an overview on erp - chapter 1 with changes

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5/3/2012

ERP : An Overview

By:-

Gaurav Goyal

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CONTENTS

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Evolution of ERP What is ERP?

Components of ERP

Information Integration through ERP systems

Core ERP Components

Extended ERP Components Reasons for growth of ERP Market

Characteristics of ERP

Advantages / Disadvantages of ERP

Why ERP over conventional apps?

ERP Implementation : Problem areas

ERP Implementation Costs

Roadmap for successful ERP implementation

Feedback??

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EVOLUTION OF ERP

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Types of Systems

Time Purpose Systems

Reorder point systems 1960s Used historical data to forecast futureinventory demand; when an item fallsbelow a predetermined level additionalinventory is ordered.

Designed to manage high volumeproduction of a few products, withconstant demand; focus on cost.

Materials requirementplanning (MRP) systems

1970s Offered a demand-based approach forplanning manufacture of products andordering inventory.

Focused on marketing; emphasison grater production integrationand planning.

Manufacturing resourceplanning (MRP-II) systems

1980 Added capacity planning; couldschedule and monitor the execution ofproduction plans

Focus on quality; manufacturingstrategy focused on processcontrol, reduced overhead costsand detailed cost reporting.

MRP-II with manufacturingexecution (MES)systems

1990s Provide ability to adapt productionschedules to meet customer’s needs;

provide additional feedback with respectto shop floor activities.

Focus on the ability to create andadapt new pre-cuts and serviceson a timely basis to meetcustomers’ specific needs

ERP(Enterprise Re-sourcePlanning Systems)

Late1990andonward

Integrate manufacturing with supplychain processes across the firm;designed to integrate the firm’s

business processes to create aseamless information flow from

suppliers, through manufacturing todistribution to the customer.

Integrates supplier manufacturingand customer data throughout thesup-ply chain.

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EVOLUTION OF ERP

Production Planning and Control technique: MRP to CRM toMRP II

Business Perspective: expended from the simple coordination ofmanufacturing processes to the composite integration ofenterprise-wide back end processes.

Technological Aspect: ERP has evolved from mere legacyimplementation to a more flexible, tired client-server

architecture.

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WHAT IS ERP?

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Enterprise Resource Planning is a software solution thatintegrates the various functional spheres in an organization ---a link through the entire supply chain, aimed at adapting thebest industry and management practices for providing theright product at the right place and at the right time atminimum cost.

It is a total business solution that not only supports various

business processes within the organization but also integratesits value chain with its suppliers and customers.

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What is a database

A database is a structured collection of records or data stored ina computer system so that a computer program or person usinga query language can consult it to retrieve related information.

The records retrieved in answer to queries provide informationthat can be used to make decisions.

The computer program used to manage and query a database is

known as a database management system (DBMS).

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COMPONENTS OF ERP

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Core ERP component – traditional components included inmost ERP systems and they primarily focus on internaloperations

Extended ERP component – extra components that meet theorganizational needs not covered by the core components andprimarily focus on external operations

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COMPONENTS OF ERP

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INFORMATION INTEGRATION THROUGH ERP

SYSTEMS 5/3/2012

Strategic & OperationalPlanning

Finance

Human Resources

Logistics Management

Maintenance Management

Sales & Distribution

QualityManagement

Materials

Management

Manufacturing

ERPSyste

m

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CORE ERP COMPONENTS

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Three most common core ERP components

1. Accounting and finance

2. Production and materials management

3. Human resource

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Accounting and Finance ERP Components

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Accounting and finance ERP component – manages

accounting data and financial processes within the enterprisewith functions such as general ledger, accounts payable,accounts receivable, budgeting, and asset management

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Production and Materials Management ERPComponents

•Production and materials

management ERP component – handles the various aspects ofproduction planning andexecution such as demandforecasting, production

scheduling, job cost accounting,and quality control

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EXTENDED ERP COMPONENTS

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Extended ERP components include:

I. Business intelligence

II. Customer relationship management

III. Supply chain management

IV. E-business

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BUSINESS INTELLIGENCE

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Business intelligence (BI) refers to skills, technologies,applications and practices used to help a businessacquire a better understanding of its commercial context.

It is a broad category of applications and technologiesfor gathering, storing, analyzing, and providing access todata to help enterprise users make better businessdecisions.

BI applications include the activities of decision supportsystems, query and reporting, online analyticalprocessing (OLAP), statistical analysis, forecasting, anddata mining

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CUSTOMER RELATIONSHIP MANAGEMENT

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CRM consists of the processes a company uses totrack and organize its contacts with its current andprospective customers.

CRM software is used to support these processes Information about customers and customer

interactions can be entered, stored and accessed byemployees in different company departments.

Typical CRM goals are to improve services providedto customers, and to use customer contactinformation for targeted marketing.

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SUPPY CHAIN MANAGEMENT

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Supply chain management (SCM) is themanagement of a network of interconnectedbusinesses involved in the ultimate provision ofproduct and service packages required by end

customers. Supply Chain Management spans all movement and

storage of raw materials, work-in-process inventory,and finished goods from point of origin to point of

consumption (supply chain).

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e-BUSINESS

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E-business (electronic business), derived from suchterms as "e-mail" and "e-commerce," is the conduct ofbusiness on the Internet, not only buying and sellingbut also servicing customers and collaborating with

business partners. Companies are using the Web to :-

buy parts and supplies from other companies,

to collaborate on sales promotions

and to do joint research.

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REASONS FOR GROWTH OF ERP MARKET

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To enable improved business performance Cycle time reduction

Increased business utility

Inventory reduction

Order fulfillment improvement

To support business growth requirements

New products/product lines, new customers

Global requirements including multiple languages andcurrencies

To provide flexible, integrated, real-time decisionsupport Improve responsiveness across the organization

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REASONS FOR GROWTH OF ERP MARKET

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To eliminate limitation in legacy systems Century dating issues

Fragmenting of data and processing

Inflexibility to change

Insupportable technologies

To take advantage of the untapped mid-market

Increased functionality at a reasonable cost

Client server/open systems technology

Vertical market solutions

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Characteristics of ERP

Integrated Architecture

Real time processing

Flexibility

Modular and open architecture Best business practices

Global functionality

Beyond organizational boundaries

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Session 2 complete

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ADVANTAGES OF ERP

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BUSINESS INTEGRATION Automatic data updating is possible among related

business related components.

Communication and integration of information is stronghence no obstacle in introducing new products or shifting to

new business classification.

FLEXIBILITY Different languages, currencies, accounting standards and

so on can be covered in one system.

Also helps to cope with company globalisation and systemunification.

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ADVANTAGES OF ERP

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BETTER ANALYSIS AND PLANNING CAPABILITIES It becomes possible to fully utilise decision support systems and

simulation functions due to comprehensive data integration.

USE OF LATEST TECHNOLOGY Utilisation of the latest developments in Information Technology (IT)

enables ERP vendors to grow and also sustain the growth.

Latest technologies include open systems, client/server technology,Internet/Intranet, CALS (Computer-Aided Acquisition and Logistics

Support), electronic-commerce etc.

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ADVANTAGES OF ERP

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What benefit HowReliable information access Common DBMS, consistent and accurate

data, improved reports.

Avoid data and operations redundancy Modules access same data from the centraldatabase, avoids multiple data input andupdate operations.

Delivery and cycle time reduction Minimizes retrieving and reporting delays

Cost reduction Time savings, improved control byenterprise-wide analysis of organizationaldecisions.

Easy adaptability Changes in business processes easy toadapt and restructure.

Improved scalability Structured and modular design with “add-ons.”

Improved maintenance Vendor-supported long-term contract aspart of the system procurement.

Global outreach Extended modules such as CRM and SCM

E-Commerce, e-business Internet commerce, collaborative culture.

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ADVANTAGES OF ERP

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What benefit How

Improved organizational efficiency Help business processes across departments into single enterprise-wide information system. Providing transactional processing model.ERP systems provide integration along multiple functional areashence facilitate improved coordination and decision-makingcapabilities.

Implement best practices and removeinformation asymmetries Within themselves a thousand or more best practiced businessprocesses.ERP systems remove information asymmetries by consolidating allthe information into a common database

Organizational alignment Better alignment of strategies and operations to minimizeorganizational risks and maximize productivity and insight byleveraging self-service and analytics across the organization.

Data accessibility Data Warehouse

Lower operational cost ERP software help to track actual costs of activities and performactivity-based costing and reduction in the overall operational costs.

Additional tangible benefits Increased flexibility of the organization, reduced quality cost,enhanced information accuracy, decision making capabilities, etc.



DISADVANTAGES OF ERP

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DISADVANTAGES HOW TO OVERCOME?

Time-consuming Minimize sensitive issues, internal politics and raise generalconsensus.

Expensive Cost may vary from thousands of dollars to millions. Businessprocess reengineering cost may be extremely high.

Conformity of the modules The architecture and components of the selected system shouldconform to the business processes, culture and strategicgoals of the organization.

Vendor dependence Single vendor vs. multi-vendor consideration, options for “best of

breeds,” long-term committed support.

Features and complexity ERP system may have too many features and modules so the userneeds to consider carefully and implement the needful only.

Scalability and global outreach Look for vendor investment in R&D, long term commitment to productand services, consider Internet-enabled systems.

Extended ERP capability Consider middle-ware “add-on” facilities and extended modules such

as CRM and SCM.

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WHY ERP OVER CONVENTIONAL APPS?

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ERP handles individual business functions such as accounts andinventory, and also the entire range of business functions

ERP packages are targeted at everything from small businessesto the largest organizations, and they can be composed of a

highly flexible decentralized database and an information systemcluster linked by a network.

ERP packages have the ability to adapt globally since it hasmultilingual and multi-currency capacity and thus enables

companies manufacturing & selling in different areas of the worldto manage their data effectively.

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ERP IMPLEMENTATION: PROBLEM AREAS

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Attitude reform of the employees at all levels

Companies not having time schedules and deadlines do notsucceed.

Companies should be able to answer questions like “By when in

what way can such-and-such thing be achieved?”, “How should

we do such-and-such thing?” etc

Cost estimations should be done in an effective manner for ERPimplementation, should include additional costs like consultation,customization, training and education.

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ERP Implementation Costs

Training

Integration and Testing

Customization Data conversion

Data analysis

Best employee turnover

Implementation teams can’t be replaced

Post-ERP depression

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Challenges Faced During ERPImplementation

All ERP implementations are not successful. Implementation succeed orfail due to a number of reasons. Implementation risks occur throughoutthe ERP system life cycle, which ranges from go-on-go decisions onERP to the time the system has gone live, including training issues.

The type of risks and the extent of their impact on the organization varyas we move through the ERP implementation life cycle.

(Daniel E. O’Leary,

2000)

1. Technical Risk

2. Business Risk (all other risks are cover in it)

a. An organization’s choice of the model, artifacts, and processes used

in ERP implementation

b. Conformity of mapping the existing processes with the new system inthe org.

c. Integration of the existing processes with the external partners.5/3/201230



Roadmap for successful ERP implementation

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Most important step is the GAP ANALYSIS.

What is GAP ANALYSIS?

It is the step of negotiation between the companyrequirements and the functions a package possesses.

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STEPS IN GAP ANALYSIS

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To make a note of the existing business system and list out the flaws

and positive aspects.

Evaluate and decide the additions that need to be made to thebusiness in view of ERP implementation.

Rating the existing level of performance to set a benchmark orstandards for the business as on date.

Having an in-depth study of the regulations and statements in the

organizations and suggesting modifications.

Clearly defining the roles of individuals in the organization so that thepriorities are met and the structure remains undisturbed.

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STEPS IN GAP ANALYSIS

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Checking if the objective in discharging duties are met because it isthe ultimate solution to any issue. If they are not met the gaps shouldbe made known and corrected.

Ensuring that functions are executed properly and if need be

personnel can be rewarded to boost up and encourage performance.

Gap Analysis either recommends the implementation of an ERPsystem or rejects the idea in totality by taking all possible factors intoconsideration.

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FEEDBACK??

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an overview on erp - chapter 1 with changes

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