Enterprise Resource Planning ERP systems Associate professor Mikhail

Enterprise Resource Planning (ERP) systems Associate professor Mikhail S. Slobodyan Department of Natural Resources Economics 1 Institute of Natural Resources National Research Tomsk Polytechnic University

CONTENTS OF THE COURSE 1. 2. 3. 4. 5. Introduction (What is ERP system and for what purpose? ) Evolution of management and enterprise systems Business process management ERP solutions in the worldwide market ERP implementation project management 2

REFERENCES 1. 2. 3. 4. Ellen F. Monk and Bret J. Wagner. (2009). Concepts in Enterprise Resource Planning. – Boston: Course Technology Cengage Learning. O’Leary, D. (2000). Enterprise Resource Planning Systems. Cambridge, U. K. : Cambridge University Press. Liaquat Hossain, Mohammad A. Rashid, Jon David Patrick. (2002). Enterprise Resource Planning: Global Opportunities and Challenges. London, Hershey: Idea Group Publishing. Graeme Shanks, Peter B. Seddon and Leslie P. Willcocks. (2003). Second Wave Enterprise Resource Planning Systems: Implementing for Effectiveness. – U. K. : Cambridge University Press. 3

REFERENCES 5. 6. 7. 8. 9. Dimitris N. Chorafas. (2001). Integrating ERP, CRM, Supply Chain Management, and Smart Materials. Auerbach Publications. Mathias Weske. (2012). Business Process Management – Concepts, Languages, Architectures, 2 nd Edition. Berlin, Heidelberg: Springer. Hammer, M. , Champy. J. (1993). Reengineering the Corporation: A Manifesto for Business Revolution. Harper Collins, London. Scheer A. W. (1992). Architecture of Integrated Information Systems. Berlin, Springer. Scheer A. W. (1998). ARIS – Business Process Frameworks. Berlin, Springer. 4

INTRODUCTION 5

ENTERPRISE SYSTEMS (ES) Enterprise systems (ES) are large-scale organizational systems which composed of people, processes and information technology built around packaged enterprise system software: ü is a set of packaged application software modules, with an integrated architecture, that can be used by organizations as their primary engine for integrating data, processes, and information technology, in real time, across internal and external value chains; ü impound deep knowledge of business practices that vendors have accumulated from implementations in a wide range of client organizations, that can exert considerable influence on the design of processes within new client organizations; 6

ENTERPRISE SYSTEMS (ES) ü is a generic “semi finished” product with tables and parameters that client organizations and their implementation partners must configure, customize, and integrate with other computer based information systems to meet their business needs. 7

ENTERPRISE SYSTEM SOFTWARE (ESS) Enterprise system software (ESS) includes: ü Enterprise Resource Planning (ERP) ü Customer Relationship Management (CRM) ü Supply Chain Management (SCM) ü Product Life Cycle Management (PLM) ü Enterprise Application Integration (EAI) ü Data Warehousing ü Decision Support ü Intelligent Presentation Layer ü e. Procurement/e. Marketplace/electronic exchange software 8

ENTERPRISE RESOURCE PLANNING SYSTEMS (ERP) ü ü “ERP comprises of a commercial software package that promises the seamless integration of all the information flowing through the company – financial, accounting, human resources, supply chain and customer information” (Davenport, 1998). “One database, one application and a unified interface across the entire enterprise” (Tadjer, 1998). “ERP systems are configurable information systems packages that integrate information and information based processes within and across functional areas in an organization” (Kumar & Van Hillsgersberg, 2000). “ERP systems are computer based systems designed to process an organization's transactions and facilitate integrated and real time planning, production, and customer response” 9 (O'Leary, 2001).

ENTERPRISE RESOURCE PLANNING SYSTEMS (ERP) ü ü “A method for the effective planning and controlling of all the resources needed to take, make, ship and account for customer orders in a manufacturing, distribution or service company“ (American Production and Inventory Control Society, 2001). “Core software used by companies to coordinate information in every area of the business such as planning, manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, transportation and e business” (Monk, 2009). 10

ENTERPRISE RESOURCE PLANNING SYSTEMS (ERP) SUMMARY: 1. ERP programs help to manage company wide business processes, using a common database and shared management reporting tools. 2. ERP software supports the efficient operation of business processes by integrating throughout a business tasks related to sales, marketing, manufacturing, logistics, accounting, and staffing. 11

WHAT IS IT A “BUSINESS PROCESS”? A business process is a collection of activities that takes one or more kinds of inputs (raw material, information, etc. ) and creates an output, such as a goods, report or forecast, that is of value to the customer. 12

BUSINESS PROCESSES IN CEMENT INDUSTRY 13

THE SAMPLE OF THE FUNCTIONAL ORGANIZATION CHART Top Management Marketing and Sales (M/S) Employee Supply Chain Management (SCM) Employee Accounting and Finance (A/F) Human Resources (HR) Employee 14

MAIN FUNCTIONAL AREAS OF COMPANY’S OPERATION q q Marketing and Sales (M/S) ü Marketing of a product ü Taking sales orders ü Customer support ü Customer relationship management ü Sales forecasting ü Advertising Supply Chain Management (SCM) Accounting and Finance (A/F) Human Resources (HR) 15

MAIN FUNCTIONAL AREAS OF COMPANY’S OPERATION q q Marketing and Sales (M/S) Supply Chain Management (SCM) ü Purchasing goods and raw materials ü Receiving goods and raw materials ü Transportation and logistics ü Scheduling production runs ü Manufacturing goods ü Plant maintenance Accounting and Finance (A/F) Human Resources (HR) 16

MAIN FUNCTIONAL AREAS OF COMPANY’S OPERATION q q Marketing and Sales (M/S) Supply Chain Management (SCM) Accounting and Finance (A/F) ü Financial accounting of payments from customers and to suppliers ü Cost allocation and control ü Planning and budgeting ü Cash-flow management Human Resources (HR) 17

MAIN FUNCTIONAL AREAS OF COMPANY’S OPERATION q q Marketing and Sales (M/S) Supply Chain Management (SCM) Accounting and Finance (A/F) Human Resources (HR) ü Recruiting and hiring ü Training ü Payroll ü Benefits 18

FUNCTIONAL AREA INFORMATION SYSTEMS: MARKETING & SALES 19

FUNCTIONAL AREA INFORMATION SYSTEMS: SUPPLY CHAIN MANAGEMENT 20

FUNCTIONAL AREA INFORMATION SYSTEMS: ACCOUNTING & FINANCE 21

FUNCTIONAL AREA INFORMATION SYSTEMS: HUMAN RESOURCES 22

INFORMATION AND MATERIAL FLOWS IN A FUNCTIONAL BUSINESS MODEL 23

DATA FLOW WITHIN AN INTEGRATED INFORMATION SYSTEM 24

TYPICAL TECHNOLOGICAL CHARACTERISTICS OF AN ERP systems are large integrated computer software packages consisting of components, each with a given set of functions. All available functions operate on a shared set of data, thereby achieving integration. The idea of these systems is to support every single aspect of organizational storage, processing, retrieval, and distribution of data. 25

TYPICAL ERP SYSTEM MODULES 26

INFORMATION AND MATERIAL FLOWS IN A PROCESS BUSINESS MODEL 27

ADVANTAGES OF ERP SYSTEMS What benefit Reliable information access Avoid data and operations redundancy How Common DBMS, consistent and accurate data, improved reports Modules access same data from the central database, avoids multiple data input and update operations Delivery and cycle time reduction delays Minimizes retrieving and reporting Cost reduction Time savings, improved control by enterprise wide analysis of organizational decisions 28

ADVANTAGES OF ERP SYSTEMS What benefit Easy adaptability Improved scalability Improved maintenance Global outreach E Commerce How Changes in business processes easy to adapt and restructure Structured and modular design with “add ons ” Vendor supported long term contract as part of the system procurement Extended modules such as CRM E business Internet commerce, collaborative culture 29

DISADVANTAGES OF ERP SYSTEMS Disadvantage Time consuming Expensive Conformity of the modules How to overcome Minimize sensitive issues, internal politics and raise general consensus Cost may vary from thousands of dollars to millions Business process reengineering cost may be extremely high The architecture and components of the selected system should conform to the business processes, culture and strategic goals of the organization 30

DISADVANTAGES OF ERP SYSTEMS Disadvantage How to overcome Single vendor vs. multi vendor consideration, options for “best of Vendor dependence breeds”, long term committed support ERP system may have too many features and modules so the user Features and complexity needs to consider carefully and implement the needful only Look for vendor investment in R&D, long termcommitment to Scalability and global outreach product and services, consider Internet enabled systems 31

DISADVANTAGES OF ERP SYSTEMS Disadvantage Extended ERP capability How to overcome Consider middle ware “add on” facilities and extended modules such as CRM and SCM. 32