E(lectronic)-Business

International Management and

International Management and

E(lectronic)-Business

Enterprise Resource Planning Systems (ERP) and E business

Enterprise Resource Planning Systems (ERP) and E-business

System Integration

Prof. Michael H. Breitner ([email protected])

Dipl.-Ök. Nadine Guhr ([email protected])

Agenda

Agenda

1. Enterprise Resource Planning (ERP) Systems

2. ERP systems within the E-business architecture

3. ERP system market and issues in implementation

4. ERP system implementation projects

System Classification

System Classification

Technical

software

software

e.g. CAD or CASE

systems

Business

Sector-specific

software

Standard

software

Business

software

for order fullfilment, payroll accounting, accounts receivables

and payables etc.

Functional

software

Application

software

and payables etc.

Specific

software

Mixed

software

Software

e.g. CIM systems

Internal

System

software

Custom

software

development

External

development

software

development

System Classification

System Classification

ƒ ERP Core Modules

and their integration

ƒ Functional vs.

sector-specific classification

of ERP systems

Integration

Integration

Integration

Integration

ƒ Data integration

ƒ Central master data management (data which are continuously

used, e.g. product and customer data, manufacturing resources,

staff)

Incr

staff)

ƒ Central Database

easing level

o

ƒ Process integration

ƒ Seamless integration of process execution (Order-to-Cash /

Procure to Pay

)

o

f integration

Procure-to-Pay…)

ƒ e.g. Simultaneous booking of financial

and inventory streams

y

Functional vs Process Orientation

Functional vs. Process Orientation

ƒ Integration is a consequence of process thinking!

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ing

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c

tional

thin

k

Sourcing

Manufacturing

Sales

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l

t

I t

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t

Fun

c

OtC / PtP etc.

Customer

Internal customer

Internal customer

Process

objectives

Process

results

Customer

ERP Definition

ERP Definition

ƒ

Software providing integrated functions for major business functions such as

production distribution sales finance and human resources management (Chaffey

production, distribution, sales, finance and human resources management (Chaffey

2009).

ƒ

Cross-functional software solutions that manage and evaluate business processes,

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p

,

such as production, sales, logistics, finance and human resources. An ERP system

consistently manages different business functions and is therefore a useful instrument

for controlling and management. More recent ERP systems can be applied for

management and evaluation of external business processes (translated from

management and evaluation of external business processes (translated from

http://wirtschaftslexikon.gabler.de/Archiv/3225/erp-v10.html

)

ƒ

Enterprise Resource Planning (ERP) are software solutions for management of

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)

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business processes. Their scope of application spans from organization to

administration and controlling of business processes.[…] ERP systems increasingly use

integration via company networks and the internet, in order to support commerce,

e-procurement and other electronic processes Among these are customer relations via

procurement and other electronic processes. Among these are customer relations via

CRM and enterprise-wide integration of software through Enterprise Application

ERP 3-tier architecture

ERP 3-tier architecture

ƒ ERP Frontend is usually a

common user interface for

employees from different

departments or business

Graphical User Interface (GUI)

departments or business

functions.

ƒ Applications encompass the

business logic or business

rules for process execution

Applications/ Business Logic

rules for process execution

ƒ A common database is the

ƒ A common database is the

minimal level of integration

and ensures consistency

Database Management System (DBMS)

Evolution of ERP systems

Evolution of ERP systems

ƒ ERP II or Enterprise Application Integration (EAI)

ERP

ERP II

Role

Domain

Enterprise optimisation

Value chain participation/

e-commerce enablement

Manufacturing

and distribution

All sectors/segments

Function

Process

Manufacturing, sales

and distribution, and

finance processes

Cross-industry, industry

sector and specific

industry processes

Internal, hidden

Process

Externally connected

Architecture

Internal, hidden

y

Web-aware,

closed, monolithic

Web-aware,

Open, componentized

Internally generated

Internally and externally

Data

Internally generated

and consumed

Internally and externally

published and subscribed

Process integration in E-business systems

Process integration in E-business systems

ƒ Business processes are seamlessly integrated and executed

throughout the e-business architecture

CRM

1. Log activity --->

2. Log opportunity--->

3 Check for contract

>

< --- 16. Apply payment

< --- 15. Invoice

<

14 Ship

ERP

3. Check for contract --->

4. Check inventory --->

5. Check ATP/CTP --->

< --- 14. Ship

<--- 13. Send ASN

<--- 12. Plan and produce

SCM

6. Determine price --->

7.Quote customer --->

8. Create Quote --->

< --- 11. Confirm order

<--- 10. Check credit

<--- 9. Generate order

ERP systems within the E-business

y

architecture

Role of ERP system in E-business

Role of ERP system in E-business

ƒ Relation with e-commerce: ERP systems are the backbone for

any e-commerce application as they deliver relevant real-time

information via interfaces

ƒ ERP systems are a source of “good practice” ( vs “best

ƒ ERP systems are a source of good practice ( vs. best

practice”) which is especially useful when e.g. new e-commerce

processes are implemented.

Buy-Side

In-Side

Sell-Side

SCM

ERP

CRM

Buy-Side

In-Side

Sell-Side

Enterprise

Real-time Enterprise (RTE)

Real-time Enterprise (RTE)

ƒ Concept originates from customer-oriented thinking

ƒ New enterprise technology has reached the point where

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unconditional process orientation becomes technologically

possible

ÆBusiness processes should be executed without any time lag

ÆBusiness processes should be executed without any time lag

ÆOccurring time lags need to be monitored, analyzed and

minimized

Æ seamless integration of systems and common data exchange

standards are necessary in order to link the entire enterprise

value chain

ƒ The ultimate objective is achieving full customer satisfaction

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d hi h

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Best-of-breed vs single source-systems

Best-of-breed vs. single source-systems

ƒ E-business architecture (ERP, CRM, SCM etc.)

ƒ sourced from a single vendor

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d d i t f

b

d th

l

i t

ti

t

ƒ Standard interfaces can be used thus lower integration costs

ƒ No necessarily the optimal fit with business requirements

ƒ sourced from multiple vendors applying a best-fit approach

(best-of-breed)

ƒ Software can be chosen based on business requirements

ƒ Software can be chosen based on business requirements

ƒ Integration costs need to be evaluated

Enterprise Application Integration (EAI)

Enterprise Application Integration (EAI)

ƒ EAI enables integration of formally isolated enterprise systems

in order to provide seamless integration of data, applications,

processes and workflows in a heterogeneous system

environment.

environment.

ƒ Multiple systems are integrated via middleware.

GUI Integration

People

GUI Integration

via Portals

CRM

Legacy

Systems

EAI

App-lications

Proces-ses

Business process

integration and automation

ERP

Other

Data

Bu-siness

partners

integration and automation

of workflows

Middleware

Integration typologies

Integration typologies

ƒ Peer-to-Peer

ƒ 1:1 connections

ƒ Inflexible, low initiation costs; high

follow up costs

follow-up costs

ƒ Hub-and-Spoke

ƒ n:m connections

ƒ Flexible, high initial cost; low

follow-up costs

up costs

Enterprise Application Integration (EAI)

Enterprise Application Integration (EAI)

ƒ Example:

ƒ Company A is a well-established fashion label and uses

department stores as their primary sales channel. The sales

director and the analyst team decide to introduce a webshop as

director and the analyst team decide to introduce a webshop as

a direct sales channel.

ƒ Why does EAI play an important role in extending the company‘s

e-business system architecture?

Whi h d t i

i d t f

d th

b h

d

h

d

thi

ƒ Which data is required to feed the webshop and where does this

data come from?

ƒ The logistics director supports the webshop. What are the benefits

g

pp

p

the logistics department can expect from the webshop and which

functionalities are required to fulfill them?

ERP system market and issues in

y

implementation

ERP market in Germany

ERP market in Germany

56,30%

45,00%

R&D/product management

After sales service/support

75 80%

75,30%

57,30%

,

Administration

Sales and distribution

Supplier management

/p

g

83,00%

77,00%

75,80%

Production

Corporate management and planning

Administration

Processes covered by ERP systems in industrial businesses

84,60%

Order fulfillment

Market share of ERP system vendors in

di

(100 499

l

)

d

medium (100-499 employees) and

large enterprises (>499 employees)

Issues in ERP Implementation

Issues in ERP Implementation

ƒ Cost categories and shares

ƒ Cost categories and shares

for ERP implementation

projects

29,20%

14,90%

Implementation/customizing

User Training

27,00%

28,90%

Hardware/middleware

Software licences

ƒ Share of businesses

37,50%

28,50%

Implementation/customizing

User Training

ƒ Share of businesses

significantly exceeding

planned implementation

19,40%

22,20%

Hardware/Middleware

Software licences

costs

Issues in ERP Implementation

Issues in ERP Implementation

ƒ Reasons for deviations

System extensions

19,40%

of implementation/

customization costs

,

18,60%

16,70%

y

Planning errors

Unexpected efforts

16,70%

12,20%

New/different requirements

Other unexpected problems

13,90%

13 months and 

ƒ Implementation project

duration

28,90%

25,60%

longer

7‐12 months

4‐6 months

duration

31,60%

shorter than 3 

months

ERP system implementation

ERP system implementation

ƒ General IT Project Management Lifecycle

Initiating

g

Planning

g

Executing

Monitoring

and

controlling

Closing

Source: Phillips 2010

Project management basics

Project management basics

ƒ SMART project goals

ƒ Project management Triangle

ƒ Specific: detailed and precise

requirements definition

ƒ Measurable: metrics need to

ƒ Measurable: metrics need to

be introduced and measured

ƒ Achievable: realistic in terms

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t i t

f th

Cost

of the constraints of the

available resources (e.g.

project management triangle)

Manage-

Project

ƒ Relevant: project goals should

benefit the organization (cut

cost increase revenue etc )

Manage

ment

Triangle

cost, increase revenue etc.)

ƒ Time-bound: short to

middle-term requirements

SAP ERP Implementation: ASAP Methodology

SAP ERP Implementation: ASAP Methodology

ƒ Accelerated SAP (ASAP) Methodology

ASAP (Accelerated SAP)

ASAP (Accelerated SAP)

ƒ Comprehensive solution for faster and systematic implementation

and continuous optimization (based on experiences)

ƒ Gives answers for following questions

ƒ

How much will the project cost?

ƒ

How long will the project last?

ƒ

How should the project participants proceed?

ƒ

How can quality be ensured?

ƒ

Which tools are available?

ƒ Service & Support by vendor (consultancy, training, EarlyWatch,

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y

(

y,

g,

y

,

GoingLiveCheck) as „accelerators“

Benefits of ASAP

Benefits of ASAP

ƒ Faster implementations with streamlined and focused

methodology

ƒ More reliable projects, through proven tools, accelerators, and

best practices

best practices

ƒ Lower risk

ƒ More efficient use of resources

More efficient use of resources

ƒ Reduced costs

ƒ Effective project management based on Project Management

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g

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g

Institute standards

ASAP Tools

ASAP Tools

ƒ Key project workstreams:

ƒ Deliverables

ASAP Phase 1: Project Preparation

ASAP Phase 1: Project Preparation

ƒ

In the project preparation phase, the project team defines project goals, a high-level

scope, and a project plan. Executive sponsorship is secured, and the project

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standards and organization are set up. The implementation strategy is defined and

approved. At the same time, the project procedures, standards, organization, and

staffing are finalized. Roles and responsibilities of the entire project team are agreed

upon and documented. The objectives of the project are validated, and all initiation

activities are documented in the project charter.

ASAP Phase 2: Business Blueprint

ASAP Phase 2: Business Blueprint

ƒ

During this business blueprint phase, solution and technical designs are documented

in the business blueprint. Lead by solution and industry experts from the SAP

e bus ess b uep

ead by so u o a d

dus y e pe s o

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Consulting organization, a series of structured process workshops are planned and

executed to arrive at the “to-be delivered" SAP enterprise solution. All available

documentation for standard, delivered support for SAP business scenarios and all

relevant preconfigured support for best practices are reviewed and discussed with SAP

relevant preconfigured support for best practices are reviewed and discussed with SAP

experts. All functional and technical requirements, coupled with project issues and

ASAP Phase 3: Realization

ASAP Phase 3: Realization

ƒ

In the realization phase, the SAP software system is configured and tested in a

number of cycles. Initially, the baseline configuration, which represents the core

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business process settings, is performed, tested, and confirmed. This is followed with

a series of configuration and development cycles, to implement the entire end-to-end

solution. The solution is tested in a number of cycle tests and in a focused

end-to-end integration test Configuration is documented in SAP Solution Manager All

end integration test. Configuration is documented in SAP Solution Manager. All

development such as enterprise services, interfaces, data conversion programs,

reports, and any required enhancements are built and documented in SAP Solution

Manager. Legacy data conversion programs are created and tested. The production

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g

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p g

p

system is installed during realization.

ASAP Phase 4: Final Preparation

ASAP Phase 4: Final Preparation

ƒ

Within the final preparation phase, all systems are known to function correctly

following the approved integration test. Technically, all integration issues should now

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be resolved. Detailed transition and cutover plans are created. The customer support

organization is put in place. The production system is set up with transports and

customer data. At the end of this phase, the production system is switched on and

business operations start in the new environment.

ASAP Phase 5: Go Live Support

ASAP Phase 5: Go Live Support

ƒ

The purpose of the go-live support phase is to move from a preproduction

environment to live production operation An easily accessible production support

environment to live production operation. An easily accessible production support

organization must be in place to support the end-user community, not just for the first

critical days of production operations, but also for long-term support.

Project Management Success

Project Management Success

ƒ Standish group "CHAOS Summary 2009" report shows once

again that project failure rates are high

Critical Success Factors in ERP Implementation

Critical Success Factors in ERP Implementation

ƒ Critical success factors (CSF) in IT project management:

aspects where things have to go right for the project to succeed

ƒ Limited number (…) of characteristics, conditions, or variables

that have a direct and serious impact on the effectiveness,

efficiency and viability of an organization program or project

efficiency, and viability of an organization, program, or project.

Activities associated with CSF must be performed at the

highest possible level of excellence to achieve the intended

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(B

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overall objectives (BusinessDictionary.com)

ƒ CSF can be regarded as project risk factors and should be

ƒ CSF can be regarded as project risk factors and should be

Research Paper on CSF for ERP Implementation

Research Paper on CSF for ERP Implementation

ƒ Esteves, J., Pastor, J.A.,

Organizational and technological

critical success factors behavior

along the ERP implementation

along the ERP implementation

phases,

Enterprise Information Systems VI,

2006, Part 1, 63-71

The Unified CSF Model

The Unified CSF Model

ƒ Strategic: related to the organization‘s mission and long-term

goals

ƒ Tactical: affect business activities with short-term objectives

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tor

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0

Source

: Est

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CSF along ASAP Phases

CSF along ASAP Phases

s/P

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r 2006

Source: Es

teve

Findings (1)

Findings (1)

ƒ Organizational factors are „more“ important than technological

ƒ „Organizations should consider organizational factors early in

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d i

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the project lifecycle, during project preparation and business

blueprint and at the end“.

ƒ Careful monitoring of CSF throughout the project need to

consider the shift from organizational to technological factors

and vice versa.“ERP project monitoring and controlling involves

a dynamic multi-success-factor management since the most

relevant CSFs may change along the project “

Findings (2)

Findings (2)

ƒ “The adequate project manager role is the most relevant CSF

along all the ERP implementation phases. Therefore,

organizations must put special attention on the selection,

motivation and retention of this person and try to select the

motivation and retention of this person and try to select the

most adequate person for this role.

ƒ The project manager requires skills to address both,

organizational and technological aspects.

Summary

Summary

ƒ ERP systems are integrated business application that support

all business functions along end-to-end business processes.

ƒ ERP systems are the backbone of an e-business architecture

and have evolved into comprehensive e business applications

and have evolved into comprehensive e-business applications

(ERP II).

ƒ Within the EAI concept ERP systems can be seamless

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y

integrated with sell-side (CRM) and buy-side (SCM)

applications.

ERP

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t ti

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t f il

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d t b

ƒ ERP system implementation is prone to failure and needs to be

managed carefully.

ƒ In research and practice procedure models have been

ƒ In research and practice, procedure models have been

developed and are continuously extended.

ƒ CSF can be identified and used for planning, controlling,

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g

g

Recommended Literature

Recommended Literature

ƒ

O‘Leary, D.E., Enterprise resource planning systems : systems, life cycle, electronic

commerce and risk Cambridge University Press 2000 ISBN 0-521-79152-9 partially

commerce, and risk, Cambridge University Press, 2000, ISBN 0 521 79152 9, partially

available via Google Books

ƒ

Jacob, O. (Ed.), ERP Value : Signifikante Vorteile mit ERP-Systemen, Springer, 2008, via

Springerlink http://dx.doi.org/10.1007/978-3-540-74440-5

ƒ

Hesseler, M.; Görtz, M., Basiswissen ERP-Systeme : Auswahl, Einführung & Einsatz

betriebswirtschaftlicher Standardsoftware, W3L-Verlag, 2008, ISBN 978-3-937137-38-4,

available via Google Books

ƒ

Leon A Enterprise Resource Planning McGraw-Hill Education Ltd 2007 available via

ƒ

Leon, A., Enterprise Resource Planning, McGraw-Hill Education Ltd., 2007, available via

Google Books

ƒ

Scheer, A-W., et al. Real-time Enterprise, Springer Verlag, 2003, available via Google Books

ƒ

Konradin Erp-Studie 2009, Einsatz von ERP-Lösungen in der Industrie, available upon

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g

p

registration via http://www.infor.de/erp-studie-2009

ƒ

Phillips, J., IT Project Management: On Track from Start to Finish, The McGraw-Hill

Company, 2010

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J P

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J A O

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d t

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b h

i

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Esteves, J., Pastor, J.A., Organizational and technological critical success factors behavior

along the ERP implementation phases, Enterprise Information Systems VI, 2006, Part 1,

63-71, DOI: 10.1007/1-4020-3675-2_8

ƒ

Esteves J., Pastor J., "Towards the Unification of Critical Success Factors for ERP

,

,