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Enterprise Systems

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Title: Enterprise Systems


1
Enterprise Systems
  • ES

Enterprise Resource Planning (ERP) Enterprise
Resource Management (ERM)
P.Pille, Ryerson Polytechnic University School of
Information Technology Management
2
Enterprise Systems
  • Early Automation
  • What is ERP
  • ERP Implementation
  • Beyond ERP
  • ERM
  • SAP
  • Electronic Marketplace

3
Early Automation
  • Automation of tasks within departments
  • Therefore, each dept had its own system(s)
  • Functionality for tasks for that department only
  • Systems werent powerful enough to attempt
    broader range of tasks
  • Usually single vendor for all parts of system
    (e.g. IBM)
  • All hardware and network components
  • All operating system and application software
  • Result Generally communication between
    departments remained largely manual
  • IS/IT was often at the mercy of single vendors

Antony Upward,CGI
4
  • Open Systems
  • Application vendors built applications to support
    the tasks in specific departments (Finance,
    Billing, Workforce Management, HR etc.) -- Best
    of breed
  • Better technology allowed automated interfaces
    between systems
  • But Interfaces
  • Have difficulty with different data definitions
  • Often dont eliminate re-keying
  • Are expense to build and maintain
  • Are visible and get in the way of the end-users
  • Result Functional organizations systems
    landscape are usually a mess and cant support
    end-to-end processes

Antony Upward,CGI
5
Business Processes
  • Cross functional boundaries
  • simple example
  • Customer orders a product
  • deals with salesperson
  • warehouse picking
  • out of stock?
  • purchase order to vendor
  • manufacturing order
  • shipping
  • accounts receivable
  • effect on demand forecasting (marketing, manuf.)

6
Business Processes
  • In Classical / Functional / Hierarchical
    organizations business processes exist but
  • No single point of accountability
  • No single source of consistent, timely,
    information about a process
  • Multiple incompatible systems poorly connected
    via multiple expensive interfaces
  • Result In a functional organization a process
  • is very hard to change
  • is very hard to e-enable

Antony Upward,CGI
7
ERP - What is it?
  • Process view of business vs. functional silos
  • Integration of systems, one database
  • Support most of co.s info needs
  • Transaction oriented systems (OLTP)
  • Accounting, payroll, invoicing, supply chain
    optimization, sales force automation, customer
    service,

8
ERP - What is it?
  • Leads to improved performance, better decision
    making, competitive advantage
  • Lays foundation for electronic commerce
  • Replaces a multiplicity of different systems and
    databases
  • one integrated system

9
Evolution to ERP
  • MRP - Material Requirements Planning
  • what material needed?
  • when how purchased?
  • how managed?
  • maximize efficiency of physical, financial assets
  • MRP 1960's
  • master production schedule
  • material requirements planning
  • capacity requirements planning

10
  • MRPII 1970's
  • sales operations planning
  • simulation
  • forecasting

11
  • ERP 1990's
  • sales and distribution
  • material management
  • plant maintenance
  • quality management
  • financial accounting
  • controlling
  • investment management
  • human resource management
  • ...

12
ERP Requires
  • Strong executive support to implement
  • Process approach rather than silos
  • Change in business procedures (BPR)
  • Change in organizational structure, culture,
    strategy
  • Technology change

13
ERP
  • Difficult to install
  • Very large and complex software
  • Provides info about all aspects of the business
    -- worldwide
  • Reduces inventory, waste
  • Easy communication with customers, suppliers

14
Before ERP
  • Multiple systems, different interfaces, difficult
    to extract info about customers, sales,...
  • Hard to maintain, many languages, databases,
    inconsistencies
  • Can take weeks or months to obtain info about
    customers, or where systems changes are needed

15
After ERP
  • Integrated systems
  • Consistent interface
  • One database
  • Access to current data
  • Improved planning capabilities
  • Multinational capabilities

16
Example Order Processing
  • Salesperson generates a quote for computer
    equipment overseas
  • System immediately creates product configuration,
    price, delivery date, shipping method,...
  • Customer accepts quote over Internet

17
System automatically
  • Schedules shipping
  • Reserves material
  • Orders parts from suppliers
  • Schedules assembly
  • Checks customer credit limit
  • Updates sales production forecasts
  • Creates MRP bill-of-material lists

18
System automatically
  • Updates salesperson's payroll
  • commission
  • travel account
  • Calculates product cost profitability
  • Updates accounting, financial records

19
ERP Implementation
  • Need business exec in charge, not IT
  • Make a business case
  • long term benefits
  • inventory reduction, customer service,.
  • Costs
  • software
  • hardware
  • people (by far the most expensive)

20
ERP Implementation
  • Software
  • ERP, database licenses
  • maintenance
  • support fees
  • add-on packages
  • Hardware
  • new client/server architecture
  • network capability
  • backup
  • multiple servers -operations, testing

21
ERP Implementation
  • People - for system configuration
  • internal, consultants
  • Managers
  • can require time commitment for several years
  • Continual support from senior execs
  • Change management
  • almost all personnel will be affected

22
ERP Implementation
  • ERP system configuration
  • thousands of parameters to set
  • Need stability, but business constantly changes
  • Difficult to implement, difficult to change
  • but is a non ERP collection of poorly integrated
    systems databases any easier?
  • Change is never ending

23
ERP Implementation
  • Training needed
  • technical staff
  • business staff
  • 20-50 of project budget on educational and
    skills development
  • Results in less people needed, but more skills,
    understanding of the organization
  • 4 months to 5 years to implement

24
ERP Implementation
  • Options
  • add-on systems where ERP is lacking?
  • keep good legacy systems, build interfaces to
    good legacy systems?
  • more than one ERP instance?
  • different divisions, subsidiaries
  • but more than one increases complexity, reduces
    benefits
  • interconnect consistent, distributed ERP systems
    (one logical system)

25
ES Implementation
  • DOW Chemical
  • global SAP implementation
  • great transformation of DOW
  • common processes, info in finance, admin
  • substantial customer service improvements
  • info support - better management decisions
  • more integrated organizational structure
  • 15 ROI

26
CEO Survey - why ERP?
  • 67 Improve info accuracy, availability
  • 61 Improve management decision making
  • 51 Reduce cost/improve efficiency
  • 38 Upgrade technology
  • 31 Resolve tactical issue (e.g. Y2k)
  • 24 Grow revenue
  • 15 Havent done it yet
  • 4 Other

Davenport,T.H., Mission Critical
27
ERP Package Selection
  • Major packages are similar
  • Some packages suited to specific industries
  • e.g. JDA, Richter Systems for retail
  • PeopleSoft - strong in HR
  • SAP - financial, supply chain
  • Baan - flexible manufacturing software

28
ERP Package Selection
  • ERP appropriate for 25 US million and up
  • Mid-tier 25 to 1 billion
  • SAP - typically largest global firms
  • (but can be done for smaller co. also)
  • J.D.Edwards - smaller firms
  • Oracle, PeopleSoft, - middle
  • Baan - mostly middle customers

29
ERP Market
  • 15 US billion ERP hardware, software worldwide
    market
  • Plus professional services 10 billion
  • High growth rate
  • Large co. e.g. Intel expect to spend 1 billion
    on ERP (can never finish)

Davenport,T.H., Mission Critical
30
SAP R/3 ERP
  • Market leading ERP product
  • Extensive functionality
  • Used by mid to large companies
  • International features
  • Can be run over internet/intranet
  • 10 million users, 30,000 installations
  • 13,000 companies, gt 100 countries
  • SAP AG 5 billion, 5,000 developers, 15-20 on
    research

31
SAP R/3
  • SAPs core transaction system
  • Logistics
  • Financials
  • Human Resources

32
Accounting
Logistics
Human Resources
33
R/3 Logistics
  • Sales and Distribution
  • Production Planning
  • Materials Management
  • Plant Maintenance
  • Quality Management
  • Procurement

34
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35
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36
R/3 Financials
  • Financial Accounting
  • general ledger, accounts receivable, payable,...
  • Controlling
  • costing, profitability, planning,
  • Treasury
  • Cash, funds management,
  • Capital Investments

37
R/3 Human Resources
  • Administration
  • Payroll accounting
  • Shift management
  • Employee attendance
  • Trip costs
  • Training
  • Recruitment
  • Personal management

38
Industry Specific R/3 Solutions
  • Aerospace Defense
  • Automotive
  • Banking
  • Chemicals
  • Consumer Products
  • Engineering Construction
  • Healthcare
  • High Tech Electronics
  • Higher Education Research
  • Insurance
  • Media
  • Mill Products
  • Mining
  • Oil Gas
  • Pharmaceuticals
  • Project Oriented Manufacturing
  • Public Sector
  • Retail
  • Service Provider
  • Telecommunications
  • Utilities

39
SAP R/3 Architecture
  • Processes written in ABAP/4 language
  • 1000s of switches for package configuration
  • Multiple platforms
  • Client server - multi tier
  • database server (multiple servers, distributed
    database )
  • application server (multiple servers, distributed
    )
  • Internet server
  • presentation level (browsers)
  • User exits - Java, C,...
  • Communication interfaces with other packages

40
Multi tier client / server architecture
Layers
  • Presentation
  • Internet / intranet
  • Application
  • Database

Multiple database, application servers
Technology Infrastructure 4.0 at
http//emedia.sap.com/usa/default.asp
41
SAP R/3 Platforms
  • OS
  • NT
  • AS/400
  • UNIX
  • OS/390
  • Database 20-30GB initially
  • Oracle
  • Informix
  • AS/400
  • DB2
  • MS/SQL

42
Ryerson Academic R/3 Configuration
  • SAP R/3 version 4.6B
  • IBM Netfinity 8500R server equipped with
  • 4Gb RAM
  • P!!! Xeon 550Mhz processor
  • 20 - 9.1 Gb HDDs in a Raid 5 array
  • 40/80 DLT tape drive
  • CD-ROM
  • APC smart UPS 5000
  • NT 4
  • Oracle 8.0 database
  • 100 GB in use for NT, R/3, IDES-TS training
    database

43
Implementation Options
  • Hosted solutions
  • hardware software outsourced to an Application
    Service Provider (ASP)
  • minor configuration, no license
  • major configuration, need license
  • user access through Web browser
  • In house
  • hardware software on site
  • optional maintenance by SAP partners
  • user access through Web browser

44
The Alpha NZ Case
  • Larsen,M.A., Myers, M.D., 1999. When success
    turns into failure a package-driven business
    process re-engineering project in the financial
    services industry. Strategic Information Systems,
    8 (1999) 395-417.

45
The Alpha NZ Case
  • 9 New Zealand banks merged, same core financial
    services
  • BPR project to centralize Accounting at head
    office
  • re-engineer recording reporting
  • automate routine accounting
  • improve access to financial info
  • create new corporate accounting team - highly
    skilled, motivated
  • Timeline
  • July 1993 - preliminary report - goal to
    integrate the banks
  • Dec 1993 - key areas identified for improvement
  • Aug 1994 - consultant appointed
  • Feb 1995 - contract with SAP, hardware, software
    installed, training
  • Jan 1996 - go live

46
The Alpha NZ Case
  • Accounting staff reduced from 75 to 24
  • Consultants consider system a great success
  • No original project team members remained
  • All in-house expertise disappeared, low skills
    remain
  • Management reporting deficiencies in the system
  • no skills to enable implementation of needed
    reports
  • lack of expertise in the system
  • low moral, poor management
  • Users consider the system a failure
  • Oct 1996 Alpha merges with Beta Ltd.
  • Alpha SAP system to be scrapped, Beta Oracle
    Financials system to be implemented

47
OLTP e.g. SAP R/3
  • Highly normalized data
  • Many tables represent an object and are connected
    with foreign key relationships to one another
  • Database tuned for writing records
  • Problems
  • Reporting
  • Difficult to combine data from different
    applications
  • Performance issues with reporting
  • SAP R/3 Includes Limited Operational Reporting,
    updated in Real-time from the transactional data
  • Integrating external data

48
ERP and beyond
ES or ERM
  • Supply Chain Management (SCM)
  • Customer Relationship Management (CRM)
  • Data Warehouse
  • Electronic Marketplace

49
ERP and beyond
  • Supply Chain Management
  • planning and optimization
  • supply planning, demand planning, plant
    scheduling, transportation warehouse management
  • more integration with trading partners
  • Customer Relationship Management (CRM)
  • marketing, sales, service
  • Data Warehouse
  • On line Analytical Processing (OLAP)
  • Internet access
  • for employees, customers, suppliers

50
ERP and beyond
Electronic (Internet) Marketplace
  • Buy, sell products and services on-line
  • Collaborate with suppliers
  • planning, forecasting, customer demand needs
    (collaborative forecasting)
  • Collaborate with distributors and resellers
  • Auction off excess inventory
  • Publish or bid on requests for proposals
  • .

51
mySAP.com
E-business platform for inter-enterprise
collaboration between a company, its suppliers
and customers.
  • R/3 ERP
  • Supply Chain Management (SCM)
  • Business to Business Procurement (BBP)
  • Strategic Enterprise Management (SEM)
  • Customer Relationship Management (CRM)
  • Business Information (Data) Warehouse (BW)
  • .

52
SAP AG mySAP
Internet / Intranet
Business Information (Data) Warehouse
R/3 Industry Solutions
Environment, Health Safety
Strategic Enterprise Management
R/3 Applications
Consumer
R/3 Basis Database
Business to Business
Knowledge Warehouse
Corporate Finance Management
Logistics HR Accounting
Business to Business Procurement
Customer Relationship Management
Automotive, ...Utilities,...
Logistics Advanced Planner Optimizer
Employee
53
mySAP Workplace
  • Single point of access to all applications
  • SAP
  • non SAP
  • Customized for each employee
  • Roles on left
  • Applications on right

54
(No Transcript)
55
SAP Components Beyond R/3
  • Supply Chain Management (SCM)
  • planning, optimizing, scheduling
  • suppliers, agents, production planners,
    purchasers, customers

56
SCM -APO Solvers
APO - Advanced Planning Optimization
  • Demand Planning
  • Supply Network Planning
  • Production Planning Scheduling
  • Heuristic Methods
  • Linear Programming /Mixed Integer Linear
    Programming
  • Genetic Algorithms
  • Constraint- based Programming
  • Exponential Smoothing
  • Holt Winters
  • Multiple Linear Regression

57
Business to Business Procurement
  • Requisitions
  • Purchase orders
  • Approval, rejection
  • Payments
  • Status
  • By end users from the desk top
  • Internet, EDI, ALE

58
CRM Roles
  • Sales
  • Sales Manager
  • Global Account Manager
  • Sales Representative
  • Sales Assistant
  • ...
  • Service
  • Service Manager
  • Hotline Specialist
  • External Service Engineer
  • Contact Center Agent
  • Marketing
  • Marketing Manager
  • Marketing Analyst
  • Product/Brand Manager
  • ...

59
SAP Business Warehouse (BW)
  • On-line Analytical Processing (OLAP)
  • De-normalized data
  • Diverse data is combined into large aggregated
    data sets
  • Logistics Information System,...
  • Used for decision support and investigation
  • Future
  • SAP is using BW as the base for many analysis
    products
  • SAP will likely move from batch to on-line
    updates of BW in future releases (small scale
    this is already in place with current release)

Antony Upward, CGI.
60
Strategic Enterprise Management (SEM)
  • Integration of strategic, financial and
    operational information
  • Internal external business information sourcing
  • Financial and non-financial Key Performance
    Indicators (KPI)
  • Business Planning and Simulation
  • Business simulation
  • Operational Planning

61
Knowledge Management
  • SAP Knowledge Warehouse
  • All standard SAP training courses
  • 20 languages
  • Glossary
  • Can be modified by customer

62
Integration Also Means...Linking Transactions,
Analysis and Planning
Act
Transaction
Transaction
Transaction
Operational Process (OLTP)
Management Process(OLAP)
63
ERM Systems
  • Trust the vendor to embed and continually improve
    their support for best business practices into
    their product
  • Leverage vendors RD spending via upgrades
  • But only if no modifications to core code
  • Actively work with vendor to identify
    opportunities for improvement
  • User Groups (ASUG, T-SIG)
  • SAP Industry Business Units (IBUs)
  • Joint development of industry specific
    functionality
  • SAP Account Executives

Antony Upward,CGI
64
ERM Systems
  • Assume vendor solutions embed best business
    practices and you will change business practices,
    not vendors core code
  • Leverage package to gain lowest total cost of
    ownership advantages - maximize use of product
    before considering alternatives

Antony Upward,CGI
65
ERM Systems
  • Within organizations -greatest strength - ability
    to facilitate end-to-end business processes
    through integration
  • Shared Database for all Users
  • On-line Real Time
  • Shared, Integrated Functionality and Process
    Designs
  • Web based Portal to allow access anywhere anytime
  • Roles Based, to focus Functionality and Security
    for Users

Antony Upward,CGI
66
ERM Systems
  • Between organizations ERMs greatest strength is
    their ability to facilitate end-to-end business
    processes using the Internet
  • Database Shared via Marketplaces
  • Shared, Integrated Functionality and Process
    Designs
  • Portal to allow access to Business Partners
    (Customers, Vendors, etc.)
  • Roles Based to focus Functionality and Security
    for Users
  • Gartner calls this Collaborative Commerce or
    c-Commerce

67
Collaborative-Commerce
  • c-Commerce achieves the dynamic collaboration of
    people, applications, and corporations in all
    aspects of business
  • Customers, employees, suppliers, and business
    partners work together as if they were all one
    company
  • Examples
  • Collaborative buying and selling
  • Public bidding
  • Collaborative forecasting
  • Collaborative planning
  • Collaborative engineering
  • Collaborative invoicing/billing

68
c- Commerce Marketplaces
  • The Old World
  • Individual connection to each business partner
  • Different technologies (EDI, Edifact, FAX, XML,
    cXML, )
  • Constant maintenance
  • Need to buy the technology

Seller
Buyer
  • The New World
  • Only one connection to the marketplace to connect
    to all business partners
  • The marketplace deals with issues like
    technology, security, search tools, catalog, etc.
  • Enables ad-hoc buying from all participants in
    the marketplace.

Seller
Buyer
69
c-Commerce Example Buying and Selling
Buyer
Seller
70
Kinds of Marketplaces
Regional (USA, France, ..)
Oil Gas, Chem/Pharma
Vertical (industry-specific)
Content
Community
  • Business-oriented communities/forums
  • General content
  • Business-specific content
  • Interaction
  • Communication
  • Discussion

Collaboration
  • Specialized inter-enterprise applications
    services

Commerce
  • Buying/selling goods and services

Horizontal (Cross industry)
Infrastructure
71
Likely End-point Federations of Marketplaces
Marketplace as a Product
www.mySAP.com Marketplace
Joint Venture Marketplaces
Seller
Vertical Marketplace
Horizontal Marketplace
Horizontal Marketplace
Buyer
Vertical Marketplace
Local/vertical Marketplace
Horizontal Marketplace
e.g. Chemical Marketplace
72
ERM Implementation
  • Very Little Analysis / Design / Programming
    Required
  • Typically 10-20 of Total Effort
  • Interfaces
  • Conversions
  • Bolt-ons (via Published User Exits)
  • Configuration Replaces Programming
  • Table Driven
  • Master Data
  • Enables substantially automated upgrades

Antony Upward,CGI
73
ERM Implementation
  • Business People Normally Configure (with some
    Training)
  • Largely removes non-value added activity of
    translating business requirements to technology
    requirements
  • Result
  • Implementation focuses on realizing business
    value not getting the technology to work

74
ERM Implementation
  • ERM makes technology less visible during
    implementation allowing project teams to focus
    simultaneously on all aspects of delivering
    business value
  • Business Process Design Organization Design
    Application Configuration
  • This is a good thing!
  • Typical ERM implementation project teams are
    cross functional
  • End-users 50-75, frequently including project
    leadership
  • ERM configurators (usually ex-business people)
    15-30,
  • ERM and legacy technicians / programmers 5-25

Antony Upward,CGI
75
ERM Implementation
  • Typical ERM implementation projects have a
    different mix of tasks
  • Delivering business value requires significant
    focus on Business Change Management, typically
    10-30 of team tasks
  • Technology is no longer the prime driver of ERM
    implementations (only 10-40 of team tasks)
  • Less program specifications and programming
  • Little or no data design
  • ERM Specific Implementation Methodologies
    Required
  • Still learning how to do ERM implementations well

Antony Upward,CGI
76
ERM Re-engineering
  • Re-engineering typically started with a blank
    sheet of paper for the process designs
  • Equivalent to asking What are the requirements?
  • Numerous re-engineering efforts failed
  • Analysis paralysis
  • Huge software projects
  • Customizing ERP systems
  • Today ERM packages can support so much of so many
    processes can now ask
  • Not what do you want, but
  • Which process designs can the ERM system support
  • Leverages the massive RD spending of ERM vendors
  • SAP spends 15-20 of Revenues on RD
  • Need to do regular upgrades to get benefit of
    this RD

Antony Upward,CGI
77
Implications of ERM for IT Strategy
  • Can no longer ask the question of the end-users
  • What is your requirement?
  • This question was fundamental to I.T. strategy
    from the 1970s to the mid-1990s
  • I.T. practitioners made the following assumptions
    that
  • The business knew what they needed
  • Requirements would stay still long enough for
    I.T. to build systems to support them
  • I.T. could use open systems to make each
    departments systems work together without a lot
    of effort or expense
  • Recent business trends, particularly the
    increasing pace of change, have made all these
    assumptions false
  • Now we must ask what business process designs can
    a package support out of the box
  • Assumes ERM vendor has done their home work

Antony Upward,CGI
78
ERM Job Opportunities
  • Account executive - SAP support
  • Business consultant - system solutions
  • Sales manager - ERP solutions
  • Instructor - SAP products
  • Software developer - ABAP/4, C,...
  • Systems analyst
  • MIS manager
  • SAP administration.
  • SAP installation, support
  • OS, database, SAP Basis knowledge

79
Sources
  • Antony Upward, Director, Business Architecture,
    CGI Group Inc.
  • Davenport ,T.H., 2000, Mission Critical -
    Realizing the Promise of Enterprise Systems,
    Harvard Business School Press
  • Watson, E., Schneider, H., 1999, Using ERP
    Systems in Education, Communications of AIS
    Volume 1, Article 9
  • The AMR Research SAP Advisory Alert for June 15,
    2000 http//wwwext03.sap.com/usa/press/2000/amrr
    eport.aspcom1
  • SAP info and links http//www.ryerson.ca/ppille/
    sap/
  • SAP www.sap.com www.mySAP.com
  • SAP USA home site http//wwwext03.sap.com/usa/
  • SAP emedia file Technology Infrastructure 4.0 at
    http//emedia.sap.com/usa/default.asp
  • SAP emedia file mySAP Frequently Asked Questions
    at http//emedia.sap.com/usa/default.asp

80
Sources
  • SAP R/3 Functionality Overview, Wednesday,
    September 15, 1999, Jim Kelly, Curriculum
    Development Manager - ERP, SAP America
    http//wwwext03.sap.com/usa/education/alliance/wha
    tsnew.asp
  • Central Michigan University http//sap.mis.cmich.
    edu/
  • International Demo and Education System (IDES)
  • www.sap.com/ides
  • Go to site and register for a user id and
    password
  • Can trial pretty much the whole SAP product over
    the internet (HTML GUI)
  • Americas SAP User Group (ASUG) - www.asug.com
  • Other Web Sources - www.sapinfo.net
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