Enterprise resource planning _ERP_ - Sysoft by wuzhenguang


									                              What is ERP?

• Enterprise resource planning (ERP) system
     – Set of core software modules that enables
       organizations to share data across the entire
     – Common database and management reporting tools
     – Enables people in various organizational units to
       access and update the same information
          • Based on permission levels assigned within the

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               What is ERP? (continued)

• Best practices
     – Most efficient and effective way of accomplishing a
     – Based on procedures that have proven themselves
       repeatedly over a long period of time
• Each industry has different business practices
• ERP vendors offer specially tailored software
     – Designed to meet the needs of specific industries
     – Companies can pick and choose which modules to
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       ERP and Customer Relationship
            Management (CRM)
• Customer relationship management (CRM)
     – Supports the processes performed by entities
       involved in creating or increasing the demand for an
       organization’s products and services
     – Often part of the offering from an ERP software
• CRM system must effectively capture and present
  customer information
     – So that employees can successfully use that data

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  ERP and Supply Chain Management
• Supply chain
     – Flow of materials, information, and dollars as they
       move from supplier to manufacturer to wholesaler to
       retailer to supplier
• Major processes
     –   Demand planning
     –   Sourcing
     –   Manufacturing
     –   Logistics
     –   Customer Service

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  ERP and Supply Chain Management
         (SCM) (continued)
• Supply chain management (SCM)
     – Planning, executing, monitoring, and controlling of
       this set of processes
• Goal
     – Lower costs and inventory levels while still providing
       timely delivery of high-quality products
• Major ERP software suppliers
     – Include software modules to handle many of these
     – No one supplier has a single, all encompassing
       software package that meets all of the SCM needs
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  ERP and Supply Chain Management
         (SCM) (continued)
• Many companies elect to implement “best of breed”
  solutions for specific tasks
• SCM applications
     – Frequently draw on the data captured and stored in
       an ERP system
     – Some sort of interface must be built to allow stand-
       alone SCM applications to access data from the
       ERP system database

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          Benefits of Implementing ERP

•   Standardized business processes
•   Lowering cost of doing business
•   Improving the overall customer experience
•   Facilitating consolidation of financial data
•   Supporting global expansion
•   Providing a compliant system

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       Establish Standardized Business
• Standardized streamlined business and workflow
     – Ensure that workers are performing their work in an
       efficient manner
     – Provide a consistent interface between the
       organization and its customers and suppliers

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          Lower Cost of Doing Business

• Reduced inventory costs
     – Resulting from better planning, tracking, and
       forecasting of customer demand and inventory levels
• Faster collection of receivables
     – Based on better visibility into accounts and fewer
       billing and delivery errors
• Lower vendor costs
     – By taking better advantage of quantity discounts
     – Tracking vendor performance to use as leverage in
       negotiating prices

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Improve Overall Customer Experience

• Improved inventory management
• Shorten the lead time from receipt of order to
  delivery of product
• Improve overall product quality

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    Facilitate Consolidation of Financial
• ERP system enables rapid consolidation of
  financial data across multiple organizational units
  and countries
     – Every business unit is using the same system and
       same database
     – Designed to deal with differences in currencies and
       fluctuating currency exchange rates

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               Support Global Expansion

• Nearly 80 percent of U.S. companies view
  expansion into global markets as a growth
• ERP systems
     – Support global expansion
     – Designed to monitor supply chains thousands of
       miles long

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       Provide Fully Compliant Systems

• Side benefit of ERP implementations is increased
  compliance with many state and federal laws
     – Sarbanes-Oxley Act
     – Health Insurance Portability and Accountability Act,
       or HIPAA
     – Public Health Security and Bioterrorism
       Preparedness and Response Act (Bioterrorism Act)

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                                ERP Issues

• Potential issues associated with the
  implementation of ERP systems
     –   Post start-up problems
     –   High costs
     –   Lengthy implementation
     –   Organizational resistance

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                  Post Start-Up Problems

• Deloitte Consulting survey
     – One in four firms confessed to an actual drop in
       performance for some period of time after their ERP
       system went live
• Early ERP efforts in the 1990s and early 2000s
     – Less than glowing successes

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    Post Start-Up Problems (continued)

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    Post Start-Up Problems (continued)

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                                   High Costs

• Several hundred thousand dollars to hundreds of
  millions of dollars
• Cost depends on a number of factors
• Best to set a realistic budget rather than an
  optimistic one
• Recent surveys
     – 38 percent said organization’s ERP total project
       costs were 10 to 30 percent above original budget
     – 17 percent say total costs exceeded the original
       budget by 30 percent or more

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                   High Costs (continued)

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                   High Costs (continued)

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                   High Costs (continued)

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                   High Costs (continued)

• Costs commonly overlooked or underestimated in
  setting the budget for an ERP project
     –   Hardware upgrades
     –   Training
     –   Testing
     –   Customization
     –   Data conversion
     –   Consultants

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                  Lengthy Implementation

• Organizational changes of great magnitude do not
  come easily or quickly
• Time frame for full implementation
     – One to four years
• Faster ERP implementations are possible
     – When the scope of the effort is limited
• Small and medium businesses (SMBs)
     – Usually achieve less than the full potential of
       business benefits possible from the implementation
       of ERP systems

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 Difficulty in Measuring a Return on an
              ERP Investment
• Simple return on investment
• Decision makers would like to have an accurate
  estimate of the return on investment for an ERP
     – Before beginning
• Difficult to put an exact dollar figure on the benefits
  and costs associated with an ERP project
• Difficult to measure the return on investment
     – Because the project frequently takes years to

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               Organizational Resistance

• Considerable changes to an organization’s
  business processes
     – Includes modification in the way employees do their
       work and interact with others
• Organizational resistance manifests itself in many
• Many ERP projects take much longer than
  expected and/or fail to deliver hoped for enterprise

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 ERP System Implementation Process

• Major ERP vendors
     – Developed a recommended implementation process
     – Process divides the effort into well-defined stages
       with associated tasks
• Organizations typically will try to assign employees
  who have previous ERP implementation
  experience to the project
• Common factors associated with failed ERP
  implementation projects

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   Best Practices to Ensure Successful
          ERP Implementation
• Achieving ERP project success can be a very
  difficult challenge
• Set of best practices
     – Ensuring senior management commitment and
     – Choosing the right business partners to help
     – Assessing the level of ERP customization that may
       be needed
     – Avoiding increases in project scope
     – Planning for effective knowledge transfer

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           Ensure Senior Management
          Commitment and Involvement
• Requires the commitment of senior management to
  achieve the necessary organizational buy-in
• Senior management must:
     – Define a vision for the ERP system with supporting
       goals and visible, measurable success criteria
     – Provide leadership and take action to ensure that the
       goals of the project are met

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   Choose the Right Business Partners

• Three key business partners
     – ERP system integrator
     – ERP software provider
     – ERP software support providers
• Chosen business partners should have a solid,
  verifiable track record of successful engagements
     – With other organizations in your industry
• First step
     – Develop a solid understanding of your business
       needs and processes as they are now
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         Assess Level of Customization
• Determine if your organization’s fundamental ways
  of doing business can be supported by an ERP
• If not, the options are:
     – Change the inconsistent business processes to
       accommodate the software
     – Modify the software to fit the process
     – Select a different ERP solution

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       Avoid Increases in Project Scope

• As an organization implements an ERP system, it
  learns that there is much more that could be done
  than was included in the original project scope
• Strong temptation to expand the ERP project scope
     – Potential increases in scope should be rejected
     – When original project scope is complete, new ideas
       can be further evaluated and implemented if justified

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 Plan for Effective Knowledge Transfer

• Employees need to understand the rationale of why
  ERP is being implemented
     – Should be given the big picture on the extent of
• Training should not be considered a one-time event

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                           Test Thoroughly

• Thorough testing
     – Key to a smooth start-up
• Key business processes must be tested from start
  to finish
• Tests and test data must be set up carefully
     – Execute a wide range of possible scenarios
• Considerable time is required to plan and prepare
  the necessary test data

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 Plan for a High Level of Initial Support

• Anticipate a heavy need for support
• Contract for a heavy level of coverage during at
  least the first three months following

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 A Manager Takes Charge: ERP – The
    Arizona State University Way
• William Lewis, Vice Provost and Chief Information
  Officer of Arizona State University (ASU)
• Oracle PeopleSoft Student Administration and
  HR/Payroll ERP system
• Estimated cost $23 million
• Targeted for completion in fall of 2006
     – HR/Payroll portion of the project to be delivered no
       later than the end of 2007

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 A Manager Takes Charge: ERP – The
    Arizona State University Way
• Unconventional approach to installing its ERP
     – Problems would be fixed on the fly as they arose
• Final cost of the project was a total of $30 million
     – $7 million over the Feb 2006 budget request

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                                ERP Trends

• ERP solutions targeted for SMBs
     – Growth is expected to come as SMBs begin using
       ERP systems
     – Large, well-established ERP vendors are creating
       software for this market
• ERP as a service
     – Software as a service (SaaS) model for the delivery
       of ERP solutions
     – Considerable work to be done to reap the full
       benefits of an ERP implementation
     – Security implications
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             Open Source ERP Software

• Open source ERP solution advantages
     – Lower initial acquisition cost
     – User has access to the source code
     – Wide range of resources that can make
       modifications to the software
• Popular open source vendors
• Organizations will not get the same level of support
  that they would receive from commercial software

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• Effective ERP system implementation can bring
  many benefits to an organization
• A number of potential issues are associated with
  the implementation of ERP systems
• Organizations should follow their ERP vendor’s
  recommended ERP implementation process
• Achieving ERP project success is a very difficult
• Rapid growth is expected in the use of ERP
  systems within SMBs
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