Operations Management MSOM 306.001 Lecture 11 – Enterprise Solutions for Managing Operations Al Baharmast, Ph.D

Operations ManagementMSOM 306.001

Lecture 11 – Enterprise Solutions for Managing Operations

Al Baharmast, Ph.D.

Some lecture content courtesy of Prentice Hall, Rights Reserved

Enterprise Resource Planning (ERP) Fundamentals

• ERP Fundamentals:

Not just another business software system…, ERPs are -

• Packaged business solutions comprised of multiple components, that, when implemented in tandem, automate, integrate and optimize extended business processes across organizational value chains

• They enable sharing of common data and business practices both within the enterprise and across supply chains

• Also referred to as “Packaged Software,” “Standard Software,” and “Best Practices Software”


What Compels the Adoption of Best Practices Software Solutions?

ERP Solution Drivers

ERP Standards Software (COTS) applications - Deliver a lower Total Cost of Ownership (TCO) over an extended lifecycle:

Development, Implementation, Integration and Support/Maintenance Costs Longer Life Cycles than custom applications

Provide proven methodologies (Embedded resources) for implementation, testing, training, documentation

Limit financial risks (vendor/systems knowledge dissolution) Provide scalability Allow businesses to focus on their core competencies (unless you are a software

development firm …) Ultimately, ERP implementations are driven by the desire to -

Obtain better information on process performance Improve operational efficiency & implement system-enforced controls Support process transformation, product innovation and partner integration


ERP’s Manufacturing RootsMaterial Requirements Planning (MRP)Material Resource Planning (MRP II)

Enterprise IntegrationERP (Back-office – Human Resources, Financials, Supply Chain)Industry Vertical Solutions

Expanding Enterprise IntegrationERP (Services Offerings), Supply Chain Management (SCM), Supplier Relationship

Management (SRM) and Customer Relationship Management (CRM)

The Newest WaveERP II (Lehman, 2001) – “C-commerce and collaborative business models are

beginning to replace standard strategies focused on operational efficiency and value chain management.” Collaborative Commerce – Sharing business processes across the enterprise bounds within

“communities of interest” – automating process interactions with customers/clients and third parties.

ERP Evolution


The Financial Picture (from FY 2010) –

SAP Revenues – $12.5 Billion R&D Expenditures – $1.7 Billion Net Income – $2.6 Billion

Oracle*

Revenues – $26.8 Billion R&D Expenditures – $3.3 Billion Net Income – $9.0 Billion

* Includes Oracle Database and other non-ERP product/service lines

Big market players – SAP and Oracle

ERP Vendors


Seven ERP Concepts –

• Best Practices Software – Embedded Business Processes

• Reference Models• Process Orientation• Enterprise-Level Standards• Single Source of Data• Broad Scope of Integrated Solutions•Implementation Methodologies and Toolsets

ERP Concepts


Best Practices SoftwareEmbedded Business Processes

ERP Concepts


ERP as “Best Practices Software” – All ERP applications execute extended business processes either as explicitly represented or implicitly understood (increasingly becoming explicit)

Embedded business processes are those developed from years of research and synthesis into “best practices”

Allows you to map your business processes to those executed in the system (solution reference models)

Thousands of ways to configure the embedded business processes to better suit your needs

May require modification of business processes If neither configuration nor adaptation is possible, other

alternatives may be sought (i.e., bolt-ons and extensions; customization is seldom recommended)

If all else fails, only then seek alternative (bolt-on/extension) solutions

Best Practices SoftwareERP Concepts

Configuration – GoodCustomization – Bad

Some lecture content courtesy of Prentice Hall, Rights ReservedSource: SAP

With hundreds of best practices

incorporated into the SAP

system, organizations have a

ready-made facility for adopting

proven processes without the

burdens of trial-and-error

operational design and of

benchmarking themselves

against another organization

[Curran, 1997]

SAP Supply Chain CollaborationProcess Model (High Level)


Reengineering, as some have conceptualized it, calls for “clean slate” process redesign prior to searching for technology solutions.

A standard software solution is implemented in an opposite fashion:• A set of “reference” process, data, and function models are purchased.• Internal processes are aligned with the standard software solution reference

processes.• Through configuration analysis, many options exist for finding the most

suitable variant of a reference process.

Standard software-based Business Process Management (BPM)• Anticipates alignment to reference business processes and the systems

configuration that will build a process variant that is most suitable for the adopting organization.

The Antithesis of “Clean-Slate” Business Process Reengineering

Business Process Management


Reference Models

ERP Concepts


SAP Reference Model

Depiction of Process Execution

Using SAP Reference Objects

Electronic Bill Presentment

And

Payment


Plan Source Make Market Sell Support

Enterprise Management

Aligning with Supply Chain Operational Reference Model (SCOR)

Oracle Industry Model: Process Manufacturing

Supply Chain Back OfficeCRM

Project to Profit

People to Paycheck

Accounting to Financial

Reports

Concept to Release

(Process)

Contact to Resolution

Campaign to Lead

Contract to Renewal

Forecast to Plan

Procure to Pay

Demand to Build

(Process)

Order to Cash

Inventory to

Fulfillment

Problem toPrevention

Lead to Order

Source - Oracle

SolutionSpotlight


A reference model provides a pre-engineered set of abstracted views. • One type of reference model might depict a standard for business process

execution, another might depict standard data flows.

• Recall that ERPs either implicitly or explicitly execute pre-defined business processes; applicable reference models represent the underlying business processes being driven by the ERP.

• This affords several benefits to the organization contemplating ERP implementation –

– A ready-made basis for gap analysis

– A basis or “reference” point for configuration/extension

• Allows all implementing organizations to design and develop once, and then replicate many times.

• The reference model will have to be tailored for the implementing organization; this effort is significantly less than approaching each implementation as one might a new software development project.

Reference Models


Process Orientation

ERP Concepts


Output

Domain “A”Acquisition

(Purchasing)

Domain “C”Finance

(Payables)

Domain “B”Logistics

(Receiving)

VerticalProcesses

A

B

C

D

E

1

2

3

4

5

α

β

γ

δ

ε

Input

Acq.IS

Log.IS

Fin.IS

Vertical,Non-Integrated

Systems“Stovepipes”

Functionally-Oriented Operations Management


OutputProcess

Variant 1

Input

A

B

C

D

Functions

E

1

2

3

4

5

α

β

γ

δ

ε

Domain “A”Acquisition

(Purchasing)

Domain “C”Finance

(Payables)

Domain “B”Logistics

(Receiving)

ProcessVariant 2

ProcessVariant 3

ProcessVariant 4

Process-Oriented Operations Management – Driven by ERP


Oracle - Maintenance Plan to Schedule Process

Schedule to MaintainSignal to ReplenishmentAssess to ProgressStrategic Staffing to HirePayroll to PaymentPlan to Project Budget

Asset to Maintenance PlanSignal to ReplenishmentAssess to ProgressStrategic Staffing to HirePayroll to PaymentPlan to Project BudgetSchedule to Maintain

AM7513

Determine Asset

Availability

AM7513

Determine Asset

Availability

• Review production orders, property usage/hours, shutdown/holidays etc. in order to determine asset availability.

AM7527

Manage Work Request

Process

AM7527

Manage Work Request

Process

• Create a work request, approve the work request, and associate the work request to a work order.

AM7515

Schedule and Resource

Asset

AM7515

Schedule and Resource

Asset

• Perform constraint based scheduling, what-if analysis, and adjustment of variables (overtime, contract labour, deferrals, etc.)

AM7516

Create Maintenance

Schedule

AM7516

Create Maintenance

Schedule

• Schedule work orders, identify dependencies, and identify resources (People/ Equipment/ Parts)

Enterprise Roles

Maintenance Supervisor

Maintenance Planner

Source: Oracle

SolutionSpotlight


Enterprise-Level Standards

ERP Concepts


Business Process Standardization• Results in significant reduction in or elimination of the different ways of doing

the same job.

Configuration Standardization & Management• Embeds process standardization in the ERP system.• Requires a pre-defined configuration control process to avoid constant change

and/or the development of process variances.

User Roles Standardization• Identifies logical groups of users based on common activities and

organizations. System functions and data visibility are constrained (or enabled) by user role.

User Training Standardization• Provides the discrete information to user groups necessary to enable process

standardization.

Enterprise-Level Standards


Single Source of Data

ERP Concepts


Define Product Quality Characteristics and Leverage One Set of Master Data

that to Manage Inspections

Source: SAP

One of the central tenets of ERP is the consolidated

and centralized management of all the instances of

identical data (both Master Data and Transactional

Data)

… based on the foundational efficiency principle of

data reutilization

Process 1

Requisition

ERP Database

Vendor A

Data

SAP - Quality

Inspection

Example

Process 2

P.O. Issuance

Process 3

Receiving

Process 4

A.P.

Single Source of Data


Broad Scope ofIntegrated Solutions

ERP Concepts


R/3R/3Client / ServerClient / Server

ABAP/4ABAP/4

FIFIFinancialFinancial

AccountingAccounting

COCOControllingControlling

AMAMFixed AssetsFixed Assets

Mgmt.Mgmt.

PSPSProjectProjectSystemSystem

WFWFWorkflowWorkflow

ISISIndustryIndustry

SolutionsSolutions

MMMMMaterialsMaterials

Mgmt.Mgmt.

HRHRHumanHuman

ResourcesResources

SDSDSales &Sales &

DistributionDistribution

PPPPProductionProductionPlanningPlanning

QMQMQualityQuality

Manage-Manage-mentment PMPM

Plant Main-Plant Main-tenancetenance

Business process

solutions

Open systems

Client / serverarchitecture

Comprehensive implementation support:

Business Engineering Workbench

Designed for all typesof business

Multinational

Comprehensivefunctionality

Over 25,000 installations around

the world

SAP Modules


mySAP Business Suite


Oracle E-Business Suite


Source: Oracle

• Collaborative Planning• Demand Planning• Supply Planning• Inventory Optimization• Advanced Scheduling• Order Promising

Planning


DocumentManagement

•File Management •Workspaces •Complex Search•Categories •Versioning •Review Process •Edit-in-Place •File Synchronization

Source: Oracle

EngineeringPlans Mgmt

•Multi-format CAD Rendering and Markup•Collaboration•Structure hierarchy• Parts lists• Part attributes• Query of attribute data


Implementation MethodologiesAnd Toolsets

ERP Concepts


SAP Solution Manager Roadmap


Oracle ApplicationImplementation Methodology (AIM)


Definition - Plan the project, review client business objectives, understand the business processes, and evaluate the feasibility of meeting those objectives under time, resource, and budget constraints.

Operations Analysis - The project team develops the Business Requirements Scenarios based on deliverables from the Definition phase. A model for the application architecture is created and the technical architecture is designed. Finally, a Transition Strategy is developed for migrating the client organization from the current system to the new production system.



Solution Design - Project team members create detailed Business Procedure Documentation. Supporting business requirements may require building application extensions to standard features. While new system designs are being finalized, the application and technical architecture begins to take form. The technical staff designs a technical architecture that can support the standard application configuration and customization.

Build - Test the business system as a formal conference room pilot (CRP). The business system test validates the configuration of the new system and is performed in an environment that closely resembles production.



Transition - The project team deploys the new system into the client organization. The project team trains the users while the technical team configures the Production Environment and converts data. During Transition, users perform an acceptance test of the new system. The Transition phase ends with the switch-over to production, when users start performing their job duties using the new system.

Production - The client compares actual results to project objectives and determines if improvements can be made. Finally, the client starts preliminary planning of the future business and technical direction of the organization.



Source:

ValueSAP

More Implementation Tools


Source:

ValueSAP



Tools to Support System Testing

Source:

ValueSAP


Documents

Operations Management MSOM 306.001 Lecture 11 – Enterprise Solutions for Managing Operations Al Baharmast, Ph.D