Enterprise Resource Planning (ERP) And

Integration
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ERP: What Is It?

Enterprise resource planning software, or ERP,

doesn't live up to its acronym. Forget about

planningit doesn't do thatand forget about resource, a throwaway term. But remember the enterprise part. This is ERP's true ambition. It attempts to integrate all departments and

functions across a company onto a single

computed system Darwins Executive Guide
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Optimizing Theresources Idea Basic the Real time management . available. Deliver value added product and services in shortest possible time.

The Basic Idea

Automatic discovery, pre configured control panels, and automatic alerts .

Integration of specialized modules; all under one Roof.

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Characteristics

Flexibility

An ERP system should be flexible to respond to the changing needs of an enterprise. The client server technology enables ERP to run across various data base back ends through Open Data Base Connectivity (ODBC).

Modular & Open

ERP system has to have an open system architecture. This means that any module can be interfaced or detached whenever required without affecting the other modules. It should support multiple hardware platforms for the companies having heterogeneous collection of systems. It must support some third party add-ons also.
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Characteristics ( Contd)
Beyond The Company

It should not be confined to the organizational boundaries, rather support the on-line connectivity to the other business entities of the organization.

Best Business Practices

It must have a collection of the best business processes applicable world-wide.

Simulation of Reality

Last but not the least, it must simulate the reality of business processes on the computers. In no way it should have the control beyond the business processes and it must be able to assign accountabilities to the users controlling the system.
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Major Suppliers

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Some of the Modules

Sales and Distribution

Reporting

Human Resource

Material Management

Finance and Costing

Supply Chain Management

Time and labour

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Asset Management

Implementation
Complex process of configuration of fit business
Entering rules and preferences Loading and standardizing existing data Writing custom code where needed

Hooking up to remaining applications

Retraining users

Redesigning business processes

Also human parts

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Benefits : Operational Efficiency

Lower cost
Current data accessible to all participants. E.g. customer service rep can see stock levels in other divisions, progress on order, etc.

Data entered only once, used by all processes and Departments

Allows management of processes across organizational boundaries

Better customer service

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Benefit: Lower IT cost

But expect long term savings from Elimination of legacy systems Upgrades, maintenance and licensing costs

Future maintenance and upgrades cheaper

Spread costs over a large base

ERP is very expensive

Huge costs for adhoc integration of aging applications

Biggest saving in integration

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Benefit: Standard Process

ERP is managerial means to force global standardization in processes

Local variation, workarounds eliminated

May bring efficiency

Technological enforcement coded into software

Will sacrifice flexibility

Centralization of control over procedures

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Benefit: Managerial Data

Standardizing processes requires standardization of Product codes Accounting methods And Human Resources systems

This allows comparisons between divisions Especially using financial measures of effectiveness e.g. Economic Value Added (EVA) analysis and On global basis

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Issue: Cost

Project cost is 2 to 10 times software price

High profile implementation failures

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Issue: Complexity
Rely on to keep business running Will need further work on analysis to deliver promised benefits

Inherent complexity of global project

ERP team is permanent fixture

Training costs for users easy to underestimate Existing data often in worse shape than admit

New system gives shortterm efficiency slump

Like any major reorganization But may afflict whole business at once

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Issue: Inflexibility
Possible Problems non-standard modules

ERP standardizes business processes

Will be running business the same way as competitors Sees its processes as core competence

Cant find better ways to do things Tied to capabilities of software Limits scope for reengineering, etc except as software requires and supports

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Issue: Dependence

ERP is not just a new program, its a new way of doing business How to deal with things it wont support?

Long-term commitment

Can users lobby for new features? What if supplier is taken over? What if supplier raises prices? What if supplier shifts direction of product?

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Issue: Integration

When doesnt work well in one area

Problems in integrating into other systems

Can try to patch the ERP software Can rely on external application and links Can alter business to fit the software
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Create & maintain custom interfaces Not well suited for data warehouses

Issue: Upgrades

Like all software, frequent new releases

Can be a year long project, cost 30% of original installation price

Can cause major disruption

Likely to break custom code & interfaces to other applications

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Users resent having to upgrade just because vendor is pulling support

Trends in ERP

Increased modularization of suites Reduces scale of commitment Supposed to work better with other applications Shift to web based front ends

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Oracle tries to buy People Soft Initially to prevent merger with J.D. Edwards Announces customers will have to migrate to Oracle applications Still trying to acquire merged firm

People Soft buys J.D. Edwards Succeeds, just in time

SAP profits from chaos Market share continues to rise

Consolidation of suppliers
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CRM
Customer Relationship Management
Idea: centralize all processes and data related to interaction with customers Often offered by ERP suppliers Sold as next big thing, though problems set Hit by slump in IT spending from 2001

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