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Enterprise Resource Planning

BA4031 ENTERPRISE RESOURCE PLANNING LTPC 3003

COURSE OBJECTIVES:
 To exhibit the theoretical aspects of Enterprise Resource Planning.
 To provide practical implication on ERP Suite implementation.

UNIT I INTRODUCTION 8
Overview of enterprise systems – Evolution - Risks and benefits - Fundamental technology – warehouse management.
UNIT II ERP SOLUTIONS AND FUNCTIONAL MODULES 10
Overview of ERP software solutions, BPR, Project management, Functional modules-Organisational data, master data
and document flow.
UNIT III ERP IMPLEMENTATION 10
Planning Evaluation and selection of ERP systems - Implementation life cycle - ERP implementation, Methodology and
Frame work- Training – Data Migration. People Organization in implementationConsultants, Vendors and Employees.
UNIT IV POST IMPLEMENTATION 8
Maintenance of ERP- Organizational and Industrial impact; Success and Failure factors of ERP Implementation.
UNIT V EMERGING TRENDS ON ERP 9
Extended ERP systems and ERP add-ons -CRM, SCM, Business analytics - Future trends in ERP systems-web enabled,
Wireless technologies, cloud computing and Augmented reality.
TOTAL: 45 PERIODS
COURSE OUTCOMES:
1. Knowledge of risk and benefits associated with Enterprise Resource Planning.
2. Knowledge or ERP solutions and functional modules
3. Exposure to the implementation environment
4. Understanding of post implementational impact and maintenance of ERP
5. Knowledge of emerging trends on ERP
REFERENCES:
1. Alexis Leon, ERP demystified, second Edition Tata McGraw-Hill, 2008.
2. Simha R. Magal , Jeffrey Word, Integrated Business processes with ERP systems, John Wiley &
Sons, 2012.
3. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
4. Alexis Leon, Enterprise Resource Planning, second edition, Tata McGraw-Hill, 2008.
5. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Macmillan India, 2009
6. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice, Prentice Hall of India,
2006.
7. Summer, ERP, Pearson Education, 2008
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UNIT -I
UNIT I INTRODUCTION 8
Overview of enterprise systems – Evolution - Risks and benefits - Fundamental technology – warehouse
management

Overview of enterprise systems

Enterprise is a business organization. It comes from Old French, which means “something done.”
Those who start, operate, and run are called entrepreneurs.
An enterprise is a group of people working together, which has certain goal to achieve .
Usually enterprise have a manufacturing or production department,production planning department,
purchasing department, sales and distribution department, finance department, R&D department
and so on.
• Typical Business Process :
 A typical enterprise has many Departments/ Business units(BU).
 These Departments/ BU continuously communicate and exchange data with each other.
 The success of any organization lie’s in effective communication and data exchange within the Departments/ BU
as well as associated third party such as Vendors, Outsourcers and Costumers.
 Also known as Decentralized System.

Problems with Decentralized System

 Numerous disparate information system are developed individually over the time.
 Integrating the data becomes time and money consuming.
 Inconsistences and duplication of data.
 High inventory, material and human resource cost.

An enterprise system, It is a process that allows companies to integrate business processes, such as sales,
deliveries and accounts receivable, by sharing information across business functions and employee
hierarchies.
An enterprise resource planning (ERP) system, is a cross-functional information system that provides
organization-wide coordination and integration of the key business processes and helps in planning the
resources of an organization.
Enterprise resource planning, supply chain management and customer relationship management
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systems are each examples of enterprise systems

The purpose was to integrate all aspect of the business enterprise under one suite of software
applications.

in few words the differentiation between ERP and ES “Where ERP functionality ends the role of ES
begins.”
“Enterprise Resource Planning” is a term originally coined in 1990 by The Gartner Group to describe the
next generation of Material Requirements Planning (MRP) software.
The practice of consolidating an enterprise’s planning, manufacturing, sales and marketing efforts into
one management system.

 Combines all databases across departments into a single database that can be accessed by all
employees.

 ERP automates the tasks involved in performing a business process

• Centralized System :
 Data is maintained at a central location and is shared with various Departments.
 Departments have access information/ data of the other Departments/ BU/
•. Benefits of Centralized System
 Eliminates the duplication, discontinuity and redundancy in data.
 Provides information across departments in real time.
 Provides control over various business processes.
 Increase Productivity, better inventory management, promotes quality, reduced material cost, boosts
profits.
 Better Customers interaction, increased throughput, improves customer services.

AFTER ERP
https://www.slideshare.net/SiddharthModi1/complete-knowledge-of-enterprise-resource-planning-best-
ppt
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Business Functions and Business Process:

Business Functions

Organizations functional areas of operation:

• Marketing and Sales
• Production and Materials Managements
• Accounting and Finance,

• Human Resources etc.

Each functional area comprises a variety of business functions and business activities. Managers and
organizations have now started to think in terms of business processes rather than business functions.
A business process is a collection of activities that takes one or more kinds of inputs and creates an output
that is of value to the customer. The difference between a business function and a business process is that
a process cuts across more than one business function to get a task done.

ERP MEANING
Meaning : An ERP system refers to software that is integrated across multiple aspects of the processes of a
business.
ERP is a set of integrated business applications, or modules which carry out common business functions such as
general ledger, accounting, or order management.
Ex: IT software that integrates business activities across an enterprise
There are ERP solutions specifically designed for municipalities, school districts, and even upstream oil and gas
exploration/production. In addition, the wholesale and distribution sector is a frequent user of ERP software, often
with related functionality covering things such as warehouse management systems (WMS) and supply chain
management (SCM).
• Enterprise resource planning (ERP) is software designed to help companies store, manage, and
use data regarding their daily and regular processes.
• ERP keeps track of a wealth of information, including payroll, raw materials, business
commitments, purchase orders, and capacity for production.

The main aim of an enterprise resource planning system is to share information across all departments in a
business, this is all done in real-time and the data is only captured once.

This allows businesses to make more accurate and up to date decisions, as well as enabling employees to work
more efficiently.
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ERP is a package software solution that addresses the enterprise needs of an organization by tightly
integrating the various functions of an organization using a process view of the organization.

Many of the processes implemented in an ERP software are core processes such as order processing, order
fulfillment, shipping, invoicing, production planning, BOM (Bill of Material), purchase order, general
ledger, etc., that are common to all industry segments.

ERP software is ready-made generic software; it is not custom-made for a specific firm. ERP software
understands the needs of any organization within a specific industry segment. Many of the processes
implemented in an ERP software are core processes such as order processing, order fulfillment, shipping,
invoicing, production planning, BOM (Bill of Material), purchase order, general ledger, etc., that are
common to all industry segments.

ERP does not merely address the needs of a single function such as finance, marketing, production or HR;
rather it addresses the entire needs of an enterprise that cuts across these functions to meaningfully execute
any of the core processes.

ERP integrates the functional modules tightly. It is not merely the import and export of data across the
functional modules. The integration ensures that the logic of a process that cuts across the function is
captured genuinely. This in turn implies that data once entered in any of the functional modules
(whichever of the module ownsthe data) is made available to every other module that needs this data.
This leads to significant improvements by way of improved consistency and integrity of data.

ERP uses the process view of the organization in the place of function view, which dominated the
enterprise software before the advent of ERP.

DEFINITION OF ERP

Minahan (1998) defines ERP as a complex software system that ties together and automates the basic processes of
a business.

Researchers and practitioners have defined ERP in many different ways.

Kumar et al. (2000) define enterprise resource planning (ERP) systems as “configurable information
systems packages that integrate information and information-based processes within and across functional
areas in an organization”

Al-Mashari and Zairi (2000) states that ERP represent an optimal enterprise-wide technology
infrastructure. The basic architecture of an ERP system builds on one database, one application, and a
unified interface across the entire enterprise.

Nah et al. (2001) defines ERP as “An enterprise resource planning (ERP) system istypically defined
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as a packaged business software system that facilitates a corporation tomanage the efficient and effective
use of resources (materials, human resources, finance, etc.) by providing a total integrated solution for
the organization’s information-processing requests, through a process-oriented view consistent across the
company.”

EVOLUTION OF ENTERPRISE RESOURCE PLANNING

https://www.erp-information.com/history-of-erp.html?ez_vid=8e3783cb943ae59f079d183aa5cdd653055dcedc#ezoic-
pub-video-placeholder-10
(VIDEO)
Enterprise resource planning (ERP) has evolved as a strategic tool, an outcome of over four decades. This
is because of continuous improvements done to the then available techniques to manage business more
efficiently and also with developments and inventions in information technology field.

Stages of ERP Evolution

Pre Material Requirement Planning (MRP) stage(1960)

Prior to 1960s businesses generally relied on traditional ways of managing inventories to ensure smooth
functioning of the organizations. These theories are popularly known as ‘Classical Inventory Management
or Scientific Inventory Control Methods’. Most popularly used among them were Economic Order Quantity
(EOQ); Bill of Material (BOM) etc. However these systems had very limited scope.

ERP system has evolved from the Material Planning System of 1980’s. There are various phases through
which this evolution process has gone through. The various phases of development of resource planning
system in relation to time and evolution of concept of ERP.

Material Requirement Planning (MRP) (MID 1970)

MRP was the fundamental concept of production management and control in the mid-1970s and
considered as the first stage in evolution of ERP. Assembly operations involving thousands of parts such
as automobile manufacture led to large inventories. The need to bring down the large inventory levels
associated with these industries led to the early MRP systems that planned the order releases. Such planned
order releases ensured proper time phrasing and accurate planning of the sub-assembly items, taking
into account complex sub-assembly to assembly relationships characterized by the Bill of Materials.
Example:
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A typical example is a bicycle manufacture. To manufacture 100 units of bicycles, one needs 200 wheels,
100 foot-pedals, and several thousands of spokes. On a given day, a plant may have 40 units of complete
bicycles in stock, 57 units of wheels, 43 units of foot-pedals and 879 units of spokes. If the plant is to
assemble 20 units of bicycles for the next 4 days of production, wheels and spokes-is a non trivial problem.
If the independent demand of the spare parts is also to be taken into account, one can visualize the
complexity of it.

A typical automobile plant with hundreds, if not thousands of parts, has to face problems that are in order
of magnitude even more difficult. MRP systems address this need. Using the processing power of
computers, databases to store lead-times and order quantities andalgorithms to implement Bill-of-Material
(BOM) explosion, MRP systems brought considerable order into the chaotic process of material
planning in a discretemanufacturing operation.
Essentially MRP addresses a single task in manufacturing alone. Material requirement planning (MRP)
system was adopted by firms for creation and maintenance of master data and bill of material across all
products and part within an organization. MRP on the other hand was an outgrowth of bill of material
(BOM) processing, which is purchase order management that utilizes parts list management and parts
development.

Manufacturing Resources Planning II (MRP- II) (1980S)

A natural evolution from the first generation MRP systems was the manufacturing planning systems MRP
II that addressed the entire manufacturing function and not just a single task within the manufacturing
function. MRP II went beyond computations of the materials requirement to include loading and
scheduling. MRP II systems could determine whether a given schedule of production was feasible, not
merely from material availability but also from other resource point of view.

Typically, the resources considered from MRP II systems would include production facilities, machine
capacities and precedence sequences. The increased functionality enabled MRP II systems provided a way
to run the system in a loop. First it was used to check the feasibility of a production schedule taking into
account the constraints.

Enterprise Resource Planning (ERP) (1990S)

The nineties saw unprecedented global competition, customer focus and shortened product life cycles. To
respond to these demands corporations had to move towards agile (quick moving) manufacturing of
products, continuous improvements of process and business process reengineering. This called for
integration of manufacturing with other functional areas including accounting, marketing, finance and
human resource development.

Activity-based costing would not be possible without the integration of manufacturing and accounting.
Mass customization of manufacturing needed integration of marketing and manufacturing. Flexible
manufacturing with people empowerment necessitated integration of manufacturing with the HRD
function. In a sense the 1990s truly called integration of all the functions of management. ERP systems
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are such integrated information systems build to meet the information and decision needs of an enterprise
spanning all the functions of management.

Extended ERP (E-ERP) (20TH CENTURY)

Further developments in the enterprise resource planning system concept have led to evolution of extended
ERP (E- ERP) or web - enabled ERP. With globalization on one hand and massive development in the
internet technology on the other, need for web based IT solution was felt. Thus E- ERP is development in
the field of ERP which involves the technology of Internet and World Wide Web (WWW) to facilitate the
functions of an organization around the web.

Enterprise Resource Planning II (ERP- II)

ERP II is the advanced step of E-ERP. It is the software package which has strengthened the original ERP
package by included capabilities like customer relationship management, knowledge management,
workflow management and human resource management. It is a web friendly application and thus
addresses the issue of multiple office locations.

ERP – A Manufacturing Perspective

ERP systems evolved out of MRP and MRP II systems. MRP systems addressed the single task of
materials requirements planning. MRP II extended the scope to the entire manufacturing function. The
manufacturing industry traditionally had a better climate to use computers. First of all the manufacturing
community being dominated by engineers had no computer phobia. Second the extensive use of Computer
Aided Drafting (CAD), Computer Aided Design (CAD) and Computer Aided Manufacturing (CAM) had
prepared the manufacturing function to use computers well, in fact exceptionally well. In fact
manufacturing engineers contributed significantly to the theoretical computer science by way of
contributions in the areas of graphics, computational geometry, significant visualization, feature
recognition etc.
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Large corporations like General Motors (GM), Ford, Hewlett Packard (HP), and Digital primarily viewed
themselves as manufacturing companies until the 1980s. Naturally complex MRP systems were considered
the ultimate in enterprise information systems. The investments in hardware and software to manage such
complex manufacturing solutions gave these systems avisibility unparalleled in the industry. Compared to
these systems accounting systems, financial systems or personnel information systems were relatively
inconsequential to the organization.

With the globalization of operations and the proliferation of computer networks, it was important that the
manufacturing organizations extend their information system across the supply chain. The supplier’s
information system spread across continents with complex combinations of hardware and software need
to be integrated. Similarly the dealer-distributor network had to be integrated with the manufacturing
information systems. The reduction in product life cycle necessitated a quick response manufacturing
system that had its ears tuned to the market.

This forced manufacturing information systems to have a tighter integration with marketing information
systems. The manufacturing flexibility had translated into mass customization calling for further
integration of information systems. The opening up of several world economies including that of the
Asian giants like China and India, the emergence of trade blocks and consolidated markets such as
European Union paved the need for accounting and finance functions to be tightly integrated with
manufacturing functions. It was not sufficient anymorejust to manufacture and sell but organizations
had to arrange for finance, comply with complex trade restrictions, barriers, and quotas.
The balance sheets needed to account for multiple currencies, multiple export import rules and regulations,
multiple accounting codes, practices, accounting periods. This necessitated further
integration of accounting and financial information systems with manufacturing systems. In fact with large
capacities built around the world particularly in Asian countries, outsourcing and contract manufacturing
became viable alternative even in the high-tech industries like semi conductor manufacturing.

Suddenly the need was for an Enterprise Information System that looks beyond the manufacturing function
to address inbound logistics, outbound logistics, manufacturing, materials managements, project
management, quality management, accounting, finance, salesand personnel management. It was nearly
impossible to integrate individual modules of information systems. What was necessary was a system that
addressed the enterprise needs from the design stage. ERP systems were the natural choice in this changed
scenario.

Differences between MRP and ERP.

MRP ERP
It means material requirement planning It means enterprise resource planning
It is a solo software It can integrate with other systems or software easily
You can integrate it with other software, It combines with other software or modules without any
but that is challenging. difficulty.
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It suits all industries and huge enterprises because it can fulfill

It suits manufacturing industries. the requirements of all the departments of large industries
with its modules.
Types of its users are minimum because
Types of its users are maximum with extended users in
only the manufacturing department uses
different departments.
it.
It is less expensive It is more expensive

BENEFITS OF ERP:

(a) Business integration: The first and the most important advantage lie in the promotion of
integration. The reason ERP packages are called integrated is the automatic data up gradation
between related business components, since conventional company information systems were
aimed at the optimization of independent business functions in business units, almost all were
weak in terms of the communication and integration of information that transcended the different
business functions in the case of large companies in particular, the timing of system structure
and directives differs from each product and department / functions and sometimes they are
disconnected.
For this reason, it has become an obstacle in the shift to new product and business classification.
In the case of ERP packages the data of related business functions is also automatically updated
at the time a transaction occurs. For this reason, one is able to grasp business details in real
time, and carry out various types of management decisions in atimely manner based o that
information.

(b) Flexibility: The second advantage of ERP packages is their flexibility. Diverse multi functional
environments such as language, currency, accounting standards and so on are covered in one
system and functions that comprehensively managed multiple locations that span a company are
packaged and can be implemented automatically. To cope with company globalization and
system unification, this flexibility is essential, and one could say that it has major advantages,
not simply for development and maintenance, but also in terms of management.

(c) Better analysis and planning capabilities: Yet another advantage is the boosting of planning
type functions. By enabling the comprehensive and unified management of related business and
its data, it becomes possible to fully utilize many types of decision support
systems and stimulation systems. Furthermore, since it becomes possible to carry out flexibility
and in real time the feeling and analysis of data from a variety of dimensions, one is able to give
decision makers the information they want, thus enabling them to make better and informed
decisions.

(d) Use of latest technology: The fourth advantage is the utilization of latest developments in
information technology (IT). The ERP vendors were very quick to realize that in order to grow
and to sustain that growth: they have to embrace the latest developments in the field of
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information technology. So they quickly adopted their systems to take advantages of the latest
technologies like open systems, client server technology, internet/ intranet, computer aided
acquisition and logistics support, electronic commerce etc. It is this quick adaptation to the latest
changes in information technology that makes the flexible adaptation to changes to future
business environments possible. It is this flexibility that makes the incorporation of the latest
technology possible during the system customization, maintenance and expansion phases.

(e) Reduced inventory and inventory carrying cost: The manufacturing nature of many ERP
users makes the issue of process and material costs savings paramount. The main factor behind
these savings is that implementation of the ERP system allows customers to obtain information
on cost, revenues and margins, which allow it to better, manage its overall material cost structure.
This ability to manage costs is best seen in savings that organizations can obtain in their inventory
systems. Customers can perform a more complete inventory planning and status checking with
the ERP system.

These checks and plans reveal existing surpluses or shortages in supplies. Improved planning
and scheduling practices typically lead to inventory reductions to the order of 20 per cent or
better. This provides not only a one time reduction in assets (cost of the material stocked), but
also provides ongoing savings of the inventory carrying costs. The cost of carrying inventory
includes not only interest but also the costs of warehousing, handling, obsolescence, insurance,
taxes, damage and shrinkage.

(f) Reduced manpower cost: Improved manufacturing practices lead to fever shortages and
interruptions and to less rework and overtime. Typical labor savings from a successful ERP
system are a 10 per cent reduction in direct and indirect labor costs. By minimizing rush
jobs and parts shortages, less time is needed for expediting, material handling, extra setups,
disruptions and tracking splits lots odd jobs that have been set aside. Production supervisors have
better visibility of required work and can adjust capacity or loads to meet schedules. Supervisors
have more time for managing, directing and training people. Production personnel have more
time to develop better methods and improve quality.

(g) Reduced material costs: Improves procurement practices lead to better vendor negotiations
for prices, typically resulting in cost reductions of 5 per cent or better. Valid schedules permit
purchasing people to focus on vendor negotiations and quality improvements rather than
spending their time on shortages and getting material at premium prices. ERP systems provide
negotiation information, such as projected material requirements by commodity group and
vendor performance statistics. Giving suppliers better visibility of future requirements help them
achieve efficiencies that can be passed on as lower material costs.

(h) Improves sales and customer service: Improved coordination of sales and production leads to
better customer service and increased sales. Improvements in managing customer contacts,
making and meeting delivery promises, and shorter order to ship lead times, lead to higher
customer satisfaction, goodwill and repeat orders. Sales people can focus on selling instead of
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verifying or apologizing for late deliveries. In custom product environment, configurations can
be quickly identified and prices, often by sales personnel or even the customer rather than the
technical staff.
Taken together, these improvements in customer service can lead to fewer lost sales and actual
increase in sales, typically 10 per cent or more. ERP systems also provide the ability to react to
changes in demand and to diagnose delivery problems. Corrective actions can be taken early
such as determining shipment priorities, notifying customers of changes to promise delivery
dates, or altering production schedules to satisfy demand.

(i) Efficient financial management: Improves collection procedures can reduce the number of
days of outstanding receivables, thereby providing additional available cash. Underlying these
improvements is fast, accurate invoice creation directly from shipment transactions, timely
customer statements and follows through on delinquent accounts. Credit checking during order
entry and improved handling of customer inquires further reduces the number of problem
accounts. Improved credit management and receivable practices typically reduce the days of
outstanding receivables by 18 per cent or better. Trade credit can also be maximized by taking
advantage by supplier discounts and cash planning, and paying only those invoices with
matching recipients. This can lead to lower requirements for cash-on- hand.

The benefits from ERP come in three different forms i.e. in the short-term, medium-term and
long-term. When initially implemented, in a year of the organization going live with ERP, it helps
in streamlining the operational areas such as purchase, production, inventory control, finance and
accounts, maintenance, quality control, sales and distribution, etc. This benefit is in form of
‘automating’ the transactions which promises accuracy, reliability, availability and consistency of
data.

RISK/ DISADVANTAGE / DRAWBACKS IN ERP:

Even in a single site, implementing ERP means "Early Retirement Probably." An ERP packageis
so complex and vast that it takes several years and millions of dollars to roll it out. It also requires
many far-flung outposts of a company to follow exactly the same business processes. In fact,
implementing any integrated ERP solution is not as much a technological exercise but an
"organizational revolution." Extensive preparation before implementation is the key to success.
Implementations carried out without patience and careful planning will turn out to be corporate root
canals, not competitive advantage. Several issues must be addressed when dealing with a vast ERP
system, and the following sections discuss each of them in detail.

Top Management Commitment

Implementing an ERP system is not a matter of changing softwaresystems, rather it is a matter of

repositioning the company and transforming the business practices. Due to enormous impact on the
competitive advantage of the company, top management must consider the strategic implications of
implementing an ERP solution.
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Management must ask several questions before embarking on the project. Does the ERP system
strengthen the company's competitive position? How might it erode the company's competitive
position? How does ERP affect the organizational structure and the culture? What is the scope of the
ERP implementation -- only a few functional units or the entire organization? Are there any
alternatives that meet the company's needs better than an ERP system? If it is a multinational
corporation, the management should be concerned about whether it would be better to roll the system
out globally or restrict it to certain regional units?

Management must be involved in every step of the ERP implementation. Some companies makethe
grave mistake of handing over the responsibility of ERP implementation to the technology
department. This would risk the entire company's survival because of the ERP system's profound
business implications.

It is often said that ERP implementation is about people, not processes or technology. An
organization goes through a major transformation, and the management of this change must be
carefully planned (from a strategic viewpoint) and meticulously implemented. Many parts of the
business that used to work in silos now have to be tightly integrated for ERP to work effectively.
Cutting corners in planning and implementation is detrimental to a company.

The top management must not only fund the project but also take an active role in leading the change.
A review of successful ERP implementations has shown that the key to a smooth rollout is the
effective changemanagement from top. Intervention from management is often necessary to resolve
conflicts and bring everybody to the same thinking, and to build cooperation among the diverse
groups in the organization, often times across the national borders.
Top management needs to constantly monitor the progress of the project and provide direction to
the implementation teams.

The success of a major project like an ERP implementation completely hinges on the strong,
sustained commitment of top management. This commitment when percolated down through the
organizational levels results in an overall organizational commitment. An overall organizational
commitment that is very visible, well defined, and felt is a sure way to ensure a successful
implementation.

Reengineering

Implementing an ERP system involves reengineering the existing business processes to the best
business process standard. ERP systems are built on best practices that are followed in theindustry.
One major benefit of ERP comes from reengineering the company's existing way of doing business.
All the processes in a company must conform to the ERP model. The cost and benefits of aligning
with an ERP model could be very high. This is especially true if the company plans to roll out the
system worldwide. It is not very easy to get everyone to agree to the same process. Sometimes
business processes are so unique that they need to be preserved,and appropriate steps need to be
taken to customize those business processes.
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An organization has to change its processes to conform to the ERP package, customize the software
to suit its needs, or not be concerned about meeting the balance 30 percent. If the package cannot
adapt to the organization, then organization has to adapt to the package and change its procedures.
When an organization customizes the software to suit its needs, the total cost of implementation rises.
The more the customization, the greater the implementation costs. Companies should keep their
systems "as is" as much as possible to reduce the costs of customization and future maintenance and
upgrade expenses.
Integration
There is a strong trend toward a single ERP solution for an entire company. Most companies feel that
having a single vendor means a "common view" necessary to serve their customers efficiently and
the ease of maintaining the system in future. Unfortunately, no single application can do everything
a company needs.

Companies may have to use other specialized software products that best meet their unique
needs. These products have to be integrated along with all the homegrown systems with the ERP
suite. In this case, ERP serves as a backbone, and all the different software are bolted on to the
ERP software. There are thirdparty software, called middleware, which can be used to integrate
software applications from several vendors to the ERP backbone.

Unfortunately, middleware is not available for all the different software products that are available
in the market. Middleware vendors concentrate only on the most popular packaged applications and
tend to focus on the technical aspects of application interoperability rather than linking business
processes.

Many times, organizations have to develop their own interfaces for commercial software applications
and the homegrown applications. Integration software also poses other kinds of problems when it
comes to maintenance. It is a nightmare for IS personnel to manage this software whenever there are
changes and upgrades to either ERP software or other software that is integrated with the ERP system.
For every change, the IT department will be concerned about which link is going to fail this time.

Integration problems would be severe if the middleware links the ERP package of a company to its
vendor companies in the supply chain. Maintaining the integration patchwork requires an inordinate
and ongoing expenditure of resources. Organizations spend up to 50 percent of theirIT budgets on
application integration? It is also estimated that the integration market (products and services) equals
the size of the entire ERP market.When companies choose bolt-on systems, it is advisable to contact
the ERP vendor for a list of certified third-party vendors. Each year, all the major ERP vendors
publish a list of certified third-party vendors. There are several advantages to choosing this option,
including continuous maintenance and upgrade support.

One of the major benefits of ERP solutions is the integration they bring into an organization.
Organizations need to understand the nature of integration and how it affects the entire business.
Before integration, the functional departments used work in silos and were slow to experiencethe
consequences of the mistakes other departments committed. The information flow was ratherslow,
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and the departments that made the mistakes had ample time to correct them before the errors started
affecting the other departments. However, with tight integration the ripple effect of mistakes made
in one part of the business unit pass onto the other departments in real time. Also, the original mistakes
get magnified as they flow through the value chain of the company.

For example, the errors that the production department of a company made in its bill of materials
could affect not only the operations in the production department but also the inventory department,
accounting department, and others. The impact of these errors could be detrimental to a company.
For example, price errors on purchase orders could mislead financial analysts by giving a distorted
view of how much the company is spending on materials.

Companies must be aware of the potential risks of the errors and take proper steps, such as monitoring
the transactions and taking immediate steps to rectify the problems should they
occur. They must also have a formal plan of action describing the steps to be taken if an error is
detected. A proper means to communicate to all the parties who are victims of the errors as soon as
the errors are detected is extremely important. Consider the recent example of a manufacturing
company that implemented an ERP package. It suddenly started experiencing a shortage of
manufacturing materials. Production workers noticed that it was due to incorrect bills of materials,
and they made necessary adjustments because they knew the correct number ofparts needed to
manufacturer.

However, the company did not have any procedures to notify others in case any errors were
found in the data. The domino effect of the errors started affecting other areas of business. Inventory
managers thought the company had more material than what was on the shelves, and material
shortages occurred. Now the company has mandatory training classes to educate employees about
how transactions flow through the system and how errors affect the activities in a value chain. It took
almost eight weeks to clean up the incorrect bills of materials in the database.

Companies implementing electronic supply chains face different kinds of problems with integration
of information across the supply chain companies. The major challenge is the impact automation has
on the business process. Automation changes the way companies deal with one another, from
planning to purchase to paying. Sharing and control of information seem to be major concerns.
Companies are concerned about how much information they need to share with their customers and
suppliers and how to control the information. Suppliers do not want their competitors to see their
prices or order volumes.

The general fear is that sharing too much information hurts their business. Regarding controlling
information, companies are aware that it is difficult to control what they own let alone control what
they do not own. Companies need to trust their partners and must coordinate with each other in the
chain. The whole chain suffers if one link is slow to provide information or access. The
management also must be concerned about the stress an automated supply chain brings within each
organization. For instance, a sales department may be unhappy that electronic ordering has cut it out
of the loop, while manufacturing may have to adjust to getting one week's notice to order changes
 16

and accommodate those changes into its production orders.

ERP Consultants

Because the ERP market has grown so big so fast, there has been a shortage of competent consultants.
The skill shortage is so deep that it cannot be filled immediately. Finding the right people and keeping
them through the implementation is a major challenge. ERP implementation demands multiple skills
-- functional, technical, and interpersonal skills. Again, consultants with
specific industry knowledge are fewer in number. There are not many consultants with all the
required skills.

One might find a consultant with a stellar reputation in some areas, but he may lack expertise in the
specific area a company is looking for. Hiring a consultant is just the tip of the iceberg. Managing a
consulting firm and its employees is even more challenging. The success or failureof the project
depends on how well you meet this challenge.

Implementation Time

ERP systems come in modular fashion and do not have to be implemented entirely at once. Several
companies follow a phase-in approach in which one module is implemented at a time.

For example, SAP R/3 is composed of several "complete" modules that could be chosen and
implemented, depending on an organization's needs. Some of the most commonly installed modules
are sales and distribution (SD), materials management (MM), production and planning, (PP), and
finance and controlling (FI) modules.

The average length of time for a "typical" implementation is about 14 months and can take as much
as 150 consultants. Corning, Inc. plans to roll out ERP in ten of its diversified manufacturing
divisions, and it expects the rollout to last five to eight years. The length of implementation is affected
to a great extent by the number of modules being implemented, the scope of the implementation
(different functional units or across multiple units spread outglobally), the extent of customization,
and the number of interfaces with other applications.

The more the number of units, the longer implementation. Also, as the scope of implementation
grows from a single business unit to multiple units spread out globally, the duration of
implementation increases. A global implementation team has to be formed to prepare common
requirements that do not violate the individual unit's specific requirements. This involves extensive
travel and increases the length of implementation.
Fundamental Technology of ERP:

When it comes time for your organization to evaluate ERP systems, whether you are replacing a
small business accounting package or an aging ERP, It is important to clarify the components. Each
piece (often called module) of the ERP system delivers different value for your organization. To get
 17

the most from the full system, make sure your evaluation team understands the fundamentals.

Financial Management

At the core of ERP are the financial modules, including general ledger, accounts receivable, accounts
payable, billing and fixed asset management. If your organization is considering the move to an ERP
system to support expansion into global markets, make sure that multiple currencies and languages
are supported.
Other functionality in the financial management modules will include budgets, cash-flow, expense
and tax reporting. The evaluation team should focus on areas that are most important to support the
strategic plans for your organization.

Business Intelligence

Business Intelligence (BI) has become a standard component of most ERP packages. In general, BI
tools allow users to share and analyze the data collected across the enterprise and centralized in the
ERP database. BI can come in the form of dashboards, automated reporting and analysis tools used
to monitor the organization business performance. BI supports informed decision making by
everyone, from executives to line managers and accountants.

Supply Chain Management

Supply Chain Management (SCM), sometimes referred to as logistics, improves the flow of materials
through an organization by managing planning, scheduling, procurement, and fulfillment, to
maximize customer satisfaction and profitability. Sub modules in SCM often include production
scheduling, demand management, distribution management, inventory management, warehouse
management, and procurement and order management.
Any company dealing with products, from manufacturers to distributors, needs to clearly define their
SCM requirements to properly evaluate an ERP solution.

Human Resource Management

Human resource management ERP modules should enhance the employee experience – from initial
recruitment to time tracking. Â Sub modules can include payroll, performancemanagement, time
tracking, benefits, compensation and workforce planning. Self-service tools that allow managers and
employees to enter time and attendance, choose benefits and manage PTO are available in many ERP
solutions.

Manufacturing Operations

Manufacturing modules make manufacturing operations more efficient through product

configuration, job costing and bill of materials management. ERP manufacturing modules often
 18

include Capacity Requirements Planning, Materials Requirements Planning, forecasting, Master

Production Scheduling, work-order management and shop-floor control.

Integration
Key to the value of an ERP package is the integration between modules, so that all of the core
business functions are connected. Information should flow across the organization so that BI reports
on organization-wide results.

ISSUES TO BE CONSIDER IN PLANNING DESIGN AND IMPLEMENTATION OF

CROSS FUNCTIONALINTEGRATED ERP SYSTEMS:

The problem with ERP packages is that they are very general and need to be configured to a specific
type of business. This customization takes a long time, depending on the specificrequirements
of the business. The extent of customization determines the length of the implementation. The more
customization needed, the longer it will take to roll the software out and the more it will cost to keep
it up-to-date.

For small companies, SAP recently launched Ready-to-Run, a scaled-down suite of R/3 programs
preloaded on a computer server. ERP vendors are now offering industry-specificapplications to cut
the implementation time down. SAP has recently outlined a comprehensive plan to offer 17 industry-
specific solutions, including chemical, aerospace and defense, insurance, retail, media, and utilities
industries. Even though these specific solutions would able to substantially reduce the time to
implement an application, organizations still have to customize the product for their specific
requirements.

Implementation Costs

Even though the price of prewritten software is cheap compared with in-house development, the total
cost of implementation could be three to five times the purchase price of the software. The
implementation costs would increase as the degree of customization increases. The cost of hiring
consultants and all that goes with it can consume up to 30 percent of the overall budget for the
implementation.

Once the selected employees are trained after investing a huge sum of money, it is a challenge to
retain them, especially in a market that is hungry for skilled SAP consultants. Employees could
double or triple their salaries by accepting other positions. Retention strategies such as bonus
programs, company perks, salary increases, continual training and education, and appeals to company
loyalty could work. Other intangible strategies such as flexible work hours, telecommuting options,
and opportunities to work with leading-edge technologies are also being used. Many companies
simply strive to complete the projects quickly for fear of poaching by head-hunting agencies and
other companies.
ERP Vendors
 19

As there are about 500 ERP applications available and there is some company consolidation going
on, it is all the more important that the software partner be financially well off. Selecting a suitable
product is extremely important. Gartner Group has BuySmart program, which has more than 1700
questions to help a company choose a suitable ERP package. Top management input is very
important when selecting a suitable vendor. Management needs to ask questions aboutthe vendor,
such as its market focus (for example, midsize or large organization), track record with customers,
vision of the future, and with whom the vendor is strategically aligned.

For a global ERP rollout, companies need to be concerned about if the ERP software is designed to
work in different countries. Also, the management must make sure the ERP vendor has the same
version of the software available in all the countries the company is implementing the system. Vendor
claims regarding global readiness may not be true, and the implementation team may need to cross-
check with subsidiary representatives regarding the availability of the software. Vendors also may
not have substantial presence in the subsidiary countries. It is important to evaluate if the vendor
staffers in these countries are knowledgeable and available. If there is a shortage of skilled staff,
bringing people from outside could solve the problem, but it would increase the costs of
implementation.

Selecting the Right Employees

Companies intending to implement an ERP system must be willing to dedicate some of their best
employees to the project for a successful implementation. Often companies do not realize the impact
of choosing the internal employees with the right skill set. The importance of this aspect cannot be
overemphasized. Internal resources of a company should not only be experts in the company's
processes but also be aware of the best business practices in the industry. Internal resources on the
project should exhibit the ability to understand the overall needs of the company and should play an
important role in guiding the project efforts in the right direction.

Most of the consulting organizations do provide comprehensive guidelines for selecting internal
resources for the project. Companies should take this exercise seriously and make the right choices.
Lack of proper understanding of the project needs and the inability to provide leadership and guidance
to the project by the company's internal resources is a major reason for the failureof ERP projects.
Because of the complexities involved in the day-to-day running of an organization, it is not
uncommon to find functional departments unwilling to sacrifice their best resources toward ERP
project needs. However, considering that ERP system implementation can be a critical step in forging
an organization's future, companies are better off dedicating their best internal resources to the project.
 20

Training Employees

Training and updating employees on ERP is a major challenge. People are one of the hidden costs of
ERP implementation. Without proper training, about 30 percent to 40 percent of front- line workers will
not be able to handle the demands of the new system. The people at the keyboard are now making
important decisions about buying and selling -- important commitments of the company. They need to
understand how their data affects the rest ofcompany. Some of the decisions front-line people make with
an ERP system were the responsibility of a manager earlier. It is important for managers to understand
this change in theirjob and encourage the front-line people to be able to make those decisions themselves.

Training employees on ERP is not as simple as Excel training in which you give them a few weeks of
training, put them on the job, and they blunder their way through. ERP systems are extremely complex
and demand rigorous training. It is difficult for trainers or consultants to pass on the knowledge to the
employees in a short period of time. This "knowledge transfer" gets hard if the employees lack computer
literacy or have computer phobia. In addition to being taught ERP technology, the employees now
have to be taught their new responsibilities. With ERP systems you are continuously being trained.
Companies should provide opportunities to enhance the skills of the employees by providing training
opportunities on a continuous basis to meet the changing needs of the business and employees.

Employee Morale

Employees working on an ERP implementation project put in long hours (as much as 20 hours per day)
including seven-day weeks and even holidays. Even though the experience is valuable for their career growth,
the stress of implementation coupled with regular job duties (many times employees still spend 25 to 50 percent
of their time on regular job duties) could decrease their morale rapidly. Leadership from upper management
and support and caring acts of projectleaders would certainly boost the morale of the team members. Other
strategies, such as taking the employees on field trips, could help
ERP and Related Technologies:
 21

Enterprise Resource Planning means the techniques and concepts for integrated management of
business as a whole, from the viewpoint of the effective use of management resources to improve
the efficiency of enterprise management. ERP systems serve an important function by integrating
separate business functions – materials management, product planning, sales, distribution,
financials, and other – into a single application. However, ERP systems have three significant
limitations.
 22

1. Managers cannot generate custom reports or queries without the help form the programmer and
this inhibits them from obtaining information quickly so that they can act on it for competitive
advantage.
2. ERP systems provide current status only, such as open orders. Managers often need to look past
the current status to find trends and patterns that aid better decision-making.

3. The data in the ERP application is not integrated with other enterprise or division systems and
does not include external intelligence.
There are many technologies that help to overcome these limitations. These technologies,
when used in conjunction with the ERP package will help overcoming the limitations of a
standalone ERP system and thus help the employees in making better decisions. Technologies,
which when integrated with the ERP system, will enable the companies to do business at Internet
speed. Some of the technologies are:
• Business Process Reengineering
• Data Warehousing and Data Marts
• Data Mining

• On-line Analytical Processing (OLAP)

• Supply Chain Management
• Customer Relationship Management (CRM)
• Geographical Information Systems (GIS)

• Intranets and Extranets

• Electronic Data Interchange (EDI)
• Digital Cash
• Cryptography etc.

• BUSINESS PROCESS RE-ENGINEERING :

• Dr.Michael Hammer defines BPR as “Business Reengineering is the fundamental
rethinking and radical re-design of business processes to achieve dramatic improvements
in critical, contemporary measures of performance such as cost, quality, service and
speed”.
• One of the main tools for making this change is information technology(IT).
 23

• Any BPR that fails to understand the importance of IT and does the pre-BPR analysis and
planning phases without considering the various IT options available and the effects of the
proposed IT solutions on the employees and organization is bound to crash before take off.
• Many BPR initiatives end up in the ERP implementation.

2. DATA WAREHOUSING :

• The primary concept of DATA WAREHOUSING is that the data stored for business
analysis can most effectively be accessed, by separating it from data in the operational
systems.

• The reason for this data separation has always been the potential performance degradation
on the operational system that can result from the analysis process.
• Advances in technology and changes in the nature of business have made many of the
business analysis processes much more complex and sophisticated.
• In addition to producing standard reports, today’s data warehousing systems support very
sophisticated on-line analysis including multi-dimensional analysis.

3. DATA MINING:
• Data Mining is the process of identifying valid,novel,potentially useful and ultimately
comprehensible knowledge from databases that is used to make crucial business decisions.
• Modern data mining systems self learn from the previous history of the investigated
system, formulating and testing hypothesis about the rules, which this system obeys.
• When concise and valuable knowledge about the system of interest has been discovered, it
can and should be incorporated into some decision support system, which helps the
manager to make wise and informed business decisions.
• One additional benefit of using automated data mining systems is that this process has a
much lower cost than hiring an army of highly trained professional statisticians.
• While data mining does not eliminate human participation in solving the task completely,
it significantly simplifies the job and allows an analyst who is not a professional in statistics
and programming to manage the process of extracting knowledge from data.
4. ONLINE ANALYTICAL PROCESSING(OLAP):

• According to business intelligence ltd.OLAP can be defined in five words

FAST ANALYSIS OF SHARED MULTI-DIMENSIONAL INFORMATION.

• FAST means that the system is targeted to deliver most response to users within about five
seconds, with the simplest analyses taking no more than one second and very few taking
more than 20 seconds.
 24

• ANALYSIS means that the system can cope with any business logic and statistical analysis
that is relevant for the application and the user, and keep it easy enough for the target user.
• SHARED means that the system implements all the security requirements for
confidentiality and, if multiple write access is needed, concurrent update locking an
appropriate level.

• MULTI-DIMENSIONAL means that the system must provide a multi-dimensional

conceptual view of data, including full support for hierarchies and multiple hierarchies.
• INFORMATION is all of the data and derived information needed, wherever it is and
however much is relevant for the application.
• OLAP is being used for applications such as product profitability, pricing analysis,
marketing analysis, quality analysis, management system, product profitability etc…

5. PRODUCT LIFE CYCLE MANAGEMENT :

• The product life cycle refers to the succession of stages a product goes through.
• Product life cycle management is the succession of strategies used by management as a
product goes through its life cycle.

• The product life cycle goes through many phases (product development, market
introduction, growth, maturity, and decline) and involves many professional disciplines
and requires many skills, tools and processes.
• PLM helps organizations in the following areas :

• Reduce time-to-market through faster design and validation.

• Get product design changes into production quickly.
• Reduce product development and manufacturing costs.
• Reduce levels of obsolete component inventory at multiple locations.
• The PLM software should provide an information backbone to help you access relevant
information anywhere , anytime.

6. SUPPLY CHAIN MANAGEMENT :

• A supply chain is a network of facilities and distributions options that performs the
functions of procurement of materials, transformation of these materials into intermediate
and finished products and the distribution of these finished products to customers.
• Supply chains exist in both service and manufacturing organizations, although the
complexity of the chain may vary greatly from industry to industry and firm to firm.

• CUSTOMER RELATIONSHIP MANAGEMENT (CRM):

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• Customer relationship management (CRM) covers methods and technologies used by

companies to manage their relationships with clients. Information stored on existing
customers is analyzed and used to this end.
• Automated CRM processes are often used to generate automatic personalized marketing
based on the customer information stored in the system.

• CRM is a corporate level strategy, focusing on creating and maintaining relationships with
customers.
• CRM is not a technology in itself, rather a holistic approach to an organization’s
philosophy, placing the emphasis firmly on the customer.
• CRM applications often track customer interests and requirements as well as their buying
habits. This info. Can be used to target customers selectively.

• Furthermore, the products a customer has purchased can be tracked throughout the
product’s life cycle, allowing customers to receive information concerning a product or
target customers or alternate products once a product brgins to-be phased out.

• CRM is an alternative to the “ONE SIZE FITS ALL”.

7. GEOGRAPHICAL INFORMATION SYSTEM(GIS):
• A GIS is a computer based tool for mapping and analyzing things that exist and events that
happen on earth.
• GIS technology integrates common database operations such as query and statistical
analysis with the unique visualization and geographic analysis benefits offered by maps.
• GIS will give you the power to create maps, integrate information, visualize scenarios,
solve complicated problems, present powerful ideas and develop effective solutions like
never before.
• GIS is a tool used by individuals and organizations, schools, governments and business
seeking innovative ways to solve their problems.
8. MANAGEMENT INFORMATION SYSTEM:
• MIS is a computer based system that optimizes the collection, collation, transfer and
presentation of information throughout organizations, through an integrated structure of
databases and information flow.
• The following are few characteristics :
• Supports data processing.

• Uses an integrated database

• It is Flexible.
 26

• Provides operational, tactical and strategic levels of organization with timely,

structured information.
9. ELECTRONIC DATA INTERCHANGE(EDI):
• It includes both INTRANET and EXTRANET.
• The relationship between Intranet and Extranet is caused to develop E-commerce.
• With the predominantly web protocols to connect the business users.

• Intranets are localized therefore more data faster than Extranet with support of bandwidth.
• Extranet will connect the different business people with common interface and consists
semantics.
10. DIGITAL CASH

Digital cash is a system of purchasing cash credits in relatively small amounts, storing the
credits in your computer, and then spending them when makingelectronic purchases over the
Internet. Theoretically, digital cash could be spent in very small increments, such as tenths of
a cent (U.S.) or less.

11. CRYPTOGRAPHY
Cryptography or cryptology is the practice and study of techniques for secure communication
in the presence of third parties called adversaries.

WAREHOUSE MANAGEMENT SYSYTEM

What Is a Warehouse Management System (WMS)?

A warehouse management system (WMS) is defined as software designed to manage the movement of
inventory to know where final products and goods are at any time to fulfill orders. A warehouse management
system can be standalone software or part of an enterprise resource planning (ERP) system working with other
integrated modules such as accounting, order management, inventory management, MRP, customer
relationship management (CRM), and more using one central system and data source.
 27

Why Is a Warehouse Management System Needed?

With WMS software in place, running a warehouse and distribution center is much easier as it provides step-
by-step guidance and verifies processes are being done correctly at each step. It can take away human error
from a paper-based approach to improve efficiency, increase the speed of shipping and delivery, and improve
the quality of customer service. It provides immediate insight into what is happening within the warehouse
and historical information based on tracked data to understand trends and demand. Companies using a
warehouse management system can be more competitive, provide a better customer experience, keep up with
constantly changing demand, and optimize their supply chain.

Difference Between a Warehouse Management System

 28

and an Inventory Management System?

A Warehouse Management System keeps track of the storage and movement of items in a warehouse or
distribution center. It also helps to ensure items are stored in the most efficient location and the correct items
are picked and packed. WMS software also helps to manage all of the labor operations in the warehouse and
monitor employee performance.

Inventory management systems help track inventory on hand, including raw materials, work in progress
(WIP), final goods, and components needed to manufacture final goods. They keep track of stock levels and
inform businesses if and when to produce more final goods and when materials and components are needed to
manufacture a product. It provides information on how much of a specific item is available, whereas a
warehouse management system tells you exactly where those items are within the warehouse right down to the
bin it’s located in.

The biggest difference between the two systems is warehouse management systems help manage the work of
employees in the warehouse, and inventory management only deals with stock and finished goods. Warehouse
management systems are therefore typically more complex than inventory management systems.

What Are the Benefits of WMS Integrated With ERP?

There are so many new technologies that are helping warehouses be more efficient, but they can only do so
much without being connected to other parts of your business. When a warehouse management system is
integrated, and even better fully built-in, with your ERP system, it further enhances business operations by
connecting your whole organization. Having your WMS integrated with your ERP system provides additional
business benefits that include:

Improved Visibility and Collaboration

Having all data and workflows housed and orchestrated in one system that is shared across the organization
increases visibility throughout the company. It also integrates manufacturing and warehouse operations with
core business functions like financials, customer service, logistics, and it improves coordination and
collaboration.
 29

Increased Accuracy

Eliminate manual entry and errors from data having to be re-entered because it is housed in one system of
record and source of truth that other business functions and departments can access and share, avoiding the
need for redundant data entry.

Better Decision Making

Real-time information from the warehouse provides insight into what is happening with inventory movement,
customer orders, and overall scheduling and planning across the organization to help make informed
decisions.

Smarter Sales and Customer Service

Provides the sales team with information on what is in stock and the lead times needed. It equips your
customer service team with real-time status on customer orders and delivery timing so your business can make
promises it can deliver upon.

Greater Agility

With a modern ERP system that is connected across the company, all departments are in sync and it is simpler
to adjust business processes as needed when critical information is easily accessed and shared.
 30

Faster Billing

Having shipment information processed immediately and sent to accounting allows for invoices to be sent
quicker and payments to be received faster.

Track Productivity

With instant notification about where employees are with jobs, managers can ensure things are kept moving
and they can track how well staff are performing.