Enterprise Resource

Planning
(ERP)
Enterprise Resource Planning
Business environment is full of challenge &
opportunities
Business require not just information but instant real
time response.
Dependence on the information as a driving energy
source, is increasing.
Needs to integrate suppliers & customers to achieve
organization goals. That’s why word enterprise is
chosen.
Enterprise application
Systems that span functional area, focus on executing business
processes across the firm
Helps business become more flexible & productive through focus
on efficient management of resources & customer service.
There are four major applications
 Enterprise system

 Supply chain management

 Customer relationship management

 Knowledge management system

Each of these integrates a related set of function & business

processes to enhance the performance of the organization as a
whole
 ERP – General Concepts
Enterprise Resource Planning

 What is ERP?
 The Current Scenario
 Why ERP?
 Definition
 Evolution
 Expectations
 What is ERP?
ERP is a solution, which
Enterprise Resource Planning

facilitates company-wide integrated

information systems, covering all
functional areas

performs core Corporate activities and

increases customer service augmenting
Corporate Image

Provides valuable information for improving

management decision making
ERP Components
 ERP - Definition
Enterprise Resource Planning

“Software solution that addresses the

Enterprise needs, taking a process view of
the overall organization to meet the goals,
by tightly integrating all functions and
under a common software platform”
 ERP Definition
ERP is a networked system of functional processes designed to
meet customer expectations using all resources effectively &
efficiently. Focus on Resource

ERP is a integrated system of business applications & has open

system architecture independent of OS and DB promising seamless
flow of data & information. Focus on Integration

ERP is a IT enabled resource management system

Helping resource mobilization and deployment to achieve
business goals. Focus on management of enterprise
 Features of ERP
1. Focus on Best process practices for implementation
2. Authorization- for ensuring that the transaction is completed
with regards to the business rules

3. Referencing – provided for tracking the chain of events for

monitoring, progress checking & control

4. Accommodating variety – provides both multi lingual, multi

currency, multi mode manufacturing & multi facility capable
to compete & succeed globally
 Features of ERP (Contd…)

5. Provide drill down & context sensitive helps in decision making

6. Flexible to configure for specific business requirement

7. Capable of interfacing to other technologies saving processing

time`

8. Provides intelligent support in business management

9. Seam less Integration of functional models

10. Security – high level of data & information integrity. The

security system is built around the OS security
 Why ERP?
Enterprise Resource Planning

For Management – to know what is happening

in the company
One solution for better Management
For cycle time reduction
To achieve cost control & low working capital
To marry latest technologies
To shun the geographical gaps
To satisfy the customers with high expectations
To be Competitive & for survival
Automated decision at operations level
 ERP Benefits: Operational
1. Operational
Reduction in processing cycle

Empowerment of decision makers due to access to information

Automated decision making eliminates delays

Reduction in overheads

Resource productivity increased

Business operations more efficient & effective

 ERP Benefits: Business

2. Business benefits
Higher profits due to better efficient use of resources

Less working capital due to reduced inventory &

receivables, and better credit management

Reduction in managerial overheads

ROI is before
 ERP Benefits: Management

3. Management benefits
Lean flat organization

Same information status to all

Collaborative working in network environment

Improved strategic management of business

 ERP impact
Working capital: Reduced
Fixed assets: Improved utilization
Organization: Lean ,flat & learning
Larger market reach: Growth in business
Distributed operations & working: Quicker access &
availability
Learning organization: Able to face competition
Performance: Shows radical change
 Disadvantages of ERP
 There are frequent compatibility problems with the various
legacy systems of the partners.
 The system may be over-engineered relative to the actual
needs of the customer.
 Systems can be difficult to use.
 ERP systems can be very expensive to install for companies.
 Systems are too restrictive and do not allow much flexibility in
implementation and usage.
 Once a system is established, switching costs are very high for
any one of the partners
 Evolution of ERP
Enterprise Resource Planning

1960’s - Systems Just for Inventory Control

1970’s - MRP – Material Requirement Planning
(Inventory with material planning & procurement)
1980’s - MRP II – Manufacturing Resources Planning
(Extended MRP to shop floor & distribution Mgnt.)
Mid 1990’s - ERP – Enterprise Resource Planning
(Covering all the activities of an Enterprise)
2000 onwards – ERP II – Collaborative Commerce
(Extending ERP to external business entities)
ERP models
A typical ERP solution has the foll modules
 Business forecasting, Planning & Control (Business)
 Sales & distribution (sales)
 Production planning & control (production)
 Materials management (materials)
 Finance & accounting (finance)
 Personnel management (personnel)
The seamless integration of the modules allow
the user at any level to take a micro & macro
view of the function & process view of the
transaction.
ERP Implementation
Pre- selection screening
Package Evaluation
Project Planning phase
Gap analysis
Reengineering
Configuration
Implementation team training
Testing
Going Live
End- User training
Post implementation
Pre-selection screening
 Selection of ERP vendors & their package

Package Evaluation
 Very Imp phase, once selected its very costly to switch over

 Imp points to be kept in mind in evaluating

 Functional fit
 Degree of integration
 Flexibility & scalability
 Complexity
 User friendliness
 Quick implementation
 Technology
 Amount of customization
 Total cost
Project Planning phase
 Details of how to go about are decided.

 Roles & responsibilities are assigned

 Implementation team members are selected

 Alternative plan in case of contingencies

Gap analysis
 Analyzing the gap b/w company’s existing business

practices & ERP package

Reengineering
 It is in this phase that human factors are taken into

account
 It has 2 diff connotations

 Use of ERP aid in downsizing efforts

 ERP as an investment as well as cost cutting measure.
Configuration
 Main functional area of ERP implementation

 Involves synchronizing existing company practices

with the ERP package without affecting routine

operations
Implementation team training
 Employees are trained to implement & run the system.

 Company should select right attitude employees who

have willing, urge to learn

Testing
 Used to find out any bugs that need to be fixed before

going live
Going live
 System is officially proclaimed operational

 Implementation team will do testing again to see

how successfully the system is running

End user training
 This phase starts much before the system goes live

 Employees are given hands on training

Post implementation
 Very critical phase for success of ERP

 Necessary enhancements are made as & when

required to get enterprise wide acceptance

 System must be upgraded as & when new version

or new tech introduced

 ERP – Options
OPTION 1 – MAKE [Using Internal resources]
Enterprise Resource Planning

Developing a custom-built ERP package, specific to the

requirements of the organization, with the help of the
in-house IT department

OPTION 2 - BUY
Going for Tailor-made ERP packages available in the market like
SAP, Oracle applications, Baan, PeopleSoft etc.

OPTION 3 – MAKE [using External resources]

Developing a custom-built ERP package, specific to the
requirements of the organization, with the help of a
software solution provider
Building ERP solutions
using
Internal Sources
ERP – Building using Internal
resources – The Facts
 Lack of adequate & qualified manpower
 Not driven with clear focus on expectations,
time & cost
 Poor software project management
 Lack of seriousness with the Management & the
IT Team
 High employee turnover
 Lot of schedule gaps during Project execution
 Normally project life is more
 Frequent change in the scope with the approval
of the Management
Tailor-made

ERP

Solutions
 About

Generalized off the shelf application s/w packages

Tailor-made ERP solutions

Modules based on rich functionalities for all business

functions
User tested with lot of installations
No lead time requirement for software development
since its modular structure, one can implement
solution in phased manner
Tuned for more users/networks with adequate & in-
built security
Parameterized for flexibility
Can sit on latest hardware & software platforms
Upgradation of functionalities with version control
ERP Product selection Criteria
Goal:
Functionality
To select the
Most Suitable Software 5 Strategic
Package Solution Requirement
Levels Technology

Vendor

Support

Costs
Custom-built
ERP
Solutions
using external resources
 The Principle!
Custom-Built ERP solutions

The best as seen elsewhere, need not be the

the best for you.
What is your best is what
can be successfully implemented
 About

Here the whole package is designed & built

Custom-Built ERP solutions

 by keeping a specific enterprise & its business

Practices in mind
 with due integration
 without compromising or changing the current way
of doing the business and
 providing flexibility to accommodate your business
fluctuations
 Why?
 Very economical while comparing the cost of implementing
Custom-Built ERP solutions

tailor-made ERP solutions

 The company can opt for its choice of Hardware, Software &
communication platforms based on the skill availability
 The proximity b/w the company & ERP vendor would be high
& convenient.
 IT department has good control over the Project
 What is required only would be considered under the scope –
No redundancy
 The existing practices & applications can be tuned and
linked with the proposed package
 Maintenance & improvements are easy & less costlier.
Even IT team can maintain the setup after getting the
source code
Challenges in ERP implementation
Lack of top management commitment
Inadequate requirements definition
Poor ERP package selection
Inadequate resources
Resistance to change
Misfit of application software with business processes
Unrealistic expectations of benefits & ROI
Inadequate training & education
Poor project design & management
Miscalculation of time & effort
Poor communication
Issues in ERP implentation
Customization
Use of external consultant
Supplier relationship management
Change management
Business measures
User training
Management reporting needs
Technological challenges
Supply Chain Management

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What Is the Supply Chain Management ?

Helps businesses manage relationships with Suppliers,

purchasing firms, warehouses, distributors and retail
outlets
These system help to share information about orders,
production, inventory level & delivery so that they can
source, produce & deliver goods & services efficiently.
Ultimate objective is to get the right amount of their
products from their source to their source of
consumption with the least amount of time & with the
least cost
It is a cross functional approach to manage inventory &
act as a bridge b/w external network of suppliers,
customer & business partners
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The Supply Chain
Suppliers Manufacturers Warehouses & Customers
Distribution Centers

Transportation Transportation
Costs Costs
Material Costs Transportation
Manufacturing Costs Inventory Costs Costs
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What Is Supply Chain Management (SCM)?

Plan Source Make Deliver Buy

A set of approaches used to efficiently integrate

 Suppliers
 Manufacturers
 Warehouses
 Distribution centers
So that the product is produced and distributed
 In the right quantities
 To the right locations
 And at the right time
System-wide costs are minimized and
Service level requirements are satisfied

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Why Is SCM Difficult?

Plan Source Make Deliver Buy

Uncertainty is inherent to every supply chain

 Travel times
 Breakdowns of machines and vehicles
 Weather, natural catastrophe, war
 Local politics, labor conditions, border issues

The complexity of the problem to globally optimize a

supply chain is significant
 Minimize internal costs
 Minimize uncertainty
 Deal with remaining uncertainty

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 The Importance of Supply Chain Management
Helps firm to decide when & what to produce, store &
move
Rapidly communicate orders
Track the status of orders
Check inventory availability & monitor inventory levels
Reduce inventory, transportation & warehousing cost
Track shipments
Plan production based on actual customer demand
( meeting demand with the supply)
Rapidly communicate changes in product design.

U.S. firms spent $898 billion (10% of GDP) on supply-chain related activities in 1998
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 Supply Chain Management – Benefits
A 1997 PRTM Integrated Supply Chain Benchmarking
Survey of 331 firms found significant benefits to
integrating the supply chain
Delivery Performance 16%-28% Improvement
Inventory Reduction 25%-60% Improvement
Fulfillment Cycle Time 30%-50% Improvement
Forecast Accuracy 25%-80% Improvement
Overall Productivity 10%-16% Improvement
Lower Supply-Chain Costs 25%-50% Improvement
Fill Rates 20%-30% Improvement
Improved Capacity Realization 10%-20% Improvement

Source: Cohen & Roussel

These systems increase firm profitability by lowering the costs of moving &
making products & By enabling managers to make better decision about
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how to organise & schedule sourcing, production & distribution.