Enterprise Resource Planning

David Haigh OISM 470W The Pennsylvania State University

Today we will be covering:

What exactly is ERP? History of ERP. How ERP can be used in our company? ERP Implementation.

Company Examples.
Training Exercise. Summary of todays training.

What is ERP?
ERP software integrates all departments

and functions onto a single system that can serve the needs of the entire company. Some of ERPs functions include:
Bookkeeping & Accounting Human Resource Management Planning Production Supply-Chain Management

More Of What ERP can do

History of ERP
ERP has its roots in the MRP and MRPII systems of the 70s and 80s. Came about as companies realized that the management and flow of information was just as important as materials and inventory management. ERP has also evolved considerably with computer and technology advances.

How we can use ERP

Update our legacy systems. Cut down on inter-office paperwork. To standardize our manufacturing processes and increase productivity. Will give us more information and better access to our suppliers and customers.

Brainstorming Session
What are the employees looking for in an ERP system? Are there any ideas on how else we can use ERP to improve our processes?

Implementation
Steps for implementation: Cost analysis Blueprinting of Business Processes Staff Training Integration Data Conversion Going live with ERP

Cost Analysis
Costs to implement an ERP system is not

just a one-time thing. Real costs are in constant training, upgrading, and maintenance. Average Total Cost of Ownership (TCO) is $15 million. Benefits are not seen right away.

Blueprinting of Business Processes

Business processes must be modeled to fit ERP software. A blueprint can be modeled in-house. We can choose from a ready made blueprint supplied by an ERP software company.

Pros of Blueprinting
Blueprints are made by industry

professionals. Blueprints can greatly optimize business processes. Flexibility in choosing. Few companies can afford a zero-based approach.

Cons of Blueprinting
Professionals may still not know enough. Pre-designed blueprints may still not be

enough. There are so many blueprints its overwhelming.

Staff Training
Most overlooked of ERP implementation

costs. Needed to get the most out of new software. Training is needed to make sure employees do not abandon the system.

Integration
Installing new equipment and software. Customization if needed. Testing-Testing-Testing

Data Conversion
Moving Data: Employee Records Company Information Customer and Supplier Records, etc.

Going live with ERP

Final changeover to ERP system. Real test of software. Most costly errors can happen at this stage.

3 Steps to Integration:
Implement entire business at once. Implement one business unit at a time and make sure its right. Implement one business unit until its right and then implement the rest all at once.

ERP & Raytheon Aircraft

$2.7 billion subsidiary of Raytheon Co. Implemented SAP in just over 1 year. Total cost of about $55 million. Eliminated 30 legacy systems.

Integrated four manufacturing sites and

fifteen airport service stations.

Raytheons Training
$5.5 million went into training employees. 5,000 employees trained for 20

hours/week months before the go-live date. 150 go-live managers worked full-time on SAP before go live date.

Energy Northwest
Chose an in-house approach. Only implemented accounting functions. Only $2 million in expenses.

Training Exercise
Employee teams can now break off and decide if ERP is right for us. Some thing to look at are: Can we afford implementation. How and where can this help us. How will our corporate culture be affected?

Summary
ERP is a business wide common system. Can integrate all of our business units.

Very expensive and time intensive.

Proper implementation can help the

business function better. Poor implementation can hurt the business immensely. Training

Bibliography
Callaway, Erin. ERP-The Next Generation: ERP is Enabled For E-Business. Charleston, SC: Computer Technology Research, 2000.

Curran, Thomas A. and Andrew Ladd. SAP R/3 Business Blueprint. New York: Prentice Hall, 2000.
Hoffman, Tom. ERP: Not Just for HR anymore. Internet. Http://www.computerworld.com/cwi/story/0,1199,NAV4772_STO43432,00.html. 13 February 2001. Jordan, Win G. and Kip R. Krumwiede. Reaping the Promise of Enterprise Resource Systems. Strategic Finance October 2000:48-52.

Bibliography (cont.)
Konicki, Steve. Fast Deployments at a Price. InformationWeek October 2000: 77-96.

Ptak, Carol A. and Eli Schragenheim. ERP: Tools, Techniques, and Applications for Integrating the Supply Chain. New York: St. Lucie Press, 2000.
Slater, Derek. The ABCs of ERP. Internet. Http://www.cio.com/forums/erp/edit/122299_erp_content.html. 14 February 2001. Wah, Louisa. Give ERP a Chance. Management Review March 2000: 2024.