erp – ERP Systems

Making ERPs “smarter”

Machine learning, cognitive computing, artificial intelligence (AI), for the past few years these were some of the most widely discussed buzzwords in high-tech. Tech giants were also quietly devoting resources in developing AI technologies or acquiring smaller companies that specialize in these fields. The idea that AI will increasingly play a bigger role in how businesses function has made many excited about the possibilities of what can be achieved and how to enfold these technologies to be ahead of competitors.

Naturally, AI is also being applied to ERP systems to produce the next wave of innovation. Predictive business intelligence technology has been maturing for the past years and it is quickly being integrated into ERP functionalities. In other words, ERP systems can use past activities and data to predict, calculate, and respond to changes in workflow that can optimize business operations. For instance, whereas an actual person might be in charge of making purchase requests, a “smart” ERP system might automate the process when stock levels fall to a certain level or when a sales prediction technology signals a future growth in demand. This article by Bix Matrix discusses the topic in greater detail.

Furthermore, consulting company, Deloitte, predicts that over 80 of the largest ERP software companies will have integrated cognitive computing technologies into their products by the end of 2016. That number is expected to rise to 95 out of the top 100 by 2020.

In this article by Computer World UK, SAP discusses how they are deploying machine learning capabilities as APIs on its enterprise cloud and embeds them into existing applications. Since the start of their machine learning journey, SAP has “screened over 180 machine learning use cases. The first wave prioritized horizontal apps near [their] core and [they] are currently prioritizing a second layer and all spaces that are of value to [their] customers, such as the Internet of Things (IoT) and analytics, [such as ]predictive capabilities”.

It seems that the AI in the ERP world is well underway, it would be interesting to see where ERP would go in the coming years!

Etsy: a helping hand for all things handmade

It’s mid-October and Halloween preparations are now in full swing! This year’s costume theme is “The Very Hungry Caterpillar”, the timeless children’s book by Eric Carle. Now that I have two kids, coordinating costumes is a must-do. And since I was feeling particularly ambitious, I’ve decided to DIY it. Which means, instead of browsing on Amazon and countless other online stores, I’ve been spending a hefty amount of time on Esty, hunting for the perfect handmade caterpillar hat.

I’ve been an Etsy user as a buyer for several years now, but I’ve never really thought about my purchases from Etsy’s point of view. It’s always been: add to cart, checkout, make payment, receive confirmation, and get package in mail. Technically, Etsy isn’t a merchant; they just provide a platform for individual sellers to reach buyers looking for specific items, much like eBay and Amazon Marketplace. Therefore, they do not hold inventory, but use sellers as part of their fulfillment and distribution.

The fulfillment process could look something like this:

Purchase order is created once customer clicks “submit order” after filling out the online purchase form.
Etsy generates a sales order and sends a notice to the seller: (Image source)
Seller’s notification from a purchase order
Customer payment is posted the next business day, Etsy then pay the seller.
Seller packs the item with a packing slip, prints a shipping label provided by Etsy, and ships the package within the specified time frame.

Within their ERP system, it’s apparent that financial documents are being generated, but I think material documents also exist, even though they don’t handle inventory. Each seller and customer is required to open an account and past purchased items are tracked and viewable on the accounts. It would be an easy ways for Etsy to gather lots of data of the types of items sold, what is popular, and how much of a particular item sells. I think this is also a reason why they started Etsy Manufacturing and Etsy Wholesale the aim of helping individual sellers build their production capabilities and connect to large retailers.

Hopefully more about this on a future blog post!

A 2003 Patent: US 20040162768 A1

During the last session, we discussed the procurement process for a Vendor-Managed Inventory (VMI) by using the Safeway example. The concept was initially initiated by Walmart and it’s supplier Protect & Gamble back in the 80s to provide 4 main advantages for the suppliers:

Improved customer service
Reduced demand uncertainty
Reduced inventory requirements: By knowing exactly how much inventory the customer is carrying, a supplier’s own inventory requirements are reduced since the need for excess stock to buffer against uncertainty is reduced or eliminated.
Reduced costs: To mitigate the up-front costs that VMI demands, Fox suggests that manufacturers reduce costs by re-engineering and merging their order fulfillment and Distribution Center replenishment activities.
Source: Mary Lou Fox

Meanwhile, vendor managed inventory (VMI) has evolved as both technology has advanced and as business processes have improved. Therefore, to meet this evolution the ERP system needed to integrate VMI into the general enterprise architecture.

The US patent 20040162768 A1 was one of the first solutions to elaborate an effective implementation of VDI processes into a shared portion of ERP between the customer and the supplier.

You can find here the Patent document. It’s a little bit long (remember that it’s a legal document, so it has to) but very clear. And let’s face it, we don’t spend time reading patents, so it could be your first time doing it. Happy reading experience.

“Cracking” the bullwhip effect

Last week we’ve discussed the procurement process in detail and how a vendor managed inventory model would shape an ERP system. One point I’d like to go in a bit more detail is about the vendor managed inventory (VMI) model when it comes to stock management. This model is effective because it gives suppliers a lot of information about how their products are selling and thus be able to coordinate their orders and shipments accordingly.

In supply chains, particularly forecast driven supply chains, one of the hardest phenomenon to control is the bullwhip effect. This happens when small changes in end customer demand causes larger quantities in order placed as it moves upstream in the supply chain. Each participant along the supply chain reacts to the signals from downstream by ordering larger quantities to build up safety stock in order to protect against stock outs. I should highlight that actual end customer demand is hidden to the upstream participants.

bullwhip

When suppliers have access end customer demand information, they can effectively reduce unnecessary inventory, which leads to lower cost all around. In addition, it allows the supplier to develop much better forecasts for future demand of a certain product.

So how is ERP involved? While researching this online, I’ve found that there are actually several ways to implement this process. For instance, SAP offers three different ways:

Standard, non-consigned (customer sends stock/sales data from its ERP system to the vendor).
Consigned (vendor maintains and manages its inventory at the customer’s site and handles replenishment planning on behalf of the customer).
Parallel consigned and non-consigned (for organizations handling both types at the same time).

The key takeaway to successfully using VMI is that ERP systems allow the data that is transmitted between customer and supplier to be accurate, complete, and in real-time. This lets vendors make informed decisions that lead to reduced costs, better customer service, and improved forecasting.

Image Source

OLTP & OLAP: A small clarification

This post is about curious thoughts that I had during one of my internship when I had to implement an Oracle’s Hyperion Reporting software. I understood by that time that I was using an OLAP environment.

Wait, what is OLAP again? The concept surfaced again the last week. During the previous sessions, we explored the accounting transaction concept within an ERP system. We highlighted the 3 different types of data:

1. Master data
2. Organizational data
3. Transaction data

The ERP generates a huge volume of these data sets that need to be stored in two different ways, depending on the freshness: “Transaction” data for the current processes and “historical” data for past processes.

OnLine Transactional Processing (OLTP) to process the current data needed to fulfill a current business process.
OnLine Analytic Processing environment (OLAP) to analyze a huge amount of historical transactions.

OLAP environments needs a lot of processing power to aggregate all the historical data in order to provide the analysts with different “Views” of the overall data. Data are arranged by dimensions and can be modeled by a “Cube”.

what-is-a-cube

Apples to apples or apples to pears?

Like one of my fellow classmates, I too had wondered if there was any differences between traditional accounting software and the accounting capabilities of ERP systems. Are they the same thing? If I was a new company picking out my software and system needs, how am I to distinguish between the two? Are we comparing apples to apples or apples to pears?

As it turns out, while the two types do cover some accounting functions, they are still technically different. As explained by this article at ERPSoftwareblog.com, accounting software handles typical accounting transactions such as receivables, payables, payroll, and balances. ERP systems handles the financial resources of a company plus the ability to manage intangible assets like work hours, product lifecycles, performance, and customer relationships. Accounting software is only for tasks related to accounting, but ERP systems actually interface to other aspects of business operations/processes.

So accounting software is more like an apple with ERP being the branches of an apple tree. Great.

But since ERP systems can easily take over much of the accounting capabilities, and many ERP packages have full accounting functions already built in (like the Microsoft Dynamics series), what’s the trend for independent accounting software these days? Well, according to the article, that industry is contracting. And this makes sense too. Comprehensive software packages are becoming more in demand and many accounting software companies either get absorbed into larger ones or fade away. Sooner or later, we’d only hear about ERP softwares in place of accounting.

Welcome to the Fall 2016 ERP Systems class!

https://www.youtube.com/watch?v=Q8LvsMziO8w

Enterprise Resource Planning Systems (ERP) systems are the unsung heroes of the digital economy. Almost every business transaction is processed by an ERP systems. Whether you order your groceries online, download music online, get your paycheck issued, or see your doctor, an ERP system will handle the business transactions. ERP systems integrate all areas of an organization including accounting, sales, production, purchasing, and inventory.

This makes ERP systems incredibly complex. A typical ERP systems is shipped with more than 20,000 database tables. Organizations have to choose from hundreds of software modules to configure the ERP system that helps them to realize their strategy.

This course allows you to cut through the complexity of ERP. Upon successful completion you:

have a solid understanding of the conceptual and technological fundamentals of ERP,
can analyze and evaluate design options for ERP-driven business processes, and
have a moderate level of comfort working with SAP ERP systems.

The chances are high that you will be working with ERP systems throughout your career. This course enables you to establish a competitive advantage in the global marketplace.