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E nterprise R esource P lanning
BA9271
UNIT I - INTRODUCTION
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1. Overview of Enterprise System
2. Evolution
3. Risks and benefits
4. Fundamental technology
5. Issues to be consider in planning design andimplementation of cross functional integrated ERP systems
6. Case studies
UNIT I - INTRODUCTION
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1. Overview of E nterprise System
Introduc on
The business environment has changed more in the last five years that it did over the previous five
decades. The pace of change continues to accelerate and corporations around the world seek to
revitalize, reinvent and resize in an effort to position themselves for success in the 21 st century. The
ability to respond to new customer needs and seize market opportunities as they arise is crucial.
Successful companies today recognize that high level of interaction and coordination along the
supply chain will be a key ingredient of their continued success. Enterprise are continuously
striving to improve themselves in the areas of quality, time to market, customer satisfaction,
performance and profitability.
To make it possible for the companies to execute this vision, there is a need for an infrastructure
that will provide information across all functions and locations within the organization. The
Enterprise Resource Planning fulfills this need.[1]
Enterprise
The enterprise is often used in general business situations to describe a corporate entity, anything
from a small to large organization. An enterprise is the group of people with a common goal, which
has certain resources at its disposal to achieve this goal.
The enterprise acts as a single entity. Traditionally, the
organization is divided into different units based on the
functions they perform, like manufacturing, purchasing, sales
& distribution, finance, R&D and so on. These departments are
compartmentalized and have their own goals and objectives,
which from their point of view is in line with the organization’s
objectives. These departments function in isolation and have
their own systems of data collection and analysis. The information that is created or generated by
the various departments is available only to the top managements. Hence, one department does not
know what the other does. The result is that, instead of taking the organization towards the
common goal the various departments end up pulling it in different direction.
For example, the sales and marketing people will want more product variety to satisfy the varying
needs of the customers. But the production department will want to limit the product variety to cut
down production costs. Unless and until all the departments know what the others are doing andfor what purpose, these kinds of conflicts will arise thus disrupting the
normal functioning of the organization.
But in the enterprise way the entire organization is considered as a system
and all the department are its sub -systems. Information about all the
aspects of the organization is stored centrally and is available to all
departments. This transparency and information access ensures that each
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sub -system knows what others are doing, why they are doing it and what should be done to move
the company towards the common goals. ERP systems help to make this task easier by integrating
the information systems, enabling smooth and seamless flow of information across departmental
barriers, automating business process and functions and thus helping the organization to work and
move forward as a single entity. [2]
ERP De ni on
ERP is an abbreviation for Enterprise Resource Planning and means, the
techniques and concepts for integrated management of businesses as a
whole from the viewpoint of the effective use of management resources
to improve the efficiency of enterprise management. ERP packages are
integrated software packages that supports the above ERP concepts ERP
package are integrated software packages that support the above ERP
concept [3]
Enterprise Systems
An ES or enterprise system is a large scale system which includes packages like ERP and CRM. ERP
is a subset of Enterprise System. It contains a variety of solutions. ES contains applications and
packaged solutions which can be directly used in an enterprise. [4]
The latest generation ERP systems also known as ERP – II or enterprise systems extend beyond the
organization by capturing inter -organizational processes such as supply chain management (SCM),
supplier relationship management (SRM), customer relationship management (CRM), employee life
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What are the items that need to be purchased?
MRP uses the master production schedule (MPS) to find out the answer to the first question, what
products are going to make? It gets the details of the materials required to make the products from
the bill of materials (BOM). It searches inventory records to find out what items are in stock. It then
calculates the items that need to be purchased for producing the goods. [3] MRP successfully
demonstrated its effectiveness in reduction of inventory, production and delivery lead times byimproving coordination and avoiding delays, thus making commitment more realistic. MRP proved
to be a very good technique for managing inventory, but it did not account other resources of an
organization. [7]
Closed -loop MRP
MRP evolved into something more than merely a better way to order and the evolution was very
fast as there were many followers for MRP, and they want more. Along with producing material re -
ordering schedule, MRP maintained the order due dates and could be used to detect and warn when
an item did not arrive on the due date. This new capability helped in reducing the uncertainty that
is part of any production process.
Soon, techniques for planning capacity requirement were merged with MRP. Tools were developed
to support the planning of sales and production levels, development of production schedules,
forecasting, sales planning, capacity planning and order -processing. Closed -loop MRP is not merely
material requirements planning but a series of functions for automating the production process. It
contains tools and techniques to address both priority and capacity and supports both planning and
execution.
Manufacturing Resource Planning (MRP II)
The next stage in the evolution of ERP is called MRP II. It is the next logical step of closed –loop MRP
and contains the following additional capabilities -sales and operational planning, financial interface
and simulation capabilities.
Thus, MRP II is a method for effective planning of all the resources of a manufacturing company. It
addresses operational planning in units, financial planning in Rupees and has a simulation
capability to answer ‘what if’ questions. MRP II is made up of a variety of functions, each linked
together: business planning, sales & operations planning, demand management, production
planning, master scheduling, material requirement planning, capacity requirement planning and
the execution support systems for capacity and material.
Enterprise Resource Planning (ERP)
The final step in the evolution is the emergence of ERP. The fundamental ERP are the same as that
of MRP II. However, the enterprise software makes ERP a set of business processes that is broader
in scope, is capable of dealing with more business function and has a better and tighter integration
with the finance and accounting functions. ERP predicts and balances demand and supply. It is an
enterprise -wide set of forecasting, planning and scheduling tools, which links customers and
suppliers into complete supply chain, employs proven processes for decision -making and
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coordinates sales, marketing, operations, logistics, purchasing, finance, product development and
human resources.
Its goals include high -levels of customer service, productivity, cost reduction and inventory
turnover. It does this by developing plans and schedules so that the right resources – manpower,
materials, machinery and money – are available in the right amount when needed. [3]
Extended ERP or ERP II
ERP II includes applications such as SCM and CRM, which helps in consolidating an organization’s
entire value chain.
Reference
[1] Vinod Kumar Garg & N K Venkitakrishnan, “ERP – A Curtain Raiser,” in Enterprise Resource Planning
Concepts and Practice, 2 nd ed. PHI Learning, New Delhi, 2011, pp. 3 -9
[2] Alexis Leon, “Enterprise - An overview,” in ERP Demystified, 2 nd ed. TATA McGraw Hill, 2010, pp. 3 -11
[3] Alexis Leon, “Introduction to ERP,” in ERP Demystified, 2 nd ed. TATA McGraw Hill, 2010, pp. 12 -24
[4] Dr Andrew Napier, http://ezinearticles.com/?What -Is-The -Difference -Between -ERP-And -Enterprise -
System?&id=6114179 , accessed August 2013
[5] Mahadeo Jaiswal & Ganesh Vanapalli, “Understanding ERP – Based Enterprise Systems,” in The Text Book
of Enterprise Resource Planning, 1 st ed. MacMillan, 2010, pp. 5
[6] http://www.sysoptima.com/erp/history_of_erp.php , accessed August 2013
[7] Rahul V. Altekar, “Origin, Evolution and Structure”, in Enterprise wide Resource Planning: Theory and
Practice, PHI Learning, pp 10
[8] Ashim