An Overview of Enterprise Resource Planning

8/9/2019 An Overview of Enterprise Resource Planning

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OVERVIEW OF ERP

- By Amit Gupta


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What is ERP?

ERP-A CONCEPT An ERP System is a fully integrated business management

system covering all the functions ofLogistics , Production , Finance and Human Resources.

It is one of the most advanced business managementapplications in the market today having been developed tosupport all of these processes of manufacturing anddistribution companies in a wide variety of industries.


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Importance of ERP for Management

Students Reports for fast decision making.

Coordination among the functional department.

Work in a integrated way.

Work in automated environment.


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The Necessity of ERP Aggressive cost control initiatives Need to analyze costs and revenues on a product or customer

basis More informed management decision making

Changes in ways of doing business

Common Applications Developed:

Management Information Systems (MIS) Integrated Information System (IIS) Executive Information System (EIS) Material Requirement Planning (MRP)


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Characteristics of ERP: ERP facilitates company wide Integrated Information system .

ERP bridges the information gap across organization.

ERP provides complete integration of the system not only across thedepartments but also across the companies under the samemanagement.

ERP allows automatic introduction of latest technology like electronicfund transfer (EFT) , electronic data interchange (EDI) .

Productivity enhancement ,customer service, cash management,inventory management, quality control and prompt delivery

Ex-Big Bazar,Tata motors,Cipla Pharmaceutical etc.


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Prerequisites of ERP: Business Process Reengineering (BPR) is a prerequisites for going

ahead with a powerful planning tool like ERP.

An in depth BPR study has to be done before taking up ERP.

BPR involves following steps :

Study the current System Design and develop new system Find the Gap between new and old system Define processes , organization structure and procedure

Customize the Software Train People Implement New System


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Guidelines for ERP Implementation: ERP Implementation is recommended to be done in the phased manner.

A step by step method of implementation will yield a better result.

The total time required for successfully implementing an ERP package would be

between 6 and 24 months.

Phases for ERP Implementation: Project Planning Business analysis BPR Installation and configuration

Project and Training Business requirement mapping Module Configuration System Interfaces Custom Documentation End User Training Acceptance Testing

Post Implementation and Audit Support


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PROJECT METHODOLOGY:

IT PROJECTS

REQUIREMENT ANALYSIS

DESIGN

CODING

TESTING

INSTALLATION ANDMAINTENANCE

SAP PROJECTS

AS IS STUDY

TO BE STUDY

BUSINESS BLUEPRIN

REALIZATION

GOLIVE

DEVELOPMENT

TESTING

PRODUCTION

INSTALLATION AND

MAINTENANCE


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Benefits of ERP:Tangible Benefits :-

Provides greater and effective control on accounts payable byhaving increased control on invoicing and payment processing

Reduction of paper work Availability of timely information

Greater Accuracy

Improved cost control

Enable quick response to change in business operations and

market consumption. Provides a unified customer database usable by all

applications


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Intangible Benefits :-

Improved Customer Satisfaction.

Improved vendor Performance.

Increased flexibility.

Improved information utility.

Improved information accuracy


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ERP versus Traditional ISERP versus Traditional IS

(information system)(information system)

ERP systems areERP systems are package software.package software.

ERP systems handles theERP systems handles the majoritymajority of theof the

enterprises information requirements.enterprises information requirements.

ERP systems facilitate theERP systems facilitate the flow of informationflow of informationacross the enterprise.across the enterprise.

Uses aUses a single databasesingle database..

Fits theFits the organizations business processesorganizations business processes..


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ERP Employ Best Practices

ERP employ processes that are known to work and thatintegrate with each other

Those processes can be used to improve the way that firms dobusiness.


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ERP Eliminate Information Asymmetries

What is an information asymmetry?

Since all information goes into a single database, accessible tomany, means that many information asymmetries disappear.

If you dont do your job, I can see that something hasnt beendone


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ERP Provide On-Line and Real Time

Information

Since data is widely available and available on-line and in realtime, all have access to the same information

As a result, information is available Anytime! Anywhere! to Anyone!

which can facilitate more consistent planning.


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Growth of ERP SystemsGrowth of ERP Systems

The market for ERP systems grew rapidly in the late 1990s. The majorThe market for ERP systems grew rapidly in the late 1990s. The major

reasons for this included:reasons for this included:

The client/server environment became a popular enterpriseThe client/server environment became a popular enterprise

computing platform for many organizations. Most ERP systems arecomputing platform for many organizations. Most ERP systems aredesigned to take advantage of this platform.designed to take advantage of this platform.


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Disadvantages of ERPDisadvantages of ERP

ERP implementation is very difficult. There is a change in theERP implementation is very difficult. There is a change in theway business is done. From a business function approach to away business is done. From a business function approach to aprocess approach.process approach.

ERP systems are very expensive to implement. Can take yearsERP systems are very expensive to implement. Can take yearsand huge cost .and huge cost .

Training is also very expensive.Training is also very expensive.

It takes time to realize the benefits of an ERP system,It takes time to realize the benefits of an ERP system,approximately 8 months after implementation.approximately 8 months after implementation.


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Disadvantages of ERP:

Employee control issues:Employee control issues:

Share information that was once closely guarded. (i.e. theirShare information that was once closely guarded. (i.e. theirinformation)information)

Make decisions they were never required to make.Make decisions they were never required to make.

Both of these issues lead to resistance, redundancies, andBoth of these issues lead to resistance, redundancies, anderrors.errors.

About 1/2 of ERP implementations fail to achieve the hoped forAbout 1/2 of ERP implementations fail to achieve the hoped forbenefits because of under estimates in change management.benefits because of under estimates in change management.These are referred to as unintended consequences.These are referred to as unintended consequences. Emotional fallout.Emotional fallout. Resistance to further change.Resistance to further change.


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Consequences:

ERP systems are strategic solutions. In essence you areERP systems are strategic solutions. In essence you are

betting the companys future on a successful ERPbetting the companys future on a successful ERP

implementation.implementation.

If the implementation fails, the consequences to the companyIf the implementation fails, the consequences to the company

can be disastrous.can be disastrous.

Companies have gone out of business as a result of a failedCompanies have gone out of business as a result of a failed

ERP implementation effort.ERP implementation effort.


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Recent ERP Trends:Recent ERP Trends:

ERP systems are now linking groups and applicationsERP systems are now linking groups and applications

external to the organization. Ex Dell, Maruti Vendorexternal to the organization. Ex Dell, Maruti Vendor

We are now linking ERP systems with web and E-We are now linking ERP systems with web and E-

commerce applications, b-to-b, b-to-c.commerce applications, b-to-b, b-to-c.

ERP systems are now beginning to use web browsers asERP systems are now beginning to use web browsers as

the GUI.the GUI.


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Pre-Implementation ObjectivesPre-Implementation Objectives

To increase the chances of a successful ERP implementation,To increase the chances of a successful ERP implementation,companies should achieve the following objectives before ERPcompanies should achieve the following objectives before ERPimplementation begins:implementation begins:

Ensure alignment of the project to the companys businessEnsure alignment of the project to the companys businessplan.plan.

Ensure ERP goals are clearly and widely understood.Ensure ERP goals are clearly and widely understood.

Develop a well established communication plan thatDevelop a well established communication plan thatinvolves the entire organization.involves the entire organization.

Obtain executive sponsorship.Obtain executive sponsorship.


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Factors affecting ERPImplementation:

ERP implementations will be significantly influenced by 4 major criteria:ERP implementations will be significantly influenced by 4 major criteria: Functional complexity.Functional complexity. Size/type of user population.Size/type of user population. Geographical spread.Geographical spread. Package modifications.Package modifications.

s Functional complexityFunctional complexity. ERP Functionality can be grouped into five areas:. ERP Functionality can be grouped into five areas:Finance, Manufacturing, Logistics, Sales, and HR/Payroll.Finance, Manufacturing, Logistics, Sales, and HR/Payroll.

Size/type of user populationSize/type of user population. Complexity increases proportionately with users .. Complexity increases proportionately with users . Geographic spreadGeographic spread. Single-site deployments are the simplest, while multiple. Single-site deployments are the simplest, while multiple

sites across multiple continents are the most complex.sites across multiple continents are the most complex.

Package modificationPackage modification. Many companies make the mistake of trying to over. Many companies make the mistake of trying to over

customize the application framework to fit their existing business process model,customize the application framework to fit their existing business process model,rather than adjusting business processes to fit the application suite.rather than adjusting business processes to fit the application suite.

During the package selection process, it is important to gauge the fit of the ERPDuring the package selection process, it is important to gauge the fit of the ERPsystem with the existing business model. Minimizing customization andsystem with the existing business model. Minimizing customization andmodifications will result in a faster, more successful, deployment.modifications will result in a faster, more successful, deployment.


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ERP Costs:ERP Costs:

ERP Implementation and Maintenance CostsERP Implementation and Maintenance Costs

Cost ComponentCost Component PercentagePercentage

Implementation costsImplementation costs 70%70%

Two-year post-implementation costsTwo-year post-implementation costs 30%30%

Total cost of ownership (TCO)Total cost of ownership (TCO) 100%100%


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Key Steps For Ensuring MaximumBusiness Value from an ERP System:

PROPER ERP VENDOR SELECTION

BUSINESS PROCESS OPTIMIZATION


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SAP:SAP:

SAP - Systems, Applications, Products in Data Processing.SAP - Systems, Applications, Products in Data Processing.

The worlds leading vendor of ERP systems.The worlds leading vendor of ERP systems.

The company SAP AG was founded in 1972 by 4 former IBM employees.The company SAP AG was founded in 1972 by 4 former IBM employees.

SAP makes 2 ERP software packages:SAP makes 2 ERP software packages:

R/2, R/3.R/3R/2, R/3.R/3 is the follower to the R/2 system and was introduced in 1992.is the follower to the R/2 system and was introduced in 1992.

The latest version that is ruling the market is ECC 6.0, a descendant ofThe latest version that is ruling the market is ECC 6.0, a descendant of

ECC 5.0.ECC 5.0.

Clients are mainly big international companies with revenues of at leastClients are mainly big international companies with revenues of at least

60 million dollars.60 million dollars.

SAPs revenue shows a slight slow down from 1998 onwards. But afterSAPs revenue shows a slight slow down from 1998 onwards. But after

y2k problem SAP provided the solution to business and grown very fast.y2k problem SAP provided the solution to business and grown very fast.


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R/3 System:R/3 System:

The R/3 system has evolved from R/2 technology.The R/3 system has evolved from R/2 technology.

R/3 is used in new applications as well as in companies convertingR/3 is used in new applications as well as in companies converting

from a legacy mainframe system to a client/ server architecture.from a legacy mainframe system to a client/ server architecture.

The major characteristics of R/3 are:The major characteristics of R/3 are:

ALE technology - allows R/3 to link to external systems and R/2ALE technology - allows R/3 to link to external systems and R/2

applications.applications.

Integration with standard PC applications - easy interactionIntegration with standard PC applications - easy interaction

with excel, word, and access.with excel, word, and access.

Very good GUIVery good GUI

SAP has the strong hold in Manufacturing moduleSAP has the strong hold in Manufacturing module


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Oracle:Oracle:

SAPs nearest challenger, in terms of revenue, is OracleSAPs nearest challenger, in terms of revenue, is Oraclewith its product Oracle Applications.with its product Oracle Applications.

Oracle established itself as the largest database vendorOracle established itself as the largest database vendorbefore moving into the ERP market in 1989.before moving into the ERP market in 1989.

One reason for Oracle not being so successful is that theOne reason for Oracle not being so successful is that thefirm has prioritized marketing rather than functionalityfirm has prioritized marketing rather than functionalityor value for the money.or value for the money.

Oracle they have the strength in financial domainOracle they have the strength in financial domain


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People soft: (Oracle)People soft: (Oracle)

The third largest ERP vendor is Peoplesoft.The third largest ERP vendor is Peoplesoft.

They produce Peoplesoft 7.5.They produce Peoplesoft 7.5.

Peoplesofts focus was in the area of Human Resources, which is still thePeoplesofts focus was in the area of Human Resources, which is still thecompanys strength.companys strength.

Some critics consider that Peoplesoft is not a complete ERP vendor, butSome critics consider that Peoplesoft is not a complete ERP vendor, butthe company has today well-developed modules in manufacturing,the company has today well-developed modules in manufacturing,distribution and financials.distribution and financials.

Too US-centric to make a serious challenge to the market.Too US-centric to make a serious challenge to the market.

Only 20 percent of its sales are derived from clients outside USA.Only 20 percent of its sales are derived from clients outside USA.


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J.D. Edwards: (oracle)J.D. Edwards: (oracle)

US-based JD Edwards (JDE) was founded in 1977.US-based JD Edwards (JDE) was founded in 1977.

JDE started as a custom software developer, then moved toJDE started as a custom software developer, then moved to

off-the-shelf (finance and logistics) packages.off-the-shelf (finance and logistics) packages.

JDE mostly targets mid-size corporations and has enjoyed aJDE mostly targets mid-size corporations and has enjoyed a

long-term growth rate in excess of 50% over its 20 years inlong-term growth rate in excess of 50% over its 20 years in

business.business.

After three years of development, its ERP products are nowAfter three years of development, its ERP products are now

sold under the brand namesold under the brand name One WorldOne World..


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Siebel (Oracle)

Siebel also the part of Oracle now

Siebel they are the leaders in customer relationshipmanagement

Most of the BPO companies are working on Siebel.


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Microsoft Dynamics and Navision

Microsoft acquire Navision which has good presence in SMEsegment and very user friendly.

Microsoft has come with Microsoft Dynamics to give thecompetition to SAP.


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Epicor:

Targeted to medium-size companies with $50 - $250 Million inrevenues.

Front office/CRM End to end solution in some ways similar to Tier One products

(SAP, PeopleSoft, Oracle) with much of the functionality but at40% of the cost.

Warehouse management Light manufacturing Multiple Currencies E Procurement. Consolidation and inter company processing


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Microsoft Business Solutions -Navision

Targeted to small, medium-sized and some large companieswith $10 - $500 Million in revenues.

Customization. Rock solid performance.

Dimensional reporting. Financial reporting. Navigation. Navision provides superior tools to easily drill

down for detailed information. Supply Chain. Inter-company transactions.


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Basic Modules of SAP R/3:

Functional Modules of SAP: Financial Accounting (FI) Controlling (CO) Assets Management (AM) Project System (PS) Human Resources (HR) Plant Maintenance (PM) Materials Management (MM) Quality Management (QM)

Production Planning (PP) Sales and Distribution (SD)

ABAP - CODING

BASIS SYSTEMADMINISTRATION

SAP Technical Modules


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FI Financial Accounting:

Designed for automated management and externalreporting of general ledger, accounts receivable, accountspayable and other sub-ledger accounts with a user definedchart of accounts.

As entries are made relating to sales production andpayments journal entries are automatically posted. Thisconnection means that the "books" are designed to reflectthe real situation.SD Sales and Distribution:

It helps to optimize all the tasks and activitiescarried out in sales, delivery and billing. Key elementsare; pre-sales support, inquiry processing,quotation processing, sales order processing,delivery processing, billing and sales information

system.


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CO Controlling:

It represents the company's flow of cost and revenue. It is a

management instrument for organizational decisions. It too is

automatically updated as events occur.

AM Asset Management:

It is designed to manage and supervise individual aspects of fixed

assets including purchase and sale of assets, depreciation andinvestment management.


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HR Human Resources:

It is a complete integrated system for supporting the planningand control of personnel activities.

PM Plant Maintenance:

In a complex manufacturing process maintenance means morethan sweeping the floors. Equipment must be services andrebuilt. These tasks affect the production plans.

MM Materials Management:

It supports the procurement and inventory functions occurringin day-to-day business operations such as purchasing,inventory management, reorder point processing, etc.


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QM Quality Management:

It is a quality control and information system supportingquality planning, inspection, and control for manufacturingand procurement.

PP Production Planning:

It is used to plan and control the manufacturing activities of

a company. This module includes; bills of material, routings,work centers, sales and operations planning, masterproduction scheduling, material requirements planning,shop floor control, production orders, product costing, etc.


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An Overview of Enterprise Resource Planning

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