A

Project Report
On

ENTERPRISE RESOURCE
PLANNING

PREFACE

The present project, undertaken as a part of the partial fulfillment as a requirement for
the award of MBA- MBL, is an honest attempt to study the concept of Enterprise
Resource Planning Systems. The study undertaken in order to come up with the
project has given me a good knowledge about the changing and developing methods
being adopted by the big companies to meet the changing needs of the time.

The project looks into the evolution and development of the concept of ERP and how
it has contributed to the way the functioning of the organisations have changed over
the past years.

The Enterprise Resource Planning (ERP) system plays a very important role. The
major decision making and it execution is done through ERP. It’s the system of
managing all functions of the business with information support coming through the
ERP. It handles the operational systems to run business and provides the required
inputs to planning and control systems handled by the middle management.
INTRODUCTION:

The growing and the dynamic business environment of today is faced with lots of
challenges and opportunities. The dependence on the information, as a driving
energy source is increasing. The business needs today stretch beyond the transaction
processing, requiring an instant real time response wherever it occurs.
The word ‘Enterprise’ conveys that it encompasses the larger business community
covering all the players and their participation in the business. The system has
extended beyond corporate boundaries and the system that is being designed is an
enterprise wide.

The business today is a paperless operation, a wireless communication as a result of

fully transparent and automated operations at all centers in an integrated and
coordinated manner taking care of the business, actions and decision needs. And these
demands of the business are met by systems of information processing and
communication.

Though the tools and technologies, and the solutions for these needs are available but
what is required is an integrated solution out of these technologies and the systems
offering an enterprise. Such an integrated solution is called Enterprise Management
System (EMS).

In EMS, the Enterprise Resource Planning (ERP) system plays a very important role.
The major decision making and it execution is done through ERP. It’s the system of
managing all functions of the business with information support coming through the
ERP. It handles the operational systems to run business and provides the required
inputs to planning and control systems handled by the middle management.
ENTERPRISE RESOURCE PLANNING

The initials ERP originated as an extension of MRP (material requirements planning

then manufacturing resource planning). ERP systems now attempt to cover all basic
functions of an enterprise, regardless of the organization's business or charter. Non-
manufacturing businesses, non-profit organizations and governments now all utilize
ERP systems.

The introduction of an ERP system to replace two or more independent applications

eliminates the need for external interfaces previously required between systems, and
provides additional benefits that range from standardization and lower maintenance
(one system instead of two or more) to easier and/or greater reporting capabilities (as
all data is typically kept in one database).

The Enterprise planning system (ERP) deals with the planning and use of resources
used in the business. The resources are finance, materials, manufacturing capacity and
human resource. The ERP provides methodology of assessing the resource needs for
a given business plan to achieve certain business objectives. It also helps to execute
the strategies, plans, decisions and actions in a time bound manner. The ERP provides
a support system in transaction processing, updation, and reporting across the
functions.
The ERP is a package encompassing all major functions of a business.

Prior to the concept of ERP systems, departments within an organization (for

example, the human resources (HR)) department, the payroll department, and the
financial department) would have their own computer systems. The HR computer
system (often called HRMS or HRIS) would typically contain information on the
department, reporting structure, and personal details of employees. The payroll
department would typically calculate and store paycheck information. The financial
department would typically store financial transactions for the organization. Each
system would have to rely on a set of common data to communicate with each other.
For the HRIS to send salary information to the payroll system, an employee number
would need to be assigned and remain static between the two systems to accurately
identify an employee. The financial system was not interested in the employee-level
data, but only in the payouts made by the payroll systems, such as the tax payments to
various authorities, payments for employee benefits to providers, and so on. This
provided complications. For instance, a person could not be paid in the payroll system
without an employee number.

ERP software, among other things, combined the data of formerly separate
applications. This made the worry of keeping numbers in synchronization across
multiple systems disappear. It standardized and reduced the number of software
specialties required within larger organizations.

The system design of ERP is integrated with the features and functions providing an
enterprise wide solution to handle all the process functionalities. For example, it
provided capability to process the purchase order from ordering to bill processing,
and also meets the information needs of purchase, stores, manufacturing accounts and
finance.

The ERP packages build information base and provide knowledge base for planning
and control of business function management. The ERP is the main system, interfaced
or assisted by the other systems in an organisation. These systems may be stand alone
or constitute a part of the manufacturing or commercial processing systems.

These systems provide the database to the ERP or support the ERP by the basic data
input directly or through the data transfer. For example, the manufacturing system
module of the ERP is interfaced with drawing, engineering database querry, viewing
and usage of drawings and it accepts the data of work order by process operations, for
costing and for building the standards for the future.

The key benefit of ERP id that it provides an integrated solution for all the
requirements of the business. It addresses the issue of data integrity, information
transparency, seamless integration and information communication. Simultaneously
it respects the organisational hierarchy of authority, while conducting the business
transactions through the system.

FEATURES

Some of the major features of ERP and what ERP can do for the business system are
as below:

• ERP performs core corporate activities and increases customer service and
thereby augmenting the Corporate Image.
• ERP bridges the information gap across the organization
• ERP provides for complete integration of Systems not only across the
departments in a company but also across the companies under the same
management.
• ERP is the only solution for better Project Management.
• ERP allows automatic introduction of latest technologies like Electronic Fund
Transfer (EFT), Electronic Data Interchange (EDI), Internet, Intranet, and
Video conferencing, E-Commerce etc.
• ERP facilitates company-wide Integrated Information System covering all
functional areas like Manufacturing, Selling and distribution, Payables,
Receivables, Inventory, Accounts, Human resources, Purchases etc.,
• ERP eliminates the most of the business problems like Material shortages,
Productivity enhancements, Customer service, Cash Management, Inventory
problems, Quality problems, Prompt delivery etc.,
• ERP not only addresses the current requirements of the company but also
provides the opportunity of continually improving and refining business
processes.
• ERP provides business intelligence tools like Decision Support Systems
(DSS), Executive Information System (EIS), Reporting, Data Mining and
Early Warning Systems (Robots) for enabling people to make better decisions
and thus improve their business processes.
• The ERP solution provides ‘Drill Down’ and ‘Context sensitive’ helps to use
the system. The drill down helps to run through the system to locate the week
 spot for action and control. The context sensitivity help provides an access to
help library which can be used by the user by calling help. The help could be
for information, guidance and understanding of the term or process or format.

COMPONENTS

Examples of modules in an ERP which formerly would have been stand-alone

applications include:

Manufacturing

• Engineering
• Bills of Material
• Scheduling
• Capacity
• Workflow Management

Quality Control

• Cost Management
• Manufacturing Process
• Manufacturing Projects
• Manufacturing Flow

Supply Chain Management

• Inventory
• Order Entry
• Purchasing
• Product Configurator

Supply Chain Planning

 • Supplier Scheduling
• Inspection of goods
• Claim Processing
• Commission Calculation

Financials

• General Ledger
• Cash Management
• Accounts Payable
• Accounts Receivable
• Fixed Assets

Projects

• Costing
• Billing
• Time and Expense
• Activity Management

Human Resources

• Human Resources
• Payroll
• Training
• Time & Attendance
• Rostering Benefits

Customer Relationship Management

 • Sales and Marketing.
• Commissions
• Service
• Customer Contact and
• Call Center support

Data Warehouse

• various Self-Service interfaces for Customers,

• Suppliers, and
• Employees

Planning and Quality control:

• System of data gathering to assess quality and measure against standards.

• Analysis of quality by process, material and work centre location.
• Analysis of quality by reasons and action taken
• Monitoring quality across the organisation from input to output for operating
decisions and business decisions.

Maintenance:

• Plant maintenance planning.

• Breakdown, preventive, conditional maintenance.
• Monitoring performances fro maintenance action as all kind kinds of
productive assets.

Enterprise Resource Planning is a term originally derived from manufacturing

resource planning (MRP II) that followed material requirements planning (MRP).
MRP evolved into ERP when "routings" became a major part of the software
architecture and a company's capacity planning activity also became a part of the
standard software activity. ERP systems typically handle the manufacturing, logistics,
distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise
Resource Planning or ERP software can aid in the control of many business activities,
like sales, marketing, delivery, billing, production, inventory management, quality
management, and human resource management.

ERPs are often incorrectly called back office systems indicating that customers and
the general public are not directly involved.

ERPs are cross-functional and enterprise wide. All functional departments that are
involved in operations or production are integrated in one system. In addition to
manufacturing, warehousing, logistics, and information technology, this would
include accounting, human resources, marketing, and strategic management.

Implementation
Because of their wide scope of application within a business, ERP software systems
are typically complex and usually impose significant changes on staff work practices.
Implementing ERP software is typically not an "in-house" skill, so even smaller
projects are more cost effective if specialist ERP implementation consultants are
employed. The length of time to implement an ERP system depends on the size of the
business, the scope of the change and willingness of the customer to take ownership
for the project. A small project (e.g., a company of less than 100 staff) may be
planned and delivered within 3-9 months; however, a large, multi-site or multi-
country implementation may take years.

To implement ERP systems, companies often seek the help of an ERP vendor or of
third-party consulting companies. These firms typically provide three areas of
professional services: consulting, customization and support.

Process preparation
ERP vendors have designed their systems around standard business processes, based
upon best business practices. Different vendors have different types of processes but
they are all of a standard, modular nature. Firms that want to implement ERP systems
are consequently forced to adapt their organizations to standardized processes as
opposed to adapting the ERP package to the existing processes. Neglecting to map
current business processes prior to starting ERP implementation is a main reason for
failure of ERP projects. It is therefore crucial that organizations perform a thorough
business process analysis before selecting an ERP vendor and setting off on the
implementation track. This analysis should map out all present operational processes,
enabling selection of an ERP vendor whose standard modules are most closely
aligned with the established organization. Redesign can then be implemented to
achieve further process congruence. Research indicates that the risk of business
process mismatch is decreased by:

- linking each current organizational process to the organization's strategy;

- analyzing the effectiveness of each process in light of its current related business
capability;
- understanding the automated solutions currently implemented.

A disadvantage usually attributed to ERP is that business process redesign to fit the
standardized ERP modules can lead to a loss of competitive advantage. While
documented cases exist where this has indeed materialized, other cases show that
following thorough process preparation ERP systems can actually increase
sustainable competitive advantage.

Configuration

Configuring an ERP system is largely a matter of balancing the way you want the
system to work with the way the system lets you work. Begin by deciding which
modules to install, then adjust the system using configuration tables to achieve the
best possible fit in working with your company’s processes.
Modules - Most systems are modular simply for the flexibility of implementing some
functions but not others. Some common modules, such as finance and accounting are
adopted by nearly all companies implementing enterprise systems; others however
such as human resource management are not needed by some companies and
therefore not adopted. A service company for example will not likely need a module
for manufacturing. Other times companies will not adopt a module because they
already have their own proprietary system they believe to be superior. Generally
speaking the greater number of modules selected, the greater the integration benefits,
but also the increase in costs, risks and changes involved.

Configuration Tables – A configuration table enables a company to tailor a particular

aspect of the system to the way it chooses to do business. For example, an
organization can select the type of inventory accounting – FIFO or LIFO – it will
employ or whether it wants to recognize revenue by geographical unit, product line,
or distribution channel.

So what happens when the options the system allows just aren’t good enough? At this
point a company has two choices, both of which are not ideal. It can re-write some of
the enterprise system’s code, or it can continue to use an existing system and build
interfaces between it and the new enterprise system. Both options will add time and
cost to the implementation process. Additionally they can dilute the system’s
integration benefits. The more customized the system becomes the less possible
seamless communication becomes between suppliers and customers.

Advantages

In the absence of an ERP system, a large manufacturer may find itself with many
software applications that do not talk to each other and do not effectively interface.
Tasks that need to interface with one another may involve:
• Ease of use
• General Purpose
• Readymade solution for most of the problems
• Integration of all functions already established
 • design engineering (how to best make the product)
• order tracking from acceptance through fulfillment
• the revenue cycle from invoice through cash receipt
• managing interdependencies of complex Bill of Materials
• tracking the 3-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 on
a granular level.
• Change how a product is made, in the engineering details, and that is how it
will now be made. Effective dates can be used to control when the switch over
will occur from an old version to the next one, both the date that some
ingredients go into effect, and date that some are discontinued. Part of the
change can include labeling to identify version numbers.
• Some security features are included within an ERP system to protect against
both outsider crime, such as industrial espionage, and insider crime, such as
embezzlement. A data tampering scenario might involve a disgruntled
employee intentionally modifying prices to below the breakeven point in order
to attempt to take down the company, or other sabotage. ERP systems
typically provide functionality for implementing internal controls to prevent
actions of this kind. ERP vendors are also moving toward better integration
with other kinds of information security tools.

Disadvantages

Many problems organizations have with ERP systems are due to inadequate
investment in ongoing training for involved personnel, including those implementing
and testing changes, as well as a lack of corporate policy protecting the integrity of
the data in the ERP systems and how it is used.
Limitations of ERP include:

• Success depends on the skill and experience of the workforce, including

training about how to make the system work correctly.
• Managers cannot generate custom reports or queries without help from a
• programmer. This inhibits managers from obtaining information quickly so
that
• they can act on to for competitive advantage. This can create a backlog for the
• is department.
• ERP systems provide current only such as open orders. Managers often need
to look past the current status to find trends and patterns that aid better
decision-making
• Small enterprises are often undercapitalized & are also not updated about the
latest offerings in the market
• Personnel turnover; companies can employ new managers lacking education
in the company's ERP system, proposing changes in business practices that are
out of synchronization with the best utilization of the company's selected ERP.
• Customization of the ERP software is limited. Some customization may
involve changing of the ERP software structure which is usually not allowed.
• 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 to install often ranging from 30,000 US
Dollars to 500,000,000 US Dollars for multinational companies.
• ERP vendors can charge sums of money for annual license renewal that is
unrelated to the size of the company using the ERP or its profitability.
• Technical support personnel often give replies to callers that are inappropriate
for the caller's corporate structure. Computer security concerns arise, for
example when telling a non-programmer how to change a database on the fly,
at a company that requires an audit trail of changes so as to meet some
regulatory standards.
• ERPs are often seen as too rigid and too difficult to adapt to the specific
workflow and business process of some companies—this is cited as one of the
main causes of their failure.
• Systems can be difficult to use.
• Systems are too restrictive and do not allow much flexibility in
implementation and usage.
• The system can suffer from the "weakest link" problem—an inefficiency in
one department or at one of the partners may affect other participants.
• 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 (reducing flexibility and strategic control at the corporate level).
• The blurring of company boundaries can cause problems in accountability,
lines of responsibility, and employee morale.
• Resistance in sharing sensitive internal information between departments can
reduce the effectiveness of the software.
• 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.
• There are frequent compatibility problems with the various legacy systems of
the partners.
• The system may be over-engineered relative to the actual needs of the
customer. .

• The data in ERP application is not integrated with other enterprise or division
systems and dies not include external intelligence.