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There are a number of organizations that could greatly benefit from using
ERP applications. Some of these organizations are supply chains, financial
companies, and human resources. The most important aspect of ERP is integration.
The information or data from various parts of an organization must be compressed
into a single entity.
The best way to accomplish this is to have the ERP connected to one
database. In most cases, a number of software modules will be used in
conjunction with this. Each module will provide various forms of data from
different departments within the organization. It is possible for an organization to
only use certain portions of an ERP unit.
They can create an interface for systems that are stand-alone. As of this
writing, it is quite rare for a company to use a total ERP system. Most of the
institutions that use ERP are very large, and they have specific needs that
standard systems cannot meet.
In the 1970s, the focus shifted to MRP systems which translated the master
schedule built for the end items into time-phased net requirements for the subassemblies, components and raw materials planning and procurement.
In the 1980s, the concept of MRP-II (Manufacturing Resources Planning)
evolved, which was an extension of MRP to the shop floor and distribution
management activities.
In the early1990s, MRP-II was further extended to cover areas like
engineering, finance, human resources, sales and distribution, project
management, etc. ,that is the total range of activities within any business
enterprise. Hence the term ERP (Enterprise Resource Planning) was coined. ERP
is focused within an enterprise.
MRP-II was based on mainframe technology and hence was highly
centralized and server-centric. ERP is based on client-server computing
architecture and, hence, is distributive in nature.
To fully understand ERP, it is first important to understand the concept of
Best Practices. When an ERP system was utilized by a company, the company
had to decide if the software would be customized or if they would simply
modify that existing procedures.
The next important part of ERP is called implementation. In order for an
ERP system to function properly, it must have a great deal of software written for
it. Adding a complex system such as ERP to a company takes considerable
resources. In most cases, a company would need to use programmers, analysts,
and end users in order to make sure it functioned correctly. While the
introduction of the Internet has greatly sped up this process, it can still take time
to set up. If professionals are not used to set up the ERP system, the process can
become exceptionally expensive.
The cost involved with ERP has only allowed it to be adopted mostly by
multinational corporations. However, it is possible for medium sized business to
use it. If a company uses the services of a professional, an ERP system can be
implemented in about six months.
IMPLEMENTATION OF ERP
1) Speed
Speed of a project is directly related to the amount of time that a company
has before the completion of the ERP implementation or the amount of time
that the company would like to take for the implementation.
The speed of the project in the context is how much time the company
would like to take in implementing the system. The amount of time that the
company actually takes may be dramatically different. The amount of time that the
company would like to take should be the figure used when developing a project
plan.
2) Scope
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The scope of the project includes all of the functional and technical
characteristics that the company wants to implement. A company installing a fullfledged ERP system would have a much greater scope than a company installing a
few modules.
3) Resources
Resources are everything that is needed to support the project. This includes
people, hardware systems, software systems, technical support and consultants. All
the different resources of an implementation have one thing in common money.
4) Risk
The risk of a project is a factor that impacts the overall success of the ERP
implementation. Success is measured by factors such as overall user acceptance,
return on investment (ROI) , time to implement, etc. High-risk situations are less
likely to possess these characteristics.
5) Complexity
Complexity is the degree of difficulty of implementing, operating and
maintaining the ERP system. Companies of different sizes, business environments
and organizational cultures have different levels of complexity. A multinational
corporation that has production facilities and teams spread across different parts of
the world and working in different time zones is generally much more complex
than a company with 50 employees occupying one geographical location.
Implementation
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ADVANTAGES OF ERP
1) Integration
2) Efficiency
3) Cost reduction
4) Less personnel
5) Accuracy
1) Integration
Integration can be the highest benefit of them all. The only real project
aim for implementing ERP is reducing data redundancy and redundant data entry.
If this is set as a goal, to automate inventory posting to G/L, then it might be a
successful project.
Those companies where integration is not so important or even dangerous
tend to have a hard time with ERP. ERP does not improve the individual efficiency
of users, so if they expect it, it will be a big disappointment. ERP improves the
cooperation of users.
2) Efficiency
Generally, ERP software focuses on integration and tends to not care about
the daily needs of people. I think individual efficiency can suffer by implementing
ERP. The big question with ERP is whether the benefit of integration and
cooperation can make up for the loss in personal efficiency or not.
3) Cost reduction
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DISADVANTAGES OF ERP
1) Expensive
2) Not very flexible
1) Expensive
This entails software, hardware, implementation, consultants, training, etc.
Or you can hire a programmer or two as an employee and only buy business
consulting from an outside source, do all customization and end-user training
inside. That can be cost-effective.
2) Not very flexible
It depends. SAP can be configured to almost anything. In Navision one can
develop almost anything in days. Other software may not be flexible.
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In the 1980s, the term Supply Chain Management (SCM) was developed to
express the need to integrate the key business processes, from end user through
original suppliers. Original suppliers being those that provide products, services
and information that add value for customers and other stakeholders. The basic
idea behind the SCM is that companies and corporations involve themselves in a
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Definitions of SCM
More common and accepted definitions of Supply Chain Management are:
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We identified these twelve areas. Each area represents a supply chain issue
facing the firm.
These areas are as follows :
1) Location
2) Transportation and logistics
3) Inventory and forecasting
4) Marketing and channel restructuring
5) Sourcing and supplier management
6) Information and electronic mediated environments
7) Product design and new product introduction
8) Service and after sales support
9) Reverse logistics and green issues
10) Outsourcing and strategic alliances
11) Metrics and incentives
12) Global issues.
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1) Location
It pertains to both qualitative and quantitative aspects of facility location
decisions. This includes models of facility location, geographic information
systems (GIS), country differences, taxes and duties, transportation costs
associated with certain locations, and government incentives. Exchange rate issues
fall in this category. Decisions at this level set the physical structure of the supply
chain and therefore establish constraints for more tactical decisions.
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2) Distribution Strategy:
Questions of operating control (centralized, decentralized or shared);
delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD
(direct store delivery), closed loop shipping; mode of transportation, e.g., motor
carrier, including truckload, parcel; railroad; intermodal transport, including TOFC
(trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight;
replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g.,
owner-operated, private carrier, common carrier, contract carrier).
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4) Information:
Integration of processes through the supply chain to share valuable information,
including demand signals, forecasts, inventory, transportation, potential
collaboration, etc.
5) Inventory Management:
Quantity and location of inventory, including raw materials, work-in-progress
(WIP) and finished goods.
6) Cash-Flow:
Arranging the payment terms and methodologies for exchanging funds
across entities within the supply chain.
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1. Creation Era
The term supply chain management was first coined by a U.S. industry
consultant in the early 1980s. However, the concept of a supply chain in
management was of great importance long before, in the early 20th century,
especially with the creation of the assembly line. The characteristics of this era of
supply chain management include the need for large-scale changes, re-engineering,
downsizing driven by cost reduction programs, and widespread attention to the
Japanese practice of management.
2. Integration Era
This era of supply chain management studies was highlighted with the
development of Electronic Data Interchange (EDI) systems in the 1960s and
developed through the 1990s by the introduction of Enterprise Resource Planning
(ERP) systems. This era has continued to develop into the 21st century with the
expansion of internet-based collaborative systems. This era of supply chain
evolution is characterized by both increasing value-adding and cost reductions
through integration.
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3. Globalization Era
The third movement of supply chain management development, the
globalization era, can be characterized by the attention given to global systems of
supplier relationships and the expansion of supply chains over national boundaries
and into other continents. Although the use of global sources in the supply chain of
organizations can be traced back several decades (e.g., in the oil industry), it was
not until the late 1980s that a considerable number of organizations started to
integrate global sources into their core business. This era is characterized by the
globalization of supply chain management in organizations with the goal of
increasing their competitive advantage, value-adding, and reducing costs through
global sourcing.
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Service
Specialization within the supply chain began in the 1980s with the inception
of transportation brokerages, warehouse management, and non-asset-based carriers
and has matured beyond transportation and logistics into aspects of supply
planning, collaboration, execution and performance management.
At any given moment, market forces could demand changes from suppliers,
logistics providers, locations and customers, and from any number of these
specialized participants as components of supply chain networks. This variability
has significant effects on the supply chain infrastructure, from the foundation
layers of establishing and managing the electronic communication between the
trading partners to more complex requirements including the configuration of the
processes and work flows that are essential to the management of the network
itself.
Supply chain specialization enables companies to improve their overall
competencies in the same way that outsourced manufacturing and distribution has
done; it allows them to focus on their core competencies and assemble networks of
specific, best-in-class partners to contribute to the overall value chain itself,
thereby increasing overall performance and efficiency. The ability to quickly obtain
and deploy this domain-specific supply chain expertise without developing and
maintaining an entirely unique and complex competency in house is the leading
reason why supply chain specialization is gaining popularity.
Outsourced technology hosting for supply chain solutions debuted in the late
1990s and has taken root primarily in transportation and collaboration categories.
This has progressed from the Application Service Provider (ASP) model from
approximately 1998 through 2003 to the On-Demand model from approximately
2003-2006 to the Software as a Service (SaaS) model currently in focus today.
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Supply chain software can offer tremendous value to any company that
relies on the smooth planning and execution of related operations to achieve longterm profitability and maintain a solid competitive edge. Thats why more and
more organizations are purchasing and implementing supply chain applications. In
fact, the market for supply chain and related softwares is expected to reach $7.4
billion in 2008, according to a report by ARC Advisory Group.
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2)Minimized Delays
Many supply chains particularly those that havent been enhanced with a
supply chain application are plagued by delays that can result in poor
relationships and lost business. Late shipments from vendors, slow downs on
production lines, and logistical errors in distribution channels are all common
issues that can negatively impact a companys ability to satisfy customer demand
for its products.
With supply chain software, all activities can be seamlessly coordinated and
executed from start to finish, ensuring much higher levels of on-time delivery
across the board.
3)Enhanced Collaboration
Imagine having the ability to know exactly what your suppliers and
distributors are doing at all times and vice versa.
Supply chain softwares make that possible, bridging the gap between disparate
business softwares at remote locations to dramatically improve collaboration
among supply chain partners. With supply chain softwares, all participants can
dynamically share vital information such as demand trend reports, forecasts,
inventory levels, order statuses, and transportation plans in real-time. This type
of instantaneous, unhindered communication and data-sharing will help keep all
key stakeholders informed, so supply chain processes can run as flawlessly as
possible.
4)Reduced Costs
A supply chain software can help reduce overhead expenses in a variety of
ways. For example, it can:
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Some of the issues concerning ERP for supply chain management are as
follows:
1)Manages change
By and large the whole process of ERP is known for the umpteen numbers
of changes in all areas right from organizational structure to the rules and
regulations. In this context the headache of managing changes is an important issue
for the senior management.
Infact the senior management themselves have to be convinced either by Inhouse IT personnel or Vendors/consultants. The task of creating awareness about
the change is not an easy one. Everybody is bound to react in a negative manner.
Irrespective of the consequences and aftermath action managements have to go for
ERP if they strongly feel so and if the market demands the same. Otherwise
negative changes will be reflected in the balance sheet in the form of increase in
expenditures and reduction in profits! No organization will tolerate them if it is
beyond a negligible quantum .Organizations will be prepared to lose on this small
scale only if there are unavoidable reasons.
Now the real difficulty lies in the hands of the organization. How do they measure
or map change? What are the ways to implement the required measures? How can
one find the rate and pace at which the organization is getting accosted to the
mammoth change namely ERP? Supply chain management is the one phrase
answer to all these three questions.
Supply chain is the tool which indicates how things go about in the
organization. This has increased the prospects of ERP supply chain software
market.
ERP and supply chain management helps in coordination of resources. The
organization should manage the supply chain process. This remains true in any
situation. ERP acts as a tool that helps the companies to execute the things in
required for managing the supply chain in a proper manner.
Any enterprise application be it MRP or MRP II or ERP is helpful for the
organization in planning and scheduling the required commodities. Since the
function of supply chain lies in calculating all these ERP can add value and
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2)Identify mistakes
Errors are a part of human life. No organization however big and successful
can curb them once for all. The difference lies in identifying and rectifying them.
Organizations which don't identify them will find that they will never fulfill their
objectives even if means managing their supply chain flawlessly. The simple
reason is that their supply chain is itself not devoid of any errors and hence the
results will only be negative even because it is nothing better than rightly
managing a wrong process. There was no solution to this till erp and supply chain
management came together.
However all organizations don't find an opportunity to periodically asses their
mistakes and make correct things. This may be due to circumstances or various
reasons that are beyond the scope of repair. However when ERP is implemented in
an organization the first and foremost step is to identify the existing errors and
make changes. The knowledge of ERP helps the supply chain process to do that
very effectively and efficiently. The reason is that everything in the organization
will be tuned and restructured to become ERP friendly. This naturally means
redefining the supply chain and its constituents. This will be done to suit ERP
which equals to adapting to a new process and rectifying the old mistakes.
However there are still shortcomings of ERP in manufacturing supply chain
market.
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3) Set metrics
The organizations will be able to visualize and introduce some parameters.
These parameters will become effective means for measuring ERP, its impact and
the level of change, if it is compatible or in tune with the quantity desired and so
on. Unless ERP is implemented in an organization it becomes difficult to set these
parameters because there is no basis for measurement.Unless supply chain
functions properly in the organization there is a tool for making the above said
measurements. There for ERP and Supply chain management mutually helps each
other in this regard and also helps in scaling accountability for one another. This
can be easily done if one identifies the supply chain segments supported by ERP.
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CONCLUSION
ERP and supply chain management have greatly helped the manufacturing
sector. The shortcomings of ERP in manufacturing supply chain have to be
rectified in order to make it more effective.
ERP has a major impact on Supply Chain and most of that impact is
positive. During the boom period of the late 1990s, investors seem to throw money
at ERP without much of its appropriateness. Economic realities since 2000 have
proven the need for sound analysis.
ERP is not best for everyone. There are ways to implement it and not all
organizations need what it provides. However, the market has evolved to provide
very flexible products so that the firms can choose systems appropriate to them.
ERP needs to be considered by most organizations in order to utilize
information technology to manage business efficiently. Most of the ERP are failing
due to lack of user training. The most important factor, which is overlooked in
practice, is user training. Even though, ERP vendors have been very successful in
reducing installation time. It is important to get quality systems in place, but it is
also necessary to allow time to allow to employees to learn the new system and to
adapt to their work methods.
The findings fo the present study is related to the role of ERP in improving
the SCM. The general conclusion can be that one should not expect too much from
ERP for Supply Chain Management in extended enterprises.
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Supply chain software can offer tremendous value to any company that
relies on the smooth planning and execution of related operations to achieve longterm profitability and maintain a solid competitive edge. Thats why more and
more organizations are purchasing and implementing supply chain applications.
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ABBREVIATIONS
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BIBLIOGRAPHY
Sr. No.
1.
2.
3.
4.
Book Name
Textbook of Enterprise Resource
Planning
Enterprise Resource Planning
ERP A Managerial Perspective
Enterprise Resource Planning
5.
ERP in Practice
WEBSITES
1) www.google.com
2) www.wikipedia.org
3) www.scribd.com
4) www.erpwire.com
5) www.exforsys.com
6) www.erp.com
7) www.supplychainmanagement.in
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Author
Jaiswal/Vanapalli,
McMillan
Alexis Leon
S Sadagopan
Parag Diwan &
Sunil Sharma
Jagan Nathan
Vaman