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Enterprise Resource Planning

ERP [Enterprise Resource Planning]
ERP is defines as an integrated software package which integrate all the departmen
organization. Several department of an organization are marketing, sales, finance, p
Since an ERP package integrates these entire departments, thus the performance of
will be improved. It is used to manage the important part of business including pro
purchasing, maintaining inventories, customer service etc.

Every department has its own computer system optimized for their particular work
combines them all together into a single computer through integrated system appro
system provides a single database where business transaction are recorded, process
reported.
ERP system does not replace the computer of a particular department rather it integ
department of an organization into a single computer and provides a flexible databa
Benefits of an ERP System or reasons for growth of ERP
Effective utilization of resources
Improvement in business performance
Reduction of inventory due to JIT approach
Integration of information i.e. integration of all the department of an organizati
Sharing of common data and information
Global Adaptation
Improvement in the quality of the product at the same price
ERP targeted all types of business organization whether large business or small
organization
Lowers the total cost in supply chain management through JIT approach.
Eliminate limitation in legacy system i.e. traditional system
Order fulfillment improvement
Improvement in customer service.
Evaluation of ERP
Inventory control or Re-order point (1960): In 1960’s most of the ERP system was
inventory control ability also called re-order point system. Historical data were use
inventory demand. When an item falls below the predetermined level additional inv
Material requirement planning (1970): In 1970’s this system was introduced and it
based approach for planning and manufacturing of product and ordering inventory.
Manufacturing resource planning (1980): In 1980’s this approach was introduced. I
adding tool for sales promotion, customer satisfaction, customer order processing,
focus on quality and reducing overhead cost and detailed reporting.
Manufacturing resource planning-II with manufacturing executive system (MES) (
system was introduced. It provides ability to adapt production schedules to meet cu
Main focused was on ability and adopt new products and services to meet custome
ERP in late 1990
Hidden Cost of ERP System:
Training expenses
Customization: Core of ERP system is actual customization of ERP system itse
Integration and testing
Replacing the staff
Implementation team can never stop
Wait for ROI
Integrated System Approach
ERP package integrate the different department of an organization with the help of
approach. Integrated system approach requires successful implementation of re-eng
for better result of an ERP system. Business re-engineering revolves around the IT
change. It is a fundamental rethinking of business process to improve the quality an
product or service.
Designing Phase:
The fundamental decision in the designing phase is whether re-engineering the bus
customize the ERP package. When the business process is re-engineered then team
ERP package from the shelf and install it. The process is re-engineered in such a m
Reduce the cycle time
There is no unnecessary to and fro of information
In customizing team select a commercial ERP package and customize it according
requirements. However poor customization is one of the reasons of the failure of E
re-engineering of the business process will give the full benefits of the ERP system
Customization has to take the following parameters:
End user requirement
Vision of the top management
Technical requirements of the products
The higher the degree of customization lower will be the benefit of ERP system be
software purchased and installed mainly to refine existing business process and to i
performance of the organization. Or we can say that higher the customization will n
benefits of ERP system.
Implementation phase and steps of implementation
Implementation includes addressing and configuration as it involves the migration
system to new system, building interface, order processing, implementing reports a
package. Many companies take the help of expert from software supplier to assist i
The unwritten rule of implementation is synchronizing the existing company packa
package rather than changing the source code and customizing the ERP system to s
Features that are to be considered for configuring ERP system:
Data ownership: It includes that, which will be responsible for data integrity. Whet
responsibility or local responsibility.
Distribution of procedures: It includes that which is to be centralized.
Data management: Will ERP support centralized data management or local data ma
Steps in implementation of an ERP package
Establishing securities
Migrating the data from old system to new system and ensure that data to be m
and authentic.
Building interfaces to other system like office system.
User training: Training of the user can be started at the tine of test run and user
department are to be trained in there respective areas. It includes: logging in
know the system, trying sample transaction in the entire department.
Parallel run: Under this business transaction are carried on both new system as
and the implementation team take care of any problem or errors which com
parallel run.
User documentation: It is different from general documentation. It includes how
transaction.
Post implementation: It generally involves queries from user and minor change
the formats.
System monitoring and fine tuning: IT peoples monitors system closely to see p
aspects so that end user can get the full benefits of ERP system.
ERP & Related Technology
BPR: BPR stand for Business Process Re-engineering. It can be define as a
approach aiming at improvement by means of elevating efficiency and effec
that exits within and across the organization. Its main focus is on better bus
is a radical transition that a company must make to keep pace with today’s e
global market and to achieve dramatic improvement in critic contemporary
performance such as quality, cost, service etc. One of the main tools for ma
IT. IT and BPR goes together and merger of these two concepts is known a
engineering.
ERP system helps in integrating various business processes with the help of
development in IT and with a good ERP system an organization will be cap
achievement in improvement in cost, quality, and service. The main require
decentralize decision making to decision maker to be responsive to custome
use of IT, facilitating newly re-engineering process.
Principles of BPR:
It assumes that current process is irrelevant and does not work.
To break away from outdated rules.
Linking of parallel activities.
Capture information once and at source.
Elements of BPR:
Business Process
Integration of business process
Technology to redesign business process
Cross functional coordination
Timing improvement process continuously
Complement market driven strategies designed to provide a competitive
OLAP: OLAP stands for Online Analytical Processing. According to busin
OLAP can be define in five words i.e. fast analysis of shared multidimensio
Fast: fast mans that system is targeted to deliver most fast response to user w
seconds.
Analysis: IT means that system can cope with any business logic and statist
relevant for application and user.
Shared: It means that system implements all security requirements for confi
system is prevent from unauthorized person and competitors.
Multidimensional: It means that system must provide multidimensional con
data.
Information: It means that data is refined i.e. data is accurate, timely and rel
OLAP can be used in variety of business area including sales, marketing, fi
profitability analysis budgeting and planning and many others.
Data Warehouse: Since operational data can’t be kept in the database of ER
as time passes volume of data will increase and this will affect the performa
system, thus need arise to save this data.
The primary concept of data warehouse is that data stored for business anal
accessed most effectively by separating it from the data in operational syste
warehouse provides the analytical tools. It combines data from sales, marke
other departments.
In other words it can be define as copy of business transaction data speciall
query and analysis.
If operational data is kept in database then it will create a lot of problem by
performance of ERP system. So it is better to archive operational data once
‘Use is over’ does not mean that archived data is useless rather it is one of t
resources of organization. However once the operational use of data is over
removed from operational database. Once the data is imported into Data wa
non-volatile i.e. no modification can be made afterward once data has been
warehouse. Data warehouse is a blending of technologies including multidi
relational databases because it is integrated data from different sources and
a single data format which make it possible to analyze data in a consistent w
A well implemented data warehouse is key for understanding business deci
be taken in entering data into data warehouse otherwise invalid data will pro
results.
Advantages of Data warehouse:
Increased quality and flexibility of enterprise analysis as multidimensio
used.
More cost effective decision making.
Enhanced customer service by maintaining better customer relationship
Better enterprise intelligence.
Data Mining: Data mining can be defines as extraction of hidden predictive
large databases and is a new powerful technology with great potential to he
on most important information in data warehouse. It uses advance algorithm
computations, massive database etc.
Today, for a business organization quality decision making is very importan
and decision making is depend upon availability of information. Data minin
identifying valid, novel, potentially useful and ultimately comprehensible in
database that is used to make crucial business decision.
Advantages of data warehouse:
Automated prediction of tends and behavior: It automate process of find
information in large databases.
It has a much lower cost than hiring highly trained professional statistic
It can be incorporated with DSS (Decision Support System) which help
take wise and quality business decision.