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Application Consultant
Farhan Ahmed
hafizfarhan@gmail.com
Contact: +923332233385
http://pk.linkedin.com/in/hfarhan
http://erpfarhan.blogspot.com

ERP

Why Study ERP Systems?

HAMDARD UNIVERSITY

ERP
ERP Affects Business Partner Requirements
ERP Provides A Key Reengineering Tool
ERP has Diffused Many Best Practices
ERP Facilitated Adoption of Client Server Computing
ERP Changed the Nature of the IS and Accounting
Functions

HAMDARD UNIVERSITY

ERP
ERP has Changed the Nature of Jobs in All Functional
Areas
ERP Systems Can Create Value
ERPs Integrate Firm Activities
ERPs Employ Best Practices
ERPs Enable Organizational Standardization

HAMDARD UNIVERSITY

ERP
ERPs Eliminate Information Asymmetries
ERPs Provide On-Line and Real Time Information
ERPs Facilitate Inter/Intra Organization
Communication and Collaboration

HAMDARD UNIVERSITY

ERP SYSTEM AND TECHNOLOGY

Client Server Computing
Networks
Relational Databases
Software
Reengineering
Systems Analysis
HAMDARD UNIVERSITY

SOFTWARE LAYERS

ERP Applications

Database Management System

Operating System(s)

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ORDER MANAGEMENT SAMPLE

PROCESS
Propose

Commit Configure

Check
Credit

Deliver

Bill

Collect

Sales & Distribution

Production
Planning
Financial
Materials
Mgmt

Accounting
HAMDARD UNIVERSITY

ERP Life Cycle

Deciding to go ERP
Choosing an ERP
Designing an ERP
Implementing ERP Systems
Going Live

HAMDARD UNIVERSITY

ERP VENDORS

Big five (BOPSE)

Baan, Oracle (Applications)
PeopleSoft, SAP and, J.D.
Edwards

HAMDARD UNIVERSITY

APPROACHES TO ERP SYSTEM

There are two basic approaches that
are used as bases of choosing ERP
software
Requirements Analysis (As Is)
Best Practices Analysis (To Be)

HAMDARD UNIVERSITY

GAP ANALYSIS

Match AS IS and TO
BE to determine if any
gaps.

HAMDARD UNIVERSITY

Dimensions ...

There are two dimensions of

change
Change in Software
Change in Organizational Processes

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Implementation Failure and Success

Factors
The highest probability of a successful
implementation is when there is minimal
change to both organization and
software.
This does not mean all organizations should
pursue that approach.

Change to organization processes can

mean resistance to change, choice of
the wrong best practices, etc.
HAMDARD UNIVERSITY

Implementation Failure and Success

Factors
Depends which is best for your firm?

Extensive
Minimal

Change to Org.
Processes

Potential Project
Potential Project

Failure because of

Failure because ofProcess Changes and

Process ChangesIT Changes to Software

BIG R

Highest Probability

Potential Project

of Successful

Failure because of IT

Implementation

Changes to Software

Small r
Minimal

Extensive

Extent of Change to
Software

HAMDARD UNIVERSITY

MAPs
MAPs (Models, Artifacts and Processes)
The quality of the MAPs will have a huge
impact on the overall success of the ERP
implementation.
MAPs that are not efficient or effective for a
particular firm can drag down the overall
performance of that firm.
Similarly, MAPs that meet the needs of a firm can
push it to better performance, giving it a
competitive edge.
HAMDARD UNIVERSITY

POST IMPLEMENTATION
Why?
New software and processes for users
System bugs
Technical issues

HAMDARD UNIVERSITY

Post-Support from ERP Team

Detecting and responding to system bugs
Answering user questions
Changing system parameters
Responding to changing reporting needs
Upgrading the software/hardware

HAMDARD UNIVERSITY

TRAINING
The easiest mistake to make is underestimating the
time and cost of training end users.
An implementation will be a failure if the software runs
perfectly, but employees dont know how to use it.
Despite the importance associated with the need for
ERP training, a recent survey found that in a
Benchmarking Partners survey of 150 sites, 43%
indicated that the amount of training was the biggest
surprise encountered.

HAMDARD UNIVERSITY

Technical Risks and

ERP Life Cycle
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Deciding to go ERP
Firms that have kept up with technology are likely
to better understand the risks associated with ERP
systems.
Try to see what has worked in the past

HAMDARD UNIVERSITY

Technical Risks and

ERP Life Cycle
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Choosing an ERP system

Virtually all software choice can be manipulated,
since it is a political process
Requirements change as new technology
becomes available.

HAMDARD UNIVERSITY

Technical Risks and

ERP Life Cycle
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Designing
One company designed an ERP contract based on
computing capacity, so the vendor had to fix any
problems with insufficient capacity

HAMDARD UNIVERSITY

Technical Risks and

ERP Life Cycle
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Implementing and Going-Live

Upon implementation and going-live, capacity six
transactions a minute 360 per hour or 3600 for a ten
hour day was not enough
Needed more network capacity

HAMDARD UNIVERSITY

Technical Risks and

ERP Life Cycle
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Training
Risk that mainframe IS personnel might have to be retooled to client-server technology
ERP system may require different technical people with
different skills

HAMDARD UNIVERSITY

BUSINESS RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Deciding whether or not to do ERP

Must have the resources to do the project
Firms get going on ERP and then find that they dont
have the resources.
This typically means that either the organization fails
or the project fails.
Must meet needs of the business
What is needed by the firms partners?
HAMDARD UNIVERSITY

BUSINESS RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Choosing an ERP System

Determine specific requirements, e.g., transaction
handling capabilities
Fox Meyer - system could do 10,000 invoice lines, but
they needed 420,000
The business risk is that the ERP Vendor can not meet the
companys needs
HAMDARD UNIVERSITY

BUSINESS RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

ERP Design

Design is a political process. As a result, there is a risk that the

design is sub-optimal.
There is also the risk that processes designed by one group in
the organization will not interface well with processes designed
by other groups.
There is the risk of project stopping
This project would have changed how people work and reduced
staffing by half. It was the easiest thing to cut because people did
not have the stomach for it
HAMDARD UNIVERSITY

BUSINESS RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Implementing
The project will take longer than expected
The project will cost more than expected

HAMDARD UNIVERSITY

BUSINESS RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Going Live
If the ERP is not working properly, there could be
problems with customers and suppliers.
Hershey Foods Inc. lost most of their Halloween,
Thanksgiving and Christmas sales due to a poorly
functioning ERP system

HAMDARD UNIVERSITY

BUSINESS RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Training
Training should provide users with process and system
information
The main business risk is that timing is too short and too
late.

HAMDARD UNIVERSITY

ORGANIZATIONAL RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Deciding whether or not to do ERP

Reportedly, one of the biggest risks is that top
management is not involved.
Another risk is that the domain areas are not involved and
committed

HAMDARD UNIVERSITY

ORGANIZATIONAL RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Choosing an ERP System

Choosing the right consultant is the biggest challenge
(Risk)

HAMDARD UNIVERSITY

ORGANIZATIONAL RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

ERP Design and Implementation

Models of organizations are built into the software, as a
result, there are risks that the models do not match

HAMDARD UNIVERSITY

ORGANIZATIONAL RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Going Live
Cultural issues that relate to big R reengineering create
organizational risk.
One firm went from compensation based on number
of units sold to salary to accommodate the ERP
system

HAMDARD UNIVERSITY

ORGANIZATIONAL RISKS
Technical

Business

Organizational

Deciding
Choosing
Designing
Implementing
Going Live
Training

Training
Employees not accustomed to data input will take on the
task.
If users dont know how to use the system, it will fail.
There may be inadequately trained personnel after
implementation due to poor training or attrition.

HAMDARD UNIVERSITY

Oracle E-Business Suite

Release 12

EBS R12 available since Jan. 2007

HAMDARD UNIVERSITY

General Ledger
The Center of ERP

Inventory

Projects

Other

Cash Mgmt

General
Ledger

Payables

Assets

Purchasing

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Receivables

Release 12 Evolutionary New Architecture

Centralizing Key Architectural Components

Projects

Inventory

General
Ledger
Other

Payables

Purchasing

HAMDARD UNIVERSITY

Cash Mgmt

General
Ledger

Assets

Receivables

Centralized
Accounting

Release 12 Trading Community Architecture

Centralization Extended

Intercompany
Projects

Other

Payables

Purchasing

HAMDARD UNIVERSITY

Inventory

Cash Mgmt

Assets

Receivables

Trading
Community
Global
Tax
Banks &
Accounts
Centralized
Accounting

R12 Financial Organization

Ledger 1

Ledger 2

LedgerSecondary
3
Ledger

Ledger Sets

LE1

Dr

Cr

LE3

LE2

Centralized Accounting Engine

Bank
&
Payments

LE & Org
Setup

Dr

Cr

Inter
Company

-%

Tax
Engine

Role Based
Access
Inventor Purchasing Receivable
y
s

Project
s

Payable
s
Inventor Purchasing Receivables
y

US Organization 1

Payables

Inventor2
US Organization
y

HAMDARD UNIVERSITY

Purchasing

Payables

EU Organization 1

SLA keeps the Subledgers & GL tied out

Keep the auditors happy!

Subledger
Applications
Accounting
Events

Accounting
Configurations

Organization
Setup

Accounting
Program

Subledger
Journal
Entries

Transactions
Reconciled:
(& adjustments)
Docs, SLA, GL in synch
Default
Distributions

HAMDARD UNIVERSITY

Subledger
Balances

Subledger Accounting
Service

General
Ledger

GL
Journal
Entries
and
Balances

Ticked & Tied

Opening
Balance

SLA Controls that

GL Balances and
SLA Balances tie,
and that both tie
to the document
(invoice, payment, etc.)
sources

Opening
Balance

Debit

Credit

GENERAL LEDGER
Cash
Receivables
Inventory
Assets
Prepayments
Payables
Accruals
Shares
Previous Results
Balance Sheet
Sales
COGS
R&D
S&M
G&A-Fin
G&A-IT
G&A-HR
Period Income
Income Statement

Debit

100
1,000,000
500,000
100,000
1,000
(750,000)
(250,000)
(100,000)
(501,100)
-

Credit

3,500,000
3,000,000
1,200,000

2,750,000
3,500,000
1,500,000

2,800,000

2,700,000
50,000

10,500,000

10,500,000
3,000,000

1,500,000
300,000
300,000
300,000
150,000
150,000
300,000
24,000,000

24,000,000

Closing
Balance

750,100
500,000
200,000
100,000
1,000
(650,000)
(300,000)
(100,000)
(501,100)
(3,000,000)
1,500,000
300,000
300,000
300,000
150,000
150,000
300,000
-

Closing
Balance

SUBLEDGER ACCOUNTING
Receivables
Customer
Customer
Customer
Customer
Customer
Total

One
Two
Three
Four
Five

250,000
350,000
100,000
100,000
200,000
1,000,000

150,000
250,000
1,500,000
800,000
300,000
3,000,000

400,000
450,000
1,400,000
750,000
500,000
3,500,000

150,000
200,000
150,000
500,000

1,000,000
75,000
725,000
1,000,000
2,800,000

900,000
50,000
775,000
975,000
2,700,000

(150,000)
(75,000)
(200,000)
(225,000)
(650,000)

Payables
Vendor
Vendor
Vendor
Vendor
Total

I
II
III
IX

HAMDARD UNIVERSITY

(250,000)
(100,000)
(150,000)
(250,000)
(750,000)

General Ledger
SLA Detail

Multiple Accounting Representations

Global Financial Reporting, Local and GAAP
Ledger A

Ledger B
BE Rules
BE Chart
BE Calendar

EUR

EUR

Dr

Cr

Centraliz
edAccou
nting

Payables Invoice
HAMDARD UNIVERSITY

US GAAP
US COA
US
Calendar

Single business transaction can

create multiple accounting
representations, in multiple
currencies

Invoice Entered in Accounts Payable

HAMDARD UNIVERSITY

Multiple Ledgers
Efficient Ledger Sets
Share:
Chart of
Accounts
Calendar

Ledger
Set

Ledger C

Ledger B

Ledger A

BE Rules
BE
Rekeningplan
BE Calendar

US GAAP
US COA
US
Calendar

EUR

EUR

Defined by 4 Cs:
Accounting
Convention
Chart of Accounts
Calendar
Currency

Ledger Set Benefits:

Cross/Multiple Ledger processing and reporting
Data and definitions that can be shared and secured
Native support for multiple accounting representations

HAMDARD UNIVERSITY

US GAAP
US COA
US Calendar

USD
Ledger D
US GAAP
US COA
US
Calendar

GBP

Reporting
Currency

Multiple Ledgers
Efficient Ledger Sets

HAMDARD UNIVERSITY

Accounting Setup Manager

R12 Single Page for Accounting Setup

Define legal entities dashboard

Assign/view legal entities

Define ledger (set of books)

Define operating units

** Setup which had comprised multiple steps across many forms is now consolidated into one dashboard
**

HAMDARD UNIVERSITY

Release 12 Bank Account Changes

Centralized Bank & Bank Account Definitions

Intercompany
Projects

Other

Payables

Purchasing

HAMDARD UNIVERSITY

Inventory

Cash Mgmt

Assets

Receivables

Trading
Community
Global
Tax
Banks &
Branches
Accounts
Centralized
Accounting

Centralized Banking and Payments

Funds Disbursement and Capture
Bank account is now
associated with LE
entity rather than
Operating Unit

LE
OU B

OU A

Inventory

Work in
Process

OU C

Receivable
Receivabl
s
es

Purchasin
g

Payables
Payables

E-Business Suite

Projects
Project
s
Assets

Single bank account

serves multiple
Operating Units
Any and all Operating
Units associated with a
ledger can be
permitted to use the
bank account

Plu
s
Centralized
Credit Card Model
Credit Card Encryption
Supplier & Customer Banks in
TCA

HAMDARD UNIVERSITY

Example: Shared Service Disbursement

OU A

OU B
Centralized
Accounting

Single
Payment
Instruction

OU C

Invoices

HAMDARD UNIVERSITY

Bank

Payments

1. Setup accounting policies

2. Select invoices from
multiple OUs
3. Format for bank and
disbursement countries
4. Send single instruction to
bank
5. Generate separate
payments for each OU

User Experience
Payables Payments Dashboard

HAMDARD UNIVERSITY

Secure Treasury Operations & Information

With Seamless and Timely Bank Reconciliation

Bank Statement
Open Interface

Miscellaneous
Transactions

Formats
BAI2
SWIFT940
EDIFACT
XML

Payroll

AR
Accounting
Entries

$
General
Ledger

Statements

Cash
Management

AP

Treasury

HAMDARD UNIVERSITY

Reconciliation
Open Interface

External
Systems

Banks

Meet Enterprise Cash Requirements

With Flexible Cash Forecasting

HAMDARD UNIVERSITY

Release 12 Global Tax

Centralized Tax Determination & Reporting

Intercompany
Projects

Other

Payables

Purchasing

HAMDARD UNIVERSITY

Inventory

Cash Mgmt

Assets

Receivables

Trading
Community
Global
Tax
Banks &
Accounts
Centralized
Accounting

Centralized Rules &

Determination
Improved Reporting
Effective Dated Setup
Tax Simulator

Oracle eBusiness Tax

Processing taxes for transactions and reporting

Transactions

Purchasing
Parties
Single Interface for Transactions

Payables

Places
Products

Sales Orders

Receivables

61

Processes

Determine Applicable Tax Status

Regimes Taxes
& Rate

Taxable
Basis

Calculate
Tax
Amount

Transparent Integration with Tax Partner Services

Tax Reports
- PDF, HTML, RTF
- Security enabled

Copyright Oracle Corporation, 2006. All rights reserved.

Tax
Transactions

Taxes,
Rules

Global Tax
Regime to Rate Configuration

Regime

Tax

Status
Rate

63

Copyright Oracle Corporation, 2006. All rights reserved.

Global Tax
Rules & Exceptions

64

Copyright Oracle Corporation, 2006. All rights reserved.

Release 12 Trading Community Architecture

Centralization Extended

Intercompany
Projects

Other

Payables

Purchasing

HAMDARD UNIVERSITY

Inventory

Cash Mgmt

Assets

Receivables

Trading
Community
Global
Tax
Banks &
Accounts
Centralized
Accounting

Suppliers
Banks & Branches
Tax Geographies
Improved Consistency

Suppliers in TCA

Leveraging centralized data model

-%
Payable
Purchasi
s
ng

Global
Tax

Geographies

Suppliers

Payment
s

Party
Informati
on

Cash
Manageme
nt
Banks

and
Branches

Trading
Community
Architecture

ERP

HAMDARD UNIVERSITY

CRM

rd Party
3rd

Suppliers in TCA

HAMDARD UNIVERSITY

Release 12 Intercompany
Advanced Global Intercompany System

Intercompany
Projects

Other

Payables

Purchasing

HAMDARD UNIVERSITY

Inventory

Cash Mgmt

Assets

Receivables

Trading
Community
Global
Tax
Banks &
Accounts
Centralized
Accounting

Intercompany Account
Definition
Integration with Payables
& Receivables
Improved Reconciliation
Inter & Intra Company
Balancing

Centralized Intercompany
Faster Period-End Close
Advanced Global
Intercompany
System

Subledger
Invoices &
Documents

Manual
Entry
Open
Interfaces /
API
Excel
(Web ADI)

Generate subledger invoices

Control transaction entry with
Intercompany Calendar
Fully Configurable Approval
Rules
Centrally defined Intercompany
Accounts
Transaction-level balancing

Dr

General
Ledger

HAMDARD UNIVERSITY

Online
Reconciliatio
n Reporting

XML
Publisher
Reports

Cr

Subledger
Accounting

Receivable
s

Payable
s

Advanced Global Intercompany System (AGIS)

This is the
Receivables
Balance in Vision
Sweden

HAMDARD UNIVERSITY

This is the
Payables
Balance in
Vision Norway

Totals of the journals posted in

each of the Legal Entities grouped
by source and category

The Payables balance in Vision

Norway is less than the
Receivables balance in Vision
Sweden indicating Payables
Invoices have not been posted.

HAMDARD UNIVERSITY

Details of the
journals in Vision
Sweden

HAMDARD UNIVERSITY

MOAC

HAMDARD UNIVERSITY

Role-Based Access
More Productive Shared Services Operations
Perform multiple tasks across
operating units without changing
responsibilities
US

Italy

France

Legal Entity

Legal Entity

Legal Entity

US

Italy

France

Operating
Unit

Operating
Unit

Operating
Unit

Responsibility Responsibility
Single
Responsibility

HAMDARD UNIVERSITY

Responsibility

Functional Tasks
Accounting
Billing, Dunning
& Collections
Procurement
Order Management
Payments
Data Management

MOAC in Action

HAMDARD UNIVERSITY

BI Publisher

HAMDARD UNIVERSITY

BI Publisher

Work Think Manage

Business Users Format and Deliver Documents

BI Publisher

Data Sources
Oracle
Applications

Publishing
Engine

XML

Output Formats
PDF
RTF

HTML
XML

EDI
Excel

CRM

Destination
Email
Printer
Fax

Projects
FMS

Templates

HCM
SCM

Any XML
Data Source

HAMDARD UNIVERSITY

Business
User

Letters

Order
Confirmations

Fund
Transfers

Online
Paychecks

Bills

Government
Grant Forms

BI Publisher
High Quality Enterprise Reporting

HAMDARD UNIVERSITY

HAMDARD UNIVERSITY