Presentation on theme: "Building The E-Business Backbone: Enterprise Resource Planning"— Presentation transcript:
1 Building The E-Business Backbone: Enterprise Resource Planning Chapter EightBuilding The E-Business Backbone: Enterprise Resource PlanningThe E-Business material shall at all times remain the property of E-Business Strategies, Inc. No license under any trade secrets, copyrights, or other rights is granted by this Agreement or any disclosure of Confidential Information hereunder. Any such permitted copies will be considered Confidential Information. Confidential Information of E-Business Strategies, Inc. may not be copied or reproduced by the Recipient without E-Business Strategies, Inc. prior written consent.
2 ERP: The Technological Backbone of E-Business Typical corporate computing environment today of mainframe- based apps is antiquatedCannot meet demands of new economy and must be replacedERP integrated app suiteFramework to automate back-office functions: Financial, Manufacturing and Distribution, HR, AdministrativeUnites major business processes within single family of modules: production, order processing, inventory mgmt and warehousing, A/P and A/R, general ledger, and payrollERP phenomenon also catching fire among dot-comsManaging customer relationships key for the newer online firmsERP offers customers efficient, high-quality serviceAbility to order online; inquire about product pricing and order statusERP prices dropping and rental ASP model becoming prevalent
3 ERP: The Technological Backbone of E-Business ERP is the technological backbone of e- businessEnterprise-wide transaction framework with links intosales order processing; inventory mgmt and control; production and distribution planning; financeIn early 1990s, only large manufacturers saw benefits of ERPToday, medium-size and dot-com firms also recognize necessity of integrating back-office processes for front-office success in e-commerce world
4 Who Really Uses ERP Suites? Large corporations that want to gain control over disparate groups of core business apps3Com, Chevron Products Company, GM3 primary categories of ERP implementationsSingle to few products in single industry: eToysSingle SBU firms, selling only few products in a single industry: Delta Airlines, Dell, Microsoft, NikeLarge corporate conglomerates or multiple-SBU firms, selling many products in multiple industries: GE, IBM, Colgate-Palmolive, and Nabisco
5 The Basics of ERPIntegrated LogisticsProduction PlanningCustomer/ EmployeeAccounting & FinancialsSales Distributions (Order only)Human ResourcesEnterprise ArchitectureThese apps are themselves built from smaller s/w modules that perform specific business processes within a given functional area
6 ERP之源起 Wave 1 ERP之源起在於1960年代之庫存管理與控制的套裝軟體 70年代即有material requirement planning (MRP)與 distribution resource planning (DRP)之出現,各自將 “production master scheduling”與“centralized inventory planning”工作加以自動化到了80年代,一個誤用的名稱“MRP II”出現,將傳統MRP專注 於production process之焦點,延伸到其他的營運功能,包括 order processing,manufacturing,及distribution.由於MRP藉由技術連接不同營運功能對企業之貢獻日益明顯, 經理人開始將公司其他的功能,如財務,人力資源,專案管理等漸 次整合. 由於MRP II 之名稱並不適當,便改名為ERP.
8 Evolution of ERP Wave 4 Wave 3 Wave 2 Wave 1 1960s Automation of all aspects of production master schedulingShowed technology could link disconnected business functionsWave 4Interenterprise Integration (XRP)Wave 3Customer-Centric Integration (CRP)Wave 2Enterprise Integration (ERP)Wave 1Manufacturing Integration (MRP)
9 Evolution of ERP Wave 4 Wave 3 Wave 2 Wave 1 Began in 1980s as MRP II as execs sought for similar benefits as MRP by integrating other functionsBusiness drivers of ERP: replacing legacy systems, greater control, globalization, regulatory change, integration of decisions across enterpriseY2K preparation in 1999 a significant factorWave 4Interenterprise Integration (XRP)Wave 3Customer-Centric Integration (CRP)Wave 2Enterprise Integration (ERP)Wave 1Manufacturing Integration (MRP)
10 Evolution of ERP Wave 4 Wave 3 Wave 2 Wave 1 ERP evolving into CRP to integrate “brick” with “click”Using middleware has drawbacksTraditional ERP build for make-to-stock business models; but this is no longer the case; customer value, effectiveness, enhanced service delivery key todayContinuous planning vs. long planning cycle of ERPEricssonWave 4Interenterprise Integration (XRP)Wave 3Customer-Centric Integration (CRP)Wave 2Enterprise Integration (ERP)Wave 1Manufacturing Integration (MRP)
11 Evolution of ERP Wave 4 Wave 3 Wave 2 Wave 1 A company’s partners benefit from the same seamless integration as the company itselfExtends beyond four walls of the enterprise to customer, suppliers and trading partnersB2B marketplacesERP does not support continuous-planning requirements of SCPCollaborate or perishWave 4Interenterprise Integration (XRP)Wave 3Customer-Centric Integration (CRP)Wave 2Enterprise Integration (ERP)Wave 1Manufacturing Integration (MRP)
12 Benefits of ERPCritical business need: Enterprise-wide shared servicesReplace old, autonomous departmental, or divisional services with single, streamlined, corporate-level processShared-services standardize the processes for routine, non-core functions for all business units to use (Porter’s value chain next 3 pages)AccountingWith processes defined, an ERP-based IT infrastructure can be established to manage them efficiently
14 Generic Value Chain -Primary Activities Inbound logistics: receiving, storing and disseminating inputs to the product.Operations: transforming inputs into the final product.Outbound logistics:collecting, storing and physically distributing the product to customers.Marketing and sales: identifying markets and how customers buy the company’s products or services.Service: dealing with customer support and repair service.
15 Generic Value Chain -Support Activities Procurement of inputs used in the firm’s value chain.Technology development in every facet of the operation but not limited to information technology.Human resource management involving the recruiting, hiring, training, development and compensation of employees.Firm infrastructure includes planning, accounting and finance, legal, community affairs, government relations and quality management.
16 ERP Decision = Enterprise Architecture Planning Management must resolve enterprise architecture issues before selecting an ERP suite of products“What kind of company do we want to be?”Not, “What are each application’s features?”Inability to find the right fit between ERP apps and their business causing corporate frustrationFoxMeyerProblem not with ERP concept but in management’s demands for quick fixes and rapid cures to underlying structural problems
17 ERP Decision = Enterprise Architecture Planning Selecting and installing a new ERP solution one of the most important and most expensive endeavorsAlso most likely to go wrongLack of alignment between ERP, business processes and e-commerce objectives can derail best of firmsManagers must understand core functionality, not abdicate responsibility to IT deptSuccessful organizational change is gradualEnterprise apps require moving decades of corporate knowledge and information to a new technology platformTechnology is not the only challenge in managing transformation
18 ERP Decision = Enterprise Architecture Planning Cannot lose sight of customers“Is this something our customers will recognize as valuable?”“Will it shorten order-to-delivery cycle?”“Will this improve our product and performance?”ERP impacts not just s/wCorporate culture, business processes, staff, and day-to-day procedures are all affectedExecutive mgmt must understand technical basis for business change and e-commerce functionality, besides ROI of new technology“What business are we in?”“What are the key issues facing us today?”“What issues will be important tomorrow?”
19 ERP Decision: Build Vs Buy Vs Rent Important decision: whether to build or buy or rentERP apps define overall corporate architectureEnterprise-wide implementationsCustom design app that meets specific requirements of an organization has several drawbacksHighly complexLengthy design, development and implementation effortsLimited flexibility to support diverse and changing operations or to respond effectively to evolving business demands and technologies
20 ERP Decision: Build Vs Buy Vs Rent COTS apps address limitations of custom built appsProvide broad functionality, better integration with existing legacy systems, greater flexibility to change and upgrade, and a lower TCODownside of COTS appsReengineer estbd. business practicesCustomize appsHire consultants to make s/w workNo competitive edgeMgmt must view COTS apps within the context of overall business strategy“What business processes bring us our identity and our competitive advantage?”“How can we ensure that we enhance these with COTS solution?”“How can we support our ecommerce initiatives with COTS?”
21 Capabilities of COTS ERP Solutions Consolidation of back officeCreation of single back office that supports multiple distribution channelsFacilitation of changes in business practicesFacilitation of changes in technology
22 MicrosoftSpent 10 months and $25 million installing SAP R/3 to replace a tangle of 33 financial-tracking systems in 26 subsidiaries$18 million annual savingsGrowth rate was straining company’s systems50 subsidiaries worldwide; continues to grow every dayMore than 30 systems implemented in a piecemeal fashion over time supported financial, operations and HR groups aloneBatch processes to move information between systemsRun time grew to more than 12 hours90% of the more than 20,000 batch robs that ran each month retrieved and processes same informationMgmt realized it needed a global and integrated solution to support its core business
23 ERP Implementation: Catching the Bull by the Horns Installation of ERP packages uniqueEach ERP app suite has own architecture, customization features, installation procedures, and level of complexityImplementation strategies for SAPStep-by-stepOne module at a timeBig bangReplacing all old systems at onceModified big bangVarious modules at once, but pilot firstVery commonEven if implementation strategy is right, setting up the solution not easyBrother Industries
24 Roadmap to Rapid Implementation: Accelerated ERP Approach Today’s intense competitive pressures require fast responseERP app suites can’t keep upBut successful companies understand business processes, simplify them, and then introduce automationAutomating complex or non-value-adding processes will not increase productivity or provide measurable improvements in performanceAutomation without simplification immortalizes ineffective processes
25 Roadmap to New Leadership Skills Effective coordination mgmt encompasses a combination of four capabilitiesStrategic thinkingHow well does your ERP selection, implementation, and evolution strategy align with your business strategy?Process reengineeringManaging implementation complexityTransition management
26 E-Business Strategies, Inc. x201FaxThe E-Business material shall at all times remain the property of E-Business Strategies, Inc. No license under any trade secrets, copyrights, or other rights is granted by this Agreement or any disclosure of Confidential Information hereunder. Any such permitted copies will be considered Confidential Information. Confidential Information of E-Business Strategies, Inc. may not be copied or reproduced by the Recipient without E-Business Strategies, Inc. prior written consent.The E-Business material may not be re-sold. It is intended to be used solely for the purpose of accompaniment of the E-Business 2.0 Roadmap for Success book in an instructional manner.
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