ENTERPRISE RESOURCE PLANNING

Unit 1
ERP: An Overview
1.1 What is ERP?
1.2 Need & advantages of ERP
1.3 Reasons for Growth of ERP
1.4 Characteristics and features of ERP
1.5 Benefits of ERP.
1.1 WHAT IS ERP
• Originally for manufacturing industry
• Designed to model and automate many of the basic processes of the
company
• Mirror image of major business processes of an organization.
ERP – ENTERPRISE RESOURCE PLANNING
Definition: ERP is the techniques and concepts for integrated management
of businesses as a whole from the viewpoint of the effective use of
management resources to improve the efficiency of enterprise
management.
• Enterprise resource planning promises
➢ one database,
➢ one application,
➢ one user interface
• for the entire enterprise, where once disparate systems ruled
manufacturing, distribution, finance and sales.
1.2 ADVANTAGES OF ERP
• DIRECT BENEFITS
– Business integration
– Flexibility
– Better analysis and planning capabilities
– Use of latest technology
• INDIRECT BENEFITS
– Better Corporate image
 – Improved customer goodwill
– Improved customer satisfaction
1.3 REASONS FOR THE GROWTH OF THE ERP MARKET
Without doubt the ERP market is very hot. Industry analysts are forecasting
growth rates of more than 30% for at least the next five years.
Some of the reasons for the growth are:
• Enable improved business performance
• Support business growth requirements
• Provide flexible, integrated, real-time decision support
• Eliminate limitation in legacy issues
• Take advantage of the un-tapped mid-market
As more and more companies are joining the ERP race and as the ERP
vendors are shifting their focus from big companies to different market
segments, the future will see fierce battle for market share.
Ultimate winner will be the customer, who will get better products and
better services at affordable prices.
1.4 CHARACTERISTICS AND FEATURES OF ERP

1. Flexible
These days, way of doing business is changing fast due to changing
in law and amendments in the standards. So, management of
business process which is done through ERP should be flexible. If ERP
system will be flexible, we can change processing system as per our
requirement.
2. Modular and Open
 One of the great characteristics of any good ERP system that it has
open module architecture. It means, if there is error in any module,
we can correct it by opening it instead affecting all other modules.
For example, OpenERP has following module which can be open
separately.
3. Comprehensive
ERP system should be advance and it should use comprehensive way.
It means, all most all the functions of business should be done
through ERP System. If we will get only small number of activities
through ERP and other will be done through manual, then, this ERP
system is not ok. Its capacity should to cover all the functions of
business.
4. Online-Connection with Other ERP System
Today, in the market, there are lots of ERP solution but which is the
best, it will tell its features? Check whether it has capacity to connect
other ERP system online or not. Because, today business has started
to interact with millions of other business. So, it is necessary to
connect them online through our ERP.
5. Best Business Practices
Each business activities have lots of standards. For
example, accounting follows IFRS, quality management follows ISO
9000 and marketing follows the standard of MASB. So, your ERP
system will updated regarding all standards.
6. Multi-Facilities
A good ERP System should have multi-facilities. It means, it can work
in multi-currencies, multi-mode manufacturing and multi-platform.
7. Strategic planning
Strategic Planning is the main and top function of business. It should
be done through ERP. ERP should integrate all its sub-part systems
for making better strategic planning.
8. Optimize the data
A good ERP system optimize the data for effective utilization of
limited business resources. It also optimizes the data for reducing
cost and risk.
9. Project Management
A good ERP System collaborate the team in real time for working
together on a project. Everything about the project process can be
tracked through this.
10. Automatic Functions
We can measure the quality of ERP from its advance automatic
functions. With these automatic functions, organisation saves his lots
of time. This automatic function may be in electronic fund transfer,
electronic data interchange and eCommerce.
 1.5 BENEFITS OF ERP

• Direct advantages of ERP:

– Improved efficiency
– Information integration for better decision-making
– Faster response time to customer queries
• Indirect advantages of ERP
– Better corporate image
– Improved customer goodwill
– Customer satisfaction
Some of the benefits may be tangible (quantitative) and others intangible
(non-quantitative)
Information Integration

• ERP systems automatically update data between related business

functions and components.
• Eg. Order Processing System
– Triggers a lot of action in various modules like finance,
production planning, production, inventory management, and
so on

• All information updating happens instantaneously.

• Up-to-the-minute information available at finger-tips.
• Leads to better decision-making and resolution of problems
• Tremendous potential for improving productivity

Reduction of Lead-Time
• Lead-time – the elapsed time between placing an order and
receiving it
• Helps in purchasing and inventory control
• Material demands should be anticipated well ahead of actual need

• Inventory systems have safety mechanisms – safety or buffer stock,

re-order level, built into them to avoid stock-outs.
• Non-availability of item can lead to
– Missing delivery schedules
– Losing customer goodwill due to delayed delivery
– Losing customer to competition

• Solution –
– Requesting for materials well in advance
– Keeping large buffer stock
– Maintaining very high re-order level
• All this leads to high inventory levels and blocking of large funds
 • Company should find minimum lead-time and attempt to correct
supplier’s delay instead of automatically increasing allowed lead-
times
• To reduce lead-time should have efficient inventory management
system, which is integrated with purchasing, production planning,
production.
• Not possible to manually track lead times when there are hundreds
of products.
• ERP systems automate these tasks
• Since ERP is integrated, demand for a particular item can be known
as early as an order is received
• Example: Orders received for 100 air-conditioned cars
• On entering data in system, lot of actions triggered:
– Whether available in finished goods inventory
– If to be manufactured, whether items available in inventory
• Can be done easily with this system

• Suppliers also connected in system.

• Supplier’s information immediately updated on issue of purchase
order
• Preparation of contracts, issuing purchase order and payments,
happen thru system, saving time phenominally

• Hence, ERP, being integrated in nature, use latest technologies like

EFT and EDI, and reduce lead-times, and can be just-in-time
inventory system

Better control & Higher profits

• ERP compels the staff to be organized and disciplined, as it does not
accept any shortcuts.
• Thus, it can provide online MIS for the management to know the
exact status of the business at a click of the mouse and enables it
to take timely business decisions
• Cost control and cost reduction at every stage and improvement in
profitability.

Efficiency is improved

• Reduce manual work

• No more inefficient paper-based business processes
• ERP makes the organization paperless, or shall we say less-and less
paper.
• Thus becoming more efficient.
What is the benefit of the supply chain management module in
ERP?
• By deploying ERP, companies have been able to closely integrate
their business processes with those of their trading partners
➢ Faster order processing.
➢ Extending the market reach.
➢ Increase sales.
➢ Better tracking of inventories.
➢ More accurate order fulfillment.
➢ Better customer service.
➢ Vendor relationship management (VRM)

FG inventory control

• ERP has resulted in a faster response / delivery time.

• For example, in the legacy system the Invoice preparing was
cumbersome and was taking lot of time
• In ERP, now users are making CCI (Challan-cum-Invoice), in a very
efficient manner, which is not only faster but also ensures accuracy
– Stock is updated automatically when the item is purchased
and sold. This results in ensuring that the stock figures are
always up-to-date. Correct response to customer about
delivery commitment is now possible.

Pre-sales
• Quotation Automation has resulted in proper costing and capturing
overheads
• The Sales Order is automatically created after the quotation
approval and subsequently the Work Order is printed for the
Production giving information about the proper raw material (or
child items) requirement.

BOM
• The Bill Of Material (BOM) master is automatically updated in the
Sales Order stage resulting into greater accuracy of Item Master
and very useful for MRP – Material Requirement Planning.

Smart business operations

• The Inspection Report is automatically printed after the Invoice
saving lot of time in documentation, which in turn assures high
Quality standards and customer satisfaction.
• Better customer reach has resulted into increased revenue.
• Customer master data and actual sales data are now available
online.
 • Purchase is entered online which gives the vendor wise purchase
information
• Serial number or batch number tracking keeps track of the raw
material.
• The Digital Nervous System provides top management, the
automated paper-less flow of information between departments.
• Affordable client / server software eliminates data corruption and
RDBMS (e.g. MS SQL Server) increases the reliability of data.
USE OF LATEST TECHNOLOGY
• ERP package vendors use the latest developments in the field of IT.
• Hence they can quickly adapt their systems to take advantage of
the latest technologies
• This quick adaptation to latest changes in IT makes the flexible
adaptation to changes in future development environment possible.