September 1, 2005 1ERP Methodology and Project Management
Air Force Mentor-Protégé Program
ERP Overview
Ronald E. Giachetti,Ph.D.Associate ProfessorIndustrial and Systems EngineeringFlorida International University
Duane P. Truex, Ph.D.Associate Professor
Robinson College of BusinessDepartment of Computer Information Systems
Georgia State University
September 1, 2005 Day 1 M odule 3 Slide 2
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
"Any sufficientlyadvanced technology isindistinguishable from
magic."
(Arthur C. Clarke)
September 1, 2005 Day 1 M odule 3 Slide 3
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Agenda ERP ERP Benefits and Costs ERP Market ERP Implementation
September 1, 2005 Day 1 M odule 3 Slide 4
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP A packaged application that supports
and automates business processesand manages data.
Characteristics of ERP are:Modules are integrated, applicationdesigned based on business process.Reflect ‘best business’ processes.Large and complex.
September 1, 2005 Day 1 M odule 3 Slide 5
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP Drives Business Change Enables high levels of integration
across business functions and units new way of business for manyorganizations.
Provides for widespread sharing ofdata from a single informationrepository
Drives extensive businesstransformation and changemanagement efforts sinceorganization must change to matchprocesses supported by ERP
Requires high levels of implementationeffort and support
ERP
September 1, 2005 Day 1 M odule 3 Slide 6
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP FunctionalityFinance
-General Ledger-Accounts Receivable-Accounts Payable-Procurement-Fixed Assets-Treasury Mgmt-Cost Control-Grant Management
Human Resources
-HR/BenefitsAdministration-Payroll-Self-serv ice HR
e-Business
-eProcurement- Employee Self Serv ice- e-Recruiting/e-Hiring- e-Filing- Citizen Access- Web-enabled transactions- e-Commerce
Transaction EngineCore software that managestransaction flow amongapplications and handles taskslike security and data integrity
Customer Relationship Mgt
-Consistent user experience- Personalization of serv ices- Realtime access- enterprise info
Supply Chain Mgmt
Planning, scheduling and fulfillmentapplications that address allprocurement requirements across the enterprise
Data Analysis
Decision support software thatlets senior executives and otherusers analyze transaction data totrack business performance
September 1, 2005 Day 1 M odule 3 Slide 7
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Evolution of ERP 1960s: software packages with inventory
control 1970s: MRP systems
Production schedule with materialsmanagement
1980s: MRPII systemsAdds financial accounting system
1990s: MRPIIIntegrated systems for manufacturingexecution
Late 1990s: ERPIntegrated manufacturing with supply chain
September 1, 2005 Day 1 M odule 3 Slide 8
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Enterprise System Software Enterprise Resource Planning (ERP) Customer Relationship Management
(CRM) (SAP now market leading, 6% sales fromCRM).
Supply Chain Management (SCM) Product Data Management (PDM) Enterprise Application Integration (EAI) Data Warehousing (DW) eMarketplace / eProcurement
September 1, 2005 Day 1 M odule 3 Slide 9
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
SupportingorganizationalchangesFacilitatingbusinesslearningEmpoweringand buildingcommonvisions
Building
business
flexibility
IT cost
reduction
increased IT
infrastructure
capability
Supporting businessgrowthbusinessalliance
Building businessinnovationscostleadershipexternallinkages
Generating productdifferentiation
Improve
Access to
information
Resource
management
Decision
making
Planning
Performance
Reduction
Cost
Cycle time
Improvement
Productivity
Quality
Customerservice
ORGANIZATIONALIT
INFRASTRUCTURESTRATEGICMANAGERIALOPERATIONAL
Expected ERP Benefits
September 1, 2005 Day 1 M odule 3 Slide 10
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé ProgramSix primary reasons emerged for package selection
decisions
Factor FrequencyPercent
Features/functionality best fit requirements 193 20%
Architecture best fit with IT strategy/goals 127 13%
Vendor's reputation 126 13%
Vendor's ability to provide a complete solution 124 13%
Price 110 12%
Vendor product/vision 99 10%
Advice from peers 67 7%
Previous experience with vendor 41 4%
Part of larger purchasing group that selected product 38 4%
Advice from consultant/industry analyst 28 3%
Why did universities pick a particular vendor?
Respondents were asked to “pick all that apply”
Note that this does not necessarily mean that these were the most important reasons packageswere selected – just that they played a role in the decision
September 1, 2005 Day 1 M odule 3 Slide 11
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP Solution Components Costs
Implementation
60%
Infrastructure
20%
ERP Software
20%
‘rule of thumb’ – based onconsultant experiences.
September 1, 2005 Day 1 M odule 3 Slide 12
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé ProgramSoftware License Costs to Services
(implementation) Ratios
1
5
1
15
0
2
4
6
8
10
12
14
16
Commercial Government
Software
Services
Source: OMB 2003
September 1, 2005 Day 1 M odule 3 Slide 13
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP Hidden Costs Training – usually underestimated. Employees must learn new
process not just software. Integration & Testing – Testing links between ERP and other
systems. Add-ons from vendor. Customization – All consultants recommend ‘plain vanilla’ but
be realistic some customization is needed. Data Conversion – need to clean and filter data in legacy
systems and transport it. Data Analysis – ERP stores transactional data, often need to
integrate with other data for decision support. Consultants – need to plan disengagement of consultants. Replacing best and brightest employees – need to staff ERP
project with best employees, backfilling a cost. Implementation team stays in place – cannot just disband
team, need to keep in place since they now know ERP in-and-out.
September 1, 2005 Day 1 M odule 3 Slide 14
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
High-end ERP Software• Sales: from $500 million (92) to $3.3 billion (97)• Fastest-growing software company worldwide• more than 84,000 installations, in more than 50 countries
• Bought by PeopleSoft in 2003• WorldSoftware and OneWorld
• Was Baan, bought by SSA(System SoftwareAssociates) in 2003• Now targeting SME besidesLarge companies
• 2nd biggest• (now 1st after acquisition?)• Most open package
September 1, 2005 Day 1 M odule 3 Slide 15
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Mid-level ERP Software
September 1, 2005 Day 1 M odule 3 Slide 16
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Revenue (Billion $)
SSA Global (Baan)
3%
Geac
2%
Intentia
2%
Infor Global
Solutions
2%
Lawson Software
2%
Microsoft Business
Solutions
4%
Sage
5%
Oracle
PeopleSoft
18%
SAP
40%
Others
22%
ERP Market (2004)
Source: AMR MarketReport 2004.
September 1, 2005 Day 1 M odule 3 Slide 17
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP Market ERP Extensions are applications that
increase the functionality of ERP.Customer Relationship Management(CRM)Supply Chain Management (SCM)E-businessBusiness intelligence tools
ERP extensions are becoming agreater part of the overall ERP market.
September 1, 2005 Day 1 M odule 3 Slide 18
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP in Government
ERP
ERP Services
Source: Input Inc. Reston VA, 2004.
Estimated 2009 Federal Market forERP ( $7.7 Billion Total) • Services for
integration veryimportant.
• Department ofDefense andDepartment ofHomeland Securityexpected to be largestconsumers.
September 1, 2005 Day 1 M odule 3 Slide 19
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Trends in the ERP Marketplace Speed, Speed, Speed
TemplatesRapid Implementation Methodologies
Cost Effective Implementations for LargeEnterprises
Product expansion (tax collections, fleetmanagement)
Internet/Intranet and Electronic Commerce Outsourcing and Application System Providers Application Management Services
September 1, 2005 Day 1 M odule 3 Slide 20
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ERP MarketMost of Fortune 500 companies havealready installed ERP systemsExpanding rapidly into new markets•Small and medium sized enterprises
(SME)•Developing countries
Trends in the ERP Marketplace
September 1, 2005 Day 1 M odule 3 Slide 21
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
IT projectsOther:
• Decided how they wanted todo business
• Choose a software package• Rewrote large portions of the
software code
ERP:• The business often must be
modified to fit the system• More complex and failure prone
Tight Fit
Loose Fit
ERP Projects are Different
September 1, 2005 Day 1 M odule 3 Slide 22
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
10%
55%
35%
On time, w ithin budgetOverrunCancelled
178%230%
0%
50%
100%
150%
200%
250%
300%
350%
Cost overruns Schedule overruns
Overrun
100%
Implementedfunctionality:
41% of whatwas desired
ERP Project Over-runs
September 1, 2005 Day 1 M odule 3 Slide 23
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Summary ERP remains complex, but knowledge
about implementation has developedsubstantially over the past few years.
ERP systems drive organizationalchange.
ERP market moving towardsextensions (addressing weaknesses ofERP) and towards mid-market andsmaller enterprises.
September 1, 2005 24ERP Methodology and Project Management
Air Force Mentor-Protégé Program
Enterprise Reference Architectures
Ronald E. Giachetti,Ph.D.Associate ProfessorIndustrial and Systems EngineeringFlorida International University
Duane P. Truex, Ph.D.Associate Professor
Robinson College of BusinessDepartment of Computer Information Systems
Georgia State University
September 1, 2005 Day 1 M odule 3 Slide 25
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
“Everything should bemade as simple aspossible, but not simpler”– Albert Einstein
September 1, 2005 Day 1 M odule 3 Slide 26
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Agenda Modeling Theory Reference Architectures ARIS Reference Architecture as a
commercial example utilized by SAP
September 1, 2005 Day 1 M odule 3 Slide 27
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Definitions Enterprise: a complex set of business
processes that can be designed toaccomplish a specific set of objectives.
Architecture:A description (often graphical) of thestructure of something.A structured plan, a framework on the basisof which a product or an organization ofan enterprise can be constructed
Reference model: a general model that can beused as a base to derive other models from.
Reference Architecture: is a structured set ofmodels which represent the building blocks of thesystem.
September 1, 2005 Day 1 M odule 3 Slide 28
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Why we need ERP Reference Architectures ERP systems are complex and difficult to understand how they
operate. A reference architecture is a model that describes ERP
systems – helps people understand how they work. Use of reference architectures for:
Business Process Reengineering (both ‘AS-IS’ and ‘TO-BE’modeling)TrainingConfiguration
Reference architectures capture, standardize, and representthe commonalities found in business process reengineeringand enterprise integration projects (Vernadat 1996).
Characterize the best-in-class management practices andsoftware solutions; i.e. knowledge management.
Inclusion of all elements. Leverage the previous work done in enterprise engineering;
i.e., learning.
September 1, 2005 Day 1 M odule 3 Slide 29
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Models An abstract representation of
reality that excludes much of theworld’s infinite detail.
The purpose of a model is toreduce the complexity ofunderstanding or interacting witha phenomenon by eliminating thedetail that does not influence itsrelevant behavior.
September 1, 2005 Day 1 M odule 3 Slide 30
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Abstraction
September 1, 2005 Day 1 M odule 3 Slide 31
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Modeling Point #1 Modeling is the ‘art’ of abstraction,
knowing what to include in modeland what to leave out.
September 1, 2005 Day 1 M odule 3 Slide 32
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
A model reveals what its creatorbelieves is important in understandingor predicting the phenomenamodeled
September 1, 2005 Day 1 M odule 3 Slide 33
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Africa is morethan 10 timeslarger thanGreenland!
Mecator’s Projection
September 1, 2005 Day 1 M odule 3 Slide 34
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Peterson’s Projection: Area Accurate
September 1, 2005 Day 1 M odule 3 Slide 35
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Modeling Point #2 All models are built with a purpose,
the purpose is determined by themodel creator.
Standard models have built inpurposes (for example, UML activitydiagrams or role activity diagrams).
September 1, 2005 Day 1 M odule 3 Slide 36
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Model Views
A
Figure 1. Front view of physical object
September 1, 2005 Day 1 M odule 3 Slide 37
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Model Views
A
Possibility 1 Possibility 2
A
Figure 2. Two possible top views for the same front view
September 1, 2005 Day 1 M odule 3 Slide 38
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Enterprise System Views
FunctionBehaviorOrganizationor resourceinformation
DataProcessI/O
ControlDataFunctionOrganization
FunctionInformationOrganizationResource
CurtisZachmanARISCIMOSA
September 1, 2005 Day 1 M odule 3 Slide 39
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Enterprise Views A Reference Architecture for an ERP
system requires the following views:Information or Data view – describes thedata structure of the entities or objects inthe system.Function View – describes the functionssupported by the system (what thesystem does).Process View – describes how the systemcompletes the functions.Organization View – describes how theenterprise is organized.
September 1, 2005 Day 1 M odule 3 Slide 40
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Modeling Point #3 Systems tend to be complex, our
models only abstract limited parts ofthe entire system (called a view).
You need multiple views tounderstand the entire system. We usedecomposition, but instead of ahierarchy into views.
Views must be consistent!
September 1, 2005 Day 1 M odule 3 Slide 41
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Enterprise Modeling Enterprise modeling has to fulfill several
requirements to achieve efficient and effectiveenterprise integration:
provide a modeling language easily understood bynon-IT professionals, but sufficient for modelingcomplex industrial environments.provide a modeling framework which:
• covers the life cycle of enterprise operation fromrequirements definition to end of life.
• enables focus on different aspects of enterpriseoperation by hiding those parts of the model notrelevant for the particular point of view.
• supports re-usability of models or model parts
September 1, 2005 Day 1 M odule 3 Slide 42
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ARIS The Architecture for Information
Systems (ARIS) developed in Germanyand adopted by SAP.
Adheres to enterprise concepts foundin CIMOSA, GRAI, and other RA.
Uses Event Process Chains to modelprocesses.
September 1, 2005 Day 1 M odule 3 Slide 43
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
ARISExecutivemgmt
Materials mgmt Sales
InventoryDisposition
RequestOffer
Customer
Requestreceived
Requestprocessed
Offerprocessing
RequestRequest
processing
Salesprocessing
Determine delivery
date
RequestprocessingSales Offer
processingCheckCredit
worthiness
Organizationalview
Data view Control view Functional view
September 1, 2005 Day 1 M odule 3 Slide 44
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Event Process Chains Event Driven Process Chains (EPC), which
are one of the central components of theArchitecture for Integrated InformationSystems (ARIS) (Scheer 1995).
Used by SAP in modeling business processessupported by their ERP package SAP R/3.
EPC depict several important relationships ina business process.
Control Flow depicted as a sequence of event-function-event linkages.Information flow which specifies where data iscreated, read, updated, or deleted by a function.Organization assignment showing who does thefunction.
September 1, 2005 Day 1 M odule 3 Slide 45
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
CASE Tool based on EPC
September 1, 2005 Day 1 M odule 3 Slide 46
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
EPC ConstructsConstruct Symbol Definition
Event
Event name
An event describes a change
of state in the system.
Funct ion
Function
name
A function describes the
transformation from an entry
state to a target state.
Link Operators
XOR
V
V
The link operators describe the
logical connection between
events and functions or
process paths.
Process Path
Process
Name
A process path describes the
link to another process.
Organization Unit
Organization
unit name
An organization unit describ es
who is responsible for
completing the function.
Information Object
Information
object name
An information object
describes a real - world data
structure (e.g. order form)
Information Flow
An information flow describes
either the creation, read,
update, or deletion of t he
information object.
Control Flow
The control flow connects
events and functions to show
the sequence of activities.
Assignment of Organization
U n i t
The organization unit
assignment shows who
September 1, 2005 Day 1 M odule 3 Slide 47
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
START
Generate
Supply
Request : D
Generate
Inventory
Report : D
V
Supply
Request
Accepted
Inventory
Report
Generated
Generate PIN
Order : S
Generate PO
:M
PO Sent
PIN Order
Generated
Supply
Request
Inventory
Report
Create CD-
ROM with
PINs : PM
(2,3)
(1,3,5)
Supply
Request(1,1,3)
Prototype
Card for
Validation
Order Details
Printing Order
Generated
Generate
Order Details/
Request
Prototype : M
Prototype
Card
Validated
PO
POS PIN
Order
Generated
V
Sales
Information
(2,2,3)
XOR
Supply
Request
Rejected
Review
Supply
Request : S
Supply
Request Sent
(4,5)
V
(5,7)
(2,3)
Generate
Prototype
Card : P
Prototype
Card Ready
Prototype
Requested
(4,5)
Validate
Prototype
Card : M
(5,7)
(1,5,6)
(3,5)
V
(3,5)
Generate
Printing Order
: M
V
(4,6)
CD-ROM with
PINs created
Print Cards :
P
V(5,6)
(5,6)
CD-ROM with
PINs
(1,5,6)
(1,4,5)
(1,3,5)
Printing Order
Printing Order (1,4,6)
(3,5)
Activation/
Deactivaion
PIN Order
Sales Analysis
(2,4,4)
(1,4,5)
V(1,3,5)
(1,3,5)
Order Details
(1,5,6)
PO
(1,3,5)
Order Details (1,5,6)
EPC for Latin American PrePaid Telephone Cards
September 1, 2005 Day 1 M odule 3 Slide 48
FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program
Summary Reference Architectures describe how
an ERP system is organized andoperates.
SAP makes the greatest usage ofreference architectures, but othervendors use them as well.
The reference architecture is used toconfigure, understand, and driveprocess redesign efforts.