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ERP

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Technology plays a key role in today’s business environment. Many companies greatly rely on computers and software to provide accurate information to effectively manage their business. It is becoming increasingly necessary for all businesses to incorporate information technology solutions to operate successfully. One way that many corporations have adopted information technology on a large scale is by installing enterprise resource planning (ERP) systems to accomplish their business transaction and data processing needs.

Enterprise resource planning (ERP) systems are software packages that use relational database technology to integrate various units of an organization’s information system. ERP systems provide several separate, but integrated, modules that can be installed as a package for any organization.

Many large corporations use several different information systems, often because they have merged with and/or acquired other companies with varied systems. An ERP system integrates these diverse information systems and results in improved data reliability and processing efficiency. ERP systems quickly became popular with large corporations that needed a seamless integration of their business, but are now frequently used by small to midsized companies. The excellent ability of ERP systems to simplify business transaction processing, eliminate work that adds little or no value and simultaneously improve customer service are the main reasons for the outstanding success and popularity of these systems.

What is ERP:

  • ERP software is a suite of applications from a single vendor intended to integrate all of a company’s processes.
  • The software provides a universal user interface, shared reporting and analysis tools, and a common architecture.
  • ERP systems operate via integrated databases and one set of data. Thus, information can be accessed across the enterprise, rather than looking at separate operating units.

Evolution of ERP:

  • 1970′s: Custom developed systems
  • 1970′s – 1980′s: Highly customized package from one software vendor
  • 1980′s – 1990′s: Interfaced packages from multiple software vendors
  • Present: Integrated solution from one vendor

ERP Modules:

  • Financial Modules: (G/L, A/P, A/R, etc.)
  • Human Resource Modules (Payroll, Benefits, etc.):
  • Distribution Module: (Sales Order, Procurement, etc.)
  • Manufacturing Modules (Planning, Shop Floor, etc.)

General expectations from ERP System

  • Enterprise Integration
  • Integrated components or modules create functional breadth
  • Functionality within modules create functional depth
  • Technical architecture facilitates integration
  • One instance of data (no replicas)
  • Real-time updating
  • One-time updating
  • Integration also allows drill-down and ad-hoc reporting capability
  • Windows-based GUI
  • Workflow
  • Drill-Down and Ad-Hoc Reporting
  • Security
  • International Features
  • Internet-Enabled ERP

ERP Life Cycle

  • Evaluation of current systems
  • Development of a business case for the new system
  • Evaluation of potential systems
  • Selection of a system
  • Implementation of a system
  • Support of system

Strategic benefits of implementing an ERP

  • Improved customer responsiveness
  • Strengthened supply chain partnership
  • Enhanced organizational flexibility
  • Providing a “single face” to the customer
  • Improved decision-making capabilities
  • Reduction in time to market

Operational Benefits of an ERP

  1. Reduction in inventories
  2. Reduction in personnel
  3. Reduction in total logistics costs
  4. Reduction in manufacturing costs
  5. Reduction in outside warehousing
  6. Reduction in procurement costs
  7. Increased production capacity
  8. Improved order cycle time/accuracy/cost

Financial Benefits of an ERP

  1. Increased shareholder value
  2. Reduced assets deployed
  3. Increased return on equity
  4. Improved cash flow

Technical Benefits of an ERP

  1. Leverage IS dollars instead of “reinventing the wheel”
  2. Integrated package forces a process focus approach during implementation
  3. Integrated package eliminates the need to maintain version control and interfaces associated with separate packages
  4. Integrated package reduces the level of training necessary

Disadvantages of ERP

1. Implementation cost
1. Software and hardware
2. Expertise
3. Opportunity costs
2. Time to implementation
1. Lengthy and difficult process
3. MOC (management of change) challenges
4. System integration difficulties
5. Vendor dependence

ERP Vendors:

  • SAP
  • Oracle
  • Microsoft
  • Ramco

ERP Packages

ERP Trends:

  • Improvements in integration and flexibility
  • Extensions to e-business applications (CRM, supply chain)
  • Broader reach to new users (vendors, suppliers, self-service)
  • Adoption of internet technologies (web servers, Java, XML)
  • Mergers, acquisitions and divestitures of software vendors
  • General to Industry Specific Focus Transition
  • Software as a Service (SAAS) Model

Causes of ERP failures

1.    Underestimating the complexity of the planning, development, and training required

2.    Failure to involve affected employees in the planning & development phases and change management programs

3.    Trying to do too much, too fast

4.    Insufficient training

5.    Believing everything the software vendors and/or consultants say

ERP Success Factors

1.    Senior management involvement

2.    Cross-functional implementation team

3.    Extra effort up-front defining detailed plan

4.    Clear guidelines on performance measures

5.    Clear guidelines on using outside consultants

6.    Detailed plans to train users

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