1. Building The E-Business Backbone: Enterprise Resource Planning
Chapter Eight
Building The E-Business Backbone: Enterprise Resource Planning
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2. ERP: The Technological Backbone of E-Business
Typical corporate computing environment today of mainframe- based apps is antiquated
Cannot meet demands of new economy and must be replaced
ERP integrated app suite
Framework to automate back-office functions: Financial, Manufacturing and Distribution, HR, Administrative
Unites major business processes within single family of modules: production, order processing, inventory mgmt and warehousing, A/P and A/R, general ledger, and payroll
ERP phenomenon also catching fire among dot-coms
Managing customer relationships key for the newer online firms
ERP offers customers efficient, high-quality service
Ability to order online; inquire about product pricing and order status
ERP prices dropping and rental ASP model becoming prevalent

3. ERP: The Technological Backbone of E-Business
ERP is the technological backbone of e- business
Enterprise-wide transaction framework with links into
sales order processing; inventory mgmt and control; production and distribution planning; finance
In early 1990s, only large manufacturers saw benefits of ERP
Today, 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 apps
3Com, Chevron Products Company, GM
3 primary categories of ERP implementations
Single to few products in single industry: eToys
Single SBU firms, selling only few products in a single industry: Delta Airlines, Dell, Microsoft, Nike
Large corporate conglomerates or multiple-SBU firms, selling many products in multiple industries: GE, IBM, Colgate-Palmolive, and Nabisco

5. The Basics of ERP
Integrated Logistics
Production Planning
Customer/ Employee
Accounting & Financials
Sales Distributions (Order only)
Human Resources
Enterprise Architecture
These 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.

7. Evolution of ERP Wave 4 Wave 3 Wave 2 Wave 1
Interenterprise Integration (XRP)
Wave 3
Customer-Centric Integration (CRP)
Wave 2
Enterprise Integration (ERP)
Wave 1
Manufacturing Integration (MRP)

8. Evolution of ERP Wave 4 Wave 3 Wave 2 Wave 1 1960s
Automation of all aspects of production master scheduling
Showed technology could link disconnected business functions
Wave 4
Interenterprise Integration (XRP)
Wave 3
Customer-Centric Integration (CRP)
Wave 2
Enterprise Integration (ERP)
Wave 1
Manufacturing 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 functions
Business drivers of ERP: replacing legacy systems, greater control, globalization, regulatory change, integration of decisions across enterprise
Y2K preparation in 1999 a significant factor
Wave 4
Interenterprise Integration (XRP)
Wave 3
Customer-Centric Integration (CRP)
Wave 2
Enterprise Integration (ERP)
Wave 1
Manufacturing 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 drawbacks
Traditional ERP build for make-to-stock business models; but this is no longer the case; customer value, effectiveness, enhanced service delivery key today
Continuous planning vs. long planning cycle of ERP
Ericsson
Wave 4
Interenterprise Integration (XRP)
Wave 3
Customer-Centric Integration (CRP)
Wave 2
Enterprise Integration (ERP)
Wave 1
Manufacturing 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 itself
Extends beyond four walls of the enterprise to customer, suppliers and trading partners
B2B marketplaces
ERP does not support continuous-planning requirements of SCP
Collaborate or perish
Wave 4
Interenterprise Integration (XRP)
Wave 3
Customer-Centric Integration (CRP)
Wave 2
Enterprise Integration (ERP)
Wave 1
Manufacturing Integration (MRP)

12. Benefits of ERP
Critical business need: Enterprise-wide shared services
Replace old, autonomous departmental, or divisional services with single, streamlined, corporate-level process
Shared-services standardize the processes for routine, non-core functions for all business units to use (Porter’s value chain next 3 pages)
Accounting
With 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 frustration
FoxMeyer
Problem 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 endeavors
Also most likely to go wrong
Lack of alignment between ERP, business processes and e-commerce objectives can derail best of firms
Managers must understand core functionality, not abdicate responsibility to IT dept
Successful organizational change is gradual
Enterprise apps require moving decades of corporate knowledge and information to a new technology platform
Technology 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/w
Corporate culture, business processes, staff, and day-to-day procedures are all affected
Executive 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 rent
ERP apps define overall corporate architecture
Enterprise-wide implementations
Custom design app that meets specific requirements of an organization has several drawbacks
Highly complex
Lengthy design, development and implementation efforts
Limited 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 apps
Provide broad functionality, better integration with existing legacy systems, greater flexibility to change and upgrade, and a lower TCO
Downside of COTS apps
Reengineer estbd. business practices
Customize apps
Hire consultants to make s/w work
No competitive edge
Mgmt 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 office
Creation of single back office that supports multiple distribution channels
Facilitation of changes in business practices
Facilitation of changes in technology

22. Microsoft
Spent 10 months and $25 million installing SAP R/3 to replace a tangle of 33 financial-tracking systems in 26 subsidiaries
$18 million annual savings
Growth rate was straining company’s systems
50 subsidiaries worldwide; continues to grow every day
More than 30 systems implemented in a piecemeal fashion over time supported financial, operations and HR groups alone
Batch processes to move information between systems
Run time grew to more than 12 hours
90% of the more than 20,000 batch robs that ran each month retrieved and processes same information
Mgmt 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 unique
Each ERP app suite has own architecture, customization features, installation procedures, and level of complexity
Implementation strategies for SAP
Step-by-step
One module at a time
Big bang
Replacing all old systems at once
Modified big bang
Various modules at once, but pilot first
Very common
Even if implementation strategy is right, setting up the solution not easy
Brother Industries

24. Roadmap to Rapid Implementation: Accelerated ERP Approach
Today’s intense competitive pressures require fast response
ERP app suites can’t keep up
But successful companies understand business processes, simplify them, and then introduce automation
Automating complex or non-value-adding processes will not increase productivity or provide measurable improvements in performance
Automation without simplification immortalizes ineffective processes

25. Roadmap to New Leadership Skills
Effective coordination mgmt encompasses a combination of four capabilities
Strategic thinking
How well does your ERP selection, implementation, and evolution strategy align with your business strategy?
Process reengineering
Managing implementation complexity
Transition management

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