1. Enterprise Resource Planning (ERP)
Rev: Feb, 2012
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT:
Dept. of Industrial & Management Engineering POSTECH

2. Contents ※ Discussion Questions 1 Introductions of ERP 21)
Fundamental Introductions of ERP 2)
Development of ERP 3)
Functions of ERP 4)
Structure of ERP System 5)
Characteristics of ERP 2
ERP Selection Criteria
Phases of ERP Selection
Market Share
ERP Vendors with Their Characteristics 3
Case Study

3. Discussion Questions (1/2)
What do you think is the main function of ERP?
Give a definition of ERP system by your own words
How can we meet the challenges that ERP brings to us?
Which ERP selection criteria do you think is the most important, and why?
What are the pros & cons of ERP vendors (SAP and Oracle)?

4. Discussion Questions (2/2)
Case 2 in textbook (pp. 290~291, Chapter 7)
What are some of the business benefits of the technologies described in the case? Provide several examples beyond the mere automation of transaction-oriented processes
What are some of the challenges and obstacles in developing and implementing HRM systems? Are these unique to this type of systems? What strategies would you recommend for companies to meet those challenges? Provide several specific recommendations
Discussion Questions in textbook (p. 305, Chapter 7)
Why is there a strong trend toward cross-functional integrated enterprise systems in the business use of information technology?

5. What is ERP? Definition of ERP (Enterprise Resource Planning)
1. Introductions of ERP
1) Fundamental Introductions of ERP
What is ERP?
Definition of ERP (Enterprise Resource Planning)
A set of applications designed to bring business functions into balance and represents the next generation of business systems – by Gartner Group
An accounting oriented information system for identifying and planning the enterprise wide resource – by APICS
Advanced
Process
Information
Technology
ERP
BPR
Process
Innovation

6. Why ERP ? Roles of ERP (Enterprise Resource Planning)
1. Introductions of ERP
1) Fundamental Introductions of ERP
Why ERP ?
Roles of ERP (Enterprise Resource Planning)
The backbone of business processes
A cross-functional enterprise system
An integrated suite of software modules
A system supports basic internal business processes
A system facilitates business, supplier, and customer information flows

7. ERP Application Components
1. Introductions of ERP
1) Fundamental Introductions of ERP
ERP Application Components

8. Benefits and Challenges of ERP
1. Introductions of ERP
1) Fundamental Introductions of ERP
Benefits and Challenges of ERP
ERP Business Benefits
1. Quality & efficiency
2. Decreased costs
3. Decision support
4. Enterprise agility
ERP Costs
1. High risk & cost
2. Hardware and software are a small part of overall project
3. Failure can cripple or kill a business

9. Costs of Implementing a New ERP
1. Introductions of ERP
1) Fundamental Introductions of ERP
Costs of Implementing a New ERP

10. Common Causes of ERP Failure
1. Introductions of ERP
1) Fundamental Introductions of ERP
Causes of ERP Failures
Common Causes of ERP Failure
Under-estimating
the complexity of
planning,
development,
training
Failure to involve
affected
employees in
planning and
development
Over-reliance on
ERP vendor or
consultants
ERP Selection Criteria
Insufficient
training
Insufficient data
conversion and
testing
Trying to do too
much, too fast

11. Development of ERP 1970’s 1980’s 1990’s 2000’s 1. Introductions of ERP
Inter-company Optimization
Win-Win-Win
Enterprise-wide Planning
Management Innovation
SCM
(Supply Chain
Management)
Closed Loop MRP
Capacity Planning
Cost Reduction
ERP
(Enterprise
Resource
Planning)
Material Planning
Minimum Inventory
MRPII
(Manufacturing
Resource
Planning)
MRP
(Material
Requirement
Planning)
1970’s
1980’s
1990’s
2000’s

12. ERP Functions of ERP 1. Introductions of ERP 3) Functions of ERP
Finance/
Accounting
Engineer-
ing
Sales/
Mktg
Supplier
Production
Logistics
Customer
Product Development Process
CAD/CAM
PDM
Drawing/Docu Mgmt
EC Mgmt
Configuration Control
Release Control
Order Fulfilment Process
Manufacturing Process
Management Process
Employee
MES
Finite Scheduling
Data Collection/POP
Facility Management
Quality Management FA

13. Structure of ERP System
1. Introductions of ERP
4) Structures of ERP System
Structure of ERP System
Supplier AR
Planning AP GL
Receiving
Shipping
Inventory
Manufacturing Plants
Distribution Centers
Product Life cycle
Engineering
Purchasing
Order Admin
Finance
Order
Entry
Shop Floor Control
PDM E D I . W e b FA
Customer

14. Characteristics of ERP
1. Introductions of ERP
5) Characteristics of ERP
Characteristics of ERP
BPR Enabler
BPR Tool
BPR Infrastructure
Integration
Data Integration
Single View of Distributed Systems
Communication Tool
Globalization
Configuration Function
No Programming
Supporting Multi-language
Enterprise
Real-time
Integration

15. Phases of ERP Selection
2. ERP Selection Criteria
1) Phases of ERP Selection
Phases of ERP Selection
Phase 0
Studies the business(mission, strategy, etc.), business processes
Decide if the company has to acquire an ERP
Phase 1
Conduct a market research initiative looking for ERPs
Reduce the number of candidates
Phase 2
Obtain one or more interviews with the providers
Get as many fact sheets, catalogs, articles, ect., as possible
Select 2 or 3 ERP candidate solutions
Phase 3
Analyze the demonstration of candidates
Visit the providers
Phase 4
Make final decisions
Negotiate and plan
Acquirement
First filter
Second filter
Analysis
Final decision

16. ERP Selection Criteria (1/3)
Functionality criteria
Criteria
Definition
Included functionality
Areas or functions of the company that the ERP has to serve
It is described how the ERP covers each function
Main target
Functional area or areas for which the ERP is specially oriented or strong
Adaptability
Possible level of customization in general and for the specific company
Openness for
custom development
working with other systems
Level of openness to additional bespoke development (internal or external) and to other existing applications
E.g. API, CRM, SCM, etc.
Specifics supports
E.g. Y2K, euro, ISO-9000, etc.

17. ERP Selection Criteria (2/3)
Technical criteria
Criteria
Definition
Platforms
Information technology platforms supported
Database management systems
DBMS or DBMSs used as base for the ERP
Languages and development tools
Languages and development tools used to customize the ERP
User management tools
Management capabilities: users, user groups, access levels, roles, authorizations, etc.
User documentation
Printed manual
Online help
Tutorials
Type of user documentation for training and helping to use the ERP
Technical documentation
Database schema
Source code
Design
Technical documentation provided about internal structure of ERP master programs and databases
Internet/Web
Remote
EDI
Types of external connectivity supported

18. ERP Selection Criteria (3/3)
Others
Cost
Are the license costs justified given the functionality offering?
Are annual maintenance charges reasonable?
How quickly can payback be received?
Service & Support
Can the supplier provide a complete turn-key solution?
How quick are non-critical software bugs fixed?
Does the vendor offer business process reengineering as part of the implementation process?
Does the supplier have industry experience?
Vendor longevity
How many years has the company been actively engaged?
When was the product’s first release? What is the current release version being quoted?

19. 2010 2005 Market Share Market share of ERP vendors in 2005 and 2010
2. ERP Selection Criteria
3) Market Share
Market Share
Market share of ERP vendors in 2005 and 2010
2010
2005

20. ERP Vendors with Their Characteristics (1/2)
2. ERP Selection Criteria
4) ERP Vendors with Their Characteristics
ERP Vendors with Their Characteristics (1/2)
Logistics & Workflow
System Administration
Integration of Modules
SAP
Workflow-oriented
Excellence in outbound logistics
Oracle
Effective in e-commerce
SAP
Offering tools to simplify system administration
users cannot utilize sufficiently
Oracle
Ease of system administration (basis of Oracle Database)
SAP
Excellence in interface bet. Modules
Lack of 3rd party vendors
Oracle
Following OLE, ODBC, DDE standard

21. ERP Vendors with Their Characteristics (2/2)
2. ERP Selection Criteria
4) ERP Vendors with Their Characteristics
ERP Vendors with Their Characteristics (2/2)
Usability
Ease of implementation
SAP
Complex to use
Oracle
Good in usability
SAP
Very complex to implement
Oracle
AIM (Application Implementation Methodology)
Ease of configuration

22. Case Study

23. Note MIT PPT materials (MRP/ERP)

24. Reference
Euiho Suh, “BPR/ERP(PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)
Euiho Suh, “ERP Selection Criteria (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)
O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”, McGraw – Hill, Chapter 7, pp. 271~276