MODUL PERKULIAHAN

ENTERPRISE RESOURCE PLANNING

POKOK BAHASAN :
Pendahuluan

Fakultas

Program Studi

Tatap Muka

Pasca Sarjana

Magister
Teknik Industri

01

Abstract

Disusun Oleh

53011

Dr.Eng Bonivasius P.I

Kompetensi

Modul one explain an introduction

of ERP, including Evolution of
ERP, Integrated System Approach,
Business Benefits of ERP, ERP
Modules and Business Case ERP
2014

Kode MK

Develop an understanding of how

ERP systems can improve the
effectiveness
of
information
systems in organizations.

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

INTRODUCTION
Enterprise Resource Planning (ERP) refers to large commercial software
packages that promise a seamless integration of information flow through an
organization by combining various sources of information into a single software
application and a single database. Although ERP has its roots in more primitive
applications, the turn of the century has seen an explosion of research, debate, and
information about its evolution and place in the business world. The outcome of ERP
itself is still a mystery, but the trends and issues it has created will be the enigma that
future generations will have to solve.
Today, businesses are striving for integration. Organizations are also
transforming their processes to meet demands by becoming more flexible, adaptable,
and efficient. Not only is accurate and up-to-date information needed, success in
business today entails a seamless flow in supply chain, excellent customer relationship
management, and capabilities to carry out electronic commerce. Traditionally, separate
units were created within an organization to carry out various tasks, and these
functional areas would create their own information systems thereby giving rise to
systems that were not integrated. ERP strives to provide a solution to these problems.
In the 1950s, large manufacturing companies produced Material Requirements
Planning (MRP), which was created to keep track of all products and materials across
one or more plants, and was also used to keep track of needed materials. Two decades
later, MRP was extended in the software application called Manufacturing Resource
Planning (MRP II), which not only processed the material portion of the equation, but
also the planning process. Taking into account the production schedule, amount of
resources available, and other planning requirements, MRP II was a step beyond its
predecessor. The promise of integration and the benefits that it could produce, coupled
with the approach of the new millennium and the Y2K scare, made ERP the most
heavily invested software package in the 1990s. Unfortunately, many who tried to
implement these packages had to face a much harsher reality. Both MRP and MRP II
were created with the manufacturer in mind, but ERP is more than a material and
scheduling application package. ERP software packages are designed to integrate
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

information used by all the functional areas of a business into a single database to
streamline business processes for an enterprise. The promise of integration and the
benefits that it could produce, coupled with the approach of the new millennium and the
Y2K scare, made ERP the most heavily invested software package in the 1990s.
Unfortunately, many who tried to implement these packages had to face a much
harsher reality.
Many businesses encountered numerous problems when trying to implement the
massive systems. The packages not only cost large amounts of money, but the
processes to implement those systems often ran over budget because of hidden costs.
This, however, was the first of many issues in ERP implementation. Other risk factors
include failure to redesign business processes to fit those set out by the software, lack
of top management support or a champion, insufficient training and inclusion of the
end-users during and after implementation, inability to recruit and train qualified ERP
systems developers, insufficient data standardization, lack of integration across all
functional areas of a business, and failing to obtain and keep expert knowledge of the
system. Much research attention has focused on both understanding these issues and
identifying ways to solve these implementation problems.
Small to medium ranged businesses are also looking for integration solutions.
PeopleSoft, Baan, and SAP have structured quick implementation and training
packages to relieve the problems that larger companies have fought. The vendors are
also allowing these companies to outsource parts of ERP software, because smaller
firms may not be able to support the entire package by themselves. Further, vendors
have modified their software into components, allowing clients to easily install portions
of an ERP suite and to have accelerated implementation time. This has helped vendors
to cater to small to mid-ranged companies. With a nearly saturated ERP market for
large businesses, ERP vendors are extending their software to provide a total business
solution.

EVOLUTION OF ERP
The unprecedented growth of information and communication technologies (ICT) driven
by microelectronics, computer hardware and software systems has influenced all facets
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

of

computing applications across organizations.

Simultaneously the

environment is becoming increasingly complex with functional units

business
efficient

procurement of product-parts, management of inventory, accounting, human resources

and distribution of goods and services. In this context management of organizations
need efficient information systems to improve competitiveness by cost reduction and
better logistics. It is universally recognized by large and small to medium size
enterprises (SME) that the capability of providing the right information at the right time
brings tremendous rewards to organizations in a global competitive world of complex
business practices.
Starting in the late 1980s and the beginning of the 1990s new software systems
known in the industry as Enterprise Resource Planning (ERP) systems have surfaced in
the market targeting mainly large complex business organizations. These complex,
expensive,

powerful,

proprietary

systems

are

off-the-shelf

solutions

requiring

consultants to tailor and implement them based on the companys requirements. In

many cases they force companies to reengineer their business processes to
accommodate the logic of the software modules for streamlining data flow throughout
the organization. These software solutions, unlike the old traditional in-house designed
company-specific systems, are integrated multi-module commercial packages suitable
for tailoring and adding add-ons as and when required.
The phenomenal growth of computing power and the Internet is bringing ever
more challenges for the ERP vendors and the customers to redesign ERP products
breaking the barrier of proprietorship and customization, and embracing the
collaborative business over the Intranet, Extranet and the Internet in a seamless
manner. The vendors already promise many add-on modules, some of which are
already in the market as a sign of acceptance of these challenges by the ERP vendors.
It is a never-ending process of reengineering and development bringing new products
and solutions to the ERP market. ERP vendors and customers have recognized the
need for packages that follow open architecture, provide interchangeable modules and
allow easy customization and user interfacing.
The evolution of ERP systems closely followed the spectacular developments in
the field of computer hardware and software systems. During the 1960s most
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

organizations designed, developed and implemented centralized computing systems

mostly automating their inventory control systems using inventory control packages (IC).
These were legacy systems based on programming languages such as COBOL,
ALGOL and FORTRAN. Material Requirements Planning (MRP) systems were
developed in the 1970s which involved mainly planning the product or parts
requirements according to the master production schedule. Following this route new
software systems called Manufacturing Resources Planning (MRP II) were introduced in
the 1980s with an emphasis on optimizing manufacturing processes by synchronizing
the materials with production requirements. MRP II included areas such as shop floor
and distribution management, Project management, Finance, Human Resource and
Engineering. ERP systems first appeared in the late 1980s and the beginning of 1990s
with the power of enterprise-wide inter-functional coordination and integration. Based on
the technological foundations of MRP and MRP II, ERP systems integrate business
processes including manufacturing, distribution, accounting, financial, human resource
management, project management, inventory management, service and maintenance,
transportation providing accessibility, visibility and consistency across the enterprise.

During the 1990s ERP vendors added more modules and functions as add-ons
to the core modules giving birth to the extended ERPs. These ERP extensions include
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

advanced planning and scheduling (APS), e-business solutions such as customer

relationship management (CRM) and supply chain management (SCM). Figure 2
summarizes the historical events related with ERP.

BUSINESS BENEFIT OF ERP

The significance of ERP lies in its many benefits. Recall that integrated information
systems can lead to more efficient business processes that cost less than those in unintegrated systems. In addition, ERP systems offer the following benefits:

ERP allows easier global integration. Barriers of currency exchange rates,

language, and culture can be bridged automatically, so data can be
integrated across international borders.

ERP integrates people and data while eliminating the need to update and
repair many separate computer systems. For example, at one point, Boeing
had 450 data systems that fed data into its production process; the company
now has a single system for recording production data.

ERP allows management to actually manage operations, not just monitor

them. For example, without ERP, getting an answer to How are we doing?
requires getting data from each business unit and then analyzing that data for
a comprehensive, integrated picture. The ERP system already has all the

2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

data, allowing the manager to focus on improving processes. This focus

enhances management of the company as a whole, and makes the
organization more adaptable when change is required.
An ERP system can dramatically reduce costs and improve operational
efficiency. For example, EZ-FLO International, Inc., a family-run plumbing products
manufacturer and distributor, had been experiencing double-digit growth and needed a
scalable business platform to support its global growth. The company selected SAP
Business All-in-One customized for wholesale distribution. As a result of the integrated
process capabilities, EZ-FLO has been able to greatly improve its inventory
management processes and has eliminated its annual inventory count, which used to
take 100 employees two days to complete. In addition, the company has reduced
manufacturing lead times in its domestic plants by two weeks. These process
improvements led to improved customer service, and a 20 percent increase in the
number of new customerswith a 12 percent growth in sales per customer.
Welch Foods, Inc., is the processing and marketing subsidiary of the National
Grape Cooperative, an organization of 1,200 U.S. and Canadian grape growers. In
2004, Welchs decided to implement Oracles E-Business Suite to make better
decisions regarding product mix, production, and marketing. For Welchs, a key
advantage of the ERP system is that it provides a single source of truth on production
costs and on customer and product profitability, allowing Welchs management team to
make better business decisions.

ERP AND E-COMMERCE/ E-BUSINESS

ERP is a structured approach to optimizing a companys internal value chain.
The software, if implemented fully across an entire enterprise, connects the various
components of the enterprise through a logical transmission and sharing of data (Norris
et al., 2000, pp.12-13). When customers and suppliers request information that have
been fully integrated throughout the value chain or when executives require integrated
strategies and tactics in areas such as manufacturing, inventory, procurement and
accounting, ERP systems collate the data for analysis and transform the data into useful
information that companies can use to support business decision-making. ERP
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

systems, if implemented successfully, enhance and redesign business processes to

eliminate non-value-added activities and allow companies to focus on core and truly
value-added activities. The following are two examples where ERP systems have
dramatically increased the efficiency and productivity of companies: IBM has used ERP
to reduce the processing time for updating pricing data from 80 days to five minutes and
Chevron has used ERP to decrease its annual purchasing cost by 15%.

Figure 3: The Relation of ERP, SCM, CRM, E-Commerce and E-Business

E-business stands for electronic business, which involves communications and

doing business electronically through the Internet. E-business is defined as the use of
electronically enabled communication networks that allow business enterprises to
transmit and receive information (Fellenstein and Wood, 2000). It can significantly
improve business performance by strengthening the linkages in the value chain
between businesses (B2B) and consumers (B2C). Besides increasing efficiency in
selling, marketing and purchasing, e-business achieves effectiveness through improved
customer service, reduced costs and streamlined business processes. Furthermore, ebusiness creates a strategic, customer-focused business environment for shared
business improvements, mutual benefits and joint rewards. Companies use the Internet
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

to implement customer-relation-management (CRM) and supply-chain-management

(SCM) capabilities, which enable them to link their operations seamlessly with
customers and suppliers. For example: Nantucket Nectars, a juice manufacturer with
40% growth and $70 million in annual sales revenue, sells its organic juices through 150
distributors nationwide as well as general stores and juice bars in Nantucket.
By using Oracles ERP system and e-business platform, the salespersons can
track sales and promotions through the Internet, and are provided assistance and
suggestions to enhance their performance. The salespersons and distributors have
access to commission reports, and they can track and adjust sales orders. Through
consolidating its financial, compensation, sales and depletion data into a single report,
Nantucket prevents out-of-stock and partial shipments. The forecasted need for 50%
more labor force to handle customer service issues in the past was eradicated by
integrating ERP system with e-business (Oracle, 2000).

ERP INTEGRATION
In a traditional business process, after a customer order is received, the order
information flows from department to department through order entry, manufacturing,
warehousing, distribution and finance until the product is delivered to the customer and
the payment is received. The key elements of the value chain have been controlled by
separate and disparate information systems that could not communicate with one
another. Not only did the companies not take an integrated view of their own business
processes, but they also had an equally vague understanding of how their systems
relate to the systems of their suppliers, competitors, business partners, distributors and
customers. Hence, these transactions are typically carried out with minimal or no shared
business processes.
In recent years, there has been a revolution in systems planning and design.
Management takes an integrated company-wide view of its IT investments and choices,
and implements an ERP system that integrates the core business processes of an
entire company into a single software and hardware system. Customers, suppliers and
business partners are consciously included in the business process, systems operation
and systems development.
2014

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id

An ERP system is analogous to the internal technological hub of a company.

When fully implemented as an integrated suite, it can be thought of as a companys
central repository. The five major processes in a typical ERP system are: finance,
production/manufacturing, human resources, sales/ marketing and enviromental (refer
to Figure 4). The focus of ERP systems is on the efficiency and effectiveness of the
internal process. It offers a way to streamline and align business processes, increase
operational efficiencies and bring order out of chaos.

If a corporation decentralizes autonomous business units, they need to be able to

access and share data between departments, managers and employees. With ERP
systems, a transaction only needs to be entered once. The system can process the
transaction across different software modules, resulting in highly comprehensive and
integrated information that can be used for decision-making. While an ERP system can
be viewed as a repository for data, information and knowledge, and it extends beyond
functional boundaries by redefining enterprise wide processes, a Web-enabled ERP
system forces companies to look at processes that span multiple enterprises.
2014

10

ERP

Pusat Bahan Ajar dan eLearning

Dr.Eng Bonivasius P.I

http://www.mercubuana.ac.id