A PROJECT REPORT ON

ERP
SUBMITTED BY

Ashwin John Abraham Zeba Malik Vishakha Karale Amruta Patil Shruti Shinde Rhutuja Thorat

TO

Prof. Satish Bendre

In partial fulfillment of the requirement for the Degree of Masters of Management Studies in the University of Mumbai.
2011-2012

Acknowledgement

We would like to add a heartfelt word for a few people who have helped us in bringing out the creativeness of this project. We are grateful to our Prof. Satish Bendre for his encouragement and suggestions on the project. Also thanks to the other faculty members who were always more than willing to help us whenever we required any immediate assistance. Last but not the least we would like to acknowledge parents, friends and people who are directly and indirectly related to the successful completion of our project.

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Index

Sr. No.

Title

Page No.

Origin ERP

How Does ERP Help

ERP Implementation

ERP Vendor Evaluation

Advantages of ERP

10

Disadvantages of ERP

11

Operations Management

12

10

ERP Successes And Failures

13

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Origin
Manufacturing management systems have evolved in stages over the past 30 years from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP). The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning).ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organization's business or charter. Non-manufacturing businesses, non-profit organizations and governments now all utilize ERP systems. To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package. However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database). That integrated approach can have a tremendous payback if companies install the software correctly. Take a customer order, for example. Typically, when a customer places an order, that order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and re-keyed into different departments' computer systems along the way. All that lounging around in in-baskets causes delays and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse's computer system to see whether the item has been shipped. "You'll have to call the warehouse," is the familiar refrain heard by frustrated customers.
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ERP
ERP (enterprise resource planning) is an industry term for the broad set of activities supported by multi-module application software that help a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business. Typically, an ERP system uses or is integrated with a relational database system. The deployment of an ERP system can involve considerable business process analysis, employee retraining, and new work procedures. We can get a broader sense of understanding by comparing an organization before ERP implementation and after ERP implementation. Before ERP

ABC USA

ABC INDIA

ABC UK

ABC is a organization with different departments. But ABC spans at different location around the world. Before ERP there is individual data which hard to deal with.
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After ERP

ABC USA

ABC ERP
ABC INDIA ABC UK

After the implementation, all the ABC functions spanning across the globe are integrated and have one single data repository.

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How Does ERP Help An Organization?

ERP automates the tasks involved in performing a business process such as order fulfillment, which involves taking an order from a customer, shipping it and billing for it. With ERP, when a customer service representative takes an order from a customer, he or she has all the information necessary to complete the order (the customer's credit rating and order history, the company's inventory levels and the shipping dock's trucking schedule). Everyone else in the company sees the same computer screen and has access to the single database that holds the customer's new order. 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, one need only log into 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. That, at least, is the dream of ERP. The reality is much harsher. Let's go back to those inboxes for a minute. That process may not have been efficient, but it was simple. Finance did its job, the warehouse did its job, and if anything went wrong outside of the department's walls, it was somebody else's problem. Not anymore. With ERP, the customer service representatives are no longer just typists entering someone's name into a computer and hitting the return key. The ERP screen makes them business people. It flickers with the customer's credit rating from the finance department and the product inventory levels from the warehouse. Will the customer pay on time? Will we be able to ship the order on time? These are decisions that customer service representatives have never had to make before and which affect the customer and every other department in the company. But it's not just the customer service representatives who have to wake up. People in the warehouse who used to keep inventory in their heads or on scraps of paper now need to put that information online. If they don't, customer service will see low inventory levels on their screens and tell customers that their requested item is not in stock. Accountability, responsibility and communication have never been tested like this before.

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ERP Implementation
Because of the wide scope of application within a business, ERP software systems are typically complex and usually impose significant changes on staff work practices. Implementing ERP software is typically not an "in-house" skill, so even smaller projects are more cost effective if specialist ERP implementation consultants are employed. The length of time to implement an ERP system depends on the size of the business, the scope of the change and willingness of the customer to take ownership for the project. A small project (e.g., a company of less than 100 staff) may be planned and delivered within 39 months; however, a large, multi-site or multi-country implementation may take years. To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies. These firms typically provide three areas of professional services: consulting, customization and support. Why do ERP systems Fail? There are various reasons for failure of an ERP system; most are due to the employee resistance, which is, caused due to wrong end user activities. The end users need to be trained carefully and should be explained the dos and the donts of the system. Other reason for the failure is the wrong customization. The fault in the customization is mostly due to wrong interpretation of the business activity of the customer.

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ERP Vendor Evaluation

Most of the ERP software vendors in the market are busy promoting their product. Some of them can also provide efficient software solution. Nevertheless, it is challenging to decide which software is apt for efficient and dependable ERP software system. Moreover, there are innumerable vendors in the market, which makes the task Spartan. The company needs a vendor qualifying all the parameters from service to cost. ERP vendor selection is not a trivial task and the business houses often need to conduct a comprehensive formal evaluation of the short listed suppliers with the aid of external consultants. This process, which can take up to six months, presumes that the company has already identified the to-be business processes and requirements. Depending on the business requirements and budgetary limitations, you can prepare a long list of 10-12 vendors who are to be assessed. Discuss the business requirement with each of the long listed vendors and have an overview demo of the product. Based on the key requirements that a software package must entail, draw a short list of 5 vendors. Now you need to conduct a more thorough assessment and analysis of the short-listed suppliers depending on your prioritized business needs that your organization expects to be catered by a potential ERP package. From these requirements, create demo scripts to ensure that each vendor is not omitting to show how their software fits with your business. Also, involve the key users to obtain quantitative assessment of how well the products cater to the key demands of the business and the demo scripts. Along with the functional requirements, assess the technical capabilities like scalability, ability to integrate with legacy systems, openness of the architecture, etc. Make a list of the vendors strengths and shortcomings and then as per input from the vendor evaluations and technical assessments, make your decision.

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Advantages of ERP Implementation

Installing an ERP system has many advantages - both direct and indirect. The direct advantages include improved efficiency information integration for better decision-making, faster response time to customer queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction and so on. Some of the benefits are quantitative (tangible) while others are non-quantitative (intangible). Tangible benefits are those measured in monetary terms and intangible benefits cannot be measured in monetary terms but they do have a very significant business impact. Tangible benefits: Improves the productivity of process and personnel Lowering the cost of products and services purchased Paper and postage cost reductions Accurate and faster access to data for timely decisions Inventory reduction Faster product / service look-up and ordering saving time and money Automated ordering and payment, lowering payment processing and paper costs Intangible benefits: Increases organizational transparency and responsibility Can reach more vendors, producing more competitive bids; Improved customer response Saves enormous time and effort in data entry; Uniform reporting according to global standards
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Disadvantages of ERP Implementation

The cost of ERP Software, planning, customization, configuration, testing, implementation, etc is too high. ERP deployments take 1-3 years to get completed and fully functional. Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade. The cost savings/ payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same. The participation of users is very important for successful implementation of ERP projects So, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to use (and learn). Migration of existing data to the new ERP systems is always difficult to achieve as with integrating ERP systems with other stand-alone software systems. ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems. Once an ERP system is implemented it becomes a single vendor lock-in for further upgrades, customizations etc.

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Operations Management in ERP

Enterprise solutions that are developed with a modular framework that focus on one area of business processes at a time, such as ERP modules focused on sales and marketing, or ERP modules focuses on customer relationship management, for example, are enabling companies with smaller capital and human resources to enjoy the benefits of an enterprise application without rolling out a companywide-enterprise wide solution. Along with the other modules perhaps one of the most important module in an ERP which forms the core of the system is the operations module. The operations module comprises of the following elements. Purchase Orders The Purchase Orders module provides a comprehensive, fully integrated purchasing system. You can combine multiple purchase orders on a single receipt and multiple receipts on a single invoice. The Shippable Back order report helps identify orders that can be completed based on recent Inventory Receipts. Order Entry The Order Entry module allows you to enter orders and sales returns and print invoices, credit notes, order confirmations, picking slips, and shipping labels. You can track transaction details and sales information on-screen and in printed reports. Order Entry integrates fully with Inventory Control and Accounts Receivable, so you always know your inventory levels and the status of your customer accounts. Inventory Control Inventory Control is a complete multi-location inventory management system that keeps track of stock levels and processes inventory receipts, shipments, returns, and adjustments. Inventory Control includes extensive screen inquiry and reporting functions to give you the detailed, current information crucial for effective inventory management.

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Successful ERP Implementations

There are a number of ERP vendors out there in the market, each claiming to be the best. It is only the implementation that can shoe the right results. In theory everyone can be the best, but implementation is where it becomes practical and we see a whole new side to the best ERP. Two such ERP successful implementations are: IBM Storage Systems Division IBM reduced the time consumed to ship a replacement part from 22 days to 3 days. Furthermore, it also reduced the time to complete accredit check from 20 minutes to 3 seconds. This was all because of the ERP system they implemented. Fujitsu Microelectronics Fujitsu Microelectronics, an international manufacturer of semiconductors, successfully completed its ERP implementation within ten months. They attribute success in part to top management support. During the entire project, company management provided substantial incentives to team members, and ensured that internal communication channels were open at all times. This led to reducing reduction in cycle time from 18 days to 1.5 days.

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Failed ERP Implementations

FoxMeyer Drug FoxMeyer Drugs was a $5 billion company and the nation's fourth largest distributor of pharmaceuticals before the fiasco. FoxMeyer conducted market research and product evaluation and purchased SAP R/3 in December of that year. Third, the execution of the project was an issue due to the shortage of skilled and knowledgeable personnel. In conclusion, FoxMeyer's experiences provide valuable lessons on how to avoid ERP failure. Dell Computers Dell computer attempted to implement the SAP R/3 system to support its manufacturing operations in 1994. However, Dell experienced significant difficulty in implementing the SAP system, and finally abandoned this implementation project two years later, in 1996. Hershey Foods A$112 million ERP project has blown up in the face of Hershey Foods Corp., which last week said it's still struggling to fix order-processing problems that are hampering its ability to ship candy and other products to retailers. Analysts and sources in the industry said the Hershey, Pa., manufacturer appears to have lost a gamble when it installed a wide swath of SAPAG's R/3 enterprise resource planning applications, plus companion packages from two other vendors, simultaneously during one of its busiest shipping seasons. The sources said Hershey squeezed what was originally envisioned as a four-year project into just 30 months before going live with the full ERP system in July. That's when retailers begin ordering large amounts of candy for backto-school and Halloween sales.

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