EPS Assignment

Jaideep Singh

122

MBA(tech)-IT 4th year

Q: Briefly discuss the evolution of ERP (from Payroll to ERP) and also taking into account the
principles of business process reengineering laid out by Hammer and Champy.

Evolution Of ERP

History of ERP dates back in 1960’s when computers were used to perform elementary business
activities like payroll. Since then ERP has become an effective tool to integrate various
organisational processes. Accounting Information System (AIS) was developed. Accounting
Information System is basically a tool which is used to perform specific actions such as payroll
maintenance, updating and invoicing of bills etc. Thereafter applications such as general ledger,
accounts receivable and fixed assets were automated.

The latter half of 1960’s and early 1970’s saw the introduction of MRP systems. MRP stands for
Materials Requirement Planning. The software package was aimed at improving the efficiency of
an manufacturing unit by providing a logical way to keep a count of the number of components
used, the various parts that are in inventory and the different components that would be required
for the production of a particular part. To operate effectively the system made use of functions
such as demand scheduling, inventory planning etc. This software package was also called
MRP1 system. This method was very effective in job shop situations where both MRP system
and Push system could work interchangeably.

Thus came into the scene, the MRP-2 systems which were created using large production control
systems which would actually create an integrated system. The MRP-2 systems were essentially
about management of flow of material throughout the firm. The systems thus created an
environment wherein master schedules were created form the feedback given by the current
systems. One interesting fact about the MRP-2 systems is that they have different levels of
hierarchy. To use the given systems, firms had to ensure that their functions must be integrated.
Also strict data performance was essential for the given systems.

MPR II was further developed in ERP systems with additional features, creating a much more
user friendly interface, making use of fourth generation languages and operating on real time
data. Additionally ERP systems could handle JIT, both types of discrete and continuous work
orders and EDI. ERP could even be extended for managing human resource in addition to
traditional processes such as accounting functions and payroll activities. Implementation of ERP
systems in organizations enables them to integrate all the various departments and their various
functions into one single entity which can be accessed by all.
\

The business process reengineering movement began with publication of two papers: Michael
Hammer’s “Reengineering Work: Don’t Automate, Obliterate” and Thomas Davenport and
James Short’s “The New Industrial Engineering: Information Technology and Business Process
Redesign. Later Michael Hammer and James Champy wrote a book Reengineering the
Corporation: A Manifesto for Business Revolution.

Hammer and Champy observed that many organisations were not being organised and controlled
in an effective manner. This disorganisation occurred mainly because companies gradually
evolved and grew over time and so the processes that evolved were not integrated in nature. BPR
essentially is an end-to-end process and if implemented so, then only can the benefits of BPR be
observed. So basically the top management needs to get a holistic view of the entire organisation
and use their judgement to eliminate process inefficient processes and make effective processes
more efficient.

BPR theorists stressed on the fact that due to comprehensive nature of businesses it is important
for companies to define all the major processes and then focus more on processes that offered
most return on improvement efforts.

Hammer and Champy laid down certain principles which are guidelines for implementing BPR.
These are as follows:
 1. Several processes and jobs are integrated into a single entity.
2. The workers are entrusted with decision making ability.
3. All the steps involved in the process are performed in a natural, logical sequence.
4. The processes are so designed that they are flexible enough to adjust to changes.
5. Processing of orders take place when the time is most appropriate.
6. Various checking and controlling methods are minimized as much as possible, and put
only when they make economic sense.
7. The time between shifting of processes is reduced and only a single case manager should
be responsible for it.

BPR implementation can take place in three steps:

1. Existing processes are mapped

2. New processes are thought about and developed.

New processes so formed and thought about are implemented.

Q: Explain the factors which led to the transition from an enterprise package (ERP) to an
enterprise business suite (ERP II) giving an ERP vendor’s product offerings.
The ERP systems were generally associated with the manufacturing sector at large. Most of the
benefits & usage capabilities were restricted to this sector. However this has been taken as a
drawback of the ERP systems. This is because other sectors were not able to get the benefits
from this system. Thus ERP-2 systems came into being & more & more organizations were able
to enjoy the fruits of an integrated enterprise system. Another essential factor is that this system
gave equal benefits to every sector & was not solely about the manufacturing sector.

ERP’s basic strength lies in processing data and internal company information, coupling it with
outside information and creating solutions for problems. Today ERP has entered the next stage
of the evolutionary cycle known as ERP II. Major reason that has brought about this change is
the sea change in the dynamics of business due to the proliferation of Internet as a business
medium.

ERP II on the other hand provided an efficient mix of focus on both the macro and micro factors.
The software could efficiently cover both the aspects and helped management make important
micro decisions based on the macro factor, or vice versa. For example in case of any defects in
the functioning of the processes in an organisation, ERP II did not only mention what went
wrong but also pointed out what remedial measures could be undertaken in order to improve the
process.

ERP was a very rigid application in terms of functions. ERP mostly served individual functions.
The multiple functions they served didn’t cater to different functions from different category.
There was a need to integrate different functions not only from different departments but from
different industries and ERP II was able to suffice this need.

The ERP-2 systems gave an easy access to the internet & made the internet an integral
component of the firm. The ERP systems however just served as a means of support. In a manner
of speaking, the ERP systems then raised issues of clarity & transparency. This was because the
ERP systems were much more internalized as compared to the ERP-2 systems & the ERP
systems in turn had a certain reservation about the abundant use of the internet.

It is believed that ERP will be completely replaced by ERP II in a span of few years. It is
believed that users will gradually get more educated and will slowly but definitely move on to
adopt ERP II.

From a vendor’s viewpoint, the ERP-2 systems will give the optimum results to a firm only
when the firm will employ or use multiple vendors. This is due to the fact that the system
specializes in multi-tasking. As discussed above, the ERP-2 systems have the best mix & match
capabilities. Thus the companies can really benefit if they are able to make the best selection
among the diverse vendors & their packages.

ORACLE’s latest release has been Oracle’s Primavera Portfolio Management 8 which offers
various advanced features. Implementing this business suite, managers are able to track down the
historical data and in turn it is easier to predict milestones and achieve targets. ERP also helps in
identifying potential risks and they set some standards, against which the company’s
performance can be measured.

Talking about SAP. Initially its basic model SAP R/3 had limited applications, then it upgraded
to SAP R/3 enterprise which used a SAP web application server technology and included an
enterprise extension set. As time progressed and need was felt for functions such as CRM, SCM,
strategic enterprise management, etc which are included in the latest product offerings by SAP
like SAP ERP 6.0. and SAP NetWeaver.

The ERP system also did not encourage much of user participation. Most of the users were
merely mute spectators as most were not able to comprehend the technicalities of the system.
This led to a huge gap between the employees understanding & the systems being provided by
the vendors. In the end the user was utilizing the vendor systems without adequate knowledge.
However in the ERP-2 systems, the application was able to meet both the users as well as the
vendor’s requirements. Under this system there was a simultaneous selection of the vendors &
customers. This led to a proportionate composition of both parties.

References

http://www.ksystem.vn/Upload/48/Nam_2009/32gif.gif

http://www.praxa.com.au/Practices/erp/PublishingImages/ERP_Visual.jpg
https://www.infosci-online.com/downloads/excerpts/193070836XExcerp.pdf

http://www.brad.ac.uk/acad/management/external/pdf/workingpapers/2005/Booklet_05-19.pdf

http://tamanpowell.com/Writing/assets/Business%20Process%20Reengineering.pdf