The document is about introduction to enterprise resource planning (ERP). It discusses that ERP integrates different business functions like manufacturing, supply chain, customers, finance and human resources. ERP systems help manage important parts of a business like ordering, inventory, customer service and finance. The document also outlines the evolution of ERP from earlier systems for manufacturing planning and explains the different approaches companies can take to implement ERP projects.

1. Welingkar’s Distance Learning Division
ERP & WEB BASED SUPPLY Chain
Management
Chapter 1
Introduction to ERP
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Introduction to ERP
Concept
ERP is short of Enterprise Resource Planning,
which is business management system that
integrates all facets of the business such as
manufacturing operations, supply chain,
customers, human resource & finance.
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Introduction to ERP Concept
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ERP Simplified view
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ERP Simplified view
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Introduction to ERP Concept
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ERP’s Full potential
Manufacturing
units
Customers
Corporate
Office
Vendors
Regional
Office
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Introduction to ERP Concept
The salient features of above definition is that ERP
refers to in house developed or commercially
available software solutions which provide an
integrated suit of IT applications. That support the
activities of the organization as a whole.
ERP Systems are the information backbone of the
company. It serves as central nervous system &
termed as digital nervous system of the company.
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Introduction to ERP Concept
ERP (enterprise resource planning) is an industry term for the broad set
of activities supported by multi-module application software that helps a
manufacturer or other business manage the important parts of its
business, including product planning, parts purchasing, maintaining
inventories, interacting with suppliers, providing customer service, and
tracking orders. ERP can also include application modules for the
finance and human resources aspects of a business.
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Introduction to ERP Concept
ERP in manufacturing sector was primarily to address to know :
1) Stock of finished goods
2) Understand material movement
In 1970 the focus of manufacturing systems shifted to MRP
MRP Software applications have emerged to translate the Master
Schedule built for the end products into Time phased net requirement
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Introduction to ERP Concept
In 1980 the concept of MRPII was evolved
All the resources such as People, Infrastructure, Process to
various user group necessitate planning & utilization of such
resources
MRP was further extended to cover areas like Engineering,
Projects ,Management etc & led to what is known as ERP.
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Introduction to ERP Concept
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Introduction to ERP Concept Key Terms
Integration:
Integration of operations with accounting result in converting the
physical units into rupee value.ERP integrates all facets of
business including
1) Planning
2) Manufacturing
3) Sales
Software applications have emerged to help business managers
implement ERP in business activities such as Inventory Control,
Order tracking, Customer service
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Introduction to ERP Concept
Key Terms
•
ERP finds useful application in human resource management,
warehousing.
•
ERP implies the use of the Shelf packed
•
Software rather than proprietary software written for one customer
•
The cost of developing & maintaining ERP modules become cost
prohibitive & Time Consuming.
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Introduction to ERP Concept
Key Terms
ERP modules are generally expected to have the capability to
interface
with organizations own software.
Depending upon business requirement, ERP modules may be altered
using vendor’s Proprietary tools ,Programming languages.
A good business strategy drives everything that comes in its way
including its IT & IS resource
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Introduction to ERP Concept
Key Terms
Systems:
The systems view of business or enterprise is a holistic view.
A system consists of Input, Process , Output & feedback
For example production system has input of Men(labor),material,
money(finance).The output is goods and or services.
The processing converts input to value added outputs
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ERP Across Business System
Financial Systems
Operational logistics
Accounts receivables & payable
Cash planning & Management
Cost accountancy
General ledger
Product Cost accounting
Profit center analysis
Profitability analysis
Executive Information system
Asset accounting
Standard costing
Human Resources
Payroll, Manpower planning
Travel Expenses,
HR accounting
Inventory Management
MRP
Plant management
Production Planning
Project management
Purchasing
Quality management
Routing
Dispatching
vendor analysis
Sales & Marketing
Sales Order, Pricing
Sales management
Sales planning
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Process view/ Model of Business
•
Process Model defines entity or a set of activities that together
respond to a set of inputs to produce desired output
• The process of converting input to desired output is governed by
factors such as performance
standards,knowledge,procedures,material,machine,,constraints,&
control points
Material
Input
Machines
Output
Processing
Knowledge & Training
Methods &
procedures
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Process view/ Model of Business
The fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in critical
contemporary measures of performance, such as cost, quality,
service, and speed”
Process innovation, ”encompasses the envisioning of new work
strategies, the actual process design activity, and the
implementation of the change in all its complex technological,
human, and organizational dimensions”.
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Process view/ Model of Business
Diagram illustrate basic philosophy of business process reengineering
Understand
Existing
Processes
Simplifying
Processes by
Eliminating
wastes
Automate
The process
Methods
Methods
Methods
Diagramming
Story boarding
Brainstorming
Elimination
Combination
Rearrangement
EDI
ERP
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Preparing for the ERP
Inter Company Integration
To begin with ,an enterprise has framed departments, with some
minimum interface with one another. organizations then adopt
systems approach where the output of one system became input
for other system and so on to form integrated system.
The isolated systems of yester years were called management
systems(MIS) later DSS or decision support systems were
developed. Executive Support system is a step beyond both MIS
& DSS that collates information from different sources
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Preparing for the ERP
Before implementing ERP ,an organization has to decide where it is
right now, where it would like to be,& what methods could be used
to get there.
The data captured is of immense value in ERP in Finance, HR, SCM
and enables such as data warehousing, EIS, workflow etc.
ERP is not just an IT project. It changes the organization in terms of
authority responsibility relationship It brings discipline to the
organization.
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Preparing for the ERP
Business process reengineering focuses on transformation of
business process to make them more efficient whereas ERP focuses
on automating
The business process using & some objective in mind.
A project team is drawn from IT, Sales, Purchase, Production &
Finance.
The outside consultant can be hired.
ERP being an enabling tool help us to do things better
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Journey of ERP
SYSTEM
DESCRIPTION
MIS
Management Information Systems. No decision support
IIS
Integrated Information Systems. No decision support
EIS
Executive Information Systems. Decision support
CIS
Corporate Information Systems. Decision support
EWS
Enterprise Wide System. No decision support
Logistics are considered as part of system
EDI,JIT,
EFT
Electronic Data Interchange, Just in Time,
Electronic fund transfer inter company integration
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ERP maturity Levels
ERP like living organization passes through different stages of
development & maturity the business grows, ERP has to adopt
itself to the changing processes, organizational structure &
demand patterns to deliver effectively.
The ERP team takes a lot of effort after the “Go-Live” at three
different stages of growth & maturity.
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ERP maturity Levels
Stage 1 Chaos
The organization takes the ‘Go-Live’ decision. It requires
streamlining of the processes
In stage 1,the attention is focused on administration and
information stability. Roles and responsibilities are fixed.
The organization starts utilizing the information generated through
ERP, It has to cope with change in organization culture.
It is likely that alignment between the ERP and the process
prevailing is lost.
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ERP maturity Levels
Stage 2 Stagnancy
After the Implementation of the ERP organization expects a whole
lot of benefit from it. However it does not happen immediately.
Organizations expect higher ROI.
There two ways to improve situation
First manual activities are eliminated and are replaced by
automated ERP system. This results in overall transaction
complexity.
Secondly ,the intelligence of the system is enhanced
by using Advanced planning engines& schedules
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ERP maturity Levels
Stage 3 Growth
At this stage ,Management seeks strategic support from the
ERP. The system is aligned with the overall Corporate vision &
strategies.
The focus is on profit and Working Capital Management.
The organization is committed to growth of human resources.
This improves the value chain. Capital management becomes
better. There is optimization between customer product mix.
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ERP maturity Levels
Streaming Operations
Strategic transformation
Chaos
Chaos
Stage1
Optimization
Optimization
Stage2
Stagnancy
Stagnancy
Enhancement
Enhancement
Operational Improvements
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Organization of ERP Projects
There are three common ways to implement ERP projects.
Big Bang is an approach that casts off all the legacy system in one
go & installs a single ERP system across the company.
Franchising approach believes in implementing independent ERP
system in each unit while linking common processes across the
enterprise. It is one of most common method to install ERP.
Slam dunk is an approach where the ERP dictates the process. A
few key processes are selected for focus
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Introduction to ERP
End of Chapter 1
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