1

Enterprise Resource Enterprise Resource PlanningPlanning

Mike SullivanMike SullivanJeff FrederickJeff FrederickKaren GrubbsKaren Grubbs

Melissa OrlandoMelissa Orlando

2

What is ERP?What is ERP?

• ERP systems are software packages that integrate all the enterprises data, and provide information based on this data on a real time basis.

Gefen, David and Arik Rogowsky “A Multi-Level approach to measuring the benefits of an ERP system in A Manufacturing firm”

3

Tonight’s TopicsTonight’s Topics

• Overview of ERP

• How it works and why use it

• ERP software suppliers: Oracle, SAP, & Microsoft

• Case Studies: Spartech, Lone Star Steel, & Data2 Corp.

• Take-Aways

4http://www.cs.nccu.edu.tw/~lien/Lib/Image/BCC2/erp-relationship.gif viewed 4/15/2006

ERP System

Help Desk

Call CenterWorkflow

CRMCustomer

Relationship Management

Knowledge Management

E-BusinessE-Commerce

Supply Chain Management

Data Warehouse

Data Flow within ERPData Flow within ERP

5www.developer.ibm.com/partnerworld/pwhome.nsf/weblook/pe_sc_solutions_erp.html viewed 4/15/2006

ERP approach

ERP package selection

Implementation plan

Sandbox

ERP design & deployment

ERP integration

IT infrastructureOperations

Extending The Enterprise

Solution Inquiry

Lifecycleof

ERP

6

Payroll ExamplePayroll Example

http://icsun.ithaca.edu:88/jbarr/312205/312205cc?D=A viewed 4/15/2006

7

Payroll Example (old method)Payroll Example (old method)

Employee fills

out time card

Supervisor

collects timecard

Get OK

From Mom

Supervisor gives

time sheets to

HR

HR produce

s paychec

ks

Supervisor gets

paychecks from HR

Checks distributed to employees

Checks given to employees

http://www.professorsearch.com/search/payroll viewed 4/15/2006

Accuracy check

8

Payroll Example (ERP method)Payroll Example (ERP method)

http://www.wellesley.edu/Computing/Binders/Common/payroll.html viewed 4/15/2006

http://www.cometconstructionsoftware.com/images/prcheck.gif viewed 4/15/2006

9http://www.blog.ebiznis.info/wp-images/blog/ERP%20Benefits_web.jpg viewed 4/15/2006

Benefits of ERPBenefits of ERPB

enef

its

Ben

efit

s

TimeTime

Improved Improved EfficiencyEfficiency

Organizational Organizational EffectivenessEffectiveness

Enterprise Enterprise TransformationTransformation

Lower infrastructure costsLower infrastructure costs

Process EfficiencyProcess Efficiency

Supply Chain EfficienciesSupply Chain Efficiencies

Production ImprovementsProduction ImprovementsPersonnel reductionPersonnel reduction

Cycle Time ReductionCycle Time ReductionInventory ReductionInventory Reduction

Lower procurement costsLower procurement costs

Lower distribution costsLower distribution costsGreater Customer SatisfactionGreater Customer Satisfaction

Revenue/Profit EnhancementRevenue/Profit Enhancement

Improved information quality, Improved information quality, better business processes, better business processes, and increased integrationand increased integration

10

Costs of ERPCosts of ERP

• Training

• Integration and Testing

• Customization

• Data Conversion

• Outside Consultants

• Replacing employees

• Never ending implementation

• Drop in Performance

http://www.cio.com/research/erp/edit/erpbasics.html viewed 4/9/2006

11

How will ERP affect our How will ERP affect our processes?processes?

• Financial processes– Real-time cost and performance analysis

• Across projects and divisions– Better financial planning

• Logistics processes– Supports all phases of procurement process– Integrates transportation management across the supply chain

• Sales processes– Complex pricing and profitability analysis– Real-time inventory control

www91.homepage.villanova.edu/william.wagner/MBA8556/erplec1.ppt viewed 4/15/2006

12

Vendors of ERP softwareVendors of ERP software

www.oracle.com viewed 4/15/2006, www.sap.com/usa/index.epx viewed 4/15/2006, www.ibm.com viewed 4/15/2006

13

““Big Three” Market ShareBig Three” Market Share

Relative Peer Group ShareRelative Peer Group Sharerolling 4 quarters – based on software revenuesrolling 4 quarters – based on software revenues

http://www.sap.com/company/investor/pdf/Misc_IR_FactSheet_04_06_06.pdf, viewed 4-18-2005

Siebel 9%

Microsoft 13%

Oracle 16%SAP 62%

14

Oracle (Nasdaq: Oracle (Nasdaq: ORCLORCL))

• World's leading supplier of software for information management, and the world's 2nd largest independent software company.

• Founded in 1977, now has +40,000 employees in over 100 countries

• Focuses on enterprise software– Database & Middleware – Applications

http://www.oracle.com/corporate/story.html, viewed 4-13-2005

15

• Attempting to capture larger portion of the Enterprise Application market

• 18 Acquisitions in the past 16 months (over $18 billion)– PeopleSoft (JD Edwards)– Siebel– Portal Software– Retek

Enterprise InitiativesEnterprise Initiatives

http://www.oracle.com/corporate/acquisition.html, viewed 4-17-2005

16

• 2000 ERP Software Product of the Year

• Oracle E-Business Suite– Oracle E-Business Suite is a fully integrated, comprehensive suite of

business applications for the enterprise.

• Benefits– Oracle E-Business Suite helps businesses protect their existing

investment, extend the value of their applications, & evolve to the next generation of business applications.

http://www.oracle.com/applications/e-business-suite.html viewed 4/15/2006

17

• Fusion Application Suite – Aims to integrate

solutions software from acquisitions with preexisting applications and databases

– In the pipeline, with 2008 release target

                                                                

http://searchsap.techtarget.com/generic/0,295582,sid21_gci1166780,00.html, viewed 4-17-06

18

• Oracle Certifies PeopleSoft Applications with Oracle® Fusion Middleware: PeopleSoft Customers to Benefit from Oracle’s Hot pluggable service oriented software

– REDWOOD SHORES, Calif.,   13-DEC-2005  Oracle today announced it has certified Oracle's PeopleSoft Enterprise applications with Oracle(r) Fusion Middleware 10g Release 2. This marks a key milestone in the delivery of the Oracle fusion software.

http://www.oracle.com/corporate/press/2005_dec/ofm_psft_certification.html viewed 4/15/2006

19

(NYSE: SAP)(NYSE: SAP)

• World's largest inter-enterprise software company and 3rd largest software supplier overall

• Founded in 1972, with a vision to develop standard application software for real-time business processing.

• Currently employs +32,000 people in over 120 countries

http://www.sap.com/usa/company/index.epx, viewed 4-17-06

20

Enterprise InitiativesEnterprise Initiatives

• Focus on less expensive, organic growth

• Capture market share through business migration– Safe Passage program

• mySAP

http://www.sap.com/usa/solutions/safepassage/index.epx,http://searchsap.techtarget.com/originalContent/0,289142,sid21_gci1135873,00.html?track=NL-137&ad=530635USCA, Both Viewed on 4-18-2006

21

• mySAP and SAP NetWeaver

– Gain new market insights and adapt quickly to market changes.

– Sense and respond to customer requirements in real time.

– Extend processes beyond the organization to include customers, suppliers, and partners.

– plus support for systems management -- all powered by the SAP NetWeaver platform.

That's the power of mySAP ERP.

http://www.sap.com/solutions/business-suite/erp/index.epx viewed 4/15/2006

22

An Efficient ERP System Based on SAP

Financial Management

SalesOrder

MPS

MRP Purchase QCMaterial

Management

Manufacture

QCStorageDeliveryPostSales

Service

http://www.kongyue.com.cn/corporate/system.htm viewed 4/15/2006c

23

• Expected to be the most purchased ERP solution in 2006

• Dynamics Business Suite– Replaced the Microsoft

Business Solutions software this year

– Less costly than the other two competitors

– Ready to use with other Microsoft office-productivity applications

(NYSE: MSFT)(NYSE: MSFT)

http://www.microsoft.com/dynamics/overview.mspx, viewed 4/17/2006

24

SAP AG Oracle Microsoft

SpecialtyMid to Large Businesses Mid to Large Businesses

Small to Mid Businesses

Current offering mySAP and NetWeaver eBusiness, Enterprise One Dynamics ApplicationsHope for the Future mySAP and NetWeaver Fusion Applications Dynamics ApplicationsRelative Costs of Ownership High Average to High LowRelative Tech Resources Average High HighOverall Current State Stable Growth Uncertainty due to mergers Expected Growth

Compatability with Existing ApplicationsAverage Above Average High

Track RecordIndustry Founder /

LeaderSearching for More Market

ShareEmerging Contender

““Big Three” ComparisonBig Three” Comparison

www.XXXXX.com, viewed XXXXX

26

Business Application Business Application Revenue to Total RevenueRevenue to Total Revenue

Microsoft

$38,788

$803

Oracle

$11,799

$3,508

SAP

$10,082

$2,783

http://www.sap.com/company/investor/reports/annualreport/2005/pdf/2005_SAP_Annual_Report.pdf, viewed 4-22-06,http://www.oracle.com/corporate/investor_relations/4q05_pressrelease.pdf, viewed 4-22-06Microsoft 2005 Annual Report, HTML version, viewed 4-22-06

27

Case Studies:Case Studies:

• Spartech Corporation

• Lone Star Steel

• Data 2 Corporation

28

Industries and ProductsIndustries and Products

Spartech 2005 Annual Report

• Products

– Extruded thermoplastic sheet and rollstock

– Polymeric compounds

– Custom engineered plastic products

• Industries

– Packaging

– Transportation

– Building and Construction

– Recreation and Leisure

– Sign and Advertising

– Lawn and Garden

– Appliance and Electronics

29

Company BackgroundCompany Background

• Global plastics manufacturer headquartered in St. Louis, MO with plants in the US, Canada, Mexico, & France.

• 3,500 employees

• $14 billion in sales for 2005

• $12.2 million in profit for 2005

• 25-30 IT employees

• CIO reports directly to CFO; with 4 managers reporting to the CIO

• $8 million IT budget for 2005“Spartech 2005 Annual Report”

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

30

Innovative ProductsInnovative Products

“Spartech 2005 Annual Report”

• Polyactide

– corn based-biodegradable material that is safe for food packaging.

• Low-E Poly

– material that “virtually eliminates the evaporative emissions of gasoline in fuel tanks.”

31

Products and ApplicationsProducts and Applications

Products:• Steel for oil field products.• Specialty tubing products.• Cold-drawn carbon and alloy tubing.

Applications:• Energy• Industry• Mechanical• Automotive• Construction• Communications

“Lone Star Technologies 2005 Annual Report”, http://www.lonestarsteel.com viewed 4/8/2006

32

Company BackgroundCompany Background

• Parent company is Lone Star Technologies, Inc.

• Headquarters near Dallas, Texas

• 3,500 employees

• $1.3 billion in sales for 2005

• $272 million in profits for 2005

• 25-30 IT employees

“Lone Star Technologies 2005 Annual Report”, http://www.lonestarsteel.com viewed 4/8/2006, Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

33

Products and ServicesProducts and Services

• Miniaturized UPC barcode labels

• Specialty labels

• EDI and internet ordering system

• SKU database system interfaces

• Blank labels

Personal knowledge of Data2 as an employee per Melissa Orlando

34

Company BackgroundCompany Background• Operations began in 1960, incorporated in 1989, and

in 2003 completed a downstream merger to create Data2 Corp.

• Corporate headquarters and production in St. Peters, MO with marketing and sales in Concord, CA.

• $12 million in revenue for 2004

• Customer base throughout the U.S. and 22 countries worldwide.

• Operates under a JIT process.

• 65 employees

Data2 Corporation Company Profile – internal document accessed as an employee by Melissa Orlando

35

Market Channel MatrixMarket Channel Matrix

Accessed from Data2 Marketing file, as an employee per Melissa Orlando

36

Product ExamplesProduct Examples

Accessed from Data2 Marketing file, as an employee per Melissa Orlando

37

Need for ERPNeed for ERP

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

38

Spartech’s Need for ERPSpartech’s Need for ERP

• Decision made in 2003 to implement ERP

• Passage of Sarbanes-Oxley

• 8 -10 different systems running among 43 locations with no common platform. Impossible to see inventory from plant to plant.

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

39

Lone Star’s Need for ERPLone Star’s Need for ERP

• Specific business reason

• Lead time on products too long; competition at two weeks while Lone Star offered four weeks.

• Current software in place was as efficient as possible.

• CEO: “Go find a system and implement it”

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

40

Data2’s Need for ERPData2’s Need for ERP

• Operating two independent systems that did not share data.

• Difficult to access and analyze critical information.

• Limited functionality in current systems.

• Outdated, character-based; non-graphical interfaces.

• Navigation within each system was not intuitive – no help or reference manuals.

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

41

Selection CriteriaSelection Criteria

• Software / Hardware implementation costs.

• Annual maintenance costs.

• Vendor qualifications.

• Implementation lead times.

• Technology platforms.

• Integration capabilities.

• User interface.

• Required software features.

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

42

ERP ImplementationERP Implementation

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

43

ERP ImplementationERP Implementation• Formal process began in 2005 with budget of $10

million

• Implementation team of 25: 14 Spartech employees and 11 outside consultants.

• Phase I: Defining and mapping business processes at Spartech.

• Phase II: Implementation of a “pilot” in Stratford, Ontario. Live date is May 30, 2006.

• Phase III: Roll-out plan to implement in system in remaining 42 sites.

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

44

ERP ImplementationERP Implementation

• Depended heavily on a consulting company because no internal ERP or Oracle experience.

• Internal timeframe: 1.5 years with a budget of $6-7 million.

• Total process: 3 years with a budget of $13.2 million.

• Over time and over budget, yet still called the project “successful”.

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

45

ERP ImplementationERP Implementation• Original consultant was acquired by another

company after implementation.

• Original consultant outsourced manufacturing aspect.

• Only found 65% “out of box” software relevant – still needed 35% customization.

• Consultant did not have capabilities to fully understand Data2’s manufacturing processes and the customization needed for efficiency purposes.

• Employees did not fully grasp the software after the suggested training was completed.

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

46

Planned vs. ActualPlanned vs. Actual

• Original budget $350K vs. final expenses of $550K.

• Original timeframe was 6 month from start to finish vs. actual of 18 months.

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

47

Project OutcomesProject Outcomes

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

48

Success FactorsSuccess Factors

• Largely attributed to team lead’s previous experience with ERP. All team members have had experience with Oracle.

• Change management activities: end-user acceptance testing throughout.

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

49

Lessons LearnedLessons Learned

• Make sure ERP implementation process has corporate sponsorship.

• Make sure employees are involved in initial planning stages. Decision makers for time and budget must be familiar with business processes and the company.

• User testing and training is one of the most important aspects. Success is dependent upon it.

• Try to avoid extensive customizations.

Tim Landrum, Manager of Applications, Spartech Corporation – St. Louis, Interviewed in person by Karen Grubbs, April 7, 2006

50

Final ResultsFinal Results• Customers receive acknowledgement of orders and

shipments electronically.

• Packing slips and invoices are more straight forward and provide essential information.

• On-time shipping to customers has improved.

• Order accuracy has improved.

• Customers able to access order status information themselves.

• Suppliers are provided more accurate projections of material requirements.

• Ordering patterns with suppliers are more stable based upon ROP / ROQ analysis.

Mike Borgna, VP & CFO of Data2 Corporation, interviewed in person by Melissa Orlando, April 13, 2006.

51

The Future of ERPThe Future of ERP

• 71% of 271 polled organizations plan to increase ERP spending in 2006

• ERP budget growth is expected to be 14.6% in 2006– 50% of that being application

software

PR Newswire Europe. New York: Jan 24, 2006. Pg. n/a

52

ERP “Take Aways”ERP “Take Aways”

• ERP integrates business information across departments

• Can be very beneficial, but costly

• Many different software providers

• Lessons from the case studies.