ERP : An Overview

By:Ankit Mahindroo (Lecturer)

3/7/2012

CONTENTS
 What is ERP?  Evolution of ERP  Components of ERP  Information Integration through ERP systems  Core ERP Components  Extended ERP Components  Reasons for growth of ERP Market  Advantages / Disadvantages of ERP  Why ERP over conventional apps?  ERP Implementation : Problem areas  Roadmap for successful ERP implementation  Feedback??
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WHAT IS ERP?
y ERP

integrates all departments and functions throughout an organization into a single IT system (or integrated set of IT systems) so that employees can make enterprise wide decisions by viewing enterprise wide information on all business operations.

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EVOLUTION OF ERP
Types of Systems
Reorder point systems

Time
1960s

Purpose
Used historical data to forecast future inventory demand; when an item falls below a predetermined level additional inventory is ordered. Offered a demand-based approach for planning manufacture of products and ordering inventory. Added capacity planning; could schedule and monitor the execution of production plans

Systems
Designed to manage high volume production of a few products, with constant demand; focus on cost.

Materials requirement planning (MRP) systems

1970s

Focused on marketing; emphasis on grater production integration and planning. Focus on quality; manufacturing strategy focused on process control, reduced overhead costs and detailed cost reporting. Focus on the ability to create and adapt new pre-cuts and services on a timely basis to meet customers specific needs Integrates supplier manufacturing and customer data throughout the sup-ply chain.

Manufacturing resource planning (MRP-II) systems

1980

MRP-II with manufacturing execution (MES)systems

1990s

Provide ability to adapt production schedules to meet customers needs; provide additional feedback with respect to shop floor activities. Integrate manufacturing with supply chain processes across the firm; designed to integrate the firms business processes to create a seamless information flow from suppliers, through manufacturing to distribution to the customer.

ERP(Enterprise Re-source Planning Systems)

Late 1990 and onward

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COMPONENTS OF ERP
y Core ERP component traditional components

included in most ERP systems and they primarily focus on internal operations
y Extended ERP component extra components that

meet the organizational needs not covered by the core components and primarily focus on external operations

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COMPONENTS OF ERP

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Strategic & Operational Planning Finance Manufacturing Human Resources

Materials Management

ERP System
Logistics Management

Quality Management Maintenance Management

Sales & Distribution

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CORE ERP COMPONENTS

Three most common core ERP components

1.

Accounting and finance Production and materials management Human resource

2.

3.

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Accounting and Finance ERP Components

y Accounting and finance ERP component

manages accounting data and financial processes within the enterprise with functions such as Journal ledger, accounts payable, accounts receivable, budgeting, and asset management

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Production and Materials Management ERP Components

Production and

materials management ERP component handles the various aspects of production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control
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EXTENDED ERP COMPONENTS

y Extended ERP components include:

y Business intelligence y Customer relationship management y Supply chain management y E-business

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BUSINESS INTELLIGENCE
Business intelligence (BI) refers to skills,

technologies, applications and practices used to help a business acquire a better understanding of its commercial context.
BI applications include the activities of
decision support systems, query and reporting, online analytical processing (OLAP), Forecasting Data Mining
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CUSTOMER RELATIONSHIP MANAGEMENT

y CRM consists of the processes a company uses to

track and organize its contacts with its current and prospective customers. y CRM software is used to support these processes y Typical CRM goals are:y to improve services provided to customers, and y to use customer contact information for targeted

marketing.

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SUPPY CHAIN MANAGEMENT

y SCM is the management of a network of

interconnected businesses involved in the ultimate provision of product and service packages required by end customers. y It involves :y all movement and storage of raw materials, y work-in-process inventory, and y finished goods from point of origin to point of

consumption (supply chain).

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e-BUSINESS
y E-business (electronic business), derived from such

terms as "e-mail" and "e-commerce," is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners. y Companies are using the Web to :y buy parts and supplies from other companies, y to collaborate on sales promotions y and to do joint research.

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REASONS FOR GROWTH OF ERP MARKET

y To enable improved business performance y Cycle time reduction y Increased business utility y Inventory reduction y Order fulfillment improvement y To support business growth requirements y New products/product lines, new customers y Global requirements including multiple languages and currencies y To provide flexible, integrated, real-time decision

support
y Improve responsiveness across the organization

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REASONS FOR GROWTH OF ERP MARKET

y To eliminate limitation in legacy systems y Century dating issues y Fragmenting of data and processing y Inflexibility to change y Insupportable technologies y To take advantage of the untapped mid-market y Increased functionality at a reasonable cost y Client server/open systems technology y Vertical market solutions

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ADVANTAGES OF ERP
BUSINESS INTEGRATION Automatic data updating is possible among related business related components. Communication and integration of information is strong hence no obstacle in introducing new products or shifting to new business classification. FLEXIBILITY Different languages, currencies, accounting standards and so on can be covered in one system. Also helps to cope with company globalization and system unification.

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ADVANTAGES OF ERP
y BETTER ANALYSIS AND PLANNING CAPABILITIES y It becomes possible to fully utilise decision support systems and simulation functions due to comprehensive data integration. y USE OF LATEST TECHNOLOGY y Utilisation of the latest developments in Information Technology (IT) enables ERP vendors to grow and also sustain the growth. y Latest technologies include open systems, client/server technology, Internet/Intranet, CALS (Computer-Aided Acquisition and Logistics Support), electronic-commerce etc.

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ADVANTAGES OF ERP
What benefit
Reliable information access Avoid data and operations redundancy

How
Common DBMS, consistent and accurate data, improved reports. Modules access same data from the central database, avoids multiple data input and update operations. Minimizes retrieving and reporting delays Time savings, improved control by enterprise-wide analysis of organizational decisions. Changes in business processes easy to adapt and restructure. Structured and modular design with add-ons. Vendor-supported long-term contract as part of the system procurement. Extended modules such as CRM and SCM Internet commerce, collaborative culture.

Delivery and cycle time reduction Cost reduction

Easy adaptability Improved scalability Improved maintenance Global outreach E-Commerce, e-business

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DISADVANTAGES OF ERP
DISADVANTAGES
Time-consuming

HOW TO OVERCOME?
Minimize sensitive issues, internal politics and raise general consensus. Cost may vary from thousands of dollars to millions. Business process reengineering cost may be extremely high. The architecture and components of the selected system should conform to the business processes, culture and strategic goals of the organization. Single vendor vs. multi-vendor consideration, options for best of breeds, long-term committed support. ERP system may have too many features and modules so the user needs to consider carefully and implement the needful only. Look for vendor investment in R&D, long term commitment to product and services, consider Internet-enabled systems. Consider middle-ware add-on facilities and extended modules such as CRM and SCM.

Expensive

Conformity of the modules

Vendor dependence

Features and complexity

Scalability and global outreach

Extended ERP capability

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WHY ERP OVER CONVENTIONAL APPS?

y ERP handles individual business functions such as
y Accounts y Inventory y Sales and Distribution y and also the entire range of business functions

y ERP packages are targeted at everything from small

businesses to the largest organizations, and they can be composed of a highly flexible decentralized database and an information system cluster linked by a network. y ERP packages have the ability to adapt globally since it has multilingual and multi-currency
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ERP IMPLEMENTATION: PROBLEM AREAS

y Attitude reform of the employees at all levels y Companies not having time schedules and deadlines

do not succeed. y Companies should be able to answer questions like By when in what way can such-and-such thing be achieved?, How should we do such-and-such thing? etc y Cost estimations should be done in an effective manner for ERP implementation,
y consultation, y customisation, y training and
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y education.

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ROADMAP FOR SUCCESSFUL ERP IMPLEMENTATION

y Most important step is the GAP ANALYSIS. y What is GAP ANALYSIS? y It is the step of negotiation between the company

requirements and the functions a package possesses.

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STEPS IN GAP ANALYSIS

y To make a note of the existing business system and list out the flaws and

positive aspects.
y Evaluate and decide the additions that need to be made to the business in

view of ERP implementation.

y Rating the existing level of performance to set a benchmark or standards for

the business as on date.

y Having an in-depth study of the regulations and statements in the

organizations and suggesting modifications.

y Clearly defining the roles of individuals in the organization.

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STEPS IN GAP ANALYSIS

y Checking if the objective in discharging duties are met because it is the

ultimate solution to any issue.

y Ensuring that functions are executed properly and if need be personnel can

be rewarded to boost up and encourage performance.

y Gap Analysis either recommends the implementation of an ERP system or

rejects the idea in totality by taking all possible factors into consideration.

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