Enterprise Systems

Enterprise System
Manufacturing Accounting

Business Process
Vendors Customers
Enterprisewise Business
Process

Sales and
Marketing
Human Finance
Resources
Benefits of an enterprise system
• Firm structure & organization-One
organization
• Management-Companywide knowledge-
based management process
• Technology-Unified platform
• Business-More efficient operations &
customer-driven business processes
 Challenges of enterprise systems

• Daunting implementation
• High upfront costs & future benefits
• Inflexibility
• Hard to realize strategic value
 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 Enterprise wide 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 6M’s 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 System Description

1960s Inventory Management & Inventory Management and control is the combination of information technology
Control 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 Materials Requirement Planning (MRP) utilizes software applications for scheduling
Planning(MRP) 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

1980S Manufacturing Manufacturing Requirements Planning or MRP utilizes software applications for
Requirements coordinating manufacturing processes, from product planning, parts purchasing,
Planning(MRP II) inventory control to product distribution

1990s Enterprise Resource Enterprise Resource Planning or ERP uses multi-module application software for
Planning(ERP) 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
 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 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
 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?
• India’s 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 • J. D. Edwards
• PeopleSoft • System Software
• Oracle • Associates
• Computer • Geac Computer
Associates Corp.
• Baan • IBM
• JBA Holdings
 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
 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-the-
minute 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)