ERP
Content
Enterprise Resource Planning
What is ERP?
y
An ERP or Enterprise Resource Planning system integrates information and business processes to enable information entered once to be shared throughout the organization. ERP had its origins in manufacturing and production planning. In the mid-90¶s it was extended to other backoffice functions such as financial management and human resource management. More recently these systems have addressed applications specific to higher education such as student systems and grants management.
y
y
Enterprise Resource Planning (ERP)
Software designed for organizing and managing business processes Modules share information across all business functions Can share customer sales data with the supply chain to help with global replenishment All modules are fully integrated and use a common database ± some PC base
Integration of ERP
Evolution of ERP
y y
First generation ERP
Managed all internal business activities
Second Generation ERP
Late 1990¶s software integrated supply chains Systems focused on decision-making SCM (supply chain management) modules include LP and simulation support SCI (supply chain intelligence) capability allows collection of intelligence along the entire supply chain ASP (application service provider) suppliers set-up and run systems for others
Evolution of ERP
1960¶s - Systems Just for Inventory Control 1970¶s - MRP ± Material Requirement Planning (Inventory with material planning & procurement) 1980¶s - MRP II ± Manufacturing Resources Planning (Extended MRP to shop floor & distribution Mgnt.) Mid 1990¶s - ERP ± Enterprise Resource Planning (Covering all the activities of an Enterprise) 2000 onwards ± ERP II ± Collaborative Commerce (Extending ERP to external business entities)
Benefits of ERP
Reduce time Business integration Process re-engineering Foundation of new process Better analysis & planning capabilities
Challenges of ERP
Daunting Implementation Large initial cost Inflexibility Failure to achieve strategic benefit
Objectives
For Management ± to know what is happening in the company One solution for better Management For cycle time reduction To achieve cost control & low working capital To come up with latest technologies To shun the geographical gaps To satisfy the customers with high expectations To be Competitive & for survival
ERP Vendors
SAP PeopleSoft Sage Group Oracle etc.
ERP Components
components of an ERP system are the common components of a Management Information System (MIS). - Module based ERP software is the core of an ERP system. Each software module automates business activities of a functional area within an organization. Common ERP software modules include product planning, parts purchasing, inventory control, product distribution, order tracking, finance, accounting and human resources aspects of an organization.
ERP Software Business Processes The
- Business processes within an organization falls into three levels - strategic planning, management control and operational control. ERP has been promoted as solutions for supporting or streamlining business processes at all levels. Much of ERP success, however, has been limited to the integration of various functional departments.
Contd«
of ERP systems are employees of the organization at all levels, from workers, supervisors, mid-level managers to executives. Operating Systems - Many large ERP systems are UNIX based. Windows NT and Linux are other popular operating systems to run ERP software. Legacy ERP systems may use other operating systems.
Hardware and ERP Users - The users
ERP Applications
Finance and accounting
Investment, cost, asset, capital, and debt management Budgets, profitability analysis, and performance reports
Sales and marketing
Handles pricing, availability, orders, shipments, & billing
Production and materials management
Process planning, BOM, product costing, ECN¶s, MRP, allocates resources, schedules, PO¶s, & inventory
Human resources
Workforce planning, payroll & benefits, & org. charts
PHASES
Needs Assessment Phased Implementation Software Selection
ERP Project
Training Conference Room Pilot Process Reengineering
ERP Product selection Phase
ERP Team formation for selection Appointment of Consultants [if needed] Scoping study Product selection Cost estimation
Preparation Phase
Framing ERP Implementation Strategies Functional & IT team formation Training on ERP functions & features Scope finalization GAP analysis Action plan to resolve the gaps
ERP product acceptance
Adapting directly, all the functions available in the ERP Product [Applicable for startup companies] Change the way the firm does the business to fit the product [Compromising] Customize the ERP product to suit the business Processes. [Customization]
GAP Analysis
This is the process to identity the gaps by mapping the expectations of the company with the capabilities of the ERP product
Production Phase
Installing the software & hardware Tuning the software to meet the Customization needs.
Implementation Phase
Conference Room Pilot [Parallel run] Resolving the Parallel run issues Training the end users Live run
Post-Implementation Phase
Regular monitoring Maintenance
BPR Introduction
y
Why does so much IT investment seem not produce corresponding increase in productivity and performance? 1. Faulty measurements 2. Information Technology 3. Organizational process, structure and design
y
Hammer & Champy ± radically redesign key business processes ³Reengineering The Corporation: A Manifesto for Business Revolution´ Davenport & Short ± highlight the relationship between IT and BPR relationships: ³The New Industrial Engineering: Information Technology and Business Process Redesign´
y
Business Process Reengineering (BPR)
Making processes
effective - producing the desired resulted efficient - minimising the resources used adaptable - to changing customer & business needs.
BPR Philosophy Radical, cross functional, dramatic
Focus on & organise around outcomes Provide direct access to customers (internal & external) Harness technology Control through policies, practices and feedback Enable independent and simultaneous work Build in feedback channels
Hammer and Champy, Re-engineering the Corporation, Harper Collins, 1993
BPR Focus
y On end-to-end business process that extends all to the way to a customer
(external or internal) who receives some value from the process
y On essential processes that deliver outcomes
- moving flow - cross-functional in scope within enterprise - cross-enterprises
y Assumptions about performance improvement thru. reengineering
1. clean-sheet rethinking 2. quantum improvements > incremental improvements 3. use IT to re-engineer process in qualitatively different ways 4. maximum value-added in process, minimize everything else 5. measure value thru. surrogate performance measures 6. Change work environment to fit reengineered process
ERP and BPR
Implementation goes closely with business process reengineering and organizational remodelling Understanding the full import of going for ERP; whether enough organizational resilience and flexibility to undertake the project. Mismatch between the management aspirations and organizational compliance.
Material Requirements Planning (MRP)
Computer-based information system that schedules and orders dependent-demand inventory components. Uses the master production schedule, bills of materials, and inventory records as inputs. Outputs recommendations:
± When to release new orders. ± When to reschedule open orders.
Objective of MRP
Determines the quantity and timing of material requirements
± Determines what to order (checks BOM), how much to order (lot size rules), when to place the order (needed date minus lead time), and when to schedule delivery (on date needed)
Input/Output - MRP Process
Business Needs
Recognizing that innovation is the key to gaining competitive advantage. Investing in the latest advanced automation technologies capable of adapting to new requirements quickly while keeping costs under control.
Solution
Adopting the IBM IT Resource Optimization approach. Through virtualization, provisioning and orchestration technologies, IT resources and workloads are optimized for more efficient usage, yet offer improved response times.
Key-Benefits
Reduced IT operational costs by ten percent annually despite a higher workload. Estimated IT workload increase of 15 percent while reducing cost by 70 percent. Estimated storage need increase of 30 percent while reducing cost by 60 percent. Enabled dynamic reallocation of server capacity.
ERP Models
Hardware: Blade Center, Blade Center JS20, System p:eserver p5 595 Software: Lotus Notes, Tivolic System Manager. Operating System: AIX, AIX 5C Business
Financial Growth
The gross profit was increased to $3 million, $100 million and $196 million in 2004, 2005 and 2006 respectively. These increased gross profit margin by a percentage of net sales by 10 basis points, 90 basis points and 160 basis points in 2004, 2005 and 2006 respectively.
Thank You!!! hank ou!!!
What is ERP?
y
An ERP or Enterprise Resource Planning system integrates information and business processes to enable information entered once to be shared throughout the organization. ERP had its origins in manufacturing and production planning. In the mid-90¶s it was extended to other backoffice functions such as financial management and human resource management. More recently these systems have addressed applications specific to higher education such as student systems and grants management.
y
y
Enterprise Resource Planning (ERP)
Software designed for organizing and managing business processes Modules share information across all business functions Can share customer sales data with the supply chain to help with global replenishment All modules are fully integrated and use a common database ± some PC base
Integration of ERP
Evolution of ERP
y y
First generation ERP
Managed all internal business activities
Second Generation ERP
Late 1990¶s software integrated supply chains Systems focused on decision-making SCM (supply chain management) modules include LP and simulation support SCI (supply chain intelligence) capability allows collection of intelligence along the entire supply chain ASP (application service provider) suppliers set-up and run systems for others
Evolution of ERP
1960¶s - Systems Just for Inventory Control 1970¶s - MRP ± Material Requirement Planning (Inventory with material planning & procurement) 1980¶s - MRP II ± Manufacturing Resources Planning (Extended MRP to shop floor & distribution Mgnt.) Mid 1990¶s - ERP ± Enterprise Resource Planning (Covering all the activities of an Enterprise) 2000 onwards ± ERP II ± Collaborative Commerce (Extending ERP to external business entities)
Benefits of ERP
Reduce time Business integration Process re-engineering Foundation of new process Better analysis & planning capabilities
Challenges of ERP
Daunting Implementation Large initial cost Inflexibility Failure to achieve strategic benefit
Objectives
For Management ± to know what is happening in the company One solution for better Management For cycle time reduction To achieve cost control & low working capital To come up with latest technologies To shun the geographical gaps To satisfy the customers with high expectations To be Competitive & for survival
ERP Vendors
SAP PeopleSoft Sage Group Oracle etc.
ERP Components
components of an ERP system are the common components of a Management Information System (MIS). - Module based ERP software is the core of an ERP system. Each software module automates business activities of a functional area within an organization. Common ERP software modules include product planning, parts purchasing, inventory control, product distribution, order tracking, finance, accounting and human resources aspects of an organization.
ERP Software Business Processes The
- Business processes within an organization falls into three levels - strategic planning, management control and operational control. ERP has been promoted as solutions for supporting or streamlining business processes at all levels. Much of ERP success, however, has been limited to the integration of various functional departments.
Contd«
of ERP systems are employees of the organization at all levels, from workers, supervisors, mid-level managers to executives. Operating Systems - Many large ERP systems are UNIX based. Windows NT and Linux are other popular operating systems to run ERP software. Legacy ERP systems may use other operating systems.
Hardware and ERP Users - The users
ERP Applications
Finance and accounting
Investment, cost, asset, capital, and debt management Budgets, profitability analysis, and performance reports
Sales and marketing
Handles pricing, availability, orders, shipments, & billing
Production and materials management
Process planning, BOM, product costing, ECN¶s, MRP, allocates resources, schedules, PO¶s, & inventory
Human resources
Workforce planning, payroll & benefits, & org. charts
PHASES
Needs Assessment Phased Implementation Software Selection
ERP Project
Training Conference Room Pilot Process Reengineering
ERP Product selection Phase
ERP Team formation for selection Appointment of Consultants [if needed] Scoping study Product selection Cost estimation
Preparation Phase
Framing ERP Implementation Strategies Functional & IT team formation Training on ERP functions & features Scope finalization GAP analysis Action plan to resolve the gaps
ERP product acceptance
Adapting directly, all the functions available in the ERP Product [Applicable for startup companies] Change the way the firm does the business to fit the product [Compromising] Customize the ERP product to suit the business Processes. [Customization]
GAP Analysis
This is the process to identity the gaps by mapping the expectations of the company with the capabilities of the ERP product
Production Phase
Installing the software & hardware Tuning the software to meet the Customization needs.
Implementation Phase
Conference Room Pilot [Parallel run] Resolving the Parallel run issues Training the end users Live run
Post-Implementation Phase
Regular monitoring Maintenance
BPR Introduction
y
Why does so much IT investment seem not produce corresponding increase in productivity and performance? 1. Faulty measurements 2. Information Technology 3. Organizational process, structure and design
y
Hammer & Champy ± radically redesign key business processes ³Reengineering The Corporation: A Manifesto for Business Revolution´ Davenport & Short ± highlight the relationship between IT and BPR relationships: ³The New Industrial Engineering: Information Technology and Business Process Redesign´
y
Business Process Reengineering (BPR)
Making processes
effective - producing the desired resulted efficient - minimising the resources used adaptable - to changing customer & business needs.
BPR Philosophy Radical, cross functional, dramatic
Focus on & organise around outcomes Provide direct access to customers (internal & external) Harness technology Control through policies, practices and feedback Enable independent and simultaneous work Build in feedback channels
Hammer and Champy, Re-engineering the Corporation, Harper Collins, 1993
BPR Focus
y On end-to-end business process that extends all to the way to a customer
(external or internal) who receives some value from the process
y On essential processes that deliver outcomes
- moving flow - cross-functional in scope within enterprise - cross-enterprises
y Assumptions about performance improvement thru. reengineering
1. clean-sheet rethinking 2. quantum improvements > incremental improvements 3. use IT to re-engineer process in qualitatively different ways 4. maximum value-added in process, minimize everything else 5. measure value thru. surrogate performance measures 6. Change work environment to fit reengineered process
ERP and BPR
Implementation goes closely with business process reengineering and organizational remodelling Understanding the full import of going for ERP; whether enough organizational resilience and flexibility to undertake the project. Mismatch between the management aspirations and organizational compliance.
Material Requirements Planning (MRP)
Computer-based information system that schedules and orders dependent-demand inventory components. Uses the master production schedule, bills of materials, and inventory records as inputs. Outputs recommendations:
± When to release new orders. ± When to reschedule open orders.
Objective of MRP
Determines the quantity and timing of material requirements
± Determines what to order (checks BOM), how much to order (lot size rules), when to place the order (needed date minus lead time), and when to schedule delivery (on date needed)
Input/Output - MRP Process
Business Needs
Recognizing that innovation is the key to gaining competitive advantage. Investing in the latest advanced automation technologies capable of adapting to new requirements quickly while keeping costs under control.
Solution
Adopting the IBM IT Resource Optimization approach. Through virtualization, provisioning and orchestration technologies, IT resources and workloads are optimized for more efficient usage, yet offer improved response times.
Key-Benefits
Reduced IT operational costs by ten percent annually despite a higher workload. Estimated IT workload increase of 15 percent while reducing cost by 70 percent. Estimated storage need increase of 30 percent while reducing cost by 60 percent. Enabled dynamic reallocation of server capacity.
ERP Models
Hardware: Blade Center, Blade Center JS20, System p:eserver p5 595 Software: Lotus Notes, Tivolic System Manager. Operating System: AIX, AIX 5C Business
Financial Growth
The gross profit was increased to $3 million, $100 million and $196 million in 2004, 2005 and 2006 respectively. These increased gross profit margin by a percentage of net sales by 10 basis points, 90 basis points and 160 basis points in 2004, 2005 and 2006 respectively.
Thank You!!! hank ou!!!
