1

346E2440(4)
1 –15

ANNAMALAI UNIVERSITY
CENTRE FOR DISTANCE AND ONLINE EDUCATION

Master of Business Administration(MBA)

FOURTH SEMESTER

ENTERPRISE RESOURCE PLANNING

LESSONS: 1 – 15

Copyrights Reserved
(For Private Circulation Only)
 i

MASTER OF BUSINESS ADMINISTRATION(MBA)

Fourth Semester
ENTERPRISE RESOURCE PLANNING

Editorial Board

Dr. K Vijayarani
Dean
Faculty of Arts
Annamalai University
Dr. T. Srinivasan Dr. L. Mullainathan
Director Director
Centre for Distance and Online Education Directorate of Academic Affairs
Annamalai University Annamalai University

Dr. M. Arul Dr. A. Selvarasu

Professor and Head Professor and Co-ordinator
Department of Business Administration Management Wing, DDE
Annamalai University Annamalai University
Internals
Dr P Rajmohan Dr.S. Partheeban
Associate Professor Assistant Professor
Department of Business Administration Management Wing, CDOE.
Annamalai University Annamalai University

Externals
Dr.S.Usha Dr. P.R. Muthusamy
Assistant Professor Director
Department of Management Studies Kovai Medical Centre
University of Madras Aranai Road
Chennai Coimbatore – 641 114
Lesson Writer
Dr.S.Sivakumar
Assistant Professor / Programmer
Department of Computer and Information Science
Annamalai University
 i

MASTER OF BUSINESS ADMINISTRATION(MBA)

Fourth Semester
ENTERPRISE RESOURCE PLANNING
SYLLABUS
Learning Objectives
The objectives of the course are:
LO1: To understand the business process of an enterprise;
LO2: To grasp the activities of ERP project management cycle;
LO3: To understand the emerging trends in ERP developments;
LO4: To cover ERP basics, myths, risks, benefits and related technologies, ERP
marketplace and market dynamics, ERP functional modules, ERP implementation,
ERP operation and maintenance, Present and future of ERP.
Course Outcomes
Upon completing this course, the candidates will be able to:
CO1: Manage ERP implementation cycle;
CO2: Capable of expanding ERP in business process;
CO3: Able to evaluate ERP systems, business analytics, future trends and
CO4: To map business processes using ERP concepts and techniques
Teaching Methods
Lecture and Case study Method
Unit-I : Introduction
Introduction to ERP - Overview of Enterprises System – Evolution - Risk and
Benefits - Fundamental Technology – Business Engineering and ERP - Definition
and Principles of Business Engineering – Issues to be Considered in Planning,
Designing and Implementing of Cross Functional Integrated ERP System.
Unit–II : ERP Software Solutions
Overview & ERP Software Solution – Small, Medium and Large Enterprises –
Vendor Solution - Business Process Management - Best Business Practices -
Business Modeling for ERP - Building the Business Model.
Unit–III : ERP System
Planning, Evolution and Selection of ERP System - Implementation Life Cycle –
ERP Implementation – Methodology & Frame Work – Training - Role of Consultant,
Vendors and Users - Customisation – Precautions - Data Migration.
Unit–IV : ERP Implementation
ERP Post Implementation Option - ERP Implementation Technology -
Maintenance of ERP - Organizational and Industrial Impact – Guidelines for ERP
Implementation and Follow Up.
 ii

Unit–V : Sales and Marketing of ERP

ERP - Sales and Marketing – Management Control Process in Sales and
Marketing – ERP - Customer Relationship Management – ERP – Systems -
Accounting and Finance Control Process.

Unit–VI ERP Operations

ERP - Production and Material Management - Control Process on Production
and Manufacturing - Production Module in ERP - Supply Chain Management and
e-Market Place-e-Business & ERP – e-Supply Chain & ERP - Expanded ERP System
Text Books
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education, 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007.
Supplementary Readings
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
Journal and Magazines
1. Journal of Enterprise Resource Planning Studies
2. The International Journal of Enterprise Information System
3. Enterprise Information System
4. International Journal of Management and Enterprise Development
Web Resources
1. http://www.sap.com/pc/bp/erp.html
2. http://en.wikipedia.org/wiki/Enterprise_resource_planning
3. http://www.netsuite.com/portal/resource/articles/erp/what-is-erp.shtml
4. http://www.aptean.com/solutions/application/erp-solutions
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MASTER OF BUSINESS ADMINISTRATION(MBA)

FOURTH SEMESTER
ENTERPRISE RESOURCE PLANNING
CONTENTS
Sl. Page
Title
No No.
Unit-I : Introduction

1. Introduction to ERP 1

2. Business engineering and ERP 11

Unit-II : ERP Software Solutions

3. ERP software solution 24

4. Business modeling for ERP 31

Unit–III : ERP System

5. Planning, evolution and selection of ERP system 37

6. ERP implementation – an overview 46

7. Role of Consultants, Vendors and Users 56

Unit–IV : ERP Implementation

8. ERP post implementation 64

9. Organizational and industrial impact 71

10. Guidelines for ERP implementation 80

Unit–V : Sales and Marketing of ERP

11. ERP sales and marketing 84

12. Customer Relationship Management 91

13. Accounting and finance control process 102

Unit–VI : ERP Operations

14. Production and material management 106

15. Supply chain management 112

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 1

UNIT-I : INTRODUCTION
LESSON - 1

INTRODUCTION TO ERP
1.1 INTRODUCTION
To survive, thrive and best the competition in today's competitive world, one
has to manage the future. Managing the future means managing information. The
national economy is undergoing substantial changes. The changes are due
globalization and the extensive growth of global trade and international trade. The
other change, which the trend in the market, is technological change. The
rapidness of the technological growth is that every day a new product is being
offered in the market especially electronic market. These changes are to be met with
adaptability of the technology. The advent of the client/server concept has made
remarkable difference in approach of a customer in deciding a solution of his/her
need and choice. The core aspect of business process is orientation and
implementation of these aspects to achieve a competitive advantage. This can be
realized only by accepting the concept of Enterprise Resource Planning.
1.2 OBJECTIVE
 This lesson aims focuses on overview of Enterprise resource planning.
Towards the end of this lesson the reader will be able to understand the
concept of Integrated Management System.
1.3 CONTENTS
ERP is one of the fastest growing segments of information technology today. If
ERP packages are chosen correctly, implemented judiciously and used efficiently
they have the ability to raise productivity and profits of companies dramatically.
Many companies fail in this because of incorrect selection of a package, haphazard
implementation and ineffective usage. The most crucial factor that decides the
success of an ERP implementation is how the employees use the system. Even the
best ERP system can fail if the employees are not interested, or is using it wrongly
or inefficiently. To receive total and complete employee support and participation,
the organization must make it a point to educate its employee about the potential
benefits and provide them the requisite training.
The Key strength of Enterprise Resource Planning (ERP) is integration. It
integrates all the functions of an organization. The success of ERP also hinges on
its synergy between technology and management. ERP software not only uses
cutting edge technology but also embeds the best of the breed management
practices from the leading edge companies such as Intel, Compaq, Microsoft, GM,
Mercedes Benz, Boeing, Unilever, Philips, Exxon, British Petroleum, Lufthansa,
AT&T and Motorola. The ERP bandwagon had already become a buzzword in the
Indian corporate houses as well as among the student community.
1.3.1 Integrated Management Information
Today's users require flexible reporting tools to extract the information as and
when they need it without depending on an information systems department to
produce the report. They also need electronic data interchange (EDI) to
electronically accept customer information like purchase orders, schedule
amendments or cash and electronically send data such as order acknowledgment
and invoices to customers.
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An information system is an open, purposive system that produces

information using the input-process-output' cycle. The minimal information system
consists of three elements -people, procedures and data. People follow procedures
to manipulate data to produce information. In today's computer world, the
definition, of information systems has undergone a slight change. Today, an
information system is an organized combination of people, hardware, software,
communication networks and data resources that collects, collates, transforms and
disseminates in an organization. .
Management Information Systems, also called information-reporting systems,
were the original type of management support systems, and they still are a major
category of information systems. MIS produce information products that support
many of the day-to-day decision making needs of the management Reports, charts,
graphs, displays and responses produced by such systems provide information that
managers have specified in advance, such predefined information satisfies the
needs of managers at the operational levels of the organization who are faced with
the structured type of decision-making.
But the problem with these information systems is that they operate at a
departmental level and' that they give only predefined information. So each
department will have its own database and information systems. These systems will
produce different reports of varying detail that were specified when the systems
were built.
So, what is needed is a system that treats the organization as a single entity
and caters to the information needs of the whole organization. If this is possible,
and if the information that is generated is accurate, timely and relevant, then these
systems will go a long way in helping the organization in realizing its goals.

Fig 1.1 General Mode of ERP

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Seedless Integration
The upper two quadrants in the above figure represent the strategic and
business planning activities supporting an enterprise, while the lower two
quadrants represent the operational planning and execution activities. The left
quadrants depict functionality relating to materials while the right side depicts it for
resources. The upper-left quadrant represents activities that go into the strategic
and business planning process for materials. The most crucial is engineering
change management. Whether it is the management of new product introductions
or changes to existing products, integrating this application fully into enterprise
system is important. The engineering change management should include
electronic approval routing, complete affectivity control, revision-level, control,
change-order process routing, automatic generation of product structure and also
handle multiple parents and existing assemblies by issuing a single engineering
change order.
1.3.2 Evolution of ERP
1. Material Requirement Planning (MRP)
Developed in 1970s, Material Requirement Planning is widely used approach
for production planning and scheduling in industry. It is the approach embedded in
many commercially available software applications.
The function of MRP is to provide material availability (i.e.,) it is used to
produce requirement quantities on time. This process involves monitoring of stocks
and demand, leading to automatic creation of procurement proposals for
purchasing or production. The main objective of MRP is to determine which
material is required, quantity required and by when it is required.
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2. Manufacturing Resource Planning (MRP II)

Developed in 1980s, Manufacturing Resource Planning is an expansion of
closed loop MRP for managing an entire manufacturing company. This system
provides information that is useful to all functional areas and encourages cross-
functional interactions. It supports sales and marketing by providing and orders
promising capability. It is a broad-based resource co-ordination system involving
other areas of a firm in planning processes, such as marketing, finance and HR.

Manufacturing Resource Planning (MRP II)

3. Enterprise Resource Planning (ERP)

Developed in 1990s, Enterprise Resource Planning is foundation system for

domestic and global operations, supporting most or all functional areas in their
daily operations. is one of more common categories of business software, especially
with large-scale businesses. It is a business strategy and a set of industry-domain-
specific applications that build customer and shareholder community’s value
network system by enabling and optimizing enterprise and inter-enterprise
collaborative operational and financial processes. ERP at its core is an effective way
of centralizing information and workflow processes through data management
because ERP keeps all of your workflow data in one place.
4. Enterprise Resource Planning (ERP II)
Developed in 2000s, ERP II is name now use to describe ERP. Basically, it is
successor of ERP. It is a business strategy and set of collaborative operational and
financial processes internally and beyond enterprise. These new business models
reflect an increased business focus on internal integration. It’s domain is in all
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sectors and segments. Data in this is internally and externally published and
subscribed. It includes departmental modules, CRM, SCM and other stake holders
modules. It emphasis on intangible assists.

1.3.3 Risk and Benefits

Unique risks of ERP
Every project suffers from risks. There are also risks for the ERP projects such
as organizational factors, employee skills, software systems design issues, and
technology integration factors. One of the most important risk factors is to redesign
the business process to suit the best practice business process.
The main challenge in ERP system is acquiring the necessary skills.
Insufficient training and re-skilling of the IT workplace in new ERP technology,
insufficient internal expertise, failure to mix internal and external expertise
effectively, and lack of business analysts are all the risks associated with the IT
professionals. The risk factor is aggravated by the scarcity of ERP-trained systems
developers and the high market demand for their skills. The investment in
recruiting, re-skilling, and re-training IT professionals is very high.
Some other risks factors that are unique to ERP implementation are non-
adherence to standardized specifications, data migration from legacy systems, lack
of top management support, etc. The complete list is given in the following table:
Risk Category Risk Factors
• It fails to redesign business process
Organizational factors • It also fails to follow the wide design of an enterprise
which is helpful for the data integration
• Insufficient training and re-skilling
• Insufficient internal expertise
Employee skills
• There is lack of business analysts with proper
knowledge of business and technology
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Risk Category Risk Factors

• It fails at mixing of internal and external expertise
effectively
• Also there is lack of ability to recruit and retain
qualified ERP systems developers
• Lack of senior management support
• Lack of proper management control structure
Management factors
• Lack of champion
• Ineffective communications
• It fails to adhere to standard specifications which are
being followed by the software
Software systems design
• Lack of integration
issues
• Poor data quality of legacy data and data migration
problems
• Insufficient training of end-users
• Ineffective communication
User training and
• There is a lack of full-time commitment to customers
involvement
for project management and project activities
• Lack of sensitivity to user resistance
Technology planning and • Inability to avoid technological bottlenecks
integration • Attempting to build bridges to legacy applications
Benefits of ERP
ERP systems integrate all business management functions including planning,
inventory/materials management, engineering, order processing, manufacturing,
accounting and finance, human resources etc. The biggest advantage of an ERP system
based on its real-time capabilities and the ability to see what is going on with the
organization as it happens. Installation of an ERP system has many advantages. The
advantages may be both direct and indirect. The direct advantages include efficiency
improvement, integration of information, faster response time to customer queries, etc.
Example of indirect benefits include better corporate image, improved customer goodwill,
customer satisfaction and so on. Some of the benefits are as follows:
 Integrating and sharing of information across different departments.
 Reducing redundant data entry and processes.
 Guarantee for the security of organization data.
 Better communication across various departments.
 Improving workflow and security.
There are also some benefits which are both tangible and intangible which are as
follows:
1. Information Integration
The most important benefit is promotion of integration. It is because it has the
ability to update data between related business functions and components. Also the
people involved in a project are interlinked to each other, thus it help in
improvement of productivity.
 7

2. Reduction of Lead-Time
Lead-Time is the elapsed time between placing an order and receiving it. By
reducing Lead-Time organization should have an efficient inventory management
system, which is integrated with the purchasing, production planning and
production departments.
3. On Time Shipment
ERP system are designed to help your company to reduce data transfer time,
reduce errors and increase design productivity. By using steps of ECO i.e.
Engineering Change Order, ERP system automatically implements change in
production database. Thus by using these, an ERP system ensures on time delivery
of goods to customers.
4. Reduction in Cycle Time
It is time between the placement of order and delivery of product. There are
two types of situations; one is make-to-order and second one is make-to-stock. In
both cases cycle time can be reduced but more time is saved in make-to-order case
because in this ERP system save time by integrating with CAD/CAM systems.
5. Better Customer Satisfaction
ERP system is capable of producing goods in a flexible way with consideration
of time and cost management. It means will get individual attention and get
services without spending more money or waiting for long period.
6. Increased Flexibility
Product flexibility is type of ability of the operation to efficiently produce highly
customized and unique products. ERP system not only improve flexibility of
manufacturing operations, but is also improve flexibility of organization.
1.3.4 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 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
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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, performance management, 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 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.
1.4 REVISION POINTS
1. ERP: they have the ability to raise productivity and profits of companies
dramatically.
2. EDI: To electronically accept customer information like purchase orders,
schedule amendments or cash and electronically send data such as order
acknowledgment and invoices to customers.
Seedless Integration
The upper two quadrants represent the strategic and business planning
activities supporting an enterprise, while the lower two quadrants represent the
operational planning and execution activities.
Material Requirement Planning:
It is widely used approach for production planning and scheduling in industry.
It is the approach embedded in many commercially available software applications.
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1.5 INTEXT QUESTIONS

1. Define ERP.
2. Write short notes on EDI.
3. List the benefits of ERP.
1.6 SUMMARY
The rabidness of the technological growth is that every day a new product is
being offered in the market especially electronic market. ERP is one of the fastest
growing segments of information technology today. The Key strength of Enterprise
Resource Planning (ERP) is integration. An information system is an open,
purposive system that produces information using the input-process-output' cycle.
MIS produce information products that support many of the day-to-day decision
making needs of the management Reports, charts, graphs, displays and responses.
The most crucial is engineering change management. Whether it is the
management of new product introductions or changes to existing products,
integrating this application fully into enterprise system is important. The function
of MRP is to provide material availability (i.e,) it is used to produce requirement
quantities on time. These new business models reflect an increased business focus
on internal integration. It’s domain is in all sectors and segments. One of the most
important risk factors is to redesign the business process to suit the best
practice business process. The main challenge in ERP system is acquiring the
necessary skills. ERP systems integrate all business management functions
including planning, inventory/materials management, engineering, order
processing, manufacturing, accounting and finance, human resources.
1.7 TERMINAL EXERCISES
1. Explain the general mode for ERP with an neat sketch.
2. Discuss in detail about Seedless integration.
3. Describe the Fundamental technology of ERP.
4. What are the unique risks of ERP/ Explain.
1.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
1.9 ASSIGNMENTS
1. Explain the various features of ERP.
2. Discuss in detail about the integrated management system.
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1.10 REFERENCE BOOKS

1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
1.11 LEARNING ACTIVITIES
1. Exemplify the Information Reporting System.
2. Describe the Evolution of ERP.
1.12 KEYWORDS
1. ERP – Enterprise Resource Planning
2. EDI – Electronic Data Interchange
3. MIS – Management Information System.
4. MRP – Material Requirement Planning

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LESSON - 2
BUSINESS ENGINEERING AND ERP
2.1 INTRODUCTION
Business Engineering revolves around information technology and continuous
change. It is the constant refinement of an organization's changing needs. The
sudden popularity of the term business process reengineering (BPR) has led many
to dismiss it as the latest business buzzword, BPR, however, is not a passing fancy.
According to Michael Hammer and James Champy, authors of the hugely
successful Reengineering the Corporation, business reengineering represents the
radical transition that companies must make to keep pace with today's ever-
changing global markets. "In the post-industrial age we are now entering", write
Hammer and Champy, "corporations will be founded and built around the idea of
reunifying tasks into coherent business processes."
2.2 OBJECTIVES
This lesson aims focuses on Business Engineering and its significances.
Towards the end of this lesson the reader will be able to understand the various
phases of BPR.
2.3 CONTENTS
2.3.1 Business Engineering
The industrial expert may say that Business Engineering is a new animal in
the society, and even some expert may argue that in the hot alphabetical soup of
three-lettered management terms, ERP, MRP, JIT, TQM, CRM, and so on, BPR is
the leader as it will have the components of all the other systems. On the face of it,
BPR does what ERP sets about doing in a more elaborate and comprehensive
manner. The most accepted definition of BPR is given by Michael Hammer and
James Champy "BPR is the fundamental rethinking and radical redesign of
processes to achieve dramatic improvement in critical, contemporary measures of
performance such as cost, quality and service and speed".
2.3.2 Significance of Business Engineering
The uncertainty which prevailed during the earlier nineties and the down size
became a battle cry for consultants and the managers. As the urge to consolidate
the new organization increased, business engineering came to replace the outdated
and simplistic views implied by downsizing.
While many pro-downsizing programmers spoke of obliterating existing
organizations, consultants provided guidelines on how to restructure the learner, to
more efficient companies. With the advent of new technology the approach in
business has made a tremendous change from normal approach to process-
oriented approach. This new infrastructure was designed to meet the challenge of
creating a business environment that would optimize performance enough to
accommodate changes.
BPR would take a long time to achieve, say two or three years, and a radical
BPR means enormous change and the organization should be willing to undertake
 12

such an exercise, which is no easy task. ERP solutions on the other hand come in
the form of an integrated software package easy to implement without requiring
major organizational shake up. Much of the ERP process would "seamlessly" fit in
with the normal working schedules. BPR is something, which completely
transforms the organization and in the process may also cause systematic chaos for
a long period of time to cope with.
The leading multinational accounting firm, KPMG conducted a survey of
Indian organizations to find out how organizations approach ERP and also to
establish the relationship between BPR and ERP. The survey indicated that no one
had gone for full-scale BPR even though most of the people interviewed said that
ERP has become a competitive compulsion in India for the future.
The survey established that ERP could be a technological enabler for future
implementation of BPR. ERP acts as a stepping-stone and brings about a pro-
change culture in the organization.
Whatever may be stated as merits and demerits of both the approaches, the
fact is that both are complementary to each other and their implementation would
depend upon the type of solutions one may need, based on the level of problems
one may be facing in one's organizations.
2.3.3 BPR - The Different Phases
According to Peter F. Drucker, "Reengineering is new, and it has to be done."
The tasks experts agree upon to successfully perform BPR can be grouped into
seven steps, or phases. All successful BPR projects begin with the most critical
requirement communication throughout the organization.
1. Begin organizational change
2. Building the re-engineering organization
3. Identifying BPR opportunities
4. Understanding the existing process
5. Reengineering the process
6. Blueprint the new business system
7. Perform the transformation
Phase 1: Begin Organizational Change
The main activities in this step are:
 Assess the current state of the organization
 Explain the need for change
 Illustrate the desired state
 Create a communications campaign for change
The first step is to take a long, hard look at how the organization operates. The
focus of this analysis is on the operating procedures and the bottom-line results
that are generated by them. The purpose of performing the analysis described below
is to determine whether dramatic changes are possible by doing the BPR.
 13

Aspects of the business that need to be evaluated are:

 How are things currently done?
 What changes may be occurring?
 What new circumstance exists in the business environment?
The next Step is to look for harmful operating procedures, if any within the
organization that have caused or will cause irreparable damage to the company's
business goal and functioning. What are the sources of concern for the
organization? May be the demands of the marketplace are dwindling. Perhaps
competitors have made significant advancements in products and services.
Regardless of the reasons, it should be clear whether or not the organization, in its
current state, is able to meet the needs of the markets it serves. The consequences
of inaction should be identified and well understood. In moat easily these
consequences are the loss of jobs by shutting down portions of the business, or
perhaps the entire business.
If an organization wishes to change the way it operates, it must turn to its
people to make it happen. People are the agents of change and it is these same
people who can create the maximum amount of trouble. Creating business plans
and strategies are important, but they are only tools to guide the actions of people.
Because BPR can potentially require significant changes throughout an
organisation, it must begin with a communications campaign to educate all those
who will be impacted by this change. Communication to all levels of personnel must
remain active from start to finish to keep everyone involved and working towards a
common goal. Without a common understanding about what is happening,
confusion and uncertainty about the future can result in resistance, strong enough
to stop any reengineering effort.
Phase 2: Build the Reengineered Organization
The major activities of the second phase are given below.
 Establish a BPR organizational structure
 Establish the roles for performing BPR
 Choose the personnel who will reengineer
An infrastructure must be established to support reengineering efforts.
Although this phase consists of only a few tasks, it has a tremendous impact on the
success of a BPR endeavor.
One of the most important members of the reengineering effort is the executive
leader. The leader must be a high-level executive who has the necessary authority
to make people listen, and the motivational power to make people follow. Without
the commitment of substantial time and effort from the top management, no BPR
project can overcome the internal forces and will never reach implementation. A
process owner is responsible for a specific process and the reengineering effort
focused on it. There should be a process owner for each high-level process being
reengineered. Allocating the responsibility of a process to a specific person ensures
 14

that someone is m charge of how that process performs. The executive leader
usually appoints process owners.
The process owner convenes a reengineering team to actually reengineer
his/her process. The team, dedicated to the reengineering of a specific process
should be made up of insiders who perform the process and are aware of its
strength and weakness alone with output who can provide objective input to spark
creative ideas for redesign. The team must be small, usually five to ten people.
Since they will be the ones who investigate the existing process, and oversee the
redesign and implementation, they should be credible in their respective areas. The
inclusive of the employees in the team is very important and plays a vital role in
reducing the resistance by company personnel to the new process.
Lastly, a reengineering specialist or consultant can be an invaluable addition
to the overall effort. A reengineering specialist can assist each of the reengineering
teams by providing tools, techniques and methods to help them with their
reengineering tasks.
Phase 3: Identify BPR Opportunities
This phase consists of the following activities:
 Identify the core/high-level processes
 Recognize potential change-enablers
 Gather performance metrics within the industry
 Gather performance metrics outside the industry
 Select processes that should be reengineered
 Priorities selected processes
 Evaluate pre-existing business strategies
 Consult with customers to know their desires
 Determine customer's actual needs
 Formulate new process performance objectives
 Establish key process characteristics
 Identify potential barriers to implementation
In this phase, we begin to break away from normal patterns of identifying
business opportunities. We start by dividing the entire organization into high-level
processes rather than the usual, vertical business areas such as marketing,
production, finance, etc. These processes, usually less than a dozen, are the major
processes of the organization. This activity is not a time consuming task, but it is
difficult because it requires a good knowledge of how the company thinks about itself.
In many cases, seeing the company from the customer's point of view can help
identify what these high-level processes might be. For examples, when Texas
Instruments outlined their major processes for their semiconductor business, they
came up with only six processes as follows: Strategy Development, Product
Development, Customer Design and Support, Order Fulfillment, Manufacturing
Capability Development, and Customer Communications. Each of these processes
converts inputs into outputs.
 15

Phase 4: Understand the Existing Process

The main activities of the fourth phase are:
 Understand why the current steps are being performed
 Model the current process
 Understand how technology is currently used
 Understand how information is currently used
 Understand the current organizational structure
 Compare current process with the new objectives.
Now that one knows which process to reengineer, one needs to take a look at
why one currently performs the process the way it is done. "Understand' is a key
word here. One may not need to scrutinize every detail of how one is performing the
process this effort has the potential to go on indefinitely, sometimes referred to as
analysis paralysis, which can weaken the momentum needed to carry the project all
the way to implementation.
Modeling the current process is an important part of this phase. It not only
helps to better understand the existing process, but also helps with planning the
migration from the old to the new process and executing the physical
transformation of personnel, organizational structures, and information
requirements, as well as to understand how technology is used. Information that
should be included in the models are process inputs (such as task times, data
requirements, resources, demand etc.) and process outputs (such as data outputs,
cost, throughput, cycle-time, bottle necks etc.).
Phase 5: Reengineer the Process
The major activities are:
 Ensure the diversity of the reengineering team
 Question current operating assumptions
 Brainstorm using change levers
 Brainstorm using BPR principles
 Evaluate the impact of new technologies
 Consider the perspectives of stakeholders
 Use customer value as the focal point
During this phase, the actual "re-engineering" begins from strategy and
analysis phases into -the redesign phase. The Re-engineering Team that was
formed to take part in the reengineering sessions should consist of designers and
implemented, including people well-versed in technology. These team members
should come from both inside and outside the existing process.
The "inside" perspective may reveal information about the existing process that
was not uncovered in phase 4. People, who will be the future process owners, or
those responsible for the new process, are a critical component of the team,
including the future owners will help to ensure that the reengineered process
succeeds once it is implemented.
 16

Equally important is the "outside" perspective of some who will look at the
process with a "fresh eye" and raise questions about operating assumptions that
may not be obvious of the insider, as he might be too close to the process to be
objective.
Lastly, a technologist will provide insight as to how technology can be applied
in new and innovative ways. In other words, the technologist will help to visualize
how the process can be performed outside the boundaries of the current
implementation. Including both outsiders and technologists on the team will help
spark "out-of-box" thinking creatively above and beyond the current restrictions.
The Re-engineering Team now has to conduct brainstorming sessions to create
new process ideas. According to Dr. Hammer, brainstorming sessions are most
successful when the following BPR principles are considered.
 Several jobs are combined into one
 Workers make decisions
 The steps in a process are performed in a natural order
 Processes have multiple versions
 Work is performed where it makes the most sense
 Checks and controls are reduced
 Reconciliation is minimized
 A case manager provides a single point of contact
 Hybrid centralized / decentralized operations are prevalent
During the brainstorming sessions, the Reengineering Team must also
consider new technologies. They will need to evaluate the impact of new technology
on the process. Technologies that are often considered enablers of reengineering
include:
 EPR systems
 Internet technologies
 Distributed computing platforms
 Client/server architectures
 Work/flow automation technologies
 Groupware
The Reengineering Team should also search for uses of new information as
well as-new ways to use existing information. The reengineered process may enable
the organization to collect data that was not gathered before, thereby bringing new
knowledge into the process to help in decision-making.
Lastly, the Reengineering team must consider all process stakeholders in the
redesign of a process. Stakeholders are those people whose actions impact the
organization, and those who are impacted by the organization's actions.
Stakeholders include both those internal to the process and those external to the
process.
 17

Phase 6: Blueprint the New Business System

The activities of Phase 6 are the following:
 Define the new flow of work
 Model the new process steps
 Model the new information requirements
 Document the new organizational structure
 Describe the new technology specifications
 Record the new personnel management systems
 Describe the new values and culture required
Blueprints are detailed plans required to build something in accordance with
the designer's intentions. In BPR, blueprints must be created to identify all the
necessary details of the newly reengineered business system and to ensure that it
will be built as intended.
The blueprints should also contain models of the redesigned organizational
structure. Instead of the traditional organization chart, a different kind of chart is
needed. This chart will show the new process flow along with the process team
members, the process owners, the case managers and the process facilitators. The
chart should also indicate parts of the organization, which interact with the process
personnel.
Phase 7: Perform the Transformation
The activities of this last phase are:
 Develop a migration strategy
 Create a migration action plan
 Develop metrics for measuring performance during implementation
 Involve the impacted staff
 Implement in an iterative fashion
 Establish the new organizational structures
 Assess current skills and capabilities of workforce
 Map new tasks and skill requirements to staff
 Re-allocate workforce
 Develop a training curriculum
 Educate the staff about the new process
 Educate the staff about the new technology used
 Educate the management of facilitation skills
 Decide how the new technologies will be introduced
 Transition to the new technologies
 Incorporate process improvement mechanisms -
The first step in transforming the organization is to develop a plan for
migrating to the new process. One needs a path to flow from where the organization
is today, to where the organization wants to be. Migration strategies included:
 Full changeover to the new process
 18

 Phased approach
 Pilot project
 Creating an entirely new business unit
An important point to consider is the integration of the new process with other
process. If only one process is reengineered, then it must interact with the other
existing processes. If multiple processes are slated for reengineering, then the new
process must not only integrate with existing processes, but also with the newly
reengineered processes that will come online in the near future/Therefore, the
implementation of the new process must be flexible enough to be easily modified
later on.
Successful transformation depends on consciously managing behavioral as
well as structural change, with both sensitivity to employee attitudes and
perceptions, and a tough-minded concern for results. BPR implementation requires
the reorganization, retraining and retooling of business systems to support the
reengineered process. The new process will probably require a new organization,
different in structure, skills and culture. The new management structure should
result in the control paradigm being changed to the facilitation paradigm. The new
process team structure should result in the managed paradigm being changed to
the empowered paradigm. Once the new structures are established, we should map
tasks in the process to functional skill levels, and ultimately to workers.
Transforming the workforce will require an array of activities. It begins with an
assessment of the current skills or capabilities of the workforce to include soft,
operational and technical skills. This skill inventory compilation may require
personal, peer and supervisor evaluations. Feedback should be provided to all
personnel to ensure accuracy of current skills and interest for all staff.
An educational pyramid is an effective way to transfer knowledge of team
building, self-mastery, and subject matter knowledge. System training is essential
to understand the use of new information systems and how to take advantage of
their capabilities. Process training may be needed to help employees think beyond a
linear process to a more holistic interdependent process. Facilitating training for
the management is critical in order to develop their abilities of listen, allow
mistakes, handle disputes among process experts, and transition to a
coach/facilitator role. Education may be necessary for Total Quality Management
(TQM), Statistical Process Control (SPC), or Continuous Process Improvement (CPI),
if these mechanisms are designed into the new processes.
Transforming information systems to support the new process may involve
retooling the hardware, software and information needs for the new process. One
approach to this transition could be a controlled introduction. The method would
ensure that each part of the system is operational for a segment of the business
before the next module is implemented.
2.3.4 Principles of Business Engineering
In the past, the companies have followed the old way of cost cutting that is by
reducing the production costs the output can be increased. This allowed them to
 19

offer standard products and services to large, relatively stable consumer markets
and to concentrate on optimizing tasks in well-defined areas. Competition and
increased customer power have now undermined the importance of economy of
scale. The current relationship between a company and its customers is no longer
limited to just the buying and selling of a product. It encompasses the whole gamut
of business activities, from customer service, consulting and pricing, to production
and shipping. With more goods available to them than ever before, consumers can
now be more selective. The selectivity has caused executives to reexamine their
business processes. They have discovered that organizational structure, job
definitions, and workflow created to manage the growth era of the 1950 to 1970s
are now outdated and require drastic change.
Business engineering makes companies more customer-focused and
responsive to changes in the market. It achieves these results by reshaping
corporate structures around business processes. BE implements change not by the
complete automation of a business but rather by the redefinition of company tasks
in holistic or process-oriented terms.
Only companies with innovative staff, products, and services as well &s short
development cycles, will be able to retain their share of the market or hope to get a
bigger slice of the pie. By maximizing individual and team creativity and
emphasizing a process-oriented approach, BE enables a company to realize these
goals.
2.3.5 Business Engineering with Information Technology
BPR has been around for quite some time and a lot has been written about it
in both, the practitioner trade press and the academic research journals. However,
the controversy still remains about whether there is any accurate description of
BPR, or BPR is just a fad an appealing label to tag on whatever your company is
doing, to suggest that your latest and greatest work is in vogue. But if reengineering
is to continue in the long run, then it must do more than advertise its considerable
successes to data. It must become more proactive and inclusive with regard to
human, organizational and motivational change issues.
The definition is worth considering again as one is about to deal about the
Business Engineering with information technology. Dr. Michael Hammer defines
BPR- as "in the fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in critical, contemporary measures of
performance such as cost, quality, set vice and speed." One of the main tools for
making this change is the Information Technology (IT). Any BPR effort that fails to
understand the importance of IT, and goes through the pre-BPR analysis and
planning phases without considering the various IT options available, and the effect
of the proposed IT solutions on the employees and the organization, is bound to
crash during takeoff.
The various business processes of the organization will help the modern
developments in IT. With a good ERP package, the organization will have the
 20

capability of achieving dramatic improvements in critical areas such as cost,

quality, speed and so on.
2.3.6 Issues to be consider in planning design and implementation of cross functional
integrated 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 specific requirements 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-specific applications 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
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 Buy Smart 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 about the
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,
 21

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 failure of 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.
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 of company. 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 their job 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
 22

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 project
leaders would certainly boost the morale of the team members. Other strategies,
such as taking the employees on field trips, could help reduce the stress and
improve the morale.
2.4 REVISION POINTS
1. BPR
BPR is the fundamental rethinking and radical redesign of processes to
achieve dramatic improvement in critical, contemporary measures of performance
such as cost, quality and service and speed.
2. PHASES IN BPR
The tasks experts agree upon to successfully perform BPR can be grouped into
seven steps, or phases.
3. EXECUTIVE LEADER
The leader must be a high-level executive who has the necessary authority to
make people listen, and the motivational power to make people follow.
2.5 INTEXT QUESTIONS
1. Define Business Engineering.
2. What are the significances of Business Engineering? Explain.
2.6 SUMMARY
BPR is the leader as it will have the components of all the other systems. On
the face of it, BPR does what ERP sets about doing in a more elaborate and
comprehensive manner. The uncertainty which prevailed during the earlier nineties
and the down size became a battle cry for consultants and the managers. All
successful BPR projects begin with the most critical requirement communication
throughout the organization. If an organization wishes to change the way it
operates, it must turn to its people to make it happen. One of the most important
members of the reengineering effort is the executive leader.
 23

2.7 TERMINAL EXERCISES

1. Explain the Principles of Business Engineering.
2. Examine the Various Phases of BPR.
3. Discuss the issues to be consider in the implementation of cross functional
integrated ERP systems:
2.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
2.9 ASSIGNMENT
1. Compare and Contrast Business Engineering with Information Technology.
2. List out the issues to be consider in planning and design of cross functional
integrated ERP systems:
2.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
2.11 LEARNING ACTIVITY
1. Discuss about Blueprint the New Business System.
2.12 KEYWORDS
1. IT - Information Technology
2. SPC - Statistical Process Control
3. TQM - Total Quality Management
4. CPM - Continuous Process Improvement

 24

UNIT-II : ERP SOFTWARE SOLUTIONS

LESSON - 3

ERP SOFTWARE SOLUTION

3.1 INTRODUCTION
When it comes to daily business management, ERP software is the most
critical for success. This software compiles information from each area of your
company in one location. Thus, it allows you to see the status of your business’s
operations on a daily basis. The market for ERP software has grown tremendously
over the years. Enterprise Resource Planning (ERP) software, or an ERP system,
manages daily activities from every department of your business. This can include
accounting, procurement, project management, human resource (HR), risk
management and compliance, marketing, supply chain operations, and just about
any other activity.
At its core, this software allows you to feel the pulse of your business on a day-
to-day basis. On top of managing your company’s existing systems, full ERP suites
also analyze this data to come up with financial assessments. These assessments
allow businesses to create more accurate budgets and provide investors a clearer
picture of the health of a company. And perhaps the most important aspect of this
software is its ability to scale with your company. As companies grow, so does the
number of systems they need to manage and each ERP solution is tailored to a
specific industry.
3.2 OBJECTIVES
 This lesson aims focuses on various software solutions in ERP. Towards the
end of this lesson the reader will be able to understand the medium, small
and large enterprises of vendor solutions and business process
management.
3.3 CONTENTS
3.3.1 Oracle Netsuite
It is one of, if not the most, respected names in the ERP software industry. It
provides ERP solutions for enterprises, start-ups, family-owned businesses, small
businesses, and everything else. And it does all of this while providing powerful
tools to its customers. It really can accommodate any business size or model, which
simplifies everything. The bread and butter of Oracle Netsuite are its analytical
tools. You can use them to turn data into easy-to-read visual charts, create the
most accurate budget reports based on day-to-day activities, and supports your
business’s growth at all stages and sizes. With this tool, you can manage finances,
inventory, production quotas, supply chain efficiency, warehouse storage and
fulfillment, procurement, and much more. It really is able to compile your entire
company’s day-to-day activities on one screen.
Benefits of Oracle Netsuite
 The entire system is cloud-based.
 The dashboard is easy to navigate to make it simple for any skill level.
 Great CRM tools for any business.
Price of Oracle Netsuite
 25

 Oracle Netsuite does not make its pricing public. Instead, you must contact
them for a quote.
2. Sage ERP Software
Sage ERP Software is an excellent choice for small businesses looking for their
first ERP system. The interface can be accessed directly from your web browser on
multiple devices, which makes the software accessible from anywhere. And for
business owners that have to travel on a daily basis, that’s a crucial feature. The
software offer solutions based on your type of industry. They currently support food
& beverage, manufacturing, distribution, chemicals, and service industries. Each
one provides tools and features that cater to your business type. It also offers a
plethora of financial tools to take advantage of. Some of these include inventory
management, sales & purchasing management tools, shop floor control, BOM
planning, budgets and accounting, and even fixed assets to name a few.
Benefits of Sage ERP Software
 The mobile interface is clean and responsive.
 Options available to add other Sage software to your business.
 A helpful FAQ and knowledge base is available.
Price of Sage ERP Software
 Sage does not make its pricing public. Thus, you must contact them to
receive a quote.
3. Infor
If you have a mid-sized business, software built for small businesses won’t cut
it. That’s why in for built a solution just for you. The entire software is cloud-based
to make it accessible from any location, including mobile devices with a dedicated
app. And like most ERP software, the solutions are industry-specific. They include a
broad assortment of industries like fashion, food & beverage, distribution,
automotive, manufacturing, chemicals, casino & gambling, hotels & resorts,
education, banking & financial, health care, and plenty more. And each solution is
tailored for the specific industry. To enhance your business’s ability to operate
effectively, you can take advantage of prepackaged workflows that similar
businesses use. For example, you can receive tips from an AI that uses data to
predict and recommend improvements to your business.
Benefits of Infor
 Infor certification exams are available to help you learn the software inside
and out.
 Ensures that your company is following regulations in your area.
 View a full report on your business’s finances in a few clicks.
Price of Infor
 Infor does not provide pricing details. Thus, you must contact them for a
quote.
4. Microsoft Dynamics
Many people may not realize this but included in your Microsoft 365
subscription, is a 30-day free trial of Microsoft Dynamics 365. While it lacks a lot of
features offered by the top ERP software, it is a great option to consider when
 26

starting out. Keep in mind that this service is only available in the United States
and Canada. The software focuses on small to midsize businesses and provides
users the familiar Microsoft interface. Thus, it’s really easy to use. And as you
would expect, this software integrates with Microsoft Office and other Microsoft
tools. In fact, you’re encouraged to connect everything on the landing page. One
feature that really sets Dynamics apart from the competition is that it includes
fixed asset support. In most cases, ERP software does not include this functionality
or it costs a premium. You can enter an asset and its value into the program and
then use a straight line, declining balance, or depreciation to calculate the worth in
a half-year format.
Benefits of Microsoft Dynamics
 The launch screen provides an easy to read summary of day-to-day
activities.
 The inventory system allows you to pair a picture with the item.
 Graphs are easy to read and simplify the data.
Price of Microsoft Dynamics
 Sales Professional plans start at $65 per month per user.
 Sales Enterprise plans start at $95 per month per user.
 And Sales Premium plans start at $135 per month per user.
 Microsoft Relationship Sales plans start at $165 per month per user.
5. Account Mate
If you’re looking for robust reporting tools and options in your ERP software,
look no further than Account Mate. This software provides the most reporting
options out of any software, but keep in mind that many of these options may only
be available if you purchase certain modules. However, it must be said that the
visuals in this software are not the best. This software is module-based. Each
module adds or improves a specific functionality of the platform, thus it can grow
with your business. However, this software really only works for small businesses.
There are many features or necessities that are not baked into the software, even
with additional modules. Yet, for small businesses that don’t need all of the bells
and whistles and want a simple ERP software, Account Mate fits the bill. As the
name suggests, it has a strong focus on accounting needs and will make inventory
management much easier. While it’s not flashy, it gets the job done.
Benefits of Account Mate
 Only pay for the features you need.
 Utilizes a spreadsheet format for inventory that is easy to import and export.
 Supports local and hosted environments.
Price of Account Mate
 Account Mate does not make its pricing visible. Instead, you must contact
them for a quote.
6. SAP Business One
Last on our list, but certainly not least, is SAP Business One. This ERP
software provides an excellent user experience, robust and powerful tools to handle
day-to-day management, and can be accessed from any device, especially on
 27

mobile. In fact, I will go as far as to say that this ERP solution has the best mobile
app available. The mobile app allows you to manage leads, customer accounts, view
stock, scan QR codes, provide maps to customer residencies (great for contractors),
and even place an order. It offers close to the same power that the desktop version
offers. However, there is one thing everyone needs to be aware of…the setup is not
quick or easy. In fact, it’s unlikely you will be able to get it working without help.
Those said, after you set up the software and connect it with your business,
everything else is smooth sailing.
Benefits of SAP Business One
 The dashboard shows important information for at a glance check-ins.
 Supports multiple currencies.
 Provides plans for small, mid, and enterprise-sized businesses.
Price of SAP Business One
 SAP Business One does not make its pricing public. Thus, you must contact
them for a quote.
Small, Medium and Large Enterprise Vendor Solutions
The flexibility which ERP offers is definitely a very big advantage which interests the
small business. Flexibility and the real time control over the price and the jobs are the
key features for a small sized company. Concise reporting is also a main factor which
decides the quality of the company. Based on these needs, ERP vendors have made
installation of the related software as very less complex with much less manual job
needed. The user friendliness of the applications also got improved. Adding more users
or customers will no way affect the functionality of ERP. Many small businesses are
already enjoying the benefits after successful ERP implementation. The profit of the
company has certainly increased after the usage of ERP provided the implementation
procedures are followed perfectly. Business which implemented ERP successfully saw
their business profit increasing within one year itself.
A good ERP system comes with essential features that will provide the functionality
of comparing the hours of working of the professionals and the actual hours of work
which was paid as a salary. In fact, many small businesses just doubled their return on
income with just using this service effectively. With this ERP, they were able to monitor
the time of production, cost, employee activity, overall performance of the company and
many more crucial information. Before setting up ERP systems, small business must
first identify the business requirements. The impact which the ERP is going to have on
the business should be well analyzed. Cost factor involved in implementation should be
set aside initially. Once the requirements are well planned, then comparison can be
made on different vendors available and the vendor which provides cost effective service
and be opted.
Organizations are implementing Enterprise Resource Planning system to
streamline their internal business process and for smooth flow of data between the
different functional departments like inventory, purchase, production, accounts,
etc. The different functional modules of the ERP software look after the respective
functional department. Some of the functional modules in the ERP are as follows:
 28

1) Production Planning Module: The Enterprise Resource Planning system has evolved
from Material Resource Planning which was used for the manufacturing
requirements of the companies. ERP is more robust software for production
planning as it optimizes the utilization of the manufacturing capacity, material
resources and the parts using production data and sales forecasting.
2) Purchasing Module: This module aids in streamlining the procurement of required
raw materials. It is integrated with the inventory control and production planning
modules and often with the supply chain management software. This module
automates the process of identifying potential suppliers, supplier evaluation. It is
used for automation and management of purchasing.
3) Inventory Control Module: This module aids in managing the company's resource
inventory and the product inventory. It helps in handling the replenishment of the
product and maintenance of the stock levels of the products. The inventory control
module monitors the inventory stock present at the different locations like at the
warehouse, office and stores. The module can manage the inventory of raw
materials used for product planning. It enables the company to plan the future
production and keep a stock of products which go below critical level.
4) Sales Modules: This module automates the sales tasks, customer orders, invoicing
and shipping of products. It is integrated with the company's ecommerce websites
and many vendors provide with online storefront as a part of this module. The sales
department is an important area for the organization.
5) Accounting and Finance Modules: Accounting and finance are the core areas of an
organization. This module interacts with the other functional modules to collect the
financial data for the general ledger and other financial statements of the company.
6) Human Resource Module: This can be used as an independent module. It is used
for integrating the recruitment process, payroll, training and the performance
evaluation process. The module handles the history of the employee, tracks the
employees laid off and aids in rehiring of the employees.
7) Manufacturing Module: This module includes product designing, bills of material,
cost management, workflow, etc.
8) Marketing Module: The ERP marketing module supports lead generation and the
promotional activities.
Each of these above functional modules of ERP software plays an important
role. The organizations can choose to implement some of the modules or all
according to their requirements. The companies opt for the modules which are
technically and economically feasible to them. These modules streamline the flow of
the communication across the company by integrating the various functional
departments. The enterprise resource system is bound with all these functional
modules. These distinct yet seamlessly integrated modules cover most of the
functional needs of an organization. The functional modules of ERP software help to
achieve efficiency of operations, cost savings and help to maximize the profits.
Processes, organization, structure and information technologies are the key
components of BPR, which automates business processes across the enterprise and
provides an organization with a well-designed and well-managed information
system. While implementing ERP, the organizations have two options to consider.
 29

Either the organization must reengineer business processes before implementing

ERP or directly implement ERP and avoid reengineering.
Business Process Management (BPM)
Business Process Management (BPM) updates the processes in real-time. It is
a process-centric approach for improving business performance that combines
information technology with governance methodologies. It is a set of activities that
helps the business to run smoothly. These processes begin from company’s
activities from the starting stage to the final sales.
The key process involved in BPM is Risk Management, business process
modeling, business process outsourcing, employee motivation and product
inventory. It’s main objective is to improve the effectiveness and efficiency of a
company’s business and to improve the operational performance.
Advantages:
 Guides users through decisions.
 Automatically prioritizes and routes work.
 Standardizes resolutions across geographies.
 Monitors for business events and initiates action.
 Real-time visibility and process-control.
 Automate key-decisions.
 Improve forecasting.
 Improves productivity.
 Lower Cost.
Disadvantages:
 Does not allow processes to be repeated.
 It has its limit.
 Lack of communication.
3.4 REVISION POINTS
Oracle Netsuite
It provides ERP solutions for enterprises, start-ups, family-owned businesses,
small businesses.
Infor
The entire software is cloud-based to make it accessible from any location,
including mobile devices with a dedicated app
Account Mate
This software provides the most reporting options out of any software, but
keep in mind that many of these options may only be available if you purchase
certain modules
SAP Business One
It provides an excellent user experience, robust and powerful tools to handle day-
to-day management, and can be accessed from any device, especially on mobile.
3.5 INTEXT QUESTIONS
1. List the benefits of infor.
2. Write a note on Microsoft dynamics.
 30

3.6 SUMMARY
The ERP software compiles information from each area of your company in one
location. The Oracle Netsuite really can accommodate any business size or model,
which simplifies everything. The Sage ERP software currently supports food &
beverage, manufacturing, distribution, chemicals, and service industries. Infor
includes a broad assortment of industries like fashion, food & beverage,
distribution, automotive, manufacturing, chemicals, casino & gambling, hotels &
resorts, education, banking & financial, health care, and plenty more. The mobile
app allows you to manage leads, customer accounts, view stock, scan QR codes,
provide maps to customer residencies and even place an order. Business Process
Management updates the processes in real-time. It is a process-centric approach
for improving business performance that combines information technology with
governance methodologies.
3.7 TERMINAL EXERCISES
1. Give a brief note on Account mate.
2. Briefly explain about Oracle Netsuite.
3.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education, 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
3.9 ASSIGNMENTS
1. Discuss the SAP Business One with its advantages and disadvantages.
2. Explain in detail about the Business Process Management.
3.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
3.11 LEARNING ACTIVITIES
1. Describe the functional modules in ERP.
2. Compare the Small, Medium and Large enterprises vendor solutions.
3.12 KEYWORDS
1. BPM – Business Process Management
2. BOM – Bills of Material
3. SAP – System Applications and Products

 31

LESSON - 4
BUSINESS MODELING FOR ERP
4.1 INTRODUCTION
The approach to ERP is to first develop a business model comprising the
business processes or activities that are the essence of business. ERP is generally
termed as a business model, showing the interconnection and sequence of the
business subsystems or processes that drive it. ERP is developed to provide the
required information to the organization to manage the processes that are part of
the business model.
4.2 OBJECTIVES
 This lesson aims focuses on Building Business Model. Towards the end of
this lesson the reader will be able to understand the concepts of new
enterprise model.
4.3 CONTENTS
4.3.1 Building the Business Model
ERP has a way of invading organization like a well-trained army. All one has to
do is to begin somewhere. As one prepares to do that there is a need to first assess
what one already has on one's plate. After all, before committing crores for a new
technology it is necessary to know why the existing technologies painstakingly built
within the organization at considerable cost and precious man-hours will not be
enough to do the bidding. Here, again a self-test is needed to know about the health
and reach of management information system (MIS) and draw up an IT road map
for the organization. Once this is done, choosing ERP would be the most natural
thing one would do. To guarantee success one just need to take few concepts and
ideas of MIS and the following paragraphs gives some idea about the type of MIS
environment necessary and also an enterprise model centered around this
environment, all in order to present a case for bringing in ERP.
ERP solution is linked with MIS planning and requires the development of a
business model comprising the core business processes or activities of the
business. The arrows show how planning is done to arrive at the process from top-
down while the MIS that helps to understand how the process works upwards. An
ERP solution is developed to provide the required logistic support to the
organization to manage the processes that are part of the business model.
The following illustration further explains the point. Irrespective of the nature
of the company the general principles of business process analysis remain the
same.
 32

4.3.2 A New Enterprise Model

A model of business enterprise can be built for a typical manufacturing
enterprise in order to understand the dynamics involved in ERP implementation.
Such a model would also help one to understand how deep and how wide the
enquiry relating to ERP goes and how all-pervading is this concept going to be when
applied to one's enterprise.
The following representative blueprint along with the above two illustrations
giving details of entities in the data model, forms the input to various
implementation methodologies such as enterprise modeling of BaaN and ASAP of
SAP, the two famous ERP solution providers. This could be used as a "template" or
 33

reference model by one's company to list the processes and then subsequently
modify them to suit one's special requirements. The following table summarizes the
core processes in a manufacturing company.
Process Description
1. Forecasting Sales, long-term fund flows, say ten years
2. Fund management Determines the necessity of funds and define risk
between alternatives
3. Auditing Routine inspection of organizational processes
4. Product planning Decides product line, a complicated and
unstructured process
5. Place planning, the use of Decisions about how product is to be distributed
EDI, etc
6. Promotional Selling, advertising, marketing and sales
7. Price Pricing decisions, technology for feedback and
sensitivity analysis
8. Budget Computerized algorithms to decide about fund
allocation
9. Product design CAD, CAE approach to product design
10. Facilities design Plant layout, assembly line, shop-floor design
11. Production scheduling, Process of making new products and chain of
MRP, materials planning processes involved
12. Quality control Quality checking through statistical quality control
or process control
13. Order information Process to collect customer orders on demand and
time period basis
14. Verification of orders Checking product numbers/description, intimating
customer
15. Credit authentication Method of payment, credit status
16. Customer notification Intimating customer about order status, use of EDI
17. Filling orders New orders, back orders matching of stock levels,
issue of packing slip
18. Reordering stock Optimizing inventories, integrating suppliers to
inventory system
19. Invoice preparation Invoice creation and statement of receivables
20. Shipping goods Packing of goods to final loading including shipping
instructions
21. Receivable data Edits transactions, invoices, packing slips and also
credits payments
22. Outstanding and Current and past dues, sales analysis, tracking
remainders balances
23. Vendor selection Vendor research based on cost, quality and other
advantages
24. Order commitments Negotiating with vendors, for terms
 34

Process Description
25. Purchase orders Document management, imaging and EDI use for
purchases
26. Inventory Data of RM, WEP and finished goods along with
reorder data
27. Shippers' data Data about shipping agencies and their capabilities
28. Purchase commitments Data relating to company's products and services
29. Payroll data Data about salaries, tax, other deductions
30. General ledger Integrated transaction data, basis for budgeting and
planning data

Besides the above, the following entities have to be taken into consideration
wherever necessary.
 External data comprising details of consumers, suppliers, competitors and
distributors.
 Internal data forming information generated from the firm's transaction
processing system, internal forecasts or parameters monitored.
 35

 Transaction processing data involving day-to-day operations.

 Internal forecast data relating to planning of expenses, revenue and sales
projections.
 Funding data relating to source, availability.
 Portfolio data, which includes the current list of securities.
 Government regulation-details.
 Market research and intelligence data.
 Union and labor data.
 Warehousing and inventory management data.
While the above more or less sum up almost all the areas which ERP is likely
to touch as it gets implemented, there is a need to go one step further. One should
know what sort of IT infrastructure or IT support is required for setting up ERP.
4.4 REVISION POINTS
1. Business Model
The development of a business model comprising the core business processes
or activities of the business.
2. Enterprise Model
A model of business enterprise can be built for a typical manufacturing
enterprise in order to understand the dynamics involved in ERP implementation.
4.5 INTEXT QUESTIONS
1. Define Enterprise model.
2. Show the ERP strategic Matrix.
4.6 SUMMARY
ERP has a way of invading organization like a well-trained army. All one has to
do is to begin somewhere. ERP solution is linked with MIS planning and requires
the development of a business model comprising the core business processes or
activities of the business. A model would also help one to understand how deep and
how wide the enquiry relating to ERP goes and how all-pervading is this concept
going to be when applied to one's enterprise. This could be used as a "template" or
reference model by one's company to list the processes and then subsequently
modify them to suit one's special requirements.
4.7 TERMINAL EXERCISES
1. Illustrate the building of MIS in detail.
2. Explain the business model with neat sketch.
4.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
 36

5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical

Perspective. New Delhi, NY: New Age International, 2007
4.9 ASSIGNMENT
1. Discuss the entities have to be taken into consideration wherever necessary
in the Business model.
4.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
4.11 LEARNING ACTIVITY
1. Summarize the core processes in a manufacturing company.
4.12 KEYWORD
1. MIS – Management Information System

 37

UNIT–III : ERP SYSTEM

LESSON - 5

PLANNING, EVOLUTION AND SELECTION OF ERP SYSTEM

5.1 INTRODUCTION
A successful ERP project requires selecting an ERP solution, implement the
solution, manage changes and examine the practicality of the system. Wrong ERP
solution choice would either fail the implementation or weaken the system to a
greater impact on the enterprise. Most enterprises often jump into looking at ERP
functions and features rather than examining the strategy and business processes.
It is important for management to know the current strategy, processes and
supporting systems compared to what they could be with the new systems. For
most enterprises, the decision to implement ERP functionalities will require buying
a software package from one of the more popular vendors on ERP market like SAP
and Oracle. But the selection process is not a straightforward task, hence thorough
understanding of what ERP packages are to offer, differences in each of them and
what might be at stake in selecting one package over the other should be well
examined.
Evaluating and selecting an ERP system can be a very complex process on the
other hand, but it should be a 'fact-based' process that will bring the enterprise to
the point where comfortable & well-informed decisions can be made. Therefore, a
research carried out by Management Agility Inc, revealed that it is imperative to
adopt a thorough evaluation and evaluation process before adopting any ERP
solution in SMEs.
5.2 OBJECTIVES
 This lesson aims focuses on planning the system. Towards the end of this
lesson the reader will be able to understand various ERP selection process
and evolution.
5.3 CONTENTS
5.3.1 ERP Selection Process Steps
There are many different ways and steps to selecting an ERP system. Software
Selection is a somewhat different process than developing an application. Most
companies follow a similar process with some minor deviations here and there.
However, not all organizations will follow a structured approach. Considerations for
the kind of approach the company chooses are size of the company, urgency of time
to select and implement, kind of business or industry, scale of the software, and
available human and financial resources to name a few.
According to Wybo, Robert, and Léger, a company’s search strategy is “the
order in which applications should be evaluated and the conditions under which
the firm should end the evaluation and pick the solution”. The company is trying to
maximize benefits while minimizing costs. The most significant activity during
application development is the capturing of all requirements and clearly defining
them. In contrast, the most significant activity in selecting software is the process
of evaluating all the alternatives. Siriginidi developed criteria to be considered when
 38

selecting an ERP provider, including the vendor’s history and stability, and the
support offered during implementation. A company should research the ERP
provider’s sales records for the past year, as well as third party integration of
products with the ERP, and potential system upgrades.
Cisco Systems, Inc. took an entirely different approach to the selection of their
ERP software. In 1993, Cisco ran on a UNIX-based software package that
maintained its transaction processing. Financials, manufacturing, and order entry
systems were the functional areas utilized. At the time it was a $500 million
company, but had its sights on being a $5 billion-plus company. The current
system could not handle the growth, redundancy, reliability, and maintainability
needed. The application had become too customized for Cisco’s needs, and the
software vendor offered an upgrade. However, the size of company the upgraded
application could support was $300 million, and this would not be sufficient for a
rapidly- growing Cisco. Cisco was constantly band-aiding their existing systems,
experiencing an 80% annual growth rate, and suffering routine system outages.
In January 1994, Cisco experienced a major meltdown of their legacy systems
so dramatic that it caused the company to shut down for two days, as Cisco’s
central database had become corrupt. The existing systems could no longer
perform. Originally Cisco’s approach was for each functional area to come up with
its own solution, but they later came to the conclusion that it would take too much
time. A team was put together to investigate options and replace the existing
application. Cisco also felt it needed strong partners to help with the selection and
eventual implementation. The newly formed team of about 20 people had a strategy
of building as much knowledge as possible by leveraging the experiences of others.
The team reached out to other large corporations, the “Big Six” accounting firms,
and the Gartner Group to gather information. Cisco moved quickly by deciding on 5
packages within two days, and narrowed the candidacy to two after one week. One of
Cisco’s big considerations was that they wanted to choose a vendor that was not
smaller in size than their own company. Request for Proposals (RFP) went out to the
top two vendors and in the meantime, Cisco visited a series of selected-vendor
reference clients. A three-day demonstration that included a sample of Cisco’s data
was requested from each vendor, and the vendors explained how Cisco’s requirements
would be met or not met. Throughout this time, the cost had not even been considered.
It was not until the selection team met with the company’s Board, that they ever
considered the cost and time needed for implementation. The overall time from
inception to final selection of a vendor took 75 days.
How is Cisco’s selection process different than others? First, the time spent
from inception to final selection was aggressive. Costs, time, and risks were not
even considered until before meeting with the Board. Contract negotiations had
already commenced with the chosen software vendor. Before going to the Board,
and after negotiations started, the timetable and the budget for the project were
decided on. Usually, the timeframe and budget are defined during the planning
phase.
 39

Typically, the ERP selection process can include the following steps:

The ERP selection team is comprised of individuals from each of the functional
areas of the business. The team made up of the best and brightest individuals who
know the ins and outs of their departments. The team members will be
cheerleaders for the positive change to the new enterprise system, leading the
infusion of information sharing and integration. The reason behind the change to a
new enterprise system, and the conditions that exist, will be communicated to the
implementation team. The team will also need to understand what the end result
should look like.
5.3.2 ERP Selection Overview Diagram
The typical ERP selection process steps are a part of the phases of selecting an
ERP system. The presented phases mirror the same stages or phases for project
management and are used to simplify the selection process. Planning, request for
information, evaluation, and selection phases are not linear or circular in nature. In
the diagram, the phases overlap. They are iterative, meaning each phase may need
to be revisited and tweaked throughout the process of selecting the ERP system.
 40

5.3.3 Planning Phase

The first phase is the Planning Phase. What steps must be taken when
developing a plan? What elements should be considered? During this phase a plan
needs to be developed, an evaluation team should be formed, and a feasibility
analysis must be conducted. Forming the business objectives, comprehension of
changes, project risk understanding, strong leadership, and budget watching are
imperative at this phase. The planning phase is one of the most critical phases of
the process. In general, this is the phase where many companies fail regardless of
whether it is selection of an ERP system, implementing a new or updated system, or
some other project. It is important to make sure the checklist items have been
accounted for, all requirements have been gathered, and the changes that may
potentially impact existing systems or processes have been analyzed. Also, a vision
is created to provide an explanation of why selection of an ERP system is
considered.
A feature/function list is established to provide understanding of what the
company wants and needs in a new ERP system. Verville and Halingten suggest a
company examine the participants for each phase, specifically who, acquisition
strategies, evaluation criteria, requirements, and an assessment of the present
status.
5.3.4 Request for Information (RFI) Phase
Request for Information (RFI) is a key phase in the ERP selection process.
Depending on the size of the company and its requirements the RFI and RFP can be
combined to fulfill the same objectives. At this point in the ERP selection process
the initial planning is completed and marks the beginning of the acquisition life
cycle. The major planning activities to select a team are established, detailed
objectives and goals are defined, and the feasibility analysis is done. Additionally,
an assessment of the company’s requirements is done, usually a very high process,
and the budget is established for the acquisition effort. It is critical when
determining the “right fit” that the ERP acquisition team has established its
selection and evaluation criteria prior to contacting any ERP vendor or considering
an ERP solution.
Typically, the RFI/RFP phase is when a company will identify a comprehensive
list of ERP system vendors that potentially meet the requirements based on the
selection and evaluation criteria outlined during initial planning. This RFI/RFP
phase may be an interactive process, as the ERP acquisition team gathers
information on vendors from internal and external sources, and eliminates those
that do not meet their requirements. Internal and external sources provide a means
to obtain information about potential vendors. Internal sources are usually sources
within the acquisition company such as individual users, team members,
consultants, and contractors. External sources are large professional research
groups such as Gartner Group, Meta Group, and CSC Index. These are well-known
and popular sources used to obtain information about a company for strategic
decision making.
 41

Other external sources that may be used are tradeshows, publications,

conferences, and the Internet. Another particularly valuable external source can be
a company’s industry competition. Companies in the same or similar industry who
have successfully implemented an ERP system are an excellent validation of the
ERP vendor’s capability. Additionally, their experience with the ERP vendor can be
reassuring, as well as being an extremely reliable and substantially accurate source
of information. As with any part of the RFI/RFP phases, mistakes will be made.
However, knowing the common pitfalls can help the ERP acquisition team to
operate more effectively and efficiently.
5.3.5 Evaluation Phase
“The greatest enterprise system implementation failures seem to occur when
the new technology’s capabilities and needs are mismatched with the organization’s
existing business processes and procedures”. For this reason, the evaluation phase
is a significant phase in the selection process. The evaluation phase is the process
of assessing the different vendor options. At this point many companies compose a
score- card, score sheet, or check off list for the assessment. A number of criteria
are decided upon, and then measured against prospective vendors. The number of
items on the evaluation will vary from company to company. There will be some
questions or scorecard items that all ERP selecting companies should have, and
there will be others that are specific to that particular company. The evaluation and
criteria used to identify the list of recommended ERP vendors should be based on a
weighted value which includes five main categories: functionality, integration with
other applications, ease of implementation, vendor strength and/or reputation, and
cost. The company’s assigned criteria weights reflect the level of importance.
Market Analysis - Common Results
For example, if the company heavily values the ability to upgrade or expand the
proposed system, then the company might assign it the weight of 30% and the other
criteria may receive 10% each. The evaluation phase is done twice.
 42

After a short list has been compiled, ERP vendor product demonstrations, a
business case, and management commitment must all be created or obtained. The
ERP demos require a scripted demo outline to be developed. Typically, scripted
demos identify strategic company business processes, problems facing the company
in certain organizations, or both. These scripted scenarios should identify key
business processes that may be challenges with the existing legacy system that
would provide substantial benefit to the organization if they were supported by
better information and functionality. “What are the 10 to 15 key things that are
difficult to do today with the current systems that would provide substantial benefit
to the organization if they were supported by better information and functionality?”
Most often, this separates the ERP vendors that are or aren’t a fit with the
company’s business objectives and goals.
The scripts should list the detailed steps, functions, and if available, sample
data for a particular business process. It is suggested that the demonstration
scripts be prioritized and keep short with eliminating important detail. Keeping to
these guidelines allows the ERP vendor sufficient time to prepare the scripted
demos, and puts emphasis on the most important business issues. Management
and users of the current system should review and accept the scripts. This
demonstrates that the selection process is business driven and not technology
driven. Subsequently, the selection phase commences once the evaluation phase
has been completed.
Many times a proof of concept is requested from a potential vendor. Typically,
when the vendor list is narrowed to two or three vendors is when it is appropriate to
solicit for this type of request. A vendor will put a lot of time and effort into the
preparation of a proof of concept hoping to win a company’s business. When the
vendor demonstrates the proof of concept, close attention to the existing ERP
system functionality and the amount of customization required to meet business
requirement are important to ERP vendor selection.
5.3.6 Selection Phase
The ERP Selection phase culminates with a “final choice” or “recommendation”
for an ERP vendor solution. Site visits are an important aspect of the ERP vendor
selection process. It allows the acquisition team and other interested individuals to
see first-hand a particular ERP vendor solution in operation. Keep in mind there
are unique company processes that may appear to be similar, but vary based on
the industry and process. For example, company size matters – performance and
technology infrastructure can be different as you increase the number of users or
the volume of transactions. The ERP vendor will usually provide a list of reference
clients that a company can visit or call on.
Now the acquisition team has re-evaluated the potential ERP vendors as “fit”
solutions. Further examination is now the total cost of ownership. All cost
associated with acquisition is thoroughly scrutinized for the next step in the
process. Clarification questions are posed; customization requirements are refined
 43

to understand impact, hardware infrastructure modification/additions are blue-

printed, and ERP software maintenance are dissected. If a RFP is needed, the
proposal is prepared (see RFI for detail). Expanded detail can be added to the RFI
outline to include specific terms and conditions, current and future costs, license
agreements, and preliminary training and deployment plans.
The next step in the ERP selection process is to negotiate with ERP vendors to
finalize the “recommendation” or “final choice”. Negotiation will most likely entail
discussions with a company’s legal department and senior management or steering
commit- tee with accountability for the project’s success. Do not expect this process
to move fast. Several iterations of meetings and discussions almost always happen
before final ERP vendor selection.
The final step is to arrive at the “final choice” or “recommendation”. The
acquisition team reaches a decision and gives a comprehensive report of the
findings. A decision is communicated with justified tangible and intangible benefits.
A go, no-go decision is made to move on to the ERP implementation. In extreme
cases, if necessary, reverse the decision, evaluate other ERP vendors, or renegotiate
the contract.
5.3.7 Selection Trade-Offs
What is a trade-off and why should it be considered when selecting an ERP
system? According to Dictionary.com, a trade-off is the replacement of one item or
concept for another that is of more or less equal value, particularly to affect a
compromise. Trade-offs for ERP selection will vary by company. Here is some
example trade-offs that a company may face when selecting an ERP system:

Customized versus Vanilla ERP system

Vendor Module Functionality Offerings
Scalability of System
Degree of Consultant Involvement
A company must decide whether a customized ERP System is more
appropriate than the adoption of a COTS system. Vendor module functionality
offerings are an additional trade-off. Vendors will have a portfolio of module
capability to offer customers. The customers selecting an ERP must choose which
vendor best serves the business functionality required. A trade-off may arise when
deciding on which modules are selected due to constraints such as time, budget, or
perhaps what vendor is selected. In addition, the scalability of a system may also be
a trade-off consideration, as a company may be compelled to choose an ERP vendor
based on this requirement and what costs or resources are involved. A trade- off
could occur when a company considers whether the ERP selection will be handled
by internal teams or external consult- ants. External consultants will be more
knowledgeable based on past experience and will free internal resources; however,
the consultant fees may be costly and the consultants may not be as familiar with
 44

the company or its needs. Internal teams will have knowledge of the company, but
may not have the expertise or resources to put forth.
Flow Chart of a Preliminary ERP Selection Process

5.5 REVISION POINTS

1. Request for Information
RFI is a key phase in the ERP selection process. Depending on the size of the
company and its requirements the RFI and RFP can be combined to fulfill the same
objectives.
2. Selection phase
The ERP Selection phase culminates with a “final choice” or “recommendation”
for an ERP vendor solution.
5.5 INTEXT QUESTIONS
1. Give a brief note on selection phase.
2. Write a note on planning phase.
5.6 SUMMARY
Software Selection is a somewhat different process than developing an
application. Most companies follow a similar process with some minor deviations
 45

here and there. The ERP selection team is comprised of individuals from each of the
functional areas of the business. The typical ERP selection process steps are a part
of the phases of selecting an ERP system. The planning phase is one of the most
critical phases of the process; this is the phase where many companies fail
regardless of whether it is selection of an ERP system, implementing a new or
updated system, or some other project. Depending on the size of the company and
its requirements the RFI and RFP can be combined to fulfill the same objectives.
Typically, the RFI/RFP phase is when a company will identify a comprehensive list
of ERP system vendors that potentially meet the requirements based on the
selection and evaluation criteria outlined during initial planning. The evaluation
phase is the process of assessing the different vendor options. The ERP Selection
phase culminates with a “final choice” or “recommendation” for an ERP vendor
solution.
5.7 TERMINAL EXERCISES
1. Briefly explain about RFI phase.
2. Give a brief account on Selection Trade-offs
5.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007.
5.9 ASSIGNMENTS
1. What are the different ways and steps to selecting an ERP system? Explain.
2. Describe the evolution phase.
5.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
5.11 LEARNING ACTIVITIES
1. Explain the ERP Selection overview diagram.
2. Draw a flowchart for Preliminary ERP Selection Process and explain.
5.12 KEYWORDS
1. RFI – Request For Information
2. RFP – Request For Proposal

 46

LESSON - 6
ERP IMPLEMENTATION – AN OVERVIEW
6.1 INTRODUCTION
The best way to begin the process of inducting of ERP is to start denying it to
the enterprise in these meetings. This radical and self-defeating approach is base
on the experience of many CEOs who went about finding out what the enterprise
can do to/save costs without having to implement costly solutions like ERP systems
are now sleeping easy with a robust ERP system taking care of their enterprise.
While the people went about searching for solutions they actually found the root of
the problems and the ways to solve them after which it was a simple matter of
applying the universal healing balm of the information age, ERP.
This way one has also earned the commitment of various sections of
management whose help one could count on when the ERP bandwagon start
rolling. The exercise would also prove to be useful for you to learn about the
organization in a new light and also make one understand how much or how often
one can push one's core team. And finally, whatever reservations one may have had
about shelling out the fancy price for the ERP package would vanish, and in its
place there would be an eager expectation about when to begin, and once one does
the excitement of what to expect from the whole exercise.
6.2 OBJECTIVES
 This lesson aims focuses on implementation of Enterprise Resource
Planning. Towards the end of the lesson the reader will be able to
understand the role of customers, vendors and users and data migration.
6.3 CONTENTS
6.3.1 Startup
Nevertheless here are a few startup tips one can use. While modeling a
company format these tips will be useful. The manager or the person has to take
some steps before he could implement the ERP. The responsibility of the person in
charge or the Manager is very high in nature, if one is going to handle then these
tips are going to be vital.
1) Create a base case of annual savings from cost cuts that could be made without the
ERP system in place.
2) Create a case for annual savings that could be made with the ERP in place. This
should include the savings that may be made without ERP as well.
3) Subtract the base case savings from the ERP case savings on as annual basis and
calculate the NPV of residual cash flow. A positive NPV will indicate that one should
proceed with the deployment of the ERP system. And if it is negative NPV then
conduct sensitivity analysis of the business process, for one may find one's business
bleeding from all sides.
4) Ask one's IT people to prepare a workable IT road map, say for the next three to five
years. This would be needed to ensure that one is not hit by technological
 47

obsolescence and one's accountant does not ask too many questions when the ERP
vendor suggests his whopping price tag!
5) Make sure that one spends enough hours agonizing one's top team whether to go all
out or in incremental stages implementing an ERP solution. This is crucial as
whether packaged or custom built, ERP system would eventually lead to
reengineering several parts and processes of one's enterprise which needs to be
prepared.

Fig. Project Implementation Structure for an ERP Implementation Project

Once one gets the hang of the whole thing, or got sufficiently obsessed to risk
spending a fortune, make sure that everyone down the line gets to hear about
it so that the buzz starts much before the bite begins. There is no point in
taking people by surprise when one can really take them on at one's leisure
6) Make sure that no usual suspects, or the favorites get in, as they not only
become show spoilers, they may even delay things when they figure out that it
is not easy to do a jig to impress the boss when all one has to do day in and
day out is to start at a colorful screen filled with figures, flow charts and fast
moving mumbo-jumbo.
7) Begin by appointing a steering committee comprising besides oneself, the IT
guys, and all other key senior staff who would ultimately have to handle the
after-effects of an ERP process. Many in this group may never even know
Microsoft and SAP are rivals in the game, but what matters would be their
commitment to implement the solutions in their respective spheres and their
willingness to be held accountable for achieving the promised savings after it is
in place.
8) Along with the steering committee appoint a project leader who would
eventually become the fall guy for ERP implementation. This person should
have functional experience across one's company with keen interest in
information technology, be politically savvy, highly communicative and above
all have the credibility of character.
 48

9) The team is as important as the leader. One should make sure that the best
and the brightest join the team. Remember a lot of good people may not like to
be pulled out of their current jobs. The fact that they have to sacrifice their
known turf to prove themselves once again in an unknown environment is
disincentive enough. This means, one has to make some promises that one
should be willing to keep. But fortunately, ftp most of the people moving into
the ERP arena, the cast has been set and much of employee reluctance is
already vanishing with the kind of hype the whole business is receiving.
10) Since in any event there are quite a few already initiated in it and are otherwise
willing to put their hat in the ring, why not use it to for advantage? One of the
best ways to do this is to encourage the ERP vendors, supporters and
educators to conduct periodic workshops and seminars with the promise that a
sufficient number of one's employees would ultimately be part of the ERP team
one way or the other. If it is the ERP education institute one can always work
out a system of compensating one's employee the atrocious fees these
institutes seem to be charging. If one is clever one could invest this money on
one's employees and recover it by way of discounts while the ERP vendors come
knocking at one's door, as more often than not, it is the same institution that
would be running the ERP teaching too! As for you, one has won the employee
loyalty and his willingness to join the team and, at the same time, one has also
won the goodwill of the would-be ERP vendor, a factor that would go a long way
in helping one while implementing the package.
11) Lot of spare time at the initial stages of ERP implementation would save lot of
hushed discussions, muted dissent and wile rumors of eventual job losses.
When people find their years of grind simply going out of the window and they
are asked to relearn their job all over again, things will not be easy. The trouble
with ERP is that one cannot halt everything No that is not the way with ERP.
Like a well-trained enemy agent, ERP will have to infiltrate the system slowly
and thoroughly even while the show goes on as usual.
12) If one is opting for a customized solution, one's job may be a bit easy-more of
this later but if one were implementing a package, one would have a lot to pray
literally. These expensive packages need to be reinvented literally on the job
with much of the work being done by the vendor himself, which keeps everyone
else in one's organization in the dark heightening the animosity and perhaps
hatred to this outside interference. Besides, most of the solutions have been
developed in an environment and organizational culture far removed from one's
and despite the best reassurances that the best industry norms have been
followed for each of the solutions, these often do not work in practice.
6.3.2 In-house Implementation-Pros and Cons
To successfully set up and implement an ERP package, which functions
perfectly, is not an easy task. One cannot go in for a trial-and-error method of
implementation strategy due to the huge amount of investments involved. The
consequences of a failed ERP implementation can be quite catastrophic. It might
put the organization out of business. Also, the ERP implementation process cannot
go on for a long time, it has to be completed within reasonable time period.
 49

To successfully carry out the implementation within a reasonable timeframe,

the in-house people who are designated to do the job should possess a certain
amount of knowledge and skill. To start with the company should have people who
are familiar with the ERP package and with the technical issues. Implementing the
ERP software means, assigning the optimum values to the various parameters and
the variable elements of the systems. Experience has proven that a good
professional needs at least one year to become reasonably good in an ERP system
and that this one year should be hands-on practical experience. It is not possible to
become an expert by reading product brochures and on-line help files. One needs to
have practical implementation experience.
A good package vendor need not be good at implementing his own product.
Also, each group of people in an implementation project (vendors, consultants, in-
house team, users and so an) have definite roles, it can create problems when a
conflict arises. For example, if the vendor is doing the implementation, the vendor's
consultants may not be as open to the ideas of the in-house team as third-party
consultants, because the vendor's consultants will have a mindset which will
prevent them from seeing the other side's perspective.
Besides having a very good knowledge of the product, the people who are to
implement the ERP system should possess the following skills:
 Knowledge of how to organize and run a project of this magnitude. This calls
for good organizational skills, project management skills, team management
skills and knowledge of scientific methods of software project management.
 Enough experience in handling problems and issues that arise during the
implementation. No implementation will be smooth process; there will be
problems, cost overruns, time overruns and so on. Knowing what to do in these
situations is vital for the success of the project.
 Good People Skills: Any ERP implementation will face resistance from the
employees. The resistance could be due to ignorance about the product, fear of
unemployment, fear of training, fear of technology and so on. So it is very
important that the people in the implementation team are very good diplomats,
adopt at diffusing crisis situations.
 Good Leadership Skills: ERP implementation will involve dealing with a lot of
people and good leadership and communication skills are very effective.
 Excellent Training Skills: Every ERP project involves considerable amount of
training' at various levels and in various details. There will be familiarization
programs for all the employees, executive programs for the top management,
functional training for the implementation team members and end-user
training.
 In today's business environment, where the trend is to reduce manpower and
focus more on the company's core competencies, it becomes ever more
difficult to take the total responsibility of the ERP implementation and get it
done using in-house resources. If the company is planning to do the ERP
implementation in-house, it might have to hire experts and have them on the
company's rolls. This is an expensive proposition because once the
 50

implementation is over; one will not need that many experts to keep the system
running-the post-implementation phase. One will need only a handful of people
may be a few of them in each functional area, to effectively handle the post-
implementation scenario. If the company is planning to do the ERP
implementation all by itself, then it will be wasting a lot of its resources and
spending a lot of money on training-most of which are not needed after the
package implementation.
In summary, it is better for companies to concentrate on their business and
leave the job of ERP implementation to people who are in that business. But to get
maximum benefit out of a packaged solution, the company personnel should
participate fully during the implementation of the package. The company should
plan the participation so that its people play an appropriate role in the
implementation project so that it has enough experts in-house, once the
implementation is over. The company should bring in the know-how and experience
that will guarantee the best possible use of the acquired package.
6.3.3 ERP implementation life cycle

Since ERP implementations consist of 8 important steps, it is not a one-day’s

job. By integrating various facets of the business, it optimizes the efficiency at
which you manage your business and immensely contributes to profitability. Let’s
look at the 8 stages of ERP implementation life cycle:
Step-1: Selection of package
Every business is different and so are its needs. Thus, choosing the right ERP
software for your business is the first and the most important step. With numerous
options available in the market, it could be rather daunting to choose the right fit
for your business operations. Thus, in this step, ERP modules that do not fit your
requirement are eliminated.
Step-2: Project planning
When kicking off any project, it needs to be planned out perfectly, so that there
are no surprises during the implementation. From choosing the right resources to
 51

allocating tasks to respective team members, planning is key to achieve accurate

ERP implementation.
Step-3: Analysis GAP
Another important step in the life cycle of ERP implementation step, GAP
analysis is performed to evaluate and compare the current system of the
organization and its future position as needed. This way you can easily identify the
key processes that need the most attention with your ERP.
Step-4: Re-engineering
To make the process more efficient and worthy, re-engineering is implemented
as the process involves several changes and alterations based on the planning and
gap analysis.
Step-5: Training
Since there is a new system in place, it will require for employees to get proper
training so they can start using the product, seamlessly.
Step-6: Testing
This is another crucial step in ERP implementation life cycle. It is basically
carried out to assess the errors and try to resolve them before the actual
application process.
Step-7: Application
This is the stage where the actual implementation of the ERP system occurs.
Once all the data is collated, analysed and converted to be fed into the system, the
new implementation is applied, and the older system is discarded.
Step-8: Maintenance
The last and the final step, of the ERP life cycle is maintenance. Now that the
new system is in place, it is the responsibility of the employees working on it to stay
updated with the latest technology offerings. Employees also need to learn how to
keep the system up and working whenever the need arises.
6.3.4 ERP implementation Methodology
The steps shall be briefly discussed:
Identification of the needs for implementing an ERP Package: The first
step for implementing an ERP package is to identify the reasons for going in for an
ERP solution for one's business. The factors that should be taken into
consideration are:
 Need for quick flow of information between business partners.
 Effective management information system for quick decision-making.
 Elimination of manual preparation of various statutory statements.
 Need for a high level of integration between the various business functions.
Evaluating the "as-is" situation of one's business: In this step, one needs to
thoroughly understand what existing business processes the organization is
following to transact its business. The various business functions should first be
enumerated. For example, procurement, production, sales, etc. Now the processes
used to achieve the business transactions should be listed in detail. The technique
 52

of process mapping can be used here. The map should give one the following details
for any business process:
 The total time the business process takes to complete.
 The total number of decision points involved.
 The number of departments/geographical locations that the business
process involves.
 The flow of information.
 The number of reporting points
Deciding upon the desired would be situation for one's business: In this
step, one decides on what one wants the business processes to finally look like.
Here one uses the techniques of benchmarking to ensure that the targets set are
comparable to the best in the industry. Benchmarking can be done on various
aspects of the business like cost, quality, lead-time service, etc.
Re-engineering of the business processes to achieve the desired results:
To achieve the new business processes one re-engineers the existing
processes in such a manner that:
 The business process cycle time is reduced significantly.
 The number of decision points is reduced to the bare minimum.
 The flow of information is streamlined, that is there is no unnecessary to-
and-fro flow of information between departments.
Evaluation of the various ERP packages: In this step various ERP package
available in the market are evaluated with respect to the following aspects.
Global presence: Check the performance and acceptability of the package
globally.
Local presence: Check how the package id performance in the local market,
gives an idea as to how well a package is taking care of the country specific
business needs.
Investment in R&D: Evaluate the package from the point of view of
investments the ERP vendor is making in R&D to continuously upgrade their
product. A good investment in R&D is a healthy indication of the longevity of the
package.
Target market: See which segments of the industry the package is basically
aiming at. Some packages, for example, are specific to process industry type of
applications whereas others cater specifically to discrete manufacturing. Choose a
package that has a strong hold in one's type of industry.
Price: This is of course the main criteria which will decide what package one
will finally go in for.
Modularity: This aspect needs to be considered when one wants to implement
only some particular functions in the ERP package. The availability of the package
as independent modules is a must in this case.
 53

Obsolescence: While considering a package it is essential to see what would

be the active life of the product before it becomes obsolete. As mentioned above the
investments in R&D directly contribute to upgrade a package from time-to-time
thus increasing its useful lift.
Ease of implementation: This factor needs to be looked into in detail because
a quick, smooth and hassle-free implementation is the key to successful transition
from the legacy system. This in turn ensures that one's business is not adversely
affected in the transition period.
Cost of implementation: With large-scale integration of ERP packages and
the consequent complexity built into them, it has become essential to consider the
cost of implementation, which in some cases can be phenomenal.
Post-implementation support: Before deciding on an ERP package, it is
advisable to check the quality and range of the post-implementation support that
the vendor provides for his package.
Finalizing the ERP package: After a thorough evaluation of all the ERP
packages vis-a-vis the key factors of one's business, the package best suited to
one's business needs is selected. The process of finalizing can be simplified by
marking a matrix of the factors.
Installing the requisite hardware and networks: In this step one has to
install le hardware and network required for the chosen ERP package. The
installation of the hardware has to be well planned because generally the hardware
arrives in time and lies idle due to the delays in implementation.
Finalizing the implementation consultants: The factors, which go into the
selection of the consultant, are:
 Skill-set available with the consultant (application areas).
 Installation base of the consultant.
 Industry-specific experience (knowledge of the various industry specific
business processes).
 Finances involved in hiring the particular consultant.
Implementation of the ERP package: The broad steps involved in the
implementation of the ERP packages are:
 Formation of implementation team
 Preparation of implementation plan
 Mapping of business processes on to the package
 Gap analysis
 Customization
 Development of user-specific reports and transactions
 Uploading of data from existing systems
 Test runs
 User training
 54

 Parallel run
 Concurrence from user on satisfactory working of the system
 Migration to the new system
 User documentation
 Post-implementation support
 System monitoring and fine-tuning
6.4 REVISION POINTS
1. Good Leadership Skills: ERP implementation will involve dealing with a lot
of people and good leadership and communication skills are very effective.
2. Training Skills: Every ERP project involves considerable amount of training'
at various levels and in various details.
3. Good People Skills: Any ERP implementation will face resistance from the
employees. The resistance could be due to ignorance about the product, fear
of unemployment, fear of training, fear of technology and so on.
4. Project Planning: When kicking off any project, it needs to be planned
out perfectly, so that there are no surprises during the implementation.
6.5 INTEXT QUESTIONS
1. Define Good leadership skill.
2. List the Pros and Cons of In-house implementation.
6.6 SUMMARY
The responsibility of the person in charge or the Manager is very high in
nature, if one is going to handle then these tips are going to be vital. Developing an
ERP package is a very complex and time-consuming process, which needs a lot of
skilled manpower and other resources. Designing and implementing integrated
software packages is not the business of most companies, or focus of their
executives, the systems that their in-house team comes up with will never equal in
quality, scope, functionality or technology. ERP implementation process cannot go
on for a long time; it has to be completed within reasonable time period. A good
package vendor need not be good at implementing his own product. The company
should plan the participation so that its people play an appropriate role in the
implementation project so that it has enough experts in-house, once the
implementation is over.
6.7 TERMINAL EXERCISES
1. Explain the steps before the manager could implement the ERP.
2. Describe ERP implementation Life Cycle.
6.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
 55

5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical

Perspective. New Delhi, NY: New Age International, 2007
6.9 ASSIGNMENTS
1. Discuss the project implementation structure for an ERP implementation
project.
2. Examine ERP implementation Methodology.
6.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
6.11 LEARNING ACTIVITY
1. Exemplify the skills possess by the people those who are to implement the
ERP system.
6.12 KEYWORD
1. NPV – Net Present value.

 56

LESSON - 7
ROLE OF CONSULTANTS, VENDORS AND USERS
7.1 INTRODUCTION
Vendors are the people who have developed the ERP packages. They are the
people who have invested huge amounts of time and effort in research and
development to create the packaged solutions. If one studies the history of the ERP
packages and finds out how each package evolved, it soon becomes evident that
every ERP package grew out of the experience or opportunity of a group of people,
working in a specific business, who created systems that could deal with certain
business segments. Now with the ERP market places becoming crowded with more
and more players entering the market and the competition becoming hot, today’s
ERP packages have features and functionality to cater to the needs of business in
almost all sectors. The ERP vendors spent billions of rupees in research to come up
with innovations that make the packages more efficient, flexible, and easy to
implement and use.
7.2 OBJECTIVES
 This lesson aims focuses on role of consultants, vendors and users. Towards
the end of this lesson the reader will be able to understand the concepts of
customization, precautions and Data migration.
7.3 CONTENTS
7.3.1 Role of the Vendor
First and foremost, the vendor should supply the product and its
documentation as soon as the contract is signed. Only after the software is
delivered, can the company develop the training and testing environment for the
implementation team. The vendor is responsible for fixing any problems in the
software that the implementation team encounters. So the vendor should have
liaison officers who should constantly interact with the implementation team.
Another role the vendor has to play is that of the trainer to provide the initial
training for the company's key users, people who will play lead roles in the
implementation of the system. These key users are the ones who will define,
together with the consultants, how the software is to serve the company. In other
words, it is these in-house functional experts who will decide how the
functionalities are to be implemented, as well as how to use or adapt the product to
suit the company's unique requirements. So it is very critical that these key users
are given a through training on the features of the package. Vendor's training
should achieve the goal of showing the key users how the package works, what are
the major components, how the data and information flows across the system, what
is flexible and what is not, what can be configured and what cannot, what can be
customized and what should not, what are the limitations, what are the strengths
and weaknesses and so on.
The consultants also have a role to play during this vendor training. They
should participate in the training sessions to evaluate how the users react to the
 57

reality that is starting to take shape from the detailed presentations and demos.
The role of the package vendor does not end with the training. The vendor also
plays an important project support function and must exercise the quality control
with respect to how the product is implemented. It is the vendor who understands
the finer details and subtleties of the product and can make valuable suggestions
and improvements that could improve the performance of the system. It is also in
the best interests of the vendor that this participation continues, because if the
implementation fails, most of the blame will fall on the vendor.
The vendor has other responsibilities also. There will be 'gaps' between the
package and the actual business process. The software might have to be
customized to suit the company's needs. Customizing learns altering the product so
that it is suited for the company's purposes. The choice of whether to customize or
not, is the one that can have enormous impact on the project and it often
constitutes a point of conflict between the consultants and users. But if the
decision to customize has been taken, it is the vendor's duty to carry out the
necessary modifications. This is because only the vendor knows the product well
enough to make the necessary changes without affecting the other parts.
7.3.2 Consultants
Business consultants are professionals who specialize in developing
techniques and methodologies for dealing with the implementation and with the
various problems that will crop up during the implementation. They are experts in
the administration, management and control of these types of projects. Each of
them will have many man-years of implementation experience with various
industries and would have time-tested methodologies and business practices that
will ensure successful implementation. They will be good at all phase of the
implementation lifecycle, right from package evaluation to end-user training. The
only problem with them is that they are expensive.
Many of the big consulting firms, having forecasted the ERP boom, invested a
great deal on money in developing a range of consulting services in this field and
assigned many of their professionals to become specialists in the various aspects of
ERP packages and their implementation. These firms researched the various
products, developed an in-depth understanding of each product's strengths and
weakness, worked by the side of the ERP vendors, confirmed that the vendor's
packages worked and learned the tricks and techniques of the trade, found out the
pitfalls and mistakes that should be avoided and thus created a pool of experts who
could handle the ERP implementation without failure.
Thus, consultants are people who have made the business of ERP
implementation their business and have invested huge amount, of money and
manpower for that purpose. So when one wants to get the service of these
consultants, the first question that will be asked is "Are they going to be
expensive?" The answer is a definite YES. The consultants will be expensive, so the
company will have to formulate a plan regarding best optimum utilization of the
 58

money spent on consultants. If one studies the statistics, one can see that a well-
selected, integrated system that was successfully implemented and which is
successfully working, usually pays for itself in a relatively short period between 10
and 30 months. If one analyzes the cost break-up one will find that the most
expensive part of the implementation was the consultation charges.
For a typical ERP implementation, the cost of consultants is 1.5 to 3 times for
every rupee invested in the software product. Sounds amazing, but it is true and it
is also true that the software will pay for itself the software cost, the consultant's
charges and other expenses incurred during implementation in the above-
mentioned period (10-30 months). But the catch is that the product has to be the
right one and the implementation has to be successful. That is why the expertise of
the consultants becomes invaluable and the money spent on good consultation is
never wasted. So finding the right consultants people who have the necessary
know-how, who will work well with the company personnel, people who will transfer
their knowledge to the company's employees and people who are available in case
their services are required again is very important.
7.3.3 Role of Consultants
The role of the consultants is very familiar to all of us because one has seen
many of them in action. The company places its trust in the consultants, that its
business objectives will be achieved. In fact, it is a better practice that the contract
between the company and the consultants should have all the performance clauses
in place. The consultants should guarantee the success of the project and should
be able to show the results (quantifiable results like reduction in cycle time,
increased response time, improved productivity and so on) to the satisfaction of the
company's management.
Consultants are responsible for administering each of the phase of
implementation, so that the required activities occur at the scheduled time and at
the desired level of quality and with effective participation of-all those who must
participate. For keeping the promises that the consultants have made during the
negotiations, they have to transform their approaches and methodologies into
detailed work plans. The methodology will have to be converted into tasks and
should be allocated to the right people.
Consultants should add value to the project. They bring the know-how about
the package and about its implementation. The know-how that is not included in
the standard documentation. This know-how (also known as practical knowledge) is
derived from their expertise, which stems from practical experience. Because the
consultants have seen many projects and have made or seen many mistakes, they
can avoid the phenomenon of 'reinventing the wheel'. They will know what will work
and what will not. Thus by eliminating the trial-and-error method of
implementation and by doing it right the first time, the consultants help in saving
huge amounts of money, time and effort.
 59

Consultants should also know how to remain impartial while questioning

current company processes in an effort to promote better business practices and
better implementation results. They should strive to improve the company's
business processes so that the software package can be used as its developers
originally intended it. Refining the company's processes can only optimize the
performance of the system and maximize future user satisfaction. The consultants
are also responsible for analyzing and clearly addressing the customization issues.
They must be able to distinguish between the 'must have and nice to have item and
decide on the level of customization. This is an area where the consultants have to
use their diplomatic, skills, as the company people might want to customize all the
aspects.
It is the duty of the consultant to understand the total context and scope of
the envisioned work and to know when to alert the company management about
actions and decisions that must be undertaken so that the job will not be
compromised and the implementation will not be jeopardized. Maintaining technical
documentation on the project also falls within the duty of the consultant. The
consultants will leave once the project is complete, but the knowledge of the project
must stay within the organization.
7.3.4 End-users
These are the people who will be using the ERP system once it is in place.
These are the people who were doing the functions that are being automated or
computerized by the ERP system. With the implementation of the ERP system, the
old job description will change; the nature of the job will undergo drastic
transformation. It is human nature to resist change. When one i talking about
implementing an ERP system, one is talking about change in a very massive scale.
Employees will fear that system will replace existing jobs, as many functions will be
automated. Also people will be afraid of the amount of training they have to
undergo and learning they have to do to use the new system. Job profiles will
change, job responsibilities will undergo drastic alterations, and people will be
forced to develop new skill sets. If these fears are not addressed and alleviated well
in advance, it will cause trouble for the organization.
It should be worth nothing the fact, that while the ERP systems eliminate
many existing jobs, it creates many new ones, ones with more responsibilities and
value addition. It is easy to see that the automation of the business processes,
through technology, can eliminate the jobs of many employees whose function is to
record, control, calculate, analyze, file or prepare reports. But it must be pointed
out to the employees that the same automation creates many more opportunities
for them, because they can get away from the monotonous clerical work and
transform themselves into highly valued individuals, in a new and challenging
working environment using modern technology.
7.3.5 Customization
During the course of ERP implementation, the demand for changing the core
package is common phenomenon. The scope of change may vary from a simple
 60

cosmetic change to a major 'functionality change. The consultant has to carefully

weigh the impact of such changes and convey this to the users. In some cases it may
be impossible to proceed with the overall project without carrying out certain
alterations. In such cases, it may be deemed necessary to customize. However, it is
important to understand that customization is not expected to be the focus area of an
implementation. One should try to satisfy user requirements and overall business
objectives within the existing framework of the standard package because any change
in an integrated system has an adverse impact on the functioning of other modules of
the package. During the up gradation of the system, the customization exercise has to
be repeated and maintenance of consistency in changes becomes problem. This makes
it more difficult to implement the package and considerably increases the risks and
throws the costs and schedules out of gear.
It is the responsibility of the consultant to help users appreciate the fact that it
is they who are ultimately benefited by implementing the standard package. This
can serve to motivate and reinforce confidence among the users, who are the
driving force behind any successful implementation. The success of an information
system should be measured in terms of how completely it is accepted by its users.
Many positive changes come about as a result of user acceptance and this becomes
visible over a period of time. However, some of the benefits are instantaneous. The
consultant has to drive home this fact so that the users appreciate this reality and
continue to contribute positively.
7.3.6 Precautions
When coordination and communication are missing, one might as well forget
efficiency and successful ERP implementation. A large consumer product
manufacturer recently had as many as six major performance improvement
programs, including ERP implementation, going on simultaneously. Functional
heads of production, marketing, finance, operations, procurement and sales were
the project leaders. Each carried a different banner such as ERP implementation,
reengineering, cost reduction, ISO certification, and so on.
The efforts put forward by various teams to coordinate these activities
remained absent or were forced most of the time when attempts were made to
formalize communication, it became bureaucratic. The result, as one may imagine,
was that a great opportunity for improving the profitability of the organization was
lost. Surprisingly, individual teams declared that their projects were a huge success
and tremendous savings had occurred. In most occasions the people tend to behave
against their will, at that stage the approach to people, process and technologies
conflicted with each other. The lack of coordination increased the redundancy of
work and de-motivated the project team members.
In India, ERP is not that successful, which means it does not reach the
stability or maturity to deliver business benefits in significant measure. The impact
of ERP on this is very vital on corporate Information Systems (IS). It has emerged a
beacon of hope that promises to solve all information-related hassles. ERP strives to
 61

create a seamlessly integrated organization that is transparent and efficient, paving

the way for quick and quality decision-making.
7.3.7 Data Migration
ERP data migration is the process of transferring data from its original sources to
the ERP system’s database. It often involves moving data from a variety of different
systems, formats and storage types into a single, common structure. Before the adoption
of ERP, some departments may use systems designed to support only their specific
functions, such as standalone accounting or human resources applications, while other
groups may rely on general-purpose tools such as spreadsheets. To ensure a successful
data migration, businesses need to take a methodical approach, which typically includes
inspecting, extracting, cleansing and transforming the data from each of these
applications before importing it into the database.
DATA MIGRATION CHALLENGES
ERP data migration can present a variety of challenges:
1. Data redundancy and integrity
Multiple departments may store their own copies of information about the same
customers or products—but that doesn’t mean their data is identical. Each department
may categorize data differently. For example, they may store customer names and
addresses in different formats or have different addresses for the same customer. If you
simply import every record from each departmental system into the ERP database, you
could end up with problems such as duplicated or inaccurate customer lists.
2. Data migration cost
The cost of extracting, cleaning and restructuring data can add up to a significant
part of the overall ERP implementation budget. Even if you are merely moving data from
an older ERP system to a newer one, the cost of data migration can add 10–15% to the
overall cost of the new system, per a report from ERP Focus.
3. Stakeholder buy-in
The company’s top managers have many priorities, and ERP data migration may
not be at the top of the list. However, buy-in from the top is necessary to avoid internal
conflicts. As mentioned, various units may have been using their own disparate systems
related to their own business needs, and their staff may be accustomed to entering data
in a specific way. Management backing is often necessary to ensure all groups cooperate
to produce a single, consistent set of data.
4. Regulatory issues
A growing number of regional and industry-specific regulations affect the way
organizations can store and use data. When transferring data, make sure you comply
with those regulations. For example, a healthcare organization will need to follow HIPAA
rules that stipulate a six-year retention period for certain documents. Meanwhile, new
legislation such as Europe’s GDPR and the California Consumer Protection Act requires
that organizations retain the ability to delete all of a consumer’s personal data on
request.
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7.4 REVISION POINTS

1. Customization: The scope of change may vary from a simple cosmetic
change to a major 'functionality change.
2. Data migration: It is the process of transferring data from its original
sources to the ERP system’s database.
3. Consultants:
4. Business consultants are professionals who specialize in developing
techniques and methodologies for dealing with the implementation and with
the various problems that will crop up during the implementation.
7.5 INTEXT QUESTIONS
1. Define Vendor.
2. Write a note on Consultants.
7.6 SUMMARY
The vendor is responsible for fixing any problems in the software that the
implementation team encounters. The choice of whether to customize or not, is the one
that can have enormous impact on the project and it often constitutes a point of
conflict between the consultants and users. consultants are people who have made the
business of ERP implementation their business and have invested huge amount, of
money and manpower for that purpose. Consultants are responsible for administering
each of the phases of implementation, so that the required activities occur at the
scheduled time and at the desired level of quality and with effective participation of-all
those who must participate. End users should be worth nothing the fact, that while the
ERP systems eliminate many existing jobs, it creates many new ones, ones with more
responsibilities and value addition. Functional heads of production, marketing,
finance, operations, procurement and sales were the project leaders.
7.7 TERMINAL EXERCISES
1. Give a brief note on Data Migration.
2. Discuss the concepts of Precautions in details..
7.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
7.9 ASSIGNMENTS
1. Discuss the role of consultants.
2. Describe the End user in detail.
 63

7.10 REFERENCE BOOKS

1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012.
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008.
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009.
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008.
7.11 LEARNING ACTIVITIES
1. Discuss the challenges of Data migration.
2. Examine the role of vendors.
7.12 KEYWORD
 IS – Information System

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UNIT-IV : ERP -IMPLEMENTATION

LESSON - 8

ERP POST-IMPLEMENTATION
8.1 INTRODUCTION
After an ERP implementation, organizations should not sit back and relax,
depending on the scope of the ERP implementation exercise; several options can be
explored to further maximize the gains. The first thing that an organization should
look forward to, after an ERP implementation, is improved morale of the workforce.
Needless to say, it would have a cascade effect in terms of increased productivity
and better customer response.
On the monetary side, depending on the level of success, ROI should also be
on the way up. It is estimated that a well-managed ERP project can have up to 200
per cent return on investment within a short period of time while a poorly managed
ERP project can yield a return on investment as low as 25 per cent.
8.2 OBJECTIVES
 This lesson aims focuses on role of ERP post implementation technology.
Towards the end of this lesson the reader will be able to understand the
concepts of open technology and maintenance of ERP.
8.3 CONTENTS
8.3.1 ERP Post-Implementation Technology
The speed with which things are getting mixed up, technology has ceased to
exist as belonging to special brand of scientific-minded or scientifically trained folk,
which also means one does not have to have any compunction in sticking our finger
into decisions that are usually certified as being "technical" in nature.
Also, partly owing to the massive budgets involved and mainly because the impact
of the process is going to be all pervading, the decision about ERP cannot be left to the
team of nerds who run one's information and technology wing. This may come as a
major disappointment to MIS heads, without leaving any alternatives. They can at least
be a part of the core team that would ultimately deliberate the introduction of ERP in
the company and nothing more. The real thing is not even the finance team, even
though they are the first one to point to the marketing, consumer support one can go
for ERP. To make things more complicated not just one's company folks, even our
dealers, the retailers, the transport operators, and security agency and countless other
people to whom one outsource work are going to be involved in the process. In fact this
is the interesting thing about the knowledge-based solutions. They do not underscore
the fact that our organization cannot exist in isolation nor can one dictate terms to
one's fancied set of vendors or markets.
The ultimate transparency aspect of ERP and its ease of use with which it may
become a "Damocles1 sword on many heads in one's organization, which otherwise
had worn the crown of power and attention, can earn you their wrath. In other
words, since ERP is going to affect everyone, why leave the decision to the MIS team
alone? But the trouble is, as in democracy, one cannot have too many people trying
to take a decision, which perforce means the ball is squarely backed into your turf.
The buck after all stops at one's door as CEO.
 65

The team of apex management should know what to expect from the whole exercise,
so that one can decide whether or not to put our necks on the chopping block. It is a
decision that ideally should be based on business needs and benefits. Unfortunately
though, that does not actually happen.
Indian politicians, despite their "earthy and often vague" ways of handling
their politics, have given the IT world an interesting tool to handle in extremely
tricky situations hammer together a committee of wise men and leave them to
decide, or better still, to dilate.
So the way to go about it is to bring together a core team comprising:
1) Directors
2) Business mangers
3) Implementation task group
4) Project mangers
5) Technical support representatives
6) General administration and finance staff
7) Consultants
8) Union representatives
8.3.2 ERP maintenance steps
An ERP maintenance step include enterprise performance management, and
regularly up keeping the software that helps plan, budget, and report and even
predict an organization’s financial results. In short: ERP systems connect a
multitude of data points and business processes, enabling the flow of data between
them. ERP systems are powerful because they eliminate data duplication and
provide data integrity: hence the title of “the single source of truth”. So, what are
the steps to follow in ERP maintenance? Read on to find out.
1. Educate yourself about your ERP maintenance
Part of learning about your ERP beyond choosing the right software, is
learning how to maintain it. For this, you need to learn everything about your
system, including familiarizing yourself with your ERP vendor, to understand the
system’s upgrade path. In the process, you will learn how your software fits your
business’ needs, what its benefits and drawbacks are, and ultimately, how it aligns
with your overall strategy. This way, you will understand the full spectrum of
options available when it comes to choosing and implementing your ERP – as well
as what key steps to take to ensure ERP maintenance runs smoothly.
2. Assess your in-house talent
Do you rely on ERP specialists within your IT department? Or have you
contacted an ERP vendor to take care of implementing it? Depending on your
answers, you can assess whether to bring in ERP maintenance specialists or if you
have the manpower to take care of it in-house. Overall, an analysis of your internal
capabilities is essential to ensure the next steps move forward smoothly.
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3. Service Level Agreements: Why are they important?

If you’re a business with an ERP vendor and want to outsource ERP
maintenance to them, make sure to check your service level agreement to
understand where and how they can help you in the ERP maintenance process.
These are a key part of the contracting process for maintenance services. Seek
clarity on the SLA policy, particularly on the different levels of severity when
problems arrive. This is key to understanding how quickly your service provider can
respond, and at what speed they will provide solutions to these issues.
Service level agreements protect the maintenance service from being available
to clients 24/7, but it also protects you from high charges at the end of the month
due to receiving special, hands-on attention. By having clear definitions of issues
that may arise and their urgency levels, you will have an agreement that saves you
from any confusion or frustration in your interactions.
4. Plan your ERP life cycle
By considering your now thorough knowledge of your ERP, it’s key to
understand that system upgrades must not be skipped, as they ensure your ERP is
bug-free, safe, and operates at peak functionality. Understanding what software
version you use at any given time, and when the next update is planned, gives you
a sense of control and allows you to explain any issues more clearly if they were to
arise. This is also a strategic moment to assess your software with every upgrade: is
it still supporting your goals? How can it best support you?
Lastly, ensure your ERP runs on the latest security protocols. This is essential
to protect your business from cyber-attacks, whether on-premise or cloud based.
This is a way to make sure there are security measures in place in case of any risk.
This is why it’s important to consider the latest security protocols in every update
you run.
5. Safeguard your ERP
System reviews are one of the best tools for your business to assess your ERP
system. You can have them periodically, as they are not as necessary as software
updates. A system review is a health check for your ERP, with the goal of assessing
the functionality of the system and addresses any issues that could be slowing
performance.
This is on par with upgrade evaluations, as a way for your business to gain a
clearer vision of the opportunities for improvement, or budget adjustments needed
to accommodate this shift. By maintaining your ERP, you can ensure all business
processes are aligned and bug-free for executing your strategy without a hitch.
Lastly, make sure you have a plan in place for regular monitoring of your ERP
system. Have a dedicated team to monitor and maintain it internally is an option.
You can also choose an integrated solution where specialists come in from time to
time. This is the most time- and budget-efficient choice out of the two, depending
on your constraints.
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6. Up level your business with integrated e-commerce

Understanding how to optimize your business processes is essential to cut
back on your most important resource: time. You and your team have already put
so much time, energy and money into setting up your ERP and making sure it runs
smoothly for your company: Build on this investment by integrating your ERP with
other systems (like your e-commerce). There are many solutions on the market to
cut back on expenses and on-site operations, leaving your teams to focus on ways
to expand, scale and innovate your business.
8.3.3 Open Technology
Table below shows all current SAP-supported systems. The list is growing fast,
so for an update of supported systems, contact SAP or ask any system vendor:
What basically makes systems open is the use of standard formats for data
exchange, communication interfaces, and program-to-program communication.
SAP extends the open concept in several respects:
At the System Level: Support for multiple operating system platforms such
as UNIX, Windows NT, and AS/400. Supports a large number of standard GUIs
(user interfaces) such as Windows 3.1, Windows 95, Windows NT, Macintosh, Motif,
and OS/2 Presentation Manager.
At the Database Level: R/3 supports various relational database systems
such as Oracle, Informix, Adabas D, DB2, and SQL-Server. Access to the data
managed by R/3 is possible using standard R/3 reports as well as any other SQL
standard tool: ODBC, SQL browsers, and so on. SAP has incorporated the standard
ANSI-SQL.

Unix System
Hardware vendors AT&T, Bull, Data General, Digital, IBM, HP,
Pyramid, Sequent, SNI, SUN
Operating systems (UNIX AT&T UNIX, DG-UX, Digital UNIX, AIX, HP-UX,
flavors) DC/OSX, DYNIX/ptx, SINLX, SOLARIS
Databases Adabas D, DB2for AIX, Informix Online, Oracle 7
SAP GUI (presentation) Windows 3.11, Windows95, Windows NT,
Presentation Manager, Macintosh, OSF/Motif
Windows NT System
Hardware vendors AT&T, Bull, Compaq, Data General, Digital (Intel),
Digital, (Alpha), HP (Intel), IBM (Intel), Sequent, SIN
Databases Adabas D, MS SQL, Server, Oracle
SAP GUI (Presentation) Windows 3.11, Windows 95,Windows NT,
Presentation Manager, Macintosh, OSF/Motif
Other System
Hardware IBM AS/400
 68

Operating system OS/400

Databases DB2/400
SAP GUI (Presentation) Windows 3.11, Windows 95, Windows NT, OS/2
As the database manipulation language, which allows users and programmers
to store, view, and retrieve data to and from all different underlying database
products.
 At the Application Level: The system is open to be enhanced and extended
to meet specific business requirement. The R/3 reference model enables users
to understand the relationships and inner workings of R/3 applications. The
R/3 programming interface lets other R/3 systems and external programs
invoke R/3 function modules via RFCs (remote function calls) or RPCs (remote
procedure calls). SAP offers the Remote Function Call Software Developer Kit
(RFC SDK), a standard interface for customers and independent software
vendors (ISVs) to carry out individual extensions to SAP business applications
that support the direct communication with the function modules of R/3
 At the Desktop Level: With the deployment of Microsoft OLE (Object Linking
and Embedding) technology, R/3 enables desktop users to access SAP data
and functions from many OLE client programs.
 At the Communication Protocol Level: SAP can use the standard
communication protocols TCP/, SNA-LU6.2, CPIC, and OSF/DCE/DME for
inter-program communications as well as for network communication and
data transfer.
 At the External Communication Level:
• R/3 includes EDI (Electronic Data Interchange) interfaces to automate the
exchange of data (invoices, orders, etc.) between R/3 and other applications
systems used by business partners.
• It also uses MAPI (Messaging Application Program Interface) technology,
supporting standardX.400 and SMTP Protocols. These standards allow R/3
users to communicate with other mail systems and the Internet.
• SAP is actively investing in the new electronic commerce technology with the
deployment of the Internet, which allow business transactions to happen
between Internet users and R/3 systems.
• Using development environments such as standard ANSI C, C++, or Visual
Basic, developers can integrate external applications with the R/3 system,
exchanging information on the level of business objects.
User Interface
The R/3 user interface is designed for ease of use and friendliness by all levels
of staff The SAP graphical user interface, known as SAPGUI, acts as the
presentation server and is available in Windows 3.1, Windows 95, Windows NT,
Motif, OS/2 Presentation Manager, and Macintosh. They all look identical, whatever
underlying system they are running on. The SAPGUI includes all graphical
capabilities of modem windows interfaces, with push buttons, menu bars, toolbars,
hypertext links, on-focus descriptions, and right-clicking options. The graphical
 69

design and functionality is homogeneous across the entire system, which makes
training easier and more straightforward for all level of SAP users.
8.4 REVISION POINTS
1. Service level agreement: It protects the maintenance service from being
available to clients 24/7, but it also protects you from high charges at the end
of the month due to receiving special, hands-on attention.
2. Safeguard ERP: System reviews are one of the best tools for your business to
assess your ERP system.
3. Open Technology at Database level: R/3 supports various relational
database systems such as Oracle, Informix, Adabas D, DB2, and SQL-Server
4. Open Technology at System level: Support for multiple operating system
platforms such as UNIX, Windows NT, and AS/400.
8.5 INTEXT QUESTIONS
1. Define Service Level Agreement.
2. Write a note on user interface.
8.6 SUMMARY
The first thing that an organization should look forward to, after an ERP
implementation, is improved morale of the workforce. To make things more
complicated not just one's company folks, even our dealers, the retailers, the transport
operators, and security agency and countless other people to whom one outsource
work are going to be involved in the process. The ultimate transparency aspect of ERP
and its ease of use with which it may become a "Damocles1 sword on many heads in
one's organization, By maintaining your ERP, you can ensure all business processes
are aligned and bug-free for executing your strategy without a hitch.
8.7 TERMINAL EXERCISES
1. How to safeguard your ERP? Explain.
2. Give a detailed account on Open Technology.
8.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
8.9 ASSIGNMENT
1. List and explain the steps for ERP maintenance.
8.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
 70

3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.

4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
8.11 LEARNING ACTIVITY
1. Discuss in detail about ERP Post-Implementation Technology
8.12 KEYWORDS
1. OLE - Object Linking and Embedding
2. RFC - Remote Function Calls

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LESSON - 9
ORGANIZATIONAL AND INDUSTRIAL IMPACT
9.1 INTRODUCTION
ERP systems have revolutionized businesses around the globe. Processes are
leaner and more efficient, costs are minimized, positive customer service is more
prevalent, and government compliance is present. Companies have saved
significant amounts of money, sometimes even in the millions, when their
operations are run by an ERP system. The ERP system not only affects the
company itself, but also the supply chain including external entities, both
customers and suppliers. Throughout this chapter, you will see the importance and
impact that ERP systems make on industry and organizations.
9.2 OBJECTIVES
 This lesson aims focuses on Business and IT value of ERP systems. Towards
the end of this lesson the reader will be able to understand the importance
of strategic alignment of ERP with business goals.
9.3 CONTENTS
9.3.1 Benefits and Importance
There are many benefits to having an ERP system within the organization.
Information is readily available for the proper users, all data is kept in a central
repository, data redundancy is minimized, and there is a greater understanding of
the overall business picture. If a company does not have an ERP system and
employs separate standalone systems for functional areas of a business, the
company will not be running at its full potential.
Data may be compromised because it is stored in multiple locations. When a
customer calls to inquire about an order, the customer may be bounced around to
numerous departments within the company because the customer service
representative does not have all the answers at his or her fingertips. Here is an
illustration of this type of scenario produced by Hammer and Company.
 72

With this illustration, the cycle has come full circle; back to the original
starting point. How much easier would it have been for the customer if the
customer service representative had the answers to every question that the
customer asked? One of the most significant features of an ERP system is that all of
the information kept by a company, including within functional areas, is retained in
one central data repository, or in other words, the information is saved in a single
database. By having the information in one location with authority levels for access
in place, a customer service representative would have been able to answer all the
questions posed by the customer instead of having to transfer the customer from
department to department. All of the information is shifted from functional areas to
the front-line, or in other words, to the person the customer will first contact when
communicating with the company. From the above illustration, the importance of
the correct employees having the correct information is crucial to delivering
exceptional customer service, and in turn serving the customer in the most
valuable way. Fuβ have researched multiple articles and developed a list of
anticipated benefits of ERP systems.
The list includes the following benefits:
 Improved security and availability
 Increase in organizational flexibility
 Cost reduction
 Fast amortization of investment
 More efficient business processes
 Higher quality of business processes
 Improved integrability
 Reduced complexity and better harmonization of IT infra- structure
 Better information transparency and quality
 Better and faster compliance with legal requirements and frameworks
An ERP system allows users and the company to formulate a better
understanding of the overall business picture. With access to multiple functional
areas in one system, and the ability to generate any report necessary, the benefits
of an ERP system are endless. Management and executives can formulate better
business decisions because of all the data readily available within the system.
Business performance can improve since the ERP system integrates business
processes that traverse multiple business functions, divisions, and geographical
locations.
9.3.2 Value of ERP Systems
Getting the most out of IT is not a one-shot effort, but rather a continuous and
evolving process. Included is not just the IT investment, but also how a company
approaches improvement opportunities in support of its business strategy and
objectives, business processes, and value assessments.
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KPI is a tool that can be used to measure the ERP systems and process
performance. Once an organization has defined its operational and strategic goals,
progress can be measured. The value of KPIs is a quantifiable measurement that
reflects critical success factors of an organization. KPIs are established prior to the
ERP implementation and will differ depending on the organization. For example, a
KPI could be defined to measure
(a) percentage of payable invoices that do not match a purchase order.
(b) accuracy of purchase orders that are received without defect, complete, and
on time.
(c) elapsed time for order approval.
9.3.3 IT Value of ERP Systems
When examining the value of ERP systems, investing in technology is only half
of what is needed to realize its benefit. According to SAP Executive Agenda,
“investment in IT without analogous improvements in the management practices
around IT will lead only to a slight increase in productivity”. It is suggested that
companies that invest in IT while enhancing management practices and
governances have experienced sustainable results in increased value and improved
productivity, in some instances as much as a 20% boost.
Research has demonstrated a circular cycle where one IT success gives rise to
yet another IT success more favorable than the first. The cycle typically gets started
with an investment in core ERP systems software generating the landscape to
facilitate a homogeneous integrated platform. Once the core ERP software
demonstrates sound operational performance, investments to extend and add value
to processes such as customer relationship management (CRM), supply chain
management (SCM), and business analytics components are examined.
9.3.4 Business Value of ERP Systems
Not only is IT value prevalent in ERP systems, but there is sound business
value as well. For example, an ERP human capital management (HCM) system can
help align a company’s business strategy. This provides integrated processes and
reporting, the managing of workforce to place the right people in the right jobs,
develop and reward top performers, retain key talent for the long term, and increase
efficiency and operating performance throughout the entire organization. An HCM
ERP provides substantial benefit to a company while delivering a blueprint for
transforming a company’s human resource operations. These types of ERP systems
make it possible to rapidly experience return on investment through reduced
operation costs and increased efficiency. The HCM ERP system connects employees
and management to deliver business processes and automate common
administrative tasks, while leveraging industry best practices.
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9.3.5 Business Process Integration

Companies realize the business value of ERP systems with the ability to obtain
business process integration. Business process integration allows processes within
a company to be incorporated together in one centralized system. The value of
encompassing process integration permits companies to gain efficiencies in overall
and individual processes. Additionally, potential process improvements may
become visible. SAP University Alliances and the Rushmore Group, LLC developed a
diagram of how business process integration works. In this example, a customer
would like to place a sales order for a product. To start the sales process, a pre-
sales activity such as a newspaper advertisement, television commercial, or word-
of-mouth has prompted the need or desire to purchase a product or products.
The customer will then place a sales order. Next, the company will check the
availability of the item or items requested. If the item is in stock, the materials
management segment of the company will pull the item from the plant or
warehouse, and prepare the item for delivery to the customer. If the item is not in
stock, this will prompt the materials management segment of the company to begin
the procurement process with a vendor to restock the item. Once the item (good)
has been received from the vendor, then the plant or warehouse will prepare the
item or items for delivery to the customer.
At the issuing of the items to the customer and the item receipt point from the
vendor, the financial accounting segment of the business is integrated into the
overall process, with accounts receivable and accounts payable due. Another
process could have been included into this scenario had the company been a
manufacturing company. At the availability check point, in place of purchasing the
item, the item may have been produced. The procurement process may have played
a role in the production process as well, had a raw material or component part not
been available to complete the production of the item. In this illustrated example,
all three processes of sales, procurement, and accounting are integrated to
complete the overall process of the cash-to-cash cycle. This is a prime case of
business process integration.
Due to the characteristic nature of ERP system cross-module integration
features, the more modules selected for implementation, the greater the integration
 75

benefits. However, with the increased benefits comes increased complexity and care
to ensure minimum risk to map correctly a company’s business process to the ERP
system processes. Implementing the processes incorrectly can lead to poor
integration between modules in the system, leading to significant operational
deficiency. Additionally, there exists considerable risk in changing multiple
processes at a time. The risk is certain to increase if a fallback plan is non-existent.

An industry best practice of streamlining and simplifying business processes

ahead of time may mitigate the risk. Prior research has concluded that the higher a
company’s process complexity, the higher the radicalness of its ERP
implementation to enable fundamental and radical change in the company’s
operational performance. However, many common business process challenges may
be ameliorated if addressed appropriately. Listed below are a few typical ERP
business process challenges, and suggested resolutions faced in business process
integration
Business Process Problem Suggested Resolution
Lack of feedback opinions from process and Obtain feedback from experts
legacy experts involved in processes
Lack of IT expertise Obtain qualified IT staff
Matching the process to ERP software Communication with users
Lack of analysis of existing processes Analyze the existing processes in
greater detail
Hurrying business process redesign effort Careful planning and measurement
Anxiety arising out of a massive downsizing Mitigate through communication
Previous research has indicated that an ERP system meets only 80% of the
company’s functional requirements. A gap exists between company requirements
 76

and the proposed ERP solution. What is practiced by most companies is listed
below, based on a survey by Forester Research.

9.3.6 Importance of Strategic Alignment of ERP With Business Goals

ERP systems are strongly characterized as operational Information Technology
(IT) systems, enabling management to have sufficient data for analysis and decision
making purposes. This greatly contributes to a company’s capability to align with
its core business strategies and competences. Alignment involves “applying IT in an
appropriate and timely way and in harmony with business strategies, goals, and
needs”. These types of enterprise information systems provide a holistic integration,
functional operation, and real-time processes in a single common database.
The mechanisms used to attain alignment can vary by business strategy and
industry. Interestingly Chan acknowledged a difference between industry
companies and academic institutions when examining organization size on IT
alignment. What would uniquely differentiate an academic organization from an
industry company alignment? Industry companies and academic institutions
operate within substantially different institutional environments. While academic
institutions have similar, if not the same highly skilled leaders, organizational
structures, processes, and size as organizations; academic institutions may not
necessitate the same level of requirements for its alignment
9.3.7 ERP System Use in Organizations
ERP systems are widely used in many Fortune 500 companies. Here are
several examples of ERP systems in real-world scenarios demonstrating business
value. These companies span a breadth of industry and ERP business needs. Aegis
Logistics, one of US leading oil and gas logistics service providers has completed
Project Blue water, where they rolled out a major ERP implementation. The project
is considered to be the single most important IT initiative in the company’s history.
Aegis experienced several inefficiencies with backend operations that used old
disparate systems without any integration, lacked automation across key business
processes, and did not have a consolidated view of all operations. Over the years,
 77

their legacy systems led to issues such as inconsistent workflows, unavailability of

timely and accurate data, duplication of work, and other operational challenges.
Just a little over two years after the implementation, Aegis realized the value and
benefit of its ERP solution. The ERP system brought discipline to their business
processes, eliminated duplication of work, and captured all crucial operational data
to facilitate a seamless information exchange.
9.3.8 Future Impacts to Industry and Organizations
ERP systems continue to be impactful towards industry and organizations. So
many innovations have been developed and implemented just in the last five to ten
years. More focus has been made towards supply chain management and customer
relationship management. Many ERP vendors have incorporated these modules into
their systems to help better serve customers. Vendors realize the need for the
companies they serve to continue to be scalable, flexible, and have the ability to
compete in their respective industries.
One future impact on the horizon is the amalgamation of cloud computing.
Cloud computing is going to allow companies to free up resources, because the
company will have a third party hosting the system and software needed to do
business over the Internet. ERP systems could be included in this opportunity.
More companies will be served with this new capability. The company will not be
required to manage the hardware and software used. Companies will be allowed to
pay as they use the service, instead of making a capital investment. Cloud
computing will also make an impact on rapidly changing flexible areas of the
company. Collaboration and communication including e-mail and file sharing
will be positively affected. Transactions and workflows outside of the company,
sourcing, procurement, trade finance, and supply chains, are suited for cloud
computing. “This type of flexible technology opens the door to a new way of
conducting agile business without being limited by technology infrastructure.”
Business Intelligence (BI) is another hot topic making an impact on future
industry and organizations. BI is the ability to analyze data for decision making
purposes using computer-based techniques. ERP systems have a built in BI
component to help the data mining process. BI is also offered as a SaaS or
software- as-a-service. It is expected that the Saas BI market will have triple growth
and compounding annual growth at a rate of 22.4 percent through 2013. SaaS BI
can assist front- office workers more efficiently. With the BI component of an ERP
system, the Public sector has found the importance of this feature in critical areas
such as public safety, border management, and tax collection. The impact of BI on
the company’s bottom line is so significant that employers are requesting more and
more graduates have BI experience
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9.4 REVISION POINTS

1. Benefit of ERP: Information is readily available for the proper users, all
data is kept in a central repository, data redundancy is minimized, and there
is a greater understanding of the overall business picture.
2. Value of ERP Systems: Getting the most out of IT is not a one-shot effort,
but rather a continuous and evolving process. Included is not just the IT
investment, but also how a company approaches improvement opportunities
in support of its business strategy and objectives, business processes, and
value assessments.
3. Business Process Integration: It allows processes within a company to be
incorporated together in one centralized system.
9.5 INTEXT QUESTIONS
1. Define the value of ERP system.
2. Give a brief note on Business Process Integration.
9.6 SUMMARY
Data may be compromised because it is stored in multiple locations. By having
the information in one location with authority levels for access in place, a customer
service representative would have been able to answer all the questions posed by
the customer instead of having to transfer the customer from department to
department. An ERP system allows users and the company to formulate a better
understanding of the overall business picture. KPI is a tool that can be used to
measure the ERP systems and process performance. Research has demonstrated a
circular cycle where one IT success gives rise to yet another IT success more
favorable than the first. The customer will then place a sales order. Next, the
company will check the availability of the item or items requested. The mechanisms
used to attain alignment can vary by business strategy and industry.
9.7 TERMINAL EXERCISES
1. List the Benefits and Importance of ERP system.
2. Write a note on IT Value of ERP systems.
9.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
9.9 ASSIGNMENTS
1. Explain the Business Value of ERP systems.
2. Discuss about the ERP System Use in Organizations.
 79

9.10 REFERENCE BOOKS

1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
9.11 LEARNING ACTIVITY
1. Show the Future Impacts to Industry and Organizations.
2. Describe the Importance of strategic alignment of ERP with business goals.
9.12 KEYWORDS
1. BI - Business Intelligence
2. HCM - Human Capital Management

 80

LESSON - 10
GUIDELINES FOR ERP IMPLEMENTATION
10.1 INTRODUCTION
Companies today face tougher competition in the market place in optimizing
the resources availability, improving profitability and satisfying customers. Hence,
many organizations have realized the importance of implementing an ERP Solution.
ERP implementation reduces the complexity and implements new strategy which
helps to support the overall growth of the company. However, an ERP
implementation has several aspects to be considered and if not executed properly, it
may lead to a business disaster rather than an advantage. Hence choosing an ERP
solution that meets your specific business requirements will enable you to have a
smoother implementation
10.2 OBJECTIVES
 This lesson aims focuses on various ERP software Evolution criteria.
Towards the end of this lesson unit the reader will be able to understand the
guidelines for ERP implementation.
10.3 CONTENTS
10.3.1 ERP Software Evaluation Criteria
The following tips are offered by the senior consultant of BaaN Info systems, while
evaluating ERP software.
1) Functional fitness with the company's business processes
2) Degree of integration between the various components of the ERP system
3) Flexibility and scalability
4) Complexity; user friendliness
5) Quick implementation; shortened ROI period
6) Ability to support multi-site planning and control
7) Technology; client /server capabilities, database independence, security
8) Availability of regular upgrades
9) Amount of customization required ^
10) Local support infrastructure
11) Availability of reference sites
12) Total costs, including cost of licenses, training, implementation,
maintenance, customization and hardware requirements
10.3.2 Implementing ERP
The success of an ERP solution depends on how quick the benefits can be
reaped from it. This necessitates rapid implementations, which lead to shortened
ROI periods. Traditional approach to implementation has been to carry out a
business process re-engineering exercise and define a "TO BE" model before the
ERP system implementation. This led to mismatches between the proposed model
and the ERP functionality, the consequence of which was customizations, extended
implementation time frames, higher costs and loss of user confidence.
 81

The BaaN approach is to conduct a concurrent business process re-

engineering during the ERP implementation and aim to shorten the total
implementation time frame based on two scenarios.
1) Comprehensive implementation scenario: Here the focus is more on business
improvement than on technical improvement during the implementation. This
approach is suitable when: improvements in business processes are required;
customizations are necessary; different alternative strategies need to be evaluated;
high levels of integration with other systems are required; and multiple sites have
to be implemented.
2) Compact implementation scenario: Here the focus is on technical migration
during the implementation with enhanced business improvements coming at a
later stage. This approach is suitable when: improvements in business processes
are not required immediately; change-minded organization with firm decision-
making process; company operating according to common business practices; and
single site has to be implemented.
3) Software consultant Alexis Leon, in his book Enterprise Resource Planning, lists
the following phases of implementation of ERP, which should be taken note of:
(a) Pre-evaluation screening
(b) Package evaluation
(c) Project planning phase
(d) Gap analysis
(e) Re-engineering
(f) Configuration
(g) Implementation team training
(h) Testing
(i) Going live
(j) End-user training
(k) Post-implementation phase
Gap analysis: This is a crucial aspect of ERP implementation module that
both anticipates and covers any functional gaps has to be custom-tailored to one's
company's needs. Based on this module, one's team would be able to assess the
gaps that need to fill in implementing ERP, so as to cover all the functional areas of
one's organization's work.
Implementation team training: The vendor's representatives as well as one's
own ERP team should be put through the training drill so that while ERP is being
implemented everyone speaks the same language, failing which in the Tower of
Babel that would emerge, the organization would be the ultimate loser.
Testing: This the crucial test to see whether the ERP really works even as it is
being laid out throughout the organization's nervous system. It is a sort of wake up
call to see how vendor responds to one's prodding. The system should be tested for
its reaction to extreme situations such as system overloads, multiple users logging
with the same query, restricted area protection, weak links, etc.
 82

End-user training: Celebrations are one thing but the real test of whether one
would work or not would depend upon whether everyone in the organization feels
the presence and is willing to bid to do things which otherwise was impossible to
complete so far. For this staff at every level beginning with the crucial ones who
would handle the bulk of ERP-based work should be trained.
Post-implementation phase: This is important phase where efforts are going
to have their say. Put together a crack team of maintenance engineers and software
developers to see that the ERP always works night or day and all through the year.
10.3.3 Four Guidelines of ERP
1. Project Alignment & Changes Management
Most of the project problems arise because of the misalignments between the
goals, expectation and reality. The executive team should have a perfect alignment,
timeline, budget, overall scope of the project and commitment throughout the
project. The Team leaders and members should be well versed in the ERP
technology to provide guidance and should know to prepare the change
management to make the team more productive. A good change management relies
on, effectively communicating the value of changes to everyone in the organization.
2. Understanding the Business Processes
Process followed in the organizations should be mapped to focus on, what you
do, what can be easily done and what are the changes to improve the processes.
Team members should analyze the business process, and during team discussions,
the following queries to be considered. Are your procedures up to date? Are there
processes that could be automated? Etc. With the more understanding of the
current state, you can plan better to reach the desired state.
3. Vertical industry focus
There may be different verticals and strategies followed in an industry and
there may be variations between the processes followed. All these verticals should
be addressed and the vendors should provide the right solution meeting specific
needs of the business processes. This may avoid deadlines and delayed
implementation of the processes.
4. Vendor Partnership
Now it is a time to arrive a final decision for successful ERP implementation. It
is very essential to establish a close relationship with ERP vendors who understand
your business processes. ERP Vendor and the organization should work together
and communicate well to make ERP implementation, a successful one.
10.4 REVISION POINTS
1. End-user training: Celebrations are one thing but the real test of whether
one would work or not would depend upon whether everyone in the
organization.
2. Post-implementation phase: This is important phase where efforts are
going to have their say.
 83

3. Gap analysis: This is a crucial aspect of ERP implementation module that

both anticipates and covers any functional gaps has to be custom-tailored to
one's company's needs.
10.5 INTEXT QUESTIONS
1. Define Gap analysis.
2. Write short notes on Post implementation phase.
10.6 SUMMARY
ERP implementation reduces the complexity and implements new strategy
which helps to support the overall growth of the company. Traditional approach to
implementation has been to carry out a business process re-engineering exercise
and define a "TO BE" model before the ERP system implementation. The executive
team should have a perfect alignment, timeline, budget, overall scope of the project
and commitment throughout the project.
10.7 TERMINAL EXERCISES
1. List the phases of implementation of ERP.
2. Suggest few more guidelines for implementation of ERP.
10.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
10.9 ASSIGNMENT
1. Show the ERP software evaluation criteria.
10.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
10.11 LEARNING ACTIVITIES
1. Discuss the two scenarios of implementation time frame.
10.12 KEYWORDS
1. R&D – Research and Development
2. ROI – Return On Investment

 84

UNIT–V : SALES AND MARKETING OF ERP

LESSON - 11

ERP SALES AND MARKETING

11.1 INTRODUCTION
ERP sales and marketing module will help a company stay competitive and
streamline their sales and marketing activities of both domestic and export sales.
11.2 OBJECTIVES
 This lesson aims focuses on Sales and Marketing activities. Towards the end
of this lesson the reader will able to understand the features of sales
modules and management process control.
11.3 CONTENTS
11.3.1 Activities in sales and marketing

Sales and Marketing module provides functionalities which begin from

contacting customers which are referred to as pre sales activities, allows tracking of
each customer orders right from placing an order to dispatch of material for that
particular order, raising sales invoices and receiving payments from customer.
Below are the lists of core functionalities of ERP sales and Marketing module.
 Sales order
 Order scheduling
 Shipping with delivery note
 Tracking sales invoices
 85

 Sales returns
Additionally the following activities can be recorded with the ERP sales and
marketing module:
 Automating the sales force activities such as visits to customers and
tracking their expenses.
 Target setting for marketing personnel.
 Business partners and franchises are common in today's businesses.
Marketing personnel need to work closely with business partners to promote
their business. Recording of these activities.
 Recording of payments received from customers after dispatches are made.
An ERP sales and marketing module allows marketing executives to contact
customers and follow-up each and every sales invoice and receive payments
for invoices.
 Track lost orders and identify the reasons for loosing those orders.
 Allow the preparation of comprehensive reports of the sales and marketing
activities of the company such as track sales trends over different periods,
drill down for the consolidated data and allow for sales forecast.

Stock updates and Reports in sales module

11.3.2 Features of sales module
Multiple dispatches against single Sales Order
A typical sales order contains multiple products and their sales amounts.
Sometimes these products should be shipped on different delivery dates and in
varying quantities. Delivery on a particular date or dates is an important
requirement for some customers and they would want products to be delivered on
those dates. Some orders with multiple products should be delivered together.
Some customers prefer to deliver individual products on different dates. The ERP
 86

system should support this multiple dispatches against single Sales Order. In the
Sales Order data entry screen, in the customer field, customer lookup displays
customer names to select a customer name. System also provides items look up to
select items.
Sometimes there is a need for customized Item Processing
The Sales module also enables you to take orders for special items. These
orders can be for one-time and on custom specifications. Billing for these order are
done based on labor cost for that order and materials cost.
Sales forecast
Sales forecasts are expected future sales or orders by customer. Many ERP
systems include a variety of tools to generate forecasts from past sales patterns.
These forecasts are useful to predict future orders and correspondingly raw
materials procumbent schedules and production planning.
Pending orders
ERP system can generate report on pending orders based on today, this week,
current month and next month time periods.
Sales reports on a geographic location
ERP system can generate sales reports on a geographic location and based on
sales persons. Usually, each sales person will be attached to a territory within the
system and he will be responsible for orders, bookings, and backorders in that
geographical area. Sometimes customers make advance payments to book orders.
The system accommodates this advance amount and adjusts by raising a sales
voucher automatically.
11.3.3 Management Control Process
Controlling function of management can be defined as comparison of actual
performance with the planned performance. If there is any difference or deviation
then finding the reasons for such difference and taking corrective measures or
action to stop those reasons so that future thee is match between actual and
planned performance. The meaning of controlling makes it clear that controlling
function is undertaken for right and timely implementation of plans.
Steps Involved in the Management Control Process
Management control process is the continuous and ongoing dynamic process
of monitoring performance and taking action to ensure desired results.
1. Setting Up of (target) Standards
Standards mean target or the yardstick against which the actual performance
is measured. The standards must be achievable, high or very high standards which
cannot be achieved are of no use. Standards must be set up keeping in mind the
resources of the organization and as far as possible standards must be set up in
numerical or measurable terms. Sometimes it is not possible to express the
standards in numerical terms. For example, setting up of quality standards or
standards for managerial work etc. The standards must specify the time limit
within which they have to be achieved and as far as possible the standards must be
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set up for short term. If long term standards are set up they must be divided into
short term. With short term targets or standards the errors can be detected early
and timely actions can be taken. The standards must be revised from time to timely
actions can be taken. The standards must be revised from time to time keeping in
mind the changes of business environments.
2. Measuring of Performance
After setting up standards of the performance of the employees is measured by
evaluating the actual work done by the employees. When the performance can be
measured numerically then it is very convenient to measure the performance. While
measuring the performance the quantitative as well as qualitative aspect of
performance is kept in mind. Sometimes employees achieve the quantitative
standards by ignoring qualitative standards. That is why while measuring
the performance quality standards are also measured. Certain quality parameters
are fixed to measure the quality standard when numbers of rejection or sales return
increases. It indicates low standard of quality.
Generally the performance of managers is measured by looking at the overall
efficiency level of the organization. The performance of research and development
department is measured by change in technology and updating of production
department. The performance of financial department is measured by checking the
solvency and liquidity ratios etc. the performance must be measured periodically in
short period of time.
3. Compare Performance against a Standard
After measuring the performance the manager compares the actual
performance with the planned performance and standard. If there is match in both
then the controlling function ends there only. But if there is mismatch or deviation
then the manager tries to find out the extent of deviation. If the deviation is minor
then it should be ignored. But if the deviation is more than timely action must be
taken.
4. Analyzing Deviations
All deviations need not be brought to the notice of top management. A range of
deviations should be established and only cases beyond this range should be
brought to the knowledge of top level management. They must divide the deviations
in two categories deviations which need to be attended urgently in one category and
minor or insignificant decisions in other category. These two categories must be
controlled by following ways:
Critical point control: It means keeping focus on some key areas (KRAs) and
if there is any deviation in these key areas, and then it must be attended urgently.
Key areas are those which have impact on whole organization. For example, if there
is increase in production cost by 2$, per unit and there is increase in postal cost by
10$, then more focus should be to find out reasons for increase in cost of
production as it will affect the profits and future revenue of organization whereas
postal cost is incurred rarely and managers have no control over postal cost.
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Management by exception: It means a manager who tries to control

everything may end up controlling nothing. The deviations which are beyond the
specific range should only be handled by managers and minute or minor deviations
can be ignored. Manager should not waste his time and energy in finding solutions
for minor deviations rather he should concentrate on removing deviations of high
degree. For example, if production cost increases by 2$, it can be ignored but if it
increase more than 2$, then managers must try to find out the reason for such
increase after identifying the reasons for deviations which need immediate
attention. These deviations and reasons must be brought to the knowledge of top
level management for critical evaluation whereas the increase less than 2$ can be
handled at supervisory level or can be ignored also for some time. The causes for
deviations can be many: for example, fault in machinery, inefficient staff, shortage
of resources, over or understating of standards. It is very essential to find out the
exact and accurate cause of deviation.
5. Taking Corrective Measures
On comparing the actual performance with the planned performance, the
manager will come to know about the deviations between the plan and actual
performance. They the next step is to know the reasons for such deviations and
trying to remove deviations in future. The manager takes measures to bring back
everything on the track i.e., according to plan. Taking corrective measures may
involve. Let the situation remain same if the deviations are minor. Redesign or re-
frame the plans or strategies if these are overstated or not matching with the
present day business environment. Taking corrective measures to improve the
performance so that in future it matches with the plan.
Generally the managers take measures to improve the performance such as
sending the employees for training if the deviation is due to inefficient performance,
getting the machine repaired if delay in performance is due to fault in the
machinery, making the supervisors more responsive. If delay is due to carelessness
and laziness of the employees, sometimes the managers have to see the standards
and targets again if standards are not realistic and achievable. This revision of
standards is called downward revisions because standards are reduced to make
them realistic and achievable. Sometimes the performance is higher than the set
standards; in that case upward revision of the plan is done and plans are set at
high rote so that they match with the actual performance. The manager must take
the corrective measure only by finding the root cause of the deviation and try to
remove that cause.
6. Feedback in Controlling
The controlling function does not end by taking corrective action as it is a
continuous process. After suggesting the corrective measure a feedback report is
prepared. Feedback refers to list of reasons for deviations of plans or for inefficiency
in overall working of organization; along with reasons the corrective measures are
also specified in the feedback report and feedback acts as a base to establish the
standard for next year and controlling process again starts from first step.
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11.4 REVISION POINTS

1. Critical point control: It means keeping focus on some key areas (KRAs)
and if there is any deviation in these key areas, and then it must be
attended urgently.
2. Sales forecast
Sales forecasts are expected future sales or orders by customer. Many ERP
systems include a variety of tools to generate forecasts from past sales
patterns.
3. Pending orders
ERP system can generate report on pending orders based on today, this
week, current month and next month time periods.
11.5 INTEXT QUESTIONS
1. Write a note on sale forecast.
2. Define Critical point control.
11.6 SUMMARY
Sales and Marketing module provides functionalities which begin from
contacting customers which are referred to as pre sales activities, allows tracking of
each customer orders right from placing an order to dispatch of material for that
particular order. Business partners and franchises are common in today's
businesses. Marketing personnel need to work closely with business partners to
promote their business. A typical sales order contains multiple products and their
sales amounts. Sometimes these products should be shipped on different delivery
dates and in varying quantities. The Sales module also enables you to take orders
for special items. These orders can be for one-time and on custom specifications.
ERP system can generate sales reports on a geographic location and based on sales
persons. Controlling function of management can be defined as comparison
of actual performance with the planned performance. The standards must specify
the time limit within which they have to be achieved and as far as possible the
standards must be set up for short term. Generally the performance of managers is
measured by looking at the overall efficiency level of the organization.
11.7 TERMINAL EXERCISES
1. What are the lists of core functionalities of ERP sales and Marketing
module? Explain.
2. Explain the Steps involved in the Management Control Process.
11.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007
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11.9 ASSIGNMENTS
1. Describe the various features of sales module.
2. Show the diagrammatic representation of stock updates and reports in sales
module.
11.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
11.11 LEARNING ACTIVITY
1. Explain the activities in sales and marketing with neat sketch.
11.12 KEYWORDS
1. MCP- Management Control Process
2. Critical Point Control

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LESSON - 12
CUSTOMER RELATIONSHIP MANAGEMENT
12.1 INTRODUCTION
Customer Relationship Management (CRM) has become an essential part of
the ERP business, as one of the avowed goals of ERP is to improve this area. There
are some within the industry who are even prepared to say that ERP as a
nomenclature would soon be replaced by CRM.
Customer Relationship Management is the new concept available in this
technology field. Furthermore it is eCRM the hottest in the market about the people
management, eCRM solutions seem to be quite strong. The bottleneck of proper
data not being filtered into analytics engines from the various media from call
centers to field officers interactions to even legacy database over which CRM-related
communication happens still looms large. However, things are looking brighter for
eCRM product companies.
12.2 OBJECTIVES
 This lesson aims focuses on understanding eCRM, Market outlook and
eCRM strategy. Towards the end of this lesson the reader will be able to
understand the technology architecture and prototype development.
12.3 CONTENTS
Customer Relationship Management is a concept as old as the barter system.
It became more apparent when small bazaars sprouted across the ancient world,
from Greece to Babylon, from Indus to Arabia. Shopkeepers selling merchandise as
varied as spice and gems and silk knew exactly what their customers wanted their
choices and their tastes and knew how best to extract business out of them.
In all this, the most important factor was the personal touch since individual
shopkeepers understood their customers inside out. Information about individual
customers was all on their fingertips how often they shopped, their demographics,
favorite products and key events in their life. Based on this information, they
determined inventory, pricing, discounting and credit policy so that sales could
happen as often as possible.
The greatest advantage of personalized relationships with customers was
tailor-made shopping experiences. The personal touch could be addressing
customers directly by their first name or a salutation indicating a more personal
level to the relationship. They also presented proactive offers for purchases, gifts or
services that customers found appealing. In addition, shopkeepers transacted with
every customer, providing them with useful information and becoming a trusted
source over time.
Since then, superior economics of mass markets, chain stores, improved
highways and mass advertising via television and radio created more attractive
value propositions to consumers than the small town shopkeeper's customer
service strengths. Now, at the beginning of the 21st century, Electronic Customer
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Relationship Management (eCRM) is making it possible to recreate an "old

fashioned" customer service experience in every sector of the economy.
Marketing of goods and services in industries such as retailing, financial
services, healthcare, automotive, steel and agri-business is shifting from mass
marketing of standardized goods to one-to-one marketing of personalized offers.
Web, wireless and voice technologies offer new tools for companies to get closer to
their customers and configure their value propositions on the fly. Technology
makes it feasible to combine a personal touch and customized service with mass-
market efficiencies of selling to millions of customers, recreating the shopping
experience of Main Street at near-zero marginal cost.
It is now possible for customers to order goods online and give permission to
receive additional message with customized, one-to-one communication about
products, shipping schedules, special offers and other value-added information.
This is the essence of eCRM. None of it was possible five years ago eCRM derives
from CRM techniques, which leveraged call centers and direct marketing technology
to market mass-produced goods and services. eCRM expands on this technology by
using next generation segmentation and analysis technologies and comprehensive
customer interaction.
12.3.1 Understanding e-CRM
With globalization, business started realizing that the customer was all-
important and business had to make every effort to keep her/him happy. But for
businesses with thousands of customers, keeping track of the customers and their
preferences was one hell of a task because technology had not yet evolved to help
them do that. With the rise of the software industry, database could be made,
maintained and analyzed to get rich information about customers. However, it was
still difficult to get the information required for the database. What has changed
with the advent of the Internet? The Net has not only enabled faster communication
between businesses and customers, it is also rising fast as a medium for buying
and selling. Along with that come technology tools that enable business to obtain
customer intelligence.
As business strives ever more harder to find new ways to get and retain
customers, CRM in general and eCRM in particular, because of its obvious
advantages, will get bigger and bigger. And while businesses today are looking at
doing eCRM faster, cheaper and better, the next phase will mean doing things they
have not even thought of until now. That will require a lot of technological
innovations, particularly from software developers. What are the opportunities?
Where are the challenges?
Over the recent past, reams of newsprint, considerable TV time and zillions of
web pages have been dedicated to Customer Relationship Management. With every
major company in the world implementing or seriously considering CRM
implementation, the market is set for boom time. The arrival of the internet has
brought with it the attendant challenges and opportunities of a geometrically
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expanded customer base which is online and whose fulfillment needs have to be
catered to, in real-time.
Several other reasons have prompted increased top management attention on
CRM. The Customer of today is a totally different 'animal* than what marketers,
have been used to. There is a global context to Customer locations and availability
of alternative. These have made it even more imperative that the Quality of offering
is personalized and customized to the target segment of ONE, and of a comparable
/ better standard to what he / she will have access at from other providers. There
is an added complexity of product and service delivery whether it is for a CD,
groceries that you may shop for over the web, or for one's daily news. All of these
have to be tailored with geographical and cultural sensibilities in mind and these
sensibilities should be reflected at all customer touch points across employees,
dealers, website, agents, associates, ATMs, interactive kiosks etc.
The new-age customer is therefore:
 Different, complex a challenge to manage.
 Approaches businesses over multiple touch-points and has several products
to his choice.
 Has a rising expectations from product, services that he/she may want
 Since the entry of the web, and the availability of better aid more trusted
means of fulfillment and distribution logistics, there are no entry/exit
barriers loyalty has to be earned.
 Businesses therefore have to successfully map increasing number of
electronic channels of contact.' CRM is the key to differentiate and several
companies like Dell Computers are global leaders to effectively use CRM.
The following are other reasons why companies are increasingly turning to CRM:
 Diminishing ability to sustain competitive differentiation with traditional
mechanisms (product innovational, price value, etc.).
 Globalization and deregulation resulting in increasing competitive reach.
 Customer empowerment-access to increasing amounts of information and a
variety of suppliers.
 Churn (annual turnover of customer base) rates reaching an all-time high
(especially in the financial services industry).
 Customer loyalty from delivery to the "segment of one" emerges as the only
sustainable differentiation.
What is CRM?
Several reasons have led to the concept of CRM being misunderstood and it
may be common to hear people describe a Call Center implementation as CRM or
automation of Sales Support & Order Tracking as CRM. To top it all, because
technology as a key enabler has a very easy to assume that CRM is a technology
decision or software package that one can buy off the shelf which will provide
succor for all one's customer management concerns. Nothing0can be further from
the truth. CRM is a well-defined business strategy comprising a series of functions
skills, processes and technologies, which together allow companies to:
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 More profitably manage (acquire and retain) customers as tangible assets.

 Offer personalized and well-differentiated customer experiences.
 Build life-long relationships with customer.
To effectively deploy CRM, companies need to not only manage customer
service effectively but also manage all other customer touch-points, customer
communication as well as map the setting up of interactive customer feedback
loops resulting in the right product or service to the right customer (delivered
through the right channel, at the right time and the right cost). Effective
deployment of CRM has the following benefits:
 Builds meaningful relationship that last.
 Maximizes profitability of each individual customer.
 Leverages existing relationships to allow higher revenues per customer.
 Reduces cost of customer management/service.
 Creates customized and differentiated offerings that can help make each
customer feel special.
 Delivers insights into customer behavior that can help.
 Acquire the right customer.
 Direct customer towards desired behavior.
 Deepen relationships with customer though cross-selling, continuity selling
and, up selling.
 Reduce chum-rate among desired customer base.
CRM software is designed to aggregate and automate front-office tasks, such
as sales, marketing and customer support and create a unified data store in the
same way that enterprise resource planning software has allowed them to collect
and modify the data and processes associated with back-office functions such as
accounting, inventory and human resources. This one window to customer
information enables an organization to better manage its customer relationships.
12.3.2 Market Outlook
 The CRM market will reach $16.8 billion by the year 2003, with a compound
annual growth rate (CAGR) of 49 % over the next five years. (AMR Research).
 CRM is the number one "essential business technology" for the year 2001 as
reported by a recent survey of its readers in the December 1999 issue of
beyond computing magazine.
 CRM solutions should be designed to handle the following issues:
 Diverse client / customer needs
 Integration issues
 Reporting
 Optimum information velocity
 Security
Customer contexts are incredibly complex in today's business environment.
Customer contact takes place over different channels including walk-ins, phone,
fax, email and Web-chat etc. within an organization, different departments from
 95

what are called information silos where data is maintained as if in a repository with
no channels for info exchange. These different departments also follow differing
processes /ways in dealing with information. Companies have made several bold
moves to transition to new economy companies. However, integration with legacy
systems of clients is a major issue.
Companies have also come to realize the inherent value that their customer
data presents and how this can be used to draw insights to influence "outside-in"
customer-oriented thinking rather than an "Inside-out" perspective that companies
follow. By doing this, CRM software helps to effectively address SLA and Quality
Audit requirements. The speed at which information moves within one's
organization is critical to how.lithe1 an organization is in today's environment. It is
imperative that there are no latencies in any of the process. Customers require real-
time, vice and real-time fulfillment. With several companies increasingly
considering outsourcing RM services as a viable option, the security of data is a
crucial issue that needs to be considers
Any CRM application has to take into consideration the following:
 Touching the customer more frequently and in a more measurable manner.
 Analyzing customer information across channels and leveraging it more
quickly.
 Synchronizing communications between online and offline channels.
 Understanding the customer in a truly individualized manner, in order to
deliver the most personalized communications.
Regardless of the form of Customer interactions like letter, fax, email,
telephone or a personal visit to the Customer Care Center of the client, the tracking
system enables each of these interactions to be recorded along with actions taken
to satisfy a customer’s request.
12.3.3 FEATURES IT DELIVERS
1. Personalized Customer Service
 Interactions are handled uniformly by converting them into interaction vectors
i.e., capturing all relevant data received from and sent to the customer. This is
done irrespective of the channels these interactions originate from.
 The Customer Relationship Associate (CRA) has access to all past interactions
of the Customer, and hence is able to provide personalized support to the
Customer with minimum tenancies.
 Customer leverage can be integrated with client's databases (knowledge
banks) so that the CRA ha access to data in other systems. This helps in
servicing customers better and faster.
2. Minimal Communication Latencies
 The web-based architecture allows the system to be accessed from within or
outside the organisation.
 The workflows originating out of the interaction is accessible instantly to all
the people/departments who need to participate in the resolution of the
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workflow. This cuts down any intra-organization latencies and helps in

speeding up the resolution process.
3. Rich Reporting and Analysis Tools
 The interaction vector captures data at every step of the interaction and the
resolution process.
 The Client is provided with a web-base user interface that allows for an online
review of the entire Customer satisfaction process.
 This data lends itself to analysis and reporting.
 Tracking service levels for interaction resolution.
 Performance management of CRA.
 Productivity tracking and load distribution.
 Identifying delays and latencies in resolution.
 Identifying trends in issues.
 Customer satisfaction level.
4. Technology Benefits
 Thin client only a browser is required at each workstation.
 Uses open technology at the backend, which makes it easy to integrate and
work with other technologies / systems.
 The use of Windows NT technologies helps in minimizing administration and
training costs.
 The software is server-based, which reduce administration, distribution and
versioning costs.
Several developments are taking place in the CRM marketplace that has led to
considerable action. Vendors, who traditionally started off by automating sales,
services and marketing processes such as Siebel Systems, Vantive Corp., Remedy
Corp., etc are adding-on to their set of products to build an integrated suite of
products.
These companies are actively moving or have already moved to building a
browser-enabled interface to their applications. Other companies in the software
marketplace are vendors who have started off in the Internet age and have assumed
that the web will be the primary channel of sales and service contact.
These include Epiphany, Onyx Software, etc who have designed applications that
are e-enabled.
Another segment that is seen are the ERP vendors, who are looking to give
front-office automation the same functionality that they gave to their back-office
applications. What these vendors like Oracle, SAP and BaaN offer, is the integration
of CRM functionality onto their ERP suites. A forecast by Aberdeen Group estimates
that software license revenues will hit US $ 4.5 billion by 2002. All in all, the CRM
software marketplace is set to emerge as an even more exciting segment of industry
and should see plenty of action in the near future.
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12.3.4 eCRM Strategy

The Net is significantly redefining the way companies do business primarily
because of its capability to swiftly shift intelligence from the seller to the buyer. The
Customer today has instant access to information, the ability to sieve through
structured and unstructured comparative analysis of products and services and the
ability to transact in a flash.
Companies are therefore forced to meet or exceed customer's expectations all
of the time. They have realized the need to create a customer-centric organization
that operates with a single, seamless view of the customer, to continually
strengthen and nurture a long-term relationship by leveraging the net. This is the
core of electronic CRM or eCRM strategy.
With eCRM, organizations need to integrate all modes of communication web,
email, chat, video, voice to serve and support their customers in order to maximize
the total customer lifetime value to the organization. eCRM focuses anytime access
from anywhere to information and intelligence. It is about bringing together all
customer interaction and linking the front office functions of sales, marketing and
customer service with the back office functions of order management, billing and
delivery.
12.3.5 Understanding the Customer
This is probably the most critical aspect, which defines the overall architecture
of the eCRM solution. To begin with, one needs to understand the demographic
profile of the customers particularly the geography they come from. When do they
interact with the organization? Does one have a history of access times or can one
reasonably predict their access patterns?
The answers to these questions are extremely important. For instance, if
customers are coming in only from a single geography 01 time zone and one knows
that they do not demand any services or minimal services from us between 12
midnight and 4 in the morning, then the demands for availability of the system are
not very high. This implies that one can use relatively inexpensive technologies to
meet expectations because one has a four hour window to perform various
administrative tasks, like integrity checking, updates to the operating system,
software platforms and custom built solutions, taking backups and cleaning up
and optimizing the performance of the system.
On the other hand, if customers are spread out all over the world and access is
virtually spread over every one for 24 hours, then we need to architect for 24 by 7
availability the technologies used in such cases can be significantly different and
may cost the organization several times more. For instance, one may need to
abandon all conventional systems starting from the file system to the application
management system, clustering solution and the application delivery system.
Next, how do customers interact with the organization? Through the
telephone, through e-mail, through online chat sessions, through cell phones,
through personal digital assistants, through two-way pagers, or in person? Which
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is their preferred channel of interaction? What combinations of channels are used

at any point of time? This will determine how many different "avatars" of the same
application need to be created applications, which are fundamentally built on the
same business logic and are digging into a universal database.
Mapping all customer interaction points and types is the next step in creating
a clear map of how the organization communicates in the marketplace. Contacts a
customer makes with the organization, and vice versa, are usually through various
functional departments.
These interactions are in various forms, such as billing statements,
solicitations, customer service calls, and advertisement. Integrating these points is
the goal of the eCRM process. However, it is important to draw out a phase-wise
build plan and use the iterative and incremental approach to building the eCRM
solution.
Creating the "Information Design"
The overall vision of the solution needs to be understood by a diverse set of
people the business managers, the customer service personnel, the technology
architects, the system designers, the software engineers and possibly a
representative of customers.
To make sure that all these "interested" constituents have a shared
understanding of what the solution is expected to do, an "Information Design"
serves as a powerful communication method. The information design is typically a
set of HTML pages, which define the information buckets, the navigation streams
and the expected functionality of the solution. A standard HTML authoring tool may
be used for creating the information design, from which one can also derive the
overall Site Map of the solution. This can then become a uniting platform where the
requirements are understood, articulated and shared in a language easily
understood by all personnel concerned.
12.3.6 Technology Architecture
Based on the customer touch points, user transaction volumes, the access
patterns, the access devices and the backend databases to be integrated, the overall
technology story needs to be architected. At this point, an important decision needs
to be taken. Will one uses the NT+SQL+ASP+COM approach or does one want to
take the Solaris + Oracle + JSP + EJB route? This decision must be taken after a
careful consideration of the following:
 reliability, availability and scalability requirements of the solution;
 development capabilities;
 availability of third party solutions which will be bought and integrated into
the solution;
 marketing time;
 budget constraints.
Use of XML for integrating diverse information sources, in any case, would be
extremely appropriate. Further, adherence to Internet standards is almost
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mandatory. For instance, instead of storing user profile and preference information
in an RDBMS, consider using LDAP, store all calendar information in iCAL format
etc. This will allow seamless integration of applications without the need of gluing
together the applications by slow and unreliable methods. Invariably, storage of
data is taken quite lightly. Decisions need to be taken on whether to adopt internal
storage, direct attached storage or network-attached storage.
Data intensive operations are probably best built on a "Storage Area Network"
which allows multiple paths to data and removes internal data traffic from the
Internet user traffic network, followed by storage, backup and recovery strategies
need to be spelt out. This largely depends on the "permissible maximum time to
recover" as dictated by business requirements. Disaster recovery sites may become
necessary for 99.99% availability.
The technology architecture should also take into account the synchronization
or replication needs of server farms, if several geographically dispersed servers are
used for better performance. If synchronous replication is necessary, which will
invariably be the case, a VPN between the server farms with dedicated clean
bandwidth commitments needs to be planned.
12.3.7 Prototype Development
The "Interface Development Team" which would typically consist of interactive
visualizers and web-writers would now begin creating the look and feel of the eCRM
solution. This needs to be integrated with the functionality modules developed by
the software engineering group. The prototype needs to be validated for the overall
approach to the solution so that large-scale re-work is avoided.
Module Development, Integration, Internal Testing
The final solution may be a mix of third party solutions, an ASP solution and
custom built modules. Integration and testing plays an extremely critical role and
may consume as much as 30% to 40% of the total development time.
Data Mining, Profiling and Personalization
Powerful tools are available which can map customer interaction and create
profiles of customers based upon their interaction history.
These can be used to define new business rules, which will appear to be
intuitively sensing the customer's needs and servicing him.
To summarize, the eCRM strategy is built upon an iterative and incremental
approach where the organization Is constantly learning about the needs of the
customers, predicting his behavior and offering him a multi-channel based
consistent service experience.
12.4 REVISION POINTS
Personalized Customer Service:
Interactions are handled uniformly by converting them into interaction vectors
i.e., capturing all relevant data received from and sent to the customer. This is done
irrespective of the channels these interactions originate from.
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Technological Benefits
The software is server-based, which reduce administration, distribution and
versioning costs.
e-CRM Strategy
The Customer today has instant access to information, the ability to sieve
through structured and unstructured comparative analysis of products and
services and the ability to transact in a flash.
Consultants
Business consultants are professionals who specialize in developing
techniques and methodologies for dealing with the implementation and with the
various problems that will crop up during the implementation.
12.5 INTEXT QUESTIONS
1. How to Understand eCRM?
2. Write a note on Consultants.
12.6 SUMMARY
Customer Relationship Management is a concept as old as the barter system.
It became more apparent when small bazaars sprouted across the ancient world.
Marketing of goods and services in industries such as retailing, financial services,
healthcare, automotive, steel and agri-business is shifting from mass marketing of
standardized goods to one-to-one marketing of personalized offers. CRM software is
designed to aggregate and automate front-office tasks, such as sales, marketing
and customer support. The consultants also have a role to play during this vendor
training. Consultants are responsible for administering each of the phase of
implementation, so that the required activities occur at the scheduled time and at
the desired level of quality and with effective participation of-all those who must
participate. . The impact of ERP on this is very vital on corporate Information
Systems.
12.7 TERMINAL EXERCISES
1. How to create the information Design?
2. Explain vendor and its role.
12.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007.
12.9 ASSIGNMENTS
1. Discuss the role of consultants.
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2. What are the ERP post implementation options? Explain.

12.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006.
6. Summer, ERP, Pearson Education, 2008.
12.11 LEARNING ACTIVITIES
1. Discuss the Various features in Market outlook.
2. Examine the Technology Architecture.
12.12 KEYWORDS
1. CRM – Customer Relationship Management
2. SLA – Service Level Agreement
3. IS – Information System
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LESSON - 13
ACCOUNTING AND FINANCE CONTROL PROCESS
13.1 INTRODUCTION
Enterprise resource planning software is an optimal way to manage business
activities, especially in the finance sector. To meet the companies’ requirements, the
accounting and finance module in ERP has some specific features to streamline all
your business finance activities. They are collecting and storing finance data, asset
management, cash management, even creating reports and supporting analysis of
financial data. Moreover, you can integrate the accounting module with various
activities like purchasing, ordering, cash flow management to have sufficient
financial data and view your financial picture carefully. With the accounting
module in ERP, enterprises can have accurate data, avoid regretting mistakes,
forecast the financial statement and have effective plans.
13.2 OBJECTIVES
 This lesson aims focuses on key benefits of ERP for accounting and financial
management. Towards the end of the unit the reader will be able to
understand how the companies can completely automate accounting and
financial tasks.
13.3 CONTENTS
By using ERP for accounting and financial needs, companies can completely
automate accounting and financial tasks. For example, a business can streamline
accounts payable and accounts receivable management and cash management.
Automation can also let businesses track their financial transactions more quickly
13.3.1 Key Benefits of ERP for Accounting and Financial Management
Enterprise Resource Planning (ERP) software has become an inevitable part of
modern businesses. It provides business functionalities that are designed to
address inventory requirements, the quality of finished products, productivity, and
visibility to crucial business processes. The benefits of ERP systems are many, but
how does it benefit the accounting and financial management department in an
organization?
5. Key Benefits of ERP for Accounting and Financial Management
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1. Finance and Accounting ERP provides greater financial control through business integration
The Finance and Accounting department in every business is indispensable.
The way they work can be unique and different, but the objective is almost the
same in every case. Every financial manager aims at:
 improving profit margins
 minimizing expenses
 promoting savings
 ensuring safety and optimization of investments
 increasing the firm’s value
From estimation of capital requirements to disposal of surplus assets to
management of cash and financial control, there are many responsibilities of the
financial team. ERP lets you unify the data and bring it all together in one place. An
integrated ERP system improves cost accounting by allowing managers to
accurately define budget and allocate costs for raw material, labor, transportation,
and other overhead costs.
Whether making payment to vendors, paying wages to employees, or financial
forecasting, an ERP system helps you to better manage all activities of a finance
department. Also, when you have a single business management system, i.e. an
ERP system, to look after multiple departments, you eliminate the need to work in
multiple systems which minimizes costs, increases productivity, and improves
processes.
2. Better tracking and management of finances with accounting and financial ERP
An ERP financial management software handles customer payment schedules,
revenue tracking, and credit management across the business. ERP systems also
include a CRM (Customer Relationship Management) system to automate
reminders and prevent customer complaints. With increased tracking capabilities
and simple to use automated payment systems, you can easily manage billing,
payments, and revenue. Finance ERP helps with cost analysis, profit tracking,
invoice tracking, budgeting, investment management, and more.
3. Real-time visibility and secure financial data
When processes are well organized and resources are optimized, you can
better examine future opportunities to enhance your bottom line. ERP for
finance provides fast access to in-depth information so you can drill down to see
what is best for your organization. Financial data is confidential and can’t be
disclosed openly. An ERP finance module allows you to safeguard your information
and co-author, edit, and manage it according to the access you allow. Multiple
reporting options and modules eliminate the need for maintaining spreadsheets and
paper files for increased security.
4. Integrated and automated data across the organization even in multiple countries
With ERP software you get immediate data synchronization, improved data
quality, and an updated view of the organization at the push of a
button. Generating information, consolidating it, and managing company-wide
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business processes becomes hassle-free with an ERP system. Shared management

tools and integrated financial management modules track accounting data with
international standards. This means you can select a framework in multiple
languages, currencies, companies, and charts of accounts. ERP systems let you
gather financial data from different departments to generate reports such as the
general ledger and other financial statements. Every piece of data is seamlessly
integrated within the system making ERP an indispensable part of every modern
business.
5. Greater financial control with GAAP compliant ERP
Generally, accounting software is not GAAP compliant, whereas a full-fledged
ERP solution typically is compliant with GAAP. Adopted by the US Securities and
Exchange Commission, GAAP is the accounting standard that provides a
systematic methodology for recording transactions and events. A strong
ERP solution, driven by a powerful engine, encourages productive financial
reporting that works well with multiple accounting standards, including GAAP.
13.4 REVISION POINTS
Transparency Financial Information
1. With ERP in accounting, you can access financial information whenever you
need it.
Workflow Automation
Improving your core business ops becomes a breeze with a system that can
automate your processes.
Financial Data Security
Being of a very confidential nature, financial information demands a high
degree of security protocols for data protection.
13.5 INTEXT QUESTIONS
1. What is ERP financial management?
2. What are the accounting activities in ERP?
13.6 SUMMARY
The benefits of using an ERP system for accounting and financial
management are numerous. A finance manager can understand capital
requirements and manage the accounting activities of the organization with greater
insight. Most business owners utilize accounting software, but with an ERP system,
you get an all-in-one solution that encompasses modules for every department to
include finance, production, quality, sales, procurement, and more.
A manufacturing ERP financial management system provides all of those same
capabilities, as well as functionality that is specific to the manufacturing industry.
13.7 TERMINAL EXERCISE
1. How does ERP support accounting and finance? Explain.
13.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education, 2011.
 105

3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:

Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007.
13.9 ASSIGNMENT
1. How an ERP can impact your financial management? Explain.
13.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012.
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008.
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009.
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008.
13.11 LEARNING ACTIVITY
1. Exemplify the Industrial Financial Systems.
13.12 KEYWORD
1. GAAP – generally Accepted Accounting Principles

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UNIT – VI: ERP OPERATIONS

LESSON - 14

PRODUCTION AND MATERIAL MANAGEMENT

14.1 INTRODUCTION
It is one of the core components of ERP which handle various aspects of
production planning and implementation. This process involve forecasting,
scheduling, ordering, and quality control.Production control is the process of
overseeing, managing, and controlling the tasks involved in producing goods or
services. It uses different control techniques with the aim to meet production
targets on schedule and according to the set quality. "Materials management is the
branch of logistics that deals with the tangible components of a supply chain.
Specifically, this covers the acquisition of spare parts and replacements, quality
control of purchasing and ordering such parts, and the standards involved in
ordering, shipping, and warehousing the said parts.
14.2 OBJECTIVES
 This lesson aims focuses on production and material management. Towards
the end of this lesson the reader will be able to understand the control
process of accounting and finance.
14.3 CONTENTS
14.3.1 Production Management
Product Management is an organizational lifecycle function within a company
dealing with the planning or forecasting or marketing of a product or products at all
stages of the product cycle." It deals mainly with the manufacturing of the goods.
Product management are very similar with product marketing. They share the same
goal which is to produce a product that will maximize company's profit. However,
there are several differences. One of them is product management focuses on how
the companies operate in producing the product and deal mainly before the product
is being sold to the public. On the other hand, product marketing focuses on how
the product is selling in the public. Product marketing deals with ways to make the
product successful in the market. Its means of making the product successful in
the market can range from advertisement, promotions and even gifts.
Since there is a direct relationship between production management and
product marketing, it is very important for the manager in the production
management to communicate with the product marketing to find out what the
market is seeking and translate the idea of the type of product to be produced.
Product management is supported by much well-known software. Some of the
examples of software for product management are Oracle 10g database produced by
oracle, SAP R/3 ERP made by SAP AG, etc. This software will help a company in
understanding the product market better and produce a successful product.
14.3.2 Steps Involved in the Production Planning
1. Determine the production capacity
2. Specify your audience and forecast the market demands
3. Proper inventory control
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4. Reduce the generation of waste

5. Risk assessment and management control
Without further ado, let’s look at the role of ERP in the production planning
process.
ERP System Lead to Productivity
An ERP system comprises an array of integrated business management
systems that assist with production planning. By streamlining the processes, all
information is available in a centralized location — giving a 360-degree view of the
entire manufacturing process. Besides, it enables you to monitor the production
status in real-time without any dependence on the team members. For instance,
the procurement team can monitor the availability of the raw material stock and
keep restocking it. Automation brings inefficiency to the system and improves
productivity, helping companies to maintain their order commitments.
14.3.3 Benefits of ERP in Production Planning
1. Customer Service Enhancement
The production planning module in ERP streamlines the process right from the
procurement of raw materials until its conversion to the final product. It takes care
of scheduling and optimizing the production period. Thus, it ensures the timely
delivery of the final product with no compromise in quality. Delivering products on
time is crucial to maintaining customer relationships. Such activities result in the
gained trust from your customers and persuading them to place more orders with
you. In short, it helps build long-term relationships with your customers.
2. Smooth Workflow
If you want to enjoy running your business, you want to make sure that your
workload is not overburdened with poor workflow.
A poor workflow can have bad consequences, resulting in delays in delivery
orders and lost customers. Workload automation processes ensure smooth and
reliable workflow, eliminating repetitive tasks such as data entry. It allows workers
to focus more on important tasks, thereby increasing their work productivity.
Furthermore, the manufacturing ERP system facilitates manufacturers to not just
plan, execute, and control production but integrate these operations into other
business processes.
3. Inventory Control (Material Requirements Planning)
ERP in inventory management is the lifeblood of the manufacturing process.
Managing stock in a structured manner is critical as planners need to balance
holding enough stock to satisfy customer demand while also minimizing the risk
and cost involved in holding extra inventory. An ERP in production planning keeps
updating the status of materials in real-time and reorders them automatically when
the stock needs replenishment. These systems also use a Just-In-Time scheduling
strategy to further reduce the need for holding large quantities of work-in-process
items. ERP software in production planning ensures that inventory processing
occurs in a streamlined manner.
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4. Equipment Improvement
Equipment needs regular maintenance and cleaning to ensure its smooth
functioning. But most often, things like these are delayed, which results in lost
productivity as machines fail to meet their production targets. However, with ERP
in production planning, you can schedule regular maintenance management and
ensure timely cleaning for the underperforming equipment. It will make sure that
equipment is able to meet the targeted outputs and the optimal use of resources.
5. Plant Morale Improvement
When you have a systematic workflow, it reduces stress on the shop floor and
helps increase workers’ productivity. Stress acts as a great hindrance in
manufacturing as it results in distraction and defects on the shop floor. This can be
avoided by implementing ERP in the production planning process. An ERP will
ensure that everyone is well-coordinated, and there is no rush in meeting
deadlines. The floor workers are aware of their tasks and can meet their goals in an
organized manner.
6. Idle Time Reduction
Idle time in manufacturing refers to when workers are getting paid, but a
worker or machine is unproductive. This is generally due to a shortage of raw
materials or various machine repairs. This period of low productivity can easily be
avoided with the help of a manufacturing system. The ERP in production planning
minimizes downtime by scheduling timely replenishment of stock and regular
preventive maintenance. It effectively coordinates with the purchase departments
for the release of materials, ensuring that every production step is right on
schedule.
7. Improved Delivery Performance
Another significant advantage of ERP in production planning is that it keeps
quality checks in control. Delivering high-quality products is critical to running a
business successfully. Your customers are more likely to endorse your brand if they
are satisfied with your product quality. It’s important that your products meet
industry standards at various checkpoints in the manufacturing process. The
product planning process looks after the aspect of procuring quality raw material
and resource optimization. This will ensure that the delivery of your final products
is not compromised.
14.3.4 Material Management Module
Material Management in ERP System determines needs, identifies a potential
source of supply, compare alternative quotations, create a purchase order, track
the status of the purchase order, receive goods, and verify invoices upon receipt of
goods. An ERP System provides a needed integration between Material Management
System and other sub-modules. For example, all purchase orders are assigned to a
cost center in the Management Accounting module. In production planning, the
inventory function post component needed to fill Production Orders. This shows
purchasing and financial accounting share common vendor data.
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Importance of Material Management

The efficient and structured Material Management Module is very
advantageous for many companies. Also, customer satisfaction is can be noticeably
increased because only a well-functioning material is available at the right time in
the right place and in the required quantity and quality. This in turn is the basis for
high adherence to deadlines and the lowest possible throughput times. Material
management is also important with regard to the warehouse management because
companies will know how many raw material, finished products, and spare parts,
etc. are available in Warehouse at all the time.
Also, with the help of the material management module following below tasks can
be handled much easier:
 Collecting material
 Shipping planning
 Container Management
 Inventory Management
Key Components for setting up Material Management
 When multiple projects are being managed then assigning of Unique Project
Number Schema reduces the ambiguity.
 Material Storage Location must be clearly defined and marked.
 Inspection, Certifications, Quality Management, Tracked Digitally.
 The unit of measure and material classifications must be descriptive and
accurate to ensure all material can be found quickly and efficiently.
Objective of Material Management
 Get at Right Price
 High Turnover
 Low Procurement and Storage Cost
 Consistency in Quality
 Continuity Of Supply
 Inter-Department harmony
 New Material and Product
 Product Improvement
14.3.5 Advantages of Material Management System
i) Material Valuation: Material Valuation helps in:
 Determining the price of the material.
 Helps in recording tracking and moving material.
 It provides divergent inventory valuation methods such as LIFO, FIFO,
Moving Average, etc.
ii) Multi-location Inventory: For Manufacturing units that produce goods on large scale
and for consumer goods there are more than one Distribution Unit for making
Supply Chain Management Easier. In different distribution units lot tracking,
serialized inventory, and specific costing, etc. are properly maintained.
iii) Traceability: Consumer goods and Raw Material consist of Lot number or serialized
number which is used to track the location of goods. For example, if the product is
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sent to the consumer, importing raw material, amount of goods available in the
Warehouse can be easily traced by an organization which makes the work of
organization much easier.
iv) Product Life Cycle Management: New products and old products are the backbones
of an organization. So every organization make the analysis of the new and old
product and measure the demand and supply of that product. So the product
which is more demanded having a high life span.
For example: Let us take 2 products from a company suppose A and B.
Out of its product A highly demanded and Product B is very less demanded.
So in that company Product A is manufactured more and the company will
spend more on Advertising of that Product.
A new product in an Organization when manufactured have gone through five stages:
 Introduction Stage
 Growth Stage
 Maturity Stage
 Decline Stage
 Abandonment Stage
Disadvantages of Material Management:
 Data integration issue cause when Material is placed in Multi-Location.
 Engineering requisition issues are also caused.
 Inaccurate Inventory level caused due to Shipping and Receiving Error.
14.4 REVISION POINTS
1. Traceability
Consumer goods and Raw Material consist of Lot number or serialized
number which is used to track the location of goods.
2. Material Valuation
Material Valuation helps in determining the price of the material and
recording tracking and moving material.
3. Smooth Workflow
If you want to enjoy running your business, you want to make sure that
your workload is not overburdened with poor workflow.
14.5 INTEXT QUESTIONS
1. What is Production Management
2. Write a note on material management module.
14.6 SUMMARY
Product Management is an organizational lifecycle function within a company
dealing. Product management are very similar with product marketing. An ERP
system comprises an array of integrated business management systems that assist
with production planning. The production planning module in ERP streamlines the
process right from the procurement of raw materials until its conversion to the final
product. Workload automation processes ensure smooth and reliable workflow,
eliminating repetitive tasks such as data entry. ERP in inventory management is
 111

the lifeblood of the manufacturing process. The efficient and structured Material
Management Module is very advantageous for many companies.
14.7 TERMINAL EXERCISES
1. List the steps involved in the Production Planning.
2. Exemplify the importance of material management.
3. Discuss the objectives of material management.
14.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007.
14.9 ASSIGNMENTS
1. How the ERP System Lead to Productivity? Explain.
2. Explain the benefits of ERP in Production Planning.
14.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.
4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
14.11 LEARNING ACTIVITY
1. Discuss the advantages and disadvantages of Material Management System.
14.12 KEYWORD
1. MRP – Material Requirement Planning
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LESSON - 15
SUPPLY CHAIN MANAGEMENT
15.1 INTRODUCTION
At this juncture supply, chain management deserves some treatment. Supply
chain, also called logistics management. This is about using various IT tools to
study the flow of supply of raw materials and finished goods from one point in the
organization to another. It would deal with:
(a) Supply of raw materials
(b) Maintenance of inventory
(c) Operational activities, including manufacturing and purchasing
(d) Distribution of goods
(e) Shop floor control
(f) Resource management
To be effective any ERP solution should be comprehensive, flexible, open-
ended and modular for replication, fully integrated, going beyond the company's
immediate frame work to reach out to customers, suppliers, bankers and
government in order to create a compete logistical chain covering the entire route
from supply to delivery, across multiple geographies, currencies and country-
specific rules. It should also be able to point to the best business practices in the
industry and be able to benchmark one's enterprise on real-time basis to help one
to make the course corrections and it should also be flexible enough for
technological up gradation with minimum cost. Above, all it should be insulated
from problems like Y2K that may impair its usefulness.
15.2 OBJECTIVE
 This lesson aims focuses on supply chain management and Resource
management. Towards the end of this lesson the reader will be able to
understand the concepts of Integrated Data model.
15.3 CONTENTS
15.3.1 Benefits of ERP
 Gives one sustainable competitive advantage;
 Reduces overall cycle-time and hence cost of one's finances;
 Homogenizes the organization process in such a way that every point in one's
organization would have the full backing of the organization, a crucial factor
while dealing with vendors and customers;
 Dramatic rise in one's response to competition and customer care;
 Total transparency and information leads to better external and internal
communication;
 High customer responsiveness would build better relationships;
 One's brand positioning and customer service costs would be drastically
reduced;
 One's scenario planning and other forecasting model will be more scientific:
 One's long-term survivability will be truly enhanced;
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 One's capacity utilization becomes better;

 One's inventory management may become more optimum;
 There would be an increase in the accuracy of one's decisions
As a measure of abundant caution, make sure that the multitude of
technologies that may be used to build an ERP system should lend themselves for
easy maintenance after being set up. Also they are amenable for use with one's
planned push towards electronic commerce or E-business.
15.3.2 Resource Management
Two of the major resources that should be optimally planned are human
resources and equipment. The upper-right quadrant of figure represents the
strategic and business planning centered on an enterprise's resources. Looking at
human resources management, the functionality provided here should include the
employee database, job descriptions and evaluations, applicant tracking,
requisition management, performance review, cost benefits, career and succession
planning, creating alternate organization structures, apart from taking care of the
training needs of employees on a continuous basis.
Equipment is another critical resource. Online records need to be kept on
equipment location and status. Proper accounting methods need to be followed with
respect to equipment location to track unit, status, operating and maintenance
costs. Time accounting and billing must be integrated when the equipment is
directly charged to a job.
The next strategic application area concerning resources is total quality
management (TQM). This should include provision for quality planning required for
ISO 9000 certification. The strategic execution applications are joined together by a
facilities maintenance management application. Maintenance management is
critical, it must provide a "bridge" between the materials planning and maintenance
planning functions, allowing planners from both sides to communicate with each
other.
The last quadrant represents the operational planning and execution
applications specific to resources. The most vital application is resource MIS.
Resource MIS is driven from a forecast and should work out resource requirements
for various periods, locations and their financial implications. It should be linked to
capacity planning. Resource MIS should take the generated plans and spread them
into work center to analyze bottleneck areas or over-committed resources.
Another important resource execution application is quality control. It provides
the ability to monitor and track specifications regarding a product or process. It
controls resources by identifying which equipment is required 10 execute the
testing process, and how it is to be accomplished. Results gathered from the testing
process need to be stored at the item level, allowing certificates of acceptance to be
produced.
Manufacturing cost accounting provides for the tracking and analysis of costs
directly related to the production process. Movements into and out of WIP, labour
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efficiency, material utilization, and actual-to-engineered variances all need to be

tracked. This application literally lives within shop floor control, product data
management and the general accounting ledgers.
A fixed asset management application should support multiple depreciation
methods, disposal analysis, and responsibility reporting, financing and insurance
information, in addition to property tax and license renewal information.
Budgeting provides the functionality to monitor performance. It displays all the
accumulated activity throughout the development, sales, manufacturing and
distribution cycle against the planned numbers. Budgets should be available online
for work centers, departments, divisions or companies.
The payroll application should not only provide wage administration, step
progression, billings and retroactive pay, but also provide history and turnover
analyses, full integration to accounts payable, and simple maintenance and mass
change capability.
15.3.3 Integrated Data Model
One of the most critical steps in the ERP implementation is the creation of an
integrated data model. One of the advantages of having an ERP system is that all
the employees from the different departments get access to the data the integrated
data. The company uses this integrated data for its analysis and decision-making.
With the implementation of ERP system, the departmental information
systems and the departmental database will have to go. There can no longer be
isolated database, which cater to the needs of a particular department. All the data
has to be from the integrated database. This approach will reduce data redundancy
and provide updated information about the entire organization to all employees.
For the integrated database to be effective it should clearly depict the
organization; it should reflect the day-to-day transaction and it should be updated
continuously. At any given time, the database should give a snapshot of the
organization at that point in time. So if an order is entered, the sale is done and the
goods are dispatched, then the database should reflect those changes. The
inventory should be reduced and the account receivable should be increased. All
these things should happen instantaneously and automatically. That is the
challenge and that is the advantage of the integrated database and the integrated
data model. So when designing the data model for the ERP system, the most
important thing that should be kept in mind is the information and the process/
procedure automation. The data model should reflect the entire organization and it
should successfully depict and integrate the data structures of the entire
organization.
Installing an ERP system has many advantages both direct and indirect. The
direct advantages include improved efficiency, information integration for better
decision -making, faster response time to customer queries, etc. The indirect
benefits include better corporate image, improved customer goodwill, customer
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satisfaction, and so on. In this lesson some of the benefits of the ERP system will be
discussed. They are:
 Reduction of lead-time
 On-time shipment
 Reduction in cycle-time
 Improved resource utilization
 Better customer satisfaction
 Improved supplier performance
 Increased flexibility
 Improved information accuracy and decision-making capability
15.3.4 Reduction of Lead-Time
The elapsed time between placing and receiving is known as the lead-time. It
plays a significant role in purchasing and inventory control. Most purchasing
departments urge the managers to anticipate material demands well ahead of
actual need. All inventory system have safety mechanisms like safety stock, re-
order level and so on built into them, to avoid the situation where the material is
out of stock. The consequences of the non-availability of an item that is required
and production can result in a lot of problems like missing the delivery schedules.
Losing the customer goodwill due to delayed delivery or even losing the customer to
the competition. One can avoid this situation by requesting for the materials well in
advance rather than when they are actually needed (early requests), or by keeping
large buffer stock, or by maintaining a very high re-order level. But all this means
that larger inventories must be kept, which block the money. Also the practical
consequence of allowing longer times for delivery this is due to the ‘squeaky wheel
principle’ buyers who expect the shortest lead-times complain the loudest when
deliveries are late and thereby receives the most attention from suppliers. So the
company should find out minimum lead-time and should attempt to correct
supplier’s delivery delays instead of automatically increasing existing lead-time.
In order to reduce the lead-times, the organization should have an efficient
inventory management system, which is integrated with the purchasing, production
planning and production departments. In this era of just-in-time manufacturing,
the knowledge of the exact lead-times for each and every item is paramount
importance for uninterrupted production. For a company dealing with hundreds
and thousands of raw materials and components, keeping track of the lead-times of
each and every individual item manually, is practically an impossible task.
The ERP system helps in automating this task and thus, makes the inventory
management more efficient and effective. Also since, the ERP system is integrated
and the material management module is integrated with other modules like sales,
marketing, purchasing manufacturing and production planning, the demand for a
particular item can be known as early as an order is received.
15.3.5 On-Time Shipment
Today, companies must be able to deliver customer-specific products (made-
to-order) with the lead-time of standard, off-the-shelf products. The companies
must be able to change the mode of production from make-to-stock to make-to-
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order, yet retain the cost and time advantages of off-the-shelf products. Today, the
ERP system provides the freedom to change manufacturing and planning methods
as needs change, without modifying or reconfiguring the workplace or plant
layouts. With ERP system, businesses are not limited, many manufacturing
method, such as make-to-stock or make-to-order. Instead, many manufacturing
and planning methods can be combined within the same operation, with unlimited
flexibility to choose the best method or combination or methods for each product at
each stage throughout its life cycle. In efficiently manage different types of
production. Because these systems support the entire range of production
strategies, only one system is needed to manage all manufacturing activities.
Engineer-to-order products are planned using these systems, while the forecasting
and distribution planning features handle make-to-stock items. Products that are
assembled to order can be planned using the extensive production planning
capabilities of these ERP packages. Various production scenarios can be simulated
using the simulation features and the best one can then be selected. Also since the
different functions involved in the timely delivery of the finished goods to the
customer purchasing, materials management, production planning, plant
maintenance, sales and distribution are integrated and the procedures automated,
the chances of errors are minimal and the production efficiency will be high. Since
all the information is available to the management at the desired level of detail and
since the system has exception handling features the management can keep track
of things and can take corrective actions at the appropriate time.
15.3.6 Reduction in Cycle-Time
Cycle-time is the time between receipt of the order and delivery of the product.
At one end of the manufacturing spectrum is the make-to-order operation, where
the cycle-time and cost of production are high. This is because in a make-to-order
situation the manufacturer starts making the product or designing the product only
after receiving the order. He will procure the materials and components required for
production only after getting the order. On the other end of the manufacturing
operations is the make-to-stock approach, where the products are manufactured
and kept in the finished goods inventory before the order is placed.
In both cases the cycle-time can be reduced, but the reduction will be more in
the case of make-to-order systems. In the case of make-to-stock, the items are
already manufactured and kept in warehouses or with distributors for the sales.
Here, the cycle-time is reduced not in the shop floor, but during the order
fulfillment. In the earlier days, even for the made-to-stock items, the cycle-time
used to be high. This was because the process was manual and if computerised,
not integrated. Suppose a customer places an order. The order entry clerk has to
check whether the order is available in the warehouse nearest to the customer. If it
is not available there, he will have to check whether it is available in any other
warehouse or with any of the distributors. Then he will have to process the order,
inform the concerned warehouse or distributor to ship the item, inform the finance
department to raise the invoice, and so on. All this used to take a lot of time few
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days or sometimes even weeks. But with an ERP system, as soon as the order is
entered into the system, the system checks the availability of the items. If it is not
available with the nearest manufacturer, then the warehouse that is closest to the
customer and which has the item in stock is identified. The warehouse is informed
about the order and the shipment details are sent to the distribution module, which
will perform the necessary tasks like packaging and picking so that the delivery is
effected. The finance module is also alerted about the order so that they can raise
the invoice. All these actions are triggered by the click of a button by the order
entry clerk. Since all the data, updated to the minute, is available in the centralised
database and since all the procedures are automated, almost all of these activities
are done without human intervention. This efficiency of the ERP systems helps in
reducing the cycle-time.
15.3.7 Improved Resource Utilization
As manufacturing processes become more sophisticated as the philosophies of
elimination of waste and constraint management achieve broader acceptance,
manufacturers place increased emphasis upon planning and controlling capacity.
The creation of an accurate, achievable production schedule requires the
availability of both material and capacity. It is not necessary, to have financial
resources tied up in material, if the capacity is insufficient or improperly planned.
Waste not only raises costs, it also affects customer service levels and customer
goodwill.
The capacity planning features of most ERP systems offer both rough-cut and
detailed capacity planning. The system loads each resource with production
requirement from master production scheduling, Material requirements planning
arid shop floor control (detailed capacity planning). All planned and released,
production is evaluated and loaded against capacity definitions for each resource,
and all capacity requirements are pegged back to the order comprising the load.
Capacity definitions are provided from work center and machine records. Work
center's can be facility-specific or enterprise-wide. Any work centre can be
designated as a critical work centre for evaluation by rough out capacity planning.
This capacity provides an easy and efficient way to designate bottleneck operations
that act as system constraints. As the constraints change over time, the user can
redesignate the work centres as critical or non-critical High volume repetitive
environments are further supported with both 'from and to’ material movement
location designations. These locations are used for pull system backflushing
/replenishment and can be designated by individual machines within the work
centre. These systems provide further refinement of available capacity by providing
definition for specific machines or pieces of equipment. Each work centre also has
user-defined input/output control tolerance factors to control the level of labour
and machine, designation of shift/hours schedule and maximum desired load
percentage (with 100% as the default). Capacity minimums can also be designated
for processes involving vessel size constraints and fixed cycle constraints (heat
treating pickling, plating, sand blasting, paint dipping, etc.).
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The ERP systems also have simulation capabilities that help the capacity and
resource planners to simulate the various capacity and resource utilisation
scenarios and choose the best option. The efficient functioning of the different
modules in the ERP system like manufacturing, materials management, plant
maintenance, sales and distribution ensures that the inventory is kept to a
minimum level, the machine down time is minimum, the goods are produced only
as per the demand and the finished goods are delivered to the customer in the most
efficient way. Thus, the ERP systems help the organization in drastically improving
the capacity and resource utilisation.
15.3.8 Better Customer Satisfaction
Customer satisfaction means meeting or exceeding customer's requirements
for a product or service. Assessment of the degree of satisfaction is usually made on
at least three measures:
 Whether the product or service includes the features that are most
important to the customer.
 Whether the company can respond to the customer's demands in a timely
manner a criterion that is especially important for custom products and
services.
 Whether the product or service is free of defects and performs as expected.
ERP system has proved that they can produce goods with the flexibility of
make-to-order approach without loosing the cost and time benefits of made-to-
order operations. This means that the customer will get individual attention and
the features that he/she wants, without spending more money or waiting for long
periods, with the introduction of the order and make the payment sitting at home.
The customer could get technical support by either accessing the company's
technical support knowledge base (help desk) or by calling the technical support.
Since all the details of the product and the customer are available to the person at
the technical support department, the company will be able to provide better
support to the customer.
15.3.9 Improved Supplier Performance
The quality of the raw materials or components and the capability of the
vendor to deliver them on time, are of critical importance for the success of any
organization. So an organization needs to choose its suppliers or vendors very
carefully and monitor their activities closely, so that problems can be corrected
before it can disrupt the functioning of the company, To realise these benefits,
corporations rely heavily on supplier management and control systems to help
plan, manage, and control the complex processes associated with global supplier
partnerships. The ERP systems provide vendor management and procurement
support tools designed to coordinate all aspects of the procurement process. They
support the organization in its efforts to effectively negotiate, monitor and control
procurement costs and schedules while assuring superior product quality. The
supplier management and control processes are comprised of features that will help
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the organization in managing the supplier relations, monitoring the vendor

activities and managing the supplier quality.
There is a growing trend for organization to establish partnership agreements
with their suppliers. Through such business relationships, mutually beneficial
results have been achieved in the areas of quality, delivery, and cost. To realise
these benefits, companies rely heavily on procurement support systems to help
manage and control processes associated with supplier partnership agreements.
Request for quotations, contract negotiation and control, purchase order release
and delivery are process steps considered when formalising such partnership.
Complexities arise in the areas of types of products or services being procured,
quantity and price breaks, terms of the agreement, and methods employed for
tracking and controlling the process. The procurement support system that
provides immediate feedback, flexibility and comprehensiveness in managing
supplier partnerships will provide a clear, competitive advantage to the enterprise.
The ERP systems have features that will enable companies to realize the
benefits associated with established partnership agreements. Supplier quotations
and contracts can be created to support the procurement of all products and
services required by the enterprise. Examples of this include inventory and non-
inventory products, office supplies, and services, as well as products requiring
direct shipment to customer. Since each agreement must stand on its own merit,
multiple quantity and price breaks, along with terms specifying should be effective
and supported. To address the methods, companies employ when tracking and
controlling this agreement, these systems provide a number of alternatives.
15.3.10 Increased Flexibility
Competition is growing, companies must learn to respond more rapidly to
customer's wishes as well as changes in the market. They will need to design new
products or redesign old products quickly and efficiently. Only then will companies
have the chance to capitalize on opportunities while they are available. The window
of opportunity is often quite small. The manufacturing process must be flexible
enough to accommodate new product designs with minimal disruption or time loss.
Flexibility is a key issue in the formulation of strategic plans in companies.
Sometimes, flexibility means quickly changing something that is being done, or
completely changing to adjust to new product designs. At other times, flexibility is
the ability to produce in small quantities, in order to produce a product mix that
may better approximate actual demands and reduce work-in-progress inventories.
Regardless of the definition of flexibility, traditional fixed automation
manufacturing facilities, while efficient, are often inflexible. Similarly; extremely
flexible operations are often inefficient. An argument can be made for the relative
merits of both efficiency and flexibility. Actually, both are desirable.
Product flexibility is the ability of the operation to efficiently produce highly
customized and unique products. Manufacturer's tried to introduce some amount
of flexibility by using the assemble to-order approach. This provided some amount
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of flexibility without increasing the production cost, but could not be applied to all
situations. Along the broad spectrum of make-to-order manufacturing, there is a
growing convergence between strictly assemble-to-order (limited options and
features) and completely engines no-order (just about anything goes, at a cost)
environments. This evolving environment is often referred to as configure-to-order.
Most ERP systems have now also added this technique to their systems. Using a
rules-based product configuration system, configure-to-order (CTO) manufacturers
are able to simplify the order entry process and retain engineer-to-order (ETO)
flexibility, without maintaining bills of materials for every possible combination of
product options.
15.3.11 E-MARKETPLACE
E-marketplaces connect buyers and sellers together on a single platform for
commercial activity. When you talk about marketplaces, you definitely hear terms
like B2C, B2B, C2C or peer-to-peer.
The way how they are connected and how the services or products are being
sold on the platform categories the marketplace into different types. These
marketplaces are also often defined under the term multi-vendor marketplace
and sharing economy platforms.
Types of E-marketplace
1. Product Online Marketplace
This type is what we typically call as an ecommerce marketplace, where people
buy and sell products. The platform brings together all types of sellers into a one-
stop-shop that is convenient for consumers to not only check prices for the best
deals but do so all under one electronic roof. Also, with features like auction and
fixed price sale, the seller lists a product and sets a deadline; buyer with the
highest bid gets the item. Usually, this type of marketplace is owned by an operator
who enables third-party sellers to sell products alongside the marketplace owner's
regular offerings.
Examples include Amazon, Flipkart, eBay, etc. Here, the vendor business
model plays a major role that determines the profit for marketplace owners. Hence,
it is wise to choose the right multi-vendor software that has a flexible model and
suits your requirements.
2. Online Service Marketplace
The online marketplace is no longer restricted to just selling products. You can
even cater to the service industry. For a startup business that wants to launch a
marketplace with minimal input, it is good to offer different services that people
search for. In a services marketplace, the discovery of services forms the basis of its
offering to customers and opportunities for paid work form the basis of its offering
to freelancers. Platforms like Fiverr, Upwork are freelance services marketplaces.
With the service business, all you have to do is to offer a robust & reliable
online platform to connect service seekers with service providers. The platform acts
as a bridge connecting both these ends. You can earn a commission on each
successful transaction.
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3. Online Rental Marketplace

When it comes to online rental marketplace, the transportation and fashion
industry are popular among investors and aspiring entrepreneurs. However, in the
past few years, the rental marketplace for home appliances, electronic accessories,
gears, is not too far behind to become famous.
Mobile apps like Uber, Ola are fantastic examples of this model, which are
giving a huge rise to peer-to-peer marketplaces that are renting through online
mediums. As an aspiring entrepreneur, you can focus on niche-based online rental
marketplaces such as vacation rental, car rental, bike rental and equipment rental
with the help of rental ecommerce platform.
4. Hybrid Model in Ecommerce
There can be two types of hybrid online marketplaces. One category is where
people expect to sell and buy both services and products on the same platform. The
online marketplace like OLX fits into this category. Another one is where people
want to get the combined benefits of buying from the online and offline stores. In
this model, the customer first books the products online. After that, they walk down
to the nearby physical store to buy those products. Currently, ticket booking
websites like Book My Show works based on this model.
As per the latest update, big retailers like Reliance Trends and Myntra foray
into the ecommerce segment with a hybrid online-offline model. This model creates
shared profitability by integrating offline stores via the online platform. As such you
can launch hybrid online marketplaces to bring local merchants to sell their
products through its website.
5. Hyperlocal Marketplace
The concept of hyperlocal came into the picture when people start to look for
the nearby options while searching for shops, restaurants, etc. through search
engines. In this marketplace model, the aim is to provide facilities and services
within the shortest possible time from local vendors.
The hyperlocal ecommerce marketplace is quite similar to marketplaces like
Amazon. The main difference is that the customers will be only able to buy
products from vendors who can ensure delivery within 24 hours.
Examples for this marketplace model includes Urbanclap, Bigbasket,
ClickYourMed, etc. Also, the food delivery marketplaces like Zomato and Swiggy
comes under this category with little bit tweaks in their workflow.
E-BUSINESS
E-Business (Electronic Business) is any process that a business organization
conducts over a computer-mediated network. Business organizations include any
for-profit, governmental, or nonprofit entity. Their processes include production,
customer, and internal or management focused business processes. It is the
conduct of online business processes on the web, internet, extranet or a
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combination thereof. These customer, internal and management focused business

processes include buying and selling goods and services, servicing customers,
processing payments, managing production and supply chains, collaborating with
business partners, sharing information, running automated employee services and
recruiting employees.

E-business is similar to e-commerce but encompasses much more than online

purchasing transactions. Functions and services range from the development of
intranets and extranets to the provision of e-services over the internet
by application service providers. Enterprises conduct e-business to buy parts and
supplies from other companies, collaborate on sales promotions and conduct joint
research.
Corporations are continuously rethinking and reshaping their business models
influenced by advanced technologies, hybrid workforces, heightened customer
expectations and, specifically, the internet's availability, reach and ever-changing
capabilities. The growth of e-business in recent decades has given rise to new
business requirements. Consumers expect organizations to provide self-service
options to conduct transactions, personalized experiences, and speedy, secure
interactions. New regulatory laws and best practices for keeping electronic data
secure have been established. Companies have adopted stringent security protocols
and tools, including encryption, digital certificates and multi-factor authentication,
to protect against hackers, fraud and theft.
Cyber security has become ingrained in e-business with deployments of
endpoint device security and advance detection and response capabilities. Security
is built into browsers, and digital certificates are now available for individuals and
companies from various vendors providing cyber security tools and technologies.
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Even though securing business transactions on the web remains a pressing issue
for consumers and enterprises, e-business continues to grow at a healthy pace.
BOTTOM OF FORM
Components of Electronic Business
The core components of e-business are information, communication,
and transaction. Business partners use digital networks (i.e. public or private
communication networks) to conduct business processes using innovative
technologies to improve efficiency. Three key areas are particularly important for e-
business:
E-procurement: the electronic sourcing of products and services by companies,
focused on reducing costs and effort.
Online stores: the electronic sale of products and services via appropriate
platforms, such as online stores.
Online marketplaces: electronic commerce via digital networks, connecting the
buyers and suppliers of products and services.
There are also two further areas of e-business:
Online communities: electronic communication network between individuals
and organizations, which supports data and knowledge sharing as well as the
preparation of transaction decisions.
Online companies: electronic business cooperation for connecting individual
company services, resulting in a virtual business with a common transaction offer.
Features of E-Business
To fully understand the concept of e-business, you must first grasp the link
between e-business and the net economy and know who the typical market
participants are in the industry.
Net economy and e-business
The range of e-business is determined by the net economy. This refers to the
commercial use of digital data networks for handling information, communication,
and transaction processes via various platforms.Since the late 90s, or even earlier,
the development of digitalization not only led to a major structural change in
society, but also in the economy. Since then, the focus has shifted to the
information sector. The systematic use of technology to collect and utilize
information laid the foundations of a so-called “information economy,” in which
competitiveness is achieved through knowledge superiority.
Market participants in e-business
E-business can take place between a large number of market participants:
between businesses and consumers, various private individuals, public
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administrations, and other organizations such as NGOs. Generally speaking, these

various market participants can be divided into three distinct categories:
1. Business (B)
2. Consumer/citizen (C)
3. Administration (A)
All three categories can play the role of either buyer or service provider within
the market, meaning there are nine possible combinations for e-business
relationships. Within this context, B2C and B2B belong to e-commerce, while A2B
(administration-to-business) and A2A (administration-to-administration) are a part
of the so-called e-government sector (also a part of e-business).
Function of Electronic Business
The most important role of electronic business is “electronic value creation” –
the generation of electronic added value. The forms of electronic added value are
usually distinguished in the following way:
1. Structuring value: an online offer achieves an overview of a large quantity of
information
2. Selection value: an online offer provides specific database information upon
request
3. Matching value: an online offer makes it possible to merge inquiries from
supplier and buyers more efficiently
4. Transaction value: an online offer makes a business more efficient
5. Coordination value: an online offer allows different providers to better
combine their services
6. Communication value: an online offer improves communication between
different consumers
Depending on which type of value a company decides to pursue, they can
choose one or more value activities – for example the collection, structuring, pre-
selection, summary, or distribution of information. A so-called “digital information
product” can also be created, offering added values which the customer is prepared
to pay for. This information product may be a website, blog comparison portal, e-
book, or a software application.
The electronic value creation process involves the following steps:
 Collecting large quantities of information to identify data relevant to the
product
 Processing the information and transforming it into a product
 Transferring the final information product to the customer
 Repeat this process whenever new information becomes available –
information products are not static and must be kept up to date
Besides the generation of electronic added value, the various long-term goals of
the e-business must be determined, such as how best to automate commercial
processes, or establishing new business models.
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Examples of e-business
There are countless examples of different e-business activities, but here is a
brief selection.
The e-procurement sector includes the following activities:
 Organize the implementation of a desktop purchasing system (DPS) that
supports the whole procurement process, such as checking stock availability
and handle the order and payment
 Constructing and operating an online marketplace for products and services
 Integrating various electronic supplier catalogs into your own enterprise
resource planning (ERP) system to support procurement, warehouse
management, order processing, production management, and logistics
 The e-commerce sector includes the following activities:
 Designing and maintaining an internet presence and/or an online
store including: products or services accessible from anywhere at all times,
multiple payment options, automatic e-mail notifications on orders, and
customer support (live chat, hotlines, or help centers)
 Developing and provisioning additional content, such as an informational
blog or comparison portal
 Expanding online marketing and targeting advertising to customers, for
example by using big data from cookies, purchase behavior, and customer
data
E-businesses provide consumers the convenience of shopping and purchasing
products without physically visiting stores. The business model saves time and
money. Existing studies reveal that small businesses are rapidly adopting e-
business to keep up with market and consumption trends. This shift in the
business strategy allows SMEs to compete with large online business examples
such as Amazon and Walmart.
E-businesses can assume the form of online marketplaces of storefronts. Examples
of these types of e-business include;
 Shopify
 WooCommerce
 Magento
 Squarespace
Typically, these enterprises operate through websites, allowing SMEs the
flexibility to run an online store. Other examples of e-businesses function as
marketplaces that link buyers and sellers. Examples include;
 Fiverr
 Upwork
 eBay
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 Etsy
Examples of businesses that offer online services include;
 Uber
 Lyft
E-SUPPLY CHAIN MANAGEMENT (E-SCM)
E-Supply chain management is practiced in manufacturing industries. E-SCM
involves using internet to carry out value added activities so that the products
produced by the manufacturer meets customers’ and result in good return on
investment.
components of e-scm
Electronic supply chain management (e-SCM) has six significant components.
An effective e-SCM policy has a few separate parts that work in congress with each
other. The first of these is e-procurement.
E-procurement is any business-to-business, business-to-consumer and
business-to-government method to purchase and sell supplies, services and other
goods through the internet. Depending on how you must source your product, this
can also include information networking.
Business-to-business e-procurement describes the process of your business
buying from another business.
For example, if you buy widgets that go into your final product from A
Corporation, you are engaged in a business-to-business relationship. Using an
online supply management system will allow you to order parts more effectively and
would be considered an e-procurement system.
Players of E-Supply Chain Management
ESCM chain consists of the following players — manufacturer, logistics
companies, distributors, suppliers, retailers and customers. E-Supply Chain
Management concentrates on the coordination between the various players in the
chain. Coordination is very essential for the success of the organization. E-SCM
focuses on reducing the inventory cost.
15.3.12 SUPPLY CHAIN MANAGEMENT FLOW
ESCM flows can be divided into three main activities
1) Product flow,
2) Information flow and
3) Financial flow.
1) Product Flow: The product flow includes the movement of goods from a
supplier to a customer, and also any goods returned by customers.
2) Information flow: The information flow involves transmitting orders and
updating the status of delivery.
3) Financial flow: The financial flow consists of credit terms, payment schedules,
consignment and title ownership arrangements.
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Issues dealt by Supply Chain Management

Supply chain management deals with three issues:
1) Coordinating all the order processing activities that originate at the customer
level, such as the process of order generation, order acceptance, entry into
order processing system, prioritization, production, and material forecast.
2) Material related activities such as scheduling, production, distribution,
fulfillment and delivery
3) Financial activities such as invoicing, billing, fund transfer and accounting.
4) ESCM involves counter checks of materials, information and finances as they move
in a process from supplier to manufacturer to wholesaler to retailer to consumer. It
involves coordinating and integrating these flows both within and among
companies. Extranet, intranet, Internet is used in e-supply chain. Extranet helps to
connect the participating companies. It may be the supplier or the customer. A
customer can check the order status. Likewise, a supplier can collect data about
inventory to know about the replenishment of the inventory.
With the help of internet, a company can advertise about the product and accept
online orders. With the help of intranet, an organization can maintain
communication within the boundaries of the company. It is said that the ultimate
goal of any effective SCM is to reduce inventory. E-supply chain enables to link the
supplier with the customer by exchanging information instantaneously. The
organization has sufficient inventory when required. There will not be any shortage
or surplus of inventory. Shortage of inventory brings down the reputation of the
firm. Likewise, excess inventory blocks the funds of the firm unnecessarily.
Advantages of e-supply chain management
Companies implementing E-SCM can enjoy the following advantages:
1) It improves efficiency
2) It reduces inventory
3) It reduces cost
4) It helps to take competitive advantage over competitors.
5) It increases ability to implement just-in-time delivery, increases on-time
deliveries, which enhances customer satisfaction.
6) It reduces cycle time, increases revenue, by providing improved customer
service.
7) It improves order fulfillment, order management, decision making, forecasting,
demand planning, and warehouse/distribution activities.
8) It reduces paperwork, administrative overheads, inventory build-up, and the
number of hands that handle goods on their way to the end-user i.e., the
customer.
EXTENDED ERP
It focuses on external activities to promote the management of connections
with clients, vendors, transporters, and other parties. Popular extended ERP
modules that could be used by organizations include those for supply chain
management, business intelligence, e-commerce, and customer relations.
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Extended enterprise resource planning modules go beyond these basic

business functions to include additional modules that support external operations.
The most common extended ERP components focus on e-commerce, customer
relationship management, business intelligence and supply chain management,
although modules related to product management and data mining also exist.
These modules may be available from the same software vendor or may come from
a third party, so managers need to assess compatibility and cost when choosing to
add these components.
15.4 REVISION POINTS
Integrate Data Model:
It should reflect the day-to-day transaction and it should be updated
continuously.
1. Lead Time
The elapsed time between placing and receiving is known as the lead-time.
2. On-Time Shipment
The companies must be able to change the mode of production from make-to-
stock to make-to-order, yet retain the cost and time advantages of off-the-shelf
products.
3. Cycle Time
Cycle-time is the time between receipt of the order and delivery of the product.
4. Customer Satisfaction
It means meeting or exceeding customer's requirements for a product or
service.
5. Flexibility
Flexibility is a key issue in the formulation of strategic plans in companies.
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15.5 INTEXT QUESTIONS

1. Define On-Time shipment.
2. How to increase flexibility?
15.6 SUMMARY
To be effective any ERP solution should be comprehensive, flexible, open-
ended and modular for replication, fully integrated, going beyond the company's
immediate frame work to reach out to customers, suppliers, bankers and
government. Two of the major resources that should be optimally planned are
human resources and equipment are the upper-right quadrant and the upper-left
quadrant. The company uses the integrated data for its analysis and decision-
making. The elapsed time between placing and receiving is known as the lead-time.
Cycle-time is the time between receipt of the order and delivery of the product. The
capacity planning features of most ERP systems offer both rough-cut and detailed
capacity planning. The ERP systems also have simulation capabilities that help the
capacity and resource planners to simulate the various capacity and resource
utilisation scenarios and choose the best option. ERP system has proved that they
can produce goods with the flexibility of make-to-order approach without loosing
the cost and time benefits of made-to-order operations. There is a growing trend for
organization to establish partnership agreements with their suppliers. Product
flexibility is the ability of the operation to efficiently produce highly customized and
unique products.
15.7 TERMINAL EXERCISES
1. Explain the Benefits of ERP.
2. Describe the Integrated Data model.
15.8 SUPPLEMENTARY MATERIALS
1. Ray, Enterprise Resource Planning, Tata McGraw-Hill Education, 2011.
2. Goyal, Enterprise, D. P., Resource Planning, Tata McGraw-Hill Education,
2011.
3. Vinod Kumar Garg, Venkitakrishna, N. K., Enterprise Resource Planning:
Concepts and Practice, 2nd Ed, PHI Learning Pvt. Ltd., 2003.
4. Leon, Enterprise Resource Planning. New York, NY: Tata McGraw-Hill
Education., 2013.
5. Parthasarthy, S., Enterprise Resource Planning: A Managerial & Technical
Perspective. New Delhi, NY: New Age International, 2007.
15.9 ASSIGNMENTS
1. How to improve supplier performance? Explain.
2. Explain the Reduction in Cycle time.
15.10 REFERENCE BOOKS
1. Sinha P. Magal and Jeffery Word, Essentials of Business Process and
Information System, Wiley India, 2012
2. Jagan Nathan Vaman, ERP in Practice, Tata McGraw-Hill, 2008
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3. Alexis Leon, Enterprise Resource Planning, 2nd, Tata McGraw-Hill, 2008.

4. Mahadeo Jaiswal and Ganesh Vanapalli, ERP Mc Millan India, 2009
5. Vinod Kumar Grag and N.K. Venkitakrishnan, ERP- Concepts and Practice,
Prentice Hall of India, 2006. 6. Summer, ERP, Pearson Education, 2008
15.11 LEARNING ACTIVITIES
1. Discuss in detail about Resource management.
2. Exemplify the Better Customer Satisfaction.
15.12 KEYWORDS
1. TQM - Total Quality Management
2. CTO - Configure-To-Order
3. ETO - Engineer-To-Order

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