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Background

• ERP system have been around since the mid-1970s

• Invested huge sums in these big and complex systemsnow have elaborate legacy setups

• ERP providers and customers introduce changes totechnology and deployments gradually to avoid costlymistakes.

• ERP is still evolving – adapting to developments intechnology and the demands of the market.

• Four important trends are shaping ERP’s continuingevolution

i. Improvements in integration and flexibility

ii. Extensions to e-business applications

iii. A broader reach to new users

iv. The adoption of internet technologies

Fundamentals Concepts

• ERP is software that allows companies to:

i. Automate and integrate many of their business processes

ii. Share a common database and business practices throughout the enterprise

iii. Produce information in real time

• Objective of an ERP system is to coordinate a firm’swhole business, from supplier evaluation to customerinvoicing

• ERP systems are evolving as umbrella systems that tietogether a variety of specialized systems.

• ERP system also include:

i. Supply chain management (SCM)

ii. Customers relationship management (CRM)

How ERP software works

Ordering Availability

Production Warehousing

Order tracking Planning

Advantages of ERP System

• Business Integration

– Uses a single database and a common software infrastructure toprovide a broader scope and up-to-date information, enablingmanagement to make better decisions that can benefit the entiresupply chain.

• Flexibility

– Different languages, currencies, accounting standards and so oncan be covered in one system, and functions thatcomprehensively manage multiple locations of a company can bea packaged and implemented automatically.

• Standardize manufacturing processes

– Since it having information in one software system ratherthan scattered among many different system that cannotcommunicate with one another, companies can keep track ofmaterials, order, and financial status effectively andcoordinate manufacturing, inventory, and shipping amongmany locations and business units at the same time.

• Better analysis and planning capabilities

– Since it becomes possible to carry out flexibility and in realtime, the filling and analysis of data from a variety ofdimensions, one is able to give the decisions makers theinformation they want, thus enabling them to make better andinformed decisions.

• Reduce supply chain inventories

– It enables the supply, manufacturing, and logistic processes toflow smoothly by providing visibility of the order fulfillmentprocess throughout the supply chain.

– Supply chain visibility leads to reduction of the bullwhip effect(the buildup of supply chain safety stock inventories) and helpssupply chain member to better plan production and end-productdelivers to customers.

• Online Data Flow decreases the process time

• Fast & Online Confirmation

• Less Paperwork

• No need for folder storage

• Database Security

• Less Employee needed

• Easy Financial Management

• Better Inventory Management

In this real case there the benefits of the ERP systems

Disadvantages of ERP System

• Expenses and need time in implementation

– Getting the full benefits of ERP takes time and money.

– Large firms typically need three to five years and spend tens ofmillion of dollars to implement a successful ERP system.

• Difficult implementing change

– In some cases, a company has to radically change how itoperates to conform to the ERP’s work processes as its bestpractices.

– Sometimes, the best practices simply are not appropriate for thefirm and cause great work disruptions.

• Difficulty integrating with other systems

– Most companies have other systems that must be integratedwith the ERP systems, such as financial analysis programs, e-commerce operations, and other applications.

– Because of the difficulty of these other system operate with ERPsystem, they needed an additional software to create these link.

• Risks in using one vendor

– After a company has adopted an ERP system, the vendor hasless incentive to listen and respond to customer concerns.

– Selecting an ERP system involves not only choosing the bestsoftware product but also the right long-term business partner.

• Risk of implementation failure

- Implementing an ERP system for a large organizations isextremely challenging and requires tremendous amounts ofresources and plenty of management support.Unfortunately, large ERP installations occasionally fail, andproblems with an ERP implementation can require expensivesolutions.

How to Avoid Common Causes of Failed ERP Implementation

• Assign a full-time executive to manage the project.

• Appoint an experienced, independent resources to provide projectoversight and to verify and validate system performance.

• Allow sufficient time for transition from the old way of doing things tothe new system and new processes.

• Plan to spend a lot of time and money to training people to using thissystem.

• Define metrics to assess project progress and to identify project-relatedrisks.

• Keep the scope of the project well defined and contained to essentialbusiness processes.

• Be wary of modifying the ERP software to conform to the firm’sbusiness practices.

ERP IN

SERVICE SECTOR

Health care

Government

Retail storesFinancial service

Telecommunications

EducationInformation Technology

Insurance

Tourism

ERP systems attempt to integrate all internal and external processesof the entire organization into an unified system.

ERP system will use multiple components of computer software,computer hardware and network configurations to achieve theintegration.

ERP system use an unified database to store data for the various systemmodules.

In a service business, companies have to face the every daychallenge of selling an intangible product that is difficult to quantifyand changing all the time. Evolving service offerings to meetrapidly-changing customer demands. To be profitable, the projectsneed to be estimated correctly, completed on time, and meet andexceed customer requirements. Here, ERP software intend to helpthe project management and accounting to gain a significantstrategic advantage.

Sales

Inventory Management

Payroll

Internal and external management information across an entire organization

Customer

Relationship

Management -

CRM

Purchasing

Accounting

Vendor

Integration

E-

Commerce

ERP SERVICE MODULES

Springer- Miller Systems

ERP package for the hotel market with software that handles all front- andback- office functions. This system integrates tasks such as maintaining questhistories, booking room and dinner reservations, scheduling golf tea times,and managing multiple properties in chain.

PeopleSoft/Oracle

Extends supply chain in real time by connecting suppliers and customers withcompany business processes. Provides integrated spend management for allcategories of goods and services. Delivers embedded analytics to monitorsupply chain performance and adjust as conditions and business goals shift.

Efficient Customer Response (EPR)

In the grocery industry, these supply chain systems are known as efficientConsumer Response (ECR) systems. As in the case of manufacturing, ECRsystems tie sales to buying, to inventory, to logistics, and to production. Thesystem increase the level of services to consumers through close cooperationamong retailers, wholesalers, and manufacturers. By aiming to improve theefficiency of a supply chain as a whole beyond the wall of retailers, wholesalers,and manufacturers, company can reduce the opportunity loss, inventory level,and entire cost, as well as increase monetary profitability by sharing thepurpose of "customer satisfaction.

Springer- Miller Systems

HOW ERP SOFTWARE WORKS IN PRODUCTION SECTORS..

Italian sportswear company Benetton.

World’s fastest factory and the most efficient distribution in the garment industry.Located in Ponzano, Italy, Benetton makes and ships 50 million pieces of clothingeach year. That is 30000 Benetton outlets in 60 countries. This highly automateddistribution center uses only 19 people. Without ERP, hundreds of people would beneeded.

1) Ordering:

A salesperson in the south Boston store finds that she is running out of a best-selling blue sweater. Using a laptop PC, her local Benetton sales agents taps intothe ERP sales module.

2) Availability:

ERP’s inventory software simultaneously forwards the order to themainframe in Italy and finds that half the order can be filled immediately fromthe Italian warehouse. The rest will be manufactured and shipped in 4 weeks.

3) Production:

Because the blue sweater was originally created by Computer Aided Design (CAD), ERPmanufacturing software passes the specifications to a knitting machine. The knittingmachine makes the sweaters.

4) Warehousing:

The blue sweaters are boxed with a radio frequency ID (RFID) tag addressed to the Bostonstore and placed in one of the 300000 slots in the Italian warehouse. A robot flies by,reading RFID tags, picks out any and all boxes ready for the Boston store, and loads them forshipment.

5) Order Tracking:

The Boston salesperson logs onto the ERP system through the internet and sees that thesweater (and other items) are completed and being shipped.

6) Planning:

Based on the data from ERP’s forecasting and ERP’s financial modules, Benetton'schief buyer decides that blue sweaters are in high demand and quite profitable. She decidesto add three new hues.

ERP vendors such as SAP have developed many business application -

programming interfaces (BAPIs) in order to allow file access to the ERP database.

Nike Sneakers.

1) A Nike salesperson enters an order into his ERP system for 20 000 pairs ofsneakers for Foot Locker, the data are instantly available on the manufacturingfloor.

2) Production crews start filling the order if it is not in the stock, accounting printsFoot Locker’s invoice, and shipping notifies the Foot Locker’s of the futuredelivery date.

3) The salesperson, or even the customer, can check the progress of the order at anypoint. This is all accomplished using the same data and common applications.To reach this consistency, the data field must be defined identically across theentire enterprise.

ERP system can integrate operations at production sites fromVietnam to China to Mexico, at business units across the globe,in many currencies, and with reports in a variety of languages.

ERP information flows, showing Customer Relationship Management (CRM), Supply Chain Management (SCM) and Finance/ Accounting

CHALLENGES OF ERP

Done right, a new ERP implementation can dramatically improve business processes BUT when an implementation fails or takes

a prolonged course, huge amounts of money and effort could be misspent.

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1. Inadequate Requirements Definition

The requirements definition should be clearly specify the issues andproblems that the ERP systems is supposed to solve, the additionalcapabilities expected out of the system.

If the requirements are properly specified then the implementationteam can go about their job including selection of the ERP packagethat is best suited to meet these needs, the areas where customizationis needed, function where the organization’s business process shouldbe changed.

Failing to provide these could result in the selection of the wrong ERPpackage, unnecessary customization, and lack of employee re-training.

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2. Resistance to change

• Implementing an ERP system is a change and it is human nature toresist change.

• Users will be skeptical about the new system. But for an ERPimplementation to succeed, the co-operation of everyone involved is anabsolute necessity. ERP is first an attitude, then a system. So, ifemployees are not convinced about the importance of ERP and thebenefits of using an ERP system they will not be co-operative, which canresult in the failure of the system.

• Forcing the system on unwilling people will only harden their resolve torevolt. One main reason for the resistance is ignorance. People alwayshave a lot of misconceptions about ERP – it will increase workload, itwill hinder creative work. But if the ERP implementation team backedby the management spends a little time and effort in educating usersabout ERP and how it will help the company and the users and thenuser resistance can be reduced if not fully eliminated.

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3. Inadequate Resources

• ERP implementation is a very costly that requires a variety of resource- money, people, software, hardware.

• Getting the right people with the necessary skills, aptitude and enthusiasm is one of the most difficult tasks faced by ERP implementation team.

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4. Lack of Organizational Readiness

• ERP projects appear to have a six month learning curve at thebeginning of the project, at a minimum, everyone who uses ERPsystems needs to be trained on how they work and how they relateto the business process early on in the implementation process.

• Although many companies use consultant to help during theimplementation process, it is important that knowledge istransferred from the consultant to the internal employees.

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Cont. Challenges

• Lack of Top Management support

• Poor ERP package selection

• Poor project design and management

• Poor communications

• Inadequate Training and Education

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Challenges to successful ERP implementations

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POTENTIAL OF ERP

ERP systems have the potential to:

– Links all areas of a company including ordermanagement, manufacturing, human resources,financial systems, and distribution with externalsuppliers and customers into a tightly integratedsystem with shared data and visibility

– Reduce transaction costs

– Increase the speed and accuracy of information

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ERP Commercial applications

Manufacturing

Bills of material, scheduling,

capacity, workflow management, quality

control, cost management

Supply chain management

Order to cash, inventory, supplier scheduling, inspection of goods,

commission calculation

Financials

• Cash management, accounts

payable, fixed assets

Project management

• Costing, billing, time and expense,

performance units, activity management

Human resources

• Human resources, payroll, training, time and attendance,

• Sales and marketing, commissions, service, customer contact and call

center support

ERP Commercial applications

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Transfer to

Accounting Office

Before ERP Systems

Problems:

Delays, Lost Orders, Keying into different

computer systems invites errors51

Companies after ERP Systems

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An example for an ERP software

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THE END….

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