Enterprise Resource

Planning

Overview

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Important Topics
What is Enterprise Resource Planning (ERP)?
Evolution Of ERP
Need For ERP
Selection process of an ERP package
Features of ERP
Components / modules of ERP
Comparison of ERP products
Technology requirements / infrastructure
Pre requisites for effective ERP implementation :
Implementation phases of ERP
Post implementation plan
Benefits of ERP
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What is Enterprise Resource Planning (ERP)?

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Ver.1.0 Slide 5
 Evolution of ERP

1960s - Systems Just for Inventory Control

Enterprise Resource Planning

1970s - MRP Material Requirement Planning

(Inventory with material planning & procurement)
1980s - MRP II Manufacturing Resources Planning
(Extended MRP to shop floor & distribution Mgnt.)

Mid 1990s - ERP Enterprise Resource Planning

(Covering all the activities of an Enterprise)

2000 onwards ERP II Collaborative Commerce

(Extending ERP to external business entities)

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Need for ERP
The need for linkages between systems

Overstocking at some
warehouses; under stocking $ $

at others Supply Chain

HR Finance

Accounts receivables not $

$
$

claimed Accounts
$

Payroll processing not

representing sales rep's Manufacturing

?
latest account wins
Balance sheets do not show

proper depreciation of Inventory

assets Warehouse
Underuse of Transportation

facilities Customer
More inventory cycle times

Purchasing

Marketing
Quality Assurance

Ver.1.0 Slide 7
 Objectives of ERP
Implementation
a) Business drivers:
To streamline business processes.
To get an integrated view of data.
To ensure better monitoring of KPIs.

b) Technology driver:

To achieve a single technology platform.

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Streamlined Business
Processes
a. Financials
a. Financials and
and Accounting
Accounting

b. Human
b. Human Resource
Resource Management
Management

c. Supply
c. Supply Chain
Chain Planning
Planning

d. Product
d. Product Lifecycle
Lifecycle Management
Management

e. Procurement
e. Procurement f.f. Manufacturing g. Fulfillment
Manufacturing g. Fulfillment

h. CRM
h. CRM

Old flow (Illustrative)

New flow (Illustrative)

Increase in operational efficiency through

streamlined business processes.

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An Integrated View of Data
a. Financials
a. Financials and
and Accounting
Accounting

b. Human
b. Human Resource
Resource Management
Management

c. Supply
c. Supply Chain
Chain Planning
Planning

d. Product
d. Product Lifecycle
Lifecycle Management
Management

e. Procurement
e. Procurement f.f. Manufacturing g. Fulfillment
Manufacturing g. Fulfillment

h. CRM
h. CRM

Real-time data for quick

business decisions.

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Better Monitoring of KPIs
a. Financials
a. Financials and
and Accounting
Accounting

b. Human
b. Human Resource
Resource Management
Management

c. Supply
c. Supply Chain
Chain Planning
Planning

d. Product
d. Product Lifecycle
Lifecycle Management
Management

e. Procurement
e. Procurement f.f. Manufacturing g. Fulfillment
Manufacturing g. Fulfillment

h. CRM
h. CRM

Support for Executive

Management.

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A Single Technology Platform
Across Cos.- 1
Client Company Client Company - 2
a.a.Financials
Financialsand
andAccounting
Accounting a.a.Financials
Financialsand
andAccounting
Accounting

b.Human
b. HumanResource
ResourceManagement
Management b.Human
b. HumanResource
ResourceManagement
Management

c.c.Supply
SupplyChain
ChainPlanning
Planning c.c.Supply
SupplyChain
ChainPlanning
Planning

d.Product
d. ProductLifecycle
LifecycleManagement
Management d.Product
d. ProductLifecycle
LifecycleManagement
Management

g.Fulfillment
g. Fulfillment g.Fulfillment
g. Fulfillment
e.e.Procurement
Procurementf.f.Manufacturing
Manufacturing e.e.Procurement
Procurementf.f.Manufacturing
Manufacturing
h.CRM
h. CRM h.CRM
h. CRM

Single ERP
Technology
Platform

Centralized, scalable,
and easily
maintainable IT
infrastructure

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Before/After ERPFacilitates all business processes

and interconnects all the departments

of a company

The silo effect

Work duplication
Lack of standardization

Lack of vision

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Improving operational efficiency
Without ERP With ERP
Financial
Management
Business Efficiency
Decision
Making
Financial
Management
Reporting and
Controls Business
Decision
Making

Reporting and
Controls
Transaction
Processing
Transaction
Processing

Reduce time and resources spent on lower value-added activities while

increasing the level of involvement in business decision making

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Benefits of ERP

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Benefits of ERP

Ver.1.0 Slide 16
Benefits of ERP

Ver.1.0 Slide 17
Disadvantages of ERP
ERP implementation is very difficult.
There is a change in the way business is
done. From a business function
approach to a process approach.
ERP systems are very expensive to
implement. Can take years and cost 10s
of millions of dollars.

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Disadvantages of ERP
It takes time to realize the benefits of an
ERP system.
Forces people to change and change =
resistance:
Share information that was once closely
guarded (i.e., their information).
Make decisions they were never required to
make.
Do things they were never required to do
before
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Disadvantages of ERP
ERP systems are strategic solutions. In
essence some companies are betting their
future on a successful ERP implementation.
If the implementation fails, the consequences
to the company can be terrible.
Companies have gone out of business as a
result of a failed ERP implementation effort.

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Risks in ERP Implementation

Ver.1.0 Slide 21
Risks in ERP Implementation

Ver.1.0 Slide 22
Client Server Principle

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ERP System Client/Server
Configuration

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3-Tier Architecture of ERP
Applications
The 3-tier system is also a Client- Server Architecture.
A 3-tier system logically consists of a front-end UI client, a server and a
back-end database. Minimally, the business logic and database is
located at the server and the UI process resides at the client.

25
ERP Architecture
PCs, Laptops, etc. Browser Client

Network

Web Server
Internet
Presentation Transaction
Server

Application Application
Servers
Database
Database

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ERP Conceptual Areas
ERP Conceptual Areas

Basis Area Development Area

Application Area (The technical
(1. A developers
(Initiate and execute workbench
administration of
ERP transactions) 2. Create & Test
the system)
ABAP/4 programs)
(Functional)
(Authorizations/Ids/etc)
(Technical)

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 Transport Request

Development Quality Production

System System System
(DC) (QC) (IC)

Systems in ERP
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 ERP- Architecture (three
main
ERP is parts)multi-
for multi locational,
specific to particular Customer,
taking care of specific
currencies, multi-countries, multi- requirements of its processes, its
languages distributed enterprise company policies, its report
requirements etc
application.

Customization
local taxes and other laws, local
currencies, local language user-
Localization interface

Standard
business Logic, Presentation layer and the
databases, which is common to all Countries, All
languages, All Currencies, All companies

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ERP- Architecture (Open System)

Independent of OS, Hardware

Support to all major Operating Systems like Unix, MS-NT, all Windows
platforms

Independent of Database and UI Interfaces:

- Supports all major Database Systems like Oracle, Informix, SQL

Server, DB2, Sybase
User Interfaces:
Supports various Windows platforms, Browsers
Open Communication Protocols: TCP/IP

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 Typical REQUIREMENTS with ERP
Architecture
Performance:

Good performance for processing and opening pages/ giving outputs.

However it depends on UI design, S/W modularity, Inter-process
communications etc

Distributed System
- Different data/ Modules/ Transactions to be used at different locations
- Disparate Operating Systems

Security

- Data/ Processes for only authorized persons

- Sensitive Business data security from outsiders

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 Typical REQUIREMENTS with ERP

Architecture
Scalability:
@ Larger volume of Data / larger no. of users
@ Load balancing / Server Farm
@ Multi-language Support

Flexibility

@ Ease of Change/ Update/ Replace

@ Integration to new Technologies (Bar Code/ RFID)

Maintainability

@ Ease of decoding, debugging

@ Normally supported by different vendors

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 n-Layer common ERP Architecture

APPLICATION LOGIC ( Mfg., Procurement, W/H..)

APIs and Tools ( customize/ maintain)
ORACLE
Logic Layer

CLIENT SQL
V.M/C
UI DRIVER DATA BASE DRIVER Server

INFORMIX
Browser

DataBase Laye
VIRTUAL MACHINE
Presentn Layer
Windows
Windows
Variants
Variants
OS Driver
Unix
Unix
Variants
Variants

HARD WARES

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1. OS Driver: Operating System Driver, is a program , which identifies
from which OS the connection is made in the network (whether Unix,
Windows like MS-NT and accordingly manages the interactions (input/
output etc)

2. Database Drivers: This is a program, which identifies from which

database (Oracle 8i/ 9i or DB2 or MS-SQL etc) the data is coming and
accordingly manages the interactions including inputs/ outputs

3. UI Driver: User Interface Driver is a program which identifies from

which User Interface (Client program on the Client machine, or
browser etc) the interactions are taking place and accordingly
manages the interactions including inputs/ outputs

4. Application Logic layer: This layer has the main business logic
(depicting the functionalities of procurement, manufacturing, sales
and delivery etc). This layer also has the Tools and APIs, which are to
be used to make any modification, customization, maintenance of the
application.

5. Virtual machine: this set of middleware program layer manages the

package configuration, data dictionary, other layers of program,
program workflow, transaction completion etc of the various
processes.

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Typical ERP Integration with legacy
Applications
Managers & Stakeholders Enterprise
EDI/
Banks Gateway ERP System EAI Legacy
Finance Planning
Sales & Manufacturing
Delivery

EAI Front Shared Back

EAI
CRM Office Database office SCM
Inventory
Service and Supply
HRMS
EAI EAI
APO WMS
Employees
EAI

BI & Reporting Tools

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Typical ERP Supported Functions
Financial HR Logistics Sales & Mkt.

Accts receivable Time accounting Inventory Orders

Asset account Payroll MRP Pricing

Cash forecast Personnel plan Plant Maintenance Sales Mgt

Cost accounting Travel expense Prod planning Sales plan

Exec Info Sys Project Mgmt

Financial consol Purchasing

General ledger Quality Mgmt

Profit analysis Shipping

Standard costing Vendor evaluation

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 Alternative ERP Options
Method Advantages Disadvantages
In-house Fit organization Most difficult, expensive,
slowest
In-house combine proven Difficult to develop
+vendor features with Expensive & slow
supp. organizational fit
Best-of- Theoretically ideal Hard to link, slow, potentially
breed inefficient
Customize Proven features Slower, usually more expensive
vendor modified to fit than pure vendor
system organization
Select Less risk, fast, If expand, inefficient and higher
vendor inexpensive total cost
modules
Full vendor Fast, inexpensive, Inflexible
system efficient 37
ERP vendor competitive positioning

Large
enterprise
SAP Oracle
mySAP EBS and
SSA
Business Enterprise Lawson Infor
Suite MBS /Intentia QAD
Oracle IFS
AX
Midmarket E1
Unit 4
MBS
Agresso
GP Epicor
MBS MBS Exact
SAP Sage NAV SL
Small Business Group NetSuite
business One

Source: Forrester Research Inc

38
The Enterprise Services Battlefield
$1 billion plus $1 billion to $250 million $250 million to $50 million Under $50 million

Large Companies Upper Mid market Lower mid market Small businesses

SAP Business One

SAP
mySAP All-in-One

Oracle Oracle E-Business Suite Special Edition

Microsoft Dynamics Product Suite*

Axapta

Great Plains

Navision

CRM

Other mid-market players

39
ERP Revenue Growth (Source: Forrester
Research)

40
Vendors focus on different verticals
Public Finance/ Utilities/ Business Retail/ Manu-
Vendor sector insurance telecom Healthcare services wholesale facturing
SAP

Oracle
Sage Group

MBS
Lawson-Intentia
SSA Global

Infor
Unit 4 Agresso
IBS
Epicor
IFS
Exact

Capability
Source: Forrester Research Inc
Low High

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 ERP Vendors
There were five dominating ERP software suppliers:
SAP, Oracle, PeopleSoft, Baan and J.D. Edwards.
They controlled more than 60% of the multi- billion
dollar global market.
Each vendor had a specialty in one particular
module area such as
Baan in manufacturing,
PeopleSoft in human resources management,
SAP in logistics, and
Oracle in financials

42
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 SAP AG
SAP AG (Systeme, Anwendungen, und Produkte in
Datenverarbeitung), or Systems, Applications and Products in
Data Processing
In 1979, SAP launched SAP R/2, a mainframe-based ERP
In 1992 SAP R/3 was launched based on client/server
By 1999 SAP became the third largest software vendor in the
world and the largest in the ERP sector with a market share of
about 36% serving over 17,000 customers in over 100 countries.
In 1999 SAP extended the ERP functions by adding CRM, SCM,
sales-force automation and data warehousing.
SAPs Internet-enabled ERP solutions are provided by the
recently launched ERP product called mySAP.COM

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Oracle Corporation
founded in 1977 in the USA, is best-known for its database
software and related applications and is the second largest
software company in the world after Microsoft.
second to SAP in the enterprise systems category with over
5,000 customers in 140 countries.
Oracles ERP system is known as Oracle Applications, having
more than 50 different modules in six major categories: finance,
accounts payable, human resources, manufacturing, supply
chain, projects and front office.
Now taken over PeopleSoft and JD Edwards

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PeopleSoft Inc.
Started in 1987 in California, with specialization in
human resource management and financial
services modules.
Enterprise solutions from PeopleSoft include
modules for manufacturing, materials management,
distribution, finance, human resources and supply
chain planning.
One of the strengths of PeopleSoft is the recognition
by its customers that it is flexible and collaborative
In 2005 PeopleSoft became a part of Oracle offering
PeopleSoft 9

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J.D.Edwards
founded in 1977 in Denver (cofounded by Jack Thompson, Dan
Gregory and C. Edward McVaney) with long experience of
supplying software for the AS/400 market.
Its ERP product called OneWorld is capable of running on
multiple platforms and with multiple databases, ... [and]
revolutionizes enterprise software by liberating users from
inflexible, static technologies
The product includes modules for finance, manufacturing,
distribution/logistics and human resources, quality management,
maintenance management, data warehousing, customer support
and after-sales service
Now a part of Oracle offering JD Edwards EnterpriseOne and JD
Edwards World

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Baan
Found in 1978 with expertise in software for the
manufacturing industry
ERP solution areas that Baan covers include
finance, procurement, manufacturing, distribution,
integration and implementation, planning, sales,
service and maintenance, business portals,
collaborative commerce and business intelligence.
Bought by Infor in 2006

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 Current Situation
JD Edwards was merged with PeopleSoft
Then PeopleSoft was merged with Oracle in 2005
Baan was bought by Invensys (in 2000), then SSA
Global Technologies (in 2003) and changed the
name to SSA ERP
SSA ERP was acquired by Infor in 2006
Now 3 largest ERP companies:
SAP : logistics
Oracle : financial, HRM
Infor: manufacturing

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ERP Product evaluation
criteria

49
 ERP Product evaluation criteria
Functional fit with the companys Business processes
Degree of integration between the various components of the ERP

systems
Tailor-made ERP solutions

flexibility and scalability

complexity; user friendliness

Reputation of the ERP product

Quick implementation; shortened ROI period

Ability to support multi site planning and control

technology; client/server capabilities, database independence,

security

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ERP Product evaluation
criteria
Availability of regular updates
availability of reference sites
Total cost, including cost of license, training,
implementation, maintenance,
customization, and hardware requirement.

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ERP Product selection Criteria
Goal:
Functionality
To select the
Most Suitable Software 5 Strategic
Package Solution Requirement
Levels Technology

Vendor

Support

Costs
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Technology requirements/ Infrastructure

Assessment of existing systems during the pre-implementation

planning
Layout, configuration, setup and interoperability of hardware
components
Networking issues

Workstation

Server Server
Firewall

Data
Laptop

Ver.1.0 Slide 53
 Implementation phases of ERP: 4D Methodology

Discovery
Design
Development
Deployment

Discovery Design Development Deployment

System High level Design Configuration using Deployment on

Appreciation
Scoping Effort Estimates Tools Client's systems
Workshops Functionality Matrix Coding and scripting Integration with other
Project Plan Presentation,
Client Interviews apps
Questionnaires Presentation, Business and Data Data migration
Gap Analysis Business and Data build QA testing
Onsite design Data migration UAT
Mostly Onsite Product testing Onsite
Mostly Offshore

Ver.1.0 Slide 54
Implementation phases of ERP: INTRAK
Methodology

Ver.1.0 Slide 55
 Implementation phases of ERP: Offshorability
The degree of off-shoring for the implementation varies across the stages and depends on the project environment and the risk
absorption capacity of the client and program management teams.

Phase Activities Organization Onsite Offshore

Risk
Requirement Review of As-Is Processes High
Gathering
Review of Current System Landscape High
Oracle Overview Training High
Offshore-ability:
Approx 25% Consolidation of Process Documents Low
Identification of High Level Gaps Low
Process Standardization Workshop High
To-Be Design Future State Process Documentation Low
To-Be Process Finalization- Work Shop High

Offshore-ability: Solution Option Document Preparation Low

Approx 25%
Development and finalization of standards High
Conference Room Pilot Preparation and Execution High
(2 CRPs)
Incorporate CRP results into Global Design High
Finalize and validate Interface, Customization and High
Report Requirements
Data Migration Strategy Low
Finalize Global Design Document High

Ver.1.0 Slide 56
Implementation phases of ERP: Offshorability

Stage Activities Organization Onsite Offshore

Risk
Configuration and Development of Detailed Level design documents Low
Development
Build and Unit Test Interfaces, Reports and Data Migration Low
Scripts
Offshore-ability Configure and Test System Integration Environment High
: Approx 50%
Data Migration dry run(Iterative Process) High
Testing and Preparation of System Integration and User acceptance High
Deployment testing scripts

User Training and User Acceptance Testing High

Offshore-ability:
Approx 40% Data Migration on Production Instance High
Cutover and Go Live Audit Activities High
Support
Go Live High
Offshore-ability: Post Go-Live Support High
Approx 30%

Ver.1.0 Slide 57
Post Implementation Plan
KT (knowledge transfer) to the users Support and maintenance of the App

Upgrade roadmap Ongoing Business Process

Reengineering

Ver.1.0 Slide 58
1. Project Preparation, in which the project team is identified and
mobilized, the project standards are defined, and the project work
environment is set up;

2. Blueprint, in which the business processes are defined and the

business blueprint document is designed;

3. Realization, in which the system is configured, knowledge

transfer occurs, extensive unit testing is completed, and data
mappings and data requirements for migration are defined;

4. Final Preparation, in which final integration testing, stress testing,

and conversion testing are conducted, and all end users are trained;
and

5. Go-Live and Support, in which the data is migrated from the

legacy systems, the new system is activated, and post-
implementation support is provided.

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Two Main ERP Applications

Core applications

Online Transaction Processing (OLTP)

transaction processing systems
support the day-to-day operational activities of the business
support mission-critical tasks through simple queries of
operational databases
include Sales and Distribution, Business Planning,
Production Planning, Shop Floor Control, and
Logistics modules

60
Two Main ERP Applications

Business analysis applications

Online Analytical Processing (OLAP)

decision support tool for management-critical tasks through
analytical investigation of complex data associations
supplies management with real-time information and permits
timely decisions to improve performance and achieve
competitive advantage
includes decision support, modeling, information retrieval, ad-
hoc reporting/analysis.

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OLAP

Supports management-critical tasks through analytical

investigation of complex data

Consolidation is the aggregation or roll-up of data.

Drill-down allows the user to see data in selective
increasing levels of detail.
Slicing and Dicing enables the user to examine data
from different viewpoints often performed along a time
axis to depict trends and patterns.

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Colgate Example
Divergence of operating platform
Dozens of platforms
Low IT skills/knowledge
No one understood all of the legacy systems
Each CIO for each country very decentralized
IS organization no standards or best
practices in place
No centralized operation
Decided to implement ERP software in 1999

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Integration of Processes
Some benefits
Activity Before After
Enter pricing data 5-80 days 5 min.
Customer credit check 15-20 min. automatic

Enter customer order 30 min. 5 min.

Customer billing 15-20 min. real-time

inquiry
Ship replacement part 3-44 days 2 days

Credit returned item 1-5 months 5 days

Commit date for 2 hrs.-3 real-time

delivery wks.
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 Outcomes for Colgate
Availability of information in real time Colgate saved $225 million
Decision making made easy because of where as target was $125
availability of accurate and up-to-date million.
data Datacenters shrinks to 1
Business process re-engineered and in (and one backup) from 75
some cases different departments Inventory reduce by 10%
consolidated into one
Facilitated move to
Improved efficiency: about 30% for the eCommerce.
database applications and about 50%
reduction in processing time

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Discussion Questions
What is ERP.
How it is different from Information Systems?
At what level of IS the ERP works?
Why an organization should implement ERP system?
Why an Organization should implement ERP if they
already have functional systems?
What are some of the benefits that organizations
derive by implementing ERP?
What do you mean by a business process?
How are the business process different from
business functions?
IS BPR necessary for ERP implementation?

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