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Copyright 2011 The McGrawCopyright 2011 The McGraw--Hill Companies, All Rights ReservedHill Companies, All Rights Reserved
Chapter 14
Enterprise Resource PlanningSystems
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Learning Objectives
1. Understand the scope of enterprise resource
planning (ERP) systems.
2. Recognize the client/server structure of ERP
systems.3. Relate the value of integrated information in a
complex firm.
4. Identify the challenges associated with
implementing ERP systems.
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Enterprise Resource Planning (ERP)
y Enterprise resource planning (ERP) system:computer system that links all the areas of thebusiness
Manufacturing knows about new orders as soon asthey are entered
Sales knows the exact status of a customer order
Purchasing knows what manufacturing needs to
the minute The accounting system is updated as all the relevant transactions
occur
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Major Developers of Enterprise
Resource Planning Software
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SAP
y SAP AG is the world leader in providing ERP software
Flagship product is R/3
y Software designed to operate in a three-tier
client/server configurationy Cost is a high-speed network of database servers
y Application consists of software modules
y Applications are fully integrated and share data
y Firms wishing to use SAP may need to change their
practices to those implemented by SAP
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Three-Tier Client/Server
Configuration
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SAP Application Modules
y Software is built around a set of application modules:
Financials
Human capital management Operations
Corporate services
DuetMicrosoft Office integration
y Can be used either alone or in combination
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Financials
y Financial application provides functionality to runthe financial accounts for the company
y The application is divided into three areas:1. Financial and management accounting module:
includes general ledger, accounts payable, accountsreceivable, capital investments and closing the books
2. Corporate governance: internal control and auditfunctions needed to adhere to corporate governancestandards, documentation of internal controls, and audits
that comply with current requirements3. Financial supply chain management: handles the
money flow related to supply chain activities
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Human Capital Management
y This application contain the full set of capabilities needed tomanage, schedule, pay, and hire the people who make acompany run
y It includes:
Payroll
Benefits administration
Application data administration
Personnel development planning
Workforce planning
Schedule and shift planning
Time management
Travel expense accounting
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Human Capital ManagementContinued
y The talent management functions are designed to
help align employee goals with corporate goals by
maximizing the impact of training
y Workforce deployment applications are to aid in
deploying the right people with the right skills to
positions in the firm
y Managing project teams, monitoring the progress
of projects, and tracking time are supported
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Operations
y Materials management covers all tasks within the
supply chain
It also includes inventory and warehouse
management
y Plant maintenance supports the activities
associated with planning and performing repairs
and preventive maintenance
y Quality management plans and implementsprocedures for inspection and quality assurance
and is built around the ISO 9001 specifications.
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Operations Continued
y Production planning and control supports both
discrete and process manufacturing processes
y Sales order management, configuration
management, distribution export control, and
shipping and transportation management are
handled as well
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Corporate ServicesCorporate Services
y The corporate services applications are designedto manage both centralized and decentralizedservices
y This includes managing the firms real estateportfolio, including:
Property acquisition and disposal
Property management
Building operations and maintenance
Investment reporting
y Another major aspect of the corporate services istravel management
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Implementing ERP Systems
y SAP has strong competition
Oracle
i2 Technologies
PeopleSoft
y Implementation of ERP is costly
Cost of the software typically one-third or less of
the total cost
y ERP implementation does not always work out
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Reasons to Implement ERP
y Desire to standardize and improve processes
y
To improve systems integration
y Improve information quality
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