erp project

WARIS

ASIM AHMED

TALAL MW

MBA (Evening)

Project of Information Technology

Muhammad Waris Ahmad Arbab

Muhammad Asim Siddique Talal Khalid

http://www.google.com.pk/imgres?imgurl=http://www.parronet.com/images/ERP_logo_lg.jpg&imgrefurl=http://www.parronet.com/erp.html&usg=__mc_ZIZxFw5ij1Hvc3MdH6PVvbS8=&h=140&w=400&sz=20&hl=en&start=33&zoom=1&tbnid=cUtC41KvPsFexM:&tbnh=72&tbnw=205&ei=siw4Tbm6OtCp8APYwbmoCA&prev=/images?q=pics+of+logo+of+erp+system&um=1&hl=en&sa=X&biw=1020&bih=567&tbs=isch:1&um=1&itbs=1&iact=rc&dur=219&oei=oyw4TfroB8av8QOvsYGcCA&esq=3&page=3&ndsp=16&ved=1t:429,r:1,s:33&tx=102&ty=40

ENTERPRISE RESOURCE PLANNING. STAR GROUP

“IN THE NAME OF ALLAH

THE MOST GRACIOUS THE MOST MERCIFUL”


Project on Information Technology:

Topic:

Report Prepared by:

STAR Group:

Members: 1. Muhammad Waris 2. Muhammad Asim Siddique 3. Ahmad Arbab 4. Talal Khalid

STAR

GROUP



Contents:

Topics name Page #

1:What is ERP ? and ERP Terminology: 5 to 6

E-Enterprise R-Resource

P-Planning

2:Goal of ERP System:

3:Evolution of ERP

4:Famous Players of ERP System

5: Integrated ERP System

6: Advantages of ERP

7:How can ERP improve a company’s business performance?

8:Disadvantages of ERP

9: Configuration of ERP software

10:Tributes to ERP


“Enterprise is an integrated computer based system used to manage internal and

external resources including tangible assets, financial resources, material and

human resources”

1 WHAT IS ENTERPRISE RESOURCE PLANNING

DEFINITION



The New Lexicon-Webster’s Dictionary of the English language (p 315) (1991 E)

“A commercial or industrial undertaking”

The New Shorter Oxford English Dictionary (p 2565) (1993)

“The collective means possessed by a country for its own support of assistance”

The New Lexicon – Webster’s Dictionary of the English Language (p 767) (1991 E)

“The making or delineation of a plan or diagram”

1 E Enterprise

2 R Resource

3 P Planning

ERP TERMINOLOGY


With an ERP system, the goal is to enter a customer order once into a computer and have it automatically synchronize the following resources required to get it into the hands of customers: Men Material Machinery Warehouse Transportation

Both Enterprise Resource Planning (ERP) and Total Quality Management (TQM) share similar goals - customer satisfaction, productivity improvement, increased competitiveness, waste reduction, effort duplication and so on. ERP system will help in achieving these goals when used in conjunction with TQM.

Here ERP has the role of an enabler of the TQM principles and philosophies. ERP is also benefited by the implementation of TQM. Effective use of TQM creates better performing ERP systems. TQM brings problem solving techniques and continuous improvement opportunities for all ERP systems. The effective use of TQM helps companies obtain the maximum return on investment from expensive investments.

Therefore, the organizations applying or targeting TQM in their businesses, ERP software has become an essential

The users have obtained the following benefits:

1. Customer exactly knows where their order stands. 2. Significant reductions in inventory, procurement, distribution and manufacturing costs

have been seen. 3. Eye-popping cycle-time improvements have occurred in order fulfillment and financial

closing.

GOAL OF ERP SYSTEM 2


ERP is an outcome of 40 years of trial and error. It has evolved as a strategic tool because of continuous improvement in the available techniques to manage business and the fast growth of information technology.

Prior to 1960s, business had to rely on the traditional ways of inventory management to ensure smooth functioning of the organization. These theories are called classical inventory management of scientific inventory control methods. The most popularly known amongst them is EOQ (Economic Order Quantity).

In this method, each item in the stock is analyzed for its ordering cost and the inventory carrying cost. A trade off is established on a phased out expected demand of one year, and this way the most economic ordering quantity can be decided. This technique in principle is a deterministic way of managing inventory.

Along with EOQ, we find various inventory models such as fixed order quantity, periodic order method, optional replenishment method, etc., which were in practice earlier. These theories were very popular in pre-MRP era.

In 1960s, a new technique of Material Requirements Planning, popularly known as MRP, was evolved. This was a proactive manner of inventory management. This technique fundamentally explodes the end product demand obtained from the Master Production Schedule (MPS) for a specified product structure (which is taken from Bill of Material) into a detailed schedule of purchase orders or production orders, taking into account the inventory on hand. MRP is a simple logic but the magnitude of data involved in a realistic situation makes it computationally cumbersome. If undertaken manually, the entire process is highly time-consuming.

MRP successfully demonstrated its effectiveness in reduction of inventory, production, and delivery lead times by improving coordination and avoiding delays, thus making commitments more realistic. MRP proved to be a very good technique for managing inventory, but it did not take into account other resources of an organization. In 1970s, this gave birth to a modified MRP logic, popularly known as closed loop MRP. In this technique, the capacity of the organization to produce a particular product is also taken into account by incorporating a module called capacity requirements planning (CRP).

In 1980s, the need was felt to integrate the financial resource with the manufacturing activities. From this evolved an integrated manufacturing management system called Manufacturing Resource Planning (MRP II).

Transition from MRPII to ERP happened during 1980-90. The basic MRP II system design was suffering from a few inherent drawbacks such as limited focus to manufacturing activities, assumption of the mass or repetitive production set ups, and poor budgetary and costing controls.

3 EVOLUTION OF ERP


The shortcomings of MRP II and the need to integrate new techniques led to the development of a total integrated solution called ERP, which attempts to integrate the transactions of the organization to produce the best possible plan. Today we see further development in the ERP concept and evolution web-based ERP.


S. NO PLAYERS

1 SAP

2 Oracle Financial

3 SSA’s BPCS

4 J.D. Edward

5 People Soft

6 BAAN

FAMOUS PLAYERS OF ERP

SYSTEM 4


History:

SAP was established in 1972 and is today as the world’s 5th largest software

company. SAP is the name of the company and the name of computer system.

SAP is a German Company. It operates globally with 28 subsidiaries and

affiliates and six partner companies maintaining offices in 40 countries.

Approach:

It provides an opportunity to replace large numbers of independent systems that

have been developed and implemented in established organizations with one

single modular system. Each module performs difference function.

Market Served:

SAP markets its products globally to almost every industry, Government, educational

institutions, hospitals, etc.

SAP R/3 Applications:

Scope of applications includes the following:

1) Financials

2) Product Data Management (PDM)

3) Materials Management

4) Human Resources Management


Verticent's back-office, Enterprise Resource Planning (ERP) solutions help streamline your

manufacturing, distribution and financial operations. With Verticent ERP software solutions,

your back-office moves in sync with up-to-date product, shipping, customer account and billing

data distributed to all users.

Classic ERP solutions tie manufacturing, distribution and finance together to work in an

integrated manner. Typically, sales force automation (SFA) and customer relationship

management (CRM) applications are provided by 3rd party partners via some sort of interface.

Verticent's ERP systems are different. Our manufacturing, distribution and financials modules

are seamlessly integrated with Verticent CRM solutions - empowering your entire company with

accurate enterprise information.

5 INTEGRATED OF ERP SYSTEM

http://www.verticent.com/products/crm/index.php


ERP solutions tie the whole enterprise together by capturing and moving data harmoniously

in a real-time or near real-time manner. Transactional activity is very efficient because it can be

entered once and used in many different ways throughout the ERP system and the departments

in your organization. The key benefit is that it puts everybody on the same page, improving

operational efficiency.

To take advantage of what an ERP software solution delivers, data needs to be transformed

into information. This can be accomplished in many ways. In fact, many organizations have

benefited from business intelligence reporting solutions to help them with deployment of metrics

to monitor their business and properly execute in their supply chain.

Some more benefits:

Lower inventory

Lower ordering

Lower production

Reduced fulfillment times

Reduced number of stock-outs

More efficient lot sizes and scheduling

Reduce error due to better coordination

The customer satisfaction improvement

ADVANTAGES OF ERP 6


ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes it into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn’t handle the up-front selling process (although most ERP vendors have developed CRM software or acquired pure-play CRM providers that can do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer’s credit rating and order history from the finance module, the company’s inventory levels from the warehouse module and the shipping dock’s trucking schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. With luck, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee benefits or financial reporting.

How long will an ERP project take?

Companies that install ERP do not have an easy time of it. Don’t be fooled when ERP vendors tell you about a three or six month average implementation time. Those short (that’s right, six months is short) implementations all have a catch of one kind or another: The company was small, or the implementation was limited to a small area of the company, or the company used only the financial pieces of the ERP system (in which case the ERP system is nothing more than a very expensive accounting system). To do ERP right, the ways you do business will need to change and the ways people do their jobs will need to change too. And that kind of change doesn’t come without pain. Unless, of course, your ways of doing business are working extremely well (orders all shipped on time, productivity higher than all your competitors, customers completely satisfied), in which case there is no reason to even consider ERP.

The important thing is not to focus on how long it will take—real transformational ERP efforts usually run between one and three years, on average—but rather to understand why you need it and how you will use it to improve your business.

Over the last few years, however, Internet-driven changes have occurred that can drastically reduce how long it takes vendors to deliver ERP modules. These faster implementations (meaning weeks, not years) are the result of a new category of ERP software delivery referred to as on-demand or software-as-a-service (SaaS). Typically, on-demand and SaaS ERP applications (such as finance or HR packages) are hosted by a third party, and customers access the multitenant (or shared) ERP applications via a Web connection. Because the software doesn't need to be installed as in the traditional on-premise manner, implementation times can be drastically shorter than implementing ERP applications on-premise.

HOW CAN ERP IMPROVE A COMPNAY BUSINESS

PERFORMANCE? 7


The biggest disadvantage is that you have to buy all applications from a single vendor. One vendor may have very strong offerings among some applications but generally won't be the best in all areas. Using a "best of breed" approach gives you the best functionality, but the systems will not be integrated. The customer would have to build that integration through interfaces or messaging transactions. The customer would also have to translate all data into one format for reporting. Implementing individual systems can be done faster and cheaper than a full ERP, even if the ERP is done one module at a time. This is because ERP implementation requires multiple groups working together and agreeing on configuration and rules.

So much expensive Highly cost Complicated Skilled workers required

What does ERP really cost?

One of the most often-cited studies of the total cost of ownership (TCO) of ERP was completed by Meta Group in 2002. (Gartner acquired Meta Group in 2005.) This TCO study accounted for hardware, software, professional services and internal staff costs. Costs included initial installation and the two year period that followed, which is when the real costs of maintaining, upgrading and optimizing the system for your business are felt. Among the 63 companies surveyed—including small, medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400,000). While it’s hard to draw a solid number from that kind of range of companies and ERP efforts, Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it. The TCO for a "heads-down" user over that period was a staggering $53,320.

Results from a 2007 Aberdeen Group survey of more than 1,680 manufacturing companies of all sizes found a correlation between the size of an ERP deployment and the total costs. Therefore, "as a company grows, the number of users go up, along with the total cost of software and services," states the Aberdeen report. For example, a company with less than $50 million in revenue should expect to pay an average of $384,295 in total ERP costs, according to the survey results. A mid-market company with $50 million to $100 million in revenues can expect to pay (on average) just over a

DISADVANTAGES OF ERP 8

http://www.lawson.com/www/resource.nsf/pub/TCO_Mid_Size_2007.pdf/$FILE/TCO_Mid_Size_2007.pdf


$1 million in total costs; a much bigger mid-market company, with $500 million to $1 billion in revenues, should expect to pay just over $3 million in total costs. And those companies with more than $1 billion in revenues can expect to pay, on average, nearly $6 million in total ERP costs.

Why do ERP projects fail so often?

At its simplest level, ERP is a set of best practices for performing different duties in your company, including finance, HR, manufacturing and the warehouse. To get the most from the software, you have to get people inside your company to adopt the work methods outlined in the software. If the people in the different departments that will use ERP don’t agree that the work methods embedded in the software are better than the ones they currently use, they will resist using the software or will want IT to change the software to match the ways they currently do things. This is where ERP projects break down. Political fights break out over how—or even whether—the software will be installed. IT gets bogged down in long, expensive customization efforts to modify the ERP software to fit with powerful business barons’ wishes. Customizations make the software more unstable and harder to maintain when it finally does come to life. The horror stories you hear in the press about ERP can usually be traced to the changes the company made in the core ERP software to fit its own work methods. Because ERP covers so much of what a business does, a failure in the software can bring a company to a halt, literally.

But IT can fix the bugs pretty quickly in most cases, and besides, few big companies can avoid customizing ERP in some fashion—every business is different and is bound to have unique work methods that a vendor cannot account for when developing its software. The mistake companies make is assuming that changing people’s habits will be easier than customizing the software. It’s not. Getting people inside your company to use the software to improve the ways they do their jobs is by far the harder challenge. If your company is resistant to change, then your ERP project is more likely to fail.

One cautionary tale that came to light in 2008 illustrates that sometimes there is a big difference between what an ERP vendor promises to deliver in its software and what actually is ready for prime-time enterprise use. Trash-disposal company Waste Management announced in March 2008 that it was suing SAP, seeking the recovery of $100 million in project expenses that related to a failed ERP implementation that had started in 2005. In the complaint, Waste Management alleges that SAP executives participated in a fraudulent sales scheme and that SAP's Waste and Recycling ERP product was actually "fake software" that was still not ready for Waste Management's use by spring 2008.

http://www.cio.com/article/205852/


How do I configure ERP software?

Even if a company installs on-premise ERP software for the so-called right reasons and everyone can agree on the optimal definition of a customer, the inherent difficulties of implementing something as complex as ERP is like, well, teaching an elephant to do the hootchy-kootchy. The packages are built from database tables, thousands of them, that IS programmers and end users must set to match their business processes; each table has a decision "switch" that leads the software down one decision path or another. By presenting only one way for the company to do each task—say, run the payroll or close the books—a company’s individual operating units and far-flung divisions are integrated under one system. But figuring out precisely how to set all the switches in the tables requires a deep understanding of the existing processes being used to operate the business. As the table settings are decided, these business processes are reengineered, ERP’s way. Most ERP systems are not shipped as a shell system in which customers must determine at the minutia level how all the functional procedures should be set, making thousands of decisions that affect how their system behaves in line with their own business activities. Most ERP systems are preconfigured, allowing just hundreds—rather than thousands—of procedural settings to be made by the customer.

Even the new on-demand or software-as-a-service (SaaS) ERP offerings necessitate some system configuration and customization to each company's individual requirements. This process, however, generally takes less time and resources than with an ERP application that's installed on-premise.

How do companies organize their ERP projects?

Based on our observations, there are three commonly used ways of installing ERP.

The Big Bang—In this, the most ambitious and difficult of approaches to ERP implementation, companies cast off all their legacy systems at once and install a single ERP system across the entire company. Though this method dominated early ERP implementations, few companies dare to attempt it anymore because it calls for the entire company to mobilize and change at once. Most of the ERP implementation horror stories from the late ’90s warn us about companies that used this strategy. Getting

CONFIGURATION OF ERP

SOFTWARE 9



everyone to cooperate and accept a new software system at the same time is a tremendous effort, largely because the new system will not have any advocates. No one within the company has any experience using it, so no one is sure whether it will work. Also, ERP inevitably involves compromises. Many departments have computer systems that have been honed to match the ways they work. In most cases, ERP offers neither the range of functionality nor the comfort of familiarity that a custom legacy system can offer. In many cases, the speed of the new system may suffer because it is serving the entire company rather than a single department. ERP implementation requires a direct mandate from the CEO.

Franchising strategy—This approach suits large or diverse companies that do not share many common processes across business units. Independent ERP systems are installed in each unit, while linking common processes, such as financial bookkeeping, across the enterprise. This has emerged as the most common way of implementing ERP. In most cases, the business units each have their own "instances" of ERP—that is, a separate system and database. The systems link together only to share the information necessary for the corporation to get a performance big picture across all the business units (business unit revenues, for example), or for processes that don’t vary much from business unit to business unit (perhaps HR benefits). Usually, these implementations begin with a demonstration or pilot installation in a particularly open-minded and patient business unit where the core business of the corporation will not be disrupted if something goes wrong. Once the project team gets the system up and running and works out all the bugs, the team begins selling other units on ERP, using the first implementation as a kind of in-house customer reference. Plan for this strategy to take a long time.

Slam dunk—ERP dictates the process design in this method, where the focus is on just a few key processes, such as those contained in an ERP system’s financial module. The slam dunk is generally for smaller companies expecting to grow into ERP. The goal here is to get ERP up and running quickly and to ditch the fancy reengineering in favor of the ERP system’s "canned" processes. Few companies that have approached ERP this way can claim much payback from the new system. Most use it as an infrastructure to support more diligent installation efforts down the road. Yet many discover that a slammed-in ERP system is little better than a legacy system because it doesn’t force employees to change any of their old habits. In fact, doing the hard work of process reengineering after the system is in can be more challenging than if there had been no system at all because at that point few people in the company will have felt much benefit.

The On-Demand Nibble—You're most likely to see this approach in a small or midsize business that's lost its patience for Excel spreadsheets and the fax machine, and in large companies that either have massive operations and will never be able to standardize on one system or have been burned by costly and not-so-satisfying ERP rollouts in the past.


In this instance, companies turn to a small but growing number of on-demand or software-as-a-service (SaaS) ERP vendors that can offer:

faster implementation times (there's no software to install on-premise, and that literally shaves months off installation periods);

easier and more frequent upgrades (they can happen automatically because the vendor manages the applications and can roll out patches and bug fixes more regularly); and

cheaper up-front costs (the software price tag can be much cheaper than traditional on-premise applications because of subscription pricing that is on a "per user, per month" basis as well as big reductions in integration and consulting fees).

Why companies are just "dipping their toes" in the on-demand and SaaS waters right now is because those companies (and their vigilant IT departments) still have concerns about housing their mission-critical and highly sensitive ERP data (such as HR and financial) on a third party's servers and not their own.

Several scholars have given befitting tributes to the benefits derived from ERP. Given below are

excepts from the famous CIO magazine, the leading resource for information executives by CIO

communications, Inc, USA.

1. The Hidden Costs of Enterprise Software:

(January 15, 1998- CIO Enterprise)

Software packages – SAP’s R/3, people soft and their ilk – promise great benefits

2. Living with ERP:

(December 01, 1998 – CIO)

It is time we acknowledge ERP systems are here for the long hault and start adapting to

permanent life with them.

TRIBUTE TO ERP 10




3. The ties that Bolt:

(April 15, 1999 – CIO)

There is no escaping it. You need bolt-ons so that your ERP software can share data

with legacy and other systems.

4. From Team Techie to Enterprise Leader

(October 15, 1999 – CIO)

After leading an ERP team, David Jhon discovered that he had learned everything

management knew it too.

5. The Most Important Team in History

(October 15, 1999 – CIO)

After a company turns its ERP software, the only people who understand how the

business works are on the implementation team.

How do I know my ERP data is any good?

When you start talking about data integrity and just how "clean" your enterprise data is, you'll usually hear about the goal of getting to "one version of the truth" with your ERP data. As usually is the case, the bigger the company, the more systems it has with more employees that need to touch those systems, and the more complicated it becomes to keep data accurate and timely. Most of time, companies don't want to know just how dirty their data is. But when companies do start "peeling back the onion" in an attempt to remedy their data ills, what they typically find is a hodge-podge of systems and anywhere from a dozen to hundreds of financial and HR data sources. Therefore, the job of new data management techniques, such as master data management (MDM), is to rectify those inconsistencies by creating an integrated and standards-laden system that automatically fixes data discrepancies. (Beware: It's not easy.) Because ERP systems are the backbones of most businesses, they are a key piece of any data-management overhaul. General ledgers, financial data repositories, reporting applications, purchase orders, invoices, customer contact information, inventory data, performance management tools—they will all be apart of any company's data management initiative.


Just how important have ERP systems become?

An October 2007 CIO magazine survey of nearly 400 IT executives who had an ERP system installed found that more than 85 percent of them agreed or strongly agreed that their ERP systems were essential to the core of their businesses, and that they "could not live without them." Though there has been recent IT scuttlebutt that ERP systems are now shrugged off as legacy inside 21st-century businesses, almost 80 percent of those surveyed disagreed or strongly disagreed with the statement, "My company views ERP systems as legacy systems and no longer invests in them." And when asked if their company would be able to live without its ERP systems within the next five years, more than 80 percent disagreed or strongly disagreed. For better or worse, ERP systems are here to stay.


erp project

Education

evolution of erp erp

erp systems

goal of erp system

integrated erp system6

famous players of erp

tqm principles

implementation of tqm

effective use of tqm