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Enterprise Resource Planning

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Enterprise Resource Planning Dr. David L. Olson James & H.K. Stuart Professor of MIS Dept. of Management, UNL History of ERP Extension of materials resource planning ... – PowerPoint PPT presentation

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Title: Enterprise Resource Planning


1
Enterprise Resource Planning
  • Dr. David L. Olson
  • James H.K. Stuart Professor of MIS
  • Dept. of Management, UNL

2
History of ERP
  • Extension of materials resource planning
  • Integrate a firms computing for reporting,
    planning, control common architecture
  • Multifunctional, Integrated, Modular
  • In 1990 industry about 1 billion
  • SAP, Baan, PeopleSoft, JDEdwards, Oracle, others
  • Rapid growth in late 1990s
  • Some relation to Y2K fears, but not the main
    reason
  • Mergers in early 2000s
  • Peoplesoft bought JDEdwards
  • Oracle bought Peoplesoft

3
History of ERP
  • SAP All-comprehensive in theory, apply
    best-practices
  • Very intrusive, very expensive, require massive
    changes in operations
  • If changes a core business competency, dont
  • While theory centralized, many implementations
    modular
  • PeopleSoft human resources
  • Finance Accounting a common first module

4
New Market Shares 2004Van Arnum,
www.chemicalmarketreporter.com 24 Jan 2005 22-23
5
Geographic Sales 2004Van Arnum,
www.chemicalmarketreporter.com 24 Jan 2005 22-23
6
ERP Project Failure
7
Comparative Modules
8
Relative ERP Module Use(Mabert et al. 2000
Olhager Selldin, 2003)
9
BAAN Industry-Specific Variants
10
Microsoft Great Plains Business Solutions
11
Reasons for Implementing ERPmeasured on 1-5
scale (5 best)

12
Reasons for Implementing ERPmeasured on 1-5
scale (5 best)
13
Implementation Time Required
  • 6 months or less 9
  • 7 to 12 months 25
  • 13 to 18 months 24
  • 19 to 24 months 21
  • 25 to 36 months 11
  • 37 to 48 months 6
  • Over 48 months 2
  • Rate of technology change makes 18 month IT
    projects dubious
  • although ERP a major system, longer times
    appropriate

14
Estimated System Life 20th Century
  • Less than 3 years 3.1
  • 3-5 years 12.2
  • 5-7 years 30.6
  • 7-10 years 26.5
  • over 10 years 27.6
  • Now less
  • Due to technology change
  • Designed obsolescence

15
Expected ROIMabert et al. (2000) Olhager
Selldin (2003)
16
SAP Best Practices
  • A key to original product
  • The most efficient way to perform a task
  • SAP devotes considerable research to best
    practices
  • 800 to 1000 best practices reported in their R/3
    system
  • Davenport 1998
  • Firms vary in what is best for them
  • Business world dynamic
  • Rigid approach has dangers
  • If a firm develops a competitive advantage, they
    give it up by adopting best practices

17
Non-ERP Process
  • Salesperson enters customer order
  • Salesperson notifies CRM of order
  • CRM employee records order
  • Salesperson notifies accounting
  • Accounting employee records sale
  • Salesperson notifies warehouse
  • Warehouse employee records order
  • Warehouse employee notifies packing shipping
  • Shipping employee records order
  • Shipping employee notifies procurement
  • Procurement employee records order for raw
    materials replacement
  • Procurement employee notifies production to make
    more
  • Production employee records order

18
ERP System Process
  • Sales person enters customer order on sales order
    system (SOS)
  • SOS
  • Notifies CRM
  • Notifies Accounting
  • Records sale in Accounting System
  • Notifies Warehouse
  • Records order on Warehouse Management System
    (WMS)
  • WMS
  • Notifies packing shipping
  • Records order on Packing and Shipping System
    (PSS)
  • PSS
  • Notifies procurement
  • Records order for raw materials with Procurement
    Management System (PMS)
  • PMS
  • Notifies production to do work
  • Enters manufacturing order on Production Planning
    System (PSS)

19
Strategic Approach Mabert et al. 2000
  • Single ERP package 40
  • Several ERP packages best-of-breed 4
  • Single ERP package supplemented 50
  • Multiple ERP packages supplemented 5
  • Totally in-house 0.5
  • In-house supplemented 1
  • Over 50 vendors (130 providers on market at that
    time)
  • SAP PeopleSoft 25

20
Implementation Strategies Used
21
System Cost
22
Cost Component of total implementation
23
Cost Impact
  • Also affects operations
  • Intent was to lower operations cost
  • Initially, often the reverse
  • Often use data warehouse system
  • Very efficient data storage
  • Very expensive

24
ERP MaintenanceNah et al. (2001)
  • Corrective
  • Incorporate vendor patches, fix problems
  • Adaptive
  • Implement new features, internal customization,
    implement interfaces
  • Perfective
  • New versions
  • Preventive
  • Monitor response time, errors, track maintenance
    activities

25
ERP System Migration
  • Over time, need to adopt changes
  • Minor modifications
  • Maybe system replacement
  • Vendors change products
  • WHY
  • The longer the time between upgrades, the harder
  • Easier to support a smaller number of software
    versions
  • Migrations can increase sales of seats, add-ons

26
BOLT-ON Software
  • Demand planning
  • Inventory management
  • E-Procurement
  • BtoB
  • Integrated suite systems (I2)
  • Order tracking
  • Factory planning scheduling
  • On-line collaboration
  • Warehouse management
  • Data mining

27
Example Bolt-OnsMabert et al. 2000
28
Middleware
  • ERP interfaces to external applications difficult
    to program
  • Middleware is an enabling engine to allow such
    external applications eto ERP
  • Data oriented products - shared data sources
  • Messaging-oriented - direct data sharing

29
Example of MiddlewareD. Thomas, Computer Weekly
5/18/2004 p. 1
  • British American Tobacco PLC
  • Wanted to reduce the cost of moving data around
    Enterprise Application Integration software
  • Hoped to save 75 of integration projects through
    MIDDLEWARE Cast Iron Systems Inc.s Application
    Router
  • Transfer data between
  • point-of-sale,
  • Oracle databases,
  • Siebel CRM,
  • SAP ERP

30
Data Storage Systems
  • Data Warehousing
  • Orderly accessible repository of known facts
    related data
  • Subject-oriented, integrated, time-variant,
    non-volatile
  • Massive data storage
  • Efficient data retrieval
  • CRM one data mining application
  • Can use all of this data
  • Common ERP add-on

31
Database Product Comparison
32
Supply Chains
  • Collections of organizations working together
  • Raw materials products retail
  • Old manufacturing vertical integration
  • Military logistics
  • Now appropriate for e-business

33
Supply Chain
  • Raw Materials Suppliers
  • Processing Plants
  • Assembly Plants
  • Service Centers (warehouses)
  • Retail outlets

34
ERP Tools in Supply ChainsKelle Akbulut, Int.
J. Prod. Econ. 93-94 (2005) 41-52
  • Supply chain integration valuable
  • Buyers improve production plans delivery
    schedules
  • Suppliers use buyer inventory info to plan their
    production inventory control
  • Improve customer service quality
  • Speed payment cycle
  • Cost savings
  • Identify overcome bottlenecks

35
ERP ToolsKelle Akbulut, Int. J. Prod. Econ.
93-94 (2005) 41-52
  • Real-time transaction tracking
  • Internal process integration
  • Decision Support Tools (through Add-ons)
  • Advanced Planning Scheduling (APS)
  • Demand Planning Revenue Management (DPRM)
  • Customer Relationship Management (CRM)
  • Sales Force Automation (SFA)
  • Supply Chain Management (SCM)

36
Supply Chain Coordination Effects
  • Value
  • Logistic efficiencies
  • Coordinated advertising
  • Large scale service
  • Joint optimal policy will always save total
    system cost
  • 1-30 for supplier
  • 25-60 for buyer
  • NEED TO NEGOTIATE

37
Obstacles to Supply Chain Tool Use
  • Real-time transaction tracking
  • Unwillingness to share information
  • Need to show monetary benefits savings
  • Too much data, too many details
  • Data analysis (data mining)
  • Activity based costing to focus on value-added
  • Internal process integration
  • Doesnt support operational decisions
  • Cooperative models, share benefits

38
Advanced Planning Systems
  • Computer technology makes supply chain capable of
    dealing with demand uncertainty
  • Forecasting
  • Inventory reduction
  • Optimized transportation costs
  • Advanced planning systems use operational data to
    analyze material flows in supply chain
  • Use historical demand for forecasts
  • Easy to collect data
  • Dynamic nature makes long-range forecasting
    difficult

39
Advanced Planning System Providers
40
Open System LinkageB. Bacheldor,
Informationweek.com, 19 Jan 2004, p. 30
  • Radio-frequency identification (RFID) technology
  • Allows remote data input
  • Requires middleware to translate RFID data into
    formats usable by applications
  • Oracle RFID-ready version for supply-chain
    applications soon
  • SAP Auto-ID Infrastructure links RFID data to
    other systems

41
RFIDR. Boucher Ferguson, eweek, 17 Jan 2005, p.
32
  • Wal-Mart
  • Top 100 suppliers expected to be RFID-enabled by
    mid-January 2005
  • Electronic bar codes
  • Allows collaborators to access data quicker
  • Bayer Corp.
  • Acsis software integrates RFID into their SAP
  • Compare Wal-Mart data with their own
  • The Gillette Co.
  • OATSystems Inc. software links real warehouses to
    data warehouses

42
Portals of Major ERP VendorsStein Davis
1999 Stein 1999
43
ERP Security Threats
44
CPU Support
  • Originally mainframe
  • SAP R/2 1974
  • Client/Server architecture early 1990s
  • More flexible
  • SAP R/3
  • SAP announced discontinuing R/3
  • Outcry by customers delayed to 2011

45
Expected Benefits from ERPMabert et al. (2000)
Olhager Selldin (2003)1-not at all 5-to a
great extent
46
Benefits from ERPMabert et al. (2000) Olhager
Selldin (2003)1-not at all 5-to a great extent
47
Lessons Learned
  • ERP implementation projects problematic
  • Variety of ways to implement
  • Benefit assessment problematic
  • Different ways to design ERP
  • Customization of vendors popular
  • Many enhancements available
  • Supply chain opportunities
  • Requires open systems

48
ERP Success Factors Business Horizons 2000
  • Senior management involvement
  • Cross-functional implementation team
  • Extra effort up-front defining detailed plan
  • Clear guidelines on performance measures
  • Clear guidelines on using outside consultants
  • Detailed plans to train users

49
Apparent Future
50
Advantages Disadvantages
  • System Integration
  • Improved understanding across users
  • Less flexibility
  • Data Integration
  • Greater accuracy
  • Harder to correct
  • Better methods
  • More efficiency
  • Less freedom creativity
  • Expected lower costs
  • More efficient system planned
  • Dynamic needs, training typically underbudgeted,
    hidden implementation costs

51
Summary
  • ERP software has had a major impact on
    organizational computing
  • Technological, financial, organizational benefits
  • Also expensive, massive, inflexible
  • Many hidden costs
  • Complex system meriting study
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