Supply Chain Management
Business Network
TransformationSAP
Why ERP?
Note: Based on multiple answers per respondent
6%
10%
11%
12%
15%
15%
19%
20%
21%
24%
26%
27%
37%
42%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Unable to Support Growth
Inconsistent Processes
Obsolete Systems
Difficult to Integrate Acquisitions
Business Becoming Global
Unable to Implement New Business Strategies
Business Processes or Systems Not Integrated
Complex, Ineffective Business Processes
Not Responsive Enough to Customers
Cost Structure Too High
Poor Quality/Visibility of Info
Poor/Uncompetitive Performance
Disparate Systems
Systems Not Y2K Compliant
Pro
gra
m M
oti
va
tio
n
% Respondents
Source: Deloitte Consulting and Benchmarking Partners (Based on a study of 62 companies that have gone live with an ERP system)
ERP Evolution
1970s
Accounts Receivable
Accounts Payable
General Ledger
Payroll
Financial ManagementInformation System
Human Resources
MRP11
Distribution
Scheduling
Planning
MRP
EDI
ERP
SCM
e-CommerceSFACRM
e-business
ERP11
1980s 1990s 2000s
What is an Enterprise Resource Planning System?
An ERP System can be defined as a “modularised, integrated, real time
information system with broad functional scope responsible for the processing and
management of business transactions”
(Hawking 2005)
Executive Management
MiddleManagement
OperationalManagement
Operations
Finance
Sales&Distribution
Production
HumanResources
ERP System
EnterpriseResourcePlanning System
ERP Characteristics
Links all business processes automatically
Reduce inter-processing time (transactions occur one time at the source)
Maintain an audit trail of all transactions
Utilises a common database
Perform internal conversions automatically (tax, foreign currency, legal rules for payroll)
Empowers employees by putting data at the fingertips of employees
Involve employees in the entire functional cycle
Raytheon’s Goals
Replace thirty year old non-integrated legacy systems
Obtain benefits of business process re-engineering
Use ERP to drive integration
One time entry and access to information
Facilitate achievement of Raytheon Aircraft Company five year plan
$19.8 billion in revenues
More than 100,000 employees worldwide
ERP Example
5,500 SAP users
6 countries
8 major business units
Over 40 key systems replaced, including primary manufacturing support system, corporate and field financial and purchasing systems, marketing expense control systems, and project management systems
7,500+ SAP transactions, 100+ reports, 150+ forms, 50+ interfaces to existing systems
Benefits Achieved
Davenport 2003
SAP R/3 Order Entry IBM Storage
Benchmarks - 110 days after production
Enter pricing data into system
Check customer credit upon order
Enter customer order in system
% Manual order/ship to total # of orders/ships
Generate customer invoice after ship
Respond to customer billing inquiry
Ship evaluation unit from customer request
Ship repair/replacement part
Credit returned drive
Obtain commit date for customer order
Unconstrained SJ manufactured drives
Allocated; non-SJ manufactured drives
Focus Area9/1/93
Cycle Time
5 - 80 Days
15 - 20 Minutes
30 Minutes
75%
2 - 23 Days
15 - 20 Minutes
3 - 30 Days
3 - 44 Days
1 - 5 Months
2 Hrs - 3 Weeks
ReengineeredTarget 10/1/93
SAP Performance01/20/95
5 Minutes
Automatic
5 Minutes
0%
1 Day
Real Time
2 Days
2 Days
5 Days
Real Time
5 Minutes
Automatic
15 Minutes
0%
8 Hours
Real Time
2 Days
3 Days
10 Days
Real Time2 Hrs- 3 Weeks
Toyota’s Benefits
D
Current
Future
TOPSPOSTEXCEL
Systems
ERP POST
ERPPOST
ERP ERPALC
ERP ERP ERP
ERP ERP
POSTBSS
VTSVOS
BSSALCVTS
BSSVTS
VTSVTSMSA
MSA VTS
BenefitsLead-time
Flexi-bility
Cost
LeanOrg.
O
O
D
D
D
O
D
D
D
D
O
D DD
D D
O O
O O
D
O
D
O
D
O
O
D
D
D
D
D
O
D
O
O
CreateSales/Prod’nPlan
FinalProd'nSchedule
CreateSalesOrder
CompleteFinishedVehicle
Enquiry onVehicleStatus
CompleteDelivery toDealer
CreateInvoice toFinanceCompany
PaymentFromFinanceCompany
CreateRetailDeliveryRecord
O = No Change D = Improvement X = Detriment
ERP Systems and Value Creation
Integrate Optimise Informate
ERP Evolution
Journey
Business Basics
Information Systems ERP Systems
Supply Chain Management
Business Network
TransformationSAP
Supply Chain
Supply Chain Challenges
GlobalizationWorldwide reach is not a competitive advantage but a necessity
Forces Driving the Evolution of the SCM
Cost LeadershipCost targets and industry consolidation
InnovationSuppliers need to be involved earlier in product development
Forces of Change
OutsourcingFocus on core activities, trusted partnership
Forces Driving the Evolution of the SCM
Retailer Time to Market
Traditional Clothing Retailer 36 weeks
Zara 4 weeks
Forces Driving the Evolution of the SCM
North American Glass Suppliers
2001
Owens-Illinois
Corning
Consumers
Anchor Hocking
2006
Owens-Illinois
Software Company Consolidation
Forces Driving the Evolution of the SCM
Date Entry Price
May 2002 Coca Cola $2.87/6-pack‘Vanilla Cola’
May 2003 Sam’s Choice $1.00/6-pack
‘Vanilla Cola’
August 2003 Pepsi $1.99/6-pack
‘Vanilla Cola’
Key Industry Trends
Quick Copying Erodes Price and Market Share
Product Date Price
Proctor &Gamble introducesSwiffer 1999 $9.62
Pledge 1999$7.32
Grabber
Magic 2001$7.09
Sweeper kit
Clorox 2002$6.69
Ready Mop37% PriceDecline
Forces Driving the Evolution of the SCM
Focusing on Core (Moore)
Core: Processes that create unique competitive differentiation Source of growth in revenues and profits
Context: All other processes No prize for doing these well But there are penalties for doing them poorly
This is not the same as your core competence
This is not the same as your core business
Journey
Business Basics
Information Systems ERP Systems
Supply Chain Management
Business Network
TransformationSAP
Business Network (Moore)
Business networks are core/context ecosystems Each member contributes a unique core—their “claim to fame” Every other member supplies the context to support that core
Business network create higher returns Differentiating spend is greater, duplicated spend is less Higher differentiation creates higher returns on capital for all
Business networks are competitive weapons Silicon Valley, New York, Milan, Bangalore, Shanghai The Internet has made this a “virtual” phenomenon
Dell Business Network
Business Networks: A Dell Laptop for Thomas Friedman
Total order lead time was 13 days.
The order was delayed 9 days because of a Wireless card “control issue”.
Total supply chain estimated at 400 companies in North America, Europe, & Asia.
112
3
4
5
67
89
10
11
1213
14
15
16
17
18
192021
1. Laptop was designed2. Order was taken by phone3. Order hit the Dell factory4. Intel microprocessor*5. Memory *6. Graphics card*7. Cooling Fan*8. Motherboard*9. Keyboard*10. LCD*
11. Wireless card*12. Modem*13. Battery*14. Hard Drive*15. CD/DVD drive*16. Notebook bag*17. Power adapter*18. Power Cord*19. Memory stick*20. Repackaged21. Sent to Tom Friedman
Dell Laptop Story
1. Laptop was designed jointly in Austin, TX and Taiwan2. Order was taken by Mutjeba Naqvi over Dell’s 800 number3. Order hit the Dell Factory in Penang, Malaysia4. Intel microprocessor came from either Phillipines, Costa Rica, Malaysia, or China5. Memory from either Samsung in Korea, Nanya in Taiwan, Infineon in Germany, or Elpida in
Japan6. Graphics card from MSI or Foxcom both in China7. Cooling Fan from CCI or Auras both in Taiwan8. Motherboard from Samsung or Quanta, both in Shanghai, or Compal or Wistron in Taiwan9. Keyboard from Alps, Sunrex, or Darfon, all in China10.LCD from Korea, Japan, or Taiwan11.Wireless card from Malaysia, Taiwan or China12.Modem from China13.Battery from Mexico, Maylasia, China, Taiwan, or Korea14.Hard Drive from Singapore, Thailand, or Phillipines15.CD/DVD drive from Indonesia, Philippines, China, or Malaysia16.Notebook bag from China17.Power adapter from Thailand, Taiwan, Korea, or China18.Power Cord from India, China, or Malaysia19.Memory stick from Israel or Malaysia20.Repackaged w/ external options in Nashville, TN21.Sent to Tom Friedman in Maryland
Apple
And companies must employ new strategies to survive in the new SCM reality
Cost Focus
Outsource everything
Cut Spending
Squeeze Suppliers
Sell to “best”
customers
Eliminate headcount
Value Focus
Partner Strategically
Spend Wisely
Collaborative/Win-win
Acquire “non”
customers
Increase productivity
It is all about INTEGRATION
ERP Systems and Business Network
Journey
Business Basics
Information Systems ERP Systems
Supply Chain Management
Business Network
TransformationSAP
SAP
SAP
Summary
ERP/Enterprise systems are the second most important technology of the last decade (after the Internet)
Considered essential infrastructure
Immense investment (time, money and attention) by businesses
Support global business networks
NOT all companies realize the benefits of these systems
Corporate Strategy
Paul HawkingSAP Academic Programs DirectorSchool of Management and Information systemsTelephone: +61-3-99194031Mobile: +61-419301628Email [email protected]
Thankyou
