ERP SYSTEMS
DEVELOPMENT
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OBJECTIVES
1. Identify the factors that led to the
development of Enterprise Resource Planning
(ERP) systems.
2. Describe the distinguishing modular
characteristics of ERP software.
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INTRO...
1. In today’s competitive business environment, companies try to
provide customers with goods and services faster and less
expensively than their competition.
2. the key is an efficient, integrated information system.
3. Increasing the efficiency of information systems results in more
efficient management of business processes.
4. When companies have efficient business processes, they can be
more competitive in the marketplace.
5. An ERP system can help a company integrate its operations by
serving as a company-wide computing environment that includes a
shared database—delivering consistent data across all business
functions in real time.
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THE EVOLUTION OF INFORMATION
SYSTEMS
he big problem in many company until recently :
un-integrated system --> silos
Such unintegrated systems might work well within each individual
functional area, but to be competitive, a company must share data
among all the functional areas.
When a company’s information systems are not integrated, costly
inefficiencies can result.
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THE EVOLUTION OF INFORMATION SYSTEMS
Computer Hardware and Software
Development
In 1965, Intel employee Gordon Moore observed that the
number of transistors that could be built into a computer
chip doubled every 24 months.
computer software was also advancing to take advantage of
the increasing capabilities of computer hardware.
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THE EVOLUTION OF INFORMATION SYSTEMS
Computer Hardware and Software
Development
The actual increase in transistors on a chip approximates Moore’s Law
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THE EVOLUTION OF INFORMATION SYSTEMS
Early Attempts to Share Resources
1. As PCs gained popularity in business in the 1980s. Stand
Alone
2. By the mid-1980s, telecommunications developments
allowed users to share data and peripherals on local
networks. client-server
3. By the end of the 1980s, much of the hardware and
software needed to support the development of ERP
systems was in place: fast computers, networked access,
and advanced database technology. Database
Management System (DBMS).
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THE EVOLUTION OF INFORMATION SYSTEMS
The Manufacturing Roots of ERP
Manufacturing software advanced during the
1960s and 1970s. material requirements planning
(MRP) software.
The basic functions of MRP could be handled by
mainframe computers; however, the advent of
electronic data interchange (EDI).
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Information and Material Flows
In a Functional Business Model
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THE EVOLUTION OF INFORMATION SYSTEMS
Management’s Impetus to Adopt ERP
The hard economic times of the late 1980s
and early 1990s caused many companies to
downsize and reorganize.
These company overhauls were one stimulus
for ERP development.
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Information and Material Flows
In a Process Business Model
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ERP SOFTWARE EMERGES
SAP
In 1972, five former IBM systems analysts in Mannheim,
Germany—Dietmar Hopp, Claus Wellenreuther, Hasso
Plattner, Klaus Tschira, and Hans-Werner Hector—formed
Systemanalyse und Programmentwicklung (Systems
Analysis and Program Development), or SAP—pronounced
“S-A-P”. Later, the acronym was changed to Systeme,
Anwendungen und Produkte in der Datenverarbeitung
(Systems, Applications and Products in Data Processing.)
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ERP SOFTWARE EMERGES
PeopleSoft
PeopleSoft was founded by David Duffield, a
former IBM employee who, like SAP’s founders,
faced opposition to his ideas from IBM
management.
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ERP SOFTWARE EMERGES
Oracle
Oracle is now SAP’s biggest competitor. Oracle began in
1977 as Software Development Laboratories (SDL).
Its founders, Larry Ellison, Bob Miner, and Ed Oates, won a
contract from the Central Intelligence Agency (CIA) to
develop a system, called Oracle, to manage large volumes of
data and extract information quickly.
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The basic functions of ERP
Data flow within an integrated information system
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The basic functions of ERP
Modules within the SAP ERP integrated information systems environment
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The basic functions of ERP
The basic functions of each of the modules are as follows:
1. The Sales and Distribution (SD) module records sales orders and scheduled
deliveries. Information about the customer (pricing, address and shipping
instructions, billing details, and so on) is maintained and accessed from this
module.
2. The Materials Management (MM) module manages the acquisition of raw
materials from suppliers (purchasing) and the subsequent handling of raw
materials inventory, from storage to work-in-progress goods to shipping of
finished goods to the customer.
3. The Production Planning (PP) module maintains production information. Here
production is planned and scheduled, and actual production activities are
recorded.
4. The Quality Management (QM) module plans and records quality control
activities, such as product inspections and material certifications.
5. The Plant Maintenance (PM) module manages maintenance resources and
planning for preventive maintenance of plant machinery in order to minimize
equipment breakdowns.
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The basic functions of ERP
6. The Asset Management (AM) module helps the company manage fixed-asset
purchases (plant and machinery) and related depreciation.
7. The Human Resources (HR) module facilitates employee recruiting, hiring, and
training. This module also includes payroll and benefits.
8. The Project System (PS) module facilitates the planning for and control over new
research and development (R&D), construction, and marketing projects. This
module allows for costs to be collected against a project, and it is frequently used
to manage the implementation of the SAP ERP system. PS manages build to-order
items, which are low-volume, highly complex products such as ships and aircrafts.
9. The Financial Accounting (FI) module records transactions in the general ledger
accounts. This module generates financial statements for external reporting
purposes.
10. The Controlling (CO) module serves internal management purposes, assigning
manufacturing costs to products and to cost centers so the profitability of the
company’s activities can be analyzed. The CO module supports managerial
decision making.
11. The Workflow (WF) module is not a module that automates a specific business
function.
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SAP ERP Software Implementation
A truly integrated information system requires
integrating all functional areas, but for various
reasons, not all companies that adopt SAP software
use all of the SAP ERP modules.
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CHOOSING CONSULTANTS AND
VENDORS
Because ERP software packages are so large and complex, one person
cannot fully understand a single ERP system; it is also impossible for an
individual to adequately compare various systems.
So, before choosing a software vendor, most companies study their needs
and then hire an external team of software consultants to help choose the
right software vendor(s) and the best approach to implementing ERP.
Working as a team with the customer, the consultants apply their expertise
to selecting an ERP vendor (or vendors) that will best meet their customer’s
needs.
After recommending a vendor, the consultants will typically recommend the
software modules best suited to the company’s operations, along with the
configurations within those modules that are most appropriate.
This preplanning should involve not only the consultants and a company’s IT
department, but the management of all functional business areas as well.
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THE SIGNIFICANCE AND BENEFITS
OF ERP SOFTWARE AND SYSTEMS
ERP systems offer the following benefits:
1. ERP allows easier global integration. Barriers of currency exchange rates,
language, and culture can be bridged automatically, so data can be integrated
across international borders.
2. ERP integrates people and data while eliminating the need to update and
repair many separate computer systems. For example, at one point, Boeing had
450 data systems that fed data into its production process; the company now
has a single system for recording production data.
3. ERP allows management to actually manage operations, not just monitor
them. For example, without ERP, getting an answer to “How are we doing?”
requires getting data from each business unit and then analyzing that data for a
comprehensive, integrated picture. The ERP system already has all the data,
allowing the manager to focus on improving processes. This focus enhances
management of the company as a whole, and makes the organization more
adaptable when change is required.
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QUESTIONS ABOUT ERP
1. How Much Does an ERP System Cost?
2. Should Every Business Buy an ERP Package?
3. Is ERP Software Inflexible?
4. What Return Can a Company Expect from Its ERP
Investment?
5. How Long Does It Take to See a Return on an ERP
Investment?
6. Why Do Some Companies Have More Success with ERP
Than Others?
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Be Careful...
Usually, a bumpy rollout and low ROI are caused by people problems
and misguided expectations, not computer malfunctions:
1. Some executives blindly hope that new software will cure
fundamental business problems that are not curable by any
software. The root of a problem may lie in flawed core business
processes. Unless the company changes its business processes, it
will just be computerizing an ineffective way of doing business.
2. Some executives and IT managers don’t take enough time for a
proper analysis during the planning and implementation phase.
3. Some executives and IT managers skimp on employee education
and training.
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Be Careful...
4. Some companies do not place the ownership or accountability for the
implementation project on the personnel who will operate the system. This
lack of ownership can lead to a situation in which the implementation
becomes an IT project rather than a company-wide project.
5. Unless a large project such as an ERP installation is promoted from the top
down, it is doomed to fail; top executives must be behind a project 100
percent if it is going to be successful.
6. A recent academic study attempting to identify the critical success factors of
ERP implementations showed that a good project manager was critical and
central to success of a project. In addition, training was crucial—along with a
project champion, that is, someone who might not be in the CEO role but who
brings enthusiasm and leadership to a project.
7. ERP implementation brings a tremendous amount of change for users of the
system. Managers need to effectively manage that change in order to ensure a
smooth implementation.
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Thanks...
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