imt sem2 presentation
TRANSCRIPT
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Enterprise
Resource
PlanningBy : Rahul Gupta
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Contents
What is ERP?
ERP Evolution
Characteristics of ERP Systems
ERP Market Share
ERP System Cost Components ERP
Advantages
Disadvantages
Conclusion
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Historical Context of ERP
Historically, companies created islands of automation. A
hodge-podge of various systems that operated or
managed various divergent business processes.
Sometimes these systems were integrated with each other and
sometimes they werent.
The total organizational costs of maintaining a patchwork of
redundant and overlapping systems has grown over the years to
the point where the cost of maintaining these systems is greater
than installing a new system.
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What is ERP?
It integrates all departments and functions across
a company onto a single computer system thatcan serve all those different departments
particular needs.
ERP automates the tasks involved in performing a
business process
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An example: order
fulfillment
Problems:
Delays, lost orders, keying into differentcomputer systems invites errors
Before ERP
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An example: order fulfillment
(2)
Front-Office Functions Back-Office Functions
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ERP Evolution
1960-70s
MRP (Material Requirement Planning)Inventory and process time reduction with new
production planning systems
1980s MRP II (Manufacturing Resource Planning )
Greater reductions due to the integration with
accounting and human resource systems
1990s ERP
Focused on clients. Real time transactions.Corporate optimization.
2000s ERP Extended or ERP II
Focused on clients, optimizing the whole business
network; including suppliers and clients
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Characteristics of ERP Systems
Integration: seamless integration of all the information flowing
through a company financial and accounting, human resource
information, supply chain information, and customer information.
Best Practices: ERP vendors talk to many different businesses
within a given industry as well as academics to determine thethe
best and most efficient way of accounting for variousbest and most efficient way of accounting for various
transactions and managing different processestransactions and managing different processes. The result isclaimed to be industry best practices.
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Characteristics of ERP Systems
The general consensus is that business process change adds
considerably to the expense and risk of an ERP systems
implementation. Some organizations rebel against the inflexibility
of these imposed business practices.
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ERP Package Saturation in U.S.
Manufacturing Firms Company has installed a package ERP
system
44.1%
Company is currently installing a package
ERP system
18.8%
Company plans to install a package ERP
system within 18 months
10.3%
No ERP system is planned 26.8%
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ERP Market Share
SAP 25%
Oracle 14.2%
Multiple packages 9.8%
Baan 8.8%
J.D. Edwards 7.4%
Peoplesoft 2.5%
SSA/BPCS 2.5%
QAD 2.5%
Other packages 27.3%
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ERP System Cost Components
Software 30.2%
Consulting 24.1%
Hardware 17.8%
Implementation Team 13.5%
Training 10.9%
Other 3.3%
Source: Enterprise Resource Planning Survey of US Manufacturing Firms, Mabert, Soni
and Venkatraman, Production and Inventory Management Journal, 2000
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Hidden costs of ERP
Integration and testing
Data conversion
Data analysis
Replacing your best and brightest
Implementation teams can never stop
Waiting for ROI Post-ERP depression
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Advantages
design engineering (how to best make the
product)
Reduction of personnel Increased productivity
Increased visibility of corporate data
Improved on-time delivery performance Improved responsiveness to customer
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Disadvantage )
Customization of the ERP software is limited. Some customization may involve changing of
the ERP software structure which is usually not allowed
ERP systems can be very expensive to install often ranging from 30,000 to 500,000,000 for
multinational companies.
ERP vendors can charge sums of money for annual license renewal that is unrelated to the
size of the company using the ERP or its profitability.
Once a system is established, switching costs are very
high for any one of the partners (reducing flexibility and
strategic control at the corporate level). Once a system isestablished, switching costs are very high for any one of
the partners (reducing flexibility and strategic control at the
corporate level).
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ERP Failure
Standish Group Study of ERP Implementations:
35% are Cancelled
55% overrun their budgets Less than 10% are on time and under budget.
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ERP Failure
Standish Group Study of ERP Implementations:
Implementation Averages
Cost: 178% over budget
Schedule: 230% longer
Functionality: 59%
or: the system will only perform 41% of the
functions it was intended to perform.
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Summary
Companies that manufacture products to sell have these
basic functional areas:
Marketing and Sales
Production and Materials Management
Accounting and Finance
Human Resources
Functional areas are served by information systems
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Summary Continued
Employees in one functional area need information
from another to do their job
Today, business managers think in terms of business
processes rather than functional areas. ERP
software encourages this new thinking