ERP Systems

1. ERP Systems

2. What is ERP? • ERP stands for Enterprise Resource Planning, which is a software system that: • Takes an enterprise approach to integrating and optimising business processes across departments (finance, HR, sales, etc). • Provides consistent information for timely decision-making and performance measurement

3. ERP vendors and market • The ERP market has consolidated considerably in the last 5 years leaving SAP and Oracle as leaders. • Oracle acquired PeopleSoft who had acquired JD Edwards • Typical of maturing technology markets which have 2 leaders and a few niche players • There are also specialised vendors • Infor (GEAC, SSA) – consolidator/vertical niches • Microsoft Dynamics - SME • Open source projects are not widely used • Unclear if they will gain ground • This lecture will cover general ERP issues but focus on SAP as an example. • This is not an advert for SAP!

4. An example of a cross-department process: Purchase-to-Pay 1. Determine requirements, complete purchase requisition. Automatically generate the purchase requisition based on quantity on-hand, quantity-on-order, and expected demand. © L. Gray, CNU

5. Purchase-to-Pay 2. Prepare and record purchase order. Assists the buyer in identifying sources of supply for the requested item, preparing RFQs to vendors, analyzing vendor quotes, comparing vendor prices, terms, and past performance

6. Purchase-to-Pay 3. Receive and record goods. Compare quantity ordered to quantity received. Routes goods to the function that requested them or directs them the warehouse for immediate sale. It also records vendor performance data.

7. Purchase-to-Pay 4. Receive vendor invoice, match with PO and receiving report; record payable. If the three-way match fails, the enterprise system notifies the proper personnel to ensure timely reconciliation of differences.

8. Purchase-to-Pay 5. Prepare and record cash disbursement and update accounts. Uses vendor and AP data to schedule payments in accordance with vendor terms and to receive discounts.

9. Example ofInefficient Process • A telephone ordering service • Requires the agent to take the ordered items • Provide pricing information • Estimate delivery date • Check availability of credit for the caller • A manual/semi-automated process would run like this…

10. Inefficient Customer Service 1. Check if the customer exists in the system and has good credit. © L. Gray, CNU

11. Inefficient Customer Service 2. Find out if item is available from warehouse stock or if it has to be scheduled for manufacturing. Tell the customer when they would receive the item.

12. Inefficient Customer Service 3. If item is not in stock shelf, when will it be available from manufacturing? Sally could review production schedules and add the time required to pick, pack, and ship the item. This would not, however, tell her if the item had already been allocated to another customer.

13. Inefficient Customer Service 4. In the event that the item must be manufactured, when could it be scheduled, and how long will the manufacturing process take?

14. Inefficient Customer Service 5. How long will it take vendors to supply raw materials so that manufacturing can take place?

15. Inefficient Customer Service 6. What price will be charged to this customer for this order? The price to charge must be obtained from marketing.

16. Inefficient Customer Service 7. Needs to check Accounts Receivable balance to determine if customer has sufficient credit. Without direct access to the available credit data, Sally will have to call accounting to approve this order.

17. Inefficient Customer Service 8. If credit is insufficient, must check with credit department for change in credit line.

18. Requirement • Provide agent with a single point of access from which they can complete the order • Check information (availability of items, pricing and credit) • Request initiation of internal processes (manufacturing, delivery) • Provide reliable information to the customer (delivery date, price) • But associated data and processes relate to different functions within the organisation which may be in different systems.

19. Potential Solutions • Integration of existing function based systems • EAI is the solution • Consolidation into a single application • ERP is the solution • In most cases, an enterprise will combine both approaches • Consolidate in some places • Integrate in other places

20. Recap: Problems with integration of function based systems • Data Sharing is difficult between systems • Data duplication and inconsistencies • Which is the true address or order? • Data model inconsistencies • Integration of information not automatic • Often results in manual steps • Partial information leads to isolated decisions lead to overall inefficiencies • Increased expenses • Note: This does not mean integration is wrong all the time. See end of lecture.

21. Enterprise Resource Planning • An ERP deployment consists of • Integrated modules • Common process and data models and definitions • Common database • Update one module, automatically updates others • ERP is • More about business process change than technology • An approach to managing all resources and their use in the entire enterprise in a coordinated manner • A set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order management • An approach to supporting business through optimizing, maintaining, and tracking business functions • Focused on value chains, rather than individual functions

22. Typical Technical Architecture • N-tier architecture • Database server with a single data model (multiple servers hosting a distributed database ) • Application logic servers with process models (multiple servers, distributed ) • Web/Internet server • Presentation level (browsers) • Evolved to include Service Oriented Architecture for leading vendors • Architecture facilitates integration of external systems into the ERP system.

23. e.g. mySAP ERP

24. mySAP ERP Integrate SAP systems Portal Data Warehouse Technology to integrate people, information and business processes across technologies

25. mySAP ERP Management of travel costs and expense claims HR: Workforce compensation Managing corporate liability Management of property etc Traditional ERP: Controlling areas of most expense

26. mySAP ERP Traditional ERP: All the well-known value chain processes: Order to cash etc.

27. mySAP ERP Human Capital Management: support of line management, retention/recruitment, global HR planning and management

28. mySAP ERP Financials: Automation of finance functions to minimise costs. Speed up the preparation of financial information. Compliance, better management of free cash resources

29. mySAP ERP Analytics: Optimisation and automation of planning, analysis of performance, management accounting support.

30. mySAP Business Suite Solutions Cross-Industry Solutions • mySAP Workplace • mySAP CRM • mySAP SCM • mySAP Marketplace • mySAP E-Procurement • mySAP BI • mySAP PLM • mySAP HR • mySAP Financials • mySAP Mobile Business Industry Solutions • mySAP Aerospace & Defense • mySAP Automotive • mySAP Banking • mySAP Chemicals • mySAP Consumer Products • mySAP Engineering & Construction • mySAP Financial Service Provider • mySAP Healthcare • mySAP High Tech • mySAP Higher Education & Research • mySAP Insurance • mySAP Media • mySAP Mill Products • mySAP Mining • mySAP Oil & Gas • mySAP Pharmaceuticals • mySAP Public Sector • mySAP Retail • mySAP Service Providers • mySAP Telecommunications • mySAP Utilities Infrastructure and Services • mySAP Technology • mySAP Hosted Solutions • mySAP Services • Many variants of the horizontal ERP package are available for specific industy needs. • There are also some niche ERP vendors focusing exclusively on individual industries.

31. The user view of an ERP: • Login screen

32. The user view of an ERP: • Choose your options

33. The user view of an ERP: • Create a requisition

34. The user view of an ERP: • Create a requisition (II) • ERP implementations may contain 1,000s of screens ERP embeds knowledge of the organisation’s and industry’s terminology, processes and data

35. ERP approach extends beyond ERP • ERP vendors also provide other enterprise applications including • Customer Relationship Management • Supply Chain Management • Product lifecycle management • Supplier Relationship management

36. Benefits of ERP • Common set of data • Removes consistency and synchronisation issues • Ready integration for decision support systems • Inter-department integration for all departments using the ERP • Library of available standard template processes and modules make integration easier • Forces Business Process Reengineering

37. Potential Limitations of ERP • Global ERP can be a never-ending project for large organisations • No organisation exists in isolation • There are always suppliers and clients who use different data models. • This means that the need for integration cannot be removed. • Inter-department integration relies on using the global ERP • Causes problems with anomalous departments, recently required, geographically isolated or with different business processes. • The software can drive the business rather than the other way around • Templates tend to impose the standard business process rather than your organisations business process. This is okay for commoditised processes but not for all.

38. ERP Implementation Options • Green field • Create IS architecture from scratch • ERP by Function • Deploy one or a few ERP modules across all Business Units • Risk: May never extend beyond original function. • ERP by Business Unit • Deploy fully integrated ERP suite in one or more Business Units • Fully Integrated ERP • Full scale deployment across the enterprise

39. ERP and integration capabilities • All ERP implementations require integration with other systems • Supplier or customer systems • Legacy systems which cannot be retired. • As part of an incremental transition to a global ERP system • ERP Integration layers • Provide SOA or EAI type capabilities • Typically tightly coupled to the ERP and focus on integration into the ERP • E.g. • SAP NetWeaver • Oracle Fusion

40. Example: SAP XI • SAP Exchange Infrastructure (SAP XI) • An integration server (EAI) • Integrates SAP applications and 3rd party applications • Integration server • Message routing • Message mapping/transformation • Integration adapters • Protocol and data format conversion (into/out of XML)

41. Implementing an ERP system • ERP is always a major project • Any ERP project requires significant time and cost. • It is likely to be disruptive and result in business process changes across the organisation. • To be successful • The project must have high priority and visibility within an organization. • Senior management commitment with regular progress reviews at the appropriate levels of management. • Risks • Many companies are unclear on the likely total project cost or return. • As with any enterprise level project, scope creep, organisational politics and change regularly cause failure.

42. SAP‘s ASAP – Rapid Implementation Methodology • Five step approach to implementation of SAP • Incorporates many standard concepts of project management Continuous Change Project Preparation Final Preparation Go Live &Support Realization Business Blueprint © SAP

43. Contents Search Home Page What’s New Roadmap Phase 1: Project Preparation Phase 2: Business Blueprint Phase 3: Realization Phase 4: Final Preparation Phase 5: Go Live and Support Implementation Accelerators Project Plan Knowledge Corner Glossary Help SAP provided tools • SAP provides tools to assist and support implementation • Implementation Accelerators, Project Plan, Consulting Guides, Knowledge Corner, Glossary, Help Hide Back Forward Refresh Print Options Welcome to AcceleratedSAP Contents Search Home Page What’s New Roadmap Implementation Accelerators Project Plan Question and Answer Database Issues Database Business Process Procedures Knowledge Corner Glossary Continuous Change Help Project Preparation Final Preparation Go Live &Support Business Blueprint Realization Version

44. Structure and definitions • Phase • The major organizational steps of the ASAP Roadmap. • Work package • A group of activities designed to accomplish a major portion of a Roadmap phase. A work package is assigned to a project team for completion. • Activity • A group of tasks. • The results of an activity can produce certain deliverables and can be accomplished by one or more project team members. Several activities comprise a work package. • Task • A specific event to be performed by a project team member. • Within ASAP, tasks can be accelerated using: • How-To - Explanation documentation of how to perform a process, activity , or task. • Accelerator documents, templates, tips and tricks used to accelerate task completion.

45. SAP‘s ASAP – Rapid Implementation Methodology • Phase 1: Project Preparation • Provides initial planning and preparation for project. • Gather requirements • Requirements workshops • Requirements documentation and control processes • Project success requires requirements gathering which • Is inclusive with representation and engagement from all participants. • Has clear and effective approval processes at senior management level. • Phase 2: Business Blueprint • Create the Business Blueprint • detailed documentation of the results gathered during requirements workshops. • documents the business process requirements of the company which creates a common understanding of how the company will operate.

46. Strengths/Weaknesses of Business Blueprints • Strengths • Share a common understanding with everyone on the project • Formalises the agreement between • The IT project team and business • Different business departments • Reduced level of communication required during implementation • Supports impact analysis when requirement change occurs. • Weaknesses • Processes can be difficult to model • Business process can be poorly defined • Need to distinguish between real business process requirements and legacy “way we do business” • Must balance need to perfect definitions and need to complete the project. • Business processes can change rapidly

47. SAP‘s ASAP – Rapid Implementation Methodology • Phase 3: Realization • Implement all the business and process requirements based on the Business Blueprint. • Configure the system step by step in two work packages, Baseline and Final configuration. • Phase 4: Final Preparation • Complete testing, end user training, system management and cutover activities to achieve go-live readiness. • Final Preparation phase requires resolution of all critical open issues.

48. SAP‘s ASAP – Rapid Implementation Methodology • Phase 5 Go Live and Support: • Transition from a project-oriented, pre-production environment to live production operation. • Continuous Change: • Provide on-going support and assistance for post go-live. • Provide solutions for standard minor tweaks and changes • Provice solutions for evolution of the solution to support: • Business changes • Technology changes • Changes in the user community or • New business content. • ASAP covers these activities

49. Supporting Continuous Change ASAP Continuous Change Competitive Environment Changes Implementation Release 3 New Business Content New Analysis Requirements Implementation Release 2 Market Technology Changes New Functionality Implementation Release 1 5 ASAP Implementation 4 1 3 2 Go Live & Support Project Preparation Final Preparation Realiz- ation Business Blueprint

50. Example Penguin’s Global ERP Strategy