SECOND EDITION Chapter 15-1 Prepared by Coby Harmon Prepared by Coby Harmon UniversityofofCalifornia, California, Santa Santa Barbara University Barbara Westmont College College Westmont IT Infrastructure for E-Business Chapter 15-2 Study Study Objectives Objectives The overview of an ERP system The history of ERP systems Current ERP system characteristics The modules of an ERP system The market segments of ERP software systems Implementation issues of ERP systems The benefits and risks of ERP systems ERP systems and the Sarbanes–Oxley Act Chapter 15-3 Real Real World World Agri-Beef Co is a privately held, Idaho firm with annual sales in excess of $500 million Believing that its old accounting systems were antiquated, the management at Agri-Beef recently switched to an ERP system They experienced a very successful implementation that took only six weeks and they began experiencing benefits immediately The treasurer of the company, while describing the benefits with regard to the preparation and handling of intracompany transactions, said the following: “With the old method, we had to walk each transaction through Now we can post transactions straight through to another division’s general ledger account.” The improved efficiency resulted in two check runs instead of 22 runs, and a 200 man hour savings per month Chapter 15-4 Overview Overview of of ERP ERP Systems Systems Enterprise Resource Planning (ERP) system integrates all business processes and functions into a single software system, using a single database ERP system components: Financials Data in a(n) Human resources Operational database Procurement and logistics Data warehouse Product development and manufacturing Sales and services Analytics Chapter 15-5 SO The overview of an ERP system Overview Overview of of ERP ERP Systems Systems Exhibit 15-1 An ERP System Chapter 15-6 SO The overview of an ERP system Overview Overview of of ERP ERP Systems Systems Concept Check Manufacturing companies implement ERP systems for the primary purpose of a increasing productivity b reducing inventory quantities c sharing information d reducing investments Chapter 15-7 SO The overview of an ERP system History History of of ERP ERP Systems Systems ERP systems: ► Developed during the 1960s and 1970s ► First generation was materials requirements planning (MRP) software ► MRP evolved into manufacturing resource planning (MRP II) ► ERP software did not become popular with large corporations until the 1990s Chapter 15-8 SO The history of ERP systems History History of of ERP ERP Systems Systems Concept Check In the late 1990s, the Y2K compatability issue was concerned primarily with computer systems’ a file retrieval capability b data storage c human resource comparisons d capital budgeting Chapter 15-9 SO The history of ERP systems Current Current ERP ERP System System Characteristics Characteristics EDI, Internet EDI, or extranets are used to connect a company’s ERP system to the IT systems of its suppliers and customers Exhibit 15-2 An ERP II System Chapter 15-10 SO Current ERP system characteristics ERP ERP Modules Modules Illustration: Match the ERP modules with their purpose of the related processes d Accounting for personnel and payroll activities Chapter 15-18 SO Current ERP system characteristics ERP ERP Modules Modules Illustration: Match the ERP modules with their purpose of the related processes e Data mining and other processes for obtaining feedback and supporting managerial decision making Chapter 15-19 SO Current ERP system characteristics ERP ERP Modules Modules Illustration: Match the ERP modules with their purpose of the related processes f Chapter 15-20 Planning and scheduling of conversion activities SO Current ERP system characteristics Market Market Segments Segments of of ERP ERP Systems Systems Tier One Software ► Usually implemented in very large organizations ► Minimum cost to purchase is approximately $350,000 Often, the cost exceeds $1 million ► Three most popular ERP systems in tier one are SAP, Oracle, and Peoplesoft Chapter 15-21 SO The market segments of ERP software systems Market Market Segments Segments of of ERP ERP Systems Systems Cloud Based ERP All ERP vendors have developed ERP products for cloud computing For example, ►SAP offers a cloud-based ERP system for small to medium- sized entities (SMEs) called SAP Business ByDesign ►Customers who use cloud-based software need only a small IT system ►ERP system can be used through a computer with Internet access and a Web browser Chapter 15-22 SO The market segments of ERP software systems SkullCandy, founded in 2003, is a manufacturer and seller of headphones exclusively tailored for snowboarders, skateboarders, and other action-sports enthusiasts It has experienced tremendous growth over the past decade During one period, it grew 300 percent over four years The growth became explosive when its products were accepted by Best Buy, Circuit City, and Target In response to this growth, SkullCandy sought a business software system that would meet its accounting and reporting needs but could also easily scale to match the company’s growth The company chose SAP Business ByDesign, a cloud-based system, as its ERP system Real Real World World Chapter 15-23 On leap day, February 29, 2012, Microsoft’s Azure cloud experienced outages that, in some cases, lasted up to 16 hours The outages occurred in cloud data centers in Chicago, San Antonio, and Dublin, Ireland After investigation, Microsoft determined the outage was triggered by a security system bug related to leap day itself The system sets expiration dates for security certificates in the virtual machines that run software for customers Those security certificates, by default, expire one year later The system tried to set the security date to February 29, 2013, a nonexistent date (since 2013 is not a leap year) This was the initial cause of the crash that Microsoft had to quickly fix Real Real World World Chapter 15-24 Market Market Segments Segments of of ERP ERP Systems Systems Concept Check The type of ERP system used by large, multinational corporations is known as a big bang implementation b modular implementation c Tier one software d Tier two software Chapter 15-25 SO The market segments of ERP software systems Implementation Implementation of of ERP ERP Systems Systems Important factors and issues to considers when implementing an ERP system Hiring a consulting firm Customization of ERP system The best fit ERP system Costs of hardware and software Which modules to implement Testing the ERP system Best of breed, verses ERP modules Data conversion Business process reengineering Chapter 15-26 10 Training of employees 11 Method of conversion, or “go live” Big Bang SO Implementation issues of ERP systems Location-Wise Modular Implementation Implementation of of ERP ERP Systems Systems Concept Check Which of the following ERP approaches accomplishes the ERP implementation beginning with one department? a the pilot method b the modular implementation approach c the big bang approach d the location-wise implementation method Chapter 15-27 SO Implementation issues of ERP systems Benefits Benefits and and Risks Risks of of ERP ERP Systems Systems Benefits of ERP Systems 1.Interactive nature of the modules 2.Real-time nature of processing 3.“Best Practices” nature of the processes 4.Single database enhances sharing of information 5.Capability to analyze large amounts of data 6.Capability to enhance e-commerce and e-business 7.Capability to interact in real-time 8.ERP systems are scalable Chapter 15-28 SO The benefits and risks of ERP systems Benefits Benefits and and Risks Risks of of ERP ERP Systems Systems Risks of ERP Systems 1.Implementation Risks 2.Operation Risks a Security b Availability c Processing integrity d Online privacy e Confidentiality Chapter 15-29 SO The benefits and risks of ERP systems ERP ERP Systems Systems and and the the Sarbanes-Oxley Sarbanes-Oxley Act Act ERP systems Provide feedback information to management regarding internal control Steps the company must accomplish: ►Establish and maintain a list of incompatible duties ►Tracking each employee’s ID and password ►Used to properly segregate duties ►Can incorporate a matrix of tasks that are incompatible ►Allows real-time monitoring and reporting of exceptions Chapter 15-30 SO ERP systems and the Sarbanes–Oxley Act ERP ERP Systems Systems and and the the Sarbanes-Oxley Sarbanes-Oxley Act Act Exhibit 15-5 Examples of Accounts Payable Internal Control Reports Chapter 15-31 SO ERP systems and the Sarbanes–Oxley Act Copyright Copyright Copyright © 2013 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Chapter 15-32 ... in real-time 8.ERP systems are scalable Chapter 15- 28 SO The benefits and risks of ERP systems Benefits Benefits and and Risks Risks of of ERP ERP Systems Systems Risks of ERP Systems 1.Implementation... Security b Availability c Processing integrity d Online privacy e Confidentiality Chapter 15- 29 SO The benefits and risks of ERP systems ERP ERP Systems Systems and and the the Sarbanes-Oxley... market segments of ERP software systems Implementation issues of ERP systems The benefits and risks of ERP systems ERP systems and the Sarbanes–Oxley Act Chapter 15- 3 Real Real World World Agri-Beef