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Introduction to ERP
History of organizational systems
• Calculation systems
• Functional systems
• Integrated systems
Calculation systems
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1950-80
Single purpose
Eliminate tedious human work
Examples: Payroll, General ledger,
Inventory
• Technology used: Mainframes, magnetic
tapes, batch processing
A System/370 Model 145
(1970’s)
removable-disk hard drives
Hard drives
A very nice-looking magtapedrive
Magtapes
Batch processing
Printer
800 lines/minute with 48 character
train, 136 columns with 6 or 8 lines
per inch spacing
Stack of Computer Printout Paper
Functional systems
• 1975-20??
• Use computers to improve operations
• Applications: Human resources, order
entry, manufacturing resource planning
• Technologies: Mainframes, PC’s, LAN’s
Minicomputer
Functional systems
• Typically contained within a department
• Islands of automation
• Applications independently developed
and deployed
• Driving force: availability of minicomputers
Functional system applications
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Human resources System
Accounting and finance systems
Sales and marketing System
Operations management System
Manufacturing Systems
Human Resources
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Recruiting
Compensation
Assessment
Development and Training
Planning
Accounting and Finance
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General Ledger
Financial Reporting
Costing
Budgeting
Accounts Payable
Accounts receivables
Sales and Marketing
• Lead tracking
• Sales forecasting
• Customer management
Operations
• Order management
• Inventory management
• Customer service
Manufacturing
• Inventory
• Planning
Types of Organizational
information Systems
• Administrative systems
• Scheduling / Transaction systems
• Value oriented systems
• Reporting and controlling systems
• Analysis and information systems
• Planning and decision support systems
(From Business Process Engineering by
A.W. Scheer)
Problems with function based
application
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Sharing of data between systems
Data duplication
Data inconsistency
Applications that don’t talk to one another
Limited or lack of integrated information
Isolated decisions lead to overall
inefficiencies
• Increased expenses
Solution to disparate systems?
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Integration
Consolidation
Right-sizing
Business Process Redesign
Enterprise wide system
Integrated systems
or
Enterprise Resource Planning
System
ERP - Definition
• ERP is a process of managing all
resources and their use in the entire
enterprise in a coordinated manner
ERP system: Definition
• 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
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HRM
Distribution
Financials
Manufacturing
What makes ERP different
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Integrated modules
Common definitions
Common database
Update one module, automatically
updates others
• ERP systems reflect a specific way of
doing business
• Must look at your value chains, rather
than functions
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
• A way to force BPR (reengineering)
• Easy way to solve Y2K problem
Vendors
Difficulty in implementation
• Very difficult
• Extremely costly and time intensive
• Typical: over $10,000,000 and over a
year to implement
• Company may implement only certain
modules of entire ERP system
• You will need an outside consultant
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
Survey of ERP
implementations
Done by ittoolbox.com in 2004
Overview
• 375 IT and business professionals
• 52% anticipate budget increases for
new ERP implementations/new modules
• SAP and PeopleSoft/J.D. Edwards were
cited as the most popular ERP packages
• 46% indicated that the main challenge
to successful ERP implementations was
inadequate definition of requirements
and resistance to change
How would you characterize your budget for new ERP
implementations/new modules deployments for 2004 compared to
your budget in 2003?
Who is directly responsible for determining
your ERP implementations/new modules
deployments?
Who are the other key decisionmakers/influencers in decisions to add new
ERP packages/new modules?
Do you currently have an ERP
package?
If your answer is "Yes", which ERP
package(s) do you currently use?
Are you considering adding new modules to
your existing ERP package?
If your answer is "Yes", which modules are
you planning to add?
If you plan to deploy a new ERP package
and/or add modules to your existing
packages, when would this implementation
take place?
Who do you partner with for new ERP
implementations and additions of new
modules?
What do you see as the main challenges to
successful ERP implementations within your
organization?
For more details…
• http://projectmanagement.ittoolbox.co
m/documents/research/