Enterprise Resource Planning (ERP) Systems

Transcription

1 Entrpris Rsourc Planning (ERP) Systms For Non-Practitionrs Octobr 1997

2 Octobr 1997 National Industry Srvics - Industrial & Automotiv Products ERP nabls companis to driv th optimum intr-oprability btwn all parts of th organization, lctronically closing th loop btwn th information systms that oprat on ach sit. - John Wolfndn, Fourth Shift UK WHAT IS ERP? Entrpris rsourc planning (ERP) softwar is a group of programs and functions intgrating corporat accounting and rsourc managmnt with production schduls and customr ordrs. ERP may not b a dirct focus of oprations and dsign nginrs; howvr, ERP is on of th most critical tchnological shifts an organization can mak. Th rsulting impact of th corporat information managmnt systm is profound, such that th ntir organization, vn plant-floor procss control, for xampl, must adapt to it. ERP rplacs manufacturing rsourc planning (MRP II), which was unabl to mt th vr-changing challngs providd by th intrnational manufacturing world. ERP is proactiv (i.., if w gt this ordr, which plant has th skills/capacity to handl it ) whil MRP II is typically ractiv (i.., th ordr rat has changd - what do w nd to do to rspond? ). Th trm ntrpris rsourc planning was coind to dmonstrat th fact that ths systms hav volvd wll byond thir origins as invntory-transaction and costaccounting systms. Th softwar now acts as th mans to support and xpdit th ntir ordr fulfillmnt procss. ERP can also lad to businss-procss rnginring. By rmoving barrirs btwn functional dpartmnts and rducing duplication of ffort, th systms incras flxibility and rsponsivnss. Th vision of ERP is volving to includ th xtndd ntrpris. Extndd ERP is an intr-ntrpris vision that includs balancing and optimization of not just th ntrpris, but th valu ntwork, or th ntir st of supply and dmand businss procsss that driv th ntrpris s dlivry of goods and srvics. Extndd ERP is customr focusd and dynamically balancd through asst optimization and ral-tim transaction procssing. Pag 2

3 Octobr 1997 WHY ERP? Th primary drivr in th ERP markt boom has bn th Yar 2000 issu. As companis ar facd with rquird systm upgrads to corrct Yar 2000 dficincis, many hav dtrmind it mor fficint to upgrad to an ERP systm at th sam tim. Companis figur spnding $25 - $30 million on an ERP systm (which is Yar 2000 compliant) maks mor sns than spnding $20 million solly to b com Yar 2000 compliant. Companis ar also looking towards ERP packags to upgrad thir financials. ERP allows companis to link financial rporting with all othr businss procsss. ERP involvs considrabl tim and xpns to fully implmnt. Nvrthlss, th companis that succssfully implmnt ERP systms can sav millions of oprating dollars, and in som instancs can incras production. ERP systms ar nabling companis to mt today s prioritis, including guarantd quality, lowr margins throughout th supply chain, fast turnaround and rapid rspons. ERP flourishs whn thr is strong partnrship btwn th company, its supplirs and tchnological providrs. Although MRP has bn widly rcognizd as a long-trm planning tool, it is oftn too slow and cumbrsom to cop with th rapidly changing daily ralitis of manufacturing procsss. Th sophisticatd advanc forcasting of MRP is of littl valu whn ordrs nd to b turnd around in a day. ERP corrcts this problm by offring ral tim tracking activity. In th automotiv industry, for xampl, ERP supports lctronic data intrchang (EDI) nabld transactions that alrt th ntir supply chain to changs in any on ara. A chang in product schduling by an OEM could trickl down in a ral-tim fashion to tirfour supplirs. Many companis look to ERP for commonization of data. Just as car makrs ar trying to commoniz global standards for building vhicls around th world, thy ar also trying to mak sns out of th smingly ndlss data that flows through thir companis. A common systm would allow th customr and supplir to spak to ach othr as if thy wr working for th sam company. Anyon joining th systm could potntially participat on vhicl dvlopmnt projcts, coordinat factory schduling, st up just-intim parts dlivris, xchang billing information and financial data, shar human rsourc plans and run factory planning modls. Ths systms allow th auto companis to manag thir supply chains and nabl tru just-in-tim dlivry. Thy facilitat r-nginring and rmov infficincis and rdundancis in th ntwork. And thy allow for lctronic commrc says Alln Bond, computr industry analyst for th Yank Group. Pag 3

4 Octobr 1997 As notd abov, th major downsids of ERP ar th cost and tim rquird to fully implmnt a nw packag. Th ntir procss consums millions of dollars and can last up to two or thr yars. Prsonnl from narly all dpartmnts ar typically involvd in implmntation and tsting. Prsonnl must b abl to adapt to a mor complx systm for maximum bnfit. SUMMARY OF THE BIG FOUR VENDORS SAP Amrica Total sals of ovr $2.4 billion in 1996, 31% markt shar in Entrpris Businss Solutions, and 5 th largst softwar vndor in th world 1,700 E&Y MC prsonnl gnratd rvnus of $300 million in mploys, 6,000+ customrs and worldwid prsnc in ovr 50 countris 6 out of th top 10 Fortun 500 companis us SAP SAP Strngths Tchnology ladr with largst R&D budgt by far Knowldg of businss Multi-languag, multi-currncy, multi-company Highly intgratd businss procsss - within th ntrpris, across th ntrpris, and lvraging th Intrnt Continuous businss procss innovation Markting ability Rlativly strong manufacturing componnt SAP Waknsss Difficult to implmnt (high-risk, complx, long) Cost Inflxibl High turnovr of xprincd customr projct staff Human rsourcs wll vrsd in SAP (in all consulting firms). Pag 4

5 Octobr 1997 SAP Outlook SAP was hardly known for 20 yars until it introducd its R/3 product in R/3 was th first thr-tird, clint/srvr ERP softwar to hit th markt. This brakthrough placd SAP at th forfront, and th rst of th markt has bn playing catch-up vr sinc. Howvr, rcurring storis about th difficulty to fully implmnt R/3 has promptd SAP to simplify th procss of installing R/3. In ordr to accomplish this goal, SAP has dvlopd a program calld ASAP, or Acclratd SAP, to manag th procss. ASAP was dvlopd from provn mthodologis for organizing all th popl, projcts, and softwar involvd in R/3 installation. Incorporatd softwar is xpctd to allow for swift rconfiguration of various R/3 modls to addrss th nds of spcific businsss. SAP will soon launch svral othr initiativs gard toward making products mor customr focusd. Programs includ broadning of lctronic commrc and Intrnt capabilitis, and xpansion of R/3 s supply-chain managmnt functions. SAP plans to utiliz profssionals from its 15 SAP Cntrs of Excllnc throughout North Amrica to work with customrs in various industris and dvlop solutions for thir spcific businss nds. SAP is looking for nw arnas to conqur, spcifically th markt for mid-sizd manufacturrs. Christophr Burton, SAP s dirctor of product markting, nots Quit simply, thr ar a hug amount of potntial customrs in th midrang markt. W rcogniz that thy hav somwhat smallr budgts and a nd for quickr implmntations. But w also think w now hav solutions to mt thir nds. Oracl Total sals of ovr $700 million in 1996 Dp product offrings - 35 moduls covr all facts of ntrpris computing (from manufacturing to human rsourcs to sals forc automation) 430 E&Y MC prsonnl gnratd rvnus of $36 million in 1996 Oracl Strngths Excllnt financials functionality Ladr in wb-basd applications Pag 5

6 Octobr 1997 Succssful implmntations ld by wll-traind Oracl consultants, industry xprts Industry solutions vision through Bst of Brd stratgy (alliancs vs. R&D) Global markt prsnc Advancd databas tchnology Scalability (i.. across divisions) Flxibility Oracl Waknsss Contntion btwn Oracl srvics and major systms intgrators Oftn complx businss rlationships with systm intgrators Oprats on on databas HR product suit still maturing Oracl Outlook Oracl rcntly announcd th first of its own lin of robust supply-chain products, in addition to unviling th gnral availability of all of its applications on th Windows NT platform. Oracl anticipats th Windows announcmnt will incras markt shar among mid-sizd manufacturrs. Oracl dvlopd its nw supply chain moduls - Oracl Supply Chain Planning, Oracl Supplir Schduling, and Oracl Product Configurator - to nhanc manufacturing companis customr srvic via intgratd, ntworkd supply chains. As is th cas with all othr Oracl applications, ths moduls run on numrous computing platforms, including th World Wid Wb. Krry Lamson, a company vic prsidnt, xplains how ths moduls ar just anothr way in which Oracl maks it possibl for manufacturing and distribution companis to utiliz tchnology for comptitiv advantag: Th addition of ths moduls to our alrady xtnsiv supply-chain solutions will hlp customrs xtnd thir supply chain throughout th ntrpris, and byond. Now, thy truly can includ customrs and supplirs as part of thir supply chain. Oracl also plans to grow Oracl Consulting whil strngthning rlationships with lading srvics firms, spcially for largr ntrpris-wid projcts and middl-markt clints. PoplSoft Pag 6

7 Octobr 1997 Total sals of $450m in 1996; 111% growth ovr last 5 yars Ovr 1400 customrs worldwid Product philosophis: Entrpris-rady; built for popl; dsignd for chang; customr drivn Rcntly bcam major playr in ERP markt, rising to top tir of vndors, having alrady stablishd strong bas of HR, financial, and distribution applications Approach to advancd planning tchnology has rdfind ERP PoplSoft Strngths: Flxibility and as of modifications Shortr implmntation cycl and intgratd workflow Rcognizd HR ladr and strong Financial position Focus on customr srvic Strong customr bas - in survy of 700 customrs, 99% would buy again Growing Big 6 support Innovativ Rd Pppr acquisition PoplSoft Waknsss Manufacturing product is nw No procss manufacturing support Managing fast growth Uncrtain scalability Not significantly rcognizd in markt (outsid HR) Poplsoft Outlook Th company s rcnt acquisition of advancd planning vndor Rd Pppr Softwar has hlpd st th standard for th ERP markt, as othr companis rac to scur supplychain planning tchnology. Th Rd Pppr intgration, as wll as othr alliancs with othr 3 rd party on-lin analytical procssing (OLAP) vndors, also pos challngs to th company as it xpands its bas from HR and Financials to ERP. Som plannd futur nhancmnts/additions in th works ar Intrnt rady and wbbasd slf srvic applications, a widr global functionality, and th addition of dmand forcasting and transportation planning moduls. Pag 7

8 Octobr 1997 Baan Total sals of $388m in 1996; succssful public offring in customrs worldwid; sals/distribution cntrs in ovr 40 countris Supports clint/srvr architctur Baan Strngths: Strong manufacturing prsnc Opn systm architctur: databas-indpndnt; usr intrfac-indpndnt; oprating systm-indpndnt; multi-platform Configurabl and scalabl Acclratd tim-to-implmnt, taming modl Orgwar positioning (dirct linkag of procss modls to application moduls) Baan Waknsss: Focus of organization Srvic/support R&D xpnditurs Difficult to implmnt Baan Outlook Baan s third-party alliancs and customr and quality initiativs rflct its strong dsir to b a dominant forc in th worldwid ntrpris softwar markt. Th rcnt allianc with Hyprion Softwar will build up its financial applications, whil th company s acquisition of Aurum Softwar will strngthn th sals and customr srvic pics of its applications suit. Th company launchd an arospac and dfns industry markting initiativ, bringing a formr Boing xcutiv on board as xcutiv vic prsidnt of customr initiativs. Baan is also pursuing mid-sizd manufacturing companis, having rcntly announcd that its Baan IV ERP suit is now compatibl with Microsoft s BackOffic, which uss Windows NT and SQL Srvr. Baan has also formd its own Wb stratgy, with th dvlopmnt of a Java-basd Wb browsr for all currnt applications, and cration of stand-alon Wb solutions that can run on any ERP suit. Th company has introducd its first Wb-basd product, a suit of supply-chain functions that includ a Wb-nabld sals configurator. Pag 8

9 Octobr 1997 SUCCESS STORY Shard Srvics SAP Implmntation - Auto Parts Manufacturr Cost prssurs in th automotiv industry drov an E&Y clint to considr implmnting shard srvics for financial transactions. In th prior phas of work, E&Y assistd with th slction of th softwar packag, SAP. W wr ngagd du to our combind xprtis in shard srvics implmntations and SAP softwar implmntations. W rducd th clint's risk of failur and rducd th clint's xpctd cycl tim to implmnt. Whil th clint chos not to shar th intrnally dvlopd shard srvics valu statmnt for comptitiv purposs, it acknowldgd that th savings wr stimatd to b $35 million ovr a fiv yar priod. Mor ERP Endorsmnts : Ultimatly, a cntralizd (ERP) databas will provid mor timly accss to data, and improv human rsourcs rlatd srvics for our 700,000 associats throughout our oprations worldwid. - Ton Pucktt, Dirctor of Information Systms, Wal-Mart PoplSoft s global ntrpris solution was th bst for both our tchnological and our functional nds. Its ability to modl our structur and businss procsss graphically, as wll as its powrful dvlopmnt tools and Yar 2000 complianc, convincd us. - Srgio Frrira Dias, Carrfour TRENDS IN ERP MARKETPLACE/OUTLOOK FOR FUTURE Sinc 1991, ERP application vndors hav xprincd phnomnal growth: total rvnu, including licns, maintnanc, and srvic fs, has jumpd from lss than $200m to almost $11.5b in ERP licns rvnu alon in 1996 was $6.21b. Pag 9

10 Octobr 1997 Whil th days of 100%-plus growth ar gon, th markt will continu to xpand at a rat of 30% - 40%. This halthy growth rat is xpctd to continu into th nxt cntury, with som analysts prdicting total rvnu of ovr $32b in yar Maintnanc fs will command a largr prcntag of total rvnu, with growth in nw licns fs dropping from ovr 30% to lss than 10%. Thos vndors with matur global sals and support ntworks will xprinc th highst growth, whil a varity of convrging factors will caus many ERP vndors to xprinc flattnd sals. Du to th slowdown in growth, strongr comptition among vndors, and th nar commodity status of ERP packags, avrag slling prics for basic transaction functionality is xpctd to dcras 50% during th nxt thr yars. Historical Markt Sgmntation Disintgrating Markt sgmntation will vaporat as high-nd vndors xhaust opportunitis at th largst companis and mov downstram to invad small to mid-sizd oprations, traditionally th mainstay of middl-markt vndors such as J.D. Edwards and SSA. By yar 2000, th middl markt will rprsnt th sam total markt opportunity as th ovr $1b sgmnt. Consolidation of ERP Markt As a rsult of th incrasd focus of high-nd vndors on mining th middl markt, many smallr vndors will b forcd to consolidat or fold. Som analysts prdict that up to 60% of today s ERP vndors will not surviv th nxt 5 yars. Th fallout will not scap largr vndors as wll, with som prdicting a 30% rduction in high-nd vndors by yar 2000 and only a handful surviving which catr to th largst Fortun 500 companis. Industry-Spcific Solutions Driving Futur Markt By yar 2000, th ris of spcializd vrtical solutions will hav a major impact on th ERP markt. Usrs will incrasingly align with vndors dlivring dp industry-spcific functionality, acquird through intrnal dvlopmnt fforts or partnrships with thirdparty vndors. Focus on Componnts/ Bolt-On Packags On or mor larg vndors will striv to stablish th d facto standard for th industry, by controlling th componnt intrfacs on which all othr vndors dpnd. Othr vndors will b forcd to follow thir lad. Many vndors, for xampl, ar bolting-on supply chain, warhous managmnt and nginring packags to thir backbon packags. Pag 10

11 Octobr 1997 Spcializd vrtical solutions with opn componnt architctur will giv usrs mor control and flxibility. At th sam tim, ntrpris-wid implmntations will b lss commonplac, and focusd, quickr implmntations will prvail which mt th incrasd dmand for agility, simplicity, and customr focus. Making ERP Easy Approximatly 44% of Fortun 1000 companis which implmntd ERP applications stimatd thy spnt at last four tims as much on implmntation hlp - lik systms intgrators and th Big Six consulting firms - as thy spnt on th softwar licns itslf. As such, most ERP vndors ar looking for ways to spd implmntations. Th as of implmntation is important for all manufacturrs, but vn mor so for small to mid sizd manufacturrs. Implmntations nd to bcom considrably chapr as wll. CONCLUSION Drivn primarily by Yar 2000 complianc issus, most manufacturrs hav ithr takn th plung into ERP or ar invstigating its possibilitis. ERP s impact on manufacturr supply chains, customr srvic, and information managmnt is constantly growing. Th ntir markt has xprincd incrdibl growth and is volving to mt customr dmands. Th nxt stp in this volution is th mrgnc of bolt-on packags to original ERP. Ths nw, mor complt ERP packags ar xpctd to b chapr and asir to implmnt. Th shortag of human rsourcs, howvr, is a problm which must b addrssd to continu th growth in th marktplac. Pag 11

12 Octobr 1997 BIBLIOGRAPHY 1. Parkr, Kvin, A Stunning Succss, Manufacturing Systms, July Chappll, Lindsay, High-tch Hookup: Nw Ntwork Lts Automakrs, Supplirs Link, Automotiv Nws, Jun Basta, Nicholas, Going Liv with Entrpris Rsourc Planning, Chmical Enginring, Novmbr Piszczalski, Margin, ERP: Considr Connctivity; Entrpris Rsourc Planning Systms, Automotiv Manufacturing & Production, April Barrll, Jnnifr, Automakrs Talk, Markt Listns, Manufacturing Systms, Fbruary Michl, Robrto, Rinvntion Rigns, Manufacturing Systms, July Pag 12