ERP Demystified, 3/e

Alexis Leon

ERP and Related Technologies

by: Dr. Usman Tariq

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 LIMITATIONS OF THE ERP SYSTEM
The ERP system has 3 significant limitations:

1.Managers cannot generate custom reports or queries

without the help from a programmer and this inhibits them from
obtaining information quickly, which is essential for making a
competitive advantage.

2.ERP systems provide current status only, such as open

orders. Managers often need to look past status to find trends
and patterns that aid better decision-making.

3.The data in the ERP application is not integrated with other

enterprise or division systems and does not include external
intelligence.

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There are many technologies that help to overcome these limitations.
These technologies when used in conjunction with the ERP package, help
in overcoming the limitations of a stand-alone ERP system and thus help
the employees to make better decisions.
Some of these technologies are:
1. BUSINESS PROCESS RE-ENGINEERING (BPR)
2. DATA WAREHOUSING & Data Marts
3. DATA MINING
4. ON-LINE ANALYTICAL PROCESSING (OLAP)
5. PRODUCT LIFE CYCLE MANAGEMENT (PLC)
6. SUPPLY CHAIN MANAGEMENT(SCM)
7. CUSTOMER RELATIONSHIP MANAGEMENT
8. GEOGRAPHICAL INFORMATION SYSTEMS
9. INTRANETS AND EXTRANETS
10. ELECTRONIC DATA INTERCHANGE (EDI)
11. ELECTRONIC FUNDS TRANSFER (EFT)
12. CRYPTOGRAPHY 3
 BUSINESS PROCESS RE-ENGINEERING (BPR)

DEFINITION :
 Dr. Michael Hammer defines BPR as “the fundamental
rethinking and radical redesign of business processes to
achieve dramatic improvements in critical, contemporary
measures of performance such as cost, quality, services
and speed.”

 One of the main tools for making this change is the

Information Technology (IT).

 Any BPR effort that fails to understand the importance of IT,

and goes through the pre-BPR analysis and planning
phases without considering the various IT options available,
and the effort of the proposed IT solutions on the employees
and the organization is bound to crash during take off.
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Business Process Reengineering Steps

 Step #1: Identity and Communicating the Need for

Change
 Risk of Failure: Not Getting Buy-In From The Company
 Step #2: Put Together a Team of Experts
 Risk of Failure: Not Putting The Right Team Together
 Step #3: Find the Inefficient Processes and Define Key
Performance Indicators (KPI)
 Risk of Failure: Inability to Properly Analyze Processes
 Step #4: Reengineer the processes and Compare KPIs

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How you fix: BPR is the answer
1. excessive exchange of information, redundant
data, multiple entries;
2. Long delivery times, huge stocks, buffer and
other reserves;
3. a great deal of control in comparison with
appreciation;
4. much extra work to make up/iterations and
5. a high complexity, i.e. a great amount of
exception rules/special cases.
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 ADVANTAGES OF BPR

1. It helps in integrating the various business processes

of the organization.

2. With good ERP package, the organization will be able to

achieve dramatic improvements in areas such as cost,
quality, speed, etc.
Hence, many BPR initiatives are used in ERP
implementation.

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 DATA WAREHOUSING
1. If operational data is kept in the database of
the ERP system, it can create a lot of
problems.
2. As time passes, the amount of data will
increase and this will affect the performance of
the ERP system.
3. However once the operational use of the data
is over, it should be removed from the
operational databases.

 Data Mart: The data mart is a subset of the

data warehouse and is usually oriented to a
specific business line or team. Whereas data
warehouses have an enterprise-wide depth,
the information in data marts pertains to a
single department.
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IMPORTANCE OF DATA WAREHOUSING

 The primary concept of the data warehousing is

that the data stored for the business analysis
can be accessed most effectively by
separating it from the data in operational
systems.
 The most important reason for separating data for
business analysis, from the operational data, has
always been the potential performance
degradation on the operational system that can
result from the analysis processes.
 High performance and quick response time is
almost universally critical for operational system.
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 DATA MINING
 DEFINITION: Data mining is the process of identifying
valid, novel, potentially useful and ultimately
comprehensible information from databases that is used to
make crucial business decisions.
 The main reason for needing automated computer systems for
intelligent data analysis is the enormous volume of existing and
newly appearing data that require processing.

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Data mining is all about
organizing and interpreting data.
 You’ll see data points that may include:
1. What time they visited your site
2. What device they used to access your site
3. Which pages they visited
4. Which items they put into their shopping cart
5. Which items they purchased together
6. Whether they compared items
7. How often they come back to your site

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Example: When potential homeowners come in to request a mortgage, they have
to give the bank lots of information, including:
•Current income
•Employment status
•Savings-to-debt ratio
•Credit score
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 The amount of data accumulated each day by various
businesses, scientific and governmental organizations around
the world is daunting.

 Research organizations, academic institutions and

commercial organizations create and store huge amounts of
data each day.

 It becomes impossible for human analysts to cope with such

overwhelming amounts of data.

 Two other problems that surface when human analysts

process data are:

i. The inadequacy of the human brain when searching for

complex multi-factorial dependencies in the data.

ii. The lack of objectiveness in analyzing the data

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 ADVANTAGES: Data Mining
 A human expert is always a hostage of the
previous experience of the investigating other
system.
 Sometimes this helps, sometimes this hurts, but
it is almost impossible to get rid of this fact.
 While data mining does not eliminate human
participation in solving the task completely, it
significantly simplifies the job and allows an
analyst, who is not a professional in statistics
and programming to manage the process of
extracting knowledge from data.

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ON-LINE ANALYTICAL PROCESSING (OLAP)
DEFINITION
OLAP can be defined in five words – Fast Analysis of Shared Multi-dimensional
Information.
 Fast : means that the system is targeted to deliver most
responses to users within about 5 seconds, with the simplest
analysis not taking more than one second and very few taking
more than 20 seconds.
 Analysis: means that the system can cope with any business
logic and statistical analysis that is relevant for the application
and the user, and keep it easy enough for the target user.
 Shared: means that the system implements all the security
requirements for confidentiality and if multiple write access is
needed, concurrent update locking at an appropriate level.
 Multi-dimensional: means that the system must provide a
multi-dimensional conceptual view of the data, including full
support for hierarchies and multiple hierarchies.
 Information: is refined data that is accurate, timely and
relevant to the user. 18
 Importance
 OLAP technology is being used in an increasingly wide
range of applications.
 The most common are sales and marketing analysis,
financial reporting and consolidation and budgeting and
planning.
 OLAP is being used for applications such as product
profitability and pricing analysis; activity based coating;
manpower planning and quality analysis or for that
matter any management system that requires a flexible,
top down view of an organization.

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PRODUCT LIFE CYCLE MANAGEMENT (PLM)
 In industry, product lifecycle management (PLM) is the
process of managing the entire lifecycle of a product
from inception, through engineering design and
manufacture, to service and disposal of manufactured
products.

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 ERP and PLM support different business needs.
The capabilities of each system:
PLM: The system of record for your ERP: The system of record for your
product financials
Bill of materials (BOM) management Purchasing
Item management Inventory management
Change management (ECR, ECO, ECN) Order management
Document management Accounting
Compliance management

Establishing your manufacturing process with an effective PLM

system before integrating with a compatible ERP system will
minimize organizational inefficiencies and transition costs as
well as optimize the capabilities of each system across the
entire organization.
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SUPPLY CHAIN MANAGEMENT(SCM)
DEFINITION:
A supply chain is a network of facilities and distribution
options that performs the function of procurement of materials,
transformation of these materials into intermediate and
finished products and the distribution of these finished
products to the customers.
1. Supply chains exist in both service and manufacturing
organizations, although the complexity of the chain may
vary greatly from industry to industry and firm to firm.
2. Traditionally, marketing, distribution, planning,
manufacturing and the purchasing organizations along the
supply chain operated independently.

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SUPPLY CHAIN MANAGEMENT (Cont.)

3. These organizations have their own objectives

which are often conflicting.

4. There is a need for a mechanism through which

these different functions can be integrated
together.

5. Supply chain management is a strategy through

which such integration can be achieved.

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GEOGRAPHICAL INFORMATION
SYSTEMS (GIS)
 A Geographic Information System (GIS
Software) is designed to store, retrieve,
manage, display, and analyze all types of
geographic and spatial data.

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Benefits: GIS
 Telecom and network services
 Urban planning
 Environmental impact analysis
 Transportation planning
 Surveying
 Traffic density planning
 Regional planning
 Disaster and business community planning

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INTRANETS AND EXTRANETS
 An intranet is a network where employees
can create content, communicate,
collaborate, get stuff done, and develop
the company culture.

 An extranet is like an intranet, but also

provides controlled access to authorized
customers, vendors, partners, or others
outside the company. 29
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Benefits of Intranet
 Communicate within the business: both top-down and bottom-up by
distributing news and announcements, providing feedback and
sharing information
 Manage documents and business information: intranets offer a
centralized location to host, search and access vital business
content
 Facilitate common business processes: through use of workflow and
forms, an intranet can enable users to self-serve for many common
business processes, such as booking holidays or reclaiming
expenses
 Enable collaboration: functionality such as team areas, forums,
blogs and social tools can support employees to work together
effectively, regardless of their department or location
 Support strategic business objectives: these may span improved
employee engagement and morale, embedding a business culture,
increasing staff retention or encouraging better productivity and
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Benefits of Extranet

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ELECTRONIC DATA
INTERCHANGE (EDI)
 Electronic Data Interchange (EDI) is the
computer-to-computer exchange of
business documents in a standard
electronic format between business
partners.

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The EDI process looks like this — no paper, no people involved:

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EDI Benefits
 EDI can speed up your business cycles by 61%.
Exchange transactions in minutes instead of the days or
weeks of wait time from the postal service
 Improves data quality, delivering at least a 30—40%
reduction in transactions with errors—eliminating errors
from illegible handwriting, lost faxes/mail and keying and
re-keying errors
 Using EDI can reduce the order-to-cash cycle time by
more than 20%, improving business partner transactions
and relationships

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Electronic Fund Transfer
 Electronic funds transfer (EFT) are electronic transfer of
money from one bank account to another, either within a
single financial institution or across multiple institutions,
via computer-based systems, without the direct
intervention of bank staff.

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 EFTs include, but are not limited to:
 automated teller machine (ATM) transfers;
 direct deposit payment or withdrawals of funds initiated by the
payer;
 direct debit payments for which a business debits the
consumer's bank accounts for payment for goods or services;
 transfers initiated by telephone;
 transfers resulting from credit or debit card transactions, whether
or not initiated through an payment terminal.
 wire transfer via an international banking network such as
SWIFT;
 electronic bill payment in online banking, which may be delivered
by EFT or paper check;
 transactions involving stored value of electronic money, possibly
in a private currency;
 instant payment.

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Cryptography
 Cryptography is a method of protecting
information and communications through
the use of codes so that only those for
whom the information is intended can read
and process it.."

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 Modern cryptography concerns itself with
the following four objectives:
 Confidentiality: the information cannot be understood by
anyone for whom it was unintended
 Integrity: the information cannot be altered in storage or
transit between sender and intended receiver without the
alteration being detected
 Non-repudiation: the creator/sender of the information
cannot deny at a later stage his or her intentions in the
creation or transmission of the information
 Authentication: the sender and receiver can confirm
each other's identity and the origin/destination of the
information

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