END OF CHAPTER MATERIAL

CONCEPT CHECK

1. 1. Which of the following advantages is least likely to be experienced by a company implementing an enterprise resource planning (ERP) system?
   1. Reduced cost
   2. Improved efficiency
   3. Broader access to information
   4. Reduced errors
2. 2. An ERP system is a software system that provides each of the following except
   1. collection, processing, storage, and reporting of transactional data
   2. enhancement of e-commerce and e-business
   3. coordination of multiple business processes
   4. physical controls for the prevention of inventory theft
3. 3. Which of the following is not a feature of an ERP system's database?
   1. Increased efficiency
   2. Increased need for data storage within functional areas
   3. Increased customer service capability
   4. Increased data sharing across functional areas
4. 4. Manufacturing companies implement ERP systems for the primary purpose of
   1. increasing productivity
   2. reducing inventory quantities
   3. sharing information
   4. reducing investments
5. 5. What company developed the first true ERP systems?
   1. Microsoft
   2. Peoplesoft
   3. SAP
   4. IBM
6. 6. In the late 1990s, the Y2K compatibility issue was concerned primarily with computer systems'
   1. file retrieval capability
   2. data storage
   3. human resource comparisons
   4. capital budgeting
7. 7. The primary difference between ERP and ERP II systems is that ERP II may include
   1. Internet EDI
   2. logistics modules
   3. reporting modules
   4. a data warehouse
8. 8. Which of the following is not one of the reasons for increased spending on ERP systems in recent years?
   1. The need for Sarbanes-Oxley compliance
   2. Globalization and increased competitive pressures
   3. The need for earnings management
   4. The need for customer service enhancements
9. 9. Supply chain management (SCM) is a critical business activity that connects a company more closely with its
   1. customers
   2. suppliers
   3. subsidiaries
   4. customers and suppliers
10. 10. The type of ERP system used by large, multinational corporations is known as
    1. big bang implementation
    2. modular implementation
    3. tier one software
    4. tier two software
11. 11. Which of the following ERP approaches accomplishes the ERP implementation beginning with one department?
    1. The pilot method
    2. The modular implementation approach
    3. The big bang approach
    4. The location-wise implementation method
12. 12. Which of the following statements best describes the risks of ERP systems?
    1. The risks of implementing and operating ERP systems are nearly identical to the risks of implementing and operating IT systems.
    2. The risks of operating and implementing ERP systems are greater than the risks of implementing and operating IT systems, due to the scope, size, and complexity of ERP systems.
    3. The risks of implementing ERP systems are greater than the risks of implementing IT systems, but the operating risks are nearly identical.
    4. The risks of operating ERP systems are greater than the risks of operating IT systems, but the implementation risks are nearly identical.

DISCUSSION QUESTIONS

1. 13. (SO 1) Describe how ERP systems enhance efficiency in a business organization.
2. 14. (SO 1) Why is real-time processing essential in an ERP system?
3. 15. (SO 1) How has ERP increased the responsibilities of customer service representatives?
4. 16. (SO 1) What is an MRP II system and how is it different from the ERP systems in use today?
5. 17. (SO 1) What are the two databases used by ERP systems?
6. 18. (SO 1) Differentiate between the enterprise-wide and nonvolatile features of a company's data warehouse.
7. 19. (SO 2) What was unique about SAP's first ERP system?
8. 20. (SO 2,5) Differentiate between the features of SAP's R/1, R/2, and R/3. What does the “R” stand for in this name?
9. 21. (SO 3) How do ERP II systems allow businesses to improve efficiencies with respect to sharing information with trading partners?
10. 22. (SO 3) How did the tragic events of September 11, 2001, affect the market for ERP systems?
11. 23. (SO 4) What are some of the activities included in an ERP module for supply chain management?
12. 24. (SO 4) What are some of the features of an ERP module for customer relationship management?
13. 25. (SO 5) Which company is today's top seller of ERP systems in the United States?
14. 26. (SO 5) Differentiate between Oracle's back office and front office modules.
15. 27. (SO 5) Which tier one company introduced the first ERP system that was “pure Internet,” requiring no programming code to reside on the client computer?
16. 28. (SO 5,6) Which of the tier one ERP companies is likely to provide the “best fit” for a manufacturing firm? for a human resources placement company?
17. 29. (SO 6) Why is business process reengineering an important aspect of ERP implementation?
18. 30. (SO 6) Why should customization of an ERP system be limited?
19. 31. (SO 6) Differentiate between location-wise and modular implementation approaches to the conversion to an ERP system.
20. 32. (SO 7) Which method of conversion to an ERP system is sometimes referred to as a “pilot” method? Why is this name appropriate?
21. 33. (SO 8) How can an ERP system assist a company in its efforts to comply with the Sarbanes–Oxley Act of 2002?

BRIEF EXERCISES

1. 34. (SO 2) Why was there so much growth in the sales of ERP systems in the late 1990s?
2. 35. (SO 3) What are the five most common reasons for increased spending on ERP systems in the early 2000s? Which of these reasons was the impetus for Viper's ERP implementation in 2003?
3. 36. (SO 4) Match the ERP modules on the left with their purpose of the related processes on the right:

   

4. 37. (SO 6) Discuss the potential advantages and disadvantages that exist with respect to engaging a consultant for an ERP implementation.
5. 38. (SO 7) What are the primary benefits of an ERP system? What are the primary risks?
6. 39. (SO 7) What are Shang and Seddon's five dimensions of ERP benefits?
7. 40. (SO 7) Name the AICPA Trust Services Principles' five operations risks. Why are these risks greater for ERP systems than for other IT systems?
8. 41. (SO 8) Explain how an ERP system can enhance internal controls. Specifically, how can it facilitate the separation of duties?

PROBLEMS

1. 42. (SO 1) Describe the ERP's modular interface that is necessary in a typical manufacturing environment.
2. 43. (SO 2) Identify and describe the first generation of ERP systems used in the 1970s and the second generation of ERP systems used in the 1980s.
3. 44. (SO 4) Compare and contrast the functionality of the logistics module and supply chain management activities.
4. 45. (SO 7, 8) Suppose a company is experiencing problems with omitted transactions in the conversion processes—that is, inventory transactions are not always being recorded as they occur. How can an ERP system help to alleviate such a problem?
5. 46. (SO 6) Using an Internet search engine, search for the terms “best of breed” and ERP. Locate information that addresses the debate and dilemma faced by many companies regarding the implementation choice between best of breed technology versus new applications from an ERP vendor. Write a brief memo to discuss this issue.
6. 47. (SO 6) Using an Internet search engine, search for the terms “big bang” and ERP. Identify at least one company that represents a success story with regard to this ERP implementation method (other than Marathon, as described in this chapter's Real-World example). Also identify at least one company that experienced problems with this approach (other than the City of Tacoma, as described in this chapter's Real-World example).
7. 48. (SO 6) Using an Internet search engine, search for the terms “ERP” and “SME.” Describe why a small to medium-sized entities might choose an ERP system.

CASES

1. 49. Zostner-Zostner Industries (ZZI) is a manufacturer of warehouse and inventory tracking systems. ZZI has four U.S. plants and three warehouses. The company employees 3500 workers at these facilities and the corporate headquarters. ZZI is using legacy systems for its accounting, materials requirement planning, receivables, payables, inventory, and payroll processes. These various legacy systems were developed at different times and do not necessarily have common data formats or programming. Often, ZZI must export data from one legacy system to incorporate into a second legacy system. The president has decided that the company must switch to an ERP system to bring the company's systems up to date and to enable the company to remain competitive.

   Required:

   1. Describe how an ERP system could improve performance at ZZI.
   2. Describe the relative advantages and disadvantages of a big bang versus a modular implementation.
   3. If ZZI chooses a modular implementation, how might it choose the order in which to implement modules?
2. 50. Chacon University is a Midwest university with 16,000 students, using various legacy systems for student records, financial systems, human resources, and financial aid. The president of Chacon heard a presentation about ERP systems at a seminar for university administrators.

   Required:

   Read the article at http://www.cio.com/article/107706/university_ERP_Big_Mess_on_Campus. In addition, search online for “Montclair University” and “Oracle” to read about another university's ERP implementation problems. Summarize the problems with using an ERP system at a university.

CONTINUING CASE: ROBATELLI'S PIZZERIA

Consider the case of Robatelli's Pizzeria as presented at the end of Chapter 1. Assume that Robatelli's management wishes to upgrade its accounting software to an ERP system. To answer some of the questions here, you may have to do research about ERP systems on the Internet. Examples of websites with information about accounting software are www.accountingsoftware411.com and www.2020software.com

Required:

Answer the following questions regarding Robatelli's:

1. What advantages could Robatelli's expect by upgrading to an ERP system?
2. As Robatelli's considers modules to purchase, which four or five modules do you believe would be most critical? Why?
3. Which method of implementation of an ERP system do you suggest for Robatelli's? Why?
4. Recommend two or three ERP systems that would be appropriate for Robatelli's. Be specific with respect to the name of the ERP software system and the provider company. When making these recommendations, consider the size of Robatelli's and, therefore, what it might be able to afford.

SOLUTIONS TO CONCEPT CHECK

1. (CIA, CMA Adapted) (SO 1) a. Reduced cost is the advantage least likely to be experienced by a company implementing an ERP system. Although ERP systems can lead to significant benefits, many companies experience increases in IT equipment costs and related staffing costs. This is because multiple additional computer systems are needed to link the ERP systems and facilitate their smooth functioning.
2. (SO 1) An enterprise resource planning (ERP) system is a software system that provides each of the given options except d. physical controls for the prevention of inventory theft.
3. (SO 1) b. Increased need for data storage within functional areas is not a feature of an ERP system's database. ERPs operate on an operational database, which allows for the centralized storage of data.
4. (CIA Adapted) (SO 1) Manufacturing companies implement ERP systems for the primary purpose of c. sharing information. To compete globally, companies must be able to share information quickly and effectively across the organization.
5. (SO 2) c. SAP developed the first true ERP systems.
6. (SO 2) In the late 1990s, the Y2K compatibility issue was concerned primarily with computer systems' b. date storage. The concern was that older legacy systems would “blow up” when faced with a date of 2000 or later, as they might interpret the year “00” as 1900 instead of 2000.
7. (SO 2) The primary difference between ERP and ERP II systems is that ERP II may include a. Internet EDI. EDI, Internet EDI, or extranets are used to connect a company's ERP systems with the IT systems of its trading partners.
8. (SO 3) c. The need for earnings management is not a reason for increased spending on ERP systems in recent years.
9. (SO 4) Supply chain management is a critical business activity that connects a company more closely with its d. customers and suppliers.
10. (SO 5) The type of ERP system used by large, multinational corporations is known as c. tier one software. Answers a. and b. are implementation methods rather than types of systems.
11. (SO 6) b. The modular implementation approach accomplishes the ERP implementation one department at a time. This approach normally limits the scope of implementation to one functional department, gradually phasing in each module.
12. (SO 7) The following statement best describes the risks of ERP systems: b. The risks of operating and implementing ERP systems are greater than the risks of implementing and operating IT systems, due to the scope, size, and complexity of ERP systems.