ENTERPRISE RESOURCE PLANNING

ENTERPRISE RESOURCE PLANNINGENTERPRISE

RESOURCE

PLANNINGWHAT IS ERPEnterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources.

ERP software integrates all facets of an operation, including product planning, development, manufacturing, sales and marketing.ERP........ERP MYTHSERP........ Means more work & ProceduresMake many employees redundant & joblessSole responsibility of the management Just for Managers/ Decision makersJust for the ERP implementation teamSlows down the organizationJust to impress customersTake care of everythingVery expensive

MATERIAL REQUIREMENTS PLANNING (MRP)An outgrowth of Bill of Materials processing.

MRP asks the following questions:What products are we going to make?What are the materials needed to make these products?What are the materials that are presently available in stock?What are the items that need to be purchased?

MRP solved the great manufacturing & production problems & made manufacturing of goods easierEVOLUTION OF ERPMRP evolved into something more than merely a better way to order

MRP system maintained the order due dates, detect & warn when an item did not arrive on the due date

Tools were developed to support the planning of sales & production levels, development of production schedules, forecasting, sales planning, order-processingCLOSED LOOP MRPNext logical step of closed loop MRP

Additional capabilities incorporated Sales & operational planning, financial interface, demand management, and simulation capabilities (for better decision making)

MRP-II is a method for effective planning of all the resources of a manufacturing company

MRP-II has a simulation capability to answer what if questions.

Output from the system is integrated with financial reports, such as business plan, shipping budget, purchase commitment report

MANUFACTURING RESOURCE PLANNING (MRP II)The fundamentals of ERP are the same as that of MRP II.

ERP is broader in scope, capable of dealing with more business functions, & has a better & tighter integration with the finance & accounting functions.

ERP coordinates sales, marketing, operations, logistics, purchasing, finance, product development and human resources

Capable of integrating with other tools like CRM, SCM, thereby supporting business across company boundariesENTERPRISE RESOURCE PLANNINGTimelineSystemDescription1960sInventory Management & ControlInventory Management and control is the combination of information technology and business processes of maintaining the appropriate level of stock in a warehouse. The activities of inventory management include identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status1970sMaterial Requirement Planning (MRP)Materials Requirement Planning (MRP) utilizes software applications for scheduling production processes. MRP generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation.1980sManufacturing Requirements Planning (MRP II)Manufacturing Requirements Planning or MRP utilizes software applications for coordinating manufacturing processes, from product planning, parts purchasing, inventory control to product distribution.1990sEnterprise Resource Planning (ERP)Enterprise Resource Planning or ERP uses multi-module application software for improving the performance of the internal business processes. ERP systems often integrates business activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, fulfillment, to order tracking. ERP software systems may include application modules for supporting marketing, finance, accounting and human resources.INTEGRATION : A popular computer buzzword that refers to two or more components merged together into a single system.

A fully integrated system means that the products are one.

This happens when two or more products work closely together to combine different functionalities into one product. DATA INETGRATION & INTERFACEINTERFACE :A boundary across which two independent systems meet and act on or communicate with each other. Also known as a bridgeTo connect with or interact with by means of an interface.

In computer technology, there are several types of interfaces.

USER INTERFACE - the keyboard, mouse, menus of a computer system. The user interface allows the user to communicate with the operating system.

SOFTWARE INTERFACE - the languages and codes that the applications use to communicate with each other and with the hardware.

HARDWARE INTERFACE - the wires, plugs and sockets that hardware devices use to communicate with each other.

DATA INETGRATION & INTERFACEData integration means combining information from various sources into something useful. Its about efficiently managing data and making it available to those who need it.

Both a technical and a business process, IBM defines it as discovery, cleansing, monitoring, transforming and delivery of data from a variety of sources.

REASONS WHY INTEGRATING DATA IS ESSENTIAL

EVERY DATA TYPE HAS ITS STRENGTHS :Every data format was designed for a reason. Each one represents information in a way no other format can, with unique attributes, metadata, structure, and schema. Integrating data from different formats adds various levels of specialty to the dataset.

For instance, CAD and GIS data can be integrated to enhance a CAD drawing with specialized GIS information and attributes.

NEED FOR DATA INTEGRATIONTAKE ADVANTAGE OF SPECIALIZED APPLICATIONS

Every piece of software that works with data represents, analyzes, and transforms information in a specialized way. By integrating data into a format accepted by that application, youre giving yourself the power to open and use your data in that software.

REDUCE DATA COMPLEXITY

The number of potential interfaces between applications in an organization is an exponential function of the number of applications. Thus, an organization with one thousand applications could have as many as half a million interfaces

Thrashing around in that web of connections will only get you tangled. Forming a data integration plan, on the other hand, is like entering that web with a machete. Data integration is about managing complexity, streamlining these connections, and making it easy to deliver data to any system. NEED FOR DATA INTEGRATION, contd.......INCREASE THE VALUE OF DATA THROUGH UNIFIED SYSTEMS

Bringing disparate datasets together increases the value of the informationExamples include:Integrating various spatial, non-spatial, and web-based sources.

Merging with and leveraging external data (e.g. from vendors);

Combining data of varying natures (structured, unstructured, spatial, tabular, web, raster, big data, etc.);

Applying spatial information to non-spatial data;

Combining databases from different repositories

NEED FOR DATA INTEGRATION, contd.......MAKE DATA MORE AVAILABLE

Centralizing your data makes it easy for anyone at your company (or outside of your company, depending on your goals) to retrieve, inspect, and analyze it.Easily accessible data means easily transformed data. People will be more likely to integrate the data into their projects, share the results, and keep the data up to date. This cycle of available data is key for innovation and knowledge-sharing.

UNDERSTANDING DATA MEANS SMARTER BUSINESS DECISIONSIntegrated data means transparent processes within your company. By giving people the flexibility to use your data in whatever system, youre giving them the opportunity to better understand the information. Its much easier and more informative to navigate through organized repositories that contain a variety of integrated datasets.NEED FOR DATA INTEGRATION, contd.......DATA INTEGRITY

Data integration technology should cleanse and validate the information passing through.

we all want our data to be robust and high quality. An integration strategy ensures data is free of errors, inconsistencies, and duplication.

MAKE YOUR DATA LIVE

An integrated data solution makes it easy to keep information up to date. One input can propagate across all integrated systems, keeping your data current.NEED FOR DATA INTEGRATION, contd.......DATA INTEGRATION FOR MANUFACTURING COMPANIESERP SYSTEMS DATA INTEGRATIONTHE PHYSICAL FLOW Sales TransactionsTHE ADMINISTRATIVE FLOW Data in inventory & financial records Before the implementation of an ERP system

After the implementation of an ERP system

During 1980s ERP expanded over the full value chain including all secondary processes of manufacturing companies. Important steps were set to enable integration of the various secondary processes. Example(s);

HUMAN RESOURCE MANAGEMENT WITH FINANCE

HUMAN RESOURCE MANAGEMENT WITH MANUFACTURING

TECHNOLOGY MAINTENANCE WITH PRIMARY PROCESSES

PROCUREMENT WITH FINANCE

Financial service providers have different value chains. An insurer can be modelled as a company with two types of primary processes: Policy Processing & Claims Processing. ERP can realise data integration between these two primary processes and the financial recordsERP SYSTEMS DATA INTEGRATION, contd...Relied upon by more than 90 percent of Fortune 100 companies, enterprise resource planning (ERP) systems integrate accounting, human resources distribution, manufacturing, and other back-end process-esthose that do not directly involve customersfor businesses of all sizes. In recent years, they have also evolved to include front-end processesthose that involve customerssuch as customer relationship management (CRM), supply chain management, and e-commerce. In the early 1990s, most major corporations began upgrading their mainframe systems with the new client/server-based ERP systems developed by industry leaders like SAP AG, People-Soft Inc., and J.D. Edwards & Co.

In the early 1990s, most major corporations began upgrading their mainframe systems with the new client/server-based ERP systems developed by industry leaders like SAP AG, People-Soft Inc., and J.D. Edwards & Co. As the World Wide Web began to replace client/server platforms later in the decade, ERP firms began working to enable their technology to operate via the Web.

EARLY ERP PACKAGES (DEVELOPERS)SAP AG

The world's largest provider of ERP software, Germany's SAP AG, was founded in 1972 by five German engineers working for a branch of IBM.

SAP's first project was to develop integrated enterprise software applications that could run on a mainframe; the five engineers had been working on a similar project for IBM, and when IBM moved the enterprise software project to a different unit, the partners decided to form their own company and continue working on the software.

Originally, SAP was an acronym for systems analysis and program development; however, the wording was later changed to systems, applications, and products in data processing.

EARLY ERP PACKAGES,CONTD....PEOPLESOFT, INC.

One of SAP's first true rivals in the ERP market emerged in 1987, when software developers Dave Duffield and Ken Morris left their posts at Integral Corp. to establish PeopleSoft, a maker of human resources software that could run on the increasingly popular client/server computer systems.

The following year, the company introduced People-Soft HRMS, the market's first viable human resources software application for a client/server platform. Eastman Kodak became the first large client to purchase HRMS. Sales in 1989 reached $1.9 million

The firm also began selling its products in France, England, and South America. Earnings grew nearly twofold, to $8.4 million, on $320 million in revenues. In 1994, the firm launched PeopleSoft Distribution and PeopleSoft Financials products.

In 1996, PeopleSoft began to compete directly with SAP when it acquired Red Pepper Software Co., a maker of ERP software, which it folded into its new PeopleSoft Manufacturing unit.

EARLY ERP PACKAGES, CONTD....J.D. EDWARDS & CO.

An ERP systems provider targeting smaller clients than SAP and PeopleSoft, Denver, Colorado-based J.D. Edwards was founded in 1977 by Jack Thompson, Dan Gregory, and Edward McVaney. Originally a designer of software for small and mid-sized computers, J.D. Edwards evolved into a developer of ERP systems after it began focusing its efforts on software for IBM's System/38 machine in the early 1980s.

The firm's flagship ERP product, World Software, eventually ran on IBM's AS/400 computer. The application was designed to integrate the back-end functions, including accounting and manufacturing, of businesses with $50 million to $1 billion in sales.

In 1996, after recognizing that its software's dependency on a single platform was limiting its reach, J.D. Edwards released One World, a client-server-based suite of applications that could run on a variety of platforms, such as Unix and Windows NT. The firm completed its initial public offering (IPO) the following year. By then, customers exceeded 4,000.

EARLY ERP PACKAGES, CONTD....SAP AG ERP product, R/2, was launched in 1979Redesigned as client/server software R/3 in 1992System R/3 was a breakthrough and by 1999 SAP AG became the third largest software vendor in the world and the largest in the ERP sector with a market share of about 36% serving over 17,000 customers in over 100 countries.SAP has also invested significantly in its R&D sector with the result of newer versions of R/3 3.1, 4.0, 4.6 including Internet functionalities and other enhancements.SAPs Internet-enabled ERP solutions are provided by the recently launched ERP product called mySAP.COM.EARLY ERP PACKAGESPeopleSoft is one of the newest ERP software firms started in 1987 in Pleasanton, California, with specialization in human resource management and financial services modules.

PeopleSoft version 1, released in the late 1980s

Enterprise solutions from PeopleSoft include modules for manufacturing, materials management, distribution, finance, human resources and supply chain planning.

The flagship application PeopleSoft8 (2000) with scores of applications was developed by PeopleSoft with an expenditure of $500 million and 2,000 developers over 2 years

PeopleSoft with about 10% market share, is the third largest ERP vendor after SAP AG and Oracle.

PeopleSoft Inc.Flagship Product PeopleSoft8Founded in 1978 in The Netherlands, Baan started with expertise in software for the manufacturing industry and by 1997 claimed an ERP market share of roughly 5%.

ERP solution areas that Baan covers include finance, procurement, manufacturing, distribution, integration and implementation, planning, sales, service and maintenance, business portals, collaborative commerce and business intelligence.

Banns flagship product is BaanERP (formerly called Triton, then Baan IV), launched in 1998.

Baans ERP software is best known in the aerospace, automotive, defence, and electronics industries.

The Baan CompanyFlagship Product BaanERPJ.D. Edwards flagship ERP product called OneWorld (late 1996) is capable of running on multiple platforms and with multiple databases

The product includes modules for finance, manufacturing, distribution/logistics and human resources, quality management, maintenance management, data warehousing, customer support and after-sales service.

J.D. Edwards Internet-extended version of OneWorld was launched recently (2001) as One World Xe (Xe stands for extended enterprise).J.D. Edwards & Co.Flagship Product OneWorldOne Size does not fit all

Customized products to survive

One stop application to the organization

MARKET OPPORTUNITIES & TRENDSNEW MARKETS

Vendors are being forced to find new markets for their product in order to continue to drive their growth. They are pressurized to increase their appeal to small business clients through a number of initiatives such as ;

Supplementing their direct sales force with re-seller channels

Lowering the entry price point

Improving the implementation methodologies for faster deployment

MARKET OPPORTUNITIES & TRENDS, contd....NEW CHANNELS

Vendors such as SAP AG, ORACLE CORPORATION, etc have been building re-seller channels to reach the smaller business that are looking for a complete one-stop shopping for their ERP Solution.

The ERP software is made more financially attractive by lowering the entry price point for each module and ramping up the total costs by pricing based on user licenses MARKET OPPORTUNITIES & TRENDS, contd....FASTER IMPLEMENTATION METHODOLOGIES

Implementing the ERP package is difficult

ERP system consists of dozens of modules that are deployed on a multinational basis to service hundreds of users from many different business departments.

Complete change of IS infrastructure

ERP Vendors Focus on making the implementation process easier MARKET OPPORTUNITIES & TRENDS, contd....EASIER CUSTOMIZATION TOOLS

Customization is one of the hidden costs of any ERP implementation

Consulting firms charge huge sums

To lower the customization costs, most ERP Vendors offer customization tool kits along with their products MARKET OPPORTUNITIES & TRENDS, contd....NEW BUSINESS SEGMENTS

ERP vendors are now capable of delivering specialised variants of their applications to service vertical markets such as government, healthcare, financial, retail etc.

Some vendors are moving into more specialised areas such as supply chain management, demand forecasting, or sales automation & marketing. MARKET OPPORTUNITIES & TRENDS, contd....NEED BASED APPLICATIONS

ERP vendors offer need based applications, even if these programs are not available.

Liberty to purchase & install software programs pertaining to one particular function.

Increase the scope of ERP Large firms, small and medium businessMARKET OPPORTUNITIES & TRENDS, contd....REDUCTION IN IMPLEMENTATION TIME

Companies discouraged ERP because it took such a long time to install them & set the whole process into action

Current day ERP applications are less complex to install & train.MARKET OPPORTUNITIES & TRENDS, contd....OPEN SOURCE, WEB-ENABLED & WIRELESS TECHNOLOGIES

Three important elements have rejuvenated the functioning of ERP

OPEN SOURCENo hassles of paying license fees not only during installation but also whenever a modification is made.

WEB ENABLED ERPHelps an organization to go online , details can be sourced immediately anytime , anywhere

WIRELESS ERPSharing enterprise information through the internet and other devices making it possible for outsiders to access the sameMARKET OPPORTUNITIES & TRENDS, contd....ENTERPRISE APPLICATION INTEGRATION

ERP vendors are offering applications such as SCM, CRM, BI, analysis and reporting as part of their offerings.

If not part of the ERP software, then features and capabilities to integrate these applications seamlessly with the ERP software are provided.

Improving decision support the focus of all the ERP vendorsMARKET OPPORTUNITIES & TRENDS, contd....More than hundred ERP packages are available in different sizes, with different features & for different pockets.

Selecting the right ERP package can be a make or break for success of ERP project. No package will meet a particular companys 100% need as these packages were not created particularly for this company but for a wide variety of companies.

The idea of selection is to find a good fit with the companys business requirement & can support the companys long term goals

ERP PACKAGE SELECTIONA company's small team comprising of different department heads & companys top management (CIO or CFO), is a part of the selection committee.

The selection committee also has few consultants who know the leading packages well.

The selection committee defines the selection process, selection criteria, attends all presentations by the vendor, makes a comparative analysis of different ERP vendors & finally selects the ERP packageSELECTION WHO WILL DOIt is important to do a good preparation & keep a game plan ready before attending such presentations.

Have your list of requirements ready

Ask the vendor to give a demo & run some of your critical business scenarios in their ERP system

Ask for reference sites

Ask the vendor how different are their ERP packages from that of other ERP vendors? DEAL WITH ERP VENDORS???1. SCREENING

Evaluation process can start with large number of packages (for e.g 5) & based on a set of criteria few of them are shortlisted (for e.g 2).

2. CONTRACT WITH VENDOR

Shortlisted packages are compared against the list of the requirements of the company. After the detailed evaluation of the shortlisted packages, one package is selected and the company enters into contract with the vendor ERP SELECTION A TWO STEP PROCESSERP PACKAGE SELECTION PROCESSHAVING ERP SELECTION TEAM IN PLACE

DECIDING SELECTION CRITERIA & WEIGHTS FOR EACH CRITERIASCREENING THE INITIAL LIST OF VENDORS & SHORTLISTING A FEW

MAKING A DETAILED & FINAL EVALUATION OF SHORTLISTED VENDORSFINALISING THE ERP VENDOR & ENTERING INTO CONTRACT WITH THE VENDORCRITERIA FOR INTIAL PACKAGE SCREENINGTECHNOLOGY MATURITYLOCAL PRESENCEERP SOFTWARE COSTCUSTOMER SERVICE/ SUPPORTCONSULTING PARTNERSHIPPRODUCT STRATEGY, VISION,INNOVATIONFINANCIAL VIABILITYINDUSTRY EXPERIENCEINTEGRATION WITH 3RD PARTY APPLICATIONSFUNCTIONALITY FITINTIAL PACKAGE SHORTLISTINGWieghtage & criteria for short listing packages are done .

Based on the total Wieghtage, top ranking packages are shortlisted & are taken for the next level of evaluation

FINAL PACKAGE SELECTIONThe top three packages shortlisted earlier are taken up for a detailed functionality evaluation against the business requirements of the company.

Against the functional requirements as mentioned in RFP, different package vendors indicate whether the application can straight away meet the requirements, or can be met in an alternate way or whether the requirement can not be met at all.

ERP PACKAGE SELECTION PROCESSRFP Request for proposal process for selecting an ERP package is quite common for large projects & mandatory for all government organizations who intend to go for ERP

DIFFERENT SECTIONS OF A RFP DOCUMENT

How and when the proposal /bid need to be submitted.

Overview of companys business, current operations, locations from where it operates etc.

Current IT systems (legacy systems) the company is using & which of them need interface with ERP systems

Scope of the project

Benefits the company is expecting from the implementation

The details of the payment schedule

Bids are first evaluated technically & then financially . The first bidders are awarded the contract

RFP PROCESS FOR PACKAGE SELECTIONThe final step in the ERP package selection process is completing the contract formalities with the ERP vendor. Contract is a legal obligation for both the parties

STANDARD PACKAGE VENDOR CONTRACT CLAUSESPayment term

Intellectual property or copyright clauses

List of deliverables along with software

How training for the software will be handled

How the software maintenance will be handled, what will be included in the maintenance, different support mode onsite, telephonic, etc, yearly maintenance costs

How future upgrades for the software will be provided & at what cost

Software installation help to be provided

Prerequisite to install the software- the hardware specification, operating system needed, database needed etc,.

Licence cancellation costs

FINALISING THE CONTRACT Selecting the right consulting partner is another important decision for ERP implementation.

Consulting partners can be selected for different phases of the project

It is common to break a large implementation project among several consulting companies, the main reason is to bring down the overall implementation cost .

Most of the consulting service providers use an onsite-offshore modelCONSULTANT - SELECTIONPARTNER SELECTION - FACTORSINDUSTRY EXPERIENCEREPUTATIONEND-TO-END SERVICECLIENT REFERENCESCLIENT SATISFACTIONQUALITY OF PROJECT MANAGEMENTPROCESS CONSULTING EXPERIENCEPRICE & VALUE FOR MONEYQUALITY OF TOOLS & METHODOLOGYGLOBAL PRESENCERFP Request for proposal process for selecting an ERP package is quite common for large projects & mandatory for all government organizations who intend to go for ERP

DIFFERENT SECTIONS OF A RFP DOCUMENT

How and when the proposal /bid need to be submitted.

Overview of companys business, current operations, locations from where it operates etc.

Current IT systems (legacy systems) the company is using & which of them need interface with ERP systems

Scope of the project

Benefits the company is expecting from the implementation

High level project duration that the company is looking for the implementation

The details of the payment schedule

Confidential information

Bids are first evaluated technically & then financially . The best bidders are awarded the contract

RFP METHOD FOR CONSULTANT SELECTION