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Enterprise Resource Planning. IST 421 Fall 2006. ERP Evolution. Integrated applications seem obvious today Complex hardware and software system not feasible until the 1990’s ERP systems evolved as a result Development of hardware & software technology
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Enterprise Resource Planning IST 421 Fall 2006
ERP Evolution • Integrated applications seem obvious today • Complex hardware and software system not feasible until the 1990’s • ERP systems evolved as a result • Development of hardware & software technology • Development of a vision of integrated information systems
ERP Evolution • Integrated Vision: Materials Requirements Planning (MRP) used for inventory tracking Electronic Data Interchange (EDI) enabled processing of purchases avoided paper purchase orders & invoicing systems Start of Supply-Chain Management
ERP Evolution • Business model started in 1930’s by Alfred P. Sloan – Functional Model of Business Organization • During economic problems of 1980’s and 1990’s, view changed to cross-functional processes. • Michael Hammer’s 1993 book, Reengineering the Corporation: A Manifesto for Business Revolution
ERP Evolution • ERP software was seen as a solution to business problems • Number of ERP vendors: • SAP (Systems, Applications, and Products in Data Processing ) • PeopleSoft • Oracle • Baan • J.D. Edwards
ERP Applications • Best-of-Breed approach • Each ERP vendor has perceived specialty • SAP – Production Planning & Materials Management • PeopleSoft – Human Resources • As is install or customize?
ERP Applications • Failed package installation projects • Dell Computers cancelled implementation • Owens-Corning lengthy implementation • FoxMeyer drug company (bankrupt) lawsuit • In a fortune 500 company, software, hardware and consulting fees exceed $100 million and take years to fully implement
ERP Applications • Most use three-tier architecture • Presentation layer • Application server layer • Database layer • Various integration techniques • Proprietary • EDI, COM, CORBA, Java
ERP Applications • Business Vision – What business problem is being addressed? • Adopt “best practices” addressed by software vs. customization?
ERP Applications • Returns expected? • 33% of companies saw a cost savings in sales order management • 34% reduced personnel needs • More sales can be generated through streamlined process • Reduced frustration • Realized returns?
Supply Chain Management • Supply chains support the flow of goods and services from their origin to their endpoint – the customer.
Supply Chain Management • Supply Chain Management (SCM) comprises business-management applications that provide guidance on which products to manufacture, when, and where they should be distributed. • The category includes software that manages plant scheduling, demand forecasting, ordering raw materials and related functions.
Supply Chain Management • Plant automation applications are involved in the actual manufacturing processes, such as machining, material movement, blending, heating, cooling, etc. • These applications are generally hosted on small, independent controllers, on Supervisory Control and Data Acquisition systems running on PCs, or on complex and elaborate distributed control systems.
Supply Chain Management • Prior to 1999, most companies were looking at the supply chain from an internal perspective. • The emphasis was on bringing together the operations of manufacturing, planning and scheduling with sales and marketing. • Many companies turned to Enterprise Resource Planning (ERP) and advance planning and scheduling systems to bring together the procurement process internally.
Supply Chain Management • Performance measurements – • Cash-to-cash cycle time: the time from paying for raw materials to collecting cash from the customer. Efficient SCM processes do this in 30 days vs. 100 days. • Total SCM cost: cost of buying and handling inventory, processing orders, and information systems support. Efficient SCM incur costs equal to 5% of sales vs. costs equal to 12% of sales.
Supply Chain Management • Other Performance measurements – • Initial fill rate: % of the order that the supplier provided in the first shipment • Initial-order lead-time: time needed for the supplier to fill the order • On-time performance: how often the supplier meets agreed to requested delivery dates
Packaged Applications • Market leaders • SAP • Oracle • Baan • State-of-the-art client/server or internet/intranet architectures
Integrated Supply Chain • Supply chain or value chain is the flow of goods and services from their points of origin to the ultimate consumer. • Fully integrated supply chain can react to consumer demand in minutes • High-value opportunity for most businesses
Integrated Supply Chain • Step 1: automate and optimize major business processes within each member organization. • Step 2: Extend the enterprise to all members in the supply chain
Exercise • What would be a supply chain for our semester project?