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Enterprise Resource Planning Systems ERP

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The stock has fallen more than 8 % in one day and 15 % in the week following Halloween ... PeopleSoft primarily targets corporation that have labor intensive products. ... – PowerPoint PPT presentation

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Title: Enterprise Resource Planning Systems ERP


1
Enterprise Resource Planning Systems (ERP)
  • Petr Caslavka

2
What is ERP System?
  • ERP (Enterprise Resource Planning) System is a
    software solution that addresses the enterprise
    needs taking the process view of an organization
    to meet organizational goals (profit, return on
    investment) tightly integrating all business
    functions

3
Evolution of ERP
  • ERP systems evolved from Materials Requirement
    Planning (MRP) Systems and Manufacturing
    Resources Planning System (MRP II) Legacy
    System
  • MRP MRPII systems serving one specific
    purpose such as inventory or manufacturing

4
Downfall of MRPs and MRPII
  • Legacy system proved to be insufficient and
    unable to handle complex tasks as companies were
    engaging more and more in international trade,
    built international sites, and dealt with
    different currencies and languages.
  • Legacy systems are not designed to communicate
    among each other
  • Legacy systems lack analytical capabilities.

5
Integration function
  • ERP systems were specifically designed to
    eliminate these issues and provide tools for
    integration of various business functions,
    including
  • Marketing
  • Finance
  • Procurement
  • Purchasing
  • Production etc.

6
Ultimate goal of ERPs
  • Better and faster Order Fulfillment
  • Traditional order handling
  • Duplication of tasks
  • Lack of information sharing and cooperation
  • Great potential for error
  • With ERP
  • No duplication
  • Constant sharing of information among
    departments, typically real-time
  • Reduced potential errors

7
Delta Airlines
  • 1997 New CEO - Leo Mullin
  • IT one of the main problems of company
  • Frequent duplication of tasks
  • 30 different platforms
  • More than seventy different databases
  • None of the platforms were interconnected.

8
Deltas solution - ERP
  • Cross-functional team and external consultants.
  • 30 million budget to implement the ERP powered
    by SAP (R/3)
  • Elimination of half of the code
  • Seventy databases were reduced to eleven
  • Creation of "central nervous system
  • The system now manages a new flight every 40
    seconds
  • The system automatically notifies all selected
    users of every gate change, time change etc.

9
Deltas solution - Continued
  • All information is deployed simultaneously to
    gate agents, crews, baggage handlers, caterers,
    and even passengers via monitors.
  • All flight relevant information is deployed to
    pilots, flight attendants, and other relevant
    staff via handheld devices and phones.
  • Screens at each Delta gate answer passengers
    most common questions about flight delays,
    standby and upgrade lists, and boarding status.
  • Delta also fully integrated its reward system Sky
    Miles into its ERP system.

10
Hersheys Example
  • Decision to implement ERP
  • In September 1999 announcement of problems with
    its new order-taking and distribution computer
    system ERP.
  • Project in a total cost of 112 million
    (Combination of SAP and Siebel CRM.
  • Problems resulted in loss of 100 million worth
    of sales of candy products for Halloween
  • The stock has fallen more than 8 in one day and
    15 in the week following Halloween
  • It took the company twelve month to restore
    investor confidence and return to the previous
    price level.

11
Typical Setbacks of ERP Implementation
  • Complicated process and buy-in problems
  • Buy-in from all parties involved.
  • Traditionally processes may not have been
    efficient, but they were fairly simple.
  • ERPs are changing the way the employees are
    utilized.
  • It is making people communicate and cooperate.
  • People don't like to change
  • Enterprise resource systems ultimately ask
    people to change the way they work.

12
Typical project length
  • The actual length of project depends on the size
    of company, its IT budget, scope of
    implementation etc.
  • Small companies should be able to successfully
    complete the implementation within 12 months.
  • Mid-size and large companies often need 2 3
    years to complete the project.

13
Implementation time
14
Benefits of ERP for business
  • Integration of financial information
  • Integration of customer order information
  • Streamline and speed up manufacturing processes
  • Reduction of inventory
  • Standardization of HR Management

15
Total cost of ownership
  • Total cost of ownership (TCO) of ERP include
    hardware, software, professional services and
    internal staff costs.
  • TCO are usually measured over a period of up to
    two years afterward, which are the real costs of
    maintaining, upgrading and optimizing the system.
  • Survey of 172 companies the average TCO was
    approximately 15 million (the highest was 464
    million and lowest was 56,000).

16
TCO Survey by MetaGroup
17
Hidden costs of ERP
  • Training
  • Customization
  • Data conversion
  • Consulting fees for extended period of time
  • Replacing best and brightest employees

18
Major Vendors of ERP Software
  • SAP, A. G.
  • German firm, which is the Worlds Leading ERP
    Software Provider (market share of 59) and the
    Worlds Third-Largest Software Provider
  • Flagship Product is Known as R/3
  • Products are used in more than 17,500 Firms in
    120 countries.
  • Company employs about 28,000 people in more than
    fifty countries

19
Major Vendors
  • Oracle
  • Oracle is the Worlds Leading Supplier of
    Information Management Software, Worlds 2nd
    largest software company
  • Over 13,000 Customers.
  • Its share of ERP market is 19 .
  • Oracles Strategy Focuses on Five Principles
    Globalization, Simplification, Standardization,
    Automation, and Innovation.

20
Major ERP Vendors
  • PeopleSoft
  • PeopleSoft primarily targets corporation that
    have labor intensive products.
  • Its market share has been increasing in last 5
    years and reached 15 in 2002.
  • It has been recently a target of hostile bid by
    Oracle.
  • Siebel
  • Software Company, which primarily sells ERP
    system with Customer Relationship Management
    function built in. Market share is currently 13 .

21
Comparison of Major Vendors
22
ERP and E-commerce
  • Opinions that are ERPs are outdated
  • ERP assumes that the only users handling order
    information will be internal employees. In the
    e-commerce age, suppliers and customers often
    require access to shared information, such as
    order status and inventory levels.
  • B2B and B2C channels need to access the
    information from the same database, but present
    them in two different formats.
  • ERP systems are big and complex and require
    maintenance. These two factors make it difficult
    to integrate because websites cannot or should
    not be taken down. Taking the website down
    results in loss of sales and causes major
    aggravation for customers.

23
ERP consulting industry
  • ERPs created a brand new branch of consulting
    industry.
  • This subject was the hottest of the consulting
    market in late 1990s.
  • ERPs were considered a silver bullet and
    hastily utilized by all major companies.
  • Because the implementation is very complicated,
    consulting became necessary. Majority of the
    early ERP implementations ended up costing more
    in consulting fees than any other part of the
    project.
  • Consulting fees usually went to a very small
    group of companies and consultants making it one
    of the most lucrative branches of consulting.

24
Pay in ERP Consulting
  • The market for consultants was among the hottest
    markets in the late 1990s.
  • Average salary of experienced ERP consultant
    reached 150,000/year with the top consultants
    making over 2 million/year.
  • Companies usually engage in hiring race for the
    top employees of companies that just finished ERP
    implementation.
  • Signing bonuses of 100,000 were not unheard of.
  • The industry has cooled off significantly, but
    remains among the most attractive in consulting
    overall.

25
  • Questions?
  • Comments?
  • Suggestions?
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