OM 0011 Enterprise Resource Planning Q1.a.Explain how ERP systems can achieve business integration.

. Ans: The IT being the back bone, Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the integrated management of businesses as a whole, from the viewpoint of the effective use of management resources, and to improve the efficiency of an enterprise. ERP packages are unified (covering all business functions) software packages that support the above ERP concepts. In the 90s, ERP packages were targeted at the manufacturing industry, and consisted mainly of functions for planning and managing core businesses such as sales management, production management, accounting and financial affairs, and so on. However, in the last decade, adaptation not only to the manufacturing industry, but also to diverse types of industry has become possible. With the ever developing and innovating IT techniques, the expansion of implementation and use of ERP packages has been progressing on a global level. ERP software is intentionally designed to model and automate many of the basic processes of a company. It established an effective link between the various functions of a company from the top level to the bottom level of the hierarchy, with the goal of integrating information across the company, for example, a communication channel is established between the finance department and the shop floor for information sharing,. This software helped in eliminating complex and expensive links between computer systems that were never meant to talk to each other. It also established a faultless and continues flow of information within the company. ERP software is a replica of the major business processes of an organisation, such as customer order fulfilment and manufacturing. The success of an ERP system depends on its ease for information access. A constrained ERP system is not much better than the legacy system it replaces. In lots of cases, it is worse, as the old code at least was written specifically for the company and the task. ERP systems are a set of generic processes, they are capable of producing dramatic improvements, when used to connect parts of an organisation, and integrate its various processes seamlessly. For example, when a warehouse in Noida enters a customer order, for example, the data flows automatically to others in the company who need to see it. Data flows to the finance department at the company headquarters in Mumbai, and to the manufacturing plant in Chennai. The attractive Information Integration Techniques (IIT) of ERP was able to capture the attention of ERP vendors primary targets the CEOs and CFOs of various organisations, and the sales of ERP in the global market took of in early 1990s. Business Integration The first and most important advantage lies in the promotion of integration. The reason why ERP packages are considered to be integrated is the automatic data updating (automatic data exchange among applications) that is possible among the related business components. Since conventional company information systems were aimed at the optimisation of independent business functions in business units, almost all were weak in terms of the communication and integration of information that transcended the different business functions. In many of the large organisations during product manufacturing the system construction timing and guide lines provide for manufacturing differs, this can also be seen even across its departments and many a times they are not well connected to each other. This turns out to be a biggest obstacle faced by most of the organisation when they plan to shift for new product line and

also in classification of the business. With the help of ERP packages, when a transaction occurs the related data of the business functions is updated automatically in the system. For this reason, we are able to grasp business details in real time, and carry out various types of management decisions in a timely manner, based on that information. Q1.b. What is business modeling? Ans: Business modelling or creating a business model is one of the first activities in any ERP project. As mentioned earlier, the ERP systems should be a replica of the organisations business processes. A business model is not a mathematical model, but it is a representation of the business as one large system showing the interconnections and interdependencies of the various subsystems and business processesBased on the organisation's goals, objectives, and strategic plans, a business model consisting of the business processes is developed. Different individuals in the organisation (the people) control these business processes to achieve common goals. Based on the business model the ERP system is developed with the aim of providing the required information and necessary assistance to the various individuals in an organisation. This helps them perform their business processes more effectively and efficiently. In business modelling, we model the business as an integrated system, taking the processes managing its facilities and materials as resources. Information is a very important resource and is very critical in managing all the other resources. Thus, the business model is a representation of the actual business, the various business functions of the organisation, the relation that exists between them, the manner in which they are interdependent, and so on, to achieve a common goal or objective. The business model is usually represented in the graphical form using flow charts and flow diagrams. The data model of the system is created from the business model. For example, in a small scale automation industry the order bagged by the marketing is passed on to planning department. From here the actual production starts and it has to be cautiously tracked by the planning department. It is the responsibility of the planning department to request the design department to release the drawings and the requirements for the production department. Once the released documents reach the production department, it has to ensure that it allocates man power and a time plan for the manufacturing of the product. Planning has a time schedule of its own for the manufacturing, which has to be planned in accordance to the production department, and has to be informed to the marketing department. Production has to check for the availability of the required items for production from stores and if in case there is any shortage it has to be informed both to the planning and purchase through a proper channel, so that the requirements can be brought in as early as possible. Once the product leaves from production to quality department and then to packing, the information about the status of work and the product description should be available to the planning department. Thus you can see how each department has to work coordinating to each other and the essence of communication between the departments. As important as process planning, market planning is very crucial phase of business modelling. Since, market planning also has an important role when it comes to decision making in large organisation on market strategy. So that it can enable the organisation to successful meet commercialisation requirements according to changing market trend. Its main concern is how decision taken on certain issues can change the companys revenues and its profit margins. Hence, planning is a crucial element of business model for this to achieve an ERP system is suppose to be capable of handling information not only about the process of various departments but it needs to track the companys market performance and the companys product competency

compared to its competitors in the market and allow the management to take decision quickly and effectively. Q2.a. Write a note on OLAP? Ans: On-Line Analytical Processing (OLAP) -According to Business Intelligence Ltd3, OLAP can be defined in five words Fast Analysis of Shared Multidimensional Information. FAST means that the system has the ability to deliver most of its responses to users within about five seconds, with the simplest analysis taking no more than one second and very few taking more than 20 seconds. ANALYSIS means that the ability of the system to cope with any business logic and statistical analysis that is relevant for the application and the user, and keep it easy enough for the target user. SHARED means that the system is well equipped to meet all the security requirements for confidentiality (possibly down to cell level). If multiple write access is needed; it provides concurrent update locking at an appropriate level. MULTIDIMENSIONAL means, that the system must provide a multidimensional conceptual view of the data, including full support for hierarchies and multiple hierarchies. INFORMATION is refined data that is accurate, timely, and relevant to the user. Simply put, OLAP describes a class of technologies that are designed for live ad-hoc data access and analysis. While transaction processing (OLTP) generally relies solely on relational databases, OLAP has become synonymous with multidimensional views of business data. Multidimensional database technology supports these multidimensional views, and provides the technical basis for calculations and analysis required by Business Intelligence applications.For a very wide range of applications OLAP technology is preferred as a right choice for a company. The most common applications are budgeting and planning; sales and marketing analysis; financial reporting and consolidation. In past few years OLAP is extensively being used for applications such as product profitability and pricing analysis; activity based costing; manpower planning; and quality analysis. Any management system that requires a flexible, top down view of an organisation use OLAP. Q2.b. Briefly explain the key principles to a proper ERP system selection process Ans: Proper ERP system selection methodology It is important to apply key principles to the process to address common mistakes that lead to an improper ERP system selection, they include: 1. Structured approach The first step in selection of a new system is to adopt a structured approach to the process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements, invitation to tender, how potential vendors are selected, the format of demonstrations, and the process for selecting the vendor. 2.Focused demonstrations Demonstrations by potential vendors must be relevant to the business. However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business. Therefore, it is imperative that vendors are treated equally in requests for demonstrations. It is incumbent on the company to identify sufficient demonstrations that allow a proper decision to be made and also ensures that vendors do not opt out of the selection process due to the extent of preparation required.

3.Objective decision process "Choosing which ERP to use is a complex decision that has significant economic consequences, thus it requires a multi-criterion approach."4 There are two key points to note when the selection criteria used in evaluating potential vendors. First, the criteria and the scoring system must be agreed prior to viewing any potential systems. Secondly, in no circumstance should people with affiliations to one or more systems be allowed to advise in this regard. 4.Full involvement by all personnel The stakeholders within the enterprise must decide on the system. "It requires top management leadership and participation it involves virtually every department within the company"5. Representatives should: i.Be involved in the project initiation phase ii. Assist in the gathering of requirements iii.Attend the Vendor Demonstrations iv.Have a significant participation in the short-listing and final selection of a vendor. Q3.Write a note on quality management. Ans: The ISO 9000 series of standards defines the elements of a quality management system and the functions of quality management. The functions in the Quality Management (QM) module support the essential elements of such a system. The other integrated modules in the QM system complement this functionality. The ISO standards require that QM systems must be an essential part in all processes within an organisation. According to the quality looping method, it is not only during the production or manufacturing (implementation phase) but also during production planning and product development (planning phase) quality control must be carried out. Quality must be monitored starting from procurement of materials to sale and distribution of the finished product, and it must be monitored in the entire usage phases of an organisation. In the areas of production, quality assurance is no longer viewed in terms of inspections that are the elimination of defects alone. Instead, the production process itself becomes the focus of attention. With product quality under the microscope in all industries today, every company strives for superior quality in its products and services. All manufacturing modules track quality control activities across the enterprise, from intermediate producers to finished goods. These systems allow a wide variety of characteristics and parameters to be specified in test and inspection operations. They also maintain an extensive history of data, to improve product quality and identify recurring problems. Material Inspection subsystem offers a wide range of capabilities for process supervision and control. These capabilities are fully integrated with the other modules like purchasing, inventory management, and shop floor control functions, to ensure that the right quality control procedures are followed. It also includes various other functions like on-line maintenance of product specification by production method and customer, event driven sample requests, sample log-in, entry of test results, quality performance analysis, and equipment calibration support. Product quality metrics are collected and archived in a manner that offers full support for statistical process control techniques.Material Disposition is another feature available in many systems. It offers advanced disposition functions and material review that ensure the right quality control decisions are made. It must also provide an audit trail of decisions for compliance purposes. It include features like automated material review and approval, automated material disposition, sub-lot control, optional automatic second disposition, optional automatic repeat testing, grading, re-designation, and implementation of user-defined policies and procedures for authorisation and control.

Q4.Explain JIT & Kanban .Mention the benefits of JIT. Ans: Just-in-Time (JIT) means to produce goods and services when needed, not too early and not too late. It is time dependent and often has quality and efficiency targets. JIT is a production philosophy and not a technology. This is due the fact that it monitors the whole of the production system, and goes far into inventory control. The JIT system has been called many names, from zero defects and synchronous production to stockless production at Hewlett Packard. The JIT system also uses the pull method of scheduling material flow (Kanban). A JIT system aims to make goods available just in time and these can be parts, products or subassemblies. JIT helps organisation to achieve some of the following benefits: i. Increased flexibility ii. Parts reduction iii. Increased quality iv.Simplicity of system The enhanced flexibility allows a company the ability to react to changing events, i.e. change in customer orders, or design modifications. Increased productivity means that the shortest time and minimum of resources are needed to make a product. The overall objective of JIT is to produce parts in lot sizes of one, but this is not economically feasible due to the set-up cost being higher as compared to the carrying cost. At the heart of JIT, is a set of tools and techniques. To achieve the aims of JIT a disciplined approach is needed which incorporates three principles applied to the organisation: i. Elimination of Waste ii. Total Quality Management (TQM) iii. Total Employee Involvement iv.Elimination of Waste: Waste elimination is basically removal of any activity that is not value-added, but first it has to be identified. These activities don't increase product value and are costly to the company. Examples of non-value-adding activities include traditional production methods, i.e. inspection of parts, holding stock, inventories, time, and so on. Waste is eliminated from these activities by removal of defects and by not over producing hence, make-to-order. i.Total Quality Management: TQM eliminates waste by eliminating defects. In a JIT environment, the aim is to prevent defects from occurring, and this is achieved by detecting problems at their source. The whole organisation is involved in the process, right from the stages of manufacturing, product development and purchasing. Manufacturing uses statistical process control (SPC) and in-process testing (to allow detection at source), while product development ensures that new products can be manufactured to specification. Purchasing makes sure that; the parts that are bought are of the required quality. ii.Total Employee Involvement: Total employee involvement has management providing the leadership which results in employees wanting to be involved in the processes. Opportunity provided through education and training, and work teams. Kanban -Most companies in manufacturing sector view the making of a product as continuous from design, manufacture, and distribution to sales and customer service. For many companies, the soul of this process is the Kanban, a Japanese term for Visual record', which directly or indirectly drives much of the manufacturing

organisation. It was originally developed at Toyota in 1950s as a way of managing material flow on the assembly line. Over the past three decades the Kanban process, which is a highly efficient and effective factory production system, has developed into an optimum manufacturing environment leading to global competitiveness. The Kanban process of production is sometimes incorrectly described as simple just-intime management technique, a concept that attempts to maintain minimum inventory. The Kanban process involves more than fine tuning of production and supplier scheduling systems. Supplying the components only when needed in production it minimises the inventories, and monitors the work progress. It also allows industrial reengineering such as a 'module and cellular production' system and group production techniques. This is where team members are responsible for specific work element and employees are encouraged to effectively participate continuously in proving the Kanban processes for continuous improvement. The Japanese refer to Kanban as a simple parts-movement system it depends on cards and boxes/containers to take parts from one work station to another on a production line. Kanban stands for Kan-card, Ban-signal. The fundamental of the Kanban concept is that a supplier or the warehouse must or deliver components to the production line as and when they are needed, so that there is no storage in the production area. Within this system, workstation located along production lines only produce/deliver desired components when they receive a card and an empty container, indicating that more parts is needed in production. Each work station will only produce enough components to fill the container and then stop in case of line interruptions. In addition, it limits the amount of inventory in the process by acting as an authorisation to produce more inventories. Since Kanban is a chain process system in which orders flow from one process to another, the production or delivery of components is pulled to the production line. In contrast to the conventional forecast oriented method where parts are pushed to the line.The advantages of Kanban over the traditional push system are: i.A simple and understandable process ii. Provides quick and precise information iii. Low costs associated with the transfer of information iv.Provides quick response to changes v.Limit of over-capacity in processes vi. Avoids overproduction vii.Minimises waste viiiMaintains control ix.Delegates responsibility to line workers Benefits of JIT-JIT is continuously monitoring to reduce inventory levels of work in process (WIP), raw-materials and finished goods. Therefore, space is required is less with lower inventories so there is less chance of the product becoming damaged, spoiled or obsolete. Material handling of lots can be automated, and operations can be placed closer together, enhancing communication and teamwork. The following are some of the benefits of a properly implemented JIT system: i.Increased flexibility: This can be done through small batch sizes, which achieves faster throughput. Flexibility is a prerequisite, if small batch sizes are to be kept. A flexible workforce means that the operators must be multi-skilled which is done through training. Increases the freedom of worker to move from low demand to high demand areas. ii. Parts reduction: JIT constantly seeks to reduce inventory levels of raw materials, work in process and finished goods. Lower inventory means less space and less

chance of the product being obsolete, damaged or spoiled. Work in process inventories are reduced as a firm implements the 'pull system'. Raw material reduction is the important part of the JIT system and requires a sound relationship with the supplier. Inventories can be reduced if products are produced, purchased, delivered in small lots. To avoid unnecessary production delays, materials must arrive just before they are needed. It must be the correct material and must satisfy the quality specifications. iii.Increased quality: When operating a JIT system, disruption has a minimum impact. Therefore, quality problems need to be eliminated. Benchmark: Quality Function Deployment and service design can be used for device operations. Service employees need to learn the value of providing defect free services. iv.Simplicity of system: Product mix or volume changes as planned by Master Production Schedule (MPS), can be accomplished by adjusting the number of cards in the system. Production orders are prioritised by the cards on a post. Production orders for parts that are running low are moved in front of parts that have more supply. Q5.Briefly explain the functioning of a ERP purchase System Ans: ERP Purchase module handles all of the Purchase Requisitions, Purchase Orders, Receiving and Vouchering of Invoices for raw materials, MRP purchases, Maintenance and other MRO purchases, and one-time purchases. These and other terms related to purchase module are briefly explained below. Purchase Requisitions: You can create purchase requisitions in a variety of ways. This is efficient and saves time as you can create purchase requisition: i. Directly from a maintenance requirement ii. Easily by copying an existing requisition, using the same as/except capability iii.Automatically from MRP for suggested raw material purchases iv.Easily by entering multiple items or lines on a single requisition After you have created the Purchase Requisition, it is submitted for approval, with approval limits by amount. Your Approver can either approve and forward to Purchasing, or reject and return to the requestor. Purchase Orders: You can initiate a purchase order in multiple ways. You can: i.Enter necessary information to create a new PO from a manual requisition. ii. Copy a prior PO and change it as needed iii.Convert an approved purchase requisition to a purchase order, with the ability to split the requisition to multiple suppliers or combine multiple requisitions into one purchase order for the same supplier. iv.Make a release against a blanket purchase order. You can enter multiple items on one purchase order and each item can have multiple deliveries with separate quantity for each delivery. Receiving: You can combine the functions of recording the receipt of material and then verifying quantity into one transaction, or splitting them into multiple steps if they are performed by different users or at a different time. Supplier Returns: You can return a receipt to the supplier either during the receiving process or after the receipt has been made. The Supplier return can only be done prior to vouchering of the invoice for the related purchase order or receipt.

Vouchering Invoices: You can create vouchers with a three-way matching of invoices between the purchase order with the price, receipt quantity, and invoice (with price and quantity) from the supplier. Supplier file: The Purchase module contains a supplier file for accounting and purchasing. The Supplier file includes information such as payment terms, purchasing information, addresses and tolerance for receiving and invoicing. Q6.What is web ERP? What are its benefits? Ans: Web ERP has become a necessity for businessmen to be aware of their stock and inventory from anywhere, at anytime. Web ERP is an absolute web-based ERP system that requires only a web browser and PDF reader. It has now become an open source application and is offered as a free download.Web ERP systems are gaining popularity than ever. It allows businessmen to update their systems in large organisations without the need of installing updates at any remote locations, almost immediately. It provides real time information about finance, inventory, employee management, etc by providing advanced levels of service to consumers and suppliers Web ERP Inventory system has many benefits. Some of them include: 1. It processes data on the server side. Therefore, no installation is required on the client machines. 2. It provides Multilanguage support; users can view the interface in their preferred language. 3. It provides Multi-theme support; users can view the interface in their preferred graphical theme. 4. It runs on any web server and suitable for both high speed and low speed internet connections. 5. It can be installed on any device that has internet access. Web ERP is developed using PHP as a web development language. These scripts are developed with stability and ease so that the application becomes readable with a minimum knowledge of scripting in PHP and the structure of ERP. The logic is made as clear and simple as possible in order to remove any generalisation from the code, and to make it readable for all kinds of employees. It can also be configured easily on any operating system and the processing constraints required are also economical. Web ERP has many features that make it suitable for maintaining organisations of different sizes. It provides an easy structure of processing by supporting features such as multiple inventory locations and multiple currencies. .Web ERP maintains all records that provide information like, amount of inventory stock available, amount of inventory ordered, amount of inventory sold, and amount of inventory that is defective.