Enterprise Resource Planning (ERP) Past Paper PDF

TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof. Massimiliano Oleotto ENTERPRISE RESOURCE PLANNING ERP: what they are, where do they come from and how do they su...

TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof. Massimiliano Oleotto ENTERPRISE RESOURCE PLANNING ERP: what they are, where do they come from and how do they support process improvement Chapter 6 Materials - a.y. 2024-2025 2 Learning Objectives Q1. What problem does an ERP system solve? Q2. What are the elements of an ERP system? Q3. What are the benefits of an ERP system? Q4. What are the challenges of implementing an ERP system? Q5. What types of organizations use ERP? Q6. Who are the major ERP vendors? Q7. What makes SAP different from other ERP products? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 3 Functional Structure: Advantages and Disadvantages functions between nCommunication Problems: as more organizational nProvides people with the opportunity to functions develop, each with their own hierarchy, they learn from one another and become more become increasingly distant from one another specialized and productive nMeasurement Problems: information needed to measure the profitability of any functional group is difficult to obtain is a product profitable. nPeople who are grouped together by common skills can supervise one another and nLocation Problems: centralized control hinders ability control each other’s behavior to satisfy the special needs in different geographic regions nCustomer Problems: servicing the needs of new kinds nPeople develop norms and values that allow of customers and tailoring products to suit them is relatively difficult them to become more effective at what they nStrategic Problems: top managers spend too much do time finding ways to improve coordination Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Advantages and disadvanges of functional organizational 4 structure Functional specialization allows the development of managerial competences, but it can also promote the development of functional specific languages and orientations that make horizontal integration difficult, up to make it real the risk of «transposition of objectives» and of conflicts among functions SUBUNITORIENTATION SO WHAT? It is essential enhancing organizational integration capabilities HOW? Integration units are not the only Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto solution… ERP can be o tool  Advantages and Disadvantages of a (multi)didivisional structure 5 ↳ integration issues (it's important) amag divisions nManaging the corporate-divisional relationship: finding the balance nIncreased organizational effectiveness: clear between centralization and decentralization division of labor between corporate and divisional managers generally increases organizational nCoordination problems between divisions: divisions start competing for effectiveness resources and coordination problems arise between divisions nIncreased control: extra control provided by the nTransfer pricing: problems between divisions often revolve around the corporate office can encourage the stronger pursuit transfer price, i.e., the price at which one division sells a product or of internal organizational efficiency by divisional information about innovations to another division managers nProfitable growth: when each division is its own nBureaucratic costs: multidivisional structures are very expensive to profit center, individual profitability can be clearly operate evaluated nCommunication problems: tall hierarchies tend to have communication nInternallabor market: the most able divisional problems, particularly the distortion of information managers are promoted to become corporate managers Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Advantages and disadvanges of divsional organizational 6 structure Divisional specialization allows the reduction of complexity, increases Caratteristiche Vantaggi Difficoltà Correttivi coordination among functions Diminuzione della complessità Accentramento a livello (within divisions), increases the Moltiplicazione delle e della dimensione delle unità corporate delle funzioni in funzioni ed elevati costi di ability to satisfy customers, con autonoma responsabilità cui le economie di scala e La struttura viene di risultato struttura improves resource allocation, but it le interazioni tra prodotti articolata in divisioni sono rilevanti (per can also promote inefficiency, Ciascuna divisione ha al suo autonome Perdita delle economie di esempio, ricerca e coordination issues among interno le competenze scala consentite dalla sviluppo, comunicazione, divisions and poor synergies necessarie; migliore concentrazione funzionale finanza) coordinamento funzionale SO WHAT? Migliore capacità di soddisfare Specializzazione per Difficoltà di coordinamento i bisogni del cliente e di linee di prodotto o per tra linee di prodotto e cogliere i potenziali di segmenti di clientela potenziali conflitti Meccanismi di innovazione coordinamento (comitati, Coordinamento Migliore allocazione delle task force, gruppi di attraverso la risorse Possibile incapacità di lavoro) standardizzazione degli Riduzione della perdita di cogliere le sinergie It is essential balancing output controllo della direzione interdivisionali centralization and decentralization centrale and improving coordination among Sviluppo di posizioni Riserva di competenze divisions con visione manageriali Sistemi di remunerazione e Opportunismo manageriale imprenditoriale e della Spinta alla crescita incentivazione sul residuo HOW? linea intermedia dimensionale Deciding what is centralized and what is decentralized, improving integration mechanisms Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Matrix Structure 7 2 lines of authority nMatrix structure: an organizational design that groups people and resources in two ways simultaneously, by function and product nA matrix is a rectangular grid that shows a vertical flow of functional responsibility and a horizontal flow of product responsibility nThe members of the team are called two-boss employees because they report to two superiors: the product team manager and the functional manager nTheteam is the building block and principal coordination and integration mechanism Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Risk : ambiguity conflicts , Figure 6-12: Matrix Structure 8 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 8  We needo powerfull tool to manage the 2 limes 9 Advantages and disadvantages of a Matrix Structure nMatrix lacks a control structure that leads employees to nThe use of cross-functional teams reduces functional barriers and subunit orientation. develop stable expectations of one another nThe lack of a clearly defined hierarchy of authority can also nOpens communication between functional lead to conflict between functions and product teams over specialists the use of resources nPeople are likely to experience a vacuum of authority and nThe matrix enables an organization to responsibility maximize its use of skilled professionals, who n People then create their own informal organization to move from product to product as needed provide themselves with some sense of structure and stability nThe dualfunctional and product focus promotes concern for both cost and quality Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Extended ERP with of our * integration things out org. Advantages and disadvantages of matrix 10 structures Matrix structure allows simultaneous focus on efficiency and effectiveness, but it can also promote conflicts and ambiguity SO WHAT? It is essential to give some stability to employees making as clear as possible authority relationships and responsibility, keeping the balance between functional and product team needs to promote cooperation and flexibility HOW? Organizational culture is not the only solution… Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  (from the last class) How Can an IS Hinder a Process? 11 Information Silos – Data exists in isolated functional IS - is not easily shared with other function 8 NOT NECESSARY Why Information Silos Exist BAD MOTIVATIONS : – Data stored in separate databases – To control data – Variety of objectives – Sensitive data not to be shared ⑧ – Departmental systems purchased and implemented quickly ↳ different objectives – Less expensive ↳ to EVERY FUNGION ensure privacy HAS ITS IS G TO CONTROL info DATA Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto..O M B wena. should be shared - materials Not only one ! 1 sometimes there isn't 17 What Problem Does an ERP System Solve? Information Silo Problem § Data isolated in separate information systems Solutions § Enterprise Application Integration (EAI) § Enterprise Resource Planning (ERP) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 18 What Problem Does an ERP System Solve? EAI § Connects information silos via a new layer of software § Enables existing applications to communicate and share data § Provides integrated data § Leverages existing systems, leaving departmental information systems as is, but providing an integration layer Any «drawbacks» from the adoption of over the top this approach? § Enables a gradual move to ERP How often is an EAI still adopted? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  !! Problem : develop commectors 19 What Problem Does an ERP System Solve? ERP Characteristics § Consolidation of data for real-time sharing of data ü “Source or truth” § Integrated processes ü “lefthand of the Isesport can organization to know more processes what the right hand is doing” ERP emerged around 30 years ago… why? Thecnological advancements Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Brief history of ERP: business and IS co-evolve 20 The focus of manufacturing systems in the 1960s was on inventory control. Companies could afford to keep lots of ‘‘just-in-case’’ inventory on hand to satisfy customer demand and still stay competitive. Consequently, techniques of the day focused on the most efficient way to manage large volumes of inventory. Most software packages (usually customized)were designed to handle inventory based on traditional inventory concepts. In the 1970 s, it became increasingly clear that companies could no longer afford the luxury of maintaining large quantities of inventory. This led to the introduction of material requirements planning (MRP) systems. MRP represented a huge step forward in the materials planning process. For the first time, using a master production schedule, supported by bill of material files that identified the specific materials needed to produce each finished item, a computer could be used to calculate gross material requirements. Using accurate inventory record files, the available quantity of on-hand or scheduled-to-arrive materials could then be used to determine net material requirements. This then prompted an activity such as placing an order, canceling an existing order, or modifying the timing of existing orders. For the first time in manufacturing, there was a formal mechanism for keeping priorities valid in a changing manufacturing environment. The ability of the planning system to systematically and efficiently schedule all parts was a tremendous step forward for productivity and quality. Yet, in manufacturing, production priorities and materials planning are only part of the problem. Capacity planning represents an equal challenge. In response, techniques for capacity planning were added to the basic MRP system capabilities. Tools were developed to support the planning of aggregate sales and production levels (sales and operations planning), the development of the specific build schedule (master production scheduling), forecasting, sales planning and customer order promising (demand management), and high-level resource analysis (rough-cut capacity planning). Scheduling techniques for the factory floor and supplier scheduling were incorporated into the MRP systems. When this occurred, users began to consider their systems as company-wide systems. These developments resulted in the next evolutionary stage that became known as closed loop MRP. In the 1980 s, companies began to take advantage of the increased power and affordability of available technology and were able to couple the movement of inventory with the coincident financial activity. Manufacturing resources planning (MRP II) systems evolved to incorporate the financial accounting system and the financial management system along with the manufacturing and materials management systems. This allowed companies to have a more integrated business system that derived the material and capacity requirements associated with a desired operations plan, allowed input of detailed activities, translated all this to a financial statement, and suggested a course of action to address those items that were not in balance with the desired plan. By the early 1990s, continuing improvements in technology allowed MRP II to be expanded to incorporate all resource planning for the entire enterprise. Areas such as product design, information warehousing, materials planning, capacity planning, communication systems, human resources, finance, and project management could now be included in the plan. Hence, the term, ERP was coined. And ERP can be used not only in manufacturing companies, but in any company that wants to enhance competitiveness by most effectively using all its assets, including information. Source: Umble et al., Enterprise resource planning: Implementation procedures and critical success factors, European Journal of Operational Research 146 (2003)241–257 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 21 Effects of introducing ERP for a single process What positive effects does the introduction of an ERP make possible? List disadvantages and advantages of each solution Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 22 Effects of introducing ERP for a single process What positive effects does the introduction of an ERP make possible? You can loose bargaining power After: You could accept Standardized purchasing different process conditions 3 diff Effective management We can purch of purchasing process exploit processing Supplier Higher bargaining power Any drawbacks? · speed. less specific requirements · motivational effect Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  What Problem Does an ERP System Solve at the single 23 process level? Before and After ERP With the university purchasing office now orchestrating the process, specific and clear objectives and measures have been developed for the process and shared with all purchasing agents. Advantage of ERP impl. ↳ having objective Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  What Problem Does an ERP System Solve at the 24 organization level? Compare the pre-ERP and the post-ERP situation if the sales department has the unexpected opportunity to sell 1,000 bicycles Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto With all ERP we can face unespected order. ↳ Databases are integrated  What Are the Elements of an 25 ERP System? Manufacturing Software § MRP § MRPII ERP includes applications that integrate the processes for the following functions: § SCM (e.g. procurement, sales order processing, inventory management, etc) § Manufacturing (e.g. capacity planning, quality control, bill of materials, etc) § CRM (e.g. sales prospecting, customer management, marketing, call center, etc) § Human Resources (e.g. payroll, time and attendance, HR management, benefits administration, etc) § Accounting (e.g. accounts receivable, accounts payable, cash management, fixed-asset, etc) Frequently an organizational will purchase and implement just parts of the total ERP package. Why? ONE IS EASIER LEX EXPENSIVE Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 26 What Are the Elements of an ERP System? Five Components of an ERP System § Software § Hardware § Data § Procedures § People Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  SAP is o software 27 What Are the Elements of an ERP System? ERP Software HIGHER COSTS § Configuration: how many configuration decisions to customize? Is there a limit? If a customer requirement cannot be met? Adapt business or the software? (write application code - customization? For example to create company-unique reports) ERP Data § Transactional Data: related to events § Master Data: do not change with every transaction § Organizational Data: about the organization Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 28 What Are the Elements of an ERP System? Hardware § Variety of hardware (servers, clients, printers, scanners…) ES EMILIA ROMAGNA § Cloud implications: what are they? LESS EXPENSIVE LESS RISKY , , UPDATE SAFE LOCATION Procedures ENSURE SAFETY IN TERMS OF CYBERATTAKS § Select ERP processes and specify how they will be executed on the ERP software § Procedures improve control: limit behavior and provide consistent results. Any drawbacks? § First step: crafting procedure – Second step: training employees to use the procedure. Training is expensive. People § Users: employees of the firm implementing the system § Systems Analysts: employees that support, maintain and adapt the system after implementation § Consultants: work for the ERP vendor § Success in ERP position is based less on technical skills and more on process understanding and ability to work with people. Why? § When using ERP each individual plays a specific role and have access to screens and data based on that role. Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 29 CLOUD IMPLICATIONS 1. Lower costs: limited investments in hardware, software, and configurations 2. global scalability: right amount of IT resources only when necessary 3. performances: worldwide network of secure, up-to-date data-center 4. security: 5. flexibility 6. reliability: more simple and lower cost of backing up data Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 30 What Are the Elements of an ERP System? ERP systems are more than an IS YOU BUY THE PROCESSES OF SOMONE EUSE = Inherent Business Processes in ERP CUSTOMization ? § System specified business processes § Process blueprints Implementing ERP implies adapting to the predefined inherent processes or design new ones. What are the implications of designing new ones? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  31 What Are the Benefits of an ERP System? 1. Trends as they occurs and appropriate responses 2. Processes converted into best- practices 3. Better control: dashboards ⑧ 4. No silos problem ⑤ 5. Easier to exchange data with partners Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  What Are the Challenges of Implementing an ERP System? 32 WENEED AN FRP : ↳ our For prosa e What decisions need to be made? Decision-Making Challenges – Details What are people-related challenges? People Challenges --Top Manag. TERp – Changes ERP Upgrades What issues an upgrade is likely to imply? © Pearson Education Limited 2015 6-32 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  What Are the Challenges of Implementing an ERP System? 33 1. Selecting the right vendor: long-term become emotional relationship thecustomer knows less than vendors (consultant) technology vendor must have experience 2. Gap between business requirements - and the capabilities of the chosen ERP: C Focused, well-understood, short list of they should chose you o “likes” - * How to sell your ERP, why " to implement sales really they they know what need ? - - What you Key factors for your are looking for : company success 3. Configuration: up to thousands of decisions: suitability of configurations offered vs customization If I think my BP a re the best ↳ expensive , can create problems when updating 4. Format of data - issue 5. Transition: gradual or “one big step”? ↓ * anemodulat e eith to m a ke it at time ASAP a small maybe : Problem process TO SOLVE * acquisition Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  What Are the Challenges of Implementing an ERP System? 34 Top management need to stay involved, ensure implementation is How You monitored, resources are wied committed, good procedures, deal With training change Oversells: risk of buying more management features than needed routines were Cultural change associated to ERP * challenges good in the past changing people routimes of cultural resistance * Collaboration: each of the roles change man. logic involved masters a piece of knowledge required Is of on lot coll when intro a new Era ↳ people coming from diff functions Extra inducements might be way to silos break needed to promote the change ↳ incentives When you don't see gains Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto G  What Are the Challenges of Implementing an ERP System? 35 Ifpeople believe the upgrade will be as disruptive More challenges justifying the With a new ERA upgrade compared to the initial implementation Customization can lock into the ↳ specific investment (NO VALE Outside) original customized version No long-term orientation Strateg People don't see the need to change Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 36 What Types of Organizations Use ERP? ERP by Industry Type ERP by Organization Size: large vs small. Is it different? International Firms and ERP: multi language and multi currencies. Any issue? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto