Transcript ERP Systems

Introduction to ERP Systems
and SAP
MBA 8556
Fall 2004
Dr. Wagner
What is ERP Anyway?
“Enterprise Resource Planning”
 A set of integrated software modules
for supporting all of an enterprise’s
processes in real-time.

– Sales, Production, Logistics, Purchasing,
Accounting, and Human Resources share
relevant information with each other as
needed.
Your first business enterprise…
Think in terms of business
processes…

What are the
processes involved
in running a
lemonade stand?
– Assume one person
– Assume cash
business
Inputs
Process
Outputs
Sample Lemonade Processes
Get OK
From
Mom
Get
supplies
together
Make
Get OK
Make
lemonade
Sign(s)
From
Mom
Rake in
Make
Make
Set
up
Choose
The cash
lemonade
lemonade
table
location
Sample Lemonade Processes
Get OK
From
Mom
Is it
feasible?
Get
supplies
together
What
supplies do
I need?
Make
Get OK
Make
lemonade
Sign(s)
From
Mom
How much
do we
make?
How much
to charge?
Rake in
Make
Make
Set
up
Choose
The cash
lemonade
lemonade
table
location
Is it worth
continuing?
Who are my
customers?
Your enterprise partners…
Customers
Grocery
Friends
Mom/Dad
Lemonade Stand Exercise

Point of this exercise?
– We can view everything we do, personal
and professional as a set of processes.
– Start to think about how our decisions
affect others and their processes
Lemonade Stand Exercise

Point of this exercise?
– We can view everything we do, personal
and professional as a set of processes.
– Start to think about how our decisions
affect others and their processes
What would happen if all the partners in
this process had access to each other’s
information in real-time?
Functional Silo View of an Organization
Functional Silo View of an Organization
Functional Silo View of an Organization
Functional Silo View of an Organization
Functional Silo View of an Organization
Functional Silo View of an Organization
Information?
Cross-Functional Nature of the Order
Management Process
Quote
Commit
Produce
Check
Credit
Deliver
Bill
Collect
Cross-Functional Nature of the Order
Management Process
Quote
Commit
Produce
Check
Credit
Deliver
Bill
Collect
Sales & Distribution
Production
Planning
Financial
Materials
Mgmt
Accounting
Cross-Functional Nature of the Order
Management Process
Quote
Commit
Produce
Check
Credit
Deliver
Bill
Collect
Sales & Distribution
Production
Planning
Financial
Materials
Mgmt
Accounting
What if….

You had Real Time information in your
Job?
– Accurate inventory data
– Single point of data entry
What if….

You had Real Time information in your
Job?
– Accurate inventory data
– Single point of data entry

You could tap into information that
other departments collect?
– Vendor selection data
– Vendor pricing data available
What if….

You had Real Time information in your Job?
– Accurate inventory data
– Single point of data entry

You could tap into information that other
departments collect?
– Vendor selection data
– Vendor pricing data available

You had certain tasks and work processes
automated?
– RFQ and contract processing
– No more reconciliations
– Automatic data transfer and update
That’s what an ERP System
Does
It is a packaged business system that
allows you to:

Automate and integrate many of the
more tedious business practices.
That’s what an ERP System
Does
It is a packaged business system that
allows you to:

Automate and integrate many of the
more tedious business practices.

Share common data and practices
across the entire enterprise.
That’s what an ERP System
Does
It is a packaged business system that allows
you to:

Automate and integrate many of the more
tedious business practices.

Share common data and practices across the
entire enterprise.

Update and access information in a real-time
environment
Why implement ERP?

Technological reasons

Business reasons
Other Organizations implemented
ERP for these Technology Reasons
42
Y2K
disparate systems
37
poor quality of
information
26
systems not integrated
19
difficulty integrating
acquisitions
obsolete systems
unable to support
growth
12
11
6
Common Business Reasons for
implementing ERP
poor performance
27
high costs
not responsive
to customers
24
21
complex processes
20
unable to support
strategies
globalization
inconsistent
business processes
15
15
10
Business Process
Reengineering




BPR is the creation of entirely new and more
effective business processes, without regard
for what has gone before.
BPR is cross-functional by its very nature
BPR involves questioning assumptions
Text prefers “Business Engineering” term to
describe redesign of entire process chains
across functional and even organizational
boundaries
ERP Industry

80% of Fortune 1000 have implemented
– includes MSFT, IBM, and APPLE

30-40%+ annual revenue growth for 19952000 (SAP +14% Q2 2004)
– partly attributable to Y2K re-engineering

Major players
– SAP ---38% of market
– PeopleSoft
– JDEdwards, Baan/Invensys, Oracle, SCT, SGAI
Some ERP
Market Figures

1998 worldwide revenues (only license sales): $4.8 Billion
ERP:
The Competitive Arena
Source: Gartner Group
What is SAP?




A series of integrated core business application
modules for transaction processing
A set of functions that implement best business
practices
Client/Server software that processes business
transactions
A methodology for implementing application software
SAP and Market

SAP (Pronounced “Ess, Ay, Pee”!) is
industry standard in:
– software, oil, chemicals, consumer goods,
electronics

Expanding into:
– healthcare, government, pharmaceuticals,
automotive, construction, retail, service
Event-Driven Transaction
Processing

An EVENT is a condition that has
business relevance
– customer order
– production order
– customer payment receipt
Events trigger processing actions
 Events are fundamental activities in
processing business transactions
 Behind SAP’s EPC methodology

– (Event Driven Process Chain)
3 Key ERP Concepts
1.
2.
3.
Everyone works with real-time shared
data and applications
Technology becomes transparent for
users through open systems
architecture
A Process View of the organization is
required to make the project a success
Key Concept: Shared Data & Applications
1.
Integrated Data and Applications
– Data sharing in common relational
database


SAP term “Master Data” ex. Material master
95% accurate data is no longer good enough
Key Concept: Shared Data & Applications
1.
Integrated Data and Applications
– Data sharing in common relational
database


SAP term “Master Data” ex. Material master
95% accurate data is no longer good enough
– Different Application modules are
responsible for maintaining master data

Application modules should reflect “process
view” of organization
Name That Module. . .
SD
FI
Sales &
Distribution
Financial
Accounting
MM
CO
Materials
Mgmt.
Controlling
PP
AM
Production
Planning
R/3
QM
Client / Server
Quality
Management
Fixed Assets
Mgmt.
PS
Project
System
PM
Plant Maintenance
WF
Workflow
HR
IS
Human
Resources
Industry
Solutions
Key Concepts: Technology becomes transparent
for Users through Open Systems Architecture
2.
Open systems architecture
 Generally entails a 3-tier Client/Server
architecture
 May require connecting to a wide variety
of databases and mainframes/servers

SAP solves this problem through the use of
various middleware technologies that make
this transparent to the user
Key Concepts: A Process View of the
Organization is Required for the Project to be a
Success
3.
Business Process Redesign (BPR) of the
Organization...
–
–
–
–
–
Often requires major changes. Why?
May involve everyone in redesign of processes
Creates entirely new and more effective
business processes, without regard for what has
gone before.
Is Cross-functional by its very nature
Involves questioning assumptions
How will ERP affect our processes?

Financial processes
– Real-time cost and performance analysis

Across projects and divisions
– Better financial planning

Logistics processes
– Supports all phases of procurement process
– Integrates transportation management across the
supply chain

Sales processes
– Complex pricing and profitability analysis
– Real-time inventory control
Classification of Information Systems
DSS
MIS
TPS
Classification of Information Systems
DSS
MIS
TPS
Classification of Information Systems
DSS
MIS
TPS
Benefits of R/3 Reference Model
Don’t have to start from scratch
 Quick overview of application
architecture
 Identifies key R/3 process elements
 Helps visualize processes
 Shows R/3 functionality
 Speeds up process
 Helps to define current processes

– maintains process documents
SAP R/3 Basis System
Hardware
UNIX Systems
Bull
IBM
Digital
SNI
HP
SUN
Operating
AIX
Systems Digital UNIX
SINIX
SOLARS
AT&T
Bull/Zenith
Compaq
Data
General
HP (Intel)
IBM (Intel)
Sequent
SNI
...
Windows NT
IBM
AS/400
OS/400
HP-UX
Databases
Dialog
SAP-GUI
ADABAS D
DB2 for AIX
INFORMIX-OnLine 7
ORACLE 7
ADABAS D
MS SQL Server 6.0
ORACLE 7
Windows 3.11, Windows 95, Windows NT, OSF/Motif,
OS/2-Warp, Macintosh
Languages
ABAP/4, C, C+ +
DB2/400
Windows 3.11,
Windows 95,
Windows NT,
OS/2-Warp
Future Challenges for SAP




Based on late 1980’s C/S technology
– not pure Object-Oriented design
– servers are treated as distributed m/f with desktop
as almost a dumb terminal using function calls to
application server
Lack of flexibility
– difficult to modify business processes
– modifications done by configuration channels or
tack on modules by external vendors--possible
upgrade problems
Complexity- frightens some customers
Lack of strategic fit
– best for strong top-down type of organizations