ERP

1David O Campbell, JrBusiness Transformation Solutions

Enterprise Resource Planning(ERP)


What is ERP?

ERP is a multi-module application software that helps a company manage the important parts

of its business.


The Evolution of ERP

MRPMRPMaterial

RequirementsPlanning

Linear Planning

1970s

ERPERPEnterpriseResourcePlanning

Integrated Closed Loop

Planning

1990sMRP IIMRP II

ManufacturingResourcePlanning

Closed LoopPlanning

1980s


What does ERP do?

• Product Planning• Parts Purchasing• Managing Inventories• Interacting with

Suppliers

• Providing Customer Service

• Tracking Orders• Company Finances • Human Resource

Management

ERP helps businesses with:


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


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.


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.


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.


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


Investment Justification

• Plants become more efficient• Increased delivery/performance• Reduced lead times• Increased inventory accuracy• Reduced work-in-process inventory


Business Risks

• High initial investment ($100M for large companies is common)

• Uncertainties (software)• Employees are given much greater

responsibilities


Long-term/Short-term Cost Factors

• Implementation costs• Consultant and internal costs• Maintenance costs


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


Where do you get ERP?

• SAP• ERPLX• ERP/LN• Oracle• People-Soft

• J.D.Edwards• Microsoft• IBM• Many smaller

companies

Some of the sources of ERP software are:


How is ERP implemented?

Who is responsible?When can it be done?Where are we now?

Where are we going?Where do we start?


Who’s responsible for implementation?

Implementation Team Leaders/Members•Project leader (IS Department)•Module/Phase leaders (subject area experts)•Individual team members


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.


Where are we now? (pre-ERP)

Software–MRP/MRPII–Other

Hardware–Mainframe–Client server

Personnel


Where are we going? (post-ERP)

Expected Benefits–Improved process flow–Reduced Inventories–Better data and analysis–Better customer information–Improved margins–Others


What is really needed?

• Module Selection/Priority• Full or Partial Implementation?

– Must have– Want– Do not need


Where do we start?

• Pre evaluation Screening• Evaluation Package• Project Planning• GAP analysis• Reengineering• Team training• Testing• Post implementation


Pre-selection Process

Package Evaluation

Project Planning

Gap Analysis Reengineering Configuration

Implementation Team Training Testing End- user Training

Going Live

Post – implementation Phase

ERP implementation Life Cycle


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.


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.


Cont.

• Package must be user friendly

• Regular up gradation should available.

• Cost


Project planning

• Designs the implementation process.

• Resources are identified.

• Implementation team is selected and task allocated.

• Special arrangement for contingencies.


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


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.


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.


Testing/Prototyping

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


ERP Implementation Factors (cont’d)

• System Links– Resource Linking– Customer Satisfaction

• Limitations– Policies and Procedures– Pay Back Period


Management Requirements

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


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


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


Measuring ERP’s Performance

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


How does ERP affect the customer?

• Reduces errors in ordering, billing, shipping• Decreases lead time• Increases quality• Includes the customer in the process -

“Extranets”


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.


About PresenterDave 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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