Erp

Enterprise Enterprise Resource Resource PlanningPlanning

ConceptConcept ERP is a set of tools and processes that ERP is a set of tools and processes that

integrates department and functions across a integrates department and functions across a company into one computer system. company into one computer system.

ERP runs off a single database, enabling various ERP runs off a single database, enabling various deptts to share information and communicate deptts to share information and communicate with each other. with each other.

ERP system comprise function specific modules ERP system comprise function specific modules designed to interact with other modules, e.g. designed to interact with other modules, e.g. accounts receivable, accounts payable accounts receivable, accounts payable purchasing etc.purchasing etc.

ERP is an enterprise reengg. solutions that uses ERP is an enterprise reengg. solutions that uses new business computing paradigms to integrate new business computing paradigms to integrate IT processes across co’s divisions and IT processes across co’s divisions and departments.departments.

Evolution of ERPEvolution of ERPTimelinTimelinee

SystemSystem DescriptionDescription

1960s1960s Inventory Inventory Mgmt & Mgmt & controlcontrol

It’s a combination of infr. tech, It’s a combination of infr. tech, and bus processes of and bus processes of maintaining the appropriate maintaining the appropriate level of stock in a warehouse.level of stock in a warehouse.

1970s1970s Material Material Req. Req. PlanningPlanning

Utilizes s/w applications for Utilizes s/w applications for scheduling production scheduling production processes.processes.

1980s1980s MRP IIMRP II Utilizes S/w applications for Utilizes S/w applications for coordinating mfg processes.coordinating mfg processes.

1990s1990s Enterprise Enterprise Resource Resource PlanningPlanning

Uses multi module application Uses multi module application s/w foe improving the s/w foe improving the performance of internal bus, performance of internal bus, processes. processes.

What drives ERP ?What drives ERP ? BusinessBusiness Customer satisfactionCustomer satisfaction Business developmentBusiness development Face competitionFace competition Efficient processesEfficient processes

Cross functional Cross functional approach of ERPapproach of ERP

Customer/Employee

ProductionPlanning

Integrated Logistics

Accounting and Finance

Sales, Distribution, order Management

Human Resources

Components of ERPComponents of ERP ERP system is consists of two types of ERP system is consists of two types of

components Core components and Extended components Core components and Extended components.components.

CORE ERP COMPONENTSCORE ERP COMPONENTS:: CEC are the CEC are the traditional components included in most ERP traditional components included in most ERP systems and they primarily focus on internal systems and they primarily focus on internal operationsoperations..

EXTENDED ERP COMPONENTSEXTENDED ERP COMPONENTS:: EEC are the EEC are the extra components that meet the organizational extra components that meet the organizational needs not covered by the core components needs not covered by the core components and primarily focus on external operations.and primarily focus on external operations.

CORE & EXTENDED CORE & EXTENDED COMPONENTS OF ERPCOMPONENTS OF ERP

Enterprise Resource Planning S/W

Accounting & FINANCE

Production & Materials Management

Human Resource

Business Intelligence

Customer RelationshipManagement

Supply Chain Management

E- Business

Core ERP Components

Extended ERP Components

Core ERP Components:-Core ERP Components:-Accounting and Finance:Accounting and Finance: A/cng and A/cng and

Finance components manage a/cng data Finance components manage a/cng data and manage financial processes within and manage financial processes within the enterprise with functions as accounts the enterprise with functions as accounts payable, accounts receivable, assets payable, accounts receivable, assets management, credit management etc.management, credit management etc.

Production and material Production and material managementmanagement:: handles the various handles the various aspects of production planning and aspects of production planning and execution such as demand forecasting, execution such as demand forecasting, product scheduling, quality control.product scheduling, quality control.

Example of Production planning Example of Production planning process of Grupo Farmanova process of Grupo Farmanova Intermed, in Costa Rica…Intermed, in Costa Rica…Sales Forecasting

Operations Planning

Detailed SchedulingMaterials requirement

planning

Production Purchasing

Human Resource Components:Human Resource Components: Tracks employee’s information including Tracks employee’s information including payroll benefits, compensation, payroll benefits, compensation, performance assessment, and assume performance assessment, and assume compliance with legal requirements of compliance with legal requirements of multiple jurisdictions and tax authorities.multiple jurisdictions and tax authorities.

Extended ERP Components:-Extended ERP Components:-Business Intelligence:Business Intelligence: ERP system ERP system

offers powerful tools to measure and offers powerful tools to measure and control organizational operations. BI control organizational operations. BI describes the information people used to describes the information people used to support their decision making efforts.support their decision making efforts.

Customer Relationship Management Customer Relationship Management Component: Component: involves managing all the involves managing all the aspects of customer’s relation with an aspects of customer’s relation with an organization to increase customer loyalty and organization to increase customer loyalty and retention and organization’s profitability.retention and organization’s profitability.

Supply Chain Management ComponentsSupply Chain Management Components: : involves the management of information flows involves the management of information flows b/w and among stages in a supply chain to b/w and among stages in a supply chain to maximize total supply chain effectiveness and maximize total supply chain effectiveness and profitability.profitability.

E-Business Components: E-Business Components: means conducting means conducting business on the internet, not only buying and business on the internet, not only buying and selling, but alsoselling, but also

serving customer and collabrating with serving customer and collabrating with businessbusiness

partners. Two primary functions of E-Bus is E-partners. Two primary functions of E-Bus is E-Procurement and E-Logistics.Procurement and E-Logistics.

Example of E-Business as ERP Example of E-Business as ERP component of Orbis Corp. , component of Orbis Corp. , Australia.Australia.

RetailerSupplier(Sony)

Courier

AD Agency

Scanning House

Digital ImageCatalog

User

Linear Process model Followed By Orbis Corp.

After Introducing E-bus,the Orbis After Introducing E-bus,the Orbis Business model is likeBusiness model is like

Product-bank.comHub

Printer

Sony

Nokia

Other

AD Agency 1 AD Agency 2

Other

Retailer 2

Retailer 1

Basic advantages of Basic advantages of ERPERP . The Direct advantages include improved. The Direct advantages include improved Business Integration Business Integration EfficiencyEfficiency Faster responseFaster response FlexibilityFlexibility Better analysis and planning capabilitiesBetter analysis and planning capabilities Use of latest technologyUse of latest technology

The Indirect benefits includes better The Indirect benefits includes better corporate image, improved customer corporate image, improved customer goodwill, customer satisfaction etc.goodwill, customer satisfaction etc.

Some of the quantitative benefits are:Some of the quantitative benefits are: Reduced Inventory and inventory carrying Reduced Inventory and inventory carrying

cost.cost. Reduced manpower costs.Reduced manpower costs. Improved sales and customer service.Improved sales and customer service. Efficient financial management.Efficient financial management.Some of the qualitative benefits are:Some of the qualitative benefits are: AccountingAccounting Product and process designProduct and process design Production and material managementProduction and material management Sales Sales MIS FunctionMIS Function

Why ERP is Why ERP is Important in a Important in a

company?company?

ERP in A company resultsERP in A company results ERP effects almost all the organizations- ERP effects almost all the organizations-

irrespective of their size and nation.irrespective of their size and nation. Forces the competition to change their Forces the competition to change their

strategies.strategies. Influence bus partners to become more Influence bus partners to become more

competitive.competitive. Improves the Profits.Improves the Profits. Fully utilize the true potential client-server Fully utilize the true potential client-server

computing to deliver an enterprise product.computing to deliver an enterprise product. Changes the nature of information systems Changes the nature of information systems

functions.functions.

ERP BenefitsERP Benefits Integrate Financial InformationIntegrate Financial Information Integrate Customer Order Integrate Customer Order

InformationInformation Standardize & Speed up Standardize & Speed up

manufacturing Processesmanufacturing Processes Reduce InventoryReduce Inventory Standardize human resource Standardize human resource

informationinformation

Benefits to Colgate Benefits to Colgate PamolivePamolive Order acquisition & processing reduced Order acquisition & processing reduced

from 2 days to 4 hrsfrom 2 days to 4 hrs On-time deliveries increased to 97.5% On-time deliveries increased to 97.5%

from 91.5%from 91.5% Domestic inventories dropped by one -Domestic inventories dropped by one -

thirdthird Receivables outstanding dropped to Receivables outstanding dropped to

22.4 days from 31.422.4 days from 31.4 Total delivery cost per case reduced by Total delivery cost per case reduced by

10%10%

Risks of ERPRisks of ERP

DataData In 1999,Hershey missed In 1999,Hershey missed

customers( walmart) as 3 mths customers( walmart) as 3 mths behind schedule, trying to fix behind schedule, trying to fix glitches in order-processing, glitches in order-processing, shipping functionsshipping functions

Warehouses piled up with Warehouses piled up with undelivered goodsundelivered goods

III quarter sales dropped by 12.4%III quarter sales dropped by 12.4% Earnings were off 18.6%Earnings were off 18.6%

Case study-Ambuja Case study-Ambuja cementscements Launched Connect India Plus, which has Launched Connect India Plus, which has

proved to be one of the most significant, proved to be one of the most significant, large scale IT deployment. large scale IT deployment. Connecting Connecting 200 locations200 locations, training , training 2,5002,500 end-usersend-users, , and migrating data from and migrating data from 8 8 different legacy different legacy systemssystems onto the ERP all in onto the ERP all in 14 months flat14 months flat

manufacturing plants are located in manufacturing plants are located in remote areas where the scope of remote areas where the scope of connectivity was minimal, the resources, connectivity was minimal, the resources, namely hardware, software and people namely hardware, software and people were located at plant siteswere located at plant sites

Reasons to implement uniform, standard, and ubiquitous uniform, standard, and ubiquitous

system across the system across the organization(globally also)organization(globally also)

reduction in cost of operations and reduction in cost of operations and maintenance of the IT systemmaintenance of the IT system

respond quickly to changes in the respond quickly to changes in the business environmentbusiness environment..

Challenges facedChallenges faced TechTech-multiple plants, each with their -multiple plants, each with their

own computer systems and own computer systems and processes, there was a need to create processes, there was a need to create a single business blueprint across the a single business blueprint across the organization.organization.

PeoplePeople-integrate individuals with -integrate individuals with diverse background to be able to diverse background to be able to work as a focused team.work as a focused team.

ProcessesProcesses- Infrastructure refreshes, - Infrastructure refreshes, Data migrationData migration

After the successful After the successful implementationimplementation

improve operational efficiency in improve operational efficiency in terms of cycle-time monitoring terms of cycle-time monitoring

fleet managementfleet management The information is dispatched to The information is dispatched to

customers via SMScustomers via SMS

ConclusionConclusion It is the right combination of It is the right combination of

technology, architecture, technology, architecture, functionality, active customer functionality, active customer support that provides max payback support that provides max payback potentialpotential

For successful implementation it is For successful implementation it is imp to anticipate, handle & mitigate imp to anticipate, handle & mitigate risksrisks

Introduce new business processes, Introduce new business processes, eliminate redundant practiceseliminate redundant practices