Erp1 13

Information System
&
Basics of ERP
Prof. Ramesh Behl &
Prof. Himanshu Joshi
rbehl@imi.edu &
himanshu@imi.edu
Course Objectives
Provide an overview of enterprise systems including their business use,
evolution, features, advantages, modules and business applications.
Develop an understanding of how ERP systems automate business processes
used to run organizations.
Provide hands-on exposure to work on a real ERP system and develop an
appreciation for SAP software
Learn how to manage the supply chain of an organization using an ERP
system
Get an understanding of the architecture of ERP systems.
Learn the importance of managing change and reengineering while
implementing ERP systems.
Get an understanding of the strategy behind planning, designing and
implementing an ERP and associated challenges
Develop an understanding of the complementary technologies of ERP and its
future
Gain an understanding of the integration potential of ERP
Prepare students for career opportunities in industry

Prof. Ramesh Behl & Prof. Himanshu Joshi
Evaluation Pattern
Quiz 15%
Case 10%
Mid Term 20%
Assignment 15%
End Term 30%
Project 10%
Discussion Points?
Why ERP?
What is an ERP?
How it is different from Information Systems?
At what level of IS the ERP is implemented?
Why an organization should implement ERP system?
Why an Organization should implement and ERP if they
already have functional systems?
What are some of the benefits that organizations derive by
implementing ERP?
What do you understand by legacy systems?
What do you understand by Best Practice Methodology?
What do you mean by a business process?
IS BPR necessary for ERP implementation?

What is a System?

Manufacturing
Process

Input of
Raw Materials

Output of
Finished Products
Environment
Other Systems

Control by
Management
Control
Signals
Control
Signals
Feedback
Signals
Feedback
Signals
System Boundary
What is an Information System?
Information system is a set of procedures that
collects, process, store and disseminate
information to support decision making.
From a Business Perspective An Information
System is an organisational and management
solution, based on information technology, to a
challenge posed by the environment.
Information Systems are more than Computers.
INFORMATION SYSTEMS
ORGANIZATIONS TECHNOLOGY
MANAGEMENT
INFORMATION
SYSTEMS
Why ERP?
What are the Problems of Legacy Applications?
What are some of the problems of Businesses that
are not on ERP?
Organizations with
Legacy Systems
Features of Legacy Systems
Automates running processes
Normally not driven by organization strategy and
business vision.
Develop one application at a time. No integration
between applications just transaction passing.
Decentralized applications.
Are relatively inflexible to accommodate changes in
the business environment.

Features of Legacy Systems
.Cont
Written in language / platform prevalent at the time
of development.
Up gradation to latest technology is difficult
Usually not well documented.
Maintenance is a problem largely because of
poor documentation and staff attrition.
ERP Overview
Enterprise Resource Planning (ERP) programs are
software used by companies to manage information
in every area of the business.
ERP programs help manage company-wide
business processes using a common database and
shared management reporting tools.
ERP software supports the efficient operation of
business processes by integrating activities
throughout a business.
What is a Business Process?
Why Integrated Systems needs to understand the
concept of a Business Process.
Business Processes
A business process is a collection of activities that
takes one or more inputs and creates an output that is
of value to the customer
The customer may be the traditional external customer
who buys the product or service, or an internal
customer (a colleague in another department)
The business process view is the customers
perspective.
The customer does not care that different functions
are involved in processing their order, and will not
tolerate mistakes and delays caused by poor
coordination of business functions
Process View of Business
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Material Order Process
Customer Order Process
A process view of business
Integration of Business Functions
Sharing data efficiently and effectively within and
between functional areas leads to more efficient
business processes
Information systems that share data between
functional areas are called Integrated Information
Systems

Lemonade Stand Functional Areas
Marketing and Sales
Develop products
Determine pricing
Promote products
Take customer orders
Make sales forecast
Track repeat customers to send flyers or thank-yous
Manage credit
Supply Chain Management
Buying raw materials (purchasing)
Making lemonade
Manage recipe
Maintain manufacturing (cost) records
Accounting and Finance
Recording raw transaction data
Sales, raw material purchases, payroll, cash receipts
Provide data for sales forecasting, credit management,
cash management

Human Resources
Recruit, train, evaluate and compensate employees
Develop personnel plans (staffing) based on sales
Determine compensationdepends on labor market
Functional Area Information Systems
To Summarize
Employees working in one functional area need
data from other functional areas. Functional area
information systems should be integrated, so
shared data are accurate and readily available.
Business managers are increasingly thinking in
terms of business processes that integrate
functional areas.
The business process view promotes efficiency and
competitiveness.
Business processes require information sharing between
functional areas.
ERP software provides this capability by using a single
common database. Prof. Ramesh Behl & Prof. Himanshu Joshi
Understanding ERP
Why ERP?
Increasing the efficiency of information systems
can result in more efficient business processes,
making a company more competitive
Integrating information systems across functional
areas is a relatively recent phenomenon
Lack of integration can lead to costly
inefficiencies
Errors from keying in the same data more than once
Lack of timely data due to periodic updating between
systems
Problems with data being defined differently in different
systems
Why ERP?
ERP systems can integrate a companys
operations by providing a company-wide
computing environment that:
Includes a single database shared by all functions
Can deliver consistent data to all business functions in
real-time
ERP systems can dramatically reduce costs and
increase operational efficiency
With ERP, IBM Storage Systems division
Re-prices inventory in 5 minutes instead of 5 days
Ships a replacement part in 3 days instead of 22
Checks customer credit in 3 seconds instead of 20 minutes
What is an ERP

ERP is an integrated suite of software
covering various organizational systems
for companies across industries. They
follow industry standards on software
and connectivity and are deployable
easily.
What is ERP?
Software tools
Manages business systems
Supply chain, receiving, inventory, customer orders,
production planning, shipping, accounting, HR
Allows automation and integration of business
processes
Enables data and information sharing
Enterprise-wide system
Introduces best practices
Integrated Systems Approach
Common set of applications
Usually requires re-engineering business
processes
Better alignment
Limited customization
Easier upgrades
Overcomes inefficiencies of independent systems
Integrated data supports multiple business
functions
Enterprise Resource Planning
... synchronization of Company functions...
Manufacturing
Purchase
Sales
Finance
and extended to the complete
value chain...
Tier II Component
Supplier
Vehicle OEM
Tier I Component
Manufacturer
Administrative
registration
Processes monitoring &
feedback
Decision support and
analysis
... delivering administrative and decision support
with...
Characteristics of an ERP System
Includes business management software that
enables finance and human resources in a
completely integrated fashion
Enables high levels of integration across business
functions and units

Provides for widespread sharing of data from a single
information repository

Drives extensive business transformation and
change management efforts

Requires high levels of implementation effort and
support Prof. Ramesh Behl & Prof. Himanshu Joshi
Evolution of ERP
1960s: software packages with inventory
control
1970s: MRP systems
Production schedule with materials management
1980s: MRPII systems
Adds financial accounting system
1990s: MRPII
Integrated systems for manufacturing execution
Late 1990s: ERP
Integrated manufacturing with supply chain
2000s: ERP II

ERP Solution Components
Implementation
60%
Infrastructure
20%
ERP Software
20%
Best Practices
Before ERP, IS people designed software to reflect a
companys business practices
With ERP software, the software developers have used
their experience with a number of companies to develop
best practices
Best Practices represent the way an ERP company
feels a particular business transaction should be carried
out to maximize efficiency
While customers can customize their ERP systems to
represent their own particular way of doing business,
straying too far from best practices might mean that
they will not get the benefits the ERP integration
promises
Implementation Challenges
A number of companies in the 1990s experienced
lengthy and challenging implementations
Dell cancelled an SAP implementation
Owens-Corning had a lengthy implementation
FoxMeyer Drug blamed its bankruptcy, at least in part,
on a troubled SAP implementation
SAP responded by creating Accelerated SAP
(ASAP), an implementation methodology and set of
tools to aid implementation efforts
The latest version of ASAP is called Solution
Manager
Choosing Consultants and Vendors
ERP systems are so complex, one person cannot
fully understand a single system, much less be
able to compare systems effectively
A team, including external consultants, is probably
needed to select the best ERP system for a
company
A team made up of consultants and company
experts is needed to determine how to configure
ERP software properly
ERP System Costs
The cost of an ERP system:
Depends on the size and complexity of the software
package, which is a function of the size of the firm
Includes new hardware required to run the system
Includes consultant and business analyst fees
Includes the time required for implementation (disruption
of business)
Includes training costs (cost to develop and deploy
training plus employees time away from their job)
Includes transition cost
Is ERP for everyone?
A business must analyze its own business strategy,
organization, culture and operations before
choosing an ERP approach
A company may not be ready to implement ERP
The companys business processes may not be well
defined or managed
If a company is not prepared to make its processes more
efficient, then it will not gain the benefits an ERP system
can provide
Is ERP software inflexible
ERP software is designed around best practices,
so companies are encouraged to adapt their
processes to the way ERP software works
With SAP, companies can customize the software
by creating custom capabilities using its Advanced
Business Application Programming (ABAP)
language
SAP is an open-source product, meaning that the
customer has access to the softwares source code
Returns from the ERP Investment
ERP eliminates redundant effort and duplicated data,
resulting in reduced personnel needs
ERP systems can help produce goods and services more
quickly, resulting in increased sales volume
An ERP system may be required to compete with
competitors who have effectively implemented ERP systems
ERP systems can reduce frustration resulting from the
inability to get accurate and timely data
More accurate and timely data can improve external
customer relations
The payoff from ERP systems can occur over many years,
when other factors may also affect the company, making the
return hard to calculate
Implementation Problems
Some executives naively hope ERP systems will cure
fundamental business problems
Some executives and IT managers dont take enough time
for proper analysis and planning for implementation
Some executives and IT managers skimp on education and
training
Sometimes the ownership of the implementation project is
not given to the employees who will use the system
Top executive support is not always given
The organizational change process is not managed well
ERP Implementation Benefits
Streamlines or eliminates inefficient manual
processes
Eliminates disparate stand-alone systems
Provides integrated, enterprise-wide common
tools, processes and systems
Establishes a backbone structure that can be
leveraged to handle all operational processes
Integrates and increases control of budgeting,
planning and financial management processes
ERP Implementation Benefits
(continued)
Provides enterprise-wide reporting and
decision support
Presents opportunity for re-engineering with
industry best practices and templates
Presents opportunity to lever vendors future
investment in enhanced functionality
Incorporates new functionality and technology
- provides a springboard to e-Business
Business process benefits clients expect
from an ERP project
Global process/ Product management
Integrated Supply Chain Management
Leverage purchasing and vendor management
Order cycle time/ customer service improvement
Inventory reductions
Reduced information systems costs on an ongoing basis
Improved business management through worldwide
integration and information
Logistics and Distribution Sales & Customer Service
Vendors Inbound Manufacturing Transportation Distribution Delivery Customer Consumer
Logistics
Overall Business Benefits
Information
Maximizes information throughput
Provides timely information
Integrates information throughout supply chain
Minimizes response time
Pushes decision making down to lowest levels
Reduces costs
Cuts inventory
Improves operating performance

Summary
Why ERP? What is ERP?
How can ERP improve a companys business performance?
How long will an ERP project take?
What will ERP fix in my business?
Will ERP fit the ways I do business?
What does ERP really cost?
What are the hidden costs of ERP?
Why do ERP projects fail so often?
How does ERP fit with e-commerce?
How do on-demand and software-as-a-service ERP
applications work?
How do I know my ERP data is any good?
Just how important have ERP systems become?


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