Introduction to ERP Systems Enterprise Resource Planning Systems

Introduction to ERP Systems Enterprise Resource Planning Systems MSc. Nguyen Thanh Tuan 1

Contents z. Historical Context of ERP z. Problems with Non-ERP Systems z. Traditional IS Model z. What is ERP z. Two Main ERP Applications z. ERP System Configurations z. Data Warehouse For ERP System 2

Historical Context of ERP z. Historically, companies created “islands of automation”. A hodge-podge of various systems that operated or managed various divergent business processes. Sometimes these systems were integrated with each other and sometimes they weren’t. Sometimes they were loosely interfaced and sometimes they were more tightly interfaced. 3

Historical Context of ERP z. The total organizational costs of maintaining a patchwork of redundant and overlapping systems has grown over the years to the point where the cost of maintaining these systems is greater than installing a new system. 4

Historical Context of ERP z. Analysts have speculated that widespread adoption of the same ERP package by the firms in a single industry (an observed phenomenon for semi-conductor manufacturers) might lead to the elimination of process innovation-based competitive advantage (Davenport, 1998). 5

Historical Context of ERP Most companies have failed to implement ERP packages successfully or to realize the hoped-for financial returns on their ERP investment. Companies have had similar difficulties with each new wave of information technology since the first mainframe systems. It takes years to realize some envisioned ITenabled changes in organizational processes and performance, and there are many ways to fail along the way. 6

Problems with Non-ERP Systems z In-house design limits connectivity outside the company z Tendency toward separate IS’s within firm ylack of integration limits communication within the company z Strategic decision-making not supported z Long-term maintenance costs high z Limits ability to engage in process reengineering 7

Traditional IS Model: Closed Database Architecture z. Similar in concept to flat-file approach ydata remains the property of the application yfragmentation limits communications z. Existence of numerous distinct and independent databases yredundancy and anomaly problems z. Paper-based yrequires multiple entry of data ystatus of information unknown at key points 8

Business Enterprise Products Customer Materials Order Entry System Customer Sales Account Rec Customer Database Manufacturing and Distribution System Production Scheduling Shipping Manufacturing Database Procurement System Purchases Supplier Vendor Accts Pay Inventory Procurement Database Traditional Information System with Closed Database Architecture 9

What is ERP? z. Enterprise systems are commercial software packages that enable the integration of transactions-oriented data and business processes throughout an organization z. Enterprise systems include ERP software and related packages as advanced planning and scheduling, sales force automation, customer relationship management, product configuration. 10

What is ERP? z. Those activities of software packages help a company manage the important parts of its business in an integrated fashion. z. Key features include: y. Smooth and seamless flow of information across organizational boundaries y. Standardized environment with shared database independent of applications and integrated applications 11

ERP System Business Enterprise Legacy Systems Data Warehouse ERP System On-Line Analytical Processing (OLAP) Bolt-On Applications (Industry Specific Functions) Suppliers Customers Core Functions [On-Line Transaction Processing (OLTP)] Sales & Distribution Business Planning Shop Floor Control Logistics Operational Database Customers, Production, Vendor, Inventory, etc. 12

What is ERP? z. ERP Functional Architecture y. Information Systems Modules x. Human Resources Management x. Manufacturing Management x. Financial Management x. Accounting x. Marketing Management x. Workflow Management 13

ERP Life Cycle z. Deciding to go ERP z. Choosing an ERP z. Designing an ERP z. Implementing ERP Systems z. After Going Live (Stabilization Period) 14

Two Main ERP Applications Core applications z a. k. a. Online Transaction Processing (OLTP) z transaction processing systems z support the day-to-day operational activities of the business z support mission-critical tasks through simple queries of operational databases z include Sales and Distribution, Business Planning, Production Planning, Shop Floor Control, and Logistics modules 15

Two Main ERP Applications Business analysis applications z a. k. a. Online Analytical Processing (OLAP) z decision support tool for management-critical tasks through analytical investigation of complex data associations z supplies management with “real-time” information and permits timely decisions to improve performance and achieve competitive advantage z includes decision support, modeling, information retrieval, ad-hoc reporting/analysis, and what-if analysis 16

OLAP z Supports management-critical tasks through analytical investigation of complex data associations captured in data warehouses: y. Consolidation is the aggregation or roll-up of data. y. Drill-down allows the user to see data in selective increasing levels of detail. y. Slicing and Dicing enables the user to examine data from different viewpoints often performed along a time axis to depict trends and patterns. 17

ERP System Configurations: Client-Server Network Topology Two-tier ycommon server handles both application and database duties yused especially in LANs 18

First Tier User Presentation Layer Second Tier Server Applications Two-Tier Client Server Application and Database Layer Database 19

ERP System Configurations: Client-Server Network Topology Three-tier yclient links to the application server which then initiates a second connection to the database server yused especially in WANs 20

User Presentation Layer First Tier Second Tier Third Tier Applications Database Application Server Database Server Three-Tier Client Server Application Layer Database Layer 21

User Presentation Layer First Tier Second Tier Third Tier OLTP Applications Operations Database OLTP Server OLAP Applications Operations Database Server Data Warehouse Application Layer Database Layer ERP with OLTP and OLAP Client Server using Data Warehouse 22

ERP System Configurations: Databases and Bolt-Ons z. Database Configuration yselection of database tables in the thousands ysetting the switches in the system z. Bolt-on Software ythird-party vendors provide specialized functionality software y. Supply-Chain Management (SCM) links vendors, carriers, third-party logistics companies, and information systems providers 23

What is a Data Warehouse? z A relational or multi-dimensional database that may consume hundreds of gigabytes or even terabytes of disk storage y The data is normally extracted periodically from operational database or from a public information service. z A database constructed for quick searching, retrieval, ad -hoc queries, and ease of use z An ERP system could exist without having a data warehouse. The trend, however, is that organizations that are serious about competitive advantage deploy both. The recommended data architecture for an ERP implementation includes separate operational and data warehouse databases 24

Data Warehouse Process z The five essential stages of the data warehousing process are: · Modeling data for the data warehouse · Extracting data from operational databases · Cleansing extracted data · Transforming data into the warehouse model · Loading the data into the data warehouse database 25

Data Warehouse Process: Stage 1 z. Modeling data for the data warehouse y. Because of the vast size of a data warehouse, the warehouse database consists of denormalized data. x. Relational theory does not apply to a data warehousing system. x. Wherever possible normalized tables pertaining to selected events may be consolidated into denormalized tables. 26

Data Warehouse Process: Stage 2 z. Extracting data from operational databases y. The process of collecting data from operational databases, flat-files, archives, and external data sources. y. Snapshots vs. Stabilized Data: xa key feature of a data warehouse is that the data contained in it are in a non-volatile (stable) state. 27

Data Warehouse Process: Stage 3 z Cleansing extracted data y. Involves filtering out or repairing invalid data prior to being stored in the warehouse x. Operational data are “dirty” for many reasons: clerical, data entry, computer program errors, misspelled names, and blank fields. y. Also involves transforming data into standard business terms with standard data values 28

Data Warehouse Process: Stage 4 z. Transforming data into the warehouse model y. To improve efficiency, data is transformed into summary views before they are loaded. y. Unlike operational views, which are virtual in nature with underlying base tables, data warehouse views are physical tables. x. OLAP, however, permits the user to construct virtual views from detail data when one does not already exist. 29

Data Warehouse Process: Stage 5 z. Loading the data into the data warehouse database y. Data warehouses must be created and maintained separately from the operational databases. x. Internal Efficiency x. Integration of Legacy Systems x. Consolidation of Global Data 30

Data Warehouse System Legacy Systems Order Entry System Purchases System VSAM Files Hierarchical DB Network DB ERP System The Data Warehouse s iou v Pre ars Ye s iou rs v Pre arte Qu Sales Data Summarized Annually s iou v Pre eeks W Sales Data Summarized Quarterly Operations Database Data Cleansing Process ve e im T r Current (this weeks) Detailed Sales Data Ar o ved chi 31

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