CHAPTER 1 : Introduction
(ICT) driven by microelectronics, computer hardware and software systems has influenced all facets of computing applications across organizations. Simultaneously the business environment is becoming increasingly complex with functional units requiring more and more inter-functional data flow for decision making, timely and efficient procurement of product parts, management of inventory, accounting, human resources and distribution of goods and services. In this context, management of organizations needs efficient information systems to improve competitiveness by cost reduction and better logistics. Universally it is recognized by large and small-to medium-size enterprises (SME) that the capability of providing the right information at the right time brings tremendous rewards to organizations in a global competitive world of complex business practices.
For this reasons management information system (MIS) were created. The last two decades the progress in MIS application field is impressive. Today, in the center of business interest lays the Enterprise Resource Planning System.
ERP is a software architecture that facilitates the flow of information among the different functions within an enterprise. Similarly, ERP facilitates information sharing across organizational units and geographical locations. It enables decision-makers to have an enterprise-wide view of the information they need in a timely, reliable and consistent fashion.
ERP provides the backbone for an enterprise-wide information system. At the core of this enterprise software is a central database which draws data from and feeds data into modular applications that operate on a common computing platform, thus standardizing business processes and data definitions into a unifier environment. With an ERP system, data needs to be entered only once. The system provides consistency and visibility or transparency across the entire enterprise. A primary benefit of ERP is easier access to reliable, integrated information. Moreover, a related benefit is the elimination of redundant data and the rationalization of processes, which result in substantial cost savings.
The next important part of ERP is called implementation. In order for an ERP system to function properly, it must have a great deal of software written for it. Adding a complex system such as ERP to a company takes considerable resources. In most cases, a company would need to use programmers, analysts, and end users in order to make sure it functioned correctly. While the introduction of the Internet has greatly sped up this process, it can still take time to set up. If professionals are not used to set up the ERP system, the process can become exceptionally expensive.
The cost involved with ERP has only allowed it to be adopted mostly by multinational corporations. However, it is possible for medium sized business to use it. If a company uses the services of a professional and ERP system can be implemented in about six months. There are a number of similarities between ERP systems and logistics automation and supply chain maintenance. In some cases, these elements can be used to extend the capabilities of ERP. The process of setting up ERP is very important. In most cases, a company will have to hire an ERP vendor. Consultants are commonly used as well. The consultation process of ERP will generally be comprised of three categories, and these are top level architecture, process consulting, and technical consulting.
The global sails of the top 10 ERP vendors in 1995 was 2,8 $ billion, in 1996 4,2 $ billion and in 1997 5,8 $ billion. As we can see in tables 1,2 the ERP sales and the number of companies that adopted ERP system are constantly growing.
Nowadays, the production of commercial ERP software packages has evolved in a huge promising market. There are at least, 1.000 ERP software vendors that could improve the operational efficiency of the enterprise. Yet, 8 -12 are the more popular ERP vendors. They possess approximately 60 - 70% of the ERP software market. For example, the SAP AG (www.sap.com) with R/2 and R/3 application, the ORACLE (www.oracle.com) , the PeopleSoft (www.peoplesoft.com), the J.D. Edwards (www.jdedwards.com) with OneWorld application, the Baan (www.baan.com) and the Microsoft Business Solutions (www.microsoft .com/businesssolutions) with MBS-Navision, MBS-Axapta, MBS-Great Plains and MBS-Solomon applications.
CHAPTER 2 : The evolution of Production Management Systems. MRP - MRP II - ERP SYSTEMS
The focus of manufacturing systems in the 1960's was on inventory control.
This included classic models such as Economic Order Quantity - EOQ , Safety Stock - SS and Work Order Management - WOM. Companies could afford to keep lots of ''just-in-case'' inventory on hand to satisfy customer demand and still stay competitive. Consequently, techniques of the day focused on the most efficient way to manage large volumes of inventory. Most software packages (usually customized)were designed to handle inventory based on traditional inventory concepts.
In the 1970's, it became increasingly clear that companies could no longer afford the luxury of maintaining large quantities of inventory. This led to the introduction of material requirements planning (MRP) systems. MRP represented a huge step forward in the materials planning process. For the first time, using a master production schedule, supported by bill of material files that identified the specific materials needed to produce each finished item, a computer could be used to calculate gross material requirements. Using accurate inventory record files, the available quantity of on-hand or scheduled-to-arrive materials could then be used to determine net material requirements. This then prompted an activity such as placing an order, canceling an existing order, or modifying the timing of existing orders. For the first time in manufacturing, there was a formal mechanism for keeping priorities valid in a changing manufacturing environment. The ability of the planning system to systematically and efficiently schedule all parts was a tremendous step forward for productivity and quality.
Yet, in manufacturing, production priorities and materials planning are only part of the problem. Capacity planning represents an equal challenge. In response, techniques for capacity planning were added to the basic MRP system capabilities. Tools were developed to support the planning of aggregate sales and production levels (sales and operations planning), the development of the specific build schedule (master production scheduling), forecasting, sales planning and customer-order promising (demand management), and high-level resource analysis (rough-cut capacity planning). Scheduling techniques for the factory floor and supplier scheduling were incorporated into the MRP systems. When this occurred, users began to consider their systems as company-wide systems. These developments resulted in the next evolutionary stage that became known as closed-loop MRP.
In the 1980's, companies began to take advantage of the increased power and affordability of available technology and were able to couple the movement of inventory with the coincident financial activity. Manufacturing resources planning (MRP II) systems evolved to incorporate the financial accounting system and the financial management system along with the manufacturing and materials management systems. This allowed companies to have a more integrated business system that derived the material and capacity requirements associated with a desired operations plan, allowed input of detailed activities, translated all this to a financial statement, and suggested a course of action to address those items that were not in balance with the desired plan.
By the early 1990's, continuing improvements in technology allowed MRP II to be expanded to incorporate all resource planning for the entire enterprise. Areas such as product design, information warehousing, materials planning, capacity planning, communication systems, human resources, finance, and project management could now be included in the plan. Hence, the term, ERP was coined. And ERP can be used not only in manufacturing companies, but in any company that wants to enhance competitiveness by most effectively using all its assets, including information.
In MRP, rather than managing based on past usage, we look ahead to anticipated need and replenish according to future requirements. The company brings in supplies only when needed and only in the quantities necessary to meet the need.
MRP is a calculation technique that uses a master schedule, which is a build plan for the items that the company sells, as a starting point. The master schedule is developed from a forecast of demands, backlog of orders with future ship dates, or a combination of these. Like MRP, Master Scheduling identifies expected shortages and plans the activities necessary to prevent the shortage. The master schedule is planned production (start date, due date, quantity) generally only at the sellable-item level. Once the master schedule is developed, MRP is used to plan the acquisition of all the assemblies, subassemblies, components and materials necessary to meet the master schedule and supporting production.
There four easy steps to MRP. First, the gross material needs are determined by referring to the single level bill-of materials and multiplying the component quantity-per by the planned production quantity. Next, this quantity (the quantity of each component needed to satisfy the production requirement) is compared to the expected availability of the component items of the date of need. When shortages are detected, the third step is to determine the best quantity to make or buy to fill the need, using a variety of lot sizing rules (or none at all, at the user's option). The fourth and final step is to determine the start date for the acquisition activity by subtracting the components lead time from the need date.
MRP is not magic. There are some dependencies that come into play that can severely limit the probability of success. First, the bills-of-materials must be correct. If the wrong item is identified, the wrong item will be made or purchased. If the quantity needed is in error, the wrong quantity will be planned, resulting in either excesses or shortages. If lead times are not accurate, activities will be initiated too early or too late. If due dates are not met or nonconforming items are rejected, shortages will result.
In theory, MRP can be a true "Just-In-Time" system, in the strict definition of those words. That is, items can be received form their source in exact correspondence to when they are needed. MRP, in truth, seldom works that well because we ca not control the data well enough (these are the errors in the bills, inventory accuracy is not perfect, etc) and things do not always go as planned (there is scrap, poor quality causes rejections, orders are late), so we buffer with extra inventory. The more uncertainty there is, the bigger the buffers must be to avoid unpleasant surprises (shortages).
MRP is a calculation system that allows us to operate in a less-than-perfect environment. If we know what our weaknesses are, we can include factors to accommodate them, such as the buffers just mentioned. Even less-than-perfect MRP execution should result in reduced shortages along with reduced inventory levels as compared to order point. Success comes from gaining control of the unknown or uncontrolled aspect of the business, and reducing the buffers that we have built into the planning process to compensate for them.
The primary objective of MRP is to avoid shortages. Often, there is a misconception that MRP is designed to reduce inventory. While inventory reduction is a benefit that often results from successful MRP implementation, the amount of inventory required to avoid shortages is a direct result of the accuracy of the data, decisions made in setting the operating parameters of the system, and the success in carrying out the plan.
During the 1980's more affordable and available technology was coming. Companies coupled the movement of inventory with the coincident financial activity. MRP II is a natural outgrowth of MRP. Since MRP plans the activities that are to be carried out by such functions as production control, purchasing, and inventory control it only makes sense to link these applications together and around a shared database so that status information can be easily passed to the planning functions, and so that recommendations can be electronically linked to the release and execution functions. Add customer service and accounting applications and you have MRP II.
There are a number of features, functions and basic organizational factors tat are common to all packaged MRP II systems. What distinguishes one package from another is primarily the "extras" that are built into the system in addition to the core functions. There are some minor differences in how the basics are addressed, but for the most part these differences, are inconsequential. The basic functions revolve around material planning and include the following.
- Product data, which are the definitions that are used in the planning and execution functions.
- The planning functions, which include master scheduling, forecasting, MRP, and capacity planning.
- Operations, which comprise inventory control, shop activity control, and purchasing.
- Customer service functions of order entry and sales analysis and related activities.
Additionally, MRP II should also include financial and accounting functions which are not addressed as a separate area in this discussion but are included as considerations in the other areas.
In other words, MRP II supports Production planning,Capacity Planning (available machine-hours and man-hours are checked to determine if it is possible to produce the planned quantities at a given time ),purchase planning and monitoring (primary and secondary raw material),productivity monitoring, fixed assets follow up, product costing,warehouse operation support (to ensure accurate update),information on in-process products in the various production phases and machinery maintenance planning.
The operation of the MRP II System is presented in the following diagram.
ERP systems first appeared in the late 1980s and the beginning of the 1990s with the power of enterprise-wide inter-functional coordination and integration. Based on the technological foundations of MRP and MRP II, ERP systems integrate business processes including manufacturing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, and transportation, providing accessibility, visibility and consistency across the enterprise.
The architecture of the software facilitates transparent integration of modules, providing flow of information between all functions within the enterprise in a consistently visible manner. Corporate computing with ERPs allows companies to implement a single integrated system by replacing or re-engineering their mostly incompatible legacy information systems. American Production and Inventory Control Society (2001) has defined ERP systems as "a method for the effective planning and controlling of all the resources needed to take, make, ship and account for customer orders in a manufacturing, distribution or service company."
Integration is an extremely important part to ERP's. ERP's main goal is to integrate data and processes from all areas of an organization and unify it for easy access and work flow. ERP's usually accomplish integration by creating one single database that employs multiple software modules providing different areas of an organization with various business functions.
Today's ERP systems can cover a wide range of functions and integrate them into one unified database. For instance, functions such as Human Resources, Supply Chain Management, Customer Relations Management, Financials, Manufacturing functions and Warehouse Management functions were all once stand alone software applications, usually housed with their own database and network, today, they can all fit under one umbrella - the ERP system.
CHAPTER 3 : ERP implementation. Case study 1- Case study 2
Case study 1- SATO GROUP
Description of the company.
SATO SA was established in 1973 following conversion of the limited partnership METALLON HELLAS Ltd. The company/s registered offices are located in Maroussi, Athens. SATO group holds a leading position in the office furniture market and it has also penetrated the home furniture market via its brands ENTOS, Bo Concept, Divani&Divani by Natuzzi, La Maison Coloniale and Leather Concept.
The company engages in both production and trading activities. It has three production plants, in Thessaloniki, in Germany and in Turkey, and employs 371 persons, while it has also developed major commercial partnerships with respected firms abroad.
Its office and home furniture is available via an extensive distribution network (the largest in the domestic market) with 25 showrooms, 32 dealerships and 12 franchisees. SATO Office GmbH, the group/s subsidiary in Germany, is the linchpin of the group/s activities in the European market. It also operates in the Turkish market via its subsidiary TCC Buro Koltuk ltd. The company has entered into partnerships with 10 dealers abroad and exports to European, Balkan and Arabic countries.
The Group's turnover for the year 2008 amounting to €104,126 thousand.
Why did they decide to put ERP.
SATO S.A, has six major departments: Finance, Logistics, IT, Sales, Production (Thessaloniki plant), Quality and environmental control.
The main object for ERP implementation was to provide relevant information to the appropriate persons in the enterprise at the right time. The former software package was unable to cover the emergency needs for immediate access and utilization of the information between plant, warehouse, central office, suppliers and clients. The Sales Office needed to be aware at any time with the enterprise stock. So Sales Office operational data needed to be in coordination with inventory control data. Also distribution and transport were highly important. The storagefacilities, track and shipping availability had to be improved.
Benefits for ERP implementation.
ERP, helped SATO S.A to reduced operating cost. IT improved the coordination of the company process into one streamlined process where everything could be accessed through one enterprise wide information network.
Additionally operating cost were reduced by being able to control inventory costs, lower production and marketing costs, and help lower help desk support. It encouraged the establishment of backbone data warehouses and allowed employees to access the information in real time. This helped with research, decision making, and managerial control.
Case study 2- Papadopoulos S.A
Description of the company.
Papadopoulos S.A, is a modern, innovating biscuit and food products manufacturing company, and has a leading position in Greece in the biscuits and bread segment.
It is equipped with the most up to date technology. The whole company, including the four factories (in Athens, Thessaloniki, Volos, and Oinofita), is certified to ISO 9001:2000 for Quality Management and to new international standard ISO 22000:2005 for Food Safety that includes the HACCP (Hazard Analysis and Critical Control Points) system. It employs 991 persons.
The enterprise ensures the wide distribution of its products through a network of 200 salesmen and merchandisers (sales representatives included). For the year 2008 the company's turnover is 117.662.776€. Recently Papadopoulos S.A achieved a great acquisition with " The Greek Food Company S.A". Now, it is the leader of the biscuit category with a market share of about 70% in volume, while holds a significant position in the bread substitutes segment.
Why did they decide to put ERP.
The company's structure includes the : Commercial Department, Marketing Depart, Human Recourses, Purchasing, Exports, Technical, and Financial Department. The main problem of this enterprise was the distance between the four different plants, the coordination between them, the production organisational setup and the material management. The managers wanted real time information about the manufacturing procedure and the supply chain function in order to take the appropriate decision.
Benefits for ERP implementation.
With the new ERP application Papadopoulos S.A achieved to manage the entire business and eliminated point solutions that encompass multiple data base. More consistent data provided a global view of the business and drove continuous improvement strategies by helping to establish consistent performance metrics and measures. The material purchases policy altered and goals - objectives were sets both in production and raw material management.
n any discussion on implementing an ERP system, the question "What are the benefits of an ERP System?" appears. If we had to look up these benefits on more than one occasion, we would document them as listed below :
- Real time information throughout all entire company
- Better visibility into the performance of operational areas
- Data standardization and accuracy across the enterprise.
- Best-practices or proven methodologies are included in the applications
- Creates organizational efficiencies.
- Allows for analysis and reporting for long-term planning
Significant Features on an ERP System
- Information entered once into system
- Can allow for the use of the best practices
- Can be further developed
- Based on reliable file structure
- Provides functionality to interact with other elements in the process
- Provides report writers and other tools for data inquiries
The result is increased productivity, better customer service, lower purchase cost, inventory control, client history, coordination, competitiveness, creation of new strategic planning and better HR management.
CHAPTER 4 : ERP selection and implementation.
The ERP selection process is an important step in the future financial and operational success of any manufacturing or distribution organization.The actual process of evaluating and selecting an ERP System is never the same for any two companies. Unique internal conditions are going to determine exactly what work needs to be done. There are, however, common steps and exercises that a company and its evaluation team should take. So, the ERP software selection process consists of five key phases:
- Project Preparation and Planning
- RFI and Introductory Demonstrations
- Requirements and Request for Proposal
- Scripted Software Demonstrations and
- Reference Calls, Site Visit, and Supplier Selection.
Following and executing these five steps of the ERP selection process will provide the organization the necessary information to make a well-informed, quantitative software selection.
- Project Preparation and Planning.
- RFI and Introductory Demonstrations .
- Requirements and Request for Proposal.
- Scripted Software Demonstrations.
- Reference Calls, Site Visit, and Supplier Selection.
The Project Preparation and Planning phase is the first step to ERP software selection. In this step of the software selection process, organizations identify the key business drivers to justify such an effort and the executive sponsors for the initiation of a software selection project. In the absence of significant business challenges driving the need for new software, the project need not go forward. Once such challenges have been clearly identified, the project can move forward with appropriate executive sponsorship.
Once a manufacturing or distribution organization has recognised the need for new manufacturing or distribution software, it should identify the specific requirements associated with those needs using a Request for Information (RFI) document and submit that RFI document to select ERP software companies whose software is likely to satisfy those business software requirements. This phase of the ERP software choice process is when organizations document critical success factors and begin to assess how software suppliers might match up against these factors. The effect of this process is an initial list of potential software suppliers, frequently referred to as the "long list," and may include as many as 25 ERP software companies. These software companies are those companies to whom the RFI document will be sent.
Once a manufacturer or distributor has completed its initial evaluation of ERP software companies through the RFI and Introductory Demonstrations process, it is in a position to select a "short list" of potential ERP software suppliers. Once this short list has been defined, the manufacturer or distributor develops a more detailed list of business software requirements for the ERP software selection project. This detailed list of requirements forms the core of a formal request for proposal (RFP) document to be distributed to remaining ERP software suppliers for their review and written response. The vendors' RFP responses become the basis for evaluating and selecting ERP software vendors to perform onsite scripted software demonstrations in the next phase of the software selection process.
Once manufacturers and distributors have analyse and estimate the vendors' written response to the request for proposal, the organization is ready to move into the Scripted Software Demonstrations phase of the ERP software selection process. In this phase of the process, organizations will construct a written software demonstration script, which characterize the specific business processes each ERP vendor should demonstrate during the scripted demonstration. Manufacturing and distribution organizations should also provide sample company-specific data, such as products, customers, vendors, and pricing, to make the organization's business processes come to life during the demonstration. Participants should also have scorecards to be completed during the scripted demonstration. This provides the organization the capability to gather quantitative data as to how each vendor performed relative to all of the documented processes. Via this process, manufacturers and distributors are able to reach a consensus as to which ERP software vendor best meets the organization's cultural and business software requirements.
Once the Scripted Software Demonstrations phase of the software selection process has been completed, manufacturing and distribution organizations will have made a tentative selection as to their preferred software vendor. In the Reference Calls, Site Visit, and Supplier Selection phase, manufacturers and distributors perform due diligence and finalize the selection of their preferred software supplier. First, organizations should work with the preferred software vendor to orchestrate reference calls with the vendor's existing customers who are currently using the proposed ERP software solution. Next, the organization may elect to visit one of the software supplier's customer facilities to see the software in operation in a production environment. Once these steps have been successfully completed, the manufacturer or distributor finalizes agreements to acquire and implement the selected ERP software solution.
Furthermore, the organization could include for a successful ERP software selection the following remaining criteria:
- Customization: Since different organizations need different software, they need to adapt the available software in the market for their own use. But, customizations shouldn't cause difficulties in updating to future software releases.
- Implementability: Different ERPs have different requirements, thus it is important to choose an implementable one. If the organization ventures infrastructural change, the feasibility problem this change may cause shouldn't be disregarded.
- Maintenance: The software should support multi-company, multi-division and multi-currency environments. There shouldn't be any restrictions to this type of environment so that whenever an add-on procedure or a patch is available, it can be updated immediately.
- Real Time Changes: The modules should work in real time with online and batch-processing capabilities, so that no errors would occur because of the system being not up-to-date and information available to a department wouldn't be different than the other department's.
- Flexibility: Flexibility denotes the capability of the system to support the needs of the business over its lifetime.1 As the business requirements of the organization change, it should be able to add extra modules. The ERP should be flexible in order to suit the organizational culture and business strategy.
- User Friendliness: Most of the time, the end-users of an ERP system are not computer experts, thus their opinions about the software are highly valuable. The product shouldn't be too complex or sophisticated for an average user since the efficiency of end users directly affects the efficiency or the organization.
- Cost: Cost is an important issue since the implementing organization may be a small or mediumsized enterprise (SME) that may not act as comfortable as a large, multi-national organization.ERPs are generally complex systems involving high cost, so the software should be among theedges of the foreseen budget.
- Systems Requirements: Technology determines the longetivity of the product. It is important tochoose an ERP that is independent of hardware, operating system and database systems. At least, the requirements of the software should worth changing into. The ERP system design should also not conflict with the organization's business strategy.
- After Sales Support & Training: The vendor should be providing the training as well as the after sales support, since ERPs are fairly complex applications for learning by oneself. Also it should be considered that every department within the organization would have its own piece of software to use, so a kind of specialized training will be needed for each department.
- Back-up System: To obtain the security for highly complex systems with huge databases, providing a very well-formed network is not enough; the back-up unit of the system should be more than reliable. Users should be able to schedule routine and partly back-ups. Besides, the back-up unit should also offer a solution for restoring the system within the shortest time.
- Reporting & Analysis Features: Besides standard reports, management team should be able to implement their own reporting and analysis tools and dump them into the system for alter use.
- Vendor Credentials: Vendor's market share, reputation, number of consultants, number of installations performed, support infrastructure and demonstration of previous implementations are critical factors showing the commitment of the vendor to the product.
- Integration with Other Software/Applications: The modules should be integrated and provide seamless data flow among the other modules, increasing operational transparency . In case a third party application is needed, the ERP should be available to exchange data with the application, since data import/export is widely used techniques.
- Internet Integration: The software should support e-business, e-commerce and EDI transactions. At least, even if it doesn't have as built-in modules, Internet adaptation should be available as add-on modules.
- Financing Options: 'Financing options' may not be a technical criterion, but it is very important for an organization how to pay for the investment and how long pay for it.
Implementing an ERP system is not an easy task to achieve, in fact it takes lots of planning, consulting and in most cases 3 months to 1 year +. ERP systems are extraordinary wide in scope and for many larger organizations can be extremely complex. Implementing an ERP system will ultimately require significant changes on staff and work practices.
To implement the ERP system, the companies often resort to an ERP vendor or third party consulting companies. These firms generally provide three professional services - consulting, customization and support. The most important aspect of ERP implementation is that the purchasing company usurps the ownership of the ERP project.
The initial ER P implementation is done by the consulting team who are also responsible for the subsequent delivery of work to tailor the system beyond "go-live". The tailoring process entails the additional product training, creation of process triggers and workflow; specialist advice to improve the use of ERP in the business; system optimization, assistance writing reports, complex data extracts. The consulting team is also responsible for planning and jointly testing the implementation. In large ERP projects, there are three levels - system, architecture, business process consulting and technical consulting.
The customization phase can be defined as the process of extending or changing the working pattern of the system by penning new user interface and underlying application codes. Customization generally implies individualistic work practice that is not included in the core routine of ERP software and hence is often very expensive and complicated.
On the completion of the implementation process, the consulting companies enter into a support agreement so that they can assist your staff to ensure the optimal running of the ERP software. A maintenance agreement provides the company rights to all current version patches, minor and major releases and often allows the company's employees to raise support calls.
However, while undergoing ERP implementation it is important to remember certain points. It is essential to have in-house technical expertise because ERP software in the organization implies complicated computer networking and its security, Internet connection line and its support system, etc. Moreover, there should be one dedicated ERP administrator to handle new users, set up security roles for them, modify reports, making customs reports, set up printers, etc. It is also better to expect certain number of software related problems as the IT industry is not much matured yet and hence it is wise to be patient with the consultant who is trying to fix it.
CHAPTER 5 : Size and type of companies that are suitable for ERPs
Enterprise Resource planning was a term confined purely to elite class. This scene was witnessed in the IT market for some long time ever since ERP was presented. The large organizations went ahead with ERP process unmindful of negative consequences, not to ignore mentioning the fact that they took every proactive measure to curb the same. Needles to say firms had been interestedin serving such large players. As a result, the fate of Small and Medium enterprises remained unanswered. ERP for S.M.E's remained a mere dream.
It so happened that the number of larger companies without ERP turned out to be nil. Thanks to the awareness created by vendors and IT researchers. No doubt companies were initially hesitant lot and apprehensive on just hearing the word ERP. In sprite of that the industry proved them otherwise. Then came a stage where a company could not exist but without ERP. Even if their performance was appreciated they were not able to gain any competitive advantages.
This clarification of how goliaths adjusted to ERP has lot of significance in studying their intervention with S.M.E. These bigger companies were not providing the required business to ERP vendors. All though there are many big companies the number of vendors was always greater in multiples. This means only the best could strike deals and there was no possibility for mediocre or average vendors (in terms of performance).The best players also found that they had none to serve after a point of time because almost every company in the market successfully established ERP (whether on the first or further attempts).
So they had to naturally look for new fields. S.M.E.'S was the only answer. One other question was how to offer best services at an affordable cost and still make profit. In this case the vendors had to be concerned only about the number of sales they could make and not the quantum of profits because the number of vendors was few and far between when compared with the number of S.M.E.'S choosing to go for ERP. As the saying goes "necessity is the mother of Invention" vendors had to devise cost effective applications to meet the demands of the Small and Medium enterprises. This was the origin of ERP for S.M.E.'S. This benefited them in terms of business . Conversely, the firms enjoyed greater benefits by making use of this application. For that reason ERP and S.M.E. was weighed on the same scale.
S.M.E.'s are becoming the popular choice of ERP vendors. There is an increasing awareness of ERP in S.M.E. market. It has practically helped to unravel the myth that ERP is exclusively meant to business empires.
ERP systems originated to serve the information needs of manufacturing companies. Over time they have grown to serve other industries, including health care, financial services, chemical facilities, universities, the aerospace industry, and the consumer goods sector. With this growth, ERP systems, which first ran on mainframes before migrating to client/server systems, are now migrating to the Web and include numerous applications.
Just in manufacturing, the suitability of each technique and the corresponding work steps depends on the characteristics of the firm's markets, production and equipment technology, skill sets and corporate culture. Service firms are not different in this respect.
There are numerous ERP software systems that are built for non-manufacturing organisations such as Dynamic X by Microsoft, Epicor for service enterprises by Epicor, Agressor Business World by Agressor and others.
- ERP for hospitals
- ERP and e-commerce
Administrator Plus (AP) by ABC Info Soft Pvt Ltd is a fully-integrated, Hospital Information System. This ERP facilitates hospital-wide Integrated Information System covering all functional areas like out & in Patients Billing & Management, Patient Beds, Visiting Consultants, Medical Stores, Pathology Laboratories, Radiology Laboratories, Imaging, Pharmacy, Manpower Management, Kitchen and Laundry Services etc. It performs core hospital activities and increases customer service thereby augmenting the overall Hospital Image. ERP bridges the information gap across the hospital. Administrator Plus eliminates the most of the business problems like Material shortages, Productivity enhancements, Customer service, Cash Management, Inventory problems, Quality problems, Prompt delivery, Pilferage, TPA Billing etc.
The electronic trade gives the opportunity to face the storage in real time and reach clients through the web. It combines the product information with the multimedia information, and manages the sales process from the beginning to the end, taking into account the orders and helping the organisation to adapt its offer to the specific needs of the clients.
The processes that involve the integration of ERP systems and electronic commerce, it could be described as the flow of operations that take part in the marketing between two companies. Firstly, the availability of products is visible in a catalogue, and the shipping orders made online are under subjection to the prices defined for the selected articles.
The conditions of the prices agreed will be for the different clients. At the same time, the integrated systems could display online the availability and dates of delivery of the purchase.
The storage of information which arise from the purchase of products, and payment transactions are saved in databases of the trader. They could be emitted and supported in magnetic media or printed files. Furthermore, it could exist as an interactive exchange of information if the companies involved in the purchasing use systems like SAP R/3.
For example, a company using that system can mark the clients that also use the same system with the objective of registering the online purchase orders. This transaction creates a document automatically in a system, and a sale order in the providers system, which reduces the quantity of details that both companies should enter, and reduces the risk of incorrect detail entry with the opportunity to reduce the costs of communication.
CHAPTER 6 : ERP suppliers.
In 1999, the five dominating ERP software suppliers are SAP, Oracle, PeopleSoft, Baan and J.D. Edwards. Together they control more than 60% of the multibilliondollar global market.
SAP AG-Flagship Products R/3, mySAP.COM
SAP AG ("System, Anwendungen, und Produkte in Datenverarbeitung"), or Systems, Applications and Products in Data Processing, was started by five former IBM engineers in Germany in 1972 for producing integrated business application software for the manufacturing enterprise (SAP, 2001). Its first ERP product, R/2, was launched in 1979 using a mainframe-based centralized database that was then redesigned as client/server software R/3 in 1992. System R/3 was a breakthrough and by 1999 SAP AG became the third largestsoftware vendor in the world and the largest in the ERP sector with a market share of about 36% serving over 17,000 customers in over 100 countries. In 1999 SAP AG extended the ERP functions by adding CRM, SCM, sales-force automation and data warehousing. SAP has also invested significantly in its R&D sector with the result of newer versions of R/3 3.1, 4.0, 4.6 including Internet functionalities and other enhancements. SAP's Internet-enabled ERP solutions are provided by the recently launched ERP product called mySAP.COM. SAP has the broadest ERP functionality, capacity to spend significantly on R&D, strong industry-focused solutions and long-term vision.
Oracle Corporation-Flagship Product Oracle Applications
Oracle (Oracle, 2001), founded in 1977 in the USA, is best-known for its database software and related applications and is the second largest software company in the world after Microsoft. Oracle's enterprise software applications started to work with its database in 1987. It accounts for $2.5 billion out of the company's $9.3 billion in 1999, which places Oracle second to SAP in the enterprise systems category with over 5,000 customers in 140 countries. Oracles ERP system is known as Oracle Applications, having more than 50 different modules in six major categories: finance, accounts payable, human resources, manufacturing, supply chain, projects and front office. Oracle has other strong products in the software field including DBMS, data warehousing, work flow, systems administration, application development tools (APIs), and consulting services. A notable feature of Oracle is that it is both a competitor and a partner to some of the industry leaders in the ERP market such as SAP, Baan and PeopleSoft because of the use of Oracle's DBMS in their ERP systems.
Oracle has integrated its ERP solutions with the Internet and has introduced several applications in the electronic commerce and Internetbased commerce areas. Oracle's Internet infrastructure is created around two powerful products: Oracle9i Database and Oracle9i Application Server. Another significant feature of Oracle is its OSBS, or Oracle Small Business Suite which provides consistent financials, payroll, inventory control, order entry, purchase orders, and CRM functionality-all delivered as a Web service. Oracle also offers an easy-to-activate Web presence that helps companies to sell their goods via the Internet.
PeopleSoft Inc.-Flagship Product PeopleSoft8
PeopleSoft is one of the newest ERP software firms started in 1987 in Pleasanton, California, with specialization in human resource management and financial services modules. PeopleSoft quickly managed to offer other corporate functions and attained a revenue of $32 million in 1992. Enterprise solutions from PeopleSoft include modules for manufacturing, materials management, distribution, finance, human resources and supply chain planning. SAP AG and Oracle-with longer experience, stronger financial base and worldwide presence-are the main competitors to PeopleSoft. Many customers comment that PeopleSoft has a culture of collaboration with customers, which makes it more flexible than its competitors. One of the strengths of PeopleSoft is the recognition by its customers that it is flexible and collaborative. The flagship application PeopleSoft8 with scores of applications was developed by PeopleSoft with an expenditure of $500 million and 2,000 developers over 2 years as a pure Internet-based collaborative enterprise system. "Our revolutionary eBusiness platform is the first open XML platform to offer scalability and ease of use for all users. PeopleSoft 8 requires no client software other than a standard Web browser, giving you the ability to securely run your business anytime, anywhere" (PeopleSoft, 2001). "Our eBusiness applications and consulting services enable true global operations-managing multiple currencies, languages, and business processes for more than 4,400 organizations in 109 countries" (PeopleSoft, 2001). PeopleSoft with about 10% market share, is the third largest ERP vendor after SAP AG and Oracle.
The Baan Company-Flagship Product BaanERP
Founded in 1978 in The Netherlands, Baan (Baan, 2001) started with expertise in software for the manufacturing industry and by 1997 claimed an ERP market share of roughly 5%. Bann's revenue in 1998 was roughly $750 million and while facing a slight slowdown in 1999 started growing again in 2001 with sales up 12% at £7,231million and operating profit of £926 million. Baan has more than 15,000 customer sites all over the world and more than 3,000 employees. Baan believes that "the Internet is the ultimate enabler" and "Internet technologies help companies become order-driven and customerfocused by enabling collaboration across the 'value chain.' Suppliers, distributors, manufacturers and customers can work together to deliver the right product at the right price." ERP solution areas that Baan covers include finance, procurement, manufacturing, distribution, integration and implementation, planning, sales, service and maintenance, business portals, collaborative commerce and business intelligence. Bann's flagship product is BaanERP (formerly called Triton, then Baan IV), launched in 1998. One innovative product from Baan is the Orgware tool that can cut implementation cost significantly by automatically configuring the enterprise software. Baan's ERP software is best known in the aerospace, automotive, defence, and electronics industries.
J.D. Edwards & Co.-Flagship Product OneWorld
J.D. Edwards was founded in 1977 in Denver (cofounded by Jack Thompson, Dan Gregory and C. Edward McVaney) with long experience of supplying software for the AS/400 market. J.D. Edwards' flagship ERP product called OneWorld is "capable of running on multiple platforms and with multiple databases, ... [and] revolutionizes enterprise software by liberating users from inflexible, static technologies" (JD Edwards, 2001). The product includes modules for finance, manufacturing, distribution/logistics and human resources, quality management, maintenance management, data warehousing, customer support and after-sales service. J.D. Edwards' revenue jumped to $944 million in 1999 from $120 million in1992, having more than 5,000 customers in over 100 countries. The OneWorld system is considered to be more flexible than similar competing products and within the reach of smaller enterprises. J.D. Edwards' Internet-extended version of OneWorld was launched recently as OneWorld Xe ("Xe" stands for "extended enterprise").
In 2004, the five biggest ERP vendors--SAP, Oracle (which bought PeopleSoft and J.D. Edwards), Sage Group, Microsoft's Business Solutions group, and SSA Global (which bought Baan)--accounted for 72 percent of the revenues.
Each vendor, due to historic reasons, has a specialty in one particular module area such as Baan in manufacturing, PeopleSoft in human resources management, SAP in logistics and Oracle in financials.
Vendors serving large businesses: There are two "tier-one" vendors—Oracle and SAP—that provide ERP software for multi-facility, multi-language, billion-dollar enterprises. The products they offer are well equipped to support the global operations of large enterprises through multi-location, multi-currency and compliance features.
Vendors serving medium-size businesses: A majority of ERP vendors serve mid-sized businesses (100-999 users). Therefore, there is an intense competition in this segment of the market. The product offerings of ERP majors, such as SAP, Oracle and software giant Microsoft, and midmarket-focused vendors, such as Infor, Lawson, Deltek, Epicor, IFS, QAD, Sage Software, and Exact Software, are estimated to have generated approximately $2.2 billion in 2007 in North America (Gartner 2008 study). Also, vendors providing on-demand/SaaS ERP solutions register a strong presence in this segment. Intacct, Netsuite, Workday, and SAP (Business ByDesign solution) are some of the major SaaS ERP vendors.
Vendors serving small businesses: Though ERP adoption by small businesses (20-99 users) is in the nascent stage, ERP vendors are eyeing this segment with great anticipation. According to a 2008 Gartner study, the North American small-business ERP suite software market is estimated to have generated $327 million in 2007 and is expected to grow at a CAGR of 11.3 percent through 2012. Microsoft, Sage Software, Infor, Exact Software, and Epicor are the front runners in this segment. SaaS ERP vendors offering low-cost standard ERP applications attract a large segment of small businesses and are well positioned to be key players in this segment.
Vendors serving specific vertical industries: Vendors are offering ERP solutions for industry verticals ranging from generic sectors like manufacturing, retail and professional services to more specialized sectors such as defense, fashion, and non-profit. There are two classes of vendors in this segment. The first class of vendors includes large ERP majors, such as Microsoft, SAP, Oracle and Lawson that offer ERP solutions for most of the verticals. The second class of vendors focuses on specific sectors/target area. For example, QAD, Infor and Sage Software focus on the manufacturing sector; Deltek on the services sector; IFS on the retail sector; and Epicor on multi-national firms.
Vendors providing open source ERP solutions: Though traditional licensed ERP systems account for a majority of the ERP market, the scope of open source ERP has increased, and the trend is expected to continue in the future. Currently, a number of open source ERP projects exist. However, only a few of them, such as Compiere, Open For Business (OFBiz), Adempiere, and Openbravo, have gained traction and have grown to a considerable level of functionality. Compiere, Apache (OFBiz), and xTuple (OpenMFG) are the key players in the open source ERP space.
CHAPTER 7 : Conclusions and prospects.
The evolution of ERP systems closely followed the significant developments in the field of computer hardware and software. During 1960s, manufacturing systems focused on inventory control. Consequently, inventory control packages were designed, customized and implemented to automate inventory control based on traditional inventory concepts. Material Requirements Planning (MRP) systems were developed in the 1970s and mainly involved planning the product or parts requirements according to Bills of Materials (BoM) and Master Production Schedules (MPS). The decade of the 1980s witnessed the evolution of the concept of Manufacturing Resource Planning (MRP II), which was an extension of MRP with emphasis on optimizing manufacturing processes by synchronizing materials delivery with production requirements. MRP II included areas, such as shop floor, distribution management, finance, human resource and project management.
The diagram below summarizes the evolution of ERP systems.
ERP evolved from the concept of MRP and MRP II systems starting in the late 1980s. The term ERP was coined at the beginning of 1990s by the Gartner Group. Built on the technological foundations of MRP and MRP II, ERP systems emerged with the ability to integrate enterprise-wide inter-functional business processes, providing real-time accessibility, visibility and consistency across the organization.
During the late 1990s, ERP vendors started adding more modules and functions as "add-ons" to cater to business processes such as financial transactions, giving birth to the concept of "ERP II." The evolution of extended ERP reflected the fact that many non-manufacturing sectors started adopting ERP systems for financial, accounting and other business processes. The ERP extensions include SCM, CRM, advanced planning and scheduling (APS), and e-business functionalities.