M0254 - ERP

(Enterprise Resources Planning)

Session 1 - Background

Jurusan Sistem Informasi Universitas Bina Nusantara

Ir. Ekananta Manalif, MM, MKom (D2664)

ERP
Enterprise Resource Planning (ERP):

An expanded effort to integrate marketing, financial, manufacturing and human resources in a single information system. Standardized record-keeping permits information sharing throughout the organization. A computer-based system designed to process an organizations transactions and facilitate integrated and real-time planning, production, and customer response.

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Evolution of Information Systems

Prior to 1960, all systems were paper-based Data entry, storage, retrieval were slow, laborintensive processes

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Computer Hardware and Software Development

The First Business Computers Computers Smaller and Faster Moores Law Software Proliferates

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Early Attempts to Share Data

Client/Server Scalability

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ERP The Evolution

MRP

Material Requirement Planning Focus on stock reduction Integration of logistic processes Focus on stock reduction, decrease in number of stock-out, and more control

MRPII

ERP (or MRPII plus)

Evolution of MRPII thanks to:

better package coverage: multi-plant, quality, customer service, tracking, etc. technological development: client/server architecture , RDBMS

Focus on customer services rather than inventories Pro-active approach looking for the best allocation of financial, production and distribution resources Pro-active resource allocation beyond the companys boundaries: from enterprise to inter-enterprise cross-enterprise process automation

eMarkets (Extended-ERP)

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ERP The Evolution

Degree of Collaboration/ Networking
High

Extra-prize Collaboration i.e.The Networked Economy

Enterprise Integration Computer Integrated Manufacturing

(extended ERP)

eMarkets

ERP

Islands of Automation

MRP II

Low

MRP 1970 1980 1990 2000

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Why Implement ERP?

Business Reasons Technological Reasons

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Common Business Reasons for Implementing ERP

poor performance high costs not responsive to customers complex processes unable to support strategies globalization inconsistent business processes 10 15 15 24 27

21
20

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Technology Reasons for Implementing ERP

Y2K disparate systems poor quality of information systems not integrated difficulty integrating acquisitions obsolete systems unable to support growth 12 11 6 26 37 42

19

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Profitability
Profit 3,000 2,500 2,000 1,500

1,000
500 0 2000 2001 2002 2003 2004 2005 Time

You have Two Choices :

Increase in Sales OR Reduce Cost - Say 30% - Say by 5-10 %

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Business Requirements

Businesses exist to make a profit Businesses strive to provide goods and services faster and cheaper than competition More efficient ways of accessing and sharing information will increase customer service and therefore profits

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Industry Demands

Better products at lower cost. Tough competition. Need to analyze costs/revenues on a product or customer basis. Flexibility to respond to changing business requirements. More informed management decision making.

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Healthy Operation

Integration of Systems across the Functional Departments in a Company as well as across the Enterprise as a Whole. Better Customer Service. Introduction of Latest Technologies as and when the are ready for the Industry acceptance

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What IT Department shall look?

Automatic Identification System Hardware & Networking Software DBMS/RDBMS Communication ERP Supply Chain Management EDI Intranet Internet Etc
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Typical Problems

Unable to get accurate, timely information. Applications not complete for existing business practices. Modification are time consuming or not feasible.

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Typical IT Stories
My growth will be OK . No? Manufacturing Location 1 Finance

Corporate Office
Manufacturing Location 2
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Sales Group

ERP enables to

Global integration Eliminates updating and repairing separate computer systems Systematic Look into your Systems & procedures. Optimizing the processes. Discipline across the functions. Allows managers to manage, not just monitor
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Benefits of Implementing ERP

Integrated, real-time, business information and control system. Standardize and improve Processes. Improve the level of Systems Integration. Improve Information Quality.

Good information Good Decisions

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ERP Project Cost

META Group (2000)

Average cost of ownership is $15 Million Typically at a cost of $ 53,320 per user ERP cost can run as high as 2-3% of revenue 1-2 years for Medium Company 3-4 years for Big Company

Escalle, Cotteleer, and Austin (1999)

Average Implementation Time

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Questions about ERP

Is it for every company? Is the software inflexible? How much profit should you expect? How long does it take to see an ROI? Why do some have more success?

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Summary

Several factors led to development of ERP:

speed and power of hardware increased, cost and size decreased client/server architecture sophisticated software development growth of business size, complexity, and competition

Purchasing ERP software is expensive, with spectacular payoffs and challenging implementation The future of ERP will focus on:

managing customer relationships improving planning and decision making linking operations to the Internet

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