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Business Processes

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

Enterprise Resource Planning (ERP)

Organizes and manages a companys business processes by sharing information across functional areas

Connects with supply-chain and customer management applications

ERP - What is it?

Process view of business vs. functional silos Integration of systems, one database Support most of co.s info needs Transaction oriented systems (OLTP) Accounting, payroll, invoicing, supply chain optimization, sales force automation, customer service,

ERP - What is it?

Leads to improved performance, better decision making, competitive advantage Lays foundation for electronic commerce Replaces a multiplicity of different systems and databases
one integrated system

Evolution to ERP
MRP - Material Requirements Planning
what material needed? when & how purchased? how managed? maximize efficiency of physical, financial assets

MRP 1960's
master production schedule material requirements planning capacity requirements planning

MRPII 1970's
sales & operations planning simulation forecasting

ERP 1990's
sales and distribution material management plant maintenance quality management financial accounting controlling investment management human resource management ...

ERP Requires
Strong executive support to implement Process approach rather than silos Change in business procedures (BPR) Change in organizational structure, culture, strategy Technology change

Difficult to install Very large and complex software Provides info about all aspects of the business -- worldwide Reduces inventory, waste Easy communication with customers, suppliers

Before ERP
Multiple systems, different interfaces, difficult to extract info about customers, sales,... Hard to maintain, many languages, databases, inconsistencies Can take weeks or months to obtain info about customers, or where systems changes are needed

After ERP
Integrated systems Consistent interface One database Access to current data Improved planning capabilities Multinational capabilities

Example: 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

ERP Modules

Figure 12.1

ERP Implementation
Need business exec in charge, not IT Make a business case
long term benefits
inventory reduction, customer service,.

software hardware people (by far the most expensive)

ERP Implementation
ERP, database licenses maintenance support fees add-on packages

new client/server architecture network capability backup multiple servers -operations, testing

ERP Implementation
People - for system configuration
internal, consultants

can require time commitment for several years

Continual support from senior execs Change management

almost all personnel will be affected

ERP Implementation
ERP system configuration
thousands of parameters to set

Need stability, but business constantly changes Difficult to implement, difficult to change
but is a non ERP collection of poorly integrated systems & databases any easier?

Change is never ending

ERP Implementation
Training needed
technical staff business staff

20-50% of project budget on educational and skills development Results in less people needed, but more skills, understanding of the organization 4 months to 5 + years to implement

ERP Implementation
add-on systems where ERP is lacking? keep good legacy systems, build interfaces to good legacy systems? more than one ERP instance?
different divisions, subsidiaries but more than one increases complexity, reduces benefits

interconnect consistent, distributed ERP systems (one logical system)

ERP Package Selection

Major packages are similar Some packages suited to specific industries
e.g. JDA, Richter Systems for retail

PeopleSoft - strong in HR SAP - financial, supply chain Baan - flexible manufacturing software

ERP Package Selection

ERP appropriate for $25 US million and up Mid-tier $25 to $1 billion SAP - typically largest global firms
(but can be done for smaller co. also)

J.D.Edwards - smaller firms Oracle, PeopleSoft, - middle Baan - mostly middle customers

R/3 Logistics
Sales and Distribution
Production Planning

Materials Management
Plant Maintenance Quality Management Procurement

R/3 Financials
Financial Accounting
general ledger, accounts receivable, payable,...

costing, profitability, planning,

Cash, funds management,

Capital Investments

R/3 Human Resources

Payroll accounting Shift management Employee attendance Trip costs


Personal management

Industry Specific R/3 Solutions

Aerospace & Defense Automotive Banking Chemicals Consumer Products Engineering & Construction Healthcare High Tech & Electronics Higher Education & Research Insurance Media Mill Products Mining Oil & Gas Pharmaceuticals Project Oriented Manufacturing Public Sector Retail Service Provider Telecommunications Utilities

Multi tier client / server architecture

Layers: Internet / intranet Multiple database, application servers



Technology Infrastructure 4.0 at http://emedia.sap.com/usa/default.asp

ERP and beyond

Supply Chain Management (SCM) Customer Relationship Management (CRM) Data Warehouse

Electronic Marketplace

ERP and beyond

Supply Chain Management planning and optimization supply planning, demand planning, plant scheduling, transportation & warehouse management more integration with trading partners Customer Relationship Management (CRM) marketing, sales, service Data Warehouse
On line Analytical Processing (OLAP)

Internet access for employees, customers, suppliers

c-Commerce Example: Buying and Selling

mySAP.com Marketplace

Internet Buying



Internet Selling


Buy Transact Receive

Sell Collect


Other systems
Operational Systems (Financials & Logistics)

Operational Systems (Financials & Logistics)