What does a company’s strategy consist of ?

Company strategies concern,

• How to grow the business

• How to satisfy customers

• How to out compete rivals

• How to respond to changing in market conditions

• How to manage each functional piece of the business and develop

needed organizational capabilities

• How to achieve strategic and financial objectives

Introduction

Manufacturing Organizations are complex `Systems'

where the interactions between the various functions
Sales, Distribution, Manufacturing, Materials, Finance,
Human Resources, Maintenance have to be managed
towards a common purpose of delivering the customers
maximum value at the optimum price.
However, since most of these organizations have a
`Functional Structure', each function/department works
towards their own goals and objectives, rather than the
organizational goals.
These are the issues addressed by `Enterprise Resource
Planning' software solutions providing a common,
consistent system to capture data organization wide, with
minimum redundancy.
What is ERP?
ERP integrates the information across functions, and
provides a set of tools for planning and monitoring the
various functions and processes and ensuring progress
towards a common purpose
A business management system that integrates all facets
of the business, including planning, manufacturing, sales,
and marketing.
ERP helps business managers to implement ERP in
business activities such as inventory control, order
tracking, customer service, finance and human resources
MRP – the predecessor to and backbone of
MRP II
And
ERP
a joint effort between J.I. Case, a manufacturer of
tractors and other construction machinery, in
partnership with IBM.

Initial MRP solutions were big,

clumsy and expensive.(1960-1970)
 Trends Strategic plan
Demand management & Resource
management Business plan requirement

objective
planning
(Sales forecasting)

Master production Resource req.

scheduling

Reports
Inventory Transaction

MRP :
Inventory level -BOM
-Lead Time
MRPII
-Lot sizing Elements
-Planned purchase
-Performance
report reports

Capacity req. Buy

Planning(CRP)

Realistic Realistic

Factory coordination Supplier

In 1972 five engineers in Mannheim, Germany, started up
SAP
(Systemanalyse und Programmentwicklung).

The purpose of the company was to produce

and market standard software for integrated
business solutions.
The term Enterprise resource planning (ERP) was

coined in the early 1990s by the Gartner Group (Wylie,

1990). Their definition of ERP included criteria for

evaluating the extent that software was actually

integrated both across and within the various functional

A typical Example
Data Flow Diagram to
support Part product
Warranty Form
approval process
Transpotation Customer

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p pli ports
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How WIP could be improved by implementation of ERP (Work in
Process )
Without using of any integrated system

using of integrated system

 Some Questions
What are the major types of systems in a business? What
role do they play?

How do information systems support the major business

functions?

Why should managers pay attention to business processes?

 Major Types of
Systems
• Executive Support Systems (ESS)
• Decision Support Systems (DSS)
• Management Information Systems (MIS)
• Knowledge Work Systems (KWS)
• Office Systems
• Transaction Processing Systems (TPS)
Transaction Processing Systems (TPS):

• Basic business systems that serve the operational

level

• A computerized system that performs and records

the daily routine transactions necessary to the
conduct of the business
Types of TPS Systems
Payroll TPS
 Executive Support System (ESS):

Strategic level
Inputs: Aggregate data
Processing: Interactive
Outputs: Projections
Users: Senior managers

Example: 5-year operating plan

 Management Information System (MIS):

Management level
Inputs: High volume data
Processing: Simple models
Outputs: Summary reports
Users: Middle managers

Example: Annual budgeting

 Decision Support System (DSS):

Management level
Inputs: Low volume data
Processing: Interactive
Outputs: Decision analysis
Users: Professionals, staff

Example: Contract cost analysis

 Knowledge Work Systems (KWS):

Knowledge level
Inputs: Design specs
Processing: Modeling
Outputs: Designs, graphics
Users: Technical staff and professionals

Example: Engineering work station

Decision Support System (DSS)
Decision Support System (DSS)
Relation Between 5 systems
 (MIS)

With out any Integrated system

(ESS)

(KWS)

(TPS)
Using Integrated system
 ERP elements

Enterprise resources planning software

Supply Best Practice :
Chain management Comparing your process with similar processes
In higher companies

6 level of sys.(ESS,MIS,TPS,…) +MRPII

ERP Software Companies
& Marketshares Software Market Share
SAP 15.6
Peoplesoft 4.9
SAP; 15,6 Oracle 4.8

Peoplesoft;
Baan 3.0
4,9
CA 3.0
Oracle ; 4,8
JDE 2.2
Baan; 3
Others ; 59 CA; 3 SSA 2.1
JDE; 2,2
GEAC 2.0
SSA; 2,1
GEAC; 2
IBM 1.8
IBM; 1,8 JBA 1.7
JBA; 1,7
Others 59.0
 TABLE 1.2 Business Functions Potentially Supported by
ERP
source :T.H . Davenport,” Putting the Enterprise into the Enterprise System.”
Harvard Business Review, July-August 1998.

Financial Human Resources Operations and Logistics Sales and Marketing

Accounts receivable and payable Time accounting Inventory management Order management

Asset accounting Payroll Materials Requirement Planning Pricing

(MRP)

Cash forecasting Personnel planning Plant maintenance Sales management

Cost accounting Travel expenses Production planning Sales planning

Executive information systems Project management

Financial consolidation Purchasing

General ledger Quality management

Profitability analysis Shipping

Standard costing Vendor evaluation

 Modules Offered by Leading Vendors

Functional SAP Oracle People Soft JD Eswards

Description
Records sales orders and SD( Sales and Distribution) Marketing Sales Supply Supply chain management Order management
scheduled deliveries Chain
,customer information
Purchasing and raw MM (Materials Procurement Supplier Relationship Inventory Management
materials inventory, Management Management Procurement
work- in-process.
customer information
Production Planning PP (production planning ) Manufacturing Manufacturing
and scheduling actual Management
production
Product inspections QM (quality Management) Enterprise Performance Technical Foundation
,material certifications Management
,quality control
Preventive maintenance, PM (plant Maintenance) Service Enterprise Service
resource management Automation

Recruiting, hiring HR (Human Resources Human Resources Human Capital Workforce Management
training ,payroll Management
,benefits
Reasons for Implementing ERP-Rating 1(Not Important) to 5(very Important)

Reason United States Sweden

Replace legacy systems 4.06 4.11

Simplify and standardize systems 3.85 3.67

Improve interactions with suppliers & customers 3.55 3.16

Gain strategic advantage 3.46 3.18

Link to global activities 3.17 2.85

Pressure to keep up with competitors 2.99 2.48

Ease of upgrading systems 2.91 2.96

Restructure organization 2.58 2.70

 Modules Offered by Leading Vendors

Functional Description SAP Oracle People Soft JD Eswards

Internal management, CO (Controlling) Time and Expense

cost analysis by cost Management
center

Fixed-asset purchase AM (Asset Asset Management Enterprise Asset

and depreciation Management) Management

R&D ,construction, PS (Asset Projects Project Management

marketing projects Management)

Contracts Subcontract
Management Real
Estate Management

Automate system, task – WF (Workflow)

flow analysis, Prompt
actions

Best practices IS (Industry

Solutions)
 Relative ERP Module Use

Module Midwestern ERP Users Swedish ERP Users

Financial and Accounting 91.5% 87.3%

Materials management 89.2 91.8
Production planning 88.5 90.5
Order entry 87.7 92.4
Purchasing 86.9 93.0
Financial control 81.5 82.3
Distribution/logistics 75.4 84.8
Asset management 57.7 63.3
Quality management 44.6 47.5
Personnel/human resources 44.6 57.6
Maintenance 40.8 44.3

R&D management 30.8 34.2

 Advantages and Disadvantages of Alternative ERP Development Methods

Method Advantages Disadvantages

Develop in-house
In-house system
With vendor supplements
Best-of-breed
Customized vendor system
Selected vendor modules
Best fit with organizational needs Most difficult to develop
Most expensive
Slowest
Gain commercial advantages Difficult to develop
Combined with organizational fit Expensive
slow
Theoretically while keeping Difficult to link modules
Retain flexibility while keeping Slow
Vendor expertise Slower
Usually more expensive
Less risk If expand, long run time and cost higher

Relatively fast
Least expensive
Full vendor system Fast Inflexible
Less expensive
Efficient
Application device provider Least risk At the mercy of ASP provider
Least cost No control
Fastest Subject to price increases
Least subject to vendor change
 Expected ERP Project Installation Time Requirements

Installation Time United States Sweden

12 months or less 34% 38%

13 to 24 months 45 49

25 to 36 months 11 8

35 to 48 months 6 4

Over 48 months 2 1
 ERP Estimated Installation Project Cost

Installation Cost United States Sweden

Less than $5 million 42% 48%

$5 million to $25 million 33 35

$26 million to $50 million 10 18

$51 million to $100 million

7 7

Over $100 million

7 (in prior category)
 ERP Installation Project Cost Proportions

Installation Cost Proportion Installation Cost Cost Proportion

Project Proportion in United States in Sweden

Software 30% 24%

Consulting 24 30

Hardware 18 19

Implementation team 14 12

Training 11 14

Other 3 1
A supply chain is characterized by the flow of materials and
information both within and between business entities including
suppliers, manufacturers and customers. The ultimate goal of
supply chain management is to meet customer’s demand more
efficiently. For a manufacturing company, it is to make the right
product, for the right customer, in the right amount, at the right
time.
 ERP System Options and Selection Methods
Enterprise resource planning systems are very large IS/IT projects .The
cost range is enormous, depending upon the size of the firm
implementing the system ,as well as on how many modules are used.
ERP Implementation And Maintenance
ERP Systems Are Adopted In The Hopes That They Will Improve
The Performance Of An Organization On A Number Of Key
Performance Indicators , Such As Profitability , Efficiency , And
Accuracy In Information System Data And Reports . ERP Vendors
Typically Promise Gains Of 10 To 15 Percent In Revenue , Customer
Satisfaction , And Other Measures Of Value . The Effort Required To
Build These Systems Is Significant . Meta Group found that the
average ERP implementation takes 23 months with total Ownership
cost of $15 million .
Business Intelligence Systems And ERP
Enterprise Resource Planning Systems Offer Powerful Tools To Better Measure
And Control Organizational Operations . Many Organizations Have Found That
This Valuable Tool Can Be Enhanced To Provide Even Greater Value Though The
Addition Of Powerful Business Intelligence Systems . Business Intelligence In
This Context Is Supported By Sorting Data (Data Warehouse And Related
Systems) And Conducting Studies Using This Data To Solve Business Problems
( One Means To Do This Though Data Mining ) . One Of The Most Popular Forms
Of Data Mining In ERP Systems Is Support Of Customer Relationship
Management (CRM). Data Warehouses Are One Of The Most Popular Extensions
To ERP Systems , With Over Two-Thirds Of U.S. Manufacturers Adopting Or
Planning Such Systems ( And Slightly Less Than Two – Thirds of Swedish
Manufacturers doing the same ).
There Has Been Tremendous Progress In Computer Storage Of Data . Many
Applications Are Being Found For This new capacity . one major user of massive
storage capacity is ERP systems, witch have large storage requirements due to
their comprehensive nature .
 Data Mining Overview
Data Mining Overview Refers To The Analysis Of The Large Quantities Of Data
Stored In Computers . For Example , Grocery Stores Have Large Amounts Of Data
Generated By Purchases . Bar Coding Has Made Grocery Checkout Very
Convenient . Grocery Stores And Other Retail Stores Are Able To Quickly
Process Purchases , And Use Computers To Accurately Determine Product
Prices . These Same Computers Help The Stores With Inventory Management By
Instantaneously Determining The Quantity Of Items Of Each Product On Hand .
Stores Can Also Apply Computer Technology To Contact Their Vendors So That
They Do Not Run Out Of Items . Computers Allow The Store’s Accounting System
To More Accurately Measure Costs And Determine The Profit That Store
Stockholders Are Concerned About . All Of This Information Is Available Based
Upon The Bar Coding Information Attached To Each Product . The Benefits Of
Bar Coding Encompass For More Than Faster Checkout Service . The Entire
Business Management Process Can Use The Information Generated .
 ERP And Supply Chains
Supply Chain Are Collections Of Organizations That Work Together To
Provide Raw Materials That Are Converted Into Products And Delivered
To Retail Outlets Where Customers Can Obtain Them . In The Past ,
Monopolies Would Sometimes Seek Vertical Integration So That They
Could Control The Entire Supply Chain ( Standard Oil Went A Long Way
Toward Total Vertical Integration ; Steel Companies Also Attained At
Lest Something Approaching It ) . The Dutch East India Companies Are
An Early Example Of A Global Supply Chain . Military Logistics Systems
Are The Epitome Of Supply Chain Is Control And Efficiency . Today‘S
Companies Gain Efficiency Through A Higher Degree Of Specialization .
This Appears In Various Forms , Including Outsourcing . The Idea
Behind Outsourcing Is That There Are Specialists Throughout The
Supply Chain Who Can Do A Better Job Of The Specific Function They
Perform .
 n
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Conclusion
•The growing information needs of an enterprise make it imperative
to improve or replace old systems.
•Especially under the present business environment, where the
globalization has been initiated, full convertibility is coined.
•Infrastructure Projects are nearing completion, and it is expected
that the whole business system will undergo a major shift.
•Implementation of ERP solutions is one of the largest
drivers of growth in the consultancy business.
•The introduction of such a large and complex software like
ERP, enables an organization to integrate their
manufacturing, finance and marketing operations at all
levels, is in itself a challenge, since it calls for technical and
functional skills and a change in user mindsets.