Enterprise Resource Planning

1. Enterprise Resource Planning IST 421 Spring 2008

2. 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

3. 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 (SCM)

4. 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

5. ERP History Adapted from: Using ERP Systems in Education, E. Watson and H. Schneider, Communications of AIS, Volume 1, Article 9, Feb 1999

6. 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

7. ERP Applications • Best-of-Breed approach • Each ERP vendor had perceived specialty • SAP – Production Planning & Materials Management • PeopleSoft – Human Resources • As is install or customize?

8. 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

9. ERP Applications • Most use three-tier architecture • Presentation layer • Application server layer • Database layer • Various integration techniques • Proprietary • EDI, COM, CORBA, Java

10. ERP Applications • Business Vision – What business problem is being addressed? • Adopt “best practices” addressed by software vs. customization?

11. 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?

12. Supply Chain Management

13. Supply Chain Management • Supply chains support the flow of goods and services from their origin to their endpoint – the customer.

14. Supply Chain Management

15. 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.

16. Supply Chain Management • The category includes software that: • manages plant scheduling, • demand forecasting, • ordering raw materials and • related functions

17. Supply Chain Management • Plant automation applications are involved in the actual manufacturing processes, such as: • machining, • material movement, • blending, • heating, • cooling

18. Supply Chain Management • 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.

19. 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.

20. 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

21. Integrated Supply Chain • Standards: • Process-based standards: • ebXML & RosettaNet • Create common processes that span enterprises • Provide common metadata • Information exchange infrastructures

22. Integrated Supply Chain • Service-based standards: • Common services to support trading community • Example: web service globally accessible to calculate shipping costs • Share common processes and application services span multiple companies • Services need to be accessible and neutral

23. Integrated Supply Chain • Message-based standards: • Focus on exchange of information between organizations • EDI example of format • Easy to implement • Doesn’t address common processes

24. EDI

25. EDI • Short for Electronic Data Interchange • the transfer of data between different companies using networks, such as the Internet. • ANSI has approved a set of EDI standards known as the X12 standards. Source: www.webopedia.com/TERM/E/EDI.html - 46k - Sep 14, 2005

26. EDI Business Transaction Cycle • Here is a typical EDI business transaction cycle using a dial-up or network connection to a Value-Added Network (VAN): • Customer sends a purchase order (EDI 850) • Supplier sends an acknowledgement notice (EDI 997) • Supplier sends an advance shipping notice (EDI 856) • Customer sends an acknowledgement notice (EDI 997) • Supplier sends an electronic invoice (EDI 810) • Customer sends another acknowledgement notice (EDI 997) • Customer sends an Electronic Funds Transfer (EFT) payment Source: http://www.edi-101.com/edi-cycle.htm

27. Sample • http://www.edi-service.com/stds_rqst.htm