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ERP INTRODUCTION

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 Contents

What is ERP
Benefits of ERP
Reasons for the growth of ERP
Myths about ERP
Evolution of ERP
Conceptual model for ERP
Structure of ERP
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 What is ERP???

Enterprise Resource Planning integrates all the core processes

needed to run a company : finance, HR, manufacturing, supply
chain, procurement and others into a single system.
It is a process of managing all resources and their use in the entire
enterprise in a coordinated manner.

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 ERP……….

E-Enterprise R-Resource P-Planning

Money Effective
Huge
Manpower utilization
Business
Material and
Organization
Machinery optimization
Marketing of resources
Methods 4
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 ERP…..

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 An ERP Example: Before ERP

Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers
Checks for Parts
Calls back “Not in stock”
Accounting “We ordered the parts”
Files

Accounting
Sends report
Invoices
Sends report
accounting
Ships parts
Vendor
Warehouse
Order is placed “We Need parts #XX”
with Vendor
Inventory
Purchasing Files
Files “We ordered the parts”
Purchasing 6
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 An ERP Example: After ERP
Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting

Financial Data exchange;

Books invoice against PO

Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO

Order is placed
with Vendor

Warehouse
Vendor Purchasing

Ships parts
7
And invoices accounting
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 Benefits of ERP Systems
Improving integration, flexibility
Fewer errors
Improved speed and efficiency
More complete access to information
Lower total costs in the complete supply chain
Shorten throughput times
Sustained involvement and commitment of the top
management
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 Benefits of ERP Systems (cont’d)

Reduce stock to a minimum

Enlarge product assortment
Improve product quality
Provide more reliable delivery dates and higher service to the
customer
Efficiently coordinate global demand, supply and production

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 Reasons for the growth of ERP market

Enable improved business performance

Cycle time reduction
Increased business agility
Inventory reduction
Order fulfillment improvement

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 Reasons for the growth of ERP market

Support business growth requirements

New product lines
New customers
Global requirements including multiple language and currencies

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Provide flexible, integrated, real time decision support

Eliminated limitation in legacy system
Take advantage of the un-tapped mid-market

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 Myths about ERP

ERP means more work and procedures

ERP will make many employees redundant and jobless
ERP is the sole responsibility of the management
ERP is just for the managers/decision makers
ERP is just for manufacturing organizations
ERP slow down the organization
ERP is just to impress customers
ERP is very expensive INFORMATION TECHNOLOGY DEPARTMENT 13
 Evolution of ERP

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Conceptual model for ERP

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4 P’s Conceptual model

People customer mindset
Product software
Process change management
Performance process flow

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The software component :
• The software component of the ERP model is the component that is most visible to the users and is therefore seen as
the ERP product.
• It consists of several generic modules, some of which are listed below:
(1) Finance. The finance module is usually the backbone of the ERP system. It includes concepts such as the general
ledger, accounts receivable, accounts payable, fixed assets and inventory control.
(2) Human resources (HR). HR forms an integral part of an ERP system. HR administration automates personnel
management processes, including payroll, recruitment, business travel and vacation allotments. It focuses on the
automation of HR tasks from the employer’s viewpoint. The focus of the administration function is to empower employees
to manage their own employment terms and conditions. Mundane tasks like the allocation of leave days to an employee
can be predetermined and assigned to an employee. The payroll is usually integrated with the finance module and
handles all the accounting issues and preparation of cheques related to employee salaries, wages and bonuses.

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(3) Supply chain management (SCM). SCM is the oversight of materials, information and finances as they move in a
process from supplier to manufacturer to wholesaler to retailer to consumer . SCM involves coordinating and integrating
these flows both within and among companies. SCM flows can be divided into three main flows: . the product flow; . the
information flow; and . the finances flow. The product flow includes the movement of goods from a supplier to a customer,
as well as any customer returns or service needs. The information flow involves transmitting orders and updating the
status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership
arrangements.
(4) Supplier relationship management (SRM). With an increasing reliance on contractors and suppliers for material,
logistics and manufacturing capacity, the ability to manage these relationships has become critical. To maximize
profitability, companies must be able to select the right suppliers quickly, establish strategic relationships and effectively
collaborate with them as they help meet business goals.

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(5) Customer relationship management (CRM). CRM is a term for methodologies, software and usually internet
capabilities that help an enterprise manage customer relationships in an organised and efficient manner . An enterprise
builds a database about its customers.
(6) Business intelligence (BI). BI applications are decision support tools that enable real-time, interactive access, analysis
and manipulation of mission-critical corporate information. Users are able to access and leverage vast amounts of
information to analyse relationships and understand trends that ultimately support business decisions.

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Process flow
The second component in the conceptual model is the process flow within an ERP system.
• Process flow deals with the way in which the information flows among the different modules within an ERP system.
• This forms a very important part of understanding ERP systems. Before an ERP system can be implemented in an
organisation, the business processes must be modelled and, if need be, reengineered to allow smooth integration.
• The implementation of ERP systems can often be compared to the proverbial square peg in a round hole situation.
The following are some examples to illustrate the process flow within each of the software components:
1. Finance
2. HR
3. SCM
4. HRM

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Customer mindset
The third proposed component of the ERP model is the customer’s mindset.
• Resistance kills many ERP projects. A proposed ERP system may hold great promise, but often fails to consider how
the users are likely to view this so-called improvement.
• ERP systems remove the old tried-and-true ways of working which users understand and are comfortable with, even
though some of these existing, cobbled-together legacy systems are not all that good.
• When users are asked to give up what they know and what they can rely on, they will resist. For any ERP project to
succeed, the users must buy into the new ERP system. A paradigm shift or customer mindset change must be
achieved. This has to be done at three levels :

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(1) User influence. To ensure that the users fully understand the necessity of using the system correctly all the time, a
needs analysis should be done to evaluate the users’ technical skills, their existing job processes and the impact the
system will have on their jobs . Training should include information about their new roles and responsibilities, the
business objectives of the initiative and the projected benefit to the company.
(2) Team influence. A typical ERP project involves internal people from a number of departments within an organisation,
as well as many external people in the form of consultants and vendors. A primary reason for unsuccessful ERP
implementations is the inability of this disparate group to come together in a focused, team-oriented manner. All too
often the team membership polarises into “us-versus-them” factions and the project degenerates into mass finger
pointing. A successful ERP project will require that the functional and technical leadership and teams develop a strong
partnership and a shared commitment to the success of the ERP implementation. Without this joint commitment to
work together, any attempt to implement an ERP system will result in failure.
(3) Organisational influence. The users will be expected to work twice as hard during the implementation of the system.
They still need to do their normal operational work to make sure the business continues to run smoothly and they
need to give inputs to the different project teams of which they are a part. This causes the users to become
overworked, tired and stressed.
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Change management
• It plays a major role in the successful implementation of an ERP system and is the fourth component in the ERP
model. Change needs to be managed at several levels.
User attitude
Resistance to change is one of the major issues that all ERP projects will face .
• It is important to get the users to buy into the ERP project if it is to succeed. It is also a reality that not everyone will
be delighted with this new project.
• User attitude change management focuses on managing the users’ expectations and on converting the non-believers
to believers and supporters of the system.
• What the organisation needs is people to understand what it is all about, to like the new system, to take part in making
it a success and to have confidence in the project team.

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Project changes
All ERP projects are subject to scope change at some time during the lifecycle. The key to successful ERP implementation
is to manage the change of scope process effectively . The Project Management Body of Knowledge (PMBOK) defines
scope change control as:
• influencing the factors which create scope changes to ensure that changes are beneficial;
• determining that a scope change has occurred; and
• managing the actual changes when and if they occur.
Business process changes
ERP systems bring with them business process changes. The key business drivers forcing business process changes are
replacing legacy systems, gaining greater control and managing globalisation across the enterprise. The change must
happen for three reasons: stringent business conditions accentuated by channel and brand proliferation, the pressures of
managing globally and the intense service demands by customers. With globalisation has come price pressure, as
customers insist that manufacturers produce higher-quality goods with shorter delivery times and lower prices. Companies
must have a more accurate and timely information flow to meet these demands
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 Structure of ERP

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