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Unit I


Building & knowledge Creating Company:- In an economy where the only certainty is uncertainty, the one sure source of competitive advantage is knowledge When markets shift, competitors multiply, products become obsolete almost over night successful companies are those that consistently create new knowledge, disseminating it widely throughout the organization & quickly embody it in new 1

technologies & products these activities define the knowledge creating company, whose sloe business is continuous innovation. Knowledge creating companies. Making personal knowledge available to others is the central activity of the knowledge creating companies it takes place continuously & at all levels of the organization. Knowledge management has Become one of the major strategic uses of information technology. Many companies are building knowledge management systems (KMS) to manage organizational learning & business know how.

The goal of such systems is to help knowledge workers create, organize & make available important business knowledge, wherever & whenever it is needed in an organization. This includes processes, procedures, patents, reference works, formulas, best practices, forecast & problem fixes. Intranet / internet websites, data mining, knowledge data bases, on-line discussion groups are some of the key technologies that may be used by a KMS. Knowledge management systems facilitate organizational learning & knowledge creation. They are designed to provide rapid feedback to knowledge workers, encourage behaviour changes by 3

employees & significantly improve business performance. KMS helps to integrate the knowledge into organizations business process products & services. Knowledge management can be viewed as three levels of techniques, technologies & systems that promote the collection, organization, access, sharing & use of work place & enterprise knowledge.

Enterprise Intelligence

Leverage organization know how Performance support Building expert networks

Capturing & Distributing expert Information 2 stories creation, sharing & mgmt. Communication & collaboration New content creation

Access & Retrieval 1 Document Mgmt. Documents stored on-line

Knowledge management systems use information technology to help gather, organize, share business knowledge within organization. Corporate intranets have become the knowledge bases for storage & dissemination. KNOWLEDGE MANAGEMENT DEFINITION: (KM) KM is a business activity with two primary aspects:1. Treating the knowledge component of business activity as an explicit concern of business reflected in strategy, policy & practice at all levels of the organization. 2. Making & direct connection between an organizations intellectual assets both explicit 6 (recorded) & tacit (personal know how) and

positive business results. In practice, KM often encompasses identifying & mapping intellectual assets within the organization, making vast amounts of corporate information accessible, sharing of best practices, & technology that enables all of the above including information communication technology (intra net etc.) & group ware (collaborative work groups using it). A significant element of business community also views knowledge management. As a natural extension of business process re-engg.) Knowledge is a fluid mix of framed experience, values, information, expert insight & intuition that provides an environment & framework for evaluating 7 & incorporating new experience & information.

Market valuation of a company largely depends on intangible asset like its knowledge base. Knowledge unlike any physical asset, delivers increasing returns. KM helps avoid unnecessary work duplication, expensive reinvention & repeated mistakes. KM can save your company from knowledge walkouts. KM can compress delivery schedule & help you deliver ahead of time. KM mutually reinforces corporate agility. The ability of companies to react comes from their knowledge & this agility reinforces their ability to apply such knowledge. 8




KNOWLEDGE GIVES TODAYS COMPANIES THE EDGE TO COMPETE SUCCESSFULLY. Basic principles of knowledge management. 1. Knowledge acquisition:The process of development & creation of insights, skills & relationship Ex:- stock Broker can predict. 2. Knowledge Sharing:- Distributions & making available what is already known. Ex:- An expert system helps & technical call centre 9 help desk.

3. Knowledge Utilization:- Learning is integrated into

the organization apply in new situations - sharing & utilizations take place same time.

Data Base Capture Tools


Sharing Communication Network Utilization Collaborative Tools


Basic Knowledge Management Technology

Basic elements of KM & typical technology tools that can be used. Concept of knowledge management Knowledge terms & definitions Information:- Relates to description, definition, or perspective (What, Who, When, Where) Knowledge:- Comprises strategy, Practice, Method, or Approach (How) Wisdom:- Embodies Principle, Insight, moral (Why). Business Intelligence:- Is the process by which 11

businesses gather information specific to their use. Logic:- Is the sequential decision making process in an organizational context. Technology:Particularly the information technology, aimed at information & knowledge. Strategy:- Business strategy which incorporates, information & knowledge. Knowledge Management:- Is about connecting people to people & people to information to create competitive advantage.


COMPARING INFORMATION & KNOWLEDGE INFORMATION 1) Processed Data 2) Gives facts only KNOWLEDGE Actionable Information Allows Making predictions Intuitive, hard to communicate, difficult to express in words

3) Clear, structured, simple can be expressed in written form


4) Obtained by calculating data 5) Devoid of owner dependency 6) Handled well by information systems 7) Key Resource in making sense of data 8) Formalized in database / books / documents 9) Can be packaged in reusable form

Lies in conversation, intuition, peoples Depends on the owner Also needs informal channels Key resource in intelligent decision making / forecasting / intuitive judgment Evolved with experience / formed in & shared among collective minds. Often emerges in minds of people thru their experience 14

CLASSIFYING KNOWLEDGE Knowledge can be classified along four key dimensions:1 Type 2 Focus 3 Complexity 4 Perishability over time Technological
Type Focus Knowledge Complexity Perishability DIMENSIONS Business Environmental Operational Strategic Explicit Tacit Low High CLASSIFICATION

Knowledge can be broadly classified into two categories:1. Explicit:- Can be document or codified / E-mailed / web page etc. 2. Tacit:- Personal, Context specific, stored in the head of people. COMPARING TACIT & EXPLICIT KNOWLEDGE Characteristic Tacit Explicit 1 Nature:2 Development Process3 Location:Personal Difficult to record Stored in the head of people Can be codified Can be systematically recorded Stored in documents / databases

Characteristic Tacit 4 IT Support:Hard to manage, share or support with IT Needs & Rich Communicati on Medium

Explicit Well supported by existing IT

5 Medium Needed:-

Can be transferred thru conventional electronic channel

COMPONENTS OF KNOWLEDGE A KM system & KM strategy must support:Intuition Beliefs Ground Truth Intelligence

Judgment Experience Value Assumption

BUSINESS & KNOWLEDGE KMS for the Enterprise: The value of a firms products & services is based not only on its physical resources but also on intangible knowledge assets. Some firms can perform better than others because

they have better knowledge about how to create, produce & deliver products & services This firm knowledge is difficult to imitate & unique & can be leveraged into long term strategic benefit. KMS collect all relevant knowledge & experience in the firm & make it available wherever & whenever it is needed to support business process & decisions. The KMS also links the firm to external sources of knowledge. KMS support processes for discovering & codifying knowledge, sharing knowledge distributing knowledge as well as the processes for creating new knowledge & integrating it into the business 19 organization.

KMS applications help companies map sources of knowledge, create corporate knowledge directories of employees with special expertise, identify & share best practices & codify knowledge of experts so that it can be embedded in information systems & available to others. KMS also includes tools for knowledge discovery that enable the organization to recognize patterns & important relationships in large pools of data.


ROLE OF KNOWLEDGE MANAGEMENT SYSTEMS IN BUSINESS ORGANIZATION 1. Creating Knowledge KMS Provides knowledge workers with graphics, analytical, document mgmt. tools & also access to internal/external data to generate new ideas. 2. Discovering & codifying knowledge Artificial intelligence systems can elicit & incorporate expertise from human experts or find patterns or relationship from huge database. 3. Sharing knowledge Group collaboration systems (Group ware), can help employees access & work simultaneously on the same document from many

Organizational Process

different locations & co-ordinate their activities. 21

4. Distributing knowledge:- Office systems & communication tools can distribute documents & other forms of information among knowledge workers. Knowledge Management in the business organization Emergence of information & knowledge economy, core competencies (two or three things that an organization does best) are key organizational assets. Producing unique products or services or producing at lower cost than competitors is based on superior knowledge. 22

Knowledge assets:- Organizational knowledge regarding how to efficiently & effectively perform business processes & create new products & services that enables the business to create value. Knowledge assets are as important for competitive advantage & survival like financial & physical assets. Organizational Learning:creation of new standard operating procedures &business processes that reflect organizations experience. KM increases the ability of the organization to learn from its environment & to incorporate knowledge into its business processes. 23

KM refers to the set of processes developed in an organization to create, gather, store, transfer & apply knowledge. Information technology plays an important role in KM by supporting these processes for creating, identifying & leveraging knowledge across the organization. Business organizations have created explicit knowledge mgmt. programs for protecting & distributing knowledge they have identified & for discovering new sources of knowledge. - these programs are headed by a chief knowledge officer (CKO) 24

I- ALIGNING KNOWLEDGE MANAGEMENT WITH BUSINESS STRATEGY Knowledge Management A strategic perspective:In the emerging economy, a firms only advantage is its ability to leverage & utilize its knowledge Industry environment is influenced by unexpected, multiple changes making competitive advantage not sustainable. Initiatives like TQM, BPR, SCM, CRM etc resulted in firms attaining some competitive advantage but are replicable & not sustainable over longer period of time.

Hence organizations are now focusing on methods of creating new knowledge & harnessing existing knowledge to gain competitive advantage. Sustainable competitive advantage thru knowledge mgmt. - major focus for modern organizations. Strategy Concept & Framework Strategy is a method / plan by a firm to balance its external (OT) environment & the internal (SW) capabilities. Porters notion of competitive advantage says resources & capabilities of an organization can be a source of competitive advantage if they process certain characteristics of being rare, durable and difficult to imitate.

If a firm have resources with these characteristics, they can position themselves strategically on the basis of these resources & capabilities. Tangible resources mostly will not have these characteristics & hence organizations focus should be on intangible knowledge assets. Resources & capabilities are easily replicable. Tacit knowledge gained thru years of experience are not easily replicable. Market is dynamic & going thru a string of realignment hence any strategy based on market & product mix or resources or capabilities may not provide a firm with sustainable competitive advantage

Integration of knowledge or collective knowledge to be stressed. Creativity, Innovation & Knowledge Strategy Creativity & Innovation play a very important role in designing & driving the business strategy of any modern organization.

Present industry scenario, an organization does not enjoy sustainable competitive advantage merely by possessing resources & capabilities. These resources should be used & combined in new & different ways or develop new capabilities to gain 28 sustainable competitive advantage .

Experience & Knowledge

New ways of Combining Existing Resources

Competitive Advantage

Creativity & Innovation

Develop New Capabilities


Some of the innovations brought out by organizations are result of application of new knowledge & others are result of working with & recasting existing knowledge. Approach to competitive advantage Competitive Advantage Align Knowledge Strategy with Business Strategy Formulate Knowledge Strategy Identify Knowledge Gap Formulate Business Strategy


In current dynamic industry scenario, organizations cannot achieve sustainable competitive advantage, by pursuing just a product market based strategy. They need to appreciate the importance of the knowledge existing in the organization & harness the knowledge thru appropriate KM strategy & align this strategy with the business strategy. II KNOWLEDGE MANAGEMENT TECHNOLOGY

The technology perspective:- Some of the technologies associated with KM:o Internet / Intranet

o o o o o o o o o o o o o

Data Warehousing Data Mining AI / Expert Systems Information Retrieval Electronic Publishing Technology Push Technology Simulation Document Management Collaboration Groupware DBMS Web Mapping Tools Help Desk Technology

KM like any other top management initiative may use technology as an important enabler. Systems Perspective Systems & Infrastructure for Knowledge Management Information systems can promote organizational learning by identifying, capturing, codifying & distributing both explicit & tacit knowledge. Once Information has been collected & organized in a system, it can be leveraged & reused many times. Companies can use information systems to codify their best practices & make knowledge of these practices more widely available to employees. 33

Best Practices:- Are the most successful solutions or problem solving methods that have been developed by a specific organization or industry. In addition to improving existing work practices, the knowledge can be preserved as organizational memory to train future employees or to help them with decision making. Organizational memory Is the stored learning from an organizations history that can be used for decision making & other purpose. Information systems can also provide knowledge networks for linking people so that individuals with special areas of expertise can be easily identified & tacit knowledge can be shared. 34

KM Requires:- An information infrastructure that facilitates the:-


- Collection of knowledge - Sharing of knowledge. - Also requires software for distribution of information (knowledge) & make it more meaningful. It systems that are used:1 2 3 4 Group Collaboration systems Office Systems Artificial Intelligence Systems Knowledge work systems


Share knowledge 2. Distribute Knowledge Group Collaboration System Office Systems Group Ware Word Processing Intranets Desk top data base DTP Imaging & Web Publishing


Capture & Codify Knowledge Artificial intelligence Systems Expert Systems Nevral Nets Fuzzy Logic

4. Create Knowledge Knowledge Work Systems CAD Investment Work Stations


IT infrastructure for KM: Networks/Databases/Processors/Software/Internet/To ols etc. are used heavily for above systems Distributing Knowledge:- Office & Document Management Systems Office Systems:- Are any application of information technology that increases productivity of information workers.

TECHNOLOGY Word Processing / DTP / Web Publishing / Work flow Managers.

Managing Documents


Electronic Calendars / Groupware / Intranets 37


E-Mail / Voice Mail / Groupware / Intranets / Digital Answering System

Managing Data

Desktop Data Bases / Spread Sheets / User Friendly Interfaces to Main frame data bases

Knowledge Repository:- Collection of documented internal & external knowledge in a single location for more efficient management & utilization by the organization. In addition to streamlining workflow, web based & traditional document management systems provide tools for creating knowledge repositories to help 38 organizations consolidate & leverage their knowledge.

Creating Knowledge:- Knowledge work systems (KWS) KWS are information systems that aid knowledge workers in the creation & integration of new knowledge in the organization. Knowledge work is that portion of information work that creates new knowledge & information Knowledge workers perform three key roles that are critical to the organization:1) Keep the organization up to date in knowledge as it develops in the external world.

2) Serving as internal consultants regarding the areas of their knowledge, the changes taking place & the opportunities. 3) Acting as change agents evaluating, initiating & promoting change projects. Most knowledge workers rely on office systems such as word processors, voice mail & calendars but they also Require more specialized work systems Knowledge work systems are specifically designed to promote the creation of knowledge & to ensure that new knowledge & technical expertise are properly integrated into the business.

Requirements of Knowledge Work Systems: 1) Must give knowledge workers the specialized tools they need such as powerful graphics, analytical tools, communication & document management systems. 2) These systems require great computing power to rapidly handle the sophisticated graphics or complex calculations required by knowledge workers as scientific researchers, product designers & financial analysts. 3) Knowledge workers are focused on knowledge in the external world, so system should give easy & fast access to external data base.

External knowledge Base

Software Graphics Visualization Modeling Simulation Document Management Communication User Interface

Hardware Platform:- Knowledge Work Stations


REQUIREMENTS OF KNOWLEDGE WORK SYSTEMS Examples of Knowledge Work Systems 1) Computer aided design (CAD):- Information systems that automates the creation & revision of design using sophisticated graphics software. 2) Virtual Reality Systems:- Interactive Graphics software & hardware that create computer generated simulations that emulate real life situation Ex:- Aircraft design stress patterns. 43

Virtual reality applications are being developed for the web using & standard called (VRML) or Virtual reality Modeling Language. 3) Investment Work Station: Powerful desktop computer for financial specialists, which is optimized to access & manipulate massive amounts of financial data. High end PCs used in financial sectors to analyze trading situations instantaneously & facilitate portfolio management. The financial industry is using specialized investment workstations to leverage the knowledge & time of 44 brokers, trades, portfolio managers.

Firms like DSP Merrill Lynch have installed investment workstations that integrate a wide range of data from both internal & external sources. Sharing knowledge:- Group Collaboration Systems & Enterprise knowledge environment (Intranets) Community of Practice:- Informal group of people that may live or work in many different locations but who share a common professional interest. An important source of expertise for organizations. Ex:- Linux users group in a corporation that primarily uses windows operating system. - Group in an international bank with special interest in leading activities in south east Asia.

Groupware & Web Collaboration Tools:- Groupware is built around three key principles: Communication Collaboration Co-ordination - It allows groups to work meetings, route electronic forms, access shared folders, participate in electronic discussions/conferencing, develop shared data base, e-mail. Information intensive companies such as consulting firms, law firms & financial management companies found group ware an especially powerful tool for KM. 46

Internet tools for e-mail, news group discussion, conferencing offer collaborative work. Proprietary groupware remains a key tool for application requiring extensive collaboration, document tracking & frequent updating. Lotus notes, open text live link & other groupware products are used for sharing knowledge. Knowledge Map:- Tool for identifying & locating the organizations knowledge resource. Enterprise Information Portal:- Software application that enables companies to provide users with a single gateway to internal & 47 external sources of information.

- Portals help individuals navigate through various knowledge resources also called knowledge portals. - Portals provide single point access to the firms knowledge resources & helps the firm coordinate information / decision.





E-Mail Chat & Conferencing Groupware Search Tools & Directories

Web Pages Document Management Data Base & Ware House Enterprise Applications

Best Practices Projects Research & Reference News Feed


Group sharing of knowledge requires team members to believe it is in their interest to share, especially in organizations that encourage competition among employees. Successful knowledge sharing requires an appropriate knowledge sharing environment. CAPTURE & CODIFY KNOWLEDGE Artificial Intelligence: Organizations are using artificial intelligence technology to capture individual & collective knowledge & to codify & extend their knowledge base (AI). 50

AI is the effort to develop computer based systems (both hardware & software) that behave as humans. Such systems would exibit logic, reasoning, intuition & commonsense qualities that we associate with human beings.


The field of AI includes:Artificial Intelligence Natural Language Robotics Expert Systems Intelligent Machines

Why business is interested in AI? To store information & preserve expertise. Create & mechanism that is not subject to human feeling fatigue etc. To eliminate routine jobs & unsatisfying jobs held by people. 52 Handle massive & complex problems.

Capturing Knowledge Expert Systems: Expert systems are knowledge intensive computer program that captures the expertise of a human in limited domain of knowledge. Ex: Diagnosing a cars ignition system, rules of thumb used by real world experts can be understood, codified & kept in a machine. Expert systems lack the breadth of knowledge & the understanding of fundamental principles of an human expert. They are quite narrow.

The model of human knowledge used by expert system is called the knowledge base. An expert. System contains a number of rules to be followed, when used. Organizational Intelligence Case-Based Reasoning (CBR) CBRs are AI technology that represents knowledge as a database of cases & solutions done in past.

The system generates a six step process to find solutions to new problems encountered by user. How Case Based Reasoning Works o CBR represents knowledge as a database of past 54 cases & their solutions.

1 User Describes The Problem 2

System Searches Data Base Case Database Additional Qs

3 System Asks User

System Finds Closest Fit & 4 Retrieves Solution System Modifies The Solution 5 To Better Fit The Problem Successful ? System Stores Problem 6 & Successful Solution to Database




In CBR, Descriptions of past cases of human specialists experience, represented as a case are stored in a database for later retrieval when user encounter a new case with similar parameter. OTHER INTELLIGENT TECHNIQUES FOR KNOWLEDGE CAPTURE & CODIFY Neural Networks:o Neural Networks are designed to imitate the physical thought process of the biological brain. o These are hardware or software that attempts to emulate the processing patterns of the biological brain. o A neural network uses rules it Learns from patterns in data to construct a hidden layer of logic. o The hidden layer then processes inputs, classifying 56 them based on experience of the model.

NEURAL NETWORK Input Layer Income Hidden Layer Output Layer Good Credit Risks

Debt Bad Credit Risks

Age Payment Record


Neural network applications are emerging for business, science, medicine to address problems in financial analysis & control & optimization. Neural nets are used by finance industry to identify patterns in vast pools of data that help investment firms predict the performance of quity, corporate bond rating or corporate bankruptcies. Visa international is using a neural network to help direct credit card fraud by monitoring all visa transactions for sudden changes in the buying patterns of card holders. Unlike Expert System, which Provide Explanation for their solutions, neural networks cannot always explain why they arrived at a particular solution. 58

Expert systems seek to emulate or model a human experts way of solving problems & highly specific to a given problem & cannot be easily retrained. KNOWLEDGE CREATION FRAME WORK NONAKAS MODEL (SECI MOD) o According to Prof. Ikujiro Nonaka, knowledge creation is a spiral process of interaction between explicit & tacit knowledge.


Tacit Socialization Empathizing Embodying Internalization

Tacit Externalization Articulate Connecting Combination

Explicit Explicit Nonacas Model (Seci Model)






Interactions between the explicit & tacit knowledge lead to the create of new knowledge. The four modes of knowledge conversion interact in the spiral of knowledge creation & the spiral becomes large in scale as it moves up through organization levels & trigger new creation. Socialization (Tacit to Tacit):- Includes the shared formation & communication of tacit knowledge between people ie in meetings. - Knowledge sharing is often done without ever producing explicit knowledge & to be most effective, should take place between people having common culture. - So, tacit knowledge sharing is connected to ideas of 61 communities & collaboration.

Externalization (Tacit to Explicit):- By its nature tacit knowledge is difficult to convert into explicit knowledge. - Thru conceptualization, elicitation & ultimately articulation, some proportion of a persons tacit knowledge may be captured in explicit form. - Typical activities when conversion takes place are in dialog among team members, in response to Qs or thru the elicitation of stories. Combination (Explicit to explicit):- Explicit knowledge can be shared in meetings via documents, e-mails etc. or thrus education & 62 training.

Use of technology to manage & search collections of explicit knowledge is well established. - An ex: use text classification to assign documents automatically. - Put a document in a shared data base. Internalization (Explicit to Tacit):- In order to act on information, individuals need to understand & internalize it, which involves creating their own tacit knowledge. - By reading document they can to some extent, they can re experience what others previously learned. - Also, reading doc., they have opportunity to create knowledge by combining their existing tacit 63 knowledge with knowledge of others.

- A typical activity would be to read & study doc. From a number of data bases. - Knowledge creation results from interaction of persons & tacit & explicit knowledge. - Through interaction with others, tacit knowledge is externalized & shared with others. - Technologies that may be applied to facilitate knowledge conversation process:-


Tacit to Tacit E-meetings Chat (Synchronous Collaboration Explicit To Tacit Visualization Browsable Video / Audio Presentation

Tacit To Explicit Answering to Qs Annotations Explicit To Explicit Text Search Document & Acquisition

Basic knowledge Processes Acquisition, Production & Integration of knowledge occur throughout the organization to foster organizational learning.

KNOWLEDGE LIFECYCLE MODEL 1. Outside World Step 1:Acquire Information or knowledge Training Researching Browsing Reading Published or Printed Work 2. Individual Team or Community Step 2:Produce Knowledge 3. Transfer Step 3:Knowledge

Integrate Knowledge Expose Best Practices. (Redesign processes with embedded knowledge) Structure & store knowledge for instant access. Share knowledge. Instruct / Present knowledge. Knowledge Management Technologies:- Some Soft Ware Tools - Following s/w tools were evaluated for performance by a Chicago based product assessment firm & widely used in the industry:

1. WINCITE 5.0: Most mature KM product in use for more than 10 yrs. Used for competitive intelligence & few more areas. Designed to manage a shared data base & helps analysis. The program is designed with presumption that people will analyze & contribute value to what is Uses a group model, where putting content into stored. knowledge base is done by KM group but users can suggest additions. Users can add notes with proposed, suggestions, updates or new information. The KM group can see these notes & incorporate part 68 or all of them.

KM group & users can add information to the knowledge base by using forms. Each form contains a defined field / or fields & one can add information manually, add as an attachment, or dynamically link to documents outside wincite, in dedicated databases or internet. Wincite uses multidimensional data base model organized into a relational database (RDBMS). 2. INTRASPECT 1.5: It creates a group memory by storing information in maps customized to each end user & communicated thru intranet, e-mail networked file 69 etc.

The programme design assumes users will both contribute to group memory & consume information. The systems peer-to-peer model grants wide authority to contribute & inform. Every piece of knowledge information has an e-mail address. Information sent to the knowledge base can be supplemented by user. KM s/w tools.. (Contd.). 3. CHANNEL MANAGER 2.0 : It is a set of tools designed to gather information & 70 content from internal & external sources.

Uses push technology to send it to the users who need it. System runs on windows NT server & can use any connectivity compliance data base. Channel manager does not hold any the actual files & other data any the actual files & other data but just the pointers to it & thus it is designed to be conservative with storage space. The strength of channel manager is its model for rapid proliferation of organized information & low cost of ownership. 4. BACK WEB 4.0 : This s/w tool can contribute to a range of KM

applications with its main area of strength being the ability to push channels of information to a wide range of desk top users. The s/w tool is designed to gather information from any. source (internet news feed, internal users etc.) & broadcast it to the users who need it. The s/w user push technology as the mechanism to deliver information in any file format. The goal of the product is not to store information in a central repository for archival recall, but to turn available sources into channels & disseminate information on a timely basis to users who need it. The end user interface includes embedded browser & windows explorer like navigation system.

Back web has user s/w for most desk top users including Windows & Macintosh. 5. KNOWLEDGE X 1.0 : This KM s/w tool is designed to serve as a centralized repository of categorized information & then deliver it in forms that ease the work of analysis. The KM s/w is most effective when its use is centralized to a few experts who can master its concepts, then use its dissemination features to provide targeted, automated reports to a broader set of consumers. The application of this tool is mainly for 73 competitive intelligence knowledge.




Business Environment & Business Process
Financial Management Manufacturing Quality Management Materials Management ERP SYSTEM HR Management Production Planning Plant Maintenance

Sales & Distribution


ERP SYSTEM o Business can be defined as the activities of individuals or groups, involved in developing, producing & distributing the goods & services needed to satisfy other peoples needs. o Business used resources to produce & services. These resources are:1) Infrastructure (Land/Plant etc.) 2) Labour (Human Resource) 3) Capital (Financial Resource) o Resources become productive when combined in a 76 rational way for some creative or gainful purpose (.)

this is the function of the (4) th resource: Management o Management combines the resources in different ways to produce goods & services. o It is the function of management to plan the effective & efficient use of the resources available to the enterprise. o The ERP systems help the management in making the planning process more productive & efficient


Resources - Infrastructure

Produced Goods

- Human Resource


Production Process

Financial Resource

Products & Services


o ERP enables integration & automation of various business functions (Rather than functioning in isolation). o Different modules in ERP are integrated they send & receive data across departmental barriers. o Automation improves productivity & reduces response & reaction time. o A task which involved the co-ordination of two or three departments, would take days in a non-erp environment (.) with procedure integration & automation, the same task will be completed in minutes (.) o Single action may trigger _______ lot of other processes in different modules. 79 Ex:- Order Processing

BUSINESS MODULES IN ERP PACKAGE A) FINANCE:- Finance module of most ERP systems will have the following sub systems:1) 2) Financial Accounting General ledger Accounts receivable/Payable Special Ledger Fixed Asset Accounting Legal Consolidation Investment Management Investment Planning / Budgeting / Controlling / Depreciation Forecast / Simulation / Consolidation.

3) -

Controlling Overhead Based Costing Activity Based Costing Product Cost Accounting Profitability Analysis

4) Treasury - Cash Management - Treasury Management - Market Risk Management - Funds Management

5) -

Enterprise Controlling Executive Information System Business Planning & Budgeting Profit Centre Accounting

B) MANUFACTURING (PRODUCTION) o The major subsystems of manufacturing ERP module are:1. Material & capacity planning 2. Shop floor control 3. Quality management 4. Jit/Repetitive Manufacturing 5. Cost Management

6. Engineering data mgmt. 7. Engineering change control 8. Configuration mgmt. 9. Serialization / Lot control 10.Tooling C) HUMAN RESOURCE o The major subsystems of HR module of ERP are:1. Personnel Management - HR master data - Personnel Administration - Information systems


- Recruitment - Benefits administration - Salary administration 2. Organizational Management - Organizational structure - Staffing / job description 3. Payrole Accounting 4. Time Management Shift Planning Work schedule Absence Record

5. Personnel Development

- Career / Succession Planning - Training Requirement - Skills / Qualification Assessment. D) PLANT MAINTENANCE o Major subsystems of plant maintenance ERP module are:1. Preventive Maintenance control 2. Equipment tracking 3. Component tracking 4. Plant maintenance / warranty claim tracking 5. Equipment calibration tracking ISO 9000 85 requirement.

E) MATERIALS MANAGEMENT o The major sub-modules are:1. Purchasing 2. Pre-purchase activities 3. Vendor evaluation 4. Inventory Management 5. Invoice verification & 6. Material inspection F) SALES & DISTRIBUTION o The major sub-modules are:1. Master data management 2. Order management


3. 4. 5. 6. 7. 8. 9.

Ware house management Shipping Billing Pricing Sales support Transportation Foreign trade

ERP MARKET o ERP software market is very competitive & fast growing o Annual growth rate nearly 40% o ERP vendors are expanding market presence by offering new applications such as SCM, CRM, sales 87

force automation etc. o Which ERP originated in the manufacturing market, usage now has spread to every type of enterprise including retail, utilities, public sector, healthcare etc. The top five ERP vendors: SAP AG. 36% Oracle applications 10% People soft 7% Baan 6% J.D. Edwards 7% Others (SSA, JBA, QAD etc.) 34%

Indian Scenario: RAMCOs marshall is having 10% market share. Others are SAP R/3, QADs MFG / PRO, Oracle Financial, Baan etc. o Each vendor, due to historic reasons, has specialty in particular module area, Ex:- SAP Logistics, Baan Manufacturing, People Soft HR, Oracle Financials o Also about 50 established vendor for SME sector. A) SAP AG Flagship product is SAP R/3 & my o Systems applications & products o Started by five Ex. IBM engineers for developing89

o o o o

business application softwares that were integrated. First ERP product R/2 was launched in 1979 using centralized main frame system. Redesigned as R/3 in 1992 on client-server architecture. SAP AG is the largest ERP vendor cover 17000 customers in over 100 countries. My is the internet enabled ERP product.

o SAP AG has strong industry focused solution & long term vision. B. Oracle Corporation:- Flagship Product Oracle Applications o Best known for its data base s/w & related applications (RDBMS). o 2nd largest s/w company after Microsoft.

o Oracles ERP system known as oracle applications having more than 50 different modules in six major categories:- Finance, Accounts Payable, HR, Manufacturing, Supply Chain, Projects & Front Office. o Oracle has integrated its ERP solutions with the internet & has introduced several applications in the ecommerce. o Tow powerful products with internet infrastructure 1. Oracle 9 2 database 2. Oracle 9 2 application server o Another significant feature of oracle is its OSBS (oracle small business suite) provided consistent financials, payroll, inventory control, order entry purchase order & CRM functionality delivered as 91 web service.

c) People Soft inc Flagship Product People Soft 8 o ERP s/w firm started in 1987 specialization in HR mgmt. & financial services modules. o Enterprise solutions from people soft include modules for manufacturing, materials mgmt., distributions, finance, HR, SCM. o Main competitors:- SAP AG & oracle with longer experience with customers & flexible attitude. o Flagship application people soft 8 is a pure internet based collaborative enterprise system. o People Soft 8 requires no client soft ware other than a standard web browser giving ability to run business any where, any time. 92

D. The Baan Company Flagship Product Baan ERP o Founded in 1978 in the Netherlands, Baan Started with s/w expertise in manufacturing industry. o Baan ERP covers finance, procurement, manufacturing, integration & implementation, planning, sales, service & maintenance, collaborative commerce & business intelligence. E. J.D. Edwards & Co. Flagship Product One World o J.D. Edwards was founded in 1977 in Denver (USA) with long experience of supplying s/w for IBM as / 400 market. o One World is the ERP solution capable of running on multiple platforms & with multiple data base. o The product includes modules for finance, 93 manufacturing, distribution, logistics, HR, quality

o o o o

management, maintenance mgmt., data warehousing, customer support, & after sales service. One World ERP package is more flexible & within reach of smaller enterprises. J.D. Edwards internet enabled version launched is known as One World xe (xe stands for extended enterprise). J.D. Edwards World Software Provides necessary functionality & buift in longevity reduces problem of obsolescence. Different modules available in J.D. Edwards are:Financial suite Logistics / Distribution Manufacturing Suite

Engineering / Architecture / Construction / Real Estate Energy & chemical suite Payroll Human Resource Utility / Energy solutions

F. SSA System Software Associates o SSA was founded in 1981 in Chicago o Companys flagship product is BPCS client server V 6, which has successfully addressed the most critical issues facing the ERP market the implementation & integration of package applications.

ERP Present & Future ERP will continue to dominate the business practice areas of financial mgmt., HR & manufacturing. Major developments will be in supply chain management, CRM, retail, utilities etc. Major vendors will supplement direct sales thru resellers. Will improve the implementation methodology for faster deployment Lower entry price point of ERP s/w to make it financially viable. Convergence on windows NT growing popularity of windows NT forced ERP vendors to offer products on 96 this platform.

Web enabling Move from client server to web based ERP s/w. New business sectors ERP applications in service vertical markets such as government, healthcare, finance, customer service etc. ERP Implementation & Case Study ERP implementation can be a challenging task for first timers or veterens handling a migration. Implementation has t be done in a phased manner (step by step). Total implementations time may be 18-24 months. The normal steps involved are: Project Planning Business & Operation Analysis.

Business Process Reengineering. Installation & Configuration. Project Team Training. Business Requirement Mapping. Module Configurations. System Interface. Data Conversion. Custom Documentation. End User Training. Acceptance Testing. Post Implementation audit. Above steps are grouped & subdivided into four major phases - namely

1) 2) 3) 4)

Detailed Discussions. Design & Customization Implementation Production

ERP Case Studies The purpose of the case studies is to provide an idea of the situations where ERP projects are implemented & the benefits of these implementation with analysis of ERP success & failure in implementation.


CASE:- ERP Implementation EDMAC Compressor Company, Inc The case study (Distributed in the class) Highlights a success story of ERP implementation. Major factors for success:1) Involvement of Mgmt. 2) Training. 3) Change Mgmt. 4) Plan Ahead. 5) Allow for Fail-Safe. 6) Reward Employees.