Hide Notes 

Slide 1: Chapter Eight Building The EBusiness Backbone: Enterprise Resource Planning
Slide 2: ERP: The Technological Backbone of EBusiness Typical corporate computing environment today of mainframebased 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 and warehousing, 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 and order status – ERP prices dropping and rental ASP model becoming prevalent © e-Business Strategies, -2- www.ebstrategy.com
Slide 3: ERP: The Technological Backbone of EBusiness ERP is the technological backbone of ebusiness – Enterprise-wide transaction framework with links into • sales order processing; inventory mgmt and control; production and distribution planning; finance – In early 1990s, only large manufacturers saw benefits of ERP – Today, medium-size and dot-com firms also recognize necessity of integrating back-office processes for front-office success in e-commerce world © e-Business Strategies, -3- www.ebstrategy.com
Slide 4: Who Really Uses ERP Suites? Large corporations that want to gain control over 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 © e-Business Strategies, -4- www.ebstrategy.com
Slide 5: The Basics of ERP Integrated Logistics Production Planning r/ meee to us ploy Cm E Sales Distributions (Order only) Accounting & Financials Human Resources rp te En re tu c ite h rc A se These ri apps are themselves built from smaller s/w modules that perform specific business processes within a given functional area www.ebstrategy.com © e-Business Strategies, -5-
Slide 6: ERP 之源起 Wave 1 ERP 之源起在於 1960 年代之庫存管理與控制的套裝軟體 70 年代即有 material requirement planning (MRP) 與 distribution resource planning (DRP) 之出現 , 各自 將“ production master scheduling” 與“ centralized inventory planning” 工作加以自動化 到了 80 年代 , 一個誤用的名稱“ MRP II” 出現 , 將傳統 MRP 專注於 production process 之焦點 , 延伸到其他的營 運功能 , 包括 order processing,manufacturing, 及 distribution. 由於 MRP 藉由技術連接不同營運功能對企業之貢獻日益 明顯 , 經理人開始將公司其他的功能 , 如財務 , 人力資源 , 專案管理等漸次整合 . 由於 MRP II 之名稱並不適當 , 便 改名為 ERP. © e-Business Strategies, -6- www.ebstrategy.com
Slide 7: Evolution of ERP Wave 4 Interenterprise Integration (XRP) Wave 3 Customer-Centric Integration (CRP) Wave 2 Enterprise Integration (ERP) Wave 1 Manufacturing Integration (MRP) © e-Business Strategies, -7- www.ebstrategy.com
Slide 8: Evolution of ERP • 1960s • Automation of all aspects of production master scheduling • Showed technology could link disconnected business functions Wave 4 Interenterprise Integration (XRP) Wave 3 Customer-Centric Integration (CRP) Wave 2 Enterprise Integration (ERP) Wave 1 Manufacturing Integration (MRP) © e-Business Strategies, -8- www.ebstrategy.com
Slide 9: Evolution of ERP • Began in 1980s as MRP II as execs sought for similar benefits as MRP by integrating other functions • Business drivers of ERP: replacing legacy systems, greater control, globalization, regulatory change, integration of Wave 3 decisions across enterprise • Y2K preparation in 1999 a significant factor Wave 4 Interenterprise Integration (XRP) Customer-Centric Integration (CRP) Wave 2 Enterprise Integration (ERP) Wave 1 Manufacturing Integration (MRP) © e-Business Strategies, -9- www.ebstrategy.com
Slide 10: Evolution of ERP • ERP evolving into CRP to integrate “brick” with “click” • Using middleware has drawbacks • Traditional ERP build for maketo-stock business models; but this is no longer the case; customer value, effectiveness, enhanced service delivery key today • Continuous planning vs. long Wave 2 planning cycle of ERP • Ericsson Enterprise Integration (ERP) Wave 4 Interenterprise Integration (XRP) Wave 3 Customer-Centric Integration (CRP) Wave 1 Manufacturing Integration (MRP) © e-Business Strategies, - 10 - www.ebstrategy.com
Slide 11: Evolution of ERP • A company’s partners benefit from the same seamless integration as the company itself • Extends beyond four walls of the enterprise to customer, suppliers and trading partners • B2B marketplaces • ERP does not support continuous-planning requirements of SCP Wave 2 • Collaborate or perish Wave 4 Interenterprise Integration (XRP) Wave 3 Customer-Centric Integration (CRP) Enterprise Integration (ERP) Wave 1 Manufacturing Integration (MRP) © e-Business Strategies, - 11 - www.ebstrategy.com
Slide 12: Benefits of ERP Critical business need: Enterprise-wide shared services – Replace old, autonomous departmental, or divisional services with single, streamlined, corporate-level process Shared-services standardize the processes for routine, non-core functions for all business units to use (Porter’s value chain next 3 pages) – Accounting With processes defined, an ERP-based IT infrastructure can be established to manage them efficiently © e-Business Strategies, - 12 - www.ebstrategy.com
Slide 13: © e-Business Strategies, - 13 - www.ebstrategy.com
Slide 14: Generic Value Chain -Primary Activities Inbound logistics: receiving, storing and disseminating inputs to the product. Operations: transforming inputs into the final product. Outbound logistics:collecting, storing and physically distributing the product to customers. Marketing and sales: identifying markets and how customers buy the company’s products or services. Service: dealing with customer support and repair service. © e-Business Strategies, - 14 - www.ebstrategy.com
Slide 15: Generic Value Chain -Support Activities Procurement of inputs used in the firm’s value chain. Technology development in every facet of the operation but not limited to information technology. Human resource management involving the recruiting, hiring, training, development and compensation of employees. Firm infrastructure includes planning, accounting and finance, legal, community affairs, government relations and quality management. © e-Business Strategies, - 15 - www.ebstrategy.com
Slide 16: ERP Decision = Enterprise Architecture Planning Management must resolve enterprise architecture issues before selecting an ERP suite of products – “What kind of company do we want to be?” – Not, “What are each application’s features?” Inability to find the right fit between ERP apps and their business causing corporate frustration – FoxMeyer Problem not with ERP concept but in management’s demands for quick fixes and rapid cures to underlying structural problems © e-Business Strategies, - 16 - www.ebstrategy.com
Slide 17: ERP Decision = Enterprise Architecture Planning Selecting and installing a new ERP solution one of the most important and most expensive endeavors – Also most likely to go wrong – Lack of alignment between ERP, business processes and ecommerce 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 © e-Business Strategies, - 17 - www.ebstrategy.com
Slide 18: ERP Decision = Enterprise Architecture Planning 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 for business change and e-commerce functionality, besides ROI of new technology – “What business are we in?” – “What are the key issues facing us today?” – “What issues will be important tomorrow?” © e-Business Strategies, - 18 - www.ebstrategy.com
Slide 19: ERP Decision: Build Vs Buy Vs Rent Important decision: whether to build or buy or rent – ERP apps define overall corporate architecture – Enterprise-wide implementations Custom design app that meets specific requirements of an organization has several drawbacks – Highly complex – Lengthy design, development and implementation efforts – Limited flexibility to support diverse and changing operations or to respond effectively to evolving business demands and technologies © e-Business Strategies, - 19 - www.ebstrategy.com
Slide 20: ERP Decision: Build Vs Buy Vs Rent COTS apps address limitations of custom built apps – Provide broad functionality, better integration with existing legacy systems, greater flexibility to change and upgrade, and a lower 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 COTS solution?” – “How can we support our ecommerce initiatives with COTS?” © e-Business Strategies, - 20 - www.ebstrategy.com
Slide 21: Capabilities of COTS ERP Solutions • Consolidation of back office • Creation of single back office that supports multiple distribution channels • Facilitation of changes in business practices • Facilitation of changes in technology © e-Business Strategies, - 21 - www.ebstrategy.com
Slide 22: Microsoft Spent 10 months and $25 million installing SAP R/3 to replace a tangle of 33 financial-tracking systems in 26 subsidiaries $18 million annual savings Growth rate was straining company’s 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 groups alone – 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 © e-Business Strategies, - 22 - www.ebstrategy.com
Slide 23: ERP Implementation: Catching the Bull by the 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 the solution not easy – Brother Industries © e-Business Strategies, - 23 - www.ebstrategy.com
Slide 24: Roadmap to Rapid Implementation: Accelerated ERP Approach Today’s intense competitive pressures require fast response – ERP app suites can’t keep up But successful companies understand business processes, simplify them, and then introduce automation – Automating complex or non-value-adding processes will not increase productivity or provide measurable improvements in performance – Automation without simplification immortalizes ineffective processes © e-Business Strategies, - 24 - www.ebstrategy.com
Slide 25: Roadmap to New Leadership Skills Effective coordination mgmt encompasses a combination of four capabilities – Strategic thinking • How well does your ERP selection, implementation, and evolution strategy align with your business strategy? – Process reengineering – Managing implementation complexity – Transition management © e-Business Strategies, - 25 - www.ebstrategy.com
Slide 26: E-Business Strategies, Inc. www.ebstrategy.com contact@ebstrategy.com 678-339-1236 x201 Fax - 678-339-9793