1409 2005 Soininen · Hershey • ERP = Enterprise Resource Planning system, system like Winha that...

15/09/2005 Copyright © 2001 Martti Mäntylä and Timo Soininen

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Recent Case• Ajoneuvohallintakeskus AKE; ”Vehicle Management

Centre” (Itviikko, 27.11.2003)– govermental body that manages the information on vehicles being

used in Finland– 2,5 M vehicles, vehicle tax 0.5 Be

• Extra-net for the vehicle registry– register to be available to police, car dealers, tax officials...– biggest govermental IT-project– budget 17 Me– duration 5 years

• Main contractor, and subcontractors


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Symptoms• Already over budget by 80% (30 Me)• Halfway through (in 5 years), 3 years to go• Customer is not happy

– the article– ”consultant is having a hardtime [delivering]”– ”no compensation except if the technology fails”– ”the technology provider did not provide support flexibly

enough” (also the main contractor claims this)


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Causes• Claims:

– ”Adopt new technology”• main frame to Java/IBM WebSphere

– ”Clients do not have enough IT knowledge”– ”The big vendors run the game”– ”Consultants failed in providng experts, project

management, project manager changed three times”


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T-86.5141

Enterprise Systems Architecture


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Contents• Basic Terminology• Background and Motivation• Objective of the Course• Crash Course on Enterprise Systems Integration• Practical Arrangements (or not!)


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Enterprise System, My Definition• An information system that supports the operations

of an organization– Operations: manufacturing, financial accounting…– Organization: company, university, bank, ministry, …

• Q: What enterprise systems do you encounter in your studies?


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Enterprise Systems Integration• Webster’s New Collegiate Dictionary:

– in·te·grate \’int-e-,grat\ vb [L integratus, pp. of integrare, fr. integr., integer] vt 1 : to form into a whole 2 a : to unite with something else 2 b : to incorporate in a larger unit

• Both “top-down” and “bottom-up” meanings are listed!• Design and manage an enterprise wide “compound”

information system that support the operations of the enterprise

• Integrate enterprise systems to each other to perform tasks jointly

• Q: Which integrated systems do you encounter in you daily life?


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Background and Motivation• Changing World• What’s Been Happening in the Companies?


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Hershey• ERP = Enterprise Resource Planning system,

system like Winha that manages all the informationon the products, processes, finance and peoplewithin the company

• Big bang approach: take the new system in usewithout running it in parallel with the old one for some time


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Why Projects Fail – CHAOS STUDY


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Chaos Study


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Background: Enterprises in Transition• Classical company structure:

– division of labour, specialisation

– hierarchical, top-down control (“military-like”)

– mass production paradigm

– Taylorism

• “Classical” production technology and information technology developments are also chiefly aimed at the top-down, hierarchical companies


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Changes in environment

Product lifetime Number of variants

Product complexityRequired delivery time

1970 1980 19901970 1980 1990

1970 1980 19901970 1980 1990

• Companies are forced to reconsider the way they must set up themselves and their operations

• Much of the pressure created by the Japanese companies, who started applying new management and organisational principles in the 1960’s.

• Q: What example products that evidence these kinds of phenomena do you encounter?


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The ICT Revolution• One of the root causes of breakdown of the Taylorian approach is the emergence

of information and communications technologies as a major constituent of how companies and people do their work and interact

• How enterprises should set up and operate their information systems:– universal and timely access to information is essential

– information systems become open to customers, partners, and third parties

– open architectures and interfaces are essential

– more and more business will take place on electronic markets

– in addition to desktops, novel interfaces such as PDA’s, portable phones, TV’s, etc. must be considered.

• These challenges seem to coincide with the competitive pressures outlined above, and indeed may be amongst their main causes.


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Motivation for Understanding Enterprise Systems

• They are everywhere in the companies– without them nothing would happen

• They allow new ways of doing business, strategies,... – Dell Computer’s direct sales channel, customization,

order-driven, integrated systems (to suppliers as well), • Developing them is hard

– SAP frequently criticized for inflexibility, mammothsystem, ...

• Taking them into use is hard– Hershey lost $150M due to 6 mnth delay in $112M ERP

system project in 1999; problem in roll-out caused emptyh l


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Objectives of the Course• An overall view of the use of information

technology in industrial enterprises– The basic concepts and methods for planning and

managing enterprise systems integration and acquisition (in brief)

– The most common (“standard”) information systems: the main ideas and concepts, the problems they address and applications in companies, the functionality, data models and architectures

– The integration tools and approaches: main ideas, concepts, the problems they address and applications in companies, the functionality, data models and architectures


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Enterprise Integration is Cross-disciplinary• In order to provide solutions, one must understand

– the business, processes etc. in a company (operations/industrial management)

– the systems, their functions, underlying technology, and most importantly, their limitations (computer science)

• Hence, by nature a cross-disciplinary field


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Process thinking

Order processing

Product design and engineering

Production planning

Production control

Materials acquisition

Management Administration, financing, etc.

SuppliersProductionCustomers

Marketing and sales

Owners, financing inst., public bodies,

society• Formulation of the

integration strategy for a company is challenging indeed

• Starting point: a process view of an enterprise


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Order processing


Production planning

Production control




Marketing and sales


society


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Order processing


Production planning

Production control




Marketing and sales


society


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Three basic processes• The operative process: sequence of activities from customer order to

delivery.

• The tactical process: activities towards competitiveness of the company.

• The strategic process:

– The activities aiming to improve the competitive position of the company in the long range.

– These activities are the least structured; they may include items such as research and development and development of the systems and organisation of the company.

– ESI development is a typical strategic process.


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Crash Course on Enterprise Systems Architecture

• Enterprise System Integration Strategy • Enterprise Systems for Research & Development

Processes• Enterprise Systems for Sales-Order-Delivery

Process • Integrating Enterprise Systems


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Enterprise System Integration Strategy• Introduction to the course, Enterprise Systems

Integration (ESI) Big Picture• ESI Strategy, System Implementation Project and

Process Modeling.


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Islands of automation: past development in companies

• Unstructured and random: a quick fix applied to a local problem

• Local ”standard” systems start to appear, e.g.:– production, finance since

1960’s– design since 1980’s

• Improvements targeted at one bottleneck at a time, unaware of possible new problems created

Orderprocessing

Product designand engineering

Productionplanning

Productioncontrol

Materialsacquisition

Management Administration,financing, etc.


Marketing andsales

Owners,financing inst.,public bodies,

society


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Islands of automation: result of the development

• Separate systems which cannot exchange information

• Large amount of manual work is required to prepare input for the various systems and to process the outputs, leading to errors.

• Q: What islands of automation do you encounter, e.g when moving?

CAD

CAMProductionmanagement

Order entry

Materialsmanagement

Shipping


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Islands of automation: need for a strategy• Integration strategy for bridging the “islands”

CAD


Order entry

Materialsmanagement

Shipping


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What is Enterprise Integration?

• A characterisation from EIL, Toronto University:– Enterprise integration covers theories, methodologies,

architectures, tools, and components

that will enable businesses to develop, manufacture, sell, deliver and support products and services

with unprecedented speed, flexibility, quality and economy.


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What is Enterprise Integration?• A characterisation from EIL, Toronto University:

– Enterprise integration covers theories, methodologies, architectures, tools, and components that will enable businesses to develop, manufacture, sell, deliver and support products and services with unprecedented speed, flexibility, quality and economy.

– This is achieved through the application of business practices and technologies that create a business infrastructure enabling

the dissemination of information, co-ordination of decisions, and management of actions

to and among people and systems within the organisation and outside of it.


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Integrated Enterprise

• Both external pressures and the ICT revolution seem to work towards a paradigm shift:

From value added through physical processing of material to value added by the processing of information

• Information technology will serve a crucial role in facilitating the paradigm shift!


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Data integrationData and process

integration


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integration


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integration


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Virtual Enterprise, B2B integration

ProductionProduction

Production

Product configuration

R & D

Marketing & sales

Market research

Product development

Product development

Production engineering

comprising of a network of co-operating independent companies and other stakeholders.


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Breakdown of the ESI ProcessThe basic activities of the enterprise integration process can be characterised as follows:– Investigation and planning– Rationalisation– Automatisation– Integration– Iteration


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Risk Factors• based on (Sumner, 2000)

– case studies of ERP projects in seven large companies– discuss those that seem the most pertinent or controversial


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Objectives of Process Modelling• To improve the present state must be known• Specifying goal state• Including partners, customers, main competitors• Abstracted representation of reality

– Faithfully essential characteristics of reality• Complex

– Simple and understandable• Limit the scope

– Suitable as a basis of inspection and analysis• Formal models


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Process Characteristics• Process: end-to-end sequence of co-ordinated activities

performed by one or several agents for achieving a joint purpose

• Characteristics of processes, for enterprise integration :– Information and material flow: the inputs and outputs of the process

and its steps– Effectiveness: the quality of the process, measured in terms of some

quality characteristics of the output– Efficiency: how efficiently the process utilises the inputs and other

resources to generate output– Cycle time: the time the process takes to produce one unit of output– Lead time: the time it takes to transform one input to corresponding

output– Cost: the expense of the process, e.g. measured per unit of output


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A Data-Flow Diagram DFD

representing production engineering activities

PRODUCT-ION

ENGINEE- RING

Tool Management

System

ORDER

SELLING DEPT.

Capacity Utilization,

Order Inform.

Delivery Time

Order Information

Tool Information

Method Planner

New Tool Information

Method & Resource

Sustaining

Operator

Quality Feedback Method Feedback

'Job Finished' sign, Tool & Material Usage,

Quality Feedback

Operative Designer

Foreman

Resource Requirements

Product Designer

Purchase Dept.

Contructive Design Inputs

Order Information

Production Management Part Descr.,

Factory Descr.

Quality Feedback Method Feedback

´Job Finished' sign

Product Finished

Product Finished

Work Orders & Aux. Inform, NC programs

Sub- Contractors

Component Requiments

Material Requiments

Capacity Utilization

Work Shop Level Plan

Process Plan Inputs

Shop Manager Resource

Requirements

Resource Requirements

Feedback

Feedback

Production Development

Factory Model Maintanence

Production

NC -programs Control Inform.

Sensor Feedback

Resource Received

Resource Received

Resource Received

Client

Feedback

Order

Info


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Enterprise Systems for Research & Development Processes

• Product Data Management (PDM)


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SCM PDM

Order processing


Production planning

Production control




Marketing and sales


society


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Definitions of PDM

• ISO 13584-10 Parts Library:A representation of facts, concepts, or instructions about one or more products in a formal manner suitable for communication, interpretation, or processing by human beings or by automatic means.

• Crnkovic, Asklund, Persson Dahlqvist (2003):PDM is the discipline of controlling the evolution of a product and providing other procedures and tools with the accurate product information at the right time in the right format during the entire PLC

• PDT (Product Data Technology)-advisory group:Product Data Technology includes all aspects of the definition and methods of processing information pertinent to product throughout its development and operational lifecycle.


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PDM Functions Major focus ofcurrent

developmentsGenerally supported

Some support, independents

establishing market

As PDM becomes implemented across

different industry sectors, functional priorities change.

Littlesupport

ProgramManagement

Product StructureManagement

Classification& Retrieval

partno Length

Screw

axy1234 10 mm

zvy3245 20 mm

dgf2345 30 mm

Workflow and ProcessManagement

ECOECO

Data Vault and DocumentManagement

Drawings/Documents

NC

3D

SPEC

+ Support utilities


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Enterprise Systems for Sales-Order-DeliveryProcess

• Enterprise Resource Planning (ERP) • Manufacturing Systems• Configurable Products and Product Configurators


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Conf..

MS

ERPOrder

processingProduct design and engineering

Production planning

Production control




Marketing and sales


society


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Enterprise resource planning (ERP)• ERP is an integrated solution to the

problem of how to control all major business processes with a single software architecture in real time. It is a process of planning and managing all resources and their use in the entire organization.

• Leading ERP software producers- SAP, Oracle, J.D. Edwards, Computer Associates, People Soft

Main Objective of ERP

to integrate all departments & functions across a company onto a single computer system.


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Example of main modules of ERP: SAP R/3 Module Architecture

R/3R/3Client / ServerClient / Server

ABAP/4ABAP/4

COCOControllingControlling

AMAMFixed AssetsFixed Assets

Mgmt.Mgmt.

PSPSProjectProjectSystemSystem

WFWFWorkflowWorkflow

ISISIndustryIndustry

SolutionsSolutions

MMMMMaterialsMaterials

Mgmt.Mgmt.

HRHRHumanHuman

ResourcesResources

SDSDSales &Sales &

DistributionDistribution

PPPPProductionProductionPlanningPlanning

QMQMQualityQualityMgmt.Mgmt.

FIFIFinancial Financial

AccountingAccounting

PMPMPlantPlant

MaintenanceMaintenance


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Production Distribution Sales

Supplier Customer

Procurement

Employees Resources Equipment

Project management

Financial control and planning

Cust. serviceMaintenance Quality control

Supply chain management & planning

Business warehouse


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Manufacturing Systems• Vertical integration and use of information

in production and maintenance• Customer order delivery process:

– Use of automation system information enhances production and its control.

• Operations support process:– Use of automation system information enables

condition monitoring, fault diagnosis and predictive maintenance.


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Characteristics of Configurable Products• Pre-designed for a given range of customer

requirements• Each delivered product individual is adapted to the

needs of a customer• Each product individual is specified as an

arrangement of pre-defined components• The product has a pre-designed architecture• No creative or innovative design is needed as a part

of the sales-delivery process


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Basic Functionality of Configurators• A product configurator (configurer) is a program

that– allows representing and managing configuration models– is capable of checking the correctness of a configuration,

and/or– assisting in configuring on the basis of a configuration

model and requirements

• Enabler for Business Process Re-engineering (BPR)– enables fundamental rethinking of the processes by which

a company sells its (configurable) products


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Re-engineered Process• The sales person/ customer

configures the product– shorter lead-times, less work

• The system eliminates incorrect/incomplete configurations– increased quality– up-to-date information

Sales configuration

process

Component manufacturing

and/or stock

Configuration Description of

product instance

Components

Product instance

Assembly and/or

installation

Component orders

Customer

Configuration model

RequirementsCustomer spesific product instance

Product configurator


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Integrating Enterprise Systems• System Integration; Enterprise Application

Integration,


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EAI definition (whatis.com)

• EAI (enterprise application integration) is a aimed at modernizing, consolidating, and coordinating the computer applications in an enterprise.

• Typically, an enterprise has existing legacy applications and databases and wants to continue to use them while adding or migrating to a new set of applications.

• ERP vs. EAI encompassing all?


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PDM system

CRM solution

Supply Chain Mgmt

eCommerce

Enterprise Resource Planning system

Legacy application

Point-to-point integration


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EAI– “Hub and Spoke” architecture

Application

Application

Application

ApplicationEAI

Company A


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T-86.5141 Enterprise Systems Architecture

ENTERPRISE INTEGRATION STRATEGY


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Contents• Motivation• Breakdown of the ESI Process• Investigation and Planning• Deliverables• Special Issues


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Islands of automation: need for a strategy• Integration strategy for bridging the “islands”

CAD


Order entry

Materialsmanagement

Shipping


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Process thinking

Order processing


Production planning

Production control




Marketing and sales


society• Formulation of the

integration strategy for a company is challenging indeed

• Starting point: a process view of an enterprise


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Contents• Motivation• Breakdown of the ESI Process• Investigation and Planning• Deliverables• Special Issues


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Practical issues and questions• Is our company capable of implementing ESI?

If not, what should we do about it?• How can one identify and justify potential benefits of

ESI?• How should an ESI team be set up?


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Practical issues and questions• How should one go about developing a model of

enterprise? What documentation techniques should we use?

• How much of the present data base infrastructure of the company can be preserved in the new systems through integration?

• Should we pick just one supplier for all information technology needed another for manufacturing technology, etc.?


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T-86.5141 Enterprise Systems Architecture

Enterprise Modelling


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Enterprise modelling• We have discussed developing strategic vision of

enterprise integration• Now techniques for implementing the activities

– 4.1 Business process modelling– 4.2 Process measurement– 4.3 Process asessment– 4.4 Enterprise modelling – 4.5 Enterprise modelling frameworks


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Objectives of Process Modelling• To improve the present state must be known• Specifying goal state• Including partners, customers, main competitors• Model: Abstracted representation of reality





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Process Characteristics• Process: end-to-end sequence of co-ordinated activities performed by one

or several agents for achieving a joint purpose• Characteristics of processes, for enterprise integration :

– Information and material flow: the inputs and outputs of the process and its steps

– Effectiveness: the quality of the process, measured in terms of some quality characteristics of the output

– Efficiency: how efficiently the process utilises the inputs and other resources to generate output

– Cycle time: the time the process takes to produce one unit of output– Lead time: the time it takes to transform one input to corresponding output– Cost: the expense of the process, e.g. measured per unit of output


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Models of company and its operation are tools• investigate:

– actual operations of the company– how they are co-ordinated– how they pass information and material to each other– what and how much resources they consume

• rationalise:– documentation of improved processes– education of personnel– analysis and simulation

• automate:– checklists or guides for human execution of the process– basis of process or project management.

• integrate:– drive computerised processes controlling information and material flow

between processes by “executable” models– basis of process measuring and tracking;– collect and analyse quality information


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Process modelling objectives and goals• Facilitate human understanding and communication• Support process improvement• Support process management• Automated guidance in performing process• Automated execution support


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Modelling notations according to the use• organisation charts: the formal structure of the operations and personnel• economic models: budgets and economic indicators, e.g. in a spreadsheet• information flow diagrams: indicates how operative information is handled and

flows in the form of forms, messages, instructions, drawings, directives and even personal communication during a sequence of related processes

• layout models: charts of the physical location of various types of functions and resources, particularly manufacturing units

• process diagrams: material flow during various stages of product realisation• miniature models: models of machines, processes, building structures• simulation models: computer models for studying dynamic performance of a

target process, including factory models representing the physical production facilities and their layout, and economical models used in “enterprise simulators”, popular in business management education


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IDEF• 1970s U.S. Air Force Program: Integrated Computer Aided Manufacturing (ICAM)

– Manufacturing productivity through systematic application of computer technology– Amongst other things a process modelling technique– Baseline Structured Analysis and Design Technique (SADT) notation

• ICAM Definition Method, or IDEF:1. IDEF0, a "function model". A function model is a structured representation of the

functions, activities, or processes within the modelled system or subject area. 2. IDEF1, an "information model". An information model represents the structure and

semantics of information within the modelled system or subject area. 3. IDEF2, a "dynamics model". A dynamics model represents the time-varying

behavioural characteristics of the modelled system or subject area• Series of techniques continued

– In 1983, the USAF Integrated Information Support System program enhanced IDEF1 to form IDEF1X (IDEF1 Extended), a semantic data modelling technique.

– Later, also IDEF3, the “process description capture method”, – IDEF4, an object-oriented design method, and – IDEF5, an ontology description capture method have been added to the suite.


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IDEF0• Modelling technique

– combined graphics and text presented in an organised and systematic way

– to gain understanding, support analysis,– provide logic for potential changes, – specify requirements, – or support systems level design and

integration activities

• Model is composed of– a hierarchical series of diagrams that – gradually display increasing levels of

detail describing functions and their interfaces within the context of a system

A1Takes: Inputs

Controls:Starts/stops at

To meet objectivesTo adhere to standards

Under rules

Producing: Outputs

Using: Mechanisms

• Building block (box) an activity (a function) in terms of its inputs, outputs, controls, and mechanisms


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IDEF0 detailed guidelines on using the notation• Boxes are functions showing what must be accomplished. A function name should

be an active verb or verb phrase, such as:– process parts– plan resources– conduct review– monitor performance– design system– provide maintenance– develop detail design– fabricate component– inspect part

• Arrows identify data or objects needed or produced by the function. Each arrow should be labelled with a noun or noun phrase, such as:

– specifications test report budget– design requirements detail design directive– design engineer board assembly requirements


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IDEF0top-down model

generation

A0

A21

A22

A23

A2 diagram

A1

A2

A3

A4

A0 diagram


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IDEF0 a basis for many more complex notations

• IDEF0-TD (TD = triple-diagonal) is an example is combines physical material flow with a control and planning flow.


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Summary on Process Modeling• Specify the present state and goal state• Abstracted representation of reality





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Summary on Process Modeling 2• Facilitate human understanding and communication• Support process improvement• Support process management• Automated guidance and execution support

• THE ACTUAL NOTATION/METHOD USED NOT AS IMPORTANT AS THE MODELING ITSELF– but must capture the relevant issues


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Enterprise Systems Project


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Typical Project Characteristics• Duration 6 mnths(?) – several years• Cost from 100’s of k€’s to 10’s M€s

– much consultation, e.g. 50-70%, license, hardware onlyone part, the work is significant

• Often very much business and process re-engineering before actual systems project

• Various roles– business case/process owner, business process

participants, IT dept. architects, developers, consultants,...


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Typical Project Stages• Preliminary requirements for new system• Gather long list (e.g. 10) of vendors, consultants• Evaluate capability to deliver, technology, costs, based on sales

material, references, public sources and choose short list (e.g. 3)• Do pilot studies on some small part of the problem to be solved,

evaluate and choose the partner (e.g. 6 mnths- 1 year elapsed)• Real requirements gathering (and BPR) starts• Possibly configure, tailor the system to the needs, iterate• Educate users• Introduce the system to some restricted part of the organization

or use some restricted part of the system, iterate• Full roll-out to the organization, iterate• Follow-up on effects, lessons learned, iterate


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Risk Factors• Based on (Sumner, 2000)

– case studies of ERP projects in seven large companies– discuss those that seem the most pertinent or controversial


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Risk Factors 2• Organization

– no re-design of business processes +/-

– no enterprise-wide design for integration (process, db,...) +

• Skill mix– insufficient user training,

internal expertise +/-– lack of business analysts +– failure to mix internal and

external expertise +/-– difficulty to recruit and retain

experts in ERP +

• Management structure– no senior management support +– no champion +

• Software systems design– failure to adhere to standards +/-– lack of integration +

• User involvement– no commitment by customers +/-– user resistance +– ineffective communication

• Technology planning/integration+/-


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Recent Case• Ajoneuvohallintakeskus AKE; ”Vehicle Management

Centre” (Itviikko, 27.11.2003)– govermental body that manages the information on vehicles being

used in Finland– 2,5 M vehicles, vehicle tax 0.5 B E

• Extra-net for the vehicle registry– register to be available to police, car dealers, tax officials...– biggest govermental IT-project– budget 17 Me– duration 5 years

• Main contractor, and subcontractors


85

Symptoms• Already over budget by 80% (30 Me)• Halfway through (in 5 years), 3 years to go• Customer is not happy

– the article– ”consultant is having a hardtime [delivering]”– ”no compensation except if the technology fails”– ”the technology provider did not provide support flexibly

enough” (also the main contractor claims this)


86

Causes• Claims:

– ”Adopt new technology”• main frame to Java/IBM WebSphere

– ”Clients do not have enough IT knowledge”– ”The big vendors run the game”– ”Consultants failed in providng experts, project

management, project manager changed three times”


87

Risk Factors• Organization

– no re-design of business processes– no enterprise-wide design for

integration (process, db,...)

• Skill mix– insufficient user training, internal

expertise– lack of business analysts– failure to mix internal and external

expertise– difficulty to recruit and retain

experts in ERP

• Management structure– no senior management support– no champion

• Software systems design– failure to adhere to standards– lack of integration

• User involvement– no commitment by customers– user resistance– ineffective communication

• Technology planning/integration


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Causes (?)• Maybe:

– trying to adopt a new technology while providing new functionality

– failure to use consultants– bid low to get the deal, even though...


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Despair Not!• A more recent Chaos study shows significant improvement

– The project management knowledge and application has an effect?• In a recent PhD dissertation on an ERP project in Nokia the succes was

based on – Organization: project organized according to processes not according

to systems functions or modules– Needs of the business as starting point– Owners of the business process as responsible for the project– Continuous development– Creation of own ERP competence

1409 2005 Soininen · Hershey • ERP = Enterprise Resource Planning system, system like Winha that...

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