ENTERPRISE RESOURCE

PLANNING- Module 1
Faculty:
Prof. Gayathri Ranjit
 Contents
Enterprise
Business Functions and Business
Processes
Importance of Information
Characteristics of information
Types of information
Information System
Components of an information system
Different types of information systems
Management Information System
 Contents (Ctd)
Enterprise Resource Planning
Business modeling
Integrated data model
Origin and Need for an ERP System
Benefits of an ERP System
Reasons for the Growth of ERP
Market
 Enterprise
An enterprise is a group of people
with a common goal, which has
certain resources at its disposal to
achieve this goal.

In traditional approach, the

organization is divided into different
units based on the functions they
perform. These departments function
in isolation and have their own
systems of data collection and
 Enterprise
In enterprise way the entire organization is
considered a system and all departments
are its sub system, each sub system
knows what others are doing , why they
are doing and what should be done to
move the company towards common goal.

If the information that is generated is

accurate, timely and relevant, then the
systems will go a long way in helping the
organization to realize its goals
Enterprise Resource Planning (ERP) programs:
Core software used by companies to coordinate
information in every area of business
Help manage companywide business processes
Use common database and shared management
reporting tools
The activities supported by ERP system include all
core functions of an organization, including financial
management, human resource management, and
operations.

Business process:
Collection of activities that takes some input and creates
an output that is of value to the customer
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Four Functional Areas of Operation
1. Marketing and Sales (M/S)
2. Supply Chain Management (SCM)
3. Accounting and Finance (A/F)
4. Human Resources (HR)

Business functions:
Activities specific to a functional area of
operation

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Functional Areas of Operation
Functional Areas of Operation
Functional areas are interdependent
Each requires data from the others
Better integration of functional areas leads to
improvements in communication, workflow,
and success of company
Information system (IS): Computers,
people, procedures, and software that store,
organize, and deliver information

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 Business Processes
Collection of activities that takes one or more
kinds of input and creates an output that is of
value to customer

Customer can be traditional external

customer or internal customer
Thinking in terms of business processes
helps managers to look at their
organization from the customers
perspective
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Business Processes

11
 Business Processes
Businesses must always consider customers
viewpoint in any transaction
Successful customer interaction
Customer (either internal or external) is not
required to interact with each business function
involved in the process

Successful business managers view

business operations from the perspective
of a satisfied customer 12
 Business Processes
Sharing data effectively and efficiently between
and within functional areas leads to more
efficient business processes

Integrated information systems:

Systems in which functional areas
share data

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Business Processes

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 Business Processes
Businesses take inputs (resources)
and transform these inputs into
goods and services for customers
Inputs: Material, people, equipment

Managing inputs and business

processes effectively requires
accurate and up-to-date information
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 Employees working in one functional area
need data from employees in other
functional areas
Managers think in terms of business
processes that integrate the functional
areas
There is a need to share information
between processes and functional areas
ERP software provides this capability by
means of a single common database
Information is an Important
Resource
It is scarce
It has a cost
It has alternative uses
There is an opportunity cost factor involved if
one does not process information
It is critical
Information is needed to ensure effective and
efficient decisions, leading to prosperity of
the organization
Data and Information
Data vs. Information
Data
A given, or fact; a number, a statement, or an image
Represents something (quantities, actions and objects) in the real
world
The raw materials in the production of information
Information
Data that have meaning within a context
Data that has been processed into a form that is meaningful
to the recipient and is of real or perceived value in the
current or in the prospective actions or decisions of the
recipient.
Data Manipulation
Example: customer survey
Reading through data collected from a customer survey with
questions in various categories would be time-consuming and
not very helpful.
When manipulated, the surveys may provide useful
information.
Types of Information
Characteristics of Useful Information
System
System: A set of components that work
together to achieve a common goal.
Computer-based Information Systems
take data as raw material, process it,
and produce information as output.
Components of an Information System
Types of Information Systems
 Types of Information Systems

Operational-level systems support

operational managers by keeping track of
the elementary activities and transactions
of the organization, such as sales, receipts,
cash deposits, payroll, credit decisions, and
the flow of materials in a factory.
Management-level systems serve the
monitoring, controlling, decision-making,
and administrative activities of middle
managers.
Strategic-level systems help senior
management tackle and address strategic
issues and long-term trends, both in the
Types of Information
Systems
Transaction Processing
System
Transaction Processing Systems (TPS):
Basic business systems that serve the operational level
A computerized system that performs and records the daily
routine transactions necessary to the conduct of the
business
Management Information
System
Serve middle management
Structured and semi-structured decisions
Provide reports on firms current performance,
based on data from TPS
Past and Present Data
Internal Orientation
Provide answers to routine questions with
predefined procedure for answering them
Typically have little analytic capability
Decision Support System
Serve middle management
Support non-routine decision making
E.g. What is impact on production schedule
if December sales doubled?
Often use external information as well
as information from TPS and MIS
Processing is interactive in nature
Output in form of Decision analysis
Executive Support Systems
Support senior management Strategic Level
Address non-routine decisions requiring
judgement, evaluation, and insight
Incorporate data about external events (e.g.
new tax laws or competitors) as well as
summarized information from internal MIS
and DSS
User friendly interface
What if capabilities
Input from TPS, MIS and DSS
Processing is interactive and output in form
of projections
Interrelationship Among
Systems
MIS Definition and Concept
A management information
system(MIS) is system of collecting,
processing, storing, disseminating and
utilizing data in the form of information
needed to carry out the functions of
management.
Today, the term is used broadly in a number
of contexts and includes (but is not limited
to):
Decision support systems,
Enterprise Resource Planning(ERP),
Supply Chain Management(SCM),
Customer Relationship Management(CRM),
project managementand database retrieval
Difference between management information systems
and information systems

Information system applied to management

context is called MIS. IS can be applied to any
area of business while MIS is applicable for
managerial decision-making.
IS means use of hardware and software for any
business. MIS can be used in any form - even
manual reports, which aid decision-making
MIS is used to analyze other information
systems applied in operational activities in the
organization.
MIS summarize and report on the companys
basic operations. The basic transaction data
from TPS are compressed and reported
Outputs of MIS
Scheduled reports
Produced periodically, or on schedule (daily,
weekly, monthly)
Key Indicator Report
Summarizes the previous days critical
activities
Demand Report
Gives certain report at manager's request
Exception Report
Automatically produced when a situation is
unusual or requires management action
MIS Functional View
Sample MIS Report
 Origin of ERP
Most IT developers developed need based
information systems that were non compatible.
IT implementations automated only the existing
applications and not the business functions
To draw real benefits from IT, one has to devise
a system with a holistic view of the enterprise
Such a system should facilitate seamless flow of
information across departments
Such systems can plan and manage all the
resources of the organisation and are called
Enterprise Resource Planning
Isolated information systems A
pre-ERP scenario
 Need for ERP
ERP is a method of effective planning of all the
resources in an organisation
ERP covers the techniques and concepts
employed for the integrated management of
businesses as a whole, from the viewpoint of
effective use of management resources , to
improve the efficiency of an enterprise
Today having an ERP is not a luxury, but a
necessit
Having a properly implemented ERP system
and a fully trained workforce that knows how to
use system in best possible way is a must for
survival
Information integration through
ERP systems
 ERP Software
ERP software is a mirror image of the major
business processes of an organisation
When a warehouse in Noida enters a
customer order , the data flows
automatically to others in the company who
need to see it to the finance department
at the company headquarters in Mumbai,
and to the manufacturing plant in Chennai
Such information integration caught the
attention of CEOs and CFOs and sales of
ERP took off in the early 1990s
Common ERP Myths
1.ERP means more work and procedures
2.ERP will make many employees redundant
and jobless
3.ERP is the sole responsibility of the
management
4.ERP is just for the managers/ decision-
makers
5.ERP is just for manufacturing organizations
6.ERP is just for the ERP implementation team
 Myths
7.ERP slows down the organization

8.ERP is just to impress customers

9.ERP package will take care of everything

10.One ERP package will suit everybody

11.Organizations can succeed without ERP

 Truths
1.Today's ERP tools automate many of the
repetitive,montonous and tedious
procedures,task, and processes.
2.ERP is a people system made possible by the
computer software & hardware.
3.The company management is not responsible
for the day-to-day operation of the ERP system.
4.Users should be trained to fully utilize the
various features available.
5.It evolved from Material requirement
planning(MRP) and Manufacturing Resource
Planning (MRP-II)
Evolution of ERP
MRP-outgrowth of BOM(bill of
material)

What products are we going to

make?

What are the materials needed to

make these products?

What are the materials that are

presently available in stock?

What are the items that need to be

purchased
Closed-loop MRP

Not only material requirements

planning but a series of functions for
automating the production process
MRP-II

After above in addition to sales and

operational planning, financial interface
and simulation capabilities
ERP
BENEFITS OF ERP

Direct

Improved Efficiency

information integration

faster response time to customer
queries

Indirect

Better corporate image

improved customer goodwill

customer satisfaction
 Benefits of ERP system
Business Integration
ERP packages are called integrated due to
the automatic data updation between
related business components.

Flexibility
Diverse multinational environments such as
language, currency, accounting standards
are covered in one system, and functions
that manage multiple locations that span a
company.
 Benefits of ERP system
Better Analysis and Planning
Capabilities
carry out the filling and analysis of data
from a variety of dimensions, one is able
to give decision-makers the information
they want, thus enabling them to make
better and informed decisions
Use of latest technology
open systems, client / server
technology, Internet /Intranet, CALS
(computer-aided acquistion and logistics
support), e-commerce
 Reasons for growth of ERP
market
To enable improved business
performance
To support business growth
requirements
To provide flexible, integrated real-
time decision support
To overcome limitation of legacy
systems
To take advantage of the untapped
mid-market (medium sized
 Enterprise

An enterprise is a group of people with a

common goal, which has certain
resources at its disposal to achieve this
goal.
In traditional approach , the organization
is divided into different units based on
the functions they perform.
These departments function in isolation
and have their own systems of data
collection and analysis.
Enterprise
 Enterprise
In enterprise way the entire organization is
considered a system and all departments are
its sub system, each sub system knows what
others are doing , why they are doing and what
should be done to move the company towards
common goal.
Information about all aspects of the
organisation is stored centrally and available to
all departments
ERP helps to accomplish this task by integrating
the IS, enabling smooth and seamless flow of
information across departmental barriers, and
automating business processes and functions
Enterprise
 Business Modelling
Business Modelling is one of the first
activities in any ERP project
It is a representation of the business
as one large system showing the
interconnections and
interdependencies of various
subsystems and business processes
Based on the business model, the
ERP system is developed
 Business Modelling
Business model is a representation of
the actual business- what are the
various business functions of the
organisation, how are they related,
what are their interdependencies etc
Business model is represented in
graphical form using flow charts and
flow diagrams
From the business model , the data
model of the system is created
Business Model
 Integrated data model
One of the critical steps in ERP implementation is
creation of integrated data model
With implementation of ERP systems, isolated
databases can no longer be there and all data has
to be fetched from the integrated database
This will reduce data redundancy and provide up-to-
date info about the organisation to all employees
Integrated database should reflect the day to day
transactions and give a snapshot of the organisation
Integrated data model is derived from the business
model
Information integration and process / procedure
automation should be kept in mind when designing
data model for the ERP system
Integrated data model