air force mentor-protégé program

September 1, 2005 1ERP Methodology and Project Management

Air Force Mentor-Protégé Program

ERP Overview

Ronald E. Giachetti,Ph.D.Associate ProfessorIndustrial and Systems EngineeringFlorida International University

Duane P. Truex, Ph.D.Associate Professor

Robinson College of BusinessDepartment of Computer Information Systems

Georgia State University

September 1, 2005 Day 1 M odule 3 Slide 2

FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé Program

"Any sufficientlyadvanced technology isindistinguishable from

magic."

(Arthur C. Clarke)



Agenda ERP ERP Benefits and Costs ERP Market ERP Implementation



ERP A packaged application that supports

and automates business processesand manages data.

Characteristics of ERP are:Modules are integrated, applicationdesigned based on business process.Reflect ‘best business’ processes.Large and complex.



ERP Drives Business Change Enables high levels of integration

across business functions and units new way of business for manyorganizations.

Provides for widespread sharing ofdata from a single informationrepository

Drives extensive businesstransformation and changemanagement efforts sinceorganization must change to matchprocesses supported by ERP

Requires high levels of implementationeffort and support

ERP



ERP FunctionalityFinance

-General Ledger-Accounts Receivable-Accounts Payable-Procurement-Fixed Assets-Treasury Mgmt-Cost Control-Grant Management

Human Resources

-HR/BenefitsAdministration-Payroll-Self-serv ice HR

e-Business

-eProcurement- Employee Self Serv ice- e-Recruiting/e-Hiring- e-Filing- Citizen Access- Web-enabled transactions- e-Commerce

Transaction EngineCore software that managestransaction flow amongapplications and handles taskslike security and data integrity

Customer Relationship Mgt

-Consistent user experience- Personalization of serv ices- Realtime access- enterprise info

Supply Chain Mgmt

Planning, scheduling and fulfillmentapplications that address allprocurement requirements across the enterprise

Data Analysis

Decision support software thatlets senior executives and otherusers analyze transaction data totrack business performance



Evolution of ERP 1960s: software packages with inventory

control 1970s: MRP systems

Production schedule with materialsmanagement

1980s: MRPII systemsAdds financial accounting system

1990s: MRPIIIntegrated systems for manufacturingexecution

Late 1990s: ERPIntegrated manufacturing with supply chain



Enterprise System Software Enterprise Resource Planning (ERP) Customer Relationship Management

(CRM) (SAP now market leading, 6% sales fromCRM).

Supply Chain Management (SCM) Product Data Management (PDM) Enterprise Application Integration (EAI) Data Warehousing (DW) eMarketplace / eProcurement



SupportingorganizationalchangesFacilitatingbusinesslearningEmpoweringand buildingcommonvisions

Building

business

flexibility

IT cost

reduction

increased IT

infrastructure

capability

Supporting businessgrowthbusinessalliance

Building businessinnovationscostleadershipexternallinkages

Generating productdifferentiation

Improve

Access to

information

Resource

management

Decision

making

Planning

Performance

Reduction

Cost

Cycle time

Improvement

Productivity

Quality

Customerservice

ORGANIZATIONALIT

INFRASTRUCTURESTRATEGICMANAGERIALOPERATIONAL

Expected ERP Benefits


FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé ProgramSix primary reasons emerged for package selection

decisions

Factor FrequencyPercent

Features/functionality best fit requirements 193 20%

Architecture best fit with IT strategy/goals 127 13%

Vendor's reputation 126 13%

Vendor's ability to provide a complete solution 124 13%

Price 110 12%

Vendor product/vision 99 10%

Advice from peers 67 7%

Previous experience with vendor 41 4%

Part of larger purchasing group that selected product 38 4%

Advice from consultant/industry analyst 28 3%

Why did universities pick a particular vendor?

Respondents were asked to “pick all that apply”

Note that this does not necessarily mean that these were the most important reasons packageswere selected – just that they played a role in the decision



ERP Solution Components Costs

Implementation

60%

Infrastructure

20%

ERP Software

20%

‘rule of thumb’ – based onconsultant experiences.


FLORIDA INTERNATIONAL UNIVERSITYAir Force Mentor-Protégé ProgramSoftware License Costs to Services

(implementation) Ratios

1

5

1

15

0

2

4

6

8

10

12

14

16

Commercial Government

Software

Services

Source: OMB 2003



ERP Hidden Costs Training – usually underestimated. Employees must learn new

process not just software. Integration & Testing – Testing links between ERP and other

systems. Add-ons from vendor. Customization – All consultants recommend ‘plain vanilla’ but

be realistic some customization is needed. Data Conversion – need to clean and filter data in legacy

systems and transport it. Data Analysis – ERP stores transactional data, often need to

integrate with other data for decision support. Consultants – need to plan disengagement of consultants. Replacing best and brightest employees – need to staff ERP

project with best employees, backfilling a cost. Implementation team stays in place – cannot just disband

team, need to keep in place since they now know ERP in-and-out.



High-end ERP Software• Sales: from $500 million (92) to $3.3 billion (97)• Fastest-growing software company worldwide• more than 84,000 installations, in more than 50 countries

• Bought by PeopleSoft in 2003• WorldSoftware and OneWorld

• Was Baan, bought by SSA(System SoftwareAssociates) in 2003• Now targeting SME besidesLarge companies

• 2nd biggest• (now 1st after acquisition?)• Most open package



Mid-level ERP Software



Revenue (Billion $)

SSA Global (Baan)

3%

Geac

2%

Intentia

2%

Infor Global

Solutions

2%

Lawson Software

2%

Microsoft Business

Solutions

4%

Sage

5%

Oracle

PeopleSoft

18%

SAP

40%

Others

22%

ERP Market (2004)

Source: AMR MarketReport 2004.



ERP Market ERP Extensions are applications that

increase the functionality of ERP.Customer Relationship Management(CRM)Supply Chain Management (SCM)E-businessBusiness intelligence tools

ERP extensions are becoming agreater part of the overall ERP market.



ERP in Government

ERP

ERP Services

Source: Input Inc. Reston VA, 2004.

Estimated 2009 Federal Market forERP ( $7.7 Billion Total) • Services for

integration veryimportant.

• Department ofDefense andDepartment ofHomeland Securityexpected to be largestconsumers.



Trends in the ERP Marketplace Speed, Speed, Speed

TemplatesRapid Implementation Methodologies

Cost Effective Implementations for LargeEnterprises

Product expansion (tax collections, fleetmanagement)

Internet/Intranet and Electronic Commerce Outsourcing and Application System Providers Application Management Services



ERP MarketMost of Fortune 500 companies havealready installed ERP systemsExpanding rapidly into new markets•Small and medium sized enterprises

(SME)•Developing countries

Trends in the ERP Marketplace



IT projectsOther:

• Decided how they wanted todo business

• Choose a software package• Rewrote large portions of the

software code

ERP:• The business often must be

modified to fit the system• More complex and failure prone

Tight Fit

Loose Fit

ERP Projects are Different



10%

55%

35%

On time, w ithin budgetOverrunCancelled

178%230%

0%

50%

100%

150%

200%

250%

300%

350%

Cost overruns Schedule overruns

Overrun

100%

Implementedfunctionality:

41% of whatwas desired

ERP Project Over-runs



Summary ERP remains complex, but knowledge

about implementation has developedsubstantially over the past few years.

ERP systems drive organizationalchange.

ERP market moving towardsextensions (addressing weaknesses ofERP) and towards mid-market andsmaller enterprises.

September 1, 2005 24ERP Methodology and Project Management

Air Force Mentor-Protégé Program

Enterprise Reference Architectures

Ronald E. Giachetti,Ph.D.Associate ProfessorIndustrial and Systems EngineeringFlorida International University

Duane P. Truex, Ph.D.Associate Professor

Robinson College of BusinessDepartment of Computer Information Systems

Georgia State University



“Everything should bemade as simple aspossible, but not simpler”– Albert Einstein



Agenda Modeling Theory Reference Architectures ARIS Reference Architecture as a

commercial example utilized by SAP



Definitions Enterprise: a complex set of business

processes that can be designed toaccomplish a specific set of objectives.

Architecture:A description (often graphical) of thestructure of something.A structured plan, a framework on the basisof which a product or an organization ofan enterprise can be constructed

Reference model: a general model that can beused as a base to derive other models from.

Reference Architecture: is a structured set ofmodels which represent the building blocks of thesystem.



Why we need ERP Reference Architectures ERP systems are complex and difficult to understand how they

operate. A reference architecture is a model that describes ERP

systems – helps people understand how they work. Use of reference architectures for:

Business Process Reengineering (both ‘AS-IS’ and ‘TO-BE’modeling)TrainingConfiguration

Reference architectures capture, standardize, and representthe commonalities found in business process reengineeringand enterprise integration projects (Vernadat 1996).

Characterize the best-in-class management practices andsoftware solutions; i.e. knowledge management.

Inclusion of all elements. Leverage the previous work done in enterprise engineering;

i.e., learning.



Models An abstract representation of

reality that excludes much of theworld’s infinite detail.

The purpose of a model is toreduce the complexity ofunderstanding or interacting witha phenomenon by eliminating thedetail that does not influence itsrelevant behavior.



Abstraction



Modeling Point #1 Modeling is the ‘art’ of abstraction,

knowing what to include in modeland what to leave out.



A model reveals what its creatorbelieves is important in understandingor predicting the phenomenamodeled



Africa is morethan 10 timeslarger thanGreenland!

Mecator’s Projection



Peterson’s Projection: Area Accurate



Modeling Point #2 All models are built with a purpose,

the purpose is determined by themodel creator.

Standard models have built inpurposes (for example, UML activitydiagrams or role activity diagrams).



Model Views

A

Figure 1. Front view of physical object



Model Views

A

Possibility 1 Possibility 2

A

Figure 2. Two possible top views for the same front view



Enterprise System Views

FunctionBehaviorOrganizationor resourceinformation

DataProcessI/O

ControlDataFunctionOrganization

FunctionInformationOrganizationResource

CurtisZachmanARISCIMOSA



Enterprise Views A Reference Architecture for an ERP

system requires the following views:Information or Data view – describes thedata structure of the entities or objects inthe system.Function View – describes the functionssupported by the system (what thesystem does).Process View – describes how the systemcompletes the functions.Organization View – describes how theenterprise is organized.



Modeling Point #3 Systems tend to be complex, our

models only abstract limited parts ofthe entire system (called a view).

You need multiple views tounderstand the entire system. We usedecomposition, but instead of ahierarchy into views.

Views must be consistent!



Enterprise Modeling Enterprise modeling has to fulfill several

requirements to achieve efficient and effectiveenterprise integration:

provide a modeling language easily understood bynon-IT professionals, but sufficient for modelingcomplex industrial environments.provide a modeling framework which:

• covers the life cycle of enterprise operation fromrequirements definition to end of life.

• enables focus on different aspects of enterpriseoperation by hiding those parts of the model notrelevant for the particular point of view.

• supports re-usability of models or model parts



ARIS The Architecture for Information

Systems (ARIS) developed in Germanyand adopted by SAP.

Adheres to enterprise concepts foundin CIMOSA, GRAI, and other RA.

Uses Event Process Chains to modelprocesses.



ARISExecutivemgmt

Materials mgmt Sales

InventoryDisposition

RequestOffer

Customer

Requestreceived

Requestprocessed

Offerprocessing

RequestRequest

processing

Salesprocessing

Determine delivery

date

RequestprocessingSales Offer

processingCheckCredit

worthiness

Organizationalview

Data view Control view Functional view



Event Process Chains Event Driven Process Chains (EPC), which

are one of the central components of theArchitecture for Integrated InformationSystems (ARIS) (Scheer 1995).

Used by SAP in modeling business processessupported by their ERP package SAP R/3.

EPC depict several important relationships ina business process.

Control Flow depicted as a sequence of event-function-event linkages.Information flow which specifies where data iscreated, read, updated, or deleted by a function.Organization assignment showing who does thefunction.



CASE Tool based on EPC



EPC ConstructsConstruct Symbol Definition

Event

Event name

An event describes a change

of state in the system.

Funct ion

Function

name

A function describes the

transformation from an entry

state to a target state.

Link Operators

XOR

V

V

The link operators describe the

logical connection between

events and functions or

process paths.

Process Path

Process

Name

A process path describes the

link to another process.

Organization Unit

Organization

unit name

An organization unit describ es

who is responsible for

completing the function.

Information Object

Information

object name

An information object

describes a real - world data

structure (e.g. order form)

Information Flow

An information flow describes

either the creation, read,

update, or deletion of t he

information object.

Control Flow

The control flow connects

events and functions to show

the sequence of activities.

Assignment of Organization

U n i t

The organization unit

assignment shows who



START

Generate

Supply

Request : D

Generate

Inventory

Report : D

V

Supply

Request

Accepted

Inventory

Report

Generated

Generate PIN

Order : S

Generate PO

:M

PO Sent

PIN Order

Generated

Supply

Request

Inventory

Report

Create CD-

ROM with

PINs : PM

(2,3)

(1,3,5)

Supply

Request(1,1,3)

Prototype

Card for

Validation

Order Details

Printing Order

Generated

Generate

Order Details/

Request

Prototype : M

Prototype

Card

Validated

PO

POS PIN

Order

Generated

V

Sales

Information

(2,2,3)

XOR

Supply

Request

Rejected

Review

Supply

Request : S

Supply

Request Sent

(4,5)

V

(5,7)

(2,3)

Generate

Prototype

Card : P

Prototype

Card Ready

Prototype

Requested

(4,5)

Validate

Prototype

Card : M

(5,7)

(1,5,6)

(3,5)

V

(3,5)

Generate

Printing Order

: M

V

(4,6)

CD-ROM with

PINs created

Print Cards :

P

V(5,6)

(5,6)

CD-ROM with

PINs

(1,5,6)

(1,4,5)

(1,3,5)

Printing Order

Printing Order (1,4,6)

(3,5)

Activation/

Deactivaion

PIN Order

Sales Analysis

(2,4,4)

(1,4,5)

V(1,3,5)

(1,3,5)

Order Details

(1,5,6)

PO

(1,3,5)

Order Details (1,5,6)

EPC for Latin American PrePaid Telephone Cards



Summary Reference Architectures describe how

an ERP system is organized andoperates.

SAP makes the greatest usage ofreference architectures, but othervendors use them as well.

The reference architecture is used toconfigure, understand, and driveprocess redesign efforts.

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