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Enterprise Resource Planning

Enterprise Resource Planning. IST 421 Fall 2006. ERP Evolution. Integrated applications seem obvious today Complex hardware and software system not feasible until the 1990’s ERP systems evolved as a result Development of hardware & software technology

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Enterprise Resource Planning

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  1. Enterprise Resource Planning IST 421 Fall 2006

  2. ERP Evolution • Integrated applications seem obvious today • Complex hardware and software system not feasible until the 1990’s • ERP systems evolved as a result • Development of hardware & software technology • Development of a vision of integrated information systems

  3. ERP Evolution • Integrated Vision: Materials Requirements Planning (MRP) used for inventory tracking Electronic Data Interchange (EDI) enabled processing of purchases avoided paper purchase orders & invoicing systems Start of Supply-Chain Management

  4. ERP Evolution • Business model started in 1930’s by Alfred P. Sloan – Functional Model of Business Organization • During economic problems of 1980’s and 1990’s, view changed to cross-functional processes. • Michael Hammer’s 1993 book, Reengineering the Corporation: A Manifesto for Business Revolution

  5. ERP Evolution • ERP software was seen as a solution to business problems • Number of ERP vendors: • SAP (Systems, Applications, and Products in Data Processing ) • PeopleSoft • Oracle • Baan • J.D. Edwards

  6. ERP Applications • Best-of-Breed approach • Each ERP vendor has perceived specialty • SAP – Production Planning & Materials Management • PeopleSoft – Human Resources • As is install or customize?

  7. ERP Applications • Failed package installation projects • Dell Computers cancelled implementation • Owens-Corning lengthy implementation • FoxMeyer drug company (bankrupt) lawsuit • In a fortune 500 company, software, hardware and consulting fees exceed $100 million and take years to fully implement

  8. ERP Applications • Most use three-tier architecture • Presentation layer • Application server layer • Database layer • Various integration techniques • Proprietary • EDI, COM, CORBA, Java

  9. ERP Applications • Business Vision – What business problem is being addressed? • Adopt “best practices” addressed by software vs. customization?

  10. ERP Applications • Returns expected? • 33% of companies saw a cost savings in sales order management • 34% reduced personnel needs • More sales can be generated through streamlined process • Reduced frustration • Realized returns?

  11. Supply Chain Management

  12. Supply Chain Management • Supply chains support the flow of goods and services from their origin to their endpoint – the customer.

  13. Supply Chain Management

  14. Supply Chain Management • Supply Chain Management (SCM) comprises business-management applications that provide guidance on which products to manufacture, when, and where they should be distributed. • The category includes software that manages plant scheduling, demand forecasting, ordering raw materials and related functions.

  15. Supply Chain Management • Plant automation applications are involved in the actual manufacturing processes, such as machining, material movement, blending, heating, cooling, etc. • These applications are generally hosted on small, independent controllers, on Supervisory Control and Data Acquisition systems running on PCs, or on complex and elaborate distributed control systems.

  16. Supply Chain Management • Prior to 1999, most companies were looking at the supply chain from an internal perspective. • The emphasis was on bringing together the operations of manufacturing, planning and scheduling with sales and marketing. • Many companies turned to Enterprise Resource Planning (ERP) and advance planning and scheduling systems to bring together the procurement process internally.

  17. Supply Chain Management • Performance measurements – • Cash-to-cash cycle time: the time from paying for raw materials to collecting cash from the customer. Efficient SCM processes do this in 30 days vs. 100 days. • Total SCM cost: cost of buying and handling inventory, processing orders, and information systems support. Efficient SCM incur costs equal to 5% of sales vs. costs equal to 12% of sales.

  18. Supply Chain Management • Other Performance measurements – • Initial fill rate: % of the order that the supplier provided in the first shipment • Initial-order lead-time: time needed for the supplier to fill the order • On-time performance: how often the supplier meets agreed to requested delivery dates

  19. Packaged Applications • Market leaders • SAP • Oracle • Baan • State-of-the-art client/server or internet/intranet architectures

  20. Integrated Supply Chain • Supply chain or value chain is the flow of goods and services from their points of origin to the ultimate consumer. • Fully integrated supply chain can react to consumer demand in minutes • High-value opportunity for most businesses

  21. Integrated Supply Chain • Step 1: automate and optimize major business processes within each member organization. • Step 2: Extend the enterprise to all members in the supply chain

  22. Exercise • What would be a supply chain for our semester project?

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