Introduction to ERP

Welingkar’s Distance Learning Division

We Learn – A Continuous Learning Forum

ERP & WEB BASED SUPPLY Chain Management

Chapter 1Introduction to ERP

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Introduction to ERPConcept

ERP is short of Enterprise Resource Planning, which is business management system that integrates all facets of the business such as manufacturing operations, supply chain, customers, human resource & finance.



Introduction to ERP Concept



ERP Simplified view



ERP Simplified view





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ERP’s Full potential

Corporate Office

Regional Office

Customers

Vendors

Manufacturingunits



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The salient features of above definition is that ERP refers to in house developed or commercially available software solutions which provide an

integrated suit of IT applications. That support the activities of the organization as a whole.

ERP Systems are the information backbone of the company. It serves as central nervous system &

termed as digital nervous system of the company.

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ERP (enterprise resource planning) is an industry term for the broad set of activities supported by multi-module application software that helps a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business.

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ERP in manufacturing sector was primarily to address to know :

1) Stock of finished goods

2) Understand material movement

In 1970 the focus of manufacturing systems shifted to MRP

MRP Software applications have emerged to translate the Master Schedule built for the end products into Time phased net requirement

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In 1980 the concept of MRPII was evolved

All the resources such as People, Infrastructure, Process to various user group necessitate planning & utilization of such resources

MRP was further extended to cover areas like Engineering, Projects ,Management etc & led to what is known as ERP.

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Introduction to ERP Concept Key TermsIntegration:Integration of operations with accounting result in converting thephysical units into rupee value.ERP integrates all facets of business including

1) Planning 2) Manufacturing

3) Sales

Software applications have emerged to help business managersimplement ERP in business activities such as Inventory Control, Order tracking, Customer service

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Introduction to ERP Concept Key Terms

• ERP finds useful application in human resource management, warehousing.

• ERP implies the use of the Shelf packed

• Software rather than proprietary software written for one customer

• The cost of developing & maintaining ERP modules become cost prohibitive & Time Consuming.

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ERP modules are generally expected to have the capability to interface

with organizations own software.

Depending upon business requirement, ERP modules may be altered using vendor’s Proprietary tools ,Programming languages.

A good business strategy drives everything that comes in its way including its IT & IS resource

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Systems:

The systems view of business or enterprise is a holistic view.A system consists of Input, Process , Output & feedback For example production system has input of Men(labor),material,money(finance).The output is goods and or services.

The processing converts input to value added outputs

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ERP Across Business SystemFinancial Systems Operational logistics

Accounts receivables & payable Inventory ManagementCash planning & Management MRPCost accountancy Plant managementGeneral ledger Production PlanningProduct Cost accounting Project managementProfit center analysis PurchasingProfitability analysis Quality managementExecutive Information system RoutingAsset accounting DispatchingStandard costing vendor analysisHuman Resources Sales & MarketingPayroll, Manpower planning Sales Order, PricingTravel Expenses, Sales management HR accounting Sales planning

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Process view/ Model of Business• Process Model defines entity or a set of activities that together

respond to a set of inputs to produce desired output • The process of converting input to desired output is governed by

factors such as performance standards,knowledge,procedures,material,machine,,constraints,& control points

ProcessingInput Output

Knowledge & Training

Methods & procedures

MachinesMaterial



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Process view/ Model of Business

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed”

Process innovation, ”encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions”.



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Process view/ Model of Business

Methods MethodsMethods

UnderstandExisting

Processes

SimplifyingProcesses by

Eliminatingwastes

AutomateThe process

DiagrammingStory boardingBrainstorming

EliminationCombination

Rearrangement

EDIERP

Diagram illustrate basic philosophy of business process reengineering



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Preparing for the ERPInter Company Integration

To begin with ,an enterprise has framed departments, with some minimum interface with one another. organizations then adopt systems approach where the output of one system became input for other system and so on to form integrated system.

The isolated systems of yester years were called management systems(MIS) later DSS or decision support systems were developed. Executive Support system is a step beyond both MIS & DSS that collates information from different sources



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Preparing for the ERP

Before implementing ERP ,an organization has to decide where it is right now, where it would like to be,& what methods could be used to get there.

The data captured is of immense value in ERP in Finance, HR, SCM and enables such as data warehousing, EIS, workflow etc.

ERP is not just an IT project. It changes the organization in terms of authority responsibility relationship It brings discipline to the organization.



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Preparing for the ERP

Business process reengineering focuses on transformation of business process to make them more efficient whereas ERP focuses on automating

The business process using & some objective in mind.A project team is drawn from IT, Sales, Purchase, Production & Finance.

The outside consultant can be hired.ERP being an enabling tool help us to do things better



Journey of ERPSYSTEM DESCRIPTION

MIS Management Information Systems. No decision support

IIS Integrated Information Systems. No decision support

EIS Executive Information Systems. Decision support

CIS Corporate Information Systems. Decision support

EWS Enterprise Wide System. No decision support

Logistics are considered as part of system

EDI,JIT,

EFT

Electronic Data Interchange, Just in Time,

Electronic fund transfer inter company integration



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ERP maturity Levels

ERP like living organization passes through different stages of development & maturity the business grows, ERP has to adopt itself to the changing processes, organizational structure & demand patterns to deliver effectively.

The ERP team takes a lot of effort after the “Go-Live” at three different stages of growth & maturity.



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ERP maturity LevelsStage 1 Chaos

The organization takes the ‘Go-Live’ decision. It requires streamlining of the processes

In stage 1,the attention is focused on administration andinformation stability. Roles and responsibilities are fixed.

The organization starts utilizing the information generated throughERP, It has to cope with change in organization culture.It is likely that alignment between the ERP and the processprevailing is lost.



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ERP maturity LevelsStage 2 Stagnancy

After the Implementation of the ERP organization expects a whole lot of benefit from it. However it does not happen immediately. Organizations expect higher ROI.

There two ways to improve situation

First manual activities are eliminated and are replaced by automated ERP system. This results in overall transaction complexity.

Secondly ,the intelligence of the system is enhanced by using Advanced planning engines& schedules



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ERP maturity Levels

Stage 3 Growth

At this stage ,Management seeks strategic support from the ERP. The system is aligned with the overall Corporate vision & strategies.

The focus is on profit and Working Capital Management. The organization is committed to growth of human resources.This improves the value chain. Capital management becomes better. There is optimization between customer product mix.



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ERP maturity Levels

ChaosChaos

EnhancementEnhancementStagnancyStagnancy

OptimizationOptimization

Stage1 Stage2

Stage3

Streaming Operations

Operational Improvements

Strategic transformation



Organization of ERP Projects

There are three common ways to implement ERP projects.Big Bang is an approach that casts off all the legacy system in onego & installs a single ERP system across the company.

Franchising approach believes in implementing independent ERP system in each unit while linking common processes across the enterprise. It is one of most common method to install ERP.

Slam dunk is an approach where the ERP dictates the process. A few key processes are selected for focus

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Introduction to ERP

End of Chapter 1

Education

Introduction to ERP