ES

Enterprise Systems

Enterprise Resource Planning (ERP)

Enterprise Resource Management (ERM)

P.Pille, Ryerson Polytechnic University
School of Information Technology Management
 Enterprise Systems
• Early Automation
• What is ERP
• ERP Implementation
• Beyond ERP
• ERM
• SAP
• Electronic Marketplace
 Early Automation
• Automation of tasks within departments
• Therefore, each dept had its own system(s)
– Functionality for tasks for that department only
– Systems weren’t powerful enough to attempt broader range of tasks
– Usually single vendor for all parts of system (e.g. IBM)
• All hardware and network components
• All operating system and application software
• Result: Generally communication between departments
remained largely manual
– IS/IT was often at the mercy of single vendors

Antony Upward,CGI
• Open Systems
– Application vendors built applications to support the tasks in specific
departments (Finance, Billing, Workforce Management, HR etc.) -- “Best of
breed”
– Better technology allowed automated interfaces between systems
• But… Interfaces
– Have difficulty with different data definitions
– Often don’t eliminate re-keying
– Are expense to build and maintain
– Are visible and get in the way of the end-users
• Result: Functional organizations systems landscape are usually a
mess and can’t support end-to-end processes

Antony Upward,CGI
 Business Processes
• Cross functional boundaries
• simple example
– Customer orders a product
– deals with salesperson
– warehouse picking
– out of stock?
• purchase order to vendor
• manufacturing order
– shipping
– accounts receivable
– effect on demand forecasting (marketing, manuf.)
 Business Processes
• In Classical / Functional / Hierarchical
organizations business processes exist… but
– No single point of accountability
– No single source of consistent, timely, information
about a process
• Multiple incompatible systems poorly connected via
multiple expensive interfaces
• Result: In a functional organization a process
– is very hard to change
– is very hard to e-enable Antony Upward,CGI
 ERP - What is it?
• Process view of business vs. functional
“silos”
• Integration of systems, one database
• Support most of co.’s info needs
• Transaction oriented systems (OLTP)
• Accounting, payroll, invoicing, supply chain
optimization, sales force automation,
customer service,…
 ERP - What is it?
• Leads to improved performance, better
decision making, competitive advantage
• Lays foundation for electronic
commerce
• Replaces a multiplicity of different
systems and databases
– one integrated system
 Evolution to ERP
• MRP - Material Requirements Planning
– what material needed?
– when & how purchased?
– how managed?
– maximize efficiency of physical, financial assets
• MRP 1960's
– master production schedule
– material requirements planning
– capacity requirements planning
• MRPII 1970's
– sales & operations planning
– simulation
– forecasting
• ERP 1990's
– sales and distribution
– material management
– plant maintenance
– quality management
– financial accounting
– controlling
– investment management
– human resource management
– ...
 ERP Requires
• Strong executive support to implement
• Process approach rather than “silos”
• Change in business procedures (BPR)
• Change in organizational structure,
culture, strategy
• Technology change
 ERP
• Difficult to install
• Very large and complex software
• Provides info about all aspects of the
business -- worldwide
• Reduces inventory, waste
• Easy communication with customers,
suppliers
 Before ERP
• Multiple systems, different interfaces,
difficult to extract info about customers,
sales,...
• Hard to maintain, many languages,
databases, inconsistencies
• Can take weeks or months to obtain info
about customers, or where systems
changes are needed
 After ERP
• Integrated systems
• Consistent interface
• One database
• Access to current data
• Improved planning capabilities
• Multinational capabilities
 Example: Order Processing
• Salesperson generates a quote for
computer equipment overseas
• System immediately creates product
configuration, price, delivery date,
shipping method,...
• Customer accepts quote over Internet
 System automatically:
• Schedules shipping
• Reserves material
• Orders parts from suppliers
• Schedules assembly
• Checks customer credit limit
• Updates sales & production forecasts
• Creates MRP & bill-of-material lists
 System automatically:
• Updates salesperson's payroll
– commission
– travel account
• Calculates product cost & profitability
• Updates accounting, financial records
 ERP Implementation
• Need business exec in charge, not IT
• Make a business case
– long term benefits
• inventory reduction, customer service,….
• Costs
– software
– hardware
– people (by far the most expensive)
 ERP Implementation
• Software
– ERP, database licenses
– maintenance
– support fees
– add-on packages
• Hardware
– new client/server architecture
– network capability
– backup
– multiple servers -operations, testing
 ERP Implementation
• People - for system configuration
– internal, consultants
• Managers
– can require time commitment for several
years
• Continual support from senior execs
• Change management
– almost all personnel will be affected
 ERP Implementation
• ERP system configuration
– thousands of parameters to set
• Need stability, but business constantly
changes
• Difficult to implement, difficult to change
– but is a non ERP collection of poorly integrated
systems & databases any easier?
• Change is never ending
 ERP Implementation
• Training needed
– technical staff
– business staff
• 20-50% of project budget on educational
and skills development
• Results in less people needed, but more
skills, understanding of the organization
• 4 months to 5 + years to implement
 ERP Implementation
• Options:
– add-on systems where ERP is lacking?
– keep good legacy systems, build interfaces to good
legacy systems?
– more than one ERP instance?
• different divisions, subsidiaries
• but more than one increases complexity, reduces
benefits
– interconnect consistent, distributed ERP systems
(one logical system)
 ES Implementation
• DOW Chemical
– global SAP implementation
– great transformation of DOW
– common processes, info in finance, admin
– substantial customer service improvements
– info support - better management decisions
– more integrated organizational structure
– 15% ROI
 CEO Survey - why ERP?
• 67% Improve info accuracy, availability
• 61% Improve management decision making
• 51% Reduce cost/improve efficiency
• 38% Upgrade technology
• 31% Resolve tactical issue (e.g. Y2k)
• 24% Grow revenue
• 15% Haven’t done it yet
• 4% Other

Davenport,T.H., Mission Critical

 ERP Package Selection
• Major packages are similar
• Some packages suited to specific
industries
– e.g. JDA, Richter Systems for retail
• PeopleSoft - strong in HR
• SAP - financial, supply chain
• Baan - flexible manufacturing software
 ERP Package Selection
• ERP appropriate for $25 US million and up
• Mid-tier $25 to $1 billion
• SAP - typically largest global firms
– (but can be done for smaller co. also)
• J.D.Edwards - smaller firms
• Oracle, PeopleSoft, - middle
• Baan - mostly middle customers
 ERP Market
• $15 US billion ERP hardware, software
worldwide market
• Plus professional services $10 billion
• High growth rate
• Large co. e.g. Intel expect to spend $1
billion on ERP (can never finish)

Davenport,T.H., Mission Critical

 SAP R/3 ERP
• Market leading ERP product
• Extensive functionality
• Used by mid to large companies
• International features
• Can be run over internet/intranet
• 10 million users, 30,000 installations
• 13,000 companies, > 100 countries
• SAP AG $5 billion, 5,000 developers, 15-20% on
research
 SAP R/3
• SAP’s core transaction system
– Logistics
– Financials
– Human Resources
 Accounting

Logistics

Human
Resources
 R/3 Logistics
• Sales and Distribution
• Production Planning
• Materials Management
• Plant Maintenance
• Quality Management
• Procurement
 R/3 Financials
• Financial Accounting
– general ledger, accounts receivable,
payable,...
• Controlling
– costing, profitability, planning,…
• Treasury
– Cash, funds management,…
• Capital Investments
 R/3 Human Resources
• Administration
• Payroll accounting
• Shift management
• Employee attendance
• Trip costs
• Training
• Recruitment
• Personal management
 Industry Specific R/3 Solutions
• Aerospace & Defense • Media
• Automotive • Mill Products
• Mining
• Banking
• Oil & Gas
• Chemicals
• Pharmaceuticals
• Consumer Products • Project Oriented Manufacturing
• Engineering & • Public Sector
Construction • Retail
• Healthcare • Service Provider
• High Tech & Electronics • Telecommunications
• Higher Education & • Utilities
Research
• Insurance
 SAP R/3 Architecture
• Processes written in ABAP/4 language
• 1000’s of switches for package configuration
• Multiple platforms
• Client server - multi tier
– database server (multiple servers, distributed database )
– application server (multiple servers, distributed )
– Internet server
– presentation level (browsers)
• User exits - Java, C++,...
• Communication interfaces with other packages
 Multi tier client / server
architecture

Layers:
•Presentation
•Internet /
intranet
Multiple •Application
database, •Database
application
servers

Technology Infrastructure 4.0 at

http://emedia.sap.com/usa/default.asp
 SAP R/3 Platforms
• OS
– NT
– AS/400
– UNIX
– OS/390
• Database 20-30GB initially
– Oracle
– Informix
– AS/400
– DB2
– MS/SQL
Ryerson Academic R/3 Configuration
• SAP R/3 version 4.6B
• IBM Netfinity 8500R server equipped with
– 4Gb RAM
– P!!! Xeon 550Mhz processor
– 20 - 9.1 Gb HDDs in a Raid 5 array
– 40/80 DLT tape drive
– CD-ROM
– APC smart UPS 5000
• NT 4
• Oracle 8.0 database
• 100 GB in use for NT, R/3, IDES-TS training database
 Implementation Options
• Hosted solutions
– hardware & software outsourced to an Application
Service Provider (ASP)
– minor configuration, no license
– major configuration, need license
– user access through Web browser
• In house
– hardware & software on site
– optional maintenance by SAP partners
– user access through Web browser
 The Alpha NZ Case
• Larsen,M.A., Myers, M.D., 1999. When
success turns into failure: a package-
driven business process re-engineering
project in the financial services industry.
Strategic Information Systems, 8 (1999)
395-417.
 The Alpha NZ Case
• 9 New Zealand banks merged, same core financial services
• BPR project to centralize Accounting at head office
– re-engineer recording & reporting
– automate routine accounting
– improve access to financial info
– create new corporate accounting team - highly skilled, motivated
• Timeline
– July 1993 - preliminary report - goal to integrate the banks
– Dec 1993 - key areas identified for improvement
– Aug 1994 - consultant appointed
– Feb 1995 - contract with SAP, hardware, software installed, training
– Jan 1996 - go live
 The Alpha NZ Case
• Accounting staff reduced from 75 to 24
• Consultants consider system a great success
• No original project team members remained
• All in-house expertise disappeared, low skills remain
• Management reporting deficiencies in the system
– no skills to enable implementation of needed reports
– lack of expertise in the system
– low moral, poor management
• Users consider the system a failure
• Oct 1996 Alpha merges with Beta Ltd.
• Alpha SAP system to be scrapped, Beta Oracle Financials system
to be implemented
 OLTP e.g. SAP R/3
• Highly normalized data
• Many tables represent an object and are connected
with foreign key relationships to one another
– Database tuned for writing records
• Problems
– Reporting
• Difficult to combine data from different applications
• Performance issues with reporting
• SAP R/3 Includes Limited Operational Reporting, updated
in Real-time from the transactional data
– Integrating external data
 ERP and beyond
ES or ERM
• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• Data Warehouse
• Electronic Marketplace
 ERP and beyond
• Supply Chain Management
– planning and optimization
– supply planning, demand planning, plant scheduling, transportation
& warehouse management
– more integration with trading partners
• Customer Relationship Management (CRM)
– marketing, sales, service
• Data Warehouse
– On line Analytical Processing (OLAP)
• Internet access
– for employees, customers, suppliers
 ERP and beyond
Electronic (Internet) Marketplace
• Buy, sell products and services on-line
• Collaborate with suppliers
– planning, forecasting, customer demand needs
(collaborative forecasting)
• Collaborate with distributors and resellers
• Auction off excess inventory
• Publish or bid on requests for proposals
• ….
 mySAP.com
E-business platform for inter-enterprise
collaboration between a company, its suppliers
and customers.
• R/3 ERP
• Supply Chain Management (SCM)
• Business to Business Procurement (BBP)
• Strategic Enterprise Management (SEM)
• Customer Relationship Management (CRM)
• Business Information (Data) Warehouse (BW)
• ….
SAP AG Internet / Intranet
mySAP
Business Information
(Data) Warehouse
R/3
Environment, Strategic
Industry Solutions
Health & Enterprise
R/3
Consumer Safety Applications Management

Knowledge R/3 Basis Corporate Business to

Database Finance Business
Warehouse
Management
Logistics HR

Business to Accounting
Customer
Business
Automotive, ...Utilities,... Relationship
Procurement
Management
Logistics Advanced Planner
& Optimizer

Employee
 mySAP Workplace
• Single point of access to all applications
– SAP
– non SAP
• Customized for each employee
• Roles on left
• Applications on right
 SAP Components Beyond R/3
• Supply Chain Management (SCM)
– planning, optimizing, scheduling
– suppliers, agents, production planners, purchasers,
customers
 SCM -APO Solvers
APO - Advanced Planning & Optimization
• Demand Planning
• Supply Network Planning
• Production Planning & Scheduling
• Heuristic Methods
• Linear Programming /Mixed Integer Linear Programming
• Genetic Algorithms
• Constraint- based Programming
• Exponential Smoothing
• Holt Winters
• Multiple Linear Regression
Business to Business Procurement

• Requisitions
• Purchase orders
• Approval, rejection
• Payments
• Status
• By end users from the desk top
• Internet, EDI, ALE
 CRM Roles
• Sales • Marketing
– Sales Manager
– Marketing Manager
– Global Account Manager
– Sales Representative – Marketing Analyst
– Sales Assistant – Product/Brand Manager
– ...
– ...
• Service
– Service Manager
– Hotline Specialist
– External Service Engineer
– Contact Center Agent
 SAP Business Warehouse (BW)
• On-line Analytical Processing (OLAP)
– De-normalized data
• Diverse data is combined into large aggregated data sets
• Logistics Information System,...
– Used for decision support and investigation
• Future
– SAP is using BW as the base for many analysis products
– SAP will likely move from batch to on-line updates of BW in
future releases (small scale this is already in place with current
release)

Antony Upward, CGI.

 Strategic Enterprise Management (SEM)
 Integration of strategic, financial and operational information
 Internal & external business information sourcing
 Financial and non-financial Key Performance Indicators (KPI)
 Business Planning and Simulation
 Business simulation
 Operational Planning
 Knowledge Management
• SAP Knowledge Warehouse
• All standard SAP training courses
• 20 languages
• Glossary
• Can be modified by customer
 Integration Also Means...
Linking Transactions, Analysis and
Planning
c t
A
Transac
tion
Transac
tion
Transac
tion
al
at ion
per ess
O roc )
P LTP
(O
z e
a ly
la n An
P
Management
Process
(OLAP)
 ERM Systems
• Trust the vendor to embed and continually improve
their support for best business practices into their
product
– Leverage vendors R&D spending via upgrades
– …But only if no modifications to core code
• Actively work with vendor to identify opportunities
for improvement
– User Groups (ASUG, T-SIG)
– SAP Industry Business Units (IBU’s)
• Joint development of industry specific functionality
– SAP Account Executives

Antony Upward,CGI
 ERM Systems
• Assume vendor solutions embed best
business practices and you will change
business practices, not vendors core
code
• Leverage package to gain lowest total
cost of ownership advantages -
maximize use of product before
considering alternatives

Antony Upward,CGI
 ERM Systems
• Within organizations -greatest strength - ability to
facilitate end-to-end business processes through
integration
– Shared Database for all Users
– On-line Real Time
– Shared, Integrated Functionality and Process Designs
– Web based Portal to allow access anywhere anytime
– Roles Based, to focus Functionality and Security for
Users

Antony Upward,CGI
 ERM Systems
• Between organizations ERM’s greatest strength is their
ability to facilitate end-to-end business processes using
the Internet
– Database Shared via Marketplaces
– Shared, Integrated Functionality and Process Designs
– Portal to allow access to Business Partners (Customers,
Vendors, etc.)
– Roles Based to focus Functionality and Security for Users
• Gartner calls this Collaborative Commerce – or c-
Commerce
 Collaborative-Commerce
• c-Commerce achieves the dynamic collaboration of people,
applications, and corporations in all aspects of business
• Customers, employees, suppliers, and business partners work
together as if they were all one company
• Examples
– Collaborative buying and selling
– Public bidding
– Collaborative forecasting
Customer
– Collaborative planning
– Collaborative engineering
– Collaborative invoicing/billing Collabo-
– … ration

Supplier Partner

Employee
c- Commerce Marketplaces
The “Old World”
• Individual connection to
each business partner
• Different technologies (EDI,
Edifact, FAX, XML, cXML,
…)
• Constant maintenance
• Need to buy the technology
Buyer Seller
Buyer Seller
Marketplace
The “New World”
• Only one connection to the
marketplace to connect to all business
partners
• The marketplace deals with issues like
technology, security, search tools,
catalog, etc.
• Enables ad-hoc buying from all
participants in the marketplace.
c-Commerce Example: Buying and Selling
mySAP.com Marketplace

Internet Buying Search Register Internet Selling

Select Offer

Buyer Seller
Buy Sell

Transact
Receive Collect

!
Other
systems

Operational Systems Operational Systems

(Financials & Logistics) (Financials & Logistics)
 Kinds of Marketplaces
Oil & Gas, US Home- Regional
building (USA, France, ..)
Chem/Pharma
Vertical
(industry-specific)
Content Community
• General content • Business-oriented
• Business-specific communities/forums
content • Interaction
Collaboration • Communication
• Discussion
• Specialized
inter-enterprise
applications &
services

Commerce
• Buying/selling goods and
services Human Horizontal
Resources (Cross industry)

Infrastructure
 Likely End-point – “Federations” of Marketplaces
www.mySAP.com Joint Venture Marketplace
Marketplace Marketplaces as a Product

Horizontal Vertical Seller

Marketplace Horizontal Marketplace
Marketplace

Buyer

Vertical
Marketplace
Local/vertical
Marketplace Horizontal
Marketplace
e.g. Chemical
Marketplace
 ERM Implementation
• Very Little Analysis / Design / Programming
Required
– Typically 10-20% of Total Effort
– Interfaces
– Conversions
– Bolt-ons (via Published User Exits)
• Configuration Replaces Programming
– Table Driven
– Master Data
– Enables substantially automated upgrades

Antony Upward,CGI
 ERM Implementation
• Business People Normally Configure (with
some Training)
– Largely removes non-value added activity of
translating business requirements to technology
requirements
• Result:
– Implementation focuses on realizing business
value not getting the technology to work
 ERM Implementation
• ERM makes technology less “visible” during
implementation – allowing project teams to focus
simultaneously on all aspects of delivering business value
– Business Process Design; Organization Design; Application
Configuration
– This is a good thing!
• Typical ERM implementation project teams are cross
functional:
– End-users 50-75%, frequently including project leadership
– ERM configurators (usually ex-business people) 15-30%,
– ERM and legacy technicians / programmers 5-25%

Antony Upward,CGI
 ERM Implementation
• Typical ERM implementation projects have a
different mix of tasks
– Delivering business value requires significant focus on
Business Change Management, typically 10-30% of team
tasks
– Technology is no longer the prime driver of ERM
implementations (only 10-40% of team tasks)
• Less program specifications and programming
• Little or no data design
• ERM Specific Implementation Methodologies
Required
– Still learning how to do ERM implementations well

Antony Upward,CGI
 ERM & Re-engineering
• Re-engineering typically started with a “blank sheet of paper” for the process
designs
– Equivalent to asking “What are the requirements?”
• Numerous re-engineering efforts failed
– Analysis paralysis
– Huge software projects
– Customizing ERP systems
• Today ERM packages can support so much of so many processes can now
ask:
– Not what do you want, but:
– Which process designs can the ERM system support
• Leverages the massive R&D spending of ERM vendors
– SAP spends 15-20% of Revenues on R&D
– Need to do regular upgrades to get benefit of this R&D

Antony Upward,CGI
 Implications of ERM for IT Strategy
• Can no longer ask the question of the end-users
– What is your requirement?
• This question was fundamental to I.T. strategy from the 1970’s to the mid-
1990’s
• I.T. practitioners made the following assumptions that
– The business knew what they needed
– Requirements would stay still long enough for I.T. to build systems to support them
– I.T. could use open systems to make each department’s systems work together
without a lot of effort or expense
• Recent business trends, particularly the increasing pace of change, have
made all these assumptions false
• Now we must ask what business process designs can a package support
out of the box
– Assumes ERM vendor has done their home work

Antony Upward,CGI
 ERM Job Opportunities
• Account executive - SAP support
• Business consultant - system solutions
• Sales manager - ERP solutions
• Instructor - SAP products
• Software developer - ABAP/4, C++,...
• Systems analyst
• MIS manager
• SAP administration.
• SAP installation, support
– OS, database, SAP Basis knowledge
 Sources
• Antony Upward, Director, Business Architecture, CGI Group Inc.
• Davenport ,T.H., 2000, Mission Critical - Realizing the Promise of Enterprise Systems,
Harvard Business School Press
• Watson, E., Schneider, H., 1999, Using ERP Systems in Education, Communications of
AIS Volume 1, Article 9
• The AMR Research SAP Advisory Alert for June 15, 2000:
http://wwwext03.sap.com/usa/press/2000/amrreport.asp#com1
• SAP info and links: http://www.ryerson.ca/~ppille/sap/
• SAP: www.sap.com www.mySAP.com
• SAP USA home site: http://wwwext03.sap.com/usa/
• SAP emedia file Technology Infrastructure 4.0 at: http://emedia.sap.com/usa/default.asp
• SAP emedia file mySAP Frequently Asked Questions at:
http://emedia.sap.com/usa/default.asp
 Sources
• SAP R/3 Functionality Overview, Wednesday, September 15,
1999, Jim Kelly, Curriculum Development Manager - ERP, SAP
America:
http://wwwext03.sap.com/usa/education/alliance/whatsnew.asp
• Central Michigan University: http://sap.mis.cmich.edu/
• International Demo and Education System (IDES)
– www.sap.com/ides
– Go to site and register for a user id and password
– Can trial pretty much the whole SAP product over the internet
(HTML GUI)
• America’s SAP User Group (ASUG) - www.asug.com
• Other Web Sources - www.sapinfo.net