 A database is a collection of information

that is organized so that it can be easily

accessed, managed and updated.
Data is organized into rows, columns
and tables, and it is indexed to make it
easier to find relevant information.
 A database is an organized collection of
data. It is the collection of schemas,
tables, queries, reports, views, and other
objects.
 A database management system (DBMS) is
system software for creating and managing
databases. The DBMS provides users and
programmers with a systematic way to
create, retrieve, update and manage data.
 The capture and analyzing of data is typically
performed by database management systems.
These types of database software systems
are programmed in SQL, and examples
include Microsoft SQL Server, MySQL, Oracle
SAP HANA and FoxPro.
 A database application is a computer
program whose primary purpose is
entering and retrieving information from
a computerized database. Early
examples of database applications were
accounting systems and airline
reservations systems.
 Database applications are software
programs designed to collect, manage
and disseminate information
efficiently.
DATABASE APPLICATIONS
(cont…)
 Databases are used to hold administrative
information and more specialized data, such
as engineering data or economic models.
Examples of database applications include
computerized library systems, flight
reservation systems, computerized parts
inventory systems, and many content
management systems that store websites
as collections of webpages in a database.
 A characteristic of modern database
applications is that they facilitate simultaneous
updates and queries from multiple users.
 Many of today's most widely used computer
systems are database applications, for example,
Facebook, which was built on top of MySQL.
Applications are given as follows:
 Telecom
 Industry
 Education sector
 Online shopping
 Banking
 Airlines
 Manufacturing and selling
 Human resources
Data that is well organized and integrated is very useful
in decision making.
Thus, we can infer some of the following uses of
DBMS:
 Effective and efficient management of data
 Query processing and management
 Easy to understand and user friendly
 Security and integrity of data
 Better Decision making
 Data sharing and storage
 Better access to accurate data
 Ensures error free information
 BusinessFunctions and
Business
Processes
CHAPTER ONE

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 Learning Objectives

 Name the main functional areas of operation used in business

 Differentiate business process from a business function
 Identify the kinds of data that each main functional area produces
 Identify the kinds of data that each main functional area needs
 Define integrated information systems and explain why they are important

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 Introduction

 Enterprise Resource Planning (ERP)

 Core software used by companies to coordinate information in every
area of business
 Help manage companywide business processes
 Use common database and shared management reporting tools

Business Process - collection of activities that takes one or

more kinds of input and creates an output such as report or
forecast that is of value to the customer

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 Functional Areas and Business
Processes

To understand ERP, you must understand:

 How a business works

 Functional areas of operation
 Business processes

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 Functional Areas of
Operation
 Marketing and Sales (M/S)
 Supply Chain Management (SCM)
 Accounting and Finance (A/F)
 Human Resources (HR)

Business functions - Activities specific to a

functional area of operation

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 Business functions per Functional
Area

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 Functional Areas
Interdependency
 Functional areas are interdependent
 Each requires data from the others

 Better integration of functional areas leads to

improvements in communication, workflow, and success of
company

Information system (IS) - Computers, people, procedures,

and software that store, organize, and deliver information.

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 Business Processes

 Collection of activities that takes one or more

kinds of input and creates an output such as
report or forecast that is of value to the customer

 Customer can be traditional external customer or internal

customer

 Thinking in terms of business processes helps managers to look

at their organization from the customer’s perspective

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 Business Processes Example

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 Business Processes

 Businesses must always consider customer’s viewpoint in

any transaction
 Successful customer interaction

 Customer (either internal or external) is not required to

interact with each business function involved in the
process

Successful business managers view business operations from

the perspective of a satisfied customer

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 Business Processes

 Sharing data effectively and efficiently between and

within functional areas leads to more efficient business
processes

Integrated information systems - Systems in which functional

areas share data

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 Business Processes

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 Business Processes

 Businesses take inputs (resources) and transform these

inputs into goods and services for customers
 Inputs: Material, people, equipment

 Managing inputs and business processes effectively

requires accurate and up-to-date information

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 LEARNING

ASSESSMENT
Choose an industry in which you would enjoy working, and pick a company in
that industry. Assume this company is lacking and integrated informations
system. Write a memo to the CEO explaining the benefits of integrating the
systems in the company.

 Scoring Guide:
 Contents – 30 points

 Format – 10 points

 Grammar and Spelling – 10 points

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 Functional Areas and Business Process
of a very small business

 Consists of the following

Marketing and Sales
Supply Chain Management
Accounting and Finance
Human Resources

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 Functions within Marketing and Sales

 Develop products
 Determine price
 Promote products to customers
 Take customers’ orders
 Help create a sales forecast
 keep track of customers
 Good repeat customers allowed to charge purchases—up to a
point
 Records how much each customer owes and his/her credit limit

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 Functions within Supply Chain Management

 Manufacturing of products
 Procurement of raw materials
 Production planning

Sales forecasts - Analyses that attempt to predict

the future sales of a product

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 Functions within Accounting and
Finance
 Record raw data about transactions (including
sales), raw material purchases, payroll, and
receipt of cash from customers

Raw data - Numbers collected from those

operations, without any manipulation, calculation,
or arrangement for presentation

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 Functions within Accounting and
Finance
 Data from Accounting and Finance used by Marketing
and Sales and Supply Chain Management
 Sales records are important component of sales
forecast
 Sales forecast is used in making staffing decisions and in
production planning
 Records from accounts receivable used to monitor the
overall credit-granting policy of the lemonade stand

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 Functions of Human Resources

 Recruit, train, evaluate, and compensate

employees
 HR uses sales forecasts developed by the
individual departments to plan personnel needs
 Systems integrated using ERP software provide
the data sharing necessary between
functional areas

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 LEARNING

ASSESSMENT
Consider yourself running a burger stand. Recreate a table that shows the
different functional areas of operation and their corresponding business
functions that is found on slide number six. Add a one-sentence description
for each function as it relates to a burger stand.

 Scoring Guide:
 Contents – 30 points

 Presentation – 10 points

 Grammar and Spelling – 10 points

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 Functional Area Information
Systems
 Potential inputs and outputs for each functional area
described next

 Note the kinds of data needed by each area and how

people use the data

 Information systems maintain relationships between all

functional areas and processes

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 Marketing and Sales

 Needs information from all other functional areas

 Customers communicate orders to M/S in person or by
telephone, e-mail, fax, the Web, etc.
 M/S has a role in determining product prices
 Pricing might be determined based on a product’s
unit
cost, plus some percentage markup
 Requires information from Accounting and Finance, and
Supply Chain Management data

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 Marketing and Sales

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 Marketing and Sales

 M/S needs to interact with Human Resources to exchange

information on hiring needs, legal requirements, etc.

 Inputs for M/S

 Customer data
 Order data
 Sales trend data
 Per-unit cost
 Travel expense company policy

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 Marketing and Sales

 Outputs for M/S

 Sales strategies
 Product pricing
 Employment needs

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 Supply Chain Management

 Needs information from various functional areas

 Production plans based on information about product sales (actual and

projected) that comes from Marketing and Sales

 With accurate data about required production levels:

 Raw material and packaging can be ordered as needed
 Inventory levels can be kept low, saving money

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 Supply Chain Management

 Supply Chain Management data and records can:

 Provide data needed by Accounting and Finance to determine
how much of each resource was used
 Support the M/S function by providing information about what
has been produced and shipped
 Supply Chain Management interacts in some ways with Human
Resources

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 Supply Chain Management

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 Supply Chain Management

Inputs for SCM

Product sales data
Production plans
Inventory levels
Layoff and recall company policy

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 Supply Chain Management

Outputs for SCM

 Raw material orders
Packaging orders
Resource expenditure data
Production and inventory reports
Hiring information
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 Accounting and Finance

 Needs information from all other functional areas

A/F personnel:
 Record company’s transactions in the books of account
 Record accounts payable when raw materials are purchased and
cash outflows when they pay for materials
 Summarize transaction data to prepare reports about company’s
financial position and profitability

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 Accounting and Finance

 People in other functional areas provide data to A/F

 M/S provides sales data

 SCM provides production and inventory data

 HR provides payroll and benefit expense data

 M/S personnel require data from A/F to evaluate customer

credit

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 Accounting and Finance

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 Accounting and Finance

 Inputs for A/F

Payments from customers
Accounts receivable data
Accounts payable data
 Sales data
Production and inventory data
Payroll and expense data
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 Accounting and Finance

 Outputs for A/F

Payments to suppliers
Financial reports
Customer credit data

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 Human Resources

 HR needs information from the other departments

 Tasks related to employee hiring, benefits, training,
and government compliance are all responsibilities of
HR
 HR needs accurate forecasts of personnel needs from all
functional units
 HR needs to know what skills are needed to perform a
particular job and how much the company can afford to
pay employees

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 Human Resources

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 Human Resources

 Observe governmental regulations in

recruiting, training, compensating,
promoting, and terminating employees

 Inputs for HR
Personnel forecasts
 Skills data

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 LEARNING

ASSESSMENT
Using the internet, search for all the country’s regulations for waiters and
waitresses such as the minimum age of employment. Why is it important that
the Human Resources communicate this information to the hiring department.

 Scoring Guide:
 Contents - 30 points
 Presentation – 10 points

 Grammar and Spelling – 10 points

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 Human Resources

 Outputs for HR
Regulation compliance
Employee training and certification
 Skills database
Employee evaluation and compensation

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 Human Resources

 Significant amount of data is maintained by

and shared among the functional areas
Timeliness and accuracy of these data critical to
each area’s success and to company’s ability to
make a profit and generate future growth
 ERP software allows all functional areas to share a
common database
 Allows accurate, real-time information to be
available
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 LEARNING

ASSESSMENT
Think of the last time you bought a pair of shoes. How does the process of
buying those shoes cut across the store’s various functional lines? What
information from your receipt would need to be available to the business
functions? Which business functions would need that information?

 Scoring Guide:
 Diagram – 10 points
 Explanations - 20 points
 Presentation – 10 points

 Grammar and Spelling – 10 points

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 SUMMAR

Y
Basic functional areas: Marketing and Sales, Supply Chain
Management, Accounting and Finance, and Human Resources

 Marketing and Sales: Sets product prices, promotes products

through advertising and marketing, takes customer orders, supports
customers, and creates sales forecasts

 Supply Chain Management: Develops production plans, orders

raw materials from suppliers, receives raw material,
manufactures products, maintains facilities, and ships products
to customers

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 SUMMAR

Y
Accounting and Finance: Financial accounting to provide summaries of
operational data in managerial reports, controlling accounts, planning
and budgeting, and cash-flow management

 Human Resources: Recruits, hires, trains, and compensates

employees, ensures compliance with government regulations, and
oversees the evaluation of employees

 Information systems capture, process, and store data to

provide information needed for decision making

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 SUMMAR

employees Y
Employees working in one functional area need data from

in other functional areas

 Functional area information systems should be integrated, so
shared data are accurate and timely
 Managers think in terms of business processes that integrate
the functional areas
 Need to share information between functions and functional
areas
 ERP software provides this capability by means of a single
common database

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 LEARNING

ASSESSMENT
Assume you run an Internet Business with a couple of friends from college.
Your company sells tickets to concerts and sporting events. Describe all the
flows of information between the four functional areas.

 Scoring Guide:
 Contents – 30 points

 Presentation – 10 points

 Grammar and Spelling – 10 points

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 REFERENCE
 Enterprise Resource Planning 3rd Edition
Author:
Ellen F. Monk and Bret J.
Wagner
Publisher:
Cengage Learning Asia Pte Ltd
Published:
2012

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Enterprise Resource Planning, 1st
Edition by Mary Sumner
Chapter 1:
A Foundation for Understanding
Enterprise Resource Planning Systems

© Prentice Hall, 2005: 1-61

Objectives

Develop an understanding of how ERP systems improve the effectiveness of

information systems in organizations
Recognize the business benefits of ERP systems
Understand the history and evolution of ERP

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-62
ERP Market

One of the fastest growing markets in software industry

34.5% of companies with revenues over $1 billion plan to purchase or upgrade
$180 billion in sales in 2002
Maybe as much as $1 trillion by 2010

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-63
ERP Systems

Major investment
Cost between $50,000 and $100,000,000+
Variety of business justifications
Replace legacy systems
Reduce cycle times
Lower operating costs
Enables better management decisions
Real-time
On-line

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-64
What is ERP?

Software tools
Manages business systems
Supply chain, receiving, inventory, customer orders,
production planning, shipping, accounting, HR
Allows automation and integration of business
processes
Enables data and information sharing
Enterprise-wide system
Introduces “best practices”

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-65
Evolution of ERP

1960s: software packages with inventory control

1970s: MRP systems
Production schedule with materials management
1980s: MRPII systems
Adds financial accounting system
1990s: MRPII
Integrated systems for manufacturing execution
Late 1990s: ERP
Integrated manufacturing with supply chain

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-66
Integrated Systems Approach

Common set of applications

Usually requires re-engineering business processes
Better alignment
Limited customization
Easier upgrades
Overcomes inefficiencies of independent systems
Integrated data supports multiple business functions

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-67
© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary 1-68
Overall Business Benefits

Information
Maximizes information throughput
Provides timely information
Integrates information throughout supply chain
Minimizes response time
Pushes decision making down to lowest levels
Reduces costs
Cuts inventory
Improves operating performance

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-69
Department Benefits

Sales
Increased efficiency
Lower quotes, reduced lead time, improved responsiveness
Manufacturing
Concurrent engineering
Faster design and production
Data Service
Accurate customer service history and warranty information
Accounts Payable
Suppliers paid accurately

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-70
© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary 1-71
Systems Benefits

Eliminating legacy systems

Reduces incompatible data
Can cause fragmentation
Allows sharing and monitoring of information across
organization
Foundation of eBusiness
Back-office functions
Standardization
Helps obtain and maintain competitive advantage
Improved interactions with customers and suppliers

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-72
© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary 1-73
Design Alternatives

“Vanilla” implementation
Complete vendor package
Benefits
Total integration across all functional areas
Re-engineering of all business processes
Deficits
Expensive
Time-consuming
Selected ERP modules
Benefits
Less costly and time-consuming
Deficits
Lacks total integration of data
Limited applicability and use

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-74
Design Alternatives, continued

Build in-house
Benefits
Can create system based on its needs
Competitors will not have access to similar system
Deficits
Time- and resource-consuming
Expensive
Risky
May not provide competitive advantage
Maintain concurrent legacy systems
Benefits
Familiarity
Deficits
May be a competitive disadvantage

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-75
Cost-Benefit Analysis

Net Present Value

Time value of money
5-year timeframe for ERP
Non-recurring costs:
Hardware, software,
consulting, training,
implementation
Recurring expenses:
Licenses, maintenance,
consulting, teams

© Prentice Hall, 2005: 1-76

Maintaining Competitive
Advantages
Implement ERP system better than competitors
Migrate to new versions faster
Use “vanilla” ERP for core systems and build customized modules for others
Increase availability of operational data
Better use of data for analysis

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-77
Challenges

Realization of benefits
On-time, on-budget implementations
Applying multi-stage approach
Markus
Three phases: project, shakedown, and onward and upward phases
Business results not achieved until last phase
Parr and Shanks
Four phases: planning, re-engineering, design, and configuration
and testing phases
Benefits not achieved until last two phases
Holland and Light
Benefits occur after implementation of advanced modules

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-78
Case: Business Research

Expected future growth in ERP Marketplace

U.S.
Fortune 500 and mid-cap
International
Fortune 500 and mid-cap
Market share of major vendors
U.S.
Fortune 500 and mid-cap
International
Fortune 500 and mid-cap

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-79
Summary

ERP systems can improve the effectiveness of

organizations through automation and integration of
business processes
ERP systems allow data and information sharing across
the organization
Departmental benefits include increased efficiency,
faster design and production, and accuracy
Implementing an ERP system helps the organization
obtain and maintain a competitive advantage

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 1-80
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 2:
Re-engineering and Enterprise Resource
Planning Systems

© Prentice Hall, 2005: 2-81

Objectives

Recognize factors associated with the evolution of ERP systems

BPR
Client-server networking
Integrated databases
Examine role of process modeling in redesigning business models

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-82
Re-engineering

Fundamental rethinking and radical redesign of business

processes
Goal is to achieve major improvements in performance
Efficient redesign of value chain
Primary activities
Inbound logistics, operations, outbound logistics, marketing and sales,
service
Secondary activities
Organizational activities, human resources, technology, purchasing
Motivations
Deregulation, consolidation, customer sophistication, increased
competition

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-83
© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by 2-84
Business Process Re-engineering
(BPR)
Technology used to mechanize work
Create new business rules
Remove outdated rules
Improve responsiveness
Reduce costs

© Prentice Hall, 2005: 2-85

Business Process Re-engineering
(BPR), continued
Decentralize decision making
Become responsive to customer’s needs
Flatten organization
Facilitated by information technology
Redesign of jobs
New levels of judgment
New types of leaders
Adaptable

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-86
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-87
Process Modeling

Business process
Business activities
Data store
Data needed by business process
Data flow
Data transferred between processes or from a process to
data store
Organizational unit
Units where processes take place
Event
Includes triggers and outcomes

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-88
Neighborhood Food Cooperative

Weekly cycle
Members submit list
Lists merged
Orders placed for product by
phone
Suppliers confirm in writing
with invoice
Shipments made to
cooperative
Members collect product
Cooperative pays net 10 days

© Prentice Hall, 2005: 2-89

Basis for Best Practices Supported
by ERP Modules
Re-engineered process models
Improved process change depictions
Data integration
Among multiple processes
Structural changes
Streamline business functions
Maximized productivity

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-90
Reliable Finance Company

Expansion required redesign of existing system

Needs enhanced information system
Increase number of branches exponentially
Achieve a competitive advantage
Analysis of loan application system
Reduce approval from 10-13 days to 2-3 days
Improve access to databases for approval decisions

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-91
Failure in Re-engineering

Rosenthal:
Apply “clean slate” approach
Continuous training for new roles
Measure performance
Jobs must be redesigned
Use rewards as incentives to change
Move away from status quo
Too narrowly focused
Project too general

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-92
Information Technology Facilitates
ERP
Client-server computing allows for increase power and
control
Integrated databases
Reduces redundancy
Increases data consistency
Supports multiple functional units
Data maintained separately from application modules
Database management systems
Central data administration
Improved data integrity
Improved control

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-93
Process Enterprises

Changed management structures

Process responsibility given to “process owners”
Has process design authority
Stresses teamwork
Leans toward standardization of processes
Focuses on achieving goals

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-94
Case: Re-engineering the Payment
Process System at RFC
Current payment processing system
Customers:
Make payments at branch
Cash, check, money order
Mail payments to branch
Manually processed
Batched for deposit in afternoon
Home Office mailed an Advice of Payment Received
Payment made to Home Office
Manually processed
Batched for deposit in afternoon
Branch mailed an Advice of Payment Received
Each night, batch payment processing runs to update
accounts

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-95
Case: Re-engineering the Payment
Process System at RFC, continued
Weekly delinquency analysis run
Payment reminders sent out at 15, 30, 45, and 60 days
Computer generated
Settlement figures processed upon request
Urgent requests take overnight
Major expansion planned

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-96
Summary

BPR allows the organization to rethink and radically redesign their business processes
Process modeling of business activities change organizational management structures
ERP systems are facilitated by IT
Processes are standardized and teamwork enhanced

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 2-97
Enterprise Resource Planning,
1st Edition by Mary Sumner
Chapter 3: Planning,
Design, and
Implementation of Enterprise
Resource Planning Systems

© Prentice Hall, 2005: 3-98

Enterprise Resource Planning,
st
 Objective

• Understand the information systems

development process for enterprise
systems, including planning,
design, and implementation

© Prentice Hall, 2005: 3-99

Enterprise Resource Planning,
st
 Traditional Systems
Development Life Cycle
• Detailed analysis of system using tools and
techniques to determine problem areas
– Process models
– Data models
• Phases
– Problem definition
– Feasibility study
– Systems analysis
– Systems design
– Detailed design
– Implementation
– Maintenance
© Prentice Hall, 2005: 3-100
Enterprise Resource Planning,
st
 © Prentice Hall, 2005: 3-101
Enterprise Resource Planning,
st
 Traditional Systems Development
Life Cycle, continued
• Automating current system is counter- productive
– Inherit old problems and flaws
• Provides opportunity to re-engineer current system
• Create logical database design before details are refined
• Takes too much time
• Uses a great deal of resources
• Expensive

© Prentice Hall, 2005: 3-102

Enterprise Resource Planning,
st
 New Approaches

• Prototyping
– Models shown to end-users for feedback,
guidance
– Not necessarily faster
• End-user development
– End-users create information systems using
spreadsheets and databases
– Not effective for large-scale development
• Software packages
– Economies of scale in development,
enhancement, maintenance
© Prentice Hall, 2005: 3-103
Enterprise Resource Planning,
st
ERP Systems Design Process

• Phases
– Planning
– Requirements analysis
– Design
– Detailed design
– Implementation
– Maintenance

© Prentice Hall, 2005: 3-104

Enterprise Resource Planning,
st
Planning and Requirements
Phases
– Planning
• Needs assessment
• Business justification
– Tangible and intangible benefits
– Requirements analysis
• Identify business processes to be supported
• “Best practices” offered by vendors
– Models of supported functions
• Checklist of activities and factors

© Prentice Hall, 2005: 3-105

Enterprise Resource Planning,
st
 Design Phase

• Re-engineering business processes to

fit software
– Traditional SDLC defines new business
requirements and implements conforming
software
• Re-engineering versus customization
– Re-engineering can disrupt organization
• Changes in workflow, procedures
– Customizing
• Upgrading can be difficult
© Prentice Hall, 2005: 3-106
Enterprise Resource Planning,
st
 Alternative Designs

• “Vanilla”
– Easy to implement
• Follow vendor prescribed methodology
• Employ consultants with specialized vendor
expertise
– Usually on time and on budget
implementations
• Customized
– Time and costs increase
– Not easily integrated into new
version Enterprise
© Prentice Hall, 2005:
Resource Planning,
3-107
st
 © Prentice Hall, 2005: 3-108
Enterprise Resource Planning,
st
Alternative Designs, continued

• Maintain legacy systems and add ERP

modules
– Support specific functions
– Cost-effective
– Organization doesn’t get full benefit of
ERP
– Less disruptive
– Lacks integration
• Outsourcing
– External vendor operates
• ASPs provide on time-sharing basis
• Depends on©reliability and2005:
Prentice Hall, stability of vendor 3-109
Enterprise Resource Planning,
st
 © Prentice Hall, 2005: 3-110
Enterprise Resource Planning,
st
 Detailed Design Phase

• Team selects the models, processes, and

information to be supported
– “Best practices” methodology provides
models
• Select applicable business processes
• Discard inapplicable processes
• Those processes that do not match the system will
serve as foundation for re-engineering
• Identify any areas not covered as candidates for
customization
• Interactive prototyping
• Extensive user involvement
© Prentice Hall, 2005: 3-111
Enterprise Resource Planning,
st
 © Prentice Hall, 2005: 3-112
Enterprise Resource Planning,
st
 Implementation Phase

• Implementation
– Address configuration issues
• Data ownership and management
• Security issues
– Migrate data
• Ensure accuracy
– Build interfaces
– Documentation review
– User training
– Reporting
– Testing
© Prentice Hall, 2005: 3-113
Enterprise Resource Planning,
st
 Implementation Strategies

• Big bang
– Cutover approach
• Rapid
• Requires many resources
• Small firms can employ
• Mini big bang
– Partial vendor implementation
• Phased by module
– Module-by-module
– Good for large projects
• Phased by site
– Location-based implementation
© Prentice Hall, 2005: 3-114
Enterprise Resource Planning,
st
Case: Response to Request for
Proposal for an ERP System
• Wingate Electric
– Mid-sized manufacturer of electric motors
– Owned by Dick, CEO, and Steve, COO
• MIS system
– Supports major accounting and financial
functions
• Sales order processing, inventory control, accounts
payable, accounts receivable, general ledger
– Multiple legacy systems
• Redundant data
• Inconsistent data
• Queries difficult
© Prentice Hall, 2005: 3-115
Enterprise Resource Planning,
st
Case: Response to Request for Proposal
for an ERP System, continued

• Competitors adopting ERP systems

– Integrating financial and manufacturing
– Web-based front ends
• Order processing, tracking, follow-up
• RFP for ERP system
– Initially to support accounting, financials
– Additional support for production, manufacturing
– Eventual support for sales and marketing, HR, CRM,
eBusiness
– $1,000,000 budget for system
– Determination made by five executives, representing
different user groups
• 10 scored criteria
• Vendor presentations, supplemental materials

© Prentice Hall, 2005: 3-116

Enterprise Resource Planning,
st
 Summary

• Traditional SDLC has been modified

by the use of prototyping, end-user
developments, and software packages
• ERP systems design process consists
of six phases: planning, requirements
analysis, design, detailed design,
implementation, and maintenance
– The design phase considers the use of
traditional methods, re-engineering, and
customization, as well as outsourcing
© Prentice Hall, 2005: 3-117
Enterprise Resource Planning,
st
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 4:
ERP Systems: Sales and Marketing

© Prentice Hall, 2005: 4-118

Objectives

Examine the sales and marketing modules

Understand the interrelationships among business processes

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-119
Case: Atlantic Manufacturing

Manufacturer of small motors

Problems with current order acquisition, operations,
distribution, and accounting systems
Information supplied to sales force inaccurate
Customers requesting reduced lead times
Credit system inconsistent, producing collection problems
Service calls lack warranty information
Quality control system not integrated
Competition has eliminated these problems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-120
Sales and Marketing Processes

Operational-level processes
Daily activities
Prospecting, telemarketing, direct mail
Contact management
Databases, lists
Support
Sales order processing system
POS systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-121
Sales Management Control
Processes
Designed to allocate resources to achieve maximum revenues
Decisions made on analysis of sales
Comparison of sales
Analysis of revenues against benchmarks
Listing of most profitable products, sorted by territory and salesperson
Software often used
Allows for quicker analysis
Able to identify trends
Analyze salesperson performance
Identifies both strong and weak products
Can signal potential shortfalls or excesses in stock levels

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-122
Additional Sales Management
Applications
Sales forecasting
Predicts trends
Determine customers’ needs in different market segments
Based on sales history, customer demands, demographic
trend, competitor information
Advertising
Identifies channels that will be most effective
Product pricing
Decision supported by pricing models
Examines CPI, expected consumer disposable income,
production volumes, labor costs, costs of raw materials

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-123
Sales and Marketing Modules

ERP systems differ from traditional systems

Allow for integrated marketing support systems
Provide integrated CRM software
Purpose
Identify sales prospects
Process orders
Manage inventory
Arrange deliveries
Handle billing
Process payments
Benefits
Standard codes and documents
Common database
Provides audit trail
Allows for data Integration

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-124
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-125
CRM

Front-end interface with customer to sales and marketing

Comprehensive approach
Developed from sales force automation software
Provides sales force with management tools
Sales activity
Sales and territory management
Contact databases
Leads generation and monitoring
Product-specific configuration support
Knowledge and information resource management
Needs an underlying Sales and Marketing ERP module for
operational-level data
CRM data accessible through data warehouse

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-126
Integration with Modules

Sales model may be integrated with:

CRM Human Resources

Financial Accounting Quality Management
Materials Management Controlling

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary 4-127
Featured Article: Staples and
Integrated ERP
How is technology helping Staples achieve a competitive
advantage?
Customers want full range of services
Consistent
Seamless
Online kiosk
Connected to e-commerce web site
POS system, order management system, supply chain
Access information about products and services
View inventory
Build PCs to order
Multiple channel shoppers have greatly increased lifetime value
Acquired Quill
Implemented an integration level to connect two disparate systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-128
Featured Article: Staples and
Integrated ERP, continued
Reduced number of direct linkages
Standardized systems
Web services
Team review of systems, users, needs

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-129
Summary

The sales and marketing modules for ERP systems are

designed to support the sales order processing
systems, control daily activities like prospecting, and
manage contacts.
This system produces sales forecasting, identifies
advertising channels, and helps to maintain
competitive pricing scales.
The CRM module serves as a front-end interface
between the customer and the sales and marketing
departments.

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 4-130
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 5:
ERP Systems: Accounting and Finance

© Prentice Hall, 2005: 5-131

Objectives

Examine accounting systems within ERP

Understand ERP financial systems
Review the interrelationships among business processes supporting finance and
accounting

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-132
Case: Atlantic Manufacturing

Inaccurate and/or incomplete paperwork produces problems

Exchange of information between departments made manually
Unable to supply quantity discount information to sales force
Lack of coordination between departments

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-133
Accounting Processes

Operational
management level
Production of
transactions
Paychecks, invoices,
checks, purchase
orders

© Prentice Hall, 2005: 5-134

Management Control Processes

Budgeting
Analysis of allocations, expenditures, revenues
Cash management
Cash flow analysis
What-if analysis
Capital budgeting
Evaluation tools: NPV, IRR, pay-back period
Investment management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-135
Accounting Systems

Traditional
Provide operational-level software
Produce invoices, checks, statements
Financial accounting
Financial statements for external reporting purposes
Management accounting
Information on profitability

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-136
Accounting Systems v. ERP
Modules
ERP
Information shares integrated database
Provides up-to-date information
Seamless
Creates document flow of transactions
Accounting systems
Manual or separate transfer of information
Multiple platforms

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-137
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-138
ERP Financial Accounting Module

External reporting
Set by general accounting standards
Legal requirements
Includes accounts receivable subsystem
Interfaces with cash management
Monitors accounts and updates, handles payments, creates
due date lists, produces statements
Accounts payable
Handles payments, applies available discounts to maximize
profits

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-139
Management Accounting Modules

Internal accounting perspectives for directing and controlling operations

Information on variances between planned and actual data
Key activities
Cost center accounting
Internal orders as a basis for collecting and controlling costs
Activity-based costing of business processes
Product cost controlling for profitability analysis
Profitability analysis by market segment
Profit center accounting of individual areas of organization
Consolidation of financial data for accounting perspectives
Enable management to better allocate resources, maximizing profitability
and performance
Central clearinghouse for accounting information

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-140
ERP Systems

Provide on-line, real-time data

Operational data
Feedback on quality and efficiency of processes
Information must be timely and specific
Used for real-time operational control
ABC data
Information on profitability and products
Real-time data
Estimates are sufficient
Strategic information
Basis for continuing improvement to operations

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-141
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-142
Featured Article: The Changing Landscape of
Computerized Accounting Systems
Define each of the “in-technologies and systems”.
What is their relationship to the success of ERP?

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-143
Featured Article: The Changing Landscape of
Computerized Accounting Systems, continued

New types of accounting software

Fair pricing
Database management standardized
Ease of mobility
PC-based
New markets
ERPs dominate highest end
Mid-levels are SQL-based and non-SQL-based
Low-end systems range from very low end to more robust
E-commerce and e-business drive most mid- and high-level
systems, as well as a few low-level

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-144
Featured Article: The Changing Landscape of
Computerized Accounting Systems, continued

Internet-based commerce
Hottest technology
E-business
Quicken allows remote entries through Web
EDI and EFT
E-commerce
Amazon.com and on-line securities trading
Dell Computer
ERP
Internet additions
Prices decreasing

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-145
Featured Article: The Changing Landscape of
Computerized Accounting Systems, continued

Best practices
Improve bottom line
Create air of control
Structured Query Language
Database of choice

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-146
Summary

Most accounting processes operate at the operational

management level
Additional software enables financial and management
accounting
Each department or division may operate different software
and databases
ERP systems’ integrated database allow for seamless
information sharing
Easier reporting
Includes all operational data and ABC data
Coordinates with management accounting modules

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 5-147
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 6:
ERP Systems: Production and Materials
Management

© Prentice Hall, 2005: 6-148

Objectives

Examine the production management system in ERP

Understand the materials management system
Acknowledge the interrelationships among business processes supporting production
and materials management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-149
Case: Atlantic Manufacturing

Materials and manufacturing are dealing with

inconsistent levels of raw materials and finished
products
Change specifications are not made timely
Sequential design produces long lead times
Inadequate information from other divisions
Lost purchasing requisitions

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-150
Manufacturing Systems Background

Designed to re-order inventory using re-order point

Adapts production to customer orders
Increased flexibility, responsiveness, integration
60s, 70s, 80s: High-volume production of few products
Mainframe-based databases
Late 80s: Production of new products to meet customers’ needs
Changeable and flexible
Manufacturing Execution Systems provided continuous feedback and
control
90s: Integration of processes and data produce operational
efficiency
ERP systems gave total integration, including supply chain

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-151
Problems with Traditional
Production Systems
Lack of integration between divisions in organization
Production must be linked to sales to maintain proper
inventory levels
Inaccurate production forecast will create incorrect
purchasing decisions
Producing either a shortage of or extra raw materials
Creating an excess of finished products or shortage
Excess inventories
Impact cash flow and profitability in accounting

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-152
Production Systems

Objectives
Create production plan
Acquire raw materials
Schedule equipment, facilities, human resources
Design products
Produce appropriate quantities and expected quality level

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-153
Production Planning and
Manufacturing Processes
Operational-level processes
Daily activities
Purchasing
Acquire correct quantity of raw materials and supplies
Receiving
Inspection of delivered products and processing
Quality control
Monitoring of receivables and identification of unacceptable deliveries
Monitoring quality of production goods
Inventory management
Maintains appropriate levels

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-154
Information Systems Support

Production planning and manufacturing processes

Supported by information systems
Data collection systems
Material management systems
BOM systems
Inventory management systems
Cost accounting systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-155
Material Resource Planning

Processes:
Identify stock needed
Calculate lead time for stock
Determine safety stock levels
Assign most cost-effective order quantities
Produce accurate purchase orders
MRP takes inputs from the MPS
MPS employs sales forecasts to identify products
needed

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-156
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-157
Just-in-Time Systems

Ideal production and manufacturing situation

Only maintain necessary inventory levels; no excess
Requires supplies to be delivered only as needed to meet
production schedule
EDI or Internet used to place orders
Continuous replenishments of raw materials
Reduces storage cost and space both pre- and post-
production
Improved supply chain and value chain management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-158
Capacity Planning

Evaluation of production capacity against production

goals
Requires specific information
Creates time-phased plans for product and production area
Production scheduling
Allocation of specific facilities
Estimates human resource needed
Product design and development is integrated with
cost information
Allows comparison of alternatives to decrease expenses

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-159
Production Planning and Materials
Management Modules
ERP extends information distribution
Supports materials requirement planning, inventory management, capacity
planning
Allows for merging of multiple databases
Eliminates paperwork and bottlenecks
Decreases design costs, lead time, personnel costs
Increases productivity
Sales forecasts employed to develop production plans
MPS created through demand management
Determines quantities and dates for finished products
MRP creates efficient, detailed material plan
Determines what needs to be ordered and when
Creates work orders sent to production
ERP systems provides integration

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-160
Materials Management Modules

MES
Factory floor information and communication systems
Provide feedback on real-time basis
Can be front-end combined with back-end applications
APS systems
Business analysis and support
Leverage data for decision support
Data collection
Real-time data gathered with mobile phone or Internet-enabled devices
Automated data collection

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-161
eBusiness Strategies

Facilitates communication along supply chain

B2B
Many suppliers available
Internet enables quick and easy exchange of information
Planning forecasts
eMarketplaces allow for aggregation of buyers to improve
purchasing power
Reduces costs
Communities
Eliminate traditional supply chains and problems
RFPs handled more efficiently

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-162
Featured Article: What ERP Can
Offer ABC
What manufacturing data is used by the managerial accounting module within ERP?
How is this information used to control costs, to maximize productivity, and to
streamline operations?
How does this data integration support managerial decision making?

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-163
Featured Article: What ERP Can
Offer ABC, continued
Activity-based costing systems
Need correct activity cost driver
Nonfinancial measures difficult to find in accounting systems
Usually not controlled by accounting system
Lack process controls
Often derived from “back-of-an-envelope” information systems
ERP systems and activity cost-driver information
Increase availability
Increased reliability
Allows for integration of multiple systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-164
Featured Article: What ERP Can
Offer ABC, continued
SAP’s R/3 system
Links production planning with materials management
Allows establishment of standards
Materials handling as process
Activity cost driver – “number of pallet moves”
Materials handling process attributed to specific product
Direct costs can be calculated instead of being considered overhead
Bill of services created

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-165
Featured Article: What ERP Can
Offer ABC, continued
Activity-based budgeting
Anticipates demand on process
Estimates practical capacity
Estimates quantity of direct materials and direct costs
Can be used to improve processes, determine adjustments
Collects nonfinancial measures for use as drivers
Formal process
Built-in controls for reliability
High degree of integrity

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-166
Summary

Traditional production systems offered no integration within the

organization
Most production planning lacks coordination with the
organization’s manufacturing , particularly at the operational
level
Organizations want material resource planning, JIT systems, and
capacity planning
ERP systems offer both production planning and materials
management
Facilitating communications along the supply chain
Improving e-Business opportunities

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 6-167
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 7:
ERP Systems: Human Resources

© Prentice Hall, 2005: 7-168

Objectives

Examine the HR processes supported by ERP

Understand the interrelationships among business processes supporting human
resource management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-169
Case: Atlantic Manufacturing

Recruitment, training, and retention of sales force is

difficult
HR records inadequate
HR paperwork and compliance requirements increase
steadily
Management of compensation packages difficult
Needs to create a strategy for controlling the cost of
various employee benefits

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-170
Human Resources Problems

Maintaining accurate employee information

Job analysis and design
Applicant selection
Compensation
Benefit administration
Training
Governmental reporting

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-171
Evolution of HR Systems

Traditionally relied upon stand-alone systems

Specialized applications for applicant tracking, compensation, benefits,
attendance
Redundant data
No link to financial systems
ERP
Linked to financial systems
“Best practices”

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-172
ERP HR Modules

Components
HR Management
Personnel records
Resumes
Benefits administration
Links employee data to actual benefits
Allows selection from group of benefits
Payroll
Paychecks, tax reports, accounting data
Time and labor management
Employee/Manager self service
Travel reimbursement
Personnel data and benefits changes
Training class

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-173
HR Modules

Attributes
Integration
Common database
Provide audit trails
Scalable and flexible
Drill-down capability
Workflow management for electronic routing of documents
and other document management
Process standardization
Security
User friendly and web-accessible

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-174
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-175
Management Control Modules

HR information enables management of diverse workforce

Supports managerial decision making through query and reporting tools
Operational level controls
Maintain and update employee files
Job analysis files
Design files
Regulatory files
Skills inventory files
Strategic level controls
Human capital inventory for tracking employees
Position control linked to budgeting
Labor/management relationships
Business intelligence tools for predicting trends
Module integration is significant benefit

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-176
Featured Article: Keep Track of Your
Employees
What are the benefits of automated time and attendance records?
What advantages might accrue to employees using these systems?

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-177
Featured Article: Keep Track of Your
Employees, continued
Employees’ attendance, time at work, and skill levels
Most companies uncertain
If tracked, usually manual
Records usually neglected
Often piece-meal, no end-to-end solution
Benefits of automating
Eliminates manual process
Time-consuming
Error-prone
Better analysis
More control

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-178
Featured Article: Keep Track of Your
Employees, continued
Banner Health
Selected Kronos Inc. software
Time- and labor-management
Accessible from web, phone, badge terminals
Information available in real-time
Allows for quick staffing adjustments
Financial benefits to employees, company
Smurfit-Stone Container Corp
Uses Workbrain Inc.’s ERM3, SAP financial applications, and
PeopleSoft payroll processing
Web-based employee-relationship management software
Optimized scheduling and tracking of employees
Interfaces with PeopleSoft applications

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-179
Summary

ERP systems include HR modules that offer records management, benefits

administration, and payroll
Offer integrated operational and strategic level controls
Scalable and very flexible

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 7-180
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 8:
Managing an ERP Project

© Prentice Hall, 2005: 8-182

Objectives

Acknowledge the importance of project management and control

Examine the process of organizational change

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-183
Factors Influencing Information
Systems Project Success
Number of modifications
Effective communications
Authority for project implementation
Business management
Ability to generate additional funds to cover implementation

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-184
Factors Causing Information
Systems Project Failures
Poor technical methods
Communication failures
Poor leadership
Initial evaluation of project

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-185
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-186
Risk Factors

Organizational factors
Changes in scope
Sufficiency of resources
Magnitude of potential loss
Departmental conflicts
User experience
Management support
Changing requirements and scope
Lack of commitment
Software design
Developing wrong functions, wrong user interface
Problems with outsourced components

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-187
Risk Factors, continued

User involvement
Lack of commitment
Ineffective communication
Conflicts
Inadequate familiarity with technologies
Project management
Size and structure
Control functions
Project escalation
Societal norms
Continue pouring resources into sinking ships

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-188
Implementation Risks

Technology
Consistencies with current infrastructure
Organizational
Customization increases risks
Redesign of business processes to fit package decreases risk
Human resource factors
IT staff skills and expertise
Project size

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-189
Managing Large-Scale Projects

MRP or ERP
Package implementation differs from custom implementation
Vendor participation
User skills and capabilities
Management commitment
Project champion
Communication with stakeholders
Training in MRP
Good project management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-190
Managing ERP Projects

Implementation factors
Re-engineering business processes
Changing corporate culture
Project team
Include business analysts on project team
Management support
Commitment to change
Risk management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-191
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-192
Factors in Successful ERP Projects

Customization
Increases time and cost
BPR advantage from “best practices” adoptions lost
Use of external consultants
Offer expertise in cross-functional business processes
Problems arise when internal IT department not involved
Supplier relationship management
Need effective relationships to facilitate and monitor contracts
Change management
People are resistant to change
Organizational culture fostering open communications
Business measures
Create specific metrics at start of project

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-193
Project-Related Factors

Project division into subprojects

Project leader with proven track record
Project focus on user needs instead of technology
Project champion
Slack time in project schedule

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-194
Additional Factors in the Success of
a Project
User training
Focus on business, not just technical
Critical
Management reporting requirements
May need to add query and reporting tools
Technological challenges
Data conversion
Interface development

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-195
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-196
FoxMeyer versus Dow Chemical

FoxMeyer
Project went over budget because of new client
Implemented two new systems at same time
Technical issues with the ERP software
No open communications
Unrealistic expectations on ROI
Dow
Had project implementation problems
Dow had strong leadership and project champion
Was able to adjust scope and maintain control
Fostered open communications

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-197
Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive
or Was It Misled?
Was FoxMeyer misled?
What strategies could have been put into place to avoid the project disaster?
What business misjudgments occurred?
Was FoxMeyer’s failure due to technology failure or business failure?

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-198
Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
Nation’s fourth largest pharmaceutical distributor
1990s engaged in enterprise-wide software and warehouse automation project
Filed Chapter 11 in 1996
Claimed to be misled by SAP, Anderson Consulting, Pinnacle Automation
Claimed vendors oversold capabilities
Computer integration problems topped $100 million
Vendors blame management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-199
Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
Background
FoxMeyer had orders for over 300,000 items per day,
anticipated much growth
Processing hundreds of thousands of transactions each day
Old system was Unisys mainframe
Wanted scalable client/server system
Tested SAP’s software on both DEC and HP against
benchmarks
Implementations scheduled by Andersen for 18 months
Modules to be implemented in 2-3 months
Unrealistic – could take up to 12 months
All modules fast-tracked

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-200
Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
Two systems for most important business systems
SAP supplied the accounting and manufacturing software
Claims volume was issue
Warehouse system from McHugh Software International
Purchased through Pinnacle
Pinnacle also supplied some hardware
Added complexities to project
Functional holes in systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-201
Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
FoxMeyer strategies
High volume
Low price
Anticipated savings from new computer system
Wanted to win market share by further price-cutting
Hoped new system would be more efficient, but did not improve processes

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-202
Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
FoxMeyer got major new client
Out of capacity of mainframe
Issues on balancing system traffic
Unisys-based management system eventually failed
Information wasn’t being received timely
FoxMeyer suffered losses in transferring inventory to new centers
Customers received incorrect shipments
New customer didn’t deliver expected volume
FoxMeyer overspent

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-203
Summary

A number of factors will effect the success or failure of

a systems project
Operational methods and techniques
Business management and style
Leadership and communications
Risk factors effecting projects must be considered
Organizational factors, management support, software
design, the levels of user involvement, and the scope and
size of the project itself
Implementation risks for technologies, the organization, and
human resource

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-204
Summary, continued

Success in ERP projects includes factoring in

Consideration of customizations, use of external consultants, management of
supplier relationships, establishing metrics, and change management
Project-related concerns
Technological changes, user training, and management requirements

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-205
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-206
Enterprise Resource Planning, 1st
Edition by Mary Sumner

Chapter 9:
Supply Chain Management and the
eMarketplace

© Prentice Hall, 2005: 9-207

Objectives

Examine the supply chain participants

Acknowledge the interrelationships among business processes that support the
supply chain
Understand the role of ERP in supporting eBusiness
Recognize how business intelligence tools are used in decision analysis

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-208
Supply Chain Management (SCM)

Integrated planning of the activities in a supply chain

Planning and control of flow of goods, services, money, and information
Allows customers and suppliers to partner together
Maximize responsiveness and flexibility
Reducing costs and paperwork
Gain sustainable competitive advantage

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-209
Supply Chain Relationships

Can be maintained by manufacturer

Continuous replenishment
Can link into POS systems
Cross-docking
Creates linkages between supplier and retailer
Lower costs
Better customer service
Increased profitability
Information sharing along supply chain
Translates sales transactions into production processes and
material requirements

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-210
Supply Chain Management (SCM),
continued
Benefits
Cost reduction
Inventory reduction
Cycle time improvement
Improved customer service
Integration requires commitment to strategy, process,
organization, and technology
What linkages should be established
Communications
Data integration

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-211
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-212
Partnership Evolution

VMI
Responsibility of inventory management on supplier
Supplier monitors level and replenishes inventories
No risk of stockouts
Quicker response time
Retailer reduces inventory and administration costs
Supplier gets more business
No expedited orders
Returned goods to supplier drops

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-213
SCM Evolution

Electronic linkages facilitate JIT systems

Reduced costs, improved response time, increased
responsiveness to customer

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-214
eBusiness Value Chain

Evolution of virtual value chain

Provides information-based channels
Changed from transaction-based to contract-based relationships
Moved from vertically integrated to selective sourcing
Core firm outsources all parts of its business

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-215
eProcurement

eProcurement
RFBs on web
Bidding more competitive
Free-market bidding levels playing field
Increased choices
Reduced transaction costs

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-216
B2B Hubs

B2B hubs
Spot sourcing of operating inputs
Systematic sourcing of inputs
Bring suppliers of similar or complementary products together at one web site
One-stop shopping
Automate transactions and reduce costs

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-217
eSupply Chain

Facilitates real-time updates across chain

From consumers to suppliers
Greater ability to fill orders
Better understanding of customer needs

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-218
Business Intelligence with ERP
Data
Data warehouse
Repository for making management decisions
Data integrity accomplished by cleaning
Consistent formatting applied
Data mart
Data storage for specific set of users
Special data analysis
Data mining
Analysis of data for trends, sales forecasting, inventory
management
Identifies problem, develops research, collects and analyzes data

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-219
© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-220
Future of ERP

Increased integration through SCM

ASPs will provide cost efficiency and access to latest
technology
Netsourcing
Renting ERP services, applications, and infrastructure over
web
Additional risks in migration, contracts
Internal IT capabilities must be maintained
Application software integration of legacy systems with
ERP
Plug and play
Flexible, modular

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-221
Case: Data Solutions

Specializes in network implementation and management

Provides network services to companies with no internal networking analyst or IT
manager
Uses legacy accounting software for financial accounting and financial
management
Added billing package for client services
Wants CRM

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-222
Case: TechKnowledge

Disitributor of presentation technologies

Wants to netsource back-office functions
Has no internal IT capability
Wants and ERP vendor via hosting arrangement

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-223
Featured Article: Leveraging the ERP
Backbone?
Dow Corning implemented SAP’s Business Information
Warehouse
Integrate global business processes
Gain efficiency and reduce costs
Wanted to fully automate
Improve business intelligence
Consolidate internal and external information
Replaced legacy systems on mainframes
Beta-tested system
Important to evaluate software with all details decided
Hopes to facilitate rapid scale-up of data warehouse
capabilities
Vital to business intelligence infrastructure

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-224
Summary

Supply chain management offers an integrated

planning and control of goods, services, money, and
information between suppliers and customers
Produces lower costs and reduced inventories
Improves customer service
Increases profitability
Virtual value chains provide information-based
channels
Contract-based
Applies selective sourcing instead of vertical integration

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-225
Summary, continued

eProcurement employs web-based RFBs

More competitive and more choices of suppliers
eSupply chains facilitate real-time updates, responding to customer needs
Business intelligence is increased by mining data warehouses and data marts

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-226