1、1,Enterprise Resource Planning -ERP,Kevin Cowell Natthawut Lertpitayakun Isabelle Mertha Xiaoguang You,2,What is ERP?,The practice of consolidating an enterprises planning, manufacturing, sales and marketing efforts into one management system.1 Combines all databases across departments into a single
2、 database that can be accessed by all employees.2 ERP automates the tasks involved in performing a business process.1,Sources: 1. http:/ viewed September 19, 2002 2. CIO Enterprise Magazine, May 15, 1999.,3,Evolution of ERP,Source: http:/ viewed September 19, 2002.,4,Employees,Managers and Stakehold
3、ers,How Do ERP Systems Work?,Central Database,Reporting Applications,Human Resource Management Applications,Financial Applications,Manufacturing Applications,Inventory And Supply Applications,Human Resource Management Applications,Service Applications,Sales and Delivery Applications,Sales Force And
4、Customer Service Reps,Customers,Back-office Administrators And Workers,Suppliers,Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business Review, July-Aug. 1998.,5,ERP Components,Finance: modules for bookeeping and making sure the bills are paid on time. Examp
5、les: General ledger Accounts receivable Accounts payable HR: software for handling personnel-related tasks for corporate managers and individual employees. Examples: HR administration Payroll Self-service HR,Manufacturing and Logistics: A group of applications for planning production, taking orders
6、and delivering products to the customer. Examples: Production planning Materials management Order entry and processing Warehouse management,Source: http:/ viewed September 19, 2002.,6,An ERP Example: Before ERP,Customers,Vendor,7,An ERP Example: After ERP,Database,Customers,Sales Dept.,Purchasing,Wa
7、rehouse,Accounting,Vendor,8,Who are the main ERP vendors?,Baan JD Edwards Oracle PeopleSoft SAP,9,ERP Vendors and Industries They Serve,10,Revenue and Profits of Major ERP Vendors,11,Revenue and Profits of Major ERP Vendors,12,ERP Market,Source: AMR Research, 2001.,13,ERP Investments,Source: AMR Res
8、earch Survey of 686 companies with annual revenues ranging from $1B, October 2001.,Roughly 65% of companies surveyed already have ERP in place. Of those, many are still actively spending to upgrade existing systems and to take advantage of new web-oriented features.,14,ERP Investments,n=666,n=232,So
9、urce: AMR Research Survey of 686 companies with annual revenues ranging from $1B, October 2001,15,Why ERP?,3 Major Reasons: To integrate financial data. To standardize manufacturing processes. To standardize HR information.,Source: http:/ viewed September 19, 2002.,16,ERP Project and Time,Real trans
10、formational ERP efforts will usually run between 1 to 3 years, on average. Short implementations (3 to 6 months): small companies, implementation limited to a small area of the company, or the company only used the financial pieces of the ERP system. The important thing is not to focus on how long i
11、t will take but to understand why you need ERP and how you will use it to improve your business.,Source: http:/ viewed September 19, 2002.,17,Total Cost of Ownership of ERP,Total cost of ownership (TCO) is a model developed by Gartner Group to analyze the direct and indirect costs of owning and usin
12、g hardware and software. TCO essentially helps a company determine whether it wins or loses from specific technology implementations.Metagroup study among 63 companies surveyed showed that: the average TCO was $15 million (the highest was $300 million and lowest was $400k), the average TCO per user
13、was $53,320.,Source: http:/ viewed September 19, 2002.,18,Total Cost of Ownership of ERP,It also found that: it took 8 months after the system was in to see any benefits, but that the median annual savings from the system was $1.6 million per year.,Source: http:/ viewed September 19, 2002.,19,Hidden
14、 Costs of ERP,Training Integration and testing Data conversion Data analysis Consultants Replacing best and brightest staff after implementation Implementation teams can never stop Waiting for ROI Post-ERP depression,Source: http:/ viewed September 19, 2002.,20,Benefits of ERP Systems,Improving inte
15、gration, flexibility Fewer errors Improved speed and efficiency More complete access to information Lower total costs in the complete supply chain Shorten throughput times Sustained involvement and commitment of the top management,21,Benefits of ERP Systems (contd),Reduce stock to a minimum Enlarge
16、product assortment Improve product quality Provide more reliable delivery dates and higher service to the customer Efficiently coordinate global demand, supply and production,22,Risks with ERP Implementation,Expensive (can costs 100 thousands to millions of dollars) Time-consuming (can take months t
17、o years) Great risk for the organization Transfer of Knowledge Acceptance with the company,23,Case Study,Nestl USA,24,Nestl Background,Found in 1866, Switzerland. Worlds largest food company, # 50 in Fortune magazines Globe 500 Nestl USA was incorporated in 1990; Home Office in Glendale, CA. 33 manu
18、facturing facilities, 6 distribution centers and 17sales offices around the country, 17,300 employees nationwide. $ 11.1 billion in Sales (2001) “Americas most admired Food Company for the fourth consecutive year” - Fortune Magazine, February 2001,Source: http:/ , viewed October 14, 2002, and http:/
19、 viewed October 14, 2002.,25,Milk products, dietetic foods, infant foods, chocolate and confections, refrigerated and frozen items, ice cream, and pet foods,Nestls products and brands,Source: Weller, Joe, “Introduction to Nestle in the USA”, http:/ viewed October 14,2002.,26,Competitive Market,USA F
20、ood Market in 2001,Source: Weller, Joe, “Introduction to Nestle in the USA”, http:/ viewed October 20,2002.,27,Organizational Chart,Joe Weller Chairman & CEO,Jeri Dunn CIO,Other Board members,Tom James Dir. of Process change,Jose Iglesias Dir. of IS,Dick Ramage VP of supply chain,Ben Worthen, “ Nest
21、ls ERP Odyssey”, May 15, 2002 Issue of CIO Magazine,28,Business Challenges,After the brands were unified and reorganized into Nestle USAin 1991,. Divisions still had geographically dispersed. For example, Nestle USAs brands were paying 29 different prices for vanilla - to the same vendor. Nine diffe
22、rent general ledgers and 28 points of customers entry. Years of autonomous operation provided an almost “insurmountable hurdle”. “ Nestle was the worlds NO. 1 food and beverage company but one of the least efficient ”,Source: 1. Ben Worthen, “ Nestls ERP Odyssey”, May 15, 2002 Issue of CIO Magazine;
23、 2. “Nestle: An Elephant Dances”, http:/ viewed October 20, 2002.,29,Project Scope “BEST”,Five SAP Modules purchasing, financials, sales and distribution, accounts payable and accounts receivable and Manugistics supply chain module From October 1997 to 1st Quarter of 2000. $210 million budget 50 top
24、 business executives and 10 senior IT professionals,Source: Worthen, Ben, “ Nestls ERP Odyssey”, May 15, 2002 Issue of CIO Magazine.,30,Project Objectives - “One Nestle, under SAP”,Transforming the separate brands into one highly integrated company. Internal aligned and united, establishing a common
25、 business process architecture Standardizing master data,Source: Worthen, Ben, “ Nestls ERP Odyssey”, May 15, 2002 Issue of CIO Magazine.,31,Process of SAP Implementation,The new business process confused most of employees, then resistance grew into rebellion in 2000.Reconstructed in June 2000 and c
26、ompleted in 2001.,Source: Worthen, Ben, “ Nestls ERP Odyssey”, May 15, 2002 Issue of CIO Magazine.,32,Conclusion of Nestl Case,Changes and success Common database and business processes lead to more trustworthy demand forecast. A comprehensive account planning tool. Nestle can now forecast down to t
27、he redistribution center level. Nestle has improved forecast accuracy by 2% Higher factories utilization fewer factories = big gains in factories Utilization Reduce inventory level,Source: Brownson, Jim, and Mitchell-Keller, Lori, Nestle USA, Case study: supply chain: Nestle Integrated CRM and SCM O
28、ptimize Enterprise Effectiveness, http: viewed on November 06, 2002.,33,Conclusion of Nestl Case,586,371,Source: Weller, Joe, “Introduction to Nestle in the USA”, http:/ viewed October 20,2002.,Saved $ - With ERP in practice , $ 371 million has been saved until 2001.,34,Conclusion of Nestl Case,Less
29、ons learned by Nestl Dont start a project with a deadline in mind. Update your budget projection at regular intervals. ERP isnt only about the software. “No major software implementation is really about the software.” Former Nestl CIO Jeri Dunn says, “You are challenging their principles, their beli
30、efs and the way have done things for many many years” Keep the communication lines open. Remember the integration points.,Source: Worthen, Ben, “ Nestls ERP Odyssey”, May 15, 2002 Issue of CIO Magazine.,35,Nestl in the Future,The Global Business Excellence ProgramSupported by SAP, contracted in June
31、 2000 and by IBM in July 2002. To be completed by the end of 2005 To save cost around CHF 3 billion, with benefits realized from 2003.,Source: http:/www.idealliance.org/news/2002/mem0307.asp, viewed on November 1, 2002.,36,Case Study,37,What is Agilent Technologies?,Agilent Technologies is the world
32、s leading designer, developer, and manufacturer of electronic and optical test, measurement and monitoring systems. Separated from Hewlett Packard and became a public company in 1999 World HQ in Palo Alto, CA,Source: http:/,viewed, viewed November 3, 2002.,38,Around the World,Agilent has facilities
33、in more than 40 countries and develops products at manufacturing sites in the U.S., China, Germany, Japan, Malaysia, Singapore, Australia and the U.K. Approximately 37,000 employees throughout the world,Source: http:/ viewed November 3, 2002.,39,Products and Services,Agilent operates in three busine
34、ss groups: Test and Measurement Test instruments and systems, automated test equipment. Semiconductor Products Semiconductor solutions for wired and wireless communications, information processing. Chemical Analysis Life sciences and analytical instrument systems.,Source: http:/ viewed November 3, 2
35、002.,40,Agilent revenue for 2001,Test and Measurement: $5.4 billion Semiconductor Products: $1.9 billion Chemical Analysis: $1.1 billion Total revenue: $8.4 billion,Source: http:/, viewed November 3, 2002.,41,Agilents Customers,Served customers in more than120 countries around the world1 Electronic
36、component manufacturers Pharmaceutical companies Chemical companies Communication companies2,Source: 1. http:/ viewed November 3, 2002; 2. http:/ viewed November 3, 2002.,42,Source: http:/ viewed November 3, 2002.,43,Project Scope,Oracles li E-Business Suite software Started September 2000 till 2004
37、 Budget roughly 100 Oracle consultants to install the program,Source: Songini, Marc L., “ERP effort sinks Agilent revenue” Computerworld, Framingham, August 26, 2002.,44,ERP Project Objective,“One IT” organization Supply chain capability; for example, - Suppliers- Customers Migrating 2,200 legacy ap
38、plications that it inherited from HP to Oracle,Source: Gaither, Chris, “Watching Oracle For Signs Of Strength” Boston Globe, Boston, Mass., September 16, 2002.,45,One IT Project (Before),IT spend was 8-10% of sales 80% for business operations 20% maint. & upgrading legacy systems Further autonomy ov
39、er the IT portfolio would have led to 50% cost increase,Source: http:/ viewed November 3, 2002.,46,One IT Project,Marty Chuck, CIO, developed a Vision for One IT organization in August 2000 Moved more than 2,500 IT professionals in the different site, regional and divisional IT organizations,Source:
40、 http:/ http:/ viewed November 3, 2002.,47,One IT Project Objective,To consolidate a large number of independent operating groups into a single worldwide IT function To share information quickly and efficiently To drive the operational costs down by more than 20% To combine all IT budgets,Source: ht
41、tp:/ viewed November 3, 2002.,48,Changes in Supply Chain Process: Supplier,Migrating from all existing ERP systems to a single Oracle-based infrastructure system The use of bar code for materials received from suppliers The use of Evaluated Receipt Settlement (ERS),Source: http:/ viewed November 3,
42、2002.,49,Source: http:/ viewed October 31, 2002.,The process of migrating ERP systems to Oracle,50,Evaluated Receipt Settlement (ERS),An automated invoice and payment system How does ERS work?,Source: http:/ viewed November 3, 2002.,51,Changes in Supply Chain Process: Customers,Real-time information
43、 about inventory and order status Easier to understand invoicing and pricing Improved visibility on product delivery lead time,Source: http:/ viewed November 3, 2002.,52,Troubles with Project Everest,Because of the consolidation of its 2,200 software systems to under 20, confusion meant lost order a
44、nd revenue. An $88 million reduction in third-quarter ordersOf that, $38 million was lost and $50 million will be pulled through the fourth quarter. $105 million in lost revenue and $70 million in operating profit,Source: Shah, Jennifer B., “Agilents ERP Rollout Expensive Glitches” EBN; Manhasset, A
45、ugust 26, 2002.,53,Troubles with Project Everest,CFO Adrian Dillon said the problem was twofold: Software bug“As we began to hit sort of a 50 percent ramp of normal capacity, we began to get conflicts in priorities of systems instructions. When we had those conflicts that inevitably shut the system down.”,
