ERP attempts to integrate all departments and functions across a company

onto a single computer system that can serve all.

ERP combines them all together into a single, integrated software program
that runs off a single database so that the various departments can more
easily share information and communicate with one another
a method for the effective planning and controlling of all the
resources needed to take, make, ship and account for customer
orders in a manufacturing, distribution or service company.
- American Production and Inventory Control Society
 
ERP (enterprise resource planning systems) comprises of a
commercial software package that promises the seamless
integration of all the information flowing through the company
–financial, accounting, human resources, supply chain and
customer information – Davenport
ERP systems concept
 ERP system Concept

ERP delivers a single database that contains all data for the software
modules, which would include:

• Manufacturing: Engineering, bills of material, scheduling, capacity,

workflow management, quality control, cost management,
manufacturing process, manufacturing projects, manufacturing flow.

• Supply chain management : Order to cash, inventory, order entry,

purchasing, product configuration, supply chain planning, supplier
scheduling, and inspection of goods, claim processing, and commission
calculation.

• Financials: General ledger, cash management, accounts payable,

accounts receivable, fixed assets.
 ERP system Concept

 Project management: Costing, billing, time and expense,

performance units, activity management.

 • Human resources: Human resources, payroll, training, time and

attendance, roistering, benefits.

 • Customer relationship management: Sales and marketing,

commissions, service, customer contact and call center support,
Data warehouse and various self-service
 interfaces for customers, suppliers, and employees.

 • Access control - user privilege as per authority levels for process

execution Customization - to meet the extension, addition, change
in process flow.
 Business Integration
•Flexibility
Better Analysis and Planning
Capabilities
Use of Latest Technology
Reduction in lead-time,
On-time shipment,
Reduction in cycle time,
Better customer satisfaction,
Improved supplier performance
Improved resource utility, Improved Information accuracy
Vendor Management
Enhanced decision making capability.
ERP systems are basically meant for recording , not Planning

These systems can process orders, but they do not analyze business
situations to provide insight into future courses of action.

ERP is rigid in their ability to continually reshape and restructure

workflows as business challenges and opportunities arise.

While ERP systems integrate multiple business functions, they lack the
ability to expand their scope to multiple enterprises.
Evolution of ERP
Inventory Control and Management

Identifying Inventory Requirement

Setting Target

Providing Replenishment

Monitoring item usages

Reconciling the inventory balance

Reporting Inventory balance

 Material Requirement Planning
• Ensure materials and products are available for production and delivery to
customers.
• Maintain the lowest possible level of inventory.
• Plan manufacturing activities, delivery schedules and purchasing activities.

Manufacturing strategies in practice

1. Make-to-Stock
2. Make-to-Order
3. Assemble-to-Order

Aspects of MRP
I. Inventory
II. Economic Order Quantity ( EOQ )
III. Master Production Schedule ( MPS )
IV. Bill of Materials ( BOM )
MANUFACTURING RESOURCE PLANNING (MRP II)

Manufacturing Resource Planning (MRP II) is defined as a method for the

effective planning of all resources of a manufacturing company. It is made
up of a variety of functions, each linked together:

• •Business planning
• Sales and operations planning
• Production planning
• Master scheduling
• Material requirements planning
• Capacity requirements planning
• Execution support systems for capacity
and material
 ENTERPRISE RESOURCE
PLANNIG
A typical ERP application supports cross-functional business processes
by linking the following primary business functions.

1. Accounting and Controlling

2. HR Management
3. Production and Materials Management
4. Project Management
5. Quality Management and Plant
Maintenance
6. Sales and Distribution.

Recently, ERP vendors are branching into new areas such as supply chain
management (SCM), ecommerce, customer relationship management
(CRM) and business intelligence (BI).
 ENTERPRISE RESOURCE
PLANNIG
Central Components
• Enterprise Resource Planning (ERP)

Corporate Components
• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• Supplier Relationship Management (SRM)
• Product Lifecycle Management (PLM)
• Employee Lifecycle Management (ELM)
• Corporate Performance Management (CPM)

Collaborative Components
• Business-to-consumer (B2C)
• Business-to-business (B2B)
• Business-to-employee (B2E)
• Enterprise Application Integration (EAI)
Enterprise Resource Planning
ERP Modules
All the ERP software is provided with either a single module or a set of
modules based on the requirements of the client/customer. It all depends on
the organization going for ERP implementation. The important reasons for
selecting a particular ERP module and not preferring a complete integrated
system with all the ERP modules are as follows:

• Cost reduction
• Specialized module
• Reduced project duration
• Less risk
• Reduced resistance to change
• The possibility of purchasing different modules from different vendors
• More features, less training and easy maintenance
VARIOUS MODULES OF ERP
Finance Module
Finance pervades all activities of business - production, marketing, planning and
the like . Finance includes investment decision, finance decision and dividend
decision.

This figure shows the relationship of financial management with the Accounting
and other disciplines. It also highlights the functions of financial management.
Finance Module

Profit maximization is the financial objective of the firm wherein it takes into
consideration total operating profit, accruing to shareholders which are in other
words emphasis on total earnings per share, which is financial welfare only
without considering the owners economic welfare which is ultimately objective
of any shareholders. The Wealth maximization brings in economic welfare to
the shareholders.

Functions of Finance Module

I. Accounting
II. Investment management
III. Cost controlling
IV. Treasury management
V. Planning and forecasting
Finance Module
Accounting deals with ledger, trial balance, balance sheet, fixed asset,
liabilities, accounts receivable and accounts payable, etc.

Investment management deals with investment planning, investment

budgeting, depreciation, simulation, monitoring the investment and controlling
investment, etc.

Cost controlling deals with controlling the cash flow, funds flow, overhead cost,
product cost and profitability analysis, etc.

Treasury management deals with cash management, risk analysis, risk

planning, risk management, funds management, etc.

Planning and forecasting deals with preparation of budget, forecasting the

business expenditure, capital required, decision making, better business
planning, and financial report of the company to top management, etc.
 ERP Financial Module

Both for-profit organizations and non-profit organizations benefit from the

implementation of 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 balance
sheet, general ledger, trail balance, and quarterly financial statements.
 ERP HR Module
HR (Human Resources) is another widely implemented ERP 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
 ERP Module - HR

Functions of HR Module
Two kinds of functions are carried out by HR module. They are: (1) Managerial
functions (2) Operative functions.

The Managerial functions of HR involve the following:

1. Planning
2. Organizing
3. Directing
4. Controlling

The Operative functions of HR involve the following:

(a) Employment
(b) Human Resource Development (HRD)
(c) Compensation
 MATERIALS MANAGEMENT (MM) MODULE

The Materials Management (MM) Module is the preferred module for most of
the manufacturing companies than any other ERP module.

The main difficulties faced by these organizations are

 the poor maintenance of stock,
 inabilities to meet the deadlines and
 to provide smooth services to the suppliers and to ensure proper service to
the customers and so on

The MM Module of the ERP package is provided with all these features and
helps the organization to have its inventory properly managed and monitored.
Based on the MM Module reports, the top management can take suitable
steps to improve its position to retain suppliers and customers
The MM Module is the central point of operating logistics containing the
essential integrated functions for:

• Inventory management

• Material requirements planning (MRP)

• Purchasing

• Warehouse management

• Vendor evaluation

• Invoice verification

• Product costing
The objective of the Materials Management module is:

(a) Reducing cost of material

(b) Extending full support to suppliers
(c) Ensuring right quantity, right quality and right price at right time
for purchase
(d) Effective controlling of inventories leading to release of working
capital to other useful
purposes without disturbing the production schedule for want of
materials
(e) Materials planning
(f) Purchasing of materials
The objective of the Materials Management module (cont..)

(g) Receiving and warehousing

(h) Store administration
(i) Inventory control
(j) Standardizing variety reduction
(k) Simplification, product development
(l) Make or buy decisions
(m) Quality control for inspection
(n) Disposal of scrap surplus and obsolete materials
 ERP Purchasing Module
Purchase module streamlines 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.
 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
Inventory Management Module Cont..

The Inventory management of any enterprise needs to ensure the following:

1. Adequate inventories of finished goods to meet the demand for prompt

customer services.

2. Adequate inventory of materials to maintain smooth flow of production

operations and

3. Keeping the money blocked in inventories at a reasonable level.

The objectives of effective inventory management are as follows:

• Ensuring regular supply of materials to facilitate uninterrupted production

• Maintaining adequate stocks of raw materials to meet situations of scarcity or

mounting prices

• Ensuring prompt delivery to the customer through ensuring adequate stock

• Optimizing inventory ordering, carrying and stock-out costs

 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.

The key elements of the Sales and

Distribution module are:

(i) Selling
(ii) Shipping
(iii) Billing of Product/Service to
Customer
(iv) Master Data Management
(v) Customer's Order Management
(vi) Pricing Strategies
Sales & Distribution Module
1. Increased Productivity
Perhaps one of the biggest benefits that can be enjoyed from ERP
for small business is an increase in productivity, which is important
for any company’s bottom line. When all of your business data is
easily available to all departments at once, your employees save the
time and hassle of having to contact employees in other
departments for the information they need.

2. Streamlined Data Flow

Furthermore, when your small business makes the switch to ERP
software, you can enjoy streamlined data flow. This is especially true
among fast-growing businesses, which may run into problems when
it comes to data being compartmentalized in different departments.
3. Better Collaboration
For small businesses struggling with collaboration, implementing an
ERP system can make all the difference. After all, poor communication
and lack of collaboration often comes as a result of employees not
having access to the data they need.

4. Decreased Operating Costs

Perhaps most important for many small business owners, an ERP
system can help reduce overall operating costs. By streamlining data
into one software application, business owners can save money on the
individual software and management systems that they were previously
paying for in each department.
5. Delivery of Business Insights
When it comes to making decisions for a small business, it’s important to
have all the data that’s needed on-hand and being confident that the data
is up-to-date. With ERP for small business, there’s never any doubt that
this is the case. As a result, decision-makers enjoy greater peace of mind
and confidence in the choices they make.

6. Improved Decision-Making
Finally, when data is easily available and consistently updated,
management can make the best decisions for the growth of the company.
They can also enjoy having a better overall “big picture” idea of how the
business is operating, which is vital when it comes to responding to
changes and improving overall financial planning of the business.
With proper implementation, an ERP system for a
small business can:

 boost productivity
 reduce operating costs
 streamline data flow
 encourage collaboration
 delivery business insights
 improve decision-making