Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.

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UNIT I
1.
2.
3.
4.
5.
6.

OVERVIEW OF ENTERPRISE SYSTEMS

EVOLUTION
RISKS AND BENEFITS
FUNDAMENTAL TECHNOLOGY
ISSUES TO BE CONSIDER IN PLANNING DESIGN
IMPLEMENTATION OF CROSS FUNCTIONAL INTEGRATED ERP
SYSTEMS.

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------UNIT I
What is ERP?
Enterprise Resource Planning (ERP) system is Computer based information
system that uses an integrated database to provide a common integrated infrastructure
for typical business processes within functional areas and consistent information
across areas.* ERP is a method of effective planning of all the resources in an orgn.
Enterprise
An enterprise is a group of people with a common goal, which has certain
resources at its disposal.
Resources
Resources include money, manpower, material, and infrastructure that are
required to run the enterprise.
Planning
Planning is a conscious determination of future course of action, planning is
done to ensure that nothing goes wrong.
Advantages of ERP / Tangible and Intangible Benefits
ERP

Direct
Advantages

Indirect
Advantages

Business
Integration

Flexibility

Better Corporate
image

Better Analysis
and Planning
Capabilities

Use of latest
Technology

Customer
satisfaction

Improved
efficiency

Information
Integration

Improved
Resource
Utilization

Better decision
making

Faster response
time to consumer
queries

Improved
customer
goodwill

Reduced Quality
Cost

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------Direct Advantages:
1. Business Integration:
ERP system can integrate functions of various departments in an
organization,

this

integration

approach

aimed

at

improved

communication and integration of information among various

departments of business units in organizations. So hen transaction
occurs, ERP systems automatically every transaction in related
business functions in real time. This enables anyone to be able to grasp
business details in real time and carry out various types of management
decisions in a timely manner, based on that information.
2. Flexibility:
ERP Packages have their unique feature of flexibility. Different
languages, Currencies, accounting standards, and so on can be covered
on one system and functions that manage multiple locations of a
company can be packaged and implemented automatically. To cope
with system globalization and system unification, this flexibility is
essential.
3. Better Analysis and Planning Capabilities:
ERP enable to boost the planning functions. By enabling
comprehensive and unified management of related business and its
data, it becomes possible to fully utilize many types of decision
support systems and simulation functions. Filing and better analysis of
data from a variety of dimensions becomes possible.
4. Use of Latest Technology:
ERP include many functions that will be necessary for future systems.
The latest information technology systems such as open systems,
client/server technology, internet, intranet, CALS (Computer-aided
acquisition and logistic support), electronic commerce, etc. are adapted
quickly by ERP system to take advantage of the latest technologies.
5. Improved Efficiency / Reduction of Lead Time:
The elapsed time between placing an order and receiving it is known as
the lead-time. ERP has efficient inventory management system which
is integrated with the purchasing, production planning, and production
departments. Similarly material management integrated with sales,
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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------marketing, purchasing, manufacturing and production. Hence ERP can
automate these tasks more efficient and effective.
6.

Information Integration / Reduction in Cycle Time:

Cycle time is the time between receipt of the order and delivery of the
product. ERP systems save cycle time by integrating with CAD/CAM
systems. CAD engineering designs are converted automatically into
software programs for computerized production machines. This
automatic conversion eliminates the costly and time consuming steps.

7. Better Decision Making :

ERP manage information for the future of the organization, beat
competition, survive etc. ERP provides high quality organized data to
the decision makers at the right time. It uses IT for collection,
refinement and organization of data according to the needs of the
enterprise. It treats organization as a single entity and using data
integrated technology, it supply data for the various levels of
management. So that decision makers can take right decision at the
right time.
8. Faster response time to consumer queries / On time Shipment:
ERP system supports the entire range of production strategies. It
provides freedom to change manufacturing and planning methods as
needs change, without modifying or reconfiguring the workplace or
plant layouts. Hence companies are able to deliver customer-specific
products (made-to-order) with the lead time of standard, off-the-selfproducts.
Indirect Advantages:
1. Better Corporate Image / Increasing Flexibility:
Flexibility means quickly changing something that is being done or
completely changing to adjust to new products designs according to the
changing market demand and customer wish. ERP enhance flexibility
of the manufacturing operations rapidly using latest technology tools
without modifying plant layouts.
2.

Improved Customer Goodwill / Improving supplier Performance:

ERP ensures quality of raw materials, capability of vendors, delivery
time, by closely monitoring their activities. ERP include supplier

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------management and control systems to help, plan, manage and control the
complex processes associated with global supplier partnerships.
3.

Customer Satisfaction:
ERP enhance customer satisfaction by three ways. They are as
follows: Product and service includes the features that are most
important to the customer.
Respond to the customers demands in a timely manner.
Product and service is free of defects and performs as
expected.
ERP certainly produce quality product on time at low cost as enhance
customer satisfaction.

4. Reduced Quality Costs:

Specification control systems in ERP systems offer a state-of-the-art
approach for documenting specifications and enable organization to
standardize and simplify its quality assurance and control functions.
ERP reduce the following cost when ensuring quality: Internal Failure Costs :- Costs of scrap, rework, reinspection
External Failure Costs :- Warranty claims, repairs, and
service costs etc.,
Appraisal Costs :- Cost of inspection upon arrival, during
manufacture, in laboratory tests etc.,
Prevention Costs : - Design & Development of new quality
equipment evaluation costs of a new product or service,
training of quality personnel .
5.

Improved Resource Utilization:

The capacity of machines, availability of material and production
schedule is properly planned by ERP. ERP offers detailed capacity
planning and loads each resource with production requirements from
master production scheduling, material requirement planning, and shop
floor control. This minimizes cost and waste.

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------ERP System also have simulation capabilities that help the capacity
and resource planners to stimulate the various capacity and resource
utilization and choose the best option.
Historical Evolution of ERP Systems

Types of Systems

Year

Purpose

Results
Designed
to
manage
high
volume
production of a
few
products,
with
constant
demand; focus on
cost
Focus
on
marketing;
emphasis
on
greater
production
integration and
planning.
Focus on Quality;
manufacturing
strategy focused
on
process
control, reduced
overhead costs,
and detailed cost
reporting.
Focus on the
ability to create
and adapt new
products
and
services on a
timely basis to
meet customers
specific needs.
Integrates
suppliers,
manufacturing
and
customer
data throughout
the supply chain.

Re-Order Point

1960s

It is used to inform the

management when an items falls
below a predetermined level,
additional inventory is ordered.

Material
Requirements
Planning(MRP)
Systems

1970s

Offered a demand based approach

for planning manufacture of
products and ordering inventory.

Manufacturing
1980s
resource planning
(MRP-II) Systems

Added capacity planning; could

schedule
and
monitor
the
execution of production plans

MRP
II
with 1990s
manufacturing
execution (MES)
Systems

Provide ability to adapt production

schedules to meet customer needs;
provides additional feedback with
respect to shop floor activities.

Flexible
ERP(Enterprise
Resource
Planning)

Integrate manufacturing with

supply chain processes across the
firm; designed to integrate the
business processes to create a
seamless information flow from
suppliers, through manufacturing,
to distribution to the customer.

Late
1990s
and
onward

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------Web Enabled ERP

1995
onwards

Inter-Enterprise
ERP

1999
onwards

Customized (ERP)

2002
onwards

To incorporate web interfaces and Designed to share

networking capabilities with ERP
data
and
communicate
information
among internal
and
external
environment.
To incorporate internet as well as It is designed for
intranet tools with ERP to enhance linking subsidiary
communication and data sharing
companies, and
group companies
under the single
umbrella for data
sharing decision
making.
To provide ERP systems products It is designed to
according to the needs of a integrate
and
customer
disseminate
modules so that
small
and
medium
companies
can
buy and use.

Trends in the Evolution of ERP applications:

3
3
Inter-enterprise
Inter-enterprise
ERP
ERP

4
4
E-Business
E-Business
Suits
Suits

2
2
Web-Enabled
Web-Enabled
ERP
ERP
1
Flexible1ERP
Flexible ERP
ERP Trends
ERP Trends
Still Evolution
Improvements in
Improvements
integration andin
integration
flexibility and
flexibility

Eensions to
Eensions to
e-business
e-business
applications
applications

A broader reach
A broader
to reach
to
new users
new users

Adoption of
Adoption
Internet of
Internet
Technologies
Technologies

Trends shaping
continues
evolution

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------1. Flexible ERP :
In 1990 :ERP software packages were the mainstage of ERP
implementations; critisised for their inflexibility; gradually modified
into more flexible products. Companies who installed ERP systems
pressured software vendors to adopt more open, flexible, standards
based software architectures.
2. Web Enabled ERP software:
This is the next development in ERP ;for the reason that internet ;
corporate intranets ant extranets grew

this prompted software

companies to use internet technologies to build the following into ERP

Systems.

Wed interfaces

Networking capabilities
These would enable ERP systems conveniently to use and connect to
other internet applications as well as the systems of a companys
business partners.

3. Inter-enterprise ERP:
By this arrangement of Internet connectivity, inter-enterprise ERP
systems were developed that provide wed-enabled links between key
business systems [such as inventory and production] of a company and
its customers, suppliers, distributors etc. These external links gave rise
to a move towards the integration of internal-facing ERP applications
with the external-focused applications of supply chain management
(SCR) and a companys supply chain partners.
4. E-Business suites:
The developments mentioned earlier have provided the business and
technological momentum for the integration of ERP functions into e-business
suites. Popular ERP software companies have developed.
Modular, wed-enabled software suites that integrate ERP, customer
relationship management, procurement, decision support, enterprise portals and
other business applications and functions.

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------Benefits and Challenges of ERP:

Firm Structure

Daunting
Implementation
B
E
N
E
F
I
T
S

Management
process

Technology
platform

C
H
A
L
L
E
N
G
E
S

Business capability

Benefits:

High up front
costs
Future benefits

Inflexibility

Realising strategic
Value

Enterprise system promises to greatly change the following

dimensions: Firm Structure and organization, management, technology platform and

business capability.
i.

Flat structure and organization:

Companies use ERP to support:

Organizational structures that was not previously

possible.

ii.

To create a more disciplined organizational culture.

Management Process:
ERP automates many internal business transactions (Order
receipt, entry, paying suppliers, employee benefits, status
change etc.). Further, it can improve management reporting and
decision making.

iii.

Technology platform:
Enterprise systems promise to create a single, integrated
repository that gathers data on all the key business processes. It
promises to provide firms with a single, unified, and all
encompassing information system technology platform and
environment. The data have common, standardized definitions
and formats that are accepted by the entire organization.

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------iv.

Business capability:
ERP can help create the foundation for a customer driven or
demand

organization.

By

integrating

discrete

business

processes, the entire organization can efficiently respond to.

Challenges:

Customer requests for products or information

Forecast new products

Build and deliver them as demand requires.

ERP improves organizational coordination, efficiency, and

decision making; they have proven very difficult to build. But it needs large
technology investments but also fundamental changes in the way the business
operates.
i.

Daunting implementation:
ERP causes dramatic charges in business. As per re-engineering
principles, it requires not only deep seated technological
changes but also fundamental changes in the way the business
operates.

ii.

Large initial cost:

ERP start up costs are high, highly visible and often politically
charged. Hence one should be careful in knowing the future
benefits which cannot be qualified at the beginning of a project.

iii.

Inflexibility:
ERP software are complex, costs high and difficult to master,
world wide shortage of experienced skilled people in installing
and maintaining it. It is deeply intertwined with corporate
business processes.

iv.

Failure to achieve strategic benefits:

If the standard ERP software do not allow the firm to use
unique business processes needed by the company to gain
competitive advantage over competitors, then the firm fails to
achieve strategic benefits and do not realize strategic value.

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------Objectives of ERP system
The three primary objectives what we find are as depicted
below:
Provides support for all variations of
Best business processes

Objectives
Of ERP
Systems

Empower the customer to modify

The implemented business
processes to suit their needs.

Implementation of the best

processes by integration and
With cross functional activities
towards enhancing productivity.

ERP technologies:

Main
Mainframe
frame
based
based
computing
computing

Client
Client
Server
ServerEra
Era

Internet
Internet
Era
Era

Computing
Computing power
power
delivered
at
delivered at desk
desk
top
machines
top
machines
(increased
(increased many
many aa
times
times and
and reaches
reaches
mainframe
mainframe
computing
computingpower)
power)

Advancement
Advancementinin
communication
communication
infrastructure
infrastructure

Prese
Ability
Prese
Abilitytotodeliver
deliver
ntnt
information
information
ERP
around
ERP
aroundthe
theglobe
globe
syste
syste
mm
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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

------------------------------------------------------------------------------------------------------Limitation / Problems of Acceptance of ERP Systems:

Is not due to

Cost,Availability,
Availability,service
service
Cost,
standard
or
risk
standard or risk

Limitations
Limitationsofof
acceptance
acceptanceofof
ERP
ERPsystems
systems

Is due to

Non-pervasiveness
pervasivenessofofIT
IT
Nonculture,Absence
Absenceofofexternal
external
culture,
stimulaii
to
change,
Lackofof
stimulaii to change, Lack
awareness
awareness

MATERIAL REQUIREMENT PLANNING [MRP-1]

MRP is a technique of working backward from the scheduled quantities
and needed dates for end items specified in a master production schedule, to
determine the requirements for components needed to meet the master production
schedule. This technique determines what components are needed, how many are
needed and when they are needed, and when they should be ordered, so that they are
likely to be available when needed. MRP material requirement planning] usually is a
computer system, that as the name implies, plans when material and other components
will be required.
BILL OF MATERIALS
Bill of Material [BOM] shows the list of all the components needed, to product
is either purchased on manufactured after the order is received many make-or-buy
decisions are mate at this time.
Functions of BOM are File maintenance functions Single level parts list phantom
parts list Detailed parts list Summarized parts List Single level usage list Phantom
usage list Summarized usage list Drawing cross reference

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

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Cross-functional enterprise system

It is a group of people with different functional expertise working towards a
common goal.
It may include the people from finance, marketing, operations, human
resources. Typically, it includes employees from all levels of an organization.
Cross-functional enterprise system often function as self-directed enterprise
systems responding to broad, but not specific directives.
Evolution
Application frameworks
Customer Relationship Management
Supply Chain Management
Selling Chain Management
Enterprise Resource Management
Enterprise Application Integration
E-procurement
Knowledge Management
Decision Support
Business Intelligence
Collaboration system in manufacturing
It is designed for one basic purpose, to help unite employees or people that are
working on similar task, or it could be the exact task and system helps unite
them to complete their task and achieve whatever goal that task sets out to do.
Enterprise collaboration system
Communicate
Coordinate
Collaborate and Cooperation
Tools used
Electronic mail
Voice mail
Bulletin board systems
Fax
Video conferencing tools
Collaboration system in manufacturing
Structured collaboration system
Easier to organize
Excellent for hierarchical organizations
Increases proficiency
Limitations of structured collaboration system
Same workflow information
Can cause groupthink
Encourages lack of creativity
Enterprise application integration
The use of software and computer systems architectural principles to integrate
a set of enterprise computer applications.
It is an integration framework composed of collection of technologies and
services which form a middleware to enable integration of systems and
applications across the enterprise.
Transaction processing systems
A transaction processing system is a type of information system. TPSs collect,
store, modify, and retrieve the transactions of an organization.

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Class Notes / S.A.E.C / DOMS/ III SEM / ERP / Mr.V.K.Ajay A.P.,

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A transaction is an event that generates or modifies data that is eventually

stored in an information system.
The essence of a transaction program is that it manages data that must be left
in a consistent state. E.g. if an electronic payment is made, the amount must be
both withdrawn from one account and added to the other; it cannot complete
only one of those steps
Single-User System
Presentation Services - displays forms, handles flow of information to/from
screen
Application Services - implements user request, interacts with DBMS
ACID properties automatic (isolation is trivial) or not required (this is not
really an enterprise)
Centralized Multi-User System
Dumb terminals connected to mainframe
Application and presentation services on mainframe
ACID properties required
Isolation: DBMS sees an interleaved schedule
Atomicity and durability: system supports a major enterprise
Transaction abstraction, implemented by DBMS, provides ACID properties
Centralized Multi-User System
Transaction Processing in a Distributed System
Decreased cost of hardware and communication make it possible to distribute
components of transaction processing system
Dumb terminal replaced by computers
Client/server organization generally used
Two-Tiered Model of TPS
Three-Tiered Model of TPS
features
Rapid response
Reliability
Inflexibility
Controlled processing
types
Batch processing
Real time processing

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