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Chapter 1 : Importance and Impact of ERP Systems on Industry And MD01 ME59N Execute MRP Convert to purchase order Purchaseorder 405 Independent requirement MIGO Post goods 401 receipts 406 MD61 Goods receipt Create forecast DB CR MIRO Raw mat GR/IR Post invoice DB CR 407 Domestic sale revenues F-53 Raw material DB CR consumption Post payment DB CR Cash Acc. Rec. DB CR Inventorysold productchange GR/IR Acc. Pay. DB CR Investments DB CR DB CR Factoryproduction output 410 Acc. Pay. Cash DB CR Acc. Rec. Revenues DB CR DB CR CO41 Finished Prod. 409 products output Mass release DB CR 414 production order DB CR Cons. Raw MD07 raw material DB CR Release DB CR VF01 Inventory Finished production order change product Production Create billing DB CR order 411 Delivery 413 DB CR Investments Cash CO15 DB CR 305 VL01N Conrm production Create delivery CHAPTER 1 Chapter 1 and Organization Mary M. Dunaway, Susan E. Bristow (University of Arkansas) The importance and impact of ERP :systems Importance across the industry and Impact of ERP Systems on Industry is discussed. Ways on how to capitalize for continued growth are suggested. Examples that relate to real-world scenarios are Dunaway & Bristow applied to demonstrate business value. MD01 ME59N Execute MRP Convert to 1.1 Introduction purchase order ERP systems have revolutionized businesses around the globe. Processes are leaner and more efficient, costs are minimized, - Importance and Impact of ERP Systems on Industry and Organization positive customer service is more prevalent, and government Purchasecomplianceorder is present.405 Companies have saved significant amounts of money, sometimes even in the millions, when their operations are run by an ERP system. The ERP system not only affects the company itself, but also the supply chain including Independent requirement external entities, both customers and suppliers. Throughout this chapter, you will see theMIGO importance and impact that ERP systems make on industry and organizations. Post goods 401 receipts 1.2 Basic Concepts and Definitions There are several key terms that can help to understand the importance and impact of ERP systems within industries and 406 Information technology in the broadest sense refers to both MD61 organizations. This is not a comprehensive list of terms; however, Goods receipt Create it will provide a foundation. the hardware and software used to store, retrieve, and manipu forecast late information using computer systems and applications. Business intelligence is a computer-based technique to help with decision making by analyzing data. Key performance indicators known as KPI, provide baseline DB CR MIRO metrics that companies use to measure how well the system and Business process is a logically related activity or group of activ processes are performing. ities that takes input, processes it to increase value, and provides Raw mat GR/IR Post invoice output (Harrington, 1991). Legacy system is when a new system is identified for replace DB CR ment; the407 older system is referred to as the legacy. Business process integration is the assimilation of business Domestic processes together in a central system. Lifecycle refers to the structure from which software applica sale revenues tions such as ERP evolves and is integrated within business Cloud computing is having a third party host the software and processes. systems a business needs as a service through the use of the F-53 Internet. ERP systems bring corporate business processes and data access Raw material together in an integrated way that significantly changes how consumption DB CR Data redundancy is when the same data is stored in multiple they do business. ThePost ERP payment system implementation, an enormous separate locations. DB CR capital expenditure, consumes many corporate resources Cash Acc. Rec. Data repository is a location to store data. associated with a high level of risk and uncertainty. ERP systems DB CR Inventory change GR/IR Acc. Pay. are an obvious choice for companies operating with dispar Information system referssold product to interaction between information ate legacy systems that do not communicate well with each technology, business processes, and data for decision making. DB CR other. These systems provide significant inter-related informa tion, greater information visibility, and accuracy on a common - Investments database. Within the ERP systems are a standardized process to perform the majority of business processes using industry Readings on Enterprise Resource Planning best practices. ERP DBsystems CR are so widely diffused that they are Preliminary Version - send comments to [email protected] commonly described as the de facto standard for replacement DB CR Factoryproduction output - 410 of legacy systemsAcc. Pay. in medium Cash and large sized organizations. If today’s company CIOsDB CRwere asked about the importance and - Acc. Rec. Revenues impact of ERP systems on industries and organizations, more DB CR DB CR likely than not, they would say it is impossible to work without an ERP system. CO41 - Finished Prod. 409 products output Mass release DB CR 1.3 Benefits and Importance 414 production order There areDB many CR benefits to having an ERP system within the organization. Information is readily available for the proper MD07 users,Cons. all data Raw is kept in a central repository, data redundancy is raw material Release DB CR minimized, and there is a greater understanding of the overall DB CR business picture. VF01 - Inventory Finished production order change product If a company does not have an ERP system and employs separ Production Create billing DB CR ate standalone systems for functional areas of a business, theorder - company will not be running at its full potential. 411 Delivery 413 DB CR Investments Cash CO15 DB CR 305 VL01N Conrm production Create delivery - 4 MD01 ME59N Execute MRP Convert to purchase order Purchaseorder 405 Independent requirement MIGO Post goods 401 receipts 406 MD61 Goods receipt Create forecast DB CR MIRO Raw mat GR/IR Post invoice DB CR 407 Domestic sale revenues F-53 Raw material DB CR consumption Post payment DB CR Cash Acc. Rec. DB CR Inventorysold productchange GR/IR Acc. Pay. DB CR Investments DB CR DB CR Factoryproduction output 410 Acc. Pay. Cash DB CR Acc. Rec. Revenues DB CR DB CR CO41 Finished Prod. 409 products output Mass release DB CR 414 production order DB CR Cons. Raw MD07 raw material DB CR Release DB CR VF01 Inventory Finished production order change product Production Create billing DB CR order 411 Delivery 413 DB CR Investments Cash CO15 DB CR 305 VL01N Conrm production Create delivery CHAPTER 1 Data may be compromised because it is stored in multiple locations. How would a user know which information is most current be updated in all storage locations to start and finish than necessary ? When data is changed, is there a guarantee that it will Dunaway & Bristow MD01 ME59N Execute MRP Convert to purchase order - Importance and Impact of ERP Systems on Industry and Organization ? Are processes taking longer ? Purchaseorder 405 Independent requirement MIGO When a customer calls to inquire about an order, the customer Post goods receipts may be bounced around to numerous departments within the 401 company because the customer service representative does not have all the answers at his or her fingertips. Here is an illustration of this type of scenario produced by Hammer and Company. 406 MD61 Goods receipt Create forecast DB CR MIRO Raw mat GR/IR Post invoice DB CR 407 Domestic sale revenues With this illustration, the cycle has come full circle; back to the original starting point. How much easier would it have been for the customer if the customer service representative F-53 Raw materialhad the answers to every question that the customer asked DB CR consumptionOne of the most significant features of an ERP system is that Post payment all of the information kept by a company, including within DB CR Cash Acc. Rec. functional areas, is retained in one central data repository, or in DB CR other words, the informationInventorysold productchange is saved in a single database. By GR/IR Acc. Pay. having the information in one location with authority levels for DB CR access in place, a customer service representative would have Investments Readings on Enterprise Resource Planning DB CR Preliminary Version - send comments to [email protected] DB CR Factoryproduction output 410 Acc. Pay. Cash DB CR Acc. Rec. Revenues DB CR DB CR CO41 Finished Prod. 409 products output Mass release DB CR been able to answer all the questions posed by the customer 414 instead of having to transfer the customer from department to production order ? department.DB All CR of the information is shifted from function Cons.al areas to Raw the front-line, or in other words, to the person the MD07 customer raw will material first contact when communicating with the DB CR Release company.DB From CR the above illustration, the importance of the VF01 correct employees having the correct information (in this case Inventory Finished production order change product the customer service representative), is crucial to delivering Production Create billing DB CR exceptional customer service, and in turn serving the customerorder in the most valuable way. 411 Delivery 413 DB CR Investments Cash CO15 DB CR 305 VL01N Conrm production Create delivery - 5 MD01 ME59N Execute MRP Convert to purchase order Purchaseorder 405 Independent requirement MIGO Post goods 401 receipts 406 MD61 Goods receipt Create forecast DB CR MIRO Raw mat GR/IR Post invoice DB CR 407 Domestic sale revenues F-53 Raw material DB CR consumption Post payment DB CR Cash Acc. Rec. DB CR Inventorysold productchange GR/IR Acc. Pay. DB CR Investments DB CR DB CR Factoryproduction output 410 Acc. Pay. Cash DB CR Acc. Rec. Revenues DB CR DB CR CO41 Finished Prod. 409 products output Mass release DB CR 414 production order DB CR Cons.
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