Enterprise Resource Planning and Management Information Systems : Text and Case Studies [1 ed.] 9789350432778, 9789350245620

Citation preview

ENTERPRISE RESOURCE PLANNING AND MANAGEMENT INfORMATION SYSTEMS (TEXT AND CASE STUDIES)

C.S.V. MURTHY B.Sc., B.E., MI.E., Chartered Engineer, Industrial Consultant, Visiting Faculty at various Management Colleges, Bangalore, India.

tm Gflimalaya GpublishingGlfouse Gpvt.GLtd . • MUMBAI • NEW DELHI • NAGPUR • CHENNAI • PUNE • LUCKNOW . BAN GALORE •

.

©AUTHOR No part of this book shall be reproduced, reprinted or translated for any purpose whatsoever without prior permission of the Publisher in writing.

ISBN : 978-93-5024-562-0

Published by

First.Edition : 2008

Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd. "Ramdoot", Dr. Bhalerao Marg, Girgaon, Mumbai-400 004. Phones: 2386 01 70 12386 38 63, Fax: 022 - 2387 71 78 E-Mail: [email protected] Website: www.himpub.com

Branch Offices De/hi

"Pooja Apartments", 4-B, Murari Lal Street, Ansari Road, Darya Ganj, New Delhi-110 002. Phone: 23270392, Fax: 23243030, Fax: 011 - 2325 62 86

Nagpur

Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur-440 018. • Phone: 272 12 16, Telefax: 0712-272 12 15

Banga/ore

NO.16/1, (Old 12/1), 1st Floor, Next to Hotel Highlands, Madhava Nagar, Race Course Road, Bangalore - 560 001. Phone: 22281541,22385461, Telefax:080-2228 6611

Hyderabad

No.2-2-1167/2H, 1st Floor, Near Railway Bridge, Tilak Nagar, Main Road, Hyderabad - 500 044. Phone: 6550 17 45, 040-3293 04 33, Fax: 040-2756 00 41 E-mail: [email protected]

Chennai

No.2, Ramakrishna Street, North Usman Road,

T. Nagar, Chennai - 600 017. Mobile: 09380460419 Pune

No.11,·3rd Floor, Wing-A, Sahadeo Avenue - II, S. No. 5/9+5/10, Someshwarawada, Baner Road, Pune - 411 008. Phone: 25898907

Lucknow

C-43, Sector C, Anigunj, Lucknow - 226 024 Phone: 0522-4047594

Printed by

Geetanjali Press Pvt. Ltd. Ghat Road, Nagpur - 18

[

CONTENTS~ Page No.

CHAPTER 1 - Enterprise Resource Planning (ERP) 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12

Overview of ERP Material Requirement Planning (MRP or MRP - 1) Manufacturing Resource Planning (MRP - II) Evolution of ERP Integrated Management System Reasons for the Growth of ERP Business Modeling Integrated Data Model Obstacles of Applying IT Foundations of IS in Business ERP Markets Other Topics about ERP

CHAPTER 2 - IS Models 2.1 2.1 2.2 2.3

2.4 2.5

2.6 2.7 2.8 2.9 2.10

52 - 73

Client / Server Architecture for ERP Nolan Stage Hypothesis IS Strategic Grid Critical Success Factors Soft Systems Methodology Socio-Technical Systems Approach Systems Development Life Cycle Prototype and End user Computing Application Packages Outsourcing Deciding Combination of M~thods

CHAPTER 3 - Business Process Re-engineering (BPR) 3.1 3.2 3.3 3.4 3.5

1 - 51

BPR Process Clean Slate Re-engineering Technology Enabled Re-engineering Myths regarding BPR Business Intelligence Systems

74 - 107

3.6

Data Mining 3.7 Data Warehousing 3.8 On-line Analytical Processing (OLAP) ·3.9 Supply Chain Management 3.10 Best Practices· in ERP

CHAPTER 4 - ERP Modules

108 - 154

4.1 4.2

Finance Accounting Systems 4.3 Manufacturing & Product Systems 4.4 Sales & Distribution 4.5 Human Relations Systems 4.6 Plant Maintenance Systems 4.7 Materials Management Systems 4.8 Quality Management Systems 4.9 ERP System Options and Selections 4.10 ERP Proposal Evaluation

CHAPTER 5 - Types of Information Systems

155 - 248

5.1 5.2

Transaction Processing Systems MIS 5.3 Decision Support Systems 5.4 Office Automation System 5.5 Communication Systems 5.6 Knowledge Work Systems 5.7 Artificial Intelligence 5.8 Group Decision Support Systems (GDSS) 5.9 Expert Systems 5.10 Executive Information Systems 5.11 Strategic Information Systems and Strategy Level Information Systems.

°

CHAPTER 6 - Benefits of ERP

6.1 6.2 6.3 6.4

Introduction Lead Time Reduction On-Time Shipment Reduction in Cycle Time

249 - 263

6.5 6.6 6.7 6.8 6.9 6.10

Improved Resource Utilisation Better Customer Satisfaction Improved Supplier Performance Increased Flexibility Reduced Quality Costs Improved Information Accuracy and Decision Making Capabilities

CHAPTER 7 - ERP Implemenation and Maintenance

7.1 7.2 7.3 7.4 7.5

Implementation Strategy Options Features of Successful ERP Implementation Strategies to Attain Success End User Training Maintaining ERP & IS

CHAPTER 8 - IS Security, Control and Audit

8.1 8.2 8.3 8.4 8.5

264 - 288

289 - 313

System Vulnerability and Abuse Business value of ,Secuirty and Control Need for Security Methods of Minimizing Risks, IS Audit Ensuring System Quality

Case Study

314 - 327

Index

328 - 331

ENTERPRISE RESOURCE PLANNING (ERP)

.:.

CONTENTS

.:.

1.1

Overview of ERP

1.2

Material Requirement Planning (MRP or MRP - I)

1.3

Manufacturing Resource Planning (MRP - II)

1.4

Evolution of ERP

1.5

Integrated Management System

1.6

Reasons for the Growth of ERP

1.7

Business Modeling

1.8

Integrated Data Model

1.9

Obstacles of Applying IT

1.10 Foundations of IS in Business 1.11 ERP Markets 1.12 Other Topics about ERP (i) Who needs ERP? (ii) Components of an ERP (iii) ERP and its benefits (iv) Objectives :of ERP system (v) ERP Applications (vi) The Scope of an Enterprise System (vii) Speciality of Existing ERP System

Q]~=========== Enterprise Resource Planning & Managment Information Systems

1.1 OVERVIEW OF ERP Information technology (IT) is a vital component of successful businesses and organisations. It constitutes an essential field of study in business administration and management. The reason for studying information system is you probably intend to be a manager, entrepreneur or business professional and it is absolutely necessary for any person of this cadre is to have a basic understanding of information systems as it is to understand any other functional area in business. Computers and communications are becoming important in every one's lives. In order to beat the competition and to survive, thrive in business and in today's competitive world, one has to manage the future. For managing the future, one has to manage the information properly. This has been explained in Figure 1. ~ below.

Manage • means J Manage • means IDeliver Proper. to the I Information I I Information I Future I

Decision makers at the right time

1

automate

Use it in the best way for success

-1

Use it to the full potential

I

I

Organisations have to make use of IT

.

Computers

the process of data collection, collation refine and process in i the organisation

• Communications • Networks etc.

Fig. 1.1 Managing the Future

Every organisation has certain goals and objectives. For organisation to succeed, all its' business units and its organs should work towards common goals. Each business units or even each department of the business units in the organisation will have its own goals. Sometimes some of these might even conflict in its own way while thinking and moving to its ultimate goals. IT has may ~oles to play in the organisation. IT is a subset of Information System (IS). Business professionals rely on many types of Information Systems that use a variety of information technologies. IS frame work for business professionals deal with five areas of knowledge, out of which IT is regarded as one of the areas. Foundation Concepts Business Applications Development Processes Information Technologies Management Challenges

Enterprise Resource Planning

=======================0]

The success of an organisation depends in resolving the conflicts found in the various business functions and making them to do what is good for the organisation. It is not enough if each department manages its function only without understanding the problems arise at the other associated functions of other departments in the organisation. Similarly even at employee's level, he should understand how his actions or decisions are affecting the othe.r departments. Without IT, in the earlier days, the actions taken individually on their own was difficult to know its repurcussion on others was a serious problem. Now with the advancement of IT, things have become easier, because of the information sharing at each of the levels and stages. IT ensures seamless flow of information across the different departments (or functions), develops and maintains an enterprise-wise database which would help anyone to access and come to a common understanding and sharing of the information. Such an enterprisewide data sharing has given many benefits like: • •

Automation of procedures and actions High quality information availability to all the people in the organisation for better decision making

•

Faster response times etc.

Enterprise resource planning (ERP) systems is now a subject which is considered a very hot topic since it is a system that intenrates individual traditional business functions into a series of modules so that a single transaction occurs seamlessly within a single information system rather than several separate systems.

DEFINITION OF ENTERPRISE RESOURCE PLANNING (ERP) (1)

Enterprise involves a complete business consisting of:

•

functions

•

divisions

•

other components

us~d

to accomplish specific objectives and defined goals.

Enterprise

is a group of people with a common goals; it has certain resources at its dJsposal to achieve that goal (II) Resources are:

the assets of an enterprise that are assigned to activities and used in the process of producing an output, product or services.

[]]F============Enterprise Resource Planning & Managment Information Systems

Resources Example • Materials

• • • •

Funds Labour Labour hours Machine hours

People

Fig. 1.2 Enterprise

ENTERPRISE RESOURCE PLANNING (ERP) is an integrated cross functional software that re-engineers man':lfacturing, distribution, finance, human resources and other basic business processes of a company to improve its efficiency, agility and profitability. Cross functional information systems are information systems that are integrated combinations of business information' systems. Sharing information resources across the functional units of an organisation, is the main function of ERP. Enterprise Re-source planning is also known ' as Entel1lrise systems. It is a firmwide information systems that integrate key business processes. ' It enables Information to flow fre~ly from different parts of the firm .

Enterprise Resource Planning ~==""""'~=================1OJ

ERP includes

'. • • •

All business, functions like sales and marketing, HR, Production, Logistics, Accounts and Finance, Distribution, Costing, Maintenance etc. Enterprise covers all from customers to suppliers. Cross functional activities (Integrated combination of business activities thus sharing information resollrces .across the functional units of an organisation). Integrated, orgcmized and formalised commonsense system.

1.2 MATERIAL REQUIREMENT PLANNING (MRP OR MRPl) ERP packages are veFY useful in many of the business functions. The business fuctions can be classified under several categories like: •

Sales and Marketing

•

Finance and Accounting ,

•

Human Relations (HR)

•

Manufacturing and Production

•

Plant Maintenance

•

Logistics

•

Quality Management

•

Materials Management etc

Plannin~

The manufacturing segment is very wide and accounts for a quarter (25%) of the total IT spending in the country and it is the largest segment spending a lot of money on IT. Under this category again,' the process manufacturing sector spends more on IT, as majority of the companies are engaged in this activity. The manufacturing activities include Inventory control, production costs, marketing costs, channel relationship improvisation between supplier and delivery, Improving IT infrastructure, automating processes, decision' making through IT etc. ERP is very helpful in the manufacturing industry and many industries have realised that without deploying ERP pack«;lges, they -may find it difficult to ..compete not only iIi: the country and much more with the global players. Some of the areas where ERP is very much 'sought in the manufacturing sect.or are: •

~aterlal , Requir.ernent Planning (MRP or MRP I)

•

Manufacturing Resource Planning (MRP II)

• •

Computer-Aided Design (CAD) Computer-Aided ManufactlJring (CAM) etc.

[]Jf============ Enterprise Resource Planning & Managment Information Systems MRP is a computer-based inventory and production schedule system that considers all that goes into completing an order for large shop situations where many products are manufactured in periodic lots via several processing shops.

In order to understand an MRP, let us take a simple example of a product A. The structure tree of a product is as shown below in figure 1.3

A

is a product

B&C

are' two sub assemblies

O,E.F

are components

Fig. 1.3 Structure Tree of a Product

In order to produce one number of product A, two sub-assemblies of B and two subassemblies of C are required. To produce one sub-assembly of B, 2 components of 0 and two components of E are required. Similarly to produce one sub-assembly of C, two components of F and one component of E are required. If one number of product A is to be produced, then the quantities are:

(i)

two sub-assemblies of B

(ii) two sub-assemblies of C (iii) four components of 0

(iv) six components of E (v) four components of F are required. If 100 numbers of product A are required, then

200 sub-assemblies of B (ii) 200 sub-assemblies of C (iii) 400 components of 0 (i)

(iv) 600 components of E (v) 400 components of F are required. Calculilting'the net requirement of components for 100 products of A, inventory on hand is to be considered.

Enterprise Resource Planning

========================0

Suppose certain stocks are available for sub-assembly C, components D and E as shown above; the quantities are to be deducted from the total requirements to arrive at the net requirements. If the material requirement plan is to be worked out, a production schedule is as shown below in Fig. 1.4 is to be worked out. Product! sub-assemblies/ components

Total requirements

Inventory on hand

100 200 200 400 600 400

-

Product A Sub-assembly B Sub-assembly C ComponentD ComponentE ComponentF

Net requirement

100 200 150 370 400 400

50 30

200

-

Fig. 1.4 Calculation of Net Requirements

Fr----------------------,

~ [Ijl--------I 0

I

I

7

6

cgf-----------'$ 5

I

I

1

4

3

2

~ I

o

No of Weeks

Fig. 1.5 Determination of Time Schedrile.

The horizontal axis (x-axis) is represented as number of weeks in the reverse order starting for 7 to o. If the product A is required at point '0' (shown in Fig. 1.5 by the customer, product A should be ready one week earlier at the factory for packing and transportation and receiving operations at 1. Sub-assemblies Band C should be ready at 2, 2 weeks still earlier as they need Qne week for assembly to produce the product A. Similarly, the component D needs one week to manufacture and E needs two weeks to manufacture and for assembly of D and E one more week to get sub-assembly B, Hence D and E should be ready at points 4 and 5 respectively. Fig. 1.5 shows the positions when the components or parts, sub-assemblies and assemblies are to be ready. Similarly, E and F components should be ready at points 5 and 6 respectively, for manufacture and sub-assembly at C (2nd week). The raw materials

CIl~===========Enterprise Resource Planning & Managment Information Systems

are to be ready for the manufacture of component F at 7th week (one week earlier). Similarly, the raw materials required for the manufacture of E and 0 components are required at 6th and 5th weeks respectively. The working shows how complicated is to work out the material requirement plan even for a simple example shown above with one product, two sub-assemblies and three components. There are factories which are producing thousands of components in each product and hundreds of varieties in each of the products. In such cases, it is humanly impossible (without a computer) to work out the MRP. Computers are needed. Further, the example taken above is with a forecast figure of 100 of product A. These forecasts also vary and accordingly the MRP is to be adjusted now and then which will make the exercise still difficult. MRP is worked out knOWing the actual requirement (based on the orders and on the forecast), and the time schedule required for manufacture and the stock available on hand (inventory). It is eye opening to realize that a major case of production inefficiency is a lack of integrated production planning, production scheduling and production control information systems. One approach to improved production efficiency is material requirements planning (MRP) which is a set of computer software programs. MRP integrates several production related information system so that MRP programs can access and extract data from these systems to accomplish production scheduling automatically. MRP's purpose is to greatly improve both inventory management and production scheduling. Toe next step is to work out a material requirement plan as shown in the next page in Figure 1.6 Several of the MRP systems distributed by a variety of computer program vendors integrate several of the systems shown in Fig. 1.7 below and also provide an automated inventory and production scheduling system that gives accurate and up-to-date information for production management purposes. The scope of many MRP systems is shown in Fig. 1.7. The computer file of planned transfers, distribution requirements etc. indicates the use by the MRP programs of information about the possible need to transfer completed parts or components to other production locations for further production activity and about the logistic arrangement for distribution of finished goods to the wholesale or other markets.

Enterprise Resource Planning

========================~Q]

Items

Week No

1 Assembly

A

2

3

4

5

Requirement

200 150

C Requirement

150 370

order release Requirement 0

order release

E

order release

370 400

Requirement

400 400

Requirement F

7 100

100 200

order release

Components

6

Requirement order release

Sub assembly B

Lead

400

order release

Fig. 1.6 Material Requirement Plan

~: ~-----~ f

,\

~ ~

: ,"', , _rj

.. ,

~

..

'

HI)"':')' 1',

. .=----:--~ I h

'

,

,

.,'; ('. r ;l,I.

j

Fig. 1.7 AnMRPSystem

MRP systems probably introduce as much change to an organisation as any other major type of system's implemefltation and perhaps more. A primary reason for the partial success or outright failure of many MRP systems is that the top manageme~t does not invest the time necessary to learn the new MRP concepts thoroughly. Top level managers do not perceive the entire manufacturing process as an information system that requires their total commitment for successful implementation. Because MRP is also a system of management, its implementation is not primarily a data processing task, and however, lacking a complete understanding of MRP, the management is likely to make the error of assigning the task to the data processing department.

[EJ1============Enterprise Resource Planning & Managment Information Systems

MRP activity shown above usually begins with the development of a master production schedule by family of products. The individual product members of each product line are then assigned quantities and time periods for production. This master production schedule, the bills of materials and data about inventory levels serve as input to the MRP programs. MRP programs first determine the material needs of the individual products by 'exploding' each bill of materials and by multiplying the quantity of the product scheduled for production by the material needs per unit of the product. The programs then combine the needs of all products for each type of material and determine net materials requirements by taking into account existing uncommitted materials inventory and inventory due to be received prior to production. MRP is also utilised when a product is manufactured only after a receipt of customer order. An order and its delivery data can be entered into the MRP system when received and the bills of materials for the products ordered are exploded so that a list of materials needed is developed automatically. The MRP system that compares these needs with inventory records and creates a purchase order for materials not available from inventory. The MRP program determines what and how many components and products must be produced and when production must be started so that .the delivery date can be met.

The benefits of a successful MRP system include: (i)

Significantly decreased inventory levels decreases in inventory carrying costs.

(2~O%

reduction) and corresponding

(ii) Fewer stock shortages, which caused production interruptions and time consuming schedule juggling by managers. (iii) Less expediting by a factor of several times, with savings of labour, material costs and premium transportation charges. (iv) Increased effectiveness of production supervisors. Less production chaos and decreased expediting free them to devote more attention to the tasks in their job description, such as personnel relations and operation contro!. (v) Better customer service, an increased ability to meet delivery schedules and to set delivery dates earlier and more reliably. MRP system schedules production and purchases of: (i) Custom, (ii) Standard and

(iii) Stock items . It controls the timing and amount of replenishment orders and operates on a continuous on-line, real time basis.

MRP is designed to order releases piecemeal whenever a change occurs in: (i) Sales forecast, (ii) Inventory status and

(iii) Reorder parameters.

It is transaction driven and also could be operated on a batch system but for update inventory records, which is on-line. System is composed of five sub systems: (i) Order release scheduling, (ii) Explosion,

(iii) Requisitioning,

(iv) Reporting and (v) Regeneration.

Order release scheduling This sub-system maintains the 'planned order releases' data item in the inventory file. This determines the timing and quantity for each planned order release for product that is to be purchased as well as for product to be manufactured in a job shop/production line. It handles stock, standard and custom items for parts and finished products. "1 he order release scheduling program is called into action whenever reconsideration by the existing planned order releases are there, which is based on projected on-hand quantities, on-hand in future periods (known as buckets). Order releases are planned to cover net requirements. The system may use a number of different rules for deciding how much to order. The rule is different for parts than for final products. One approach is to use an 'Economic order quantity'. Two methods involved are: (i) Fixed quantity ('Q' type)

(ii) Fixed interval of time ('P' type) The method of determining the timing of an order release depends on whether the item is produced on a scheduled production line or not. In the case of production line items, the production line schedule file should be accessed to determine the timing of an order release.

Explosion In the case of manufactured products, an order release creates a requirement for the component parts used to make the·items {listed in the product structure file}. Whenever the

[ill===========~Enterprise Resource Planning & Managment Information Systems

order release scheduling program creates or revises a planned order release, it calls the explosion program unless the item is a purchased part or raw material. The explosion program retrieves the list of component parts and the quantity of each per unit of product being ordered. For each component, it retrieves the appropriate inventory record, and increases the appropriate 'requirements' data item by the quantity of the component required to meet this new planned order release (requirement is increased because this is a dependent demand). Any time a requirement is changed in an inventory record, an order release scheduling program is called.

Requisitioning Order release action takes place when a planned order becomes 'mature' that is, when the timing of its release coincides with the current period. For each inventory record with a positive quantity in the 'action bucket' appropriate requisitioning procedure is called. For purchased items, a procedure is called that adds records to the purchasing and purchase detail files, filling in the requisition data items. For manufactured parts and products, a procedure is called which adds records to the work order file, filling in the product number and number of units ordered,

Reporting The past due data items in the MRP data of the inventory file constitute information. useful for supervisory control purposes. These data items show deviations from plan and provide a basis for exception reporting. The past due requirements are the difference between actual and planned withdrawals from stocks in the last period. In addition to weekly reports on past due amounts, daily reports on new orders that should be released and needed changes in released order due dates should be generated. In addition to this weekly maturing of orders, the release date on planned orders (the required delivery date on both planned and released orders) can change at any time as a result of revised forecasts, unscheduled stock disbursements, scrap, physical inventory count adjustments, lead time changes and so forth. Once in a day for example, the reporting system can be run to generate the reports of order release changes, and clue date changes that require management action.

Regeneration The MRP system that has been'described assumes that the sets of inventory records exist and that are individually and collectively balanced and consistent. The only task is to adjust them for changes, often called as net change MRP system. It is conceived as an online, continuously operating system. A regeneration system is needed to develop this initial set of inventory records and to periodically purge an ongoing set of records of accumulated errors. The net change MRP system relies on a high degree of integrity in both inventory

Enterprise Resource Planning

========================~Q!)

transaction reporting and product structure and inventory file maintenance. To regain this integrity and when too many errors accumulate, the regeneration system is run (once/twice a year). The regeneration system begins by using requirements for each item based only on the forecast independent demand. It begins the process of calling the order release scheduling program and the explosion program. The end result is a set of inventory records that have requirement data items that contain dependent as well as independent demand.

r------------------, -.....,

I

I I

/.

Basic components ofMRP

I I I I I I I I I I I

Master production schedule (MPS)

~

status ---t file

..

I I

:r--t I I

-

J

I I

MRP Processing

I

I

~

I I

-

Order release requirements

(Orders to be released now)

Order rescheduling

(expedite, deexpedite cancel open order)

I

r------.J f---4o

~ Bills of materials ---t file

Planned orders (Future)

L __________ .JI

Fig. 1.8 Material Requirements Planning System

1.3 MANUFACTURING ~SOURCE PLANNING (MRP II) OR "CLOSED LOOPMRP MRP II is an integrated information system that shares data and synchronises the activities of production and the other functional areas of the business. MRP II steps beyond first generation MRP to synchronise all aspects of the business. MRP II system coordinates by adopting a local production and by using one unified database to plan and update the activities of all the systems.

•

•

Sales/Marketing

•

Purchasir.:,

Finance/Accounting (Accounts payabel/Accounts receivable,

•

Engineerinr

billing, general ledger)

•

Manufacturing

• •

Receiving Executive information system (EfS)

•

Other functional information systems

[EJI============= Enterprise Resource Planning & Managment Information Systems Manufacturing (materials, capacity, production schedules) Business Plan Production Plan

Rough cut capacity plan

Master production schedule (MPS) Material requirement plan

Purchasing (vendor orders) Receiving EIS & Other Functional Information system Engineering (Process and product design) Marketing (Sales order entry, delivery projections)

Detailed capacity plan

Finance (Capital requirements for capacity, working capital requirement, General ledger) Shop floor control, purchases control

Accounting (Accounts payable, Accounts receivable) Billing

Fig. 1.9 MRP I1:An Integrated System for Planning and Control (Production and operation management, Fifth Edition p.544 by Everette ADAM, Jr. Ronald J.EBERT), Pentice Hall of India, New Delhi.

Master Production Planning: The Master Schedule or Master Production Schedule or MPS, sets the quantity of each end item (Finished Product) to be completed in each time period (week or month or quarter) of the short-range planniJlg horizon. Rough Cut Capacity Plan: This is done in conjunction with the tentative master production schedule to test its feasibility in terms of capacity before the Master Production Schedule (MPS) is finalised. . Capacity Planning: Capacity Planning is concerned with defining the long-term and short-term capacity needs of the firm and determining how these needs will be met.

Computer Aided Software for Manufacturing •

CAD is a software system. It is an approach to product and process design that utilises the power of the computer. CAD covers several automated technologies such as computer graphics to examine the visual characteristics of a product. These are able to do in screen tests, replacing the early phases of prototype testing and modification. These have been used to top design everything from computer chips to potato chips; can custom design swimsuits. CAD is used to refine dimensions of Tote wheels to meet airline requirements for checked baggage.

•

CAE is to evaluate its engineering characteristics

•

CAPP computer aided process planning is used to design the computer past programs that serve as instructions to computer controlled machine tools and to design the programs used to sequence parts through the machine centers and other processes (such as washing and inspection) needed to complete the part.

•

MP&CS (Automated manufacturing planning and Control systems) are computer based information systems that help, plan, schedule and monitor a manufacturing operation

CAD is to be linked with CAM for data integration Computer Integrated Manufacturing (CIM) technologies are tied together using a network and integrated database. CIM is the automated version of the manufacturing process, where the three major manufacturing functions-product and process design, planning and control and the manufactUring process are replaced by the automated technologies.

[CIM = CAD + CAM + CAE + CAPP + MP & CS]

SAP AG's R/3 This software consists of four modules: •

Financial Accounting

•

Manufacturing and Logistics

•

Human Resources

•

Sales and Distribution

SAP AG via German firm, is the world leader in providing ERP Software. They have a manufacturing firm in Bangalore also. The software is designed to operate in a three-tier client/server configuration. (Refer Figure 1.10)

Database Server R/3

Fig. 1.10 Three-tier Client Server Configuration

CEI •

Enterprise Resource Planning & Managment Information Systems

Softwares for project management information system

Microsoft project for windows

Mile stone

Primavera project planner

Schedule publisher

Time line

Texim project

Project scheduler

PMIS

Primaveras mate carlo risk analysis program •

Factory layout software

CHAIT (Computerised Relative Allocation of Facilities Technique) CORELAP SPACE CHAIT (Modified version of CHAIT) Factory flow software package ASYBL $ General Electric Company's . configuration for computerized line balancing •

Assembly

line

Computer programs for Forecasting

Microsoft Excel Jack Yurkiewicz has developed 50 forecasting and statistical analysis programs. •

Aggregate planning

Microsoft excel-solver option MRP Type Systems

SAP AG's R/3 IBM's Application system/400 System Software Associates, Chicago Andersen Consulting, Chicago-Mac-Pacwon Expert configurator Pansophic Systems Inc. Illinois Software packages for manufacturing job shops, schedules

Helwett Packards Manufacturing Management II (MMII Program) Job system by Pruett and Schartner Software for Simulation

Simulation programs (SLAM II, SIMSCRIPTII-5, GPSS/HP, GPSS/ PC, PC-MODEL, RESQ, SIMAN, MAP/I, SIMFACTORY)

Enterprise Resource Planning

=======================~@J

1.4 EVOLUTION OF ERP djffer~nt

•

In the earlier years, software package used to come in integrated fashion, with a very high cost.

forms and in a non-

•

Later on, a need was felt to integrate various segments of an enterprise.

•

Growth of Business to Business (B2B) requirement and large database, concepts of Supply Chain Management (SCM), Just-in-Time (JIT) to-order manufacture made to think about ERP. That is new dynamics of business, forces the corporates towards ERP solutions. B2B Business to Business

Sell products or services to other businesses. Brings multiple buyers or sellers together in a central market place. JIT Just in Time

A policy calling for the delivery of materials, product or services at the time they are needed in an activity or process. Supply Chain Management (SCM)

Integrating management practices and information technology to optimise information and product flows among the processes and business partners within a supply chain. •

Shrinking Geographical borders due to global entry of business companies, integration of currencies, decreasing product life cycles, reduced profit margins due to competitions, need to raise productivity to meet sudden spurt of demands etc necessitated ERP to take up each of these problems. The result is proper pooling up of physical, inventory, financial, marketing, human relations, logistics, accounting etc and maintained, and ERP solution would tackle this.

•

The Original -thinking of the companies is that only global organizations, multinational companies (MNCs) and large corporations operating in different parts of the world considered ERP solutions were useful to them. Now even a small company looking for global market has to go in for ERP solution. With the Iiberalisation policies of the country like India and with international market integration, even the small company can target the global market and expand .

•

The cost of implementation of ERP in the present days has come down. Hence any company can go for it. Readymade templates brought about by ERP solution providers can be user!. for small companies.

[ill~============Enterprise Resource Planning & Managment Information Systems

•

Experience shows productivity levels are three fold up now with the implementation of ERP solutions. But in India, this concept has not caught up fast. Some people still doubt on the usefulness of ERP and hence used to the same old traditional packages use. However, it is hoped that India will catch up very soon and find the advantages of ERP. Abbreviations: MRP I - Material Requirement Planning MRP II - Manufacturing Resource Planning E-ERP - Extended ERP or Web enabled ERP SCM - Supply Chain Management APS - Advanced Planning and Scheduling CRP - Capacity Requirement Planning BOM Bill of Materials MPS - Master Production Schedule

E-ERP. ERP

Inventory Management

--

EOQ

Years 1950

MRPI MIS

-

BOM

1960

MRP II MRPI ERP

1980

SCM B2B JIT

1990

SCM APS

2000

....

Fig. 1.11 ERP Development and Beyond

Bill of Materials (BOM) List of direct materials and quantity per assembly required to manufacture a given !Jroduct.

Trends in the Evolution of ERP Applications (I) Flexible ERP In 1990: ERP software packages were the mainstay of ERP implementations; critisised for their inflexibility; gradually modified into more flexible products. Companies who installed ERP systems pressurised software vendors to adopt ~ore open, flexible, standards based software architectures. This makes the software easier to integrate with other application programs of business users.

Enterprise Resource Planning

""""========================~~

Trends in the evolution of ERP applications

3

Still Evolving

Trends shaping ~ continous evoluhon

Improvements in integration and flexibility

Tensions to e-businessapplications

A broader reach to new users

Adoption of Internet Technologies

Fig. 1.12 Trends in the Evolution of ERP Technologies

Figure 1.12 shows four major deve,lopments and trends that are evolving in ERP app1ic~tions

ERP is even today evolving in: •

Adopting to the developments in technology

•

Meeting the demands of the market

ERP companies have diiferent brands World wide brands are:

•

SAp, J.D, Edwards,

•

Baan, People soft

•

Oracle, QAD

Specialised brands

•

Algorithm

• JDA • Reteck (Caters to specific industries)

1]2]============ Enterprise Resource Planning & Managment Information Systems (II) Web Enabled ERP Software: This is the next development in ERP, for the reason that Internet, corporate intranets and extranets grew. This prompted software companies to use Internet technologies to build the following into ERP Systems

•

Web interfaces

•

Networking Capabilities.

These would enable ERP systems conveniently to use and connect to other internal applications, as well as the systems of a company's business partners. (III) Inter-enterprise ERP: By this arrangement of Internet connectivity, inter-enterprise ERP Systems were developed that provide Web-enabled links between key busil1ess systems (such as inventory and production) of a company and its customers, suppliers, distributors etc. These external links gave rise to a move towards the integration of internal-facing ERP applications with the external-focussed applications of supply chain management (SCM) and a company's supply chain partners. (IV) e-Business Suites: The developments ~entioned earlier have provided the business and technological momentum for the integration of functions into e-business suites. Popular ERP software companies have developed:

•

Modular, Web-enabled software suites that integrate ERP, customer relationship management, procurement, decision support, enterprise portals and other business applications and functions. Examples: (a) Oracle's e-Business suite (b) SAP's my SAP

Oracle e-Business Suite

It is a complete set of business applications that enables you to manage customer interactions, delivery services, manufacture products, slip orders, collect payments etc. All are built on a unified information architecture. Some e-business suites disassemble ERP components and integrate them into other modules. Other products keep ERP as a distinct module in the software suite. The goal of such software suites is to enable companies to run most of their business processes using one-enabled system of integrated software and databases, instead of a variety of separate ebusiness applications. ERP system is a difficult and costly process that has caused serious business losses for some companies as shown later, who underestimated the planning, development, and training that were necessary to re-engineer their business processes to accommodate their new ERP systems. However, continuing developments in ERP software like web enabled ERP modules, inter- enterprise ERP e-business software suites have made ERP to gain more flexibility and have become user friendly, as well as extending it outwards even to company's business partners.

Enterprise Resource Planning

========================~I]IJ

Business processes are unique ways in which organisations coordinate and organise work activities, information, knowledge, to produce a product or serivice.

Example: •

Developing a new product

•

Generating and fulfilling an order

•

Hiring an employee

The advance of enterprise wide client-server computing came with a new challenge; How to control all major business processes coming under different functions with a single software architecture in real time? The integrated solution, known as enterprise resource planning (ERP), promises benefits from: increased efficiency to improved quality, productivity and profitability.

,

raises Inventory

Example:

....... Prod uctlVlty

Product data

.0 rd er entry •_ 1

allows -
~

Distribution and Insurance Companies

ERP needed for all types of industries

Manufacturing ERP Customers and Distribution - - - - - - - - - - - - . ) are more Industries

Fig. 1.35 ERP Applications

(vii) The Scope of an Enterprise System An enterprise system enables a company to integrate the data used throughout its entire organisation. This list shows some of the many functions supported by SAP's R/3 package. But are enterprise systems living up to company's expectations? is the question The growing number of horror stories about failed or out of control projects should certainly give managers a pause. If one is not careful, the dream of information integration can turn into a nightmare according to Mr. Thomas H. Devenport, a professor at the Boston University School of Management. It is true that enterprise systems can deliver great rewards, but the risk they carry are equally great when considering and implementing this system, managers need to be careful that their enthusiasm about the benefits does not blind them to the hazards. The anatomy of an enterprise system is as under: At the heart of an enterprise system is a central database that draws data from and feeds data into a series of applications supporting diverse company functions. Using a single database dramatically streamlines the flow of information throughout a business.

Gil~============= Enterprise Resource Planning & Managment Information Systems Human Resources

Sales and Marketing

· ·• ·

• Order management • Pricing • Sales management

·

Sales planning

Human-resources time accounting Payroll Personnel planning Travel expenses

Operations and Logistics

Financials

• Accounts receivable and payable • Asset accounting

·•

· · · · ·• ·

• Inventory management

Cash management and forecasting Cost element and cost center accountin'g Executive information system Financial consolidation

· ·• · · ·• ·•

MRP Materials management Plant maintenance Production planning Project management

•. Purchasing

General Ledger Product cost accounting Profitability analysis Profit center accounting

Quality management Routing Management Shipping Vendor evaluation

Standard and period related costing

Managers and stake holders Sales and delivery ~

Reporting appli~tions

"~ cut r-t Sales force and mers

customers service reps SeNi~

application

l«

Pf

I

Financial

/ C!tral Dat Base

r

Human resource management applications

i(.

"

I

Manufacturing applications

~

"

~ Inventory and

aat ~ Sup-

office pliers

supply applications

Employees

(Source: Harvard Business Review, July-August 1998, p. 124 Thomas H.Davenport Putting the Enterprise into the Enterprise system)

Fig. 1.36 Anotomy of an Enterprise System

Enterprise Resource Planning

=======================~[ill

(viii) Speciality of Existing ERP System •

Systems are built in with a clear separation of functional activities.

•

The user interface is graphical user interface (GUI) techniques is deployed on client machines.

•

Powerful server machines host the database; The databases built a.re using relational database technology.

•

Business logic written as server procedures; split on the former depepding on the product architecture to be executed on the client, server or both.

•

With the availability of suitable communication structure, the systems could be used in a distributed environment enabling business processes which span across multi-geographicalloactions could be indentified and tied up.

Graphical user interfaces support the usability aspect of business systems by providing intutive and consistent user interface. •

The technology areas that apply to ERP systems are :Relational database systems Communication protocols. Graphical User Interface framework

The above technologies have helped the users to architect the system in such a way that installation, customisation and extensions are possible in shorter time frames, Object oriented development practice in buliding GUI has enabled the vendors to provide the above to accommodate additional data entry.

II QUESTIONS

t

1.

Explain how Information Technology is a vital component of successful business and organization? How IT can be used to manage the future?

2.

In the information system frame work, IT is regarded as a major subset why? Which are the other subsets?

3.

"IT ensures seamles flow of information across different departments, functions and maintains an enterprise - wise database? Comment.

4.

Define Enterprise', and 'Enterprise Resources'.

5.

Give the meaning of an enterprise?

6.

Define ERP. What does ERP includes?

7.

How are business functions classified?

[E]============ Enterprise Resource Planning & Managment Information Systems 8.

Discuss on material Requirement planning (MRP or MRPI)

9.

Define MRP Explain an MRP system. What is an MRP concept?

10. What are the subsystems of MRP? Explain each one of them. 11. Explain manufacturing resource planning {MRP - II) with a neat sketch. 12. How do you say that MRP-II is an integrated system for planning and control. 13. Discuss on the evolution of ERP. 14. Explain the trends observed in the evolution of ERP applications. 15. Give the meaning and purpose of ERP. Explain an ERP software what does it typically include? 16. Give the meaning of ERP application. 17. Explain the working of enterprise systems in a large organisation. 18. Compare and contrast the traditional view of systems with an enterprise system. 19. What do you mean by an integrated management system. Give some examples. 20. Does ERP deals with "Multi' concept? Which are the multis coming under this? 21. Explain Business Model. 'The very first activity in ERP project is Business modeling or creation of such a model' what are your comments on this? 22. What is an Integrated Data Model? Explain how this is useful in ERP? 23. Explain the benefits and challenges of ERP. 24. Explain the foundations of IS in Business. 25. What are the strategic issues involved in ERP Implementation? 26. How does the IS Technologies have moved from original main frame based computing to the Internet era? 27. What are the problems faced in India in using ERP? 28. Give a broad outline of ERP Markets in India. 29. Explain the history of leading Software companies in India in brief and what are its popul~r brands? 30. Compare and contrast briefly the major global vendors of ERP and their products. 31. Write down a few lines on the evolution of ERP III. 32. Explain the components of an ERP. 33. Write a brief note on ERP and its sectors. 34. Explain the stages followed in advanced countries to introduce ERP

Enterprise Resource Planning

======================~[EJ

35. What are the objectives of ERP systems? What differences we notice in the ERP vendors while marketing their brands with different marketing strategies? 36. Write a note on ERP applications. 37. Explain the scope of an enterprise system. 38. Write down briefly the anatomy of an enterprise system with a sketch. 39. What are the specialties of existing ERP system?

*****

IS MODELS

2.1

Nolan Stage Hypothesis

2.2

IS Strategic Grid

2.3

Critical Success Fadors

2.4 Soft Systems Methodology 2.5

Socio-Technical Systems Approach

2.6

Systems Development life Cycle

2.7

Prototype and End user Computing

2.8 Application Packages 2.9

Outsourcing

2.10 Deciding Combination of Methods

IS ModeIs"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""======="""""===""""""""",,=@]

A model is a simplified, abstract representation of some real world system. This has to be simplified because we cannot handle all the details of the real system. Why we build models, is for its simplicity. However, it should contain most of the features of the original system and behave in the same way. Models represent systems and thus they are built from a collection of many related subsystems. Models are used for multi purposes and we also find several types of model s like •

Physical

•

Process

•

Business Modeling

Physical Model: The goal is generally to create a model that can be constructed cheaply that looks like the original system. E.g., Movie studios build physical models. This can be destroyed without injuring people or expensive property. Architects construct models to help builders visualize and building and its surroundings these have certain limitations. Process Model: These are used to display business processes. Drawings and pictures to represent the various objects are used. However at heart, they typically use mathematical equations.

E.g., Data Flow diagrams are useful models of business processes engineers use process models to evaluate the flow of materials and products through the production process. Business Modeling: This has been already explained in chapter 1. Here, the models of a business or business process are built to help managers make decisions. Most businesses are to complex for any individual to understand all the details. A variety of models may be created to present a simplified view of the business. Model Building: The four primary reasons for building and using models are given as under:

•

Understand the process (to define objects and specify relationships)

•

Optimisation (Search for the best solutions: minimizing costs, improving efficiency, increasing profits etc.)

•

Simulation (To examine what might happen if we make changes to the process)

The models used here are: Descriptive, graphical, and mathematical. Mathematical models are tend to be, emphasized for optimation and simulation. Information system model is a conceptual frame work that views are information system as a system that uses the resources of hardware (machines and media) software (programs and procedures) people (users and specialists) and networks (communications media and network support to perform input, processing, output, storage and control activities that transform data resources (databases and knowledge bases) into information products.

IS Models====-=========================~Gil

A model is a simplified, abstract representation of some real world system. This has to be simplified because we cannot handle all the details of the real system. Why we build models, is for its simplicity. However, it should contain most of the features of the original system and behave in the same way. Models represent systems and thus they are built from a collection of many related subsystems. Models are used for multi purposes and we also find several types of model s like •

Physical

•

Process

•

Business Modeling

Physical Model: The goal is generally to create a model that can be constructed cheaply that looks like the original system. E.g., Movie studios build physical models. This can be destroyed without injuring people or expensive property. Architects construct models to help builders visualize and building and its surroundings these have certain limitations. Process Model: These are used to display business processes. Drawings and pictures to represent the various objects are used. However at heart, they typically use mathematical equations.

E.g., Data Flow diagrams are useful models of business processes engineers use process models to evaluate the flow of materials and products through the production process. Business Modeling: This has been already explained in chapter 1. Here, the models of a business or business process are built to help managers make decisions. Most businesses are to complex for any individual to understand all the details. A variety of models may be created to present a simplified view of the business. Model Building: The four primary reasons for building and using models are given as under:

•

Understand the process (to define objects and specify relationships)

•

Optimisation (Search for the best solutions: minimizing costs, improving efficiency, increaSing profits etc.)

•

Simulation (To examine what might happen if we make changes to the process)

The models used here are: De!,criptive, graphical, and mathematical. Mathematical models are tend to be emphasized for optimation and simulation. Information system model is a conceptual frame work that views are information system as a system that uses the resources of hardware (machines and media) software (programs and procedures) people (users and specialists) and networks (communications media and network support to perform input, processing, output, storage and control activities that transform data resources (databases and knowledge bases) into information products.

I]il

Enterprise Resource Planning & Managment Information Systems

2.1 NOLANSTAGEHYPOTHESIS This gained popularity when it first appeared in an article in the Harvard Business Review in 1974. He suggested that an organisation goes through identifiable stages as it computerises. In 1979, in the same magazine, he updated his thinking and added two more stages to his original proposal. Stage 1: Initiation : In this stage, the computer is introduced within the organisation. Users are encouraged to use the system, but due to unfamiliarity, do not yet flock to request applications. The applications that are developed are simple and typically of an accounting orientation. During this stage, the data processing organisation is often centralised because this organisation, like the users, must also learn the new technology and upgarde its market position. Stage 2 : Contagion: Soon the users become superficially enthusiastic about using the computer and request the development of all sorts of applications. Computer services are taken free to them since computing expenses are often carried as an overhead expense during this stage and thus new developments are encouraged. Pressure is exerted by data processing to expand computer hardware and computer staff during this stage to keep up with the demand for services. The budget in the data processing department rises rapidly. The management of the computer department can be characterized as lax, since little planning is done and much control is lacking. Stage 3: Control: The organisation has entered the control stage when senior management becomes very concerned about the level of benefits being received from computer applications versus the cost of the data processing functions. When this occurs, a halt is called to budget expansion. The total Data Processing budget is either held constant or the growth rate is shortly reduced. The focus is on giving the department the type of professional management found in other parts of the organisation. Planning and control systems are initiated. Emphasis is placed upon documenting existing applications and moving them more towards middle management and away from a focus on strictly operational functions. It is also during this stage that an attempt is made to make the users accountable for their computer use by introducing the chargeout systems. Stage 4: Integration: The integration stage is characterised by an attempt to take advantage of new technology, typically database, by integrating existing systems. The Data Processing function is set up much as a utility to service the users. There is, according to Nolan, a significant transition point in an organisation computer use, once this stage is reached. Stage 5: Data administration: In the data administration stage, the database technology is in place and this function is created to plan and control the use of an organisation's data. By this time, users are effectively accountable for compufer resource use and the emphasis

is upon common, integrated systems in which data is shared among various functions in the organisation.

~

Stage 6: Maturity: When an organisation reaches maturity (and few have), they have truly integrated the computer into their managerial processes. The data resource is at this time, meshed with the strategic planning process of the organisation. Applications mirror the informational flows of the organisation. Finally, joint user and data processing accountability exists regarding the allocation of computing resources within the organisation. The schematic shown in Fig. 2.1 depicts a 'budget curve' as an organisation passes through the stages.

1 2

1 Initiation 1958

I

Contagion 1963

3

4

5

I

I

I

Control 1968

Integration 1975

Dala adrnini-

stration 1980

6 I

Ml,1uIiy (7)

iii'

Fig. 2.1 Nolan's six stages of data processing growth (Study made by Nolan, Norton_!l"d Company - study made on a large national agricultural cooperative, Mid West Co-Op.)

Dickson's Systems Hierarchy In 1968, G.W. Dickson wrote an article that attempted to define the area of MIS. In doing this, he identified several levels of systems. The levels he identified and defined are with , slight modifications, still valid today. The reason that this framework is useful is that we often speak of MIS as though all systems were management information systems and provided information for management deciSion-making. Clearly, various types of levels of systems exist, the federation of which may be an organisation's MIS. The Dickson levels are: (i) Clerical system (Levell) and (ii) Information system (Level 2)

2.2 IS STRATEGIC GRID It is a model of competitive forces (competitors, customers, suppliers, new.entrants and substitutes) and competitive strategies (cost leadership, differentiation, growth, innovation

[E)~==========~Enterprise Resource Planning & Managment Information Systems

and alliances) as well as a value chain model of basic business activities. These models can be used in a strategic planning process to help generate ideas for the strategic use of information technologies to support new e-business initiatives. McFarian_McKenney in 1983 has derived a contingency approach to decide on the information planning effort known as strategic grid. This grid defines four types of information systems planning situations depending on the strategic impact of the existing information systems applications portfolio and the strategic impact of the portfolio of applications planned for development as shown below in the figure. These are classified into four positions to define the position of the information systems activity related to the organisation. Strategic:

In this case information system activities are critical not only to toe current competitive strategy, but also to the future strategic directions of the enterprise. Information systems applications are part of new strategic decisions. This falls in quadrant 4.

Factory:

Here, information system applications are vital to the successful functioning of well defined, well accepted activities. But information systems are not of future strategic operations and hence shown in quadrant 3.

Support:

It is represented in quadrant 2 where in it can be noticed that information system applications are useful in supporting the activities of the organisation.

A portfolio weighted to support cell emphasizes traditional data processing applications. Information system activities are not essential to critical operations and hence not included as part of future strategic directions. This is represented in quadrant 2. Turnaround:

As could be seen from the sketch, turnaround is a transition stage from support to strategic grid. Earlier the organisation had support type application but now intends to plan for applications vital to strategic success of the organisation (represented in quadrant 1).

The cell can now be used to suggest organisation and management of information systems planning: (a)

Strategic position in the grid needs significant general management guidance. In addition, integration of corporate planning and information systems planning is required. There is a need for smooth functioning of information systems activity.

(b)

For turnaround position, it is same as above.

(c)

Factory position in the grid needs less involvement from top management. Guidance from corporate plan to maintain information systems alignment is required. Detailed operational and capacity planning by information system function.

IS

Models===========================~=WJ (d)

Support involves little top management involvement and as well as little or no guidance from corporate plan. Strategic impact of planned application development portfolio High

Low

2

TURNAROUND 1

FACTORY

STRATEGIC

3

4

SUPPORT

Strategic impact of existing operating applications

High

Fig. 2.2 The strategic grid

(Courtesy: F. WMcFarian and J.L. McKen ney, Corporate Information Systems Management: The issues facing senior executives, Irwin, Homewood, IL, 1983, p.1S).

2.3 CRITICAL SUCCESS FACTORS (CSFs) One of the approaches to eliciting information about the requirements for a new system is to use critical success factors (CSPs). The analyst asks users, which four or five items are the most important in performing their jobs. These items must be critical to the success of the organisation and the person being interviewed. The answers could be anything like: •

Spotting sales trends quickly.

•

Identifying products which have good sales, for the production department to take up immediately for manufacture.

•

Managing costs.

•

Inventory control - etc.,

This list is prepared at a very high level. It could not be used to design a specific system. However a list was developed for the information systems plan for the organisation. Then working at different levels of the management, critical success factor were determined for the warehouses manager and the company controller. CSFs help to focus the user on the variables needed for success rather than on his immediate problems that day. (i)

•

Critical success factor is an idea that leads to strategic alignment by highlighting the way better information might help the firm achieve its business goals. These are the things that must go right for a business to succeed. The first step in the CSF method is to

1]il===========~Enterpr;se Resource Planning & Managment Information Systems

identify the finn's primary mission and the objectives that define satisfactory overall perfonnance. Now executives identify the CSFs. (ii) Most businesses have relatively few of them, and these typically come from sources such as the structure of the industry, the finn's competitive strategy, its industry position or geographic location, environmental factors surrounding the finn, and temporary operating problems or opportunities.

CSFs for one firm included improving customer relationships, improving supplier relationships, making the best use of invenotry and using capital and HR efficiently and effectively. (iii) The third step is to identify the pertinent indicators or measures of performance for each CSF. E.g. Customer relations might be measured in terms of: trends in customers lost new customers ratio of customer inquiries to customer orders on-time delivery (iv) It is to decide which measures are most important and then make sure that IS plans provide means for collecting and using this infonnation. CSF provides a shared understanding of what is critical to a company by aiding executive, communication about important company issues and influences priorities for system development. CSF provides a useful framework in many situations; like any technique it should be applied with care; more effective when used with senior managers who focus more in their own areas and are less aware of the organisation's overall CSFs. CSFs focus on issues in specific areas of business; they may not be very helpful in making investment decisions about IT infrastructure shared between different areas.

2.4 SOFT SYSTEMS METHODOLOGY

IThe user I Soft Systems Methodology

is

a development / d . an process centnng ~ on S-u-b-je-c-tw-o-r1d-s-'.

I. .

Fig. 2.3 Soft Systems Methodology

IS Models

==============================[ill

One way to describe the usage world is to use rich pictures. This is the premise of what are known as soft systems methodologies, where the user world is described in terms as closely as possibly to what people see happening in their world-by pictures and scenarios. Examples from the usage world are then used to develop a subject world model by defining the terms that will be used to describe this world. The choice of concepts is left open to the designers.

Fig. 2.4 A Rich Picture Sharing Integration Between People

Scenarios: Support models such as the rich picture by illustrating system dynamics using typical sequences of actions in the user world. Example one scenario.

i)

The committee chairperson writes a project brief and assigns it to different work groups.

ii)

Work group leaders coordinate their work groups by discussing the brief creates the initial draft which is passed between the work group members.

iii) Work group leaders meet occasionally with the chair person and external advisors and other nominated committee members to resolve any conflicts. iv) The subject world focuses on business issues. v)

In the system world, we begin to talk more in general system ways which can be applied to any probler:n. This area is often termed as conceptual modeling in computer system design.

vi)

Structured systems analysis include models such as data flow diagrams, entities and relationships and process descriptions.

[E)~==========~ Enterprise Resource Planning & Managment Information Systems

2.5 SOCIO-TECHNICAL SYSTEMS APPROACH The study .of inf.ormation systems is a multi disciplinary field. N.o single the.ory .or perspective d.ominates. The maj.or disciplines are indicated bel.ow that c.ontribute problems, issues and s.oluti.ons in the study .of inf.ormati.on systems. ~h.ough they are c.omp.osed.of machines, devices and 'hard' physical technalagy, they require . substantial sacial, arganizatianal and intellectual investments ta make them wark properly. The study .of infarmatian systems facus an their use in business and management.

Technical

Fig. 2.5 Contemporary Approaches to Information Systems (As per Kenneth Laudon)

The study .of Management Infarmatian Systems (MIS) arose in the 1979s ta facus an camputer based infarmatian system (eBIS) aimed at managers (Refer Davis and Olsan; 1985). It cambines the the.oretical wark with a practical .orientatian taward building systems and applicatial!s as per the abave figure. Problems with systems and their salutians are rarely all technical .or all behaviaral. It is better ta kn.oW the praspective .of all disciplines. Ad.opting a sacia-technical systems praspective help avaids a purely technalagical approach ta Infarmatian Systems. A socio-technological perspective an infarmatian systems is the .one in which the perfarmance .of a system is .optimized when bath the technalagy and the arganizatian mutually . adjust t.o .one anather until a satisfg.ctary fit is .obtained.

IS

Models============================~Wl

IA1ter~ative l~

I Alte~ative

~ Alter~ative

1·'4

I

I I

.1 Alter~ative I

Alternative

I

3

I'4 l

.1 Alternative

~

3

I

Final Desing Final Desing of of Technology Organisation

Fig. 2.6 A Socio-technical Systems Approach

Organisations and IT To understand the organisational impact of IT is to view an organisation as a sociotechnical system, the basic components to be accommodated in an IS are people,

tasks, technology, culture and structure components and relationships of an organisation.

Fig. 2.7 Organisation and IT

Traditional Building Approaches Systems differ in terms of their size and technological complexity and in terms of the organisational problems they are meant to solve. Because there are different kinds of systems, a number of methods have been developed to build the systems. These are:

Fig. 2.8 System Building Al!proaches

[]il~~~~~~~~~~~~~"""Enterprise Resource Planning & Managment Information Systems Understand the Business problem or opportunity

1

Develop an Information system solution

2

System Investigation ...... Product: Feasibility study

+--+

System Analysis Product: Functional Requirements

o

o

o

o

3

+---+

Implement the Information system solution

~

System Design Product: System Specification

System Implementation Product: Operational system

o

o

o

o

S System Support

-+--

System Maintenance Product: Improved system

o

Determine whether a business problem or opportunity exists. Conduct a feasibility study to determine whether a new or improved information system is a feasible solution. Analyse the Information needs of end users, the organisational environment and any system presently used. Develop the functional requirements of a system that can meet the needs of end users.

Develop specifications for the hardware, software, people, network and data resources and the information products that will satisfy the functional requirements of the proposed system.

Acquire (or develop) hardware and software. Test system, and train people to operate and use it. Convert to the new system. Use a post implementation review process to monitor, evaluate, and modify the system as needed.

Fig. 2.9 Traditional Infonnation Systems Development Life-Cycle

2.6 TRADITIONAL INFORMATION SYSTEMS DEVELOPMENT LIFE CYCLE The traditional information systems development cycle is shown in fig. 2.9 below. System development life cycle is a phased approach to analysis and design that holds the systems which are best developed through the use of a specific cycle of analyst and user activities.

The steps of SOLe include: (i)

Identifying problems, opportunities and objectives

Definition

(ii) Deciding information requirements

Definition

(iii) Frequency of information

Definition

(iv) Analysing the need of the system

Definition

IS Models~~~~~~==~===~================1]il (v) Designing of the recommended system

Development

(vi) Developing of the system

Development

(vii) Documentation

Development

(vii) Testing and maintenance of the system

Installation and the operation

(ix) Implementation and evaluating the

Installation and the system operation

The steps can be broadly. classified as: (i) System Planning (Investigate)

(ii) System Analysis

(iii) System Design

(iv) System Implementation

(v) System Maintenance

(vi)System Support

A system development cycle is a systematic and orderly approach to solving system problems.

Fig. 2.10 Irifonnation System Development Life Cycle System problem solving is the act of studying a problem environment in order to implement corrective solutions that take the form of new or improved systems - The general problem - solving steps are : (i)

Planning: Identify the scope and boundary of the problem and plan the devel?pment strategy and goals.

(ii) Analysis: Study and analyse the problems, causes and effects. Then, identify and analyse the requirements that must be fulfilled by any successful solution.

(iii) Design: If necessary, design the solution - not all solutions require design.

(iv) ImplementaUon: Implement the solution.

CEl===~========""'Enterprise Resource Planning & Managment Information Systems

(v) Support: Analyse the implemented solution, refine the design and implement improvements to the solution. Different support situations can thread back into the previous steps. SOLe consists of several distinct phases that are followed methodically. Different books refer to different phases and subphases by different names (may be group two or three phases into one phase or break a phase into two or three phases). However, they follow the same steps. Though SOLe is a powerful methodology for the system analysis and design activities, organisations are forced to take short cuts, skipping a step at some points. Sometimes time pressures, finding constraints, or other factors lead developers to use other types of system development, which are known as 'Alternative Avenues for System Acquisition' (AASA).

«

;0

Planning

~

~v ",0

E'-:;

-0

~Q, ~Q,

0

5

0'0