Module IV

Enterprise Resource Planning

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 Descriptors/Topics
• Introduction, History of ERP, Scope and
Benefit, ERP and related technologies (BPR,
MIS, DSS, EIS, SCM, OLAP),
• ERP implementation methodology –
implementation life cycle, ERP and its success
factors, Pitfalls and management concerns,
ERP Market – renowned vendors and the
packages.

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 ERP Basics
• ERP : An Acronym for Enterprise resource
planning
• Essentially a Management Information
System

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 Some Basic concepts
• System: A set of elements or components that
interact to accomplish a goal
• Information system : A set of interrelated
components that collect , manipulate and
disseminate data and information and provide a feed
back mechanism to meet an objective
• Computerized information
system :Computers ,people, procedures and software
that store organize and deliver information

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• Components of an IS: People (Specialists , end
Users , Hardware, Software (Processes and
procedures),data and network resources
• Management Information System :An IS designed
to cater to the requirements of Mangers
1. Support business operations (increase efficiency)
2. Support Managerial decision Making (Increase
effectiveness
3. Enhance competitive advantage or reduce your
competitive disadvantage
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 Functional areas of operation / Business
processes
• Business Function: A particular area of
responsibility, or decision making. Eg. HR ,
Marketing, Finance Accounting Production
etc.
• Functional areas are interdependent – Each
requires data from others

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• Better integration of these functional areas
leads to improvement in communications,
work flow and success of the company

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• Process :A process is a specific ordering of
activities across time and place ,with a
beginning and an end , and clearly defined
inputs and out puts- structure for action

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• Business Process: Any set of activities
designed to produce a specified output for a
customer or market
OR
• Collection of activities that takes some inputs
and creates an output that is of value to the
customer

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• Business Processes in an organization fall into
three levels
• Strategic planning
• Management control
• Operational control

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• Thinking in terms of business processes helps
manger to look at their organization from a
business perspective.
• Managing inputs( Men, Machines , Material
Money) and business Processes effectively
requires accurate and up to date information

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• Business Process Re- engineering: The
fundamental rethinking and radical redesign
of business processes to achieve dramatic
improvements such as cost, quality ,service
speed.

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 ERP- A cross functional integrated IS

• ERP systems are computer systems that integrate application

programs in Accounting , Sales ,manufacturing marketing, HR and
other functions in the firm. This integration is accomplished
through a data base shared by all application programs .Integrated
IS facilitates sharing of data among functions
• ERP has been promoted as solutions for supporting or streamlining
processes at all levels
• This is done by sharing data effectively and efficiently between and
within functional areas leads to a more efficient business process

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 Production
Inventory
Purchase Control

Production Planning ERP Human Resources

Engineering
Sales
Accounting

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 What is ERP
• ERP integrates all data and processes of an organization
into a unified system
• A typical ERP system use multiple components of hardware
and software to achieve the integration
• A key ingredient of most ERP is the use of a unified data base
to store data for various system modules
• Primary Goal : To improve and streamline internal business
processes

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• ERP utilizes ERP software applications to
improve the performance of the
organizational resources( Men, Money,
Materials Machines), Planning, Managerial
control and Operational control.

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• It is a multi-module application software
that integrates activities across functional
departments from Production Planning ,
Parts planning ,Purchasing ,Inventory
control, Product distribution ,to order
tracking,. ERP software may include
application modules for Finance ,
Accounting, and Human resource aspects
of business
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 ERP Software modules
• Module base software is the core of an ERP
system. Each software module automates
business activities of a functional area of an
organisation (mimics a major functional are of
an organization )
• Common software modules include

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• Production planning : Optimizes utilization of manufacturing
capacity , parts components and material resources
• Purchase : Streamlines procurement of raw material by
automating the purchase process.
• Inventory control : Facilitates the process of maintaining the
appropriate level of stock in a warehouse and automates the
replenishment system . This module is integrated with the
purchase and finance

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• Sales : Implements functions of order
placement , order scheduling , shipping and
invoicing
• Marketing : Supports lead generation , direct
mailing , and campaigns

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• Finance / Accounting : Gathers financial data
from various departments and generates
financial reports such as – Balance sheet,
General ledger, Costing , profit and loss
statements
• Human Resources : Streamlines management
of human resources

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• ERP Users : The users of an ERP system are
employees , of the organization at all levels ,
from workers , supervisors, mid level
managers to executives
• ERP Vendors : SAP, ORACLE, JD Edwards,
BANN, i2 technologies
• Vendors have developed specialized ERP to
cater to a specific industry

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• E.g. Erp’s Apparel industry, Pharmaceutical
industry , Healthcare , hotels , Hospitals ,
automobile , paper cement , Retail stores etc .

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 Organizational Benefits
 Facilitates operational coordination across
departments
 Supports decision making
 Facilitates real time monitoring of activities,
tracks costs , check order completion status.
 Supports strategic planning , and facilitate
improved operational and managerial control
--- which leads to

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 Benefits
• Better management of Resources ( Men ,
Machines , Material and Money)
• Cost reduction :Lower inventory carrying costs
, production costs , marketing costs.
• Cycle time reduction :From order to delivery
• Productivity improvement:- Higher
operational efficiency and enhanced
managerial effectiveness

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• Quality Improvement: Thru reduced -errors
and Product defectives
• Performance improvement :
I. Better customer deliveries
II. Better customer service
III. Reduction in customer response time

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• Problems tackled by ERP
i. Material shortages
ii. Productivity enhancements
iii. Customer service
iv. Cash management
v. Inventory problems
vi. Quality problems

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 ERP Implementation
methodologies
• Different companies may install the same ERP
software in totally different processes. The
same company may implement different ERP
software in the same approach. There are
three commonly used methodologies for
implementing ERP systems.

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 The Big Bang Approach
• Companies layout a grand plan for their ERP
implementation. The installation of ERP
systems of all modules happens across the
entire organization at once. The big bang
approach promised to reduce the integration
cost in the condition of thorough and careful
execution.

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 Modular Implementation
• This method of modular implementation goes
after one ERP module at a time. This limits the
scope of implementation usually to one
functional department. This approach suits
companies that do not share many common
processes across departments or business
units.

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Process -Oriented Implementation
• The process-oriented implementation focuses
on the support of one or a few critical
business processes which involves a few
business units. The initial customization of the
ERP system is limited to functionality closely
related to the intended business processes.

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 Implementing an ERP Life cycle
successfully
• ERP Life Cycle: Highlights various stages of
implementation of an ERP
• Different stages of implementation are
 Pre-evaluation screening: Done to eliminate
those packages( from several ERP packages
commercially available)that are not suitable
for the organization

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 Evaluation of the package: Must be Done
rigorously against a well designed selection
criteria.
 Project planning : Includes schedule of
implementation , roles ,responsibilities
identifying personnel etc.
 Gap analysis : Done to determine the extent to
which a package meets the organizational
requirements
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 Re- engineering : Implementing ERP requires
a large number of processes to be modified.
 Team training : Training the employees in
using the module and running the system
 Testing : Must be done under both real case
scenario and extreme conditions to identify
bugs or weak links

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 Post Implementation : To ensure smooth
running and updating of the system with
changes in technology

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 5 Steps to successful
implementation of ERP
 Strategic Planning
 Assign a project team
 Examine current business process and
information flow.
 Set objectives
 Develop a project plan
 Procedure review
 Review software capabilities
 Identify manual processes
 Develop standard operating procedures
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 Data collection and clean up
• Convert data
• Collect new data
• Review all data inputs
• Clean up data

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 Training and Testing :
• Pretest the data base
• Verify testing
• Train the trainees
• Final testing
 Go Live and evaluation :
• Develop a go live check list
• Evaluate the solution
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 Managerial Concerns
• End user adoption problems
• Training
• Application maintenance
• Future Upgrades

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 ERP Critical Success factors
 Clear understanding of strategic goals
 Top Management commitment
 Project management implementation
 Great implementation
 Cope with technical issues
 Organizational commitment to change

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 Extensive education and training
 Data accuracy
 Focused performance measures
 Resolution of multisite issues

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