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Enterprise Resource Planning

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Software that links applications across enterprise with shared data ... Takes weeks to close books. Tektronix Infrastructure (cont'd) Old Technology ... – PowerPoint PPT presentation

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Title: Enterprise Resource Planning


1
Enterprise Resource Planning
  • OEMBA
  • Spring 03

2
What is ERP?
  • Software that links applications across
    enterprise with shared data
  • Most notable characteristics?
  • Expensive, complex, difficult to implement

3
Major Players?
  • SAP Systems, Applications and Products (30)
  • R/2 Mainframe integration of financial and
    operational applications (1979)
  • R/3 Unix-based client-server (1994)
  • Oracle (10) Financials
  • Peoplesoft (7) HR
  • JD Edwards (10)
  • Baan (6)

4
Why move to ERP?
  • Stabilize and improve business processes
  • Standardize manufacturing (21)
  • Reduce inventory
  • Improve level of systems integration
  • Financial (36), customer orders
  • Improve IT responsiveness information quality
  • Y2K

5
Key Issues/Risk?
  • Implementation and Cost
  • Standardization of business processes
  • Diminish competitive advantage?
  • End-user acceptance of process change?
  • Typically requires new technologies
  • Especially if migrating from legacy system
  • History of budget/schedule overruns
  • High not successful rate 50-70

6
What drives cost?
  • Implementation 3-10 times software cost
  • Shortage of experienced people
  • Only needed for implementation
  • Must upgrade underlying infrastructure
  • Need middleware
  • Change business processes
  • Existing processes are not enterprise-wide

7
Other Hidden Costs
  • Training most underestimated budget item
  • Integration and testing
  • Customization
  • Easy to change business process to match software
  • Data conversion
  • Using best and brightest on project
  • Continual implementation

8
Cisco Case
  • Who is Cisco?
  • Are they an Information age company?
  • Industrial Age Profit from design, production
    and sale of tangible products
  • Information Age Creating value with technology

9
Cisco Case
  • What was their corporate strategy?
  • Core competencies
  • Customer intimacy
  • One stop Shopping - broad product line
  • Working toward uniform industry standards
  • Maintain key alliances
  • Growth through acquisition
  • Outsource manufacturing (not a core competency)

10
Cisco
  • What triggered Cisco to move to ERP?
  • Traditional IT organization did not align with
    business strategy
  • Cost Center
  • Internally focused
  • Current systems lack flexibility
  • System capacity will not accommodate growth
  • Legacy environment failed causing the need for
    immediate action
  • Research possibility of an integrated systems
    application approach
  • Design the entire IT system then adapt
    organization structure to support this

11
Cisco
  • Resulting ERP System standardized
  • 100 UNIX at the server level
  • 100 Windows NT at the LAN level
  • 100 Wintel at the client level
  • 100 Oracle at the database level
  • 100 TCP/IP for worldwide network
  • Standardized software
  • Web as standard user interface

12
Cisco
  • Stated Cost
  • ERP Investment 15 m
  • Web-enablement investment 100 m

13
What were the real ERP costs?
  • 15 million, 9 months
  • Only 20 people on core team
  • Additional people (total of 100)
  • 80 people 160 h/mon 8 mon 50/h 5.12m
  • IT decommitted other projects
  • 100 IT people 80 committed 4.5 months 160
    h/m 50/m 2.9m
  • Hardware contract avoided undersize costs
  • 15m 32 hw expenditure 50 avoided 2.4m

14
Key Components of Strategic I-Net?
  • Real-time messaging
  • Data warehouse
  • All workers had client
  • Browser interface
  • Web site (18 million pages)
  • Self-service
  • Information transparency
  • Extended enterprise
  • Minimal knowledge management

15
Cisco Considers ERP successful.What were key
characteristics of implementation?
  • Best people
  • Can-do attitude
  • Mgt Commitment
  • High priority
  • Rapid Implementation
  • Big Bang (not phased)
  • Prototyping
  • Minimal modification strategy
  • Focus on standards
  • Vendor alliances
  • Financially strong
  • Hungry
  • Included on teams
  • Experienced consultants
  • Capability-based hardware contract

16
What were key obstacles?
  • Poor Testing Strategy
  • Immature software
  • Undersized technical architecture

17
What were the benefits?
  • After 2 years, identified 550 m in benefits
  • B2B Sales 0 in 1996, 18 billion (92) in 2000
  • Reduced Ciscos cost by 60, customers by 20
  • 80 of customer service requests handled
    electronically
  • 65 direct ship (from manufacturer to customer)
  • Internal EIS
  • Desktop training

18
Tektronix
  • Who is Tektronix?
  • Information Age vs Industrial Age
  • What was their corporate strategy?

19
Tektronix
  • Analyze the Tektronix infrastructure before ERP
  • Lack of integration between systems
  • Problems
  • Lack of global standards
  • Relics from when company had 26 divisions
  • Business Implications
  • Could not ship immediately no inventory
    visibility beyond Beaverton, manual expediting
  • Multiple entries for each order errors
  • Takes weeks to close books

20
Tektronix Infrastructure (contd)
  • Old Technology
  • Problem 1970s proprietary technologies
  • Implications Expensive and difficult to
    integrate
  • Non-Standard Business Processes
  • Problem Different all over the world
  • Implications lost efficiencies
  • Is Tektronixs situation typical?

21
Managing Implementation Risk
  • What concrete steps did Tektronix take to manage
    the risks involved in such a large and difficult
    project?

22
Risk Management (Contd)
  • Coherent guiding vision
  • Separability of business
  • Three divisions are very different
  • Requirements of one should not drive another
  • Leverage Shared Services
  • Consolidate common functions
  • Need comparable performance measures
  • Plain vanilla
  • Minimize changes to ERP software
  • Change business processes, not the software

23
Adaptive Implementation
  • Contrast Cisco and Tektronix implementation
    approaches.
  • What are the pluses and minuses of the staging
    approach?
  • Was the staged approach a better idea than the
    big-bang approach for Tektronix?

24
Characteristics of Adaptive Implementation
  • Iterative
  • Outcomes and interactions tested as they occur
  • Fast cycles that deliver value
  • Deliver functionality to end-users early in
    project
  • Incorporate feedback
  • Highly skilled project personnel
  • Must be capable of making mid-course adjustments
  • Resist ROI

25
Resist ROI
  • Allens statement
  • There was hardly any desire on Carl Nenns part
    to do some big return on investment analysis pg
    3
  • There are a lot of operational improvement
    initiatives going on around here. How much cost
    savings is directly related to the system? I
    dont know, and we dont really care. We know
    ERP is an enabler, and these improvements
    wouldnt have happened without it. pg 12

26
Standardization and Customization
  • How do you manage the perceived need to customize
    the system?
  • Were special vs resistance to change?
  • Local optimization vs company-wide efficiencies?
  • Issues with customization
  • Complex and expensive
  • Generally wiped out when upgrade

27
How did Tektronix deal with customization?
  • Used wrappers
  • Layers of code outside the system code
  • Basically used hooks into the system code
  • When upgrades, had to account for changes in
    these hooks, but majority of logic was intact
  • Today, would use XML
  • More lines of code in the wrappers than in the
    ERP product

28
Was ERP a success at Tektronix?
  • Relative to Cisco?
  • What about lack of ROI?

29
Lessons Learned
  • Clear definition with a short term goal can drive
    a multi-divisional solution
  • adequate expert resources needed
  • one driver with corporate divisional
    sponsorship
  • IT must be tied to corporate strategy otherwise
    it will be viewed as ineffective
  • Partnerships are critical for long term success
  • Clear sense of vision and strategic fit narrows
    choices and guides platform development
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