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The State of the art for computer-based technologies used by different types of people for Enterprise Resource Planning (ERP) applications in the 21st Century.
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Abstract
An Enterprise Resource Planning (ERP) solution is a computer program that provides a
general working platform for all departments of an enterprise with their management
functions being integrated into the program. These solutions are used at all the different
levels of an organization (operational, management and strategic) as well as across
functional areas (such as customer care, sales and marketing and manufacturing).
Different technologies have been used in implementing these solutions since they were
first deployed starting from the 3-tier (presentation, application, database) model to the
emerging web-service based technologies. The major ERP software vendors are SAP
AG, Oracle (which has grown its customer base based on acquisitions of other firms in
the same business), Infor Global Systems and now Microsoft.
1.0 INTRODUCTION
Enterprise Resource Planning (ERP), a business integration approach, has been widely
deployed in various kinds of organizations since it was first defined by the Gartner Group
in 1990 as the next generation of Manufacturing Resource Planning(MRP) software.
Today, ERP is considered to be “the price of entry for running a business”(Kumar & van
Hillegersber as quoted in LeRouge & Webb, 2007).
An ERP system is an integrated, configurable, and tailor-able information system which
plans and manages all the resources and their use in the enterprise, and streamlines and
incorporates the business processes within and across the functional or technical
boundaries in the organization (She & Thuraisingham, 2007). According to Lin, Yang
and Lin (2006), ERP is a business management system that integrates all facets of a
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business, including planning, manufacturing, sales, purchasing, marketing, and finance,
so they can cross organizational boundary and be more closely coordinated by sharing
information. It can therefore be seen that ERP systems facilitate collaboration in
organizations and thus can help them streamline/optimize their operations and hence
contributing to their successful existence.
Our objective in responding to this question is to give an overview of the state of the art
in the different computer based technologies being used for ERP and particularly to
discuss the developments in this field along with the different software products available
from the major players in the field of ERP software. We also look at the different levels
at which ERP solutions are used in businesses. In order to achieve this, we start by
looking at the history of ERP systems, their architecture and emerging technologies in
this field along with the different kinds of information systems used at the different levels
of a business.
2.0 HISTORY AND EVOLUTION OF ERP SYSTEMS
In order to understand the current technologies, we need to first look at the birth and
growth of ERP and its attendant solutions. The evolution of these systems dates back to
the year 1960 when systems were designed to assist the manufacturing process.
The first software that was developed in this process was Material Resource Planning
(MRP) in the year 1975. MRP was a software based production planning and inventory
control system. This was followed by another advanced version namely MRP II which is
an acronym for Manufacturing Resource Planning. The main emphasis of MRP II(which
was released in the 1980s) was the optimization of manufacturing processes by
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synchronizing the materials with production requirements.
ERP came into being with effect from 1990 though the fact remains that many people are
of the opinion that ERP existed from the year 1960 in the form of MRP and MRP II. ERP
systems now attempt to cover all core functions of an enterprise, regardless of the
organization's business or charter. These systems can now be found in non-manufacturing
businesses, non-profit organizations and governments.
From the point of view of some researchers, the ERP technology after 2000 is considered
as “Extended ERP” (Rashid, Hossain, and Patrick, 2002 as quoted in She and
Thuraisingham (2007)) because e-business solutions such as Customer Relationship
Management (CRM) and Supply Chain Management (SCM) are included into the core
modules of the original ERP systems.
Various commercial products including SAP, Oracle, and Baan, are now available in the
marketplace. Furthermore, Web services and service-oriented architectures are the major
underlying technologies for emerging ERP systems (She & Thuraisingham, 2007).
Figure 1: Evolution of ERP solutions
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3.0 ERP TECHNOLOGY
3.1 Overview
In simple terms, an ERP solution is a computer program that provides a general working
platform for all departments of an enterprise with their management functions being
integrated into the program. The program runs off a single database so that all
departments can easily share information and better communicate with each other.
Figure 2: ERP systems concept
Ideally the central database contains all data for the different software modules which
would include:
• Supply Chain Management (SCM) – This module is concerned with inventory,
order entry, purchasing, product configuration, supply chain planning. It’s focus is
on helping the firm manage its relationship with suppliers to optimize the
planning, sourcing, manufacturing, and delivery of products and services.
• Customer Relationship Management (CRM) – The focus of this module (system) is
to coordinate all the business processes surrounding the firm’s interactions with
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its customers in sales, marketing, and service to ensure customer satisfaction and
retention thus ensuring a continued revenue stream for the company. It helps the
company unify its customer interactions and provide a means to track customer
information.
• Knowledge Management Systems – This is a system for managing knowledge in
organizations for supporting creation, capture, storage and dissemination of
information. Its major focus is on enabling employees to have ready access to the
organization's documented base of facts, sources of information, and solutions.
•Manufacturing – This module would take care of managing the engineering
processes, preparation of bills of material, scheduling, capacity, workflow
management and any other direct manufacturing process.
• Financials – General ledger, cash management, accounts payable
• Project Management – Costing, billing, time and expense, performance units,
activity management
• Human resources – payroll, training, time and attendance, rostering, benefits
3.2 Architecture of ERP Systems
ERP systems are commonly developed based on a three-tiered client/server architecture
in order to offer the needed functionality, flexibility, scalability, and reliability (Jingsheng
Shi & Halpin, 2003):
• First Tier: Presentation Layer (Front) whose primary purpose is to present
interfaces to various users across the enterprise. Every time a user logs in to the
system, his/her access level and an appropriate user interface through which
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he/she can execute their tasks and duties is presented to them. The different access
levels are assigned usually based on office functions such as human resources,
accounts, administration etc.
• Second Tier: Application Layer (Middle) which is the framework engine
providing system administration and maintaining central intelligence for
facilitating client access to the third layer. It is the bridge between the end users
and applications.
• Third Tier: Database Layer (Back) which is made up of the central database that
manages the operational and business data throughout the whole enterprise. The
database contains equipment information, cost data, project data and any other
business information.
Figure 3: ERP Architecture (Source: She and Thuraisingham, 2007)
3.3 Emerging Trends in ERP technologies
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According to Thuraisingham (2006) as quoted in She and Thuraisingham (2007), the
current generation of ERP solutions is the third. The first was related to manufacturing
applications, the second was specialized systems such as supply chain management and
customer relationship management and the third and most current is the one based on
web services.
According to the World Wide Web Consortium (2004), a Web service is a software
system designed to support interoperable machine-to-machine interaction over a network.
It has an interface described in a machine-processable format. Other systems interact with
the Web service in a manner prescribed by its description using Simple Object Access
Protocol (SOAP) messages, typically conveyed using Hyper Text Transfer Protocol
(HTTP) with an eXtensible Markup Language (XML) serialization in conjunction with
other Web-related standards.
The use of Web services eases integration and also reduces costs since clients will be able
to access information without having to go through the ERP front end software.
Additionally, the clients will be able to access the information in obsolete systems
without having to worry about compatibility problems.
And according to Laudon and Laudon (2006), enterprise software vendors are
refashioning their architectures to be more Web-centric so that core systems can work
with the Internet, extended supply chains, CRM systems, and new business-to-business
(B2B) and business-to-consumer (B2C) e-commerce models. This new generation of
extended enterprise applications is sometimes referred to as Extended Resource Planning
(XRP or ERP II).
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The major enterprise application vendors also now have tools for creating cross-
application sets of services from existing systems. For example SAP’s version of cross-
application services is called xApps. xApps enables businesses to build and automate
new cross-functional, end-to-end processes atop existing applications, regardless of the
technology platform they use. xApps uses Web services standards to pull together data
from the firm’s SAP software suite, from internal legacy systems, or from external
systems for use in new business processes that span multiple functions and application
areas. The software synchronizes with the existing business processes embedded in these
systems.
4.0 ERP IN THE ORGANISATION
4.1 Organization Levels
Every organization is composed of different levels, different divisions and different
business unit goals and targets. One therefore often finds different information systems
being used in an organization to meet the differing needs of the organization.
According to Laudon and Laudon (2006), a typical organization can be split into three
levels (operational, management and strategic) and then into four major functional areas
(sales and marketing, manufacturing and production, finance and accounting and human
resources) each being served by a different information system. This is illustrated in the
diagram below:
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:
Figure 4: Levels and functional areas in an organisation
4.2 Information Systems in Organizations
There are therefore three major types of information systems used in organizations to
serve at the three different levels. At the lowest level are the operational-level systems
that support operatives by keeping track of the basic activities and transactions of the
organization. An example of an operational-level system is the cash register at a
supermarket.
At the next level are the management level systems that facilitate the decision-making
and administrative activities of middle managers. These systems are usually used to
provide periodic reports and not instant information. An example of a management-level
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system is one that tracks monthly sales figures by supermarket and reports on
supermarkets where sales exceed or fall below anticipated levels.
The highest level of information systems are those that help senior management respond
to strategic issues and long-term trends. An example of such a system is one that
forecasts sales trends in the medium to long term.
The figure below shows the specific information systems that are used at each level:
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Figure 5: Different information systems used at the different organizational levels
Each of these systems is not a stand-alone system but rather exists in a symbiotic
relationship in the systems hierarchy feeding data/information into the system a level
above it and/or picking data from the system a level below it.
4.3 Systems Integration to achieve an enterprise-wide view
It is definitely advantageous to integrate these different systems so that information can
flow easily between different parts of the organization and provide management with an
enterprise-wide view of how the organization is performing as a whole. This is where the
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enterprise systems come in and provide a cross-level, cross-functional and business
process oriented view of the organization (Laudon & Laudon, 2006). The figure below
shows the setup of these systems in the organization whereby they span the whole
organization and even including customers and key business partners such as suppliers.
Figure 6: Enterprise Applications
5.0 VENDORS & PRODUCTS
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The major vendors of ERP products traditionally included SAP AG, Oracle, JD Edwards
(purchased by PeopleSoft which was itself later purchased by Oracle) and Baan
(purchased by SSA Global Technologies which was later purchased by Infor Global
Solutions). After the acquisition of PeopleSoft and JD Edwards in 2004, Oracle gained
approximately 22% of the ERP market share. However, the Microsoft offerings in this
are area also becoming more and more prominent.
5.1 Oracle
Oracle Corporation releases five(5) ERP products of which some are homegrown and the
others were acquired when Oracle acquired different companies. The different ERP
software that Oracle offers include:
• Oracle E-Business Suite – Oracle Corporation markets its homegrown software
applications as parts of the Oracle E-Business suite. It provides pre-integrated
financial and industry-specific processes that ensure it provides consistent
financial and operation information, dynamic planning, budgeting and forecasting
etc. It makes the following applications available as part of the Oracle eBusiness
suite(Oracle, 2009):
o Asset Lifecycle Management – This application enables the organization
to manage all of its assets through all stages of their lifecycle – planning,
acquisition, deployment etc by uniquely consolidate legacy repositories
and catalogs, enable location tracking and monitor network-attached IT
assets including hardware and software inventories.
o Customer Relationship Management – This application keeps one
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centralized database with all customer information enabling all the
different business functions to draw from one central consistent source.
o Enterprise Resource Planning
Financial Management – This module makes it easy to operate
shared services across businesses and regions since it integrates all
the financial operations as well as delivering pre-integrated
financial and industry-specific processes.
Human Capital Management – This Human Resources(HR)
management solution enables the company to manage HR globally
on a single system of record. It includes such features as payroll,
workforce scheduling and advanced benefits management.
Project Management – This module supports the full lifecycle of
project and portfolio management with a single, accurate view of
all project-related activities. Its functionality allows users to select
the best portfolio of initiatives, execute projects in adherence with
methodologies, assign the right global resources, proactively
streamline project delivery, and track profitability via accurate
budgeting, forecasting, and billings/chargebacks.
o Procurement - Procurement is the integrated suite of applications that
dramatically cut all supply management costs. It helps the company
reduce spending on goods and services and streamline procure-to-pay
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processes.
o Product Lifecycle Management - This enables companies to accelerate
product innovation and maximize product profitability by managing the
information, processes, and decisions about products throughout their
lifecycles and across the global product network. It does this by providing
a centralized enterprise product record database. The product record
includes all the information required by an enterprise and its extended
design and supply chain to conceptualize, design, source, build, sell,
service and dispose of products.
o Supply Chain Management – This module aims to help companies build
and operate world-class value-chains for profitable growth. The Oracle E-
Business Suite Supply Chain Management (R12) family of applications
integrates and automates all key supply chain processes, from design,
planning and procurement to manufacturing and fulfillment, providing a
complete solution set to enable companies to power information-driven
value chains. (Oracle, 2009)
o Manufacturing
• JD Edward EnterpriseOne and JD Edwards World – JD Edward EnterpriseOne is
an integrated applications suite of comprehensive enterprise resource planning
software from Oracle that combines business value and standards-based
technology. JD Edwards World provides the Web-enabled applications for the
management of plants, inventories, equipments, finances, and people.
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• Oracle PeopleSoft Enterprise is the business application suite that offers Web
services integration with multivendor and homegrown applications; it is
admittedly considered easier to configure and more flexible than its competitors.
5.2 SAP
The company's main Enterprise Resource Planning product is SAP ERP. The current
version is SAP ERP 6.0 and is part of the SAP Business Suite. Its previous name was
called R/3. The "R" of SAP R/3 stood for real-time - even though it is not a real-time
solution. The number 3 related to the 3-tier architecture: database, application server and
client (SAPgui). R/2, which ran on a Mainframe architecture, was the predecessor of R/3.
Before R/2 came System RF, later dubbed R/1.
SAP ERP is one of five enterprise applications in SAP's Business Suite. The other four
applications are:
• customer relationship management (CRM) - helps companies acquire and retain
customers, gain marketing and customer insight
• product lifecycle management (PLM) - helps manufacturers with product-related
information
• supply chain management (SCM) - helps companies with the process of resourcing
its manufacturing and service processes
• supplier relationship management (SRM) - enables companies to procure from
suppliers
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SAP is now offering Service Oriented Architecture (SOA) capabilities (calling it
Enterprise SOA) in the form of web services that are wrapped around its applications.
While its original products were typically used by larger companies SAP is now also
actively targeting small and medium sized enterprises (SME) with its SAP Business One
and SAP Business All-in-One.
5.3 Infor Global Systems
The major ERP product offering from Infor Global is called LN/BaaN and it offers a
wide range of support for order-driven, project-based discrete manufacturing. It is
majorly used to increase operational efficiency, better control processes, better
communication and collaboration, enhance performance and scalability and leverage IT
infrastructure and information assets. It is ideal for companies in make-to-stock,
assemble-to-order, make-to-order or engineer-to-order environments.
5.4 Microsoft
Microsoft, founded in 1975, is the biggest software company in the world with its famous
Windows series products. Microsoft Business Solution Group (MBS) is the department
that focuses on providing ERP solutions, such as Microsoft Dynamics (formerly
Microsoft Business Solutions), which is the integrated business management solution that
includes financials, customer relationship management, and supply chain management.
Microsoft Dynamics has two major products each aimed at different organization types.
For the mid-sized and larger organizations, Microsoft has the Microsoft Dynamics AX
2009 software while for the small and medium-sized enterprises they offer Microsoft
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Dynamics NAV. By 2004, MBS had revenue of around $800 million, giving it a 4% ERP
market share (She & Thurainsingham, 2007).
6.0 Conclusions
Based on an analysis of the current ERP products on the market and the evolving
technologies, we can conclude that the software is going to continue evolving to keep in
touch with the evolutionary nature of Information Technology. This will lead to ERP
systems with more coordination/collaboration, more intelligent, web-based and maybe
even mobile phone enabled. As the solutions become more and more crucial to
conducting business, more and more people and organizations will look to use them and
therefore the vendors are having to scale down the cost of their products to make them
attractive to small and medium enterprises.
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