Mater 1.pdf

ENTERPRISE RESOURCE PLANNING

Fajar Pradana S.ST., M.Eng

“Enterprise Resource Planning Systems”, D. E. O’Leary, 2000 ©

CHAPTER ONE WHY STUDY ERP SYSTEMS?

ERP Affects Most Major Corporations in the World

SAP is used by more than 60% of the major firms.

“Almost every company is more or less in its hands.” Arthur D. Little’s Global Strategy Leader.


ERP Impacts Small and Medium Enterprises (SME)

In 1995 SAP generated 90% of their revenues from global companies

But 1997, SAP expected 50% its revenue SME

In 1997, roughly 35% of SAP’s revenues were from customers with revenues less than $200 million


ERP Affects Competitor Behavior On June 24, 1996, Oracle’s Application Division

announced that “Several companies went live with their Oracle Applications implementations during the quarter, including Silicon Graphics, Inc. and Quantum Corporation, both of whom successfully deployed large-scale implementations.” … at the same time, Oracle’s Application Division announced that “among the customers added that quarter included ... Western Digital ....” Western Digital was a direct competitor of Quantum.


ERP Affects Business Partner Requirements

Adopting an ERP system makes firms more “information agile,” able to more easily meet the information demands made upon them

As they become more agile they expect more from their customers, possibly integrating across the supply chain


ERP Provides A Key Reengineering Tool

In 1990 Hammer’s highly influential article on reengineering, got the corporate world interested in obliterating existing processes. Unfortunately, after things were obliterated many firms had no idea what to replace them with.

ERP provides perhaps the primary tool to guide those efforts, so much so that Gendron (1996) called ERP (particularly SAP’s) the electronic embodiment of reengineering and Hammer (1997) commented that “SAP equals forced reengineering.”


ERP has Diffused Many Best Practices

ERP systems are based on so-called “best practices” - the best ways of doing processes. SAP has over 1,000 of them! What this means is that any firm that installs has access to a wide range of best practices. Further, business practices are being added all of the time. As new best practices are found and embedded in particular applications, they can become available for inclusion in new versions of SAP. As they become available, other firms install them. As a result, there is this cycle of finding best practices, building them into the software and diffusing them out to new users.


Functional Area

Financial Accounting

General Ledger, Fixed Asset, Payables, Receivables, Cash Management, Financial Consolidation

Management Accounting

Budgeting, Costing, Cost Management, Activity Based Costing

Human Resources

Recruiting, Training, Payroll, Benefits, Diversity Management, Retirement, Separation

Manufacturing Engineering

Bill of Materials, Work Orders, Scheduling, Capacity, Workflow Management, Quality Control, Manufacturing Process,

Supply Chain Management

Supply Chain Planning, Supplier Scheduling, Order to Cash, Purchasing, Inventory, Product Configurator, Claim Processing

Project Management

Project Planning, Resource Planning, Project Costing, Work Break Down Structure, Billing, Time and Expense, Performance Units, Activity Management

Customer Relationship Management

Sales and Marketing, Commissions, Service, Customer Contact, Call Center Support - CRM systems are not always considered part of ERP systems but rather BSS systems . Specifically in Telecom scenario

ERP Facilitated Adoption of Client Server Computing

In the early 1990’s client server computing was an available technology, that offered many advantages over existing mainframe solutions. Unfortunately, there was limited software available to exploit the advantages. ERP changed all that becoming one of the dominant, initial corporate applications of client server computing.


ERP Changed the Nature of the IS and Accounting Functions

ERP systems are replacing major portions of most firms’ software needs. This changes the basic nature of the information systems function from one where systems analysts and programmers are needed, to one where knowledge of existing software packages is now critical.

Not only have needs changed, but personnel have become more mobile.


ERP has Changed the Nature of Jobs in All Functional Areas

IT (information technology) professionals in manufacturing say ERP systems are blurring the lines between IT and users. There is a huge demand for users or line-of-business personnel who also have professional level IT skills. But traditional IT types who know only about technology and nothing about the business are not needed now as they once were. “Understanding the business is probably the most critical (aspect) … Its more important to understand how you want things to flow through your factory than [to have] the skill of programming -- except for the few places where SAP doesn’t do what’s needed so you need coders.”


Cost is High

After cost of ownership is $15 million, typically at a cost of $53,320 per user, according to a Meta Study.

ERP costs can run 2-3% of revenues


ERP Systems Can Create Value

Integrates Firm Activities

Allows Use of Best Practices

Enables Organizational Standardization

Eliminates Information Asymmetries

Provides On-Line and Real-Time Information

Facilitates Intra and Inter Organization Communication and Collaboration


ERP’s Integrate Firm Activities As noted by Hammer, “Integration is the

defining characteristic of SAP”

ERP processes are cross functional, forcing the firm out of traditional, functional and locational silos.

Formerly diverse systems are integrated in ERP systems


ERP’s Employ Best Practices

ERP’s employ processes that are known to work and that integrate with each other

Those processes can be used to improve the way that firms do business.


ERP’s Enable Organizational Standardization

The same best practices can be employed at multiple locations.

This allows firms to bring those locations with substandard processes in line with other more efficient locations.

Now clients can “see” the corporation the same way, even if a firm has multiple locations.


ERP’s Eliminate Information Asymmetries

What is an “information asymmetry”?

Since all information goes into a single database, accessible to many, means that many information asymmetries disappear.

“If you don’t do your job, I can see that something hasn’t been done”


ERP’s Provide On-Line and Real Time Information

Since data is widely available and available on-line and in real time, all have access to the same information

As a result, information is available

Anytime! Anywhere! to Anyone!

which can facilitate more consistent planning.


ERP’s Facilitate Inter/Intra Organization Communication and Collaboration

Increasingly firms are opening up their databases to facilitate procurement and other functions, thus ERP facilitates collaboration

Since the ERP has all the transaction processing information in it, communication is facilitated.



CHAPTER 2 SYSTEMS AND TECHNOLOGY BACKGROUND

What Technologies Are Of Direct Interest?

Client Server Computing

Networks

Relational Databases

Software

Reengineering

Systems Analysis


Client Server Computing

SAP’s client server system has its root in its mainframe system

SAP was one of the first client server packages generally available

Nature of client differentiates some ERP systems

E.g., Oracle is thin client oriented


Client/Server Configuration


Data Management

Application Function

Presentation

Presentation

Data Management


Presentation

Data Management


Presentation

Data Management


Presentation

Data Management

Presentation

Data Management



Distributed Presentation (Thin Client)

Distributed Presentation (Fat Client)

Remote Presentation

Distributed Application

Remote Data Mgmt

Networks

Local Area Networks (LAN) link computers together over small geographical areas, such as a building

Metropolitan Area Networks (MAN) link computers together across a city.

Wide Area Networks (WAN) link computers together over larger geographical areas, such as across different states


Bandwidth and TCP/IP

Bandwidth is a network’s transmission capacity. The greater the bandwidth, the greater the capacity.

Capacity and availability are key issues

TCP/IP - Transmission Control Protocol and Internet Protocol, are standards associated with transmissions across networks.

SAP uses TCP/IP standards


Relational Databases

ERP systems “sit on top of a database”

Currently, ERP software is organized based on relational databases

A relational data base is a set of related tables

Related using key attributes

For examples ...



... Salesperson # Last Name Address

A Table

Primary Key attribute is a

unique identifier for each row

0001 Jones 123 Sunnyvale ….

A row is a set of related attributes

Non-key attribute represents a unique characteristic of the salesperson or

‘entity instance’


Customer # Customer ... Lastname

Salesperson # Last ... Name

Sales Order # Customer # Salesperson # ...

0001 0005 0001

0005 O’Leary 0001 Jones

A set of related tables

Customer Table Sales Person Table

Sales Event Table

Data Warehouse

Is a single place located across a corporation where a user can get the latest data, efficiently organized

They are large repositories of data

Typically, they include multiple years of data so that trend analysis can be done


Software

Legacy Software

Package Software

Versions of Software

Database Management Software

Operating Systems


Legacy System

Typically refers to the software that is in use prior to the new ERP software

Oftentimes, the legacy system is mainframe software


Package Software

In the same sense that personal computing software has moved toward a standard set of package options, corporate enterprise computing also has moved toward packages.

Now, some argue that the primary problem is one of choosing the right package


Versions of Software

Software has different versions

Windows, 3.1, 95, 98, 2000, ME

SAP’s R/3 has a number of different versions, 3.0, 3.1, 4.0, 4.5, 4.6


Database Management Software

DBMS is designed to facilitate use of database structures, e.g., relational database systems.

SAP supports a number of database systems

Oracle is most frequently used

There is a cost associated with having a data base work with an ERP system


Operating Systems

ERP systems are designed to run under different operating systems, e.g., Windows and Unix

For some systems, the operating systems for presentation, application and database can be all different


Software Layers


ERP Applications

Database Management System

Operating System(s)

Reengineering

ERP can be used as a tool for reengineering

“Technology Enabled”

ERP contain many “best practices”

What is a “best practice?”

Reengineering provides one theory base

for viewing ERP


Systems Analysis

Understanding and modeling flows of information

Many different tools used to model different views of enterprise models


Thank you

Mater 1.pdf

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