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IDU0010 ERP,CRM ja data warehouse süsteemid Sissejuhatus ERP süsteemidesse Enn Õunapuu enn@cc.ttu.ee. What is ERP? . ERP systems are an integrated suite of information technology applications that support the operations of an enterprise from a process perspective .
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IDU0010 ERP,CRM ja data warehouse süsteemidSissejuhatus ERP süsteemidesseEnn Õunapuuenn@cc.ttu.ee
What is ERP? • ERP systems are an integrated suite of information technology applications that support the operations of an enterprise from a process perspective. • If fully adopted, they support all the core functions of an enterprise, including financials, human resources management, manufacturing, logistics, projects, payroll etc. • Built upon relational database systems. • ERP has historically been seen as back office software. ERP vendors also offer “bolt ons” such as customer relationship management (CRM), supply chain management (SCM), etc. • Bolt ons can be purchased from 3rd party vendors or ERP vendors. • These applications provide specialized functionality above and beyond the ERP itself.
How ERP Evolved • Reorder point systems,1960s • MRP, or Materials Requirements Planning systems, that assisted manufacturing companies in planning and scheduling production, 1970’s • Manufacturing Resource Planning, or MRP II, 1980’s • ERP, late 1990’s and onward. Earlier driver for adoption was Y2K. ERP systems integrate all core systems across a firm. • These early MRP and ERP systems were mainframe-based systems – in the 1990’s evolved into client server.
ERP and Improving Business Processes • ERP systems enable adopting enterprises to deploy best practices . • Best practice is a management idea which asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method, process, etc. • When an enterprise uses an ERP system to help them transform their business processes to state of the art best practices, this is known as technology-enabled reengineering. • Under this more radical approach, business processes, work flows, information, organizational design and position descriptions are changed. • This is opposed to incremental changes to processes like TQM, a type of business process improvement.
ERP Market- Tier 1, 2, 3 • Tier 1 • Companies with over 1000 employees and sales over $250 million • There are currently two major ERP players in this Tier- SAP and Oracle • Oracle Fusion - acquisitions of Peoplesoft and JD Edwards • Tier 2 • Medium sized companies with 100-999 employees • Sales between $5 and $50 million • Can use scaled down larger packages and packages geared toward this Tier like NetSuite and Dynamics • Tier 3 • Companies with sales under $2 million and less than 100 employees • Generally use smaller ERP packages like NetSuite and depending on size could get along with Quickbooks etc.
Main ERP Player: SAP • SAP stands for - Systems, Applications, and Products in Data Processing • Founded in 1972 • 12 Million Users. 100,600 Installations. 1,500 Partners. • Recognized leader in providing collaborative business solutions for all types of industries -- in every major market. • The company, headquartered in Walldorf, Germany, employs more than 37,700 people in more than 50 countries, and serves more than 34,600 customers worldwide.
ERP Value • The value of ERP is the opportunity to integrate an entire organization by having a single point of entry and sharing of data across the enterprise. Creates less need to reconcile data and rekey. Inefficient business processes that were disjointed become much more efficient. • The legacy system layout: each dept, business unit might have their own systems (end user computing etc), leads to inefficiencies and delays. The trend now is toward integration of data. • Example: in a horizontally integrated ERP system, the Purchasing department would process a purchase order in a central database with a common General Ledger. Both Accounts Payable and Receiving have access to the same General Ledger so the data would be immediately available to them. There is no time lag, re-entry of information, or heavy dependency on paper documents.
ERP Affects All Types of Organizations • Not just large, but small and medium sized. • You could be auditing companies that use ERP systems. • You may be the end user. • You may even be involved with implementation of these systems on an internal project team capacity or external consultant (e.g., Deloitte Consulting or Accenture).
ERP Provides A Key Reengineering Tool • In 1990, Michael Hammer got the corporate world interested in obliterating existing processes (clean slate reengineering). Unfortunately, after things were obliterated, many firms had no idea what to replace them with. • In late 1990’s ERP provided the primary tool to guide reengineering efforts. Technology-enabled reengineering means using ERP to enable transformation of processes. • Hammer (1997) commented that “ERP equals forced reengineering.”
ERP Diffuses Best Practices • ERP systems are based on so-called “best practices” -the best ways of doing processes. • SAP has thousands of best practices embedded in their applications. • This means that any firm that installs has access to a wide range of best practices. • Further, business practices are being added all of the time. As new best practices are found and embedded in particular applications, they can become available for inclusion in new versions of software. • As a result, there is this cycle of finding best practices, building them into the software and diffusing them out to new users.
ERP Facilitated Adoption of Client Server Computing • In the early 1990’s ,client server computing became available and offered many advantages over existing mainframe solutions. • ERP became one of the dominant, initial corporate applications of client server computing.
ERP has Changed the Nature of IT Jobs and Most Functional Areas • The basic nature of the IS function changed from analysts /programmers/designers of systems to those where knowledge of existing ERP packages is critical. • ERP systems are blurring the lines between IT and users. There is a huge demand for users or line-of-business personnel, who also have professional level IT skills. • Traditional IT types who know only about technology and nothing about the business are not needed now as they once were. • “Understanding the business is probably the most critical (aspect) .… It’s more important to understand how you want things to flow through your factory than [to have] the skill of programming -- except for the few places where your ERP package doesn’t do what’s needed …that’s when you need programmers.”
ERP Systems Value • Integrated processes and information systems • More effective and efficient business processes • Enables organizational standardization • Eliminates information asymmetries • Provides on-line and real-time information • Facilitates intra- and inter-organization communication and collaboration • Reduced reliance on programmers to maintain and patch legacy systems • Can reduce complexity of application and technology portfolios
Benefits of ERP • Companies usually have a business case rationale for adopting ERP and take this rationale to the Board. A business case normally includes tangible as well as intangible benefits. • Some key benefits: • Integrate financials • Have one view of the customer • Standardize manufacturing processes • Reduce inventory • Standardize information such as HR and Customer data there are others……depends on company
An ERP System – Example Layout In reality, an ERP implementation is usually just one part of a more complex environment, including bolt-ons,legacy applications retained, possible data warehouse(s),enterprise application integration solutions and connections to external business partners.
Chapter 2: ERP Technology MODERN ERP SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS
IT Infrastructure for ERP • Early systems – mainframe-based • Later – client server, three-tier • Client – fat client/thin client • Database server, (relational database) application server, client
ERP Interface • With ERP software, the GUI usually takes the form of a dashboard that graphically presents many different types of information in any number of visual presentations. • These web pages are generally customized to suit the needs and preferences of a set of users or a specific user. • Can also include: • Business process activity based on production or logistics information. • Tasks, reminders and other notifications. • Calendaring and scheduling resources. • Messaging including email, instant messaging and telephone traffic. • Official communications from designated sources.
Back Office/Front Office • The grey circle in previous slide considered back office software (Core ERP). • The yellow considered front-officesoftware because they integrate with customers. • The peach considered supply chain because they integrate with suppliers/vendors. • All of the systems outside grey are considered to be bolt-ons to Core ERP.
Configure vs Customize ERP • Configurationinvolves “setting switches” during implementation. Switches determine how the system will execute business processes. • Vanilla is accepting the majority of the defaults. • Example of configuring: FIFO vs LIFO, reporting relationships, auditing mechanisms, depreciation, consolidation info etc. • TechnicalversusFunctional Configuration • Customization is changing code. • This is expensive and time consuming. • Only do this if really needed and you believe it will lead to a competitive advantage. • Don’t customize because you feel your employees will resist new way of work….that is the point of ERP!
Vanilla (out of the box) • Vanilla implementations mean 1) no customization and 2) very few if any changing default configurations. • Easy to do • Inexpensive • Run of the mill…you get what everyone has
Authoritative Data Source • The relational database – • Tables are relations • Fields are attributes in the table (in columns) • Records are instances in the table (in rows) • Each table has a primary key that is the unique identifier and connects to another table so querying and reporting can take place. Usually the primary key is some sort of code. • The primary key in one table becomes the foreign key in another table so the tables can connect and querying can take place.
Entity-Relationship Diagrams • These are diagrams that show the relationships between tables. • Many-to-many • One-to-many, many-to-one • One-to-one • These are rules that show how tables relate to one another. • Tables show up on screens in ERP menus.
Chapter 3: ERP and Business Process Reengineering MODERN ERP SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS
Business Process Reengineering • Concept coined by Michael Hammer Reengineering the Corporation… • Reengineering is the “thorough and complete redesign of business processes and systems to achieve dramatic performance improvements.” • The focus of BPR is not on how a process is done, but WHY it is done.
Types of Reengineering • Technology-enabled reengineering • A particular technology (or portfolio of technologies) is chosen as a tool to facilitate reengineering. • The technology drives the reengineering. • Clean Slatereengineering • Process design starts with a clean slate • Also referred to as “starting from scratch” • Theoretically, no limits
Somewhere Between the Two • In actuality, there are few projects that are “purely” clean slate or technology enabled • Most companies are in the middle somewhere Technology Enabled Clean Slate Most Firms
Advantages of Technology-Enabled Reengineering • ERP provides the tool and structure to facilitate change • ERP bounds the design • Design is feasible and we know it works (it’s been proven) • Designs likely are more cost effective than clean slate • Designs likely can be implemented in a timely manner
Advantages of Clean Slate Reengineering • Not constrained by a particular tool • Not constrained to a limited set of processes • Evolution is not limited by a particular technology • Can develop a design that others cannot access (which gives a competitive advantage)
Which Approach is Best? Depends on: • Firms Size: larger firms have the resources to do clean slate, are often industry leaders, are likely to use processes as a competitive advantage, and are more likely to need a unique solution • Available Resources: clean slate requires substantial resources; in some cases, clean slate will lead to many starts and stops before the “final” design is found • Time Pressure: clean slate takes longer so only firms that have the time can really do clean slate approaches
Which Approach is Best? Depends on: • Strategic Gain: The more unique a firm is in terms of its industry, processes, customers or other factors, the more likely that they see their specific processes as a competitive advantage and thus use some clean slate approach. • Uniqueness of Solution: technology enabled approaches are easily copied and diffused; clean slate approaches are not as rapidly or as easily copied.
How Do You Figure out What Processes to Reengineer? • Customer-centric processes! What process has the greatest impact on the customer? • What’s broken the most? • Which of the processes are at the moment most susceptible to successful redesign? (feasibility and scope) • Low hanging fruit
How Do You Know if a Process is Broken? • Symptom: Extensive information exchange, data redundancy, and rekeying • Disease: Arbitrary fragmentation of a natural process • Symptom: Excessive inventory, buffers, and other assets • Disease: You have created system slack to cope with uncertainty • Symptom: High ratio of checking and control to value adding • Disease: Fragmentation of the process • Symptom: Reworking and iteration • Disease: Inadequate feedback along chains • Symptom: Complexity, exceptions and special cases • Disease: Accretion on a simple base
Hammer’s Reengineering Principles • Organize around processes and outcomes not tasks • Centralize and disperse data • Capture data once at its source • Information producers process information • Output users perform the processes • Empower workers • Integrate parallel activities
Reengineering Challenges • Resistance from employees • Cost • Job losses • Tradition and culture • Time requirements • Lack of management support • Risks to managers • Retraining
Maximizing Success in BPR • Gaining top management (CEO) support is #1 • Involving users • Surrounding the project with sense of urgency • Selling the change - educate • Creating an atmosphere of trust • Keeping lines of communication open • Training employees • Change way employees are rewarded and evaluated • Realistically describing the merits of the system
Enterprise architecture An enterprise architecture (EA) is a rigorous description of the structure of an enterprise. EA describes the terminology, the composition of subsystems, and their relationships with the external environment, and the guiding principles for the design and evolution of an enterprise. This description is comprehensive, including enterprise goals, business functions, business process, roles, organisational structures, business information, software applications and computer systems.
MDA our approach • Process oriented • Evolutionary
