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Introduction to ERP

History of organizational systems

Calculation systems Functional systems Integrated systems

Calculation systems
1950-80 Single purpose Eliminate tedious human work Examples: Payroll, General ledger, Inventory Technology used: Mainframes, magnetic tapes, batch processing

A System/370 Model 145 (1970s)

removable-disk hard drives

Hard drives

A very nice-looking magtapedrive


Batch processing


800 lines/minute with 48 character train, 136 columns with 6 or 8 lines per inch spacing

Stack of Computer Printout Paper

Functional systems
1975-20?? Use computers to improve operations Applications: Human resources, order entry, manufacturing resource planning Technologies: Mainframes, PCs, LANs


Functional systems
Typically contained within a department Islands of automation Applications independently developed and deployed Driving force: availability of minicomputers

Functional system applications

Human resources System Accounting and finance systems Sales and marketing System Operations management System Manufacturing Systems

Human Resources
Recruiting Compensation Assessment Development and Training Planning

Accounting and Finance

General Ledger Financial Reporting Costing Budgeting Accounts Payable Accounts receivables

Sales and Marketing

Lead tracking Sales forecasting Customer management

Order management Inventory management Customer service

Inventory Planning

Types of Organizational information Systems

Administrative systems Scheduling / Transaction systems Value oriented systems Reporting and controlling systems Analysis and information systems Planning and decision support systems (From Business Process Engineering by A.W. Scheer)

Problems with function based application

Sharing of data between systems Data duplication Data inconsistency Applications that dont talk to one another Limited or lack of integrated information Isolated decisions lead to overall inefficiencies Increased expenses

Solution to disparate systems?

Integration Consolidation Right-sizing Business Process Redesign Enterprise wide system

Integrated systems or Enterprise Resource Planning System

ERP - Definition
ERP is a process of managing all resources and their use in the entire enterprise in a coordinated manner

ERP system: Definition

ERP is a set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order management

What is ERP?
Enterprise Resource Planning Support business through optimizing, maintaining, and tracking business functions Broken down into business processes
HRM Distribution Financials Manufacturing

What makes ERP different

Integrated modules Common definitions Common database Update one module, automatically updates others ERP systems reflect a specific way of doing business Must look at your value chains, rather than functions

Benefits of ERP
Common set of data Help in integrating applications for decision making and planning Allow departments to talk to each other Easy to integrate by using processed built into ERP software A way to force BPR (reengineering) Easy way to solve Y2K problem


Difficulty in implementation
Very difficult Extremely costly and time intensive Typical: over $10,000,000 and over a year to implement Company may implement only certain modules of entire ERP system You will need an outside consultant

Common Pitfalls
Do not adequately benchmark current state Did not plan for major transformation Did not have executive sponsorship Did not adequately map out goals and objectives Highly customized systems to look like old MRP systems

Survey of ERP implementations

Done by in 2004

375 IT and business professionals 52% anticipate budget increases for new ERP implementations/new modules SAP and PeopleSoft/J.D. Edwards were cited as the most popular ERP packages 46% indicated that the main challenge to successful ERP implementations was inadequate definition of requirements and resistance to change

How would you characterize your budget for new ERP implementations/new modules deployments for 2004 compared to your budget in 2003?

Who is directly responsible for determining your ERP implementations/new modules deployments?

Who are the other key decisionmakers/influencers in decisions to add new ERP packages/new modules?

Do you currently have an ERP package?

If your answer is "Yes", which ERP package(s) do you currently use?

Are you considering adding new modules to your existing ERP package?

If your answer is "Yes", which modules are you planning to add?

If you plan to deploy a new ERP package and/or add modules to your existing packages, when would this implementation take place?

Who do you partner with for new ERP implementations and additions of new modules?

What do you see as the main challenges to successful ERP implementations within your organization?

For more details m/documents/research/