Chapter Eight: Building The E-Business Backbone: Enterprise Resource Planning

Chapter Eight
Building The E-
Business Backbone:
Enterprise Resource
Planning
e-Business Strategies, Inc. www.ebstrategy.com
- 2 -
ERP: The Technological Backbone of E-
Business
Typical corporate computing environment today of mainframe-
based apps is antiquated
Cannot meet demands of new economy and must be replaced
ERP integrated app suite
Framework to automate back-office functions: Financial,
Manufacturing and Distribution, HR, Administrative
Unites major business processes within single family of
modules: production, order processing, inventory mgmt and
warehousing, A/P and A/R, general ledger, and payroll
ERP phenomenon also catching fire among dot-coms
Managing customer relationships key for the newer online firms
ERP offers customers efficient, high-quality service
Ability to order online; inquire about product pricing and
order status
ERP prices dropping and rental ASP model becoming prevalent
- 3 -
ERP: The Technological Backbone of E-
Business
ERP is the technological backbone of e-
business
Enterprise-wide transaction framework with links
into
sales order processing; inventory mgmt and
control; production and distribution planning;
finance
In early 1990s, only large manufacturers saw
benefits of ERP
Today, medium-size and dot-com firms also
recognize necessity of integrating back-office
processes for front-office success in e-commerce
world
- 4 -
Who Really Uses ERP Suites?
Large corporations that want to gain control
over disparate groups of core business apps
3Com, Chevron Products Company, GM
3 primary categories of ERP implementations
Single to few products in single industry: eToys
Single SBU firms, selling only few products in a
single industry: Delta Airlines, Dell, Microsoft, Nike
Large corporate conglomerates or multiple-SBU
firms, selling many products in multiple industries:
GE, IBM, Colgate-Palmolive, and Nabisco
- 5 -
The Basics of ERP
These apps are
themselves built
from smaller s/w
modules that perform
specific business
processes within a
given functional area
Integrated Logistics
Accounting
& Financials
Human
Resources
Sales
Distributions
(Order only)
Production
Planning
- 6 -
Evolution of ERP
Manufacturing Integration (MRP)
Enterprise Integration (ERP)
Customer-Centric Integration (CRP)
Interenterprise Integration (XRP)
Wave 1
Wave 2
Wave 3
Wave 4
- 7 -
1960s
Automation of all aspects of
production master
scheduling
Showed technology could
link disconnected business
functions
Evolution of ERP
Wave 1
Wave 2
Wave 3
Wave 4
- 8 -
Wave 1
Wave 2
Wave 3
Wave 4
Evolution of ERP
Began in 1980s as MRP II as
execs sought for similar benefits
as MRP by integrating other
functions
Business drivers of ERP:
replacing legacy systems,
greater control, globalization,
regulatory change, integration
of decisions across enterprise
Y2K preparation in 1999 a
significant factor
- 9 -
Wave 1
Wave 2
Wave 3
Wave 4
ERP evolving into CRP to
integrate brick with click
Using middleware has
drawbacks
Traditional ERP build for make-
to-stock business models; but
this is no longer the case;
customer value, effectiveness,
enhanced service delivery key
today
Continuous planning vs. long
planning cycle of ERP
Ericsson
Evolution of ERP
- 10 -
Wave 1
Wave 2
Wave 3
Wave 4
A companys partners
benefit from the same
seamless integration as the
company itself
Extends beyond four walls of
the enterprise to customer,
suppliers and trading
partners
B2B marketplaces
ERP does not support
continuous-planning
requirements of SCP
Collaborate or perish
Evolution of ERP
- 11 -
Benefits of ERP
Critical business need: Enterprise-wide shared
services
Replace old, autonomous departmental, or
divisional services with single, streamlined,
corporate-level process
Shared-services standardize the processes for
routine, non-core functions for all business
units to use
Accounting
With processes defined, an ERP-based IT
infrastructure can be established to manage
them efficiently
- 12 -
ERP Decision = Enterprise Architecture
Planning
Management must resolve enterprise
architecture issues before selecting an ERP
suite of products
What kind of company do we want to be?
Not, What are each applications features?
Inability to find the right fit between ERP apps
and their business causing corporate
frustration
FoxMeyer
Problem not with ERP concept but in
managements demands for quick fixes and
rapid cures to underlying structural problems
- 13 -
Planning
Selecting and installing a new ERP solution one of the
most important and most expensive endeavors
Also most likely to go wrong
Lack of alignment between ERP, business processes and e-
commerce objectives can derail best of firms
Managers must understand core functionality, not abdicate
responsibility to IT dept
Successful organizational change is gradual
Enterprise apps require moving decades of corporate
knowledge and information to a new technology platform
Technology is not the only challenge in managing
transformation
- 14 -
Planning
Cannot lose sight of customers
Is this something our customers will recognize as valuable?
Will it shorten order-to-delivery cycle?
Will this improve our product and performance?
ERP impacts not just s/w
Corporate culture, business processes, staff, and day-to-day
procedures are all affected
Executive mgmt must understand technical basis for
business change and e-commerce functionality, besides
ROI of new technology
What business are we in?
What are the key issues facing us today?
What issues will be important tomorrow?
- 15 -
ERP Decision: Build Vs Buy Vs Rent
Important decision: whether to build or buy or
rent
ERP apps define overall corporate architecture
Enterprise-wide implementations
Custom design app that meets specific
requirements of an organization has several
drawbacks
Highly complex
Lengthy design, development and implementation
efforts
Limited flexibility to support diverse and changing
operations or to respond effectively to evolving
business demands and technologies
- 16 -
ERP Decision: Build Vs Buy Vs Rent
COTS apps address limitations of custom built apps
Provide broad functionality, better integration with existing
legacy systems, greater flexibility to change and upgrade, and a
lower TCO
Downside of COTS apps
Reengineer estbd. business practices
Customize apps
Hire consultants to make s/w work
No competitive edge
Mgmt must view COTS apps within the context of overall
business strategy
What business processes bring us our identity and our
competitive advantage?
How can we ensure that we enhance these with COTS
solution?
How can we support our ecommerce initiatives with COTS?
- 17 -
Capabilities of COTS ERP Solutions
Consolidation of back office
Creation of single back office that supports
multiple distribution channels
Facilitation of changes in business practices
Facilitation of changes in technology
- 18 -
Microsoft
Spent 10 months and $25 million installing SAP R/3 to
replace a tangle of 33 financial-tracking systems in 26
subsidiaries
$18 million annual savings
Growth rate was straining companys systems
50 subsidiaries worldwide; continues to grow every day
More than 30 systems implemented in a piecemeal fashion
over time supported financial, operations and HR groups
alone
Batch processes to move information between systems
Run time grew to more than 12 hours
90% of the more than 20,000 batch robs that ran each
month retrieved and processes same information
Mgmt realized it needed a global and integrated solution
to support its core business
- 19 -
ERP Implementation: Catching the Bull by
the Horns
Installation of ERP packages unique
Each ERP app suite has own architecture, customization
features, installation procedures, and level of complexity
Implementation strategies for SAP
Step-by-step
One module at a time
Big bang
Replacing all old systems at once
Modified big bang
Various modules at once, but pilot first
Very common
Even if implementation strategy is right, setting up the
solution not easy
Brother Industries
- 20 -
Roadmap to Rapid Implementation:
Accelerated ERP Approach
Todays intense competitive pressures require
fast response
ERP app suites cant keep up
But successful companies understand business
processes, simplify them, and then introduce
automation
Automating complex or non-value-adding
processes will not increase productivity or provide
measurable improvements in performance
Automation without simplification immortalizes
ineffective processes
- 21 -
Roadmap to New Leadership Skills
Effective coordination mgmt encompasses a
combination of four capabilities
Strategic thinking
How well does your ERP selection,
implementation, and evolution strategy align
with your business strategy?
Process reengineering
Managing implementation complexity
Transition management
E-Business
Strategies, Inc.

www.ebstrategy.com
contact@ebstrategy.com
678-339-1236 x201
Fax - 678-339-9793

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