Enterprise Resource Planning (ERP)

An Enterprise resource planning system is a fully integrated business management system covering functional areas of an enterprise like logistics, production, finance, accounting and human resources. It organizes and integrates operation processes and information flows to make optimum use of resources such as men, material, money and machine. Enterprise resource planning promises one database, one application, and one user interface for the entire enterprise, where once disparate systems ruled manufacturing, distribution, finance and sales. Enterprise Resource Planning (ERP) is the latest high-end solution, which information technology has lent to business applications. ERP solutions streamline and integrate operation processes and information flows in the company to synergize the resources of an organization namely men, material, money and machine through information. An ERP system is a fully integrated business management system covering functional areas of an enterprise like Logistics, Production, Finance, Accounting and Human Resources.

ERP CHARACTERISTICS:
An ERP system is not only the integration of various organization processes, any system has to possess few key characteristics to qualify for a true ERP solution. These features are: Flexibility: An ERP system should be flexible to respond to the changing needs of an enterprise. The client server technology enables ERP to run across various database back ends through Open Database Connectivity (ODBC). Modular and Open: ERP system has to have open system architecture. This means that any module can be interfaced or detached whenever required without affecting the other modules. It should support multiple hardware platforms for the companies having heterogeneous collection of systems. It must support some third party add-ons also. Comprehensive: It should be able to support variety of organizational functions and must be suitable for a wide range of business organizations. Beyond The Company: It should not be confined to the organizational boundaries, rather support the on-line connectivity to the other business entities of the organization. Best Business Practices: It must have a collection of the best business processes applicable worldwide. An ERP package imposes its own logic on a companys strategy, culture and organization.

MAJOR FEATURES OF ERP:

ERP provides multi-platform, multi-mode manufacturing, multi-currency, multi-lingual facilities. It supports strategic and business planning activities, operational planning and execution activities, creation of materials and resources. All these functions are effectively integrated for flow and update of information immediately upon entry of any information. Has end to end supply chain management to optimize the overall demand and supply data. ERP facilitates company-wide integrated information system covering all functional areas like manufacturing, selling and distribution, payables, receivables, inventory accounts, human resources, purchases etc. ERP performs core activities and increases customers service, thereby augmenting the corporate image. ERP bridges the information gap across organizations. ERP provides complete integration of systems not only across departments but also across companies under the same management. ERP is the solution for better project management. ERP allows automatic introduction of the latest technologies like Electronic Fund Transfer (EFT), Electronic Data Interchange (EDI), Internet, Intranet, Video Conferencing, E-commerce etc. ERP eliminates most business problems like materials shortages, productivity enhancements, customer service, cash management, inventory problems, quality problems, prompt delivery etc. ERP provides intelligent business tools like decision support system, Executive Information System, Data mining and easy working systems to enable better decisions.

ERP IMPLEMENTATION
An Enterprise Resource Planning system is a fully integrated business management system covering functional areas of an enterprise like Logistics, Production, Finance, Accounting and Human Resources. It organizes and integrates operation processes and information flows to make optimum use of resources such as men, material, money and machine. ERP is a global, tightly integrated closed loop business solution package and is multifaceted. In simple words, enterprise resource planning promises one database, one application, and one user interface for the entire enterprise, where once disparate systems ruled manufacturing, distribution, finance and sales. Taking information from every function, it is a tool that assists employees and managers plan, monitor and control the entire business. A modern ERP system enhances a manufacturers ability to accurately schedule production, fully utilize capacity, reduce inventory, and meet promised shipping dates.

The characteristics of an ERP system are:

(1) Flexibility, (2) Open system architecture, (3) Comprehensive, (4) On-line connectivity to other business entities, (5) Collection of best business practices. Some of the major features of ERP are: (1) (2) (3) (4) (5) (6) (7) (i) Provides multi-platform, multi-facility, multi-currency, etc facilities Supports strategic and business planning activities Has end-to-end supply chain management Provides intelligent business tools Provides complete integration of systems Better project management Automatic introduction of latest technologies like EFT, EDI, Internet, etc. Consultants, vendors and users have to work together to achieve the overall objectives of the organization. The consultants have to clearly understand the user needs and the prevailing business realities and design the business solutions keeping in mind all these factors. Proper customization of package to the organization has to be in tune with the users needs and business objectives. Roles and responsibilities of the employees have to be clearly identified, understood and configured in the system. Acceptance by employees for the new processes and procedures is critical for the success of the package. Package to be implemented in totality to achieve the maximum benefit. Defining the implementation methodology to be followed identifying needs, evaluation of the current situation, predicting the future situation, reengineering the business process, selection of correct package. Installation of hardware, software required for the package. Selection of right kind of consultants. Preparing the implementation guidelines training users, effective leadership, adapting the new systems and making changes in the working environment etc. Post implementation monitoring of Key Performance indicators, Critical success factors etc.

The challenges involved in ERP implementation are:

(ii) (iii) (iv) (v) (vi)

(vii) (viii) (ix) (x)

Steps of ERP Implementation:

These steps are given as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Identifying the needs for implementing an ERP package. Evaluating the As Is situation of the business i.e. to understand the strength and weakness prevailing under the existing circumstances. Deciding the would be situation for the business i.e. the changes expected after the implementation of ERP. Re-engineering the Business Process to achieve the desired results in the existing processes. Evaluating the various available ERP packages to assess suitability. Finalizing of the most suitable ERP package for implementation. Installing the required hardware and networks for the selected ERP package. Finalizing the implementation consultants who will assist in implementation. Implementing the ERP package.

Implementation Guidelines For ERP:

There are certain general guidelines, which are to be followed before starting the implementation of an ERP package: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Understanding the corporate needs and culture of the organization and then adopt the implementation technique to match these factors. Doing a business process redesign exercise prior to starting the implementation. Establishing a good communication network across the organization. Providing a strong and effective leadership so that people down the line are well motivated. Finding an efficient and capable project manager. Creating a balanced team of implementation consultants who can work together as a team. Selecting a good implementation methodology with minimum customization. Training end-users. Adapting the new system and making the required changes in the working environment to make effective use of the system in future.

Role of Business Process Reengineering (BPR)

BPR and IT have the potential to create more flexible, team-oriented, coordinative, and communication-based work capability. IT is more than a collection of tools for automating or mechanizing processes. It can fundamentally reshape the way business is done and enable the process design. In leading edge practices, information technology makes BPR possible and worthwhile. BPR and IT are natural partners, yet their relationships have not been fully explored. IT roles can be categorized into three phases: before the process is designed, while the process design is underway, and after the design is complete.
Phase 1: before the process is designed (as an enabler)

BPR is a strategic action and requires a clear understanding of customers, market, industry and competitive directions. Furthermore, like any other strategic action, it requires consistency between the companys business strategy and vision. Defining business strategy and developing a strategic vision requires understanding the companys strengths and weaknesses, and the market structure and opportunities. The activities in this phase may include: Developing a strategic vision. Identifying the customers objectives. Establishing goals/targets related to market share, costs, revenue enhancement, or profit margins. Assessing the potential for reengineering. Defining boundaries and scope of the appropriate process. Keeping management committed. IT capabilities can provide good insight into the existing conditions. IT is one of several enablers, including human resources and organizational change, that all must be considered together to bring about change in business processes. Many companies ignore IT capabilities until after a process is designed. An awareness of IT capabilities can and should influence process design. Michael Hammer recommends companies to redefine the process first and automate it second. IT can play important roles in this phase of BPR efforts as follows: 1. The opportunity IT provides is to utilize newer and better technology to develop a strategic vision and to help improve the business process before it is designed. For example, an important Wal-Mart vision was to eliminate unnecessary distribution steps and cost and to provide value to customers. To accomplish this, Wal-Mart developed a strategy that included linking its suppliers to its retail stores. IT, eventually enabled Wal-

Mart to implement this strategy. An enterprise-wide information system was developed that directly connected all retail locations, distribution warehouses, and major supplies. 2. The capabilities of IT to track information and break down geographic and organizational barriers are useful in understanding the companys strengths and weaknesses, and market structure and opportunities. Communication technology helps to overcome geographic barriers and thus enable broader acceptance of the process change. At General Electric email systems are used to speed analysis and design sharing and to hold frequent virtual meetings between group from different regions and overseas. 3. The focus is on finding different approaches to manage a process. These approaches can be found and be adapted from practices of companies outside of the industry. The organization should benchmark against other industries and combine it with the experience and expertise of the team members to adopt an entirely new process technology. 4. BPR requires a flexible organization design. The existing rigid infrastructure of the organization must be altered to facilitate cooperation between various departments by using cross-functional teams instead of individuals working in isolated departments. Flexible infrastructures adapt to changing external drivers. Therefore, the flexible infrastructure includes processes for continuously evaluating existing tools to see what should be removed, and continuously seeking user input about what works or does not. 5. To achieve effective teamwork, each worker should develop several competencies. The IT organization is no exception. The demand for close collaboration with other functions dictates the need for IT staff to broaden their portfolio of skills especially in nontechnical issues such as marketing, customer relationships, etc. The combination of the Internet and the Intranet services allows a collaborative team effort from around the globe. 6. Alliances and other methods of cross company coordination are becoming common-place. In an attempt to gain market shares, many firms are teaming and collaborating with suppliers and distributors.
Phase 2: while the process is being designed (as a facilitator)

This stage involves two activities: technical and social design. During the technical phase, information is consolidated, alternatives are redefined, process linkages are re-examined, and controls are relocated prior to applying technology. The social design focuses on human aspects and involves employees who will affect corporate changes: defining jobs and teams, defining skills and staffing needs, and designing incentives are considered carefully. This stage also requires development of test and rollout plans. After the objectives are identified, the existing

processes are mapped, measured, analyzed, and benchmarked, and then are combined to develop a new business process. Development of people, processes, and technology are integrated. During the process design, accountability for development, testing and implementation must be clearly defined. Real benefits to the business result when IT becomes involved with more fundamental changes to the business process itself. The crucial roles that IT plays in this phase of BPR efforts are: 1. IT can facilitate the reengineering design process through the use of project management tools. These help identify, structure, and estimate BPR activities and help to control contingencies that arise during the process. Project management tools along with electronic communication, enable ongoing communication of the reengineering process between users and facilitators. 2. Gathering and analyzing information about the performance and structure of a process is an important step in identifying and selecting process for redesign. Mapping or flowcharting the existing process and then measuring the results in terms of cost, quality and time are the most successful. IT can facilitate this step with the use of tools that provide modelling and flow simulation, document business processes, analyze survey data, and perform structuring evaluation. Technologies such as computer-aided systems engineering (CASE) are designed primarily to draw process models. The ability to draw models and make changes rapidly speeds redesign and facilitates the process of process design. At Xerox, for example several divisions are moving directly from process modelling to automated generation of computer code. They report high user satisfaction and improved productivity with the resulting systems. In addition, IT is capable of storing and retrieving unstructured, multimedia information that can be useful for developing process prototypes. The maintenance and operating workers at Union Carbides plant in Taft, Louisiana used flow-charting to redraw their old process and create new ones. The results were a saving of more than US$ 20 million. 3. Computing technologies have facilitated a process- oriented approach to system development where a database is shared in different functional units participating in the same business process. Ford Motor Corporation, for example used databases in its accounts payable process to cut down many intermediate steps and to overhaul a sequential flow of paper documents among involved functions. As the project progressed, the reengineering efforts achieved a 75% reduction in the workforce. In addition to shared databases, imaging technology has facilitated a process-oriented approach because in

processing loan applications, for example the digitized image of an application can be worked on by several employees directly. 4. Telecommunication technologies such as LANs, groupware, etc. have improved collaboration among personnel of different functional units in their efforts to accomplish a common business process. At Texas Instruments, for example, the process for new product development was dramatically improved when a design team in different countries used global network to work on design directly without sequential flow of documents. As a result, the development cycle time for various products decreased substantially (more than 30% in some cases). At Ford, the process for new car design was improved when computer-aided design (CAD) systems were utilized. Members of design teams share a common design database across the Atlantic to exchange design ideas, criticism, and opinions without meeting face to face. 5. Making data digital from the start can provide a whole range of positive results. When figures are in electronic form, employees can look at them in any detail or in any view they desire, can study them and pass them around for collaboration. For example, SevenEleven Japan used IT to not only improve inventory control, but to provide key information to management and improve quality of sales information to make better operation decision on a regional basis. In 1979, the company established an on-line network and from there introduced the Electronic Point of Sale (EPoS) system in 1982. At Hewlett-Packard Co., the sales process improved drastically as 135 sales representatives were trained to use laptop to retrieve up-to-date inventory information from the corporate database during the customer meetings. In addition, sales persons used these laptops to communicate with their peers and superiors. As a result, time spent in meeting decreased by 46%, travel time was cut by 13%, time spent with customers increased by 27% and sales rose by 10%. 6. Input from employees and information on customer requirements is essential in reengineering. IT applications allow organizations to build a data base to track customer satisfaction, analyze complaints, and obtain employees feedback for ways to improve customer satisfaction. At Frito Lay each of the 10,000 salespersons uses a handheld computer to record sales data on 200 grocery products, reducing many clerical procedures. The data is transmitted to a central computer, which in turn, sends instructions (such as changes in pricing, and product promotions) to all salespersons through their hand-held computers. This process greatly enhances collaboration between

marketing and sales and also makes weekly summaries and analysis available to senior managers. 7. IT capabilities are used for information exchange and to improve inner organizational collaboration. For example R.J. Reynolds Tobacco Co. used EDI technology in conjunction with varied technologies of electronic commerce such as document imaging with electronic work queues to reengineer its accounts payable function. 8. IT can also be used to help identify alternative business processes. IT can help companies to achieve multiple objectives in redesigning processes. Expert systems and technological databases can provide information on current and future capabilities of technology, human resources and organization change. American Express improved quality, cost, and time of its credit authorization process with an Authorizers Assistant expert system. The successful redesign led to 25% reduction in the average time for each authorization, a 30% reduction in improper credit denials and a 7 million annual reduction in costs due to credit losses. IT makes it possible to develop much richer processes.
Phase 3: after the design is complete (as an implementer)

The bulk of the reengineering efforts lie in this phase. The reengineering efforts include planning and managing people, processes, and technology and driving the implementation toward the business vision. The objectives of this stage are to pilot test the new approach, to monitor the results, and to provide extensive retraining of employees. As reengineering efforts go forward it is important to define and redefine performance goals and objectives, maintain a strong commitment to the vision, break the barriers between the departments, and be flexible as the business environment changes. IT can facilitate the following processes in this phase: 1. Implementation of the new process through the use of project management and process analysis tools. These help identify structure and estimate all associated activities. They facilitate tracking and managing employees expectations against commitments. Contingencies and problems that arise during the implementation phase can be handled and controlled. 2. Electronic communications enable ongoing and real time communication of the process between users and facilitators. IT helps to overcome geographic barriers. 3. Evaluating the potential investments and returns of the reengineering efforts is absolutely essential. The reengineering team or management should have enough information to determine the value the new process contributes to the overall performance. 4. A fundamental source of difficulties is the fact that process are reengineered but

infrastructure is not. The rigid infrastructure of the organization must be altered to facilitate cooperation and to cross-functional barriers between departments. Crossfunctional teams must replace individuals working in isolated departments. Recently, there has been a significant growth in collaborative computing products. These range from software for conducting meetings on-line to complex programs that enable a number of users to collaborate in real time, sharing documents, managing projects and handling different tasks. These include idea generation, brainstorming, group outlining, voting, teleconference, meet-me-service, etc. 5. As other business divisions undergo reengineering process, IT organization should be improved to meet their increasing needs. For example, in 1993 CIGNA implemented reengineering of its 1000- person IT departmentCIGNA Technology Services (CTS). The main reason was to meet the increasing needs of the business divisions. A team based structure resulted, and the benefits included a major change in the philosophy of the unit. Where the unit was previously technology focused, reengineering brought about a focus on using technology to meet business strategies. Management style changed from control-based and functional, to leadership-based and team-oriented. The hierarchy was flattened, increasing flexibility. 6. Digital feedback loop makes it possible to have a specific definition of success, a specific beginning and end in terms of time and tasks, intermediate milestone and finally a budget. IT is only useful if it helps employees do their work better and differently. Organizations are not working with the employees in the organization to infuse technology. Successful reengineering requires that companies first concentrate on crucial business processes that effect competitive factors, customer service, cost reduction, product quality and time-to-market. Obtaining greatest benefit from IT requires that current processes not be simply automated or existing automation improved.

BPR The Current focus in IT

Apart from the usual ways of managing a process in any business information system, it is necessary to enhance the value of the process and also the methods used in improving the process. Some of the concepts of information management for effective information systems are the traditional concept of database, the emerging concepts of data mining and data warehousing.
Concept of Database

Database is a data structure used to store organized information. A database is typically made up of many linked tables of rows and columns. For example, a company might use a database to store information about their products, their employees, and financial information. Databases are now also used in nearly all ecommerce sites to store product inventory and customer information. Database software, such as Microsoft Access, FileMaker Pro, and MySQL is designed to help companies and individuals organize large amounts of information in a way where the data can be easily searched, sorted, and updated.
Data Mining:

Data mining is primarily used as a part of information system today, by companies with strong consumer focus retail, financial, communication, and marketing organizations. It enables these companies to determine relationships among internal factors such as price, product positioning, or staff skills, and external factors such as economic indicators, competition, and customer demographics. And, it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to drill down into summa ry information to view detail transactional data. With data mining, a retailer could use point of sale records of customer purchases to send targeted promotions based on an individuals purchase history. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments.
Data Warehousing

A data warehouse is a copy of transaction data specifically structured for querying and reporting. The main output from data warehouse systems are either tabular listings (queries) with minimal formatting or highly formatted formal reports on business activities. This becomes a convenient way to handle the information being generated by various processes. Data warehouse is an archive of information collected from wide multiple sources, stored under a unified scheme, at a single site. This data is stored for a long time permitting the user an access to archived data for years. The data stored and the subsequent report generated out of a querying process enables decision making quickly. This concept is useful for big companies having plenty of data on their business processes. Big companies have bigger problems and complex problems. Decision makers require access to information from all sources. Setting up queries on individual processes may be tedious and inefficient. Data warehouse may be considered under such situations.

ERP FAILURE REASONS

Organizations face several new business risks when they migrate to real-time, integrated ERP systems. Those risks include: Single point of failure: Since all the organizations data and transaction processing is within one application system and transaction processing is within one application system. Structural changes: Significant personnel and organizational structures changes associates with reengineering or redesigning business processes. Job role changes: Transition of traditional users roles to empowered-based roles with much greater access to enterprise information in real time and the point of control shifting from the back-end financial processes to the front-end point of creation. Online, real-time: An online, real-time system environment requires a continuous business environment capable of utilizing the new capabilities of the ERP application and responding quickly to any problem requiring of re-entry of information (e.g., if field personnel are unable to transmit orders from handheld terminals, customer service staff may need the skills to enter orders into the ERP system correctly so the production and distribution operations will not be adversely impacted). Change management: It is challenging to embrace a tightly integrated environment when different business processes have existed among business units for so long. The level of user acceptance of the system has a significant influence on its success. Users must understand that their actions or inaction have a direct impact upon other users and, therefore, must learn to be more diligent and efficient in the performance of their day-to-day duties. Considerable training is therefore required for what is typically a large number of users. Distributed computing experience: Inexperience with implementing and managing distributed computing technology may pose significant challenges. Broad system access: Increased remote access by users and outsiders and high integration among application functions allow increased access to application and data. Dependency on external assistance: Organization accustomed to in-house legacy systems may find they have to rely on external help. Unless such external assistance is properly managed, it could introduce an element of security and resource management risk that may expose the organizations to greater risk. Program interfaces and data conversions: Extensive interfaces and data conversions from legacy systems and other commercial software are often necessary. The exposures of data integrity, security and capacity requirements for ERP are therefore often much higher. Audit expertise: Specialist expertise is required to effectively audit and control an ERP environment. The relative complexity of ERP systems has created specialization such that each specialist may know only a relatively small fraction of the entire ERPs functionality in a particular core module, e.g. FI auditors, who are required to audit the entire organizations business processes, have to maintain a good grasp of all the core modules to function effectively.

CONCLUSION
It is not possible to reengineer without IT support. IT is not only an enabler for reengineering it has also become an essential and integral part of all reengineering efforts. In the implementation of reengineering IT is crucial and it provides the skills and tools that are needed to effectively reengineer. 1. IT provides project management skills that are important in the successful implementation of reengineering as a project. 2. In the design phase of implementation of reengineering the capabilities of IT can be used to simulate a model of the design and there by validate the new design. 3. The disruptive power of IT helps in the design phase of implementation of reengineering. The disruptive power helps organizations to break all the rules and think inductively about the business that they are in to gain competitive advantage. 4. If not used properly IT can become an inhibitor of reengineering if the organizations IT Infrastructure capabilities are inadequate or inflexible. 5. IT capabilities of the organization should not directly influence the IT solutions that are needed for the company. 6. IT is an indispensable tool in implementation of reengineering in the way that IT supports redesigned business process and facilitates cross-functional workflow.

Companies have to understand that the role of IT in reengineering is not to automate the business process. In future companies will not be able to reengineer without involving IT department of the company. The staff of the IT department will become the members of the reengineering team.