ENTERPRISE RESOURCE PLANNING

Unit 4

Prof. Arun Mishra

Email: arunjimishra@gmail.com

Learning Objectives
To evaluate different and popular modules of an ERP package like finance, manufacturing, plant maintenance, materials management and so on. To describe subsystems or sub-modules of these models. To describe how these modules function together.

Introduction
There are many packages that are developed depending on the requirement of an organisation requirement. These packages help not only in maintaining the data but also effectively handle the data as per the requirement of the various needs that arise in the organisation. The features and number of the modules vary with the ERP package. most of the small scale industries. some of the most common modules available in almost all packages are:
Finance Manufacturing & Production Planning Sales and Distribution Plant maintenance Quality Management Materials Management etc

1. FINANCE MODULE

1. FINANCE
Concept of Information technologies means providing:
Right information Right time Right people Can make critical difference to the organization

Financial data provides key information Financial system must provide the management with information that can be leveraged for strategic decisions, in order to achieve comprehensive advantage.

1. FINANCE

Conti

The finance module of most ERP system will have the following sub-system:
Financial Accounting: (General Ledger, Accounts Receivables/ Payable, Fixed Assets Accounting, Legal consolidation) Investment Management: (Investment planning, Budgeting, controlling, Depreciation, Forecast Simulation Calculation) Controlling: (Overhead cost controlling, Activity based costing Product cost Accounting Profitability analysis) Treasury: (Cash Management, Treasury Management, Market Risk Management, Funds Management) Enterprise Controlling: (Executive Information System (EIS), Business Planning and Budgeting, Profit centre Accounting)

1.a. Financial Accounting...

Objective :
Integration of financial information essential for strategic decision-making Centrally track financial accounting data within international framework

General Ledger :
Essential for financial accounting and decision making Serves as a central pool of financial data and in accounting area, Origin of a transaction can be traced, Supports all the functional needs in financial accounting. Typical General Ledger contains i.e. summary information of other components:
Purchasing (Quantity and value) Sales (order and bill) Vendor (Payable) Customer (Receivables) Fixed assets Employees (salary and wages)

1.a. Financial Accounting

Accounts Receivables/ Payable:

Conti...

These subsystems are integrated with all other subsystems where financial data originates: both with General Ledger, Sales and Distribution, Material Management. Transaction performed automatically Accounts Receivable and Payable functions include:
Internet integration Document management Important support for EDI processing Enterprise-wide credit management payment automation

1.a. Financial Accounting

Asset Accounting:

Conti...

Serves as a sub ledger to the General Ledger Manages company s fix assets and provides detail info about assets related transaction. Integration with plant management Management of leased assets and lease under construction

Legal Consolidation:
Serves as a tool to make a consolidated financial statement with operational data Legal consolidation is closely integrated with Financial Accounting system Permit direct data transfer from individual statement into consolidated report Ease the workload and reduces data entry error Allows multiple view of your consolidation data. Generate reports about legal entries and segments of your business.

1.b. Controlling...
Introduction:
Gathers functions for Internal cost accounting Versatile information system: (Generate reports)

Overhead Cost Controlling:

Focus on monitoring n allocation of overhead

Cost Centre Accounting:

Analyses where overhead occurs

Overhead Orders:
Collects and analysis cost based on individual internal measures Monitors and automatically check budgets assign to each measures

1.b. Controlling
Activity Based Costing:

Conti...

Goals of the entire enterprise should come before the goals of individual activity

Product Cost Controlling:

determine cost of product or services Use to determines the lowest price limit

Cost Object Controlling:

Helps to monitor manufacturing orders Integration with logistics, provides actual cost of the object costs Determine n analysis Variance betw actual manufacturing cost and plan cost

Profitability analysis:
Examines the sources of returns. Revenues are assigned according to market segment

1.c. Investment Management...

Investment planning: Where to invest, what is the expected
profit of each ventures. Which department to need more investment?

Budgeting: Financial layout of new or existing project

Availability and cost of finance

Controlling: The expenses, the overheads Depreciation: Budgeted balance sheets and cost planning are
always on current values.

Forecast: Speculation and forecast of market trend. Rising or

declining?

Simulation Calculation: Making a mathematical model and

deriving alternatives to choose from.

1.d. Treasury Modules...

Objective:
Managing long ,short, medium payment flow Managing Risk factor Planning financial transaction.

Cash Management:
Analysis financial transaction for given period Manages cash inflow and outflow Distinction is made according to time period (short medium long) Information is available to make cash management decision and for analyzing purpose. Current liquidity, Currency, Risk position Conditions prevailing on the money and capital market Consider all those before taking decision Securities and loans

Treasury Management:

1.d. Treasury Modules

Market Risk Management:

Conti...

Ensures competitiveness Complex feed back loop: from data collection, risk management, analysis and simulation Assessing the interest rates Assessing the currency rates Simulate market data what if analysis

Funds Management:
From budgeting to payment on one side and From Billing to actual receiving on the other Enables to control funds commitments and determine the budget utility. Helps to identify budget bottleneck

1.e. Enterprise Controlling...

Introduction
Compromise to optimize share holder value, for growth and investment.

Modules includes :
Executive Information System: Provides overview of critical parameters Gets both internal and external data Drill-Down reporting to evaluated data Business Planning and Budgeting: Business targets such as Return on investment Central investment planning, budget release and tracking Profit Centre Accounting: Analysis profit Possible to analysis selected balanced sheet items and use for calculation of ratio such as ROI

2. PLANT MAINTENANCE MODULE

2. PLANT MAINTENANCE ...

Introduction
Preventive Maintenance control Equipment Tracking Component Tracking Plant Maintenance Calibration Tracking Plant Maintenance Warranty Claims Tracking

2.a. Preventive Maintenance Control

Planning Scheduling Control of facilities and equipment Equipment lubrication Component replacement Safety inspection Monitoring Keeping track of
Hours of usage Production produced Consumables (fuel) Days in operation Life of each component

Lower repair cost Avoiding downtime, m/c breakage etc. Improve m/c reliability which leads to higher production

2.b. Equipment Tracking

Equipment is an asset to be used, monitored and protected History of equipment: acquisition to write off Operational dependencies (special features, imported spare parts, their cost and expected life, Guarantee period, Next service due) Information (model and serial no) for each equipment to be made available. Provide detail information to technical specialist.

2.c. Component Tracking

Components are typically sub-set of large equipment. Enable to identify chronic repair problem of component replacement or repair Do not wait for components to fail, replace it before that Reduce downtime Also include repair/exchange history and component service life.

2.d. Plant Maintenance Calibration Tracking

Allows organization to leverage their investment in Plant Maintenance module by providing for tracking of equipment calibration in support of ISO 9000 requirement

2.e. Plant Maintenance Warranty Claim Tracking :

Administrative system designed to provide control of all items covered by manufacturer and vendor warranty Recover imbursement to which they are entitled. Type and length of warranty elapsed time ,operating unit generate Complete information regarding warranty service provider

3. QUALITY MAINTENANCE

3. QUALITY MAINTENANCE...
Introduction ISO Standards defines:
Functions of QM Elements of QMS

In Production, Quality Assurance

No longer just Inspection and Elimination But also the production process becomes the focus of attention.

Quality spreads to the entire loop: Product development procurement of sales and distribution (entire usage phase)

3. QUALITY MAINTENANCE

Conti...

The quality Management Module is integrated with the master data and processes of the following applications...
Material Management:
Purchasing, inventory management, warehouse management, Material requirement planning

Production:
Work scheduling, shop floor control

Sales and Distribution:

Delivery, creation of quality certificates

The Quality Management module supports the exchange of data with other application in order to:
Prevent related data from being recorded and stored redundantly.

CAQ and CIQ

CAQ : Computer Aided Quality Management
Isolated, can t carry out comprehensive tasks of QMS

CIQ: Computer Integrated Quality Management

More appropriate

Supports quality management in procurement, product verification, quality documentation, processing of the problem

CIQ (Computer Integrated Quality Management)

Only an integrated system can support all the elements of Quality Management System according to ISO 9000. Quality Management function influence all the function within company, affecting all the phase. QM Module integrate with other modules to link the task on quality management.

3. QUALITY MAINTENANCE

Conti...

The quality Management Module fulfills the following functions: Quality Planning:
Management for basic data for quality planning and Inspection planning, Material Specification

Quality Inspection:
Trigger inspections, Inspection processing with inspection plan selection and sample calculation, Print shop papers for sampling and inspection. Records results and defects Makes the usage decision and trigger follow up action

3. QUALITY MAINTENANCE
Quality Control:

Conti...

Dynamic sample determination on the basis of Quality level history. Application of statistical process control techniques using quality control charts Quality scores for inspection lots, Quality notification for processing internal or external problems and initiating corrective action to correct the problems Inspection of lot processing QMIS (Quality Management Information System) for inspection and inspection results and quality notification

4. MATERIALS MANAGEMENT

4. MATERIALS MANAGEMENT...
The Material Management Module optimizes:
All purchasing process with work-flow driven processing functions Enables automated supplier evaluation, Lowers procurement and warehousing costs Integrates invoice verification Decides -When to buy, What to buy and How much to buy!

The main subsystems of Material Management Module are:

Pre-purchasing Activities Purchasing Vendor Evaluation Inventory Management Invoice Verifications and Material Inspection

The Pre-purchasing Activities Modules

4.a. Pre-Purchasing Activities

Maintain service master database. Service specification which include service with item and item with material. Manual entry effort is reduced 2 ways of entering service specification:
Planned Serviced Specification: service whose precise nature n intended scope is known at the beginning of the project Price n quantities are both stipulated Unplanned Serviced Specification: Services which cannot be initially specified in detail No description Entered in the form of money value limit

4.b. Purchasing
Important component of Material Management. Integrated with other modules and communicates with them for constant flow of data Support all phase:
Material planning and control, purchasing, goods receiving Inventory management Invoice management

Follows task like

Procurement of material, n service ,determine source of supply , planning n control of material, monitoring delivery n payment of vendors

4.c. Vendor Evaluation

Integrated into MM Information like delivery dates ,prices n quantity are taken from purchase order Also used data of QM
In procurement of material:
Select suppler according to existing supply relationship Provide with proper information on prices n terms of payment and delivery Evaluate vendors

In procurement of service:
Check reliability of vendors Check vendors performance

4.d. Inventory Management

Allows to manage stocks Obtain overview of current stock Shows all entries of stocks like
warehouse, stock orders but not delivered, reserved for production or for customers

quality and quantity inspection and monitored of stock Stocks from vendors and from customers managed separately Stocks are managed by values and quantity basis Prerequisite cost accounting

4.d. Inventory Management

Stock value for inventory Management Account assignment for cost accounting

Conti

With every goods movement following are updated Both quantity and values are updated automatically with the goods movement Goods movement includes
Internal movement (goods from production, stock transfer) External movement (goods from sales order)

Inventory management includes inventory methods:

Periodic Inventory Continuous Inventory Inventory Sampling Cycle Counting

4.e. Invoice Verification and Material Inspection:

Link between MM and financial management, controlling and asset accounting components It serves the following propose:
Completes the material procurement Allows invoice that do not originate in material procurement Allows credit memos

Do not handle payment or invoice Information is passed on to other department Invoice contains many information which has to be posted i.e. enter into the system. Refers to current transaction, purchase transaction Posting invoice completes invoice verification System now contains data necessary for invoice to be paid. Accounting department retrieve this data for appropriated payment

5. HUMAN RESOURCE MODULE

5. HUMAN RESOURCE MODULE

Human resource management is an essential factor of any successful business. The various subsystems under HR module are:
Personnel management: (HR master data, Personnel administration, information systems, recruitment, travel management, benefits administration, salary administration) Organizational management: (Organizational structure, staffing, schedules, job descriptions, planning scenarios, personnel cost planning) Payroll Accounting: (Gross/net accounting, history function dialogue capability, multi currency capability, international solutions) Time management: (Shift planning, work schedules, time recording, absence determination) Personnel development: (Career and succession planning, profile comparisons, qualifications assessments, additional training determination. Training and event management.)

5.a. PERSONNEL MANAGEMENT

Personnel management includes numerous software components, which allow you to deal with human resources tasks more quickly, accurately and efficiently. i. Personnel Administration Information is no longer owned by specific departments, but is shared by multiple entities across an organization. ii. Employee master data Human resource module has a centralized database with integration to multiple components for processing employee information. The system provides tools to save time and help you tailor the system to fit your needs. The HR module contains features for storing any desired information about your employees. Most systems have the facility to scan the original documents for optical Storage. The HR Information system displays graphical information such as organization charts or employee data.

5.a. PERSONNEL MANAGEMENT

iii. Recruitment management

Conti

This function helps in hiring the right people with the right skills. Reducing the cost of recruiting and hiring new employees is a challenge for the HR professional, who is responsible for placing people in the right job, at the right time, and with the right skills and education. These requirements are fulfilled only through effective automation of the entire recruitment process. The recruitment component is designed to help meet every facet of this challenge like managing open positions/requisitions, applicant screening, selection and hiring, correspondence, reporting and cost analysis.

5.a. PERSONNEL MANAGEMENT

iv. Travel Management

Conti

This module helps you in processing the travel expenses effortlessly, in several currencies and formants. HR Travel management allows you to process a business trip from start to finish-from the initial travel request right through to posting in financial accounting and controlling. This includes any subsequent corrections and all retroactive accounting requirements. Travel management automatically calculates the tax. It automatically processes credit card transactions for a particular trip. You reimburse costs incurred during a trip through a payroll accounting, accounts payable accounting or by data medium exchange. In addition, Travel management provides multiple report formats. You can enter receipts in any currency and then print reports in your native currency.

5.a. PERSONNEL MANAGEMENT

v. Benefits Administration

Conti

Using the benefits administration component, we can define eligibility groups and rules based on a wide range of factors. We can determine the variables, rules and costs formulas for each benefits plan.

vi. Salary Administration

This function helps in simplifying the process of rewarding your employees. Administration of salaries is an ongoing process within your human resource department. It is particularly important during the review processes, when your goal is to justify reward good performance. The salary administration module assists you in the salary review process by taking into account standard salary changes within the company as well as individual competition exceptions

5.b. ORGANIZATIONAL MANAGEMENT

This module will assist you in maintaining an accurate picture of your organizations structure, no matter how fast it changes. In many cases, graphical environments make it easy to review any moves, additions, or changes in employee positions.

5.c. TIME MANAGEMENT

It is a flexible tool designed to handle complicated evaluation rules to fulfill regulatory requirements and determine overtime and other time related data. The time evaluation component stores your organizations business rules and automatically validates hours worked and wage types. Shift Planning
Shift planning module helps you to plan your workforce requirements quickly and accurately. You can plan your shifts according to your requirements taking into consideration all criteria, including absences due to leave or sickness, and employee requests for time off.

5.d. PAYROLL ACCOUNTING

The payroll accounting system can fulfill the payroll requirements and provide you with the flexibility to respond to your changing needs. Payroll accounting should address payroll functions from a global point of view. You should be able to centralize your payroll processing, or decentralize the data based on country or legal entities. Most payroll accounting systems give you the options and capabilities to establish business rules without modifying the existing payroll. Many systems have the features to remind you when transactions are due for processing. With payroll accounting, you have the ability to tailor the system to your organization requirement. With country specific versions of payroll accounting, you can fulfill language, currency and regulatory requirements.

5.e. PERSONNEL DEVELOPMENT

Effective personnel development planning ensures that the goals of the organization and the goals of the employee are in harmony. The benefits of such planning include improvements in employee performance, employee potential, staff quality, working climate and employee morale. i. Training and Event Management A good HR system will have scheduled seminars, training courses and business events. On completion of a training course, appraisal forms can be automatically issued. Appraisals can be carried out for instructors, attendees, business events and training courses.

6. MANUFACTURING MODULE

6. MANUFACTURING MODULE
A good manufacturing system should provide for multi mode manufacturing applications that encompass full integration of resource management. Manufacturing module, allows you to accurately forecast finished goods and services that consist of multiple components. Costs associated with these components can be tracked at the individual component level or by a combination of multiple components and can be set on a unit cost basis. All forecasted increases/decreases in costs can be easily applied to determine the impact on your bottom line and cash resources. It must provide the information base upon which the entire operation should be run. It should contain the necessary business rules to manage the entire supply chain process whether within a facility, between facilities or across the entire supply chain.

Major subsystem of the manufacturing module

Materials and capacity planning Shop floor control Quality management JIT/repetitive manufacturing Cost management Engineering change control Engineering data management Configuration management Tooling Serialization/lot control

6.a. Material and Capacity Planning

Today's Customers want accurate shipment dates sometimes to the hour even when there are schedule and product changes. The Planning systems of ERP packages are designed to provide the responsiveness company needs to meet those customer requirements. With these systems, planners can simulate alternative plans; gaining the information they need to determine which parts and assemblies to make, which to buy and when to manufacture or purchase.

6.b. Shop Floor Control

The Shop Floor Control means reducing the Manufacturing time to increase the product availability in the market. The Shop Floor Control system provides real-time labour and production reporting for online production visibility throughout the enterprise. Users can log into or out of operations manually or they can use the built-in bar coding functionality to scan work order numbers and work order steps for automatic logins. The shop floor menu is easily customized to include virtually any activity, maintenance function, report or inquiry you need to run your shop floor.

6.c. Quality Management

All manufacturing modules track quality control activities across the enterprise-from intermediate producers to finished goods. These systems allow a wide variety of characteristics and parameters to be specified in test and inspection operations and maintain an extensive history to improve product quality and identify recurring problems. Sample types, sample rules and testing levels are completely user defined for maximum flexibility and ease of use. Maintenance of standard specifications, detailed sampling instructions and testing procedures is performed online.

6.d. Just-In-Time/ Repetitive Manufacturing

6.e. Cost Management

ERP packages provide extensive cost information at several levels that helps businesses identify cost drivers and reduce product costs. They support multiple inventory valuation methods, so that you can choose the costing method that best reflects company's business. To reduce administrative overhead, prevent input errors and provide faster and more accurate information for planning, these systems provide detailed records of time and materials data on the shop floor.

6.f. Engineering Data Management

It is designed to help your company trim data transfer time, reduces errors and increase data productivity by providing an automated link between engineering and production information. Most packages allow a smooth integration, with popular CAD packages, to simplify the exchange of information about drawings, items and routings.

6.g. Engineering Change Control

By using Engineering Change Control, business can gain effective control over engineering change orders. Your company can define the authoritarian steps for approving and implementing an engineering change order. When these steps are completed , the system automatically implements the change in the production data base.

6.h. Configuration management

Reduction in order cycle time is achieved by creating a flexible user-defined knowledge base that is accessed by a powerful analytical engine. The analytical interprets the knowledge base in conjunction with user selections, to ensure that the customer-specified product can be built and sold,

6.i. Tooling
The ERP systems help to ensure that tools and materials arrive together at scheduled operations by sorting tools in inventory and planning and allocating the required tools as part of the production order. They also provide visibility of tools use, calculate the remaining useful life of a tool and automatically route tools for maintenance ,based on usage.

7. SALES AND DISTRIBUTION

7. Sales and Distribution

In this ever-changing environment, keeping a competitive edge means being able to anticipate and respond quickly to changing business conditions. To keep pace with these rapid changes, companies need an integrated and flexible enterprise system that supports all aspects of their business with state-of-the-art functionality. Increased efficiency in sales and distribution is a key factor to ensure that companies retain a competitive edge and improve both profit margins and customer service. The sales and distribution modules of many ERP vendors offer a comprehensive set of best-of-breed components for both order and logistics management. Many of these systems are tightly integrated with the Distribution Requirements Planning (DRP) engine of the 'for just-in-time' deliveries.

7. Sales and Distribution

Conti

Typically, a Sales and Distribution module will contain the following sub-systems:
Master Data Management Order Management Warehouse Management Shipping Billing Pricing Sales Support Transportation Foreign Trade