Enterprise Resource Planning (ERP)

Archana Mehta

Contents
Definition Advantages & Disadvantages of ERP Structure of a good ERP solution ERP Implementation Components/Modules of ERP Major ERP Vendors

Definition

Enterprise Resource Planning (ERP)

An Enterprise Resource Planning (ERP) system is an integrated computer-based application used to manage internal and external resources, including tangible assets, financial resources, materials and human resources.

ERP
Before ERP Implementation After ERP Implementation

ERP: Advantages and Disadvantages

ERP Advantages
ERP systems does forecasting - This allows inventory levels to be kept at maximum efficiency and the company to be more profitable. Reduce redundant data entry and processes. Establish uniform processes that are based on recognized best business practices Integration among different functional areas to ensure proper communication, productivity and efficiency. Improved customer service and satisfaction. Provides top-down view of the enterprise (no "islands of information"), real time information is available to management anywhere, anytime to make proper decisions.

ERP Advantages
Reduce the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure. Shorten production lead time and delivery time Turn collections faster based on better visibility into accounts and fewer billing and/or delivery errors. Track actual costs of activities and perform activity based costing. Provide a consolidated picture of sales, inventory and receivables

ERP Disadvantages
Customization of the ERP software is limited - ERPs are at times seen as too rigid and too difficult to adapt to the specific workflow and business process of some companiesthis is cited as one of the main causes of their failure. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive. (This has led to a new category of "ERP light" solutions.) Once a system is established, switching costs are very high for any partner (reducing flexibility and strategic control at the corporate level).

ERP Disadvantages
Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. Some large organizations may have multiple departments with separate, independent resources, missions, chains-ofcommand, etc., and consolidation into a single enterprise may yield limited benefits. There could be lack of continuous technical support

ERP Implementation

ERP Implementation
The ERP implementation process goes through following five major stages : 1. Structured Planning: an capable project team is selected, present business processes are studied, information flow within and outside the organization is scrutinized, vital objectives are set and a comprehensive implementation plan is formulated.
2.

Process Assessment: the prospective software capabilities are examined, manual business processes are recognized and standard working procedures are constructed. Data Compilation & Cleanup: helps in identifying data which is to be converted and the new information that would be needed. The compiled data is then analyzed for accuracy and completeness, throwing away the worthless/unwanted information.

3.

ERP Implementation
4.

Education & Testing: aids in proofing the system and educating the users with ERP mechanisms. The complete database is tested and verified by the project team using multiple testing methods and processes. A broad in-house training is held where all the concerned users are oriented with the functioning of the new ERP system. Usage & Evaluation: is the final and an ongoing stage for the ERP. The lately implemented ERP is deployed live within the organization and is regularly checked by the project team for any flaw or error detection.

5.

Structure of a good ERP solution

Flexible: An ERP system has to have modular application architecture. This means that various functionalities are logically clubbed into different business process and structured into a module which can be interfaced or detached whenever required without affecting the other modules. Comprehensive: It should be able to support variety of organizational functions and must be suitable for a wide range of business organizations. Web-enabled capability: It should not be confined to the organizational boundaries; rather, it should support the online connectivity to the other business entities of the organization.

Components/Modules of ERP

ERP Modules

Components/Modules of ERP

Components/Modules of ERP
ERP Production Planning Module Production planning optimizes the utilization of manufacturing capacity, parts, components and material resources using historical production data and sales forecasting.

Components/Modules of ERP
ERP Purchasing Module
Purchase module streamline procurement of required raw materials. It automates the processes of identifying potential suppliers, negotiating price, awarding purchase order to the supplier, and billing processes. Purchase module is tightly integrated with the inventory control and production planning modules. Purchasing module is often integrated with supply chain management software

Components/Modules of ERP
ERP Inventory Control Module Inventory module facilitates processes of maintaining the appropriate level of stock in a warehouse. The activities of inventory control involves in identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status. Integration of inventory control module with sales, purchase, finance modules allows ERP systems to generate vigilant executive level reports.

Components/Modules of ERP
ERP Sales Module Revenues from sales are live blood for commercial organizations. Sales module implements functions of order placement, order scheduling, shipping and invoicing. Sales module is closely integrated with organizations' ecommerce websites. Many ERP vendors offer online storefront as part of the sales module. ERP Market in Module ERP marketing module supports lead generation, direct mailing campaign and more.

Components/Modules of ERP
ERP Financial Module
The financial module is the core of many ERP software systems. It can gather financial data from various functional departments, and generates valuable financial reports such as balance sheet, general ledger, trail balance, and quarterly financial statements.

Components/Modules of ERP
ERP HR Module
HR module streamlines the management of human resources and human capitals. HR modules routinely maintain a complete employee database including contact information, salary details, attendance, performance evaluation and promotion of all employees. Advanced HR module is integrated with knowledge management systems to optimally utilize the expertise of all employees.

Major ERP Vendors

SAP Oracle (PeopleSoft and J.D Edwards were independent vendors earlier but are subset of Oracle now)
 

J.D Edwards PeopleSoft

Baan Siebel Systems

Industry-Specific Focus
Each vendor has turned to customized ERP products to serve industry-specific needs Eg. BAAN Industry-Specific Variants:
Discrete Manufacturing Aerospace & Defense Automobile Industrial Machinery Electronics Telecommunications Construction Logistics Process Manufacturing Chemicals Food & Beverage Pharmaceuticals Cable & Wire Pulp & Paper Metals

Comparative Modules
SAP SD MM PP QM PM HR FI CO AM PS WF Asset Management Projects Order Management Contracts Subcontract, real estate Service Human Resources Financials Oracle Marketing, Sales Procurement Manufacturing Enterprise perform Enterprise service Human capital mgmt Workforce management Financial mgmt sol. Financial management Time & Expense mgmt Enterprise asset mgmt Project management PeopleSoft Supply chain Supplier relationship JDEdwards Order management Inventory, procurement Manufacturing mgmt Technical foundation

Abbreviations used
SD MM PP QM PM HR FI CO AM PS WF IS Sales & Distribution Materials Management Production Planning Quality Management Plant Maintenance Human Resources Financial Accounting Controlling Asset Management Project System Workflow: Industry solutions: MRP

prompt actions best practices

Relative ERP Module Use

Module Financial & Accounting Materials Management Production Planning Order Entry Purchasing Financial Control Distribution/Logistics Asset Management Quality Management Personnel/HR Maintenance R&D Management Use reported - US 91.5% 89.2% 88.5% 87.7% 86.9% 81.5% 75.4% 57.7% 44.6% 44.6% 40.8% 30.8% Use reported Sweden 87.3% 91.8% 90.5% 92.4% 93.0% 82.3% 84.8% 63.3% 47.5% 57.6% 44.3% 34.2%

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