dheeraj

Enterprise Resource Enterprise Resource Planning (ERP)Planning (ERP)

What is ERP?

“An initiative launched by organizations to better manage all enterprise-wide business processes

using a common integrated database and shared data

management applications and reporting tools.”

Basis For the Development of ERP• An organization’s critical business processes often cut

across many of the organization’s functional business boundaries (e.g., Order Processing)• In most organizations, each business process has it’s own separate set of data needs and applications that operate as distinct “systems” within the organization.• The results of this approach:

- Function-Centric View in Business Units: The functional units (e.g., sales, accounting, production, etc.) are only concerned with the applications and data needs of their portion of the business process.- Operational Inefficiencies: By viewing the complete process as a series of distinct pieces – the organization is introducing operational inefficiencies and information sharing challenges into the process. These information sharing challenges include: 1) data redundancy (same data elements in numerous locations) 2) program redundancy (many programs doing the same thing) 3) lack of systems integration (flow of information between systems)

Basis For the Development of ERP(An Example)

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Customer Order

Evolution of ERP• The vision of an integrated information system to fully support operations began on the factory floor in the 1960s through the 1970s• The development of Materials Planning Software (MRP) allowed plants managers to plan the production and raw materials requirements by working backwards from the sales forecast:

1 – Identify Demand: The production manager looked at marketing and sales forecast of demand (What is the production needed?).2 – Review Current Production Schedule: The production manager would then look at the current production schedule in relation to the planned demand (Who is needed for production?). 3 - Raw Materials for Production: The production manager would identify what raw materials will be needed based on the production schedule and the sales forecast (How much do we need?).4 – Plan Raw Materials Orders: The production manager would then project when purchase orders would need to be sent to the key suppliers in the value chain (When will the supplies arrive?).

Evolution of ERP• The growing acceptance of EDI and EFT technologies by firms allowed trading partners in the value chain to both send and receive time-critical business transactions, avoiding the cost and delays resulting from using paper purchase order and invoice systems.

• In the 1980s, MRP II was developed to integrate the financial function into the planning process: “Instead of having one set of numbers for the operating system in manufacturing and one set kept by the financial people – once the manufacturing people have numbers that are valid, the financial people can use these to get their numbers. Of course, whenever there are two systems – the numbers are bound to be different. With MRP II, everybody can be working to the same set of numbers But that’s only the technical difference. The big difference comes in the way management uses these tools…MRP II becomes a company game plan for manufacturing, marketing, engineering, and finance.”

Oliver Wright, The Executives Guide to Successful MRP II, 1982

Evolution of ERP• By the late 1980s and early 1990s, company downsizing and corporate reorganizations pushed companies to fully explore how IT could be used to reduce process costs and improve operational efficiency.• By the early 1990s, organizations began to explore how they could reengineer their existing business processes to “squeeze out” costly process inefficiencies & improve relationships with value chain trading partners.• It was this climate that led five former IBM systems analysts to develop the system Systemanalyse und Programmentwicklung in Manheim, Germany – SAP. - In 1988 the SAP AG firm released SAP R/3 a fully integrated software system that has distinct modules for each key business process (12 modules linked to a single open architecture client/server system) - By 2000, SAP AG had 22,000 employees in 50 countries – and 10 million users at 30,000 installations around the world. - Main Competitors: PeopleSoft, J.D. Edwards, Oracle, and Baan.

Evolution of ERP

SAP R/3 Approach

WF (Work Flow)

IS (Industry Solutions)

PS (Project System)

CO (Controlling)

AM ( Fixed Assets Mgt)

FI (Financial Accounting)

R/3Client / Server

MM (Materials Management)

PP (Production Planning)

SD (Sales & Distribution)

PM (Plan Maintenance)

HR (Human Resources)

QM (Quality Mgt)

NOTE: The approach allows for the “linking” of applications from SAP business partners – 3,000 business partners world-wide

Why Undertake ERP?1) Integrate Financial Information: ERP ensures that there is a

consist and credible set of financial information since all of thefunctional areas use the same integrated system.

2) Integrate Customer Order Information: ERP provides a singleenvironment from the time the customer places an order untilthe customer receives the order – instead of having orderinformation spread across a number of distinct systems.

3) Standardize and Speed Up Manufacturing Processes: Manyorganizations have found it difficult to manage productionin the current “merger and acquisition” business environment.ERP ensures that a single standardized process is employedresulting in: increased productivity and reduced head count.

4) Reduce Inventory: ERP – along with new IT technologies – hasmade it possible to better manage both supplier side inventoryand retailer side inventories through real-time informationsharing with the firm’s value chain trading partners.

5) Standardize HR Information: ERP allows the firm to betterestimate and track what resources are required to support theirbusiness processes – thus optimizes the firm’s needed workforce.

The General ERP Process1) Product Analysis: The firm will hear the sales and marketing

“pitches” from ERP firms that they believe meet their generalbusiness needs and objectives.

2) Module Selection: The firm determines which of the ERP modulesto implement to meet their current business needs.

3) Process Analysis: The ERP firm will provide consultants to helptheir client identify the processes impacted by the selectedERP modules. The consultants will then do a complete analysisof those processes to establish data and processing needs.

4) Data Analysis: In order for ERP systems to function properly,all ERP systems must have a single integrated data repositoryfor ALL data items used by the firm. Therefore, consultants arerequired to establish the standardized database.

5) Applications Integration: In order for ERP to run properly, theexisting legacy systems applications have to be modified to usethe new ERP environment. New hardware and software mayhave to be purchased to run the ERP system.

6) Testing and Installation: The new system must be tested toensure it meets the desired firm specifications.

7) Employee Training: The employees must learn the new system.

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

HelpDesk

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard

CustomerBehaviorModeling

Sample PeopleSoft SystemSample PeopleSoft System

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

CRM ModulesCRM Modules

Sample CRM System

-----------------------Marketing,

Sales, Customer Support, and

Telemarketing

BillingOrder

Management

Inventory

Purchasing

Supply-Chain ModulesSupply-Chain Modules

Sample SCM System

----------------------Takes Orders, Fulfills Orders,

Manages Inventory

DemandPlanning

InventoryPlanning

EnterprisePlanning

BillingOrder

Management

Inventory

Purchasing

Supply-Chain ModulesSupply-Chain Modules

SCM often includes Planning Modules

to forecastSales Demand,

Inventory Demand,

Global LogisticsDemandPlanning

InventoryPlanning

EnterprisePlanning

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

Financial ModulesFinancial Modules

Sample Financials------------------------Receives feedsinto AR, AP, GL

to provide reports,Also manages

Assets

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard


Enterprise Data WarehouseEnterprise Data Warehouse Global Data

Repository-----------------------Holds data from

all corporate systems,

provides several ways to deliver

corporate reports, often

provides detailed

analytics, and detailed KPIs.

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard


Sample Flow of Data – Step 1Sample Flow of Data – Step 1

Initiate aMarketing Campaign

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Campaign generates Sales

Volumehandled by the Sales Channels

directly, or through

Telemarketing

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Sales Orderis captured

and processedby the

Order Capturemodule

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



CRM, through an interface, sends the Sales Orderto the Supply-

ChainOrder

Managementmodule

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Through integration, Inventory is

askedto pick/pack/ship

the Orderto the Customer

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Inventory will automatically

generate a sourcing request for more Product

as needed

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Additional Product processing (PO,

receipt, adjustments) will be controlled by

Purchasing,Paying for Product is handled by AP

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Shipped Orderswill be invoiced

through theBilling module

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Collecting payments on

invoices, past due balances, and feeswill be controlledby Receivables

(AR)

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Many modules send financial transactions

through to the General Ledger

for reporting

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



After shipping,Order

Managementwill keep CRM

updated to reflectCustomer activity

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard



Periodically(perhaps Monthly)

data from all systems

is transferred to theData Warehouse

GeneralLedger

Payables

Receivables BillingOrder

Management

Inventory

Purchasing

OrderCapture

Support

Marketing

Sales

Back Office isFinancials andSupply-Chain

combined

Basic CTIFrameworkconnects toPBX (phone)

Basic ERP & CRM System

CTIInterface

Tele-Marketing

Support module

handles allCustomer Service

GeneralLedger

Payables

Receivables BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

Web & On-Line

Take existingPeopleSoft

functionalityto the web without

re-inventing the wheel

GeneralLedger

Payables

Receivables

AssetManagement

Expenses

BillingOrder

Management

Inventory

Purchasing

OrderCapture

SupportSelf-Service

CTIInterface

Support

On-LineMarketing

Marketing

Tele-marketing

Sales

OrderCapture

Self-Service

HelpDesk

EnterpriseWarehouse

EnterpriseScorecard

CustomerScorecard


PeopleSoft Modules: Financials, Supply Chain, CRM & EPM

How Much Does an ERP Package Cost?• The total cost of an ERP Implementation can vary

significantly depending upon: 1) The Size and Geographical Distribution of the Company 2) The Size of the ERP Package (How Many Modules?) 3) The Addition of New Hardware to Support ERP 4) The Addition of New Systems Software to Support ERP 5) Consultants’ and Analysts’ Fees (Can be VERY Expensive) 6) Time Required for Implementation (Disruption of Business) 7) Training Costs (Both Time and Money)

• A large company may spend from $50 million to $500 million for an integrated ERP system.

• Meta group did a survey of the Total Cost of Ownership (TCO) of ERP (including hardware, software, consulting) at 63 companies (small through large) in a range of industries and found that the average cost was $15 million. The high was $300 million and the low was $400,000.

How Much Does an ERP Package Cost?

• $14.5 Billion Systems Manufacturer• World-Wide Operations• Install ERP in their Turbocharging Systems Division which encompasses 11 countries, 18 sites and 9 languages.• ERP implementation will be complex and have a huge database

• Estimated Costs: 1) $30 million in software license fees 2) $200 million in consulting fees 3) Millions in hardware integration costs 4) Millions in software integration costs 5) Millions in training costs

• Time to Implement System: Four to Six Years

Business Example: Allied Signal, Inc.

How Long Until the Firm Sees a Return on their Investment in ERP?

• A Meta Group Study of 63 companies that took 8 months after an average implementation time of 24 months (31 months total) to see any benefits from their ERP initiative.• BUT, the medium annual cost savings from the new ERP system was $1.6 million

Examples:

1) Pitney Bowes: ERP cut overall operations costs by 28%. Sales Reps can now give price quotes in 15 minutes rather than hours resulting in a 4% increase in sales - $160 million.2) Toro: Spent $25 million and four years on their ERP project with no initial quantifiable return. Sales to large national retailers like Sears and Home Depot resulted in $10 million due to inventory reduction benefits.3) FoxMeyer: Is suing SAP AG claiming the ERP implementation caused their bankruptcy.

Why Do Some Companies Have More Success With ERP Than Other

Companies?• Loss of Top Management Support: Commitment by the firm’s top management to the successful completion of the ERP project decreases over time.• Improper Cost Estimation: Ability of the firm to properly identify the TRUE cost and time commitments that will be required by the firm. MOST ERP projects experience cost overruns!• Realistic Expectations: The assumption that an ERP system will cure fundamental business problems that are not curable by any software application• Select Proper ERP Implementation: Executives do not take enough time for proper analysis of the ERP impact during the project planning phase. (Requirements?)• Cultural Impacts: People throughout the organization resist the changes made to business processes to support new ERP system.• Training Costs: Some firms under budget or skimp on employee ERP system training (People Costs)• IT Customization and Integration: The IT shop is bogged down in ERP integration

QUESTIONS??QUESTIONS??

dheeraj

Business

production manager

sap business partners

key business process

development of erp

business units

customer order information

planning process

integrated information