erp benefits and risk

7/27/2019 ERP Benefits and Risk

1/13

ERP Value

The value of ERP is the opportunity to integrate an entireorganization by having a single point of entry and sharing of dataacross the enterprise. Creates less need to reconcile data andrekey. Inefficient business processes that were disjointedbecome much more efficient.

The legacy system layout: each dept, business unit might havetheir own systems (end user computing etc), leads toinefficiencies and delays. The trend now is toward integration ofdata.

Example: in a horizontally integrated ERP system, the Purchasingdepartment would process a purchase order in a central

database with a common General Ledger. Both Accounts Payableand Receiving have access to the same General Ledger so thedata would be immediately available to them. There is no timelag, re-entry of information, or heavy dependency on paperdocuments.


2/13

Before and After ERP


3/13

Benefits of ERP

Companies usually have a business case rationale foradopting ERP and take this rationale to the Board. Abusiness case normally includes tangible as well asintangible benefits.

Some key benefits: Integrate financials

Have one view of the customer

Standardize manufacturing processes

Reduce inventory

Standardize information such as HR and Customer data

there are othersdepends on company


4/13

An ERP SystemExample Layout

In reality, an ERP implementation is usually just one part of a more complex

environment, including bolt-ons,legacy applications retained, possible data

warehouse(s),enterprise application integration solutions and connections to

external business partners.


5/13

5

What is ERP?

The practice of consolidating an enterprises

planning, manufacturing, sales and marketing

efforts into one management system.1 Combines all databases across departments into a

single database that can be accessed by allemployees.2

ERP automates the tasks involved in performing abusiness process.1

Sources:1. http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 20022. CIO Enterprise Magazine, May 15, 1999.
http://www.cio.com/summaries/enterprise/erp/index.htmlhttp://www.cio.com/summaries/enterprise/erp/index.html


6/13

6

Employees

Managers andStakeholders

How Do ERP Systems Work?

CentralDatabase

Reporting

Applications

Human

ResourceManagementApplications

FinancialApplications

ManufacturingApplications

InventoryAnd SupplyApplications

Human

ResourceManagementApplications

Service

Applications

Sales and

DeliveryApplications

Sales ForceAnd CustomerService Reps

Customers Back-officeAdministratorsAnd Workers

Suppliers

Source:Davenport, Thomas, Putting the Enterprise into the Enterprise System, Harvard Business Review, July-Aug. 1998.


7/13

7

ERP Components

Finance: modules for bookeepingand making sure the bills are paidon time. Examples:

General ledger

Accounts receivable

Accounts payable

HR: software for handlingpersonnel-related tasks forcorporate managers andindividual employees. Examples:

HR administration

Payroll

Self-service HR

Manufacturing and Logistics: A

group of applications for planning

production, taking orders and

delivering products to the

customer. Examples:

Production planning

Materials management

Order entry and processing

Warehouse management

Source:http://www.computerworld.com/printthis/1998/0,4814,43432,00.html, viewed September 19, 2002.
http://www.computerworld.com/printthis/1998/0,4814,43432,00.htmlhttp://www.computerworld.com/printthis/1998/0,4814,43432,00.html


8/13

8

Who are the main ERP vendors?

Baan

JD Edwards

Oracle

PeopleSoft

SAP


9/13

9

Why ERP?

3 Major Reasons:

To integrate financial data.

To standardize manufacturing processes.

To standardize HR information.

Source:http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.


10/13

10

Hidden Costs of ERP

Training

Integration and testing

Data conversion

Data analysis Consultants

Replacing best and brightest staff after implementation

Implementation teams can never stop

Waiting for ROI

Post-ERP depression

Source:http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.


11/13

11

Benefits of ERP Systems

Improving integration, flexibility

Fewer errors

Improved speed and efficiency

More complete access to information

Lower total costs in the complete supply chain

Shorten throughput times

Sustained involvement and commitment of the

top management


12/13

12

Benefits of ERP Systems (contd)

Reduce stock to a minimum

Enlarge product assortment

Improve product quality Provide more reliable delivery dates and

higher service to the customer

Efficiently coordinate global demand, supplyand production


13/13

13

Risks with ERP Implementation

Expensive (can costs 100 thousands to millions

of dollars)

Time-consuming (can take months to years)

Great risk for the organization

Transfer of Knowledge

Acceptance with the company

erp benefits and risk

Documents