1. Enterprise Resource Planning Systems
Chapter 14
Enterprise Resource Planning Systems

2. Understand the scope of enterprise resource planning (ERP) systems.
Learning Objectives
Understand the scope of enterprise resource planning (ERP) systems.
Recognize the client/server structure of ERP systems.
Relate the value of integrated information in a complex firm.
Identify the challenges associated with implementing ERP systems.

3. Enterprise Resource Planning (ERP)
Enterprise resource planning (ERP) system: computer system that links all the areas of the business
Manufacturing knows about new orders as soon as they are entered
Sales knows the exact status of a customer order
Purchasing knows what manufacturing needs to the minute The accounting
system is updated as all the relevant transactions occur
LO 1

4. Enterprise Resource Planning (ERP) Continued
The potential benefits are huge
Savings in redundant postings
Redundant jobs can be eliminated
Other jobs can be done faster
Creates new ways to do business
Benefits are not without cost
ERP systems are complex and expensive
May require major changes in processes
LO 1

5. Major Developers of Enterprise Resource Planning Software

6. SAP SAP AG is the world leader in providing ERP software
Flagship product is R/3
Software designed to operate in a three-tier client/server configuration
Cost is a high-speed network of database servers
Application consists of software modules
Applications are fully integrated and share data
Firms wishing to use SAP may need to change their practices to those implemented by SAP
LO 1

7. Three-Tier Client/Server Configuration
LO 2

8. SAP Application Modules
Software is built around a set of application modules:
Financials
Human capital management
Operations
Corporate services
Duet–Microsoft Office integration
Can be used either alone or in combination
LO 2

9. Financials
Financial application provides functionality to run the financial accounts for the company
The application is divided into three areas:
Financial and management accounting module: includes general ledger, accounts payable, accounts receivable, capital investments and closing the books
Corporate governance: internal control and audit functions needed to adhere to corporate governance standards, documentation of internal controls, and audits that comply with current requirements
Financial supply chain management: handles the money flow related to supply chain activities
LO 3

10. Human Capital Management
This application contain the full set of capabilities needed to manage, schedule, pay, and hire the people who make a company run
It includes:
Payroll
Benefits administration
Application data administration
Personnel development planning
Workforce planning
Schedule and shift planning
Time management
Travel expense accounting
LO 3

11. Human Capital Management Continued
The “talent management” functions are designed to help align employee goals with corporate goals by maximizing the impact of training
“Workforce deployment” applications are to aid in deploying the right people with the right skills to positions in the firm
Managing project teams, monitoring the progress of projects, and tracking time are supported
LO 3

12. Operations
Materials management covers all tasks within the supply chain
It also includes inventory and warehouse management
Plant maintenance supports the activities associated with planning and performing repairs and preventive maintenance
Quality management plans and implements procedures for inspection and quality assurance and is built around the ISO 9001 specifications.
LO 3

13. Operations Continued
Production planning and control supports both discrete and process manufacturing processes
Sales order management, configuration management, distribution export control, and shipping and transportation management are handled as well
LO 3

14. Corporate Services
The corporate services applications are designed to manage both centralized and decentralized services
This includes managing the firm’s real estate portfolio, including:
Property acquisition and disposal
Property management
Building operations and maintenance
Investment reporting
Another major aspect of the corporate services is travel management
LO 3

15. mySAP.COM and SAP NetWeaver–Integrated E-Business Applications
All SAP functions can be implemented using an Internet interface
mySAP versions work over the Internet
Can run SAP without deploying any special software
Cloud computing: delivering hosted services over the Internet
Three distinct characteristics:
Sold on demand
It is elastic
The service is fully managed by the provider
LO 3

16. NetWeaver
NetWeaver allows users to build their own application on top of SAP applications
Users and third-party vendors can offer an unlimited variety of specialized applications
LO 3

17. Implementing ERP Systems
SAP has strong competition
Oracle
i2 Technologies
PeopleSoft
Implementation of ERP is costly
Cost of the software typically one-third or less of the total cost
ERP implementation does not always work out
LO 4

18. Major Problems with ERP Implementation
ERP technology could not support their businesses
Their organizations could not make changes needed to benefit from ERP
ERP implementation might actually damage their businesses
LO 4

19. Reasons to Implement ERP
Desire to standardize and improve processes
To improve systems integration
Improve information quality
LO 4