Enterprise Resource Planning: Department of Business Management

Enterprise Resource
Planning
Department of Business
Management
Enterprise Resource Planning
ERP
General Concepts
December 7, 2021 2
Definition of ERP
 Business solution that addresses all the

needs of an enterprise with the process
view of an organization to meet the
organizational goals and integrate all the
functions of the Enterprise.
December 7, 2021 3
ERP how it evolved?
 The ERP acronym is an outgrowth of

MRP (materials requirements planning)
and MRP II (manufacturing resource
planning)
 Type of manufacturing-specific software
that aim to streamline the manufacturing
process by devising efficient production
plans according to supply and demand,
resources, and materials.
December 7, 2021 4
What is the myth about ERP?
 Enterprise Resource Planning

 A generalized packaged software solution
 Meets the total need of the Enterprise and
implemented across it
 It is a solution for the entire enterprise, not
for a specific function alone
 Works on a single data base for the
enterprise
December 7, 2021 5
What is ERP?
 Brings the best business practices of many

organizations around the Globe
 Requires customization to fit to any particular
Organization
 Broken down into business processes
• Sales & Distribution
• Financials
• Manufacturing
• Purchase
December 7, 2021 6
What is ERP?
 “Enterprise resource planning software, or

ERP, doesn't live up to its acronym. Forget
about planning—it doesn't do that—and forget
about resource, a throwaway term. But
remember the enterprise part. This is ERP's
true ambition. It attempts to integrate all
departments and functions across a company
onto a single computer system…”
From the Darwin “Executive Guide” reading
December 7, 2021 7
What is the GOAL of ERP?
 To integrate all facets of business

 All primary and support processes like
planning, manufacturing, sales, human
resources, finance, materials to manage
across the enterprise.
December 7, 2021 8
Enterprise – An overview
 A group of people with common goal

 A single entity
 Traditional approach
• Functional – own goal & target
• Conflicting interest
• Sales – more product varieties
• Production – limit variety to cut down cost
 Modified approach
• Departments no longer have separate entities
• Enterprise is a system and departments are its sub
systems
December 7, 2021 9
Enterprise – An overview
 Modified approach
• Departments no longer work in isolation
• No independent goal
• Each sub-system knows what other sub-
system is doing
• No departmental barriers in information flow
December 7, 2021 10
What was wrong with departmental
approach?
o Helps day-to-day decision process of management

o Produce reports pre-defined by managers
o Helps people at operational level
o Designed at department level – own system and own
database
o A system in a department does not know what others are
doing
o Gap in information
o Summary reports to top management – combining data
from departments
o Top managers – different versions of same information
December 7, 2021 11
Objective of ERP Software
• Facilitates Company-wide integrated Information Systems

Covering all functional Areas.
• Performs core business activities and increases customer
service augmenting Corporate Image.
• Organizes & Optimizes the data input methodologies
systematically.
• A fully harmonised online system, which can integrate with
Back Office
• Introduce proper systems and processes which will not be man
dependent
continued……………
December 7, 2021 12
Objective of ERP Software
• To ensure full security by introducing adequate controls,

checks and balances and also by maintaining audit Trails.
• To minimize data redundancy by eliminating duplicate
entries.
• To enable the organizations to provide its customers a
more value added service.
• To create a flexible system so that future needs and
changes in the business flow can be easily incorporated
December 7, 2021 13
To Enhance Profitability
BY
Increase in Sales - Say 30%
And /OR
Reduce Procurement Cost - Say by 5-10 %
December 7, 2021 14
ERP - The Enabler
December 7, 2021 15
What is that ERP enables ?
• Systematic Look into your Systems & procedures

• Optimizing the processes
• Enables you to adapt yourself to new technologies
• Discipline across the functions
December 7, 2021 16
What drives ERP ?
 Business
 Customer Satisfaction
 Business Development - new areas, products, services
 Ability to face competition
 Efficient processes required to push the company to top
gear
 IT
 Present Software does not meet business needs
 Legacy systems difficult to maintain
 Obsolete hardware/software difficult to maintain
December 7, 2021 17
Integration of Information Systems
IS messages IS messages
Manufacturing Head Quarters Marketing/Sales

 Local purchasing,  InformationSystems  Sales, shipping
invoice verification  Project Mgmt
and billing
 Inventory  Inventory  Purchasing of
management  Purchasing
trading goods
 Internal sales,  Sales  Inventory
shipping and billing  Budget
Management
 Profit/loss  Cash Management  Customer service
 Capacity utilization
December 7, 2021 18
Advantages of an ERP Package?
 Highly Graphics based User Interface.

 Zero down time/ planned down time.
 Readymade solutions for most of the problems.
 Integration of all functions ensured.
 Easy enterprise wide information sharing.
 Suppliers and Customers can have on-line communication.
 Automatic adaptation to new technology.
December 7, 2021 19
Authorization and Security
• User / Password level authentication

• User wise activity permission
• Tracking of changes made by users
• Facility of authorization/approval of
transaction
• Restriction in modifying the transaction after
approval is done
December 7, 2021 20
Without ERP
• Islands of Information
• Difficult to get timely & accurate information
• Heterogeneous Hardware & Software platforms &
practices
• Poor connectivity between different organizational
locations
• Sticking with obsolete technology
• Resist to change
• Lack of proven man-power to develop integrated
software
December 7, 2021 21
Why ERP?
 It helps in unification of business processes through

integrated enterprise applications and centralized
data.
 It is the cure to the “Islands of information”
syndrome.
 Brings the best practices in the software
 Other alternative to ERP
• Customized solution to suit the Enterprise need
• Development is time consuming and requires time to
become a stable product.
December 7, 2021 22
Why ERP?
 Power of Computers & Communications increasing

rapidly
 Highly competitive market
 Managing the future with information
 Correct and up-to-date information for decision
makers
 Information Technology matured, reduced cost of
hardware and network
 Isn’t computerization of important functions enough?
December 7, 2021 23
Why ERP?
 IS Department
• Play a pivotal role in IT services
• Computerize important functions
• Generate MIS reports
• Give support services and hand holding
support to the system users
• IS people are not the information users!!
December 7, 2021 24
Why ERP?
 User Department
• Get IS support
• Gap between users need and what system offers
them
• No direct involvement in software design,
development & implementation
• No ownership of system, usually unhappy with
existing system
December 7, 2021 25
Why ERP?
 Organization
• Divided into business functions or

departments
• Marketing, Finance, Production, Distribution,
Stores, Purchase etc.
• Each department looks for its own goal
December 7, 2021 26
Why ERP?
 Organization
• Conflicting objectives Example
• Planning – Reduce inventory level
• Production – Maintain more stocks
• Departmental requirements automated
• Periodic information sharing
• Data duplication – reconciliation, not synchronized
• Departments not focused to the organizational need
December 7, 2021 27
Why ERP?
 Why this has happened?

• Traditionally computers usage limited to accounts & finance
• Expensive Hardware
• Computers unable to share information
• Gradual development
• Departments went for separate automation – piecemeal
and isolated
• Data transfer – tape, floppy, hard copies etc.
• Late information for decision makers
December 7, 2021 28
Why ERP?
 What happened next?

• Information system matured
• Hardware & Network – improved capacity, less cost
• Software – Rugged Database, Client Server architecture,
Web Technology
• Information sharing now easy!!
• Sharing on-line among different functions – e.g.
Purchase & Finance
• Immediate reflection – e.g. bank transaction & balance
December 7, 2021 29
Why ERP?
 Can we think of a total solution?

• One solution for the entire organization!!!
• Organization goal is one
• Departmental goals are many & conflicting
 That is why ERP
 SAP thought it long back
• 1972 – 5 engineers from IBM in Germany formed
SAP
December 7, 2021 30
December 7, 2021
Vendors
31

Enterprise Resource Planning: Department of Business Management

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Enterprise Resource

 Business solution that addresses all the

 The ERP acronym is an outgrowth of

 Enterprise Resource Planning

 Brings the best business practices of many

 “Enterprise resource planning software, or

 To integrate all facets of business

 A group of people with common goal

o Helps day-to-day decision process of management

• Facilitates Company-wide integrated Information Systems

• To ensure full security by introducing adequate controls,

ERP - The Enabler

• Systematic Look into your Systems & procedures

Manufacturing Head Quarters Marketing/Sales

 Highly Graphics based User Interface.

• User / Password level authentication

 It helps in unification of business processes through

 Power of Computers & Communications increasing

• Divided into business functions or

 Why this has happened?

 What happened next?

 Can we think of a total solution?

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