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2 assignmentsfirst assignment is part 3 (2 pages)Operations ManagementEnergy DrinkGroup Assignment: – Part 3Group assignment part 3 – Answer this in 2 page /APA REFERENCE ****************Following the market estimation, the customer drivers identified, as well as the structural & infrastructural decisions made for the product or service chosen, groups should now consider and a provide a detailed answer and justification to each of the following questions:What lean operations considerations (waste minimization, people involvement, continuous improvement, push vs. pull systems, set up reduction and total productive maintenance) do you consider relevant for the product or service chosen?It is recommended to review the chapters 4, 5, 6 & 8 of the book Operations Strategy and the chapters 1 & 2 of the book A Guide to ERP: Benefits, Implementation and Trends.James, T. (2011). Operations Strategy. Chapter 4 Chapter 5 Chapter 6 Chapter 8 Sneller, L. (2014). A Guide to ERP: Benefits, Implementation and Trends. Chapter 1 Chapter 2 Very important remark to take note:Quoting I just want to caution you about using direct quotes. Even if you cite correctly, use direct quotes sparingly. Most direct quotes are not necessary – paraphrase! Also, the citation after a direct quote is as follows: (Manning, 2011, para. #) or (Manning, 2011, p. #). You use the paragraph if the document you are citing from is on the web; you use the page number if it is a journal article.second assignment is (one page)The progressive integration of communications, IT, data and physical elements within the production systems are bringing significant opportunities to increase competitiveness within organizations. Industry 4.0, Industrial Internet of Things, and Smart Factory are all concepts recently develop which refer to these emerging opportunities.Review the following article: What is Industry 4.0—the Industrial Internet of Things (IIoT)? https://www.epicor.com/en-us/resource-center/articles/what-is-industry-4-0/, and read about the Industrial Internet of things. Pay particular attention to the areas ‘Impact’ and ‘Solutions’ and then address the following questions: Will the progressive integration of communications, IT, data and physical elements result in personnel reductions within the organizations that take advantage of these opportunities? Why or why not? If losses are imminent, will there be other areas where personnel lines will increase to offset these losses?ALL APA REFERENCE
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A Guide to ERP
Benefits, Implementation and Trends
Prof. dr. Lineke Sneller RC
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Prof. dr. Lineke Sneller RC
A Guide to ERP
Benefits, Implementation and Trends
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A Guide to ERP: Benefits, Implementation and Trends
1st edition
© 2014 Prof. dr. Lineke Sneller RC & bookboon.com
ISBN 978-87-403-0729-0
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A Guide to ERP: Benefits,
Implementation and Trends
Contents
Contents
Preface
9
Part 1: What is ERP?
11
1
Why ERP?
12
1.1
The main characteristics of ERP
12
1.4 Impact of ERP
19
1.6
24
Summary
2 The functioning of ERP systems
25
2.1 The value chain and the supply chain
25
2.2 The predecessors of ERP
26
360°
thinking
.
2.3
The first ERP systems – data integration for manufacturing companies
28
2.4
ERP extensions – Data integration for other value chains
30
2.5 ERP extensions – Sophisticated best practices
2.6
ERP extensions – Data integration in the supply chain
2.7
Summary
360°
thinking
.
32
33
35
360°
thinking
.
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Dis
A Guide to ERP: Benefits,
Implementation and Trends
Contents
3
Parties in the ERP market place
36
3.1
ERP software suppliers
36
3.2
Implementation partners
41
3.3
Application service providers
44
3.4
Summary
46
4
ERP and IT architecture
49
4.1
The logical architecture of an ERP system
49
4.2
The elements of a physical IT architecture
51
4.3
ERP on a mainframe architecture
54
4.4 ERP on a client-server architecture
55
4.5
ERP on a browser architecture
58
4.6
Summary
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5 Principles of an ERP implementation
5.1
62
63
Phases in the ERP life cycle
63
5.2 The preselection of suppliers, implementation partners and application
5.3
service providers
67
The sourcing basis: turn-key or do-it-yourself
69
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A Guide to ERP: Benefits,
Implementation and Trends
Contents
5.4
Model-building strategy
71
5.5
Go live strategy
72
5.6
Summary
74
6
Functional fit analysis
75
6.1
Significance of the functional fit analysis
75
6.2
A method for functional fit analysis
78
6.3
Approach
80
6.4
Summary
84
7
Risk analysis
85
7.1
Significance of the risk analysis
85
7.2
A method for risk analysis
88
7.3
Approach
90
7.4
Summary
94
8
Cost benefit analysis
95
8.1
Significance of the cost benefit analysis
95
8.2
A method for cost benefit analysis
98
8.3
Approach
103
8.4
Summary
105
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A Guide to ERP: Benefits,
Implementation and Trends
Contents
9 ERP ex ante evaluation – an example
106
9.1
Introduction of the example company
106
9.2
The principles of the ERP implementation at P&V Europe
107
9.3
Functional fit analysis
111
9.4
Risk analysis
117
9.5
Cost benefit analysis
123
9.6
Go-no go presented to the European board
127
Part 3: Managerial trends and ERP
128
10
ERP and open source software
129
10.1
Open source software: a brief introduction
129
10.2
ERP and open source software
134
10.3
Implementation strategy
137
10.4
Summary
139
11
ERP and corporate governance
140
11.1
Corporate governance legislation: a brief introduction
140
11.2
Core concepts in internal control
144
11.3
ERP and internal control
148
11.4
Summary
150
.
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A Guide to ERP: Benefits,
Implementation and Trends
Contents
12
ERP and shared services
152
12.1
Shared service centres: a brief introduction
152
12.2
ERP and shared service centres
156
12.3
Implementation strategy
158
12.4
Summary
161
13
Criticism of ERP
162
13.1
ERP data integration and organisational culture
162
13.2
ERP best practice processes and competitive advantage
164
13.3
Summary
166
References
167
Endnotes
182
The Wake
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A Guide to ERP: Benefits,
Implementation and Trends
Preface
Preface
One of the most influential IT developments of the past forty years has been Enterprise Resource Planning,
or ERP. Thousands of organisations have used ERP to change their business models. Millions of employees
in these organisations use ERP in their daily work. Tens of thousands of software developers earn their
living with writing ERP software. Suppliers of ERP systems, such as SAP and Oracle, as well as ERP
implementation partners, such as Accenture, realise multi-billion annual revenues in the ERP market.
This Guide to ERP is meant to be read at various levels in organisations. Board members and managers
can use this book to gain an overview of the concepts of ERP, the benefits that can be obtained from it,
and the link between ERP and other managerial trends and issues. At program or project management
level, the book supports the development of ERP business cases, describes parties involved in a typical
ERP implementation, and explains a number of ERP risks and pitfalls. For ERP users, who often only
see a limited part of the ERP system in their daily work, the book offers the bigger picture.
The theoretical basis of the book is clarified by a large number of examples of ERP, from the public as
well as from the private sector. The examples, and an extended case study, make the book relevant for
higher education, especially for students in management science, financial management and information
management courses.
This book consists of three parts. The first part is a general introduction. The aim of this part is to make
the reader aware of the most important characteristics of ERP. An overview is presented of the reasons
why companies and other organisations apply ERP, and what they expect from their ERP systems. The
extent to which these expectations are realised are discussed, as well as the impact of ERP in practice.
The most important ERP suppliers are listed, and the technical foundation of ERP systems is explained
for a non-technical audience.
The two themes of the second part of the book are evaluation and implementation of ERP systems. The
objective of this part of the book is to introduce the phases that can be distinguished in the ERP life cycle
in an organisation, the most important decisions that have to be taken in these phases, and methods
that can be used for evaluation and implementation of ERP systems. The first phase of ERP, the ex ante
evaluation, is discussed in detail. This part of the books concludes with an extensive case study in which
an ERP business case is developed for an example organisation.
In the third part of the book, ERP is viewed from the organisational and managerial perspective. The
aim of this part of the book is to give the reader an overview of recent managerial trends, and how they
relate to ERP. Trends that will be discussed are open source software, corporate governance and shared
service centres.
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A Guide to ERP: Benefits,
Implementation and Trends
Preface
Undoubtedly, ERP is one of the most important and influential trends in information technology. This,
however, does not imply that everyone automatically subscribes to the advantages of ERP. The main
characteristics of ERP, and their impact on organisations have been criticised. In a guide to ERP this
criticism should not be ignored. The last chapter of this book is therefore dedicated to this criticism.
With this book I want to offer the reader a solid foundation for the use or study of ERP. In the book I
combine theoretical aspects of ERP with a large number of practical examples and illustrations. I have
only been able to do this because of the support and inspiration of a large number of people, some of
whom I want to mention by name. I could never have created the theoretical basis of the book without
the support of two of my Nyenrode colleagues, Prof. Dr. Ir. Jan Bots and Prof. Dr. Fred de Koning RA RE.
I have acquired most of the practical experience with my ERP core team, and I want to compliment Vicky
Aked, Jany Blaise, René Brouwers, Richard Cale, Henk van Deelen, Carlos Dias, Henk Haandrikman,
Bianca Hendriksen, Julia Leladze, Vicky Rodgers, Pietro Trevisanato, Jan Vos, Johan Wempe and Wilmar
Zwanenburg upon their perseverance and sense of humour. This English edition of the book has been
peer reviewed by Klaas Brongers, president of the Dutch Computer Society Ngi-NGN; I thank him a lot
for carrying out a very thorough review. Finally, I want to thank Fred Burgmans; without him I might
have started writing this book, but I would never have finished it.
Spring 2014
Lineke Sneller
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A Guide to ERP: Benefits,
Implementation and Trends
Part 1: What is ERP?
Part 1: What is ERP?
This first part of the Guide to ERP is a general introduction. The aim of this part is to make the reader
familiar with the most important characteristics of ERP. It consists of four chapters.
The first chapter starts with an overview of the defining characteristics of ERP. After this, it gives an
overview of companies and organisations that apply ERP systems, and the expectations they have before
implementation of the systems. The chapter concludes with the extent to which these expectations are
met, and the impact of ERP in practice.
In the second chapter the functioning of ERP is explained. This is done on the basis of two management
models: the value chain and the supply chain. The origin of ERP is described, and an explanation is
given of the first applications of ERP in manufacturing companies. After this, several extensions to
ERP are presented: industry solutions, improvements and extensions, and the application of ERP in the
supply chain.
In the third chapter the various parties that play a role in the ERP market are introduced. An organisation
that plans to implement ERP will meet three groups of suppliers: software suppliers, implementation
partners and application service providers. The roles of each of the three parties will be explained, their
portfolios of products and services will be described, as well as the main developments in their parts
of the market.
The fourth chapter introduces a number of technical aspects of ERP. Like any other computer system ERP
is based on a so-called computer or IT architecture. The chapter starts with the three components of the
logical architecture of ERP. After this, three physical architectures are described that have frequently been
used for ERP in the past decades. This fourth chapter describes technology, but specialist terminology is
avoided. The chapter is meant for a broad audience and not just for readers with a technical background.
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A Guide to ERP: Benefits,
Implementation and Trends
Why ERP?
1 Why ERP?
This chapter presents the impact of ERP on the management and operations of an organisation. It starts
with an overview of the defining characteristics of ERP. After this, it gives an overview of companies
and organisations that apply ERP systems, and the expectations they have before implementation of the
systems. The chapter concludes with the extent to which these expectations are met, and the impact of
ERP in practice.
1.1
The main characteristics of ERP
Enterprise Resource Planning (or: ERP) systems are computer applications that are being used by
organisations in many industries. ERP is a mature concept: it has been there for more than forty years,
tens of thousands of companies have implemented ERP, and millions of people world wide use ERP in
their daily work.
ERP systems have two important characteristics: data integration and support for best practice processes.
Data integration means that data only have to be entered once, after which they are available for use
throughout the organisation. Traditionally, many organisations have had parallel administrations before
they implemented ERP. In this situation, it would be possible that within one company the marketing
department has a customer register, the warehouse has an order register, and the credit management
department has a register of sales invoices. These registers could be electronic, in other cases they
might still be kept on physical files in filing cabinets. The data in these registers will partly overlap: in
each of them customer name and address will be registered. However, there will also be differences and
inconsistencies in the data.
With an ERP system, one integrated register can be created, which satisfies the requirements of the the
marketing, warehouse as well as the credit management department. Employees who need the data can
be given access, and for one customer data like name and address can be combined with shipped orders
or open invoices. The departments can agree upon the responsibility for the accuracy and completeness
of the data, and in many cases the ERP system can automatically update the data. When for example
the warehouse ships an order, the ERP system can automatically print an invoice and create an open
invoice in the accounts receivable register.
As a result of data integration, ERP can make double work redundant and stimulate efficiency. But maybe
more importantly, it can stop the search for and explanation of differences between the various registers
and definitions, and make the organisation rely on one shared source of data.
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A Guide to ERP: Benefits,
Implementation and Trends
Why ERP?
Figure 1.1 Data integration through ERP at Wolters Kluwer. Source: MD Business News [2003]
The second important characteristic of ERP systems is support for best practices. A best practice is a
generally accepted way of working that has been adopted by many organisations and has proven its
practical value. An example of a best practice is the use of credit limits to mitigate the risk of bad debt.
Credit limits work in the following way: when a customer places a new order, a check is performed
whether the total amounts on outstanding invoices plus the amounts of previously placed orders plus
the amount of the newly placed order does not exceed a predetermined credit limit. If the credit limit
is exceeded because of the new order, the goods will not be shipped before the customer has paid part
of the outstanding amounts.
Modern ERP systems offer support for a variety of best practices. A brief example to clarify how ERP
systems do this. In an ERP system that supports credit limits, it is possible to enter a credit limit for every
customer. With every new order entry, the ERP system calculates the total amount of open invoices,
the amount of already placed orders and the amount of this new order. If the total amount exceeds the
credit limit, the ERP system automatically puts the new order on status “credit hold”. In the warehouse,
the warehouse employees pick the orders, but they will only ship those orders that are not on credit hold.
Organisations can embed the best practices of the ERP system in their business processes. They can
introduce best practices directly when they start using the ERP system, or they can let the ERP system
support their current ways of working. They can also gradually improve their business processes by
increasing their use of the best practices supported by the ERP system.
Figure 1.1 illustrates how the company Wolters Kluwer wants to standardise its business processes and
realise data integration [MD Business News, 2003].
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A Guide to ERP: Benefits,
Implementation and Trends
1.2
Why ERP?
Organisations that use ERP
Because of their two most important characteristics, data integration and best practices, ERP systems
can substantially improve business processes. In the forty years of their existence, the use of ERP systems
has spread extensively.
From the start, ERP has been used by large multinational companies. Caldwell & Stein [1998] estimate that
around forty percent of all US companies with an annual revenue of 1 billion US$ or more use an ERP
system. The use of ERP is also wide-spread in Europe. In Table 1.1 an overview is presented of companies
with a listing on the AEX, the main Dutch stock exchange, that worked on an ERP implementation
between 1995 and 2005. During these eleven years, a total of 42 companies had a listing during at least
one year on this exchange. Of these 42 companies, 26 have been working on ERP implementations
during this period [Sneller, 2010]. This means that ERP has penetrated over sixty percent of the AEX
listed companies.
At least one remarkable conclusion can be drawn from Table 1.1: many of the companies use more
than one ERP system, which implies that they can only benefit to a limited extent from the ERP data
integration characteristic.
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A Guide to ERP: Benefits,
Implementation and Trends
Why ERP?
In Table 1.2, an overview is presented of companies with a listing on the Belgian BEL20 stock exchange
that were mentioned in press releases about ERP implementations between 1995 and 2009. In these
fifteen years, 53 companies have had a BEL20 listing, 24 of which worked on ERP during this period.
In Belgium, ERP has spread less widely than in The Netherlands. In Belgium, like in The Netherlands,
companies tend to have more than one ERP system. It is remarkable that JD Edwards and Microsoft
Business Solutions are not used by Belgian listed companies.
ERP is also used by governmental organisations and agencies. In The Netherlands, both the Ministry of
Education, Culture and Science and the Ministry of Finance have used ERP for several years. Decentralised
governments, such as the provinces of North Holland and North Brabant, as well as the Dutch Vehicle
and Driving Licence body have implemented ERP systems. The Municipality of Hengelo implements
ERP in order to allow the municipality to better anticipate information requests of other parties. The
mayor of Hengelo explains his reasons for the decision to implement ERP in the following way: “because
of this system, the transparency and the accountability for the city council’s policies and resource usage
towards the citizens can in the future be further improved.“ [Nieuwsbank, 2005]
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