Introduction to Enterprise Systems Management

Definition Historical Perspective Evolution

Authored & Designed by: Dr. Neelu J. Ahuja, COES

Whats an Enterprise?
A collection of organizations and people formed to create and deliver products to customers.

More about Enterprise

An enterprise is comprised of all the establishments that operate under the ownership or control of a single organization. An enterprise may be a business, service, or membership organization; consist of one or several establishments; and operate at one or several locations

What are Enterprise Systems? Enterprise Systems provides functionally

rich, easy-to-use, operationally stable applications allowing our user community to operate efficiently while providing high quality support services. Today Known more understandably as ERP

Systems

Enterprise Systems. Enterprise Systems (ES) are integrated,

computer-based systems that allow information to flow seamlessly around an organization.

The purpose of any enterprise or organization..

To sustain itself To provide benefits to beneficiaries. To earn profit or to generate surplus Revenue-Expenditure. Revenue-Expenditure of an enterprise should be Greater than or equal to Zero.

How do organizations achieve their purpose?

By producing such goods and services which are needed by the society and for which there is a Buyer

How are goods and services produced in enterprises

Enterprises/Organizations use Energy Information Other Resources to produce Goods and Services.

What is a system?
A system is that which consists of certain elements, relationships & has a common goal. The system could be of 2 types: Real Conceptual

About System Types..

Real Systems have physical components which can be touched and which appeal to senses. Conceptual Systems (eg: Railway reservations, schedules etc) attend to big business needs and basically deal with Information & its interpretation. Industry & Business is managed through conceptual systems. Enterprise systems are such Conceptual Systems.

More.
ES software is complex and difficult to install and maintain. Companies that sell ES software include SAP, Oracle, PeopleSoft, Baan, and J.D. Edwards. Of these, SAP's products are by far the most widely used.

ERP systems
ERP attempts to integrate all departments and all functions across a company onto a single computer system that can serve all those departments particular needs. ERP automates the tasks involved in performing the business process. If installed correctly it will have tremendous payback.

Driving growth.
Enterprise Systems are the technologies that drive corporate growth in many industries. ES software pulls together a series of complementary functions into one application.

What does an ERP or ES do?

It is designed to consolidate and integrate business functions such as procurement, manufacturing control, finance, and sales management, allowing companies to more effectively monitor and control these critical facets of their businesses. The current trend in production planning toward buildto-order in some industries would be impossible to sustain without these sophisticated systems.

Before ERP: Delays, Lost Orders, Keying into

different Systems (inviting errors).

Sales

Production

Logistics

Billing Dispatch

Order Placed

Data Analysis

Finance

Service Manufacturing

ERPCentralized Data Base

Sales Inventory & Supply Human Resources Front-office Functions Back-office Functions

 ES software can be installed in two ways: 1. A firm can install the software to support its current operations as they are. 2.Or it can redesign its business processes to be more efficient and flexible. The latter approach is the more expensive. But it is more desirable of the two because it helps a firm to customize and to further improve its processes.

Need for ES.

Enterprise systems are essential technologies for firms that want to implement e-Business applications. These applications require a highly available infrastructure that can support the growing requirements of storage and processing, and can cater to these growing at different rates.

Aiding E-business .
The ultimate goal of e-business is to seamlessly connect an organization's "front office" (customer facing) and "back office" (business processes) operations to serve its global customers.

More about ERP

There are many different systems in a large company's "back office," including planning, manufacturing, distribution, shipping, and accounting. ERP is more of a methodology than a piece of software, although it does incorporate several software applications, brought together under a single, integrated interface. An ERP system spans multiple departments in a corporation, and in some cases an ERP will also transcend the corporate boundary to incorporate systems of partners and suppliers as well, to bring in additional functions like Supply Chain Management.

ERP
Because it is so vast and all-encompassing, the ERP system goes far beyond being just a simple piece of software. Each implementation is unique and is designed to correspond to the implementer's various business processes. An ERP implementation can cost millions of dollars to create, and may take several years to complete.

An ERP is an investment.
An ERP system likely represents a company's largest IT investment, so some companies prefer to implement ERP in a more incremental fashion rather than all at once. Some ERP vendors provide modular software units together with a unified interface to allow for this gradual approach.

ERP- changing the way Enterprise Works.

ERP brings sure changes in the way firms do business. Companies often meet with resistance on the part of employees who are reluctant to let go of their proven methods. Employees may also fear for their jobs; since ERP makes such radical changes to business processes. Some job descriptions change and some activities get eliminated altogether. Once implemented the ERP system brings tremendous advantages.

Advantages of ERP..
Because all systems are joined together, all departments can more easily share information. The workflow that takes place between departments can become much more automated. The customers are better served because the individual using the customer-facing applications will have access to every bit of information regarding each relevant process. For example, someone in sales would easily be able to log into a single system to determine the status of a customer order that is still in manufacturing.

Advantages contd..
It can speed up the manufacturing process by automating processes and workflow, and as a result, it also reduces the need to carry large inventories. Even though the initial cost is quite high, but in the end, if implemented correctly, the rewards will give the company implementing the system, a major competitive edge.

Advantages contd.
With an ERP system, the customer order information is entered once and then available throughout the business. Every department is better placed to carry out its task and you have clear and more timely information on which to base critical business decisions. A well-implemented and appropriate ERP system can create significant efficiencies across the business, resulting in 1. Timely Business Information. 2. Better Customer Relationships. 3. A more cost-effective supply chain. 4. Improved Internal process 5. Increased profitability.

Entry only once & address all needs..

Advantages contd..
ERP systems stretch from headquarters across multiple factories, warehouses, engineering centers, and even sales offices. By linking these operations with profitability, ERP helps executives understand, manage, and accurately forecast all the factorsfrom sales and purchases to capacity utilization and hiringthat might affect profits.

It is an especially powerful vision in an age of relentless global competition and rising customer demands. It has helped vendors sell hundreds of thousands of ERP systems. For many manufacturers, ERP delivers on its promises.

But the road is not as smooth..

Enterprise resource management systems promise to simplify business planning, but gaps remain in moving information to and from the factory floor.

But road is not as smooth

ERPs power depends on recording and tracking thousands of individual transactions, or events, ranging from sales orders to each component on a bill of materials. It then models how those processes interact with one another. Each new transaction sets off a cascade of new events. A new sales order, for example, triggers factory work orders, claims inventory, reserves manufacturing capacity, and schedules labor. ERP models reflect reality only when each transaction is entered correctly.

Cost factor in ERP..

Setting up ERP is costly and it also includes the cost of training the officials. Training costs are high because employees must not only learn how to use new software, they must also learn new processes.

Hidden costs of ERP

Training Integration & Testing Data Conversion Data Analysis Implementer teams never give up Waiting for ROI Post ERP Depression

Historical Perspective (Evolution of ERP)

In the 1960s inventory control assumed prime importance and most of the software at that time were designed to help in inventory management. Typically, these were handled by tools called BOM processors (Bill of materials). The focus shifted in the 1970s to Material Requirement planning (MRP) as the complexity of manufacturing operations increased. The tools to support these continued to evolve by adding further functionalities to meet the increased requirements.

Evolution..
Then in the 1980's the concept of Manufacturing Resources planning (MRP-II), which was nothing but extension of MRP to shop floor and Distribution management activities, grew in importance. However, in the early 1990s, increased complexity of businesses and the need to integrate all the functions within an enterprise to sustain in the dynamic environment lead to development of ERP (Enterprise Resource planning) tool. ERP was extension of MRP II to cover the range of activities within any enterprise, additionally it addressed technology aspects like client/server-distributed architecture, RDBMS, object oriented programming.

Evolution
1960s-70s MRP Inventory & Process time reduction with new production planning systems. 1980s MRPII Greater reductions due to integration with accounting & Human Resource Systems.

Evolution..
1990 ERP Focused on clients, Real time transactions, Asset Management. 2000 ERP II or extended ERP Focused on clients, Optimizing the whole business network, including suppliers & clients.

Further evolution
ERP development: Integrated systems, that cover firms entire value chain.

These are industry oriented (specialized). Further development of E-commerce (linking with intranet and internet)& total online transactions. Linking with Object Oriented Programming to facilitate modularity & Plug & play facilities.

Commercial ERP packages implemented

SAP Oracle Baan J.D.Edwards PeopleSoft QAD SSA/BPCS