ABSTRACT
In this chapter, the concept of a single, integrated information system for the whole organization is presented. This concept is implemented by a class of information systems called enterprise resource planning (ERP) systems. ERP systems are applied in most modern organizations big and small. The strength of ERP systems is their support of data integration in a single database and the application of a single model base for all the organizational functions (an extension of the MRP systems that focus on the organizational functions that perform the transformation process, mainly the production and inventory management activities). The idea of a single database and a single model base for the whole organization is a cornerstone in the architecture of ERP information systems along with the focus on organizational process management. This idea enables efficient management of data, easy extraction of information, consistency, and uniformity of the information technology processes. By replacing several legacy systems, ERP eliminates boundaries caused by communication difficulties between different legacy systems. ERP systems support organizational business processes by:
• Providing a definition of the process activities • Providing a definition of the organizational function that performs
each of the process activities • Providing a definition of the information required for each of the
process activities • Providing a definition of the process flow between the organiza-
tional functions that perform each of the process activities • Providing data, models, and information needed to perform the pro-
cess activities • Management of the process flow • Monitoring the progress of the process
In this chapter, we show how processes are modeled and managed by the ERP system. We will also discuss the difficulties and possible failures in the implementation of ERP systems:
• The difficulty to introduce change in organizations • The substantial costs of introducing ERP systems • The difficulty to reengineer organizational processes to realize the
theoretical benefits of ERP systems
The history of ERP development is essential for appreciating its role and its importance. The roots of ERP systems stem from the development of the computerized materials requirement planning (MRP) systems. The early MRP systems (MRP1) concentrated on the management of materials in the transformation (main production or service) process by generating a work plan recommending when to issue work orders (WO), when to issue purchase orders (PO), and how much to order. The addition of capacity considerations in MRP2 systems was an extension of the MRP1 systems to allow better scheduling of resources used by the transformation process. The MRP system did not satisfy the need for data and models to support functions that are not directly involved in the core production or service process. These functions (such as accounting, human resources [HR], and sales) were supported by separate information systems (known as legacy systems) developed for each organizational function. Each legacy system had its own data and models. Its input came from data entry like typing the data or from other information systems in the same organization, and its output was essential for other computerized information systems of the same organization. For example, sales departments had their own software, while accounting departments used another separate software package; HR departments had their specialized software package, etc. When a business process was performed by two or more organizational units, data had to be transferred between the legacy systems used by these organizational units. This was done initially by retyping the data that existed in one system into the other. This double data entry was a waste of time and effort and a source of data entry errors that caused low data quality. Later on the transfer of data between legacy systems was done by transferring files that contained the data. In the 1970s, a group of former IBM employees formed the SAP Company, which developed an early solution to these problems by software that supports business processes performed by several organizational functions sharing data and models needed by the different organizational units.
