Enterprise Resource Planning - Erp: Kevin Cowell Natthawut Lertpitayakun Isabelle Mertha Xiaoguang You
Enterprise Resource Planning - Erp: Kevin Cowell Natthawut Lertpitayakun Isabelle Mertha Xiaoguang You
-ERP
Kevin Cowell
Natthawut Lertpitayakun
Isabelle Mertha
Xiaoguang You
1
What is ERP?
3
Source: http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19, 2002.
How Do ERP Systems Work?
Managers and
Stakeholders
Financial
Reporting Applications
Human
Sales and
Resource Applications
Delivery
Management
Applications
Applications
Sales Force Central
Manufacturing Back-office
Customers And Customer Database
Service Reps Applications Administrators Suppliers
And Workers
Service Human
Applications Resource Inventory
Management And Supply
Applications Applications
Employees
4
Source: Davenport, Thomas, Putting the Enterprise into the Enterprise System, Harvard Business Review, July-Aug. 1998.
ERP Components
Finance: modules for bookeeping Manufacturing and Logistics: A
and making sure the bills are paid group of applications for planning
on time. Examples: production, taking orders and
General ledger delivering products to the
Accounts receivable customer. Examples:
Accounts payable Production planning
HR: software for handling Materials management
personnel-related tasks for
Order entry and processing
corporate managers and individual
employees. Examples: Warehouse management
HR administration
Payroll
Self-service HR
5
Source: http://www.computerworld.com/printthis/1998/0,4814,43432,00.html, viewed September 19, 2002.
An ERP Example: Before ERP
Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers
Accounting
Sends report
Invoices
Sends report accounting
Ships parts
Vendor
Warehouse
Order is placed
We Need parts #XX
with Vendor
Inventory
Purchasing Files
Files We ordered the parts
Purchasing
6
An ERP Example: After ERP
Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting
Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO
Order is placed
with Vendor
Warehouse
Vendor Purchasing
Ships parts
And invoices accounting 7
Who are the main ERP vendors?
Baan
JD Edwards
Oracle
PeopleSoft
SAP
8
ERP Vendors and Industries They
Serve
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eut ic
Goo
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ufa c l/
ume
ve
De fe e /
s tria
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nse
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mac
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tron
Cons
as
I ndu
Oil/G
Pack
Aut o
Ae ro
Phar
Ele c
Man
Baan
Baan
J.D. Series& Co.
Edwards
One World, One World
Software
Oracle Corp.
Applications
PeopleSoft, Inc.
PeopleSoft 7.5
SAP
R/3
% Planned Penetration 10-15 5-10 35+ 40+ 35 30 20
Source: Benchmarking Partners Inc.
9
Revenue and Profits of Major ERP
Vendors
12
10.86
11
10.1
10
Billions of Dollars
9
8
7 6.5
5.6 2001
6
5 2000
4
3 2.07
2 1.74 1.02
1 0.394 0.894
0.32
0
SAP PeopleSoft Oracle Law son J.D. Edw ards
10
Revenue and Profits of Major ERP Vendors
1000
900 859
796
800
Millions of Dollars
700
600
2001
500
400 2000
321
299
300
200
52.6 117
100 44.8 12
0
SAP PeopleSoft Law son J.D. Edw ards
11
ERP Market
Total Revenues, 2000
Other SAP
36% 32%
Geac Computer
3%
Oracle
J.D. Edwards 15%
5% Peoplesoft Source: AMR Research, 2001
9%
Roughly 65% of companies surveyed already have ERP in place. Of those, many are still actively
spending to upgrade existing systems and to take advantage of new web-oriented features.
Source:
13
AMR Research Survey of 686 companies with annual revenues ranging from <$50M to >$1B, October 2001.
ERP Investments
Have ERP today?
No
33% n=666
Yes
67%
14
Why ERP?
3 Major Reasons:
To integrate financial data.
To standardize manufacturing processes.
To standardize HR information.
15
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
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.
16
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
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.
17
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
Total Cost of Ownership of
ERP
18
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
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
19
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
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
20
Benefits of ERP Systems (contd)
21
Risks with ERP Implementation
22
Case Study
Nestl USA
23
Nestl Background
Found in 1866, Switzerland.
World's largest food company, # 50 in Fortune magazines
Globe 500
Nestl USA was incorporated in 1990; Home Office in Glendale,
CA.
33 manufacturing facilities, 6 distribution centers and 17sales
offices around the country, 17,300 employees nationwide.
$ 11.1 billion in Sales (2001)
America's most admired Food Company for the fourth
consecutive year - Fortune Magazine, February 2001
Nestle USA
17% Kraft
27%
General Mills
7%
Sara Lee
11%
Unilever Con Agra
14% 24%
Joe Weller
Chairman & CEO
Ben Worthen, Nestl's ERP Odyssey, May 15, 2002 Issue of CIO Magazine 27
Business Challenges
After the brands were unified and reorganized into Nestle USA
in 1991,. Divisions still had geographically dispersed.
For example, Nestle USAs brands were paying 29 different prices
for vanilla - to the same vendor.
Nine different general ledgers and 28 points of customers entry.
Years of autonomous operation provided an almost insurmountable
hurdle.
Nestle was the worlds NO. 1 food and beverage company but one
of the least efficient
Source:
1. Ben Worthen, Nestl's ERP Odyssey, May 15, 2002 Issue of CIO Magazine; 28
2. Nestle: An Elephant Dances, http://www.businessweek.com/2000/00_50/b3711064.htm, viewed October 20, 2002.
Project Scope BEST
Five SAP Modules purchasing, financials,
sales and distribution, accounts payable and accounts
receivable and Manugistics supply chain module
From October 1997 to 1st Quarter of 2000.
$210 million budget
50 top business executives and 10 senior IT professionals
Source: Worthen, Ben, Nestl's ERP Odyssey, May 15, 2002 Issue of CIO Magazine. 29
Project Objectives -
One Nestle, under SAP
Transforming the separate brands into
one highly integrated company.
Internal aligned and united, establishing a
common business process architecture
Standardizing master data
Source: Worthen, Ben, Nestl's ERP Odyssey, May 15, 2002 Issue of CIO Magazine. 30
Process of SAP
Implementation
The new business process confused
most of employees, then resistance grew into
rebellion in 2000.
Source: Worthen, Ben, Nestl's ERP Odyssey, May 15, 2002 Issue of CIO Magazine. 31
Conclusion of Nestl Case
Changes and success
Common database and business processes lead to
more trustworthy demand forecast.
A comprehensive account planning tool.
Nestle can now forecast down to the redistribution center level.
Nestle has improved forecast accuracy by 2%
Higher factories utilization
fewer factories = big gains in factories Utilization
Reduce inventory level
Source: Brownson, Jim, and Mitchell-Keller, Lori, Nestle USA,
32
Case study: supply chain: Nestle Integrated CRM and SCM Optimize Enterprise Effectiveness, http:www.
dci.com/Brochure/crmny/sessions.asp?trackid=1190, viewed on November 06, 2002.
Conclusion of Nestl Case
Saved $$$
- With ERP in practice , $ 371 million has been saved until 2001.
3 5
7 8
1 6
35
Source: http://www.idealliance.org/news/2002/mem0307.asp, viewed on November 1, 2002.
Case Study
36
What is Agilent Technologies?
39
Source: http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf, viewed November 3, 2002.
Agilent revenue for 2001
43
Source: Songini, Marc L., ERP effort sinks Agilent revenue Computerworld, Framingham, August 26, 2002.
ERP Project Objective
One IT organization
Supply chain capability; for example,
- Suppliers
- Customers
Migrating 2,200 legacy applications that it
inherited from HP to Oracle
44
Source: Gaither, Chris, Watching Oracle For Signs Of Strength Boston Globe, Boston, Mass., September 16, 2002.
One IT Project (Before)
45
Source: http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf, viewed November 3, 2002.
One IT Project
Source:
http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf;
46
http://www.agilent.com/about/newsroom/features/2002june08_chuck.html, viewed November 3, 2002.
One IT Project Objective
47
Source: http://www.agilent.com/about/newsroom/features/2002june04_oneit.pdf, viewed November 3, 2002.
Changes in Supply Chain Process:
Supplier
49
Source: http://www.agilent.com/supplier/generalinformation.shtml, viewed October 31, 2002.
Evaluated Receipt Settlement
(ERS)
An automated invoice and payment system
How does ERS work?
50
Source: http://www.agilent.com/supplier/downloads/ERS_supplier_guide.pdf, viewed November 3, 2002.
Changes in Supply Chain Process:
Customers
Source:
FD (Fair Disclosure) Wire, August 19, 2002 Monday, Transcript 081902ag.735, Q3 2002 Agilent Technologies
Earnings Conference Call - Final; http://www.pressi.com/int/release/51627.html, viewed November 3, 2002, and
Shah, Jennifer B., Agilents ERP Rollout Expensive Glitches EBN, Manhasset, August 26, 2002.
53
Troubles with Project Everest
55
Source: Songini, Marc L., ERP effort sinks Agilent revenue Computerworld, Framingham, August 26, 2002.
Lessons Learned by Agilent
56
Source: Songini, Marc L., ERP effort sinks Agilent revenue Computerworld, Framingham, August 26, 2002.
Best Practices and what ERP
holds for the Future
57
ERP Implementation
58
Source: http://www.integratedsolutionsmag.com/articles/2000_03/000309.htm, viewed November 5, 2002.
Best Practices of ERP
Implementation
A Business Strategy aligned with Business Processes
Top-Down Project Support and commitment
Change Management
Extensive Education and Training
Data Clean up and Data Integrity
Implementation is viewed as an ongoing process
59
Best Practices of ERP
Implementation
A Business Strategy aligned with Business
Processes
Business strategy that will give you a competitive advantage
Analyze and map your current business processes
Develop your objectives
Evaluate your business strategy and ERP plan before you
commit to software acquisition and installation.
Sources:
1. M. Michael Umble, Avoiding ERP Implementation Failure, Industrial Management, Jan/Feb 2002;
61
2. http://www.integratedsolutinsmag.com/articles/2000_03/000309.htm, viewed November 5, 2002.
Best Practices of ERP
Implementation
Change Management
Changes in business procedures, responsibilities,
work load.1
As a result, ERP implementations are times of high stress,
long hours, and uncertainty.1
Mid-level managers must2
facilitate continual feedback from employees,
provide honest answers to their questions, and
help resolve their problems.
Sources:
1. Yakovlev, I.V., An ERP Implementation and Business Process Reengineering at a Small University,
Educause Quarterly, Number 2, 2002;
62
2. Umble, M. Michael, Avoiding ERP Implementation Failure, Industrial Management, Jan/Feb 2002.
Best Practices of ERP
Implementation
Extensive Education and Training
General education about the ERP system for everyone.
Massive amount of end users training before and during
implementation.
Follow-up training after the implementation.
10 to 15% of total ERP implementation budget for training will
give an organization an 80% chance of a successful
implementation.
Source: Umble, M. Michael, Avoiding ERP Implementation Failure, Industrial Management, Jan/Feb 2002.
63
Best Practices of ERP
Implementation
Data Clean up and Data Integrity
Clean-up data before cut-over.1
Near enough is no longer good enough.2
To command trust, the data in the system must be
sufficiently available and accurate.3
Eliminate the old systems, including all informal
systems.3
Sources:
1. http://www.bpic.co.uk/checklst.htm, viewed November 5, 2002;
2. http://www.projectperfect.com.au/info_erp_imp.htm, viewed November 5, 2002;
64
3. M. Michael Umble, Avoiding ERP Implementation Failure, Industrial Management, Jan/Feb 2002.
Best Practices of ERP
Implementation
Implementation is viewed as an ongoing process
Ongoing need for training and software support after
implementation.
Ongoing need to keep in contact with all system
users and monitor the use of the new system.
Ongoing process of learning and adaptation that
continually evolves over time.
65
Source: Umble, M. Michael, Avoiding ERP Implementation Failure, Industrial Management, Jan/Feb 2002.
ERP Implementation Phases
4 Major Phases:
Concept/initiation
Development
Implementation
Closeout/Operation and maintenance
Source: ERP Implementation and Project Management, Production and Inventory Management
Journal, Alexandria, Third Quarter 2001, FC Weston Jr. 66
Conclusion
67
The Future of ERP
68
ERP II
Integrates the front and back office to enable an information
visibility strategy that pushes the right information to the right people
at the right time through the right communications channels.
A competitive strategy that integrates a centralized, core ERP
system with highly specialized solutions.
In 2001, $4 billion (or 20%) of the $20 billion of total vendor revenue
was spent on extensions to the ERP system. In 2006, AMR predicts this
percentage will increase to 50%.
Source:
1. http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19, 2002;
2. http://www2.cio.com/metrics/2002/metric381.html, viewed September 19, 2002.
69
ERP II Architecture
70
Source: http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September
19, 2002.
ERP II: A Revolutionary
Change
71
Source: http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19,
2002.
ERP II: A Revolutionary
Change
Technology
Technology goals aligned with internal
business processes and those of diverse partners,
customers, suppliers, and distributors.
Business Process
Implementation cannot be made without a change of business processes.
People
ERP II implementation success depends on the business communitys
cultural acceptance of the system.
72
Source: http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19,
2002.
Conclusion
Source:
http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19, 2002, and
Bartholomew, D., Benefiting from the Boom, Industry Week, Cleveland, July 2002. 73
End
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