AFM241 Chapter Notes - Chapter 6: Supply Chain Management Software, Enterprise Resource Planning, Sap Se
17 May 2018
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Chapter 6
Enterprise Systems (ES): Company-wide software applications that are designed to support
various business processes, capture the flow of information and facilitate the creation of reports for
monitoring key processes within the firm
- Links all primary and support activities in a firm (manufacturing, logistics, sales,
procurement) into a comprehensive and integrated system that is based on a shared
database
- Connects are primary and support activities within the firm + integrates companys supply
chain
- Largest and most expensive IS implementation firm can undertake
o Generally 2-3% of revenues and consulting fees can be 10 that amount
• MindTree is in this chapter (Pg 271)
6.1 Introduction – Pg 273
• Although firms have many different units, their success depends on how they can integrate
everything together via an ES
• Expected ES benefit generally include
- Reduction in working capital
- Access to more accurate information about suppliers, customers and employees
- Can leverage this information to reap significant benefits from their investments
• Half of ERPs (Enterprise resource planning system) dont meet half of their projected benefits
6.2 ES Implementation – Pg 274
6.2.1 Famous ES Implementation Failures
• Overstock.com’s four year ERP nightmare
- Basically another amazon
- New Oracle ERP system failed to link some of the old accounting system practices
- This caused overstatement of revenue by $12mill and an increase in cumulative net loss of
$10mill
- Implemented ERP system too fast, (wanted to get it before the holiday shopping system)
customer service and other business functions couldnt keep up
- This hurt their customer relationships, etc
• Hershey’s ERP Experience
- New SAP system failures stopped them from delivering $100million worth of Kisses for
Halloween
- Stock dipped 8%
• Just Do It Supply Chain ERP System
- Goal to integrate ERP, supply chain and CRM into one super star system
- The $400mill project caused $100mill in lost sales, 20% stock dip, lots of law suits
• HP’s ERP System Perfect Storm Problems
- HP projected everything that could possibly go wrong with their ERP project
find more resources at oneclass.com
find more resources at oneclass.com
- They just didnt plan for all of them happening at the same time lol
- $160mill in order backlogs and lost revenue, more than 5 times project cost
• Differences between major ES providers: SAP & Oracle
- SAP AG
o German software company
o Leader in software and software related services
o One of largest software companies in the world
- Oracle
o American multinational computer technology company
o Both computer hardware systems and enterprise software products
o Third largest software maker by revenue after Microsoft and IBM
o Also does ERP, CRM (Customer relationship management software) and SCM
(supply chain management software)
6.2.2 ES Implementation – Rationale and Scope
• Basic reasons include
- Integrated IT platform
- Increased data visibility
- Improved business processes
- Reduced operating costs
- Increased Responsiveness to customers
Physical scope: Whether an ES implementation system will cover one or multiple sites within one
geographic region vs multiple sites scattered around the world
- Positive relationship between physical scope of an ES implementation, complexity, cost,
implementation time, # of users
Business Process Re-engineering Scope: The process of changing workflow to eliminate forms of
work that do not add value
- Vanilla Implementation: Firm uses BPR to map out a new business process instead of
keeping its business process and customizing the ES to fit it
o One ERP project can have various parts of the software using vanilla
implementation or ES software customization
o Challenge: decide which processes will be adopted as they are in the software
(vanilla implementation) and which are to be customized (customization of ES to
meet firms business needs
Technical Scope: How much, how customized and how complex an ES must be
- ES customization tends to lead to exponential increase in complexity, cost and length of
implementation
Functional Scope: Which business process modules a firm will want to implement in its ES
- Ie. Sales, inventory management, asset management, etc
- Typical ES has several modules and each module has several sub-modules- highly unlikely
that firm will implement all modules
- Also have to consider how to connect each module to the existing systems. There are three
options:
Types of Implementation Strategies
1. Phased Rollout/Cascaded Roll out
a. Change occurs over extended period of time
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Enterprise systems (es): company-wide software applications that are designed to support various business processes, capture the flow of information and facilitate the creation of reports for monitoring key processes within the firm. Links all primary and support activities in a firm (manufacturing, logistics, sales, chain. Largest and most expensive is implementation firm can undertake: generally 2-3% of revenues and consulting fees can be 10 that amount procurement) into a comprehensive and integrated system that is based on a shared database. Access to more accurate information about suppliers, customers and employees. Can leverage this information to reap significant benefits from their investments. 6. 2 es implementation pg 274 everything together via an es. 6. 2. 1 famous es implementation failures: overstock. com"s four year erp nightmare. New oracle erp system failed to link some of the old accounting system practices. This caused overstatement of revenue by mill and an increase in cumulative net loss of.
