ERP
Enterprise Resource Planning
D Lewis 10/02
Definitions
ERP is a process of managing all
resources and their use in the entire
enterprise in a coordinated manner
ERP is a set of integrated business
applications, or modules which carry out
common business functions such as
general ledger, accounting, or order
management
What is ERP?
Enterprise Resource Planning
Support business through optimizing,
maintaining, and tracking business
functions
Broken down into business processes
HRM - Distribution
Financials - Manufacturing
What makes ERP
different
Integrated modules
Common definitions
Common database
Update one module, automatically
updates others
What makes ERP
different (cont)
ERP systems reflect a specific way of
doing business
Must look at your value chains, rather
than functions
History of ERP
Departmentalized Systems
1960’s: systems for each department
MRP Systems
1970’s: integrated manufacturing
MRPII System
1980’s: more functions included
ERP: 1990’s integrated all across
Trends in ERP
Use of the Internet for access
More customized solutions
Decision support capabilities
Data pulled to specific application
Linkage of multiple organizations
together
Benefits of ERP
Common set of data
Help in integrating applications for
decision making and planning
Allow departments to talk to each other
Easy to integrate by using processed
built into ERP software
Benefits of ERP
A way to force BPR (reengineering)
Easy way to solve Y2K problem
Benefits of ERP
On 4 dimensions
Firm structure
Management processes
Technology platform
Business capability
Firm structure
New structures
More disciplined culture
Globally everyone uses same processes
and terminology
Freely flowing information
Management process
Unified reporting and decision making
Better data on performance
Determine which products are more
desirable
Technology platform
Single unified all encompassing
platform
Common data, common definitions and
formats
Business capability
Form basis of customer driven
organization
Better meet customers needs
Buy or Build
Pros buy
Best practices from many organizations
included
Vendor must keep up to date
Smaller staff required
Buy vs. Build (cont.)
Pros build
Complete control of features
More support required
Not as much product support
May not have best practices included
Why purchase ERP
package?
Increasing flexibility and agility
Business benefits (competitive agility)
Client/server IT architecture benefits
IT purchasing benefits
Lower costs and higher reliability than
building from scratch
Why purchase ERP
package?
Data integration
Improving access to data across business units
New ways of doing business
Moving to a process orientation
Reduction in costs
Global capabilities
Common processes and country specific
capabilities
Why purchase ERP
package?
IT architecture cost reduction
Reduced costs for systems operations and
maintenance
Most important benefit?
Data integration
Difficulty in
implementation
Very difficult
Extremely costly and time intensive
Typical: over $10,000,000 and over a year
to implement
Common Pitfalls
Do not adequately benchmark current
state
Did not plan for major transformation
Did not have executive sponsorship
Did not adequately map out goals and
objectives
Highly customized systems to look like
old MRP systems
Leading vendors
SAP
Baan
J.D. Edwards
Oracle
Peoplesoft
Which way to go?
One vendor
Easy integration
Standardization of processes
“Best of breed” approach
Easy to adapt to own needs
Decreased reliance on one vendor
How to implement
You will need an outside consultant
Potential benefits
Better information for
Strategic decision making
Greater efficiency
Greater profit
Potential for growth
Unintended
consequences of ERP
Organizational changes
Creating new work relationships
Share information
Make new types of decisions
Reactions to changes
Resistance
Confusion
Errors
Unintended
consequences
50% of implementations fail
Managers underestimate the need for
change management
Managers focus on potential benefit, rather
than on impact on employees
Emotional fallout after employees given
greater responsibility
Implementation Issues
Company may implement only certain
modules of entire ERP system
Readings
evaluation of ERP software
Getting Increased Value from ERP
Systems