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Enterprise Resource Planning
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Abeera Abbasi
Filza qudoos
Bilawal Abbasi
Kausar Gillani

INTRODUCTION:
Enterprise resource planning (ERP) is business management softwareusually a suite of
integrated applicationsthat a company can use to collect, store, manage and interpret data
from many business activities, including:

Manufacturing or service delivery

Marketing and sales

Inventory management

Shipping and payment

Product planning cost

ERP provides an integrated view of core business processes, often in real-time, using
common databases maintained by a database management system. ERP systems track
business resourcescash, raw materials, production capacityand the status of business
commitments: orders, purchase orders, and payroll. The applications that make up the system
share data across the various departments (manufacturing, purchasing, sales, accounting, etc.)
that provide the data.ERP facilitates information flow between all business functions, and
manages connections to outside stakeholders.
Enterprise system software is a multi-billion dollar industry that produces components that
support a variety of business functions. IT investments have become the largest category of
capital expenditure in United States-based businesses over the past decade. Though early
ERP systems focused on large enterprises, smaller enterprises increasingly use ERP systems.
The ERP system is considered a vital organizational tool because it integrates varied
organizational systems and facilitates error-free transactions and production. However, ERP
system development is different from traditional systems development. ERP systems run on a
variety of computer hardware and network configurations, typically using a database as an
information repository.

HISTORY:
Origin of "ERP"
The origin of ERPs goes back to the 1960s and 70s in the form of materials requirement
planning (MRP) systems. This precursor to ERP systems aimed to support inventory
requirements for manufacturing systems. These systems expanded to accommodate master
schedules that controlled the sequence of components for the final assembly of products. In
1972, five former IBM employees in Mannheim, Germany, created an ERP system with the
vision of an end-to-end business application that would address all of the needs of an
enterprise. In 1978, a mainframe-based ERP architecture was developed. It evolved to a
client-server platform in 1992.

ERP systems have grown in popularity astronomically. In 1993, ERP revenue in North
America was US $319 million; by1999, it grew to US $17.7 billion, representing a 55-fold
increase. In 2000, estimated revenue grew to US $23 billion, a 30 percent increase in just one
year. The Y2K preparation in 1998 and 1999 drove the implementation of ERP in many
organizations.
A number of ERP vendors have experienced occasional slumps in sales and revenue but the
overall long-term trend for ERPs has been continued growth.
ERP Vendors
ERP vendors include the following:

SAP (Systems, Applications and Products in Data Processing) is the global market
leader in ERPs; it has approximately 30 to 60 percent of the world market. The
strengths of its R/3 product include support for multi country, multicurrency
environments and wide scalability. The company spends a large percentage of its
revenues in research and development.

Oracle is the second-largest software company in the world. Its ERP product, Oracle
Applications, includes the popular Oracle Financials module. It has the reputation for
developing a product that can be interfaced with others to create a best-of-breed ERP
package. It should be pointed out that Oracle Applications should be distinguished
from the Oracle relational database management system, which often is part of other
ERP products such as PeopleSoft and SAP.

PeopleSoft has its origins in human resource management software that evolved to a
full feature product with the addition of other modules. However, its strength still
remains its human resource management systems. PeopleSoft has a major presence in
the US federal government.

Baan has developed a number of componentized

products. Recently, it has struggled financially
because of questionable financial reporting practices
and changes in leadership. However, it is still a
relatively dominant player in the ERP market.

JD Edwards has a product called One World with

origins in the AS/400 environment. Its target
customers are primarily smaller organizations with
less than 2,000 users.

Figure 1 shows the approximate market share by vendor.

There are many other ERP vendors, most of which are primarily aimed at specific markets.
Microsoft recently acquired Great Plains, a company traditionally known for its financial
management applications.

SAP, Oracle, PeopleSoft and other vendors have financial modules that are certified by the
US government's Joint Financial Management Improvement Program. This program supports
the improvement of financial management practices in the US government and is supported
by the US Treasury, General Services Administration, Office of Personnel Management and
Office of Management and Budget.
There are numerous other vendors, which support the companies listed previously. They
include consultants, trainers, implementers and others. These vendors constitute a major
expense to ERP end users in terms of implementation support and maintenance.

Benefits of ERP
Besides integrating organizations' activities, ERPs employ best practices that have been
proven in the real world. At least one ERP software package incorporates more than a
thousand best practices.
ERPs also enable organizational standardization. The user interface, the sequence of
operations for a process and system maintenance procedures can become common standards
across the organization.
ERPs improve information management by having a single database as opposed to multiple,
often duplicative systems. Because of this centralized data source, ERPs provide online and
real-time information and facilitate intra- and inter-organization communication and
collaboration.
Who Is Using ERPs?
In the private sector, 70 percent of the 1,000 largest companies have implemented ERPs.
Major corporations include Microsoft, IBM, General Motors, Hewlett Packard, CSX, Boeing
and Mercedes-Benz.
ERPs only recently have been implemented within the US federal government. In the US
Department of Defense, agencies either planning to implement or who have implemented
ERP modules include:

Defense Logistics AgencyBusiness systems modernization

National Security Agency/Defense Intelligence Agency/National Imagery and

Mapping Agency--Integrated human resources and payroll solution across all three
agencies

Defense Finance and Accounting System (DFAS)Defense procurement pay

system--Contract and vendor pay entitlements; DFAS corporate database (DCD)
Standard general ledger for the Air Force

Navy--Interim modernization for the NavyAccounting, payroll, human resources,

acquisitions, procurement, operations

Army--Wholesale logistics modernization program

Non-defense agencies implementing or that have implemented ERPs include:

Interior, Health and Human Services, General Services Administration, Labor, Veteran
AffairsHuman resources

Treasury's US MintConsolidated information system (COINS) and human

resources

NASA Jet Propulsion LabFinancial and human resources including payroll

Energy--Administration and resource management

Transportation, CommerceFinancials

Expansion:
ERP systems experienced rapid growth in the 1990s, because the year 2000 problem and
introduction of the euro disrupted legacy systems. Many companies took the opportunity to
replace their old systems with ERP.[11]
ERP systems initially focused on automating back office functions that did not directly affect
customers and the general public. Front office functions, such as customer relationship
management (CRM), dealt directly with customers, or ebusiness systems such as e
commerce, egovernment, etelecom, and efinanceor supplier relationship management
(SRM) became integrated later, when the Internet simplified communicating with external
parties.[citation needed]
"ERP II" was coined in 2000 in an article by Gartner Publications entitled ERP Is Dead
Long Live ERP II. It describes webbased software that provides realtime access to ERP
systems to employees and partners (such as suppliers and customers). The ERP II role
expands traditional ERP resource optimization and transaction processing. Rather than just
manage buying, selling, etc.ERP II leverages information in the resources under its
management to help the enterprise collaborate with other enterprises. ERP II is more flexible
than the first generation ERP. Rather than confine ERP system capabilities within the
organization, it goes beyond the corporate walls to interact with other systems. Enterprise
application suite is an alternate name for such systems.
Developers now make more effort to integrate mobile devices with the ERP system. ERP
vendors are extending ERP to these devices, along with other business applications. Technical
stakes of modern ERP concern integrationhardware, applications, networking, supply

chains. ERP now covers more functions and rolesincluding decision making, stakeholders'
relationships, standardization, transparency, globalization, etc.
Characteristics:
ERP (Enterprise Resource Planning) systems typically include the following characteristics:

An integrated system that operates in (or near) real time without relying on periodic
updates.

A common database that supports all applications

A consistent look and feel across modules

Installation of the system with elaborate application/data integration by the

Information Technology (IT) department, provided the implementation is not done in
small steps.

Functional areas:
An ERP system covers the following common functional areas. In many ERP systems these
are called and grouped together as ERP modules:

Financial accounting: General ledger, fixed asset, payables including vouchering,

matching and payment, receivables cash application and collections, cash
management, financial consolidation

Management accounting: Budgeting, costing, cost management, activity based costing

Human resources: Recruiting, training, rostering, payroll, benefits, 401K, diversity

management, retirement, separation

Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity,

workflow management, quality control, manufacturing process, manufacturing
projects, manufacturing flow, product life cycle management

Order Processing: Order to cash, order entry, credit checking, pricing, available to
promise, inventory, shipping, sales analysis and reporting, sales commissioning.

Supply chain management: Supply chain planning, supplier scheduling, product

configurator, order to cash, purchasing, inventory, claim processing, warehousing
(receiving, putaway, picking and packing).

Project management: Project planning, resource planning, project costing, work

breakdown structure, billing, time and expense, performance units, activity
management

Customer relationship management: Sales and marketing, commissions, service,

customer contact, call center support - CRM systems are not always considered part
of ERP systems but rather Business Support systems (BSS).

Data services : Various "selfservice" interfaces for customers, suppliers and/or

employees

EXAMPLE OF ERP IN AN ORGANIZATION:

Beverage Distributor Expands Nationally
Talking Rain is a beverage distributor based in Washington State. What struck me about this
company was the amount of time they were wasting with manual processes in their old
system. To correlate customer purchases to the appropriate accounts, staff needed to manually
enter the data from separate tables into a spreadsheet and then further analyze it. To perform
historical analysis, employees would once again have to type information from the ERP
system into a spreadsheet and then compare it to the same data from a year before. Simply
extracting the data for even a months worth of company transactions could take as long as 15
minutes. That time really added up in lost productivity, not to mention the frustration
experienced by employees.
Now that Talking Rain has installed a new ERP solution (Microsoft Dynamics NAV) all the
company information is within one system, instead of on countless spreadsheets. The
company leadership gains holistic insight into the business. The president of the company,
Kevin Klock, says that now he has a true, global view of the business.
Of Talking Rains 100 employees, 12 people in key roles across accounting and
manufacturing are in and out of the ERP system every day. They are using the solution for
accounts payable, accounts receivable, financial reporting, and manufacturing planning and
scheduling. That includes handling all inventory turnover, from initiating production orders to
scheduling, consuming, and shipping those orders.
The company expects their closing time to be cut in half, going from 8 to 10 days to 4 to 5
days. Now they can perform ad-hoc reports and queries within minutes, not days. They have
reduced out-of-stocks, delayed shipments, and the risk of losing invoices and orders, all of
which adds up to a much better experience for customers.
They are seeing double digit growth in revenue and expanding nationally without adding
additional headcount. Each person is able to be more productive with the new system. And
that is certainly a competitive advantage.
IMPLEMENTATION:
ERP's scope usually implies significant changes to staff work processes and
practices.Generally, three types of services are available to help implement such changes
consulting, customization, and support. Implementation time depends on business size,

number of modules, customization, the scope of process changes, and the readiness of the
customer to take ownership for the project. Modular ERP systems can be implemented in
stages. The typical project for a large enterprise takes about 14 months and requires around
150 consultants. Small projects can require months; multinational and other large
implementations can take years. Customization can substantially increase implementation
times.
Besides that, information processing influences various business functions e.g. some large
corporations like Wal-Mart use a just in time inventory system. This reduces inventory
storage and increases delivery efficiency, and requires up-to-date-data. Before 2014, Walmart
used a system called Inforem developed by IBM to manage replenishment.
Process preparation
Implementing ERP typically requires changes in existing business processes. Poor
understanding of needed process changes prior to starting implementation is a main reason
for project failure. The problems could be related to the system, business process,
infrastructure, training, or lack of motivation.
It is therefore crucial that organizations thoroughly analyze business processes before they
implement ERP software. Analysis can identify opportunities for process modernization. It
also enables an assessment of the alignment of current processes with those provided by the
ERP system. Research indicates that risk of business process mismatch is decreased by:

Linking current processes to the organization's strategy

Analyzing the effectiveness of each process

Understanding existing automated solutions

ERP implementation is considerably more difficult (and politically charged) in decentralized

organizations, because they often have different processes, business rules, data semantics,
authorization hierarchies, and decision centers. This may require migrating some business
units before others, delaying implementation to work through the necessary changes for each
unit, possibly reducing integration (e.g., linking via Master data management) or customizing
the system to meet specific needs.
A potential disadvantage is that adopting "standard" processes can lead to a loss of
competitive advantage. While this has happened, losses in one area are often offset by gains
in other areas, increasing overall competitive advantage.
Configuration
Configuring an ERP system is largely a matter of balancing the way the organization wants
the system to work with the way it was designed to work. ERP systems typically include
many settings that modify system operations. For example, an organization can select the
type of inventory accountingFIFO or LIFOto use; whether to recognize revenue by
geographical unit, product line, or distribution channel; and whether to pay for shipping costs
on customer returns.

Two tier enterprise resource planning

Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems
at once: one at the corporate level and one at the division or subsidiary level. For example, a
manufacturing company uses an ERP system to manage across the organization. This
company uses independent global or regional distribution, production or sales centers, and
service providers to support the main companys customers. Each independent center or
subsidiary may have its own business models, workflows, and business processes.
Given the realities of globalization, enterprises continuously evaluate how to optimize their
regional, divisional, and product or manufacturing strategies to support strategic goals and
reduce time-to-market while increasing profitability and delivering value. With two-tier ERP,
the regional distribution, production, or sales centers and service providers continue operating
under their own business modelseparate from the main company, using their own ERP
systems. Since these smaller companies' processes and workflows are not tied to main
company's processes and workflows, they can respond to local business requirements in
multiple locations.
Factors that affect enterprises' adoption of two-tier ERP systems include:

Manufacturing globalization, the economics of sourcing in emerging economies

Potential for quicker, less costly ERP implementations at subsidiaries, based on

selecting software more suited to smaller companies

Extra effort, (often involving the use of Enterprise application integration is required
where data must pass between two ERP systems Two-tier ERP strategies give
enterprises agility in responding to market demands and in aligning IT systems at a
corporate level while inevitably resulting in more systems as compared to one ERP
system used throughout the organization.

Customization
ERP systems are theoretically based on industry best practices, and their makers intend that
organizations deploy them as is. ERP vendors do offer customers configuration options that
let organizations incorporate their own business rules, but often feature gaps remain even
after configuration is complete.
ERP customers have several options to reconcile feature gaps, each with their own pros/cons.
Technical solutions include rewriting part of the delivered software, writing a homegrown
module to work within the ERP system, or interfacing to an external system. These three
options constitute varying degrees of system customizationwith the first being the most
invasive and costly to maintain. Alternatively, there are non-technical options such as
changing business practices or organizational policies to better match the delivered ERP
feature set. Key differences between customization and configuration include:

Customization is always optional, whereas the software must always be configured

before use (e.g., setting up cost/profit center structures, organizational trees, purchase
approval rules, etc.).

The software is designed to handle various configurations, and behaves predictably in

any allowed configuration.

The effect of configuration changes on system behavior and performance is

predictable and is the responsibility of the ERP vendor. The effect of customization is
less predictable. It is the customer's responsibility, and increases testing activities.

Configuration changes survive upgrades to new software versions. Some

customizations (e.g., code that uses predefined "hooks" that are called before/after
displaying data screens) survive upgrades, though they require retesting. Other
customizations (e.g., those involving changes to fundamental data structures) are
overwritten during upgrades and must be re-implemented.

Customization advantages include that it:

Improves user acceptance

Offers the potential to obtain competitive advantage vis--vis companies using only
standard features

Customization disadvantages include that it:

Increases time and resources required to implement and maintain

Inhibits seamless communication between suppliers and customers who use the same
ERP system uncustomised

Can create over reliance on customization, undermining the principles of ERP as a

standardizing software platform