ERP

Enterprise Resource Planning D Lewis 10/02

Definitions
ERP is a process of managing all resources and their use in the entire enterprise in a coordinated manner ERP is a set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order management

What is ERP?
Enterprise Resource Planning Support business through optimizing, maintaining, and tracking business functions Broken down into business processes
HRM Financials

- Distribution - Manufacturing

What makes ERP different

Integrated modules
Common definitions Common database

Update one module, automatically updates others

What makes ERP different (cont)

ERP systems reflect a specific way of doing business Must look at your value chains, rather than functions

History of ERP
Departmentalized Systems

1960s: systems for each department 1970s: integrated manufacturing 1980s: more functions included

MRP Systems

MRPII System

ERP: 1990s integrated all across

Trends in ERP
Use of the Internet for access More customized solutions Decision support capabilities Data pulled to specific application Linkage of multiple organizations together

Benefits of ERP
Common set of data Help in integrating applications for decision making and planning Allow departments to talk to each other Easy to integrate by using processed built into ERP software

Benefits of ERP
A way to force BPR (reengineering) Easy way to solve Y2K problem

Benefits of ERP
On 4 dimensions
Firm structure Management processes Technology platform Business capability

Firm structure
New structures More disciplined culture
Globally everyone uses same processes and terminology Freely flowing information

Management process
Unified reporting and decision making Better data on performance Determine which products are more desirable

Technology platform
Single unified all encompassing platform Common data, common definitions and formats

Business capability
Form basis of customer driven organization Better meet customers needs

Buy or Build
Pros buy
Best practices from many organizations included Vendor must keep up to date Smaller staff required

Buy vs. Build (cont.)

Pros build
Complete control of features More support required Not as much product support May not have best practices included

Why purchase ERP package?

Increasing flexibility and agility
Business benefits (competitive agility) Client/server IT architecture benefits

IT purchasing benefits

Lower costs and higher reliability than building from scratch

Why purchase ERP package?

Data integration

Improving access to data across business units

New ways of doing business

Moving to a process orientation Reduction in costs Common processes and country specific capabilities

Global capabilities

Why purchase ERP package?

IT architecture cost reduction

Reduced costs for systems operations and maintenance

Most important benefit?

Data integration

Difficulty in implementation
Very difficult Extremely costly and time intensive

Typical: over $10,000,000 and over a year to implement

Common Pitfalls
Do not adequately benchmark current state Did not plan for major transformation Did not have executive sponsorship Did not adequately map out goals and objectives Highly customized systems to look like old MRP systems

Leading vendors
SAP Baan J.D. Edwards Oracle Peoplesoft

Which way to go?

One vendor
Easy integration Standardization of processes

Best of breed approach

Easy to adapt to own needs Decreased reliance on one vendor

How to implement
You will need an outside consultant Potential benefits

Better information for

Strategic decision making Greater efficiency Greater profit Potential for growth

Unintended consequences of ERP

Organizational changes
Creating new work relationships Share information Make new types of decisions

Reactions to changes
Resistance Confusion Errors

Unintended consequences
50% of implementations fail
Managers underestimate the need for change management Managers focus on potential benefit, rather than on impact on employees Emotional fallout after employees given greater responsibility

Implementation Issues
Company may implement only certain modules of entire ERP system

Readings
evaluation of ERP software Getting Increased Value from ERP Systems