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Chapter Eight. Building The E-Business Backbone: Enterprise Resource Planning. ERP: The Technological Backbone of E-Business. Typical corporate computing environment today of mainframe-based apps is antiquated Cannot meet demands of new economy and must be replaced ERP integrated app suite

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chapter eight

Chapter Eight

Building The E-Business Backbone: Enterprise Resource Planning

erp the technological backbone of e business
ERP: The Technological Backbone of E-Business
  • Typical corporate computing environment today of mainframe-based apps is antiquated
    • Cannot meet demands of new economy and must be replaced
  • ERP integrated app suite
    • Framework to automate back-office functions: Financial, Manufacturing and Distribution, HR, Administrative
    • Unites major business processes within single family of modules: production, order processing, inventory mgmt and warehousing, A/P and A/R, general ledger, and payroll
  • ERP phenomenon also catching fire among dot-coms
    • Managing customer relationships key for the newer online firms
    • ERP offers customers efficient, high-quality service
      • Ability to order online; inquire about product pricing and order status
    • ERP prices dropping and rental ASP model becoming prevalent

www.ebstrategy.com

erp the technological backbone of e business1
ERP: The Technological Backbone of E-Business
  • ERP is the technological backbone of e-business
    • Enterprise-wide transaction framework with links into
      • sales order processing; inventory mgmt and control; production and distribution planning; finance
    • In early 1990s, only large manufacturers saw benefits of ERP
    • Today, medium-size and dot-com firms also recognize necessity of integrating back-office processes for front-office success in e-commerce world

www.ebstrategy.com

who really uses erp suites
Who Really Uses ERP Suites?
  • Large corporations that want to gain control over disparate groups of core business apps
    • 3Com, Chevron Products Company, GM
  • 3 primary categories of ERP implementations
    • Single to few products in single industry: eToys
    • Single SBU firms, selling only few products in a single industry: Delta Airlines, Dell, Microsoft, Nike
    • Large corporate conglomerates or multiple-SBU firms, selling many products in multiple industries: GE, IBM, Colgate-Palmolive, and Nabisco

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the basics of erp
The Basics of ERP
  • These apps are themselves built from smaller s/w modules that perform specific business processes within a given functional area

Integrated Logistics

Production Planning

Customer/Employee

Accounting & Financials

Sales Distributions (Order only)

Human Resources

Enterprise Architecture

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evolution of erp
Evolution of ERP

Wave 4

Interenterprise Integration (XRP)

Wave 3

Customer-Centric Integration (CRP)

Wave 2

Enterprise Integration (ERP)

Wave 1

Manufacturing Integration (MRP)

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evolution of erp1
Evolution of ERP
  • 1960s
  • Automation of all aspects of production master scheduling
  • Showed technology could link disconnected business functions

Wave 4

Interenterprise Integration (XRP)

Wave 3

Customer-Centric Integration (CRP)

Wave 2

Enterprise Integration (ERP)

Wave 1

Manufacturing Integration (MRP)

www.ebstrategy.com

evolution of erp2
Evolution of ERP
  • Began in 1980s as MRP II as execs sought for similar benefits as MRP by integrating other functions
  • Business drivers of ERP: replacing legacy systems, greater control, globalization, regulatory change, integration of decisions across enterprise
  • Y2K preparation in 1999 a significant factor

Wave 4

Interenterprise Integration (XRP)

Wave 3

Customer-Centric Integration (CRP)

Wave 2

Enterprise Integration (ERP)

Wave 1

Manufacturing Integration (MRP)

www.ebstrategy.com

evolution of erp3
Evolution of ERP
  • ERP evolving into CRP to integrate “brick” with “click”
  • Using middleware has drawbacks
  • Traditional ERP build for make-to-stock business models; but this is no longer the case; customer value, effectiveness, enhanced service delivery key today
  • Continuous planning vs. long planning cycle of ERP
  • Ericsson

Wave 4

Interenterprise Integration (XRP)

Wave 3

Customer-Centric Integration (CRP)

Wave 2

Enterprise Integration (ERP)

Wave 1

Manufacturing Integration (MRP)

www.ebstrategy.com

evolution of erp4
Evolution of ERP
  • A company’s partners benefit from the same seamless integration as the company itself
  • Extends beyond four walls of the enterprise to customer, suppliers and trading partners
  • B2B marketplaces
  • ERP does not support continuous-planning requirements of SCP
  • Collaborate or perish

Wave 4

Interenterprise Integration (XRP)

Wave 3

Customer-Centric Integration (CRP)

Wave 2

Enterprise Integration (ERP)

Wave 1

Manufacturing Integration (MRP)

www.ebstrategy.com

benefits of erp
Benefits of ERP
  • Critical business need: Enterprise-wide shared services
    • Replace old, autonomous departmental, or divisional services with single, streamlined, corporate-level process
  • Shared-services standardize the processes for routine, non-core functions for all business units to use
    • Accounting
  • With processes defined, an ERP-based IT infrastructure can be established to manage them efficiently

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erp decision enterprise architecture planning
ERP Decision = Enterprise Architecture Planning
  • Management must resolve enterprise architecture issues before selecting an ERP suite of products
    • “What kind of company do we want to be?”
    • Not, “What are each application’s features?”
  • Inability to find the right fit between ERP apps and their business causing corporate frustration
    • FoxMeyer
  • Problem not with ERP concept but in management’s demands for quick fixes and rapid cures to underlying structural problems

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erp decision enterprise architecture planning1
ERP Decision = Enterprise Architecture Planning
  • Selecting and installing a new ERP solution one of the most important and most expensive endeavors
    • Also most likely to go wrong
    • Lack of alignment between ERP, business processes and e-commerce objectives can derail best of firms
    • Managers must understand core functionality, not abdicate responsibility to IT dept
  • Successful organizational change is gradual
    • Enterprise apps require moving decades of corporate knowledge and information to a new technology platform
    • Technology is not the only challenge in managing transformation

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erp decision enterprise architecture planning2
ERP Decision = Enterprise Architecture Planning
  • Cannot lose sight of customers
    • “Is this something our customers will recognize as valuable?”
    • “Will it shorten order-to-delivery cycle?”
    • “Will this improve our product and performance?”
  • ERP impacts not just s/w
    • Corporate culture, business processes, staff, and day-to-day procedures are all affected
  • Executive mgmt must understand technical basis for business change and e-commerce functionality, besides ROI of new technology
    • “What business are we in?”
    • “What are the key issues facing us today?”
    • “What issues will be important tomorrow?”

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erp decision build vs buy vs rent
ERP Decision: Build Vs Buy Vs Rent
  • Important decision: whether to build or buy or rent
    • ERP apps define overall corporate architecture
    • Enterprise-wide implementations
  • Custom design app that meets specific requirements of an organization has several drawbacks
    • Highly complex
    • Lengthy design, development and implementation efforts
    • Limited flexibility to support diverse and changing operations or to respond effectively to evolving business demands and technologies

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erp decision build vs buy vs rent1
ERP Decision: Build Vs Buy Vs Rent
  • COTS apps address limitations of custom built apps
    • Provide broad functionality, better integration with existing legacy systems, greater flexibility to change and upgrade, and a lower TCO
  • Downside of COTS apps
    • Reengineer estbd. business practices
    • Customize apps
    • Hire consultants to make s/w work
    • No competitive edge
  • Mgmt must view COTS apps within the context of overall business strategy
    • “What business processes bring us our identity and our competitive advantage?”
    • “How can we ensure that we enhance these with COTS solution?”
    • “How can we support our ecommerce initiatives with COTS?”

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capabilities of cots erp solutions
Capabilities of COTS ERP Solutions
  • Consolidation of back office
  • Creation of single back office that supports multiple distribution channels
  • Facilitation of changes in business practices
  • Facilitation of changes in technology

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microsoft
Microsoft
  • Spent 10 months and $25 million installing SAP R/3 to replace a tangle of 33 financial-tracking systems in 26 subsidiaries
  • $18 million annual savings
  • Growth rate was straining company’s systems
    • 50 subsidiaries worldwide; continues to grow every day
    • More than 30 systems implemented in a piecemeal fashion over time supported financial, operations and HR groups alone
    • Batch processes to move information between systems
      • Run time grew to more than 12 hours
      • 90% of the more than 20,000 batch robs that ran each month retrieved and processes same information
  • Mgmt realized it needed a global and integrated solution to support its core business

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erp implementation catching the bull by the horns
ERP Implementation: Catching the Bull by the Horns
  • Installation of ERP packages unique
    • Each ERP app suite has own architecture, customization features, installation procedures, and level of complexity
  • Implementation strategies for SAP
    • Step-by-step
      • One module at a time
    • Big bang
      • Replacing all old systems at once
    • Modified big bang
      • Various modules at once, but pilot first
      • Very common
  • Even if implementation strategy is right, setting up the solution not easy
    • Brother Industries

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roadmap to rapid implementation accelerated erp approach
Roadmap to Rapid Implementation: Accelerated ERP Approach
  • Today’s intense competitive pressures require fast response
    • ERP app suites can’t keep up
  • But successful companies understand business processes, simplify them, and then introduce automation
    • Automating complex or non-value-adding processes will not increase productivity or provide measurable improvements in performance
    • Automation without simplification immortalizes ineffective processes

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roadmap to new leadership skills
Roadmap to New Leadership Skills
  • Effective coordination mgmt encompasses a combination of four capabilities
    • Strategic thinking
      • How well does your ERP selection, implementation, and evolution strategy align with your business strategy?
    • Process reengineering
    • Managing implementation complexity
    • Transition management

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slide22

E-Business Strategies, Inc.

www.ebstrategy.com

contact@ebstrategy.com

678-339-1236 x201

Fax - 678-339-9793