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Enterprise ResourceEnterprise Resource
PlanningPlanningCourse Code: MS- 235Course Code: MS- 235
Credits: 3Credits: 3
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4
ERP Key Concepts
Enterprise Resource Planning (or
ERP in short) systems attempt tointegrate all data and processes oan organi!ation under one um"rella#
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$e%nition o ERP$e%nition o ERP
EEnterprisenterprise◦ &usiness En'ironment or &usiness cti'ities&usiness En'ironment or &usiness cti'ities
conductedconducted
RResourceesource◦
arious Resources a'aila"le *ithin anarious Resources a'aila"le *ithin anenterprise such as+ ,inance+ Materials+enterprise such as+ ,inance+ Materials+Manpo*er+ Euipment+ ,acilities andManpo*er+ Euipment+ ,acilities andinrastructure etc#inrastructure etc#
PPlanninglanning◦
cti'ity to optimi!e the utili!ation o resourcescti'ity to optimi!e the utili!ation o resources
ERP attempts to integrate all departmentsERP attempts to integrate all departmentsand unctions o a company into a singleand unctions o a company into a singlesystem that can ser'e all those di.erentsystem that can ser'e all those di.erent
departments/ needs#departments/ needs#
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Myth a"out ERPMyth a"out ERPERP means more *or0 and procedure#
ERP *ill ma0e many employee redundantand 1o"less#
ERP is the sole Responsi"ility o themanagement#
ERP is 1ust or the Managerdecisionma0ers
ERP is 1ust or Manuacturing
rgani!ationsERP is 1ust or the 4mplementation eam
ERP slo*s do*n the organi!ation
ERP is 'ery e6pensi'e
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E'olution o ERP
789;s - Systems Manuacturing ResourcesPlanning (E6tended MRP to shop Aoor ? distri"utionMgnt#)
Mid 788;s - ERP > Enterprise ResourcePlanning (Co'ering all the acti'ities o anEnterprise)
> >
E n t e r
p r i s e
R e s o
u r c e
P l a n n
i n g
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Reason or the gro*th o theReason or the gro*th o the
ERP mar0etERP mar0et
Ena"led impro'ed &usinessperormance
4# Cycle time reduction
44#4ncreased "usiness agility#
444#4n'entory Reduction4#rder ,ul%llment 4mpro'ement
Support &usiness gro*th reuirement :-
4# Be* productsproduct lines +ne*customers
44# lo"al reuirements includingmultiple currencies+ language
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o "e continued o "e continued
Pro'ide Ae6i"le+ integrated+ real-timedecision support#
7# 4mpro'e responsi'eness across theorgani!ation #
Eliminate Dimitation in legacy system
7# Century dating issues
2#,ragmentation o $ata and
processing3#4nAe6i"ility to change
#4nsupporta"le echnologies
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d'antages o ERPd'antages o ERP&usiness integration
,le6i"ility
&etter analysis and PlanningCapa"ilities
Fse o latest echnology
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Ghy implement an ERPGhy implement an ERP
SystemHSystemH o support "usiness goals
◦ 4ntegrated+ on-line+ secure+ sel-ser'ice processes or "usiness
◦ Eliminate costly
mainrameragmented technologies 4mpro'ed 4ntegration o Systems and
Processes
Do*er Costs
Empo*er Employees Ena"le Partners+ Customers and
Suppliers
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Ghy ERPH
,or Management > to 0no* *hat is happeni in the company
ne solution or "etter Management
,or cycle time reduction o achie'e cost control ? lo* *or0ing capit o marry latest technologies o shun the geographical gaps
o satisy the customers *ith high e6pectati o "e Competiti'e ? or sur'i'al E
n t e r
p r i s e
R e s o
u r c e
P l a n n
i n g
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$e%nition o ERP$e%nition o ERP
EEnterprisenterprise◦ &usiness En'ironment or &usiness cti'ities&usiness En'ironment or &usiness cti'ities
conductedconducted
RResourceesource◦
arious Resources a'aila"le *ithin an enterprisearious Resources a'aila"le *ithin an enterprisesuch as+ ,inance+ Materials+ Manpo*er+such as+ ,inance+ Materials+ Manpo*er+Euipment+ ,acilities and inrastructure etc#Euipment+ ,acilities and inrastructure etc#
PPlanninglanning◦ cti'ity to optimi!e the utili!ation o resourcescti'ity to optimi!e the utili!ation o resources
ERP attempts to integrate all departmentsERP attempts to integrate all departmentsand unctions o a company into a singleand unctions o a company into a singlesystem that can ser'e all those di.erentsystem that can ser'e all those di.erentdepartments/ needs#departments/ needs#
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Iey "ene%tsIey "ene%ts
Standardi!ation o processes+Standardi!ation o processes+ 4ntegration o all the "usiness units+ Encompassing employees+4ntegration o all the "usiness units+ Encompassing employees+
endors+ Suppliersendors+ Suppliers ,le6i"ility to modiy the operating processes,le6i"ility to modiy the operating processes 4m"i"e e6cellence perormance+ increase operating eJciency+4m"i"e e6cellence perormance+ increase operating eJciency+
le'erage technology#le'erage technology#
nline inormation to all mem"ers#nline inormation to all mem"ers# Pro1ect monitoring or time and costPro1ect monitoring or time and cost'aila"ility o Material to a'oid the e6tra purchase etc#'aila"ility o Material to a'oid the e6tra purchase etc#Ftili!ation o Manpo*er in 'alue added tas0#Ftili!ation o Manpo*er in 'alue added tas0#Real-time inormation or all the "usiness > no need oReal-time inormation or all the "usiness > no need o
any reconciliationany reconciliation
$e'elop &est &usiness Practices in organi!ation$e'elop &est &usiness Practices in organi!ation
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Characteristics o ERPCharacteristics o ERP
Flexibility:-ERP is Ae6i"le torespond to the changing needs o anorgani!ation#
Modular & open:-4t has opensystem architecture #i#e# any modulecan "e interaced or detached*hene'er reuired *ithout a.ecting
the other modulesComprehensive:-support 'ariety o
organi!ational unctions#
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Characteristics o ERPCharacteristics o ERP
Beyond the company:-not con%nedto the organi!ational "oundariesrather support on-line connecti'ity toother "usiness entities#
Best Business practices:- mustha'e a collection o the "est "usinessprocesses applica"le *orld *ide#
Simulation of reality: it simulatethe reality o "usiness processes oncomputers#
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ERP Application Providers
Some ERP 'endors are:
◦ SP
◦ racle Corporation+
◦ Microsot Corporation+
◦ 4nor ERP (ormerly &aan)+
◦ Ramco Systems
(4ndia &ased)
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ERP > E6pectations
4ntegrating all the unctions
4ntegrating the systems running in all the location
ransparency o inormation using a single data source across the organi!ation
Sot*are must "e responsi'e
Modular ,le6i"le Easy to add unctionalities Pro'ide gro*th path
E n t e r
p r i s e
R e s o
u r c e
P l a n n
i n g
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ERP > ptions
P!"# $ % M'E ()sing "nternal resources*
$e'eloping a custom-"uilt ERP pac0age+ speci%c to thereuirements o the organi!ation+ *ith the help o thein-house 4 department
P!"# + , B)-
oing or ailor-made ERP pac0ages a'aila"le in the mar0et li0SP+ racle applications+ &aan+ PeopleSot etc#
P!"# . % M'E (using External resources*
$e'eloping a custom-"uilt ERP pac0age+ speci%c to thereuirements o the organi!ation+ *ith the help o asot*are solution pro'ider
E n t e r
p r i s e
R e s o
u r c e
P l a n n
i n g
http:***#open-source-erp-site#com
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ERP > Enterprise ResourceERP > Enterprise Resource
PlanningPlanningPDBB4B the RESFRCES o an
EBERPR4SE
ERP is a *ay to integrate the data andprocesses o an organi!ation into onesingle system *ith modules that support
core "usiness areas such asmanuacturing+ distri"ution+ %nancialsand human resources#
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ERP Ks goal is to ma0e inormation Ao* dynamicand immediate+ thereore increasing theuseulness and 'alue o the inormation#
4t act as central repository eliminating dataredundancy ? adding Ae6i"ility# the central idea
"ehind data integration is that clean data can "eentered once and reused across all applications
ERP is a Multi-Module pplication Sot*are
Pac0age that automates inter-organi!ational"usiness processes across the supply chain*hich in'ol'e "usiness partners+ suppliers+customers+ and more#
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ERPERP
Crucial role o ERP in "usiness"eside integration is to "etterposition the organi!ation to
change it;s "usiness processes#
ERP sot*are has hundreds o
"usiness processes "uilt into thelogic o the system
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&E,RE ERP&E,RE ERP
Problems:
Delays, Lost Orders, Keying into different computer systems invites errors
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,ER ERP,ER ERP
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ERP Key Concepts Contd..
Management ccounting
ccountsPayable
Finance/BookKeeping
ccountsReceivable
"nventoryManagement
Sales& Shipping
Purchase CustomerRelationship
/umanResources
0iscreteProduction
typical business organi1ation usually have follo2ingbusiness processes3
,inance and ccounting◦ Luman Resource and Payroll (LRM)
◦ Supply Chain Management (SCM)
◦ Customer Relationship Management
◦ Manuacturing Resource Planning (MRP)
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'er'ie*'er'ie* 4deally+ ERP deli'ers a single data"ase that
contains all data or the sot*are modules+
*hich *ould include:Manuacturing: Engineering+ &ills o Material+
Scheduling+ Capacity+ Gor0Ao* Management+uality Control+ Cost Management+Manuacturing Process+ Manuacturing
Pro1ects+ Manuacturing ,lo*Supply Chain Management: 4n'entory+ rder
Entry+ Purchasing+ Product Con%guration+Supply Chain Planning+ Supplier Scheduling+4nspection o goods+ Claim Processing+
Commission Calculation$ata Garehouse: and 'arious Sel-Ser'ice
interaces or Customers+ Suppliers+ andEmployees
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&PR ? ERP
&usiness Process Re-engineering N&PRO "ringsout thede%ciencies o the e6isting setup
&PR and ERP *ill gi'e *ay to implement ne*systems and the long pending impro'ementsin thee6isting systems
&PR may "e time consuming "ut the scope can"erestricted ? controlled "y the Management &
u s i n e s s
P r o c e s s R
e - e n g i n e e
r i n g
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&PR - Steps
Step 1 Step 2 Step 3
Understand Simplify!mprove "utomate
Understand t#ee$istingsystemsassociated %it#
all t#efunctionalities
Draft & frame t#epossi'ilities & %aysto simplify or!mprove or eliminate
t#e processes
!mplement%it# t#e #elpof ()*
& u s i n e s s
P r o c e s s R
e - e n g i n e e
r i n g
http:***#open-source-erp-site#com
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$e%nition$e%nition
&PR is de%ned "y Lammer andChampy as
the undamental reconsideration
and radical redesign oorgani!ational process in order toachie'e drastic impro'ement o
current "usiness perormance incost+ ser'ice and speed#Q
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$e%nition$e%nition
cc to et#al &PR is the critical analysis and radical
redesign o e6isting "usinessprocesses to achie'e "rea0throughimpro'ements in perormancesmeasures
&PR is also 0no*n as "usiness processredesign+ "usiness transormation+ or"usiness process change management
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&PR cycle&PR cycle
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,i'e steps in process,i'e steps in process
redesignredesign
$esign and "uild a prototype o the process
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Ghat is reengineeringGhat is reengineering
Reengineering is not do*nsi!ing oronly automation#
4t in'ol'es rede%ning and rethin0ing
e'erything#Reengineering in'ol'es si6
peripheral and one central R;
4# Reorchestrate:- as the central Lu"44#Reali!ation +Reuirement+ Rethin0+
Redesign+ Retool and Re'aluate
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ERP > ptions
P!"# $ % M'E ()sing "nternal resources*
$e'eloping a custom-"uilt ERP pac0age+ speci%c to thereuirements o the organi!ation+ *ith the help o thein-house 4 department
P!"# + , B)-
oing or ailor-made ERP pac0ages a'aila"le in the mar0et li0SP+ racle applications+ &aan+ PeopleSot etc#
P!"# . % M'E (using External resources*
$e'eloping a custom-"uilt ERP pac0age+ speci%c to thereuirements o the organi!ation+ *ith the help o asot*are solution pro'ider
E n t e r p r i s e
R e s o
u r c e
P l a n n
i n g
http:***#open-source-erp-site#com
h 0 h i hi 0Gh M 0 h & i hi 0
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Ghat Ma0es he &usiness o hin0Ghat Ma0es he &usiness o hin0::
he Challenges lo"ali!ation
Fnprecedented De'els Competition#
Shiting Mass Production System o Mass
Customi!ation System
$eals Gith Multiple Countries+ Multiple Currencies
rade &arriers re ,alling
Consumers re 4n $emand
Change &ecomes Constant
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Ghat 4s 4normation System:Ghat 4s 4normation System:
n 4normation System 4s n pen+ Purposi'eSystem hat Produces 4normation &y Fsing
4nput-process-outputQ Cycle ,rom he 'aila"le$ata#
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Ghy inormation systemGhy inormation system
o Remain Competiti'e+ $esired 4normation 4sReuired to he
Right People t he Right ime#
4normation Systems Fsed o Ena"le 4normation ,lo*
Githin nd &et*een Processes EJciently ndE.ecti'ely#
hrough 4normation System Competiti'e d'antageCan &e ained ia Cost Reduction+ ProductEnhancement+ nd Customer Ser'ice 4mpro'ements#
4normation Systems re Fseul ools o Ena"le ndManage
&usiness ransormation r Change
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Management inormationManagement inormation
systemsystem Pro'ide System ,or
Collecting+Processing+Storing+Retrie'ing+nd ransmitting 4normation o he Fsers
*rocessing Dissemination
)etrieval
Source
source
sourcesource
users
users
users
users
Storages
Data
capturing
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Characteristics M4S:Characteristics M4S:
Management riented: Management $irected:
4ntegrated:
Common $ata ,lo*:
Lea'y Planning Element Dong erm Planning: Su"-system Concept:
,le6i"ility nd Ease Fse:
Beed &ased:
E6ception &ased:
,uture riented
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Ghy Enterprise Resource Planning:Ghy Enterprise Resource Planning:
4normation Systems re &ecoming Morend More Comple6
$ue o he Stum"ling &loc0s: ime+ Cost+
"1ecti'e $ata+ Fnstructured Process
$e'elopment ision 4ntegrated4normation System
$issimilar Systems&usiness &ecomes lo"al
4ncoherent &usiness Process
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M4S s# ERPM4S s# ERP
&oth M4S nd ERP Systems ,ocus n heutomation &usiness Processes+ $ata ranser+nd 4normation Sharing across he rgani!ation#
M4S 4s n 4normation System $esigned ,orPro'iding 4normation o Support perational
Control+ Management Control+ nd $ecision- ma0ing,unctions 4n n rgani!ation
ERP Systems re Some he Most d'anced+State-o-the-art o Management 4normation Systems4n oday;s &usiness Gorld#
n ERP System 4ntegrates 4normation Systems nd&usiness Processes o Ena"le 4normation Enterednce o &e Shared hroughout he rgani!ation#
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M4S s# ERP:M4S s# ERP:
M4S;s Role:7# o enerate Reports-or E6ample2# o ns*er Ghat-i uestions s0ed &y Management3# o Support $ecision Ma0ing
ERP;s Role:
7# Sta. utili!ation 2# &etter 4n'entory Management 3# 4mpro'e Customer Responsi'eness # EJcient Procurement 5# Enhanced ,inancial Management nd Corporate
o'ernance: 9# Sot*are Security: E## Serade6 ERP =# Encouraging Fniueness @# Changing he Gor0ing Pattern
8# Ge"-ena"le ERP
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ERP nd &PR:ERP nd &PR:
Shit ,rom EJcient o E.ecti'e+ Passi'e o cti'e+ actical o
Strategic nd utomation o ptimi!ation+ 4s he Motto ERP
&usiness Process Re-engineering N&PRO &rings ut :-
he $e%ciencies he E6isting Setup+
Sol'es ld Pro"lems+ Redesigns Selected Processes+ etc
&PR nd ERP Gill i'e Gay o 4mplement Be* Systems nd he
Dong Pending 4mpro'ements 4n he E6isting Systems
4mplementing n ERP System Fsually Reuires Company oPerorm &usiness Process Reengineering (&PR) r &usinessProcess Re-design (&PR$)#
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ERP 4ntegrationERP 4ntegration
4ntegration has to "e le'eragedalong three dimensions:-
4normation integration
Cogniti'e integration(proessional realm in'ol'ed in
the process are matched)
Managerial integration (personalcommitment o each manager toul%ll the common goals)
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Enterprise integrationEnterprise integration
leads to :-leads to :- More agile(responsi'e) enterprise# Lelp in eliminating redundant or non 'alue added
acti'ities #
More eJcient system ater "eing ena"led "y 4#
Streamlines 5 imp Ao*s in the enterprise
a) 4normation
") material
c) money
d) Control
e) 4ntangi"les (CS+M)
Empo*erment o employees to ta0e action
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Enterprise Din0agesEnterprise Din0ages
Enterprise integration may "einitiated "y lin0ing
,lo* o inormation
,lo* o material,lo* o control
,lo* o decision across the orgn#
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Esta"lishing customer > enterpriseEsta"lishing customer > enterprise
lin0agelin0age
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Esta"lishing 'endorEsta"lishing 'endor
enterprise lin0ageenterprise lin0age