Enterprise Resource Planning

UNIT-1
OVERVIEW
 Enterprise Resource
Planning
ERP is planning philosophy enabled with software
that attempts to integrate all the business
processes of different departments and
functions across a company on to a single
computer system that can serve particular
needs of the different departments
Before ERP implementation, each department
had its own computer system optimized for the
requirements that a department needs. Each
department maintained separate databases
and deign applications as per their
functionalities.
ERP combines all the business requirements of
General Model for ERP
 WORKFLOW AUTOMATION ELECTRONIC MAIL DATABASE CREATION

1.Strategic and Business Planning - Materials 3. Strategic and business planning – Resources

* New Product introduction * Intelligent resource planning

•Bill of materials •Human resource planning
•Product Pricing •Quality management
E •Long range forecasting and capacity planning
L •Engineering change management
E
C
T
R Organization Payroll / Employee Cost accounting
O Accounts receivable
N General Ledger

IMAGING
I Job/Project Management
C Fixed assets
D * Order Management * Facilities maintenance /
* Distribution Accounts Payable Planning and
A
T Management Budgeting implementation
A Inventory
I Logistics/Distribution Materials
N
T Data Model
E
R 2. Operational planning and execution – 4. Operational planning and materials –
C Materials Resources
H
A * Routing * Payroll
N •Order processing •Recruitment
G •Supplier management •Costing and budgeting
I •Inventory / warehouse management •Job evaluation and performance appraisal
N •Forecasting •Quality control and planning
G •Distribution management •Maintenance engineering and scheduling
•Scheduling and WIP management •Fixed assets management
•Resource MIS

MULTI-PLATFORM MULTI-FACILITY MULTI-MODE MANUFACTURING MULTI-CURRENCY MULTI-LINGUAL

General Model for ERP

 General Model for ERP
The figure is assumed to consist of four
quadrants
The circle at its centre represents the
entities that constitute the central
database shared by all functions of the
enterprise
The border represents the cross-enterprise
functionality that must be shared by all
systems.
The most important part of this cross-
enterprise border will be known as “multi”,
representing the capability required by it
to compete and succeed globally
multilingual and multi-currency
multi-mode or mixed mode
 General Model for ERP
Multilingual


 be flexible enough to have customer service

representatives in different countries taking
orders in different languages and at the same
time on a single host platform
 Orders must be printed or returned to customers
in their native languages
 Multi currency functionality
 Must be capable of, for instance, receiving
invoices in Indian Rupees, splitting the
payment into German Mark and Belgian
Francs, billing in Italian Lire, receiving cash in
British Pounds, with the general ledger stated
in US Dollar or Japanese Yen.
 General Model for ERP
Multi-mode or mixed mode


manufacturing
In the enterprise of today, grown through
alliance and merger, a single
manufacturing strategy of either discrete
or continuous process is no longer
practical.
Enterprises now employ a mix of approaches
including make-to-stock, highly-repetitive,
assemble-to-order or design-to-order.
A single integrated software solution, and
not satellite software, should handle all
these concurrently, efficiently passing data
General Model for ERP
Multi-facility


 The total solution must support multiple division

or companies under a corporate banner.
 Multiple facilities are logical or physical entities
linked to divisions.
 Each of these may or may not have independent
stores, production units, assembly lines,
overhead centre, and planning units but each
usually has a set of accounts.
 Each and every transaction must flow
seamlessly to be divisions’ or corporate set of
books.
 The software should also seamlessly integrate
operating platforms as the corporate database
and departmental level applications may be
required to run on a variety of hardware and
software platforms
 Evolution of ERP
Time line System Description
1960’s Inventory Inventorymanagement and control is the

management combination of information technology and

and Control business processes of maintaining the
appropriate level of stock in a warehouse.
The activities of inventory management include

inventory requirements, setting targets,

providing replenishment techniques and options,
monitoring item usages, reconciling the
inventory balances, and reporting inventory
status.
1970’s Material MRP utilizes the software applications for

requirement scheduling production processes.

planning MRP generates schedules for the operations and

(MRP) raw material purchases based on the production

requirements of finished goods, the structure of
the production systems, the current inventory
level and lot sizing procedure for each operation
 Evolution of ERP
Time line System Description
1980’s Manufacturing Manufacturing requirements planning(MRP


requirements II) utilizes software applications for

planning coordinating manufacturing processes, from
(MRP II) product planning, parts purchasing, inventory
control to product distribution
1990’s Enterprise Enterprise resource planning or ERP uses

Resource multi module applications software for

Planning (ERP) improving the performance of internal
business processes.
ERP system integrate business activities

across functional departments, , from product

planning, parts purchasing, inventory control,
product distribution, fulfillment to order
tracking.
ERP software systems may include

application modules for supporting

marketing, finance, accounting and human
resources.
 Evolution of ERP
Time line System Description
2000 - 2005 Extended ERP Extended ERP includes the traditional
materials planning , distribution and order
entry functionality strengthened by
capabilities like CRM, HRM, KM and
workflow management
2005 ERP II ERP II have led to the advent of collaborative

onwards commerce. C- Commerce is the electronic

interaction of businesses, whether within the
supply chain or an industry.
with ERP II the customers, suppliers and the

company all work in union.

ERP II includes project management, CRM,

HRM, KM, workflow management, portal

capability, integrated financials and internet
and WWW integration.
 Business Engineering
Business engineering is the re-thinking of
business processes to improve the speed,
quality and output of materials or services
Significance of Business
Engineering
 In the early nineties, downsize became the
battle cry for consultants and managers in
corporate America
 An urge to consolidate new organizations
flourished, business engineering came to
replace the outdated and overly simplistic
views implied by downsizing.
 While many pro-downsizing commentators
spoke of obliterating existing organizations,
consultants provided guidelines on how to
restructure leaner, more efficient companies
 Such insights then paved a way for a new
company infrastructure based on combination
of process oriented business solution with
information technology
 Contd………..
Significance of Business
Engineering
 This new company infrastructure was designed to
meet the challenge of creating a business
environment that would optimize the performance
and remain flexible enough to accommodate
change
 Now, business engineering has gained acceptance
throughout the world.
 Many companies have created special groups, often
led by senior executives, that focus solely on BE.
 The reason why so many companies are engaged in
extensive reengineering efforts is that society is
shifting from an age where labourand machinery
drove productivity to an age where productivity
depends on knowledge and information
 in short, we live in the age of information. this shift
has created major social, technological and
market changes, all of which have led to the
Principles of Business
Engineering
 Customer focused
 Responsive to changes in the market
 Achieves results by reshaping corporate
structures around business processes
 implements change not by the complete
automation of a business but rather by the
redefinition of company tasks in holistic or
process – oriented terms.
 Only companies with innovative staff, products,
and services as well a short development
cycles, will be able to retain their share of the
market or hope to get a bigger slice of the pie.
 by maximizing individual and team creativity
and emphasizing process oriented approach,
BE enables the companies to realize these
goals
Business intelligence with IT
Business engineering is effective only when
it is combined with IT
There are guidelines for deciding how, when
and whether to apply Information
Technology
Before deciding upon a BE project, the
management, IT users, and the IT experts
must get together to chart out a
company’s goals and identify the key
processes that affect its success.
Next those processes should be
reengineered to improve their
effectiveness
contd
Business intelligence with IT
 Other potential benefit of IT is very helpful in
business strategy formulation to match or
exceed the performance of a company’s
competitors
 IT helps in streamline business processes to
have a maximum effect with minimum
resources in supporting company goals
 Along with implementation costs, the long term
financial advantages of information technology
are of major interest to numerous companies
 Some of the financial benefits are:
Increased revenue per business call
Decreased inventory, hardware, administrative
and operating costs
Recaptured market share
Reduced or eliminated overtime
Business intelligence with IT
 Companies take best advantage of information
technology if they already have an underlying
business model and an extensive process
engineering in place
 The effective integration of processes and their
expansion in to new areas become decisive
factor in maintaining a company’s
competiveness
 The implementation of process – based software
aims to achieve the full benefits of integration
early on through the immediate realization of
full process chains.
 To conclude, Business engineering as the
development of business processes with the
Blue Print of Business Model
Benefits of ERP
 Information integration
 Reduction of lead time
 On – time shipment
 Cycle time reduction
 Better customer satisfaction
 Improved supplier performance
 Increased flexibility
 Reduced quality costs
 Improved resource utility
 Better analysis and planning capabilities
 Improved information accuracy & decision
making capability
 Use of latest technology
 Risks of ERP
People issues
Process risks
Technological risks
Implementation issues
Operation and maintenance issues
People issues
Change management
Internal staff inadequacy
Project team
Training
Employee relocation and retraining
Staffing (includes turnover)
Top management support
Consultants
Discipline
Resistance to change

Process risks
Program management
Business process reengineering
stage transition
Benefit realization
Technological risks
Software functionality
Technological obsolescence
Application portfolio management
Enhancement / Upgrades

Implementation issues
Project size
Length implementation time
High initial investment
Unreasonable deadlines
Insufficient funding
Interface
Organizational politics
Scope management
Unexpected gaps
Configuration difficulties
Operation and maintenance
issues
ERP process never ends in implementation
phase
There will always be
new modules / features and versions to
install
New persons to be trained
New technologies to be embraced
New training to be conducted
Requires Life long commitment by the
company management and users of the
system