Enterprise Resource Planning

“ERP provides backbone to E-business”. E-Business is based on supply chain management

from procurement of raw materials to provide finished goods to the end users.

*CONCEPT OF ERP:-
Successful companies are recognizes because of high level of interaction and co-ordination
along the supply chain. This will be an e-ingredient of their continuous success.

Tomorrow’s winner will be those business that can be most effectively gather and quickly act
upon crucial information.

There is a need for an infrastructure that will be provide information across functions and
location within in the organization. The ERP software fulfils this need.

A success of business of an organization largely depends on the management of its resources

through properly planning, i.e. an enterprise (E), its resources {R} and planning for the
management of these resources {P} together form the concept called ERP.

“ERP is total automated business solution”.

*DEFINITION OF ERP:-
ERP is a development of an enterprise wide management system, the modern version of
manufacturing resources planning system [MRP-1]. ERP is a planning of all the resources of
enterprise for utilizing their best synergistic value.

ERP is essentially an activity that encompasses the entire organization irrespective of its size,
no. of plants and locations. ERP does not blindly automate and therefore if a certain function
is not possible to automate then it may not exist under ERP. ERP takes into amount not only
company’s internal issues but also external factors in terms of competition, time to market,
etc.

*SCOPE OF ERP:-
All the department of the company normally covered under the scope of ERP. Therefore
finance and accounting department, logistics department, HR, marketing, IT, production,
manufacturing department, etc. are the part of ERP.

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*FEATURES OF ERP
1. ERP provides total business solution using electronic platform (IT platform).
2. ERP is futuristic because of its flexibility.
3. Accommodating variety.
4. Integrated management information.
5. Seamless integration.
6. Resources management (both horizontal and vertical integration).
7. E- supply management.
8. Integrated data model (central data depositary).
9. The modern enterprise paradigm.
10. Applicable to all the functions of enterprise.
11. Decision support features.
12. Evaluation with the automated systems.

*ORIGIN AND EVOLUTION OF ERP:-

The origin of ERP has a long history. The package like ERP was gradually become essentials
because of following reasons:-
1. Slowly the need was felt to integrate several segment of enterprise and go beyond back
office and front office.
2. With the growth of the business requirements, the concept of supply chain management,
just in time, manufacturing resources planning and ERP have become compulsory editions.
3. New dynamics of business, forced the corporates to implement the ERP solutions.
4. Shrinking geographical boundaries integration of currencies, decreasing product life cycles,
reducing profit margins, need to raise productivity, etc. Each of these problems is addressed
by ERP solutions.
5. The physical inventory, financial information’s, market dynamics and human resources are
to be properly pooled and maintained in ERP solutions.
6. With liberation and globalization, any company can target the global market and ERP is
useful for that.
7. For small organization, some economical ERP solutions are available and the cost of
implementation of ERP is gradually coming down.
Because of above reasons ERP systems evolved in various business and became the reality of
the business world.

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*BENEFITS OF ERP

TANGIBLE BENEFITS-
1. Reduction of lead time by 60%.
2. 99% on time shipments.
3. 100% growth in business in a year or two.
4. Increase of inventory turnover by 30%.
5. Cycle time cut to the 80% (exact time to produce one unit of product).
6. Work in progress reduced to 70%.

INTANGIBLE BENEFITS:-
1. Better customer satisfaction.
2. Improved vendor performance.
3. Increase flexibility.
4. Reduce quality costs.
5. Improved resource utility.
6. Improved information accuracy.
7. Improve decision making capability.
8. Sharing information seamlessly across the enterprise without any geographical boundaries.

CURRENT TRENDS IN ERP

1. ERP is available with niche focus but for all subsidiaries.
2. More ERP choices with cloud solutions (the move to SAAS).
3. Mobile integration is becoming mandatory for ERP.
4. Data handling for competitive advantages.
5. Intelligence ERP systems [Business Intelligence].
6. Integration of ERP with the ‘Internet of Things’.
7. More competitive pricing.
8. Need for better ERP security.

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 Business Processes and Integration across Various Functions:-
In business organization, horizontal and vertical integration is possible in the following manner –
Marketing Finance HR Production
Strategic level

Tactical level

Supervisory level

Operational Level

Any business organization comprising the core business processes or activities related to the
business. In the above diagram all the business processes run by various departments are
shown horizontally, and different departments are shown vertically. With a proper integration
of these horizontals and verticals will give a model of information-distribution throughout the
organization.

Based on business strategies (long term), various business models (department wise) can be
developed. These business models comprise various business processes of the related
departments. These processes managed and controlled by various individuals/employees
working in different departments. The ERP is developed to provide the required information,
distribution support to the departments to manage the processes that are part of the business
model.

Information Decision support

Work flow automation

Business Business Business

strategies Models processes

Department
ERP Databases
Team

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 The above is showing business process breakdown structure using this structure proper
information flow is maintained by the organization, which supports proper decisions making
and automation of work flow.
Planning for Selection of an ERP System:-
Following Guidelines will be useful for the selection for the ERP system-
1. Know your requirements (Internal requirement- lower level, middle and top level), (external
environment – inbound and outbound SCM).
2. Make sure vendor competencies match your requirement.
3. Insist on demos.
4. Check training and support resources.
5. Treat your ERP project as a configuration management project (People driven configuration).
6. Enlist the aid of consultants.
7. Do not (Cut short) skip when altering resources.
8. Identify both industry specific and general ERP package.
9. Include a software as a service solution and other solution in assessment.
10. Plan for the future (choose an ERP solution that can grow with your company).
11. Buy only the modules you need.
12. Calculate the true total cost of ownership of each ERP offering.
13. Insist on a demonstration of the ERP solution to all the related topics.
14. Take advantage of your peer’s feedback on ERP.

ERP Deployment Model:-

Following three models are possible for the deployment of the ERP:-
1. “ON PREMISES” ERP SYSTEMS ARE TRADITIONAL LICENSE MODEL

ERP systems owned &

Mobile hosted on organizations
Internal cloud
users server

Organization Warehouse

Supplier Customers

Customers Customers

*Advantages of a premise ERP System:-

1. Its gives the user the greatest control and the flexibility.
2. Modification are easily possible.
3. Control over your data and you can manage it anyway you wish.
4. You can build your systems to your own specifications.

*Disadvantage of a premise ERP:-

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 1. High initial cost.
2. Long term capital investment.
3. Costly and complex software implementation, maintenance and upgrades.

2. HOSTED ERP SYSTEM USING PAAS AND IAAS:-

Two types of clouds environment are PAAS (platform as a service) and IAAS (Infrastructure
as a service) possible to be hosted on ISP (Internet service provider) servers.

ERP systems owned & hosted on ISP (Hosting Company)

Mobile users Internal cloud organizations server

Warehouse
Organization

Supplier Customers

Customers Customers

*ADVANTAGES of HOSTED ERP System:-

1. You own your own software and very less maintenance cost.
2. You have an option to bring your application back in house.

*DISADVANTAGES of HOSTED ERP system:-

1. Monthly hosting cost may exceed time to time by the hosting company.
2. You do not have direct access to the platform and internet infrastructure.
3. Less flexibility to integrate with other ERP solution.

3. ON DEMAND ERP SYSTEM USING SAAS:-

ERP VENDOR
ERP systems Rented & hosted on
Mobile users DATA cloud
vendor’s server

Warehouse
Organization

Supplier Customers
INTERNAL INTERNAL
INTERNAL USER USER USER
INTERNAL USER

*ADVANTAGES
1. SAAS solutions are financially attractive because you typically have no upfront cost to use
this system.

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2. SAAS ERP solutions can be implemented with relative ease and integrated faster into the
organizations day to day business processes.
3. It is a lead trend.

*DISADVANTAGES
1. SAAS vendors may over –inflate the cost of implementation and upgrades.
2. Less flexibility in comparison with on-premise solution.
3. Security and control are associate with third party ERP vendors.

Factors affecting adoption of ERP deployment model:

FACTORS SAAS On-premise ERP
1. Business process Simple, immature business Complex, well established
processes. business processes.
2. Employees Low tenure High tenure
3. Business model Stable with little changes Volatile with the constant
required. changes required.
4. Company size Small to medium Medium, large, global
5. IT skills Little IT skills Professional/sophisticated IT
skills.
6. IT Infrastructure Little Infrastructure Well established Infrastructure
7. Integration with other Little integrations Large integration to other
systems applications.
8. Control Little control Large control

Review of Business Process Using Business Process Reengineering (BPR):

BPR is the search for and the implementation of radicle changes in the business processes to
achieve a breakthrough results. It represents the radicle transition that companies must make
to keep pace with today’s ever changing global market. BPR is based on the following
concept “Business will be founded and built around the idea of re-unifying tasks into coherent
business processes.”

BPR revolves around information technology and continuously adopt changes using various
tools of information technology. It is the constant refinement of organization’s business
processes as per the need.

IT
BPR
Capabilities

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 BPR is the re-thinking of business processes to improve the speed, quality and the output of
production or services. The following steps are needed to go in for BPR-

1. Identify the key business processes and chart out companies vision, mission, and goals.
2. These key business process should be re-engineered to increase the effectiveness (output).
3. BPR team must establish the use of information processes.
4. Other potential benefits of IT infrastructure should be identified.
5. Start-up cost, training cost, networking cost etc. are vary with the size and scope of the IT
project. (ERP project).
6. Financial benefits can be judged with the help of cost benefit analysis.

ERP Selection Process:-

1. Pre evaluation servicing
2. Establish selection committee for evaluation.
3. Handling vendor’s
4. Role of the technology.
5. Identification of solution criteria.
SOME of the SOLUTION are given below:-
*ERP package should be in multi-language and multi-currency support.
* The package should have X number of installations out of liquid Y should be in business
sector.
*Cost of the package with all necessary modules should be less than solution of the package
“X” rupees.

QUESTIONS:-
1. What is ERP? Explain its evolution and features?
2. (A) Explain tangible and intangible benefits of ERP?
(B) Describe the current trends in ERP?
3. Explain ERP deployment models with their advantages and disadvantages?
4. (A) Explain planning for the selection of ERP systems?
(B) Explain step by step the process of selection of ERP systems?
5. What do you mean by BPR? How it is associate with ERP?

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 UNIT 3
FUNCTIONAL MODULE OF ERP SOFTWARE:

1. Financial management and costing module

2. HR module
3. Manufacturing module
 Production planning module
 Material management module
 Purchase module
 Quality management module
 Plant maintenance module
4. Marketing module
5. Sales and Distribution module
6. CRM module
7. Project management module

#1. Financial Modules of ERP:

1. Financial Accounting
i. General Ledger
ii. Account Receivables
iii. Account Payables
iv. Assets Accounting
v. Contract Accounting
vi. Time Accounting
vii. Cash Accounting
viii. Inventory Accounting
ix. Tax Accounting
x. Creation of different Financial Statements

2. Management Accounting
i. Profit Center Accounting
ii. Cost Center Accounting & Budgeting
iii. Project Accounting and Budgeting
iv. Product Cost Accounting
v. Transfer Pricing

3. Financial Supply Chain Management

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 i. Self-service Portal for Customers
ii. Collection Management
iii. Credit Management
iv. Dispute Management

4. Treasury Applications
i. Cash and Liquidity Management
ii. Financial risk Management
iii. Bank Account Management

5. Financial Management Module

i. Financial Planning and Visiting
ii. B/s Consolidation Service
iii. B/s Performance Management
iv. Activity Based Costing
v. Corporate Performance Management

#2. HR Module of ERP:

# SAP – HR module:-
SAP – HR solution is a part of SAP’s ERP offerings, which is mainly divided into two areas,
1. Talent management
2. Workforce process management

1. Talent management solution has following components-

- Recruitment
- Career Management
- Succession Management
- Enterprise Learning
- Employee Performance Management
- Compensation Management

2. Workforce process has following components-

- Employee Administration
- Benefits Management
- Organizational Management
- Time and Attendance
- Payroll and Legal Reporting
- Human capital Management Process and Forms.

#Oracle HR Solutions:-
Following components are offered by Oracle HR solutions
1. Global Core Human Capital Management - HR, Payroll, Advanced benefits.
2. Workforce Management – Time, Work, Force Scheduling and Labor.
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 3. Workforce Service Delivery – Self-service, HR Oracle Portal, Help Desk for HR.
4. Integrated Talent Management – i-Recruitment, Incentives, compensation, learning
Management.
5. HR Analysis – Oracle HR analysis, Daily Business Intelligence for HR.

#3. SALE AND DISTRIBUTION MODULE OF ERP:-

*Sales Order Cycle:-
1. Pre- sales activities including enquiry by customers.
2. Availability check in warehouse. [Material].
3. Sales order processing [customer credit check, order entry, billing etc.]
4. Inventory sourcing [purchase, outbound delivery etc.
5. Shipping [order packing at warehouse, transport management etc.]
6. Billing [invoice creation, credit\debit memos .etc.
7. Payment collection.
8. Sales and distribution documents preparation-

Following documents are prepared by sales and distribution module of ERP:-

Sales activity

Inquiry
Scheduling
Contract agreement
Quotation

Sales and order processing ORDER

Delivery Goods
issue

Billing Billing done

Marketing
Account
stock AC
receivable

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  Master files of sales and distribution module of ERP: - following master files are produced by
sales and distribution module of ERP.
1. Customer master data file.
2. Material master data file.
3. Condition master data file [terms and conditions for delivering to different customers.]
4. Route master file [transport channel of an outbound delivery].

*ERP System Support for Global Trade:-

1. Customer management (product classification custom duty calculation, custom master data).
2. Screening of suppliers.
3. Preference processing.
4. International trade rules.
5. Managing import and export license.
6. Managing import and export documentation.
7. Managing import and export processing.
8. Electronic communication with custom authorities and trade systems.
(SAP, Sabel)

*CRM Module of ERP: -

The following two software solutions for CRM are market leaders
1. SAP CRM solution
2. Oracle and Siebel CRM solution key capabilities of SAP CRM is divided into following three
broad categories. :-

1. Customer Engagement – In the customer engagement phase/module following key

capabilities are covered.
a. Marketing analytics- it includes market exploration, marketing planning lead analysis,
campaign planning and optimization.
b. Campaign management
c. Telemarketing
d. E- marketing
e. Lead management.

2. Business Transaction – In the business transition module following key capabilities are
covered.
I. Sales analytics – it includes sales and profit planning, pipeline and sales funnel analysis,
sales cycle analysis, sales organization analysis, facilitating and optimization of sales
processes.
II. Sales account and contact management
III. Opportunity management.
IV. Tele sales
V. Field sales
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 VI. Mobile sales
VII. E- Selling

3. Siebel Service module:-

I. Customer service.
II. Field service.
III. Service Analytics.

4. Siebel Contact Center Module:-

I. E-mail response.
II. Computer telephonic integration.
III. Customer dashboard.
IV. Contact management.
V. Workflow management.

#4. PRODUCTION PLANNING MODULE OF ERP:

Production, planning, control and execution is related with manufacturing resources planning. MRP-2
was the first ERP module developed in this functional are. Following functions are covered under this
module.

MRP-2 techniques Capacity Management Techniques

 Business plan -------------- resource planning
 Operation plan ---------------- rough cut capacity planning
 Master prod. schedule ------- capacity requirement planning
 Material requirement planning-------- capacity requirement planning
 Prod. Activity Control PAC----------- capacity control

1. Quality Management Module of ERP:-

ERP software support quality management process during all stages given below:-
I. Quality management during procurement and goods from vendors.
II. Quality inspection at goods received
III. Quality certificate at goods received
IV. Blocking of invoice/vendors based on quality inspection.
V. Appraisal cost calculation.
VI. Quality management standard reports.

Quality Management during Manufacturing

I. Inspection during production
II. Statically process control.
III. Test equipment calibration

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 Quality Management during Delivery
I. Delivery material as per customer’s quality specification.
II. Quality certification.
III. Quality inspection for delivery.
IV. Return and complaint handling.

2. Material Procurement and Inventory Management Module for ERP:-

ERP supports materials procurement process in the following manner:
1. Material procurement planning- the sources of supply
2. Selecting the vendors- determining the sources of supply
3. Purchase order creation.
4. Goods receipt.
5. Quality inspection.
6. Processing vendor payment and invoice verification.

Following processes are required:

a) Invoice entry.
b) Cross verification of invoice.
c) Invoice blocking.
d) Parking of invoice.
e) Credit/ debit memos.
f) Invoice reporting.

Inventory management processes in ERP includes the following:-

I. Inventory transaction processes- Following 4 types of inventory transaction supported by the
ERP system:
a) Good receipts.
b) Goods issued.
c) Reservation/ priority to have materials ready for issue at a later date or for a particular
purpose.
d) Stock transfer.
II. Inventory control processes- following inventory control processes are supported by the ERP
system.
a) Quantity control
b) Value control/ stock valuation.
III. Inventory planning processes- Following processes are supported by ERP systems.
1. Designing of better processes for inventory replenishment.
2. Supporting process of managing different inventory exceptions.
3. Taking scientific decisions on when to order and how much to order.

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IT Applications Related with ERP (IT infrastructure for ERP)
1. Business Process Reengineering (BPR).
2. Business Intelligence (BI) - Represents the tools and systems that play a key role in the
strategic planning process of the corporation.
3. Business Analytics (BA) is the practice of methodological exploration of an organized data
with emphasis on statistical data.
4. Data warehousing
5. Data mining.
6. Online Application/Analytics Processing (OLAP) fast analysis of shared multi-dimensional
information.
7. Product Life Cycle (PLC) Management, PLC refers to the succession of strategies used by
management as a product goes through its life cycle.
8. E-Supply Chain Management (E-SCM)
9. E-CRM
10. Geographic Information System (GIS) and GPS.
11. Intranet and Extranet
12. Web Portal and Vortal

ERP and Security –

Following measures can be used for providing security, ERP based systems-
1. Physical Access Restriction.
2. Passwords.
3. Firewalls and encryption.
4. Audit with audit control.
5. Remote and pro-active monitoring systems.
6. Back-ups.
7. Use of emerging security solutions.
8. Human security controls.

Prevention from authorized employee’s crime-

1. Check references.
2. Keep employee list up to date.
3. Don’t give more access than necessary.

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Prevention of ERP system from unauthorized (hacking) access.
1. Allow external parties only after proper identification check.
2. Make a policy that passwords are never to be spoken externally.
3. Make a policy that passwords are never to be left lying around near the computer.
4. Implement caller ID technology.
5. Invest is a paper- shredder to prevent snooping through the garbage.

E-commerce Framework and ERP:-

Sales-executives Managers
Organization

Website
Organizations Mobile Employees

Reporting and presenting

Business Intelligence E
Business analytics
R

P
CRM applications
Supply chain application

ISSUES IN CUSTOMIZING ERP SYSTEMS:-

During an ERP implementation, customization is required. Following points are important to consider
during customizations processes.
1. ERP affects almost all organizations including all branches and therefore during customization
local practices of each location is important to incorporate.
2. ERP forces competition to change and therefore during customization, competitive business
strategies and processes must be incorporate.
3. ERP forces business partners to become more competitive and during customizations business
partners must be involved in the processes.
4. ERP is the most important tool for business process re- engineering during customization it is
important to implement BPR practices.
5. ERP enforce best practices in an organization, during customizations it is important to
communicate employees so that they can mentally prepare for changes.

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6. ERP Fully utilizes the true potential of client server computing to device an enterprises product,
during IT customizations IT infrastructure must be ready as per standard.
7. ERP has changed the nature of information system functions and during customizations IT
professionals must be trained accordingly.
8. ERP has changed the nature of jobs in all functions b/s areas, during customization gaps between
existing and proposed system must be bridge property.
9. ERP implementation is very costly and: organization must not take any risk during
customizations.

TOP MANAGEMENT CONCERN ABOUT ERP: -

Top management of many companies are replacing their key business systems with ERP because of
following concerns-
1. To improve business performance (cycle time reduction, inventory reduction, improvement in
order fulfilment, etc.).
2. To support business growth requirements (new products, new customers, global expansion).
3. To provide flexible, integrated and real time decision support (improve responsive, across the
organization).
4. To eliminate limitations of legacy systems (insupportable technologies and other issues of
traditional systems).
5. To take advantages of the untapped mid-size markets (virtual market solutions in virtual markets).

IT INFRASTRUCTURES FOR ERP:

To implement ERP in an organizations following IT related infrastructures is required.
1. Software infrastructure – (operating system, ERP software modules, firewall and anti-viruses
software, utility programs, general purposed application software like MS- EXCEL, MS-
word, etc. driver software, protocols, and other network support software’s).
2. Hardware resources –(server- computers, client computers, wireless/moveable devices,
network hardware’s, furniture and other related infrastructure to install hardware).
3. Human ware infrastructure—Skilled workforce, that works on various ERP modules,
hardware engineers, software engineers, network engineers, information system executives
system analysts, data entry operators etc.

UNIT-5
 ERP Implementation Steps :-
1. Pre- evaluation screening.
2. Package evaluation.
3. Project planning phase.
4. Gap analysis.
5. Re- analysis.
6. Re- engineering
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 7. Customizations.
8. Testing.
9. Going live (Perform on software).
10. End user Training.
11. Post implementation maintenance.

 Constraints in ERP Implementation and Role of Consultant.

1. Inadequate requirement definition.
2. Resistance to change.
3. Inadequate resources.
4. Lack of top management support.
5. Lack of organizational readiness.
6. Inadequate training and education.
7. Inadequate expectations.
8. Poor package solution.
9. Poor project management.
10. Customization issues.
11. Long payback period.
12. Poor communication and cooperation.
13. Data quality costs.
14. Hidden implementation costs.
15. Improper integration.
16. Improper operations/ uses.

 Role of Vendors in ERP Implementation-

1. Competitive value of the software and conditions of payments must be clarify in advance.
2. List of deliverable like software, documents, etc. must be clearly specified.
3. Mode of delivery and installations help must be provided by vendors.
4. Copyright of ownership issues must require clarification from vendor side.
5. Software license agreement suggested by vendor should not have any hidden terms.

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