ERP Shilpa Balan Ph.D. Candidate (MIS)

1. ERP Shilpa BalanPh.D. Candidate (MIS) University of Mississippi

2. ERP • Enterprise resource planning (ERP) systems integrate information across an entire organization, embracing finance, manufacturing, sales and service, etc. • An integrated information system that serves all departments within an enterprise. University of Mississippi

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6. Origin of ERP • In 1990 Gartner Group first employed the ERP[as an extension of material requirements planning (MRP), later manufacturing resource planning • By the mid–1990s ERP systems addressed all core functions of an enterprise University of Mississippi

7. Using ERP for Accounting Information Problems associated with unintegrated systems Data sharing usually did not occur in real time Accounting’s data were often out of date ERP system, with its centralized database, avoids these problems In traditional accounting, company’s accounts are kept in a record called a general ledger 7 University of Mississippi

8. Management Reporting with ERP Systems Generating the right reports for the right situation is often challenging Without an ERP system, the job of tracking all the numbers that need to go into a report is a monumental undertaking With ERP system, vast amount of information is available for reporting purposes 8 University of Mississippi

9. The Enron Collapse October 16, 2001: Enron was one of the world’s largest electricity and natural gas traders Reported a $618 million third-quarter loss and disclosed a $1.2 billion reduction in shareholder equity U.S. Securities and Exchange Commission (SEC) inquiry 9 University of Mississippi

10. The Enron Collapse (cont’d.) Enron’s financial statements had been audited by Arthur Andersen, a highly regarded accounting firm Andersen employees on the Enron engagement team were instructed to destroy documentation relating to Enron 10 University of Mississippi

11. Outcome of the Enron Scandal Shareholders lost an estimated $40 billion dollars Thousands of workers lost their jobs 31 individuals were either charged or pled guilty to criminal charges Jurors convicted accounting firm Arthur Andersen for obstructing justice by destroying Enron documents U.S. Congress passed Sarbanes-Oxley Act of 2002 Act was designed to prevent the kind of fraud and abuse that led to the Enron downfall 11 University of Mississippi

12. Implications of the Sarbanes-Oxley Act for ERP Systems Companies with ERP systems in place will have an easier time complying with the Sarbanes-Oxley Act than will companies without ERP 12 University of Mississippi

13. Benefits of ERP • Eliminate the need to synchronize changes between multiple systems • Provide a comprehensive enterprise view • Real time data availability • Improve decision making University of Mississippi

14. Modules in SAP ERP • Financials (Accounting)  • Human Resources (HR) • Materials Management (MM) • Sales & Distribution (SD) • Production Planning (PP) University of Mississippi

15. Financials • Capability of meeting all the accounting and financial needs of an organization. • The FI (Financial Accounting) Module integrates with other SAP Modules such as MM (Materials Management), PP (Production Planning), SD(Sales and Distribution), HR(Human Resources) • Sub modules: Accounts Receivables Accounts Payable General Ledger Travel Management  University of Mississippi

16. Accounting and Finance Figure : The Accounting and Finance functional area exchanges data with customers and with the Human Resources, Marketing and Sales, and Supply Chain Management functional areas University of Mississippi

17. Materials Management • Tracking, controlling and management on the materials moved in within and out of the organization • Primarily covers the tasks of the company’s procurement and warehousing. University of Mississippi

18. Sales and Distribution • Sales Orders • Deliveries • Pricing • Billing University of Mississippi

19. Marketing and Sales Figure : The Marketing and Sales functional area exchanges data with customers and with the Human Resources, Accounting and Finance, and Supply Chain Management functional areas University of Mississippi

20. Production Planning • Transactions to complete the Plan to Production process • Convert Planned order to Production order • Create Delivery University of Mississippi

21. HR • Information generated from HR usually focuses on benefits, payroll, training, personnel development, compensation, time and travel • Sub-components: Personnel Management Travel Management Payroll University of Mississippi

22. Human Resources Figure : The Human Resources functional area exchanges data with the Accounting and Finance, Marketing and Sales, and Supply Chain Management functional areas University of Mississippi

23. Case Study • Kat-Kit Ltd. has operated since 1982 • Subsidiary of a US owned multinational company specializing in the confectionary business. • Famous products- Bazooka chewing gums and the Push-Pops lollipops • ‘Casper the friendly ghost’ toy containers, containing gum or sweets University of Mississippi

24. Case Study- Contd … • By 1995, 20% of their products were manufactured locally, the remainder being imported from China, Thailand, and other countries. • The product life cycle of some of the products was extremely short • Distributed out of three warehouses — Cork (Ireland), Liverpool (United Kingdom), and Rotterdam (Holland). University of Mississippi

25. Case Study- Contd … • All activities were managed from Cork • The UK was the biggest market • Sales campaigns were not launched simultaneously in all countries and regions • Spreadsheets used extensively to create mini profit and loss accounts • Complain to its parent company (too much replication of data) University of Mississippi

26. Problems • Lack of stock control • Problems with reporting to US headquarters • Compliance with requirements for regular monthly and quarterly reports was slow • Too much information was contained in employees’ heads rather than in the company’s information systems. • Orders not being met on time or being forgotten • No clear idea how much had been shipped to a particular customer. • Shipping deadlines were not met due to paperwork delays. University of Mississippi

27. Goal • Improve decision making • Automate basic flows of information University of Mississippi

28. Discussion Question • You need to plan an ERP system to convince the manager at Kat-Kit to purchase your system. While convincing, you need to tell the manager how your system will benefit Kat-Kit to grow better. University of Mississippi

29. Solution • While convincing the manager, you need to discuss in terms of time and cost which are the main assets of a company. • Since Kat-Kit Ltd. has minimal experience in terms of software, free training should be provided to employees for 3 months on the ERP system. • Discuss with the manager how the company will gain in terms of cost since they do not have to store information separately for each department. • Talk about globalization • Discuss the use of the ERP system in future transactions (payoffs). University of Mississippi

30. Solution- Contd … • Provide an offer for free upgrade or maintenance (or some discount) in the future. • Explain how the staff could use Reports and the data analysis would help improve customer profitability • Freeing of manpower for either higher level analytical tasks or improved customer service • Speeding up of reports University of Mississippi

31. The Case For ERP Systems •  ERP systems represent the implementation of a managerial dream of unifying all the information systems required by the firm in one single system.  • ERP systems have very beneficial effects that remove the need for often disparate end-user applications. • ERP systems simplify, accelerate and automate much of the data transfers. University of Mississippi