Lecture 6 recording
-
Upload
nouman-zahoor -
Category
Career
-
view
176 -
download
0
Transcript of Lecture 6 recording
2
What is ERP?
• The practice of consolidating an enterprise’s planning, manufacturing, sales and marketing efforts into one management system.1
• Combines all databases across departments into a single database that can be accessed by all employees.2
• ERP automates the tasks involved in performing a business process.1
4
Employees
Managers andStakeholders
How Do ERP Systems Work?
CentralDatabase
ReportingApplications
HumanResource
ManagementApplications
FinancialApplications
ManufacturingApplications
InventoryAnd SupplyApplications
HumanResource
ManagementApplications
ServiceApplications
Sales andDelivery
Applications
Sales ForceAnd CustomerService Reps
Customers Back-officeAdministratorsAnd Workers
Suppliers
5
ERP Components
• Finance: modules for bookeeping and making sure the bills are paid on time. Examples:– General ledger– Accounts receivable– Accounts payable
• HR: software for handling personnel-related tasks for corporate managers and individual employees. Examples:– HR administration– Payroll– Self-service HR
• Manufacturing and Logistics: A group of applications for planning production, taking orders and delivering products to the customer. Examples:– Production planning
– Materials management
– Order entry and processing
– Warehouse management
6
An ERP Example: Before ERP
Customers
CustomerDemographic
FilesSales Dept.
Vendor
OrdersParts
Accounting
AccountingFiles
PurchasingPurchasing
Files
Order is placedwith Vendor
Invoicesaccounting
InventoryFiles
Warehouse
Checks for Parts
Calls back “Not in stock”
“We ordered the parts”
“We Need parts #XX”
“We ordered the parts”
Sends report
Sends report
Sends report
Ships parts
7
An ERP Example: After ERP
Database
Customers Sales Dept.
PurchasingWarehouse
Accounting
Vendor
Inventory DataIf no parts,
order is placedthrough DB
OrdersParts
Order is submittedto Purchasing.
Purchasing recordorder in DB
Order is placedwith Vendor
And invoices accounting
Financial Data exchange;Books invoice against PO
Books inventoryagainst PO
Ships parts
9
Why ERP?
3 Major Reasons:
• To integrate financial data.
• To standardize manufacturing processes.
• To standardize HR information.
10
ERP Project and Time
• Real transformational ERP efforts will usually run between 1 to 3 years, on average.
• Short implementations (3 to 6 months):– small companies,
– implementation limited to a small area of the company, or
– the company only used the financial pieces of the ERP system.
• The important thing is not to focus on how long it will take but to understand why you need ERP and how you will use it to improve your business.
11
Total Cost of Ownership of ERP
Total cost of ownership (TCO) is a model developed by Gartner Group to analyze the direct and indirect costs of owning and using hardware and software. TCO essentially helps a company determine whether it wins or loses from specific technology implementations.
• Metagroup study among 63 companies surveyed showed that:
– the average TCO was $15 million (the highest was $300 million and lowest was $400k),
– the average TCO per user was $53,320.
12
Total Cost of Ownership of ERP
• It also found that:– it took 8 months after the system was in to see any benefits,
– but that the median annual savings from the system was $1.6 million per year.
13
Hidden Costs of ERP
• Training
• Integration and testing
• Data conversion
• Data analysis
• Consultants
• Replacing best and brightest staff after implementation
• Implementation teams can never stop
• Waiting for ROI
• Post-ERP depression
14
Benefits of ERP Systems
• Improving integration, flexibility
• Fewer errors
• Improved speed and efficiency
• More complete access to information
• Lower total costs in the complete supply chain
• Shorten throughput times
• Sustained involvement and commitment of the top management
15
Benefits of ERP Systems (cont’d)
• Reduce stock to a minimum
• Enlarge product assortment
• Improve product quality
• Provide more reliable delivery dates and higher service to the customer
• Efficiently coordinate global demand, supply and production
16
Risks with ERP Implementation
• Expensive (can costs 100 thousands to millions of dollars)
• Time-consuming (can take months to years)
• Great risk for the organization
• Transfer of Knowledge
• Acceptance with the company
Definition Of ERP
Software solution that addresses all the needs of an enterprise with the process view of an organization to meet the organizational goals and integrate all the functions of the enterprise
What is ERP ?
• Facilitates Company-wide integrated Information Systems Covering all functional Areas.
• Performs core Corporate activities and increases customer service augmenting Corporate Image.
• Organizes & Optimizes the data input methodologies systematically.
• MIS - Management Information SystemsDecision Support - No
• IIS - Integrated Information SystemsNo Decision Support - No
• EIS - Executive Information SystemsDecision Support - Yes
• CIS - Corporate Information SystemsDecision Support - Yes
• EWS - Enterprise Wide SystemsDecision Support - No
Logistics are considered as a part of system
Evolution of Business Applications
• Materials Requirement Planning (MRP)• Manufacturing Resource Planning ( MRP II)• Enterprise Resource Planning ( ERP)• Distribution Resource Planning ( DRP)
Other terminologies are :• Money Resource Planning (MRP III)• Supply Chain Management• Value Chain Management
Evolution of Planning Systems
Is It Only a Jargon ?
No. MRP and MRP II were there for a long time.
ERP is an enhancement over these.
Introduction of ERP provides you a chance to have a new look at your working.
Is It Going to be there long?
Yes and No.
ERP will be there for a long time, if you are willing to upgrade to new versions with new features as and when the are released in the market
Your ERP may still work after a long time without enhancements, if your company is not growing!
Moral : Upgrading the systems are a must!
Can We wait ?
Wait if you have :• Good systems running.• No immediate threat of Y2K, Euro and
other known/unknown problems.• No management commitment.• Financial problems.
Do not wait if you have :• Tough competition in the market.• Multiple location operations.• Plans to grow Globally.• Management Commitment for change.
ProfitabilityProfitability
You have Two Choices :
Increase in sales - Say 30%OR
Reduce Procurement Cost - say by 5-10 %
What IT Dept. shall look into?What IT Dept. shall look into?
Automatic Identification System Hardware & Networking Software DBMS/RDBMS Communication ERP Supply Chain Management EDI Intranet Internet
For Healthy Operations
• Integration of Systems across the Functional Departments in a Company as well as across the Enterprise as a Whole.
• Better Customer Service.• Introduction of Latest Technologies as and when the are
ready for the Industry acceptance• Expertise database • Avoids data redundancy
Competition In the Market!
Manufacturing Challenges.
• Manufacturing Globally.
• Distribution network spread.
• New Product introduction.
• Lower manufacturing lead time.
Focus on industry markets.
• Satisfying the needs of customers.
• Develop specific business methods and processes.
• Integration with third party products.
• Better products at lower costs
• Tough competition
• Need to analyze costs / revenues on a product or customer basis
• Flexibility to respond to changing business requirements
• More informed management decision making
Demands on the Industry
Unable to get accurate, timely information
Applications not complete for existing business practices
Modifications are time consuming or not feasible
What are your Problems ?
A Typical IT Story
Manufacturinglocation 1
Manufacturinglocation 2
Sales Group
Finance
Corporate office
My growthwill be OK . No?
What is that ERP enables ?
Systematic Look into your Systems & procedures
Optimizing the processes
Enables you to adapt yourself to new technologies
Discipline across the functions
What drives ERP ?
• Business • Customer Satisfaction• Business Development - new areas, products, services• Ability to face competition• Efficient processes required to push the company to top gear
• IT • Present Software does not meet business needs• Legacy systems difficult to maintain, Y2K Problem , Euro
currency• Obsolete hardware/software difficult to maintain
Problems Taken Care of
Availability check at the time of Accepting Sales order On-line Material Status & Shortages Productivity Enhancements Material Planning Customer Service Cash Management Inventory Quality
Subsystems of ERP
• Logistics
• Bill Of Materials
• Sales & Marketing
• Master Scheduling
• Materials Requirement Planning
• Capacity Requirements Planning
• Purchasing
• Shop Floor Control
• Accounts Payable/Receivable
• HR
Software Market Share
SAP15.6
Peoplesoft 4.9
Oracle 4.8
Baan 3.0
CA 3.0
JDE 2.2
SSA 2.1
GEAC 2.0
IBM 1.8
JBA 1.7
Others 59.0
Integration of Information Systems
Local purchasing, invoice verification
Inventory managementInternal sales,
shipping and billingProfit/loss Capacity utilization
Information Systems:Project MgmtInventory Purchasing SalesBudget Cash Management
Manufacturing Head Quarters Marketing/Sales
IS messages
Sales, shipping and billing
Purchasing of trading goods
Inventory Management
Customer service
IS messages
Definition of Business Intelligence
Any tools enabling people to make better decisions and thus improve their business processes
• Decision support systems (DSS)• Executive information systems (EIS)• Reporting• Data mining• Early warning systems (robots)
Examples:
Enabling Best Business Practices
Business EngineeringWorkbench
New Technologies
Best Business Practices
New Business Concepts
Customer
Supplier’sReference Model
Customer
Require-ments
Changes of Customer Information
Customer Representative
Change customer master data
Sales Manager
Schedule customer
visit
Credit Manager
Increase credit limit
Product Manager
Prepareproduction
Please Accept my new order for 1000
more sets
LaunchWorkflow
The Integrated Supply Chain
Finance Balance sheetCapital Costs
Machines Operating resources Human resources
Purchasing Production Sales. Procurementmarket
Managing Resources
ControlProfit/Loss
Process Automation and Lead Time
Workflow for exception handling, Trigger for mail, transactions, EDI
EDInoteBlocked
EDIentry
ATPATP Credit limitCredit limitPickingPicking
TransportTransportPricingPricing
AllocationAllocation
Standard functionsStandard functions
Scanlog
Loadinglist
EDI Sales orderentry
Delivery Billing EDI
Business Process Re-Engineering ( BPR)
• In-depth study of existing systems/processes is required before ERP is considered.
• This study brings out deficiencies of the existing system/process.
• This study is called BPR
• BPR attempts to re-structure and re-organize the human resources, functional areas, Man-Machine interfaces in the organization.
• Hence BPR attempts to maximize productivity
Re-engineering
• Study the current system & Processes• Design and develop new systems• Define Process, organization structure, procedures• Develop/Customize the software • Train people • Implement new system
ERP without Re-engineering• Advantages
– No visible changes in Functionality
– Users find it more acceptable
– Can be completed within time frame.
– Cost can be with in your control
– Impact on Organization will be moderate
• Disadvantages– Best Business practices would have been ignored
– Stability of the system is known only in long run
– May not achieve Corporate wide systems integration
– New technologies have to be studied your self
– Some functionality may be lost
Re-Engineering -a part Life with ERP!
• Re-engineer process before going for ERP• Re-engineer during implementation of ERP• Re-engineer after implementing ERP• Continuous re-engineering through ERP
If It is a Big Change, don’t do it!
If the Modifications are small and important to the business, you may customize and implement.
If the proposed changes are more, discuss with all concerned . Else you may be going towards a dead-end!
The USA Principle
• Understand, Simplify, Automate
Understand Existing Practices
SimplifyProcesses
by Eliminating waste
Automatethe
Process
EDIERP
EliminatingCombiningRearranging
DiagrammingStory-boardingBrain storming
ERP Selection
• Check whether all functional aspects of your Business are covered
• Check whether all the business functions and processes are integrated
• Check whether all latest IT trends are covered• Check whether the vendor has customizing &
implementing capabilities• Check the Service options available
• Check your purse & calculate ROI
Prepare Base for ERP• Do not start without Management commitment • Allocate sufficient funds • Identify Core Project Team• Select specialists from all functional areas• Evaluate and select ERP package • Evaluate Implementation Partner• Make an Implementation Plan• Present plan to Management Committee for sanctions• Present plan to Employee groups for feedback/acceptability• Plan for User Training• Plan for Future upgrades
Define Requirements
• Determine the hardware required• Analyze the existing Processes• Fine tune the processes to be in line with those of
ERP defined • Analyze effect of system changes.• Prototype and present • Refine the prototype & freeze the specifications
ERP Implementation
• Commitment from Management• Form a task force with personnel from all
functional Areas• Take care of Hardware requirements• Step-by-step rather than big-bang introduction• Be patient. ERP implementation takes Time.
• Project Planning
• Business & Operational Analysis, including Gap Analysis
• Business Process Re-engineering (BPR)
• Installation & Configuration
• Project Team Training
• Business Requirements Mapping to Software
• Module Configuration
• System Modification and Interfaces
• Data Conversion
• Custom Documentation
• End User Training
• Conference Room Pilot
• Acceptance Testing
• Production
• Post-Implementation Audit/Support
ERP Involves
Implementation ApproachImplementation Approach
DetailedDiscussions
Design &Customization
Implementation/Prepare to Go Live
Production/Go Live
Project Initialization Evaluation of current processes, business practices, requirements Set-Up Project Organization
Map Organization Map Business Processes Define Functions and Processes ERP S/w Configuration Build ERP System Modifications
Create Go-Live Plan & Documentation Integrate Applications Test the ERP Customization Train Users
Run Trial Production Maintain systems
Accepted norms & Conditions Project Organization Chart Identify Work Teams
Organization Structure Design Specification Process Flow Diagrams Function Model Configuration Recording Systems Modification
Testing Environment report Customization Test Report Implementation Report
Reconciliation Reports Conversion Plan Execution
Tasks Deliverables Phase
Advantages Of ERP Package
Highly Graphics based User Interface. Zero Down time/ planned down time. Readymade solutions for most of the Problems. Only Customization required. Integration of all functions ensured. ROI earlier than the software developed in-house. Easy enterprise wide information sharing. Suppliers and Customers can be on-line communication. Knowledge transfer between industries guarantees innovation. Automatic adaptation to new technology.
Inhouse Development ERP package
Project Development takes time . Ready made Projects.
Reinventing the wheel. Needs only customization
Process specific to your industry Best Business practices followed
are implemented
Documentation may not be present Documentation is part of system
EDI implementation modifications EDI Compatible. Universally accepted
to be taken care of
Enterprise implementation is The package itself is designed as
difficult as each unit follows Enterprise Package.
different S/W option
Latest Developments to be studied Constant Updates on Technology
as and when they are introduced. and Processes assured
TransportersTransporters
BanksBanks VendorsVendors
CustomsCustoms Retailers Retailers
Electronic Data Interchange
EDI
Summary
• Optimum utilization of resources• Customer satisfaction• Seamless integration between Functions• Reduced overheads & inventory• Timely responsiveness• Market share & image enhancement• Faster design to manufacturability• Keep up with technology changes
• Only way for integrated systems for a client with multiple locations