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Chapter EightBuilding The E- Business Backbone:

Enterprise Resource Planning

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e-Business Strategies, Inc. www.ebstrategy.com- 2 -

ERP: The Technological Backbone of E-Business

Typical corporate computing environment today of mainframe-

based apps is antiquated Cannot meet demands of new economy and must be replaced

ERP integrated app suite Framework to automate back-office functions: Financial,

Manufacturing and Distribution, HR, Administrative Unites major business processes within single family of

modules: production, order processing, inventory mgmt andwarehousing, A/P and A/R, general ledger, and payroll

ERP phenomenon also catching fire among dot-coms Managing customer relationships key for the newer online firms ERP offers customers efficient, high-quality service

Ability to order online; inquire about product pricing andorder status

ERP prices dropping and rental ASP model becoming prevalent

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ERP: The Technological Backbone of E-Business

ERP is the technological backbone of e-business

Enterprise-wide transaction framework with linksinto

sales order processing; inventory mgmt andcontrol; production and distribution planning;finance

In early 1990s, only large manufacturers sawbenefits of ERP

Today, medium-size and dot-com firms alsorecognize necessity of integrating back-officeprocesses for front-office success in e-commerceworld

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Who Really Uses ERP Suites?

Large corporations that want to gain controlover disparate groups of core business apps

3Com, Chevron Products Company, GM

3 primary categories of ERP implementations Single to few products in single industry: eToys Single SBU firms, selling only few products in a

single industry: Delta Airlines, Dell, Microsoft, Nike Large corporate conglomerates or multiple-SBU

firms, selling many products in multiple industries:GE, IBM, Colgate-Palmolive, and Nabisco

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The Basics of ERP

These apps arethemselves builtfrom smaller s/wmodules that performspecific businessprocesses within agiven functional area

Integrated Logistics

Accounting

& Financials

HumanResources

SalesDistributions(Order only)

ProductionPlanning

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Evolution of ERP

Manufacturing Integration (MRP)

Enterprise Integration (ERP)

Customer-Centric Integration (CRP)

Interenterprise Integration (XRP)

Wave 1

Wave 2

Wave 3

Wave 4

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1960s

Automation of all aspects ofproduction masterscheduling

Showed technology couldlink disconnected business

functions

Evolution of ERP





Wave 1

Wave 2

Wave 3

Wave 4

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Wave 1

Wave 2

Wave 3

Wave 4

Evolution of ERP Began in 1980s as MRP II as

execs sought for similar benefits

as MRP by integrating otherfunctions

Business drivers of ERP:replacing legacy systems,greater control, globalization,regulatory change, integration

of decisions across enterprise Y2K preparation in 1999 a

significant factor

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Wave 1

Wave 2

Wave 3

Wave 4

ERP evolving into CRP tointegrate brick with click

Using middleware hasdrawbacks

Traditional ERP build for make-to-stock business models; butthis is no longer the case;

customer value, effectiveness,enhanced service delivery keytoday

Continuous planning vs. longplanning cycle of ERP

Ericsson

Evolution of ERP

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Wave 1

Wave 2

Wave 3

Wave 4

A companys partnersbenefit from the sameseamless integration as thecompany itself

Extends beyond four walls ofthe enterprise to customer,suppliers and tradingpartners

B2B marketplaces

ERP does not supportcontinuous-planningrequirements of SCP

Collaborate or perish

Evolution of ERP

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Benefits of ERP

Critical business need: Enterprise-wide sharedservices

Replace old, autonomous departmental, ordivisional services with single, streamlined,corporate-level process

Shared-services standardize the processes forroutine, non-core functions for all businessunits to use

Accounting

With processes defined, an ERP-based ITinfrastructure can be established to managethem efficiently

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ERP Decision = Enterprise ArchitecturePlanning

Management must resolve enterprisearchitecture issues before selecting an ERPsuite of products

What kind of company do we want to be? Not, What are each applications features?

Inability to find the right fit between ERP appsand their business causing corporatefrustration

FoxMeyer

Problem not with ERP concept but inmanagements demands for quick fixes andrapid cures to underlying structural problems

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Selecting and installing a new ERP solution one of themost important and most expensive endeavors

Also most likely to go wrong Lack of alignment between ERP, business processes and e-

commerce objectives can derail best of firms Managers must understand core functionality, not abdicate

responsibility to IT dept

Successful organizational change is gradual Enterprise apps require moving decades of corporate

knowledge and information to a new technology platform Technology is not the only challenge in managing

transformation

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Cannot lose sight of customers Is this something our customers will recognize as valuable? Will it shorten order -to-delivery cycle? Will this improve our product and performance?

ERP impacts not just s/w Corporate culture, business processes, staff, and day-to-day

procedures are all affected

Executive mgmt must understand technical basis forbusiness change and e-commerce functionality, besidesROI of new technology

What business are we in? What are the key issues facing us today? What issues will be important tomorrow?

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ERP Decision: Build Vs Buy Vs Rent

Important decision: whether to build or buy orrent

ERP apps define overall corporate architecture Enterprise-wide implementations

Custom design app that meets specificrequirements of an organization has severaldrawbacks

Highly complex

Lengthy design, development and implementationefforts Limited flexibility to support diverse and changing

operations or to respond effectively to evolvingbusiness demands and technologies

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ERP Decision: Build Vs Buy Vs Rent

COTS apps address limitations of custom built apps

Provide broad functionality, better integration with existinglegacy systems, greater flexibility to change and upgrade, and alower TCO

Downside of COTS apps Reengineer estbd. business practices Customize apps Hire consultants to make s/w work No competitive edge

Mgmt must view COTS apps within the context of overall

business strategy What business processes bring us our identity and our competitive advantage?

How can we ensure that we enhance these with COTSsolution?

How can we support our ecommerce initiatives with COTS?

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Capabilities of COTS ERP Solutions

Consolidation of back office

Creation of single back office that supportsmultiple distribution channels

Facilitation of changes in business practices Facilitation of changes in technology

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Microsoft

Spent 10 months and $25 million installing SAP R/3 to

replace a tangle of 33 financial-tracking systems in 26subsidiaries

$18 million annual savings

Growth rate was straining companys systems 50 subsidiaries worldwide; continues to grow every day More than 30 systems implemented in a piecemeal fashion

over time supported financial, operations and HR groupsalone

Batch processes to move information between systems Run time grew to more than 12 hours 90% of the more than 20,000 batch robs that ran each

month retrieved and processes same information

Mgmt realized it needed a global and integrated solution

to support its core business

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ERP Implementation: Catching the Bull bythe Horns

Installation of ERP packages unique Each ERP app suite has own architecture, customization

features, installation procedures, and level of complexity

Implementation strategies for SAP Step-by-step

One module at a time Big bang Replacing all old systems at once

Modified big bang Various modules at once, but pilot first

Very common

Even if implementation strategy is right, setting up thesolution not easy

Brother Industries

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Roadmap to Rapid Implementation:Accelerated ERP Approach

Todays intense competitive pressures requirefast response

ERP app suites cant keep up

But successful companies understand businessprocesses, simplify them, and then introduceautomation

Automating complex or non-value-addingprocesses will not increase productivity or providemeasurable improvements in performance

Automation without simplification immortalizesineffective processes

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Roadmap to New Leadership Skills

Effective coordination mgmt encompasses acombination of four capabilities

Strategic thinking How well does your ERP selection,

implementation, and evolution strategy alignwith your business strategy?

Process reengineering Managing implementation complexity

Transition management

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E-BusinessStrategies, Inc.

www.ebstrategy.com

[email protected]

678-339-1236 x201

Fax - 678-339-9793

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