Enterprise Resource PlanningEnterprise Resource Planning

Enterprise Resource Planning

• Enterprise Resource Planning Systems is a computer system that integrates application programs in accounting, sales, manufacturing, and other functions in the firm

• This integration is accomplished through a database shared by all the application programs

ERP can be considered an initiative launched to better manage business processes across the organization using a common, integrated database, shared data management applications and reporting tools.

Enterprise Resource Planning - Background

An organization’s critical business processes often cut across many of its functional units.

In most organizations, each process has its own data needs and applications that operate as distinct systems.

The results of this approach:- Function-Centric view in the business units- Operational Inefficiencies

Example: A customer order

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Enterprise Resource Planning - Background

ERP evolved from MRP (Material Requirements Planning) and MRP II.

Material requirements plan

Inventory records Inventory transactions

Bills of materialsRoutings

Time standards

MRPMRPexplosionexplosion

Master production schedule

Manufacturing resource planCost and

financial data

Customer orders Forecasts

Enterprise Resource Planning - Background

“Instead of having one set of numbers for the operating system in manufacturing and one set kept by the financial people – once the manufacturing people have numbers that are valid, the financial people can use these to get their numbers. Of course, whenever there are two systems – the numbers are bound to be different. With MRP II, everybody can be working with the same set of numbers, but that’s only the technical difference. The big difference comes in the way management uses these tools…MRP II becomes a company game plan for manufacturing, marketing, engineering, and finance.”

Oliver Wright, The Executives Guide to Successful MRP II, 1982.

Enterprise Resource Planning – Background Timeline

ERP Functional Components

Functional ComponentsSales & Distribution Human Resources

Manufacturing & Logistics

Financial Accounting

Accounts PayableAccounts ReceivableGeneral LedgerCapital InvestmentsOpen Item ManagementABC (costing approaches)Asset Management

PayrollBenefitsSchedulingPersonnel DevelopmentWorkforce PlanningTravel Expense Accounting

Largest and most complexMaterials ManagementPlant MaintenanceQuality ManagementProduction Planning and ControlProject ManagementBudgeting

Customer ManagementOrder ManagementConfiguration ManagementBillingRebate Processing

SAP System Functional Components

Reasons for implementing ERP

• Desire to standardize and improve processes• To improve the level of systems integration• To improve information quality

• Integrate Financial Information• Integrate Customer Order Information• Standardize and Speed Up Manufacturing Processes• Reduce Inventory• Standardize Human Resources Information

• Global Outreach• Avoid Redundancies

ERP Disadvantages

• Time-consuming

• Expensive

• Fit

• Vendor Dependence

• Too many features, too much complexity

• Process Rigor (Standardized)

The General ERP Process

1. Product Analysis

2. Module Selection

3. Process Analysis

4. Data Analysis

5. Applications Integration

6. Testing and Installation

7. Employee Training

Average Implantation Time24+ Months

Meta Group Study

How Much Does an ERP Implementation Cost?

1. The size and geographic distribution of the company.

2. The size of the ERP package.

3. Hardware

4. Software

5. Consultants and Analysts Fees

6. Time

7. Training

A large company may spend from $ 50 to $ 100 M or more USD for an integrated ERP implementation.

Meta group survey; 63 companies (large and small) in a range of industries.

Average cost $ 15,000,000.

High $300 M, $300,000,000 USD

Low $ 400 K, $400,000 USD

Successful ERP Implementation Criteria

• Top Management Support• Good Cost Estimation• Realistic Expectations• ERP Implementation• Cultural Impact• Training• Customization and Integration

Hillerich & Bradsby

About Hillerich & Bradsby

Additional ERP Resources

• SSA Global Technologies – www.ssaglobal.com• SAP – www.sap.com• Oracle/PeopleSoft – www.oracle.com• IBM -http://www-03.ibm.com/solutions/businesssolutions/erp• Microsoft (Great Plains) – www.microsoft.com• Also, American Software, i2, Manugistics

Additional ERP Resources

Additional ERP Resources