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Chapter 2
Development of an
Enterprise Resource Planning System
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Chapter 2 Learning Objectives
• Identify the factors that led to the development of ERP systems
• Describe the distinguishing characteristics of ERP software
• Discuss the pros and cons of implementing an ERP system
• Summarize ongoing developments in ERP
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Introductions
• 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
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Evolution of Information Systems
• Prior to 1960, all systems were paper-based
• Data entry, storage, retrieval were slow, labor-intensive processes
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Computer Hardware and Software Development
• The First Business Computers
• Computers Smaller and FasterMoore’s Law
• Software Proliferates
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Early Attempts to Share Data
• Client/Server• Scalability
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The Manufacturing Roots of ERP
• Materials Requirements Planning (MRP)
• Electronic Data Interchange (EDI)
• MRP - II
• Downsizing and reorganization drove the impetus for ERP
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ERP and SAP’s R/3
• Software to allow all business areas to be integrated
• Interactive and real-time processing
• Users interact with computer screen, not printed data
• Initially introduced R/2
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SAP’s R/3
• Open architecture
• Access common database
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Implementation
• Choosing modules
• Configuration options
• Unique features of SAP’s R/3
• Best-of-Breed Solution
• Accelerated SAP
• Customer Relationship Management
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ERP Significance
• Global integration
• Eliminates updating and repairing separate computer systems
• Allows managers to manage, not just monitor
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Cost of ERP
• Large company – $50-500 Million– $30 million in software– $200 million in consulting– $ millions for hardware– Implementation: 4-6 years
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Cost of ERP
• Medium sized companies– $10-20 million– 2 year implementation
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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?
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The Continuing Evolution of ERP
• Additional Capabilities
• The Internet
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Another Look at Consultants
• How does a consultant steer a client through an ERP implementation?– Identify what you want improved, set goals, and
calculate benefit
– Define standard procedures
– Plan for rollout far before it happens
– Set milestones
– Train everyone
– Don’t forget your customers
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Evaluating IT and ERP Software
http://www.technologyevaluation.com/
http://www.erpevaluation.com
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Chapter 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
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Chapter Summary continued
• SAP AG produced an ERP program called R/3• 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