HOUR 2: ERP MODULES

Historical development

By:-Gourav Kottawar

Historical

By:-Gourav Kottawar

Initial Computer support to business Easiest to automate – payroll & accounting Precise rules for every case

Early 1970s centralized mainframe computer systems MIS systematic reports of financial

performance Variance analysis between budget and

actual

MRP

By:-Gourav Kottawar

Material requirements planning Inventory reordering tool Evolved to support planning MRPII extended to shop floor control

SAP ModulesSD Sales & Distribution

MM Materials Management MRP

PP Production Planning MRPII (with others)

QM Quality Management

PM Plant Maintenance

HR Human Resources

FINANCIAL FI Financial Accounting

CO Controlling

AM Asset Management

PS Project System

R/3 INTERNAL WF Workflow: prompt actions

IS Industry solutions: best practicesBy:-Gourav Kottawar

Comparative ModulesSAP Oracle PeopleSoft JDEdwards

SD Marketing, Sales Supply chain Order management

MM Procurement Supplier relationship Inventory, procurement

PP Manufacturing Manufacturing mgmt

QM Enterprise perform Technical foundation

PM Service Enterprise service

HR Human Resources Human capital mgmt Workforce management

FI Financials Financial mgmt sol. Financial management

CO Time & Expense mgmt

AM Asset Management Enterprise asset mgmt

PS Projects Project management

WF Order Management

Contracts Subcontract, real estateBy:-Gourav Kottawar

Industry-Specific Focus

By:-Gourav Kottawar

Each vendor has turned to customized ERP products to serve industry-specific needs Examples given from BAAN, PeopleSoft Microsoft also has entered the fray

BAAN Industry-Specific VariantsDiscrete Manufacturing Process ManufacturingAerospace & Defense ChemicalsAutomobile Food & BeverageIndustrial Machinery PharmaceuticalsElectronics Cable & WireTelecommunications Pulp & PaperConstruction MetalsLogistics

By:-Gourav Kottawar

PeopleSoft Industry SolutionsCommunications Consumer Products Federal

GovernmentFinancial Services Healthcare Higher Education

High Technology Industrial Products Public Sector

Professional Services

Staffing

Utilities Wholesale Distribution

By:-Gourav Kottawar

Microsoft Great Plains Business SolutionsAccounting & Finance

Customer Relationship Management

E-Business

Human Resources & Payroll

Manufacturing

Project Accounting

Supply Chain Management

By:-Gourav Kottawar

Relative ERP Module Use(Mabert et al. 2000; Olhager & Selldin, 2003)Module Use reported - US Use reported – SwedenFinancial & Accounting 91.5% 87.3%

Materials Management 89.2% 91.8%Production Planning 88.5% 90.5%Order Entry 87.7% 92.4%Purchasing 86.9% 93.0%Financial Control 81.5% 82.3%

Distribution/Logistics 75.4% 84.8%

Asset Management 57.7% 63.3%

Quality Management 44.6% 47.5%

Personnel/HR 44.6% 57.6%

Maintenance 40.8% 44.3%

R&D Management 30.8% 34.2%By:-Gourav Kottawar

Relative Module Use

By:-Gourav Kottawar

Mabert et al. (2000) surveyed Midwestern US manufacturers Some modules had low reported use (below

50% in red) Financial & Accounting most popular

Universal need Most structured, thus easiest to implement

Sales & Marketing more problematic

Why Module Use?

By:-Gourav Kottawar

Cost: Cheaper to implement part of system Conflicts with concept of integration

Best-of-Breed concept: Mabert et al. found only 40% installed system

as vendor designed 50% used single ERP package; 4% used best-of-breed

Different vendors do some things better Conflicts with concept of integration

Middleware

By:-Gourav Kottawar

Third-party software Integrate software applications from

several vendors Could be used for best-of-breed Usually used to implement “add-ons”

(specialty software such as customer relationship management, supply chain integration, etc.)

Customization

By:-Gourav Kottawar

Davenport (2000) choices: Rewrite code internally Use existing system with interfaces

Both add time & cost to implementation The more customization, the less ability

to seamlessly communication across systems

Federalization

By:-Gourav Kottawar

Davenport (2000) Roll out different ERP versions by region Each tailored to local needs

Core modules shared some specialty modules unique

Used by: Hewlett-Packard Monsanto Nestle

EXAMPLES

By:-Gourav Kottawar

Dell Computers Chose to not adopt

Siemens Power Corporation Implementation of selected modules

DELL COMPUTERS

Evaluation of SAP R/3

By:-Gourav Kottawar

Need to continue project evaluation

By:-Gourav Kottawar

Initial project adoption 1994 Dell began implementation of SAP R/3

enterprise software suite Spent over 1 year selecting from 3,000

configuration tables After 2 year effort ($200 million), revised

plan Dell business model shifted from global

focus to segmented, regional focus

Rethinking

By:-Gourav Kottawar

In 1996 revised plan Found SAP R/3 too inflexible for Dell’s

new make-to-order operation Dell chose to develop a more flexible

system rather than rely on one integrated, centralized system

Best-of-Breed

By:-Gourav Kottawar

I2 Technologies software Manage raw materials flow

Oracle software Order management

Glovia software Manufacturing control

Inventory control Warehouse management Materials management

SAP module Human resources

Core Competencies

By:-Gourav Kottawar

Glovia system interfaced with Dell’s own shop floor system I2 supply chain planning software

This retained a Dell core competency Would have lost if adopted publicly

available system

Points

By:-Gourav Kottawar

Demonstrates the need for speed Prolonged installation projects become

outdated Need to continue to evaluate project need

after adoption Tendency to stick with old decision But sunk cost view needed

Demonstrates need to maintain core competitive advantage Adopting vendor ERP doesn’t

SIEMENS ERP IMPLEMENTATIONHIRT & SWANSON (2001)

Nuclear fuel assembly manufacturerEngineering-oriented

By:-Gourav Kottawar

Siemens Power Corporation

By:-Gourav Kottawar

1994 Began major reengineering effort Reduced employees by 30%

1996 Adopted SAP R/3 system Replacement of IS budgeted at $4 million

Some legacy systems retained

Siemens Modules

By:-Gourav Kottawar

FI Finance CO Controlling AR Accounts receivable AP Accounts payable MM Materials management PP Production planning QC Quality control

Implementation

By:-Gourav Kottawar

To be led by users Project manager from User community Consultant hired for IT support

IS group only marginally involved

Project Progress

By:-Gourav Kottawar

Oct 1996 Installed FI module Sep 1997 Installed other modules On time, within budget

Permanent Team

By:-Gourav Kottawar

Made project team a permanent group Project manager had been replaced

2nd PM retained SAP steering committee SAP project team formed

SAP steering committee

By:-Gourav Kottawar

7 major user stakeholders Guided operating policy major expenditures major design changes

SAP project team formed

By:-Gourav Kottawar

15 members from key user groups part-time

Trainer User help Advisors to middle management

Training

By:-Gourav Kottawar

End users became more proficient with time Average of 3 months to learn what needed

Management training took longer Management didn’t understand system well Often made unrealistic requests

Operations

By:-Gourav Kottawar

During first year Major errors in ERP configuration Evident that users needed additional

training New opportunities to change system scope

suggested Two years after installation

R/3 system upgrade

Summary

By:-Gourav Kottawar

Core idea of ERP complete integration In practice, modules used

More flexible, less risk Can apply best-of-breed concept

Ideal, but costly Related concepts

Middleware – integrate external software Customization – tailor ERP to organization Federalization – different versions of ERP in different

organizational subelements