CONCEPT OF ENTERPRISE SYSTEMS

TEXT BOOK: ENTERPRISE RESOURCE

PLANNING BY RAJESH RAY
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LEARNING OBJECTIVES Presentations
A. To understand about Enterprise system and the Class Discussion
concept of Business Process Case Analysis
B. To be aware about its benefits and issues in the
organizations in today’s Global scenarios
Case: Opening with
KEY CONTENT: UPS Corp.
Concepts of Enterprise Systems and Business Processes
a. Evolution and Emerging Trends Article : Successful ERP
b. Benefits and Concerns
Implementation the First
c. Functional Silos vs. Integration Concept
Time

Essential Readings:
a. Chapter 1 and Chapter 3 from Enterprise Resource
Planning by Ray of McGraw Hill

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SITUATION

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BUSINESS NEEDS
Global Operations Heterogeneous Solutions Business Processes

Different locations
Different countries
Different languages
Different time zones
Central vs. distributed

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BUSINESS NEEDS CONTD.
Global Operations Heterogeneous Solutions Business Processes

Different applications
Different technologies
Different vendors
Point-to-point integration
Custom-made solutions

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BUSINESS NEEDS CONTD.
Global Operations Heterogeneous Solutions Business Processes

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Anatomy of a Traditional (Non-Integrated) Architecture

Interface Interface Interface Interface

Order Inventory Billing Others Finance

Entry Mgmt.

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 ERP (ENTERPRISE RESOURCE PLANNING)
HISTORY:

ERP is an integrated system that allows information to enter

at a single point in the process and updates a single shared
database for all functions that directly or indirectly depend
on this information.

ERP attempts to integrate all departments and functions

across a company onto a single computer system that can
serve all those different departments particular need.

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1990’S : BACK-OFFICE INTEGRATION
Accounting & Finance Human Resources

Deliver
Supplier Make Customer

Plan

Sell

Buy MRP MRP II ERP

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 2000’S : THE EXTENDED ENTERPRISE
SCM Accounting & Finance Human Resources

CRM

Deliver
Supplier Make Customer

Plan

Sell Service

Buy MRP MRP II ERP

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 WHAT’S NEXT?
SCM Accounting & Finance Human Resources

CRM

Deliver
Supplier Make Customer
ERP II

Plan

Design
Sell Service

Buy MRP MRP II ERP

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ENTERPRISE RESOURCE PLANNING-II

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 Before ERP After ERP
Information Stand-alone systems Integrated systems
systems
Coordination Lack of coordination among Supports coordination across
business functions business functions
Databases Non-integrated & inconsistent data Integrated data

Maintenance costly to maintain separate legacy Uniform maintenance

systems
Interfaces Difficult to manage interfaces Common interfaces across
between systems systems
Information Redundant & inconsistent Consistent real-time information
information
System May not be state of the art Relies on a client-server model /
architecture SOA
Processes Incompatible processes Consistent business processes

Applications Disparate applications Single applications

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 BEFORE AND AFTER ERP : BUSINESS STANDPOINT
Before ERP With ERP
Cycle time Costly bottlenecks Time and cost reduction

Transactions Multiple transactions use multiple Faster transactions, suing common

processing data files data.
Financial Increased cost of excess inventory Improves operational performance
management
Business Fragmented processes Re-engineering around a business
processes model that conforms with “best
practices”
Productivity Lack of responsiveness to customers Improvements in financial management
and suppliers and customer service
Supply chain Lack of integration Linkages with suppliers and customers
management
Information Lack of tactical information for Allows cross-functional access to the
effective monitoring and control of same data for planning and control.
organizational resources
Communications Lack of effective communications Facilitates organizational
communications
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 BUSINESS BENEFITS OF ERP
ERP Performance Outcomes Examples

Quickened information  Responses to customer billing inquiries occurred in real-time as

response time opposed to 15-20 minute response time at IBM Storage
Products Company (Jensen and Johnson, 1999)
Increased interaction  Simplification of processes at Boeing (Jensen and Johnson,
across the enterprise 1999)
 Growth in interfacility coordination at Owens Corning
(Palaniswamy and Frank, 2000)
 Real-time access to data across the organization at Diebold
(Palaniswamy and Frank, 2000)
Improved order  90% reduction in cycle time for quotations from 20 to 2 days at
management/ order Fijitsu (Jensen and Johnson, 1999)
cycle  Faster, more accurate order processing at Valenite
(Palaniswamy and Frank, 2000)
 Time for checking credit upon receiving an order was reduced
from 15-20 minutes to instantaneous at IBM Storage Products
Company (Jensen and Johnson, 1999)
Decreased financial close  50% reduction in financial closing time from 10 days to 5 days
cycle at Fijitsu (Jensen and Johnson, 1999) 15
 BUSINESS BENEFITS OF ERP
ERP Performance Outcomes Examples
Improved on-time delivery  On-time product delivery rate increased to 90% at
Earthgrains (Bingi, Sharma, and Godla, 1999)
 Delivery performance improved from 80% on-time to more
than 90% on-time at Par Industries (Bingi, Sharma, and
Godla, 1999)

Reduced direct operating  Operating margins improved from 2.4% to 3.9% at

costs Earthgrains (Bingi, Sharma, and Godla, 1999)

Lowered inventory levels  Inventory levels were reduced significantly at Owens

Corning (Palaniswamy and Frank, 2000)
 Lower levels of inventory at Valenite (Palaniswamy and
Frank, 2000)
 Work-in process inventory dropped almost 60% at Par
Industries (Bingi, Sharma, and Godla, 1999)

Improved interaction with  Lead times to customers were reduced from 6 weeks to 2
customers weeks at Par Industries (Bingi, Sharma, and Godla, 1999)
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 Tangible Benefits with ERP
.
According to a survey of 62 Fortune 500 companies by Benchmarking Partners, Inc., for
Deloitte Consulting, the most important tangible benefit realized after the ERP system went
live was inventory reduction (Fryer, 1999). The survey results in Table 10 showed these
tangible benefits:
Tangible Benefits % of Companies
Inventory reduction 32
Personnel reduction 27
Productivity improvement 26
Order management improvement 20
Financial close cycle reduction 19
IT cost reduction 14
Procurement cost reduction 12
Cash management improvement 11
Revenue / profit increase 11
Transportation / logistics cost reduction 9
Maintenance reduction 7
On-line delivery improvement 6
Source : Fryer, Bronwyn, “The ROI Challenge,” CFO,
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September, 1999, P.90
Intangible Benefits with ERP
Tangible Benefits % of Companies
Information / visibility 55
New / improved processes 24
Customer responsiveness 22
Integration 13
Standardization 12
Flexibility 9
Globalization 9
Y2K 8
Business performance 7
Supply/demand chain 5

Source : Fryer, Bronwyn, “The ROI Challenge,” CFO,

September, 1999, p.90.
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TECHNOLOGY FACTORS TO CONSIDER
IN SELECTING AN ERP SYSTEM

Technology Factors Questions

Cost of technology What are the start-up and recurring costs?
Installation What consulting assistance is offered (time,
User interfaces cost)?
Upgradability What interfaces are supported?
Computing environment What is the frequency of upgrades?
Personnel requirements What is the computing environment?
What expertise is needed for design and
implementation (business analysts,
consultants)?

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 HOW SHOULD WE IMPLEMENT ERP SYSTEMS

Obtain the right mix of people, processes and technology!!

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 ERP CHALLENGES
Managing People
Implementation Challenges  Change
Scope  Team work
Budget  Relocation
Timeline  Top Management Support
Process Redesign Support/Maintenance Challenges
Unrealistic expectation  Right people
Complex Interface  Vendors
 Up gradations
 Managing transition
 Benefits Realization
CAUSES OF FAILURES OF ERP

•Underestimation and Incorrect expectations

•Failure to involve affected employees in planning and
development phases
•Poor IT Infrastructure
•Poor Knowledge transfer
•Change Management
•Failure to do the data conversion and testing
•Inability to accurately map the business processes

Finally it’s a mix of People, Process and Technology 22

 COMMON MYTHS
ERP means more WORK and PROCEDURES

ERP will makes Employee's JOBLESS

ERP is just for the DECISION-MAKERS

ERP is just for MANUFACTURING ORGANIZATION

ERP package will take care of EVERYTHING

One ERP Package will suit EVERYBODY

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 EMERGING TRENDS
CRM is the first and the foremost priority
Cloud computing
Increasing focus on Business Intelligence
Mobile ERP
More ERP choices, more ERP decisions
Data is the new competitive advantage
Security moves beyond the perimeter
Consumer quality interfaces: Consumers spend tons of time using mobile apps
that are beautifully and intuitively designed. People want the same from
enterprise apps.

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TO DO
Research and learn about the implementation of ERP. Use trade
publications and on-line library databases (e.g., ABI Inform,
ProQuest, First Search, Wilson Select Plus, available through your
library) to conduct a search for articles.
a. Find a success story of ERP implementation. What factors
contributed to the success of this implementation?
b. Find a story of problems encountered with an ERP
implementation. What factors contributed to the encountered
obstacles?

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