ERP Value

The value of ERP is the opportunity to integrate an entire organization by having a single point of entry and sharing of data across the enterprise. Creates less need to reconcile data and rekey. Inefficient business processes that were disjointed become much more efficient. The legacy system layout: each dept, business unit might have their own systems (end user computing etc), leads to inefficiencies and delays. The trend now is toward integration of data. Example: in a horizontally integrated ERP system, the Purchasing department would process a purchase order in a central database with a common General Ledger. Both Accounts Payable and Receiving have access to the same General Ledger so the data would be immediately available to them. There is no time lag, re-entry of information, or heavy dependency on paper documents.

Before and After ERP

Benefits of ERP
Companies usually have a business case rationale for adopting ERP and take this rationale to the Board. A business case normally includes tangible as well as intangible benefits. Some key benefits:
Integrate financials Have one view of the customer Standardize manufacturing processes Reduce inventory Standardize information such as HR and Customer data there are othersdepends on company

An ERP System Example Layout

In reality, an ERP implementation is usually just one part of a more complex environment, including bolt-ons, legacy applications retained, possible data warehouse(s), enterprise application integration solutions and connections to external business partners.

What is ERP?
The practice of consolidating an enterprises planning, manufacturing, sales and marketing efforts into one management system.1 Combines all databases across departments into a single database that can be accessed by all employees.2 ERP automates the tasks involved in performing a business process.1
Sources: 1. http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002 2. CIO Enterprise Magazine, May 15, 1999.

How Do ERP Systems Work?

Managers and Stakeholders
Human Sales and Resource Delivery Management Applications Applications
Customers Sales Force And Customer Service Reps

Reporting Applications Central Database

Financial Applications

Manufacturing Back-office Applications Administrators

And Workers

Suppliers

Service Applications

Human Resource Management Applications

Inventory And Supply Applications

Employees

Source: Davenport, Thomas, Putting the Enterprise into the Enterprise System, Harvard Business Review, July-Aug. 1998.

ERP Components
Finance: modules for bookeeping and making sure the bills are paid on time. Examples:
General ledger Accounts receivable Accounts payable

Manufacturing and Logistics: A group of applications for planning production, taking orders and delivering products to the customer. Examples:
Production planning Materials management Order entry and processing Warehouse management

HR: software for handling personnel-related tasks for corporate managers and individual employees. Examples:
HR administration Payroll Self-service HR

Source: http://www.computerworld.com/printthis/1998/0,4814,43432,00.html, viewed September 19, 2002.

Who are the main ERP vendors?

Baan JD Edwards Oracle PeopleSoft SAP

Why ERP?
3 Major Reasons:
To integrate financial data.

To standardize manufacturing processes.

To standardize HR information.

Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

Hidden Costs of ERP

Training Integration and testing Data conversion Data analysis Consultants Replacing best and brightest staff after implementation Implementation teams can never stop Waiting for ROI Post-ERP depression

Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

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Benefits of ERP Systems

Improving integration, flexibility Fewer errors Improved speed and efficiency More complete access to information Lower total costs in the complete supply chain Shorten throughput times Sustained involvement and commitment of the top management
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Benefits of ERP Systems (contd)

Reduce stock to a minimum Enlarge product assortment Improve product quality Provide more reliable delivery dates and higher service to the customer Efficiently coordinate global demand, supply and production
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Risks with ERP Implementation

Expensive (can costs 100 thousands to millions of dollars) Time-consuming (can take months to years) Great risk for the organization Transfer of Knowledge Acceptance with the company

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