Enterprise

Resource
Planning
Systems

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 Problems with Non-ERP
Systems

 In-house design limits connectivity outside the

company
 Tendency toward separate IS’s within firm
 lack of integration limits communication within the
company
 Strategic decision-making not supported
 Long-term maintenance costs high
 Limits ability to engage in process reengineering

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 Traditional IS Model:
Closed Database Architecture
 Similar in concept to flat-file approach
 data remains the property of the application
 fragmentation limits communications
 Existence of numerous distinct and independent
databases
 redundancy and anomaly problems
 Paper-based
 requires multiple entry of data
 status of information unknown at key points

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 Business Enterprise

Products Materials

Manufacturing
Order Entry and Procurement Purchases
Orders Supplier
Customer System Distribution System
System

Customer Production Vendor

Sales Scheduling Accts Pay
Account Rec Shipping Inventory

Customer Database Manufacturing Procurement

Database Database

Traditional Information System with

Closed Database Architecture
 What is ERP?
 Those activities supported by multi-module
application software that help a company
manage the important parts of its business in
an integrated fashion.
 Key features include:
 Smooth and seamless flow of information across
organizational boundaries
 Standardized environment with shared database
independent of applications and integrated
applications
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 ERP System Business Enterprise

Legacy
Data Warehouse Systems

ERP System
On-Line Analytical Processing Bolt-On Applications
(OLAP) (Industry Specific Functions)

Customers Suppliers
Core Functions [On-Line Transaction Processing (OLTP)]

Sales
Business Shop Floor
& Logistics
Planning Control
Distribution

Operational Database
Customers, Production,
Vendor, Inventory, etc.
 Two Main ERP Applications
Core applications
 a.k.a. Online Transaction Processing (OLTP)
 transaction processing systems
 support the day-to-day operational activities of the
business
 support mission-critical tasks through simple
queries of operational databases
 include Sales and Distribution, Business Planning,
Production Planning, Shop Floor Control, and
Logistics modules

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 Two Main ERP Applications
Business analysis applications
 a.k.a. Online Analytical Processing (OLAP)
 decision support tool for management-critical tasks through
analytical investigation of complex data associations
 supplies management with “real-time” information and
permits timely decisions to improve performance and
achieve competitive advantage
 includes decision support, modeling, information retrieval,
ad-hoc reporting/analysis, and what-if analysis

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 OLAP
 Supports management-critical tasks through
analytical investigation of complex data associations
captured in data warehouses:
 Consolidation is the aggregation or roll-up of
data.
 Drill-down allows the user to see data in
selective increasing levels of detail.
 Slicing and Dicing enables the user to examine
data from different viewpoints often performed
along a time axis to depict trends and patterns.

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ERP System Configurations:
Client-Server Network Topology

Two-tier
 common server handles both application and
database duties
 used especially in LANs

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First Tier

User
Presentation
Layer

Application
Second Tier Server and Database
Server
Layer

Applications Database

Two-Tier Client Server

ERP System Configurations:
Client-Server Network Topology

Three-tier
 client links to the application server which
then initiates a second connection to the
database server
 used especially in WANs

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 User
First Tier Presentation
Layer

Second Tier Application

Applications Server Application
Layer

Third Tier Database Database Layer

Database Server

Three-Tier Client Server

 User
First Tier Presentation
Layer

OLTP OLTP OLAP OLAP

Second Tier Application
Applications Server Server Applications
Layer

Operations Data
Third Tier Operations Data Database
Database Warehouse
Database Warehouse Layer
Server Server

ERP with OLTP and OLAP Client Server using Data Warehouse
ERP System Configurations:
Databases and Bolt-Ons
 Database Configuration
 selection of database tables in the thousands
 setting the switches in the system
 Bolt-on Software
 third-party vendors provide specialized
functionality software
 Supply-Chain Management (SCM) links vendors,
carriers, third-party logistics companies, and
information systems providers

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 What is a Data Warehouse?
 A relational or multi-dimensional database that may
consume hundreds of gigabytes or even terabytes of disk
storage
 The data is normally extracted periodically from operational database
or from a public information service.
 A database constructed for quick searching, retrieval, ad-hoc
queries, and ease of use
 An ERP system could exist without having a data warehouse.
The trend, however, is that organizations that are serious
about competitive advantage deploy both. The
recommended data architecture for an ERP implementation
includes separate operational and data warehouse databases

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 Data Warehouse Process
 The five essential stages of the data
warehousing process are:
 Modeling data for the data warehouse
 Extracting data from operational databases
 Cleansing extracted data
 Transforming data into the warehouse model
 Loading the data into the data warehouse
database

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 Data Warehouse Process:
Stage 1

 Modeling data for the data warehouse

 Because of the vast size of a data warehouse,
the warehouse database consists of de-
normalized data.
 Relational theory does not apply to a data
warehousing system.
 Wherever possible normalized tables pertaining to
selected events may be consolidated into de-
normalized tables.

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 Data Warehouse Process:
Stage 2

 Extracting data from operational

databases
 The process of collecting data from
operational databases, flat-files, archives, and
external data sources.
 Snapshots vs. Stabilized Data:
 a key feature of a data warehouse is that the data
contained in it are in a non-volatile (stable) state.

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 Data Warehouse Process:
Stage 3

 Cleansing extracted data

 Involves filtering out or repairing invalid data
prior to being stored in the warehouse
 Operational data are “dirty” for many reasons:
clerical, data entry, computer program errors,
misspelled names, and blank fields.
 Also involves transforming data into standard
business terms with standard data values

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 Data Warehouse Process:
Stage 4
 Transforming data into the warehouse model
 To improve efficiency, data is transformed into
summary views before they are loaded.
 Unlike operational views, which are virtual in
nature with underlying base tables, data
warehouse views are physical tables.
 OLAP, however, permits the user to construct virtual
views from detail data when one does not already
exist.

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 Data Warehouse Process:
Stage 5

 Loading the data into the data warehouse

database
 Data warehouses must be created and
maintained separately from the operational
databases.
 Internal Efficiency
 Integration of Legacy Systems
 Consolidation of Global Data

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 Data Warehouse System
Legacy Systems

Order
Entry
System
VSAM Files
Purchases
Hierarchical DB The Data Warehouse s
System
Network DB vio u
Pre s
ar
Ye
s
viou s
ERP Pre arter
Sales Data Summarized Qu
System Annually s
viou
Pre eeks
Sales Data Summarized W
Quarterly
Data Cleansing
Operations Process
Database e
im
erT
v
do
h i ve
Current (this weeks) c
Ar
Detailed Sales Data
 Risks Associated with ERP
Implementation
 Pace of Implementation
 Big Bang--switch operations from legacy
systems to ERP in a single event
 Phased-In--independent ERP units installed
over time, assimilated and integrated
 Opposition to Changes to the Businesses
Culture
 User reluctance and inertia
 Need of (upper) management support

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 Risks Associated with ERP
Implementation
 Choosing the Wrong ERP
 Goodness of Fit: no ERP system is best for all
industries
 Scalability: system’s ability to grow
 Choosing the Wrong Consultant
 Common to use a third-party (the Big Five)
 Be thorough in interviewing potential consultants
 Establish explicit expectations

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 Risks Associated with ERP
Implementation

 High Cost and Cost Overruns

 Common areas with high costs:
 Training
 Testing and Integration
 Database Conversion
 Disruptions to Operations
 ERP is reengineering--expect major changes
in how business is done

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 Implications for Internal
Control and Auditing
 Transaction Authorization
 Controls are needed to validate transactions
before they are accepted by other modules.
 ERPs are more dependent on programmed
controls than on human intervention.
 Segregation of Duties
 Manual processes that normally require
segregation of duties are often eliminated.
 User role: predefined user roles limit a user’s
access to certain functions and data.

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 Implications for Internal
Control and Auditing
 Supervision
 Supervisors need to acquire a technical and
operational understanding of the new system.
 Employee-empowered philosophy should not
eliminate supervision.
 Accounting Records
 Corrupted data may be passed from external
sources and from legacy systems.
 Loss of paper audit trail

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 Implications for Internal
Control and Auditing

 Access Controls
 Critical concern with confidentiality of
information
 Who should have access to what?
 Access to Data Warehouse
 Data warehouses often involve sharing
information with suppliers and customers.

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 Implications for Internal
Control and Auditing

 Contingency Planning
 How to keep business going in case of disaster
 Key role of servers requires backup plans:
redundant servers or shared servers
 Independent Verification
 Traditional verifications are meaningless
 Need to shift from transaction level to overall
performance level

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 Implications for Internal
Control and Auditing

 ERP projects may be concurrent with BPR,

CRM, Data Warehousing, SCM
 All of these increase risk of successful
implementation
 ERP systems impact organizational
structure and internal controls
 New control policies must precede
migration to an ERP system

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 Implications for Internal
Control and Auditing

Gartner Group noted following concerns

regarding implementing ERP:

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Audits of ERPs

Audit could provide assurance covering the

areas of …
 process integrity
 application security
 infrastructure integrity
 implementation integrity

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 ERP Products
 SAP: largest ERP vendor
 modules can be integrated or used alone
 new features include SCM, B2B, e-commerce,
XML
 J.D. Edwards
 flexibility: users can change features; less of
a pre-set structure than SAP’s
 modularity: accept modules (bolt-ons) from
other vendors

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 ERP Products
 Oracle
 tailored to e-business focus
 Internet based vs. client-server based applications
 PeopleSoft
 open, modular architecture allows rapid integration
with existing systems
 Baan
 use of “best-of-class” applications

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 this concludes the ERP slide
presentation

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