Integrating an ERP System into a BSBA Curriculum at Central Michigan University By Gary Hayes and Debra Ertel McGilsky Central Michigan University Abstract An Enterprise Resource Planning (ERP) system accumulates financial and nonfinancial data helping a company monitor its success. It is estimated that by the year 2010 the global ERP software vendor market will reach $1 trillion in sales (Bingi, Sharma, and Godla, 1999), with not just large companies, but also mid-tier and small businesses using an ERP system. Therefore, business students should expect to use ERP software, most likely early in their careers, and should be prepared to work with ERP to remain relevant for the job market. Since an ERP system encompasses all business functions, the BSBA curriculum at Central Michigan University (CMU) integrates ERP throughout a number of business core courses, rather than in one single stand-alone management, accounting, or systems course. This paper describes the process and challenges of developing the curriculum and also outlines the nature of the courses that incorporate ERP. The program offers a cost-effective way for CBA faculty to ensure their students are exposed to cross-functional business processes and are able to develop the ERP skills they need. KEYWORDS: ERP, Curriculum Development, and SAP technology Introduction In today s highly competitive, cost-conscious, global marketplace, a top priority for management is efficient business processes. A valuable tool to ensure this priority is achieved is the implementation of an Enterprise Resource Planning (ERP) software system. An ERP system is a packaged software system that allows a company to automate and integrate the majority of its business processes, share common data and practices across the company, and produce and access information in a real-time environment. As illustrated in Figure 1, an ERP system enables all data generated daily 12
by a firm s various functions and processes to be accumulated and available to every function on a real-time basis through the same single integrated database, thereby eliminating redundant data and communication lags. An ERP system also helps organizations manage more efficiently with a vast array of business functions, such as supply chain, receiving, inventory management, production planning, and customer order management, and because it can accumulate both financial and nonfinancial data, it also aids in monitoring trends over time. For example, an ERP system can monitor the number of defects occurring from production to help management determine if quality goals of reducing and approaching zero defects are being achieved. Figure1. Functional Data Collected in an ERP Database Accounting and Finance Data Research and Development Data Marketing and Sales Data Central Data Human Resources Data Production Data Storage and Distribution Data Because this tool has become more accessible in recent years to all sizes of business, students need to be familiar with what an ERP system does, to remain relevant in today s job market. They must understand how an ERP system integrates business functions by accumulating financial and nonfinancial data in one database, and learn how to use that data to monitor a company s progress in improving problem areas in a business. In addition, business students need to understand the cross-functional nature of business. The dilemma faced by business faculty is determining where this learning should occur. At CMU, the business faculty chose to integrate ERP coverage throughout 13
the BSBA core courses. A major advantage of this model, in addition to exposing students to a cross-functional approach to business processes, is that the cost of teaching and implementing ERP is borne across all departments and the college itself. ERP Background: Why Companies Are Using ERP to De-Emphasize Their Functional Structures and Improve Business Inefficiencies During the 1990s and early 2000s, most ERP software systems were purchased by companies that had sales in excess of $1 billion dollars worldwide. This was because, for many years, the cost of implementing an ERP system was staggering. Estimates of total implementation costs ranged from $50 million to $500 million (Brady, Monk, and Wagner, 2001), with no guarantee that a company would get the system to work satisfactorily within its business. Eventually, as sales of ERP software saturated the large company market, many software vendors began to see the huge market potential in the mid-size and small company market. ERP leading software vendors such as SAP, PeopleSoft, and Baan now offer full-scope ERP solutions to mid-tier businesses at a significantly lower implementation cost. According to Lynne Stockstad, director of marketing at Great Plains software, they are able to do this by repositioning and restructuring their current ERP products to run on the mid-tier platform of choice, Windows NT. Even the former high-end ERP solutions, which previously cost tens of millions or more to implement, can now be implemented for less than $1 million (Sumner, 2005). Despite the huge risks taken if implementation of an ERP system fails, including major disruptions to business operations, loss of sales, and even bankruptcy, many businesses now perceive an ERP system is necessary to compete in today s global market. This is because an ERP system helps a company manage its supply chain, inventory management, customer order management, production planning, shipping, receiving, accounting, human resource management, and other business functions (Somers and Nelson, 2003). It also offers a potentially significant improvement in internal operations and often helps a company garner sales by enabling salespeople to impress customers with the breadth and reliability of information that can be presented 14
instantaneously before a sale. Other benefits an ERP system offers, including global integration and the ability to manage operations, are highlighted in Table 1. Table 1. Benefits of an ERP System Benefit Easier global integration Elimination of updating and repair of many separate computer systems Ability to manage operations, not just monitor them Better accommodation of E-commerce Description Barriers of currency exchange rates, language, and culture can be bridged automatically, allowing worldwide data to be integrated. Prior to implementing an ERP system, Boeing had 450 data systems that fed data into its production process. Now it has one single way to record production data. Without ERP, getting an answer to How are we doing? requires obtaining data from each separate business unit and then compiling that data into a single, comprehensive, integrated picture. With ERP, since the system already has all the data, a manager is able to focus on the question What are we going to do better? This allows a business to be more responsive when change is required, enhancing management as a whole (Brady, Monk, and Wagner, 2001). Most of the mid to high-end ERP products provide some sort of communications interface with the internet allowing business-to-business E-commerce to occur, an area that is expected to see increased sales growth. Despite all its advantages, the real impetus that most likely caused major companies to embrace ERP software was the hard economic times experienced in the late 1980s. During that time, companies were encouraged to downsize and reorganize (Brady, Monk, and Wagner, 2001). Specifically, companies found it necessary to root out inefficiencies resulting from the functional model of business organizations, as illustrated in the following example adapted from Brady, Monk, and Wagner (2001, 20): A boat manufacturing company is profitable and keeping pace with its competition. However, its information system (IS) is not integrated and very inefficient, as are those of its competitors. The company s CEO has learned to 15
live with this kind of inefficiency. The sales and marketing department creates a time-consuming paper trail for negotiating and making a sale. To schedule factory production, however, the production manager needs accurate, timely information about actual and projected sales orders from the marketing manager. Without such information, the production manager must guess which and how many boats to produce. To keep the production line moving, sometime(s) he overestimates, and sometime(s) he underestimates demand. Overproduction of a certain boat can result in excess storage and warehouse expenses, while underproduction of another can result in late delivery dates, unhappy customers, cancelled orders, overtime work, and the extra expense of rapid-delivery shipments. This traditional functional business model led to top-heavy and overstaffed companies incapable of reacting quickly to the changing markets of the 1990s and early 2000s. Companies needed to view themselves as a set of cross-functional business processes to survive, and their inefficiencies had to be improved, resulting in the development of ERP software. The impact of an ERP system on a company s costs and operational efficiency can be startling, as evidenced by IBM Storage Systems division. Once its ERP system was up and running properly, a replacement part could be shipped in three days rather than the usual average of 22 days, and its product (parts) inventory could be priced in 5 minutes rather than five days (Brady, Monk, and Wagner, 2001, 16). Integrating ERP into Undergraduate Business School Curriculum: Exposing Business Students to Cross-Functional Business Processes and ERP Since ERP software is being used by a variety of personnel more and more at many sizes of business, students need to be prepared to use it, and business faculty can no longer assume that only the information systems and accounting personnel will be responsible for working with it. All business students need to know what information is available from an ERP system, how to obtain it, and how to use that information to make timely decisions on the job. They need hands-on experience with an ERP system as well. The dilemma is determining where in the business curriculum this learning should occur. 16
The first possibility is to expose business students to ERP concepts and applications in one stand-alone course in their major area of study, for example, a quality management course. However, based on the model of topics provided by Bandyopadhyay and Amilinine (2004, 6-7), adding an ERP segment to this course may prove difficult. Likewise, other business disciplines may find it difficult to add an ERP segment to their stand-alone major course. This option would also require each department choosing to offer a stand-alone major course to possess all the resources necessary to independently teach ERP, including trained faculty. A second and similar option is to have all business students obtain ERP exposure in a single stand-alone business course offered by the information systems or accounting department. An advantage of this option is that only the information systems or accounting department bears the cost involved with teaching ERP, but a potential problem is that the course may be taught with a functional discipline orientation, the way businesses were previously set up. For example, an accounting course may only focus on the financial accounting module of the ERP system and not the management or marketing module. The same problems would exist if ERP concepts were taught only in an upper level management course. It too may have a heavy functional emphasis, emphasizing just the production planning module rather than teaching business students how all the modules work together. An undergraduate business curriculum that enhances business education To avoid these problems, CMU recently redesigned its BSBA to ensure ERP topics were integrated throughout the business core courses. The redesign was also undertaken to help business students obtain a better understanding of the cross-functional aspects of a business. Table 2 presents a layout of the specific courses that address these topics and shows when students typically take these courses in their program. 17
Table 2. BSBA Core Courses at CMU That Address ERP Topics Fall Semester Spring Semester Freshmen Year BUS 100 ------- Sophomore Year -------- BIS 255 ACC 255 Junior Year BUS 301 ------- Senior Year ------- MGT 499 During the first two years, students are exposed to the integration of business functions and introduced to an ERP system. This occurs in the first semester of their freshman year in BUS 100, Essential Business Skills, as well as in the second semester of their sophomore year in BIS 255, Information Systems, and in ACC 255, Managerial Accounting & Decision Making. To provide for integration of concepts and projects across BIS 255 and ACC 255, the two courses must be taken concurrently. The most unique aspect of the BSBA curriculum occurs during the junior year when students enroll in four business core courses concurrently as a cohort. The same students are placed in the same section of each of the four courses allowing that same team of students to work on projects together across the four courses. The four courses include the finance, management, and marketing core courses along with a new course, BUS 301, Integrated Business Experience. The purpose of BUS 301 is to integrate the financial, management, and marketing concepts taught in the other three junior-level core courses as well as to emphasize experiential learning and ERP projects. BUS 301 is unique in that one-half of the course is devoted to learning ERP. In the senior year capstone course, MGT 499, Integrated Capstone Strategic Management, business students are again exposed to ERP in their business analysis project. They also practice managing cross-functional business processes through analyzing business problems that integrate several functional areas. The course description, relevant student learning outcomes, course methodology, and topical coverage of all these BSBA core courses are provided in the Appendix. 18
In addition to the above business core courses, most departments also offer at least one upper-level course in which their majors learn ERP topics relevant to the specific functional area. Taking these additional upper-level ERP-designated courses enhances both the student s education and resume. Upon successful completion of each discipline-specific course, students receive a SAP certificate showing the student has successfully covered SAP functions pertaining to the course. These SAP credentials are highly regarded in the business community. Lastly, the College of Business (CBA) sponsors an elective SAP Academy every summer. The two-week Academy is open to all students who have had some SAP exposure, including students from other universities, providing they have taken an SAP course. Instruction is by SAP itself, not CMU faculty. The Academy provides an up-todate overview of the major SAP modules and how they work together. At the end of the Academy, students who pass a written test given by SAP receive a SAP certification. This certification is held in very high regard, not only by business, but also by SAP itself. Overcoming the Challenges of Integrating ERP into the Curriculum Many schools have attempted partial integration of ERP into their curriculum with varying degrees of success. Schools that attempt a full across disciplines integration of ERP into their BSBA will most likely face the same challenges CMU faced, including: 1. Selecting and implementing an appropriate ERP software package; 2. Selecting and training appropriate faculty; 3. Developing the curriculum; and 4. Administering the ERP initiative. Selecting an ERP software package Selecting an appropriate ERP system is an initial challenge. SAP was adopted by CMU, because prior to the redesign of the BSBA, CMU had adopted SAP for administration purposes and as a teaching aid for the classroom. In fact, CMU was one of the original members of the SAP University Alliance of America. Implementing SAP, however, proved to be a very costly and difficult undertaking for the university, so some 19
schools may find it prohibitive to implement a system of this magnitude. Fortunately, SAP recently developed university competency centers that provide users with SAP software and databases for an annual fee. The centers can be accessed through the internet, allowing schools to use both the software and data without having to purchase the software. The annual fee that is assessed is based on user demand for the software and databases. It represents a small fraction of the cost a school would incur to independently purchase SAP and provide the personnel needed to maintain it. Other ERP software companies, for example the mid-tier vendor Great Plains, have recently begun offering educational versions of their software as well that can be used in a university setting. Training faculty Selecting and training the faculty from each discipline who will be responsible for teaching ERP is another challenge. Initially at CMU, an interdisciplinary team made up of tenured faculty was selected. Faculty came from each functional area, including management systems, accounting, marketing, finance, and management. The team s objectives included learning SAP, incorporating it into each faculty member s respective course, developing relevant classroom material for each discipline, and presenting workshops on SAP to other interested business faculty. The college paid for the initial training and curriculum development costs. Now new team members who join the team train by either attending SAP sponsored or university sponsored training sessions or by attending the SAP Academy described above. The cost of faculty training could be prohibitive for some schools. Fortunately, numerous low-cost workshops are now offered which familiarize participants with ERP software, unlike when CMU began its initiative. In addition, the educational versions of select ERP software packages that have recently become available offer schools another low-cost training alternative. These educational versions not only provide a good overview of their software, but also give faculty the ability to train themselves, perhaps by using course release time. 20
Curriculum development Finding appropriate teaching materials for the classroom can be another challenge. In general, little material is available. Therefore, CMU faculty developed their own required materials, and in some cases they collaborated on the development to lessen the workload. Some faculty also used the database IDES by SAP. IDES is available for educational training and is populated with data representing multiple organizations across a variety of industries. Some faculty found IDES to be unrealistic, however, and not useful in helping to convince students of the importance of an ERP system, specifically that an ERP system is able to provide valuable information for decision making. Many schools have started developing their own company examples as well, including the Fitter Snacker example, Quazi Computers Company, and RF Clothing Company. These examples were developed to bridge the problem of weak or nonexistent databases with showing students how an ERP system works. They can usually be obtained at a reasonable price from the school that developed the example. Administrative support Since the ERP initiative at CMU is multidisciplinary, its leadership is not housed in one department. Instead, one faculty member on the team serves as the CBA-SAP Director. The Director receives release time to coordinate and oversee all development and administrative tasks related to the CBA SAP program. A support person from the CBA computer facilities technical staff is also assigned specifically to service the SAP program. Periodically throughout the year, the Director meets with the SAP faculty team to address development and curriculum issues. Funding an ERP program can be costly. Fortunately, as the ERP curriculum was being implemented at CMU, the CBA received approval from the university to assesses a special SAP student fee to help pay for the costs of the program. This fee is added to the regular tuition cost of each course that offers specific SAP instruction and is paid by each student enrolled in the course. It is used to provide funding for both administrative and training costs of the SAP faculty team. 21
Results The first group of business students to hold this redesigned BSBA degree will not graduate until May, 2008, so its long term success will be judged in years to come. A complete assessment of the program can be done after the first group graduates, with those results being reported in a future paper. Currently, assessment of the quality of the program occurs on an ongoing basis as issues with the program occur. Assessment of both the SAP-designated courses and the SAP Academy has been carried out using a variety of evaluations, including student and alumni opinions, feedback from companies that use SAP, and faculty suggestions for changes. The assessment data are monitored on a continuous basis and drive improvements to the SAP courses. As a result of the assessment, the courses continue to evolve and adapt. The SAP Director also continuously monitors the starting salaries of CMU graduates who took one or more SAP supported classes, comparing them to the starting salaries of CMU graduates who took no SAP supported courses. This assessment study is done in conjunction with CMU s Career Services. The results of the recent study found the starting salaries of those graduates who had taken at least one SAP supported class, for all CBA majors, were significantly higher than the starting salaries of those graduates holding the same major who had taken no SAP course. Differences in starting salaries ranged from approximately $250 in one major to $9,600 in another major. The study also found that the average starting salary of students who took the SAP Academy was about $7,500 higher than the average starting salary of students who did not. Conclusion Today s business student needs to be familiar with cross-functional business processes and ERP systems, but the dilemma business faculty face is where to include these topics in the BSBA curriculum. The business faculty at CMU decided that learning how to optimally manage a company using an ERP system best occurs across a variety of business courses, not in a single stand-alone course. Therefore, when the BSBA degree was redesigned, ERP was integrated across the undergraduate business core courses, providing a cost effective way to ensure all business students are exposed to crossfunctional business processes and they develop needed ERP skills. Incorporating ERP 22
into the BSBA adds value to the student s education as evidenced by the higher starting salaries of graduates who possess ERP knowledge and skills. References Brady, J., E. Monk, and B. Wagner. 2001. Concepts in Enterprise Resource Planning. Boston, MS: Course technology, Thomson Learning. Bandyopadhyay, Jayanta and L. Amilinine. 2004. Developing a model for quality management program in an american university in this new millennium. The International Journal of Quality and Productivity Management 4(1): 1-8. Bingi, Pl, M. Sharma, and J. Godla. 1999. Critical issues affecting ERP implementation. Information Systems Management 16: 7-14. Somers, T. and K. Nelson. 2003. The impact of strategy and integration mechanisms on enterprise system value: empirical evidence from manufacturing firms. European Journal of Operational Research 146: 315-338. Sumner, M. 2005. Enterprise Resource Planning Booklet. Upper Saddle River, NJ: Pearson Prentice Hall. ABOUT THE AUTHORS Dr. Gary Hayes is an Assistant Professor of Accounting at Central Michigan University. He also worked at Main La Frantz & Co and Gerald C Schroeder & Co, in Detroit, Michigan. His teaching and research interests include federal income taxation, ERP systems, government reporting, and managerial accounting Dr. Debra E. McGilsky is a Professor of Accounting at Central Michigan University. She also worked at Arthur Andersen & Co. in Milwaukee, Wisconsin. Her areas of expertise, teaching and research include income taxation, curriculum development, and learning assessment. 23
APPENDIX Course Description, SLOs, Methodology, and Topical Coverage of ERP-Related BSBA Core Courses BUS 100 Essential Business Skills Description: Introduces students to the concept of a business, its disciplines, and essential business skills including decision making, teamwork, and oral and written communication. Student Learning Outcomes: 1. Describe business environments and the integration of their functional areas. 2. Describe value chain components and the supply chain concept. Specific Topics Covered: 1. The concept of a business and effective skills of business people Various forms of business, including non-profits A business model and its functioning units The functional business disciplines and how they are integrated: accounting, finance, information systems, management, human resources, marketing, economics, and business law 2. Basic business processes and decision making skills The role of global markets in international business Impact of technology on business Value chain components and the supply chain concept How business decisions are made BIS 255 Information Systems (Co-requisite is ACC 255) Description: Introduction to Information Systems (IS) in business and IS development and includes application of concepts to integrated study of business problems. Methodology: An integration of managerial accounting concepts and IS applications will help students appreciate how businesses use IS to support business operations and to make business decisions. Student Learning Outcomes: 24
1. Apply IS skills and critical thinking skills to solve business problems in a series of integrated projects. 2. Define and demonstrate a knowledge of the components of an IS including ERP software. 3. Demonstrate an understanding of IS development including techniques such as the use of data flow diagrams and entity relationship diagrams. 4. Build an IS to solve business problems by using spreadsheet and database applications and accounting and financial data. ACC 255 Managerial Accounting & Decision Making (Co-requisite is BIS 255) Description: Managerial decision-making methods using accounting and financial information and includes application of concepts to integrated study of business problems. Methodology: Applied integration of managerial accounting concepts and the use of computer information systems so the student will appreciate how businesses use accounting and operational data via information systems to make business decisions. Student Learning Outcome: 1. Apply sound business processes to solve business problems and incorporate critical thinking skills to a series of integrated projects. BUS 301 Integrated Business Experience Description: Enterprise Resource Planning (ERP) applications emphasizing functional integration of supply chain activities. An integrated business simulation experience links the marketplace to the organization. Methodology: 1. Lectures on ERP and the functional areas of business which include Procurement, Production, and Sales & Distribution. 2. Interactive exercises enabling students to perform hands-on applications of business processes. 3. Team projects enabling students to perform integrative applications across functional areas and to generate managerial decisions and solutions. 4. Guest speakers from corporations utilizing ERP systems. 25
Student Learning Outcomes: 1. Use the ERP system, in general, and of its components, in particular: Procurement, Production, Sales & Distribution. 2. Identify and analyze the changes in the management business organizations as a consequence of the incorporation of an ERP system. 3. Demonstrate conceptual knowledge relating to business processes and functionality in an ERP system. 4. Apply decision making skills by generating managerial solutions to integrative applications. Specific Topics Covered: 1. ERP system overview ERP system training database Navigation in the ERP system Functional modules in the ERP system 2. Procurement module Business processes relating to the procurement cycle The procurement module Integration and linkage to the financial accounting and sales & distribution modules 3. Production module Introduction to production planning and control An example of make-to-stock production Integration and linkage to the sales & distribution modules 4. Sales and distribution module Business practices related to the sales & distribution cycle Sales and distribution module Integration and linkage to the financial accounting and the procurement modules 26
MGT 499 Integrated Capstone Strategic Management Description: An integrative capstone course applying and analyzing financial, marketing, supply chain and other business functions within a global strategic management perspective. Student Learning Outcomes 1. Apply the appropriate current information technology skills to solve business problems. 2. Bring together various disciplines to bear on the strategic issues facing an organization. 3. Analyze business problems that simultaneously involve several functional areas of the organization. 27