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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

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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

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 applicable worldwide. An ERP package imposes its own logic
on a companys strategy, 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.

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ERP Implementation :

The steps are given follows :

1) Identifying the needs of implementing an ERP package.
2) Evaluation the As Is situation of the business i.e. to understand the
strength and weakness prevailing under the existing circumstances.
3) Deciding the would be situation for the business i.e. the changes
expected after the implementation of ERP
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 :

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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.
Taking information from every function it is a tool that assists employees and
mangers plan, monitor and control the entire business. A modern ERP
system enhances a manufacturers 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.

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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).

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

Timelin System Description
e

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 1960s Inventory Inventory Management and control is the
Management combination of information technology and
& Control 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 Materials Requirement Planning (MRP) utilizes
Requirement software applications for scheduling production
Planning processes. MRP generates schedules for the
(MRP) 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
Requirements utilizes software applications for coordinating
Planning (MRPmanufacturing processes, from product planning,
II) parts purchasing, inventory control to product
distribution.
2000s Enterprise Enterprise Resource Planning or ERP uses multi-
Resource module application software for improving the
Planning (ERP) 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

( 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

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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 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

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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, 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

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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
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

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 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.

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

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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

Malicious hacking is at the forefront of everyones mind during the beginning

of this year because of national news coverage. But hacking and corporate
espionage arent new trends, and theyre not going to disappear. The number
of threats is increasing, but more concerning 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 find
theyre in need of additional, general ERP capabilities. It may also reduce the
headaches 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 the market.
As a result, the price of ERP may be on the decline. What this means for
organizations is increased access to ERP tools. Its likely, however, that
vendors will make up these price reductions in add-on modules and
customizations designed to extend ERP capabilities.

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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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