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Hour 2: ERP Modules Historical development
33

Erp Modules

Jan 18, 2015

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ERP Modules in Different Solutions like SAP Modules, BAAN Soft, Oracle, Microsoft etc.
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Page 1: Erp Modules

Hour 2: ERP Modules

Historical development

Page 2: Erp Modules

Historical

• Initial Computer support to business– Easiest to automate – payroll & accounting– Precise rules for every case

• Early 1970s – centralized mainframe computer systems– MIS systematic reports of financial

performance– Variance analysis between budget and actual

Page 3: Erp Modules

MRP

• Material requirements planning

• Inventory reordering tool

• Evolved to support planning

• MRPII extended to shop floor control

Page 4: Erp Modules

SAP Modules

SD Sales & Distribution

MM Materials Management MRP

PP Production Planning MRPII (with others)

QM Quality Management

PM Plant Maintenance

HR Human Resources

FINANCIAL FI Financial Accounting

CO Controlling

AM Asset Management

PS Project System

R/3 INTERNAL WF Workflow: prompt actions

IS Industry solutions: best practices

Page 5: Erp Modules

Comparative Modules

SAP Oracle PeopleSoft JDEdwards

SD Marketing, Sales Supply chain Order management

MM Procurement Supplier relationship Inventory, procurement

PP Manufacturing Manufacturing mgmt

QM Enterprise perform Technical foundation

PM Service Enterprise service

HR Human Resources Human capital mgmt Workforce management

FI Financials Financial mgmt sol. Financial management

CO Time & Expense mgmt

AM Asset Management Enterprise asset mgmt

PS Projects Project management

WF Order Management

Contracts Subcontract, real estate

Page 6: Erp Modules

Industry-Specific Focus

• Each vendor has turned to customized ERP products to serve industry-specific needs– Examples given from BAAN, PeopleSoft– Microsoft also has entered the fray

Page 7: Erp Modules

BAAN Industry-Specific Variants

Discrete Manufacturing Process Manufacturing

Aerospace & Defense Chemicals

Automobile Food & Beverage

Industrial Machinery Pharmaceuticals

Electronics Cable & Wire

Telecommunications Pulp & Paper

Construction Metals

Logistics

Page 8: Erp Modules

PeopleSoft Industry Solutions

Communications Consumer Products Federal Government

Financial Services Healthcare Higher Education

High Technology Industrial Products Public Sector

Professional Services

Staffing

Utilities Wholesale Distribution

Page 9: Erp Modules

Microsoft Great Plains Business Solutions

Accounting & Finance

Customer Relationship Management

E-Business

Human Resources & Payroll

Manufacturing

Project Accounting

Supply Chain Management

Page 10: Erp Modules

Relative ERP Module Use(Mabert et al. 2000; Olhager & Selldin, 2003)

Module Use reported - US Use reported – Sweden

Financial & Accounting 91.5% 87.3%

Materials Management 89.2% 91.8%

Production Planning 88.5% 90.5%

Order Entry 87.7% 92.4%

Purchasing 86.9% 93.0%

Financial Control 81.5% 82.3%

Distribution/Logistics 75.4% 84.8%

Asset Management 57.7% 63.3%

Quality Management 44.6% 47.5%

Personnel/HR 44.6% 57.6%

Maintenance 40.8% 44.3%

R&D Management 30.8% 34.2%

Page 11: Erp Modules

Relative Module Use

• Mabert et al. (2000) surveyed Midwestern US manufacturers– Some modules had low reported use (below

50% in red)– Financial & Accounting most popular

• Universal need

• Most structured, thus easiest to implement

– Sales & Marketing more problematic

Page 12: Erp Modules

Why Module Use?

• Cost:– Cheaper to implement part of system

– Conflicts with concept of integration

• Best-of-Breed concept:– Mabert et al. found only 40% installed system as

vendor designed• 50% used single ERP package; 4% used best-of-breed

– Different vendors do some things better

– Conflicts with concept of integration

Page 13: Erp Modules

Middleware

• Third-party software– Integrate software applications from several

vendors– Could be used for best-of-breed– Usually used to implement “add-ons” (specialty

software such as customer relationship management, supply chain integration, etc.)

Page 14: Erp Modules

Customization

• Davenport (2000) choices:– Rewrite code internally– Use existing system with interfaces

• Both add time & cost to implementation

• The more customization, the less ability to seamlessly communication across systems

Page 15: Erp Modules

Federalization

• Davenport (2000)– Roll out different ERP versions by region– Each tailored to local needs

• Core modules shared• some specialty modules unique

– Used by:• Hewlett-Packard• Monsanto• Nestle

Page 16: Erp Modules

EXAMPLES

• Dell Computers– Chose to not adopt

• Siemens Power Corporation– Implementation of selected modules

Page 17: Erp Modules

Dell Computers

Evaluation of SAP R/3

Page 18: Erp Modules

Need to continue project evaluation

• Initial project adoption– 1994 Dell began implementation of SAP R/3

enterprise software suite– Spent over 1 year selecting from 3,000

configuration tables

• After 2 year effort ($200 million), revised plan– Dell business model shifted from global focus

to segmented, regional focus

Page 19: Erp Modules

Rethinking

• In 1996 revised plan

• Found SAP R/3 too inflexible for Dell’s new make-to-order operation

• Dell chose to develop a more flexible system rather than rely on one integrated, centralized system

Page 20: Erp Modules

Best-of-Breed

• I2 Technologies software – Manage raw materials flow

• Oracle software– Order management

• Glovia software– Manufacturing control

• Inventory control• Warehouse management• Materials management

• SAP module – Human resources

Page 21: Erp Modules

Core Competencies

• Glovia system interfaced with – Dell’s own shop floor system– I2 supply chain planning software

• This retained a Dell core competency– Would have lost if adopted publicly available

system

Page 22: Erp Modules

Points

• Demonstrates the need for speed– Prolonged installation projects become outdated– Need to continue to evaluate project need after

adoption• Tendency to stick with old decision• But sunk cost view needed

• Demonstrates need to maintain core competitive advantage– Adopting vendor ERP doesn’t

Page 23: Erp Modules

Siemens ERP ImplementationHirt & Swanson (2001)

Nuclear fuel assembly manufacturer

Engineering-oriented

Page 24: Erp Modules

Siemens Power Corporation

• 1994 Began major reengineering effort– Reduced employees by 30%

• 1996 Adopted SAP R/3 system– Replacement of IS budgeted at $4 million

• Some legacy systems retained

Page 25: Erp Modules

Siemens Modules

• FI Finance

• CO Controlling

• AR Accounts receivable

• AP Accounts payable

• MM Materials management

• PP Production planning

• QC Quality control

Page 26: Erp Modules

Implementation

• To be led by users

• Project manager from User community

• Consultant hired for IT support– IS group only marginally involved

Page 27: Erp Modules

Project Progress

• Oct 1996 Installed FI module

• Sep 1997 Installed other modules

• On time, within budget

Page 28: Erp Modules

Permanent Team

• Made project team a permanent group

• Project manager had been replaced– 2nd PM retained

• SAP steering committee

• SAP project team formed

Page 29: Erp Modules

SAP steering committee

• 7 major user stakeholders– Guided operating policy– major expenditures– major design changes

Page 30: Erp Modules

SAP project team formed

• 15 members from key user groups • part-time

– Trainer– User help– Advisors to middle management

Page 31: Erp Modules

Training

• End users became more proficient with time– Average of 3 months to learn what needed

• Management training took longer– Management didn’t understand system well– Often made unrealistic requests

Page 32: Erp Modules

Operations

• During first year– Major errors in ERP configuration– Evident that users needed additional training– New opportunities to change system scope

suggested

• Two years after installation– R/3 system upgrade

Page 33: Erp Modules

Summary

• Core idea of ERP complete integration• In practice, modules used

– More flexible, less risk

– Can apply best-of-breed concept• Ideal, but costly

– Related concepts• Middleware – integrate external software

• Customization – tailor ERP to organization

• Federalization – different versions of ERP in different organizational subelements