Enterprise Resource Planning (ERP) - University of Tulsabus.collins.utulsa.edu/leonardln/MIS 4133/Enterprise Resource... · Cost – $212,170 (for MOVEX software, design ... disrupting

Enterprise Resource

Planning (ERP) Systems

MIS 4133

Software Systems

Outline

Definition

Model and Architecture

ERP Modules

ERP Packages and

Vendors

Business Value and

Keys to Success

ERP Business Case

Impediments to

Success and Reasons

for Failure

Hidden Costs

ERP Success and

Failure Stories

ERP and Ecommerce

Benefits and Limitations

Set of integrated business applications (modules)

that carry out common business functions:

General ledger, accounts payable, accounts

receivable, material requirements planning, order

management, inventory control, human resources

management

Usually purchased from software vendor

Enterprise Resource Planning

Systems

ERP Systems

Business process

Business process

Business process

Enterprise-wide business processes

Human

Resources

Sales and

Marketing

Manufacturing

and Production

Finance and

Accounting

ERP System

Vendors Customers

ERP System Architecture

Centralized

Database

Finance and

Accounting

Manufacturing

and Production

Human

Resources

Sales and

Marketing

ERP modules are

integrated

ERP modules reflect

a particular way of

doing business

ERP Modules

Example ERP Modules Fixed asset management

Controlling

Financial accounting

Human resources

Materials management

Plant maintenance

Production planning

Project system

Quality management

Sales and distribution

Example of How an ERP System

Works

1. Ordering

2. Availability

3. Production

4. Manpower

5. Purchasing

6. Order Tracking and More Ordering

ERP Package Benefits (rather than

customizing)

Data integration

New ways of doing business

Global capabilities

Flexibility

IT purchasing benefits

IT architecture cost reduction

ERP Software Vendors

SAP

Oracle

PeopleSoft (and J.D. Edwards)

Baan (now owned by Infor Global Solutions)

ERP Business Value

More uniform organization

More efficient operations

More customer-driven business processes

Improved decision making

ERP Keys to Success

Change Management

Management Commitment

Adequate Staff

Understanding of ERP Business Potential

Organizational Motivation linked to ERP

Value

“The ERP Business Case”

Technology

Business Process

Strategic

Competitive

Disparate Systems

Poor Quality Systems

Difficult to Integrate Acquisitions

Obsolete Systems

Unable to Support Growth

“The ERP Business Case” –

Technology Rationale

Personnel, Inventory, and IT Cost Reductions

Productivity Improvements

Financial Cycle Close

Etc.

“The ERP Business Case” –

Business Process Rationale

Different Strategies

Information Backbone

“The ERP Business Case” –

Strategic Rationale

“a lot of ERP purchases are premised on the

need to just stay in business” (O’Leary 2000)

“The ERP Business Case” –

Competitive Rationale

Difficulty in choosing the right software/implementation

Requires large investment of money and people

Choosing an ERP software vendor can be difficult

Changing, inconsistent or lack of requirements from the business

Understaffing project teams

Unwillingness to re-engineer business processes

Insufficient reporting capabilities

Inexperienced project teams

Overreliance on consultants

Not investing in training and change management

Not having a maintenance strategy

ERP Impediments to Success

ERP Reasons for Failure

Reasons for failure

Large and complex systems

Significantly impact numerous business

functions

Technical versus organizational aspects

What to avoid

Only focusing on technology and IT

department

Customizing source code

ERP Hidden Costs

Training

Integration

Testing

Customization

Data Conversion

Consultant Fees

Experienced ERP Employees leave

Endless Implementation

ERP Success Story

Colgate-Palmolive

Goal – a global ERP system

Used SAP R/3 modules and Oracle’s DBMS

Cost – $430 million

Schedule – took 5 years

ERP Failure Story

CosmeticCo

Cosmetic company located in Beijing

Goal – implement an ERP system that would meet the company’s development requirements (in which the existing financial software did not)

Used Sweden’s Intentia AB as their software package provider and Legend Advanced Systems Ltd. (LAS) as their service provider

Cost – $212,170 (for MOVEX software, design and implementation service, and hardware)

ERP and Electronic Commerce

Customer orders

Vendor-managed inventories

Build to order

Links with resellers

Merge to transit

ERP Benefits and Limitations

Benefit Limitation

Integration,

conversion,

and

consolidation

Data entered once and used by all

applications; improved accuracy and

quality of data

Data conversion from old to new

system can be tedious and complex;

Consolidation of hardware, software,

and people can be difficult

Training Consistency of user interfaces

across applications means less

employee training

Retraining of all employees with new

system can be costly and time

consuming

Maintenance Support of system improves as IT

staff is trained to support needs of

users across organization

Complexity of installing, configuring,

and maintaining the system increases,

thereby requiring specialized staff and

other resources

Security Enhanced due to better controls

Resistance Retraining of IT staff and personnel to

the new ERP system and changing

business roles and dept boundaries

can produce resistance and reduce

productivity over time

ERP Benefits and Limitations

Benefit Limitation

Business

processes

Can respond to changes in

environment more readily allowing

for market share growth; can link and

exchange info in real-time with

supply chain partners; enhanced

efficiency of business processes

Costs High initial costs of purchasing

software, consultant costs, and

disrupting the work flow of employees

Customer

service

Improved due to quicker info flows

Collaboration Improved due to sharing of info

across functional departments

Competitive

advantage

May be lost if company does not

customize because all businesses

have the same standard business

processes

References

Laudon, K.C. and Laudon, J.P. (2006). Management Information Systems: Managing the Digital Firm,

Pearson Education, Inc., Upper Saddle River, New Jersey.

Martin, E.W., Brown, C.V., DeHayes, D.W., Hoffer, J.A. and Perkins, W.C. (2005). Managing Information

Technology, 5th edition, Pearson Education, Inc., Upper Saddle River, New Jersey.

McNurlin, B.C. and Sprague, Jr., R.H. (2006). Information Systems Management in Practice, 7th edition,

Pearson Education, Inc., Upper Saddle River, New Jersey.

Motiwalla, L.F. and Thompson, J. (2009). Enterprise Systems for Management, Pearson Education, Inc.,

Upper Saddle River, New Jersey.

O’Leary, D.E. (2000). Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce,

and Risk, Cambridge University Press.

Rothenberger, M.A. and Srite, M. (2009). “An investigation of customization in ERP system

implementations,” IEEE Transactions on Engineering Management (56:4), pp. 663-676.

Schiff, J.L. (2012). “13 Common ERP Mistakes and How to Avoid Making Them,” CIO.com,

http://www.cio.com/article/print/702989 [accessed: Sept. 1, 2015].

Wailgum, T. (2009). “10 Famous ERP Disasters, Dustups and Disappointments,” CIO.com,

http://www.cio.com/article/print/486284 [accessed: Sept. 1, 2015].

Wailgum, T. (2007). “ERP definition and solutions,” CIO.com, http://www.cio.com/article/print/40323

[accessed: Sept. 1, 2015].

Wenrich, K.I. and Ahmad, N. (2009). “Lessons learned during a decade of ERP experience: a case study,”

Journal of Enterprise Information Systems (5:1), pp. 55-73.

Xue, Y., Liang, H., Boulton, W.R. and Snyder, C.A. (2005). “ERP implementation failures in China: case

studies with implications for ERP vendors,” International Journal of Production Economics (97), pp. 279-

295.