ENTERPRISE RESOURCE

PLANNING

Manojit Chattopadhyay
 ERP-Introduction

Represents significant business investment

Help to assure competitiveness, responsiveness of
customer demand, flexibility,
Implementing for best practices, leverage IT resource
Success depends on: effectiveness of management,
organisational change, use of advance IT
Incur cost and time overruns
Driven by technological motivations rather by business
Fail to harness full potential of ERP and measure the
business outcome of ERP
 ERP-Introduction

One study found >60% of Fortune 500 companies had

adopted of ERP systems (Olson, 2004)
ERP REDUCE inventories, shortening cycle times,
lowering costs and improving SCM practices
ERP systems are designed to integrate all of an
organisations information systems computing.
ERP has been credited with increasing speed with which
information flows through a company.
ERP enables companies to align business strategy
with information system strategy.
creating one-source data that results in less confusion
and error
providing on-line access to information all of these
facilitate better organisational planning,
communication and collaboration.
What is ERP System

Meaning of ERP
Enterprise Resource : All resources in an organization, including:
capital, equipment, material, intelligence, and so on.
What and how to Plan

Definition : ERP systems is a software solution that

addresses the enterprise needs. It takes the process view of
an organization to meet the organizational goals and
tightly integrates all functions in that organization.
The practice of consolidating an
enterprises planning, manufacturing,
sales and marketing efforts into one
management system.
Combines all databases across
departments into a single database that
can be accessed by all employees.
ERP automates the tasks involved in
performing a business process.
Merits of ERP:

Technical perspectives: integrating enterprise wide

computing is attractive as it fosters consistency through
use of single source files and efficiency through making
single data entry possible for all the organisations
applications.
Financial Perspective: promising economic savings
through integration of application into a big system.

Organisational perspective: all members of

organisation learn to use the same system, thus
enhancing intra-organisational communication.
There is problem in the conception of ERP
and the delivery of ERP.
Still it is an attractive idea.
ERP can lower the costs of doing business
making. it is a competitive tool in many
industries.
Why Enterprise Have to Use ERP Systems
-------Problems in enterprise information system
1. Data exchange blocks;
2. Stove-piped operations and stove-piped systems;
3. Authorization;
It is not always the cast that the more communication,
the better organizational performance

4. business process reengineering.

Examine the business process, question the necessity
step by step

Old Analyze the Reengineering

processes purpose steps
of those processes
Solution
Integrated enterprise information systems
It is a set of communication channels in a business
organization, combined together in such a way as to form
one network by which information is gathered and
disseminated.

======ERP System
Widely integrated information systems covering all
functional areas. It integrates database, applications,
interfaces, tools, and business process reengineering
( BPR ).
 ERP Working Theory

Customers

ERP
system
Departments Network Server
(data
exchange)

Suppliers
 How it Came:
1960s: software packages with inventory control
1970s: MRP systems
Production schedule with materials management
1980s: MRPI systems
Adds financial accounting system
1990s: MRPII
Integrated systems for manufacturing execution
Late 1990s: ERP
Integrated manufacturing with supply chain
 An ERP Example: Before ERP

Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers

Checks for Parts

Calls back Not in stock
Accounting We ordered the parts
Files

Accounting
Sends report
Invoices
Sends report
accounting
Ships parts
Vendor
Warehouse
Order is placed We Need parts #XX
with Vendor
Inventory
Purchasing Files
Files We ordered the parts
Purchasing
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An ERP Example: After ERP
Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting

Financial Data exchange;

Books invoice against PO

Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO

Order is placed
with Vendor

Warehouse
Vendor Purchasing

Ships parts
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And invoices accounting
 MARKET for ERP

It was SAPs idea in the early 70s that

revolutionised large organisations approach to
business computing
Due to Y2K problem ERP sales increased during
late 90s
Thus large organisation solved two problems:
integrating organisational computing as well as
became Y2K compliant
 After Y2K rush sales dropped Vendors started
developing products more attractive
Vendors then shifted to develop products those
are attractive to small to medium sized
organisation and additionally reduce the issues
related to problem of faster implementation with
offering of some sophisticated functionality like
CRM and e-business support.
 Moreover marketed heavily in govt and educational
sectors
There are currently 100 of vendors but still
dominated by the following firms popularly referred
as BOPSE using the letter of five vendors
 Table: Major ERP Vendors (Source:T.H.Davenport,
1998)
Vendor Origin Salient Features

BAAN Holland An early ERP vendor

Oracle USA A relative newcomer, but quickly

gaining share

People Soft USA Originally focused on human resource

management

SAP Germany The pioneer and the largest firm

JDEdwards USA Internet emphasis

ERP Market

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 What ERP Systems Can Offer to an
Enterprise? Benefits

ERP creates value through

1. integrating activates across a firm,
2. Implementing best practices for each business process
3. Standardizing processes within organizations
4. Creating one-source data
5. Providing on-line access to information
---facilitate better organizational planning,

communication, and collaboration.

 ERP Modules
Reasons of designing ERP systems in
Modules
1. Obtain specific functionality
2. Cost
3. Implement the system in bits rather
than bring entire massive system online
at one time
 Modules
Module Degree of module used by
companies

Financial and Accounting 91.5%

Materials management 89.2%
Production Planning 88.5%
Order entry 87.7%
Purchasing 86.9%
Financial Control 81.5%
Distribution/logistics 75.4%
 Ways to Developing ERP System
Method Advantages Disadvantages

Develop in-house Best fit with organizational Most difficult to develop,

needs most expensive, Slowest

In house system with Gain commercial advantages Difficult to develop,

vendor supplements combined with organizational fit Expensive, slow
Best-of-breed Theoretically gain best of all Difficult to link modules,
systems slow, potentially inefficient
Customized vendor Retain flexibility while keeping Slower, usually more
system vendor expertise expensive
Selected vendor modules Less risk, relatively fast, least If expand, long run time and
expensive cost higher
Full vendor system Fast, less expensive, efficient Inflexible

Application service Least risk, least cost, fastest, At the mercy of the provider,
provider least subject to vendor change no control, and subject to
price increases
Third party software designed to integrate
software applications from several vendors
known as middleware is needed that enables
cross platform operating system communications.
Thus e-commerce, data-warehouse, CRM, SCM
and other enhancement can be added to ERP
systems.
The best-of-breed can also be connected using
the middleware to the ERP backbone.
Davenport gave choices( when a firm want to
utilise its own methods within an ERP) like
Rewriting the code internally or using existing
system with interfaces.
However this add time and cost to
implementation. Thus more the customisation of
an ERP, the less the ability to communicate
seamlessly within system components and across
supplier and customer systems.
 ERP System Selection Risks
The cost, time, and risk of an ERP project depends on
following factors:

1. Project management ability;

2. Experience with this type of environment;
3. Experience with the programming environment;
4. Experience with the language or system used;
5. Familiarity with modern programming practices;
6. Availability of critical equipment, software, and
programming language;
7. Completeness of project team;
8. Personnel turnover;
9. Relative control of project manager over project team.
 Module Specialization
BAAN has similar modules to other vendors but main
focus is on industry specific product variations
All the ERP vendors have undertaken some
specialisations in ERP from year 2000
People soft has CRM
Interesting is Microsoft entry in ERP market (includes
Microsoft Great Plains Business Solutions) on
accounting, finance, CRM, e-buisiness, HR, payroll,
manufacturing, project accounting, SCM
 Vendor BAAN BAAN PeopleSoft PeopleSoft
Product Discrete Manufacturing Process Industry solutions non profit
Manufacturing
Industries served Aerospace and defense Chemicals Communications federal govt.
Automobile Food and beverage Financial services Higher
education
Industrial machinery Pharmaceuticals High technologies Public sectors
and equipment

Electronics Cable and wire Professional services Human

resources and
payroll
Telecommunications Pulp and paper Utilities Manufacturing
Construction Metals Consumer products Project
accounting
Logistics Health care
Industrial products
Staffing
Wholesale distribution
 Measurement of ERP Project
Intangible factors
increases in market share
improved customer service
better corporation image
employee satisfaction
supply chain integration
ability to support e-business operation
Hidden outcomes
change how people do their jobs
The changing nature of information technology
high dynamic technology and long-term project for
implementing ERP
 Critical Success Factors in ERP
1. Clear understating of strategic goals
2. Commitment by top management
3. Excellent implementation project management
4. Great implementation team
5. Successful coping with technical issues
6. Organizational commitment to change
7. Extensive education and training
8. Data accuracy
9. Focused performance measures
10. Multisite issues resolved