Enterprise Resource Planning

ERP is a set of tools and processes that integrates department and functions across a company into one computer system. ERP runs off a single database, enabling various deptts to share information and communicate with each other. ERP system comprise function specific modules designed to interact with other modules, e.g. accounts receivable, accounts payable purchasing etc. ERP is an enterprise reengg. solutions that uses new business computing paradigms to integrate IT processes across cos divisions and departments.

Concept

Evolution of ERP
Timeline System Inventory 1960s Mgmt & control 1970s 1980s 1990s Description
Its a combination of infr. tech, and bus processes of maintaining the appropriate level of stock in a warehouse. Material Req. Utilizes s/w applications for Planning scheduling production processes. MRP II Enterprise Resource Planning Utilizes S/w applications coordinating mfg processes. for

Uses multi module application s/w foe improving the performance of internal bus, processes.

What drives ERP ?

Business Customer satisfaction Business development Face competition Efficient processes

Cross functional approach of ERP

Production Planning Integrated Logistics

Sales, Distribution, order Management

Customer/ Employee

Accounting and Finance

Human Resources

Components of ERP

ERP system is consists of two types of components Core components and Extended components. CORE ERP COMPONENTS: CEC are the traditional components included in most ERP systems and they primarily focus on internal operations. EXTENDED ERP COMPONENTS: EEC are the extra components that meet the organizational needs not covered by the core components and primarily focus on external operations.

CORE & EXTENDED COMPONENTS OF ERP

Core ERP Components
Accounting & FINANCE

Production & Materials Management

Human Resource

Enterprise Resource Planning S/W

Business Intelligence

Customer Relationship Management

Supply Chain Management

E- Business

Extended ERP Components

Core ERP Components:Accounting and Finance: A/cng and Finance

components manage a/cng data and manage financial processes within the enterprise with functions as accounts payable, accounts receivable, assets management, credit management etc. Production and material management: handles the various aspects of production planning and execution such as demand forecasting, product scheduling, quality control.

Example of Production planning process of Grupo Farmanova Intermed, in Costa Rica

Sales Forecasting

Operations Planning

Detailed Scheduling

Materials requirement planning

Production

Purchasing

Human Resource Components: Tracks employees

information including payroll benefits, compensation, performance assessment, and assume compliance with legal requirements of multiple jurisdictions and tax authorities.

Extended ERP Components:Business Intelligence: ERP system offers powerful

tools to measure and control organizational operations. BI describes the information people used to support their decision making efforts.

Customer Relationship Management Component: involves managing all the aspects of customers relation with an organization to increase customer loyalty and retention and organizations profitability. Supply Chain Management Components: involves the management of information flows b/w and among stages in a supply chain to maximize total supply chain effectiveness and profitability. E-Business Components: means conducting business on the internet, not only buying and selling, but also serving customer and collabrating with business partners. Two primary functions of E-Bus is EProcurement and E-Logistics.

Example of E-Business as ERP component of Orbis Corp. , Australia.

Retailer Supplier (Sony) Courier

Linear Process model Followed By Orbis Corp.

User AD Agency

Catalog

Digital Image

Scanning House

After Introducing E-bus,the Orbis Business model is like

Printer Retailer 1 Sony Product-bank.com Hub Nokia

Retailer 2

Other Other AD Agency 1 AD Agency 2

Basic advantages of ERP

. The Direct advantages include improved Business Integration Efficiency Faster response Flexibility Better analysis and planning capabilities Use of latest technology

The Indirect benefits includes better corporate image, improved customer goodwill, customer satisfaction etc.

Some of the quantitative benefits are: Reduced Inventory and inventory carrying cost. Reduced manpower costs. Improved sales and customer service. Efficient financial management. Some of the qualitative benefits are: Accounting Product and process design Production and material management Sales MIS Function

Why ERP is Important in a company?

ERP in A company results

ERP effects almost all the organizationsirrespective of their size and nation. Forces the competition to change their strategies. Influence bus partners to become more competitive. Improves the Profits. Fully utilize the true potential client-server computing to deliver an enterprise product. Changes the nature of information systems functions.

ERP Benefits

Integrate Financial Information Integrate Customer Order Information Standardize & Speed up manufacturing Processes Reduce Inventory Standardize human resource information

Benefits to Colgate Pamolive

Order acquisition & processing reduced from 2 days to 4 hrs On-time deliveries increased to 97.5% from 91.5% Domestic inventories dropped by one third Receivables outstanding dropped to 22.4 days from 31.4 Total delivery cost per case reduced by 10%

Risks of ERP

Data

In 1999,Hershey missed customers( walmart) as 3 mths behind schedule, trying to fix glitches in order-processing, shipping functions Warehouses piled up with undelivered goods III quarter sales dropped by 12.4% Earnings were off 18.6%

Case study-Ambuja cements

Launched Connect India Plus, which has proved to be one of the most significant, large scale IT deployment. Connecting 200 locations, training 2,500 end-users, and migrating data from 8 different legacy systems onto the ERP all in 14 months flat manufacturing plants are located in remote areas where the scope of connectivity was minimal, the resources, namely hardware, software and people were located at plant sites

Reasons to implement

uniform, standard, and ubiquitous system across the organization(globally also) reduction in cost of operations and maintenance of the IT system respond quickly to changes in the business environment.

Challenges faced

Tech-multiple plants, each with their own computer systems and processes, there was a need to create a single business blueprint across the organization. People-integrate individuals with diverse background to be able to work as a focused team. Processes- Infrastructure refreshes, Data migration

After the successful implementation

improve operational efficiency in terms of cycle-time monitoring fleet management The information is dispatched to customers via SMS

Conclusion

It is the right combination of technology, architecture, functionality, active customer support that provides max payback potential For successful implementation it is imp to anticipate, handle & mitigate risks Introduce new business processes, eliminate redundant practices