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Information System

&

Basics of ERP

Prof. Ramesh Behl &

Prof. Himanshu [email protected] &

[email protected]

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Course Objectives

Provide an overview of enterprise systemsincluding their business use,

evolution, features, advantages, modules and business applications. Develop an understanding of how ERP systems automatebusiness processes

used to run organizations.

Provide hands-on exposureto work on a real ERP system and develop an

appreciation for SAP software

Learn how to manage the supply chainof an organization using an ERPsystem

Get an understanding of the architectureof ERP systems.

Learn the importance of managing change and reengineeringwhile

implementing ERPsystems.

Get an understanding of the strategybehind planning, designing and

implementing an ERP and associated challenges

Develop an understanding of the complementary technologiesof ERP and its

future

Gain an understanding of the integration potential of ERP

Prepare students for career opportunitiesin industry

Prof. Ramesh Behl & Prof. Himanshu Joshi

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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?Prof. Ramesh Behl & Prof. Himanshu Joshi

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What is a System?

ManufacturingProcess

Input ofRaw Materials

Output ofFinished Products

Environment

Other Systems

Control by

Management

Control

Signals

Control

Signals

FeedbackSignals

FeedbackSignals

System Boundary


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What is an Information System?

Information system is a set of procedures thatcollects, process, store and disseminateinformation to support decision making.

From a Business PerspectiveAn InformationSystem is an organisational and managementsolution, based on information technology, to achallenge posed by the environment.

Information Systems are more than Computers.


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Why ERP?

What are the Problems of Legacy Applications? What are some of the problems of Businesses that

are not on ERP?


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Organizations withLegacy Systems

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Features of Legacy Systems

Automates running processes Normally not driven by organization strategy and

business vision.

Develop one application at a time. No integrationbetween applicationsjust transaction passing.

Decentralized applications.

Are relatively inflexible to accommodate changes in

the business environment.


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Features of Legacy Systems

.Cont

Written in language / platform prevalent at the timeof development.

Up gradation to latest technology is difficult

Usually not well documented. Maintenance is a problemlargely because of

poor documentation and staff attrition.


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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 andshared management reporting tools.

ERP software supports the efficient operation of

business processes by integrating activities

throughout a business.


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What is a Business Process? Why Integrated Systems needs to understand the

concept of a Business Process.


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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 internalcustomer (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 functionsProf. Ramesh Behl & Prof. Himanshu Joshi

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Process View of Business

Sale

s

Function

Accoun

ting

Function

Purcha

sing

Function

Produc

tion

Function

Logistics

Function

Material Order Process

Customer Order Process

A process view of business


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Integration of Business Functions

Sharing data efficiently and effectively within andbetween functional areas leads to more efficient

business processes

Information systems that share data between

functional areas are called Integrated Information

Systems


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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


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Supply Chain Management Buying raw materials (purchasing)

Making lemonade

Manage recipe

Maintain manufacturing (cost) records


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Accounting and Finance Recording raw transaction data

Sales, raw material purchases, payroll, cash receipts

Provide data for sales forecasting, credit management,

cash management


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Human Resources Recruit, train, evaluate and compensate employees

Develop personnel plans (staffing) based on sales

Determine compensationdepends on labor market


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Functional Area Information Systems


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To Summarize

Employees working in one functional area need

data from other functional areas. Functional areainformation 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

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Understanding ERP

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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 betweensystems

Problems with data being defined differently in different

systems


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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 inreal-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


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What is an ERP

ERP is an integrated suite of software

covering various organizational systems

for companies across industries. Theyfollow industry standards on software

and connectivity and are deployable

easily.


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What is ERP?

Software tools Manages business systems

Supply chain, receiving, inventory, customer orders,production planning, shipping, accounting, HR

Allows automation and integration of businessprocesses

Enables data and information sharing

Enterprise-wide system

Introduces best practices


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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 businessfunctions


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Enterprise Resource Planning

... synchronization of Company functions...

Manufacturing

Purchase

Sales

Finance


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and extended to the completevalue chain...

Tier II Component

Supplier

Vehicle OEM

Tier I Component

Manufacturer


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Administrative

registration

Processes monitoring &

feedback

Decision support and

analysis

... delivering administrative and decision supportwith...


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Characteristics of an ERP System

Includes business management software thatenables 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 andchange management efforts

Requires high levels of implementation effort and

support Prof. Ramesh Behl & Prof. Himanshu Joshi

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Evolution of ERP

1960s: software packages with inventorycontrol

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


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ERP Solution Components

Implementation

60%

Infrastructure

20%

ERP Software

20%


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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 torepresent 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

promisesProf. Ramesh Behl & Prof. Himanshu Joshi

I l i Ch ll

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Implementation Challenges

A number of companies in the 1990s experiencedlengthy 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 oftools to aid implementation efforts

The latest version of ASAP is called Solution

Manager


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Choosing Consultants and Vendors

ERP systems are so complex, one person cannotfully 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 configureERP software properly


ERP S t C t

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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


f ?

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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


I ERP ft i fl ibl

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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 thecustomer has access to the softwares source code


R t f th ERP I t t

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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 externalcustomer relations

The payoff from ERP systems can occur over many years,when other factors may also affect the company, making thereturn hard to calculate


I l t ti P bl

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Implementation Problems

Some executives naively hope ERP systems will curefundamental 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 andtraining

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 I l t ti B fit

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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



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(continued)

Provides enterprise-wide reporting anddecision 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

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us ess p ocess be e ts c e ts e pect

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


O ll B i B fit

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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


S

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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 ERPapplications work?

How do I know my ERP data is any good?

Just how important have ERP systems become?

Documents

erp1-13