ERP Systems. What is ERP? ERP stands for Enterprise Resource Planning, which is a software system that: Takes an enterprise approach to integrating and

ERP Systems

What is ERP?

ERP stands for Enterprise Resource Planning, which is a software system that: Takes an enterprise approach to integrating and optimising

business processes across departments (finance, HR, sales, etc).

Provides consistent information for timely decision-making and performance measurement

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ERP vendors and market The ERP market has consolidated considerably in the last 5 years

leaving SAP and Oracle as leaders. Oracle acquired PeopleSoft who had acquired JD Edwards Typical of maturing technology markets which have 2 leaders and a few niche

players

There are also specialised vendors Infor (GEAC, SSA) – consolidator/vertical niches Microsoft Dynamics - SME

Open source projects are not widely used Unclear if they will gain ground

This lecture will cover general ERP issues but focus on SAP as an example. This is not an advert for SAP!

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An example of a cross-department process: Purchase-to-Pay

1. Determine requirements, complete purchase requisition.

Automatically generate the purchase requisition based on quantity on-hand, quantity-on-order, and expected demand.

© L. Gray, CNU

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Purchase-to-Pay

2. Prepare and record purchase order.

Assists the buyer in identifying sources of supply for the requested item, preparing RFQs to vendors, analyzing vendor quotes,comparing vendor prices, terms, and past performance

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Purchase-to-Pay

3. Receive and record goods.Compare quantity ordered to quantity received.

Routes goods to the function that requested them or directs them the warehouse for immediate sale. It also records vendor performance data.

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Purchase-to-Pay

4. Receive vendor invoice, match with PO and receiving report; record payable.

If the three-way match fails, the enterprise system notifies the proper personnel to ensure timely reconciliation of differences.

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Purchase-to-Pay

5. Prepare and record cash disbursement and update accounts.

Uses vendor and AP data to schedule payments in accordance with vendor terms and to receive discounts.

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Example of Inefficient Process

A telephone ordering service Requires the agent to take the ordered items Provide pricing information Estimate delivery date Check availability of credit for the caller

A manual/semi-automated process would run like this…

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Inefficient Customer Service

1. Check if the customer exists in the system and has good credit.

© L. Gray, CNU

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2. Find out if item is available from warehouse stock or if it has to be scheduled for manufacturing.

Tell the customer when they would receivethe item.

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3. If item is not in stock shelf, when will it be available from manufacturing?

Sally could review production schedules and add the time required to pick, pack, and ship the item.

This would not, however, tell her if the itemhad already been allocated to another customer.

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4. In the event that the item must be manufactured, when could it be scheduled, and how long will the manufacturing process take?

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5. How long will it take vendors to supply raw materials so that manufacturing can take place?

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6. What price will be charged to this customer for this order?

The price to charge must be obtained from marketing.

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7. Needs to check Accounts Receivable balance to determine if customer has sufficient credit.

Without direct access to the available credit data, Sally will have to call accounting to approve this order.

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8. If credit is insufficient, must check with credit department for change in credit line.

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Requirement

Provide agent with a single point of access from which they can complete the order Check information (availability of items, pricing and credit) Request initiation of internal processes (manufacturing, delivery) Provide reliable information to the customer (delivery date, price)

But associated data and processes relate to different functions within the organisation which may be in different systems.

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Potential Solutions

Integration of existing function based systems EAI is the solution

Consolidation into a single application ERP is the solution

In most cases, an enterprise will combine both approaches Consolidate in some places Integrate in other places

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Recap: Problems with integration of function based systems

Data Sharing is difficult between systems Data duplication and inconsistencies

Which is the true address or order? Data model inconsistencies

Integration of information not automatic Often results in manual steps

Partial information leads to isolated decisions lead to overall inefficiencies Increased expenses

Note: This does not mean integration is wrong all the time. See end of lecture.

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Enterprise Resource Planning

An ERP deployment consists of Integrated modules Common process and data models and definitions Common database

Update one module, automatically updates others

ERP is More about business process change than technology An approach to managing all resources and their use in the entire

enterprise in a coordinated manner A set of integrated business applications, or modules which carry out

common business functions such as general ledger, accounting, or order management

An approach to supporting business through optimizing, maintaining, and tracking business functions

Focused on value chains, rather than individual functions

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Typical Technical Architecture

N-tier architecture Database server with a single data model (multiple servers

hosting a distributed database ) Application logic servers with process models (multiple servers,

distributed ) Web/Internet server Presentation level (browsers)

Evolved to include Service Oriented Architecture for leading vendors Architecture facilitates integration of external systems into the

ERP system.

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e.g. mySAP ERP

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mySAP ERP

Portal Data Warehouse

Technology to integrate people, information and business processes across technologies

Integrate SAP systems

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mySAP ERP

Management of travel costs and expense claims

Managing corporate liability

Traditional ERP: Controlling areas of most expense

Management of property etc

HR: Workforce compensation

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mySAP ERP

Traditional ERP: All the well-known value chain processes: Order to cash etc.

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mySAP ERP

Human Capital Management: support of line management, retention/recruitment, global HR planning and management

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mySAP ERP

Financials: Automation of finance functions to minimise costs. Speed up the preparation of financial information. Compliance, better management of free cash resources

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mySAP ERP

Analytics: Optimisation and automation of planning, analysis of performance, management accounting support.

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mySAP Business Suite Solutions

mySAP Insurance mySAP Media mySAP Mill Products mySAP Mining mySAP Oil & Gas mySAP Pharmaceuticals mySAP Public Sector mySAP Retail mySAP Service Providers mySAP Telecommunications mySAP Utilities

Industry Solutions mySAP Aerospace & Defense mySAP Automotive mySAP Banking mySAP Chemicals mySAP Consumer Products mySAP Engineering &

Construction mySAP Financial Service Provider mySAP Healthcare mySAP High Tech mySAP Higher Education &

Research

Cross-Industry Solutions mySAP Workplace mySAP CRM mySAP SCM mySAP Marketplace mySAP E-Procurement mySAP BI mySAP PLM mySAP HR mySAP Financials mySAP Mobile Business

mySAP Hosted Solutions mySAP Services

Infrastructure and Services mySAP Technology

Many variants of the horizontal ERP package are available for specific industy needs.

There are also some niche ERP vendors focusing exclusively on individual industries.

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The user view of an ERP:

Login screen

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Choose your options

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Create a requisition

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The user view of an ERP: Create a requisition

(II)

ERP implementations may contain 1,000s of screens

ERP embeds knowledge of the organisation’s and industry’s terminology, processes and data

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ERP approach extends beyond ERP

ERP vendors also provide other enterprise applications including Customer Relationship Management Supply Chain Management Product lifecycle management Supplier Relationship management

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Benefits of ERP

Common set of data Removes consistency and synchronisation issues

Ready integration for decision support systems

Inter-department integration for all departments using the ERP

Library of available standard template processes and modules make integration easier

Forces Business Process Reengineering

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Potential Limitations of ERP

Global ERP can be a never-ending project for large organisations

No organisation exists in isolation There are always suppliers and clients who use different data models. This means that the need for integration cannot be removed.

Inter-department integration relies on using the global ERP Causes problems with anomalous departments, recently required,

geographically isolated or with different business processes.

The software can drive the business rather than the other way around Templates tend to impose the standard business process rather than

your organisations business process. This is okay for commoditised processes but not for all.

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ERP Implementation Options

Green field Create IS architecture from scratch

ERP by Function Deploy one or a few ERP modules across all Business Units Risk: May never extend beyond original function.

ERP by Business Unit Deploy fully integrated ERP suite in one or more Business Units

Fully Integrated ERP Full scale deployment across the enterprise

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ERP and integration capabilities

All ERP implementations require integration with other systems Supplier or customer systems Legacy systems which cannot be retired. As part of an incremental transition to a global ERP system

ERP Integration layers Provide SOA or EAI type capabilities Typically tightly coupled to the ERP and focus on integration into the ERP

E.g. SAP NetWeaver Oracle Fusion

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Example: SAP XI

SAP Exchange Infrastructure (SAP XI) An integration server (EAI) Integrates SAP applications and

3rd party applications Integration server

Message routing Message mapping/transformation

Integration adapters Protocol and data format

conversion (into/out of XML)

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ERP is always a major project Any ERP project requires significant time and cost. It is likely to be disruptive and result in business process changes

across the organisation.

To be successful The project must have high priority and visibility within an

organization. Senior management commitment with regular progress reviews at

the appropriate levels of management.

Risks Many companies are unclear on the likely total project cost or

return. As with any enterprise level project, scope creep, organisational

politics and change regularly cause failure.

Implementing an ERP system

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SAP‘s ASAP – Rapid Implementation Methodology

ProjectPreparation

Business Blueprint

Realization

FinalPreparation Go Live &

Support

Continuous Change

© SAP Five step approach to implementation of SAP Incorporates many standard concepts of project management

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SAP provided tools

Welcome to AcceleratedSAP

Version

Project Preparation

Business Blueprint

Realization

Final Preparation Go Live &

Support

ContinuousChange

What’s NewRoadmapImplementation Accelerators

Project PlanQuestion and Answer DatabaseIssues Database

Business Process ProceduresKnowledge Corner

Glossary

Help

Contents Search

BackHide Forward Refresh Print Options

Home Page

SAP provides tools to assist and support implementation Implementation Accelerators, Project Plan, Consulting Guides,

Knowledge Corner, Glossary, Help

What’s NewRoadmap

Phase 1: Project PreparationPhase 2: Business BlueprintPhase 3: RealizationPhase 4: Final PreparationPhase 5: Go Live and Support

Implementation Accelerators Project PlanKnowledge Corner

Glossary

Contents Search

Home Page

Help

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Structure and definitions

Phase The major organizational steps of the ASAP Roadmap.

Work package A group of activities designed to accomplish a major portion of a Roadmap

phase. A work package is assigned to a project team for completion. Activity

A group of tasks. The results of an activity can produce certain deliverables and can be

accomplished by one or more project team members. Several activities comprise a work package.

Task A specific event to be performed by a project team member. Within ASAP, tasks can be accelerated using:

How-To - Explanation documentation of how to perform a process, activity , or task.

Accelerator documents, templates, tips and tricks used to accelerate task completion.

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Phase 1: Project Preparation Provides initial planning and preparation for project. Gather requirements

Requirements workshops Requirements documentation and control processes

Project success requires requirements gathering which Is inclusive with representation and engagement from all participants. Has clear and effective approval processes at senior management level.

Phase 2: Business Blueprint Create the Business Blueprint

detailed documentation of the results gathered during requirements workshops. documents the business process requirements of the company which creates a common understanding of how the company will operate.

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Strengths/Weaknesses of Business Blueprints

Strengths Share a common understanding with everyone on the project Formalises the agreement between

The IT project team and business Different business departments

Reduced level of communication required during implementation Supports impact analysis when requirement change occurs.

Weaknesses Processes can be difficult to model

Business process can be poorly defined Need to distinguish between real business process requirements and

legacy “way we do business” Must balance need to perfect definitions and need to complete the

project. Business processes can change rapidly

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Phase 3: Realization Implement all the business and process requirements based on the Business Blueprint. Configure the system step by step in two work packages, Baseline and Final configuration.

Phase 4: Final Preparation Complete testing, end user training, system management and cutover activities to achieve go-live readiness. Final Preparation phase requires resolution of all critical open issues.

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Phase 5 Go Live and Support: Transition from a project-oriented, pre-production environment to live production operation.

Continuous Change: Provide on-going support and assistance for post go-live. Provide solutions for standard minor tweaks and changes Provice solutions for evolution of the solution to support:

Business changes Technology changes Changes in the user community or New business content.

ASAP covers these activities

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Supporting Continuous Change

Market Technology Changes

11 22 33

5544

ProjectPreparation Business

BlueprintRealiz-ation

FinalPreparation

Go Live &Support

New Analysis RequirementsNew Business Content

Implementation Release 1Implementation Release 1

ASAP Implementation

ASAP Continuous Change

New Functionality

Implementation Release 2Implementation Release 2

Implementation Release 3Implementation Release 3Competitive Environment Changes

Example

Penguin’s Global ERP Strategy

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The Globalization of Supply Chain

Systems

Anne Naramore Vice President

International Technology StrategyPearson plc

Frankfurt Book Fair

28th International Supply Chain Specialist Meeting

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Agenda•Pearson

•Supply Chain Environment Today

•Supply Chain Technology Strategy

•Case Study: Asia

•Summary

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Pearson is a world leading education and information company, helping people of all ages to live and learn.

2005 Sales: £4,096M / $7,045M

+9%2005 Adjusted Operating Profit: £509M / $875M

+22%

PEARSON A Good Read

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Geographic Businesses

Penguin: 20%£804M / $1,383M

FT Group: 15%£629M / $1,082M

Professional: 14%£589M / $1,013M

Higher Education: 19%£779M / $1,340M

School: 32%£1,295M / $2,227M

North America: 66%£2,717M / $4,673M

Europe: 24%£963M / $1,656M

Asia Pacific: 7%£300M / $516M

Rest of World: 3%£116M / $200M

Main Businesses

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250 New authors published by Penguin around the

world

18M U.S. school

students learning English and Math

with a Pearson programme

3.5M

Professionals who qualified in

our testing centres

Interesting Facts

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4.5M Readers reached by the Financial Times in print and online

0.5BN People learning

English with Longman materials

3.6M

College students in America using a Pearson online

service

Interesting Facts

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Pearson’s business strategy and organization culture has yielded a relatively diverse, decentralized portfolio of ERPs implemented at the region/operating company level.

Business process standardization within Pearson occurs largely at the region/operating company level due to market demands.

Consequently, Pearson has adopted a decentralized IT strategy, with implementations occurring at the region/operating company level.

Supply Chain: Environment Today

Business processes: The life cycle of a product/title

•Editorial & Production•Sales & Marketing•Inventory Management•Sales Order Processing•Financials•Distribution and Warehousing•eCommerce•Human Resources/Payroll•Business Intelligence (analysis and reporting)

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ERP Editorial & Production

Sales & Marketing

Inventory Mgmt

Order Mgmt Finance Distribution eCommerce HR/PayrollBusiness

Intelligence

Oracle-

Assessment

SAP 4.6-Penguin

SAP 3.1i-School

Vista-Canada

Custom System

- Higher Education

Complex Environment: North America

Supported by ERP Not supported by ERPLegend:

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ERP Editorial & Production

Sales & Marketing

Inventory Mgmt

Order Mgmt Finance Distribution eCommerce HR/PayrollBusiness

Intelligence

Vista- Dutch

JDE- Spain

Infos-

Germany

Exact- Poland

Libris- France

Oracle- Italy

SAP 4.6- UK

Vista- UK

Complex Environment: Europe

Supported by ERP Not supported by ERPLegend: Not in scope for business

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Complex Environment: Latin America ERP Editorial &

ProductionSales &

MarketingInventory

MgmtOrder Mgmt Finance Distribution eCommerce HR/Payroll

Business Intelligence

JDE- Mexico

Siscorp- Brazil

Stradivarius- Argentina

JDE- Colombia

Saab- Chile

Figaro- Uruguay


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Complex Environment: Pacific Rim ERP Editorial &

ProductionSales &

MarketingInventory

MgmtOrder Mgmt Finance Distribution eCommerce HR/Payroll

Business Intelligence

IBS Bookmaster

- Hong Kong

- Singapore

-Malaysia

Epicor- Taiwan

-Korea

Custom System

- Japan

IBS Bookmaster- Australia


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Exercise

What should Pearson do? Identify three strategies

Identify business risks with each strategy

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Supply Chain Technology: Strategy

Pearson has adopted a decentralized strategy, with implementations occurring at the region/operating company level.

While supporting all the operating companies from a single ERP is desirable, the cost to consolidate is high and difficult to justify, and the process standardization required could inhibit business performance.

Pearson’s Roadmap sets a course to:

•Maintain a decentralized approach

•Allow ‘scope’ to meet regional /operating company requirements

•Upgrade as versions go end-of-life

•Govern introduction of new systems

•Consolidate and standardize when cost justified

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Case Study: AsiaSeptember 2004: Consolidate business units into a single ERP instance

NPV: $954.9K | IRR: 37% | Payback: 1.3years

Goals:

•Standardize business processes & operating procedures across the region

•Reduce long-term costs (IT, Customer Service, Finance)

•Improve utilization of IT systems & resources

•Provide standard system platform for operation

Scope (Locations):

•Hong Kong, Taiwan, Korea, Japan, Singapore and Malaysia

•Hong Kong hosting location and support center

•MPLS connectivity for each country access

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Case Study: AsiaConsolidate business units into a single ERP instance

Functionality:

•Editorial & Production processing

•Academic adoption management

•Sales Order processing

•Inventory management

•Procurement

•Distribution & warehousing

•Financials (GL, AP, AR)

•Royalty management

•Business intelligence (analysis and reporting)

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Rollout Timeline:

Apr 200

6

May 200

6

Jun 200

6

Jul 2006

Aug 2006

Sep 2006

Oct 2006

Nov 200

6

Dec

2006

Jan 2007

Feb 2007

Mar 2007

Apr 2007

May 200

7

Jun 2007

Jul 2007

Aug 2007

Sep 200

7

Singapore

Malaysia

Hong Kong

KoreaTaiwan(delayed 6 months) Japan

2006 2007

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Solution Provider: IBS Bookmaster•Build upon existing implementation in Singapore

•Build upon existing relationship with vendor

•Singapore and Malaysia

•Pearson Australia

•South Africa (MML)

•Most cost effective solution

•Met majority of functionality needs

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What We Learned:

•Partnership with vendor

•Strong executive sponsorship and project governance

•Thorough functionality requirements

•Functionality gaps always found – accept it and manage closely

•Dedicated and skilled project managers (internal & vendor)

•Contingency: money, time and resources

•Don’t underestimate language barriers and cultural styles: slows process

down

Replicate Success and Learnings:

•Taking approach to Europe

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Summary: Environment today

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Summary: Future environment

Long-term strategy | Time, Money, and Strong Partners

Documents

ERP Systems. What is ERP? ERP stands for Enterprise Resource Planning, which is a software system that: Takes an enterprise approach to integrating and