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Enterprise Resource Planning

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ERP is an integrated information systemcharacterized by:

Centralized database

Common computing platform

Helps in effective usage ofenterprises resources

Facilitates the flow of information between allbusiness functions of the enterprise as well as

external stakeholders

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An enterprise is guided by a common set ofobjectives and no department can have aseparate/conflicting objectives from that of the

enterprise Objective as well as KPI (Key Performance

Indicators) of every department is derived fromthe organizational objectives

Organization is viewed as system and each of itsdepartments as subsystem. Each of thesesubsystem works in a synchronized mannertowards achieving the common goal.

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Organizations view the set of activities interms of process rather than an activity

pertaining to a single function . E.g.; Orderfulfillment process (sales, warehouse,production)

Needs realignment of organisation structure Instead of functional KPIs- process efficiency

gets measured

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Stand alone system (legacy system) majorissues

Duplication of data

Lack of integration between different functional

systems

No updation of all relevant information across functions

in real time

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No data duplication Data standardization

Data tracking

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Firms use enterprise systems (aka ERP) tointegrate business processes inmanufacturing and production, finance andaccounting, sales and marketing and humanresource into a single software system.

Information that was previously fragmented

in many different systems is stored in a singlecomprehensive data repository where it canbe used by many different parts of thebusiness.

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Bring in Best Practices Integration Facilitates Intra-organisation communication and

inter-organisation collaboration Provides online real time information Automates all transaction-oriented processes and

makes it efficient Reduces cash to cash cycle time /order fulfillment

process Provides better flexibility Enhances customer satisfaction Helps in planning, analysis and decision-making Facilitates BPR

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Economic Impacts Transaction Cost theory

Firms and individuals always strive at economizing production cost. Accordingto transaction cost theory they seek to economize transaction cost (market

participation) as well with the help of CBIS

Firm can shrink in size (numbers of employees) because it is far less expensiveto outsource work to a competitive marketplace rather than hire employees.

Agency theoryAgents are employees hired by the principal owner to perform tasks on his/herbehalf. These agents need constant supervision and management. As the firmgrows in size and scope , agency cost (or coordination cost increases.

IT, by reducing the cost of acquiring and analyzing information, permitsorganisations to reduce agency cost because it becomes easier for managersto oversee a greater number of employees.

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Organisational and behavioral Impacts IT flatten organisations - Organisations have

downsized, reduced the number of employees and

the number of levels in their hierarchies Authority increasingly relies on knowledge and

competence and not merely on formal positions

Implementation of information system such as ERP

has consequences for task arrangement, structuresand people. To bring in change, all four components technology, task, people and structure- must bechanged simultaneously.

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Implementation challenges

Scope changes

Huge budget

Long timeline

Unrealistic expectation

Complex interfaces

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Support/Maintenance Challenges

Getting right people

Managing multiple vendors

Managing regular vendors

Technology obsolence

Large application portfolio Managing transition

Realizing benefits

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Managing people

Managing change

Managing large project team

Managing employee retention and relocation

Top management support

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ERP for SMEs Going vertical (retail specific)

Vendor consolidation New deployment models Maintenance is the new focus area Enterprise applications upgrade a new

business model

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ERP covers all basic transaction modulespertaining to finance, sales, distribution,

procurement, inventory, quality Enterprise Application extends beyond ERP

to include:

Supplier Relationship Management (SRP)

Customer Relationship Management (CRM)

Product Lifecycle Management (PLM)

Supply Chain Management (SCM)

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