Mis 02

Poonam Garg, IMT Ghaziabad 1
Enterprise Resource Planning

Dr. Poonam Garg
Discussion Questions
What is ERP.
How it is different from Information Systems?
How is integrated information system better then departmental
information silos.
At what level of IS the ERP works?
Why an organization should implement ERP system?
Why an Organization should implement ERP if they already have
functional systems?
How does ERP facilitate seamless information flow? Explain with
an example.
Difference between Plain vanilla and best of breed
implementation. Why it is advisable to go for vanilla
implementation
How is process approach different from functional approach.
What are the different alternatives for ERP implementation.
What is tailor made ERP.

IS BPR necessary for ERP implementation? Can
organizations directly implement tailor made ERP and
avoid reengineering.
What do you mean by a business process?
How are the business process different from business
functions?
What are some of the benefits that organizations derive
by implementing ERP?

ERP Market
One of the fastest growing markets in software
industry

34.5% of companies with revenues over $1 billion
plan to purchase or upgrade

$180 billion sales in 2004

Maybe as much as $1 trillion by 2013
ERP Systems
Major investment
Total implementation cost up to 2-3% of
revenues ($100 million for a $5 billion company)
Variety of business justifications
Replace legacy systems
Reduce cycle times
Lower operating costs
Enables better management decisions
Real-time
On-line
Costs and Benefits
Implementation can take up to 2 years

Payback usually 6-30 months

Savings based on 30% reduction in administrative
and IS costs

Ver.1.0 Slide 7
What is Enterprise Resource Planning (ERP)?
"ERP comprises of a commercial software package that promises the seamless
integration of all the information flowing through the company - financial, accounting,
human resources, supply chain and customer information. [T.J. Davenport, Harvard
Business Review, July-Aug., 1998]
Supply Chain
$ $
Finance HR
Customer
Warehouse
$ $
$
Purchasing
Quality Assurance
Manufacturing
Marketing
Inventory
$
$
Accounts
$
$
ERP
Poonam Garg, IMT Ghaziabad
Enterprise-wide system integrates the business
functions and processes of an organization.
Integration of business functions into one seamless
application
Produce, share and access information in Real-time
environment
Helps the organization to run smoothly
Usually runs on a RDBMS
Replaces Countless Departmental and
Workgroup Information Systems

What is an ERP?
What is an ERP?
What is an ERP?
Operations
Operational
Management
Executive
Management
Middle
Management
Finance

Sales
Distribution
Production

Human
Resources
ERP System Drivers
Executive
Management
Middle
Management
Operational
Management
Operations
Finance

Sales
Distribution
Production

Human
Resources
ERP System Drivers
Executive
Management
Middle
Management
Operational
Management
Operations
Finance

Sales
Distribution
Production

Human
Resources
ERP System Drivers
Ver.1.0 Slide 14
Customer
Suppliers
Organization
S
C
M
P
R
M
Business
Partners
Warehouses
Distribution Channels
Service Channels
B2B exchanges/ Markets
C
R
M
ERP
Finance, Accounts, HR
Ver.1.0 Slide 15
Ver.1.0 Slide 16
Evolution of ERP
$ $
$
ERP

Inventory
Control
Material
Requirement
Planning
(MRP)
Mfg.
Resource Planning
(MRP II)
Enterprise
Resource
Planning (ERP)
S
t
a
g
e

Time
Evolution of ERP
1960s - Systems Just for Inventory Control

1970s - MRP Material Requirement Planning
(Inventory with material planning & procurement)

1980s - MRP II Manufacturing Resources Planning
(Extended MRP to shop floor & distribution Mgnt.)

Mid 1990s - ERP Enterprise Resource Planning
(Covering all the activities of an Enterprise)

2000 onwards ERP II Collaborative Commerce
(Extending ERP to external business entities)

Ver.1.0 Slide 18
Need for ERP
The need for linkages between systems
Supply Chain
$ $
Finance HR
Customer
Warehouse
$ $
$
Purchasing
Quality Assurance
Manufacturing
Marketing
Inventory
$
$
Accounts
$
$
?
Overstocking at some
warehouses; under stocking
at others
Accounts receivables not
claimed
Payroll processing not
representing sales rep's
latest account wins
Balance sheets do not show
proper depreciation of
assets
Underuse of Transportation
facilities

19
Objectives of ERP Implementation
a) Business drivers:
To streamline business processes.
To get an integrated view of data.
To ensure better monitoring of KPIs.

b) Technology driver:
To achieve a single technology platform.
20
Streamlined Business Processes
e. Procurement f. Manufacturing
g. Fulfillment
d. Product Lifecycle Management
a. Financials and Accounting
b. Human Resource Management
c. Supply Chain Planning
h. CRM
Increase in operational efficiency through
streamlined business processes.
Old flow (Illustrative)
New flow (Illustrative)
21
An Integrated View of Data
g. Fulfillment
h. CRM
Real-time data for
quick business
decisions.
22
Better Monitoring of KPIs
g. Fulfillment
h. CRM
Support for Executive
Management.
23
A Single Technology Platform Across Cos.
g. Fulfillment
h. CRM
g. Fulfillment
h. CRM
Single ERP
Technology
Platform
Client Company - 1
Client Company - 2
Centralized, scalable,
and easily
maintainable IT
infrastructure
Before/After ERP
The silo effect
Work duplication
Lack of standardization
Lack of vision
Facilitates all business processes
and interconnects all the departments
of a company
Improving operational efficiency
Reduce time and resources spent on lower value-added activities while
increasing the level of involvement in business decision making
Efficiency
Financial
Management
Business
Decision
Making
Reporting and
Controls
Transaction
Processing
Financial
Management
Business
Decision
Making
Reporting and
Controls
Transaction
Processing
Without ERP With ERP
ERP Tangible Benefits
Eliminates the duplication and redundancy in data .
Improved business processes providing a competitive advantage.
Better monitoring and quicker resolution of queries from within and outside.
Availability of timely, accurate information with detailed content and better
presentation
Reduction in paperwork because of online formats for entering and
retrieving information.
greater and effective control on accounts payable through better invoicing
and payment processing.
Improved supply- demand linkage with remote location and branches in
other country.

Improved customer service and satisfaction
Increased flexibility in operations
Improved resource utility, reduced quality
cost and information accuracy.
Improved decision making processes due to
availability of online information.
ERP Intangible Benefits
Ver.1.0 Slide 29
Benefits of ERP
Ver.1.0 Slide 30
Benefits of ERP
Ver.1.0 Slide 31
Benefits of ERP
Disadvantages of ERP
ERP implementation is very difficult.
There is a change in the way business is
done. From a business function
approach to a process approach.
ERP systems are very expensive to
implement. Can take years and cost 10s
of millions of dollars.
It takes time to realize the benefits of an
ERP system.
Forces people to change and change =
resistance:
Share information that was once closely
guarded (i.e., their information).
Make decisions they were never required to
make.
Do things they were never required to do
before
ERP systems are strategic solutions. In
essence some companies are betting
their future on a successful ERP
implementation.
If the implementation fails, the
consequences to the company can be
terrible.
Companies have gone out of business as
a result of a failed ERP implementation
effort.
Ver.1.0 Slide 35
Risks in ERP Implementation
Ver.1.0 Slide 36
Risks in ERP Implementation
Client Server Principle
ERP System Client/Server Configuration
3-Tier Architecture of ERP Applications

The 3-tier system is also a Client- Server Architecture.
A 3-tier system logically consists of a front-end UI client, a server and
a back-end database. Minimally, the business logic and database is
located at the server and the UI process resides at the client.

Processing User Request

ERP Architecture
Database
Application
Presentation
Browser Client
PCs, Laptops, etc.
Network
Application
Servers
Database
Internet
Transaction
Server
Web Server
ERP Conceptual Areas
ERP Conceptual Areas
Application Area
(Initiate and execute
ERP transactions)

(Functional)
Basis Area
(The technical
administration of
the system)

(Authorizations/Ids/etc)
Development Area
(1. A developers
workbench
2. Create & Test
ABAP/4 programs)

(Technical)
Systems in ERP
Development
System
(DC)
Quality
System
(QC)
Production
System
(IC)
Transport Request
Systems in ERP
Development
System
(DC)
Quality
System
(QC)
Production
System
(IC)
Transport Request
Sand Box
IDES
I & T
G. C U. T
ERP- Architecture (three main parts)

Standard
Localization
Customization
ERP is for multi locational, multi-
currencies, multi-countries, multi-
languages distributed enterprise
application.
local taxes and other laws, local
currencies, local language user-
interface
business Logic, Presentation layer and the
databases, which is common to all Countries, All
languages, All Currencies, All companies
specific to particular Customer,
taking care of specific
requirements of its processes, its
company policies, its report
requirements etc
Independent of OS, Hardware
Support to all major Operating Systems like Unix, MS-NT, all
Windows platforms

Independent of Database and UI Interfaces:
- Supports all major Database Systems like Oracle, Informix, SQL
Server, DB2, Sybase
User Interfaces:
Supports various Windows platforms, Browsers
Open Communication Protocols: TCP/IP

Typical REQUIREMENTS with ERP Architecture
Typical REQUIREMENTS with ERP
Architecture
Performance:
Good performance for processing and opening pages/ giving
outputs. However it depends on UI design, S/W
modularity, Inter-process communications etc

Distributed System
- Different data/ Modules/ Transactions to be used at
different locations
- Disparate Operating Systems

Security
- Data/ Processes for only authorized persons
- Sensitive Business data security from outsiders
Typical REQUIREMENTS with ERP
Architecture
Scalability:
@ Larger volume of Data / larger no. of users
@ Load balancing / Server Farm
@ Multi-language Support

Flexibility
@ Ease of Change/ Update/ Replace
@ Integration to new Technologies (Bar Code/ RFID)

Maintainability
@ Ease of decoding, debugging
@ Normally supported by different vendors
HARD WARES
OS Driver
APPLICATION LOGIC ( Mfg., Procurement, W/H..)
APIs and Tools ( customize/ maintain)
VIRTUAL MACHINE
ORACLE
SQL
Server
INFORMIX
DATA BASE DRIVER UI DRIVER
Windows
Variants
CLIENT
V.M/C
Browser
n-Layer common ERP Architecture
DataBase Layer
Logic Layer
Presentn Layer
Unix
Variants
1. OS Driver: Operating System Driver, is a program , which identifies
from which OS the connection is made in the network (whether Unix,
Windows like MS-NT and accordingly manages the interactions (input/
output etc)

2. Database Drivers: This is a program, which identifies from which
database (Oracle 8i/ 9i or DB2 or MS-SQL etc) the data is coming and
accordingly manages the interactions including inputs/ outputs

3. UI Driver: User Interface Driver is a program which identifies from
which User Interface (Client program on the Client machine, or
browser etc) the interactions are taking place and accordingly
manages the interactions including inputs/ outputs

4. Application Logic layer: This layer has the main business logic
(depicting the functionalities of procurement, manufacturing, sales
and delivery etc). This layer also has the Tools and APIs, which are to
be used to make any modification, customization, maintenance of the
application.

5. Virtual machine: this set of middleware program layer manages the
package configuration, data dictionary, other layers of program,
program workflow, transaction completion etc of the various
processes.

Typical ERP Integration with legacy
Applications

Finance
Inventory
and Supply
Sales &
Delivery
HRMS
Managers & Stakeholders
Employees
Front
Office
Back
office
Service
Manufacturing
Shared
Database
System
Enterprise
ERP
CRM SCM
EAI
EAI
APO WMS
BI & Reporting Tools
Banks
Legacy
Planning
EAI
EAI
EAI
EAI
EDI/
Gateway
Typical ERP Modules
Manufacturing
Human Resources
$
$
Finance and Accounts
$
$
$ $
$
Material Management
Plant Maintenance
Quality Management
Sales & Distribution
Typical ERP Supported Functions
Financial HR Logistics Sales & Mkt.
Accts receivable Time accounting Inventory Orders
Asset account Payroll MRP Pricing
Cash forecast Personnel plan Plant Maintenance Sales Mgt
Cost accounting Travel expense Prod planning Sales plan
Exec Info Sys Project Mgmt
Financial consol Purchasing
General ledger Quality Mgmt
Profit analysis Shipping
Standard costing Vendor evaluation
Alternative ERP Options
Method Advantages Disadvantages
In-house Fit organization Most difficult, expensive, slowest
In-house
+vendor supp.
combine proven features
with organizational fit
Difficult to develop
Expensive & slow
Best-of-breed Theoretically ideal Hard to link, slow, potentially
inefficient
Customize
vendor system
Proven features modified
to fit organization
Slower, usually more expensive than
pure vendor
Select vendor
modules
Less risk, fast,
inexpensive
If expand, inefficient and higher
total cost
Full vendor
system
Fast, inexpensive, efficient Inflexible
ASP Least risk & cost, fastest At mercy of ASP
ERP vendor competitive positioning
Large
enterprise
SAP
mySAP
Business
Suite
Oracle
EBS and
Enterprise
NetSuite
Lawson
/Intentia
SAP
Business
One
MBS
AX
MBS
GP
MBS
NAV
MBS
SL
Oracle
E1
Epicor
Sage
Group
SSA
Infor
QAD
IFS
Exact
Unit 4
Agresso
Midmarket
Small
business
Source: Forrester Research Inc
ERP Vendors
There were five dominating ERP software suppliers:
SAP, Oracle, PeopleSoft, Baan and J.D. Edwards.
They controlled more than 60% of the multi- billion
dollar global market.
Each vendor had a specialty in one particular
module area such as
Baan in manufacturing,
PeopleSoft in human resources management,
SAP in logistics, and
Oracle in financials
ITEC6620 60
SAP AG
SAP AG (Systeme, Anwendungen, und Produkte in
Datenverarbeitung), or Systems, Applications and Products in
Data Processing
In 1979, SAP launched SAP R/2, a mainframe-based ERP
In 1992 SAP R/3 was launched based on client/server
By 1999 SAP became the third largest software vendor in the
world and the largest in the ERP sector with a market share of
about 36% serving over 17,000 customers in over 100 countries.
In 1999 SAP extended the ERP functions by adding CRM, SCM,
sales-force automation and data warehousing.
SAPs Internet-enabled ERP solutions are provided by the
recently launched ERP product called mySAP.COM
ITEC6620 61
Oracle Corporation
founded in 1977 in the USA, is best-known for its database
software and related applications and is the second largest
software company in the world after Microsoft.
second to SAP in the enterprise systems category with over
5,000 customers in 140 countries.
Oracles ERP system is known as Oracle Applications, having
more than 50 different modules in six major categories: finance,
accounts payable, human resources, manufacturing, supply
chain, projects and front office.
Now taken over PeopleSoft and JD Edwards
ITEC6620 62
PeopleSoft Inc.
Started in 1987 in California, with specialization in
human resource management and financial
services modules.
Enterprise solutions from PeopleSoft include
modules for manufacturing, materials management,
distribution, finance, human resources and supply
chain planning.
One of the strengths of PeopleSoft is the recognition
by its customers that it is flexible and collaborative
In 2005 PeopleSoft became a part of Oracle offering
PeopleSoft 9
ITEC6620 63
J.D.Edwards
founded in 1977 in Denver (cofounded by Jack Thompson, Dan
Gregory and C. Edward McVaney) with long experience of
supplying software for the AS/400 market.
Its ERP product called OneWorld is capable of running on
multiple platforms and with multiple databases, ... [and]
revolutionizes enterprise software by liberating users from
inflexible, static technologies
The product includes modules for finance, manufacturing,
distribution/logistics and human resources, quality management,
maintenance management, data warehousing, customer support
and after-sales service
Now a part of Oracle offering JD Edwards EnterpriseOne and JD
Edwards World
ITEC6620 64
Baan
Found in 1978 with expertise in software for the
manufacturing industry
ERP solution areas that Baan covers include
finance, procurement, manufacturing, distribution,
integration and implementation, planning, sales,
service and maintenance, business portals,
collaborative commerce and business intelligence.
Bought by Infor in 2006
ITEC6620 65
Supply chain:
Network of organizations and processes for:
Procuring raw materials
Transforming them into products
Distributing the products
Upstream supply chain:
Firms suppliers, suppliers suppliers, processes for managing
relationships with them
Downstream supply chain:
Organizations and processes responsible for delivering products
to customers

Supply Chain Management Systems

NIKES SUPPLY CHAIN
This figure illustrates the major entities in Nikes supply chain and the flow of information
upstream and downstream to coordinate the activities involved in buying, making, and
moving a product. Shown here is a simplified supply chain, with the upstream portion
focusing only on the suppliers for sneakers and sneaker soles.
FIGURE 9-2

THE FUTURE INTERNET-DRIVEN SUPPLY CHAIN
The future Internet-
driven supply chain
operates like a digital
logistics nervous
system. It provides
multidirectional
communication among
firms, networks of firms,
and e-marketplaces so
that entire networks of
supply chain partners
can immediately adjust
inventories, orders, and
capacities.
FIGURE 9-5
Knowing the customer
In large businesses, too many customers and too many ways
customers interact with firm
Customer relationship management (CRM) systems
Capture and integrate customer data from all over the
organization
Consolidate and analyze customer data
Distribute customer information to various systems and customer
touch points across enterprise
Provide single enterprise view of customers

Customer Relationship Management Systems
CUSTOMER
RELATIONSHIP
MANAGEMENT
(CRM)
CRM systems examine
customers from a
multifaceted
perspective. These
systems use a set of
integrated applications
to address all aspects of
the customer
relationship, including
customer service, sales,
and marketing.
FIGURE 9-6
HOW CRM
SYSTEMS
SUPPORT
MARKETIN
G
Customer relationship
management software
provides a single point
for users to manage
and evaluate marketing
campaigns across
multiple channels,
including e-mail, direct
mail, telephone, the
Web, and wireless
messages.
FIGURE 9-7
CRM
SOFTWARE
CAPABILITIES
The major CRM software
products support business
processes in sales,
service, and marketing,
integrating customer
information from many
different sources. Included
are support for both the
operational and analytical
aspects of CRM.
FIGURE 9-8
CUSTOMER LOYALTY MANAGEMENT PROCESS MAP
This process map shows how a best practice for promoting customer loyalty through
customer service would be modeled by customer relationship management software.
The CRM software helps firms identify high-value customers for preferential
treatment.
FIGURE 9-9

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Poonam Garg, IMT Ghaziabad 1

Enterprise Resource Planning

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