enterprise resource planning
TRANSCRIPT
• Enterprise Resource Planning
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Enterprise resource planning
1 Enterprise resource planning (ERP) is a cross-functional enterprise system
driven by an integrated suite of software modules that supports the
basic internal business processes of a company
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Enterprise resource planning
1 Enterprise system software is a multi-billion dollar industry that
produces components that support a variety of business functions
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Enterprise resource planning
1 Organizations consider the ERP system a vital organizational tool because it
integrates varied organizational systems and enables flawless transactions and production. However, an ERP system is
radically different from traditional systems development. ERP systems can run on a
variety of computer hardware and network configurations, typically employing a
database as a repository for information.
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Enterprise resource planning Origin of "ERP"
1 In 1990 Gartner Group first employed the acronym ERP as an extension of
material requirements planning (MRP), later manufacturing resource planning and computer-integrated
manufacturing
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Enterprise resource planning Expansion
1 ERP systems experienced rapid growth in the 1990s because the
year 2000 problem and introduction of the euro disrupted legacy systems.
Many companies took this opportunity to replace such systems
with ERP.
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Enterprise resource planning Expansion
1 ERP systems initially focused on automating back office functions that did not directly
affect customers and the general public. Front office functions, such as customer
relationship management (CRM), dealt directly with customers, or e–business
systems such as e–commerce, e–government, e–telecom, and e–finance—or supplier
relationship management (SRM) became integrated later, when the Internet simplified
communicating with external parties.
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Enterprise resource planning Expansion
1 "ERP II" was coined in the early 2000s.[by whom?] It describes web–
based software that provides employees and partners (such as
suppliers and customers) with real–time access to ERP systems
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Enterprise resource planning Two tier enterprise resource planning
1 Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems at once: one at the
corporate level and one at the division or subsidiary level
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Enterprise resource planning Two tier enterprise resource planning
1 Given the realities of globalization, enterprises continuously evaluate
how to optimize their regional, divisional, and product or
manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability
and delivering value
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Enterprise resource planning Two tier enterprise resource planning
1 Factors affecting enterprises adopting two-tier ERP systems are the globalization
of manufacturing or the economics of sourcing in emerging economies, the
potential for quicker and less costly ERP implementations at subsidiaries based on selecting a software product more suited
to smaller companies, and any extra effort required where data must pass
between the two ERP systems
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Enterprise resource planning Integration
1 Organizations perceive ERP as a vital tool for organizational competition,
as it integrates dispersed organizational systems and enables flawless transactions and production
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Enterprise resource planning Integration
1 However, though most companies still follow the single source approach, a significant
number of firms employ a strategy of “best of breed” ERP to strive for a competitive
advantage. ERP vendors began to acquire products, or develop new features comparable to or better than many of the top applications.
This helped companies, via single source, maintain or create a competitive advantage based on unique business processes, rather than adopt the same business processes as
their competitors.https://store.theartofservice.com/the-enterprise-resource-planning-toolkit.html
Enterprise resource planning Integration
1 In the following years, integration was a leading investment due to a feature gap and the need to extend
and integrate the ERP system to other enterprises or "best of breed"
applications
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Enterprise resource planning Integration
1 Developers now take greater effort to integrate mobile devices with the ERP
system. ERP vendors are extending ERP to these devices, along with other business
applications. Technical stakes of modern ERP concern integration—hardware, applications, networking, supply chains. ERP now covers
more functions and roles—including decision making, stakeholders' relationships,
standardization, transparency, globalization, etc.
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Enterprise resource planning Characteristics
1 ERP (Enterprise Resource Planning) systems typically include the following characteristics:
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Enterprise resource planning Characteristics
1 An integrated system that operates in real time (or next to real-time),
without relying on periodic updates
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Enterprise resource planning Characteristics
1 A common database, which supports all applications
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Enterprise resource planning Characteristics
1 A consistent look and feel throughout each module
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Enterprise resource planning Characteristics
1 Installation of the system without elaborate application/data
integration by the Information Technology (IT) department, provided
the implementation is not done in small steps
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Enterprise resource planning Functional areas
1 An ERP system covers the following common functional areas. In many ERP systems these are called and grouped together as ERP modules:
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Enterprise resource planning Functional areas
1 Budgeting, costing, cost management, activity based
costing
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Enterprise resource planning Functional areas
1 Recruiting, training, payroll, benefits, 401K, diversity management, retirement, separation
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Enterprise resource planning Functional areas
1 Engineering, bill of materials, work orders, scheduling, capacity,
workflow management, quality control, manufacturing process,
manufacturing projects, manufacturing flow, product life
cycle management
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Enterprise resource planning Functional areas
1 Supply chain planning, supplier scheduling, order to cash,
purchasing, inventory, product configurator, claim processing
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Enterprise resource planning Functional areas
1 Project planning, resource planning, project costing, work break down
structure, billing, time and expense, performance units, activity
management
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Enterprise resource planning Functional areas
1 Sales and marketing, commissions, service, customer contact, Call
Center support - CRM systems are not always considered part of ERP
systems but rather Business Support systems (BSS). Specifically in
telecom scenario
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Enterprise resource planning Functional areas
1 Various "self–service" interfaces
for customers, suppliers and/or
employeeshttps://store.theartofservice.com/the-enterprise-resource-planning-toolkit.html
Enterprise resource planning Components
1 Customizable reporting
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Enterprise resource planning Components
1 Simple resource planning - Who Is Doing What and
When?
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Enterprise resource planning Components
1 Analysing the product
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Enterprise resource planning Components
1 External access via technology such as web
services
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Enterprise resource planning Best practices
1 Most ERP systems incorporate best practices. This means the software
reflects the vendor's interpretation of the most effective way to perform
each business process. Systems vary in how conveniently the customer
can modify these practices. Companies that implemented
industry best practices reduced time–consuming project tasks such as configuration, documentation,
testing, and training. In addition, best practices reduced risk by 71% when
compared to other software implementations.
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Enterprise resource planning Best practices
1 The use of best practices eases compliance with requirements such as IFRS, Sarbanes-Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is
because the procedure can be readily codified within the ERP software, and
replicated with confidence across multiple businesses who share that
business requirement.https://store.theartofservice.com/the-enterprise-resource-planning-toolkit.html
Enterprise resource planning Modularity
1 Most systems are modular, to permit automating some functions but not others
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Enterprise resource planning Connectivity to plant floor information
1 ERP systems connect to real–time data and transaction data in a
variety of ways.These systems are typically configured by systems integrators, who bring unique
knowledge on process, equipment, and vendor solutions.
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Enterprise resource planning Connectivity to plant floor information
1 Direct integration—ERP systems have connectivity (communications to plant floor equipment) as part of their product offering. This requires the vendors to offer specific support
for the plant floor equipment that their customers operate. ERP
vendors must be expert in their own products, and connectivity to other
vendor products, including competitors.
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Enterprise resource planning Connectivity to plant floor information
1 Database integration—ERP systems connect to plant floor data sources
through staging tables in a database. Plant floor systems deposit the necessary information into the
database. The ERP system reads the information in the table. The benefit of staging is that ERP vendors do not need to master the complexities of equipment integration. Connectivity
becomes the responsibility of the systems integrator.
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Enterprise resource planning Connectivity to plant floor information
1 Enterprise appliance transaction modules (EATM)—These devices
communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP
system. EATM can employ a staging table, Web Services, or system–
specific program interfaces (APIs). The benefit of an EATM is that it offers an off–the–shelf solution.
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Enterprise resource planning Connectivity to plant floor information
1 Custom–integration solutions—Many system integrators offer custom solutions. These systems tend to have the highest level of initial
integration cost, and can have a higher long term maintenance and
reliability costs. Long term costs can be minimized through careful system testing and thorough documentation. Custom–integrated solutions typically
run on workstation or server class computers.
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Enterprise resource planning Implementation
1 ERP's scope usually implies significant changes to staff work processes and practices
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Enterprise resource planning Implementation
1 Besides that, information processing actually has influential effects on
various business functional activities—due to severe competitions, taking control of logistics efficiently would be significant for manufacturers. Therefore, large corporations like
Wal-Mart use a just in time inventory system. This increases inventory
storage and delivery efficiency, since it helps avoid wasteful storage days
and lack of supply to satisfy customer demand.
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Enterprise resource planning Implementation
1 Moreover, many companies realize that increasing market share requires that they be sensitive to marketing
changes and make appropriate adjustments. Lots of information
processing applications could meet these requirements, and ERP covers
almost every essential functional unit of a firm’s operations—including
accounting, financing, procurement, marketing, and sales.
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Enterprise resource planning Implementation
1 This information processing tool becomes the bridge that helps
different isolated functional units share and update their data
immediately, so managers can continually revise strategies based
on data from all departments. However, information tools like ERP are expensive, and not a practical
method for medium or small business owners. To address this
issue, some software firms develop simpler, cheaper information
processing tools specifically for smaller companies.
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Enterprise resource planning Process preparation
1 Implementing ERP typically requires changes in existing business
processes. Poor understanding of needed process changes prior to starting implementation is a main
reason for project failure.
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Enterprise resource planning Process preparation
1 It is therefore crucial that organizations thoroughly analyze
business processes before implementation. This analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of
current processes with those provided by the ERP system.
Research indicates that the risk of business process mismatch is
decreased by:
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Enterprise resource planning Process preparation
1 Linking current processes to the organization's
strategy
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Enterprise resource planning Process preparation
1 Understanding existing automated
solutions
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Enterprise resource planning Process preparation
1 ERP implementation is considerably more difficult (and politically
charged) in decentralized organizations, because they often have different processes, business
rules, data semantics, authorization hierarchies and decision centers. This may require migrating some business
units before others, delaying implementation to work through the
necessary changes for each unit, possibly reducing integration (e.g.,
linking via Master data management) or customizing the system to meet
specific needs.
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Enterprise resource planning Configuration
1 Configuring an ERP system is largely a matter of balancing the way the organization wants
the system to work with the way it was designed to work. ERP systems typically
include many settings that modify system operation. For example, an organization can
select the type of inventory accounting—FIFO or LIFO—to use; whether to recognize
revenue by geographical unit, product line, or distribution channel; and whether to pay for
shipping costs on customer returns.
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Enterprise resource planning Customization
1 ERP systems are theoretically based on industry best practices, and their
makers intend that organizations deploy them as is. ERP vendors do
offer customers configuration options that let organizations incorporate their own business rules, but often
feature gaps remain even after configuration is complete.
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Enterprise resource planning Customization
1 ERP customers have several options to reconcile feature gaps, each with their own
pros/cons
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Enterprise resource planning Customization
1 Customization is always optional, whereas the software must always be
configured before use (e.g., setting up cost/profit center structures, organisational trees, purchase
approval rules, etc.).
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Enterprise resource planning Customization
1 The software is designed to handle various configurations, and behaves
predictably in any allowed configuration.
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Enterprise resource planning Customization
1 The effect of configuration changes on system behavior and performance
is predictable and is the responsibility of the ERP vendor. The
effect of customization is less predictable. It is the customer's
responsibility, and increases testing activities.
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Enterprise resource planning Customization
1 Configuration changes survive upgrades to new software versions.
Some customizations (e.g., code that uses pre–defined "hooks" that are called before/after displaying data screens) survive upgrades, though
they require retesting. Other customizations (e.g., those involving
changes to fundamental data structures) are overwritten during
upgrades and must be reimplemented.
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Enterprise resource planning Customization
1 Customization advantages include that
it:
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Enterprise resource planning Customization
1 Improves user acceptance
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Enterprise resource planning Customization
1 Offers the potential to obtain competitive advantage vis-à-vis companies using only standard
features
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Enterprise resource planning Customization
1 Customization disadvantages include
that it:
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Enterprise resource planning Customization
1 Increases time and resources required to implement and
maintain
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Enterprise resource planning Customization
1 Inhibits seamless communication between suppliers and customers
who use the same ERP system uncustomized
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Enterprise resource planning Customization
1 Can create over reliance on customization, undermining the
principles of ERP as a standardizing software platform
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Enterprise resource planning Extensions
1 ERP systems can be extended with third–party software. ERP vendors
typically provide access to data and features through published
interfaces. Extensions offer features such as:
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Enterprise resource planning Extensions
1 Archiving, reporting, and republishing
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Enterprise resource planning Extensions
1 Capturing transactional data, e.g., using scanners, tills or
RFID
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Enterprise resource planning Extensions
1 Access to specialized data and capabilities, such as syndicated
marketing data and associated trend analytics
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Enterprise resource planning Extensions
1 Managing resources, facilities, and
transmission in real-time
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Enterprise resource planning Data migration
1 Data migration is the process of moving, copying, and restructuring data from an existing system to the ERP system. Migration is critical to
implementation success and requires significant planning. Unfortunately, since migration is one of the final activities before the production
phase, it often receives insufficient attention. The following steps can
structure migration planning:https://store.theartofservice.com/the-enterprise-resource-planning-toolkit.html
Enterprise resource planning Data migration
1 Decide on migration-related setups
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Enterprise resource planning Data migration
1 Define data archiving policies and procedures
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Enterprise resource planning Advantages
1 The fundamental advantage of ERP is that integrating myriad businesses processes saves time and expense. Management can make decisions faster and with fewer errors. Data
becomes visible across the organization. Tasks that benefit from
this integration include:
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Enterprise resource planning Advantages
1 Chronological history of every transaction through relevant data
compilation in every area of operation.
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Enterprise resource planning Advantages
1 Order tracking, from acceptance through
fulfillment
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Enterprise resource planning Advantages
1 Revenue tracking, from invoice through cash
receipt
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Enterprise resource planning Advantages
1 Matching purchase orders (what was ordered), inventory receipts (what
arrived), and costing (what the vendor invoiced)
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Enterprise resource planning Advantages
1 Eliminates the need to synchronize changes between multiple systems—consolidation of finance, marketing,
sales, human resource, and manufacturing applications
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Enterprise resource planning Advantages
1 Facilitates standard product
naming/coding
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Enterprise resource planning Advantages
1 Protects sensitive data by consolidating multiple security systems into a single
structure
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Enterprise resource planning Benefits
1 ERP can greatly improve the quality and efficiency of a business. By keeping a company's internal
business process running smoothly, ERP can lead to better outputs that
benefit the company such as customer service, and
manufacturing.
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Enterprise resource planning Benefits
1 ERP provides support to upper level management to provide them with
critical decision making information. This decision support allows the
upper level management to make managerial choices that enhance the
business down the road.
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Enterprise resource planning Benefits
1 ERP also creates a more agile company that better adapts to
change. ERP makes a company more flexible and less rigidly structured so
organization components operate more cohesively, enhancing the
business—internally and externally.
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Enterprise resource planning Benefits
1 ERP can improve data security. A common control system, such as the kind offered by ERP systems, allows
organizations the ability to more easily ensure key company data is
not compromised.
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Enterprise resource planning Benefits
1 ERP provides increased opportunities for collaboration. Data takes many
forms in the modern enterprise. Documents, files, forms, audio and
video, emails. Oftentimes each data medium has its own mechanism for allowing collaboration. ERP provides
a collaborative platform allowing employees to spend more time
collaborating on content, rather than mastering the learning curve of
communicating in various formats and across distributed systems.
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Enterprise resource planning Disadvantages
1 Re-engineering business processes to fit the ERP system may damage
competitiveness or divert focus from other critical activities.
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Enterprise resource planning Disadvantages
1 ERP can cost more than less integrated or less
comprehensive solutions.
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Enterprise resource planning Disadvantages
1 High ERP switching costs can increase the ERP vendor's
negotiating power, which can increase support, maintenance, and
upgrade expenses.
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Enterprise resource planning Disadvantages
1 Integration of truly independent businesses can create unnecessary dependencies.
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Enterprise resource planning Disadvantages
1 Extensive training requirements take resources
from daily operations.
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Enterprise resource planning Disadvantages
1 Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for
production planning and supply chain management (SCM).
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Enterprise resource planning Disadvantages
1 Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of
time, planning, and money.
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Enterprise resource planning Disadvantages
1 Recognized ERP limitations have sparked new trends in ERP application development.
Development is taking place in four significant areas: more flexible ERP,
Web-enable ERP, inter-enterprise ERP, and e-business suites.
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Enterprise resource planning Further reading
1 Grant, David; Richard Hall, Nick Wailes, Christopher Wright (March
2006). "The false promise of technological determinism: the case
of enterprise resource planning systems". New Technology, Work &
Employment 21 (1): 2–15. doi:10.1111/j.1468-005X.2006.00159.x.
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Enterprise resource planning Further reading
1 Loh, Tee Chiat; Lenny Koh Siau Ching (September 2004). "Critical elements for a successful ERP implementation
in SMEs". International Journal of Production Research 42 (17): 3433–
3455. doi:10.1080/0020754041000167167
9.
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Enterprise resource planning Further reading
1 Shaul, Levi; Tauber Doron . "Hierarchical examination of success factors across ERP life cycle". MCIS
2010 Proceedings.: 79.
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Enterprise resource planning Further reading
1 Head, Simon (2005). The New Ruthless Economy. Work and Power
in the Digital Age. Oxford UP. ISBN 0-19-517983-8.
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Enterprise resource planning Further reading
1 Waldner, Jean-Baptiste (1992). Principles of Computer Integrated Manufacturing. Chichester: John
Wiley & Sons Ltd. ISBN 0-471-93450-X.
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Enterprise resource planning Further reading
1 Waldner, Jean-Baptiste (1990). Les nouvelles perspectives de la
production. Paris: DUNOD BORDAS. ISBN 978-2-04-019820-6.
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Enterprise resource planning Further reading
1 Lequeux, Jean-Louis (2008). Manager avec les ERP, Architecture Orientée
Services (SOA). Paris: EDITIONS D'ORGANISATION. ISBN 978-2-212-
54094-9.
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Enterprise resource planning Further reading
1 Clemons, E.K.; Kimborough (1986). "IS for Sustainable Competitive
Advantage". Information & Management 11 (3): 131–136.
doi:10.1016/0378-7206(86)90010-8.
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Enterprise resource planning Further reading
1 The History of Double Accounting: How Italian
Merchants Led the Way to ERP
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JD Edwards - Enterprise Resource Planning concept developed
1 McVaney and his company developed what would be called Enterprise
Resource Planning (ERP) software in response to that business
requirement.
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SAP Human Resource Management Systems - Enterprise resource planning
1 In 1973, the first commercial product was launched. The SAP R/1, as it was called, offered a common system for
multiple tasks. This permitted the use of a centralized data storage, improving the maintenance of the
data. From a technical point of view, therefore, a database was necessary.[http://chbeck.metapress.com/conten
t/ph64048135784551 Vom Programmierbüro zum globalen
Softwareproduzenten: Die Erfolgsfaktoren der SAP von der
Gründung bis zum R/3-Boom, 1972 bis 1996]
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SAP Human Resource Management Systems - Enterprise resource planning
1 In 1976, SAP GmbH was founded, and moved its headquarters the
following year to Walldorf. SAP AG became the company's official name
after the 2005 annual general meeting. AG is short for
Aktiengesellschaft (public limited company).
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SAP Human Resource Management Systems - Enterprise resource planning
1 Three years later, in 1979, SAP launched SAP R/2, expanding the capabilities of the system to other
areas, such as material management and production planning.
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SAP Human Resource Management Systems - Enterprise resource planning
1 In 1981, SAP brought a re-designed product to market
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ERP software - Two tier enterprise resource planning
1 Given the realities of globalization, enterprises continuously evaluate
how to optimize their regional, divisional, and product or
manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability
and delivering value.Ferdows, K
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ERP software - Two tier enterprise resource planning
1 Factors that affect enterprises adoption of two-tier ERP systems
include:
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ERP software - Two tier enterprise resource planning
1 * Manufacturing globalization, the economics of sourcing in emerging economies
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ERP software - Two tier enterprise resource planning
1 * Potential for quicker, less costly ERP implementations at subsidiaries,
based on selecting software more suited to smaller companies
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ERP software - Two tier enterprise resource planning
1 * Extra effort required where data must pass between two ERP
systemsMontgomery, Nigel (2010).[http://www.gartner.com/id=1412121
Two-Tier ERP Suite Strategy: Considering Your Options.] Gartner
Group
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C. Edward McVaney - Enterprise Resource Planning or ERP software concept developed
1 With the vast majority of JD Edwards' customers in the medium sized area,
clients did not have the luxury of gigantic accounting software
implementations
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Allied Council for commerce and logistics - Enterprise Resource Planning
1 * Economical Enterprise resource planning software|ERP solutions for
small logistics companies and farming communities.
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ERP system - Two tier enterprise resource planning
1 * Extra effort, (often involving the use of Enterprise application
integrationhttp://ceiton.com/CMS/EN/workflow/system-centric-
bpms.html#Back-End_EAI) is required where data must pass
between two ERP systemsMontgomery, Nigel (2010).
[http://www.gartner.com/id=1412121 Two-Tier ERP Suite Strategy:
Considering Your Options.] Gartner Group
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SAP SE - Enterprise resource planning
1 In 1973, the first commercial product was launched. It was called SAP
R/98, and offered a common system for multiple tasks. This permitted the
use of a centralized data storage, improving the maintenance of data.
From a technical point of view, therefore, a database was necessary.
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SAP SE - Enterprise resource planning
1 SAP released the new SAP R/3 in 1992. SAP developed and released
several versions of R/3 through 1995. By the mid-1990s, SAP followed the
trend from Mainframe computer|mainframe computing to client-server architecture|client/server
architectures. The development of SAP’s internet strategy with
mySAP.com redesigned the concept of business processes (integration via Internet). SAP was awarded Industry Week’s Best Managed Companies in
1999.
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SAP SE - Enterprise resource planning
1 The company's official name became SAP AG after the 2005 annual
general meeting. AG is short for Aktiengesellschaft, a (public limited
company).
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