INFO102 Introduction to Enterprise Systems

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INFO-102 Introduction to Enterprise Systems
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Learning Objectives

• IT vs. IS
• Information Systems evolution and its historical
  role
• The need for integrated systems
• ERP basics
• Overview
• Components
• Evolution
• Vendors and Market
• Benefits and drawbacks of implementing ERP systems

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Hershey

• Hersheys first attempt to implement an ERP
  system was a failure why?
• Hersheys second attempt to implement several
  years later was quite successful why?
• What does the information in this case tell you
  about the nature /characteristics of ERP systems?

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Preview

• In the early days of ERP implementation most
  organizations did not understand the magnitude of
  issues to consider before, during, and after
  implementation.
• ERP systems are very different from conventional
  packaged software, such as Microsoft Office and
  others.
• There are no shortcuts when it comes to
  implementing an enterprise system.

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Information Systems in Organizations

• Information Systems are a critical component of a
  successful organization today.
• Information Systems provide a high level of
  computer automation to support business functions
  such as
• Accounting
• Finance
• Marketing
• Customer Service
• Human Resource Management
• Manufacturing

What are some other functions in a business?
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Information Systems in Organizations (Contd)

• Information Technology hardware, software,
  communications networks and data.
• Information Systems IT procedures people.
• The role of an information system is to process
  data into information in order to support people
  and the processes they are engaged in.

Comm. Network
Comm. Network
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Basic Functions of all of an Information Systems
Examples What are the inputs, processing and
output for a sales order? A student registering
for a course?
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Information Systems includes procedures and people
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Role of Information Systems in the Enterprise

• Business organizations have become more complex
  and specialized many functions.
• Each functional area has different information
  needs.
• Management is generally categorized into three
  levels- Strategic, Middle, and Operational.
• Each management level has different information
  requirements.
• No single information system can support all the
  business needs of an organization.
• .Not even ERP

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Management Pyramid with Information Requirements
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Information Silos

• Historically, organizations developed systems to
  support individual functions
• Over time, this created a hodgepodge of
  independent nonintegrated systems
• Redundant data entry and data
• Lots of handoff
• Slow
• Poor customer service
• .more on this later

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Needs of a competitive organization

• Organizations need to be agile and flexible
  means integrated data, applications, and
  resources across the organization.
• To compete effectively, organizations have to be
  customer focused.
• This requires cross-functional integration among
  the accounting, marketing, sales, manufacturing,
  shipping..
• Traditional systems did not (dont) meet these

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Enterprise Resource Planning (ERP) Systems

• Enterprise Resource Planning Systems are
  enterprise systems meant to integrate data and
  support many of the major functions of
  organizations.
• Traditional focus back office
• ERP systems integrate various functions inside
  the organizations AND with external partners like
  customers and suppliers.
• The goal of an ERP system is integrate data and
  to make the information flow dynamic and
  immediate, therefore, increasing its usefulness
  and value.

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Enterprise Resource Planning (ERP) Systems (cont)

• Clients, employees and vendors all use the same
  system
• Major functions are integrated in a single
  software system
• Data flows seamlessly

Do you see any issues with sharing data with
customers and vendors?
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Enterprise Resource Planning (ERP) Systems
(Contd)

• Integrate departments and functions across an
  organization sharing a common database
• Replace an assortment of systems and numerous
  databases that typically existed in
  organizations.
• Integrated information available in real-time.

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ERP Supported Functions
All of these functions. One software package.
One database
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Example of How ERP Works

• Step 1 Brazilian retailer orders, via the
  Internet, 1,000 shoes from International Shoe Co.
  A sales rep takes the order, routes it to ERPs
  ordering module, ERP checks the retailer credit,
  price, etc. The order is approved.
• Step 2 Simultaneously ERPs inventory module
  checks the stocks and notifies the rep that half
  the order can be filled immediately from stock.
  The other half will be manufactured and delivered
  in 5 days directly from the factory in Taiwan.

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Example of How ERP Works

• Step 3 ERPs manufacturing module schedules the
  production in Taiwan and instructs the warehouse
  (in Chinese) to ship the shoes to Brazil and
  print up an invoice (in Portuguese).
• Step 4 ERPs human resources module calculates
  labor requirements. Due to a shortage, the
  personnel manager in Taiwan is instructed to get
  temporary workers.
• Step 5 ERPs material planning module notifies
  the purchasing manager about a shortage of purple
  dye. A purchase order is automatically issued.

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Example of How ERP Works

• Step 6 The customer logs on via the extranet to
  the companys sneakers division. He can see that
  500 shoes were shipped from the regional
  warehouse. This is done with ERP tracing
  capabilities.
• Step 7 Based on data from ERPs forecasting and
  financial modules, the CEO can determine both
  demand and profitability per product. The
  financial module also converts all foreign moneys
  to U.S., whenever needed

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Factors in development of ERP

• Speed and power of computing
• Hardware (servers and disk) now cheap and fast
  makes ERP feasible
• Happened in the 90s.
• Increasingly complex business environment
• Organizational complexity
• Increasingly demanding customers
• Globalization
• Increased competition
• Increasingly sophisticated software needs
• Legacy systems break under the strain of.all
  of the above

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Evolution of ERP

• Material Requirement Planning (MRP). 1970s
• Inventory reordering tool
• Mainframe
• Manufacturing Resource Planning (MRP II). 1980s
• Extended to managing manufacturing process
• Mainframe
• Enterprise Resource Planning (ERP) ..1990s
• Complete back office
• Client - Server
• Web Enabled Supply Chain .2000s
• Extending the capabilities of ERP to customers,
  suppliers, distributors etc.
• Internet and WWW

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ERP Vendors

• Oracle - www.oracle.com
• Peoplesoft - www.peoplesoft.com
• J.D. Edwards - www.jdedwards.com
• SAP - www.sap.com
• SSA Global - www.baan.com
• Microsoft
• Others niche/specialty
• SYSPRO Small manufacturers
• Banner Universities
• Meditech Hospitals

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Industry Life Cycle Stages
ERP software industry is here
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ERP Vendors

• Consolidation is currently taking place in the
  ERP software business
• PeopleSoft purchased ERP vendor J.D. Edwards in
  2003
• Oracle, after a long battle, acquired PeopleSoft
  in 2005
• SAP and Oracle are now the two largest ERP
  vendors
• Microsoft is challenging SAP and Oracle to sell
  ERP systems to small- and medium-sized businesses
• Other vendors

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SAP

• Founded 1972 in Waldorf, Germany
• Largest market share (30 - 60)
• Revenues exceed 5 Billion
• Used by approx. 60 of multinationals
• Fourth largest supplier of software trailing
  Microsoft, Oracle and Computer Associates
• Over 2.5 million users
• Over 9,000 implementations of R/3 at over 6,000
  companies
• Industry specific solutions

From SAPs website
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R/3 Core Business Processes
Sales Distribution MaterialManagement Productio
nPlanning QualityManagement PlantMaintenance Hu
manResources
Financial Accounting Controlling Fixed
AssetManagement ProjectSystem Workflow Industry
Solutions
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SAP Industry Solutions - example
Banking
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E-Business and ERP
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Figure 1-10 eBusiness and ERP
Organizations need effective ERP in order to
implement effective e-Business WHY?
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• How does ERP create value?
• It integrates a broad range of business functions
• It allows diverse enterprises to standardize
• It stops data redundancy and synchronization
• Data stored in one place
• One version of the truth
• It provides simultaneous access to real-time data
• It facilitates communication inside and outside
  the enterprise
• Allows an organization to reengineer (change)
• It provides a foundation for eBusiness

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ERP Drawbacks

• Very expensive
• Risky to implement
• Long time to value
• Forces organizations to change

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Hidden Costs

• Training
• Critical, but effort and cost is often
  underestimated
• Integration and Testing
• Links between modules and between ERP software
  and external systems
• Customization
• Expensive, complex, dangerous
• Data Conversion

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Hidden Costs

• Consultants
• Staffing
• Need best and brightest from business how to
  replace them?
• Implementation team needs to stay in place
• Delayed ROI
• Post-ERP Depression
• All change and upheaval impact on
  organizations morale