Hour 2: ERP Modules

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Nov 10, 2013 (3 years and 9 months ago)

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Hour 2: ERP Modules

Historical development

Historical


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


Material requirements planning


Inventory reordering tool


Evolved to support planning


MRPII extended to shop floor control

SAP Modules

SD

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 practices

Comparative Modules

SAP

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 estate

Industry
-
Specific Focus


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
Variants

Discrete Manufacturing

Process Manufacturing

Aerospace & Defense

Chemicals

Automobile

Food & Beverage

Industrial Machinery

Pharmaceuticals

Electronics

Cable & Wire

Telecommunications

Pulp & Paper

Construction

Metals

Logistics

PeopleSoft Industry Solutions

Communications

Consumer Products

Federal
Government

Financial Services

Healthcare

Higher Education

High Technology

Industrial Products

Public Sector

Professional
Services

Staffing

Utilities

Wholesale
Distribution

Microsoft Great Plains Business
Solutions

Accounting & Finance

Customer Relationship Management

E
-
Business

Human Resources & Payroll

Manufacturing

Project Accounting

Supply Chain Management

Relative ERP Module Use

(Mabert et al. 2000; Olhager & Selldin, 2003)

Module

Use reported
-

US

Use reported


Sweden

Financial & 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%

Relative Module Use


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?


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


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


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


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


Dell Computers


Chose to not adopt


Siemens Power Corporation


Implementation of selected modules

Dell Computers

Evaluation of SAP R/3

Need to continue project
evaluation


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


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


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


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


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 Implementation

Hirt & Swanson (2001)

Nuclear fuel assembly manufacturer

Engineering
-
oriented

Siemens Power Corporation


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


FI


Finance


CO


Controlling


AR


Accounts receivable


AP


Accounts payable


MM

Materials management


PP


Production planning


QC


Quality control

Implementation


To be led by users


Project manager from User community


Consultant hired for IT support


IS group only marginally involved

Project Progress


Oct 1996

Installed
FI
module


Sep 1997

Installed other modules


On time, within budget

Permanent Team


Made project team a permanent group


Project manager had been replaced


2
nd

PM retained


SAP steering committee


SAP project team formed

SAP steering committee


7 major user stakeholders


Guided operating policy


major expenditures


major design changes

SAP project team formed


15 members from key user groups


part
-
time


Trainer


User help


Advisors to middle management


Training


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


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


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