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ERP
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ENTERPRISE RESOURCE PLANNING

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2/6/2017

VISHAL KUMAR

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Contents
INTRODUCTION .............................................................................................................. 3
ERP Characteristics : .................................................................................................. 4
ERP Features :............................................................................................................. 4
ERP Implementation : ................................................................................................. 4
Benefits of Enterprise Resource Planning (ERP) : ..................................................... 5
Sample list of ERP Vendors : ..................................................................................... 5
General Model of ERP : .............................................................................................. 5
Evolution of ERP ................................................................................................................ 6
Functional modules of ERP software ................................................................................. 8
ERP Production Planning Module .............................................................................. 8
ERP Purchasing Module ............................................................................................. 8
ERP Inventory Control Module .................................................................................. 9
ERP Sales Module ...................................................................................................... 9
ERP Market in Module ............................................................................................... 9
ERP Financial Module ................................................................................................ 9
ERP HR Module ......................................................................................................... 9
ERP advantages and disadvantages .................................................................................. 10
Advantages ................................................................................................................ 10
Disadvantages ........................................................................................................... 11
Latest trends in ERP.......................................................................................................... 11

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INTRODUCTION
Enterprise Resource Planning is an integrated computerized system used to manage internal
and external resources, including tangible assets, financial resources, materials, and human
resources. The purpose is to facilitate the flow of information between all business functions
inside the boundaries of the organization and manage the connections to outside stakeholders.
It is Built on a centra database and normally utilize a common computing platform, ERP systems
consolidate all business operations into a uniform and enterprise-wide system environment.

ERP is a way to integrate the data and processes of an organization into one single system.
Usually ERP systems will have many components including hardware and software, in order to
achieve integration, most ERP systems use a unified database to store data for various functions
found throughout the organization.

The term ERP originally referred to how a large organization planned to use organizational wide
resources. In the past, ERP systems were used in larger more industrial types of companies.
However, the use of ERP has changed and is extremely comprehensive, today the term can refer
to any type of company, no matter what industry it falls in. In fact, ERP systems are used in
almost any type of organization - large or small.

In order for a software system to be considered ERP, it must provide an organization with
functionality for two or more systems. While some ERP packages exist that only cover two
functions for an organization most ERP systems cover several functions.

Today's ERP systems can cover a wide range of functions and integrate them into one unified
database. For instance, functions such as human resources, supply chain management,
customer relations management, financials, manufacturing functions and warehouse
management

Functions were all once stand alone software applications, usually housed with their own
database and network, today; they can all fits under one umbrella - the ERP system

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 ERP Characteristics :

An ERP system is not only the integration of various organization processes, any
system has to possess few key characteristics to qualify for a true ERP solution. The
features are :
1) Flexibility :- An ERP system should be flexible to respond to the changing needs of an
enterprise. The client server technology enables ERP to run across various database
back ends through Open Database Connectivity (ODBC).
2) Modular and Open : ERP system has to have open system architecture. This means that
any module can be interfaced or detached whenever required without affection the
other modules. It should support multiple hardware platforms for the companies having
heterogeneous collection of systems. It must support some third party add-ons also.
3) Comprehensive :- it should be able to support variety of organizational functions and
must be suitable for a wide range of business organizations.
4) Beyond the Company :- It should not be confined to the organizational boundaries,
rather support the on-line connectivity to the other business entities of the
organization.
5) Best Business Practices :- It must have a collection of the best business processes
appli a le orld ide. A EP pa kage i poses its o logi o a o pa s strateg ,
culture and organization.

ERP Features :

Some of the major features of ERP are :

1) Provide multi-platform, multi-facility, multi-currency etc facilities
2) Supports strategic and business planning activities
3) Has end-to-end supply chain management
4) Provides intelligent business tools
5) Provides complete integration of systems
6) Better project management
7) Automatic introduction of latest technologies like EFT (Electronic fund transfer), EDI (
Electronic data interchange), Internet, etc.

ERP Implementation :

The steps are given follows :

1) Identifying the needs of implementing an ERP package.
2) E aluatio the As Is situatio of the usi ess i.e. to u dersta d the stre gth a d
weakness prevailing under the existing circumstances.
3) De idi g the ould e situatio for the usi ess i.e. the ha ges e pe ted after the
implementation of ERP

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 4) Re-engineering the business process to achieve the desired results in the existing
processes
5) Evaluating the various available ERP packages to assess suitability.
6) Finalizing of the most suitable ERP package for implementation.
7) Installing the required hardware and networks for the selected ERP package.
8) Finalizing the implementation consultants who will assist in implementation
9) Implementing the ERP package.

Benefits of Enterprise Resource Planning (ERP) :

The benefits that are achieved by implementing ERP packages are :

They make best uses of various resources.
Reduce paper documents by providing online formats for quickly entering and retrieving
information.
Improves timeliness of information by permitting posting daily instead of monthly.
Greater accuracy of information with detailed content, better presentation, satisfactory
for the auditors.
Improved cost control.
Faster response and follow up on customers.
More efficient cash collection.
Better monitoring and quicker resolution of queries
Help to achieve competitive advantage by improving its business process.
Improves supply demand linkage with remote locations and branches in different
countries.
Improves international operations by supporting a variety of tax structures, invoicing
schemes, multiple currencies etc.
Improves information access and management throughout the enterprise.

Sample list of ERP Vendors :

Baan, Business Planning and Control System (BPCS), Mapics XA (Marcam Corporation), MFG/Pro
(QAD), Oracle Applications (Oracle), Prism (Marcam Corporation), R/3 (SAP), System 21 (JBA)

General Model of ERP :

ERP is a global, tightly integrated closed loop business solution package and is multifaceted. It
promises one database, one application, and one user interface for the entire enterprise, where
once disparate systems ruled manufacturing, distribution, finance and sales.

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Taking informatio fro e er fu tio it is a tool that assists e plo ees a d a ger s pla ,
o itor a d o trol the e tire usi ess. A oder EP s ste e ha es a a ufa turer s
ability to accurately schedule production, fully utilize capacity, reduce inventory, and meet
promised shipping dates. ERP systems are implemented in a three Tier Client Server
Architecture; the server stores the data, maintain its integrity and consistency and processes the
requests of the user from the client desktops. The load of data processing and application logic
is divided between the server and the client. As companied implementing ERP solutions have
multiple locations of operation and control, online data transfer has to be done across location
to facilitate these transactions, the important enabling technologies for ERP system are
workflow, workgroup, Group ware, EDI, data warehousing etc.

( http://www.personal.psu.edu/axk41/ERP-intro.pdf )

Evolution of ERP
ERP is an outcome of 40 years of trial and error. It has evolved as a strategic tool because of
continuous improvement in the available techniques to manage business and the fast growth of
information technology.
Prior to 1960s, business had to rely on the traditional ways of inventory management to ensure
smooth functioning of the organization. These theories are called classical inventory
management of scientific inventory control methods. The most popularly known amongst them
is EOQ (Economic Order Quantity).

In this method, each item in the stock is analyzed for its ordering cost and the inventory carrying
cost. A trade off is established on a phased out expected demand of one year, and this way the
most economic ordering quantity can be decided. This technique in principle is a deterministic
way of managing inventory.

Along with EOQ, we find various inventory models such as fixed order quantity, periodic order
method, optional replenishment method, etc., which were in practice earlier. These theories
were very popular in pre-MRP era.

In 1960s, a new technique of Material Requirements Planning, popularly known as MRP, was
evolved. This was a proactive manner of inventory management. This technique fundamentally
explodes the end product demand obtained from the Master Production Schedule (MPS) for a
specified product structure (which is taken from Bill of Material) into a detailed schedule of
purchase orders or production orders, taking into account the inventory on hand. MRP is a
simple logic but the magnitude of data involved in a realistic situation makes it computationally
cumbersome. If undertaken manually, the entire process is highly time-consuming.

MRP successfully demonstrated its effectiveness in reduction of inventory, production, and

delivery lead times by improving coordination and avoiding delays, thus making commitments
more realistic. MRP proved to be a very good technique for managing inventory, but it did not
take into account other resources of an organization. In 1970s, this gave birth to a modified MRP
logic, popularly known as closed loop MRP. In this technique, the capacity of the organization to
produce a particular product is also taken into account by incorporating a module called
capacity requirements planning (CRP).

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In 1980s, the need was felt to integrate the financial resource with the manufacturing activities.
From this evolved an integrated manufacturing management system called Manufacturng
Resource Planning (MRP II).

Transition from MRPII to ERP happened during 1980-90. The basic MRP II system design was
suffering from a few inherent drawbacks such as limited focus to manufacturing activities,
assumption of the mass or repetitive production set ups, and poor budgetary and costing
controls.

The shortcomings of MRP II and the need to integrate new techniques led to the development
of a total integrated solution called ERP, which attempts to integrate the transactions of the
organization to produce the best possible plan. Today we see further development in the ERP
concept and evolution web-based ERP.

ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements Planning

(MRP) II. From business perspective, ERP has expanded from coordination of manufacturing
processes to the integration of enterprise-wide backend processes. From technological aspect,
ERP has evolved from legacy implementation to more flexible tiered client-server architecture

The Evolution Of ERP From 1960s To 1990s

Timeline System Description
1960s Inventory Inventory Management and control is the combination of
Management & information technology and business processes of
Control maintaining the appropriate level of stock in a warehouse.
The activities of inventory management include identifying
inventory requirements, setting targets, providing
replenishment techniques and options, monitoring item
usages, reconciling the inventory balances, and reporting
inventory status.
1970s Material Materials Requirement Planning (MRP) utilizes software
Requirement applications for scheduling production processes. MRP
Planning (MRP) generates schedules for the operations and raw material
purchases based on the production requirements of
finished goods, the structure of the production system, the
current inventories levels and the lot sizing procedure for
each operation.
1980s Manufacturing Manufacturing Requirements Planning or MRP utilizes
Requirements software applications for coordinating manufacturing
Planning (MRP processes, from product planning, parts purchasing,
II) inventory control to product distribution.

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 2000s Enterprise Enterprise Resource Planning or ERP uses multi-module
Resource application software for improving the performance of the
Planning (ERP) internal business processes. ERP systems often integrates
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

( http://www.fibre2fashion.com/industry-article/3110/role-of-erp-in-textile-
industries?page=2 )

Functional modules of ERP software

ERP software is made up of many software modules. Each ERP software module mimics a major
functional area of an organization. Common ERP modules include modules for product planning,
parts and material purchasing, inventory control, product distribution, order tracking, finance,
accounting, marketing, and HR. Organizations often selectively implement the ERP modules that
are both economically and technically feasible.

ERP Production Planning Module

In the process of evolution of manufacturing requirements planning (MRP) II into ERP, while
vendors have developed more robust software for production planning, consulting firms have
accumulated vast knowledge of implementing production planning module. Production planning
optimizes the utilization of manufacturing capacity, parts, components and material resources
using historical production data and sales forecasting.

ERP Purchasing Module

Purchase module streamline procurement of required raw materials. It automates the processes
of identifying potential suppliers, negotiating price, awarding purchase order to the supplier,
and billing processes. Purchase module is tightly integrated with the inventory control and

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production planning modules. Purchasing module is often integrated with supply chain
management software.

ERP Inventory Control Module

Inventory module facilitates processes of maintaining the appropriate level of stock in a

warehouse. The activities of inventory control involves in identifying inventory requirements,
setting targets, providing replenishment techniques and options, monitoring item usages,
reconciling the inventory balances, and reporting inventory status. Integration of inventory
control module with sales, purchase, finance modules allows ERP systems to generate vigilant
executive level reports.

ERP Sales Module

Revenues from sales are live blood for commercial organizations. Sales module implements
functions of order placement, order scheduling, shipping and invoicing. Sales module is closely
integrated with organizations' ecommerce websites. Many ERP vendors offer online storefront
as part of the sales module.

ERP Market in Module

ERP marketing module supports lead generation, direct mailing campaign and more.

ERP Financial Module

Both for-profit organizations and non-profit organizations benefit from the implementation of
ERP financial module. The financial module is the core of many ERP software systems. It can
gather financial data from various functional departments, and generates valuable financial
reports such balance sheet, general ledger, trail balance, and quarterly financial statements.

ERP HR Module

HR (Human Resources) is another widely implemented ERP module. HR module streamlines the
management of human resources and human capitals. HR modules routinely maintain a
complete employee database including contact information, salary details, attendance,

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performance evaluation and promotion of all employees. Advanced HR module is integrated
with knowledge management systems to optimally utilize the expertise of all employees.

( https://www.scribd.com/document/53597905/Functional-Modules-of-ERP-Software )

ERP advantages and disadvantages

Advantages

In the absence of an ERP system, a large manufacturer may find itself with many software
applications that cannot communicate or interface effectively with one another. Tasks that need
to interface with one another may involve.

ERP systems connect the necessary software in order for accurate forecasting to be
done. This allows inventory levels to be kept at maximum efficiency and the company to
be more profitable.
Integration among different functional areas to ensure proper communication,
productivity and efficiency
Design engineering (how to best make the product)
Order tracking, from acceptance through fulfillment
The revenue cycle, from invoice through cash receipt
Managing inter-dependencies of complex processes bill of materials
Tracking the three-way match between purchase orders (what was ordered), inventory
receipts (what arrived), and costing (what the vendor invoiced)
The accounting for all of these tasks: tracking the revenue, cost and profit at a granular
level.

ERP Systems centralize the data in one place. Benefits of this include:

Eliminates the problem of synchronizing changes between multiple systems -

consolidation of finance, marketing and sales, human resource, and manufacturing
applications
Permits control of business processes that cross functional boundaries

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 Provides top-down view of the enterprise, real time information is available to
management anywhere, anytime to make proper decisions.
Reduces the risk of loss of sensitive data by consolidating multiple permissions and
security models into a single structure.
Shorten production lead time and delivery time
Facilitating business learning, empowering, and building common visions

Disadvantages

Customization of the ERP software is limited...

Re-engineering of business processes to fit the "industry standard" prescribed by the
ERP system may lead to a loss of competitive advantage.
ERP systems can be very expensive
Many of the integrated links need high accuracy in other applications to work
effectively. A company can achieve minimum standards, then over time "dirty data" will
reduce the reliability of some applications.
Once a system is established, switching costs are very high for any one of the partners.
The blurring of company boundaries can cause problems in accountability, lines of
responsibility, and employee morale.
Some large organizations may have multiple departments with separate, independent
resources, missions, chains-of-command, etc, and consolidation into a single enterprise
may yield limited benefits.

( http://www.excitingip.com/2010/advantages-disadvantages-of-erp-enterprise-resource-
planning-systems/ )

Latest trends in ERP

The upcoming year and years beyond are poised to see some additional changes in ERP
functionality and integrations. Here are the top five trends that we should watch during 2017.

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1. Predictive Analytics Will Increase Competition

Toward the end of 2016, the buzz around predictive analytics grew in intensity, and with good
reason. Predictive analytics allows organizations to tap into collected data and make educated
decisions about how customers will behave to improve offerings and reduce waste.

2. Machine Learning and Cognitive Ability Integrations in ERP Will Continue to Grow

Machine learning has already proven to be an effective technology for organizations in all
verticals. More and more organizations are demanding these capabilities. Also, as the Internet
of Things continues to grow and expand, other cognitive technologies such as artificial
intelligence) and natural language capabilities will continue to grow and become more
important elements of ERP.

3. Security Will Continue to Be a Concern

Mali ious ha ki g is at the forefro t of e er o e s ind during the beginning of this year
e ause of atio al e s o erage. But ha ki g a d orporate espio age are t e tre ds,
a d the re ot goi g to disappear. The u er of threats is i reasi g, ut ore o er i g is
the sophistication with which those threats are executed. Cloud vendors will continue to fight
cybersecurity, and some legislation may be introduced to address the issue, as well, but even
with more tools and legislation, the problem will continue as long as criminals exist.
Organizations need to invest in preventive, detective, and responsive controls, focusing more
intently on detective controls that can find and mitigate the root of an attack.

4. More ERP Vendors Will Offer General ERP, with the Option of Best-of-Breed Add-Ons

Best-of-breed solutions were all the rage in 2016. Organizations with specialized processes
adopted best-of-breed ERP to address those specialized needs without the requirements of
general, larger-scale ERP applications. In 2017, more general ERP vendors will begin offering
best-of-breed modules for their existing ERP offerings, which is good news for organizations that
fi d the re i eed of additio al, ge eral EP apa ilities. It a also redu e the heada hes
associated with trying to backwards-integrate general ERP with best-of-breed solutions.

5. Competition Is Tightening Among ERP Vendors

In 2016, the cloud opened the ERP market to businesses of all sizes. More small and mid-sized
businesses turned to cloud services as a means of tapping into ERP capabilities. An unintended
side effect of this growth is that ERP vendors are now scrambling to capture larger segments of

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the market. As a result, the price of ERP may be on the decline. What this means for
orga izatio s is i reased a ess to EP tools. It s likely, however, that vendors will make up
these price reductions in add-on modules and customizations designed to extend ERP
capabilities.

In all, 2017 should be an exciting year for seeing additional ERP capabilities brought on by ever-
expanding cognitive capabilities. Organizations will tap into these capabilities as the cost of base
ERP prices fall, but those organizations will need to do some research before selecting an ERP
application when upgrading or purchasing a new installation because additional costs accrued in
add-on modules and customizations could negate those price reductions. One thing is certain:
2017 will be an interesting year.

( http://it.toolbox.com/blogs/inside-erp/5-erp-trends-to-watch-in-2017-75399 )

Conclusion

The growing information needs of an enterprise make it imperative to improve or replace old
systems. Especially under the present business environment, where the globalization has been
initiated, full convertibility is coined. Infrastructure projects are nearing completion, and it is
expected that the whole business system will undergo a major shift. Implementation of ERP
solutions is one of the largest drivers of growth in the consultancy business. The introduction of
such a large and complex software like ERP, enables an organization to integrate their
manufacturing, finance and marketing operations at all levels, is in itself a challenge, since it
calls for technical and functional skills and a change in user mindsets.

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7. Bibliography

ERP: the implementation cycle - by Stephen Harwood

E-business and ERP: rapid implementation and project planning - by Murrell G. Shields

http://en.wikipedia.org/wiki/enterprise_resource_planning
http://www.erpwire.com/erp-articles/erp-implementation-life-cycle.htm
http://www.sysoptima.com/erp/erp_modules.php
http://www.erpwire.com/erp-articles/erp-vendors.htm
http://www.sap.com/solutions/business-suite/erp/index.epx

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