ERP

ERP Concept
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 rekeyed 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. No one in the company truly knows what the status of the order is at any given point. This can be quite tedious and frustrating experience.

ERP Defination
ERP is a software solution that integrates the various functional spheres in an organization, a link through entire supply chain, aimed at adopting the best industry and management practices for providing the right product, at the right place and at the right time, at minimum cost.

ERP is the technique and concepts employed for the integrated management or business as a whole, from the viewpoint of the effective use of management resources to improve the efficiency of an enterprise.

ERP Evolution/History/Growth
1) ERP II (Extended ERP) SCM CRM E-business Business intelligence 2) ERP (1990s) Controlling Sales & Distribution Materials Management Financial accounting investment management Quality Management Personal Management Human Resource Management Plant Maintenance

ERP Evolution/History/Growth Continued..

3) MRP II (1980s) Manufacturing Resource Planning At starting includes Shop floor and distribution management activities Later years includes Finance HR & project management

4) MRP (1970s) Material Requirement Planning Master Production Schedule (plan that the company has developed for production, staffing, inventory, etc.) Material Requirement Planning (production planning and inventory control system) Translating Master production schedule to material requirement planning
5) Inventory Control (1960s) Maintaining Stock

Need of ERP
To enable improved business performance: Cycle time reduction. Increased business agility. Inventory reduction Order fulfillment improvement To support business growth requirements New product/ product lines New customers Global requirements including multiple languages and currencies To provide flexible, integrated,real time decision support. To eliminate limitation in legency systems Inflexibility to change Insupportable technologies

Advantages of ERP
Business integration and improved data accuracy: Automatic data updation at a time transaction occurs and automatic data exchange among applications. One can grasp business details in real time and carry out mgt decisions in a timely manner. Multiple entries of same data is eliminated Flexibility: Production units, distribution centers and corporate offices reside in different countries Support Multicurrency, multilanguage and multi accounting models Can modified as per organizational requirement.

 Better analysis and planning capabilities: Contains various decision support tools like planning engines and simulation functions form integral part of an ERP system. Contains many in-built standard reports and report writer Modular and open architecture: It enables any module to be interfaced or detached, whenever required, without affecting the other modules. Real Time processing: Any transaction processing effects changes directly into online database Thus having access to continuously updated information for planning and control processes.

 Best business Practice: Processes which is applicable worldwide This processes used to improve the manner in which an organization conducts business.
Beyond organizational efficiency: Connectivity with external business entities such as customer and supplier (CRM & SCM) Improved organizational efficiency: Provide intgration along multiple locations and functional areas. Improved coordination Decision making capabilities

 Lower operational cost: Lower inventory control cost Lower production cost Lower helpdesk support cost Decreased inventory level Workforce reduction

ERP Implementation Life Cycle

Phase of ERP Implementation

Pre-evaluation screening Package Evaluation Project Planning Phase Gap Analysis Reengineering Customization Implementation team training Testing Going Live End user training Post-implementation

Pre-evaluation screening
Eliminate those packages that are not at all suitable for the companys business process. Looking at the product literature of the vendors Get help from external consultants. Finding out What package is used by similar companies. Find out area on which you want to concentrate

E.g. Peoplesoft: Strong in HR, less in

Package Evaluation
Among diff packages none of them is perfect. The objective of the selection process is not to identify a packege that covers each and every requirement. (a perfect fit). It is to find a package that is flexible enough to meet the companys need. Or has least number of differences with your company processes. Points have to take into consideration while selecting the package are:

Complexity User Friendliness Quick implementation Technology Amount of customization required Availability of reference sites Total costs including cost of license, training, implementation, maintenance, customization and hardware requirement.

Project Planning Phase

Designs implementation Process. Time schedules, deadlines Project plan is developed Organizational resources for implementation will be selected and task allocation will be done. When to begin, how to do and when to finish? What will be the corrective actions if things go wrong

Gap Analysis
Finds gap between where they are now and where they want to be. Solutions: Company have to agree to live without a particular function. Identifying a third party product that might fill the gap. Designing a custom program. Altering the ERP code

Reengineering
Human factors taken into account. High level executives have purchased ERP with aim of reducing significant no of employees. It is best to treat ERP as an investment as well as cost cutting measure rather than a downsizibg tool. This approach emphasizes the human element of necessary change within organizations.

Customization
Main functional area of ERP implementation. Business processes have to be understood and mapped in such way that the arrived at solutions match up with the overall goals of the company. Company have to make one prototype for ERP implementation and testing. Find out processes which are not fit into the package and find out way of customization to fit it. (accounting process, shiping process)

Implementation team training

Train employees to implement and run the system. Company to be self sufficient in running the ERP system after leaving hired consultants. Select employees for training with the right attitude, people who are willing to change, learn new things and not afraid of new technology and having good functional knowledge.

Testing
Test with system overloads. Multiple users logging on at the same time with the same query. Users entering invalid data. Hackers trying to access restricted areas.

Going Live
ERP is made available to the entire organization. On technical side- data conversion has done and databases are up and running. On functional side- Prototype is fully configured and tested and ready to go operational. Old system is removed and new system is replaced.

End-user Training
This very imp phase as success of system is in the hands of end user. Identify skills and divide them into groups to train them how to use the system Overall view of the system and how each persons actions affect the entire system. Each employee is trained on the job that he/she is supposed to do. Mgt should take concern of employees about resist to change to avoid failure of the

Post-implementation (Operation & Maintenance)

There should be people within the company who have the technical powers to make the necessary enhancements to the system as and when requires. The system must be upgraded as and when new versions or new technologies are introduced. But as new change again will required training and other aspects, organization should first analyze the costs and benefits.

Why do ERP implementation Fail

Lack of top management buy-in, commitment and support. Improper planning and budgeting Use of wrong ERP tool. Lack of training Work culture of the organization

Lack of top management buy-in, commitment and support.

The top management must be convinced about the importance of ERP and how it can be used as competitive weapon. If management is aware of the potential benefits of ERP , it will give full backing and the necessary organizational resources to implement the best ERP system possible. If management can assure the employees that their jobs are secure, it will ensure employees co-operation.

Improper planning and budgeting

Proper budgeting for implementation and maintenance of ERP. If planning is not done properly, then there is chance that many factors would be overlooked resulting in selecting the wrong tool. To avoid this planning phase should be taken very seriously.

Use of wrong ERP tool.

ERP tool should be best suited for its organizational environment, work culture and procedures. Before go for any tool ERP planning team should

Take into account above factors. Research the available tools, match them with organizations requirements. Visit companies where the tools are installed to see them in action Should discuss about end user training. Tool updates and upgrades. Only all members of the team are convinced that a specific tool is best suited for the organization,the purchasing decision must be taken.

Lack of training
One of the main reasons why ERP fails is due to the resistance of the users. Resistsnce because of ignorancee about the tool and fear of additional work or unemployment. Thease factors can be corrected by giving proper training at different levels, on different aspects of the ERP implementation. Once users are convinced about the potential of the ERP system , it will succeed.

Work Culture of the Organization

If the organization has the workforce that is willing to learn new things and change to new technologies, then there will be no problems for ERP implementation. So the basic mindset of the workforce needs to be changed. In changing the employee mindset, the two critical factors required are top management support and proper training.