ERP Modules: Historical Development PDF

ERP MODULES HISTORICAL INITIAL COMPUTER SUPPORT TO BUSINESS EASIEST TO AUTOMATE – PAYROLL & ACCOUNTING PRECISE RULES FOR EVERY CASE EARLY 1970S CENTRALIZED MAINFRAME COMPUTER SYSTEMS MIS SYSTEMATIC REPORTS OF FINANCIAL PERFORMANCE VARIANCE ANALYSIS BETWEEN BUDGET...

ERP MODULES HISTORICAL INITIAL COMPUTER SUPPORT TO BUSINESS EASIEST TO AUTOMATE – PAYROLL & ACCOUNTING PRECISE RULES FOR EVERY CASE EARLY 1970S CENTRALIZED MAINFRAME COMPUTER SYSTEMS MIS SYSTEMATIC REPORTS OF FINANCIAL PERFORMANCE VARIANCE ANALYSIS BETWEEN BUDGET AND ACTUAL MRP MATERIAL REQUIREMENTS PLANNING INVENTORY REORDERING TOOL EVOLVED TO SUPPORT PLANNING MRPII EXTENDED TO SHOP FLOOR CONTROL SAP MODULES SD Sales & Distribution MM Materials Management MRP PP Production Planning MRPII (with others) QM Quality Management PM Plant Maintenance HR Human Resources FINANCIAL FI Financial Accounting CO Controlling AM Asset Management PS Project System R/3 INTERNAL WF Workflow: prompt actions IS Industry solutions: best practices COMPARATIVE MODULES SAP Oracle PeopleSoft JDEdwards SD Marketing, Sales Supply chain Order management MM Procurement Supplier relationship Inventory, procurement PP Manufacturing Manufacturing mgmt QM Enterprise perform Technical foundation PM Service Enterprise service HR Human Resources Human capital mgmt Workforce management FI Financials Financial mgmt sol. Financial management CO Time & Expense mgmt AM Asset Management Enterprise asset mgmt PS Projects Project management WF Order Management Contracts Subcontract, real estate INDUSTRY-SPECIFIC FOCUS EACH VENDOR HAS TURNED TO CUSTOMIZED ERP PRODUCTS TO SERVE INDUSTRY-SPECIFIC NEEDS EXAMPLES GIVEN FROM BAAN, PEOPLESOFT MICROSOFT ALSO HAS ENTERED THE FRAY BAAN INDUSTRY-SPECIFIC VARIANTS Discrete Manufacturing Process Manufacturing Aerospace & Defense Chemicals Automobile Food & Beverage Industrial Machinery Pharmaceuticals Electronics Cable & Wire Telecommunications Pulp & Paper Construction Metals Logistics PEOPLESOFT INDUSTRY SOLUTIONS Communications Consumer Products Federal Government Financial Services Healthcare Higher Education High Technology Industrial Products Public Sector Professional Staffing Services Utilities Wholesale Distribution MICROSOFT GREAT PLAINS BUSINESS SOLUTIONS Accounting & Finance Customer Relationship Management E-Business Human Resources & Payroll Manufacturing Project Accounting Supply Chain Management RELATIVE ERP MODULE USE (MABERT ET AL. 2000; OLHAGER & SELLDIN, 2003) Module Use reported - US Use reported – Sweden Financial & Accounting 91.5% 87.3% Materials Management 89.2% 91.8% Production Planning 88.5% 90.5% Order Entry 87.7% 92.4% Purchasing 86.9% 93.0% Financial Control 81.5% 82.3% Distribution/Logistics 75.4% 84.8% Asset Management 57.7% 63.3% Quality Management 44.6% 47.5% Personnel/HR 44.6% 57.6% Maintenance 40.8% 44.3% R&D Management 30.8% 34.2% RELATIVE MODULE USE MABERT ET AL. (2000) SURVEYED MIDWESTERN US MANUFACTURERS SOME MODULES HAD LOW REPORTED USE (BELOW 50% IN RED) FINANCIAL & ACCOUNTING MOST POPULAR UNIVERSAL NEED MOST STRUCTURED, THUS EASIEST TO IMPLEMENT SALES & MARKETING MORE PROBLEMATIC WHY MODULE USE? COST: CHEAPER TO IMPLEMENT PART OF SYSTEM CONFLICTS WITH CONCEPT OF INTEGRATION BEST-OF-BREED CONCEPT: MABERT ET AL. FOUND ONLY 40% INSTALLED SYSTEM AS VENDOR DESIGNED 50% USED SINGLE ERP PACKAGE; 4% USED BEST-OF-BREED DIFFERENT VENDORS DO SOME THINGS BETTER CONFLICTS WITH CONCEPT OF INTEGRATION MIDDLEWARE THIRD-PARTY SOFTWARE INTEGRATE SOFTWARE APPLICATIONS FROM SEVERAL VENDORS COULD BE USED FOR BEST-OF-BREED USUALLY USED TO IMPLEMENT “ADD-ONS” (SPECIALTY SOFTWARE SUCH AS CUSTOMER RELATIONSHIP MANAGEMENT, SUPPLY CHAIN INTEGRATION, ETC.) CUSTOMIZATION DAVENPORT (2000) CHOICES: REWRITE CODE INTERNALLY USE EXISTING SYSTEM WITH INTERFACES BOTH ADD TIME & COST TO IMPLEMENTATION THE MORE CUSTOMIZATION, THE LESS ABILITY TO SEAMLESSLY COMMUNICATION ACROSS SYSTEMS DELL COMPUTERS NEED TO CONTINUE PROJECT EVALUATION INITIAL PROJECT ADOPTION 1994 DELL BEGAN IMPLEMENTATION OF SAP R/3 ENTERPRISE SOFTWARE SUITE SPENT OVER 1 YEAR SELECTING FROM 3,000 CONFIGURATION TABLES AFTER 2 YEAR EFFORT ($200 MILLION), REVISED PLAN DELL BUSINESS MODEL SHIFTED FROM GLOBAL FOCUS TO SEGMENTED, REGIONAL FOCUS RETHINKING IN 1996 REVISED PLAN FOUND SAP R/3 TOO INFLEXIBLE FOR DELL’S NEW MAKE-TO-ORDER OPERATION DELL CHOSE TO DEVELOP A MORE FLEXIBLE SYSTEM RATHER THAN RELY ON ONE INTEGRATED, CENTRALIZED SYSTEM BEST-OF-BREED I2 TECHNOLOGIES SOFTWARE MANAGE RAW MATERIALS FLOW ORACLE SOFTWARE ORDER MANAGEMENT GLOVIA SOFTWARE MANUFACTURING CONTROL INVENTORY CONTROL WAREHOUSE MANAGEMENT MATERIALS MANAGEMENT SAP MODULE HUMAN RESOURCES CORE COMPETENCIES GLOVIA SYSTEM INTERFACED WITH DELL’S OWN SHOP FLOOR SYSTEM I2 SUPPLY CHAIN PLANNING SOFTWARE THIS RETAINED A DELL CORE COMPETENCY WOULD HAVE LOST IF ADOPTED PUBLICLY AVAILABLE SYSTEM POINTS DEMONSTRATES THE NEED FOR SPEED PROLONGED INSTALLATION PROJECTS BECOME OUTDATED NEED TO CONTINUE TO EVALUATE PROJECT NEED AFTER ADOPTION TENDENCY TO STICK WITH OLD DECISION BUT SUNK COST VIEW NEEDED DEMONSTRATES NEED TO MAINTAIN CORE COMPETITIVE ADVANTAGE ADOPTING VENDOR ERP DOESN’T  SIEMENS ERP IMPLEMENTATION HIRT & SWANSON (2001) SIEMENS POWER CORPORATION 1994 BEGAN MAJOR REENGINEERING EFFORT REDUCED EMPLOYEES BY 30% 1996 ADOPTED SAP R/3 SYSTEM REPLACEMENT OF IS BUDGETED AT $4 MILLION SOME LEGACY SYSTEMS RETAINED SIEMENS MODULES FI FINANCE CO CONTROLLING AR ACCOUNTS RECEIVABLE AP ACCOUNTS PAYABLE MM MATERIALS MANAGEMENT PP PRODUCTION PLANNING QC QUALITY CONTROL IMPLEMENTATION TO BE LED BY USERS PROJECT MANAGER FROM USER COMMUNITY CONSULTANT HIRED FOR IT SUPPORT IS GROUP ONLY MARGINALLY INVOLVED PROJECT PROGRESS OCT 1996 INSTALLED FI MODULE SEP 1997 INSTALLED OTHER MODULES ON TIME, WITHIN BUDGET PERMANENT TEAM MADE PROJECT TEAM A PERMANENT GROUP PROJECT MANAGER HAD BEEN REPLACED 2ND PM RETAINED SAP STEERING COMMITTEE SAP PROJECT TEAM FORMED SAP STEERING COMMITTEE 7 MAJOR USER STAKEHOLDERS GUIDED OPERATING POLICY MAJOR EXPENDITURES MAJOR DESIGN CHANGES SAP PROJECT TEAM FORMED 15 MEMBERS FROM KEY USER GROUPS PART-TIME TRAINER USER HELP ADVISORS TO MIDDLE MANAGEMENT TRAINING END USERS BECAME MORE PROFICIENT WITH TIME AVERAGE OF 3 MONTHS TO LEARN WHAT NEEDED MANAGEMENT TRAINING TOOK LONGER MANAGEMENT DIDN’T UNDERSTAND SYSTEM WELL OFTEN MADE UNREALISTIC REQUESTS SUMMARY CORE IDEA OF ERP COMPLETE INTEGRATION IN PRACTICE, MODULES USED MORE FLEXIBLE, LESS RISK CAN APPLY BEST-OF-BREED CONCEPT IDEAL, BUT COSTLY RELATED CONCEPTS MIDDLEWARE – INTEGRATE EXTERNAL SOFTWARE CUSTOMIZATION – TAILOR ERP TO ORGANIZATION FEDERALIZATION – DIFFERENT VERSIONS OF ERP IN DIFFERENT ORGANIZATIONAL SUBELEMENTS