Enterprise Resource

Planning
Course Code: MS- 235
Credits: 3

ERP Key Concepts

Enterprise

Resource Planning (or

ERP in short) systems attempt to
integrate all data and processes of
an organization under one umbrella.

Definition of ERP
Enterprise
Business Environment or Business Activities
conducted

Resource
Various Resources available within an
enterprise such as, Finance, Materials,
Manpower, Equipment, Facilities and
infrastructure etc.

Planning
Activity to optimize the utilization of resources

ERP attempts to integrate all departments

and functions of a company into a single
system that can serve all those different
departments' needs.

Myth about ERP

ERP

means more work and procedure.

ERP will make many employee redundant
and jobless.
ERP is the sole Responsibility of the
management.
ERP is just for the Manager/decision
makers
ERP is just for Manufacturing
Organizations
ERP is just for the Implementation Team
ERP slows down the organization
ERP is very expensive

Enterprise Resource Planning

Evolution of ERP
1960s - Systems Just for Inventory Control
1970s - MRP Material Requirement
Planning
(Inventory with material planning &
procurement)
1980s - MRP II Manufacturing Resources
Planning
(Extended MRP to shop floor & distribution
Mgnt.)
Mid 1990s - ERP Enterprise Resource
Planning
(Covering all the activities of an
Enterprise)

Reason for the growth of the

ERP market
Enabled improved Business
performance
I. Cycle time reduction
II.Increased business agility.
III.Inventory Reduction
IV.Order Fulfillment Improvement
Support Business growth requirement :I. New products/product lines ,new
customers
II. Global requirements including
multiple currencies, language

To be continued
Provide flexible, integrated, real-time
decision support.
1. Improve responsiveness across the
organization .
Eliminate Limitation in legacy system
1. Century dating issues
2.Fragmentation of Data and
processing
3.Inflexibility to change
4.Insupportable Technologies

Advantages of ERP
Business

integration
Flexibility
Better analysis and Planning
Capabilities
Use of latest Technology

Why implement an ERP

System?
To support business goals

Integrated, on-line, secure, selfservice processes for business

Eliminate costly
mainframe/fragmented technologies

Improved Integration of Systems and

Processes
Lower Costs
Empower Employees
Enable Partners, Customers and
Suppliers

Enterprise Resource Planning

Why ERP?

For Management to know what is happenin

in the company
One solution for better Management
For cycle time reduction
To achieve cost control & low working capita
To marry latest technologies
To shun the geographical gaps
To satisfy the customers with high expectati
To be Competitive & for survival

Definition of ERP
Enterprise
Business Environment or Business Activities
conducted

Resource
Various Resources available within an enterprise
such as, Finance, Materials, Manpower,
Equipment, Facilities and infrastructure etc.

Planning
Activity to optimize the utilization of resources

ERP attempts to integrate all departments

and functions of a company into a single
system that can serve all those different
departments' needs.

Key benefits

Standardization of processes,
Integration of all the business units, Encompassing employees,
Vendors, Suppliers
Flexibility to modify the operating processes
Imbibe excellence performance, increase operating efficiency,
leverage technology.
Online information to all members.

Project monitoring for time and cost

Availability of Material to avoid the extra purchase etc.
Utilization of Manpower in value added task.
Real-time information for all the business no need of
any reconciliation

Develop Best Business Practices in organization

Characteristics of ERP
Flexibility:-ERP

is flexible to
respond to the changing needs of an
organization.
Modular & open:-It has open
system architecture .i.e. any module
can be interfaced or detached
whenever required without affecting
the other modules
Comprehensive:-support variety of
organizational functions.

Characteristics of ERP
Beyond

the company:-not confined

to the organizational boundaries
rather support on-line connectivity to
other business entities.
Best Business practices:- must
have a collection of the best business
processes applicable world wide.
Simulation of reality: it simulate
the reality of business processes on
computers.

ERP Application Providers

Some

ERP vendors are:

SAP
Oracle Corporation,
Microsoft Corporation,
Infor ERP (formerly Baan),
Ramco Systems
(India Based)

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Enterprise Resource Planning

ERP Expectations
Integrating all the functions

Integrating the systems running in all the locations

Transparency of information using a single
data source across the organization
Software must be responsive
Modular
Flexible
Easy to add functionalities
Provide growth path

Enterprise Resource Planning

ERP Options
OPTION 1 MAKE [Using Internal resources]
Developing a custom-built ERP package, specific to the
requirements of the organization, with the help of the
in-house IT department
OPTION 2 - BUY

Going for Tailor-made ERP packages available in the market like

SAP, Oracle applications, Baan, PeopleSoft etc.
OPTION 3 MAKE [using External resources]
Developing a custom-built ERP package, specific to the
requirements of the organization, with the help of a
software solution provider
http://www.open-source-erp-site.com

ERP Enterprise Resource

Planning
PLANNING the RESOURCES of an
ENTERPRISE
ERP

is a way to integrate the data and

processes of an organization into one
single system with modules that support
core business areas such as
manufacturing, distribution, financials
and human resources.

ERP

s goal is to make information flow dynamic

and immediate, therefore increasing the
usefulness and value of the information.

It

act as central repository eliminating data

redundancy & adding flexibility. the central idea
behind data integration is that clean data can be
entered once and reused across all applications

ERP

is a Multi-Module Application Software

Package that automates inter-organizational
business processes across the supply chain
which involve business partners, suppliers,
customers, and more.

ERP
Crucial

role of ERP in business

beside integration is to better
position the organization to
change its business processes.

ERP

software has hundreds of

business processes built into the
logic of the system

BEFORE ERP

Problems:
Delays, Lost Orders, Keying into different computer systems invites errors

AFTER ERP

ERP Key Concepts

Human
Resources

Finance/
Book
Keeping

Contd..

Accounts
Receivable

Accounts
Payable

Managemen
t Accounting

A typical business organization usually have following

business processes:

Finance and Accounting

Human Resource and Payroll (HRM)

Supply Chain Management (SCM)
Customer Relationship Management
Manufacturing Resource Planning (MRP)

Discrete
Production

Inventory
Managemen
t

Sales
& Shipping

Purchase

Customer
Relationship

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Overview

Ideally,

ERP delivers a single database that

contains all data for the software modules,
which would include:
Manufacturing: Engineering, Bills of Material,
Scheduling, Capacity, Workflow Management,
Quality Control, Cost Management,
Manufacturing Process, Manufacturing
Projects, Manufacturing Flow
Supply Chain Management: Inventory, Order
Entry, Purchasing, Product Configuration,
Supply Chain Planning, Supplier Scheduling,
Inspection of goods, Claim Processing,
Commission Calculation
Data Warehouse: and various Self-Service
interfaces for Customers, Suppliers, and
Employees

Business Process Re-engineering

BPR & ERP

Business Process Re-engineering [BPR] brings
out the
deficiencies of the existing setup
BPR and ERP will give way to implement new
systems and the long pending improvements
in the
existing systems
BPR may be time consuming but the scope can
be
restricted & controlled by the Management

Business Process Re-engineering

BPR - Steps
Step 1

Step 2

Step 3

Understand

Simplify/Improve

Understand the
existing
systems
associated with
all the
functionalities

Draft & frame the

Implement
possibilities & ways with the help
to simplify or
of ERP
Improve or eliminate
the processes

http://www.open-source-erp-site.com

Automate

Definition
BPR

is defined by Hammer and

Champy as
the fundamental reconsideration
and radical redesign of
organizational process in order to
achieve drastic improvement of
current business performance in
cost, service and speed.

Definition
Acc

to et.al
BPR is the critical analysis and radical
redesign of existing business
processes to achieve breakthrough
improvements in performances
measures
BPR is also known as business process
redesign, business transformation, or
business process change management

BPR cycle

Five steps in process

redesign

Design and build a prototype of the process

What is reengineering

Reengineering

is not downsizing or
only automation.
It involves redefining and rethinking
everything.
Reengineering involves six
peripheral and one central R
I. Reorchestrate:- as the central Hub
II.Realization ,Requirement, Rethink,
Redesign, Retool and Revaluate

Enterprise Resource Planning

ERP Options
OPTION 1 MAKE [Using Internal resources]
Developing a custom-built ERP package, specific to the
requirements of the organization, with the help of the
in-house IT department
OPTION 2 - BUY

Going for Tailor-made ERP packages available in the market like

SAP, Oracle applications, Baan, PeopleSoft etc.
OPTION 3 MAKE [using External resources]
Developing a custom-built ERP package, specific to the
requirements of the organization, with the help of a
software solution provider
http://www.open-source-erp-site.com

What Makes The Business To Think:

The Challenges Of Globalization

Unprecedented Levels Of Competition.

Shifting Of Mass Production System To Mass

Customization System

Deals With Multiple Countries, Multiple Currencies

Trade Barriers Are Falling

Consumers Are In Demand

Change Becomes Constant

What Is Information System:

An Information System Is An Open, Purposive

System That Produces Information By Using
Input-process-output Cycle From The Available
Data.

Why information system

To Remain Competitive, Desired Information Is

Required to The
Right People At The Right Time.

Information Systems Used To Enable Information Flow

Within And Between Processes Efficiently And
Effectively.

Through Information System Competitive Advantage

Can Be Gained Via Cost Reduction, Product
Enhancement, And Customer Service Improvements.

Information Systems Are Useful Tools To Enable And

Manage
Business Transformation Or Change

Management information
system

Provide A System For

Collecting,Processing,Storing,Retrieving,
And Transmitting Information To The Users

users

Source
Data
capturing

Processing

source
Retrieval
source

Dissemination

users
users
users

source
Storages

Characteristics Of MIS:

Management Oriented:

Management Directed:
Integrated:
Common Data Flow:
Heavy Planning Element/ Long Term Planning:
Sub-system Concept:
Flexibility And Ease Of Use:
Need Based:
Exception Based:
Future Oriented

Why Enterprise Resource Planning:

Information Systems Are Becoming More

And More Complex
Due To The Stumbling Blocks: Time, Cost,
Objective Data, Unstructured Process
Development Of A Vision Of Integrated
Information System
Dissimilar Systems
Business Becomes Global
Incoherent Business Process

MIS Vs. ERP

Both MIS And ERP Systems Focus On The

Automation Of Business Processes, Data Transfer,
And Information Sharing across The Organization.

MIS Is An Information System Designed For

Providing Information To Support Operational
Control, Management Control, And Decision- making
Functions In An Organization

ERP Systems Are Some Of The Most Advanced,

State-of-the-art of Management Information Systems
In Todays Business World.

An ERP System Integrates Information Systems And

Business Processes To Enable Information Entered
Once To Be Shared Throughout The Organization.

MIS Vs. ERP:

MISs Role:
1. To Generate Reports-for Example
2. To Answer What-if Questions Asked By Management
3. To Support Decision Making
ERPs Role:

1. Staff utilization

2. Better Inventory Management

3. Improve Customer Responsiveness

4. Efficient Procurement

5. Enhanced Financial Management And Corporate

Governance:

6. Software Security: E.G. Seradex ERP

7. Encouraging Uniqueness

8. Changing The Working Pattern

9. Web-enable ERP

ERP And BPR:

Shift From Efficient To Effective, Passive To Active, Tactical To

Strategic And Automation To Optimization, Is The Motto Of ERP

Business Process Re-engineering [BPR] Brings Out :-

The Deficiencies Of The Existing Setup,

Solves Old Problems, Redesigns Selected Processes, etc

BPR And ERP Will Give Way To Implement New Systems And The
Long Pending Improvements In The Existing Systems

Implementing An ERP System Usually Requires A Company To

Perform Business Process Reengineering (BPR) Or Business
Process Re-design (BPRD).

ERP Integration
Integration

has to be leveraged
along three dimensions:Information integration
Cognitive integration
(professional realm involved in
the process are matched)
Managerial integration (personal
commitment of each manager to
fulfill the common goals)

Enterprise integration
leads
to
:More agile(responsive) enterprise.

Help in eliminating redundant or non value added

activities .

More efficient system after being enabled by IT.

Streamlines 5 imp flows in the enterprise

a)

Information

b)

material

c)

money

d)

Control

e)

Intangibles (CS,QM)

Empowerment of employees to take action

Enterprise Linkages
Enterprise

integration may be
initiated by linking
Flow of information
Flow of material
Flow of control
Flow of decision across the orgn.

Establishing customer enterprise

linkage

Establishing vendor
enterprise linkage