We have already discussed a number of
important ways in which business strategies and processes are being changed (or
at least impacted) by IT. One topic that
may be floating around your company is ERP – enterprise systems. While the ERP concept goes back to the 1970s
and two former German IBM managers, the real boost to ERPS came in the late
1990s when companies were scared of the Y2K bug and thought since they might
have to redo all their computer systems anyway, why not buy an ERP and kill two
birds with one stone?
The best way to grasp the size and
complexity of an enterprise system is to wander through a few screens. On
the web site for this course -- http://www.uwosh.edu/faculty_staff/wresch/SAPscreens.htm
I have left a set of sample screens and a bit of dialogue so you can see what
the SAP system looks like.
As you look through the sample screens,
watch all the interconnections between the data elements. Remember that
enterprise systems are supposed to provide a single data source for all
business functions. Hence, the inventory area will also contain data for
accounting and materials planning. HR contains data that can be used for
cost accounting. Sales records tie back to customer lists, to logistics,
and to materials planning.
The complaint from people who build these
systems is that they are incredibly complicated and require endless data entry
-- often much more data entry than with past systems. But there is a
reason for all the new data. The old system might just have met the needs
of HR or Accounting or Production. The new system has to meet the
needs of all those units and more.
ERP Structure
A common term in IT is
"client-server." This is meant to denote that individual
computers (clients) are hooked to a network where much of the data they need
and the programs they need are stored on a larger computer (server) and are
transferred (downloaded) to the individual computers as needed. Because
of the huge size of enterprise systems, they are better conceived of as having
a client-server-database architecture, also known as "three-tier."
(One explanation of SAPs R/3 software is that R/3
stands for "real time / three tier.")
In this structure, your work computer is the
client and requests information (who ordered part # 4453?). The request
goes down the network to a set of servers (the size of your company will
determine whether you have one server for everything, or one server for sales,
one for production, one for HR...). Those servers will understand the
request and run the program that finds the data and prepares it for
presentation to you. The servers will get the data from a very large
database that holds all of the data from your company. So every action
takes three steps -- client to server to database.
Note that a network is required to move this
data between these three places, and to each of the clients in your company
(and to each location around the
Real - time
Another structural feature of ERRPs is the fact that they are
"real-time." This means the orders you type in are immediately
sent to the database and known to everyone in the company (production,
accounting, etc). Most of your computer software is probably already
real-time so you may not think much of this feature. But remember just
because your old production system was real time, it does not guarantee that
the folks in accounting had immediate access to that data. Often
departments take time to transfer data back and forth on a daily or even weekly
schedule. Now, since ALL data is in the same database, the minute
production updates the completion of an order, billing and accounting know what
has happened.
This probably also means that remote mills
or suppliers are connecting real time as well, so you now know immediately if a
mill is falling behind its production quota, rather than having to wait for
their monthly report. And you can know real-time if a shipment is going
to be delayed. People trying to control costs and
improve timely delivery love ERPs.
Topic Questions
1. If your company has an ERP system, when did it go in? How much of a project was it to install?
2. The Cisco case describes a successful ERP implementation. What could have gone wrong? What have you heard about ERP implementations
at other companies?
3. How would you build a business case for installing an
ERP? They cost millions and take years
to install. Why do it?