ENTERPRISE RESOURCE PLANNING

Before the advent of Systems Integration, different departments in an organization developed their own computer systems, each one working separately using its own applications and data. Manufacturing management systems have evolved in stages over the few decades from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP).

Enterprise Resource Planning or ERP is actually a process or approach that attempts to consolidate all of a companys departments and functions into a single computer system that services each departments specific needs. It is, in a sense, a convergence of people, hardware, and software into an efficient production, service, and delivery system that creates profit for the company.

BUSINESS ENVIRONMENT
To move into a more refined level of looking into an ERP system let us consider a customer

ordering and delivery where a customers order moves smoothly from Sales, where the deal is consummated, to Inventory and Warehousing, which retrieves and packages the order for delivery, to Finance, where invoicing, billing, and payments are handled, and on to Manufacturing, where purchased product replacement is done. In simpler terms the functions included in our assignment can be reflected in a typical manufacturing unit where the workflow starts with identifying How much raw material and resources are required to meet inventory level or customer demands. Procurement of the raw materials. Maintaining information of the finished goods and in progress goods. Channelizing the distribution of the finished goods. Maintaining accurate information about the capital inflows and outflows during all the above processes.

All the above given points briefly describe the different modules wiz forecasting, purchasing, inventory management, distribution and financial accounting. They are described in detail in the next section.

1. Forecasting: This module deals with identifying the need of the quantity of raw materials required to meet a certain demand for a product in the market. It may also be crucial to keep the minimum required stock in inventory.

2. Purchasing: The purchasing module deals with all the activities required to purchase the required raw material for producing any goods. It will not just merely include buying the material but also vendor management, vendor selection etc.

3. Inventory Management: Inventory management deals with the maintenance of the raw materials in stock, the details about the WIP goods as well as the finished stock.

4. Distribution: Once the raw materials move from the shop floor to finished products, moving these products to the distributors for sale to retailers and customers is the next function. The distribution deals with all processes related to these modules.

5. Financial Accounting: For the modules above there is either an inflow or outflow of money or maintenance of the credit or debit from vendors or customers. The financial accounting module covers this.

PROCESSES DELIVERED BY INTEGRATING THE MODULES

The main advantage of an ERP system is that there is a centralized system governing all the transactions in various departments which in turn streamlines various processes across the departments of the organization. Few of these processes are as under : 1. Material Requirement Estimation Process: This extends across the forecasting, sales and inventory modules. The inputs will be the sales volume of a particular product, demand for that product to estimate the required raw materials. The current levels of that raw materials in inventory will also play a role in estimation. 2. Request for Quotation Process: Once the quantity of various raw materials is estimated it is necessary to float quotation requests to various vendors who provide these materials to the organization. The system should be capable of floating such requests to all the registered vendors. 3. Vendor Selection Process: Once the vendors reply with their quotations we may select one or many vendors to supply the materials. This decision is based on the pricing provided as well as details from the accounting section as to credit debit status provide by them. 4. Vendor Accounts Management Process: After the purchase of these raw materials it is necessary to update the accounts payable section of all the vendors. Thus it concerns the purchasing as well as the accounting modules. 5. Purchasing Process: The actual inflow of raw materials where the physical goods come in. This also updates the inventory module and in turn the manufacturing process which utilizes the materials from the inventory.

6. Stock Management Process: Records the inflow of materials from the purchasing process and the outflow of these materials to the shop floor or manufacturing unit. Also keeps record of the finished goods thereby affecting the distribution module as well.

7. Raw Material Disbursement Process: This process comes in action when the manufacturing unit requires raw material form the inventory to proceed with production of any product. 8. Manufacturing Process: The actual moulding of goods into finished products and updation of the stock of these finished product into the inventory. 9. Sales Process: The movement of finished goods from the inventory to the distributor. It is closely coupled with the shipping and logistics module but us out of scope of the assignment. 10. Distributor Accounts Management: This process relates to the deciding if particular goods are to be sold to a distributor depending upon his current credit status. All updates based upon the payment made by the distributor are to be made under this process.

MODULES, TRANSACTIONS AND RELATED PROCESSES

Module

Transaction

Data Element

Related Process

Purchasing

Purchase Order

P.O. Number P.O. Date Amount ---------------------------Item Catalogue Item Quantity Item Rate

Vendor Account Management

---------------------------Goods Receipt

---------------------------Stock Management Process

Inbound Delivery Inventory ---------------------------Material Requirement Note ---------------------------Material Issue Note

Item Catalogue Item Quantity ---------------------------Item Name Item Quantity ---------------------------Item Name Item Quantity ---------------------------Item Name Item Quantity

Stock Management Process ---------------------------Raw Material Disbursement ---------------------------Manufacturing Process

---------------------------Outbound Delivery

---------------------------Sales

Distribution

Sales Order

S.O. Number S.O. Date Amount ---------------------------Item Catalogue Item Quantity Item Rate

Distributor Accounts Management ---------------------------Stock Management Process

---------------------------Goods Issue

Accounts Payable Accounting --------------------------Accounts Receivable

Outstanding Amount Vendor ID --------------------------Outstanding Amount Distributor ID

Vendor Accounts Management --------------------------Distributor Account Management

Sales ( Sales History) Forecasting ---------------------------MIN (Production)

Item catalogue Item Quantity --------------------------Item catalogue Item Quantity

Material Requirement Estimation -------------------------Material Requirement Estimation

DATA FLOW DIAGRAM

Vendors

RFQ

Quotation P.O. Invoice/SO

Distributor

Invoice/ SO Current Stock

PO

ERP SYSTEM
Payables/Receivables

Stock Warehouse

Stock level Request

Accountant
Account Updates MRN

Manufacturing Unit
MIN

ENTITY RELATIONSHIP DIAGRAM

Vendor
M Provides M

Raw Materials
M

M Required for M M

Distributor

Maintains

Stock Warehouse

Finished Product
M

Purchases

Produces M

Manufacturing Unit