ENTERPRISE RESOPURCE PLANNING

ASSIGNMENT 1
Documentation on the evolution of ERP

Submitted by
Shivani Sneha
BFT/14/169

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 INDEX

S.no Topic Page no.

1 ERP introduction 3
2 Evolution of ERP 4

3 MRP I 5-6
4 MRP II 7-8

5 Transition from MRP to ERP 9

6 Advantages and Disadvantages 10

7 BPR in ERP implementation 11

8 Next generation ERP strategies 12-14
9 Application of ERP in apparel 15-18
sector
(case study)
10 References 19

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WHAT IS ERP
ERP systems are the software tools used to manage enterprise data. It
helps organizations deal with supply chain ,inventory management,
customer order management, production planning, accounting, human
resource management, and other business functions. ERP system is a
packaged business software system that allows a company to automate
and integrate majority of its business processes; share common data and
practices across the enterprise; and produce and access information in a
real time environment. It involves business process re-engeneering
(BPR) of the existing system to implement the ERP software for a
seamless flow of information within the organization. The one problem
with ERP is the resistance of business organizations and personnels to
change and finding the gap between the cost of BPR and customization of
business process to implement ERP in order to get cost benefit.

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EVOLUTION OF ERP

Timeline System

1960s Inventory Management & Control

1970s Material Requirement Planning (MRP)

1980s Manufacturing Resource Planning (MRP II)

1990s Enterprise Resource Planning (ERP)

2000s Extended Enterprise Resource Planning

The evolution of ERP systems closely followed the spectacular

developments in the field of computer hardware and software systems.
During the 1960s most organizations designed,developed and
implemented centralizedcomputing systems, mostly automating their
inventory control systems usinginventory control packages (IC). These
were legacy systems based on programminglanguages such as COBOL,
ALGOL and FORTRAN. Material
requirements planning (MRP) systems were developed in the 1970s which
involved mainly planning the product or parts requirements according to
the master production schedule. Following this route new software
systems called manufacturing resources planning (MRP II) were
introduced in the 1980s with an emphasis on optimizing manufacturing
processes by synchronizing the materials with production requirements.
MRP II included areas such as shop floor and distribution management,
project management, finance, human resource and engineering. ERP
systems first appeared in the late 1980s and the beginning of the 1990s
with the power of enterprise-wide inter-functional coordination and
integration. Based on the technological foundations of MRP and MRP II,
ERP systems integrate business processes including manufacturing,
distribution, accounting, financial, human resource management, project
management, inventory management, service and maintenance, and
transportation, providing accessibility, visibility and consistencyacross the
enterprise.During the 1990s ERP vendors added more modules and
functions as add-ons to the core modules giving birth to the extended
ERPs. These ERP extensions include advanced planning and scheduling
(APS), e-business solutions such as customer relationship management
(CRM) and supplychain management (SCM).

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MRP-I
Material Requirements Planning is a time phased priority-planning
technique that calculates material requirements and schedules supply to
meet demand across all products and parts in one or more plants. The
main theme of MRP is getting the right materials to the right place at the
right time. Specific organizational objectives often associated with MRP
design and implementation may be identified among three main
dimensions, namely: inventory, priorities and capacity:

Dimensions Objective specifics

Inventory:
- Order the right part
- Order the right quantity
- Order at the right time

Priorities:
- Order with the right due date
- Keep the due date valid

Capacity:
- Plan for a complete load
- Plan for an accurate load
- Plan for an adequate time to view future load

Objectives of MRP should be identified with regard to inputs and outputs

associated with it. Inputs are delineated with master production schedule,
bill of materials,labor and machine standards,quality and testing
standards,economic order quantity etc.

There are two outputs and a variety of messages/reports:

Output 1 is the "Recommended Production Schedule" which lays out a
detailed schedule of the required minimum start and completion dates,
with quantities, for each step of the Routing and Bill Of Material required
to satisfy the demand from the MPS.
Output 2 is the "Recommended Purchasing Schedule". This lays out both
the dates that the purchased items should be received into the facility
AND the dates that the Purchase orders, or Blanket Order Release should
occur to match the production schedules.

Nature of functioning applications

MRP begins by compiling a Bill of Materials (BOM) for each end product or
component of interest. This is a listing of the components and quantities
that are needed to manufacture the end product or component.

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Theoretically, the compilation of BOMs continues recursively, enumerating
the subcomponents that are needed to manufacture each component,
until only raw materials appear in the generated BOMs. In practice, a
manufacturer may prefer to extend the BOM enumeration for only a
specified number of levels and to assume that components and/or raw
materials beneath that level are available on demand.
Next, MRP requires information on the lead times associated with each
manufacturing or assembly procedure that is required to produce the
components and end products. Lead time is the time required to assemble
or manufacture the needed components into the end product (or higher-
level component), and thus is the time elapsed between the point at
which all needed components are present and the end of assembly or
manufacturing. These lead times may be compiled per unit of each
component/product or may be based on predetermined batch sizes.
MRP combines the BOMs, the lead times, and estimates of demand for
end products to generate the Master Production Schedule, which details a
schedule of assembly and production that enables the manufacturer to
meet the estimated demand. This schedule addresses only the final level
of assembly or production (resulting in end products), and includes both
the timing and quantities of production. The Master Production Schedule
serves as the basis for all further output information from MRP.
Using the Master Production Schedule as a starting point, it is a
conceptually simple (but computationally demanding) task to combine it
with the data on lead times and BOMs to derive a schedule of component
(and possibly raw materials) requirements, through as many levels of
assembly and production as the manufacturer chooses. This schedule can
account for such factors as work-in-progress, current inventory of and
pending orders for materials and components, and direct demand for
components as service items. Using this schedule of requirements, the
manufacturer must determine a material replenishment strategy that
satisfies these requirements. A wide variety of ordering rules and
heuristics can be incorporated into computer-based MRP models.
In addition to the material requirements, other useful data can be
generated from the Master Production Schedule. These include the
projected inventory levels for any end product, the projected schedule for
any assembly or production process, and the projected utilization of
capacity for a particular production operation. Any of this information
should aid in evaluating current or potential materials replenishment
strategies.

Master Bill of Sub Work orders

schedule materials assemblies
Repetitive build
Assembly schedule
routing

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 Purchase Order action
orders items

Outside Order action

contract labor items

MRP-II
Defined by APICS (American Production and Inventory Control Society,
Estd. 1957) as a method for the effective planning of all resources of a
manufacturing company. Ideally, it addresses operational planning in
units, financial planning in dollars, and has a simulation capability to
answer "what-if" questions and extension of closed-loop MRP.

MRP II integrates many areas of the manufacturing enterprise into a

single entity for planning and control purposes, from board level to
operative and from five-year plan to individual shop-floor operation. It
builds on closed-loop Material Requirements Planning (MRP) by adopting
the feedback principle but extending it to additional areas of the
enterprise, primarily manufacturing-related.

An MRPII system incorporates modules from virtually every function in a

factory, frommaster production scheduling to document management and
bill of materials. Following are the basic key elements of
manufacturing resources planning.

Master production schedule (MPS)

A master production schedule is a plan that includes everything necessary
for production, including materials, staffing and inventory. The plan
includes how much time it will take to complete essential processes, parts
that will be required and any other resources that will be needed to
optimize production. An MPS is a critical module within an MRPII system.

Capacity requirements planning (CRP)

Capacity requirements planning refers to the process of determining the
factory production capacity necessary to make products and meet
demand.

Material requirements planning (MRPI)

Material requirements planning is another module you will find within an
MRPII system. It ensures that materials and products are available for

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 production, while also managing inventory and planning purchasing
activities.

Distribution resource planning (DRP)

Distribution resource planning is a method for planning orders within a
supply chain. It enables the users to set parameters for inventory control
and also to calculate time-phased inventory requirements. DRP is a key
module included with MRPII software.

Document management system (DMS)

A document management system is another feature you will find in MRPII.
A DMS tracks and stores electronic images of paper documents that are
needed in a manufacturing environment.

Bill of materials (BOM)

The bill of materials is a list of everything needed in a factory to create a
final product. A BOM is broken down by assemblies, sub-assemblies,
components, sub-components, parts and the necessary quantities of
each.

Master BOM Sub-assemblies Work orders

schedule
Assembly Repetitive build
routing schedule

Reschedule Performance to
action items schedule

Purchase Order action items

orders

Reschedule action
items

Vendor performance

Outside Order action items

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contract labor
 Reschedule action
items

Contractor
performance

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TRANSITION FROM MRP TO ERP
Material requirements planning (MRP) systems were developed in the
1970s which involved mainly planning the product or parts requirements
according to the master production schedule. Following this route new
software systems called manufacturing resources planning (MRP II) were
introduced in the 1980s with an emphasis on optimizing manufacturing
processes by synchronizing the materials with production requirements.
MRP II included areas such as shop floor and distribution management,
project management, finance, human resource and engineering. ERP
systems first appeared in the
late 1980s and the beginning of the 1990s with the power of enterprise-
wide inter-functional coordination and integration. Based on the
technological foundations of MRP and MRP II, ERP systems integrate
business processes including manufacturing, distribution, accounting,
financial, human resource management, project management, inventory
management, service and maintenance, and transportation, providing
accessibility, visibility and consistencyacross the enterprise.
During the 1990s ERP vendors added more modules and functions as
add-ons to the core modules giving birth to the extended ERPs. These
ERP extensions include advanced planning and scheduling (APS), e-
business solutions such as customer relationship management (CRM) and
supply chain management (SCM).

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ADVANTAGES OF ERP

DISADVANTAGES OF ERP

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IMPORTANCE OF BUSINESS PROCESS RE-ENGINEERING IN ERP
IMPLEMENTATION?

Business Process Re-engineering refers to the fundamental rethinking and

radical design of business processes to achieve dramatic or break through
improvement in critical contemporary measures of performance such as
Cost, Quality, Service and Speed.
Processes, organization, structure and information technologies are the
key components of BPR, which automates business processes across the
enterprise and provides an organization with a well-designed and well-
managed information system. While implementing ERP, the organizations
have two options to consider.
1. reengineering business processes, before implementing ERP, the
organization needs to analyze current processes, identify non-value
adding activities and redesign the process to create value for the
customer, and then develop in-house applications.
2. modify an ERP system package to suit the organizations
requirements i.e, customizing the erp solution according to the
needs of the organization.

Why implement Business Process Reengineering?

Business process reengineering gives organizations the opportunity
to rethink the design of their processes. In doing so, organizations
can identify the current bottlenecks of the process and rectify them.

By going through the steps of a BPR process, businesses gain a

holistic view of their organization. A holistic view enables the
organization to eliminate wasteful activities that have negatively
impacted overhead. This elimination typically begins with
identifying inventory loss, reducing materials waste, and updating
or eliminating outdated or unnecessary steps.

It then moves on to identifying new processes, followed by

workforce changes that are necessary based on new and efficient
processes.

By involving employees in the BPR process and utilizing cross-

functional teams, the company realizes improved productivity and
attention to quality control.

Employees in cross-functional teams gain new insight to how they

are dependent on the speed and accuracy of others in completing
tasks and achieving company goals

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 Get and/or maintain competitive advantage by improving the
enterprise wise process.

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NEXT GENERATION ERP STRATEGIES
The next generation of ERP is built on an underlying technology that takes
advantage of recent advances in communications and networking to bring
disparate facilities and entities together as never before. Closer
coordination through machine-to-machine communication and interaction,
and enhanced collaboration on the person-to-person side will be the
hallmarks of the enabled business in the coming years. The new ERP, built
on a service-oriented architecture, provides efficiencies not previously
available and, above all, flexibility to connect to, and interact with, other
systems regardless of platform or technologies.
CIOs recognize that a hybrid IT strategy, which melds on-premise
solutions with cloud-based services, is a powerful catalyst for change in
the very near future. However, most are less clear about how to develop a
strategic roadmap and optimal timeline for making a smooth transition to
hybrid IT as part of a shift toward a next-generation ERP platform.
Next-generation ERP systems must mirror the broader strategy of hybrid
IT. Specifically, next-generation ERP will involve the deconstruction of
yesterdays monolithic ERP platform into loosely coupled applications that
work in concert, some running in the cloud and others on-premise. A core
suite of business applications will remain, supplemented by a collection of
smaller-footprint, best-of-breed applications.
The vision for a next-generation ERP platform in the hybrid IT era is
coexistence and flexibility, with individual solutions based on functional
need, ease of use, and agility rather than allegiance to a single-vendor
strategy.

WHY REVISE ERP?

Companies are pursuing a revised vision of ERP to support the hybrid IT
era for a number of reasons:
REASON #1: BLOAT AND COMPLEXITY
For one thing, traditional ERP systems are far too bloated and fraught with
complex interdependencies that hamper IT organizations ability to stay
abreast of changing business requirements.
REASON #2: THE NEED FOR AGILITY
At the same time, the need for agility has never been greater as evolving
digital business requirements put pressure on organizations to reimagine
applications to support emerging business models.
REASON #3: HEAVY RELIANCE ON INNOVATION FROM SLOW-
MOVING INCUMBENT ERP MEGA-VENDORS
The current ERP model relies too heavily on ERP mega-vendors for
innovation and new functionality, which can often be delivered more
effectively and with greater value by alternative providers.
REASON #4: THE INEXORABLE RISE OF SHADOW IT
Consider too that shadow IT2 is on the rise, led by business owners who
have no problem breaking ranks with the core ERP platform. These
business owners and their groups are actively cherry-picking
complementary tools like talent management, recruitment, and expense

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management software from best-of-breed cloud providers, seduced by
their ease of deployment and lower startup costs.

CLOUD COMPUTING
Cloud computing is a new paradigm in which computing resources such as
processing, memory, and storage are not physically present at the users
location. Instead, a service provider owns and manages these resources,
and users access them via the Internet. For example, Amazon Web
Services lets users store personal data via its Simple Storage Service (S3)
and perform computations on stored data using the Elastic Compute
Cloud (EC2). The business will be definitely benefitted by making use of
this kind of computing platforms. Some of the benefits could be less initial
capital investment, a smaller amount of time will be required to start new
services, maintenance and operation costs could go lower, effective
utilization through virtualization and the most important thing is simpler
disaster recovery. All these points make cloud computing a striking option.
Limited energy and bandwidth are the main source of limitations of cloud
computing. Cloud computing can be utilized effectively to save the energy
which is used in mobiles. Integrated into all sectors of business
applications, cloud computing will reflect the value in a deeper level. With
the rapid development of cloud computing, it can help enterprises to
access highperformance IT services with lower cost, and also conducive to
small and medium-sized enterprises to access highperformance IT
services like large enterprises. At the same time, the reduction of IT
burden can help enterprises to concentrate on its core business. The
process optimization which based on cloud computing can achieve
throughout a large-scale reconstruction of the industry, and enhance the
overall IT standards and competitiveness

SAP S/4HANA
Case in point: S/4HANA, SAPs next-generation business suite architected
specifically for the HANA in-memory platform. S/4HANA is considered by
analysts to be a transformational shift: it involves an entirely rewritten
code line, can be run only on the HANA database platform, requires
changes to license and maintenance agreements, and demands a
complete makeover of the customers platform strategy.
S/4HANA thus potentially becomes an expensive and disruptive
proposition, undermining the value it purports to provide.
A Rimini Street Survey Report on SAP Application Strategies revealed
similar concerns on the part of customers, with 85 percent saying they
were not committed to S/4HANA. Among their top reasons: Lack of a
strong business case and unclear ROI (68 percent); an unproven, early-
stage product (44 percent); and higher migration and reimplementation
costs (36 percent). Moreover, the survey found that 72 percent of SAP
licensees are currently using stable, mature ECC 6.0 applications to run

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their businesses because the current version meets their needs (43
percent) and because its cost-prohibitive to upgrade (37 percent).5

ORACLE FUSION
Its a similar story for Fusion, Oracles next-generation ERP platform.
Rimini Street research found that only 5 percent of Oracle customers
planned to use Fusion applications and were instead choosing to remain
on their stable and mature applications. No strong business case was
cited as the number one reason for not moving (54 percent), followed by
Unclear Product Roadmap (35 percent).6

SERVICE ORIENTED ARCHITECTURE(SOA)

SOA provides the environment to extend the workflow idea beyond the
companys internal
systems. What if that new order coming in is a custom product requiring
unique parts or
materials not in stock? Through SOA, your system could send a request to
a suppliers system asking about availability of the component and get a
response confirming when you could receive it. You could then
immediately provide a validated availability and ship date to the
customer; no guess-work and no delay in making that commitment and
securing the business.
And the component that has just reached its reorder trigger? An SOA-
based electronic Kanban pull signal could be sent directly to the suppliers
system, which can initiate the replenishment action and confirm the
action back to the requesting system. The replenishment cycle is
shortened by the absence of human-induced non-value-added activities
and delays, so the reorder point can be lower, stock-out risk is reduced,
and less inventory is needed to supply the desired availability level.
Services-based applications are more flexible, adaptable, and can be
tailored more easily than those built with traditional tools and methods.
Users are able to adapt the appearance, the usability, and the
convenience of their individual workspaces to fit their needs and increase
their effectiveness without putting a burden on scarce IT resources. And
workflows greatly reduce the mundane and routine, giving them more
time to attend to the tasks requiring their judgment and experience.

SOFTWARE-AS-A-SERVICE (SaaS)
Software-as-a-Service (SaaS) is also known as on-demand or hosted
applications. The SaaS software model has fixed financial and operative
advantages over the others in comparison with, on-premise software
models. The operation cost is very less and the subscription cost is also
reduced because the service provider operates the systems which can
offer the services. SaaS offers low initial cost -mostly based on
subscription cost and further operation costs - as the service provider is
the one that operates the system. This process definitely represents

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savings in terms of money, IT resources, and time spent from
development to implementation.

APPLICATION OF ERP IN APPAREL SECTOR

Case study- Aditya Birla Nuvo Ltd,unit-Madura Garment

Exports
Jaya Shree operates in two business segments, viz., Linen and Wool. A
leading player in the domestic linen and worsted yarn segment, the
company has significantly revolutionised the Indian textile market by
popularising linen in India across a wide customer base. Jaya Shree is the
largest manufacturer of linen yarn and linen fabric in India. To strengthen
its market leadership, Jaya Shree expanded its Linen Yarn capacity from
2,300 tons per annum (TPA) to 3,400 TPA and Linen Fabric Processing
Capacity from 7.3 million meters per annum to 10.1 million meters per
annum.
Increasing popularity of Linen as a comfort & style fabric will drive growth
of linen fabric demand at a CAGR of 10% in next five years. To meet the
growing demand in India, currently ~70% of linen yarn demand is met
through imports denoting expansion opportunity for domestic players. To
tap this sector opportunity, Jaya Shree is further expanding its linen yarn
capacity from 3,400 TPA to 6,400 TPA.

Jaya Shree retails linen fabric under the well-known brand Linen Club
Fabrics. Linen Club is Indias top linen brand. It is the only integrated
linen factory in the country with state-of-the-art facilities equipped with
the latest spinning, weaving and finishing system from Switzerland and
Italy. From a commodity product to a lifestyle icon, from mass production
to customised designs, from high cost producer to high value provider -

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that's the turnaround story of Jaya Shree Textiles.
Jaya Shree Textiles has provided the evolving Indian fashion industry with
an international edge with its product portfolio containing 100 per cent
pure linen sourced from French and Belgium flax. The company also offers
other blends with lyocell, silk, rayon and wool cotton. Even at the intricate
stages of dyeing and finishing, new techniques are continuously
developed to add brighter colours and more innovative textures to the
finished product, and topped off by the most delicate finishing technology
from Italy.

Jaya Shree is focusing on the high margin Linen Fabric OTC segment. It
added 26 new Linen Club Fabrics EBOs during the year 2014 - 15. As on
31st December 2015, it had a total 124 EBOs. Linen Club is also being
retailed through more than 3,500 MBOs.
Jaya Shree is also a leading manufacturer of wool tops and worsted yarn
in India with a capacity of 8 carding machines and 26,356 spindles
respectively. It has a manufacturing facility at Rishra in West Bengal. Jaya
Shree garners around 25 per cent of its revenues from exports.

The entire business of Jaya Shree Textiles runs on state-of-the-art

SAP Applications and IBM Server Systems.

SAP
Systems Analysis and Program Development (SAP) was founded in
June, 1972 and since then, many SAP ERP operations modules has
emerged that are designed focusing on various different processes
including SAP ERP sales and service, sales and distribution,
customer relationship, financial management, business intelligence
and more.
Some of the sap modules are:
SAP Financial Accounting (FI)

SAP FI module as the term suggests deals in managing financial

transactions within enterprises. This financial accounting module helps
employees to manage data involved in any financial and business
transactions in a unified system. This module functions very well for
reporting requirements. The SAP FI module is very flexible and functions
well in any type of economic situation. Be it a smaller organization or a
larger organization, SAP implementation helps in consolidating data for
diverse business transactions and legal requirements. Financial
Accounting module helps one to get real-time financial position of an

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enterprise in the market. SAP FI incorporates with other SAP modules such
as SAP SD, SAP MM, SAP PP, Payroll and more for better work results.

SAP Controlling (CO)

SAP CO module is another important SAP modules offered to enterprises.

The controlling module supports in the process works of planning,
reporting and monitoring operations of businesses. It involves methods to
view and organize costs that are required for financial reporting.
Controlling module enables one to plan, track, perform and report about
costs. Controlling includes managing and configuring master data that
covers cost elements, cost centers, profit centers, internal orders, and
functional area and so on.

SAP Sales and Distribution (SD)

SAP SD modules deal in managing all transactions ranging from enquiries,

proposals, quotations, pricing and more. The sales and distribution
module helps greatly in inventory control and management. SAP SD
module consists of master data, system configuration and transactions.
Some of the sub-components of SAP SD module are: master data, sales
support, sales, shipping and transportation, billing, credit management,
sales information system and so on.

SAP Production Planning (PP)

SAP PP module is another important module that includes software

designed specifically for production planning and management. This
module also consists of master data, system configuration and
transactions in order to accomplish plan procedure for production. SAP PP
module collaborate with master data, sales and operations planning,
distribution resource planning, material requirements planning, Kanban,
product cost planning and so on while working towards production
management in enterprises.

SAP Materials Management (MM)

SAP MM module as the term suggests manages materials required,

processed and produced in enterprises. Different types of procurement
processes are managed with this system. Some of the popular sub-
components in SAP MM module are vendor master data, consumption

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based planning, purchasing, inventory management, invoice verification
and so on.

SAP Quality Management (QM)

SAP QM module helps in management of quality in productions across

processes in an organization. This quality management module helps an
organization to accelerate their business by adopting a structured and
functional way of managing quality in different processes. SAP QM module
collaborates in procurement and sales, production, planning, inspection,
notification, control, audit management and so on.

SAP Human Capital Management (HCM)

SAP HCM module enhances the work process and data management
within HR department of enterprises. Right from hiring a person to
evaluating ones performance, managing promotions, compensations,
handling payroll and other related activities of an HR is processed using
this module. The task of managing the details and task flow of the most
important resource i.e. human resource is managed using this SAP ERP
HCM module.

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Page 21 of 22
REFERENCES

Book- Enterprise Resource Planning by Mry Sumner

Journals:
Beyond Enterprise Resource Planning (ERP):
The Next Generation Enterprise
Resource Planning Environment
February 2012
IDA Paper P-4852
Log: H 12-000323
Copy
Laura A. Odell, Project Leader

BUSINESS PROCESS REENGINEERING AND ERP SYSTEMS BENEFITS

Eric Y. Cheng, Ying Jen Wang
Department of Information Management,
National Central University, Jhongli City, Taoyuan County, Taiwan

The Evolution of ERP

Systems: A Historical
Perspective
Mohammad A. Rashid
Massey UniversityAlbany, New Zealand

Websites
http://www.iaeng.org/publication/WCE2011/WCE2011_pp681-684.pdf

http://fm.sap.com/data/UPLOAD/files/SAP_ERP_Solution_Overview.pdf

http://www.irma-international.org/viewtitle/14572/

http://what-when-how.com/information-science-and-technology/next-
generation-erp/

http://www.business.com/erp-software/mrp-ii-key-terms/

http://panorama-consulting.com/five-reasons-why-business-process-
reengineering-should-happen-before-your-erp-implementation/

http://adityabirlanuvo.com/jaya_shree_textiles.php

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