Rabelani Dagada, Development Economist and Author

1. ERP – Expensive Reporting Programme www.csntechnologies.co.za Colin Pillay GUEST LECTURE PRESENTED DURING RABELANI DAGADA'S TECHNOLOGY & INFORMATION MANAGEMENT AT THE WITS BUSINESS SCHOOL, 17 FEBRUARY 2011

2. What is ERP? ERP is a packaged business software system that processes transactions on a single software platform and a single database

3. What does an ERP system do? (1) Integrates information across all departments Facilitates the flow of information among the different functions and processes of an enterprise functions: manufacturing, finance, HR processes: order entry Tracks a wide range of events in the enterprise in an integrated fashion Plans future activities based on these events Supports analysis of trends in these events, to improve the performance of the enterprise.

4. 2. What does an ERP system do? (2) Allows users to input data in one location, that can be processed with other data and accessed as informational reports in a real-time environment share common data and practices across the entire enterprise reengineer the majority of its processes

5. 3. Drivers of an ERP investment Technology Business processes Strategy Competition

6. 3. Drivers of an ERP investment3.1. Technology Need for an infrastructure that will provide information across all functions and locations within the organization Difficulty maintaining existing legacy systems Difficulty integrating acquisitions Obsolete hardware

7. 3. Drivers of an ERP investment3.2. Business processes Complex, ineffective business processes Business processes are not integrated Need for a set of tools for planning and monitoring the various functions and processes in a company Opportunity to reengineer business processes

8. 3. Drivers of an ERP investment3.3. Strategy Globalization New products, new services Need to be more responsive to customers Cost structures too high Poor quality or visibility of information Foundation for e-business

9. 3. Drivers of an ERP investment3.4. Competition Competitors have an ERP system

10. 4. Evolution of enterprise software - the applications typically come from multiple vendors and run on multiple platforms - companies are managed along functional lines - task oriented applications Before 1980 - functional applications - some integration 1980s - cross-functional applications - integrated applications - versions for the client-server architecture 1990s

11. 5. Evolution of ERP systems ERP has its origin in the manufacturing industry Inventory Control 1960s MRP 1970s MRP II 1980s ERP 1990s Extended ERP 2000

12. 5. Evolution of ERP systems 5.1. Inventory Control Most common approach: If the inventory drops below a minimum quantity, it is replenished with the Economic Order Quantity (EOQ) Disadvantages very large inventory investment unreliable with a highly varying demand rate large investment in safety stock requires forecasts for all items based on past demand data material obsolescence is more likely

13. 5. Evolution of ERP systems 5.2. MRP Material Requirements Planning Calculates component requirements based on the Master Production Schedule (MPS), Bill of Material (BOM) and inventory data Determines batch sizes for purchasing and manufacturing, and sends out purchasing / manufacturing orders for them at the appropriate times

14. 5. Evolution of ERP systems 5.3. Closed-loop MRP Considers material and capacity requirements Prior to releasing production orders to shopfloor, it adds the planned workload to existing workload, and compares it with the available capacity Assesses whether work should be rescheduled in order to smooth out any peaks in capacity utilization (CRP)

15. 5. Evolution of ERP systems 5.4. MRP II Manufacturing resource planning closes the loop with sales, financial and operations planning includes the allocation of production equipment and labor can manage changes in the production plan includes JIT capabilities

16. 5. Evolution of ERP systems 5.5. ERP Enterprise resource planning ERP systems go beyond the barrier of manufacturing organizations Data are generated as a result of diverse transactions and integrated to be used by multiple users, for multiple purposes and at multiple places

17. 6. ERP components Financials Human resources Sales and Distribution Manufacturing Materials management Logistics Reporting

18. 6. ERP components6.1. Financials General ledger Accounts receivable Accounts payable Asset management Treasury management Controlling

19. 6. ERP components6.2. Human Resources Human resources administration Payroll Self-service Planning personnel development workforce shift

20. 6. ERP components6.3. Sales and Distribution Prospect and customer management Sales order management Billing, invoicing and dispatch Sales history

21. 6. ERP components6.4. Manufacturing Bills of materials, routings Different planning functions production planning capacity planning shop floor control production scheduling Project management Plant maintenance Quality management

22. 6. ERP components6.4. Manufacturing (2) Multi-mode manufacturing functionalities make-to-stock make-to-order assemble-to-order engineer-to-order JIT Industry-specific solutions discrete manufacturing: automotive, high tech process industries: chemicals, oil & gas services: public services, banking, insurance

23. 6. ERP components6.5. Materials management Procurement generate purchase orders know the prices measure vendor performance receive goods into inventory pass invoices to accounts payables Inventory management where is all stock what is it worth stock movement tracking

24. 6. ERP components6.6. Logistics Warehouse management maintains records of warehoused goods process movement of products through warehouses Transportation management manages delivery of products to customers produces legal documents for tax, customs, shipping agents

25. 6. ERP components6.7. Reporting Information is made available to particular users in the form of specific reports. In addition, there are other approaches to generating data from the system, including database queries. Recently, ERP reporting capabilities have begun to evolve as ERP vendors have tried to increase the accessibility and ease of use of the ERP software.

26. 7. ERP implementation7.1. Challenge Moving away from functional silos and creating effective cross-functional processes that are truly integrated via an ERP system

27. 7. ERP implementation7.2. Preparation (1) Develop a clear business case costs versus benefits operational outcomes Set company goals and commitments Build understanding and commitment, enabling continuous improvement (change management) Examine current state Reengineer business processes

28. 7. ERP implementation7.2. Preparation (2) Make decisions about the IT infrastructure (hardware, network, telecommunications, support) Estimate project resources, costs and duration of each activity Break the implementation effort into manageable and measurable work phases Perform a risk assessment: proactive process to reduce uncertainty

29. 7. ERP implementation7.3. Software selection Vendors criteria financial stability long-term viability implementation services life cycle services (support, maintenance) Software criteria industry specific functionalities must meet business requirements performance default settings versus customizing Costs

30. 7. ERP implementation7.4. Implementation steps (1) Installation Big Bang Implementing all targeted functionality at the same time. A certain efficiency and effectiveness is achieved by implementing all modules as a single project. Phased Implementing targeted functionality in phases by module by geography by business unit Company expects to grow into ERP

31. 7. ERP implementation7.4. Implementation steps (2) Project management tracking, measuring and rechecking of milestones to ensure that scheduled changes are made on time and on budget Training provide training to everyone involved in the project Go Live Improvement

32. 7. ERP implementation7.5. Key factors for successful implementation Keep top management involved Select the right project manager Set-up cross functional implementation teams Obtain a good implementation partner Ensure that the OEM/Vendor is held accountable for QA on the project.

33. 7. ERP implementation7.6. Review ERP project on time, within budget, expected scope Business operations user performance system performance business process performance Organization competitive advantage/disadvantage process visibility and continuous improvement sound IT architecture adaptability for mergers, reorganizations

34. 8. Costs Acquisition costs Implementation costs Life cycle costs Training Costs

35. 8. Costs8.1. Acquisition costs Acquisition costs selecting the ERP system education consulting software licenses IT infrastructure hardware telecommunications

36. 8. Costs8.2. Implementation costs Implementation costs people: consultants, project team, trainers travel administrative: support, supplies, office space integration with other applications

37. 8. Costs8.3. Life cycle costs Life cycle costs maximizing the value of the ERP system ownership maintenance support Upgrades Ongoing Training

38. 9. Benefits Improved integration Improved efficiency Improved information quality Improved worldwide communication Improved customer service

39. 9. Benefits (1) Improved integration Seamless integration of all the information flowing through a company financial and accounting information human resource information supply chain information customer information Single database Corporate functions are linked together elimination of functional silos

40. 9. Benefits (2) Improved efficiency Quickly entering and retrieving of information Information entered once into the system Improved information quality Greater accuracy of information Improved access to information Improved worldwide communication Multi lingual and multi currency capacity

41. 9. Benefits (3) Improved customer service Reduced errors in ordering, billing, shipping Decreased lead time Increased quality Improved on-time delivery performance

42. 10. The Future of ERP (1) Move from client/server applications to Internet-basedapplications (cloud computing) Enterprise systems will connect to suppliers and customers. supply chain management customer relationship management E-Business self-service applications (ex. Order entry) Information will increasingly be seen and managed as an asset

43. Extended ERP Internal focus External focus E (M)- Commerce CRM SCC Basic ERP Planning Execution MA SFA CSS CPFR E- Hubs EC EP HR FIN ….. Local APS MES WHM TM Business Intelligence User Interface: Personalized Portal

44. 10. The Future of ERPExtended ERP abbreviations CRM: Customer Relationship Management MA: Marketing automation SFA: Sales Force Automation CSS: Customer Service and Support SCC: Supply Chain Collaboration CPFR: Collaborative Planning, Forecasting, Replenishment APS: Advanced Planning and Scheduling MES: Manufacturing Execution Systems WHM: Warehouse Management Systems TM: Transportation Management Systems EP: E-Procurement EC:E-Commerce

45. 11. Summary (1) ERP systems are fast replacing legacy systems ERP can integrate all of your business units Proper implementation will help the business function better ERP affects many key business processes and employees profoundly: change management and training are important Move to mid-size companies and internet-based collaborative applications

46. 11. Summary (2) Necessary actions before acquiring an ERP system In-depth study of existing systems and processes Development of a clear business case costs versus benefits operational outcomes risks

47. The end Please feel free to give any comments to colin@csntechnologies.co.za