Enterprise Resource Planning

ERP
 ERP stands for Enterprise Resource Planning. ERP is a way to integrate
the data and processes of an organization into one single system.

 ERP (enterprise resource planning) is an industry term for the broad set
of activities supported by multi-module application software that helps a
manufacturer or other business to manage the important parts of its
business, including product planning, purchasing, maintaining
inventories, interacting with suppliers, providing customer service, and
tracking orders.

 An ERP system uses or is integrated with a relational database system.

 ERP is an enterprise backbone that integrate and automates many

internal business process and information system within manufacturing,
logistics, distribution, accounting, finance and human resources function
of a company.
Major ERP Vendors

 BAAN
 Oracle
 PeopleSoft
 SAP
 JDEdwards
 Infor
 Microsoft Dynamics
 Lawson
 SSA Global
 Epicor
 Business functions supported by ERP
Financial Human Resource Operation & Logistics Sales and
Marketing
Account receivable Time Accounting Inventory Management Order
& payable management

Assets accounting Payroll Material requirement Pricing

planning

Cash forecasting Travel expense Plant maintenance Sales

management
Cost accounting Production planning Sales planning

General ledger Purchasing

Standard costing Quality management

Profitability Shipping
analysis
 Modules offered by leading vendors
Functional Descriptions SAP Oracle PeopleSoft JDEdwards

Record sales order and Sales & Marketing Sales Supply chain Mgt. Order Mgt.
scheduled deliveries, Distributi supply chain
customer information . on
Purchasing and raw Material Inventory Mgt. Supplier Inventory Mgt.
material inventory, work in Mgt. relationship Mgt.
process and finished goods
Production planning & Productio Manufacturing ----- Manufacturing
scheduling, actual n planning Mgt.
production
Production inspection, Quality - Enterprise Technical
material certification, Mgt. Performance Mgt. foundation.
quality control
General ledger account Financial Financials Financial Mgt. Financial Mgt.
transaction, generates accountin Solutions
financial statement g
Goals of ERP

 ERP goal is to make the information flow dynamic and immediate,

therefore increase the usefulness and value of the information.
 It eliminate data redundancy.
 ERP system is needed to increase supply chain efficiency, increase
customer access to products and services, reduce operating cost.
 ERP system integrate department and data across an organization onto a
single infrastructure that serve the needs of each department.
 Before & After ERP: System stand point
Before ERP After ERP
Information system Stan alone system Integrated system

Coordination Lack of coordination among Support coordination among

business functions .(e.g. business functions.
Manufacturing and sales)

Database Non integrated data Integrated data

Maintenance It is costly to maintain Changes affect multiple

separate system system

Information Redundant, inconsistent Consistent real time

information information

System architecture ------ Client- server model

 Before & After ERP: Business stand point
Before ERP After ERP
Cycle time Costly Time & cost reduction of business
processes
Transaction processing Multiple transaction use multiple Faster transaction, using common
data files. data. Reduce the time & cost of
multiple updates.

Financial Management Increased cost of excesses inventory Improved operation performances (

less excess inventory reduction in
accounts receivable.)
Supply chain Management Lack of integration Linkage with suppliers and
customers.

Communication Lack of effective communication Facilitate organizational

with customer and suppliers. communication with customers and
suppliers.

Information Lack of information for effective Allows cross functional access to

monitoring and control of same data for planning and control.
organizational resources Provides widely available
information.
ERP role in Business
 A role of ERP in business , beside integration of functional applications
and organization information, is to better position the organization to
change its business processes.
 A business process is a series of task grouped to achieve a business goal.
E.g. Order processing may include such task as taking an order, checking
inventory, preparing invoices.
Organization have set of policies and procedures to guide their
business process.
 An organization have two choice while implementing an ERP:
change business process to match software functionality or modify ERP
software.
 The best practice to implement ERP without any major modification in
software because ERP software has “best practice or leading practices” of
business process in their software.
ERP system components

 People
 Hardware Users
 Software
 Database ERP
 Company processes
 Information Database

Operating system

Hardware infrastructure
ERP architecture

 The architecture of ERP implementation influence the cost, maintenance

and use of the system. A flexible architecture is best because it allows for
scalability as the needs of the organization change and grow.
 ERP architecture helps the implementation team to build the ERP system
for an organization.
 Process of designing ERP system is different from other IT architecture.
Other IT architecture are driven by organization strategy and business
processes, if purchased ERP architecture is driven by ERP vendors. This is
often referred as package driven architecture.
 The architecture must be developed in mind after the selection of ERP
software, where as the architecture is developed in mind well before or
developing software in other IT implementation.
 Two types of architecture for an ERP system are: two tier architecture and
three tire architecture.

 Two tier architecture:

In this server handles the database and application duties.

Client present the data and pass user input back to server.

 Three tier architecture:

the database and application function are separated.

In this scenario satisfying client request require two or more network

connections. Initially the client establish communication with application
server. The application server then create connection with database server.
ERP design alternatives

Methods Advantage Disadvantage

Develop in-house Best fit with Most difficult to develop,

organizational needs expensive, slow process

Best-of-breed Gain best of all system Difficult to link modules,

slow inefficient.

Selected vendor modules Fast, least expensive If expand long run time
cost higher.

Full vendor system Fast, least expensive, Inflexible

efficient
E-business and ERP

 E-business technology focus on linking a company with its external

partners while ERP focus on integrating the functional areas of
organization into an enterprise application.
 E-business generally focused on market growth by selling products and
services to new consumers and markets. While ERP focus on integrating
business processes so to provide central database for data, information and
knowledge thereby increase organization efficiency and worker
productivity.
 E-business practically transformed the way business operate in term of
selling, customer service and relationship with suppliers. While ERP act as
a merger of data and business processes.
 ERP for internal process while e-business for external process.
Benefit and limitation of ERP
System benefit of ERP :
 Integration of data and application across functional areas of the
organization.( i.e. data can be entered once and used by all applications in
the organization improving accuracy and quality of data.)
 Maintenance and support of the system improves as the IT staff is
centralized and is trained to support the needs of users across the
organization.
 Security of data and application is enhanced due to better control and
centralization of hardware, software and network facilities.

System limitations of ERP:

 Complexity of installing, configuring and maintain the system increase,
there by requiring specialized IT staff, hardware, network resources.
 Data conversion and transformation from old system to new system can be
extremely tedious and complex process.
 Business benefits of ERP:
 Sharing of information across the functional departments means employees
can collaborate easily with each other and work in team.
 Linking and exchanging information in real-time with its supply chain
partners can improve efficiency and lower cost of products and services.
 Quality of customer service better and quicker as information flows both up
and down the organization hierarchy and across all business units.

Business limitation of ERP:

 Efficiency of business processes suffered due to business process
reengineering of organization functions.
 Retaining of all employees with new system can be costly.
ERP implementation steps

 ERP implementation includes addressing configuration issues, migrating

data from the old system to new system, building interfaces, implementing
reports and pilot testing. Many companies contract with technical support
specialist from the software suppliers to assist in implementation.
 ERP implementation include establishing security and permission , so users
have the access they need.
 Migrating data from old system to new system means ensuring that data to
be migrated are accurate and data bridge work.
 Documentation should be provided by the vendor and should be reviewed.
 User training is also important.
 The issues of whether to cutover to the new system all at once or in phases.
 There are many risks while implementing an ERP and these risk can be
reduced if the company decides to implement a complete vendor package
because the vendor tested implementation techniques will be followed.
ERP implementation strategies

 Implementing an ERP is problematic without first considering current

business process and change to those processes based on functionality of
new system.
 If business processes are not analyzed and compared with what the new
system can do, it is very likely the implementation will require significant
system modification after implementation.
 Purchased ERP system are minimally modified to protect the investment in
the system..

ERP vendors upgrades their system on regular basis, adding functionality,

fixing problems and generally keeping the product current with ever
changing technology innovation to remain competitive.
Software & Vendor selection
 Selecting vendor the organization must carefully evaluate its current and
future needs in enterprise management system.
 Assessment being with simply by looking the size of the organization in
term of number of employees that will be assessing the ERP applications.
 The assessment must look at the industry that the organization belongs to
and the functional areas that the ERP applications will be supporting.
 It must review the organization existing hardware, network and software
infrastructure and finally the resources.( money and people) available for
implementation.
 Criteria developed above help organization to select vendors.
 These vendors should be invited to submit their bid for the project.
 During this phase vendors should be asked to install their applications on
company IT infrastructure and to have it available to potential users for
testing.
 Vendors needs to evaluate on the following issues by organization:
 Business functions or modules supported by their software.
 Features and integration capabilities of the software.
 Financial viability of the vendor as well as length of time they have been in
business.
 Licensing and upgrade policies.
 Customer services and help desk support.
 Total cost of ownership.
 IT infrastructure requirement.
 Third party software integration.
 Consulting and training services.
 Future goals and plans for short and long term.