Enterprise Resource Planning

Understanding Enterprise Resource Planning Systems

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Objectives
Understanding ERP & its potential in business transformation to improve the effectiveness of information systems in organizations Recognize the business benefits of ERP systems Understand the Evolution and Demand of ERP
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What is ERP?
ERP Definition : ERP covers the techniques and concepts employed for the integrated management of businesses as a whole, from the viewpoint of the effective use of management resources, to improve the efficiency of an enterprise. Set of Software tools Manages business systems (Processes) Materials Procurement , Logistics, Supply chain, receiving, inventory, customer orders, production planning, shipping, Finance & Accounting, HR, Plant maintenance, Quality management and Project Management. Allows automation and integration of business processes Enables data and information sharing, Real time on line information for analysis and decision making. Industry specific solutions and company -wide system Introduces best practices
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ERP Market & Demand for ERP

One of the fastest growing markets in software industry, 25 - 40 % growth ? 34.5% of companies with revenues over $1 billion plan to purchase or upgrade. Close to 65 Billion INR. $ close to 500 billion in sales in 2008 Maybe as much as $1 trillion by 2015

Christ University RADM ERP Jan 2012

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ERP Market & Demand for ERP

Major investment Cost between $50,000 and $100,000,000+ Variety of business justifications Need for IT infra to improve business efficiency/ performance. Replace fragmented legacy information systems with integrated single system. Reduce cycle times and improve efficiency across all functions. Re-engineering to process based management system. Adopt global best practices inbuilt in ERP. Lower operating costs ERP is a proven system benefiting the industry. Enables better management decisions Real-time On-line

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Evolution of ERP
1960s: software packages with inventory control 1970s: MRP systems Materials management in relation to production schedule 1980s: MRPII systems Adds Distribution system, Production planning. 1990s: MRPII - Modified Integrated systems for manufacturing execution covering Engineering, Finance, HR, S & D, PM. Late 1990s: ERP Integrated manufacturing with supply chain The ERP II latest with CRM, SCM,BIS, SRM, ELM,PLM,Etc

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ERP ENABLED BUSINESS TRANSFORMATION

In India, business enterprise are undergoing the business transformation on a/c of : Globalization & de-regulation of Indian economy Emergence of IT based business practices. Most of the enterprises implementing ERP as part of organizational transformation and process re-engineering which provides the benefit of transformation in quality, productivity and profitability.
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ERP ENABLED BUSINESS TRANSFORMATION

Brings transparency in the various activities and demands flexibility and empowerment in decision making processes. For survival, companies have to transform their internal business processes with deployment of ERP systems. ERP happens to be the first large scale corporate IT application being adopted by large no. of corporate firms forcing them to change their business processes, structures and even business strategies.
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BENEFITS OF ERP

Enterprise Integration functional / geographically dispersed enterprise. Forces Organizations to re-engineer its obsolete function oriented processes. Better to align with ERP processes enabling integration of BPR and IT. Standardizing systems & Procedures across with emphasis on transparency. Overcomes inefficiencies of independent systems ensuring efficient business networking for sharing the information. Integrated data supports multiple business functions. ERP emerging as global IS infrastructure due to their capability of supporting multiple currency, multinational trade and multi industry transactions. Best Global management practices All ERP packages like SAP R/3, Ramco systems, IFS, Oracle etc have got world class best business practices inbuilt
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Christ University RADM ERP Jan 2012

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Overall Business Benefits

Information
Maximizes information throughput Provides timely information Integrates information throughout supply chain

Minimizes response time Pushes decision making down to lowest levels Reduces costs Cuts inventory Improves operating performance
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Department Benefits
Sales
Increased efficiency
Lower quotes, reduced lead time, improved responsiveness

Manufacturing

Concurrent engineering Faster design and production

Accurate customer service history and warranty information Suppliers paid accurately
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Data Service Accounts Payable

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Systems Benefits

Eliminating legacy systems

Reduces incompatible data Can cause fragmentation

Allows sharing and monitoring of information across organization Foundation of eBusiness

Back-office functions

Standardization Helps obtain and maintain competitive advantage Improved interactions with customers and suppliers

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Christ University RADM ERP Jan 2012

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ERP MODULES
ERP system has variety of functions that are linked together.
Various Modules are : Financial Accounting (FI/FA) Costing & controlling(CO) Sales & Distribution(SD) Materials Management (MM) Production Planning(PP) Quality Management(QM) Plant Maintenance(PM) Human Resource(HR) Project Systems(PS) Service Management (SM) Reports Management(RM)
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ERP MODULES

FINANCE MODULE
General Ledger (P&L, financial balances) Accounts Receivables receivables management Accounts payable track payments for various heads Fixed Assets depreciation (building, property, Equipment) Treasury Management Cash flow, financial investments, funding and assess investment risks Cost control monitor expenses ender various heads, calculate the costs for various operations and assess costing of products/services, budgeting and variances MIS financial statements for funding agency, Board, monthly P &L statement, cost/budget monitoring, variance reports, monthly receivables statements etc.
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ERP MODULES

MATERIALS(PURCHASE) MODULE
Purchase data bank materials base, vendor base, approved vendor base, coding and classification Procurement planning BOQ data, stock updation, procurement cycle and generate procurement plan sheet. Purchasing Release of Purchase documents, vendor selection and approval (intervals) Storage Receipt of goods, inspection, Storage and monitoring stocks, inventory Analysis and control, stock verification and updations. Control issues, WIP assessment, FG inventory and stock transfers. MIS Inventory reports, slow moving / non moving goods monitoring, sub-contracted items monitoring and reconciliations, stock value for banks/institutions.
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ERP MODULES

SALES & DISTRIBUTION MODULE

Customer data bank Name, type, contacts, products sold, history, coding Order processing Tracks the customer order from the receipt of order upto invoicing, delivery. At any point of time the status of the order can be derived. Distribution networking Demand & Supply status, monitoring the supplies and distribution channels and the efficiency, maintains records of stocks existing and replenishment patterns and re-order levels. Collection of receivables Monitoring the payments receivable from each customer and tracking the payments. MIS sales budget, variance reports, trends, enquiry bank, hit rate, loss of orders, customer satisfaction levels and improvements, customer complaints & status, order booking status, pending orders, receivables & forecasting.
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ERP MODULES

PRODUCTION PLANNING MODULE

Capacity planning and scheduling Monthly/weekly/daily production plans Provides data for making the materials procurement plan WIP stocks valuation and monitoring Efficiency of utilization of manpower and equipment monitoring Equipment downtime estimation and maintenance schedule planning Online transmission of information reg the status of the order processing to the concerned. MIS Production plans, variance reports, capacity utilization, manpower efficiency and individual wise efficiency monitoring reports, status of pending orders, completion of orders, OTD reports, WIP stocks value.
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ERP MODULES

HUMAN RESOURCES MODULE

Payroll Attendance & payment of salaries, statutory bodies etc. Manage Personnel admn Recruiting, induction and appraisal system Training capturing needs and scheduling MIS Training records, employee strength and retention % form time to time, recruitment status updation to departments,

PLANT MAINTENANCE MODULE

List of equipment, history updation, coding and location Generating Preventive maintenance schedules Spares and repairs management MIS machinewise downtime and efficiency reports, spares utilization and updation of history log for each equipment.
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ERP MODULES

PROJECT SYSTEMS
Scheduling - List activities & time schedule Budgeting and monitor the cost monitor cost during each phase of the project. Status updation - project monitoring and updation of project status to the concerned. MIS Variance reports, cost variance and status.

QUALITY MANAGEMENT MODULE

Key in the specifications for RM, FG and process inspection requirements. Manage the scheduling of calibration of testing / inspection instruments. Scheduling internal / external audits. ON line acceptance and approval of RM /Products / process stage clearances.
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Design Alternatives

Vanilla implementation
Complete vendor package Benefits
Total integration across all functional areas Re-engineering of all business processes

Deficits
Expensive Time-consuming

Selected ERP modules

Benefits
Less costly and time-consuming Lacks total integration of data Limited applicability and use
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Deficits

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Design Alternatives, continued

Build in-house
Benefits
Can create system based on its needs Competitors will not have access to similar system Time- and resource-consuming Expensive Risky May not provide competitive advantage

Deficits

Maintain concurrent legacy systems

Benefits
Familiarity May be a competitive disadvantage
Christ University RADM ERP Jan 2012

Deficits
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Maintaining Competitive Advantages

Implement ERP system better than competitors Migrate to new versions faster Use vanilla ERP for core systems and build customized modules for others Increase availability of operational data Better use of data for analysis
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Summary
ERP systems can improve the effectiveness of organizations through automation and integration of business processes ERP systems allow data and information sharing across the organization Departmental benefits include increased efficiency, faster design and production, and accuracy Implementing an ERP system helps the organization obtain and maintain a competitive advantage
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