Which of the following are included in core erp components

CHAPTER TWELVE

INTEGRATING THE ORGANIZATION FROM END TO END – ENTERPRISE RESOURCE PLANNING

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CLASSROOM OPENER

GREAT BUSINESS DECISIONS – Harley-Davidson Begins the Harley Owners Group (H.O.G.) to Encourage Customer Involvement

One of the biggest assets for Milwaukee-based Harley-Davidson Motorcycle Company is its intensely loyal customers. After struggling against Japanese competition throughout the 1960s and 1970s, the company turned a corner in 1981 when a group of 13 senior Harley-Davidson executives purchased the company. Vaughn Beals, the leader, celebrated with a victory ride from the company’s factory in York, Pennsylvania, to its headquarters in Milwaukee. The new owners decided to begin the Harley Owners Group (H.O.G) to get customers more involved with the product. HOG worked. With HOG, the company was able to key into its greatest asset – the people who care about the Harley-Davidson company. HOG opened a dialog outside the company with its loyal customer base and inside the company with its workforce.

In 1993, a little over 10 years after the start of HOG, the company celebrated its 90th anniversary with more than 100,000 HOG members converging on Milwaukee for a drive-through parade featuring 60,000 Harley-Davidson machines.

LEARNING OUTCOMES

Describe the role information plays in enterprise resource planning

Identify the core and extended areas of enterprise resource planning

Discuss the current technologies organizations are integrating in enterprise resource planning systems

A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

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ENTERPRISE RESOURCE PLANNING

Enterprise resource planning – Integrates all departments and functions throughout an organization into a single IT system (or integrated set of IT systems) so that employees can make enterprisewide decisions by viewing enterprisewide information on all business operations

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This section covers:

Core ERP components

Extended ERP components

ERP benefits

ERP risks

Future of ERP

ENTERPRISE RESOURCE PLANNING

Reasons ERP systems are powerful tools

ERP is a logical solution to incompatible applications

ERP addresses global information sharing and reporting

ERP avoids the pain and expense of fixing legacy systems

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The world's ten largest ERP implementation successful cases

1, The aluminum company (Alcoa)

2, Germany BASF company (BASF Aktiengesellschaft)

3, the first Capital Financial company (Capital One Financial Corp.)

4, Colgate-palm company (Colgate-Palmolive)

5, DaimlerChrysler (DaimlerChrysler)

6, Del have food company, Del Monte Foods)

7, the Dow Corning company (Dow Corning)

8, FedEx air company (FedEx)

9, the Home Depot corporation (Home Depot)

10, Whirlpool company (Whirlpool)

ENTERPRISE RESOURCE PLANNING

ERP systems collect data from across an organization and correlates the data generating an enterprisewide view

The true benefit of an ERP system is its ability take the many different forms of data from across the different organizational systems and correlate, aggregate, and provide an enterprisewide view of organizational information

The two previous spreadsheets display examples of differences in data that can be fixed by using an ERP system

Ask your students why it is important to have an enterprisewide view of data?

Without understanding how all of the different divisions, products, departments, etc. are operating you cannot run the business

Why do organizations need integrations, if an ERP system contains one database that connects all applications together?

Most organizations operate functional “silos”, and each department typically has its own systems

A company might purchase an ERP and then all of the functional silos would be on one system, however, this doesn’t happen very often in the real world

Most organizations require anywhere from 10 to 100 to 1,000 different systems to run their business

Finding one system that could meet all the needs of an entire organization from billing to sales is almost impossible, “sort of a utopia”

An organization can purchase an ERP and still have other applications running parts of its business (for example, taxation packages) that are not supported, or not supported well, by the ERP system

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ENTERPRISE RESOURCE PLANNING

ERP Systems Automate Business Processes

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ERP systems automate business processes, for example, order fulfillment

When a CSR takes an order from a customer, he or she has all the information necessary to complete the order (the customer’s credit rating and order history, the company’s inventory levels, and the delivery schedule)

Since the company is using an ERP, everyone else in the company will automatically see the information that the CSR types into the ERP system

When one department finishes with the order, it is automatically routed via the ERP system to the next department

To determine where an order is at any point in time, a user only needs to login to the ERP system and track it down

ENTERPRISE RESOURCE PLANNING

The Organization Before ERP

In most organizations, information has traditionally been isolated within specific departments, whether on an individual database, in a file cabinet, or on an employee’s PC. ERP enables employees across the organization to share information across a single, centralized database. With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency

When reviewing this diagram demonstrate to the students how each department has its own database separate from all other organizational departments

Ask your student what types of problems could occur if all departments maintain their own database and systems?

Update issues

Redundancy

Inaccurate information across databases

Different formats of information in the different databases

Inability to access other department information and not being provided with a 360 degree view of the organization

Different customer information in different databases

Customer contact from multiple departments with different messages

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ENTERPRISE RESOURCE PLANNING

ERP Bringing The Organization Together

In most organizations, information has traditionally been isolated within specific departments, whether on an individual database, in a file cabinet, or on an employee’s PC. ERP enables employees across the organization to share information across a single, centralized database. With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency

When discussing this slide be sure to explain to your students how one database that supports the entire organization could eliminate many of the issues discussed on the previous slide

Ask your students what issues could be caused by having one database that supports the entire organization?

Not as flexible and far more difficult to change

Might not meet all department needs as well as an individual specific system

Multiple access levels increases security issues

Ethical dilemmas from accessing different department information – such as payroll

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THE BENEFITS OF ERP

Core ERP component – Traditional components included in most ERP systems and they primarily focus on internal operations

Extended ERP component – Extra components that meet the organizational needs not covered by the core components and primarily focus on external operations

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Turner Industries grew from $300 million in sales to $800 million in sales in less than 10 years thanks to the implementation of an ERP system. Ranked number 369 on the Forbes 500 list of privately held companies, Turner Industries is a leading industrial services firm. Turner Industries develops and deploys advanced software applications designed to maximize the productivity of its 25,000 employees and construction equipment valued at more than $100 million.

THE BENEFITS OF ERP

This is an excellent diagram that displays where ERP started and where it is headed

Ask your students what components might be included in an ERP system in the future

Second Life component

Wiki component

Collaboration

CLASSROOM EXERCISE

Designing a Digital Dashboard for an ERP System

Digital dashboards offer an effective and efficient way to view enterprisewide information at near real-time. According to Nucleus Research, there is a direct correlation between use of digital dashboards and a company’s’ return on investment (ROI), hence all executives should be using or pushing the development of digital dashboards to monitor and analyze organizational operations.

Break your students into groups and ask them to develop a digital dashboard for an ERP system. Review the digital dashboards on page 98. Be sure your students have addressed all of the following in their digital dashboard:

Accounting

Finance

Logistics

Production

Distribution

Manufacturing

Human resources

SCM

CRM

n component (IM)

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THE BENEFITS OF ERP

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Core ERP components – traditional components included in most ERP systems and they primarily focus on internal operations

Extended ERP components – extra components that meet the organizational needs not covered by the core components and primarily focus on external operations

CLASSROOM EXERCISE

Analyzing ERP Components

Break your students into groups and ask them to provide an analysis of Figure 10.14, the enterprise resource planning vendor components. Ask your students to analyze the different components and from this brief description rank the vendors from the vendor that offers the greatest business intelligence and strategic advantage to the vendor that offers the least business intelligence and strategic advantage.

CORE ERP COMPONENTS

Three most common core ERP components

Accounting and finance

Production and materials management

Human resource

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Accounting and finance components – manage accounting data and financial processes within the enterprise with functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management

Production and materials management components – handle the various aspects of production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control

Human resource components – track employee information including payroll, benefits, compensation, performance assessment, and assumes compliance with the legal requirements of multiple jurisdictions and tax authorities

ACCOUNTING AND FINANCE ERP COMPONENTS

Accounting and finance ERP component – Manages accounting data and financial processes within the enterprise with functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management

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Discuss the Harley-Davidson example

Deeley Harley-Davidson Canada (DHDC), the exclusive Canadian distributor of Harley-Davidson motorcycles, has improved inventory, turnaround time, margins, and customer satisfaction—all with the implementation of a financial ERP system. The system has opened up the power of information to the company and is helping it make strategic decisions when it still has the time to change things. The ERP system provides the company with ways to manage inventory, turnaround time, and utilize warehouse space more effectively.

Credit-management feature set limits on how much a customer can owe at any time

Product profitability analysis feature allows companies to perform all types of advanced profitability modeling techniques

PRODUCTION AND MATERIALS MANAGEMENT ERP COMPONENTS

Production and materials management ERP component – Handles the various aspects of production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control

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Discuss the Groupo Farmanova Intermed example

Grupo Farmanova Intermed, located in Costa Rica, is a pharmaceutical marketing and distribution company that markets nearly 2,500 products to approximately 500 customers in Central and South America. The company identified a need for software that could unify product logistics management in a single country. It decided to deploy PeopleSoft financial and distribution ERP components allowing the company to improve customer data management, increase confidence among internal and external users, and coordinate the logistics of inventory. With the new PeopleSoft software the company enhanced its capabilities for handling, distributing, and marketing its pharmaceuticals.

HUMAN RESOURCE ERP COMPONENT

Human resource ERP component – Tracks employee information including payroll, benefits, compensation, performance assessment, and assumes compliance with the legal requirements of multiple jurisdictions and tax authorities

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Features include the ability to perform a detailed employee analysis to discover who is likely to leave the company unless additional compensation or benefits are provided

Can also identify employee resource utilization such as employee long distance bills and online training

EXTENDED ERP COMPONENTS

Extended ERP components include:

Business intelligence

Customer relationship management

Supply chain management

Ebusiness components include

Elogistics

Eprocurement

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Depending on when you cover this material, these terms may or may not need to be reviewed (since the students have already learned about BI, CRM, and SCM)

If you do want to review – simply cut and paste the definitions into the slide above

Business intelligence – describes information that people use to support their decision-making efforts

Customer relationship management – involves managing all aspects of a customer’s relationships with an organization to increase customer loyalty and retention and an organization's profitability

Supply chain management – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

Ebusiness – means conducting business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners

The original focus of ERP systems was the internal organization

In other words, ERP systems are not fundamentally ready for the external world of e-business

The newest and most exciting extended ERP components are the e-business components e-logistics and e-procurement

Elogistics – manages the transportation and storage of goods

Eprocurement – the business-to-business (B2B) purchase and sale of supplies and services over the Internet

MEASURING ERP SUCCESS

Balanced scorecard – Enables organizations to clarify their vision and strategy and translate them into action

Balanced scorecard views the organization from four perspectives

Learning and growth

Internal business process

Customer

Financial

The value of metrics is in their ability to provide a factual basis for defining:

Strategic feedback to show the present status of the organization from many perspectives for decision makers.

Diagnostic feedback into various processes to guide improvements on a continuous basis.

Trends in performance over time as the metrics are tracked.

Feedback around the measurement methods themselves and which metrics should be tracked.

Quantitative inputs to forecasting methods and models for decision support systems

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MEASURING ERP SUCCESS

The balanced scorecard is a management system, (in addition to a measurement system), that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise

The balanced scorecard views the organization from four perspectives, and users should develop metrics, collect data, and analyze their business relative to each of these perspectives:

The learning and growth perspective.

The internal business process perspective.

The customer perspective.

The financial perspective

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MEASURING ERP SUCCESS

ERP systems contain multiple complex components that are not only expensive to purchase, but also expensive to implement

Costs include

Software

Consulting fees

Process rework

Customization

Integration

Testing/Training

ERPs are one of the most difficult systems to implement and measure. Ask your students to research ERP vendors and determine some of the biggest issues/costs

Nike had a legendary ERP failure

Top 10 reasons for ERP Implementation failures:

1. Doing it in the first place.

2. No clear destination.

3. A good plan or just a plan?

4. Part-time project management.

5. Under-estimating resources required.

6. Over-reliance on the consultants.

7. Customization.

8. On the job training.

9. Insufficient testing.

10. Not enough user training.

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ORGANIZATIONAL INTEGRATION WITH ERP

SCM, CRM, and ERP are the backbone of ebusiness

Integration of these applications is the key to success for many companies

Integration allows the unlocking of information to make it available to any user, anywhere, anytime

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It might be a bit confusing to your student that many ERP vendors offer SCM and CRM components

Explain to your students that these modules are typically not as functional or flexible as the modules offered by industry leaders who specialize in SCM and CRM

A good analogy is to brand-name foods at a grocery store

A grocery store, such as Safeway, maintains all types of products

Safeway offers its own products, such as Safeway’s spaghetti sauce and Safeway’s paper towels, (these are known as name brand products and usually offer a cost advantage)

The store also carries products that are specific to a manufacturer, such as Ragu’s spaghetti sauce and Bounty’s paper towels

Customers can choose to buy Safeway’s product (this is similar to product supplied by the ERP), or customers can choose to buy a specialty product that is usually more expensive but offers better quality, additional features, and better taste (such as Ragu)

Explain to your students that ERP vendors carry SCM and CRM components, but they are usually not as good as the vendors that specialize in SCM and CRM components (Siebel CRM, i2 SCM)

ORGANIZATIONAL INTEGRATION WITH ERP

Companies run on interdependent applications

If one application of the company does not function well, the entire customer value delivery system is affected

The world-class enterprises of tomorrow must be built on the function of world-class applications implemented today

CLASSROOM EXERCISE

Designing a Digital Dashboard for an ERP System

Digital dashboards offer an effective and efficient way to view enterprisewide information at near real-time. According to Nucleus Research, there is a direct correlation between use of digital dashboards and a company’s’ return on investment (ROI), hence all executives should be using or pushing the development of digital dashboards to monitor and analyze organizational operations.

Break your students into groups and ask them to develop a digital dashboard for an ERP system. Review the digital dashboards on page 98. Be sure your students have addressed all of the following in their digital dashboard:

Accounting

Finance

Logistics

Production

Distribution

Manufacturing

Human resources

SCM

CRM

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LEARNING OUTCOME REVIEW

Now that you have finished the chapter please review the learning outcomes in your text

Be sure to review the learning outcomes included in the end-of-chapter material

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