Preface to Why ERP? A Primer on SAP Implementation
This is a book about ERP systems, enterprise resource planning systems. Now you see why we have done the book. We had to ask too, especially with all the press such systems are getting! ERP systems are large computer systems that integrate application programs in accounting (i.e., accounts receivable), sales (i.e., order booking), manufacturing (i.e., product shipping) and the other functions in the firm. This integration is accomplished with through a database shared by all the application programs.
When you first see an ERP program, the application programs are similar to those with which you are already familiar. So the production scheduling, billing a customer, processing a payroll and other tasks are done in ways that should be pretty familiar to those of you who have worked with these applications over the years. So what is the big deal? Integration! ERP systems tie these, usually separate, applications together. When a customer service representative takes a sales order it is entered in the common database and in the other applications where it is needed, for example, in the manufacturing backlog, the credit system and the shipping schedule. No more carrying little pieces of paper back and forth. Or writing translation programs to get the information from one function to another. Sounds great, right? Read on!
ERP systems work in real-time, meaning that the exact status of everything is always available. Further, many of these systems are global. Since they can be deployed at sites around the world, they can work in multiple languages and currencies. When they are, you can immediately see, for example, exactly how much of a particular part is on-hand at the warehouse in Japan and what its value is in Yen or Dollars. This is a pretty amazing accomplishment. Sound too good to be true? Well, that is one of the reasons you should read this book. All this doesn’t come free.
That was another reason for doing this book and for you to read it. It is not just about how these systems work, although there is that. In addition to the technical details, the way the hardware and software are organized, and technically how the logic of the system functions, there is another aspect to understanding ERP. It is the management and implementation issues associated with the systems. We focus much of the book on these concerns, in our view the most important of all. Whether you are considering the use of ERP, are faced (forced?) with implementation, or are just generally concerned about the management issues involved in using ERP systems, we feel you should understand some of the tradeoffs involved.
We are all concerned about keeping up with new technology and the challenge that this poses. The pervasive promotion and use of ERP systems suggest that, for this technology, we need to understand the scope of these systems and have a basic knowledge of how they work. Fortunately, learning about ERP is not so much learning all-new concepts and ideas, but rather learning about new ways to do things that we already have been doing and the ERP terminology associated with them. This means, whether you are a general manager, information system executive, an accountant, or a student, you already know more about how ERP works than you think you do, but you still need to learn the managerial issues associated with the degree of integration they support.
This book uses SAP R/3 as an example ERP, but the issues are the same whether you are talking about BAAN, JD Edwards, PeopleSoft, Oracle, or any of the other 30-40 ERP offerings. In terms of deployment it has been estimated that SAP R/3 is used at more than 20,000 sites around the world, making it one of the most widely implemented comprehensive business software systems to date. Many of the largest companies in the world use the package. Oh, before you ask, we know that we have used different releases of R/3 for the figures in the book. We choose the release that produced the most readable figures for the examples being shown.
We realized early on that this could be an extremely tedious, boring topic. So, to make it more interesting for you and us we decided to write a novel instead of a textbook. The main character is Billy, a manufacturing manager at a furniture plant in North Carolina. He faced what some of you have faced, are currently facing, or will face: a mandated consideration of an ERP implementation. Other important characters are Prof, a professor from the local university who acts as a sounding board for Billy’s ideas and provides advice from time to time, and Ruth, who owns the local Café and keeps the coffee flowing as Billy tries to figure out what to do.
In the first part of the book, Billy learns about ERP systems like SAP R/3 and some of the issues that are associated with buying and installing them. Billy’s boss, Mr. McDougle, who owns the company, has an opportunity to expand the business by buying his brother’s furniture manufacturing plant in Ohio. As luck would have it, the plant in Ohio is already using SAP R/3 and Mr. McDougle wants to get some efficiency by running the same software at both plants. While this sounds like a great idea there are more than a few problems in the details and, of course, Billy feels his plant is operating just fine with its existing software systems, thank you.
In the second section of the book, Billy goes to an SAP training seminar and you will be sitting right next to him all along. Billy attends the seminar to learn more about the system and to determine whether it is appropriate for his company. He is introduced to ERP concepts, the SAP R/3 software, some of the functionality, how the hardware is configured and a technique to help with the implementation. We hope that Billy asks some of the same questions that you would have or will in a similar situation.
In the third section, Billy is charged with evaluating the SAP R/3 installation in use at the Ohio plant. The implication is that he will end up being charged with implementing the software in North Carolina. He travels to Ohio and learns about how that plant works and compares it to what he knows about the plant in North Carolina. He ends up with all kinds of questions about transferring the software from the Ohio plant to the North Carolina plant. In the end, Billy has to present his boss with his recommendations and, in the process, develops some guidelines for how ERP systems should be implemented. You may be interested in what Billy actually decides to do. We wonder whether you will agree with his decisions.
We sincerely hope you enjoy reading the book.
F. Robert Jacobs, Bloomington, Indiana
D. Clay Whybark, Chapel Hill, North Carolina
October, 1999