Module 06

Information
System within © Logorilla/iStockphoto

Organization
 What is ERP?
• Enterprise resource planning (ERP) refers to
a type of software that organizations use to
manage day-to-day business activities such as
accounting, procurement, project management,
risk management and compliance, and supply
chain operations.
 What is ERP?
• The practice of consolidating an
enterprise’s planning, manufacturing,
sales and marketing efforts into one
management system.

• Combines all databases across

departments into a single database that
can be accessed by all employees.
 Evolution of ERP
 1960s: software packages with inventory control
 1970s: MRP systems
 Production schedule with materials management
 1980s: MRPII systems
 Adds financial accounting system
 1990s: MRPII
 Integrated systems for manufacturing execution
 Late 1990s: ERP
 Integrated manufacturing with supply chain
 Major Reasons for Adopting
ERP
• Integrate financial information
• Integrate customer order information
• Standardize and speed up operations
processes
• Reduce inventory
• Standardize Human Resources information
How do ERP System Work
Managers and Stakeholders

Financial Applications
Reporting
Applications

Human
Sales and
Resource
Delivery
Management
Applications
Applications Manufacturing
Sales Force Central Applications
Customers And Customer Database Back-office
Service Reps Administrators Suppliers
And Workers

Service Human
Applications Resource
Inventory
Management
And Supply
Applications
Applications

Employees
 Components of ERP
System
 Finance: modules for book keeping and making
sure the bills are paid on time. Examples:
 General ledger
 Accounts receivable
 Accounts payable
 HR: software for handling personnel-related tasks
for corporate managers and individual employees.
Examples:
 HR administration
 Payroll
 Self-service HR
 Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers
Checks for Parts
Calls back “Not in stock”
Accounting “We ordered the parts”
Files

Accounting
Sends report
Invoices
Sends report accounting

Ships parts
Vendor
Warehouse
Order is placed “We Need parts #XX”
with Vendor
Inventory
Purchasing Files
Files “We ordered the parts”
Purchasing
An ERP Example: After ERP

Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting

Financial Data exchange;

Books invoice against PO

Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO

Order is placed
with Vendor

Warehouse
Vendor Purchasing

Ships parts
And invoices accounting
 Potential Benefits of
ERP
❖ Internal Benefits (Reward for existing
employees)
▪ Integration of a single source data
Common data definition .A real-time
system Increased productivity
▪ Reduced operating costs
▪ Improved internal communication
▪ Foundation for future improvement
 Potential Benefits of ERP
❖ External Benefits(benefit gained by an
individual)
• Improved customer service and order
fulfillment
• Improved communication with suppliers
and customers
• Enhanced competitive position
• Increased sales and profits
 Benefits of ERP
Direct benefits include:
1.improved efficiency
2.information integration for better
decision making
3.Faster response time to customer
queries
 Risks with ERP
Implementation
 Expensive (can costs 100 thousands to
millions of dollars)
 Time-consuming (can take months to years)
 Great risk for the organization
 Transfer of Knowledge
 Acceptance with the company
 Before ERP & After
ERP
 Stand alone System.  Integrated System.
 Lack of coordination  Support coordination
among business among business
function(Manufacturing & functions.
sales)
 Integrated Data: Data
 Non Integrated data: Data
have the same meaning
• have different meanings. across multiple functions.
 System are maintained  Changes affect multiple
on a procedural basis functions or Systems
 Redundant data and  Common interfaces
• inconsistent information. across systems.
 Difficult to manage.
 Modules
of ERP
 Finance
 Material
 Sales
 Marketing
 Personnel
 Finance
Sale
HR
ERP

Planning

Operation

Inventory
 ERP Finance Module
 In ThisData is collected From
various functional departments
and generate financial reports
ledger, Trail Balance, Balance
Sheets etc.
ERP HR(Human Resource) Module

 HR Module routinely maintain a complete

employee database including contact information,
Salary details Attendance, Promotions of all
employees.
 Produce pay check Reports
 Maintain personnel Record
 Training
 Time and Attendance Benefits
ERP Purchasing Module
Purchasing module is
tightly integrated with the
inventory control and
production planning
Modules.
ERP Inventory Module
 Inventory Module facilitates processes
of maintaining the appropriate level of
stock in a warehouse.
Major Phases of ERP Implementation
 Initiation – develop business case, project scope,
and implementation strategy
 Planning – establish implementation team,
determine goals and objectives, establish metrics
 Analysis and process design – analyze and
improve existing processes, map new processes to
be adopted by the system
 Major Phases of ERP
Implementation
 Realization – install a base system,
customization, and test the system
 Transition – replace the formal system with
the new system, data conversion
 Operation – monitor and improve system
performance, provide continued training and
technical support
 Major Challenges to ERP
Implementation
 Limitations of ERP technical capabilities
 Inconsistency with existing business processes
 Costs - implementation (hardware, software,
training, consulting) and maintenance
 Changes in employee responsibilities
Major Challenges to ERP Implementation
Flexibility of software system upgrades
Implementation timelines
Availability of internal technical
knowledge and resources
Education and training
Implementation strategy and execution
Resistance to change
New Developments In ERP
 Availability of web-based and wireless ERP
systems
 Adoption of easy-to-install ERP systems
 Linkage to other software systems, e.g., supply
chain management system, e-commerce, customer
relationship management system
 Advantages
of ERP
 Quicker completion of Processes
 Single system
 Modular software
 Database
 Easier to track various tasks
 Manage globally Data
 Disadvantages of ERP
 Cost
 Time Consuming
 Training to employees
BPR
ERP Support for Business
Processes
• The Procurement, Fulfillment, and Production
Processes
– The Procurement Process
– The Fulfillment Process
– The Production Process

• Interorganizational Processes: ERP with SCM and

CRM
– SCM and CRM
– ERP SCM
– ERP CRM
ERP Support for Business
Processes
• The Procurement, Fulfillment, and Production
Processes
• Interorganizational Processes: ERP with SCM and CRM
The Procurement, Fulfillment,
and Production Processes
• The Procurement Process
• The Fulfillment Process
• The Production Process
Interorganizational Processes:
ERP with SCM and CRM
• SCM and CRM
• ERP SCM
• ERP CRM