Chapter 7 Enterprise Resource Planning (ERP)

Objectives

After studying the chapter, students should be able to..•Explain definition of Enterprise Resource Planning (ERP)•Identify potential benefits of ERP for businesses•Describe characteristics of ERP•Identify ERP implementation • Explain how understanding of ERP contribute the businesses create management innovation.

Contents

• What is ERP?• ERP Modules• Potential Benefits of ERP• ERP Implementation• New Development in ERP• Major Challenges to ERP

Implementation• Summary

Contents

• What is ERP?

• ERP Modules• Potential Benefits of ERP• ERP Implementation• New Development in ERP• Major Challenges to ERP

Implementation• Summary

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What is ERP?

• Enterprise Resource Planning (ERP) systems: Large, integrated, computer-based business transaction processing and reporting systems. (Bozart ^ Handfield: 415)

• ERP systems pull together all of the classic business functions such as accounting, finance, sales, and operation into a single, tightly integrated package using a common database.

“Integration” is the key word for ERP implementation.

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What is ERP?

ERP system model

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Organization: Before & After ERP

What is ERP?

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ERP evolution

What is ERP?

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Characteristics of ERP•Integration•Packages•Assembly Requirement•Best Business Practice•Evolving System

What is ERP?

ERP packages

Contents

• What is ERP?• ERP Modules

• Potential Benefits of ERP• ERP Implementation• New Development in ERP• Major Challenges to ERP

Implementation• Summary

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ERP modules1.Finance and accounting2.Sales and marketing3.Production and materials management4.Human resources

ERP Modules

12Organizational data flows

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3

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13Organizational data flows description

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1. Finance and accounting- financial accounting, investment management, cost control ,treasury management, asset management, etc- providing consistent financial data updated in real time - linking operational results with the financial effects of those result

ERP Modules

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2. Sales and marketing- supporting customer-related activities such as order processing, product configuration, delivery quotation- allowing for profitability analysis (sales module)- reserving inventory for specific customer- billing, invoicing, rebate processing, etc.

ERP Modules

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3. Production and materials management- handing all types of manufacturing processes– M2S, M2O- interfacing with CAD program- allocating resources - scheduling and monitoring production- material management refer to supply chain related activities i.e. purchasing, inventory and warehouse functions, JIT delivery.

ERP Modules

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4. Human Resources- covering all personnel management tasks; workforce planning, employee scheduling, training and development, etc.- providing database of personnel- maintaining salary and benefit structure

ERP Modules

Contents

• What is ERP?• ERP Modules• Potential Benefits of ERP

• ERP Implementation• New Development in ERP• Major Challenges to ERP

Implementation• Summary

Potential Benefits of ERP

Internal Benefits1. Integration of a single source of data

2. Common data definition

3. A real-time system

4. Increased productivity

5. Reduced operating costs

6. Improved internal communication

7. Foundation for future improvement

Potential Benefits of ERP

External Benefits

1. Improved customer service and order fulfillment

2. Improved communication with suppliers and customers

3. Enhanced competitive position

4. Increased sales and profits

Contents

• What is ERP?• ERP Modules• Potential Benefits of ERP• ERP Implementation

• New Development in ERP• Major Challenges to ERP

Implementation• Summary

ERP Implementation

ERP Implementation1. Analysing business processes2. Choosing the module to implement3. Aligning the level of sophistication4. Finalizing delivery and access5. Linking with external partners

23Major developers of ERP software

ERP Implementation

Best-of-Breed Approach•Company can pick and choose the modules from different vendors– the best-of-breed approach

ERP Implementation

Areas Implementation Practices

Project Management

link implementation teams to both the technical (IS) and functional departments

Change Management

redesigned jobs call for higher levels of skills and accountability

Technology Excellence

rely heavily on the ERP package as the majority of their application configuration

ERP Implementation areas(APQC Best-Practice Report)

Contents

• What is ERP?• ERP Modules• Potential Benefits of ERP• ERP Implementation• New Development in ERP

• Major Challenges to ERP Implementation

• Summary

New Developments in ERP

• Availability of web-based and wireless ERP systems or so called “On-Demand ERP”

• Adoption of easy-to-install ERP systems

• Linkage to other software systems, e.g., supply chain management system, e-commerce, customer relationship management system

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ERP-SAP

ERP-SAP: linkage to other software systems

New Developments in ERP

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ERP-Microsoft

ERP-Microsoft: linkage to other software systems

New Developments in ERP

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ERP- ORACLE

ERP-Oracle: linkage to other software systems

New Developments in ERP

Contents

• What is ERP?• ERP Modules• Potential Benefits of ERP• ERP Implementation• New Development in ERP• Major Challenges to ERP Implementation

• Summary

Major Challenges to ERP Implementation (1)• Limitations of ERP technical capabilities• Inconsistency with existing business

processes• Costs - implementation (hardware,

software, training, consulting) and maintenance

• Impact on organizational structure (front office vs. back office, product lines, etc.)

• Changes in employee responsibilities

Major Challenges to ERP Implementation (2)• Flexibility of software system upgrades

• Implementation timelines

• Availability of internal technical knowledge and resources

• Education and training

• Implementation strategy and execution

• Resistance to change

Contents

• What is ERP?• ERP Modules• Potential Benefits of ERP• ERP Implementation• New Development in ERP• Major Challenges to ERP

Implementation• Summary

Summary