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ERP Basics: - ERP: An Acronym For Enterprise Resource Planning - Essentially A Management Information System
ERP Basics: - ERP: An Acronym For Enterprise Resource Planning - Essentially A Management Information System
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Production
Inventory
Purchase Control
Engineering
Sales
Accounting
What is ERP
• ERP integrates all data and processes of an organization into a unified system
• A typical ERP system use multiple components of hardware and software to
achieve the integration
• A key ingredient of most ERP is the use of a unified data base to store data for
various system modules
• Primary Goal : To improve and streamline internal business processes
• ERP utilizes ERP software applications to improve the performance of
the organizational resources( Men, Money, Materials Machines),
Planning, Managerial control and Operational control.
• It is a multi-module application software that
integrates activities across functional departments
from Production Planning , Parts planning
,Purchasing ,Inventory control, Product distribution
,to order tracking,. ERP software may include
application modules for Finance , Accounting, and
Human resource aspects of business
ERP Software modules
• Module base software is the core of an ERP system. Each software
module automates business activities of a functional area of an
organisation (mimics a major functional are of an organization )
• Common software modules include
• Production planning : Optimizes utilization of manufacturing capacity , parts
components and material resources
• Purchase : Streamlines procurement of raw material by automating the purchase
process.
• Inventory control : Facilitates the process of maintaining the appropriate level of
stock in a warehouse and automates the replenishment system . This module is
integrated with the purchase and finance
• Sales : Implements functions of order placement , order scheduling ,
shipping and invoicing
• Marketing : Supports lead generation , direct mailing , and campaigns
• Finance / Accounting : Gathers financial data from various
departments and generates financial reports such as – Balance sheet,
General ledger, Costing , profit and loss statements
• Human Resources : Streamlines management of human resources
• ERP Users : The users of an ERP system are employees , of the
organization at all levels , from workers , supervisors, mid level
managers to executives
• ERP Vendors : SAP, ORACLE, JD Edwards, BANN, i2 technologies
• Vendors have developed specialized ERP to cater to a specific industry
• E.g. Erp’s Apparel industry, Pharmaceutical industry , Healthcare ,
hotels , Hospitals , automobile , paper cement , Retail stores etc .
Organizational Benefits
Facilitates operational coordination across departments
Supports decision making
Facilitates real time monitoring of activities, tracks costs , check order
completion status.
Supports strategic planning , and facilitate improved operational and
managerial control --- which leads to
Benefits
• Better management of Resources ( Men , Machines , Material and
Money)
• Cost reduction :Lower inventory carrying costs , production costs ,
marketing costs.
• Cycle time reduction :From order to delivery
• Productivity improvement:- Higher operational efficiency and
enhanced managerial effectiveness
• Quality Improvement: Thru reduced -errors and Product defectives
• Performance improvement :
I. Better customer deliveries
II. Better customer service
III. Reduction in customer response time
• Problems tackled by ERP
i. Material shortages
ii. Productivity enhancements
iii. Customer service
iv. Cash management
v. Inventory problems
vi. Quality problems
ERP Implementation methodologies
• Different companies may install the same ERP software in totally
different processes. The same company may implement different ERP
software in the same approach. There are three commonly used
methodologies for implementing ERP systems.
The Big Bang Approach
• Companies layout a grand plan for their ERP implementation. The
installation of ERP systems of all modules happens across the entire
organization at once. The big bang approach promised to reduce the
integration cost in the condition of thorough and careful execution.
Modular Implementation
• This method of modular implementation goes after one ERP module
at a time. This limits the scope of implementation usually to one
functional department. This approach suits companies that do not
share many common processes across departments or business units.
Process -Oriented Implementation
• The process-oriented implementation focuses on the support of one
or a few critical business processes which involves a few business
units. The initial customization of the ERP system is limited to
functionality closely related to the intended business processes.
Implementing an ERP Life cycle successfully
• ERP Life Cycle: Highlights various stages of implementation of an ERP
• Different stages of implementation are
Pre-evaluation screening: Done to eliminate those packages( from
several ERP packages commercially available)that are not suitable
for the organization
Evaluation of the package: Must be Done rigorously against a well
designed selection criteria.
Project planning : Includes schedule of implementation , roles
,responsibilities identifying personnel etc.
Gap analysis : Done to determine the extent to which a package
meets the organizational requirements
Re- engineering : Implementing ERP requires a large number of
processes to be modified.
Team training : Training the employees in using the module and
running the system
Testing : Must be done under both real case scenario and extreme
conditions to identify bugs or weak links
Post Implementation : To ensure smooth running and updating of the
system with changes in technology
5 Steps to successful implementation of ERP
Strategic Planning
Assign a project team
Examine current business process and information flow.
Set objectives
Develop a project plan
Procedure review
Review software capabilities
Identify manual processes
Develop standard operating procedures
Data collection and clean up
• Convert data
• Collect new data
• Review all data inputs
• Clean up data
Training and Testing :
• Pretest the data base
• Verify testing
• Train the trainees
• Final testing
Go Live and evaluation :
• Develop a go live check list
• Evaluate the solution
Managerial Concerns
• End user adoption problems
• Training
• Application maintenance
• Future Upgrades
ERP Critical Success factors
Clear understanding of strategic goals
Top Management commitment
Project management implementation
Great implementation
Cope with technical issues
Organizational commitment to change
Extensive education and training
Data accuracy
Focused performance measures
Resolution of multisite issues
Business Process Reengineering
Automation
• refers to computerizing processes
to speed up the existing tasks.
• improves efficiency and
effectiveness.
Rationalization of Procedures
• refers to streamlining of standard
operating procedures, eliminating
obvious bottlenecks, so that
automation makes operating
procedures more efficient.
• improves efficiency and
effectiveness.
Business Process Reengineering
• refers to radical redesign of business
processes.
• Aims at
• eliminating repetitive, paper-
intensive, bureaucratic tasks
• reducing costs significantly
• improving product/service quality.
Paradigm Shift
• refers to a more radical form of
change where the nature of
business and the nature of the
organization is questioned.
• improves strategic standing of the
organization.
Business Process Reengineering
• “Reengineering is the fundamental
rethinking and radical redesign of business
processes to achieve dramatic improvements
in critical, contemporary measures of
performance such as cost, quality, service,
and speed.”
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Key Words
• Fundamental
• Why do we do what we do?
• Ignore what is and concentrate on what should
be.
• Radical
• Business reinvention vs. business improvement
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Key Words
• Dramatic
• Reengineering should be brought in “when a need exits for heavy blasting.”
• Companies in deep trouble.
• Companies that see trouble coming.
• Companies that are in peak condition.
• Business Process
• a collection of activities that takes one or more kinds of inputs and creates an
output that is of value to a customer.
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What is a Process?
• A specific ordering of work activities across time and space, with a
beginning, an end, and clearly identified inputs and outputs: a
structure for action.
What is a Business Process?
• A group of logically related tasks that use the firm's resources to
provide customer-oriented results in support of the organization's
objectives
Why Reengineer?
• Customers
• Demanding
• Sophistication
• Changing Needs
• Competition
• Local
• Global
Customer Demands
• Change
• Technology
• Customer Preferences
Business Process Reengineering
WHY ?
Integrate people, technology, & organizational culture
To Respond to rapidly changing technical & business
environment and customer’s needs to achieve Big
performance gains
Why Organizations Don’t Reengineer?
• Complacency
• Political Resistance
• New Developments
• Cost
• Quality
• Service
• Speed
Business Process Flowchart Symbols
A Predefined Process
Representing a Relation
Business Process Flowchart Symbols
Continuation of the process at the same page
at an equal symbol with the same number. Used
when a relation arrow crosses another relation arrow
A Document
A Decision
A Database File
Representing a Relation
Continuation
Off-Page Connector
Rules For Data Symbols
Rules For Data Symbols
Start Symbol used to identify the start of a business process
Generate
Purchase Activities must be described as a verb
Order
OK?
Decisions have only two possibilities (Yes & No)
Yes
No
Crossing lines are not allowed
Purchase
Order
Name the document
BC 4.04
A predefined process must be described in a different
flowchart. To make the relation clear between the
predefined process and the belonging flowchart a unique
alpha numeric number should be assigned to this
predefined process.
Version Management
• For different versions of a business process or data flow some
mandatory information must be on the flowchart.
• Name of the business process
• Unique number of the business process
• Revision number
• Date of last change
• Author
• Page number with total pages
The C’s related to
Organization Re-engineering Projects
The 3C’s of The 4C’s of effective
organization Re- teams:
engineering:
- Customers - Commitment
- Competition - Cooperation
- Change - Communication
- Contribution
Key Steps
Execute Plan
1. Select the Process & Appoint Process Team
• Two Crucial Tasks
• Up-grade Equipment
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INTRODUCTION
In recent years, the term EIS has lost popularity in favor of business
intelligence .
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Components OF EIS
1) Hardware
2) Software
3) User interface
4) Telecommunications
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Hardware
The basic hardware needed for a typical EIS includes four components:
2) The central processing unit, which is the kernel because it controls the
other computer system components
3) Data storage files. The executive can use this part to save useful
business information.
2) Graphic base—graphics can turn volumes of text and statistics into visual
information for executives.
command language,
scheduled reports,
natural language,
questions/answers,
input/output.
menu driven,
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Telecommunication
Transmitting data from one place to another has become crucial for
establishing a reliable network.
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Applications OF EIS
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Advantages of EIS
Provides timely delivery of company summary information.
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Disadvantages of EIS
1) System dependent
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Decision
support
system
(DSS)
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INTRODUCTION
A decision support system (DSS) is a computer-based information
system that supports business or organizational decision
making activities.
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Components
2) the model (i.e., the decision context and user criteria), and
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Classification
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Applications
DSS is extensively used in business and management.
Due to DSS all the information from any organization is represented in the
form of charts, graphs.
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Benefits
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Promotes learning or training.
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MANAGEMENT
INFORMATION SYSTEM
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Meaning Of Information Systems
• An information system is an organized combination of
people, hardware, software, communications Networks and
data resources that collects, transforms, and disseminates
information in an organization.
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Types Of Information System
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MANAGEMENT INFORMATION SYSTEM(MIS)
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• Management information systems are distinct from regular
information systems in that they are used to analyze other
information systems applied in operational activities in the
organization. MIS involve three primary resources:
technology, information, and people.
• Management information systems are regarded to be a
subset of the overall internal controls procedures in a
business, which cover the application of people,
documents, technologies, and procedures used by
management accountants to solve business problems such
as costing a product, service or a business-wide strategy.
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Role Of MIS
• The role of MIS in an organization can be compared to the role of
heart in the body.
• The information is the blood and MIS is the heart. In the body the
heart plays the role of supplying pure blood to all the elements of
the body including the brain.
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• The system is expected to fulfill the information needs of
an individual, a group of individuals, the management
functionaries: the managers and the top management.
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Characteristics of MIS
• Management-oriented: The basic objective of MIS is to provide information
support to the management in the organization for decision making.
• Management directed: When MIS is management-oriented, it should be directed
by the management because it is the management who tells their needs and
requirements more effectively than anybody else.
• Integrated: It means a comprehensive or complete view of all the subsystems in
the organization of a company.
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• Common database: This is the basic feature of MIS to achieve the objective of
using MIS in business organizations.
• Computerized: MIS can be used without a computer. But the use of computers
increases the effectiveness and the efficiency of the system.
• User friendly/Flexibility: An MIS should be flexible.
• Information as a resource: Information is the major ingredient of any MIS.
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Features of MIS
• Timeliness
• Accuracy
• Consistency
• Completeness
• Relevance
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Components of MIS
1) Marketing Research System (MRS)
Marketing research can be seen as the systematic and
objective search for and analysis of data and information
relevant to the identification and solution of any problem in
the field of marketing.
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2) Marketing Intelligence System (MIS)
The process of acquiring and analyzing information in order to understand the
market (both existing and potential customers); to determine the current and
future needs and preferences, attitudes and behavior of the market; and to assess
changes in the business environment that may affect the size and nature of the
market in the future.
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3) Internal Record System (IRS)
Marketing managers rely on internal reports on orders, sales, prices, costs, inventory
levels, receivables, payables, and so on. By analyzing this information, they can
spot important opportunities and problems.
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4) Decision Support System(DSS)
A decision support system (DSS) is a computer-based
information system that supports business or organizational
decision-making activities. DSSs serve the management,
operations, and planning levels of an organization and help
to make decisions, which may be rapidly changing and not
easily specified in advance.
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Aim of Management Information System
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Types Of MIS
• Transaction processing systems: These systems process a large volume of
routine, recurring transactions.
• Operations information systems: These systems gather comprehensive data,
organize it and summarize it in a form that is useful for managers.
• Decision support systems: These systems help mangers with the necessary
information to make intelligent decisions.
• Expert systems: They are meant to mimic humans in making decisions in a
specific field.
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Elements of MIS
1.Hardware
2.Software
3.Control
4.Databases and application programs
5.People
6.Telecommunications and Networks
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Outputs Of a MIS
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• Demand report which
gives certain information
at a manager’s request.
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Benefits of MIS
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• It generates new evidence in support
of a decision.
• It creates a competitive advantage
over competition.
• It encourages exploration and
discovery on the part of the decision
maker.
• It reveals new approaches to thinking
about the problem space.
• It helps automate the Managerial
processes.
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