Hour 2: ERP ModulesHistorical development

HistoricalInitial Computer support to businessEasiest to automate payroll & accountingPrecise rules for every caseEarly 1970s centralized mainframe computer systemsMIS systematic reports of financial performanceVariance analysis between budget and actual

MRPMaterial requirements planningInventory reordering toolEvolved to support planningMRPII extended to shop floor control

SAP Modules

Comparative Modules

Industry-Specific FocusEach vendor has turned to customized ERP products to serve industry-specific needsExamples given from BAAN, PeopleSoftMicrosoft also has entered the fray

BAAN Industry-Specific Variants

PeopleSoft Industry Solutions

Microsoft Great Plains Business Solutions

Relative ERP Module Use(Mabert et al. 2000; Olhager & Selldin, 2003)

Relative Module UseMabert et al. (2000) surveyed Midwestern US manufacturersSome modules had low reported use (below 50% in red)Financial & Accounting most popularUniversal needMost structured, thus easiest to implementSales & Marketing more problematic

Why Module Use?Cost:Cheaper to implement part of systemConflicts with concept of integrationBest-of-Breed concept:Mabert et al. found only 40% installed system as vendor designed50% used single ERP package; 4% used best-of-breedDifferent vendors do some things betterConflicts with concept of integration

MiddlewareThird-party softwareIntegrate software applications from several vendorsCould be used for best-of-breedUsually used to implement add-ons (specialty software such as customer relationship management, supply chain integration, etc.)

CustomizationDavenport (2000) choices:Rewrite code internallyUse existing system with interfacesBoth add time & cost to implementationThe more customization, the less ability to seamlessly communication across systems

FederalizationDavenport (2000)Roll out different ERP versions by regionEach tailored to local needsCore modules sharedsome specialty modules uniqueUsed by:Hewlett-PackardMonsantoNestle

EXAMPLESDell ComputersChose to not adoptSiemens Power CorporationImplementation of selected modules

Dell ComputersEvaluation of SAP R/3

Need to continue project evaluationInitial project adoption1994 Dell began implementation of SAP R/3 enterprise software suiteSpent over 1 year selecting from 3,000 configuration tablesAfter 2 year effort ($200 million), revised planDell business model shifted from global focus to segmented, regional focus

RethinkingIn 1996 revised planFound SAP R/3 too inflexible for Dells new make-to-order operationDell chose to develop a more flexible system rather than rely on one integrated, centralized system

Best-of-BreedI2 Technologies software Manage raw materials flowOracle softwareOrder managementGlovia softwareManufacturing controlInventory controlWarehouse managementMaterials managementSAP module Human resources

Core CompetenciesGlovia system interfaced with Dells own shop floor systemI2 supply chain planning softwareThis retained a Dell core competencyWould have lost if adopted publicly available system

PointsDemonstrates the need for speedProlonged installation projects become outdatedNeed to continue to evaluate project need after adoptionTendency to stick with old decisionBut sunk cost view neededDemonstrates need to maintain core competitive advantageAdopting vendor ERP doesnt

Siemens ERP ImplementationHirt & Swanson (2001)Nuclear fuel assembly manufacturerEngineering-oriented

Siemens Power Corporation1994 Began major reengineering effortReduced employees by 30%1996 Adopted SAP R/3 systemReplacement of IS budgeted at $4 millionSome legacy systems retained

Siemens ModulesFIFinanceCOControllingARAccounts receivableAPAccounts payableMMMaterials managementPPProduction planningQCQuality control

ImplementationTo be led by usersProject manager from User communityConsultant hired for IT supportIS group only marginally involved

Project ProgressOct 1996Installed FI moduleSep 1997Installed other modulesOn time, within budget

Permanent TeamMade project team a permanent groupProject manager had been replaced2nd PM retainedSAP steering committeeSAP project team formed

SAP steering committee7 major user stakeholdersGuided operating policymajor expendituresmajor design changes

SAP project team formed15 members from key user groups part-timeTrainerUser helpAdvisors to middle management

TrainingEnd users became more proficient with timeAverage of 3 months to learn what neededManagement training took longerManagement didnt understand system wellOften made unrealistic requests

OperationsDuring first yearMajor errors in ERP configurationEvident that users needed additional trainingNew opportunities to change system scope suggestedTwo years after installationR/3 system upgrade

SummaryCore idea of ERP complete integrationIn practice, modules usedMore flexible, less riskCan apply best-of-breed conceptIdeal, but costlyRelated conceptsMiddleware integrate external softwareCustomization tailor ERP to organizationFederalization different versions of ERP in different organizational subelements