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ERP:Enterprise Resource Planning

CK FarnTel: (03)426-7250

mailto: ckfarn@mgt.ncu.edu.tw

http://www.mgt.ncu.edu.tw/~ckfarn

2005

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Meaning of ERP

A term coined in the 1980’s

Just like other terms, “ERP” was soon abused

Today, many basic business systems with internal financial management, inventory management and operations control systems are referred to as ERP

But, we have to accept the wrong usage

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Business Operations: Very Early Stage

One man show, everything is connected

Procurement

Inventory

Production

Sales

Delivery

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Business Operations: Early Stage, with independent functions

Barrier Barrier Barrier Barrier BarrierBarrier

Procurement

Inventory

Production

Sales

Delivery

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ERP: Pre-installation

No integration across functions

SalesProduction

Delivery

Input

Output

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ERP: Objective

Functional integration

Input

Output

Sales

Production

Delivery

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Internal Functional Integration

Production Management

Logistics Management

Material Management

Barrier Barrier BarrierBarrier

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Logistics Management

ERP Ideal: Internal Integration

Production Management

Material Management

BarrierBarrier

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Supply ChainManagement

Sales ForceAutomation

Internet Integration

Business Intelligent

CustomerRelationship ManagementKnowledge

Management

ElectronicCommerce

ERP IIERP

EnterpriseResourcePlanning

(+BPR， HR Logistics Service..)

MRP II

ManufacturingResourcePlanning(+Cash flow)

MRPManufacturingResourcePlanning

(+Capacity)

mrpMaterial RequirementPlanning

Evolution of ERP

MRP: MaterialRequirement Planning

MRP: MaterialRequirement Planning

PayrollPayroll

GL: General LedgerGL: General Ledger

AP: Accounts PayableAP: Accounts Payable

AR: A/C ReceivableAR: A/C Receivable

EDI-Electronic Data Interchange

EDI-Electronic Data Interchange

PlanningPlanning

SchedulingScheduling

DistributionDistribution

MRP :Ⅱ Mfg Requirement Planning

MRP :Ⅱ Mfg Requirement Planning

HR: Human ResourceHR: Human Resource

FMIS:Financial Mgmt

Information Systems

FMIS:Financial Mgmt

Information Systems

E-CommerceE-Commerce

SFA: Sales ForceAutomation

SFA: Sales ForceAutomation

CRM: Customer Relationship MgmtCRM: Customer

Relationship Mgmt

SCMSupply ChainManagement

SCMSupply ChainManagement

ERPEnterprise ResourcePlanning

ERPEnterprise ResourcePlanning

E-Business

ESCMExtended SCM

EERPExtended ERP

1970 1980 1990 2000*source: HP

Evolution of Business Systems

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ERP Packages

Large systemsSAP R/3, Oracle

Costs above NT$100 Mil, before year 2000Including license fee, business process consultant, systems modifications, installation etc.

Middle level systemsDSC(鼎新 )Tiptop, DSC WorkFlow ERP, FAST Technologies (漢康 )

NT$ 2-100 Mil

Small SystemsDSC SmartERP，正航，高格，鼎盛

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ERP Integration: SAP

Sales

Production

Sales order

SOP MPS MRPPlannedorder

Produc-tionorder

Delivery CustomerBilling

Shopfloorcontrol

Requi-sition

Vendorselection

Purchase order

Goodsreceipt

Invoice verifi-cation

Financial controlling

Resource controlling

Logistics controlling Sales, Production, Purchasing, Warehouse

CustomerOrder Customer

Payment

Vendor Payment

InventorySourcing

Presales Activity

PurchasingMat.mgt

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Invoices AR

ENG

BOM WIPBills andRoutings

Shipments

ECOS

WorkOrders

GL

AP

Planning(MRP)

PO

MaterialRequirements

EnterpriseDemand

Vendor PO

Interplant PO

Receipts

WorkOrders

Customers

Journal Entries

Journal EntriesJournal Entries

Vendor Invoices

Vendor Payments

TransportationInformation

Bills

ItemsOM INV

InternalPayments

CorporateJournal Entries

Shipments

Orders

FA

Mass Addition

Journal Entries

COST

COST

COST

Receipts

Financial Sales

HRPayroll

Workflow

Production HR.

ERP Integration: Oracle

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Customers

Post ERP: Supply Chain Integration

Internal Supply Chain

Suppliers

夥伴關係Integration of Supply and Demand Chains

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Implementation of ERP

After much hardwork, the system is functioning smoothly

Question:Are the business operations integrated?

Has the inter-functional barriers been removed?

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Driving a Car

You bought a 400 horse-power Ferrari

How fast can you drive?

Routes?FreewayDirt road

Weather?Clear skyMisty

Traffic?LightCongested

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However, you can be sure…

In an era of ox- and mule-carts …

Your driving speed will be slow

There won’t be freeways, it is useless even if there is

The Same goes with ERP• No integration without ERP• Barriers cannot be removedEven with ERP, integration is not automatic

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Successful ERP Implementation

SuccessSystem installation

Daily operational usage

Benefits realized

BPR is essentialBusiness Process Reengineering

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Business Process Reengineering

The fundamental rethinking and radical redesign

of core business processes to achieve dramatic

improvements in critical performance measures

such as quality, cost, and cycle time.

Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993

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BPR Example

Which is shorter?

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New Process

Major Concepts:• Multiple servers, one

queue• Multiple services per

server

Ford Accounts Payable Process*

Accounts Payable

Accounts Payable

VendorVendor

GoodsReceivingReceiving

Payment

Invoice

Receiving document

PurchasingPurchasingPurchase order

Copy ofpurchase order

*Source: Adapted from Hammer and Champy, 1993

Ford Procurement Process

AccountsPayable

AccountsPayable

VendorVendor

GoodsReceivingReceiving

Payment

Goods received

PurchasingPurchasingPurchase order

Purchase order

Data base

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Express Mail in the US

Traditional Express service

Point to pointComplicated network and routing

3 days

Around $10

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Air Force base in Memphis

Computerized operations

Centralized dispatch

Guaranteed 24 hour deliveryNoon-to-noon

3 times the price

Number 1 within 3 years

The Rise of FedEx