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

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


1
INFO245Introduction to Enterprise Resource
Planning (ERP)Chapter 10 Designing an ERP
SystemChoosing Standard Models, Artifacts and
Processes
2
  • 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?

3
  • MAPs Overview / Review
  • Models
  • Representation of reality within software
  • 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

4
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.

5
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 or elements
    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.

6
Models
  • Example how the organization is setup for
    accounting, sales and purchasing.
  • Other Models
  • Products/Bill of Materials
  • Chart of Accounts (G/L)
  • Customers

Corporation
Company 2
Company 1
PurchasingOrg. 1
Sales Org. 1
Plant 2
Plant 1
Warehouse 1
Warehouse 2
Storage Bin 1
Storage Bin 2
7
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?

8
Artifacts - Transaction Data
  • Includes internal and external exchanges that
    describe business activities
  • Its what remains when the activity is complete

9
Artifacts Electronic Documents
  • Combines Master data, Transaction data,
    Organizational elements

10
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

11
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
12
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? 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
13
  • MAPs Where do they come from?
  • Proposals by each business unit (globally)
  • Existing MAPs become candidates
  • Proposals by consultants
  • ERP vendor and management consultants.
  • External parties (i.e., the government,
    regulator, customer, SEC)
  • Walmart!
  • Made universal via business unit collaboration
    and cooperationor a management decree!

14
  • 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

15
  • 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

16
  • 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

17
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
  • Understanding of new product list
  • Training required to use the new list
  • Efficiency with which new list is used

18
Common Standards reality
  • In large organizations, there is often deviation
    from common or global standards
  • Reflects practical considerations regarding how
    each division operates

19
  • 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

20
CGMI
  • Root cause for lack of standards?
  • Issues experienced due to lack of standards?
  • Benefits from implementing standards?
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