ERP Day 4 Business Process Modelling
ERP and Business Processes
Presentation Overview
About ERP
Evolution of ERP
Implementation Issues
What is the State of the ERP Market?
Case Study:An ERP success: NESTLE
ERP and Business Process Modelling
Business Process Restructuring
ERP Systems: SAP
How to customize ERP systems?
Business Process Modeling Assignment: Timberjack
Parts Case
About ERP
Problem of “information islands”
About ERP
A collection of software systems that help to manage
business processes for an entire organization.
Usually runs on DBMS.
About ERP
Replaces Countless Departmental and Workgroup
Information Systems
About ERP
Integration of business functions into one seamless
application
About ERP
Implementation normally involves Business Process
Reengineering (BPR).
Cross-Functional Business Processes
Evolution of ERP
1960’s: Inventory Control Systems
1970’s: MRP: Material Requirement
Planning
1980’s: MRPII: MRP & Distribution
1990’s: MRPII ERP with introduction
of other business functions
Extended ERP, ERP II
Today:
Interenterprise ERP,
Web Enabled ERP – Connecting ERP Externally
Implementation Issues
ERP means:
Single customer, product and supplier data
Information captured only once
Visibility through the business process
Workflow management and eventtriggered processes
Empowered users
Informed management decisions
Globalisation of the business
Rapid change capability
In short, Dr Jekyl
Implementation Issues
Difficult to build:
Require fundamental changes in the
way the business operates
Technology:
Require complex pieces of software and
large investments of time, money, and
expertise
Mr Hyde
Implementation Issues (Costs)
Implementation Issues
• 35% ERP projects are cancelled
• 55% overrun their budgets
• Less than 10% are on time and under
budget
• Implementation averages
• Cost: 178% over budget
• Schedule: 230% longer
• Functionality: only 41%
Mr Hyde
Implementation Issues …..
So why do it?
Some firms recognize benefit in $10 to
$100 million +
e.g. Competitive advantage in international
supply chains
Standardize and improve processes
Improve level of systems integration –
replacement of outdated “legacy” systems
Improve IT responsiveness and
information quality
Customer-driven
Implementation Issues …..
So why do it?
Year 2000 and the Euro
Reporting requirements of Sarbanes-Oxley
and International Accounting Standards
Mergers and Acquisitions
What is the State of the ERP
Market?
Mature market in U.S. and parts of Europe ERP Systems firmly entrenched in
infrastructure
Continued growth in implementations
worldwide
Implementing CRM, SCM ERP Applications
Business Process Management
(BPM)
What is the State of the ERP
Market?
Linking ERP’s to Web
Web Services, Web Services Integration
SOA – service oriented architecture
Public Sector Growth laggards
Midmarket growth
Niche ERP packages
What is the State of the ERP
Market?
In 1999, the five biggest ERP vendors-SAP, PeopleSoft, Oracle, Baan, and J.D.
Edwards--accounted for 59% of the
market.
In 2009, the two biggest ERP vendors-SAP, Oracle (which bought PeopleSoft
and J.D. Edwards), accounted about 70%
of the revenues.
ERP and Business
Process Modelling
Where does ERP fit in a business process
class?
It is arguably the most common cause of
process redesign in business today.
But – the thinking is inverted. Instead of
designing a process and building the
support structure – including IT – you start
with the software and modify your
processes to fit.
Or else ?!
ERP and Business
Process Modelling
We have a component-based ERP
(Enterprise Resource Planning) system
that
consists of independent modules
can be customized to the organization’s needs
How can we investigate
if this system can support our business?
how it can make our business processes more
efficient?
which modules are needed?
how the modules should be customized?
ERP and Business
Process Modelling
BPR - Steps
Step 1
Step 2
Step 3
Understand
Simplify/Improve Automate
Understand the
existing
systems
associated with
all the
functionalities
Draft & frame the
possibilities & ways
to simplify, or
improve, or
eliminate the
processes
Implement
with the help
of ERP
ERP Systems: SAP
SAP (Systems - Applications - Products):
One of leading software vendors for ERP
systems
SAP R/3: Separate modules
Each module
contains a number of transactions (>5,000 all
together)
can be used independently of others
must be configured (customized)
can be supplemented with add-ons
ERP Systems: SAP
mySAP.com Solutions
Cross-Industry Solutions Industry Solutions
mySAP Workplace
mySAP CRM
mySAP SCM
mySAP
mySAP
mySAP
mySAP
mySAP
Marketplace*
E-Procurement
BI
PLM
HR
mySAP Financials
mySAP Mobile Business
mySAP Aerospace & Defense
mySAP Automotive
mySAP Banking
mySAP Chemicals
mySAP Consumer Products
mySAP Engineering &
Construction
mySAP Financial Service Provider
mySAP Healthcare
mySAP High Tech
mySAP Higher Education &
Research
Infrastructure and Services
mySAP Technology
mySAP Services
mySAP Insurance
mySAP Media
mySAP Mill Products
mySAP
mySAP
mySAP
mySAP
mySAP
Mining
Oil & Gas
Pharmaceuticals
Public Sector
Retail
mySAP Service Providers
mySAP Telecommunications
mySAP Utilities
mySAP Hosted Solutions
*mySAP Marketplace is delivered through MarketSet™,
a joint solution from SAPMarkets & Commerce One.
How to customize ERP systems?
ARIS = Architecture of Integrated
Information Systems
Toolset for modeling, analysis and
optimization of business processes
Specially tailored to the needs in SAP
projects
System described
with respect to different views (organization,
data, function)
at different implementation levels
(requirements definition, design specification,
implementation description)
How to customize ERP systems?
purchaser
John Smith
Organization View
Establish ownership of data and
responsibility for processes
Analysis of resource usage and
workflow (at different
organizational levels)
Model of organization structures
(company, departments, etc.)
Linked to processes and data
structures
How to customize ERP systems?
Purchase order
processing
Function View
Shows the main business
processes, but not the order of
execution or who carries them out
Shows the relationship between
high-level tasks/application areas
and individual low-level tasks
Hierarchical model of functions
(function tree)
Function can be application area,
high-level processes, tasks or
individual process steps
How to customize ERP systems?
Purchase
order
Data View
Analysis of information needed
to carry out tasks
Specification of information
generated in the system
Non-hierarchical static model
with entities (objects),
relationships, and attributes
May distinguish between data
elements and information
objects
How to customize ERP systems?
Process View
Combination of views
Business model portraying the
interconnections between functions, data,
and organizational units
The logical time sequence is involved
The Advantage?........
From Architecture to Configuration to Execution
Customer
Business Process supported by
ERP components (and others)
Customer
Business Process
Carries out & Supports
Carries out & Supp... Carries out & Supports
Organizational element... .
GCSS-A
PLM+
Carries out & Supports
Carries out & Supports
BSM
GFEBS
Requirement
Identified
Requirement
Identified
Create and
Send MRO
Create and
Send MRO
Carries out & Supp... Carries out & Supports
GCSS-A
PLM+
Carries out & Supports
LMP
Solution Manager
Carries out & Supports
BSM
GFEBS
Scenarios
Processes
Process Steps
.
LMP
Application system
Carries out & Supports
ERP Configuration
Model
Requirement
Identified
Requirement
Identified
Create /
Process Stock
Transport
Order i...
Create and
Send MRO
Process
Reservation
Receive
MRO
Valid
On-hand
Syste...
Not valid
On-hand
Syste...
Pick Item
Send Refusal
Notification
Item is
Physically
On Hand
Release
Item
Process copied from LMP
-> needs to be confirmed
Stock
On-hand
(System)
Stock Not
On-hand
(System)
Pick Item
Send IDoc
(Refusal
Notification)
Release
Purchase
Requisition
Item is
Physically
On Hand
Item is
Physically
Not On Hand
Item is
Physically
Not On Hand
Post Goods
Issue
Send IDoc
(Denial
Notification)
Send
Denial
Notification
Item
Released
Print Physical
Inventory
Document
Item
Released
includes all reasons
for physical inventory
Unblock
Stock
Block Stock
Receive
Refusal/
Denia...
Receive
Refusal/
Denia...
Enter Count
Results
Initiate
Inventory
Block Stock
Block Stock
Post
Inventory
Differences
Post
Inventory
Results
Send
Inventory
Results
Decide if
Backorder or
New Source
New Source
New Source
Process
Backorder
Resource
from
New Source
Send Status
to Customer
Release
Purchase
Requisition
Receive IDoc
(Refusal/Deni
al)
Process
Backorder
Send Status
to Customer
Backorder
Processing
New Source
Backorder
Processing
Resource
from
New Source
Process
Backorder
Resource
from
New Source
Process
Backorder
Send IDoc
(Status)
Receive
Status
Decide if
Backorder or
New Source
New Source
Backorder
Processing
Send IDoc
(Inventory
Results)
Release
Purchase
Requisition
Receive
Refusal/
Denia...
Block Stock
Decide if
Backorder or
New Source
Decide if
Backorder or
New Source
Backorder
Processing
Resource
from
New Source
Stock
Unblocked
Release
Purchase
Requisition
Process copied from LMP
-> needs to be confirmed
BPEL
XI Execution
Model
Send Status
to Customer
Delete
Reservation
Customer
Received
Status
Customer
Received
Status
Receive
Inventory
Results
Receive
Inventory
Results
Unblock
Stock
Unblock
Stock
Adjust
Inventory
Balance
Adjust
Inventory
Balance
Receive IDoc
(Inventory
Results)
Receive
Inventory
Results
Adjust
Inventory
Balance
Adjust
Inventory
Balance
Unblock
Stock
Update
General
Ledger
General
Ledger
Updated
Source: Peter Thiele, IDS Scheer 2006
Update
General
Ledger
General
Ledger
Updated
Exchange Infrastructure
Bridging Business and IT views of the same process!!!
How does the Integration Work???
Business Architect users
ARIS for SAP NetWeaver
Corporate Process Portal
Architecture
Pick order must
be created
Business Server
Customer order
must be created
Create customer
order
Sales
team
ARIS is the Enterprise
Process Repository
•O/S: Windows / Unix
•D/B: Oracle / SQL / DB2
Sync. using Remote
Function Call of SAP
SAP Solution
Manager
mySAP Business Suite
Delivery must be
created
Create delivery
Order
processing
dep.
Process View
Business Process Modeling
Assignment: Timberjack Parts Case
There is not one correct answer for this
assignment. Everybody’s diagram will have
differences, but it should handle all the
assumptions listed above and make use of the
information available in Timberjack’s ERP system.
The only deliverable is a process diagram (Hand
drawn is OK if it is neat). You are required to use
information symbols and organization unit
symbols.
a teamwork, ~10 minutes
Presentation Overview
About ERP
Evolution of ERP
Implementation Issues
What is the State of the ERP Market?
Case Study:An ERP success: NESTLE
ERP and Business Process Modelling
Business Process Restructuring
ERP Systems: SAP
How to customize ERP systems?
Business Process Modeling Assignment: Timberjack
Parts Case
About ERP
Problem of “information islands”
About ERP
A collection of software systems that help to manage
business processes for an entire organization.
Usually runs on DBMS.
About ERP
Replaces Countless Departmental and Workgroup
Information Systems
About ERP
Integration of business functions into one seamless
application
About ERP
Implementation normally involves Business Process
Reengineering (BPR).
Cross-Functional Business Processes
Evolution of ERP
1960’s: Inventory Control Systems
1970’s: MRP: Material Requirement
Planning
1980’s: MRPII: MRP & Distribution
1990’s: MRPII ERP with introduction
of other business functions
Extended ERP, ERP II
Today:
Interenterprise ERP,
Web Enabled ERP – Connecting ERP Externally
Implementation Issues
ERP means:
Single customer, product and supplier data
Information captured only once
Visibility through the business process
Workflow management and eventtriggered processes
Empowered users
Informed management decisions
Globalisation of the business
Rapid change capability
In short, Dr Jekyl
Implementation Issues
Difficult to build:
Require fundamental changes in the
way the business operates
Technology:
Require complex pieces of software and
large investments of time, money, and
expertise
Mr Hyde
Implementation Issues (Costs)
Implementation Issues
• 35% ERP projects are cancelled
• 55% overrun their budgets
• Less than 10% are on time and under
budget
• Implementation averages
• Cost: 178% over budget
• Schedule: 230% longer
• Functionality: only 41%
Mr Hyde
Implementation Issues …..
So why do it?
Some firms recognize benefit in $10 to
$100 million +
e.g. Competitive advantage in international
supply chains
Standardize and improve processes
Improve level of systems integration –
replacement of outdated “legacy” systems
Improve IT responsiveness and
information quality
Customer-driven
Implementation Issues …..
So why do it?
Year 2000 and the Euro
Reporting requirements of Sarbanes-Oxley
and International Accounting Standards
Mergers and Acquisitions
What is the State of the ERP
Market?
Mature market in U.S. and parts of Europe ERP Systems firmly entrenched in
infrastructure
Continued growth in implementations
worldwide
Implementing CRM, SCM ERP Applications
Business Process Management
(BPM)
What is the State of the ERP
Market?
Linking ERP’s to Web
Web Services, Web Services Integration
SOA – service oriented architecture
Public Sector Growth laggards
Midmarket growth
Niche ERP packages
What is the State of the ERP
Market?
In 1999, the five biggest ERP vendors-SAP, PeopleSoft, Oracle, Baan, and J.D.
Edwards--accounted for 59% of the
market.
In 2009, the two biggest ERP vendors-SAP, Oracle (which bought PeopleSoft
and J.D. Edwards), accounted about 70%
of the revenues.
ERP and Business
Process Modelling
Where does ERP fit in a business process
class?
It is arguably the most common cause of
process redesign in business today.
But – the thinking is inverted. Instead of
designing a process and building the
support structure – including IT – you start
with the software and modify your
processes to fit.
Or else ?!
ERP and Business
Process Modelling
We have a component-based ERP
(Enterprise Resource Planning) system
that
consists of independent modules
can be customized to the organization’s needs
How can we investigate
if this system can support our business?
how it can make our business processes more
efficient?
which modules are needed?
how the modules should be customized?
ERP and Business
Process Modelling
BPR - Steps
Step 1
Step 2
Step 3
Understand
Simplify/Improve Automate
Understand the
existing
systems
associated with
all the
functionalities
Draft & frame the
possibilities & ways
to simplify, or
improve, or
eliminate the
processes
Implement
with the help
of ERP
ERP Systems: SAP
SAP (Systems - Applications - Products):
One of leading software vendors for ERP
systems
SAP R/3: Separate modules
Each module
contains a number of transactions (>5,000 all
together)
can be used independently of others
must be configured (customized)
can be supplemented with add-ons
ERP Systems: SAP
mySAP.com Solutions
Cross-Industry Solutions Industry Solutions
mySAP Workplace
mySAP CRM
mySAP SCM
mySAP
mySAP
mySAP
mySAP
mySAP
Marketplace*
E-Procurement
BI
PLM
HR
mySAP Financials
mySAP Mobile Business
mySAP Aerospace & Defense
mySAP Automotive
mySAP Banking
mySAP Chemicals
mySAP Consumer Products
mySAP Engineering &
Construction
mySAP Financial Service Provider
mySAP Healthcare
mySAP High Tech
mySAP Higher Education &
Research
Infrastructure and Services
mySAP Technology
mySAP Services
mySAP Insurance
mySAP Media
mySAP Mill Products
mySAP
mySAP
mySAP
mySAP
mySAP
Mining
Oil & Gas
Pharmaceuticals
Public Sector
Retail
mySAP Service Providers
mySAP Telecommunications
mySAP Utilities
mySAP Hosted Solutions
*mySAP Marketplace is delivered through MarketSet™,
a joint solution from SAPMarkets & Commerce One.
How to customize ERP systems?
ARIS = Architecture of Integrated
Information Systems
Toolset for modeling, analysis and
optimization of business processes
Specially tailored to the needs in SAP
projects
System described
with respect to different views (organization,
data, function)
at different implementation levels
(requirements definition, design specification,
implementation description)
How to customize ERP systems?
purchaser
John Smith
Organization View
Establish ownership of data and
responsibility for processes
Analysis of resource usage and
workflow (at different
organizational levels)
Model of organization structures
(company, departments, etc.)
Linked to processes and data
structures
How to customize ERP systems?
Purchase order
processing
Function View
Shows the main business
processes, but not the order of
execution or who carries them out
Shows the relationship between
high-level tasks/application areas
and individual low-level tasks
Hierarchical model of functions
(function tree)
Function can be application area,
high-level processes, tasks or
individual process steps
How to customize ERP systems?
Purchase
order
Data View
Analysis of information needed
to carry out tasks
Specification of information
generated in the system
Non-hierarchical static model
with entities (objects),
relationships, and attributes
May distinguish between data
elements and information
objects
How to customize ERP systems?
Process View
Combination of views
Business model portraying the
interconnections between functions, data,
and organizational units
The logical time sequence is involved
The Advantage?........
From Architecture to Configuration to Execution
Customer
Business Process supported by
ERP components (and others)
Customer
Business Process
Carries out & Supports
Carries out & Supp... Carries out & Supports
Organizational element... .
GCSS-A
PLM+
Carries out & Supports
Carries out & Supports
BSM
GFEBS
Requirement
Identified
Requirement
Identified
Create and
Send MRO
Create and
Send MRO
Carries out & Supp... Carries out & Supports
GCSS-A
PLM+
Carries out & Supports
LMP
Solution Manager
Carries out & Supports
BSM
GFEBS
Scenarios
Processes
Process Steps
.
LMP
Application system
Carries out & Supports
ERP Configuration
Model
Requirement
Identified
Requirement
Identified
Create /
Process Stock
Transport
Order i...
Create and
Send MRO
Process
Reservation
Receive
MRO
Valid
On-hand
Syste...
Not valid
On-hand
Syste...
Pick Item
Send Refusal
Notification
Item is
Physically
On Hand
Release
Item
Process copied from LMP
-> needs to be confirmed
Stock
On-hand
(System)
Stock Not
On-hand
(System)
Pick Item
Send IDoc
(Refusal
Notification)
Release
Purchase
Requisition
Item is
Physically
On Hand
Item is
Physically
Not On Hand
Item is
Physically
Not On Hand
Post Goods
Issue
Send IDoc
(Denial
Notification)
Send
Denial
Notification
Item
Released
Print Physical
Inventory
Document
Item
Released
includes all reasons
for physical inventory
Unblock
Stock
Block Stock
Receive
Refusal/
Denia...
Receive
Refusal/
Denia...
Enter Count
Results
Initiate
Inventory
Block Stock
Block Stock
Post
Inventory
Differences
Post
Inventory
Results
Send
Inventory
Results
Decide if
Backorder or
New Source
New Source
New Source
Process
Backorder
Resource
from
New Source
Send Status
to Customer
Release
Purchase
Requisition
Receive IDoc
(Refusal/Deni
al)
Process
Backorder
Send Status
to Customer
Backorder
Processing
New Source
Backorder
Processing
Resource
from
New Source
Process
Backorder
Resource
from
New Source
Process
Backorder
Send IDoc
(Status)
Receive
Status
Decide if
Backorder or
New Source
New Source
Backorder
Processing
Send IDoc
(Inventory
Results)
Release
Purchase
Requisition
Receive
Refusal/
Denia...
Block Stock
Decide if
Backorder or
New Source
Decide if
Backorder or
New Source
Backorder
Processing
Resource
from
New Source
Stock
Unblocked
Release
Purchase
Requisition
Process copied from LMP
-> needs to be confirmed
BPEL
XI Execution
Model
Send Status
to Customer
Delete
Reservation
Customer
Received
Status
Customer
Received
Status
Receive
Inventory
Results
Receive
Inventory
Results
Unblock
Stock
Unblock
Stock
Adjust
Inventory
Balance
Adjust
Inventory
Balance
Receive IDoc
(Inventory
Results)
Receive
Inventory
Results
Adjust
Inventory
Balance
Adjust
Inventory
Balance
Unblock
Stock
Update
General
Ledger
General
Ledger
Updated
Source: Peter Thiele, IDS Scheer 2006
Update
General
Ledger
General
Ledger
Updated
Exchange Infrastructure
Bridging Business and IT views of the same process!!!
How does the Integration Work???
Business Architect users
ARIS for SAP NetWeaver
Corporate Process Portal
Architecture
Pick order must
be created
Business Server
Customer order
must be created
Create customer
order
Sales
team
ARIS is the Enterprise
Process Repository
•O/S: Windows / Unix
•D/B: Oracle / SQL / DB2
Sync. using Remote
Function Call of SAP
SAP Solution
Manager
mySAP Business Suite
Delivery must be
created
Create delivery
Order
processing
dep.
Process View
Business Process Modeling
Assignment: Timberjack Parts Case
There is not one correct answer for this
assignment. Everybody’s diagram will have
differences, but it should handle all the
assumptions listed above and make use of the
information available in Timberjack’s ERP system.
The only deliverable is a process diagram (Hand
drawn is OK if it is neat). You are required to use
information symbols and organization unit
symbols.
a teamwork, ~10 minutes