Fall 2023

Chapter Extension 9: ERP Systems

Sirine Taleb
Slides: From Pearson Book
10/3/23
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 CHAPTER
EXTENSION 9

Enterprise Resource
Planning (ERP) Systems
Q1: What is the purpose of ERP systems?
Q2: What are the elements of an ERP solution?
Q3: How are ERP systems implemented and upgraded?
Q4: What types of organizations use ERP?
Q5: How do the major ERP vendors compare?

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• Suite of modules, database, set of inherent processes for consolidating business operations into a single, consistent
computing platform
• ERP system is an information system based on ERP technology.

§ Primary purpose
§ Integration of purchasing, human resources, production, sales, and accounting data into a single system
§ Allow the left hand of the organization to know what the right hand is doing.
§ Allow real time global updates of transactions
§ Enable critical business decisions using latest data on a timely basis

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FIVE NON-INTEGRATED DATABASES)
one each for
vendors, raw
materials, finished
goods,
manufacturing
plan, and CRM.

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FIVE NON-INTEGRATED DATABASES)
Consider the problems
that appear with such
separated data when the
sales department closes a
large order, say for 1,000
bicycles.

The Figure does not show

accounting. We can
assume, however, that the
company has a separate
accounting system that is
similarly isolated.

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§ First, should the company take the order? Can it meet the schedule requirements for
such a large order?
§ Suppose one of the primary parts vendors recently lost capacity due to an earthquake,
and the manufacturer cannot obtain parts for the order in time. If so, the order
schedule ought not to be approved. However, with such separated systems, this
situation is unknown.
§ Even if parts can be obtained, until the order is entered into the finished-goods
database, purchasing is unaware of the need to buy new parts.
§ The same comment applies to manufacturing. Until the new order is entered into the
manufacturing plan, the production department doesn’t know that it needs to increase
manufacturing.
§ And, as with parts, does the company have sufficient machine and floor capacity to
fill the order on a timely basis? Does it have sufficient personnel with the correct skill
sets? Should it be hiring? Can production meet the order schedule?
§ No one knows before the order is approved.
10/3/23 7
Here all activity is processed by ERP application
programs (called modules) and consolidated data are
stored in a centralized ERP database. Copyright © 2017 Pearson Education, Ltd.
§ When sales is confronted with the opportunity to sell 1,000 bicycles, the information that it needs to confirm
that the order, schedule, and terms are feasible can be obtained from the ERP system immediately.
§ Once the order is accepted, all departments, including purchasing, manufacturing, human resources, and
accounting, are notified.
§ Further, transactions are posted to the ERP database as they occur; the result is that financial statements are
available quickly, and in most cases correct financial statements can be produced in real time.

INFO 200 – AUB – Fall 2023 – Dr. Sirine Taleb 10/3/23 9

SOME QUESTIONS PROCEDURES NEED
TO ANSWER OR RESOLVE
• It’s easy to draw a rectangle on a chart, label it “ERP application programs,” and assume
data integration takes all problems away. It is far more difficult to write those application
programs and design the database to store that integrated data. Even more problematic,
what procedures should employees and others use to process those application
programs?
• For example, what actions should salespeople take before they approve a large order?

• The following are some of the questions that procedures need to answer or resolve:
• How does sales department determine an order is “large”? By dollars? By volume?
• Who approves customer credit (and how)?
• Who approves production capacity (and how)?
• Who approves schedule and terms (and how)?
• What actions to take if customer modifies an order?
• How does management obtain oversight on sales activity?

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With such integration, ERP systems can display the current status of critical business factors to managers
and executives, as shown in the sales dashboard in Figure below.

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INFO 200 – AUB – Fall 2023 – Dr. Sirine Taleb 10/3/23 12
§ The term ERP has been applied to a wide array of application solutions. Some vendors have attempted to
catch the buzz for ERP by misapplying the term to applications that are nothing more than one or two
integrated functional applications.

§ The organization ERPSoftware360 publishes a wealth of information about ERP vendors, products,
solutions, and applications.

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 HTTP://WWW.ERPSOFTWARE360.COM/ERP-
101.HTM
§ Supply chain: (procurement, sales order processing, inventory management, supplier management,
related activities)
§ Manufacturing: (scheduling, capacity planning, quality control, bill of materials, and related
activities)
§ CRM: (sales prospecting, customer management, marketing, customer support, call center support)
§ Human resources: (payroll, time and attendance, HR management, commission calculations,
benefits administration, and related activities)
§ Accounting: (general ledger, accounts receivable, accounts payable, cash management, fixed asset
accounting)

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 HTTP://WWW.ERPSOFTWARE360.COM/ERP-
101.HTM

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An ERP solution is an information system and as such has all five components.

§ Hardware

§ ERP Application programs

§ ERP Databases
§ ERP Inherent Business process procedures
§ ERP Training and Consulting

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Hardware
§ Cloud-based hosting

§ PaaS (Platform as a Service): Install ERP software and databases on

leased cloud hardware
§ You manage and create applications. Service provider delivers a
framework upon which you develop applications with minimal input.
§ SaaS (Software as a Service): Use ERP vendors ERP software as a
service
§ SAP, Oracle, Microsoft, and others
§ Completely managed by a third-party over the internet, including data
computing, storage and maintenance.
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Hardware
§ The problem with cloud-based ERP hardware is that in some cases the law, industry practice, or
other constraints require the organization to maintain physical control over its data, or at least
substantial parts of it.

§ Solution: Hybrid model

§ ERP customers store most data on cloud servers and sensitive data on
self-managed servers
§ Governmental agencies, financial analysts, and accountants will have
defined standards against which organizations can be monitored for
appropriate compliance.

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Hardware

Depending on the resources, requirements and

technical knowledge your team possesses, you can opt
for a ready-to-use model (Software as a Service) or a
partially do-it-yourself model (Platform as a Service).

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Hardware

For an on-premise set-up, the functions listed

above are managed by the business enterprise
whereas for a SaaS application, the listed
functions are managed by the service provider

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Software: ERP Application Programs
§ Configurable application programs
§ Set configuration parameters to specify how ERP application programs will operate
§ For example, an hourly payroll application is configured to specify the number of
hours in the standard work week, hourly wages for different job categories, wage
adjustments for overtime and holiday work, and so forth.
§ More than 8,000 configuration decisions in SAP

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Data: ERP Databases
§ Includes a database design and initial configuration data
§ More than 15,000 tables.
§ The design includes the metadata for those tables, as well as their relationships to each other and rules and constraints
about how the data in some tables must relate to data in other tables.

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Two types of ERP Database program code
1. Triggers
§ Computer program stored within database keeps database consistent when certain conditions arise
2. Stored Procedures
o Enforces business rules
o Never to sell certain items at a discount
§ Developers and business users must configure these

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Business Process
§ Set of 100s-1000s inherent processes

§ ERP vendors develop hundreds, or even thousands, of procedures that enable the ERP customer
organization to accomplish its work using the applications provided by the vendor
§ How to accomplish process work using the ERP applications

§ Some ERP vendors call the inherent processes that are defined in the ERP solution process blueprints.

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*RFQ: request for quote
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P.O.: purchase order
Every function (rounded rectangle) consists of a set of
procedures for accomplishing that function.
Typically, these procedures require an ERP user to use
application menus, screens, and reports to accomplish the
activity. Copyright © 2017 Pearson Education, Ltd.
§ Because of the complexity and difficulty of implementing and using ERP solutions, ERP vendors have
developed training curricula and numerous classes for preparing employees.

§ Vendor training curricula and numerous classes before and after ERP implementation
§ To reduce expenses, vendors sometimes train some of the organization’s employees, called Super Users, to
become In-house Super Users to train the trainer (TOT)
§ Types of training
1. How to implement the ERP solution (top-level management support)
2. How to use the ERP application software
§ On-site consulting for implementing and using ERP

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§ Ironically, having done so, they now know how to do it. Consequently, some employees, seasoned by an ERP
conversion with their employer, leave that company to become ERP consultants.

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Figure summarizes the major tasks in the implementation of an ERP application.

Implementing ERP system not for the faint of heart

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The first task is to create a model of current
business procedures and practices, which is
called the as-is model.

Managers and analysts then compare those as-is

processes to the ERP process blueprints
and note differences.
The company then must find ways to eliminate
the differences, either by changing the existing
business process to match the ERP process or
by altering the ERP system.

Once the differences between as-is processes

and the blueprint have been reconciled, the
next step is to implement the system.
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 UPGRADED
Those organizations follow the same process as shown
in Figure, but they do so only for the business areas for
which the ERP system needs to be changed.

Realize, too, that while the new ERP system is being

installed normal business activity continues.

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 UPGRADED
Implementing
Implementing ERP
an ERP system
system notthefor
is not for the
faint of faint
heart. of heart
Many ERP-implementation disasters have occurred. Recently, the U.S. Air Force gave up and canceled an
ERP implementation in which it had already invested more than $1 billion.

In spite of this risk, however, more than 84 percent of organizations having between 100 and 1,000
employees have implemented ERP.

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ERP BY INDUSTRY TYPE

Industry-specific solutions

SAP, currently the market leader, spurred ERP growth by providing industry-specific implementations.

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ERP, as stated, was initially adopted by large manufacturing organizations that had complex process problems
that needed ERP solutions.
Today, ERP is used in small organizations.
However, companies of different sizes have one very important difference that has a major impact on ERP: the
availability of skilled IT personnel.

Large organizations
§ Have resources and skilled personnel to accomplish and manage an ERP implementation
§ Chief information officer (CIO): business and IT professional
§ ERP implementation part of strategic planning
§ Requires full backing of entire executive group

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§ Employ only one or two IT specialists
§ Medium-size organizations
§ Frequently small staff isolated from senior management
§ Isolation creates misunderstanding and distrust

§ First step in moving toward ERP

§ Obtain deep senior-level management commitment

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§ Another way that the ERP needs of large organizations differ from those of small organizations is
international presence
§ Worldwide consolidation of financial statements on a timely basis
§ Inherent ERP procedures adaptable to many cultures
§ Multiple currencies and languages, manage international transfers of goods in inventories, work with
international supply chains
§ www.cio.com/article/694303/How_to_Achieve_Global_ERP

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Q5:HOW DO THE MAJOR ERP VENDORS
COMPARE?
The bulk of the market is held by the five vendors described in Figure:

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