<p>ERPs are usually considered as a difficult matter to learn or to teach. ERP classes can be so general, that nothing is really learned. Or they can be based on case studies, and thus lack of any strong teaching in terms of theoretical principles. Or they can be so much linked to a given product that what people learn is the product, rather than universal and permanent principles. ERPs are also considered to be such a huge, complex pipe factory, that many people even believe that they can not be taught. In this class, we are going to change the way that ERPs were taught.</p></details></section><section>
<p>The main requirement for this class is to find an implementation field. The best way to understand ERPs is to learn how to configure an ERP. And the best way to learn the configuration of ERPs is to actually configure it on a real case. We therefore require each student of this class to find a small business, a non profit organisation, a public administration, etc. which will serve as a implementation field.</p>
<p>The configuration process will happen after the 6th session. It will only require to fill a spreadsheet, which means that it is quite straightforward from a technical point of view. However, from the user point of view, this simple configuration will completely change the way the ERP is perceived. At the end ERP will match the business environment of the implementation field and become usable and very useful.</p>
<p>Students of this class are therefore offered the unique possibility to make a major gift to a small company or a non profit organisation, by providing lean organisation and order for better productivity and better information sharing.</p>
<p>It is now time to think about who you are going to help in the next few days. Do not wait. Start searching for someone immediately because many organisations will hesitate adopting ERPs. In case they worry, just tell them that 3500 organisations in 140 countries are using it, mostly small businesses, that it is easy, compatible with any operating system and completely free. It is also based on the same technology as ERP5, a major ERP used inside EADS, a central bank and various governments and industries.</p></details></section><sectionclass="screenshot">
<p>Enterprise sales of ERP systems will grow to $32.9B in 2016, attaining a 6.7% CAGR in the forecast period of 2011 to 2016. CRM is projected to be an $18.6B global market by 2016, attaining a CAGR of 9.1% from 2011 to 2016.</p>
<p>Who needs an ERP, who are the market leaders, how much does it cost, how long does it take to implement, is it risky and is there an alternative. These are some questions which we are going to try to answer before defining what is an ERP.</p></details></section><sectionclass="illustration">
<h1>Who needs an ERP ?</h1><imgalt="Who needs an ERP"title="Who needs an ERP"src="http://img.erp5.cn/osoe-who.needs.an.erp-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>Every business, every government, every non-profit organisation needs an ERP.</p>
<p>Usually, most people believe that they need an ERP in order to track what is going on from a financial point of view. This is what usually happens in large companies which use the ERP mostly as a large accounting software capable of consolidating accountings from various branches and subsidiaries. However, this is a very partial view.</p>
<p>Businesses, NGOs and governments need an ERP because they need to manage staff, materials, purchases and sales, and it can become a nightmare to relate all of these pieces of information if they are handled by using paper or using separate applications.</p>
<p>Of course, companies which are small and issue just a few invoices with big amounts can live without an ERP. In such case, the ERP is probably the brain of the CEO.</p>
<p>However, as soon as the business activity grows, that colleagues need to work together, that some traceability is required between departments or that some automation between sales, delivery and finance must be put in place, people end up using an ERP or disappearing.</p>
<p>That being said, the ERP can take the form of a "Common Off the Shelve Package" or a custom software. It can take the form of a centralised piece of software or of a collection of components with interfaces. This is after all a matter of implementation. What remains as a common is the fact that as soon as the business activity grows, people need a common place to share and relate business documents: the ERP.</p></details></section><sectionclass="illustration">
<h1>Who does not need an ERP ?</h1><imgalt="Who dont need an ERP"title="Who dont need an ERP"src="http://img.erp5.cn/osoe-who.dont.needs.an.erp-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>Some people do not need an ERP.</p>
<p>Families probably do not need, right?</p>
<p>Individual businesses who do not need to share information with partners probably do not need an ERP, as long as the number of business documents they handle remains small. For example, a consultant who sells alone 5 contracts per year with 3 clients does not really need an ERP. His own brain is faster.</p>
<p>Small businesses which can be organised using simple tools such as a cash register and a physical inventory can live without an ERP. Very often, physical tools are more efficient than software, as long as people trust each other. The "Kanban" system which was introduced in Japan is a perfect example of a management system based on tangible tools which beats an approach based on software and mathematics.</p>
<p>Having these examples in mind is essential when considering the implementation of an ERP. Not everything needs to be put into the ERP. Some parts of a business can be kept outside the ERP, using paper, binders, drawers or, simply, human brain. The more features an ERP configuration has, the more time it takes to teach it and to make users adopt it. Keeping an ERP configuration lean and simple, using only parts of an ERP can sometimes be more efficient than trying to do everything with it.</p>
<p>Our advice for ERP implementation is simple: first implement what the organisation could not survive without, and make it used fully (a.k.a. "Less is More"). Once this is achieved, consider extending the ERP configuration with new features based on a R.O.I. rationale.</p></details></section><sectionclass="screenshot">
<p>The leader of ERPs is SAP. It is a German company and it is considered as the 2nd or 3rd software company in the world after Microsoft. The challenger of SAP is Oracle, which is also considered the 2nd or 3rd software company in the world after Microsoft.</p>
<p>SAP is definitely the reference ERP. It is used in most large corporations. However, that does not mean that corporations which use SAP do not use another ERP. EADS for example is an SAP shop. However, Infoterra, a subsidiary of EADS uses ERP5, an open source ERP, for part of its business. In reality, implementing the same single ERP for all business units and subsidiaries of a large company is nearly impossible due to the perpetual changes of the corporate structure and business processes. The common case in large companies is the existence of “plurality of ERPs”, sometimes of the same brand and sometimes of different brands. Only the financial part of the ERP is usually consolidated in the same ERP instance across business units and subsidiaries.</p>
<p>In the case of small and medium size companies, things are different. Because there is more consistency in a middle sized business than in a large multinationals, it is possible to unify all business activities within the same ERP and make the company more efficient through that unification.</p></details></section><sectionclass="illustration">
<h1>How much does an ERP cost?</h1><imgalt="The Cost"title="The Cost"src="http://img.erp5.cn/osoe-the.erp.cost-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>An ERP software is anything between 0 EUR / seat for open source software to 2,000 EUR / seat or more for proprietary ERPs. The license must be often renewed every year for a cost which amounts between 10% and 25% of the initial license cost.</p></details></section><sectionclass="illustration">
<h1>How much is an implementation?</h1><imgalt="The Implementation"title="The Implementation"src="http://img.erp5.cn/osoe-how.mush.implementation-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>Most of the costs of an ERP actually lie in the implementation.</p>
<p>Implementing an ERP requires to do some configuration, which is what we are going to learn later on. It requires teaching users how to use it and how to organise their business with the ERP. It also requires sometimes to develop some custom scripts and interfaces so that the ERP matches the technical or business environment of the customer.</p>
<p>The total implementation cost of an ERP is usually estimated between 2 man days and 6 man days per employee in a company. This is usually equivalent to 1% to 3% of the company turnover or to 1,000 EUR to 3,000 EUR per employee.</p>
<p>If we translate these figures to a small company (6 people), we will find that implementing an ERP costs about 10,000 EUR in a small company or 20 man days. In a large organisation with 1,000 employees, an ERP will implementation will quickly reach 2,000 man days or 1,000,000 EUR. In a large multinational with 100,000 employees, an ERP implementation can quickly surpass 100,000 man days and 100,000,000 EUR.</p>
<p>At the same time, the cost of selling an ERP, which is mostly the time spent in convincing prospects to adopt a given ERP, does not change so much between a small company and a mid size company.</p>
<p>As a result, ERPs are not used very often by small companies, only because nobody is willing to spend time convincing them to adopt them and make no profit out that.</p></details></section><sectionclass="illustration">
<h1>What is the success rate?</h1><imgalt="What is the success rate?"title="What is the success rate?"src="http://img.erp5.cn/osoe-what.is.success.rate-screenshot?format=png"type="image/png"/><br/><ahref="http://www.erp5.org/sections/erp/mourlon-neyer.pdf/downloadFile/file/mourlon-neyer.pdf">mourlon-neyer.pdf</a><detailsopen="true">
<p>The “Mourlon Neyer” report is one of the best sources to understand the risk of ERPs. As a rule of thumb, 50% ERP projects fail, they cost 3 times as much as expected and take twice longer than planned.</p>
<p>The reasons for failure are very seldom related to the ERP software itself, but rather to the abnormal behavior of clients of consultants. However, because clients and consultants seldom accept to recognize their own mistakes, the ERP software is often blamed for the failure of the project by either the client or the consultant.</p>
<p>In this environment, where the one which is not to blame is blamed and those who should be blamed are not, only those ERPs with a strong brand can survive a 50% failure rate, together with ERP software which implementation is strictly controlled by the software publisher.</p>
<p>
The reasons of failure are diverse. But they mostly relate to the fact that the clients do not know and <u>can not know</u> what they want precisely and the consultants do not know and <u>can not know</u> precisely what the ERP can do. This problem is well known in management under the name “<u>Limited Rationality</u>”, a decision theory which explains how and why organisations do not take the most rational decisions.
</p>
<p>
One of the most striking aspects of this “<u>Limited Rationality</u>” happens whenever a company, which knows its own business perfectly, outsources the ERP requirement specification to a junior consultant who knows little about their business if not about business. The requirement specification is then used to select an ERP vendor. The ERP is implemented according to that document and, obviously, is unusable. Then comes the moment of truth... which leads to triple budget and double time.
<h1>Are there alternatives?</h1><imgalt="ERP5 alternatives"title="ERP5 alternatives"src="http://img.erp5.cn/osoe-are.there.alternatives-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>The reasons which lead to ERP project failure are fundamental-failure related to human nature rather than to technology. ERP failures make some managers so afraid that they reject the adoption of any ERP at all, and instead they build an information system out of independent components which are then integrated in a way or another. Each component works usually very well but interfaces are always a cause of trouble (and a source of turnover for service companies). The SOA approach (or fashion?) can be considered as one of the examples of interfacing components rather than implementing an integrated ERP.</p>
<p>However, what we get in the end is an integrated system made of independent components. After all, many ERPs, including SAP itself, originate from the aggregation of independent components. Adopting the SOA approach is thus not really an alternative, since it is only a technical answer and the problem of ERP failure is actually not technical.</p>
<p>In short: whatever the way, there is no alternative in a company to the implementation of an integrated management system, whether integration is achieved through interfaces or through a common data model, through web services or through database tables.</p>
<p>
However, <strong>there is an alternative nowadays to closed source ERPs: open source ERPs</strong>
. They can help certain project succeed by providing more flexibility. They can also lead to failure whenever this flexibility is abused by unskilled consultants. Open Source ERPs are also an excellent way to create a simple prototype in short time at low cost, because there are no license costs. Using an Open Source ERP to create a “Less is More” prototype is therefore probably the safest way to adopt an ERP.
<h1>What is an ERP?</h1><imgalt="What is an ERP?"title="What is an ERP?"src="http://img.erp5.cn/osoe-what.is.an.erp-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>The definition of an ERP is quite vague. For some people, it is only a matter of using the same database. So, what happens if an ERP is based on distributed web services, is it still an ERP? For others, it is a matter of using only a single data model. So what happens for ERPs which share the same database yet use 100 different data models for the same thing.</p>
<p>For some people, MRP is the key criteria. However MRP is only for production usually. Is an ERP used in trade still an ERP? Is CRM part of ERP? What about knowledge management and e-commerce?</p>
<p>As we can see, the definition of an ERP is very vague. So let us analyse one by one the different approaches to characterize an ERP.</p></details></section><sectionclass="illustration">
<p>Some people consider that a software is an ERP as soon as it hosts inside a single database all the different kinds of business informations of an organisation.</p>
<p>However, that does not say how many tables are used and how they are used.</p>
<p>If we follow this definition, the combination of an online shop, of an accounting software and of a HR software which all use the same MySQL database is an ERP. The combination of 100 independent software, all of which use 100 tables, is also an ERP in that sense. Well, this definition is at least consistent with the way leading “legacy” ERPs are built: a collection of independent software, relying on more than 22,000 tables in a database with an integration system based in a batch technology which copies information between tables.</p>
<p>However, any computer architect is hoping probably for more integration, if not the use of database technologies which are not necessary based on tables. Just as a reminder, an ERP like ERP5 uses less than 10 tables, yet can do the same as those which are using 22,000 tables. The only difference is in the level of integration. And some management systems are not based on relational database but on object database (ex. ZODB) or even on distributed object databases (ex. Erlang based systems).</p>
<p><u>We could therefore claim that “a unified access to business data” is a required characteristic of an ERP, without saying how data is accessed.</u></p></details></section><sectionclass="illustration">
<p>Some people consider that an ERP is an integrated business software which combines at least accounting, purchase, sales, invoicing, inventory and possibly human resources, project management, production management, customer relation management, document management, etc.</p>
<p>In short, an ERP is a software which can be used to “do everything in the same place”.</p>
<p>This definition is in line with the kind of integration which is provided by leading ERPs and ERP brands. It excludes however integrated business systems which are made of the collection of various components from different suppliers.</p>
<p>At the same time, it is not because we “do everything in the same place”, with a common appearance and a common user interface that the software is well integrated. Some business systems, made of the collection of independent software, can be better integrated than single brand ERPs and provide better productivity thanks to better automation of workflows.</p>
<p><u>We could therefore claim that “a wide functional coverage” is a required characteristic of an ERP, without saying how this coverage is achieved.</u></p>
</h1><imgalt="Everyonce <u>Must</u> Use it"title="Everyonce <u>Must</u> Use it"src="http://img.erp5.cn/osoe-everyone.must.use.it-screenshot?format=jpg"type="image/png"/><detailsopen="true">
<p>Accounting software is used by accountants. Sales software is used by sales. And shipping software is used by warehouse people.</p>
<p>
On the other hand, <u>an ERP is used by many different kinds of people with different functions</u> in the company. This is another characteristics of ERP vs. specialised business software.
<p>The term workflow is a key term in ERP land. It has different meanings, although all meanings are represented mostly in the same way: a state diagram.</p>
<p>Some work-flows, a.k.a. “activity work-flows” or “business process models” are related to the sequence of activities which can start for example with an order, then the delivery of goods, the invoicing, the payment.</p>
<p>Some work-flows, a.k.a. “supply chain work-flows”, define how materials circulate in a production workshop, between a company and its suppliers or partners, how components are assembled and where.</p>
<p>Some work-flows, a.k.a. as “Document work-flows” are used to track the decision process related to a given business document such as an order or an invoice.</p>
<p>All ERPs implement the 3 different types of work-flows, either in an implicit and hard coded way, or in an explicit and configurable way.</p>
<p><u>We could therefore claim that “providing work-flows for BPM, Supply Chain and Decision Making” is a required characteristic of an ERP, without saying whether such work-flow is implicit or explicit</u>. Obviously, explicit and configurable work-flows are much more flexible.
<h1>Past, Present and Future</h1><imgalt="Past, Present and Future"title="Past, Present and Future"src="http://img.erp5.cn/osoe-past.present.future-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>ERPs are supposed to report to the head of the company the current state of everything and possibly help the management to predict the future based on the current state. Incidentally, this is probably why CEOs of large companies are so much interested in implementing a group-wide ERP which sppreads across all subsidiaries and business units. ERP vendors are well aware of this “interest” and often sell ERPs as an enabling tool for big brother wannabes. If ERP could satisfy the same “interest” of governments, ERP vendors would probably try to craft of version of their product for e-governement...</p>
<p>Besides providing a unified access to business data, ERP usually offer various reporting features which can synthesize the current status of a corporation and provide an overview of the future based on various business rules. The first part (present) provided by ERP is usually well implemented but is available always a bit too late. The second part (future) provided by ERP is seldom reliable because the data which is stored in the ERP is not reliable enough.</p>
<p><u>We could therefore claim that “providing synthetic reports on the past, present and future” is a required characteristic of an ERP</u>. The reality is that only the past is usually provided by ERP. If the present is available by ERP, it is the sign of a successful implementation. If the future is provided by ERP, we are the realm of exceptional implementations.
<h1>MRP: What Makes ERP So Different</h1><imgalt="MRP: What Makes ERP So Different"title="MRP: What Makes ERP So Different"src="http://img.erp5.cn/osoe-what.makes.erp.different-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>What makes an ERP so different from anything else is that is has been originally built around a management theory know as “MRP”, which means Material Resource Planning.</p>
<p>In 50s and 60s, industry was booming and was always looking for new ways of organising production. It was a time when mathematics in general, operational research in particular, were expected to solve all management problems.</p>
<p>MRP was one of the simple, yet mathematical, models which was adopted and implemented using software in the field of production management. It is at the core of any ERP software nowadays.</p>
<p>Other more complex models, such as constraint programming, operation research, linear programming are not as widely used and often failed. Nowadays, management of companies is increasingly based on more ad-hoc lean management techniques, such as “kan ban” and “just in time”, created and implemented by the Japanese industry, rather than on pure mathematical approaches which were initiated in Europe and US.</p>
<p>Yes, MRP is the one remaining mathematical model which is widely accepted.</p>
<p><u>We could therefore claim that “implemented a kind of MRP” is a required characteristic of an ERP</u>.
<p>The first kind of MRP is also called “MRP1”. M stands for Material.</p>
<p>The idea is simple. If we know that clients will order 100 goods, we have to produce 100 goods. If producing 1 good requires 10 components of type A and 20 components of type B, then producing 100 goods requires 1000 of A and 2000 of B.</p>
<p>If the inventory of A is 500 and if we know that we must produce 100 goods, we must at least order 500 items of A.</p>
<p>Things become a bit more complex whenever we already have a planning of purchase orders, parallel productions. But the principles are the same. The MRP calculation can be used to know how much must be purchased and when so that production can happen on time.</p>
<p>The MRP calculation can be based on different assumptions. One way is to try to optimise the cash, by ordering as late as possible. This is the “just in time” way. Another way is to try to issue large purchase orders to get reduced price. This is more the way MRP was created in the 60s, at a time when cash was not a problem in US and Europe, at a time when price and profit mattered more than cash.</p>
<h1>MRP2: Resources at Large</h1><imgalt="MRP2: Resources at Large"title="MRP2: Resources at Large"src="http://img.erp5.cn/osoe-mrp2.resources.large-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>The idea MRP2 was introduced later. Some say that the meaning of “M” changed from “Material” to “Management” or “Manufacturing”.</p>
<p>Rather than only considering materials, MRP2 takes into account cash, machines, workers, etc. It also provides a framework to optimise resources based on numerous management goals.</p>
<p>With MRP2, it is for example possible to consider that if a company orders 500 items of A, then it will need to pay those 500 items 8 weeks after ordering them. If a client purchases 10 goods, payment for the 10 goods will be received 12 weeks after the order. Knowing sales orders, purchase orders, prediction orders and the current state of the bank account, a company can predict not only its inventory but also the future of its cash.</p>
<p>The combination of MRP2 with global optimisation can be useful for example to take decisions whether to order big batches soon or small batches later. Constraints, such as cash constraints, workforce constraints are introduced in the equation to help making better decisions. This is what is is called “finite resource planification” in ERPs. It is considered as the most advanced planning tool and, sadly, is rarely usable or used. The reasons are the same: too much mathematics, too far from reality.</p>
<p>This is why another approach is often considered: user interface tools which represent with graphs and colors the different constraints which apply to production.</p>
<p>We have now finished to review the core characteristics of an ERP. Modern ERPs include however much more than unified database, wide functional coverage, work-flows, predictions and MRP. They also extended functional scope which is known with different acronyms: CRM, KM, etc.</p>
<p>CRM means “Customer Relation Management”. The idea of CRM is quite simple: making sure that all information related to a client are present at the same place.</p>
<p>In a pure ERP, such information are the person contact, orders and invoices. CRM extends this view of the customer with events and tickets. Events represent each contact made with a customer: a phone call, a visit, an email, etc. Tickets represent the interaction with a customer. After a customer orders some products, a problem can happen. The customer requests some support. A support ticket is opened in the CRM. All events which may happen after that (email, phone, etc.) are attached to that support ticket. Once the problem is solved the ticket is closed.</p>
<p>Obviously, it is quite natural to host such information in the same location as orders, packing lists and invoices because human relations with the customer (events & tickets) are directly related to trade relations with the customer (order, packing list, invoice). What is also interesting is that CRM can be used for many other things than customers: it can be used for purchase, for public relations, for sales management, etc.</p>
<p><u>We could therefore claim that “keeping track of the relation history with people” is a frequent characteristic of a modern ERP</u>.
<p>KM means knowledge management. One definition of KM, which many consider as a creation of IBM, is “the right information to the right person at the right time”. Since the ERP is the central piece of software which is used to manage a business, it is quite obvious to help users reach the right information at the right time in order to make the appropriate decisions.</p>
<p>Moreover, many pure documentary informations, such as PDF files, office files, images, videos, are needed to support certain activities such as the creation of a catalog of products to be sold, or to track the tasks in a project in relation with customer specification of committee reports. Documents are nowadays an essential part in the management of companies, and in particular in the management of the relation with customers or suppliers.</p>
<p>Many ERPs nowadays include a document management module, a.k.a. Knowledge Management. The difference between “Document Management” and “Knowledge Management” is subtle: the first one means that documentary information is “available or archived somewhere” while the second means that it was “provided to the right person at the right time”. This is commonly achieved by integrating the ERP work-flows with the human resource management subsystem and the document management system. In short: display relevant documents at the relevant time (ex. a link to the operation manual of a machine tool on the production order which requires that machine).</p>
<p><u>We could therefore claim that “handling multimedia documents in relation with people and work-flows” is a frequent characteristic of a modern ERP</u>.
<h1>ERP + Web = e-business</h1><imgalt="ERP + Web = e-business"title="ERP + Web = e-business"src="http://img.erp5.cn/osoe-erp..web-ebusiness-screenshot?format=png"type="image/png"/><detailsopen="true">
<p>E-commerce is in 2010 one of the very few fast growing businesses in IT and in industry. More than 1000 different solutions of e-commerce are available, with fantastic open source packages available.</p>
<p>However, e-commerce integration is still a dream: people get orders from one place (ex. Ebay), follow clients on another place (ex. SalesForce CRM) and keep their accounting with Quickbooks. Integration between the different aspects of business, on the Web or offline, is made by human beings, possibly with low wages in distant countries.</p>
<p>E-commerce tool are therefore trying to do more and more: CRM, accounting, etc. and are evolving towards ERPs. However, their architecture and design was not really made for that and, 10 years after the raise of e-commerce, the fully integrated solution which combines ERP, CMS, CRM and e-commerce is still far away (ERP5 does it for example with a few others).</p>
<p>If one notices that e-commerce is after all sales on the Web, that e-procurement is after all purchase on the Web, e-recruitment is HR on the Web, one can foresee what the combination of Web and an ERP could be: e-business, which is opening through the Web the corporate ERP to all partners of a company. Since business are increasingly distributed and relying on outsourcing and outside partners, it is a natural tendency for ERPs to become e-business tools.</p>
<p><u>We could therefore claim that “support of e-business” is a frequent characteristic of a modern ERP</u>.
<h1>One ERP per student programme</h1><imgalt="One ERP per student programme"title="One ERP per student programme"src="http://img.erp5.cn/user-OSOE.Website.Homepage?format=png"type="image/png"/><detailsopen="true"></details></section>
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<p>ERPs are usually considered difficult from both learning and teaching perspectives. Since ERP take accounts of all aspects within a company, students need sufficient background knowledge from almost all management subjects in order to understand an ERP system. Often ERP classes in schools are either too general that no detailed functions are taught or purely based on case studies which result in lack of theoretical principles. With time constraints in normal class settings, how could ERP knowledge be efficiently delivered to students was the main focus of this course. Thus, this course is structured in two stages. In the first stage, students will learn the theories applied in ERPs, and the universal business processes in companies. Students will also practice on an open source ERP system (ERP5). In the second stage, with the help of an questionnaire developed by ERP5, students will adopt a role of an ERP consultant to conduct an interview with a company of their choice, and analyse the information gained from the interview to perform an ERP implementation configuration.</p>
<p>There are two main requirements for this course. The first one is to have your own ERP5 system (you could either use an online instance or download the ERP5 virtual machine). The second requirement is to find a company for your ERP configuration process.</p><p>The best way to understand ERPs is to learn ERP using a real case. Therefore, for this course you need to find a small –to-medium sized business (could also be a non-profit organisation, or a public administration etc.). This business entity will serve as an implementation field. After you finished the first stage, you could apply the knowledge you learned to this implementation field, and try to configure the categories for ERP implementation.</p><p>For students, it will be a unique opportunity to learn what ERP consultants do for ERP implementation in companies. For companies you found, they will have the opportunity to gain more insights about their business processes, receive precious advices on how they could improve their business processes, and improve their performance.</p><p>The configuration process of this course only requires a configuration spreadsheet. It is a straightforward method and easier for the students to understand from the technical point of view. From the user point of view, this simple configuration method could completely change the way how an ERP is perceived. In the end, your configuration should match the actual business environment of the company, and become usable for an ERP implementation.</p>
<p>Enterprise sales of ERP systems will grow to $34.3B in 2017, attaining a 6.7% CAGR in the forecast period of 2011 to 2017. CRM is projected to be $35.5B by 2017, attaining a CAGR of 9.1% from 2011 to 2017.</p><p>What kinds of business need an ERP? How much does an ERP cost? How long does ERP implementation process take? Is it risky to implement an ERP? And are there any alternatives? These questions are what we are going to try to answer before we explain in details what an ERP is.</p>
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<h1>Who needs an ERP ?</h1>
<imgtitle="Who needs an ERP"alt="Who needs an ERP"src="http://img.erp5.cn/osoe-who.needs.an.erp-screenshot?format=png"type="image/png">
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<p>All businesses, government institutions, and non-profit organisations could use an ERP to manage their daily operations. An ERP systems can manage human resources, products and materials, purchases and sales, finance and almost all other aspects within a business entity. Even though today more and more transactions are done electronically in companies, which is much efficient than traditional paper recording. However, the efficiency of using separated applications for different business processes is not comparable to having an integrated ERP system. Especially for large organisations, ERP has become an essential success factor. It could drastically increase productivity, reduce errors, and decrease manual workload.</p><p>An ERP could take the form of a “Common Off-Shelve Package” or a custom software. It could be a centralised piece of software or a collection of components with interfaces. What remains common is that it provides a place for people to share and relate business documents.</p>
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<h1>Who does not need an ERP ?</h1>
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<p>Of course private households do not require ERPs. One-man businesses or small businesses probably do not need to use ERPs. As long as the amount of business documents remains small, there is no need to use an ERP system, or maybe any software systems. For example, a private business consultants who sells 5 contracts per year doesn't need to use any software to track transactions since his/her brain can function faster.</p><p>Very often in small businesses, physical tools are more efficient than software, as long as people trust each other. The "Kanban" system which was introduced in Japan is a perfect example of a management system based on tangible tools which defeated an approach based on software and mathematics.</p><p>Having these considerations in mind is very important in terms of ERP implementation. Not everything needs to be put into ERP. Some parts of a business can be kept outside the ERP, using paper, binders, drawers or, simply, human brain. You need to keep in mind that the more features an ERP has, the more time consuming to implement the system, and the longer time needed to teach or make users adopt. Thus, priorities need to be set when implementing an ERP system. Only the ones could bring most return should be integrated in an ERP system. Keeping an ERP configuration lean and simple, using only parts of an ERP can sometimes be more efficient than trying to do everything with an ERP.</p>
<p>The leader among all ERP providers is currently SAP. It is a German company that considered as the 2nd or 3rd biggest software company in the world after Microsoft. The most powerful competitor of SAP is Oracle.</p><p>SAP is definitely the reference ERP. It is used in most large corporations. However, that does not mean that corporations that use SAP do not use another ERP system. EADS for example is an SAP shop. However, Infoterra, a subsidiary of EADS uses ERP5, an open source ERP, for part of its business. In reality, implementing the same single ERP for all business units and subsidiaries of a large company is nearly impossible due to the perpetual changes of the corporate structure and business processes. Commonly in large companies they have “plurality of ERPs”. Normally, only the financial part of the ERP is consolidated in the same ERP instance across all business units and subsidiaries.</p><p>In terms of ERPs in small-to-medium sized companies, things are different. Because there is more consistency in these companies than in large multinational companies, it is possible to unify all business activities within the same ERP and improve efficiency through the unification.</p>
<p>An ERP system costs normally range from 0 to 2000EUR/ user (open source ERPs are cost-free). ERP license often needs to be renewed every year at a cost that amounts from 10% to 20% of the initial license fee.</p>
<p>Most costs of an ERP lie in the implementation process. The total implementation cost of an ERP is usually estimated from 2 workdays to 6 workdays per employee in a company. This is approximately equivalent to 1% to 3% of the company turnover or to 1,000 EUR to 3,000 EUR per employee.</p><p>If we translate these figures to a small company (6 people), we will find that implementing an ERP costs about 10,000 EUR or 20 man-days. In a large organisation with 1,000 employees, an ERP will implementation will quickly reach 2,000 man-days or 1,000,000 EUR. In a large multinational with 100,000 employees, an ERP implementation can quickly surpass 100,000 man-days and 100,000,000 EUR.</p><p>The cost of buying an ERP is mainly the time spent in customizing a given ERP, which is similar in small and medium sized companies.</p><p>As a result, ERPs are not often used in small companies since the profit is so small that few people would invest time in promoting them to small companies.</p>
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<h1>What is the success rate?</h1>
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<p>The “Mourlon Neyer” report is one of the best sources to understand the risks of ERP implementation. As a rule of thumb, 50% ERP projects fail, they cost 3 times the expected costs and take twice longer than planned.</p><p>The reasons for failure are very seldom related to the ERP software itself, but rather to the abnormal behaviour of clients of consultants. However, because clients and consultants seldom accept to recognize their own mistakes, the ERP software is often blamed for the failure of the project. Thus, the current ERP market is dominated by a few well-known brands because only they could survive with a failure rate of 50% or more. In this environment, the ERP implementation process is also strictly controlled by these few providers.</p><p>The most common reasons for ERP failures are: 1) the clients do not know precisely what they want to achieve with the help of an ERP system; 2) the consults do not have a clear idea of what an ERP can do. This problem is well known in management under the name “Limited Rationality”, a decision theory which explains how and why organisations do not take the most rational decisions.</p><p>This happens a lot when a company outsources its ERP requirement specifications to a junior consultant who knows little about the company’s business. Under these specifications, the implemented ERP is of course of little use and help to the business.</p>
<p>The reasons which lead to ERP project failure are fundamental-failures related to human nature rather than to technology. Thus, it makes many managers scared to adopt any ERP. Instead, they build an information system out of independent components which are then integrated in a way. In such a system, usually each individual component can function well. However, since these components have different interfaces, they normally cause troubles (sources of turnover for service companies). The SOA approach can be considered as one of the examples of interfacing components rather than implementing an integrated ERP. However, this alternative is not in the core an integrated system, rather an aggregation of components.</p><p>Another alternative nowadays to closed source ERPs is: open source ERPs. They can help certain project succeed by providing more flexibility. But of course they can also lead to failure if this flexibility is abused by unskilled consultants. Open Source ERPs are also an excellent way to create a simple prototype in short time at low cost, because there are no license costs. Using an Open Source ERP to create a “Less is More” prototype is therefore probably the safest way to adopt an ERP.</p>
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<h1>What is an ERP?</h1>
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<p>The definition of an ERP is quite vague. For some people, it is only a matter of using the same database. But what happens if an ERP is based on distributed web services, is it still an ERP? For others, it is a matter of using only a single data model. But what happens if ERPs share the same database yet use 100 different data models for the same function?</p><p>Some say that MRP is the key criteria to identify an ERP. However MRP is only used for production. Is an ERP used in trade still an ERP? Is CRM part of an ERP? What about knowledge management and e-commerce?</p><p>As we can see, the definition of an ERP is very vague. So let us analyse one by one the different approaches to characterize an ERP.</p>
<p>Some people consider that a software is an ERP if it hosts all different business information in a single database. However, that does not say how many tables are used and how they are used.</p><p>If we follow this definition, the combination of an online shop, an accounting software, and of a HR software that uses the same MySQL database is an ERP. The combination of 100 independent software, each of which uses 100 tables, is also an ERP in that sense. Well, this definition is at least consistent with the way leading “legacy ERPs” are built: a collection of independent software, relying on more than 22,000 tables in a database with an integration system based in a batch technology which copies information between tables.</p><p>However, this is only a matter of level of integration. For example, an ERP like ERP5 uses less than 10 tables, yet can do the same as those which are using 22,000 tables. And some management systems are not based on relational database but on object database (ex. ZODB) or even on distributed object databases (ex. Erlang based systems).</p><p>
<u>We could therefore claim that “a unified access to business data” is a required characteristic of an ERP, without saying how data is accessed.</u>
<p>Some people consider that an ERP is an integrated business software which combines at least accounting, purchase, sales, invoicing, inventory and possibly human resources, project management, production management, customer relation management, document management etc.</p><p>In short, an ERP is a software which can be used to “do everything in the same place”.However, what an ERP actually means is not “do everything in the same place”, but rather using a common appearance or a common user interface for different components. Some business systems that are made of the collection of independent software, can be better integrated than single brand ERPs, and can provide better productivity because of better automation of workflows.</p><p>
<u>We could therefore claim that “a wide functional coverage” is another required characteristic of an ERP, without saying how this coverage is achieved.</u>
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<h1>ERP is for all functions across the company</h1>
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<p>Accounting software is used by accountants. Sales software is used by sales. And shipping software is used by warehouse people.</p><p>
On the other hand, <u>an ERP is used by many different kinds of people with different functions in the company.</u> This is another characteristics of ERP vs. specialised business software. Thus, not only MRP is the key criterion in identifying an ERP.
<p>Workflow is a key term in ERP. There are different types of workflows. They are normally represented by a state diagram.</p><p>“Activity workflows” or “business process” models are related to the sequence of activities. For example, all activities related to an order, the activities could be process order, prepare goods, deliver, issue invoice etc.</p>
“Supply chain workflows” define how materials circulate in a production workshop. For example, how components are assembled, and where. They normally involve suppliers and partners of the company.
<p></p><p>“Document workflows” are used to track the decision process related to a given business document, such as an order or an invoice.</p><p>There three types of workflows described above are almost implemented in all ERPs, either in an implicit and hard coded way, or in an explicit and configurable way.</p><p>
<u>We could therefore claim that “providing work-flows for BPM, Supply Chain and Decision Making” is a required characteristic of an ERP, without defining whether such workflows are implicit or explicit.</u> However, keep in mind that explicit and configurable workflows are much more flexible.
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<h1>Past, Present and Future</h1>
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<p>ERPs are expected to provide the management of a company the current states of everything of importance that happening in the company now, and subsequently aid in decision making process. In order to have a good overview, management of large companies are normally interested in implementing a group-wide ERP that spreads across all subsidiaries and business units. ERP vendors are of course aware of this “interest”, they often sell ERPs as an enabling tool for big brother wannabes.</p><p>Besides providing a unified access to business data, ERP usually offer various reporting features which can synthesize the current status of a corporation and provide predictions on the future based on various business rules.</p><p>
<u>We could therefore claim that “providing synthetic reports on the past, present and future” is a required characteristic of an ERP.</u> However, in reality, often only the past is provided by ERP. If the ERP can provide an accurate state of the present, it is already a sign of a successful implementation. If the ERP pointed the right direction to the future, it is an exceptional implementation.
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<h1>MRP: What Makes ERP So Different</h1>
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<p>What makes an ERP so different from anything else is that is has been originally built around a management theory known as “MRP” - Material Resource Planning.</p><p>Back in the 50s and 60s, industry was booming and was always looking for new ways of organising production. It was a time when mathematics in general, operational research in particular, were expected to solve all management problems.</p><p>MRP was one of the simple mathematical models that was widely adopted and implemented using software in the field of production management. Later it has become the core of any ERP software while other more complex models such as constraint programming, operation research, and linear programming have become less and less popular.</p><p>Nowadays, company management are increasingly relying on on more ad-hoc lean management techniques, such as “kan ban” and “just in time”, which were created and implemented by the Japanese industry, rather than on pure mathematical approaches that were initiated in Europe and US. Yet, MRP is the one remaining mathematical model which is still widely accepted.</p><p>
<u>We could therefore claim that “a kind of MRP is implemented” is a required characteristic of an ERP.</u>
<p>The first type of MRP that we are going to introduce you is also called “MRP1”. Its focus is on materials.</p><p>The idea is simple. If we know that a client will order 100 goods, then we need to produce 100 goods. If producing 1 good requires 10 components of type A and 20 components of type B, then producing 100 goods requires 1000 of A and 2000 of B.</p>
If the inventory of A is 500, in order to have enough material to produce 100 goods, we know that we need to order at least 500 items of A.
<p></p><p>Even though in reality things are normally more complex (e.g. parallel productions, planning of purchase orders), the principles are the same. MRP calculation can tell you how much materials need to be purchased and at what point of time, so that production can happen on time.</p><p>The MRP calculation can be based on different assumptions. For example, one assumption is liquidity optimization, which means order as late as possible. This is the “just in time” way. Another assumption is to get maximum discounts by ordering as many as possible for a single item. This way is more commonly used when MRP was firstly introduced in the 60s.</p>
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<h1>MRP2: Resources at Large</h1>
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<p>The idea MRP2 was introduced after MRP1. The meaning of “M” in MRP2 indicates “Management” or “Manufacturing” rather than “Material”.</p><p>Besides materials, MRP2 also takes into account cash, machines, workers etc. It provides a framework to optimise resources based on numerous management goals.</p><p>With MRP2, companies could easily keep track of inventory level, order information, order predictions, payment details, and current state of bank accounts. That means, companies could better control inventory costs and cash flows.</p><p>The combination of MRP2 with global optimisation could be useful in deciding for example, whether to order small batches now or big batches at a later point of time. Financial and workforce constraints are introduced in the equation for better decision making. This is so called “finite resource planification” in ERPs. It is considered as the most advanced planning tool, however, sadly, it is rarely used. It has been argued to have too much mathematics, and too far from the reality.</p><p>This is why another approach is often considered: user interface tools which are commonly represented by graphs and colors, indicating the different constraints in production.</p>
<p>The characteristics such as unified database, wide functional coverage, workflows, predictions and MRP mentioned in the previous sections are the core characteristics of an ERP. Modern ERPs include of course much more than them. They also extended functional scope that is known with different acronyms: CRM, KM, and so on.</p><p>CRM is short for “Customer Relation Management”. The idea of CRM is quite simple: making sure that all information related to a client are present.</p><p>In a pure ERP system, such information include personal contact information, orders and invoices related to this person. CRM in ERP5 extends this view of customer with events and tickets. Events represent all contact made with a customer: phone calls, visits, emails, etc. Tickets represent reasons why interactions with customers occurred. For example, after a customer had ordered some products, a problem happened and the customer requested some support. Then a support ticket should be opened in the CRM. All events (email, phone, etc.) made because of this ticket are attached to the ticket. Once the problem is solved, the ticket should be closed.</p><p>Obviously, it is quite natural to host such information in the same location as orders, packing lists and invoices because human relations with the customer (events & tickets) are directly related to trade relations with the customer (orders, packing lists, invoices). CRM can be used also for other things like supplier management, public relations, and sales management etc.</p><p>
<u>We could therefore claim that “keeping track of the relation history with people” is a frequent characteristic of a modern ERP.</u>
<p>KM stands for knowledge management. One definition of KM that many people consider as a creation of IBM is “the right information to the right person at the right time”. Most ERPs help users to reach the right information at the right time in order to make appropriate decisions.</p><p>In companies, many documentary information are stored in PDF files, word documents, images, and videos. They are needed to support certain activities, for example, the creation of product portfolios, project specifications, and committee reports and so on. Documents are nowadays an essential part in the management of companies, especially in the management relating to the relations with customers and suppliers.</p><p>Many ERPs nowadays include a document management module, a.k.a. Knowledge Management. The difference between “Document Management” and “Knowledge Management” is subtle: the former means that documentary information is “available or archived somewhere” while the latter means that it is “provided to the right person at the right time”. This is commonly achieved by integrating ERP workflows with the human resource management subsystem and the document management system. In short: display relevant documents at the relevant point of time. For example, a link to the operation manual of a machine tool on the production order that requires that machine.</p><p>
<u>We could therefore claim that “handling multimedia documents in relation with people and workflows” is a frequent characteristic of a modern ERP.</u>
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<h1>ERP + Web = e-business</h1>
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<p>E-commerce was in 2010 one of the few fast growing businesses in IT industry. More than 1000 different solutions of e-commerce were made available including some fantastic open source packages. However, there was rarely integration at that time: people got orders from one place (e.g. Ebay), followed clients on another place (e.g. SalesForce CRM), and kept their accounting with Quickbooks. Integration between the different aspects of business, on the Web or offline, was made by human workforces in distant countries where wages were low.</p><p>E-commerce tools have been evolving towards ERPs since then. However, their architecture and design of those tools were not really made for such an integrated system. Thus, 10 years after the raise of e-commerce, a fully integrated solution which could combine ERP, CMS, CRM and e-commerce is still far away.</p><p>
Since nowadays more and more businesses are incorporating through the web and relying on outsourcing and outside partners, the tendency for ERP developments naturally follows: to become e-business tools. <u>We could therefore claim that “support of e-business” is a frequent characteristic of a modern ERP.</u>
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<h1>One ERP per student programme</h1>
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