Monday, July 12, 2010

BilkentMBA2010, Lessons Learned- Week 1

Lessons Learned Week 1

During the first week of the class, we have learned what ERP is, a little bit about of its history, and the basic ERP implementation cycle. In addition, we talked about what business intelligence and datamining are.

Basically, ERP- Enterprise Resource Planning is an integrated software application that facilitates managing information from some or all functions of the company such as Finance, Marketing, Human Resources, Production, etc. It is modular in design. And because it is modular, companies may choose to obtain different ERP modules from different ERP vendors and combine them. For instance, one company can obtain the human resources module from PeopleSoft, finance module from Oracle, and accounting module from SAP. Actually this approach is called Best of Breed and is basically used to develop a customized ERP system. Customization approach often yield a better solution since it combines the best practices of different vendor. However, it may create complications on the integration parts, resulting with a higher cost to manage the overall ERP system. On top of it, companies usually have to manage those integration parts by its own.

ERP actually started out as MRP- Materials Requirement Planning, which was developed for tracking down raw materials and other inventories in manufacturing companies. Later on, companies needed to integrate human resources and finance related strategic tools and MRP turned into MRP II- Manufacturing Requirements Planning. As the needs of the companies increased, ERP emerged to manage and integrate company-wide information. Today, companies are talking about ERP II, in which CRM- Customer Relationship Management and Business Intelligence units are added. (CRM is actually a company-wide strategy that focuses on managing client relations to improve service levels, loyalty, retention rates etc. Business Intelligence is a data warehouse that collects and stores data from various sources, and helps users to access and analyze it. Datamining means looking for patterns and revealing those patterns in data.)

Choosing the best ERP system is important for companies since otherwise it would be just another cost item in the financials. The costs of ERP include hardware, software license, implementation, consulting, training, and after-go-live. However, the benefits of ERP include increased process efficiency and competitive advantage.

Oracle, SAP, and SSA Global are some of the major vendors. The advantages of implementing major ones include employing best practices of the industry and the opportunity of having an on-going support after the implementation. There are also small vendors that offer tailor-made solutions to small companies. These are cheaper, but may not be reliable for after implementation support due the risk of bankruptcy. In addition, there are open source software applications available for companies as well. These are free but companies need to have experienced staff to develop these applications in-house.

Seray Ozturk

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