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Session 4

Enterprise Resource Planning


for B.Sc. (IT) Third Year 5th Semester
By

Vinod Vaze
B.Tech.(IIT/Kanpur), PGDFM(Bom.) C.C.N.A. CISCO Certified Network Associate Tel. No. 9820358746 Res. 25441310 Email: vinod_vaze@hotmail.com
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Session 4

Enterprise Resource Planning

Session 4 ERP Modules

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Session 4

Agenda
ERP Modules, Introduction, Finance, Plant Maintenance, Quality Management, Materials Management

for the Day

4
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Session 4

ERP Modules - Introduction


Various ERP packages consists of various modules They vary from package to package The most common are: Finance, Manufacturing & Production Planning, Sales and Distribution Plant maintenance Quality Management Materials Management etc
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Introduction
The entire concept of information technology is based on the premise that providing: The right information To the right people At the right time Can make a critical difference to the organisation.
We have already seen that processed data is information What are the characteristics of information? Which properties should it have?
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Session 4

Characteristics of Information
True Accurate In a given format Relevance Timeliness (Not expired) Completeness Purpose Reliable Validity
Information is not consumed by use. It can be shared by many Details v/s Summary Internal v/s External Concreteness: Hard (objective) Soft (subjective) depending more on intuition rather than facts

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Characteristics of Information
Logical: Yes or no True or false Probabilistic: Having attached a probability of occurrence. Fussy: Not sharply demarked, Blurred Deterministic
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Redundancy: Repeated information Duplicating Having Graphic as well as tabular format Scientific Mythological Normal Biased Manipulated - to suit someone /something

ERP and the world

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Natural Languages
Easy for a human being to communicate but difficult for any machine to automate.

Example: Cassette recorder Answering Machine Dictaphone Voicemail box Sound recording

Man
Natural Language

Computer
Database query

Database
Database result

Computer

Man

Natural Language

Natural Language Comprehension


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Characteristics of Information
Information Economics Types of Information Cost of Information Systems Hardware cost Office Automation System System Analysis cost Mundane work Design, implementation and training cost Increase the efficiency and productivity Cost of space and Interior decoration Transaction automation Operational cost System. Value of Information Invoicing, billing, order Information system entry, dispatch No duplication
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routine

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Finance Sub systems


The finance module of most ERP system will have the following sub-system Financial Accounting (General Ledger, Accounts Receivables/ Payable, Fixed Assets Accounting, Legal consolidation) Investment Management (Investment planning, Budgeting, controlling, Depreciation, Forecast Simulation Calculation) Controlling (Overhead cost controlling, Activity based costing Product cost Accounting Profitability analysis)
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Session 4

Finance Sub systems


sub-system (contd.) Treasury (Cash Management, Treasury Management, Market Risk Management, Funds Management) Enterprise Controlling (Executive Information System (EIS), Business Planning and Budgeting, Profit centre Accounting)

Now let us study one by one

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Session 4

Finance subsystems

Financial Accounting
Financial Accounting: General Ledger: serves as a central pool of financial data, Origin of a transaction can be traced, supports all the functional needs. Provides summary information of other components Purchasing (Quantity and value) Sales (order and bill) Vendor (Payable) Customer (Receivables) Fixed assets Employees (salary and wages) Centre for Excellence in Education, Thane

Session 4

Finance subsystems

Financial Accounting
Financial Accounting: Accounts Receivables/ Payable: Keeps track of current assets and current liabilities These subsystems are integrated with all other subsystems where financial data originates: both with General Ledger and Sales and Distribution and Material Management Electronic data Important support of EDI processing Interchange: A method the corporate world use for exchanging data over Network & Internet Centre for Excellence in Education, Thane

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Finance subsystems

Financial Accounting
Financial Accounting: Asset Accounting: serves as a sub ledger to the General Ledger Provides details regarding the transaction of Fixed Assets. Depreciation Purchase to asset life cycle (Acquisition to retirement) Assets accounting is also integrated with Plant maintenance

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Session 4

Finance subsystems

Financial Accounting
Financial Accounting: Legal consolidation: serves as a tool to make a consolidated financial statement. Different valuation methods to suit the companys policy and profit that year. Legal consolidation is closely integrated with Financial Accounting system This eases the workload of the staff reduces data entry errors Combined into one summary statement

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Finance subsystems

Investment Management
Investment planning Where to invest, what is the expected profit of each ventures. Which department to need more investment? Budgeting Financial layout of new or existing project Availability and cost of finance Controlling The expenses, the overheads Depreciation - Budgeted balance sheets and cost planning are always on current values. Forecast Speculation and forecast of market trend. Rising or declining? Simulation Calculation: Making a mathematical model and deriving alternatives to choose from.
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Finance subsystems

Controlling
Controlling: Overhead cost controlling: Reduce indirect cost, Transparency is lacking Cost center accounting Overhead order subsystems Activity based costing Goals of the entire enterprise should come before the goals of individual activity Product cost Accounting Prime cost of product or services Product cost controlling Centre for Excellence in Education, Thane

Session 4

Finance subsystems

Controlling
Controlling: Cost Object Controlling: Helps to monitor manufacturing orders Integration with logistics Actual cost estimated cost f(t) Variance from the originally planned cost Profitability analysis Examine the source of returns. Analysis as per market segment last step in the cost based settlement
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Session 4

Finance subsystems

Treasury Module
Cash Management: Controls incoming and outgoing cash Short term, Medium term and long term cash position Cash liquidity and availability Cash Requirement time wise Treasury Management Current liquidity Risk position Conditions prevailing on the money and capital market Securities and loans
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Finance subsystems

Treasury Module
Market Risk Management Ensures competitiveness Complex feed back loop: from data collection, risk management analysis and simulation Assessing the interest rates Assessing the currency rates Simulate market data what if analysis Funds Management From budgeting to payment on one side and From Billing to actual receiving on the other Identify bottlenecks Cost of non-availability
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Finance subsystems

Enterprise Controlling
Executive Information System (EIS) Provides overview of critical parameters Gets both internal and external data Data mining to create new business equations Exception management Business Planning and Budgeting Business targets such as Return on investment Central investment planning, budget release and tracking Profit centre Accounting Overall profitability is algebraic total of individual profit centre
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Session 4

Plant Maintenance
Here we will study: Preventive Maintenance control Equipment Tracking Component Tracking Plant Maintenance Calibration Tracking Plant Maintenance Warranty Claims Tracking
Now let us study one by one

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Session 4

Plant Maintenance subsystems

Preventive Maintenance control


Planning Scheduling Control of facilities Control of equipment Equipment lubrication Component replacement Keeping track of Hours of usage Consumables Spare parts Life of each component

A stitch in time saves nine Prevention is better than cure!


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Session 4

Plant Maintenance subsystems

Equipment Tracking
Equipment is an asset to be used, monitored and protected History of equipment: acquisition to write off Operational dependencies, special features, imported spare parts, their cost and expected life Guarantee period Next service due Information for each equipment to be made available People are often transferred But Equipments is generally not.
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Session 4

Plant Maintenance subsystems

Component Tracking
Components are typically sub-assemblies of large equipment. Heard of the story of Nepolean loosing war for a want a horse-shoe Availability of components Time schedule Sufficient stock of spares When would it become BER? What is B.E.R.: Beyond Economic repair The main idea is to minimise the down time
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Session 4

Plant Maintenance subsystems

Plant Maintenance Calibration Tracking


Allows organisation to leverage their investment in Plant Maintenance module by providing for tracking of equipment calibration in support of ISO 9000 requirement

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Session 4

Plant Maintenance subsystems

Plant Maintenance Warranty Claims Tracking


Administrative system designed to provide control of all items covered by manufacturer and vendor warranty Recover imbursement to which they are entitled.

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Quality Management
ISO 9000 series. Defines Functions and Elements of QMS What is QMS: Quality Management System No longer just post production Inspection standards But also the production process becomes the focus of attention. Quality spreads to the entire loop: Product development procurement of sales and distribution (entire usage phase)
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What is ISO? International Organisation for Standardization ISO is not an acronym ISO is Greek means equal

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Quality Management

CAQ and CIQ


What is CAQ? Computer Aided Quality Management What is CIQ? Computer Integrated Quality Management System in isolation cannot carry out the comprehensive task ERP integrates these isolated CAQ systems Process prescribed in Quality manuals can be implemented and automated in EDP system itself Quality is a part of the culture not only the product !
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Electronic Data Processing System

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Quality Management

Quality Management Module


The quality Management Module fulfills the following functions: Quality Planning Management for basic data for quality planning and Inspection planning Material Specification
Functions of QMM: 1. Quality Planning 2. Quality Inspection 3. Quality Control

Quality Inspection Trigger inspections, Inspection processing with inspection plan selection and sample calculation, Print shop papers for sampling and inspection. Records results and defects Makes the usage decision and trigger follow up action Centre for Excellence in Education, Thane

Session 4

Quality Management

Quality Management Module


Quality Control Dynamic sample determination on the basis of Quality level history. Application of statistical process control techniques using quality control charts Quality scores for inspection lots, Quality notification for processing internal or external problems and initiating corrective action to correct the problems Inspection of lot processing QMIS (Quality Management Information System) for inspection and inspection results and quality notification
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Session 4

Quality Management

Computer Integrated Quality Management (CIQ)


Only an integrated system can support all the elements of Quality Management System. Quality Management function influence all the function of the organisation. The Quality Management module supports the exchange of data with other application in order to: Prevent related data from being recorded and stored redundantly. Any deviation from the norms could be identified and trigger raised.
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Session 4

Quality Management

Computer Integrated Quality Management (CIQ)


The quality Management Module is integrated with the master data and processes of the following applications: Material Management: Purchasing, inventory management, warehouse management, Material requirement planning Production: Work scheduling, shop floor control Sales and Distribution: Delivery, creation of quality certificates
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Session 4

Materials Management
The Material Management Module optimises: All purchasing process with work-flow driven processing functions Enables automated supplier evaluation, Lowers procurement and warehousing costs Integrates invoice verification Optimises the Quantity to be procured and stored by using EOQ (Economic Order Quantity) techniques In short decides - When to buy, What to buy and How much to buy!

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Session 4

Materials Management
The main Modules of Material Management Module are: Pre-purchasing Activities Purchasing Vendor Evaluation Inventory Management Invoice Verifications and Material Inspection

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Let us have a break !

We shall meet here again after 5 minutes

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Session 4

Home Work
Read & understand
Section 5 from AL page Nos. 64 to 117 Section 5 from SS Assignment 4: Fill in the Blanks and Review questions on page No. 117 in AL

AL = Enterprise Resource Planning - Alexis Leon (Tata McGraw-Hill Edition) SS = A Managerial Perspective - S. Sadagopan, (Tata McGraw Hill )
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Session 4

Thanks.
Hope you enjoyed the presentation. Have a nice day !
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