ERP

ENTERPRISE RESOURCE PLANNING

DIDA LIONIESA SUSILO |
12/343552/PEK/17968
MASTER OF MANAGEMENT UNIVERSITAS GADJAH MADA
2013
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TABLE OF CONTENTS
TABLE OF CONTENTS 1
LIST OF TABLES AND FIGURES 2
1 INTRODUCTION 3
2 ENTERPRISE RESOURCE PLANNING (ERP) 3
3 ERP HISTORY 4
4 CRITICAL SUCCESS FACTORS OF ERP 5
5 ERP ADVANTAGES AND DISADVANTAGES 8
REFERENCES 10


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LIST OF TABLES AND FIGURES

FIGURE 1. ERP SYSTEM CONCEPT .......................................................................... 4
FIGURE 2. DIMENSIONS OF ERP CRITICAL SUCCESS FACTORS ...................... 6

TABLE 1. ERP HISTORY ............................................................................................. 4

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1 Introduction
Each functional unit in organizations is derived from its different functional
structure. Mostly, each of the unit is works toward their own goals and objectives,
instead of working based on organizational goals. Simultaneously the business
environment is becoming increasingly complex with functional units requiring more
and more inter-functional data flow for decision making, timely and efficient
procurement of product parts, management of inventory, accounting, human resources
and distribution of goods and services.
This issues happened because of the information flow in organization was
founded are restricted by its functions. Here, the Enterprise Resource Planning (ERP)
system was used as the solutions to overcome the issues. ERP provides a system to
capture information organization-wide, with minimum redundancy. Many
organizations acquire and implement ERP, nowadays. ERP is used by the
organizations and companies to improve the performance in operation and in strategic
value.

2 Enterprise Resource Planning (ERP)
Enterprise resource planning systems or enterprise systems are software
systems for business management, encompassing modules supporting functional areas
such as planning, manufacturing, sales, marketing, distribution, accounting, financial,
human resource management, project management, inventory management, service
and maintenance, transportation and e-business (Rashid, Hossain, & Patrick, 2002).
The term Enterprise Resource Planning is originally coined in 1990 by The
Gartner Group to describe the next generation of MRP II software. Historically, ERP
evolved from material requirement planning (MRP) and manufacturing resource
planning MRP II systems of the 1970s and the 1980s, respectively. MRP and MRP II
systems were designed to systemically link different aspects of process information
within specific business context such as manufacturing.
ERP is defined as conceptual definition involves the integration of business
processes within an organization, with improved order management and control,
accurate information on inventory, improved workflow, and supply chain
management, and better standardization of business and best practices. And ERP as a
system is about technological infrastructure designed to provide the required
functional capability required to turn the ERP concept into a reality. ERP systems
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should not be a mere technological artifact; it is a core platform designed to support
and lever the capabilities of the tools and processes used by an organization. ERP
system is the technological manifestation of the ERP concept, its benefits,
capabilities, goals, and strategic value (Djavanshir, Tarokh, & Reza, 2012). Below is
the main concept of ERP systems in most organizations.










Figure 1. ERP System Concept

3 ERP History
Based on Rashid, Hossain, & Patrick (2002), ERP development is closely
related to the developments of the computer hardware and software systems. It is
gradually changing from era to era.

Table 1. ERP History
2000s Extended ERP
1990s Enterprise Resource Planning (ERP)
1980s Manufacturing Resources Planning
(MRP II)
1970s Material Requirements Planning
(MRP)
1960s Inventory Control Packages


Customers
Sales &
Distribution
Service
Applications
CENTRAL
DATABASE
Financial
Applications
Manufacturing
Applications
Inventory
Management
Suppliers
Corporate
Reporting
HR
Management
Front-Office Back-Office
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1960s On this era, most organizations designed, developed and implemented
centralized computing systems. The organizations are mostly automating their
inventory control systems using inventory control packages (IC) on that time. There
were some systems based on programming languages such as COBOL, ALGOL and
FORTRAN.
1970s On 1970s Material Requirements Planning (MRP) systems were developed.
This era was mainly planning the product or parts requirements according to the
master production schedule.
1980s Emphasize on optimizing manufacturing processes by synchronizing the
materials with production requirements, MRP II were developed in this era. MRP II
included areas such as shop floor and distribution management, project management,
finance, human resource and engineering.
1990s Begin in the late 1980s, ERP system were developed. It was buint with the
power of enterprise-wide inter-functional coordination and integration. Based on the
technological foundations of MRP and MRP II, ERP systems integrate business
processes including manufacturing, distribution, accounting, financial, human
resource management, project management, inventory management, service and
maintenance, and transportation, providing accessibility, visibility and consistency
across the enterprise. The vendors in this era were added more modules and functions
as add-ons to the core modules giving birth to the extended ERPs. These ERP
extensions include advanced planning and scheduling (APS), e-business solutions
such as customer relationship management (CRM) and supply chain management
(SCM).

4 Critical Success Factors of ERP
In this technology-oriented centuries ERP has took a critical place in an
organizations development. It was argued as a vital part of organization in defining
their strategies. According to OLeary 2000; Sandoe et al. 2001; Bharadwaj et al.
2007, successful implementation of an ERP system can reduce inventory, production,
shipping, labor, and IT maintenance costs, and thus lead to greater effectiveness and a
better competitive edge in terms of improved strategic initiatives and responsiveness
to customers (Shaul & Tauber, 2013).
Furthermore, article by Shaul & Tauber on 2013 is classifies Critical Success
Factors (CSFs) and subfactors that play a role in todays ERP implementation and
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management. Studies of the CSFs affecting an ERP implementation have examined
different dimensions.













Figure 2. Dimensions of ERP Critical Success Factors

Late 1990s The Enterprise Era
Technological Different technical composition (graphical user interface, relational
database, client-server architecture, and open system portability) has been developed
into ERP on this era.
LEs-SMEs According to Liang and Xue (2004), the ERP market has traditionally
been limited to LEs (Large Enterprises). The main reasons for adopting an ERP
system were: Y2K problem, Euro conversion, and integration with other companies of
the group (Shaul & Tauber, 2013).
Strategy ERP software was focused on the speed of the process as a whole, to
streamline the process with higher success rates (Murray & Coffin, 2001).
Global Holland and Light (1999) argued that IT factors, in addition to known
business and management factors, played a key role in the context of global ERP
implementation.

Early 2000s Collaborative Commerce Era
Local-Global Competition increased, customer driven power with the increasing
transparency of the global market place (Akkermans et al. 2003).
Developing
Countries
Global
CULTURAL
SMEs
TECHNOLOGICAL
Organization
Large Enterprises
STRATEGIC
TACTICAL
Local
Private Sector
Life Cycle
Partner
Integrated Components
Developed
Countries
End User
Public Sector
Specific Phase
Vendor
Core ERP
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Core ERP Integrated Components ERP didnt provide full support for business
automation.
Vendors Industry consolidation took place. Vendors saw substantial revenue growth
from the acquisition of other software.
Strategy Major vendors acquisitions enabled them to offering modules to give the
solutions.
Organizational Organizational factors were equally important throughout the life
cycle whereas technical factors were more crucial during the early phases.
SMEs-Les ERP vendors were having difficulties to penetrate the large company
market sector further, while the SME market showed steady growth.
Information technology Until 2002, less than 25% of research ERP articles focused
on IT. These questions emerged in 2003 when 40% of the articles focused on ERP
and architecture, design, data models, Web services, enterprise application
integration, etc.
Developed-Developing Countries There was wide acceptance of ERP in developed
countries, while developing countries lagged far behind.
Public Sector Specific characteristics of the public sector ERP life cycle and
provided insights into factors affecting ERP implementation along with the strengths
and weaknesses of ERP systems for public sector organizations.
ERP Life cycle ERP systems must be maintained and upgraded.

Mid Decade Leveraging the Integration
Core ERP: Integrated Components ERP license revenue remained steady.
Strategy ERP models tended to differ in terms of entry into specific vertical
markets.
Vendors ERP vendors began to either acquire or develop extensions such as CRM
and SCM.
Information technology Integration, balancing between integration and best of
breed functionality started to shift. Customization, To avoid ERP software
modifications which were perceived as slowing down the project, the cause of risky
bugs needing to be rewritten in an upgrade, many organizations were committed to a
vanilla implementation. Another critical success factors in IT is its flexibility and
scalability.
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Developed-Developing countries North America lost some of its market share to
emerging markets in Asia-Pacific and Latin America. Europes overall share
remained steady at 39%.
LEs-SMEs Globalization, centralization, and regulatory compliance were the key
drivers for continued ERP investment among LEs.
Culture Organizational culture is embedded within national culture and it is
regarded as a unique factor affecting ERP systems implementation success.

Late Decade Seeking a Better Utilization of IT Infrastructure
Information Technology The spread of mobile devices has prompted ERP vendors
to extend ERP.
Tactical Companies with strained IT budgets have been forced to be more prudent
with their software implementation spending.
Vendors ERP vendors continue to acquire products or develop their own
functionality that is either comparable to or better than many of the best of breed
applications, and hence enable companies the opportunity, via single source, to
maintain or create a competitive advantage based on unique business processes, rather
than adopting the same business processes which would leave no firm with an
advantage.
Global- Local ERP system features developed by local vendors tend to be more user
friendly for domestic or local users by incorporating culture-specific factors into their
systems, whereas those developed by global vendors are likely to be less localized
than domestic ERP systems due to their orientation toward the global market.
SMEs-Les SME environment may differ substantially from ERP implementations in
LEs and cannot be extrapolated to SMEs.
Private Public sector Non-manufacturing markets such as retail, financial
services, and the public sector had been developed.

5 ERP Advantages and Disadvantages
According to Rashid, Hossain, & Patrick (2002) there are some advantages of
the use of ERP in business and/or organizations. ERP can provides more reliable
information access by using the common DBMS, consistent and accurate data, and
improved reports. It might avoid data and operations redundancy through modules
access same data from the central database, avoids multiple data input and update
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operations. It can minimize retrieving and reporting delays due to delivery and cycle
time reduction. Cost reduction time savings can be achieved by enterprise-wide
analysis of organizational decisions. ERP can adapt easily in business changing
environment and also easy to restructure. Improved scalability by structured and
modular design with addons. It may mproved maintenance Vendor-supported long-
term contract as part of the system procurement. Furthermore, ERP may reach global
outreach by extending the modules such as CRM and SCM. The use of e-commerce,
e-business internet commerce, and collaborative culture also become the advantage of
ERP.
However, ERP doesnt come without any disadvantages. Some disadvantages
that can be defined from ERP implementation, such as time-consuming, expensive,
modules conformity, the dependency to the vendor, complexity of the features,
scalability and global outreach of the system, and extended ERP capability. The
impacts of these things can be reduced by minimize sensitive issues, internal politics
and raise general consensus; the architecture and components of the selected system
should conform to the business processes, culture and strategic goals of the
organization; choose the best of breeds long-term committed support; considering the
implementation and needful carefully; longterm commitment to product and services,
consider Internet-enabled systems; and have to be considered the middle-ware add-
on facilities and extended modules such as CRM and SCM.

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REFERENCES

Djavanshir, E. N., Tarokh, M. J., & Reza, G. (2012). ERP: a literature survey.
International Journal of Advanced Manufacturing Technology , 9991018.

Rashid, M. A., Hossain, L., & Patrick, J. D. (2002). The Evolution of ERP Systems: A
Historical Perspective. In M. A. Rashid, L. Hossain, & J. D. Patrick, Enterprise
Resource Planning: Global Opportunities and Challenges (pp. 1-16). Idea Group
Publishing.

Shaul, L., & Tauber, D. (2013, August). Critical Success Factors in Enterprise
Resource Planning Systems: Review of the Last Decade. ACM Computing Surveys,
Vol. 45, No. 4, Article 55 , pp. 1-40.