ERP

Enterprise Resource Planning
(ERP)

1
David O Campbell, Jr
Business Transformation Solutions

What is ERP?

ERP is a multi-module application software that
helps a company manage the important parts
of its business.

2

The Evolution of ERP ERP
Enterprise 1
Resource 9
Planning 9
0
s
MRP II
Manufacturing 1
Resource 9
Planning 8
0
s
MRP
1
Material 9 Integrated
Requirements
Planning 7 Closed Loop
0 Closed Loop Planning
s Planning
Linear Planning

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What does ERP do?
ERP helps businesses with:

• Product Planning • Providing Customer
• Parts Purchasing Service
• Managing Inventories • Tracking Orders
• Interacting with • Company Finances
Suppliers • Human Resource
Management

4

How does ERP work?
• ERP centralizes all of the Enterprise information
• It eases the exchange of data among corporate
divisions
• Unites all major business practices
• Runs on multiple platforms – AS/400, Unix, client/
server networks
• PC’s are connected to more powerful computers
that feed them data
• Each module works separately performing specific
data-processing functions 5

ERP Module Examples
1. Order Entry modules converts a customer’s
purchasing requirement into terms that allows ERP to
track it through the sales order fulfillment process.
2. Master Schedule modules provides visibility of future
load, inventory investment, production, and delivery
commitments. ERP (via MRP) checks the
3. BOM module for each part's specific characteristics
necessary for planning, scheduling, and purchasing.

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ERP Module Examples (cont’d)
4. Inventory-management module captures
information needed to provide analysis of inventory
as it pertains to turnover ratios, accuracy, excess
and obsolescence and transaction activity for
inventory investment.
5. Shop floor module uses production work orders,
manages the input of the workload to the shop floor.
This application includes the flexibility to change a
production work order's start date, due date, bill of
material, routing, and quantity.
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ERP by Example (cont’d)
6. Cost Accounting module provides the cost
calculations and summary information for accurate
manufacturing and accounting management for
product costs.
5. Purchasing module provides control of
requisitioning, purchase order issuance, and
receipts tracking. Purchase Order’s manages
critical purchasing information necessary to make
important management decisions.
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What’s the big deal?
• Cuts production and inventory costs
• Improves customer service
• Plans and forecasts product demand
• Improves cost allocation
• Measures and accounts for product waste
• Ensures the required materials are available
when needed
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Investment Justification
• Plants become more efficient
• Increased delivery/performance
• Reduced lead times
• Increased inventory accuracy
• Reduced work-in-process inventory

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Business Risks
• High initial investment ($100M for large
companies is common)
• Uncertainties (software)
• Employees are given much greater
responsibilities

11

Long-term/Short-term Cost Factors
• Implementation costs
• Consultant and internal costs
• Maintenance costs

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ERP’s Impact on Industry
• Lowers total costs in complete supply chain
• Shortens throughput times
• Reduces stock to a minimum
• Enlarges product assortment
• Improves overall product quality
• Increases reliability of delivery dates
• Improves customer service
• Coordinates demand, supply and production
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Where do you get ERP?
Some of the sources of ERP software are:

• SAP • J.D.Edwards
• ERPLX • Microsoft
• ERP/LN • IBM
• Oracle • Many smaller
• People-Soft companies

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How is ERP implemented?
Who is responsible?
When can it be done?
Where are we now?
Where are we going?
Where do we start?

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Who’s responsible for implementation?
Implementation Team Leaders/Members
•Project leader (IS Department)
•Module/Phase leaders (subject area experts)
•Individual team members

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When can implementation be done?
• Establishing a Project Plan
– Designs the implementation process.
– Resources are identified.
– Implementation team is selected and task
allocated.
– Special arrangement for contingencies.

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Where are we now? (pre-ERP)

Software Hardware Personnel
–MRP/MRPII –Mainframe
–Other –Client server

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Where are we going? (post-ERP)

Expected Benefits
–Improved process flow
–Reduced Inventories
–Better data and analysis
–Better customer information
–Improved margins
–Others
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What is really needed?
• Module Selection/Priority
• Full or Partial Implementation?
– Must have
– Want
– Do not need

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Where do we start?
• Pre evaluation Screening
• Evaluation Package
• Project Planning
• GAP analysis
• Reengineering
• Team training
• Testing
• Post implementation
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Pre-selection Process

Package Evaluation

Project Planning

Gap Analysis Reengineering Configuration

Implementation Team
Testing End- user Training
Training

Going Live

Post – implementation
Phase

ERP implementation Life Cycle 22

Pre evaluation screening
• Decision for perfect package

• Number of ERP vendors

• Screening eliminates the packages that are not at
all suitable for the company’s business processes.

• Selection is done on best few package available.
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Package Evaluation
• Package is selected on the basis of different
parameter.

• Test and certify the package and also check the
coordination with different department

• Selected package will determine the success or
failure of the project.

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Cont.
• Package must be user friendly

• Regular up gradation should available.

• Cost

25

Project planning
• Designs the implementation process.

• Resources are identified.

• Implementation team is selected and task allocated.

• Special arrangement for contingencies.

26

Gap analysis
• Most crucial phase.

• Process through which company can create a
model of where they are standing now and where
they want to go.

• Model help the company to cover the functional gap

27

Reengineering
• Implementation is going to involve a
significant change in number of employees
and their job responsibilities.

• Process become more automated and
efficient.

• New procedures are established as need.
28

Team Training
• Takes place along with the process of
implementation.

• Company team members are trained to become
the trainer’s.

• Employee become self sufficient to maintain
system the consultant have left.

29

Testing/Prototyping

• This phase is performed to find the weak links so
that it can be rectified before its implementation.

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ERP Implementation Factors (cont’d)
• System Links
– Resource Linking
– Customer Satisfaction
• Limitations
– Policies and Procedures
– Pay Back Period

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Management Requirements
• Commitment
• Global Readiness
• Project Plan
• Clear Milestones
• Training

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What’s the catch?
• High cost of implementation
• Difficult to measure return
• “Betting the company”
• Political & sociological impact
• Over dependence on vendors or consultants
• Success is highly dependent on commitment
from upper management
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Measuring ERP’s Performance

• Decrease data entry
• Decrease IS overhead - one system vs. many
• Centralize information for decisions
• Decrease WIP inventory
• Decrease delivery cycle
• Increase profit margin
• Increase customer satisfaction and loyalty
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Measuring ERP’s Performance

• Average transaction time
• Interface complexity - “number of screens”
• Availability (uptime)
• Performance metrics - “on time delivery”

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How does ERP affect the customer?
• Reduces errors in ordering, billing, shipping
• Decreases lead time
• Increases quality
• Includes the customer in the process -
“Extranets”

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The Big IF for ERP
IF you have...
• ERP solvable process efficiency problems
• Commitment of Upper Management
• Commitment of Middle Management
• Solid Strategy & Thorough Design
• Financial, Technological & Human Resources
…then ERP may pay off big for your organization.
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About Presenter
Dave is the founder of Business Transformation Solutions and has more than 35 years of
practical experience in manufacturing, supply chain (23 yrs) and ERP consulting (12 yrs).
He has worked in Ecuador, Venezuela, American Samoa, Canada, as well as in the United
States in a variety of industries: Aerospace & Defense, Food & Beverage, Pharmaceutical,
Consumer Packaging Products, Welding Consumables Products, Wire/Cable (Consumer
& industrial), and Rail-Related Products in high-volume, make to order, and job-shop
environments.
As an industry expert he has spoken on Business Process Improvement, Change
Management, Business Process Redesign, and Operations Revitalization and has published
articles on these topics.
During his career in manufacturing and supply chain he has worked closely with many
educational intuitions. In 1994 he participated in a case study conducted by the
Massachusetts Institute of Technology (MIT) called Lean Aircraft Initiative.
Dave received his B.S. in Business Management from the New York State University at
Old Westbury. As an active member of the NYC-LI Chapter of APICS since 1978. He
has served on the Board of Directors in multiple positions and two terms as its president.
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