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1EnterpriseResourcePlanning-ERPKevinCowellNatthawutLertpitayakunIsabelleMerthaXiaoguangYou2WhatisERP?Thepracticeofconsolidatinganenterprise’splanning,manufacturing,salesandmarketingeffortsintoonemanagementsystem.1Combinesalldatabasesacrossdepartmentsintoasingledatabasethatcanbeaccessedbyallemployees.2ERPautomatesthetasksinvolvedinperformingabusinessprocess.1Sources:1.,viewedSeptember19,20022.CIOEnterpriseMagazine,May15,1999.3EvolutionofERPSource:,viewedSeptember19,2002.4EmployeesManagersandStakeholdersHowDoERPSystemsWork?CentralDatabaseReportingApplicationsHumanResourceManagementApplicationsFinancialApplicationsManufacturingApplicationsInventoryAndSupplyApplicationsHumanResourceManagementApplicationsServiceApplicationsSalesandDeliveryApplicationsSalesForceAndCustomerServiceRepsCustomersBack-officeAdministratorsAndWorkersSuppliersSource:Davenport,Thomas,“PuttingtheEnterpriseintotheEnterpriseSystem”,HarvardBusinessReview,July-Aug.1998.5ERPComponentsFinance:modulesforbookeepingandmakingsurethebillsarepaidontime.Examples:–Generalledger–Accountsreceivable–AccountspayableHR:softwareforhandlingpersonnel-relatedtasksforcorporatemanagersandindividualemployees.Examples:–HRadministration–Payroll–Self-serviceHRManufacturingandLogistics:Agroupofapplicationsforplanningproduction,takingordersanddeliveringproductstothecustomer.Examples:–Productionplanning–Materialsmanagement–Orderentryandprocessing–WarehousemanagementSource:,4814,43432,00.html,viewedSeptember19,2002.6AnERPExample:BeforeERPCustomersCustomerDemographicFilesSalesDept.VendorOrdersPartsAccountingAccountingFilesPurchasingPurchasingFilesOrderisplacedwithVendorInvoicesaccountingInventoryFilesWarehouseChecksforPartsCallsback“Notinstock”“Weorderedtheparts”“WeNeedparts#XX”“Weorderedtheparts”SendsreportSendsreportSendsreportShipsparts7AnERPExample:AfterERPDatabaseCustomersSalesDept.PurchasingWarehouseAccountingVendorInventoryDataIfnoparts,orderisplacedthroughDBOrdersPartsOrderissubmittedtoPurchasing.PurchasingrecordorderinDBOrderisplacedwithVendorAndinvoicesaccountingFinancialDataexchange;BooksinvoiceagainstPOBooksinventoryagainstPOShipsparts8WhoarethemainERPvendors?BaanJDEdwardsOraclePeopleSoftSAP9ERPVendorsandIndustriesTheyServeAerospace/DefenseAutomotiveConsumerPackageGoodsElectronicIndustrial/ManufacturingOil/GasPharmaceuticalsBaanBaanSeriesJ.D.Edwards&Co.OneWorld,OneWorldSoftwareOracleCorp.ApplicationsPeopleSoft,Inc.PeopleSoft7.5SAPR/3%PlannedPenetration10-155-1035+40+353020Source:BenchmarkingPartnersInc.10RevenueandProfitsofMajorERPVendorsERPVendorsRevenue6.50.3945.62.070.89410.861.740.321.0210.10123456789101112SAPPeopleSoftOracleLawsonJ.D.EdwardsBillionsofDollars2001200011RevenueandProfitsofMajorERPVendorsERPVendorsR&DExpenditure79685952.62991244.832111701002003004005006007008009001000SAPPeopleSoftLawsonJ.D.EdwardsMillionsofDollars2001200012ERPMarketTotalRevenues,2000SAP32%Other36%Oracle15%Peoplesoft9%J.D.Edwards5%GeacComputer3%Source:AMRResearch,2001Source:AMRResearch,2001.13ERPInvestmentsSource:AMRResearchSurveyof686companieswithannualrevenuesrangingfrom$50Mto$1B,October2001.PercentofITApplicationBudget14.0%33.5%11.0%14.0%22.5%19.0%19.0%15.5%20.5%31.0%ERPSCMCRME-commerceOther20002001Roughly65%ofcompaniessurveyedalreadyhaveERPinplace.Ofthose,manyarestillactivelyspendingtoupgradeexistingsystemsandtotakeadvantageofnewweb-orientedfeatures.14ERPInvestmentsHaveERPtoday?Yes67%No33%YesNoDon'tknown=666Willinstallnextyear?Yes28%Don'tknow10%No62%YesNoDon'tknown=232Source:AMRResearchSurveyof686companieswithannualrevenuesrangingfrom$50Mto$1B,October200115WhyERP?3MajorReasons:Tointegratefinancialdata.Tostandardizemanufacturingprocesses.TostandardizeHRinformation.Source:,viewedSeptember19,2002.16ERPProjectandTimeRealtransformationalERPeffortswillusuallyrunbetween1to3years,onaverage.Shortimplementations(3to6months):–smallcompanies,–implementationlimitedtoasmallareaofthecompany,or–thecompanyonlyusedthefinancialpiecesoftheERPsystem.TheimportantthingisnottofocusonhowlongitwilltakebuttounderstandwhyyouneedERPandhowyouwilluseittoimproveyourbusiness.Source:,viewedSeptember19,2002.17TotalCostofOwnershipofERPTotalcostofownership(TCO)isamodeldevelopedbyGartnerGrouptoanalyzethedirectandindirectcostsofowningandusinghardwareandsoftware.TCOessentiallyhelpsacompanydeterminewhetheritwinsorlosesfromspecifictechnologyimplementations.Metagroupstudyamong63companiessurveyedshowedthat:–theaverageTCOwas$15million(thehighestwas$300millionandlowestwas$400k),–theaverageTCOperuserwas$53,320.Source:,viewedSeptember19,2002.18TotalCostofOwnershipofERPItalsofoundthat:–ittook8monthsafterthesystemwasintoseeanybenefits,–butthatthemedianannualsavingsfromthesystemwas$1.6millionperyear.Sourc