IS for SME

IS

(Information System)

ERP (Enterprise Resource Planning)

- Swarnendu
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JOURNEY OF ERP:
MANUAL BACK END PROCESS AUTOMATION OF PROCESSES THROUGH SOFTWARES FINANCIAL SOFTWARES SALES AND DISTRIBUTION SOFTWARES

HR SOFTWARES

DATAPROCESSING OF FINANCE DEPARTMENT

DATAPROCESSING OF HR DEPARTMENT

DATAPROCESSING OF HR DEPARTMENT

GAP ERP

GAP

INTEGRATION OF INTERDEPARTMENTAL DATA

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Information Systems

Transaction Processing Systems (TPS) Management Information Systems (MIS)

monitor organisational performance, daily, weekly, monthly scheduled reports, exception reports

Executive Information Systems (EIS)

access to external data, drill down into internal data, graphics

Decision Support Systems (DSS)

spreadsheets and custom data models, expert systems

Knowledge Management Systems (KMS) Enterprise Systems (ERP)

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Management Support Systems

Provides May

information and support needed for effective decision making by managers.

summarize information from different operations support systems.

Used

typically at the tactical and strategic levels of the organization.

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Management Support Systems

Management

Information Systems (MIS):

Provides managerial end users with the information they need to support their day to day decision making needs.

Decision Support Systems (DSS):

Provides top and middle management with information in an interactive session on an ad-hoc basis.

Provides information for unstructured decision making.

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Management Support Systems

Executive

Information Systems (EIS):

Provides middle & top management with easy to access selective info. regarding the factors that are critical (CSF) to achieving organizational strategic objectives.

These systems are easy to operate and understand.

ERP Enterprise Resource Planning

a set of integrated business applications used to carry out the most common business functions

ERP versus Traditional IS

ERP systems are package software. ERP systems handles the majority of the enterprises information requirements. ERP systems facilitate the flow of information across the enterprise.

ERP versus Traditional IS

Driven by business processes AND NOT business functions. Uses a single database. Supported by a single development environment.

Fits the organizations business processes.

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Growth of ERP Systems

The

market for ERP systems grew rapidly in the late 1990s. The major reasons for this included:
The client/server environment became a popular enterprise computing platform for many organizations. Most ERP systems are designed to take advantage of this platform. ERP systems represents a software solution for companies migrating from a mainframe environment to a client/server environment.
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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.
Training

is also very expensive.

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Disadvantages of ERP
It

takes time to realize the benefits of an ERP system, approximately 8 months after implementation.
Employee

control issues:

Share information that was once closely guarded. (I.e. their information)
Make decisions they were never required to make. Both of these issues leads to resistance, redundancies, and errors.

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Disadvantages of ERP
About

1/2 of ERP implementations fail to achieve the hoped for benefits because of under estimates in change management.
These

are referred to as unintended consequences.

Emotional fallout.

Resistance to further change.

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ERP Problems
ERP

systems are strategic solutions. In essence you are betting the companys future on a successful ERP implementation.
If

the implementation fails, the consequences to the company can be disastrous.

Companies

have gone out of business as a result of a failed ERP implementation effort.

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Evolution of ERP Systems

ERP ERP

systems have evolved over the past 30 years. systems grew out of MRP II systems.
Thus

to understand the history of ERP systems, we must review MRP and MRP II systems.
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MRP Systems
Material Requirements Planning (MRP) is a computerized inventory control and production planning system for generating purchase orders and work orders of materials, components, and sub assemblies.
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Components of a MRP System

MRP

is designed to handle the ordering and scheduling of dependent demand inventories.

Major

components of a MRP system:

Bill of materials - composition of the finished product. Master schedule - how much of the finished product is desired and when. Inventory records file - the amount of inventory on hand or ordered.
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MRP II Systems
Manufacturing

Resource Planning (MRP II) is an expansion of MRP, originating during the early 1980s.
MRP

II helps to plan all the resources necessary for manufacturing; including financial analysis, feedback loops, and marketing plans.
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ERP and MRP II Systems

The

major differences between ERP and MRP II systems are:

Use of a GUI.

Relational Database.
Client/server architecture.

Much more integrated than MRP II.

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Recent ERP Trends

ERP

systems are now linking groups and applications external to the organization.
We are now linking ERP systems with web and E-commerce applications, b-to-b, b-to-c
ERP

systems are now beginning to use web browsers as the GUI.

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ERP Implementation
ERP
A

implementation is a very difficult and long task.

simple ERP project takes on average 16-18 months to complete.
Larger

ERP projects may take many years to complete.

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Pre-Implementation Objectives
To

increase the chances of a successful ERP implementation, companies should achieve the following objectives before ERP implementation begins:
Ensure alignment of the project to the companys business plan. Ensure ERP goals are clearly and widely understood. Develop a well established communication plan that involves the entire organization. Obtain executive sponsorship.
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ERP Implementation
The

ERP implementation must be aligned with the strategic goals of the organization.
This

is needed to prevent the common mistakes of ERP implementation and deployment.

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ERP Implementation
The

specific steps for ERP implementation range from vendor to vendor.

ERP implementations will be significantly influenced by 4 major criteria:

Functional complexity. Size/type of user population.

Geographical spread.
Package modifications.
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ERP Implementation
Functional

can be grouped into five areas: Finance, Manufacturing, Logistics, Sales, and HR/Payroll.

complexity. ERP Functionality

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ERP Implementation
Size/type

increases proportionately with heads-down users, rather than with total users. Geographic spread. Single-site deployments are the simplest, while multiple sites across multiple continents are the most complex.

of user population. Complexity

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Package

mistake of trying to over customize the application framework to fit their existing business process model, rather than adjusting business processes to fit the application suite.
During

modification. Many companies make the

the package selection process, it is important to gauge the fit of the ERP system with the existing business model. Minimizing customization and modifications will result in a faster, more successful, deployment.
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ERP Costs
ERP Implementation and Maintenance Costs Cost Component Implementation costs Percentage 70%

Two-year post-implementation costs

30%

Total cost of ownership (TCO)

100%

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PROJECT METHODOLOGY:
IT PROJECTS
REQUIREMENT ANALYSIS DESIGN CODING TESTING INSTALLATION AND MAINTENANCE

SAP PROJECTS AS IS STUDY

TO BE STUDY BUSINESS BLUEPRINT REALIZATION GOLIVE
DEVELOPMENT TESTING PRODUCTION

INSTALLATION AND MAINTENANCE

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The The

ERP market is dominated by a few large companies. major companies we will study are:
SAP AG. Baan. Peoplesoft. J.D. Edwards.

Oracle.
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SAP
SAP The

- Systems, Applications, Products in Data Processing. worlds leading vendor of ERP systems.
R/3

is the follower to the R/2 system and was introduced in 1992.

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SAP
Clients

are mainly big international companies with revenues of at least 60 million dollars.
SAPs As

revenue shows a slight slow down from 1998 onwards. SAPs primary clients tend to slow down.
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The SAP Company

The

company SAP AG was founded in 1972 by 4 former IBM employees.

SAP SAP

- Systems, Applications, Products in Data Processing. makes 2 ERP software packages:

R/2, R/3.
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R/3 System
The

R/3 system has evolved from R/2 technology.

R/3

is used in new applications as well as in companies converting from a legacy mainframe system to a client/ server architecture.
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Oracle
SAPs

nearest challenger, in terms of revenue, is Oracle with its product Oracle Applications.
Oracle

established itself as the largest database vendor before moving into the ERP market in 1989.

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Oracle
Its

applications were developed without the constraints of legacy systems and were among the first to use the advanced capabilities of relational database design.
One

reason for Oracle not being so successful is that the firm has prioritized marketing rather than functionality or value for the money.
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Peoplesoft
The

third largest ERP vendor is Peoplesoft. produce Peoplesoft 7.5.

They

Peoplesofts

focus was in the area of Human Resources, which is still the companys strength.
Some

critics consider that Peoplesoft is not a complete ERP vendor, but the company has today well-developed modules in manufacturing, distribution and financials.

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Peoplesoft
Too

US-centric to make a serious challenge to the market.

Only

20 percent of its sales are derived from clients outside USA.

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J.D. Edwards
US-based JDE

JD Edwards (JDE) was founded in 1977.

started as a custom software developer, then moved to off-the-shelf (finance and logistics) packages.

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J.D. Edwards
JDE

mostly targets mid-size corporations and has enjoyed a long-term growth rate in excess of 50% over its 20 years in business.
After

three years of development, its ERP products are now sold under the brand name OneWorld.

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Baan
The

Dutch company was founded in 1978 as a provider of financial and administrative consulting services.
Baans

strategy concentrates on manufacturing and logistic systems and operates on Unix and NT.
Baan

has already implemented Baan 4 in more than 280 companies.

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Selecting an ERP Vendor and Software

Functional

processes.
Degree

fit with the company's business

of integration between the various components of the ERP system.

Flexibility

and scalability.

Complexity
Quick

and user friendliness.

implementation.
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Selecting an ERP Vendor and Software

Ability

to support multi-site planning and control.

Technology;

client/server capabilities, database independence, security.

Availability of regular upgrades. of customization required. Local support infrastructure. Availability of reference sites.
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Amount

SAP R/3 basic modules

1. Financial Accounting (FI) 2. COntrolling (CO) 3. Assets Management (AM) 4. Project System (PS) 7. Human Resources (HR) 8. Plant Maintenance (PM) 9. Materials Management (MM) 10. Quality Management (QM) 11. Production Planning (PP) 12. Sales and Distribution (SD)

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SAP R/3 basic modules

FI Financial Accounting

designed for automated management and external reporting of general ledger, accounts receivable, accounts payable and other subledger accounts with a user defined chart of accounts. As entries are made relating to sales production and payments journal entries are automatically posted. This connection means that the "books" are designed to reflect the real situation.
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SAP R/3 basic modules

CO Controlling represents the company's flow of cost and revenue. It is a management instrument for organizational decisions. It too is automatically updated as events occur. AM Asset Management designed to manage and supervise individual aspects of fixed assets including purchase and sale of assets, depreciation and investment management.

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SAP R/3 basic modules

HR Human Resources is a complete integrated system for supporting the planning and control of personnel activities.

PM Plant Maintenance In a complex manufacturing process maintenance means more than sweeping the floors. Equipment must be services and rebuilt. These tasks affect the production plans. 47

SAP R/3 basic modules

MM Materials Management

supports the procurement and inventory functions occurring in day-to-day business operations such as purchasing, inventory management, reorder point processing, etc.
QM Quality Management

is a quality control and information system supporting quality planning, inspection, and control for manufacturing and procurement.
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SAP R/3 basic modules

PP Production Planning is used to plan and control the manufacturing activities of a company. This module includes; bills of material, routings, work centers, sales and operations planning, master production scheduling, material requirements planning, shop floor control, production orders, product costing, etc.
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SAP R/3 basic modules

SD Sales and Distribution helps to optimize all the tasks and activities carried out in sales, delivery and billing. Key elements are; pre-sales support, inquiry processing, quotation processing, sales order processing, delivery processing, billing and sales information system.
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