1.3.5. Enterprise Resource Planning (ERP) Enterprise Resource Planning term is derived from the Material Resource Planning (MRP). Aim of ERP is to integrate all the data and processes into a single system, To perform the integration (all data and processes into a single system), ERP system uses the multiple software and hardware components. Unified database is one of the key components of an ERP system. These databases store the data for various system modules. ERP system uses various techniques and concepts to increase the use of organisational resources in order to improve the working process of entire organisation. According to James O’Brien, “ERP is the technological backbone of e-business, an enterprise-wide transaction framework with links into sales order processing, inventory management and control, production and distribution planning, and finance.” With the help of ERP, all the departments in an enterprise are able to share information and communicate with each other more efficiently due to the fact that ERP combines all the business processes into an integrated and unified software program. Before the implementation of ERP, each department computer system optimized according to the needs of that department, It uses a single database to maintain the deta. The main concept of ERP system is to replace the old standalone computer systems of individual departments (having separate software that manages departmental functions related to manufacturing, finance, HR, etc.). This is shown in figure 1.14. So, employees from various departments such as purchasing, finance and manufacturing are able to carry out functions, related to their own area using the software and can also use the enterprise wide information to improve the quality of decisions.” MBA Sem ‘ For example a finance manager can use the ERP system to know the status ofthe shipment ofthe rales warehouse) to plan working capital management for upcoming time, \ ‘Seats & Option Planing Guliy Magee] t Wainenanse Magee 135.1. Features of ERP ‘Some ofthe most important features of ERP are as follows: Features of ERP ‘Aevomnolaing Vaiey abla | Y Integrated Management Information ‘Seamless Ineration |] Suppiy chain Management Resource Management [| Integrated Data Model 1), Accommodating Variety: The ERP software has the ability to support multiple currencies as well as lagu ‘The business is also able to succeed globally as ERP software supports multi-aciity and multi smanufacraring. : 2) Integrated Management Information: The present business managers are using ERP forthe folowing eas {Theres no need to depend on the information system department as the ERP serves as ibe mpt ‘oo for extracting information, as and when require. ii) ERP supports Blecwonic Data Interchange (EDI). Thus, information regarding the customer, a orders, cah payments and schedule amendments can be received electronically It is also possible invoies and acknowledgements tothe customers with the help of EDI. i) ERP sable o display specification or drawings. It is also able to store orginal purchase oes, cs quotations ad sales orders, iv) ERP database stores information related to controling and monitoring of machines, time ad aks" reporting und post sles statistics 13) Seamless Integration: Invoducton of nw products and changes i the existing products an be fly eP™ into the enterprise system, This funtion is known as engineering change management, Tis cui" the enterprise must inlude routing, automatic generation of product structures, change-ordr roc clectoni approval and revision-level controadeno nlmaon System U1) » 4) Sopply Chain Management: For those entries that have mull distibuion ntworks and manufctrig ui, the endoend soppy chin mazagemet is very cca, Wit th help of the Inteligont Resouree Pluming GRP, ti posible w opine the Now of demand and supply data. The demand supply ncn has ‘beopsimally iene by bung relatonstpbetveen vous sctvies. = 5) Resource Management: It is necessary to effectively manage the human resources and equpmect of am eqprise. To ensure effective management of he equipment, itis ncessary to keep online record regarding the ‘aus and location of the equipment. The proper accounting methods regarding the maintenance and operting ‘coi is also monitored. The ERP software package alo provides functions fr the effective management of human resbure which include inking care ofthe raining needs, earer and sucesson planing, performance review, applicant racking job deseripions and evaluations, equstion management, cost benefits, creating slterate organisational serstures, 6) Integrated Data Model: Te eceation ofan iterated data model the hear of any ERP system. Is able to integrate the data associated with the entre enterprise system and provide data to customers, suppliers snd employees 1352. Functions of ERP 1) Finance Management: All activities ofthe busines sich as planning, rodaction, marking and s0 00 36 preceded by fnzncial module, In order to undertnd the fiance function ofthe basnse, the Knowledge of accountng, marking, economies and production is acessary. Some of the important aspects of finance ae finance decison, investment dessin and dividend decision. Financial management follow both modem 20d tuaiowal appeosches for its proper feotoning. The mai task of fiance management i fo acquire adequate fonds and wulze it according to the interest of on oa 2) Manufacturing and Production Management: Sometimes the term ‘operations’ or ‘production’ is wsed ia place of ‘manufactorig’ Thies because th method of modem production were ist wed in the manafactring {ndusties. These days, production also finds pace i sevices like dy cleaning though ht doesnot produce aay tangible objet. Whea prodection i viewed asa proces, becomes vida! hat Services ke dry cleaning tars ‘withthe ublization of resources like cleaning fds, machines, presses and people and results i clean clothes hich are thought of as produc. “The main sim of the manufacturing module is to match the business process ofthe enterprise withthe technology, in oder o come up with a integrated solton This ode provides information bare, upon which the whole operation is raning must specify business rules that gover te management of he care supply ‘hain process whother it exists within, between the facies, or inthe whole soply chain. 43) Sales and Distribution: Using the Sales and Distbution module the organisation i able to get its basinese toals by taking ey elements into consideration. Every organization has to mainsin records regcling the fonder, customers and suppliers. It is necesary to deliver the rodact propery, once it hasbeen billed. To ‘etermine the cor ofthe produ he corany mst have a well-defined prising staegy. The purchase order has t be placed to the supplier atthe right time, depending on the customer's order so thatthe eustomet recives proper delivery ofthe prodct. These factions are coniniow in nature and this proper monitoing Is needed in order to ensure smooth functioning of the sales and dsuibution process. To ensure thi, te ‘concerned deparunents must be given necessary directions 44) Human Resources Management: One of the vital modules in an ERP packige i the HR module. There are many enterprises that have replaced thee existing HR management sysem with an ERP based HR module. ‘These organisations are able to continuously monitor the aetvies of thousands oftheir employees in an Aaviomatic manner with te help of the HR module, HR module reduces the manpower inthe HR tam and speed up the various processes related to human resource management and also helps in forecasting human resource requirements, aprasing the employees, career advancement, training, iterate with financial ‘management and effective decision making. 5) Plant Maintenance: An intzrted solution, having ability to suppct the enterprise-wide operational needs of ‘an organization is provided by the “Plant Maintenance module’. With th help of this module, is pesbe to improve the proceses as it contains an entre set of product that coer all the apts of equipment or pat mmabstenance. The module supports numerous opdons withthe help of which itis possible 1 stctre the ‘echnical systems with the concerned objet, type and function-elated views. I also allows navigation ia 2 Axble manner. Daca related to planing, processing and history of maintenance tsk is documeced inthe ‘yam in a welldefined manner which furder fle busines venfcaonreqirement,x» A Fn Sens tn ©) Materia! Management (IM: Almost all the manufscwring companies prefer te Mata. “Moxie over any eer module of ti ERP package. Some ofthe most common problems tat sa ‘coterie: ae inaltes to meet the deadlines, maintenance ofthe sock 8 proper mer at rope service to the customs. With the hep ofthe MMM module it posi 10 monte at Evestory propery. thaeby to cope up with the foresaid issues. For any manufctring compy zn the customers are boctbone. So the tp management can tse the repos, generated by te Mie {ake sutble neps to retain the eustmers and supplies oimprove he company postion, : 7) Quality Management: The ISO 9000 series and other standards define the functions and ality management system. These elements are supported by the Quality Management modus gs system. According to standards of quality management, it is necessary that quality managenex propazate through all the processes ia the enterprise. The functions are complemented by a that are integrated in the ERP system. Determining the task priorities, shift from production oj planning, product development to procurement and sales and distibation of the product, ate si: functionalities ofthis module. 1353, ERP Structure “There ae two popular types of ERP architecture: 1) TworTier Architecture: In this type of architecture, the database and application duis ae hades server. The task ofthe cleat isto present tbe data and to transfer use input back othe server. ‘The distribution of processing responsibilities remains same while the clients may be distributed i. rmulple serves. Ia this structure, clients are distibuted across the several ide and lal ar fae ‘proces responsblites remain same. The two-tier architecture is depicted in figure 1.1. eI Anns jez see = Figure 115: Troster Arehitectare 2) Three-Ter Architecture: The application and the database are separated from each other inti si To satisfy the client requests, two oF more network connections are required. Fist, cleat © communication wit the application server and then application server establishes the connection Wi (daabase server. The diagrammatic view ofthe theo ir architecture is piven in igure 1.16. Pure 1.16: Teeter Areitetreerase fiat Se (Ut) a ‘While designing any ERP acitecue the flowing basic functional areas are taken into consideration: 1) Database: Al the data ansfered to and from the cient are stored in his cea epasiton. 2) Clients: Using these nodes, session of request (many times, the raw data) for information is done and the representation of da that sais tbe request is carid out 3) Application Component: Tis st 2s the interface between the database andthe lint. 1354, Elements of ERP ‘Figure L17 shows the various clement ofthe ERP arctecture. Few of them ae described below: 1) Graphical User Interfaces: The manufacsers follow cern syle guidelines while designing the Grephicel ‘User Interfaces (GUD. GUL determines the interface mode! and design of mena, system messages, windows and perating elements. Some ofthe popular ile guides are shown below: CUA ~Common User Access (BM) 10) Homsn Incface Gudsines (Apple) i) ootmraecartxo 3 Sane ae eaips Opie Sym vant Peer Bene ERP Arce 2) RDBMS: Almost all the business applications carry out thei fonctions with alge volume of data. The ‘wansaction” and "master data’ normally requis large volume of disk space. Ths, thee is a need of powerful access and storge methods, so tht this large olume of data can be comforably handled. Thos, the ‘Relational Database Management Systems (RDEMS) are vied, ae they are logically simple. Two ‘mensional tables are wed to store the data ex well ast show the relationship between them. To ideaty ‘every entry uniquely, each abl ha primary ke. ee 3) Operating Systems: A separate sofware layer is create by the operating sysem snd thie lies between the machin language and hardware onthe onesie and te midsleware on te other side. I hides the appeation ‘eas uch as hardware and software use) from the wer. It also manages the processes and resources. (Operating systems can be ctegoried imo following types: i) Desktop Operating Systems: These operating systems are mein for single wers ad ae un on pool computers. They supped individual appicaoos such as spread seet and word processor. Some ofthe ‘examples of such operating systems are Windows 7, MS-DOS and Macintosh Operating Sytem. ii) Server Operating Systems: The compuers in which such operating systems are installed ae centralized ‘and powerflin ature. Many application and wer can access the resources of such comple. 49) Repository: The ene se of metadata of an enterprise is stored jn the reposition eviroment. These can be ‘esi lbally The eostry iret rm he dla detonay do oie ft at en be plemented ‘sos the mulipe database management systems and hardware platforms. 1353. Advantages of ERP 1) Redueton of Lead Time: Lesd time isthe ime that clpses between pacing 2 order and receiving it, ERP plays avery important role inthe inventry contol snd purchasing process A lot of problems like ising ‘every schedules losing the cusiomar in the compoive market o lesingeasomer goodwil due to Slay i every ean occur item require for production spot aisle 2) On-Time Shipment: As the ERP system is higly flexible fn nature, its possible vo change te panning and manofactiring methods according (othe needs. For this, hte 1s no teed to reconfigure the plan of (workplace layouts The businesses not have to rae hemelves to a sage planning proces, such 3 tmake-toordet or make-to-stockae oa 2 BA Fit Semester foment, : 3 Cycle Time: The time that elapses between receiving the order and deivein yy known as the ‘cycle time’. With the help of the ERP system, it is possible to reduce the cycle tiny 5" checks whether the item is available as soon as the order is fed into the system. In the case, yy ‘manufacturer do not have the item, then the other nearest warehouse identifies the stock item forthe 4) Improved Resource Utilization: It is possible to carry out detailed and rough-cut capacity pln help of the capacity planning features of ERP module. The resource and capacity planners ca alg best option by simulating the various resource and capacity utilization scenarios, using te capabilities of the ERP systems, So, an organization is able fo bring about drastic improvement in capacity utilization, wit the help of ERP system. 5) Better Customer Satisfaction: With te help of various features of ERP systems, itis possible to pa using the make-to-order approach. Thus, the time and cost benefits of made-to-order operations can by, ina much more flexible manner. 6) Improved Supplier Performance: It is possible to coontinate and manage the various aspcy Procurement process as there are lot of tools in the ERP system that facilitates procurement suppor aj management. While assuring superior quality of the producs, the ERP system support the organ ‘monitoring’ ‘negotiating’, ‘controlling procurement schedule’ and ‘costs’ in an effective way. 7) Increased Flexibility: One of the key issues that are taken into consideration atthe time of forma strategic plans of the organization is fexibilty’. ERP systems enhance the flexibility of the whole or bby improving the manufacturing operations. 8) Decision-Making Capability: Busitess decision sking is the outcome of implementation of ER improves accuracy of information 135.6. Disadvantages of ERP 1) Expense and Time in Implementation: 4 significant amount of ime and money has tobe invested og full benefits of the ERP system. Companies spend millions of dollars and wait for three to five yes implemented. 2) Difficulty Implementing Change: In ones to accept the working process of the ERP, many’ compan ba bring about radial change in how it operates. In many cases, the old employees have to retire ot quit they are unable to adapt such changes. This Can result shortage ofenperienced employees in the fim. The’ practices re sometimes inappropriate to firm as they suffer disruptions in the flow of work, 3) Difficulty Integrating with Other Systems: There are many other systems in an organization ike e-comms financial analysis programs and other applications, that have to be integrated with the ERP system. Mos o companies have faced problems while operating such systems with the ERP system, In many sis additional softwae is needed to link Such systems to the ERP system, 4). Risks in Using One Vendor: To switch to another vendor, ERP system involves a high cost. So mos companies avoid installation ofthe ERP system in the company. In most ofthe cass, the vendor gives ma attention fo the complains ofthe customer once the organization has adopted a system. Incase the ERP ve goes out of business or the product becomes out-dted, the cost associated with the risk of switching 3 increases, Thus, it s necessary to choose a long-term business parner and best software product atthe Gi selecting the ERP system, 5). Risk of Implementation Failure: Ics a challenging task to immpleniont the ERP system propery a I ei the use of best IS and business peopl, «huge amount of resources and a full support from the managenest 8 there are some situations where the installation fails. To cope up with problems (associated with EY implementation requires costly solutions. 13.7. Applications of ERP Following are some applications of ERP in Business Organisation 1) Finance: All activites ofthe busiess such a planning, prodton, marketing’ and so on ae pride financial module of ERP. In onder to understand the finance function of the business, the knowlegt # sccountng, masking, economics and production is necessary. Some ofthe important aspect of fn: finance decision, ivesunen decision and dividend decision. Financial management fllows Both ma 2 tmaitionalappreaches for its prope functioning, The main ask of financial management sto acquire Ms? fands and wie i aceordng tthe interest of one oral3. Introduction to Information System (Unit 1) 2) Manufacturing and Production: Sometimes the term ‘operations’ or ‘production’ is used in place of “manufacturing”. This is because the methods of modem production were first used in the manufacturing industries. These days. production also finds place in services like dry cleaning though it does not produce any tangible object. ‘When production is viewed as a process, it becomes evident that services like dry cleaning starts with the utilization of resources like cleaning fluids, machines. presses and people and results in clean clothes which are thought of as products. The main aim of the manufacturing module of ERP is to match the business process of the enterprise with the technology, in order to come up with an integrated solution. This module provides information base, upon which the whole operation is rmning. It must specify business rules that govern the management of the entire supply chain process whether it exists within, between the facilities, or in the whole supply chain. 3) Sales and Distribution: Using the Sales and Distribution module of ERP, the organisation is able to get its business goals by taking key elements into consideration. Every organisation has to maintain records regarding the orders, customers and suppliers. It is necessary to deliver the product properly, once it has been billed. To determine the cost of the product, the company must have a well-defined pricing strategy. The purchase order has to be placed to the supplier at the right time, depending on the customer's order so that the customer receives proper delivery of the product. These functions are continuous in nature and thus proper monitoring is needed in order to ensure smooth functioning of the sales and distribution process. To ensure this, the concemed departments must be given necessary directions. 4) Human Resources Management: One of the vital modules in an ERP package is the HR module. There are many enterprises that have replaced their existing HR management system with an ERP based HR module. ‘These organisations are able to continuously monitor the activities of thousands of their employees in an automatic manner with the help of the HR module. HR module reduces the manpower in the HR team and speed up the various processes related to human resource management and also helps in forecasting human resource requirements, appraising the employees, career advancement, training, interface with financial management and effective decision making 5) Plant Maintenance: An integrated solution, having ability to support the enterprise-wide operational needs of an organization is provided by the “Plant Maintenance module’. With the help of this module, it is possible to improve the processes as it contains an entire set of products that cover all the aspects of equipment or plant maintenance. The module supports numerous options with the help of which it is possible to structure the technical systems with the concerned object, type and function-related views. It also allows navigation in a flexible manner. Data related to planning, processing and history of maintenance tasks is documented in the system in a well-defined manner which further fulfils business verification requirements. 6) Material Management (MM) Module: Almost all the manufacturing companies prefer the Materials Management Module over any other module of the ERP package. Some of the most common problems that are faced by these enterprises are inabilities to meet the deadlines, maintenance of the stock in a proper manner and to provide proper service to the customers. With the help of the MM module, it is possible to monitor and ‘manage the inventory properly. thereby to cope up with the foresaid issues. For any manufacturing company, the suppliers and the customers are backbone. So the top management can use the reports, generated by the MM ‘module, to take suitable steps to retain the customers and suppliers to improve the company position. 7) Quality Management Module: The ISO 9000 series and other standards define the functions and elements of quality management system. These elements are supported by the Quality Management module of the ERP system. According (0 standards of quality management, it is necessary that quality management practices propagate through all the processes in the enterprise. The functions are complemented by other modules that are integrated in the ERP system. Determining the task priorities, shift from production to production planning, product development to procurement and sales and distribution of the product, are some of the functionalities of this module. 13.6. Supply Chain Management (SCM) Supply chain refers to the network of suppliers, manufacturers, assembly, distribution and logistics capacities Which help in sourcing materisls, transforming these materials into intermediate or finished goods and their distribution among customers. Supply chain is an important feature in both manufucturing and service industry. In order to achieve a sustainable competitive advantage, supply chain management combines the manufacturing and service functions. “Supply chain management is the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across business within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.’