ERP Systems
1. ERP Introduction
2. Benefits
3. The Evolution of ERP
4. The Conceptual model of
ERP
5. The Structure of ERP.
ERP Introduction
ERP (Enterprise Resource Planning)
Meaning
ENTERPRISE:- “An Enterprise is a group of people having
some common goal. The assemblage has some key
functions to perform in order to accomplish its goal.”
RESOURCES:- “ Resources incorporated are money,
Manpower, Materials, and all the supplementary things
that are required to run the enterprise.”
PLANNING:- “ Planning is done to make certain that
nothing goes wrong. Planning is putting necessary
function in place and more importantly putting them in
concert (jointly)”
Enterprise Resource Planning (ERP) is an integrated computer-
based system used to manage internal and external resources,
including tangible assets, financial resources, materials, and
human resources. It's purpose is to facilitate ( make Possible or
make easy) the flow of information between all business
functions inside the boundaries of the organization and manage
the connections to outside stakeholders. Built on a centralized
database and normally utilizing a common computing platform,
ERP systems consolidate all business operations into a uniform
and enterprise-wide system environment.
ERP BENEFITS
Benefits of an ERP System or reasons for growth of ERP
Effective utilization of resources
Improvement in business performance
Reduction of inventory due to JIT (Just in Time)approach
Integration of information i.e. integration of all the department of an organization.
Sharing of common data and information
Global Adaptation
Improvement in the quality of the product at the same price
ERP targeted all types of business organization whether large business or small business organization
Lowers the total cost in supply chain management through JIT approach.
Eliminate limitation in legacy system i.e. traditional system
Order fulfillment improvement
Improvement in customer service.
EVOLUTION OF ERP
1960s - Inventory Management & Control
Inventory Management and control is the combination of information technology
and business processes of maintaining the appropriate level of stock in a warehouse.
The activities of inventory management include identifying inventory requirements,
setting targets, providing replenishment techniques and options, monitoring item
usages, reconciling the inventory balances, and reporting inventory status.
1970s- Material Requirement Planning (MRP)
Materials Requirement Planning (MRP) utilizes software applications for
scheduling production processes. MRP generates schedules for the operations and
raw material purchases based on the production requirements of finished goods, the
structure of the production system, the current inventories levels and the lot sizing
procedure for each operation.
1980s Manufacturing Requirements Planning (MRP II)
Manufacturing Requirements Planning or MRP utilizes software applications
for coordinating manufacturing processes, from product planning, parts
purchasing, inventory control to product distribution.
1990s- Enterprise Resource Planning (ERP)
Enterprise Resource Planning or ERP uses multi-module application software
for improving the performance of the internal business processes. ERP systems
often integrates business activities across functional departments, from
product planning, parts purchasing, inventory control, product distribution,
fulfillment, to order tracking. ERP software systems may include application
modules for supporting marketing, finance, accounting and human resources.
CONCEPTUAL MODEL OF ERP
Conceptual components of ERP
The ERP model consists of four components that are implemented through
a methodology. Figure 1 illustrates the integration between the components.
A clear mapping results, as can be seen in Table I, when this conceptual
model is compared to the 4Ps model.
Methodology encircles all four of the components to illustrate that
each component is addressed and implemented in an integrated
manner. Components are as follows: -
1. The software component
2. Process flow
3. Customer mindset
4. Change management
Figure 1
The Software Component
The Software component of the ERP model is the component that is most visible
to the users and is therefore seen as the ERP Product. It consists of several
generic modules, some of which are listed below:-
1. Finance
2. Human resources
3. Supply Chain Management (SCM)
4. Supplier relationship management (SRM)
5. Customer relationship management (CRM)
6. Business Intelligence (BI)
Process Flow
Process Flow deals with the way in which the information flows among the
different modules within an ERP system. This forms a very important part of
understanding ERP system.
Customer Mindset
The third proposed component of the ERP model is the customer’s mindset.
Resistance kills many ERP projects. A proposed ERP system may hold great
promise, but often fals to consider how the user are likely to view this so called
improvement. When user are asked to give up what they know and what they
can rely on, they will resist. A paradigm shift or customer mindset change must
be achieved.
This has to be done at three level:
1. User influence
2. Team Influence
3. Organizational Influence
Change Management
Change management play a major role in the successful implementation of an
ERP system and is the forth component in the ERP model. Change needs to be
managed at several levels:
1. User attitude
2. Project changes
3. Business process changes
4. System Changes
ERP Methodology
Methodology refers to a systematic approach to implement an ERP system that
will ensure the Proper integration of the four component.
There are five steps of ERP methodology:
Pre- implementation
Analysis Phase
Design Phase
Construction Phase
Implementation Phase
