Enterprise Resource Planning (ERP) Systems. MIS 4133 Software Systems

Transcription

1 Enterprise Resource Planning (ERP) Systems MIS 4133 Software Systems

2 Outline Definition Model and Architecture ERP Modules ERP Packages and Vendors Business Value and Keys to Success ERP Business Case Impediments to Success and Reasons for Failure Hidden Costs ERP Success and Failure Stories ERP and Ecommerce Benefits and Limitations

3 Enterprise Resource Planning Systems Set of integrated business applications (modules) that carry out common business functions: General ledger, accounts payable, accounts receivable, material requirements planning, order management, inventory control, human resources management Usually purchased from software vendor

4 ERP Systems Manufacturing and Production ERP System Finance and Accounting Vendors Business process Business process Business process Enterprise-wide business processes Customers Human Resources Sales and Marketing

5 ERP System Architecture Finance and Accounting Sales and Marketing Centralized Database Human Resources Manufacturing and Production

6 ERP Modules ERP modules are integrated ERP modules reflect a particular way of doing business Example ERP Modules Fixed asset management Controlling Financial accounting Human resources Materials management Plant maintenance Production planning Project system Quality management Sales and distribution

7 Example of How an ERP System Works 1. Ordering 2. Availability 3. Production 4. Manpower 5. Purchasing 6. Order Tracking and More Ordering

8 ERP Package Benefits (rather than customizing) Data integration New ways of doing business Global capabilities Flexibility IT purchasing benefits IT architecture cost reduction

9 ERP Software Vendors SAP Oracle PeopleSoft (and J.D. Edwards) Baan (now owned by Infor Global Solutions)

10 ERP Business Value More uniform organization More efficient operations More customer-driven business processes Improved decision making

11 ERP Keys to Success Change Management Management Commitment Adequate Staff Understanding of ERP Business Potential Organizational Motivation linked to ERP Value

12 The ERP Business Case Technology Business Process Strategic Competitive

13 The ERP Business Case Technology Rationale Disparate Systems Poor Quality Systems Difficult to Integrate Acquisitions Obsolete Systems Unable to Support Growth

14 The ERP Business Case Business Process Rationale Personnel, Inventory, and IT Cost Reductions Productivity Improvements Financial Cycle Close Etc.

15 The ERP Business Case Strategic Rationale Different Strategies Information Backbone

16 The ERP Business Case Competitive Rationale a lot of ERP purchases are premised on the need to just stay in business (O Leary 2000)

17 ERP Impediments to Success Difficulty in choosing the right software/implementation Requires large investment of money and people Choosing an ERP software vendor can be difficult Changing, inconsistent or lack of requirements from the business Understaffing project teams Unwillingness to re-engineer business processes Insufficient reporting capabilities Inexperienced project teams Overreliance on consultants Not investing in training and change management Not having a maintenance strategy

18 ERP Reasons for Failure Reasons for failure Large and complex systems Significantly impact numerous business functions Technical versus organizational aspects What to avoid Only focusing on technology and IT department Customizing source code

19 ERP Hidden Costs Training Integration Testing Customization Data Conversion Consultant Fees Experienced ERP Employees leave Endless Implementation

20 ERP Success Story Colgate-Palmolive Goal a global ERP system Used SAP R/3 modules and Oracle s DBMS Cost $430 million Schedule took 5 years

21 ERP Failure Story CosmeticCo Cosmetic company located in Beijing Goal implement an ERP system that would meet the company s development requirements (in which the existing financial software did not) Used Sweden s Intentia AB as their software package provider and Legend Advanced Systems Ltd. (LAS) as their service provider Cost $212,170 (for MOVEX software, design and implementation service, and hardware)

22 ERP and Electronic Commerce Customer orders Vendor-managed inventories Build to order Links with resellers Merge to transit

23 ERP Benefits and Limitations Integration, conversion, and consolidation Training Maintenance Security Resistance Benefit Data entered once and used by all applications; improved accuracy and quality of data Consistency of user interfaces across applications means less employee training Support of system improves as IT staff is trained to support needs of users across organization Enhanced due to better controls Limitation Data conversion from old to new system can be tedious and complex; Consolidation of hardware, software, and people can be difficult Retraining of all employees with new system can be costly and time consuming Complexity of installing, configuring, and maintaining the system increases, thereby requiring specialized staff and other resources Retraining of IT staff and personnel to the new ERP system and changing business roles and dept boundaries can produce resistance and reduce productivity over time

24 ERP Benefits and Limitations Business processes Costs Customer service Collaboration Competitive advantage Benefit Can respond to changes in environment more readily allowing for market share growth; can link and exchange info in real-time with supply chain partners; enhanced efficiency of business processes Improved due to quicker info flows Improved due to sharing of info across functional departments Limitation High initial costs of purchasing software, consultant costs, and disrupting the work flow of employees May be lost if company does not customize because all businesses have the same standard business processes

25 References Laudon, K.C. and Laudon, J.P. (2006). Management Information Systems: Managing the Digital Firm, Pearson Education, Inc., Upper Saddle River, New Jersey. Martin, E.W., Brown, C.V., DeHayes, D.W., Hoffer, J.A. and Perkins, W.C. (2005). Managing Information Technology, 5 th edition, Pearson Education, Inc., Upper Saddle River, New Jersey. McNurlin, B.C. and Sprague, Jr., R.H. (2006). Information Systems Management in Practice, 7 th edition, Pearson Education, Inc., Upper Saddle River, New Jersey. Motiwalla, L.F. and Thompson, J. (2009). Enterprise Systems for Management, Pearson Education, Inc., Upper Saddle River, New Jersey. O Leary, D.E. (2000). Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk, Cambridge University Press. Rothenberger, M.A. and Srite, M. (2009). An investigation of customization in ERP system implementations, IEEE Transactions on Engineering Management (56:4), pp Schiff, J.L. (2012). 13 Common ERP Mistakes and How to Avoid Making Them, CIO.com, [accessed: Sept. 1, 2015]. Wailgum, T. (2009). 10 Famous ERP Disasters, Dustups and Disappointments, CIO.com, [accessed: Sept. 1, 2015]. Wailgum, T. (2007). ERP definition and solutions, CIO.com, [accessed: Sept. 1, 2015]. Wenrich, K.I. and Ahmad, N. (2009). Lessons learned during a decade of ERP experience: a case study, Journal of Enterprise Information Systems (5:1), pp Xue, Y., Liang, H., Boulton, W.R. and Snyder, C.A. (2005). ERP implementation failures in China: case studies with implications for ERP vendors, International Journal of Production Economics (97), pp