ERPUnit IIntroduction

Introduction

•Overview of enterprise systems•Evolution•Risks and benefits•Fundamental Technology•Issues-planning design & implementation

of cross functional integrated ERP systems

Enterprise : Overview

Enterprise :- Group of people- Common goal- Resources

Video Case : Stonewall Kitchen

•Flexible & Customizable•Eliminating waste costs•Driving growth•Greater productivity•Multi-channel retailing

Traditional Approach- Grouped based on

function.- Every department have

their own goals and objectives.

- Department function in isolation.

- Every dept have their own systems of data collection and analysis.

Enterprise Approach- Entire organisation

considered as a system.- All department are sub-

systems.- Integrates information

system Transparency & information access Automating business process and functions

ERP Myths

• ERP means More Work and Procedures• ERP will make many employees redundant and

jobless• ERP is the sole responsibility of the management• ERP is just for the managers/decision makers• ERP is just for manufacturing organization• ERP is just for the ERP implementation team• ERP slows down the organization• ERP is just to impress customers• ERP package will take care of everything• One ERP package will suit everybody• ERP is very expensive

Evolution of ERP

1960s Inventory Management & Control

1970s MRP I – Scheduling production process

1980s MRP II – Coordinating manufacturing

process

1990s ERP

Risks of ERPI People Issues• -Change Management• -Internal Staff Adequacy• -Project Team• -Training• -Employee Re-location and

Re-training• -Staffing (includes turnover)• -Top Management Support• -Consultants• -Discipline• -Resistance to change

 

IV Implementation Issues• -Project size• -Lengthy implementation

time• -High Initial investment• -Unreasonable Deadlines• -Insufficient funding• -Interface• -Organizational Politics• -Scope Creep• -Unexpected Gaps• -Configuration difficulties

Risks of ERP contd.,

III Technological Risks• -Software Functionality• -Technological

Obsolescence• -Application Portfolio

Management• -Enhancement and

Upgrades

V Operation and Maintenance Issues

•  •  

• II Process Risks• -Program Management• -Business Process

Reengineering• -Stage Transition• -Benefit Realization

ERP Benefits

• Information Integration

• Reduction of lead time

• On-time shipment

• Reduction in cycle time

• Improved resource

utilization

• Better Customer

Satisfaction

• Improved supplier

performance

• Increased flexibility

• Reduced Quality costs

• Better analysis and

planning capabilities

• Improved information

accuracy and decision

making capability

• Use of latest technology

ERP Limitations

• Custom reports

• Provides only current status

• Does not include external intelligence

Overcome… ERP Limitations.. Technologies

1. Business process Reengineering (BPR)2. Data warehouse and data marts3. Data Mining 4. OLAP5. Product life cycle management (PLM)6. Supply chain management7. Customer relationship management8. Geographical Information systems (GIS)9. Intranets & Extranets10.Electronic data interchange (EDI)11.Electronic funds transfer (EFT)12.Cryptography

Business process reengineering(BPR)

•Analysis and redesign of workflow within and between enterprises

•To reduce cost and increase quality of service

XEROX : Case study BPRThe problem

Non-Production Procurement (NPP) - Covers purchases other than supplies

used for production. - All office supplies, From desk, personal

computers to pencils and stationary.- Spent $4.3 billion dollars a year on NPP.

The Redesign

•BPR Team – Managers, Supervisor & Clerical personnel from various organisations.

•Different groups- Expensive items- Complex items- Routine items- Specialists (Exceptions & Rush orders)•Contracted with outside consulting group

- study best procurement practices

•Contracts to vendors to supply items at a set price

•Credit cards to managers for unique, rush purchases.

•American Express report - Credit card summary.

•Negotiate mega-purchasing deals with large suppliers

•Replaced numerous small contracts.

•Automated access between Xerox managers and suppliers to eliminate paper work.

•Departmental limits and constraints handled by computer system (without accounting personnel).

The solution

Hundreds of activities had been reduced to dozens and numerous redundant sub-processes were now combined in to three major sub-processes.

•Reduced to four suppliers•Emergency purchases delegated – Credit

cards.•NPP software system – Online handling

and eliminated paper forms.

Seven principles of BPR – By Hammer and Champy

• Organise round outcomes, not tasks• Identify all the process in an organization and

prioritize. • Integrate information processing work into the real

work that produces the information• Treat geographically dispersed resources as though

they were centralized.• Link parallel activities in the workflow instead of

just integrating the result.• Put the decision point where the work in performed,

and build control into process.• Capture information once at and at the source

Data warehousing

•Designed to support decision making in

orgn.

•Separating data from operational systems

•Effectively accessed

•Queries performed without disturbing

production systems

•Combines databases across enterprise

Data Marts

•Database or collection of databases

•Focus on particular subject or department

•Designed to help managers make

strategic decisions about business.

Data Mining

•Science of extracting useful information from large sets or databases.

•Extraction of implicit, previously unknown, and potentially useful information from data.

• Sorting through data to identify patterns and establish relationships.

Data Mining parameters ..• Association – looking for patterns where one event is

connected to another event

• Sequence of path analysis – looking for patterns where one event leads to another later event.

• Classification – looking for new pattern

• Clustering – finding and visually documenting groups of facts not previously known.

• Forecasting – Predictive analytics

On-line analytical processing (OLAP)

•Process of converting raw data into business information through multi-dimensional analysis.

• - Multi-dimensional views of data•- Complex calculations•- Time Intelligence

Product lifecycle management (PLM)

•PLC refers to the succession of stages a product goes through.

•PLM is the succession of strategies used by management as product goes through its life cycle

•PLM software solution

Supply chain management (SCM)•Spans all movement & storage of - Raw materials- Work in process Inventory- Finished goods

•Coordinating and integrating flows both within and among companies.

•Goal – To reduce inventory

Customer relationship management (CRM)•Methods and technologies used by

companies to manage relationship with clients

•Information stored on existing customers & potential customers is analyesed

CRM Components

I Operational CRM- Sales force automation (SFA)- Customer service and support (CSS)- Enterprise marketing automation (EMA)II Analytical CRM- Acquisition- Retention- Information

CRM Components contd.,

III Collaborative CRMFocuses on interaction with customers. - Efficient communication with customers

across channels- Access to customer information while

interacting with customers- Provide on-line services to reduce

customer service costs.

Geographical Information System (GIS)•Mapping and analyzing things that exists

and events happen on earth

•Geographically referenced (Geo coded)

Other Technologies..

•Intranet & Extranet•EFT•Cryptography

Issues: Planning, design and implementation of cross functional integrated ERP systems

1. Top Management Commitment - Not changing software systems- Repositioning company & transforming business

practices- Consider strategic implications

Competitive positionOrganizational culture & structureScope of ERP implementationGlobally or regional units or functional units

• Funding• Change Management• Monitor progress and provide direction

2. Reengineering

•Best business process•All process must conform to ERP model•Customize product to specific needs of

company

Research shows that even a best application package can meet only 70 percent of the organizational needs.

3. Integration

• Integration of home grown systems with ERP- Third party software – Middleware - Organisation develop own interfaces- Integration problems – Changes in IT-

patchwork• Understand nature of integration & how it

affects entire businesses. - Ripple effect of mistakes- Potential risk of the errors- Monitor transactions & steps to solve• Information across supply chain – Automation- Sharing & control of information

4. ERP Consultants

•Competent consultants – with specific industry knowledge

•Functional, technical & interpersonal skills

•Managing consulting firm

5. Implementation Time•Length of implementation- No. of modules implemented- Scope of implementation•Most follow : Phase-in approach•Most common modules : Sales &

Distribution, Materials, Production & Planning, Finance and controlling modules.

6. ERP Vendors•Top Management Input- Market focus ( Mid size or large size)- Track record of customer- Vision - For global rollout : Availability of software

across countries, Evaluation of vendor staff in those countries.

7. Selecting right employee•Choose internal employee with right skill

set. •Aware of best business practices•Ability to understand overall needs of

company8. Training employees•Hidden cost•Understand how their data affects company•Demand rigorous training•Front line people – make decisions

9. Employee Morale

•Long hours of work•Stress of implementation•Leadership from top management,

support & caring from project leaders•Other strategies – Field visit.