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What is ERP? l ERP stands for Enterprise Resource Planning, which: l l Is a software system that takes an enterprise approach to integrating and optimising business processes across departments (finance, HR, sales, etc). Provides consistent information for timely decision-making and performance measurement
ERP vendors and market l SAP and Oracle are the main vendors of ERP systems l l There also specialised vendors l l l Infor (GEAC, SSA) – consolidator/vertical niches Microsoft Dynamix - SME Open source projects are not widely used l l Other vendors such as People. Soft were purchased by Oracle Sugar. CRM has shown open source is possible for enterprise applications This lecture will cover general ERP issues but focus on SAP as an example. l This is not an advert for SAP!
Example of a common cross-enterprise process: Purchase-to-Pay 1. Determine requirements, complete purchase requisition. Automatically generate the purchase requisition based on quantity on-hand, quantity-on-order, and expected demand. © L. Gray, CNU
Purchase-to-Pay 2. Prepare and record purchase order. Assists the buyer in identifying sources of supply for the requested item, preparing RFQs to vendors, analyzing vendor quotes, comparing vendor prices, terms, and past performance
Purchase-to-Pay 3. Receive and record goods. Compare quantity ordered to quantity received. Routes goods to the function that requested them or directs them the warehouse for immediate sale. It also records vendor performance data.
Purchase-to-Pay 4. Receive vendor invoice, match with PO and receiving report; record payable. If the three-way match fails, the enterprise system notifies the proper personnel to ensure timely reconciliation of differences.
Purchase-to-Pay 5. Prepare and record cash disbursement and update accounts. Uses vendor and AP data to schedule payments in accordance with vendor terms and to receive discounts.
Example of Inefficient Business Process l A telephone ordering service l l l Requires the agent to take the ordered items Provide pricing information Estimate delivery date Check availability of credit for the caller A manual/semi-automated process would require a number of phone calls or use of multiple computer systems
Requirement l Provide agent with a single point of access from which they can complete the order l l l Check information (availability of items, pricing and credit) Request initiation of internal processes (manufacturing, delivery) Provide reliable information to the customer (delivery date, price) l But associated data and processes relate to different functions within the organisation which may be in different systems.
Potential Solutions l Integration of existing function based systems l l Consolidation into a single application l l EAI is the solution ERP is the solution In most cases, an enterprise will combine both approaches l l Consolidate in some places Integrate in other places 11
Recap: Problems with integration of function based systems l Data Sharing is difficult between systems l Data duplication and inconsistencies § l l Often results in manual steps Partial information leads to isolated decisions lead to overall inefficiencies l l Data model inconsistencies Integration of information not automatic l l Which is the true address or order? Increased expenses Note: This does not mean integration is wrong all the time. See end of lecture.
Enterprise Resource Planning l ERP is l l l An approach to managing all resources and their use in the entire enterprise in a coordinated manner A set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order management An approach to supporting business through optimizing, maintaining, and tracking business functions Focused on value chains, rather than individual functions More about business process change than technology ERP core capabilities include l l l Integrated modules Common process and data models and definitions Common database l Update one module, automatically updates others
The user view of an ERP: l Login screen
The user view of an ERP: l Choose your options
The user view of an ERP: l Create a requisition
The user view of an ERP: l Create a requisition (II) l ERP implementations may contain 1, 000 s of screens ERP embeds knowledge of the organisation’s and industry’s terminology, processes and data
ERP approach extends beyond ERP l ERP vendors also provide other enterprise applications including l l Customer Relationship Management Supply Chain Management Product lifecycle management Supplier Relationship management
Benefits of ERP l Common set of data l Removes consistency and synchronisation issues l Ready integration for decision support systems l Inter-department integration for all departments using the ERP l Library of available standard template processes and modules make integration easier l Forces Business Process Reengineering
Potential Limitations of ERP l Global ERP can be a never-ending project for large organisations l No organisation exists in isolation l l l Inter-department integration relies on using the global ERP l l There always suppliers and clients who use different data models. This means that the need for integration cannot be removed. Causes problems with anomalous departments, recently required, geographically isolated or with different business processes. The software can drive the business rather than the other way around l Templates tend to impose the standard business process rather than your organisations business process. This is okay for commoditised processes but not for all.
Typical Technical Architecture l N-tier architecture l l l Database server with a single data model (multiple servers hosting a distributed database ) Application logic servers with process models (multiple servers, distributed ) Web/Internet server Presentation level (browsers) Evolved to SOA for leading vendors l Architecture facilitates integration of external systems into the ERP system.
e. g. my. SAP ERP
my. SAP ERP Integrate SAP systems Portal Data Warehouse Technology to integrate people, information and business processes across technologies
my. SAP ERP Management of travel costs and expense claims HR: Workforce compensation Managing corporate liability Traditional ERP: Controlling areas of most expense Management of property etc
my. SAP ERP Traditional ERP: All the well-known value chain processes: Order to cash etc.
my. SAP ERP Human Capital Management: support of line management, retention/recruitment, global HR planning and management
my. SAP ERP Financials: Automation of finance functions to minimise costs. Speed up the preparation of financial information. Compliance, better management of free cash resources
my. SAP ERP Analytics: Optimisation and automation of planning, analysis of performance, management accounting support.
my. SAP Business Suite Solutions Cross-Industry Solutions l l l l l my. SAP Workplace my. SAP CRM my. SAP SCM my. SAP Marketplace my. SAP E-Procurement my. SAP BI l l l my. SAP PLM my. SAP HR my. SAP Financials my. SAP Mobile Business l l l my. SAP Financial Service Provider l my. SAP Healthcare l my. SAP High Tech l my. SAP Higher Education & l Research my. SAP Aerospace & Defense my. SAP Automotive my. SAP Banking my. SAP Chemicals my. SAP Consumer Products my. SAP Engineering & Construction my. SAP Insurance Media Mill Products Mining Oil & Gas Pharmaceuticals my. SAP Public Sector my. SAP Retail my. SAP Service Providers my. SAP Telecommunications my. SAP Utilities Infrastructure and Services l my. SAP Technology l l l my. SAP Services l my. SAP Hosted Solutions Many variants of the horizontal ERP package are available for specific industy needs. There also some niche ERP vendors focusing exclusively 29 on individual industries.
ERP Implementation Options l Green field l l l ERP by Process l l l Deploy one or a few ERP modules across all Business Units Risk: May never extend beyond original process. ERP by Business Unit l l l Create IT architecture from scratch Uncommon as there are few new companies which start off large enough to implement ERP Deploy fully integrated ERP suite in one or more Business Units Risk: May never extend beyond original function. Fully Integrated ERP l Full scale deployment across the enterprise l Risk: Very expensive and could take a long time before getting a return/
ERP and integration capabilities l All ERP implementations require integration with other systems l l ERP Integration layers l l l Supplier or customer systems Legacy systems which cannot be retired. As part of an incremental transition to a global ERP system Provide SOA or EAI type capabilities Typically tightly coupled to the ERP and focus on integration into the ERP E. g. l l SAP Net. Weaver Oracle Fusion
Example: SAP XI l SAP Exchange Infrastructure (SAP XI) l l l An integration server (EAI) Integrates SAP applications and 3 rd party applications Integration server l l Message routing Message mapping/transformation
Example: SAP XI l Integration adapters l l Runtime Workbench l l Protocol and data format conversion (into/out of XML) Test and monitor System Landscape Directory l l Component Repository includes a description of all SAP Components Landscape Directory includes a complete description of the actually installed SAP system landscape
Implementing an ERP system l ERP is always a major project l l l To be successful l Any ERP project requires significant time and cost. It is likely to be disruptive and result in business process changes across the organisation. The project must have high priority and visibility within an organization. Senior management commitment with regular progress reviews at the appropriate levels of management. Risks l l Many companies are unclear on the likely total project cost or return. As with any enterprise level project, scope creep, organisational politics and change regularly cause failure.
SAP‘s ASAP – Rapid Implementation Methodology Continuous Change Project Preparation Final Preparation Business Blueprint l l Realization Go Live & Support © SAP Five step approach to implementation of SAP Incorporates many standard concepts of project management
SAP provided tools Contents Search Home Page What’s New Roadmap Phase 1: Project Preparation Phase 2: Business Blueprint Phase 3: Realization Phase 4: Final Preparation Phase 5: Go Live and Support Implementation Accelerators Project Plan Knowledge Corner Glossary Help Hide Contents Back Forward Refresh Search Print Options Welcome to Accelerated. SAP Home Page What’s New Roadmap Implementation Accelerators Project Plan Question and Answer Database Issues Database Business Procedures Knowledge Corner Glossary Help Continuous Change Project Preparation Business Realization Blueprint Final Preparation Go Live & Support Version l SAP provides tools to assist and support implementation l Implementation Accelerators, Project Plan, Consulting Guides, Knowledge Corner, Glossary, Help
Structure and definitions l Phase l l Work package l l A group of activities designed to accomplish a major portion of a Roadmap phase. A work package is assigned to a project team for completion. Activity l l l The major organizational steps of the ASAP Roadmap. A group of tasks. The results of an activity can produce certain deliverables and can be accomplished by one or more project team members. Several activities comprise a work package. Task l l A specific event to be performed by a project team member. Within ASAP, tasks can be accelerated using: l l How-To - Explanation documentation of how to perform a process, activity , or task. Accelerator documents, templates, tips and tricks used to accelerate task completion.
SAP‘s ASAP – Rapid Implementation Methodology l Phase 1: Project Preparation l l Provides initial planning and preparation for project. Gather requirements l l l Project success requirements gathering which l l l Requirements workshops Requirements documentation and control processes Is inclusive with representation and engagement from all participants. Has clear and effective approval processes at senior management level. Phase 2: Business Blueprint l Create the Business Blueprint l l detailed documentation of the results gathered during requirements workshops. documents the business process requirements of the company which creates a common understanding of how the company will operate.
Strengths/Weaknesses of Business Blueprints l Strengths l l Share a common understanding with everyone on the project Formalises the agreement between l l l The IT project team and business Different business departments Reduced level of communication required during implementation Supports impact analysis when requirement change occurs. Weaknesses l Processes can be difficult to model l Business process can be poorly defined Need to distinguish between real business process requirements and legacy “way we do business” Must balance need to perfect definitions and need to complete the project. l Business processes can change rapidly
SAP‘s ASAP – Rapid Implementation Methodology l Phase 3: Realization l l l Implement all the business and process requirements based on the Business Blueprint. Configure the system step by step in two work packages, Baseline and Final configuration. Phase 4: Final Preparation l l Complete testing, end user training, system management and cutover activities to achieve go-live readiness. Final Preparation phase requires resolution of all critical open issues.
SAP‘s ASAP – Rapid Implementation Methodology l Phase 5 Go Live and Support: l l Transition from a project-oriented, pre-production environment to live production operation. Continuous Change: l l Provide on-going support and assistance for post go-live. Provide solutions for standard minor tweaks and changes Provice solutions for evolution of the solution to support: l Business changes l Technology changes l Changes in the user community or l New business content. ASAP covers these activities
Supporting Continuous Change ASAP Continuous Change Competitive Environment Changes New Business Content Implementation Release 3 New Analysis Requirements Implementation Release 2 Market Technology Changes New Functionality ASAP Implementation 4 1 3 2 Project Business Preparation Blueprint Final Realization Preparation 5 Go Live & Support Implementation Release 1
Example Penguin’s Global ERP Strategy
28 th International Supply Chain Specialist Meeting The Globalization of Supply Chain Systems Anne Naramore Vice President International Technology Strategy Pearson plc Frankfurt Book Fair
Agenda • Pearson • Supply Chain Environment Today • Supply Chain Technology Strategy • Case Study: Asia • Summary
PEARSON A Good Read Pearson is a world leading education and information company, helping people of all ages to live and learn. 2005 Sales: £ 4, 096 M / $7, 045 M +9% 2005 Adjusted Operating Profit: £ 509 M / $875 M +22% 46
Main Businesses Penguin: 20% £ 804 M / $1, 383 M Geographic Businesses North America: 66% £ 2, 717 M / $4, 673 M Europe: 24% £ 963 M / $1, 656 M School: 32% £ 1, 295 M / $2, 227 M FT Group: 15% £ 629 M / $1, 082 M Asia Pacific: 7% £ 300 M / $516 M Professional: 14% £ 589 M / $1, 013 M Higher Education: 19% £ 779 M / $1, 340 M Rest of World: 3% £ 116 M / $200 M 47
Interesting Facts 18 M 3. 5 M U. S. school students learning English and Math with a Pearson programme Professionals who qualified in our testing centres 250 New authors published by Penguin around the world 48
Interesting Facts 0. 5 BN 3. 6 M People learning English with Longman materials College students in America using a Pearson online service 4. 5 M Readers reached by the Financial Times in print and online 49
Supply Chain: Environment Today Pearson’s business strategy and organization culture has yielded a relatively diverse, decentralized portfolio of ERPs implemented at the region/operating company level. Business process standardization within Pearson occurs largely at the region/operating company level due to market demands. Consequently, Pearson has adopted a decentralized IT strategy, with implementations occurring at the region/operating company level. Business processes: The life cycle of a product/title • Editorial & Production • Sales & Marketing • Inventory Management • Sales Order Processing • Financials • Distribution and Warehousing • e. Commerce • Human Resources/Payroll • Business Intelligence (analysis and reporting) 50
Complex Environment: North America ERP Editorial & Production Sales & Marketing Inventory Mgmt Order Mgmt Finance Distribution e. Commerce HR/Payroll Business Intelligence Oracle - Assessmen t SAP 4. 6 -Penguin SAP 3. 1 i -School Vista -Canada Custom System - Higher Education Legend: Supported by ERP Not supported by ERP 51
Complex Environment: Europe ERP Editorial & Production Sales & Marketing Inventory Mgmt Order Mgmt Finance Distribution e. Commerce HR/Payroll Business Intelligence Vista - Dutch JDE - Spain Infos Germany Exact - Poland Libris - France Oracle - Italy SAP 4. 6 - UK Vista - UK Legend: Supported by ERP Not supported by ERP Not in scope for business 52
Complex Environment: Latin America ERP Editorial & Production Sales & Marketing Inventory Mgmt Order Mgmt Finance Distribution e. Commerce HR/Payroll Business Intelligence JDE - Mexico Siscorp - Brazil Stradivarius - Argentina JDE - Colombia Saab - Chile Figaro - Uruguay Legend: Supported by ERP Not supported by ERP 53
Complex Environment: Pacific Rim ERP Editorial & Production Sales & Marketing Inventory Mgmt Order Mgmt Finance Distribution e. Commerce HR/Payroll Business Intelligence IBS Bookmaster - Hong Kong - Singapore -Malaysia Epicor - Taiwan -Korea Custom System - Japan IBS Bookmaster - Australia Legend: Supported by ERP Not supported by ERP 54
Exercise l l What should Pearson do? Identify three strategies l Identify business risks with each strategy
Supply Chain Technology: Strategy Pearson has adopted a decentralized strategy, with implementations occurring at the region/operating company level. While supporting all the operating companies from a single ERP is desirable, the cost to consolidate is high and difficult to justify, and the process standardization required could inhibit business performance. Pearson’s Roadmap sets a course to: • Maintain a decentralized approach • Allow ‘scope’ to meet regional /operating company requirements • Upgrade as versions go end-of-life • Govern introduction of new systems • Consolidate and standardize when cost justified 56
Case Study: Asia September 2004: Consolidate business units into a single ERP instance NPV: $954. 9 K | IRR: 37% | Payback: 1. 3 years Goals: • Standardize business processes & operating procedures across the region • Reduce long-term costs (IT, Customer Service, Finance) • Improve utilization of IT systems & resources • Provide standard system platform for operation Scope (Locations): • Hong Kong, Taiwan, Korea, Japan, Singapore and Malaysia • Hong Kong hosting location and support center • MPLS connectivity for each country access 57
Case Study: Asia Consolidate business units into a single ERP instance Functionality: • Editorial & Production processing • Academic adoption management • Sales Order processing • Inventory management • Procurement • Distribution & warehousing • Financials (GL, AP, AR) • Royalty management • Business intelligence (analysis and reporting) 58
Case Study: Asia Consolidate business units into a single ERP instance Rollout Timeline: Malaysia Singapore Korea Hong Kong Taiwan (delayed 6 months) Japan Apr May Jun Nov De May Sep Jul Aug Sep Oct c Jan Feb Mar Apr Jun Jul Aug 200 2006 200 2007 2007 200 6 6 7 7 6 2007 59
Case Study: Asia Consolidate business units into a single ERP instance Solution Provider: IBS Bookmaster • Build upon existing implementation in Singapore • Build upon existing relationship with vendor • Singapore and Malaysia • Pearson Australia • South Africa (MML) • Most cost effective solution • Met majority of functionality needs 60
Case Study: Asia Consolidate business units into a single ERP instance What We Learned: • Partnership with vendor • Strong executive sponsorship and project governance • Thorough functionality requirements • Functionality gaps always found – accept it and manage closely • Dedicated and skilled project managers (internal & vendor) • Contingency: money, time and resources • Don’t underestimate language barriers and cultural styles: slows process down Replicate Success and Learnings: • Taking approach to Europe 61
Summary: Environment today 62
Summary: Future environment Long-term strategy | Time, Money, and Strong Partners 63
Exercise l Could Reach (the Irish government SOA programme) have used an ERP? l Identify organisational and technical barriers. What are the legal implications and can they be dealt with? l