Chapter 14/17

Enterprise Resource Planning Systems

McGraw-Hill/Irwin Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved

Learning Objectives

1. Understand the scope of enterprise

resource planning (ERP) systems.
2. Recognize the client/server structure
of ERP systems.
3. Relate the value of integrated
information in a complex firm.
4. Identify the challenges associated with
implementing ERP systems.

14-2
 Enterprise Resource Planning
(ERP)

• Enterprise resource planning (ERP)

system: computer system that links all
the areas of the business
– Manufacturing knows about new orders as
soon as they are entered
– Sales knows the exact status of a
customer order
– Purchasing knows what manufacturing
needs to the minute The accounting
– system is updated as all the relevant
transactions occur
LO 1
14-3
 Enterprise Resource Planning
(ERP) Continued

• The potential benefits are huge

– Savings in redundant postings
– Redundant jobs can be eliminated
– Other jobs can be done faster
– Creates new ways to do business
• Benefits are not without cost
– ERP systems are complex and expensive
– May require major changes in processes

LO 1
14-4
 Major Developers of Enterprise
Resource Planning Software

LO 1
14-5
 SAP

• SAP AG is the world leader in providing ERP

software
– Flagship product is R/3
• Software designed to operate in a three-tier
client/server configuration
• Cost is a high-speed network of database
servers
• Application consists of software modules
• Applications are fully integrated and share
data
• Firms wishing to use SAP may need to
change their practices to those implemented
by SAP
LO 1
14-6
 Three-Tier Client/Server
Configuration

LO 2
14-7
 SAP Application Modules

• Software is built around a set of

application modules:
– Financials
– Human capital management
– Operations
– Corporate services
– Duet–Microsoft Office integration
• Can be used either alone or in
combination
LO 2
14-8
 Financials

• Financial application provides functionality to

run the financial accounts for the company
• The application is divided into three areas:
1. Financial and management accounting
module: includes general ledger, accounts
payable, accounts receivable, capital investments
and closing the books
2. Corporate governance: internal control and
audit functions needed to adhere to corporate
governance standards, documentation of internal
controls, and audits that comply with current
requirements
3. Financial supply chain management: handles
the money flow related to supply chain activities

LO 3
14-9
 Human Capital Management

• This application contain the full set of

capabilities needed to manage, schedule,
pay, and hire the people who make a
company run
• It includes:
– Payroll
– Benefits administration
– Application data administration
– Personnel development planning
– Workforce planning
– Schedule and shift planning
– Time management
– Travel expense accounting

LO 3
14-10
 Human Capital Management Continued

• The “talent management” functions are

designed to help align employee goals with
corporate goals by maximizing the impact of
training
• “Workforce deployment” applications are to
aid in deploying the right people with the right
skills to positions in the firm
• Managing project teams, monitoring the
progress of projects, and tracking time are
supported

LO 3
14-11
 Operations

• Materials management covers all tasks within

the supply chain
– It also includes inventory and warehouse
management
• Plant maintenance supports the activities
associated with planning and performing
repairs and preventive maintenance
• Quality management plans and implements
procedures for inspection and quality
assurance and is built around the ISO 9001
specifications.
LO 3
14-12
 Operations Continued

• Production planning and control

supports both discrete and process
manufacturing processes
• Sales order management, configuration
management, distribution export
control, and shipping and transportation
management are handled as well

LO 3
14-13
 Corporate Services

• The corporate services applications are

designed to manage both centralized and
decentralized services
• This includes managing the firm’s real estate
portfolio, including:
– Property acquisition and disposal
– Property management
– Building operations and maintenance
– Investment reporting
• Another major aspect of the corporate
services is travel management
LO 3
14-14
 mySAP.COM and SAP NetWeaver–
Integrated E-Business Applications

• All SAP functions can be implemented using

an Internet interface
– mySAP versions work over the Internet
– Can run SAP without deploying any special
software
• Cloud computing: delivering hosted
services over the Internet
• Three distinct characteristics:
1. Sold on demand
2. It is elastic
3. The service is fully managed by the provider

LO 3
14-15
 NetWeaver

• NetWeaver allows users to build their

own application on top of SAP
applications
• Users and third-party vendors can offer
an unlimited variety of specialized
applications

LO 3
14-16
 Implementing ERP Systems

• SAP has strong competition

– Oracle
– i2 Technologies
– PeopleSoft
• Implementation of ERP is costly
– Cost of the software typically one-third or
less of the total cost
• ERP implementation does not always
work out
LO 4
14-17
 Major Problems with ERP
Implementation

1. ERP technology could not support

their businesses
2. Their organizations could not make
changes needed to benefit from ERP
3. ERP implementation might actually
damage their businesses

LO 4
14-18
 Reasons to Implement ERP

• Desire to standardize and improve

processes
• To improve systems integration
• Improve information quality

LO 4
14-19