Erp 3 Business Processes and Benefits

Enterprise Resource
Planning
Session 3
Business Processes
Neetu Ganapathy SDM IMD September 2014
ERP Redefined
Deloitte Consulting (1999) defines ERP as
a packaged business software system that
allows a company to:
Automate and integrate majority of its
business processes
Share common data and practices across the
entire enterprise
Produce and access information in a real time
environment
ERP Redefined
Integrates the various departments and
stakeholders
Makes sharing of information possible
Provides a Single window view of the

entire organisation
Makes information available in real time
Brings in a more disciplined way of
working
Brings in uniformity
Well Learn
Why ERP?
How does ERP help?
Benefits
Advantages/Disadvantages
Five reasons why companies

undertake ERP
1. To integrate financial information
2. To integrate customer order information
3. To standardise and speed up
manufacturing processes
4. To reduce inventory
5. To standardise HR information
Rationale for ERP

Technology Rationales
Business Rationales
Ability to use timely operational data
Inventory cost reductions
Ability to integrate systems, instead of

maintaining many separate systems
IT cost reduction
Ability to enhance systems without

incurring the time and cost of custom
development and modifications
Personnel cost reduction
Ability to implement new features,

such as Customer Relationship
Management (CRM)
Increased profitability
Access to on-line, real-time

operational data
Productivity improvement
Reduction in time and cost of systems

development and maintenance
Better cash management
Before and After ERP: Systems

Standpoint
Before ERP
After ERP
Information
Systems
Stand-alone systems
Integrated systems
Coordination
Lack of coordination among

business functions (e.g.
manufacturing and sales)
Supports coordination
across business functions
Database
Non integrated data: data have

different meanings (e.g.
customer); inconsistent data
definitions
Integrated Data: data have

the same meaning across
multiple functions
Maintenance
Systems are maintained on a

piecemeal basis; inconsistencies
result; it is costly to maintain
separate legacy systems
Uniform maintenance;
changes affect multiple
systems
Interfaces
Difficult to manage interfaces

between systems
Common interfaces across

systems
Before and After ERP: Systems Standpoint

Before ERP
After ERP
Information
Redundant, inconsistent
information
Consistent real-time
information (e.g. about
customers, vendors)
Systems Architecture
May not be state of the

art
Relies on a client-server
model
Processes
Incompatible processes
Consistent business
processes which are
based upon an
information model
Application
Disparate
applications(e.g. many
different purchasing
systems)
Single application (e.g. a

common purchasing
system)
Before and After ERP: Business

Standpoint
Before ERP
After ERP
Cycle Time
Costly bottlenecks
Time and cost

reduction of business
processes
Transactions
processing
Multiple transactions use

multiple data files
Faster transactions
using common data.
Reduces the time and
cost of multiple
updates
Financial
management
Increased cost of excess

inventory, cost of overdue
accounts receivable
Improves operational
performance (e.g.
less excess inventory,
reduction in accounts
receivable)
Business
processes
Proliferation of fragmented
processes with duplication of
effort
RE-engineering
around a business
model that confirms
with best practices
Before and After ERP: Business

Standpoint
Before ERP
After ERP
Productivity
Lack of responsiveness
to customers and
suppliers
Improvements in
financial management
and customer service
Supply chain
management
Lack of integration
Linkages with suppliers

and customers
e-Business
Web-based interfaces
support isolated systems
and their components
Web-based interfaces
are front-end to
integrated systems
Information
Lack of tactical
information for effective
monitoring and control of
organizational resources
Allows cross-functional
access to the same data
for planning and control.
Provides widely available
information
Communications
Lack of effective
communications with
customers and suppliers
Facilitates organizational
communications with
customers and suppliers
How can ERP improve a

company's business
performance?
12
Business Processes
Well structured set of activities with a specific
beginning and a specific end
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
Data
Analysis
Finance
Process Integration with ERP Systems
Figures 1.4 and 1.5 explains the situation before and after ERP
implementation in a typical sales transaction.
Neetu Ganapathy SDM IMD September

Figure 1.4:2014
Sales order in legacy systems
Figure 1.5: Business with ERP
Procure to Pay Cycle
20
E.g.: 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
Best Practices
Best practice
A method or technique that has consistently
shown results superior to those achieved with
other means, and that is used as a
benchmark. (Wikipedia, 2013)
ERP definition
Amalgamation of world class practices
Thus, ERP has best practices ingrained in

it.
E.g. Sales and operations planning
Benefits of ERP
Applications
The major advantages of ERP systems are:
Improves Organizational Efficiency
Best Practices and Removes Information
Asymmetries
Organizational Alignment
Data Accessibility
Lower Operational Cost
Additional Tangible Benefits
Facilitates BPR
Business Benefits of ERP

ERP Performance
Outcomes
Examples
Quickened
information response
time
Responses to customer billing inquiries occurred in

real-time as opposed to 15-20 minute response time
at IBM Storage Products Company
Increased interaction
across the enterprise
Simplification of processes at Boeing

Growth in interfacility coordination at Owens Corning
Real-time access to data across the organization at
Diebold
Improved order
management/ order
cycle
90% reduction in cycle time for quotations from 20 to

2 days at Fijitsu
Faster, more accurate order processing at Valenite
Time for checking credit upon receiving an order
was reduced from 15-20 minutes to instantaneous at
IBM Storage Products Company
Business Benefits of ERP

ERP Performance
Outcomes
Examples
Decreased financial 50% reduction in financial closing time from 10 days to

close cycle
5 days at Fijitsu
Improved
interaction with
customers
Lead times to customers were reduced from 6 weeks

to 2 weeks at Par Industries
Improved on-time
delivery
On-time delivery rate increased to 90% at Earthgrains

Delivery performance improved from 80% on-time to
more than 90% on-time at Par Industries
Reduced direct
operating costs
Operating margins improved from 2.4% to 2.9% at

Earthgrains
Lowered inventory
levels
Inventory levels were reduced significantly at Owens

Corning
Lower levels of inventory at Valenite
Work-in process inventory dropped almost 60% at Par
Industries
ERP Benefits (Summary)

Tangible
Inventory reduction
Personnel reduction
Productivity improvement
Order management
improvement
Financial close cycle
reduction
IT cost reduction
Procurement cost
reduction
Cash management
improvement
Intangible
Information/visibility
New/improved processes
Customer responsiveness
Integration
Standardization
Flexibility
Globalization
Supply/demand chain
management
Next
Manufacturing Perspective
Architecture and
More

Erp 3 Business Processes and Benefits

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Erp 3 Business Processes and Benefits

Uploaded by

Copyright:

Available Formats

Enterprise Resource

Provides a Single window view of the

Neetu Ganapathy SDM IMD September 2014

Five reasons why companies

Neetu Ganapathy SDM IMD September 2014

Rationale for ERP

Ability to use timely operational data

Inventory cost reductions

Ability to integrate systems, instead of

Ability to enhance systems without

Personnel cost reduction

Ability to implement new features,

Access to on-line, real-time

Reduction in time and cost of systems

Better cash management

Neetu Ganapathy SDM IMD September 2014

Before and After ERP: Systems

Lack of coordination among

Non integrated data: data have

Integrated Data: data have

Systems are maintained on a

Difficult to manage interfaces

Common interfaces across

Neetu Ganapathy SDM IMD September 2014

Before and After ERP: Systems Standpoint

May not be state of the

Single application (e.g. a

Neetu Ganapathy SDM IMD September 2014

Before and After ERP: Business

Time and cost

Multiple transactions use

Increased cost of excess

Neetu Ganapathy SDM IMD September 2014

Before and After ERP: Business

Linkages with suppliers

Neetu Ganapathy SDM IMD September 2014

How can ERP improve a

Neetu Ganapathy SDM IMD September 2014

Result: In a functional organization a process

Neetu Ganapathy SDM IMD September 2014

Neetu Ganapathy SDM IMD September 2014

Process Integration with ERP Systems

Neetu Ganapathy SDM IMD September

Figure 1.5: Business with ERP

Neetu Ganapathy SDM IMD September 2014

Procure to Pay Cycle

Neetu Ganapathy SDM IMD September 2014

Neetu Ganapathy SDM IMD September 2014

Neetu Ganapathy SDM IMD September 2014

Neetu Ganapathy SDM IMD September 2014

E.g.: Order Processing

Neetu Ganapathy SDM IMD September 2014

Neetu Ganapathy SDM IMD September 2014

Calculates product cost & profitability

Neetu Ganapathy SDM IMD September 2014

Neetu Ganapathy SDM IMD September 2014

Thus, ERP has best practices ingrained in

Business Benefits of ERP

Responses to customer billing inquiries occurred in

Simplification of processes at Boeing

90% reduction in cycle time for quotations from 20 to

Neetu Ganapathy SDM IMD September 2014

Business Benefits of ERP

Decreased financial 50% reduction in financial closing time from 10 days to