Enterprise Resource Planning (ERP)

The need for integrated information in business

Learning Objectives  Name the main functional areas of operation in a business  Identify the kinds of data that each main functional area produces  Identify the kinds of data that each main functional area needs  Define integrated information systems and state why they are important  Understand what an ERP system is and how it evolved

Introduction: Enterprise Resource Planning  Manage company-wide business operations  Uses a common database and shared management reporting tools

Key Functional Areas of Operation  Marketing and Sales  Production and Materials Management  Accounting and Finance  Human Resources

Business Processes  Managers now think in terms of business process - a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer  Take the customer’s perspective

Business Processes Cut Across Functional Lines 

Purchasing a new computer - customer is not concerned about how computer was marketed or how its components were purchased or how it was built, or the route the delivery truck took - just want a working computer at a reasonable price!

Example: Buying a new PC  Information on products available  Place order quickly, maybe obtain financing  Quick delivery  24 Hour help

To do this, company needs to:  Make sure functional areas are integrated  Information on customer configuration must be up-to-date  Manufacturing needs configuration from sales  If financing is required, that information from sales is needed in accounting

Functional Areas and Business Processes of a Very Small Business  Marketing and Sales  Production and Materials Management  Accounting and Finance  Human Resources

Functional Area Information Systems  Potential inputs and outputs for each functional area  Different kinds of data and usage of data

Marketing and Sales  Determine pricing  Take customer orders  Create sales forecast

Production and Materials Management  Planning  Need accurate forecasts from Marketing and Sales  Compare costs with Accounting

Accounting and Finance  Record transactions  Summarize data

Human Resources  Recruit  Train  Evaluate  Compensate

Evolution of Information Systems to Meet Integration Needs of Business  Prior to 1960, all systems were paper based  Data entry, storage, retrieval were slow, labor-intensive processes

Computer Hardware and Software Development  The first business computers mainframes (huge computers) performed repetitious data processing tasks  Computers smaller and faster - the PC is born!

 Software proliferates - release of PC software gave people control over their own computing

Early Attempts to Share Data  You may have heard the term Client/Server architecture: this was and is a way to share data residing on individual PCs  By the end of the 1980s, the hardware and software needed to support the development of integrated systems, like ERP systems, was in place: fast computers, network access and centralized database capability

ERP Systems  Software to allow all business areas to be integrated -- finance, sales, production, etc.

 Interactive and real-time processing  Users interact with computer screen, not printed data  Major advantage: access to common data across business functions -- eliminated redundant data and communications lags

Questions about ERP  Is it for every company?

 Is the software flexible?  How long does it take to implement?

 How costly is it?

 How much profit should you expect?  How long does it take to see an ROI?  Why do some have more success while others fail?