Week 6: Enterprise Resource Planning

1. Week 6: Enterprise Resource Planning MIS5001: Management Information Systems David S. McGettigan Adapted from material by Arnold Kurtz, David Schuff, and Paul Weinberg

2. Agenda • Prior Lecture Recap • Enterprise Resource Planning • Next Week

3. Prior Lecture Recap

4. Prior Lecture Recap • Sustaining Technology vs. Disruptive Technology • Characteristics and Examples of Both • Organization Innovation • Definition • Benefits • Process • Adapting to Change

5. Enterprise Resource Planning Plans are nothing; planning is everything. Dwight D. Eisenhower

6. Enterprise Resource Planning (ERP) • From the “ground up” integration of business processes • Software solutions include: SAP, Oracle, Peoplesoft • A single application ties together multiple business functions: • Finance • Sales and Distribution • Manufacturing • Human Resources • Ability to apply “best practices” to these processes “off the shelf.” • Ability to apply business processes consistently through configuration.

7. Function Example: Finance • Financial and management reporting -- Provide a series of standard analyses to meet the reporting needs of a wide range of end-users, including C-level executives, line-of-business managers, and sales assistants. • Planning, budgeting, and forecasting -- Support traditional budgeting, rolling forecasts, and collaborative planning, such as cost center planning. Analytical planning workbench allows you to model planning scenarios, and provides preconfigured planning applications for efficient operational planning. • Strategy management and scorecards -- Link and align operational and strategic plans and develop key performance indicators (KPIs) that support a number of popular scorecard methodologies, including balanced scorecard, economic value-added, and activity-based costing methods. • Cost and profitability management -- Assign overhead costs, manage the costs incurred by products and services, and analyze the profitability of products and services. • Working capital and cash flow management -- Manage working capital management with functions that optimize logistics processes and improve liabilities and receivables management. Manage cash flow, including cash flow calculations and middle- and long-term planning. • Payment behavior analysis -- Manage receivables by analyzing payment histories and determining the days sales outstanding (DSO), which form the basis for payment optimization. Source: sap.com

8. Function Example: HR • Time management -- Record hours worked, display work schedules, submit leave requests, and receive approvals. • Business travel and expense management -- Manage all aspects related to business travel and expenses, from trip planning to creating expense reports. • Payment administration -- Handle issues related to salary, such as salary verification and compensation statements. • Skills/appraisals maintenance -- Access a qualifications profile, maintain a skills database, and view recommendations for skills enhancement. • Corporate learning -- Display training schedules, sign up for training, and receive training approval. • Internal recruiting -- View job openings within the company, create application materials, apply for a position, and check the status of pending applications. • Personal information management -- View, enter, and update personal information, such as address, dependents, emergency contact, tax withholding, and bank data. • Corporate information management -- Manage items related to daily work activities, such as your company directory. • Purchasing -- Purchase goods and services required for maintenance, repair, and operations (MRO). Create a requisition, confirm receipt of goods and services, and approve an invoice for payment. Source: sap.com

9. Software Example: SAP • Employee and Manager Self-Services • Allows employees and managers to create and approve leave requests, etc. • Customer Relationship Management • Customer contact and opportunities • Sales Order Management • Sales information, handle quotation and order management, and perform reporting and analytics. • Accounts Payable Invoice Management • Receive supplier invoices electronically, quickly handle open items, avoid duplicate payments, and resolve payment disputes

10. Business Benefits • Why are the following impacted by ERP? • Shorter Cycle Time • Improved Productivity / Personnel Reduction • Lower IT Costs • Real Time Accounting • Mechanisms for control • Data validation • Role assignment • Process checks • Benefit of Integration: • Example: authority to prove purchase orders linked to HR data base and salary grade • Others???

11. Implementation Expense Hardware $1.46M Software $1.86M Internal Staff $2.46M Professional Services $4.82M • What is included in each of the above? • Why is professional services approx 45% ? • What could be the “total cost of ownership?” Source: CIO, October 15, 1999

12. Drawbacks • Cost • Complexity • Difficulty in achieving process standardization • Project management requirements • Cultural Fit • Change Management

13. Case Study: Cisco • Do what extent does information technology contribute to the Cisco strategy? • How was the ERP project justified to the board for approval? Do you agree or disagree with the approach and decision? • What was Solvik’s web strategy for Cisco? How did the Internet and Intranet strategies tie in with the ERP project? Why was the ERP project essential for their web strategy to succeed? • What makes a good manager for the projects described in this case? How high in the organization should the manager sit?

14. Next Week Knowledge Management