1 System Categories Enterprise-wide Systems aka Enterprise Systems, are systems that allow companies to integrate information across operations on a company-wide basis Interorganizational Systems (IOS) Systems that communicate across organizational boundaries who’s goal is to streamline information flow from one company to another
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1 System Categories Enterprise-wide Systems aka Enterprise Systems, are systems that allow companies to integrate information across operations on a company-wide.
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System Categories
Enterprise-wide Systems aka Enterprise Systems, are systems that allow companies to integrate information across operations on a company-wide basis
Interorganizational Systems (IOS)Systems that communicate across organizational boundaries who’s goal is to streamline information flow from one company to another
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Enterprise Systems – Within the Organization
Example – Order Process and Information Flow
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Interorganizational Systems – Across Organizations
Example – Order Process and Information Flow
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The Value Chain –Internally Focused
Used to identify the flow of information through a set of business activities. It identifies two types of activities, primary and support
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The Value Chain - Primary Activities
Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry
Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry
Primary Activities include:• Inbound Logistics – receiving and stocking raw
materials, parts, products• Operations/Manufacturing – processing orders and
raw materials into finished product• Outbound Logistics – distribution of the finished
product to customers • Marketing and Sales – creating demand for the product
(pre-sales activities)• Customer Service – providing support for the product
or customer (post-sales activities)
Primary Activities include:• Inbound Logistics – receiving and stocking raw
materials, parts, products• Operations/Manufacturing – processing orders and
raw materials into finished product• Outbound Logistics – distribution of the finished
product to customers • Marketing and Sales – creating demand for the product
(pre-sales activities)• Customer Service – providing support for the product
or customer (post-sales activities)
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The Value Chain - Support Activities
Support activities are business activities that enable Primary Activities These activities can be unique by industry but are generally more typical across industries
Support activities are business activities that enable Primary Activities These activities can be unique by industry but are generally more typical across industries
Support Activities include:• Infrastructure – hardware and software that must be
implemented to support applications for primary activities• Human Resources – employee management activities:
hiring, interview scheduling, and benefits management• Technology Development – the design and development
of applications that support the organization• Procurement – purchase of goods or services that are
required as inputs to primary activities
Support Activities include:• Infrastructure – hardware and software that must be
implemented to support applications for primary activities• Human Resources – employee management activities:
hiring, interview scheduling, and benefits management• Technology Development – the design and development
of applications that support the organization• Procurement – purchase of goods or services that are
required as inputs to primary activities
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A Value System – Externally Focused
• A connection of value chains across organizations• Allows the flow of information between organizations to support business activities
• Upstream flow is information received from another organization (i.e. from company A to Company B above)
• Downstream Flow is information sent to another organization (i.e. from Company B to Company C above)
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Options for Enterprise Systems – Packaged vs. Custom
Packaged Applications “Off the Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications)
Packaged Applications “Off the Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications)
Packaged Key Characteristics•Best Use - standardized, repetitive tasks•Cost Effectiveness – lower cost because vendors can create once and then sell many copies to others
•Organizational Fit – may not be well suited for tasks that are unique to a particular business or industry
•Maintenance – the vendor makes the changes and then sends the updates to its customer on a periodic basis. The customer does not control this schedule
Packaged Key Characteristics•Best Use - standardized, repetitive tasks•Cost Effectiveness – lower cost because vendors can create once and then sell many copies to others
•Organizational Fit – may not be well suited for tasks that are unique to a particular business or industry
•Maintenance – the vendor makes the changes and then sends the updates to its customer on a periodic basis. The customer does not control this schedule
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Options for Enterprise Systems – Packaged vs. Custom
Custom Applications
“Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization)
Custom Applications
“Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization)
Custom Key Characteristics •Best Use - unique business process to an organization•Cost Effectiveness – much higher cost due to the one-time creation of the applications
•Organizational Fit – excellent as they are designed to fit a specific business process
•Maintenance – all changes are created and implemented by the organization using the application
Custom Key Characteristics •Best Use - unique business process to an organization•Cost Effectiveness – much higher cost due to the one-time creation of the applications
•Organizational Fit – excellent as they are designed to fit a specific business process
•Maintenance – all changes are created and implemented by the organization using the application
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Enterprise System Evolution
System TypesSystem Evolution
Standalone Systems
Integrated Systems(Intraorganizational)
Integrated Systems(Interorganizational)
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Enterprise Systems – Stand-alone or Legacy
Stand Alone (Legacy) SystemsA single system or groups of systems, designed to each support one or a few business functions (e.g. accounting system or a manufacturing system, etc.)
Stand Alone (Legacy) SystemsA single system or groups of systems, designed to each support one or a few business functions (e.g. accounting system or a manufacturing system, etc.)
Stand Alone (Legacy) Systems• Little or no integration with other organizational systems. If integration exists, it is usually in batch (i.e. the accounting system gets updates from manufacturing system once a day or week
• Organizational fit may be better than integrated packages due to the focus on one function and that they have been highly modified over time
• Customization and the age of these systems make them difficult to support due to the complexity, use of older or obscure languages, etc.
Stand Alone (Legacy) Systems• Little or no integration with other organizational systems. If integration exists, it is usually in batch (i.e. the accounting system gets updates from manufacturing system once a day or week
• Organizational fit may be better than integrated packages due to the focus on one function and that they have been highly modified over time
• Customization and the age of these systems make them difficult to support due to the complexity, use of older or obscure languages, etc.
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Enterprise Systems - Legacy System Example
Legacy (stand-alone) Systems – information is not readily shared between systems (i.e. Inbound Logistics inventory information shared with Operations)
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Enterprise Resource Planning
Integrated Packages (Enterprise Resource Planning)Richly functional systems designed to support many organizational functions (e.g. accounting and finance)
Integrated Packages (Enterprise Resource Planning)Richly functional systems designed to support many organizational functions (e.g. accounting and finance)
ERP Key Characteristics• Internally focused systems designed to support the internal
operations of the organization• Highly integrated systems sharing a common data
warehouse for information sharing across functions, using real-time updates
• Organizational fit may be less for individual departments but the integrated sharing of information usually outweighs these issues
• Usually packaged applications supported by the vendor utilizing a common user interface
• Customization is discouraged but these systems have the flexibility to support other outside applications using the common data repository and interfaces
ERP Key Characteristics• Internally focused systems designed to support the internal
operations of the organization• Highly integrated systems sharing a common data
warehouse for information sharing across functions, using real-time updates
• Organizational fit may be less for individual departments but the integrated sharing of information usually outweighs these issues
• Usually packaged applications supported by the vendor utilizing a common user interface
• Customization is discouraged but these systems have the flexibility to support other outside applications using the common data repository and interfaces
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Enterprise Systems – Integrated System Example
Integrated Systems – Information is stored in a single data repository and can be accessed and updated by all functional systems (e.g. Operations)
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Choosing an ERP System - Issues
ERP Systems are: •Supplied by multiple vendors including SAP, Baan, Oracle, etc., with each having their own unique features and structures
•Packaged systems that are following a one size-fits all strategy which means they may not support all functions as well as a custom system
•Similar but are also different. They should be selected based on factors including control, business requirements, and best practices
ERP Systems are: •Supplied by multiple vendors including SAP, Baan, Oracle, etc., with each having their own unique features and structures
•Packaged systems that are following a one size-fits all strategy which means they may not support all functions as well as a custom system
•Similar but are also different. They should be selected based on factors including control, business requirements, and best practices
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Choosing an ERP System – Selection Factors
Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (who will decide?)
Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (who will decide?)
Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (what do you need?)
Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (what do you need?)
Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (how much change is required?)
Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (how much change is required?)
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ERP Capabilities – SAP Example
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ERP and Business Process Reengineering
Hammer and Champy, (“Reenginerring the Corporation”)
“The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and that the information technology was the key enabler for that radical change”
Hammer and Champy, (“Reenginerring the Corporation”)
“The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and that the information technology was the key enabler for that radical change”
Business Process Reengineering
A systematic, structured improvement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost)
Business Process Reengineering
A systematic, structured improvement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost)
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Business Process Reengineering
Steps in Business Process Reengineering• Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shortend time to market, improved quality, etc.)
• Identify critical processes that are to be redesigned• Understand and measure the existing processes as a baseline for future improvements
• Identify ways that information technology can be used to improve processes
• Design and implement a prototype of the new process(es)
Steps in Business Process Reengineering• Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shortend time to market, improved quality, etc.)
• Identify critical processes that are to be redesigned• Understand and measure the existing processes as a baseline for future improvements
• Identify ways that information technology can be used to improve processes
• Design and implement a prototype of the new process(es)
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BPR Today – Observations and Research
Many large failures exist in large scale Business Process Reengineering implementations. To be successful and organizations must have:
• Senior management support• A shared organizational vision• Realistic expectations of outcomes• Participants empowered to reengineer• The right people participating• Sound management practices• Appropriate funding
BPR failures can be tracked back to the lack of one or more of these factors in implementation!
Many large failures exist in large scale Business Process Reengineering implementations. To be successful and organizations must have:
• Senior management support• A shared organizational vision• Realistic expectations of outcomes• Participants empowered to reengineer• The right people participating• Sound management practices• Appropriate funding
BPR failures can be tracked back to the lack of one or more of these factors in implementation!
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BPR Today – Observations and Research
Large bodies of research are available on the role of BRP and BPR implementations. Some of this research has come to the following conclusions:
• Reengineering and related organizational issues are as important as the technical implementation issues (Kumar and Van Hellersberg, 2000; Markus and Tanis, 2000)
• Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system (Soh, Sia, Tay-Yoh, 2000)
• For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required (Willcocks and Sykes, 2000)
• In order to be successful, manager must first transform the organization and then implement the ERP system
Large bodies of research are available on the role of BRP and BPR implementations. Some of this research has come to the following conclusions:
• Reengineering and related organizational issues are as important as the technical implementation issues (Kumar and Van Hellersberg, 2000; Markus and Tanis, 2000)
• Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system (Soh, Sia, Tay-Yoh, 2000)
• For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required (Willcocks and Sykes, 2000)
• In order to be successful, manager must first transform the organization and then implement the ERP system
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Enterprise Systems – Integrated (Interorganizational)
Integrated PackagesRichly functional systems designed to support externally focused functions (Upstream – Supply Chain Management and Downstream – Customer Relationship Management)
Integrated PackagesRichly functional systems designed to support externally focused functions (Upstream – Supply Chain Management and Downstream – Customer Relationship Management)
Integrated Packages• Highly integrated with internal systems (ERP) through the use of interfaces and specialty software
• Organizational fit for these systems is very high as they are highly specific to the function they support
• These are usually packaged applications that are supplied and supported by the ERP vendor or other third party system integrators
• Customization or modifications are also discouraged to minimize support cost but the applications are highly tailorable with configuration options
Integrated Packages• Highly integrated with internal systems (ERP) through the use of interfaces and specialty software
• Organizational fit for these systems is very high as they are highly specific to the function they support
• These are usually packaged applications that are supplied and supported by the ERP vendor or other third party system integrators
• Customization or modifications are also discouraged to minimize support cost but the applications are highly tailorable with configuration options
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Supply Chain Management
Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers
• Supply Chain – the suppliers that an organization purchases from directly
• Supply Network – the suppliers that an organization purchases from directly and its suppliers
Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers
• Supply Chain – the suppliers that an organization purchases from directly
• Supply Network – the suppliers that an organization purchases from directly and its suppliers
SourcesThere are two primary sources of SCM systems. These systems are built to tightly integrate with ERP systems
Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:
• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in realtime)
• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)
• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)
Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:
• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in realtime)
• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)
• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)
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ERP and Supply Chains
It is comprised of a set of applications that automate routine back-end operations:
such as financial management inventory management Scheduling order fulfillment cost control accounts payable and receivable,
It includes front-end operations such as: POS Field Sales Service
It also increases efficiency, improves quality, productivity, and profitability.
ERP or enterprise systems control all major business processes with a single software architecture in real time.
ESSENTIALS OF ENTERPRISE SYSTEMS AND SUPPLY CHAINS
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ESSENTIALS OF ENTERPRISE SYSTEMS AND SUPPLY CHAINS
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Supply Chain
Supply Chain Flows Materials flows are all physical products, new materials, and
supplies that flow along the chain. Information flows relates to all data associated with demand,
shipments, orders, returns and schedules. Financial flows include all transfers of money, payments, credit
card information, payment schedules, e-payments and credit-related data.
Supply chain refers to the flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses (Value Chain), to the final consumer (Demand Chain). It includes tasks such as purchasing, payment flow, materials handling, production planning & control, logistics & warehousing, inventory control, and distribution. When it is managed electronically it is referred to as an e-supply chain.
Supply Chains contribute to increased profitability and competitiveness
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Supply Chain
Automotive Supply Chain
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Supply Chains Components
The supply chain involves three segments: Upstream, where sourcing or procurement from
external suppliers occur Internal, where packaging, assembly, or
manufacturing take place Downstream, where distribution or dispersal
take place, frequently by external distributors. It also includes the movement of
information and money and the procedures that support the movement of a product or a service.
Organizations and individuals are also part of the chain.
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Supply Chains Classifications
There are several major types of supply chain Integrated make-to-stock Continuous replenishment Build-to-order Channel assembly.
Value Chain
Demand Chain
“Supply” Chain
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Adding value along the chain is essential for competitiveness, however problems exist especially in complex or long chains and in cases where many business partners are involved. These problems are due to uncertainties and the need to coordinate several activities, internal units, and business partners.
Demand forecasts are a major source of uncertainties Competition Prices Weather conditions Technological development Customer confidence
Uncertainties exist in delivery times Machine failures Road conditions Shipments
Quality problems may also create production delays
Supply Chain Problems
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The bullwhip effect refers to erratic shifts in orders up and down the supply chain because of poor demand forecasting, price fluctuation, order batching, and rationing within the chain.Even slight demand uncertainties and variability become magnified if each distinct entity, on the chain, makes ordering and inventory decisions with respect to its own interest above those of the chain. Distorted information can lead to tremendous inefficiencies, excessive inventories, poor customer service, lost revenues, ineffective shipments, and missed production schedules.
Supply Chain Problems continued
A common way to solve the bullwhip problem is by sharing information along the supply chain through EDI, extranets, and groupware technologies. For example employing a vendor-managed inventory (VMI) strategy, the vendor monitors inventory levels and when it falls below the threshold for each product this automatically triggers an immediate shipment.
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Information sharing among supply chain partners (c-commerce) sometimes referred to as the collaboration supply chain is one method to overcome problems in the flow. Others are:
Optimal Inventory Levels Supply Chain Coordination and Collaboration Supply Chain Teams Performance Measurement and Metrics Various IT-Assisted Solutions
wireless technology optimal shipping plans strategic partnerships with suppliers just-in-time
Supply Chain Solutions
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Supply Chain Solutions
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Supply Chain Collaboration Management
Manual methods include; phone, fax, and mail EDI is typically used by large corporations EC PRM functions include:
partner profilespartner communicationslead management (of clients)targeted information distributionconnecting the extended enterprisepartner planningcentralized forecastinggroup planninge-mail price lists
Every company that has business partners has to manage the relationships with them. Information needs to flow between the firms and constantly updated and shared.
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Supply Chain Management
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Global Supply Chains
Companies go global (disperse the value chain) for a variety of reasons.
lower costs of materials, products, services and labor availability of products that are unavailable domestically the firm's global strategy technology available in other countries high quality of products intensification of global competition the need to develop a foreign presence to increase sales fulfillment of counter trade.
Supply chains that involve suppliers and/or customers in other countries are referred to as global supply chains.
Global supply chains are usually longer than domestic ones, and more complex. Therefore, additional uncertainties are likely.
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The supply chain process is intertwined with the computerization of its activities. People have wanted to automate the processes along the chain to reduce cost, expedite processing, and reduce errors.
Material requirements planning (MRP) essentially integrates production, purchasing, and inventory management of interrelated products.
Manufacturing resource planning (MRP II), enhanced MRP methodology by adding labor requirements and financial planning.
Enterprise resource planning (ERP) further integrates the transaction processing as well as other routine activities in the entire enterprise.
Integrations continues along several paths functional areas Combining transaction processing and decision support Business intelligence CRM software
Computerized Supply Chains
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Continued
Computerized Supply Chains
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E-Commerce and Supply Chains
E-commercecan digitize some productscan replace all paper documents can replace faxes and telephone calls with electronic messaging Enhances collaboration and information sharingtypically shortens the supply chain and minimizes inventoriesfacilitates customer serviceintroduces efficiencies into buying and sellingenables faster, cheaper, and better communication, collaboration, and discovery of information
E-commerce is emerging as a superb tool for providing solutions to problems along the supply chain. Many supply chain activities, from taking customers' orders to procurement, can be conducted electronically.
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E-Commerce and Supply Chains
Upstream Activities improve the upstream supply chain through e-procurement
Internal Supply Activities from entering purchase orders, to recording sales, to order fulfillment, to tracking shipments, are usually conducted over a corporate intranet
Downstream Activities enhance the activity downstream activities by providing online ordering
Vertical exchanges combine upstream and downstream EC supply chain activities. These B2B exchanges, provide a medium where buyers and sellers can meet.
A major role of EC is to facilitate buying and selling along all segments of the supply chain.
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E-Commerce and Supply Chains
Continued
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There are many benefits to integrating functional systems.
Intangible benefits: Information visibility New/improved processes Customer responsiveness Standardization Flexibility Globalization Business performance Reduction in duplication of entries controls and reconciliation are enhanced rapid assimilation of data into the organization
Supply Chains Benefits Continued
Systems can be integrated internally and externally. Internal integration refers to integration between applications inside a company, whereas external integration refers to integration of applications among business partners.
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Recommendations for Enterprise System Success
Get Help from Outside ExpertsImplementation success is enabled by deep application experience and access to supporting tools and methods
Take a Multidisciplinary Approach to ImplementationsEnterprise systems span the entire organization and as such require input and participation from all functions
Thoroughly Train UsersTraining in organization, business process, and application functions is critical to success and must be reinforced
Secure Executive SponsorshipThe highest level support is required to obtain resources and make and support difficult reengineering decisions