ERP Overview and Core Functions
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Questions and Answers

What does ERP stand for?

Enterprise Resource Planning

What was a challenge for businesses before the implementation of ERP systems?

Duplicate data across different departments

What is the primary goal of ERP systems?

To integrate data across the enterprise and replace outdated systems

ERP systems are designed to manage only a specific business operation, such as finance or human resources.

<p>False</p> Signup and view all the answers

ERP systems are primarily used by small businesses.

<p>False</p> Signup and view all the answers

Which of these is NOT a core business operation typically managed by an ERP system?

<p>Marketing</p> Signup and view all the answers

ERP systems provide a centralized platform for managing data and business processes.

<p>True</p> Signup and view all the answers

ERP systems cannot offer customization for specific industry needs.

<p>False</p> Signup and view all the answers

Prior to ERP systems, each department typically had its own specialized systems for its tasks.

<p>True</p> Signup and view all the answers

ERP systems eliminate the need for specialized systems in each department.

<p>False</p> Signup and view all the answers

What is the main advantage of using ERP software?

<p>Data integration and a unified interface across different departments</p> Signup and view all the answers

How do ERP modules work together?

<p>They use a common database and communicate with each other to share data.</p> Signup and view all the answers

Every ERP module focuses on a different business area but uses the same data to serve the company's needs.

<p>True</p> Signup and view all the answers

Companies can choose the ERP modules they need and add on more as required.

<p>True</p> Signup and view all the answers

How is data made available to authorized users in an ERP system?

<p>Data is collected on the server and made instantly available to users with permission</p> Signup and view all the answers

ERP systems can generate reports with graphs, charts, and metrics to help businesses analyze their performance.

<p>True</p> Signup and view all the answers

Legacy systems are always replaced with new ERP systems during implementation.

<p>False</p> Signup and view all the answers

What is the primary benefit of using an ERP system?

<p>Integration of an entire organization through data sharing and a single point of entry</p> Signup and view all the answers

What are the main drivers for the growth of the ERP market?

<p>All of the above</p> Signup and view all the answers

ERP systems are designed to replace all existing legacy systems.

<p>False</p> Signup and view all the answers

ERP systems can help businesses adopt best practices from industry leaders.

<p>True</p> Signup and view all the answers

Client-server architecture is a key factor behind the adoption of ERP systems.

<p>True</p> Signup and view all the answers

What are the key benefits of using an ERP system?

<p>All of the above</p> Signup and view all the answers

ERP systems can only be implemented by large companies with significant resources.

<p>False</p> Signup and view all the answers

The implementation of an ERP system can be challenging due to user resistance and technical complexities.

<p>True</p> Signup and view all the answers

What are the main advantages of using an ERP system?

<p>Increased efficiency, improved data integration, real-time insights, and enhanced collaboration.</p> Signup and view all the answers

What is the primary role of an internal/external auditor in relation to ERP systems?

<p>To ensure the security and privacy of the ERP system</p> Signup and view all the answers

The adoption of ERP systems has led to a reduction in the complexity of IT systems and applications.

<p>True</p> Signup and view all the answers

The cost of implementing an ERP system can vary widely depending on the size and complexity of the business.

<p>True</p> Signup and view all the answers

Open Source ERP systems are gaining popularity as a cost-effective alternative to commercial systems.

<p>True</p> Signup and view all the answers

ERP systems have replaced the need for enterprise application integration (EAI) solutions.

<p>False</p> Signup and view all the answers

What is the core value proposition of ERP systems?

<p>Integration of business processes and data across the entire organization</p> Signup and view all the answers

ERP implementation can be a complex process, requiring careful planning and collaboration between key stakeholders.

<p>True</p> Signup and view all the answers

What are some key considerations for choosing an ERP system?

<p>Business needs, industry-specific requirements, system scalability, vendor support, and implementation costs.</p> Signup and view all the answers

The migration to cloud computing has driven a significant shift in the ERP market.

<p>True</p> Signup and view all the answers

ERP systems are a one-size-fits-all solution for all businesses, regardless of size or industry.

<p>False</p> Signup and view all the answers

What is a key benefit of using an ERP system designed specifically for a particular industry?

<p>It provides pre-configured modules and best practices tailored to the industry's specific needs.</p> Signup and view all the answers

The future of ERP systems is likely to involve even greater integration with other business applications and platforms.

<p>True</p> Signup and view all the answers

Study Notes

ERP Background

  • Introduction of PCs led to narrowly focused information systems.
  • Duplicate data existed across the enterprise, not shared between departments.
  • In the mid-to-late 1990s, many large companies implemented Enterprise Resource Planning (ERP) systems.
  • These systems integrated data across the entire enterprise and replaced outdated (legacy) systems.

What is ERP?

  • ERP is a platform companies use to combine all core business operations needed to run the company.
  • ERP systems include financial, supply chain management, purchasing, and human resource management.
  • A data warehouse is also a component of the system.

Core Business Operations

  • Finance
  • Human Resource
  • Manufacturing
  • Supply Chain
  • Procurement
  • Services

ERP Role

  • ERP helps manage all core business operations in an integrated system.
  • ERP provides transparency by tracking business processes in areas like production, logistics and financials.
  • ERP offers customization options for different industry-specific needs.

Without an ERP System

  • Each department would have its own optimized system for specific tasks.

With ERP Software

  • Each department still has its own system, but all systems are accessible through one application, with one interface.

How ERP Works

  • ERP systems consist of integrated modules or business applications that communicate and share a common database.
  • Each module focuses on a specific business area, but they work together using the same data.
  • Companies can choose modules, add-ons, and scale as needed.
  • Once all departments are connected, data is collected on the server and is instantly available to authorized users.
  • ERP systems generate reports with graphs, charts, metrics, to help determine company performance.

Legacy Systems

  • Legacy systems work fine for some companies; however, redesigning or replacing these systems is often very expensive and time consuming.
  • Retraining employees on a new system comes with significant costs in lost time and money.
  • Systems like those handling customer accounts in banks, computer reservation systems, air traffic control, energy distribution (power grids), nuclear power plants, and military defense installations tend to be very complex.
  • The way legacy systems work can be poorly understood.

What is ERP (Definition)?

  • An ERP system is a suite of integrated information technology applications that support an enterprise's operations.
  • Cross-functional systems serve numerous functions within the organization.
  • They are process-centered; organized around processes.
  • ERP systems are built on relational database systems that allow only one data store, one source of truth.
  • ERP systems are sold in modules; users don't have to purchase or implement all of the modules.
  • More modules lead to increased integration and return on investment (ROI).
  • ERP can cost millions and take years to implement.

ERP-Supported Business Processes

  • Examples of supported business processes in ERP include managing support services, business planning, sales, and procurement.
  • Other supported areas include R&D, capital projects, plant maintenance, information technology, finance, and accounting.
  • The ERP system provides tools to support and manage these processes with integrated data.

Typical Modules in an ERP System

  • Modules include Engineering, Capacity planning, cost management, inventory, product configuration, and quality control for the engineering function.
  • Operations modules include bills of materials, process manufacturing, discrete manufacturing, order entry, supply chain planning, demand management, and cash management.
  • Financials modules include cash management, accounts payable, controlling, and time and expense management.
  • Projects include project billing, project costing, project contracts.
  • Human Resources modules include planning, payroll, training, time and attendance, benefits, recruiting, and relationship management for customer interactions.

Who Uses/Needs to Know about ERP?

  • End-users (purchasing, manufacturing, sales, accounting/finance, human resources, etc.)
  • Internal or external auditors (to verify system security, privacy and segregation of duties.)
  • Consultants (implementation or maintenance)
  • Developers (to customize the system)

ERP Value – Integration

  • ERP provides integrated systems with one point of entry and shared data across the enterprise.
  • ERP becomes the authoritative data source with reliable data for future usage by other systems.
  • Reduced reconciliation and rekeying of data leads to efficiency and reduces delays.
  • Business process issues that were previously disjointed become more efficient with the integrated system.

Before and After ERP

  • Before ERP, systems were disparate; after ERP, systems were integrated.
  • Enterprise resource planning integration (EAI) is a method to connect legacy systems.
  • EAI has limitations.

ERP Diffuses Best Practices

  • ERP systems are based on widely-accepted best practices.
  • Applications like SAP have thousands of best practices embedded in their software.
  • New best practices are constantly being developed and incorporated into software versions.

ERP Facilitated Adoption of Client Server Computing

  • Early 1990s client-server computing provided advantages over mainframe computing.
  • Client-server involves a client making a request for service from another program, the server.

Technical Benefits of ERP Systems

  • Integrated processes and information systems
  • More efficient business processes
  • Organizational standardization
  • Eliminated information asymmetries
  • Real-time information and on-line systems
  • Communication and collaboration are facilitated across the enterprise
  • Reduced complexity of application and technology portfolios

ERP System Benefits

  • Consolidated financial information
  • Standardized manufacturing processes
  • Reduced inventory
  • Standard data for HR and customer information

ERP System Disadvantages

  • Standardized way of conducting business can negatively impact company diversity.
  • Employee/user resistance and lack of acceptance.
  • Complex solutions that can be difficult to maintain.
  • Costly and time-consuming implementation

Implementation Issues

  • Employee resistance, which is often caused by lack of training, inability to understand how systems will improve motivation, or lack of understanding why a new approach is needed.
  • Complex system implementation, which leads to configuration and customization issues.

ERP Evolution

  • ERP has evolved from MRP/MRP II, systems focused solely on manufacturing.
  • Today's ERP systems support the entire enterprise.
  • Advancements like client-server technology and the rise of Software as a Service (SaaS).
  • Multi-tenancy (single instance used by all clients)
  • Open Source ERP systems are emerging.

ERP Market

  • ERP is a growing billion-dollar industry.
  • Growth indicators include globalization, centralization, and competition factors.

ERP Tiers

  • Tier 1 vendors (e.g., SAP, Oracle) serve large corporations, government entities, and multi-site, multinational companies.
  • Tier 2 vendors support medium-sized companies.
  • Tier 3 vendors serve small businesses, family-run corporations, or companies with specific business requirements (e.g., $40M or less)
  • Tier 4 vendors support small companies who primarily use general accounting software, often with specific implementations.

An Enterprise System - Reality

  • ERP implementations are often part of more extensive systems.
  • These systems include bolt-on applications, legacy applications, data warehouses, and enterprise application integration (EAI) solutions, along with connections to external business partners.

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Explore the fundamental concepts of Enterprise Resource Planning (ERP) systems and their significance in managing core business operations. This quiz covers the evolution of ERP, its role in integrating data, and the key areas it encompasses, such as finance and supply chain management.

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