idea incubation

M0254 - ERP (Enterprise Resources Planning)
Session 1 - Background

ERP
Enterprise Resource Planning (ERP):

• An expanded effort to integrate marketing, financial, manufacturing and human resources in a single information system.
• Standardized record-keeping permits information sharing throughout the organization.
• A computer-based system designed to process an organization’s transactions and facilitate integrated and real-time planning, production, and customer response.

Evolution of Information Systems

• Prior to 1960, all systems were paper-based
• Data entry, storage, retrieval were slow, labor-intensive processes

Computer Hardware and Software Development

• The First Business Computers
• Computers Smaller and Faster
• Moore’s Law
• Software Proliferates

Early Attempts to Share Data

• Client/Server
• Scalability

ERP – The Evolution
MRP

• Material Requirement Planning
• Focus on stock reduction

MRPII

• Integration of logistic processes
• Focus on stock reduction, decrease in number of stock-out, and more control

ERP (or MRPII plus)

• Evolution of MRPII thanks to:
• better package coverage: multi-plant, quality, customer service, tracking, etc.
• technological development: client/server architecture , RDBMS
• Focus on customer services rather than inventories
• Pro-active approach looking for the best allocation of financial, production and distribution resources
• eMarkets (Extended-ERP)
• Pro-active resource allocation beyond the company’s boundaries: from enterprise to inter-enterprise
• cross-enterprise process automation

ERP – The Evolution
Why Implement ERP?

• Business Reasons
• Technological Reasons

Common Business Reasons for Implementing ERP
Technology Reasons for Implementing ERP

Business Requirements
Businesses exist to make a profit
Businesses strive to provide goods and services faster and cheaper than competition
More efficient ways of accessing and sharing information will increase customer service and therefore profits
Industry Demands
Better products at lower cost.
Tough competition.
Need to analyze costs/revenues on a product or customer basis.
Flexibility to respond to changing business requirements.
More informed management decision making.
Healthy Operation
Integration of Systems across the Functional Departments in a Company as well as across the Enterprise as a Whole.
Better Customer Service.
Introduction of Latest Technologies as and when the are ready for the Industry acceptance

What IT Department shall look?
Automatic Identification System
Hardware & Networking
Software DBMS/RDBMS
Communication
ERP
Supply Chain Management
EDI
Intranet
Internet
Etc…
Typical Problems
Unable to get accurate, timely information.
Applications not complete for existing business practices.
Modification are time consuming or not feasible.
Typical IT Stories
ERP enables to
Global integration
Eliminates updating and repairing separate computer systems
Systematic Look into your Systems & procedures.
Optimizing the processes.
Discipline across the functions.
Allows managers to manage, not just monitor


Benefits of Implementing ERP
Integrated, real-time, business information and control system.
Standardize and improve Processes.
Improve the level of Systems Integration.
Improve Information Quality.
ERP Project Cost
META Group (2000)
Average cost of ownership is $15 Million
Typically at a cost of $ 53,320 per user
Escalle, Cotteleer, and Austin (1999)
ERP cost can run as high as 2-3% of revenue
Average Implementation Time
1-2 years for Medium Company
3-4 years for Big Company
Questions about ERP
Is it for every company?
Is the software inflexible?
How much profit should you expect?
How long does it take to see an ROI?
Why do some have more success?
Summary
Several factors led to development of ERP:
speed and power of hardware increased, cost and size decreased
client/server architecture
sophisticated software development
growth of business size, complexity, and competition
Purchasing ERP software is expensive, with spectacular payoffs and challenging implementation
The future of ERP will focus on:
managing customer relationships
improving planning and decision making
linking operations to the Internet