chp08 building erp
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e-bussinessTRANSCRIPT
- 1. Chapter Eight Building The E-Business Backbone: Enterprise Resource Planning
- 2. ERP: The Technological Backbone of E-Business
- Typical corporate computing environment today of mainframe-based apps is antiquated
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- Cannot meet demands of new economy and must be replaced
- ERP integrated app suite
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- Framework to automate back-office functions: Financial, Manufacturing and Distribution, HR, Administrative
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- 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
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- Managing customer relationships key for the newer online firms
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- ERP offers customers efficient, high-quality service
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- Ability to order online; inquire about product pricing and order status
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- ERP prices dropping and rental ASP model becoming prevalent
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- 3. ERP: The Technological Backbone of E-Business
- ERP is the technological backbone of e-business
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- Enterprise-wide transaction framework with links into
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- sales order processing; inventory mgmt and control; production and distribution planning; finance
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- In early 1990s, only large manufacturers saw benefits of ERP
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- Today, medium-size and dot-com firms also recognize necessity of integrating back-office processes for front-office success in e-commerce world
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- 4. Who Really Uses ERP Suites?
- Large corporations that want to gain control over disparate groups of core business apps
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- 3Com, Chevron Products Company, GM
- 3 primary categories of ERP implementations
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- Single to few products in single industry: eToys
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- Single SBU firms, selling only few products in a single industry: Delta Airlines, Dell, Microsoft, Nike
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- Large corporate conglomerates or multiple-SBU firms, selling many products in multiple industries: GE, IBM, Colgate-Palmolive, and Nabisco
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- 5. The Basics of ERP
- These apps are themselves built from smaller s/w modules that perform specific business processes within a given functional area
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- 6. ERP Wave 1
- ERP 1960
- 70 material requirement planning (MRP) distribution resource planning (DRP) , production master scheduling centralized inventory planning
- 80 , MRP II , MRP production process , , order processing,manufacturing, distribution.
- MRP , , , , . MRP II , ERP.
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- 7. Evolution of ERP www.ebstrategy.com
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- 8. Evolution of ERP www.ebstrategy.com
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- 1960s
- Automation of all aspects of production master scheduling
- Showed technology could link disconnected business functions
- 9. Evolution of ERP www.ebstrategy.com
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- 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 decisions across enterprise
- Y2K preparation in 1999 a significant factor
- 10. Evolution of ERP www.ebstrategy.com
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- ERP evolving into CRP to integrate brick with click
- Using middleware has drawbacks
- Traditional ERP build for make-to-stock business models; but this is no longer the case; customer value, effectiveness, enhanced service delivery key today
- Continuous planning vs. long planning cycle of ERP
- Ericsson
- 11. Evolution of ERP www.ebstrategy.com
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- A companys 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
- Collaborate or perish
- 12. Benefits of ERP
- Critical business need: Enterprise-wide shared services
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- 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 (Porters value chain next 3 pages)
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- Accounting
- With processes defined, an ERP-based IT infrastructure can be established to manage them efficiently
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- 13. www.ebstrategy.com
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- 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 companys products or services.
- Service : dealing with customer support and repair service.
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- 15. Generic Value Chain -Support Activities
- Procurement of inputs used in the firms 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.
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- 16. ERP Decision = Enterprise Architecture Planning
- Management must resolve enterprise architecture issues before selecting an ERP suite of products
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- What kind of company do we want to be?
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- Not, What are each applications features?
- Inability to find the right fit between ERP apps and their business causing corporate frustration
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- FoxMeyer
- Problem not with ERP concept but in managements demands for quick fixes and rapid cures to underlying structural problems
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- 17. ERP Decision = Enterprise Architecture Planning
- Selecting and installing a new ERP solution one of the most important and most expensive endeavors
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- Also most likely to go wrong
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- Lack of alignment between ERP, business processes and e-commerce objectives can derail best of firms
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- Managers must understand core functionality, not abdicate responsibility to IT dept
- Successful organizational change is gradual
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- Enterprise apps require moving decades of corporate knowledge and information to a new technology platform
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- Technology is not the only challenge in managing transformation
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- 18. ERP Decision = Enterprise Architecture Planning
- Cannot lose sight of customers
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- Is this something our customers will recognize as valuable?
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- Will it shorten order-to-delivery cycle?
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- Will this improve our product and performance?
- ERP impacts not just s/w
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- 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
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- What business are we in?
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- What are the key issues facing us today?
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- What issues will be important tomorrow?
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- 19. ERP Decision: Build Vs Buy Vs Rent
- Important decision: whether to build or buy or rent
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- ERP apps define overall corporate architecture
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- Enterprise-wide implementations
- Custom design app that meets specific requirements of an organization has several drawbacks
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- Highly complex
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- Lengthy design, development and implementation efforts
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- Limited flexibility to support diverse and changing operations or to respond effectively to evolving business demands and technologies
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- 20. ERP Decision: Build Vs Buy Vs Rent
- COTS apps address limitations of custom built apps
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- Provide broad functionality, better integration with existing legacy systems, greater flexibility to change and upgrade, and a lower TCO
- Downside of COTS apps
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- Reengineer estbd. business practices
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- Customize apps
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- Hire consultants to make s/w work
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- No competitive edge
- Mgmt must view COTS apps within the context of overall business strategy
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- What business processes bring us our identity and our competitive advantage?
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- How can we ensure that we enhance these with COTS solution?
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- How can we support our ecommerce initiatives with COTS?
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- 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
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- 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 companys systems
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- 50 subsidiaries worldwide; continues to grow every day
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- More than 30 systems implemented in a piecemeal fashion over time supported financial, operations and HR groups alone
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- Batch processes to move information between systems
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- Run time grew to more than 12 hours
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- 90% of the more than 20,000 batch robs that ran each month retrieved and processes same information
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- Mgmt realized it needed a global and integrated solution to support its core business
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- 23. ERP Implementation: Catching the Bull by the Horns
- Installation of ERP packages unique
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- Each ERP app suite has own architecture, customization features, installation procedures, and level of complexity
- Implementation strategies for SAP
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- Step-by-step
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- One module at a time
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- Big bang
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- Replacing all old systems at once
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- Modified big bang
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- Various modules at once, but pilot first
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- Very common
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- Even if implementation strategy is right, setting up the solution not easy
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- Brother Industries
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- 24. Roadmap to Rapid Implementation: Accelerated ERP Approach
- Todays intense competitive pressures require fast response
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- ERP app suites cant keep up
- But successful companies understand business processes, simplify them, and then introduce automation
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- Automating complex or non-value-adding processes will not increase productivity or provide measurable improvements in performance
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- Automation without simplification immortalizes ineffective processes
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- 25. Roadmap to New Leadership Skills
- Effective coordination mgmt encompasses a combination of four capabilities
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- Strategic thinking
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- How well does your ERP selection, implementation, and evolution strategy align with your business strategy?
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- Process reengineering
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- Managing implementation complexity
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- Transition management
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- 26. E-Business Strategies, Inc. www.ebstrategy.com [email_address] 678-339-1236 x201 Fax - 678-339-9793