Chapter 14

Enterprise Resource Planning Systems

McGraw-Hill/Irwin © 2011 The McGraw-Hill Companies, All Rights Reserved

Learning Objectives

 Understand the scope of enterprise resource planning (ERP) systems.

 Recognize the client/server structure of ERP systems.

 Relate the value of integrated information in a complex firm.

 Identify the challenges associated with implementing ERP systems.

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Enterprise Resource Planning (ERP)

LO 1     

Enterprise resource planning (ERP) system

: computer system that links all the areas of the business Manufacturing knows about new orders as soon as they are entered Sales knows the exact status of a customer order Purchasing knows what manufacturing needs to the minute The accounting system is updated as all the relevant transactions occur

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LO 1

Enterprise Resource Planning (ERP)

Continued

     The potential benefits are huge Savings in redundant postings Redundant jobs can be eliminated Other jobs can be done faster Creates new ways to do business    Benefits are not without cost ERP systems are complex and expensive May require major changes in processes

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LO 1

Major Developers of Enterprise Resource Planning Software

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SAP

LO 1        SAP AG is the world leader in providing ERP software Flagship product is R/3 Software designed to operate in a three tier client/server configuration Cost is a high-speed network of database servers Application consists of software modules Applications are fully integrated and share data Firms wishing to use SAP may need to change their practices to those implemented by SAP

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LO 2

Three-Tier Client/Server Configuration

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SAP Application Modules

LO 2  Software is built around a set of      application modules: Financials Human capital management Operations Corporate services Duet –Microsoft Office integration  Can be used either alone or in combination

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Financials

LO 3  Financial application provides functionality to run the financial accounts for the company     The application is divided into three areas:

Financial and management accounting module

: includes general ledger, accounts payable, accounts receivable, capital investments and closing the books

Corporate governance:

requirements internal control and audit functions needed to adhere to corporate governance standards, documentation of internal controls, and audits that comply with current

Financial supply chain management

: handles the money flow related to supply chain activities

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Human Capital Management

LO 3   This application contain the full set of capabilities needed to manage, schedule, pay, and hire the people who make a company run         It includes: Payroll Benefits administration Application data administration Personnel development planning Workforce planning Schedule and shift planning Time management Travel expense accounting

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Human Capital Management

Continued

LO 3  The “talent management” functions are designed to help align employee goals with corporate goals by maximizing the impact of training  “Workforce deployment” applications are to aid in deploying the right people with the right skills to positions in the firm  Managing project teams, monitoring the progress of projects, and tracking time are supported

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Operations

 Materials management covers all tasks  within the supply chain It also includes inventory and warehouse management  Plant maintenance supports the activities associated with planning and performing repairs and preventive maintenance LO 3  Quality management plans and implements procedures for inspection and quality assurance and is built around the ISO 9001 specifications.

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LO 3

Operations

Continued

 Production planning and control supports both discrete and process manufacturing processes  Sales order management, configuration management, distribution export control, and shipping and transportation management are handled as well

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Corporate Services

LO 3   The corporate services applications are designed to manage both centralized and decentralized services This includes managing the firm’s real     estate portfolio, including: Property acquisition and disposal Property management Building operations and maintenance Investment reporting  Another major aspect of the corporate services is travel management

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mySAP.COM and SAP NetWeaver – Integrated E-Business Applications

LO 3  All SAP functions can be implemented   using an Internet interface mySAP versions work over the Internet Can run SAP without deploying any special software 

Cloud computing

: delivering hosted services over the Internet     Three distinct characteristics: Sold on demand It is elastic The service is fully managed by the provider

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LO 3

NetWeaver

 NetWeaver allows users to build their own application on top of SAP applications  Users and third-party vendors can offer an unlimited variety of specialized applications

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Implementing ERP Systems

LO 4     SAP has strong competition Oracle i2 Technologies PeopleSoft   Implementation of ERP is costly Cost of the software typically one-third or less of the total cost  ERP implementation does not always work out

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Major Problems with ERP Implementation

LO 4  ERP technology could not support their businesses  Their organizations could not make changes needed to benefit from ERP  ERP implementation might actually damage their businesses

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LO 4

Reasons to Implement ERP

 Desire to standardize and improve processes  To improve systems integration  Improve information quality

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