BCO6603 ENTERPRISE RESOURCE PLANNING SYSTEMS

Assignment 1

Members:

VU ID.:

1. Danesh Jothiprahasam

3881602

The Evolution of ERP Systems

A definition of legacy systems Due to the high prevalence of information and communications technologies (ICT) contributed by semiconductor advancement in both software and hardware have shaped how software is used across the world. In addition, business environment has become more complex where it requires more inter-functional data flow between various business functions for efficient operations. Based on this, management of organizations requires better logistics and cost reduction by utilizing efficient information systems. ERP vendors and customers continuously face challenges due the rise of collaborative business, growth of computing power and internet rapid deployment globally to redesign their ERP products. Due to these factors, many companies are also force to redesign their respective business processes for data flow optimization throughout the enterprise to adhere the logic of modular software. Bringing new products and solutions to the market of ERP is a continuous engagement of development and reengineering. Unlike the traditional company specific systems which are designed in-house, the new ERP software solutions are multi modular commercial systems which are suitable for dynamic customization. Actually new software systems known as enterprise resource planning (ERP) systems which were meant for huge complex enterprises have mushroomed since the late 1980s and the beginning of the 1990s. In this globally competitive world of complex business methods, the universal benefits of ERP are easily apparent in delivering the right information at the right time for small small-to medium- size enterprises (SME) and large enterprises. ERP vendors have accepted the challenges of the market where vendors have promised even furthermore dynamic customization. Consultants are required to implement off the-shelf solutions which are proprietary systems for organizations. Due to this, the direction towards easy customization, providing swappable modules, easier user interface and open architecture have been recognized by both ERP vendors and customers. Definition and structure of an ERP system Incompatible legacy information systems can easily be replaced by ERPs which instead allows single integrated systems for corporate computing. The architecture of data flow in information systems used in enterprises should be consistently visible to allow information access across the enterprise easily via transparent module integration. This research paper based on published literature will quote several definitions to further explain the concept of ERP. The seamless integration of dataflow of information which is visible at all levels of the enterprises is known as the commercial software package, ERP (enterprise resource planning systems). ERP systems are defined as a method for the effective planning and controlling of all the resources needed to take ship and account for customer orders in a manufacturing, human resource management, marketing, distribution, inventory management, transportation and e-business financial (Production and Inventory Control Society, 2001). Software systems supporting functional areas for manufacturing, service\maintenance, sales, project management, accounting, planning and business management are enterprise systems or enterprise resource planning systems (OLeary, 2000). ERPs should across the entire the enterprise have a

unified interface, one application and one database (Tadjer, 1998). An organizations ability in facilitating integrated real-time planning and processing business transactions via computer based systems are ERP systems (Davenport, 1998). Integrating information-based processes and information within and across functional areas in enterprises are configurable information systems known as ERP systems (Kumar & Van Hillsgersberg, 2000). Figure 1 shows the general concept of how ERP is structured.

Figure 1- General conceptualization of an ERP system

Major stages in the evolution process With the power of company wide inter-functional integration and coordination of human resource, finance, project management and engineering via ERP systems began in the late 1980s and early 1990s. The rapid growths in the field software systems and computer hardware spurred the evolution of ERP systems (Davenport, 2000). However during the 1960s there were developments into automating inventory control systems using centralized computing systems via inventory control packages. During the 1970s, software development in planning master production schedule with respect to products or parts requirements were known as material requirements planning (MRP) systems. During the 1980s, to optimize manufacturing processes by synchronizing production requirements with materials using manufacturing resources planning software systems was introduced. Programming languages such as COBOL were the basis of legacy systems such as FORTRAN and ALGOL. ERP systems were consolidated based on the technological foundations of MRP via amalgamation of financial, inventory management, transportation, distribution, service/maintenance, project management and accounting aspects of the enterprise. Extended ERPs were introduced by adding more functions and modules as add-ons to the modules of the core systems during the 1990s. Customer relationship management (CRM), supply chain management (SCM), and advanced planning and scheduling (APS) were one of these extensions to ERP. Figure 2 shows the chronological development of ERP systems.

Figure 2 Chronological development of ERP systems across the decades The main features of present day ERP systems Specific capabilities or modules often define the true capability of ERP system. ERP systems have always been focussed on intra-company processes where operations that are performed within an organization and they functionally integrate cross functional business processes (Bingi, Sharma, and Godla, 1999). Connecting a companys customer to ERP system are customer relationship management (CRM) systems which are on the other side of sales processes and manufacturing. In terms of connecting suppliers to the companys ERP systems, examples of inter-company systems are supplier relationship management (SRM) systems and supply chain management (SCM). ERP systems used in administering product management and processes of research are called product lifecycle management (PLM) systems. The first fully global and integrated ERP system with multiple currencies and multiple languages which could manage end to-end processes for companies that operated in many different countries was SAP R/3 by SAP. Procurement, finance & accounting, human resources and operations are typically supported in ERP systems (Bhattacherjee, 1999). Processes and functionality that an ERP system supports is identified as the solution map. Usually the business process defined in an enterprise is similar to the solution maps functional capabilities. Functional groups within an enterprise typically have overlap areas of the SAP ERP. An application suite is a collection of standardized intra-company ERP system and inter-company systems. The main ERP vendors in todays market Due to aggressive competition for domination of the lucrative ERP market share, vendors are continuously adding new technology-based features and updating their products for ERP systems (Holland and Light, 1999). This has resulted in difficulty differentiating between ERP systems. The five dominating ERP software suppliers globally are J.D. Edwards, Baan, Oracle, PeopleSoft and SAP. Each vendor has their unique specialization in on particular module of the ERP system such as human resource management by PeopleSoft, financial management by Oracle, manufacturing by Baan, and logistics by SAP. More than 60 % of this multibillion dollar global market is collectively controlled by these 5 companies. Also competing

for remaining share of the ERP market, are few more newly emerging small and midsize ERP vendors including third-party developers and 50 other established ERP vendors (Li, 1999). Key major vendor qualities for turnkey implementation and product selection by customers of ERP system are commitment to service, module features, continuous support, financial strength for R & D, speciality, experience and long-term vision. The respective top 5 vendors and their respective suites are shown below: a) b) c) d) e) J.D. Edwards & Co.Flagship product is OneWorld The Baan CompanyFlagship product is BaanERP PeopleSoft Inc. Flagship product is PeopleSoft8 Oracle Corporation Flagship product is Oracle Applications SAP AG Flagship products are R/3 and mySAP.COM.

Conclusion ERP systems will continue to evolve with continuous complexity of businesses, the ever growing changes from the market and advances in technology continuously create a more synergetic and efficient information system.

References 1) APICS (2001). American Production and Inventory Control Society (APICS), http://www.apics.org. 2) Bhattacherjee, A. (1999). SAP Implementation at Geneva Chemical, http://www.cob.asu.edu/fac/ABhatt/cases/Geneva.pdf. 3) Bingi, P., Sharma, M. K. and Godla, J. K. (1999). Critical issues affecting an ERP implementation. Information Systems Management, 16(3), 7-14. 4) Davenport, T. H. (1998). Putting the enterprise into the enterprise system. Harvard Business Review, 76( 4), 121-131. 5) Davenport, T. H. (2000). Mission Critical: Realizing the Promise of Enterprise Systems. Boston, MA: Harvard Business School Press. 6) Holland, C. and Light, B. (1999). A critical success factors model for ERP implementation. IEEE Software, May/June, 30-36. 7) Kumar, K. and Van Hillsgersberg, J. (2000). ERP experiences and evolution. Communications of the ACM, 43(4), 23-26. 8) Li, C. (1999). ERP packages: Whats next? Information Systems Management, 16(3), 31-35. 9) OLeary, D. E. (2000). Enterprise Resource Planning Systems : Systems, Life Cycle, Electronic Commerce, and Risk. UK: Cambridge University Press. 10) Tadjer, R. (1998). Enterprise resource planning. Internetweek, Manhasset, April 13.