INTEGRATED VIEW OF ERP

In recent years, many organizations have initiated Enterprise Resource Planning (ERP)
system using software packages like SAP, Oracle, and BAAN etc. The ERP software market
is fastest group market in software industry (May Summer, 2006)1.

The term “Enterprise Resource Planning” has been derived from Manufacturing Resource
Planning (MRP I I), That followed Material Resource Planning (MRP), ERP system cross
functional and organizational wide, It typically handle the manufacturing , logistics,
distribution, inventory, shipping and accountancy functions of a company.

ERP software serves as the information back bone to the core business processes of an
organization (Forger and Gary 2000)3 (Compbell 2004)4. The core idea of implementing the
ERP solution is to get tangible business benefits that would improve the performance of the
organization and achieve xxxxx business objectives. This includes inventory reduction, less
time to market, reduce manufacturing and order processing cycle time etc.

It is true that not a single ERP implementation in India has reached the stability. However
ONGC has been able to respond to stringent demands and discipline required by the ERP
packages. The three key issues that could determine the success of an ERP implementation
and work towards delivering, better ROI are functionality, technology and implementation
solution.

Functionality: The ability of the package to support the best business practices followed
in the company’s line of business would be a critical factor in determining the smoothness of
implementation. Major gaps in required functionality can lead to time consuming and xxxxxx
customizations which would which would put time schedule and budgets off track. A
focussed evolution exercise at the solution stage would help towards eliminating in
compatible choices.

Technology: Scalable ERP solution that support open , non- proprietary technology
standards would provide for protection of investment and ensure minimum risk. They should
support difficult kind of operating system, database management systems and operate on
most major client / server hardware platforms, local area network (LANS) and user interface
(ASC II, Motif, Windows 95) so as to minimise risk towards technology obsolescence. The
ERP package’s programming language software development tools should permits ready
adoption of the system in response to outgoing changes in production and operational
processes.

The development tool set for the applications should be easy to use to minimise
customisation effort and time.
 Implementation of the Solution: The customer satisfaction and benefits of ERP would
depend not only on functionality but also on ease of configuration, ease of use and the
software, flexibility to support optimization of business process. The role and responsibilities
of different employees have to be clearly identified, understood and configured in the system.
The ability of the ERP package to manage and support dynamically changing business
processes is a critical and vital requirement for the organization. The integrated approach has
a tremendous payback in ONGC, installed the software ICE currently.

ERP
Central Server

Central

Sales Distribution Material Entity Human Profit Finance

Management Management Resource Management Management

Order Distribution Purchasing Supply Chain Back force Xxxxx to Order

Processing Requirement Inventory XXX Planning Design and Processing
Product Transportation Management Maintenance Employee Approval cost control
customer orderordero

Fig: Integrated View of Enterprise Resource Planning System.

Source: Adopted from “ERP An integrated view” by EM Shehab, et al (2004)1

1 E. M. Shehab, MW Sharp, L. Suparmanian and TA Spedding (2004) “ ERP An

integrative review”, Business Process Management Journal, vol. 10, N0. 4, PP. 359-386

ERP solutions are enterprise wide and aim at optimal utilization of organizational resources.
ERP solutions also facilitate tasks beyond resource planning such as financial control,
operational management, analysis, reporting and routine decision support. ERP system
empowers the top, middle, and bottom of the organization hierarchy by facilitating
centralized information access.

Some of the important definitions are:

a) The ERP system is an enterprise information system defined to integrate and optimize the
business process and transactions in a corporation (Young B moon, 2007)2.

Jhjhh
2)Y. B. Moon (2007) “ Enterprise Resource Planning (ERP), a review of the literature”,
International journal of management and enterprise development , Vol. 4, No. 3, PP 235-264.

3) Chen, D (2004) “Understanding of the organization impact of integrated IT application,

infrastructure through agility: The case of Enterprise Resource planning Infrastructure”,
UNIVERSITY OF GEORGIA , ATHENS.

b) ERP links all areas of a company with external suppliers and customers into a tightly
integrated system with shared data and reliability, ERP system are designed to solve the
problem of fragmentation of information over many legacy systems in large business
organization (Chen 2004)3.

c) “ERP system are “Computer based systems designed to process an organization’s

transactions and facilitate integrated and real time planning, production and customer
response” (O’ Leary, 2000)4.

4) O’ Leary D (2000) “Enterprise Resource Planning Systems: System life cycle, Electronic
Commerce and Risk” Cambridge University Process.

d) Enterprise Resource Planning (ERP) systems can be defined as a customized integrated

application software that supports the business processes and the main administrative areas of
enterprise of different industries (Klaus et al 2000)5.

5) Helmut Klaus, Michael Rosemann and Guy G. Gable (2000), “ What is ERP”, Information
system Frontiess, Vol. , No.-2.

e) The American production and University Central Society (APICS) defines ERP as “ an
accounting oriented information system for identifying and planning the enterprise wide
resources needed to take, make, ship and account for customer orders.” ( Wantson and
Schneider, 1999)6.

6) Watson, E and H. Schneider (1999), “Using ERP systems in Education”, communication

of the association for information systems Vol.1, No. 9, PP. 1-47.

Major Module of ERP software:

i) Accounting Module: The accounting software module manage the recording and
processing of accounting transactions within functional areas such as account payable ,
account receivable and payrolls . The sub ledgers feed transactions into general ledger from
where financial reports are generated for management and external stake holders.

ii) Business Intelligence Modules: Standard Business Intelligence software functionality

includes a decision support system driven by an attached dataware house. The dataware
house feeds management with real time access to adhoc reports, online, charts and tables as
well as graphical. Dashboards that offer a range of information in the form of financial report
and key performance indicators with this module can be viewed with the option to zero down
to a detail level to investigate concerns on potential xxxxxx

iii) Customer Relationship Management (CRM) Module: CRM software module supports
front office operations and customer xxxx, sales and marketing functions. CRM software
function may assist in activities such as quoting, support call management by providing a
comprehensive data set to allow the sales and marketing team behave in an more predictable
and proactive manner.

iv) Distribution Management Module: A wholesale distribution company will be concrned

with software functionality that focuses on maintaining optimal investing levels facilitating
quick movement of goods providing strong font office functionality for customer service
personal and delivering flexible reporting for management. Strong supply chain management
capabilities can help manage advanced planning, xxxxx and xxxx distribution requirement
planning (DRP) for centralized xxx environment multi ware house distribution channels.

v) Inventory Management Module (IMM): The inventory control module interacts with
many other module of functional area from purchase indent through sales order entry through
purchasing and receiving to shipping and ultimate xxxx, strong inventory management
software is necessary to provide high order fill rates contains operations costs and maintains
profit margins.

Discrete manufacturing environment generally require multi level serial number tracking,
attributed inventory, revision tracking and kilting capabilities for value added distributors.
Process manufacturing environment will typically need lot control and property tracking,
complete backward and forward traceability of lot numbers, expiration date management and
multiple units of measure per product. Regardless of environment itself, it is important to
document all inventory management software requirements and compare these needs against
available ERP packages.

vi) Order Management Software (OM): Derives order processing and fulfilment by
facilitating quick and accurate sales order entry. In many business environments this
functional area is a critical piece of the overall operations. Since order management
requirement vary greatly by industry, an ERP solution’s available functionality will quickly
short list or eliminate potential ERP software vendors. High end functionality like online
product configuration, available to promote data and multi facility sales orders will
differentiate one solution provider from another.

vii) Financial Management Module: A quality ERP software solution will include strong
financial management module that in fully integrated with the organization’s core functional
areas of manufacturing, shipping and receiving and sales order management. In robust ERP
systems, the transactional data generated from these departments will be available for
immediate review via online inquiries, ad-hoc reports and real time dashboard data. These
capabilities offer full financial visibility into organization’s payable and receivables with up
to date access to inventory levels and sales forecasts. This transparency will provide
accounting personnel and executive staff will real time highly informed business decisions.
All Enterprise xxxx including Tier I to Tier III of ERP software should include
comprehensive tools for managing all aspects of accounting transactions, budget
management, multi currency transactions, xxxx recognition and management , account
allocations, taxation, financial reporting and compliance management. In addition, the
financial management software should also support full audit capabilities to provide complete
backward traceability to each and every transaction.

viii) Human Resource Management Module: HRMS is critical as managing the

complexities of talent, pay roll and government regulations should not be left to manual
processes. ERP system that can effectively manage the day to day operations as well as the
needs of the human resources department is important for ERP planning project’s overall
success and ultimate return on investment (ROI).

ix) Planning Module: Manufacturers and distributors rely on their ERP system’s planning
module to optimize the delivery of incoming materials and the movement of its inventory
between facilities with efficient planning, manufacturers can reduce raw material inventories
and increase production output, while distribution companies can significantly reduce
transactions cost and improves customer responsiveness and overall satisfaction.

For manufacturers planning software functionality will include material requirement planning
(MRP) process and capacity requirement planning (CRP).

x) Service Module: ERP solutions that include service software functionality, capable of
managing the needs of contracts or professional service companies. Due to this, service
organization must take additional case in documenting their service software needs and
comparing these requirements to prospective ERP vendors.

The ERP solution package must focus heavily on the needs of the service personnel. A
service software package or module would include features such as help desk support, ticket
entry and management technician dispatch, field service repair, spare parts management, in-
house repair, maintains contracts and job based estimates and billing.

xi) Supply Chain Management (SCM) Module: The supply chain management module
supports the management and movement of raw materials, work in process inventory and
finished goods from a given point of origin to the ultimate points of consumptions. These
supply chain activities help built the backbone of the organization’s cost structure and
ultimate profitability. As strong supply chain management software functionality is critical
for successful companies and therefore a core concern for many ERP software selection
projects.
The most robust of ERP system will help tackle supply chain management issues, reduce
supplier lead time and control inventory while also delivering the highest level of sales order
and line fill rates for the end user customer and value added distributors.

xii) Warehouse Management System(WMS) Module: The strong WMS will reduce costs
and improve customer satisfaction by providing warehouse personnel with tools necessary to
optimize the warehouse and thus operate at the highest level of efficiency.

Warehouse management system offer benefits such as increased inventory accuracy, stream
line order picking and shipping, reduced fulfilment cycle times, and greater customer
satisfaction through increased order fill rates and greater on time delivery.

The WMS module is an integrated part of the overall enterprise system and thus provides a
transparent view of warehouse activity that is available for viewing by purchasing, sales,
accounting and the executive staff.

A study conducted by Sammon and Lowlor (2004) argues that highlighting a failure to
carryout an xxxx mandatory and desirable features required in a system with an open mind
will lead to the blind acceptance of the models underlying the ERP packages.

22. Sammon, D and Lawtor, D, (2001) “ An examination of an ERP software selection

process: An Irish case study”, proceeding of the 11th annual BIT conference, P, 79.

Major Merits of ERP system: The major minds of ERP systems:

1. Reduction of operating cost

2. Improved job time
3. Centralization of information system
4. Efficient business practices
5. Ready mode education for most of problems
6. Only customization required
7. Easy enterprise wide information sharing
8. Customer satisfaction

Major limitation of ERP Implementation: These are the limitation and pitfalls to ERP for
xxx

i) Success depends on the skill and experiences of the workforce including education in how
to make the system work correctly.
ii) Personnel turnover, companies can employ new managers lacking education in the
company’s ERP system.
iii) Proposing changes in business practices that are out of synchronization with the best
utilization of the company’s selected ERP.
iv)Total cost of ownership of ERP system is very high.
v) ERP vendors can charge sums of money for annual license renewal that is unrelated to the
size of company using ERP or its profitability.
vi)Technical support personnel often give replies to callers that are inappropriate for the
caller’s corporate structure. Computer security concern arise, for example when telling a non
programmer how to change a database on the fly, at a company that requires an audit trail of
changes so as to meet some regulatory standards.
vii) ERPs are often seen as too rigid and difficult to adapt to specific workflow and business
process of some companies. This is cited as one of the main causes of their failure.
viii) The system can suffer from the “weakest time” problem- an inefficiency in one
department or at one of the partners may affect other participants.
ix) Many of the integrated links need high accuracy in other applications to work effectively.
A company can achieve minimum standards, then overtime “dirty data” will reduce the
reliability of some applications.
x) Resistance in sharing sensitive internal information between departments can reduce the
effectiveness of the software.
xi) There are frequent compatibility problems with the various legacy systems of the partners.

The implementation of an ERP involves a complex set of tasks, from selection and system
design to installation, timing , maintenance and upgrade.
The core set of technologies and capabilities needed to accomplish these tasks is often not
obtainable in-house , due to high cost and lack of resources. This means that ERP customers
must fine way to engage top-xxx ERP experts while controlling costs and still be able to
implement and maintains a strategic ERP system.