OM0011 SLM Unit 05

Enterprise Resource Planning
Unit 5
Unit 5
ERP Modules Structure
Structure
5.1
Introduction
Objectives
5.2
Finance
5.3
Sales and Distribution
5.4
Manufacturing and Production Planning

Material and capacity planning
Shop floor control
Quality management
JIT/repetitive manufacturing
Cost management
Engineering data management
Engineering change control
Configuration management
Serialisation/lot control
Tooling
5.5
Human Resource
5.6
Plant Maintenance
Preventive maintenance control
Equipment tracking
Component tracking
Plant maintenance calibration tracking
Plant maintenance warranty claims tracking
Sikkim Manipal University
Page No. 109
5.7
Unit 5
Quality Management
Functions of quality management module
CAQ and CIQ
5.8
Materials Management
Pre-purchasing
Purchasing
Vendor evaluation
Inventory management
Invoice verification and material inspection
5.9
Summary
5.10
Glossary
5.11
Terminal Questions
5.12
Answers
5.13
Case Study
5.1
Introduction
An ERP system consists of several modules. Each module of an ERP

system supports the major functional areas of an organisation. In this unit,
let us study about different modules of a system, in detail.
Some of the common modules of an ERP system include finance,
manufacturing and production planning, human resource, quality
management, materials management, and plant maintenance. These
modules provide accurate information to an organisation, which leads to
effective decision making.
All the modules of an ERP system are integrated with each other. This helps
an organisation in tracking the overall organisational performance. For
example, the sales module of an ERP system provides information related
to the current demand of products in the market, which enables the
production department to produce the most profitable product. Similarly, the
finance module provides information related to the financial resources of an
Page No. 110
Unit 5
organisation, which helps all the departments of the organisation to make

decisions as per the available funds. The modules of an ERP system vary
across different organisations, depending on their requirements. Therefore,
it is imperative for an organisation to define its requirements clearly, in order
to choose the right combination of ERP modules.
In this unit, you will study about different modules of an ERP system. You
will first study about the finance module of an ERP system and its various
sub-modules. Next, you will be acquainted with the sales and distribution
module of an ERP system. The manufacturing and production planning
module, and its functions, is also explained in the unit. Apart from this, you
will also be familiarised with the cost management, human resource, plant
maintenance, and quality management modules. In the end, you will study
about the materials management module of an ERP system.
Objectives
After studying this unit, you will be able to:
discuss the relationship among different modules of an ERP system
explain the functions of the finance module
assess the importance of the sales and distribution module
list the features of the manufacturing and production planning module
identify the importance of the human resource module
describe the functions of the plant maintenance module
state the significance of the quality management module
discuss the benefits of the materials management module
5.2
Finance
Do you know the importance of finance in an organisation? Finance is a vital

resource for every organisation that facilitates the execution of business
operations. For example, an organisation requires finance to set up plants
and machinery, expand its business operations, and sustain its business
through continuous improvement in its products. So, you can conclude that
Page No. 111
Unit 5
finance is a highly crucial factor for an organisation; therefore, it should be

managed prudently.
The finance module of an ERP system helps an organisation by providing
financial functionality and analysis support. It also aids the financial decision
making of an organisation. Similar to other business functions, timely data
also plays an important role in performing the financial activities of an
organisation effectively. The finance module helps managers by providing
quality data related to finance. Not only this, this module consists of a set of
processes that analyses data and converts it into meaningful information.
This information is presented in a manner that managers can view every
business aspect, in order to make effective financial decisions.
To make financial decisions, managers need information from all the
departments of an organisation. The finance module integrates information
related to the different departments of an organisation such as sales,
distribution, human resource, and production. It acts as an organisationwide financial control unit, because it provides useful information to an
organisation while making strategic decisions.
The financial module of an ERP system is usually composed of several submodules, which are:
Financial Accounting: It helps in performing activities such as general
ledger, accounts payable, bills receivables, asset accounting, and legal
consolidation.
Investment Management: It is used to carry out activities such as planning,
budgeting, and investment management.
Financial Controlling: It enables an organisation to perform tasks such as
cost controlling, activity-based costing, cost accounting, and profitability
analysis.
Funds Management: It helps in activities such as funds flow management,
cash flow management, and treasury management.
Self Assessment Questions:
1.
The finance module of an ERP system helps an organisation by

providing ______ and________.
Page No. 112
Unit 5
2.
The finance module helps managers by providing quality _______

related to finance.
3.
The finance module of an ERP system acts as an organisation-wide

financial control unit. (True/False)
4.
The finance module acts independently and does not require any
integration. (True/False)
5.
Which of the following sub-modules, of the finance module, involves

activities like general ledger, accounts payable, etc.?
A. Financial accounting
B Investment management
C. Financial control
D. Funds management
Activity 1:
Using the Internet, find out the functions of the accounting information
system.
5.3
Sales and Distribution
You may not have sold anything in your life. However, you automatically
participate in a sales process when you purchase something. You must have
noticed that most activities taking place around you are directly or indirectly
related to purchasing or selling. Sales is all about transferring products or
services from one individual to another, at a mutually agreed price. It involves
reaching the right people, with the right message, at the right time.
Sales is the primary source of revenue for an organisation. In todays
business world, selling is no more done as a door-to-door activity or through
a shop in your neighbourhood. Now, the products and services of an
organisation are passed through an extensive distribution network, before
they reach the end users. This distribution network involves wholesalers,
retailers, and commission agents. An effective distribution network helps in
delivering the right product, to the right customer, at the right time. This,
ultimately, helps in increasing the sales of an organisation. An increased
Page No. 113
Unit 5
efficiency of sales and distribution helps an organisation in enhancing its

profit margins and improving customer service, thereby achieving a
competitive edge in the market.
Thus, you can say that the success of any organisation is based on how
well it manages its sales functions. The sales and distribution module of an
ERP system enables an organisation to perform its sales activities, such as
sales order management, delivery of products, and invoicing, effectively.
Not only this, the module has a significant role in the e-commerce activities
of an organisation. It enables an organisation to manage its online stores
(virtual stores) efficiently.
In order to improve the sales function of an organisation, most ERP systems
are closely integrated with Distribution Requirements Planning (DRP)
software. Basically, DRP software helps in managing the supply chain
activities of an organisation, thereby maintaining the Just-In-Time (JIT)
delivery of products. The sales and distribution module and DRP software,
collectively, enable the ERP system to produce replenishment orders based
on stock requirements. A detailed explanation of DRP is given in the next
unit. Besides this, the sales and distribution module of an ERP system helps
an organisation in:
Responding to customer queries quickly
Preparing and processing quotations
Performing activities such as order placement, order tracking, and order

shipment
Complying with sales and distribution agreements such as delivery

schedule agreement and sales contract
Managing the delivery of products by checking the availability of stock

and monitoring the shipment
Managing sales transactions by verifying credit limits and bills,

processing transactions, and calculating taxes
Providing after-sales support
Page No. 114
Unit 5
Maintaining sales and distribution records and preparing other

necessary documents such as order confirmation notes and sales
receipts
Although all the modules of an ERP system work in association with one
another, the sales and distribution module is closely integrated with material
management and financial accounting modules, for the timely delivery of
products and accurate billing.
6.
Sales involves transferring products or services from one individual to

another at a mutually agreed_______.
7.
Sales is the primary source of _______ for an organisation.
8.
An effective ________ network helps in delivering the right product,

to the right customer, at the right time.
9.
The sales and distribution module of an ERP system does not

support the functioning of the online stores of an organisation.
(True/False)
10. What does DRP stand for?

A. Distribution Resale Planning
B. Distribution Requirements Planning
C. Distribution Request Performing
D. Distribute and Require Planning
5.4
Manufacturing and Production Planning
As a customer, what expectations do you have when you purchase a

product? You always prefer to go for a quality product with unique features.
The quality of products produced by an organisation depends on its
manufacturing efficiency. Manufacturing is all about producing products with
specified quality characteristics in the right quantity and in the most costefficient way possible. The manufacturing process of an organisation is
directly related to its sales and distribution functions. For example, if an
organisation manufactures low-quality products, customers hardly prefer
Page No. 115
Unit 5
buying them. Consequently, the sales of the organisation decline. On the

contrary, high-quality products lead to a significant increase in the
organisations sales. Therefore, it is necessary for an organisation to
manage its manufacturing operations effectively.
The manufacturing and production planning module of an ERP system
provides useful information to an organisation for planning, scheduling,
directing, and controlling, its manufacturing activities. This module not only
enables an organisation to perform its manufacturing operations effectively
but also helps in managing the supply chain activities as per the business
policies of the organisation. Thus, you can conclude that the manufacturing
and production planning module supports the entire manufacturing process
of an organisation, from material procurement to the final delivery of
products. Using this module, an organisation is not confined to adopting a
particular manufacturing method. The module allows an organisation to use
a combination of manufacturing methods.
This module consists of various sub-modules such as material and capacity
planning, shop-floor control, quality management, JIT/repetitive
manufacturing, cost management, and engineering-data management. Let
us discuss all these sub-modules of the manufacturing module in detail.
Exhibit 5.1: Types of Manufacturing
In an ERP system, the manufacturing operation can be broadly
categorised into the following parts:
Process Manufacturing: In this type of manufacturing, after a product is
produced, it cannot be segregated into its components. Process
manufacturing is used in food, cosmetics, chemical, and paint, industries.
Discrete Manufacturing: In this type of manufacturing, products are
assembled from distinct components such as automotive, aerospace, and
electrical parts.
5.4.1
Material and capacity planning
Apart from purchasing quality products, you always expect on-time delivery
of products. In order to fulfil these requirements, an organisation needs to
develop an effective production schedule by properly planning its materials
Page No. 116
Unit 5
and capacity requirements. Material planning is all about managing the

supply of raw materials for quality production. On the other hand, capacity
planning involves ensuring whether the planned level of production meets
the market demand.
The material and capacity planning module helps an organisation in:
Providing a quick response to changing customer needs
Determining the consequences of alternative production plans, selecting

the best plan, and making effective purchase decisions
Making optimum utilisation of its resources
Making a proper use of its production capacity by providing graphical

reports on planned and utilised capacity.
Identifying order-processing priorities with changing business needs
5.4.2
Shop floor control
In order to reduce manufacturing time and product time-to-market,

manufacturing organisations, nowadays, are focusing more on evaluating
their shop-floor activities. Before studying how to evaluate shop-floor
activities, let us first explain what shop floor is all about.
Shop floor is the part of a factory where the machines are placed and men
are directly engaged in manufacturing activities. These activities need to be
controlled in order to make the product readily available in the market.
Shop-floor control involves efforts made by manufacturing organisations for
managing shop-floor activities and reducing cycle time. These efforts
involve the evaluation of available resources, labour capacity, machine
hours, and other information. This, ultimately, helps in planning, scheduling,
and controlling the manufacturing process.
The shop floor control module aims at minimising the cycle time; thereby
increasing productivity. Moreover, the shop floor control module is flexible
enough to re-allocate materials among various shop floors, as and when
required. The following are some of the important functions of the shop floor
control module:
Page No. 117
Unit 5
Manages the shop-floor activities of a manufacturing organisation by

providing the right information, at the right time.
Enables an organisation to execute its manufacturing operations, as per

its pre-determined schedule, thereby preventing delays in production
and maintaining on-time delivery of products.
5.4.3
Quality management
The quality management module consists of a wide range of parameters

that help an organisation in ensuring that the quality requirements, at every
stage of production, are fulfilled. For this, the module collects data from
other sub-modules of the manufacturing module that has a direct impact on
the quality of the final output. The quality management module is capable of
optimising the product-design process, production methods, and processengineering techniques, thereby ensuring high-quality output. In this way,
this module enables an organisation to perform recurring operations and
defect-cause analysis and make continuous improvements in its production
methodologies.
5.4.4
JIT/repetitive manufacturing
JIT delivery is the most crucial element of the manufacturing process of an

organisation. This approach lays emphasis on reducing cycle time and lead
time.
The JIT module enables an organisation to complete its manufacturing
activities as per the schedule and make on-time delivery of products. It also
allows an organisation to develop a transition-based production system,
instead of discrete manufacturing. A detailed explanation of JIT is given in
the next unit.
5.4.5
Cost management
An organisation needs to incur different types of costs like manufacturing

costs, transportation costs, recruitment costs, etc. Every organisation
desires to reduce these costs, in order to maximise its profit. Among these
costs, the manufacturing cost of a product has a crucial part in the overall
profits of an organisation. The manufacturing cost consists of all the
expenses that an organisation has to bear, in order to produce the desired
Page No. 118
Unit 5
quality output. This cost is incurred for procuring raw materials, employing
labour, purchasing equipment and machinery, and running various
necessary operations.
The cost management module communicates necessary information related
to different cost drivers to the employees working at different levels of an
organisation. This information helps managers in identifying the elements
that can be adjusted, in order to reduce the overall manufacturing cost, as
well as selecting the most optimum costing method.
5.4.6
Engineering data management
You are already aware of the fact that every organisation desires to reduce
its cycle time, in order to ensure timely delivery of the final product. The
engineering data management module reduces the time taken in data
transfer from one module to another in the ERP system and minimises
errors in data transfer. This leads to increased efficiency of manufacturing
operations. For this, the module develops an automatic link between
engineering and production information. In most ERP systems, the
engineering data management module works in association with Computer
Aided Design (CAD) software, to facilitate an easy exchange of information
among people engaged in the manufacturing process.
5.4.7
Engineering change control
Engineering change refers to the alteration or modification in the productdevelopment process. This change affects the material and equipment
requirements as well as the manufacturing schedule of a product.
Therefore, most organisations do not prefer to make engineering changes.
These changes can be made due to various reasons such as changing
needs of customers, technology obsolescence, and change in market
trends. An engineering change is quite critical to the success of a product in
the market. For example, when a trend of webcam-enabled laptops was
noticed in the market, most laptop manufacturers had to call for engineering
changes, in order to satisfy their customers. However, implementing this
change was a time-consuming and expensive task for manufacturers.
The engineering change control module enables an organisation to
determine the steps to be performed, before any engineering change is
Page No. 119
Unit 5
approved or implemented. For example, in order to implement engineering

changes, an organisation can determine a procedure that consists of four
steps, namely requisition, evaluation, approval, and implementation.
Consequently, every engineering change is well analysed, before it is
implemented in the manufacturing of a product.
5.4.8
Configuration management
Configuration management is a process of maintaining consistent product

performance throughout its life cycle, in terms of its functionality and
attributes. The main aim of configuration management is to reduce ordercycle time, by eliminating lengthy engineering review of products.
The configuration management module enables an organisation to reduce
the time taken in product-engineering reviews, thereby minimising the cycle
time. This module also enables an organisation to analyse the cost and
configuration feasibility of the final product. To support the functions of this
module, a user-defined database is developed. This database consists of
knowledge and expertise related to product engineering, sales, and cost
management. It also contains user-defined product attributes such as
height, weight, volume, and size.
5.4.9
Serialisation/lot control
An organisation needs to purchase an adequate amount of raw materials so

that there should be no shortage or over-supply of materials, during the
production process. For this, the organisation has to determine an optimum
lot size and the number of lots to be purchased. The lot size depends on the
sequence (serial) of operations to be performed, while producing the final
product. Therefore, the sequence in which a product is developed, needs to
be carefully analysed while determining the lot size.
The serialisation/lot control module helps an organisation in determining the
sequence of operations to be performed for manufacturing a product,
thereby deciding the optimum lot size. This module allocates unique
numbers to each lot so that it can be easily associated with the sequence of
operations.
Page No. 120
Unit 5
5.4.10 Tooling
In a manufacturing organisation, the availability of proper tools plays a
crucial role in the conversion of raw materials into finished products. The
tooling module helps an organisation in identifying the types and
requirements of tools for performing manufacturing operations. This module
is closely integrated with capacity planning and inventory management
modules in order to identify the requirements of various tools. This
integration helps an organisation keep track on the delivery of tools so that
there can be proper utilisation of productive capacity. Apart from this, the
tooling module allows an organisation to estimate the useful life of tools and
to identify their maintenance needs.
11. JIT stands for:
A. Justified in Time
B. Just in Time
C. Jack in Track
D. Jolly in Time
12. Which of the following refers to the part of a factory where the
machines are placed and men are directly engaged in manufacturing
activities?
A. Production department
B. Shop floor
C. Engineering department
D. Marketing department
13. During a manufacturing process, engineering change does not affect:
A. Material requirements
B. Equipment requirements
C. Manufacturing schedule
D. Type of product to be manufactured
Page No. 121
Unit 5
14. The quality management module enables an organisation to perform

______ and __________ to make continuous improvements in its
production methodologies.
15. The main aim of configuration management is to reduce order
________ by eliminating lengthy engineering review of products.
Activity 2:
Collect information on the production process of any renowned
manufacturing organisation.
5.5
Human Resource
Human resource refers to the workforce of an organisation that is employed

to achieve organisational goals and objectives. It is the most productive
resource that creates a long-lasting advantage for an organisation, by
utilising its skills and knowledge.
Suppose you are the owner of an organisation. Your employees are one of
your organisations precious assets. This is because the performance of your
employees has a direct impact on your brand image and service quality,
which ultimately decides the level of customer satisfaction. So, you can say
that it is important for any organisation to manage its human resource
effectively.
The human resource module of an ERP system helps an organisation to
perform human resource activities, such as performance management,
compensation management, employee motivation, communication,
administration, and training, effectively. Apart from this, the module allows an
organisation to maintain a comprehensive database of employee records and
update it whenever required. These records include information related to
salary, attendance, performance evaluation, promotion, transfer, and personal
details of all the employees working in an organisation. An advanced human
resource module is integrated with a knowledge management system, which
facilitates the sharing of expertise throughout an organisation.
Page No. 122
Unit 5
The following are some of the common sub-modules of the human resource
module:
Personnel administration
Organisational management
Payroll management
Workforce management
Employee development
You will study about these sub-modules in the succeeding units of the book.
16. Human resource refers to the ____________ of an organisation that
is employed to achieve organisational goals and objectives.
17. The ________ module allows an organisation to maintain a
comprehensive database of employee records and update it
whenever required.
18. An advanced human resource module is integrated with a knowledge
management system. (True/False)
19. Which of the following is not a sub-module of the human resource
module?
A. Personnel administration
B. Organisational management
C. Payroll management
D. Funds management
Activity 3:
Meet the human resource manager of an organisation in your locality and
discuss the importance of maintaining employee data.
5.6
Plant Maintenance
Plant maintenance is all about the overhauling of equipment and machinery

deployed in the production plant. It involves the proper cleaning, oiling,
Page No. 123
Unit 5
repair, and replacement, of machines and their spare parts. Plant

maintenance helps in maintaining equipment and machinery under good
operating conditions. However, lack of proper plant maintenance may lead
to equipment breakdowns, which, in turn, may hamper the production and
delivery schedules of an organisation. Apart from this, equipment
breakdowns also result in the wastage of material and decline in the quality
of the final output.
Why do you think plant maintenance is important for an organisation?
Needless to say, the main aim of any organisation is to maximise profits and
minimise costs. Proper maintenance of a plant leads to significant reduction in
the overall operating cost, improved productivity of the plant, and a safe
working environment for employees. Although some of the organisations
consider plant maintenance to be an extra expense, the amount spent on plant
maintenance is paid back by improved quality, JIT production, and prevention
of material wastage. Therefore, it is important for every organisation to
efficiently perform activities related to plant maintenance.
The plant maintenance module of an ERP system provides a range of
necessary mechanisms that allow an organisation to perform functions
related to plant maintenance. These functions are supported by various submodules of the plant maintenance module. Let us discuss these submodules in detail.
5.6.1
Preventive maintenance control
Preventative maintenance is all about preventing an item from wearing out

with the help of systematic inspection and detection of incipient failure. The
preventive maintenance and control module enables an organisation to
prevent breakdowns, during the production process. This is done by
planning, scheduling, and controlling tasks, involved in the maintenance of
equipment, in order to maintain it under reliable operating conditions. This
module monitors equipment and identifies potential failures with the help of
its user-defined inspection modes and everyday operating frequency. It also
collects information related to hourly operation, units of output, fuel
consumption, and serviceable life of equipment.
The preventive maintenance and control module provides the following
benefits to an organisation:
Page No. 124
Reduced repair costs
Higher machine utilisation
Improved machine reliability
Higher production yields
Extended life of equipment
5.6.2
Unit 5
Equipment tracking
The machines and equipment deployed in an organisations production

plant are usually very costly. Therefore, they are considered to be the
precious assets of an organisation. However, with the passage of time,
these assets are subject to wear and tear or decay, thus, their efficiency
reduces gradually. For example, over a period of time, the sharp blades of a
cutting-machine turn blunt, which, in turn, hampers the production process
and affects the quality of the final output. Therefore, an organisation needs
to continuously track the performance of equipment so that it can be
repaired before it affects the output.
The equipment tracking system provides details related to the current and
previous operating conditions of equipment, in terms of its, hourly, daily,
weekly, monthly, and yearly, performance. This helps an organisation in
identifying potential failures in equipment and rectifying them.
5.6.3
Component tracking
You know that a machine is made up of several spare parts (components).

Improper functioning of any of these components may adversely affect the
performance of the machine. Therefore, it is important for an organisation to
ensure whether all the spare parts of a machine are functioning properly.
The component tracking module enables an organisation to inspect all
equipment and their parts and sub-parts. Moreover, this module provides
information related to every spare part, in terms of its pre-defined codes.
These codes help an organisation to identify which sub-part belongs to
which machine. This enables an organisation, at the time of repair or
replacement of machines.
Page No. 125
5.6.4
Unit 5
Plant maintenance and calibration tracking
The plant maintenance and calibration module provides necessary

information support for tracking whether the set-up of equipment is in
compliance with the quality requirements, defined under Internationsl
Organisation for Standardisation (ISO) 9000. This module justifies the cost
incurred by an organisation on plant maintenance work.
5.6.5
Plant maintenance warranty claims tracking
You must have a lot of expectations when you purchase a product, in terms
of its quality and performance. Similarly, an organisation also expects higher
efficiency of equipment and machines while purchasing them. In order to
ensure the expected efficiency of equipment, the vendors or manufacturers
provide warranty for the operation of equipment. However, this warranty is
usually subject to certain terms and conditions. For example, the vendor of
a cooling fan can provide warranty for the replacement of the fan, in case it
does not function properly. However, the warranty is valid only for a
specified period, from the date of purchase of the fan. Thus, in this case, the
organisation need not bear the cost for the maintenance of the fan up to that
period.
The plant maintenance warranty claims tracking module acts as an
administrative tool. It provides useful information that helps an organisation in:
Complying with the terms and conditions of the warranty given by the
vendor or manufacturer (while equipment and machinery is being used)
Tracking the performance of equipment or machinery
Claiming the warranty of equipment or machinery in case any issues

related to its operation are identified

20. Plant maintenance is all about the _________ of equipment and
machinery deployed in the production plant.
21. The preventive maintenance and control module enables an
organisation to prevent __________ during the production process.
Page No. 126
Unit 5
22. The equipment tracking system provides details related to the current
and previous operating conditions of equipment, in terms of its weekly
performance only. (True/False)
23. Plant maintenance does not involve:
A. Cleaning and oiling of machines
B. Repair of machines
C. Purchase of machines
D. Replacement of machines
5.7
Quality Management
The term quality assumes a number of meanings at a workplace. However,

you can simply define quality from two perspectives, namely, the customers
perspective and the organisations perspective. From a customers
perspective, quality is a set of expectations that you have as a customer
while buying a product. On the other hand, from an organisations
perspective, quality is a measure of how well a product or service conforms
to the specified standards. The quality standards can be a combination of
product attributes to be produced by an organisation. These attributes
include the performance, reliability, and appearance of the product and
commitment to delivery time.
When you buy a product, you must always be focused on its quality,
irrespective of its cost. If the product is not as per your quality requirements,
you may not purchase it or switch to other brands. Therefore, in order to win
in todays competitive business environment, it is important for every
organisation to manage quality.
Quality management is actually a comprehensive task for any organisation.
This is because an organisation needs to manage quality at every step,
before a product reaches end users. A number of international quality
standards have been defined to help the task of quality management, such
as ISO 9000 series.
The quality management module of an ERP system provides necessary
information and technical support to an organisation for adopting
Page No. 127
Unit 5
appropriate quality standards and making continuous improvements in its

products and processes. Let us discuss the functions of the quality
management module, in detail.
5.7.1
Functions of quality management module
Although every module of an ERP system shares the responsibility of

quality management, the quality management module is specific to the
quality of the overall production process of an organisation. The major
functions of the quality management module of an ERP system are:
Quality Planning: Involves accumulating basic data for deciding the
required level of quality for materials, operations, and finished products.
Quality planning aims at improving quality by preventing repetitive defects in
the production process.
Quality Monitoring: Involves the inspection of materials, processes, and
finished products. This helps an organisation in ensuring whether the level
of quality is maintained as per the planned quality.
Quality Control: Refers to a process in which the system undertakes the
historical data related to the level of quality maintained in the past.
Thereafter, the system applies various quality control techniques to maintain
the desired level of quality and improve it continuously. Some of these
techniques include sample testing, quality control charts, and quality circles.
The quality management module is closely related to the functions of
purchasing, inventory management, shop-floor control, and customer
relationship management. Therefore, the module is capable of accessing
data from other modules such as material management, manufacturing, and
sales.
5.7.2
CAQ/CIQ
Computers are finding their way into almost every aspect of business. They
have enabled organisations to manage their business functions effectively,
thereby increasing their productivity. Recent advancements in qualityrelated applications have helped manufacturing organisations in controlling
and improving the quality of their products.
Page No. 128
Unit 5
Computer Aided Quality (CAQ) is a quality management tool that collects

and analyses data related to the quality of output to be produced by a
manufacturing organisation. It generates a set of specifications related to
the desired quality of the final output. The module also develops operational
specifications that help in realising the desired quality of the final output.
Quality management is a comprehensive task that cannot be performed in
isolation. Moreover, todays competitive business environment demands
rapid modifications in the quality of products. In such a scenario, relying only
on CAQ for quality management is not sufficient for an organisation.
Therefore, in order to improve its usability, CAQ is directly integrated with
other ERP modules. This advanced version of CAQ is known as Computer
Integrated Quality (CIQ).
So, you can define CIQ as a CAQ management tool that is integrated with
other modules of an ERP system such as finance, sales and distribution,
and manufacturing. This integration of different modules enables CIQ to use
various automatic data-processing techniques for quality management.
24. From a customers perspective, ______ is a set of expectations that
you have as a customer, while buying a product.
25. The quality standards can be a combination of a products _______
to be produced by an organisation.
26. Which of the following is a more effective software for quality
management?
A. CAQ
B. CIQ
C. CQ
D. ISO 9000
27. Product attributes include:
A. The performance of a product
B. Reliability of a product
C. Appearance of a product
D. All of these
Page No. 129
Unit 5
Activity 4:
Using the Internet, make a project on quality parameters given by the ISO.
Also, add the modifications made by the ISO in these parameters, from
time to time, in your project.
5.8
Materials Management
Now, you must have a fair idea about the importance of materials (as a
resource) in the manufacturing of products. The next question arises that
what quality and quantity of materials should an organisation employ in
order to produce standardised products? Materials management
encompasses all the aspects of materials required for converting raw
materials and other inputs into final products.
The materials management module of an ERP system helps an
organisation in handling, storing, and transporting materials. It also allows
an organisation to make judicious purchasing, reduce wastage, utilise
materials efficiently, thereby minimising materials cost. Apart from this, the
other functions of the materials management module include automated
vendor evaluation, automated inventory management, and integrated
invoice verification. To perform these functions, the material management
module works with the help of its sub-modules. Let us discuss these submodules in detail.
5.8.1
Pre-purchasing
The pre-purchasing module supports all the activities involved in planning

raw materials to be purchased for producing products. These activities are
related to bidding, supplier search, sample acceptance, and supplier
selection. This module also helps an organisation in developing a set of
service specifications for every procurement project proposed in the
organisation.
5.8.2
Purchasing
The purchasing module supports all the activities involved in purchasing raw
materials. The major purchase activities involve order placement, receipts of
goods, inventory management, and invoice verification. The module
facilitates a timely exchange of information among the members of an
organisations supply chain, such as suppliers, transporters, and
Page No. 130
Unit 5
distributors. This helps an organisation to keep tabs on activities involved in

the purchase of raw materials.
5.8.3
Vendor evaluation
Vendor evaluation is a process in which an organisation appraises the

potential suppliers of materials by performing measurable assessments. It is
one of the most important steps of the purchasing process. This is because,
the quality of final output depends on the quality of materials provided by
vendors. Therefore, it is essential for an organisation to evaluate its
suppliers carefully while taking purchasing decisions.
The vendor evaluation module helps an organisation in selecting the right
supplier of materials. This module enables an organisation to easily resolve
the issues related to the procurement of materials, thereby, maintaining
cordial relationships with suppliers. This ultimately helps in optimising the
production process of an organisation.
5.8.4
Inventory management
After an organisation receives materials from its suppliers, it is important to

store these materials properly in order to prevent them from loss or damage.
Moreover, it is important for an organisation to maintain an adequate level of
inventory (raw materials and other inputs). This is because, the excess of
inventory incurs high storage costs for an organisation, while the shortage of
inventory may cause unnecessary delays in production. Therefore, the
inventory management department has to keep track on the level of
inventory available in the organisation.
The inventory management module helps an organisation in ensuring the
availability of inventory throughout the production process, at the same time,
preventing it from loss or damage. To do so, the module provides complete
information about the quality and quantity of current and ordered stock and
daily consumption of stock.
5.8.5
Invoice verification and material inspection
When the materials are received, an organisation needs to ensure that the
received materials meet the required specifications (in terms of quality and
quantity). This can be done by performing a proper inspection of the
received materials. After inspection, the organisation can either accept or
reject the received materials. If the organisation accepts the materials, it
needs to generate an invoice for the received materials. An invoice contains
Page No. 131
Unit 5
complete information related to the received materials. It needs to be

verified before it is forwarded to the finance department (which ultimately
makes payments to the suppliers in exchange for raw materials). For
performing material inspection and invoice verification, the organisation
needs to have complete information about the material ordered and
received.
The invoice verification and material inspection module provides complete
and accurate information to an organisation so that it can efficiently examine
the received materials and verify the invoice generated. This information is
related to the quality and quantity of materials ordered and received by the
organisation. Using this information, the module automatically generates an
invoice, which can be modified as per the requirements. The invoice
verification and material inspection module can also compare the
information of ordered and received material for verifying the invoice
generated. The module acts as a link between finance and material
management modules, as it forwards the invoice verification details to the
finance department, in order to make payments to suppliers.
28. Materials management encompasses all the aspects of _______
required for converting raw materials and other inputs into final
products.
29. If an organisation accepts the materials, it needs to generate an
______ for the received materials.
30. The _____________ module supports all the activities involved in
planning the raw materials to be purchased for producing products.
31. Vendor evaluation is a process in which an organisation appraises
the potential ________ of materials by performing measurable
assessments.
Activity 5:
Visit a manufacturing organisation and observe how the materials are
managed there.
Page No. 132
5.9
Unit 5
Summary
An ERP system involves several modules. These modules support the

different functions of an organisation. Some of the common modules of
an ERP system include finance, manufacturing and production planning,
human resource, quality management, materials management, and
plant maintenance.
The finance module of an ERP system provides financial functionality

and analysis support to an organisation. In addition, it also facilitates an
organisation in taking crucial financial decisions. The financial module of
an ERP system consists of various sub-modules such as financial
accounting, investment management, financial controlling, and funds
management.
The sales and distribution module of an ERP system helps an

organisation to perform various sales functions, such as sales order
management, delivery of products, and invoicing, effectively. ERP
systems are integrated with DRP software in order to improve the sales
performance of the organisation.
The manufacturing and production planning module of an ERP system

provides useful information to an organisation for performing its
manufacturing activities effectively. In addition, it also helps in managing
the supply chain activities of the organisation. The module contains
various sub-modules such as material and capacity planning, shop-floor
control, quality management, JIT/repetitive manufacturing, cost
management, and engineering data management.
The human resource module of an ERP system enables an organisation

to perform its human resource activities. Its sub-modules include
personnel administration, organisational management, payroll
management, workforce management, and employee development.
The plant maintenance module of an ERP system provides a range of

tools and techniques for performing plant maintenance functions, which
are supported by its sub-modules. Some of these sub-modules are
preventive maintenance control, equipment tracking, component
Page No. 133
Unit 5
tracking, plant maintenance and calibration tracking, and plant

maintenance warranty claims tracking.
The quality management module of an ERP system enables an

organisation to continuously improve the quality of its products and
processes by providing effective tools. Its major functions include quality
planning, quality monitoring, and quality control.
The materials management module of an ERP system enables an

organisation to handle, store, and transport materials, throughout the
supply chain, while minimising its cost. Its sub-modules include prepurchasing, purchasing, vendor evaluation, inventory management,
invoice verification, material inspection.
5.10 Glossary
Let us have an overview of the important terms mentioned in the unit:
Replenishment Order: This order is placed in the replacement of a
previous order.
Calibration: It is a setup of equipment designed to execute manufacturing
operations.
ISO 9000: A set of quality standards that are followed by most
organisations, across the world.
Discrete Manufacturing: A manufacturing system in which every part is
produced as an individual product. These parts are further assembled to
make the final product.
Transition-based Production: A manufacturing system in which a product
is developed in a logical series of operations.
Cost Driver: An object or activity that incurs a certain cost for an
organisation.
Lot Size: The quantity of materials purchased at a time for manufacturing
purposes.
5.11 Terminal Questions

1.
Name the sub-modules of the finance module.
Page No. 134
Unit 5
2.
Explain the importance of the sales and distribution module.
3.
What is the importance of the tooling sub-module of the manufacturing

and production planning module?
4.
What is the role of the human resource module of an ERP system?
5.
Explain plant maintenance.
6.
Explain the preventive maintenance control sub-module of the plant

maintenance module.
7.
What are the functions of the quality management module?
8.
Evaluate the role of vendor evaluation sub-module of the materials

management module.
5.12 Answers
Self Assessment Questions
1.
Financial functionality and analysis support
2.
Data
3.
True
4.
False
5.
a. Financial accounting
6.
Price
7.
Revenue
8.
Distribution
9.
False
10. b. Distribution Requirements Planning

11. b. Just in Time
12. b. Shop floor
13. d. Type of product to be manufactured
14. Recurring operations and defect-cause analysis
15. Cycle time
Page No. 135
Unit 5
16. Workforce
17. Human resource
18. True
19. d. Funds management
20. Overhauling
21. Breakdowns
22. False
23. c. Purchase of machines
24. Quality
25. Attributes
26. b. CIQ
27. All of these
28. Materials
29. Invoice
30. Pre-purchasing
31. Suppliers
Terminal Questions
1.
The sub-modules of the finance module includes financial accounting,

investment management , financial controlling, and funds management.
Refer to Section 5.2 Finance that discusses the common sub-modules
of the finance module.
2.
The sales and distribution module of an ERP system helps an

organisation in performing activities, such as sales order management,
delivery of products, and invoicing, effectively. Refer to Section 5.3
Sales and Distribution, which explains the importance of the sales
module.
3.
The tooling sub-module of the manufacturing module enables an

organisation to identify the types of tools required to perform
manufacturing operations. Refer to Section 5.4 Manufacturing and
Page No. 136
Unit 5
Production Planning, which discusses the importance of the tooling

sub-module.
4.
The human resource module helps in performing activities such as

personnel administration, organisational management, payroll
management, and workforce management. Refer to Section 5.5
Human Resources, which sheds light on the role of the human
resource modules of an ERP system.
5.
Plant maintenance is concerned with keeping the physical plant of an

organisation under good operating conditions. Refer to Section 5.6
Plant Maintenance, which explains the meaning of plant maintenance.
6.
Preventive maintenance is a part of plant maintenance. It involves

taking actions for preventing breakdowns during the production
process. Refer to Section 5.6 Plant Maintenance, which explains the
preventive maintenance control sub-module.
7.
The functions of the quality management module include quality

planning, quality monitoring, and quality control. Refer to Section 5.7
Quality Management, which lists the functions of the quality
management module.
8.
Vendor evaluation is critical to the success of the purchasing process,

as the quality of the final output depends on the quality of materials
provided by vendors. Therefore, it is important for an organisation to
evaluate its vendors carefully, while taking purchasing decisions. Refer
to Section 5.8 Materials Management, which discusses the role of the
vendor evaluation sub-module.
5.13 Case Study: Implementation of an ERP System with Human

Resource Management Functionality at Atlantic
Manufacturing
In the past few years, Atlantic Manufacturing had identified continuous
decline in its sales volume. This is because the organisation was not able to
recruit talented sales representatives. Considering the situation, the
organisation decided to determine the root cause of the problem. After
continuous efforts for three days, it was found that the organisation was
using a traditional system, which was not capable of analysing the large
volume of applicant data. Moreover, the system was not able to maintain the
Page No. 137
Unit 5
data of the existing employees related to their attendance, salary,

absenteeism, role, responsibilities, performance appraisal, etc. This led to a
number of complexities in the human resource functions of Atlantic
Manufacturing.
To solve the on-going issues, the organisation decided to implement an
ERP system with the human resource management functionality. After
implementing the system, Atlantic Manufacturing was able to maintain and
analyse employee data and retrieve it, as and when required. The system
also helped the organisation to recruit the right candidates and allocate
them jobs as per their skills and capabilities. This resulted in a significant
increase in the sales of the organisation.
Questions:
1.
How did the ERP system with human resource functionality help
Atlantic Manufacturing?
2.
Name some common sub-modules of the human resource module of

an ERP system.
References and Suggested Readings
Thomas F. Wallace and Michael H. Kremzar (2001), ERP: Making It

Happen: The Implementers' Guide to Success with Enterprise Resource
Planning.
Simha R. Magal and Jeffrey Word March (2012), Integrated Business

Processes with ERP Systems.
E-references
http://www.scribd.com/doc/36927263/57/CAQ-CIQ
http://www.eresourceerp.com/
http://books.google.co.in/books?id=FnbMqI7nhIgC&pg=PA167&dq=wha
t+is+Engineering+Change&hl=en&sa=X&ei=HlGTUOXdLYPRrQfXmIHA
Bg&ved=0CDMQ6AEwAA#v=onepage&q=what%20is%20Engineering%
20Change&f=false
http://books.google.co.in/books?id=WE2M8YAD7jQC&printsec=frontcov
er&dq=Preventive+Maintenance+Control&hl=en&sa=X&ei=01CTUPadO
8TtrQeY6YGIDw&ved=0CC8Q6AEwAQ#v=onepage&q=Preventive%20
Maintenance%20Control&f=false
Page No. 138

OM0011 SLM Unit 05

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

OM0011 SLM Unit 05

Загружено:

Авторское право:

Доступные форматы

Enterprise Resource Planning

ERP Modules Structure

Sales and Distribution

Manufacturing and Production Planning

Sikkim Manipal University

Page No. 109

Enterprise Resource Planning

An ERP system consists of several modules. Each module of an ERP

Page No. 110

Enterprise Resource Planning

organisation, which helps all the departments of the organisation to make

discuss the relationship among different modules of an ERP system

explain the functions of the finance module

assess the importance of the sales and distribution module

list the features of the manufacturing and production planning module

identify the importance of the human resource module

describe the functions of the plant maintenance module

state the significance of the quality management module

discuss the benefits of the materials management module

Do you know the importance of finance in an organisation? Finance is a vital

Page No. 111

Enterprise Resource Planning

finance is a highly crucial factor for an organisation; therefore, it should be

The finance module of an ERP system helps an organisation by

Sikkim Manipal University

Page No. 112

Enterprise Resource Planning

The finance module helps managers by providing quality _______

The finance module of an ERP system acts as an organisation-wide

Which of the following sub-modules, of the finance module, involves

Sales and Distribution

Page No. 113

Enterprise Resource Planning

efficiency of sales and distribution helps an organisation in enhancing its

Responding to customer queries quickly

Preparing and processing quotations

Performing activities such as order placement, order tracking, and order

Complying with sales and distribution agreements such as delivery

Managing the delivery of products by checking the availability of stock

Managing sales transactions by verifying credit limits and bills,

Providing after-sales support

Sikkim Manipal University

Page No. 114

Enterprise Resource Planning

Maintaining sales and distribution records and preparing other

Sales involves transferring products or services from one individual to

Sales is the primary source of _______ for an organisation.

An effective ________ network helps in delivering the right product,

The sales and distribution module of an ERP system does not

10. What does DRP stand for?

Manufacturing and Production Planning

As a customer, what expectations do you have when you purchase a

Page No. 115

Enterprise Resource Planning

buying them. Consequently, the sales of the organisation decline. On the

Material and capacity planning

Page No. 116

Enterprise Resource Planning

and capacity requirements. Material planning is all about managing the

Providing a quick response to changing customer needs

Determining the consequences of alternative production plans, selecting

Making optimum utilisation of its resources

Making a proper use of its production capacity by providing graphical