INFO245: Introduction to Enterprise Resource Planning ERP Chapter 10: Designing an ERP System: Choos

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INFO245Introduction to Enterprise Resource
Planning (ERP)Chapter 10 Designing an ERP
SystemChoosing Standard Models, Artifacts and
Processes
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• Designing ERP Systems - Objectives
• Models Artifacts Processes
• Overview / Review
• Where do they come from?
• Why now, and not with legacy?
• Why are they important?
• Common Standards
• Why so hard to choose them?
• Why choose them at all?
• How to choose them?

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• MAPs Overview / Review
• Models
• Organization structure to model the firm in the
  software
• e.g. divisions, plants, warehouses
• Artifacts
• Master data and transactions (documents)
• vendor, customer numbering schemes
• Processes
• The business purposes supported by transactions
• e.g. order management, issuing an invoice

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ERP Implementation

• Major activity in implementing the ERP system is
  configuring the package
• What does this mean?
• Defining a specific models of the organizational
  structure within the package
• Many models
• Many views
• Defining artifacts
• The data that will be retained in the system
  (Master and Transaction)
• The reports and documents that will be generated
  as output
• Number schemes (orders, POs etc.)
• How value adding activities (processes) will be
  executed
• Transactions
• Rules used to execute transactions
• Sequence and dependency of transactions.

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Models - Organizational Data

• A hierarchy in which the organizational units in
  an enterprise are arranged according to tasks and
  functions
• Are static data and are rarely changed
• The definition of organization units is a
  fundamental step, it is a critical factor in how
  the company will be structured
• By linking the organizational elements, the
  separate enterprise areas can be integrated and
  the structure of the whole enterprise represented
  in the ERP System.
• Organizational elements define the structure for
  how data is to be entered, tracked, and extracted
  from the ERP system.

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Models

• Many Models
• Sales Organization
• Financial Accounting
• Materials Management
• Multiple views of models
• Inventory management vs. warehouse management.

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MAPS
SAP
Enterprise
Client
Company
Subsidiary
CompanyCode
Factory
Plant
SalesOrganization
SalesOrganization
Department
Division
BusinessArea
Division
StorageLocations
Warehouses
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Inventory Management vs. Warehouse Management
Inventory Management (MM)
Company Code
Plant
Storage Loc.
Warehouse
Aisle
Storage Rack
Warehouse Management (WM)
Quantity
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Artifacts - Master Data

• Master data is relatively fixed
• Material master data
• Vendor master data
• Customer data
• General Ledger master data (Chart of Accounts)
• Before making the master data configurations, you
  must have completely defined the organizational
  structures
• Why?
• Master Data configuration
• What elements will be captured for each type of
  Master Data?

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Artifacts - Transaction Data

• Includes internal and external exchanges that
  describe business activities
• Its what remains when the activity is complete

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Artifacts Electronic Documents

• Combines Master data,Transaction
  data,Organization elements

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Process

• The way that an organization carries out
  activities to create value
• Typically cross functional
• Involves selecting transactions to be executed
  and the rules to be used to carry out transactions

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Process Procurement
Purchase Requisition
Purchase Order
Materials Mgmt
Notify Vendor
Payment to Vendor
Vendor Shipment
Invoice Receipt
Financial Accting
Goods Receipt
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Sales Order Process
Check Availability
Sales Order Entry
Materials Mgmt
Sales and Dist.
Pick Materials
Receipt of Customer Payment
Pack Materials
Invoice Customer
Financial Accting
Post Goods Issue
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Rules
SAP Enterprise System

• Defines the parameters for Master Data and
  Transactions
• Determines functionality for Master Data and
  Transactions
• Relatively fixed
• Changes as policy changes

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Rules - examples

• Sales Distribution
• How should sales orders be numbered?
• Can quotes be turned into orders?
• Does an order need to be reviewed by a supervisor
  before completed?
• How should pricing be done for each customer?
• Define Credit Check rules
• What data is kept on each sales document?

• Material Management
• How is the Plant from which products are to
  shipped determined for each customer?
• When should stock be reordered?
• How can inventory be reserved for a customer?

Defining the rules for each process is the most
time consuming part of configuration
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Business Process Integration
FI
SD
MM
Transactions
FI
MM
SD
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Business Process Integration
SAP Enterprise System

• The Stool
• Components
• Organizational Data
• Master Data
• Rules
• Transactions

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Sales Order Process with Rules
SAP Enterprise System
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• Why study MAPs?
• MAP quality direct determinant of ERP success
• Drive effectiveness and efficiency
• Can give the organization an edge better,
  faster, cheaper
• Process used to define MAPs is important to
  success
• Standardization, Common Terminology and
  Performance Measurement.
• Best practices throughout organization
• Employees on the same page common terminology
• Integrated data ability to implement effective
  performance metrics

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• MAPs Where do they come from?
• Proposals by each business unit (globally)
• Existing MAPs become candidates (Nestle)
• Proposals by consultants
• ERP vendor and management consultants.
• External parties (i.e., the government,
  regulator, customer (defense), SEC)
• Walmart!
• Made universal via business unit collaboration
  and cooperationor a management decree!

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• MAPs Why now, and not with legacy?
• Legacy systems
• Organic and ad hoc origins
• Disparate hardware and software across the
  organization
• Often have localized software in separate
  business units
• point solutions created to solve very specific
  problems
• Not intended for enterprise
• Result a potpourri of business unit-specific
  MAPs
• Impact difficult to integrate across business
  units tomeet the customer and partner demands
• ERP systems
• Common hardware and software designed from the
  ground up to support enterprise integration
• Designed to support a variety of different
  organizational types.
• Flexible MAPs required

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• Common MAPs Why are they needed?
• MAPs drive ERP software they are required to
  make the software function
• Common materials, customer lists, etc.
• To allow seamless business across divisions
• One face to the customer / supply chain (this is
  a big deal)
• More responsive to customer needs single point
  of Contact (Owens Corning)
• Better pricing, deals from suppliers
• To regain centralized control of freewheeling
  divisions
• Control costs, quality
• Decentralized organizations most difficult to
  standardize.
• To allow a common view of the data
• Basis for effective analysis
• One view of customer - CRM
• To make processes more effective and to reduce
  costs
• Facilitates organizational change

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• Common Standards Why so difficult?
• Whats best globally is not always beneficial for
  individual local divisions
• Goals, operating environment different HO vs.
  operational units
• Standards can negatively impact operations
  locally (remember ERP data entry issues extra
  data valuable downstream, not to operational
  personnel)
• Head Office can manage and measure performance
• Were from Head Office, and were here to help
• Operational units dont necessarily welcome
  scrutiny
• Decision can become a partisan political process
• Each division lobbying for standard they prefer.
• One, many, or all divisions will have to change
• Difficult, spawns resistance

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Common Standards Product List

• All divisions need to use the same list
• Which list is to used, if there are multiple
  divisions?
• Not all divisions of a company require the same
  elements
• Variance between divisions regarding
• Understand of new product list
• Training required to use the new list
• Efficiency with which new list is used

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Common Standards reality

• In large organizations, there is often deviation
  from common or global standards
• Reflects practical considerations regarding how
  each division operates

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• Common Standards Motivation for choice?
• Maximize corporate benefit
• Minimize divisional change costs
• In response to competition
• The exercise allows classification of standards
  needs as either global or local

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• Common Standards How to choose
• Example multiple options in ERP system for
  reserving customer inventory
• Majority vote
• Representative panel assigns weights to options
• Multiple options reserve customer inventory
• Options ranked by panel members scores totaled
• Select option that satisfies a division the most,
  while dissatisfying the other division(s) least
• Corporate dictatorship
• No perfect approach

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CGMI

• Root cause for lack of standards?
• Issues experienced due to lack of standards?
• Benefits from implementing standards?