ERP Concepts

Example of an ERP system

One order is received from the client and the same is fed in the SAP system The order is reflected as Business in then Accounting system automatically Production order for the product is generated Material allocation/shortfall is indicated Dispatch is planned Invoice is generated Outstanding record is updated On collection, the bank record is updated and outstanding is reduced by the respective value.

What is ERP?
ERP stands for Enterprisewide Resource Planning. An approach to focus on business activities and leaving routine tasks to systems. An ERP software or a system essentially ensures optimum use of the 6Ms of an enterprise. (Man, Money, Machine, Methods, Materials and Market).

History & Evolution of 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

ERP Evolution
Timeline
1960s

System
Inventory Management & Control

Description
Inventory Management and control is the combination of information technology and business processes of 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 Requirement Planning(MRP)

Materials Requirement Planning (MRP) utilizes software applications for scheduling production processes. 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 Manufacturing Requirements Planning or MRP utilizes software applications for coordinating manufacturing processes, from product planning, parts purchasing, inventory control to product distribution Enterprise Resource Planning or ERP uses multi-module application software for improving the performance of the 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

1980S

Manufacturing Requirements Planning(MRP II) Enterprise Resource Planning(ERP)

1990s

Other Common Terms

SCM: Stands for Supply Chain Management. This involves proper coordination between Sales-Planning-Dispatch sections of an organization. CRM: Stands for Customer Relationship Management. This mainly entails gathering all information one can about his customer and give him proper service.

Why ERP?
Optimize resource utilization by providing up-to-the-minute information on demand for quick decision making Overall cost reduction for business An increase in per capita productivity Quick response times Lower inventory levels Better customer orientation Pressure from parent collaborators

Features of ERP
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 performs core Corporate activities and increases customer service and thereby augmenting the Corporate Image ERP bridges the information gap across the organisation 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

Features of ERP
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 ERP allows automatic introduction of latest technologies like Electronic Fund Transfer(EFT), Electronic Data Interchange(EDI), Internet, Intranet, Video conferencing, E-Commerce etc.

Why India?
Indias GNP is now the fifth largest in the world The transition to an open economy has thrust India into the information age that is forcing the country to cope with a deluge of new information relationships India must attempt to bolster its competitiveness in the global marketplace That requires industry to have a greater sophistication in dealing with materials, men, and machines.

Top 10 ERP Vendors

SAP PeopleSoft Oracle Computer Associates Baan J. D. Edwards System Software Associates Geac Computer Corp. IBM JBA Holdings

ERP Software's in market

32%
59% 9% SAP Oracle Others

ERP Software
ERP software applications are module-based Each software module automates business processes within a functional department ERP applications can be implemented and deployed module-by-module Major ERP software modules cover the major functional areas of organizations Common ERP modules include product planning module, parts and material purchasing module, inventory control module, product distribution module, order tracking module, finance module, accounting module, marketing module, and HR module Organizations often selectively implement the ERP modules that match their business needs

Operating Systems for ERP

ERP software runs on various operating systems and hardware, from UNIX, Linux, Windows to mainframe. Since one organization may acquire ERP and other enterprise software from many different vendors, the requirements for running ERP applications are common security, stability, scalability and open standards

ERP Benefits-Operational Control,Management Control and Strategic Planning

Helps reducing costs-The immediate benefit from implementing ERP systems we can expect is reduced operating costs, such as lower inventory control cost, lower production costs, lower marketing costs and lower help desk support costs ERP software attempts to integrate business processes across departments onto a single enterprise-wide information system The major benefits of ERP are improved coordination across functional departments and increased efficiencies of doing business Facilitate Day-to-Day Management-ERP systems offer better accessibility to data so that management can have up-to-theminute access to information for decision making and managerial control.

ERP Benefits-Operational Control,Management Control and Strategic Planning

ERP software helps track actual costs of activities and perform activity based costing Support Strategic Planning-Strategic Planning is "a deliberate set of steps that assess needs and resources; define a target audience and a set of goals and objectives; plan and design coordinated strategies with evidence of success; logically connect these strategies to needs, assets, and desired outcomes and measure and evaluate the process and outcomes.

Functional Modules in an ERP

A Brief Introduction

Functional Modules in an ERP

Production Planning-Production planning optimizes the utilization of manufacturing capacity, parts, components and material resources using historical production data and sales forecasting. Purchasing-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 production planning modules. Purchasing module is often integrated with supply chain management software.

Functional Modules in an ERP

Inventory Control-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. Sales & Distribution-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.

Functional Modules in an ERP

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

ERP Implementation Methodologies

Different companies may install the same ERP software in totally different processes. There are three commonly used methodologies for implementing ERP systems

ERP Implementation Methodologies

The Big Bang-The installation of ERP systems of all modules happens across the entire organization at once. The big bang approach promised to reduce the integration cost in the condition of thorough and careful execution. This method dominated early ERP implementations, it partially contributed the higher rate of failure in ERP implementation. Today, not many companies dare to attempt it anymore

ERP Implementation Methodologies

Modular Implementation-The method of modular implementation goes after one ERP module at a time. This limits the scope of implementation usually to one functional department. This approach suits companies that do not share many common processes across departments or business units. Independent modules of ERP systems are installed in each unit, while integration of ERP modules is taken place at the later stage of the project. This has been the most commonly used methodology of ERP implementation. Modular implementation reduces the risk of installation, customization and operation of ERP systems by reducing the scope of the implementation

ERP Implementation Methodologies

Process Oriented Implementation-The process-oriented implementation focuses on the support of one or a few critical business processes which involves a few business units. The initial customization of the ERP system is limited to functionality closely related to the intended business processes. The process-oriented implementation may eventually grow into a full-blown implementation of the ERP system. This approach is utilized by many small to mid-sized companies which tend to have less complex internal business processes.

Steps in Implementation of ERP

Project Planning Business Analysis including Gap Analysis BPR Installation and Configuration Project team training Business requirement mapping Module configuration System Interfaces Data Conversion Custom Documentation End-user training Testing Go-Live

Cost of ERP
The total cost of ERP ownership includes the following Costs of Software Costs of Hardware Costs of Consulting & Professional Services(Customization,Integration,Data Conversion,Testing,Training)

Questions?
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