Copy of ENTERPRISE RESOURCE PLANNING (ERP)

Gutierrez, Ibanez, Mojares, Tan, Valdivieso

ENTERPRISE RESOURCE PLANNING (ERP)

ERP SYSTEM CONFIGURATION

ERP SYSTEMS

TWO TIER MODEL

Three Tier Model

Based on client-server model (client-server model is a form of network topology in which a user’s computer or terminal accesses the ERP programs and data via a host computer called the server.

The server handles both application and database duties. Client computers are responsible for presenting data to the user and passing user input back to the server.

This uses WAN (wide-area network) for connectivity among users. Satisfying client requires two or more network connections.

OTLP vs. OLAP

(Online transaction Processing Vs. Online Analytical Processing)

• OTLP events consists of large numbers of relatively small transactions.
• Ex. Updating of accounting records that are stored in several related tables.
• OLAP can access very large amount of data
• Ex. Aggregation of sales data by region, product type and sales channel.

ERP Defined

ERP SYSTEMS

PROCESS OF DATA WAREHOUSING

Essential stages of data warehousing process

Data Mart

Definition

Data Warehousing

Modeling Data for the Data Warehouse

Cleansing Extracted Data

Loading Data into the data warehouse database

Warehouse consists of Denormalized Data

Reasons why data warehouse is created and maintained separately:

• filtering out or repairing invalid data prior to being stored in the warehouse.
• transforming data into standard business terms with standard data values
• see page 489 for the role of data cleansing.

• because of the vast size of a data warehouse, such inefficiency can be devastating.
• so normalized tables pertaining to selected events maybe consolidated into denormalized tables. (see page 488)

• Internal efficiency
• Integration of Legacy Systems
• Consolidation of Global Data

• EXTRACTING
• CONVERTING
• STANDARDIZING an organization's operational data from ERP and legacy systems
• LOADING into a central archive- data warehouse

Extracting Data from Operational Databases

Transforming data into the Warehouse Model

Data extraction

Process of collecting data from

Non-volatile

Snapshots or slices of time

• Operational databases
• Flat files
• archives
• external data sources

useful in depicting average time:

transaction data are loaded when an activity relating to it is complete.

• composed of both detail and summary data
• to improve efficiency, data can be transformed into summary views before they are loaded into the warehouse.

X

• taken to approve credits
• shipped goods that might help explain lost sales

Potential important relationships between entities may be absent from the data captured in the stable state.

**** Operational databases typically need to be out of service when data extraction occurs to avoid inconsistencies.

Snapshots Vs. Stabilized Data

** Changed Data capture

• a technique that dramatically reduce the extraction of time by capturing only newly modified data.

• Organized for a single department or function.
• Only contains tens of gigabytes of data.

Relational or multidimensional database that may

consume hundreds of gigabytes or even terabytes of disk storage.

• Multiple module software packages that evolved primarily from traditional manufacturing resource planning systems
• Coined by Gartner Group
• Its objective is to integrate key processes of the organizations, so that a single computer system can serve the unique needs of each functional area.
• Provides a standardized environment for a firm’s business processes and a common operational database that supports communications

Decisons Supported by Data Warehouse

General Groups of Applications

Internal Control Issues Related to ERP Roles

• not fundamentally different from those that traditional databases support.

Supporting Supply chain decisions

I. Core Application

• Also called “Online Transaction Processing Applications” (OLTP)
• Applications that support the day-to-day activities of the company

II. Business Analysis Application

• Also called “Online Analytical Processing” (OLAP)
• Decision support tool that supplies management with real-time information

and permits timely decisions that are needed to improve performance and

achieve competitive advantage.

Primary reason for data warehousing:

optimize business performance

• providing information when need can improve:
• relationships with customers and suppliers
• provide better service

Potential gain: more responsive and efficient supply chain.

• The creation of unnecessary roles
• Policies need to be in place to prevent this, and to ensure that temporary role assignments are deleted when the reason for them terminates.
• The rule of least access should apply to permission assignments
• Access privileges/permissions should be granted on a need-to-know-basis only
• Caused by either managers fail to exercise adequate care in assigning permissions or managers tend to be better at issuing such, than removing them
• Monitor role creation and permission-granting activities
• Effective RBAC management demands procedures that the monitor role creation and permission granting to ensure compliance with internal control objectives.
• Role-based governance can help the management monitor for risk and issue alerts when violations are detected.

Risks associated with ERP implementation

Implications for Internal Control and Auditing

Continuation:

• Access Controls
• Security administrators need to control access to the tasks and operations, as security weaknesses can result in transaction errors and financial statement misrepresentations.
• Traditional Access Control Models
• Access Control Risk
• Role-Based Access Control
• Role-Based Access Control (RBAC)
• Grouping together users according to the system resources that they need

• ERP can be significant, but they are not, risk free
• There have been many ERP failures
• Most ERP failures are the result of cultural problems within the firm

Key Concerns

Disruptions to Operations

Big Bang Vs. Phased-In Implementation

Opposition to Changes in the Business Culture

• When system begins implementing ERP “Everything looks and works differently from the way it did with legacy systems”
• Disruptions could result in decrease in profits and even losses

• If corporate culture is such that change is not tolerated or desired, ERP implementation fails
• Technological culture must be assessed

Choosing the Wrong ERP

• More ambitious and risky than phased-in implementation
• An attempt to switch operations from their old legacy systems to the new system in a single event

• Causes system failure
• Modifying an ERP program and database can introduce potential processing errors
• Can make updating the system to later versions difficult

• Suited for organizations whose units do not share a common processes and data
• ERP is installed in each business unit over time to accommodate adjustment periods

Disadvantages:

• Transaction Authorization:
• Auditors must verify transactions through knowing the company’s ERP system configuration, business processes, and information flow, by heart.
• Segregation of Duties
• Organizations that use ERP system must establish new security, audit, and control tools to ensure duties are properly segregated.
• Supervision
• Supervisors should have more time to manage shop floors and increase their span of control through improved monitoring capability.
• Accounting Records
• The risk of having corrupted and inaccurate data can be lessened by creating a strict data cleansing control.
• Independent Verification
• Focuses on individual transactions level to one that views overall performance, to ensure efficiency

• Goodness of Fit
• Functionality of chosen ERP must be ensured
• System Scalability Issues
• Scalability is the system’s ability to grow smoothly and economically as requirements increase
• Four dimensions of scalability:
• Size
• Speed
• Workload
• Transaction Cost

Choosing the Wrong Consultant

• Getting the organization in sync with the new system can be a daunting task
• ERP systems have neither familiarity nor functionality of the legacy systems
• Causes disruptions in daily operations
• Once the initial adjustment period has passed, ERP becomes effective strategic tool

• Virtually, all ERP implementations involve an outside consulting firm
• Vital aspects of implementing ERPs rely heavily on the consultant
• A frequent complaint is that consulting firms promise experienced professionals but deliver incompetent trainees

High Cost and Cost Overruns

• Total cost of ownership (TCO) varies greatly from company to company
• Risk comes in the form of underestimated and unanticipated costs
• Commonly experienced problems:
• Training
• System Training and Integration
• Database Conversion