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Microsoft Word - ERP_Book_50_Zaveri

  1. 1. ERP Business Blueprint Enterprise Resource Planning For small and medium size enterprise (SME), business school students, faculties, consultants, and for ERP power-users By Jyotindra Zaveri Page 1 of 374
  2. 2. ERP Business Blueprint Seamless Integration of business processes in ERP SECURITY CRM VAT COST SHEET ISO / Q C ESTIMATE LOCAL Sub-Contractor Order PAYROLL PURCHASE Accounts OUT fulfillment HR Import BOM EXPORT Purchase SUB- Production CONTRACTOR IN Material PLANT Automatic After Sales Multi- MAINTENANCE Service Management location E-Mail Send / Receive data Alerts Resource Sales & MRP Distribution Matrix EXCISE E-Business Page 2 of 374
  3. 3. ERP Business Blueprint About the book Some companies use information to innovate, control costs, or capture new markets. Others gather and evaluate information, but seem unable to translate data into productivity. In this ERP book, the author examines how companies use the management information to gain the competitive edge. Enterprise Resource Planning (ERP) helps the organization, especially manufacturing companies to manage the growth. There will be one more ‘w’ in the WWW’ that is wWWW, the wireless-World-Wide-Web. SME cannot keep on using the bullock cart method of doing business anymore. What is new in this ERP book? Unlike other ERP textbooks, this book gives actual data entry screens, reports, and master files details for practical learning. This book is a good reference for various key functions managers, such as accounts, purchase, sales, production, etc. It is not just a book but also a companion for corporate commandos. This ERP book might not seem extra-ordinary, but it is. Business processes integrated in ERP should have already been demystified, but it has not been. What does this ERP book offer to lecturers, faculties, consultants? The book is projected to be a comprehensive guide to all aspects of deploying ERP within an organization. Reader will find that this ERP book has a good range of case studies to support their teaching. Who should use this ERP book? This book is useful for existing ERP users and ERP power-users as well. Senior managers and directors, CEO, CFO, COO, seeking to deploy ERP to benefit their organization. For companies who have deployed ERP but not able to understand why real benefit is not seen. Study of this book will reveal the mistakes made by management, ERP coordinators, ERP task force, or ERP steering committee. Use this book before, during and after ERP is deployed, as a reference material. The knack to making informed decisions is necessary for success. Yet many times, managers make vital decisions without real information. Use this book to understand how you can use ERP to enhance your decision-making aptitude. This book will be of immense value to professionals dealing with ERP implementation, I. T. professionals, mangers handling sales and distribution, logistic, supply chain and finance. MBA Students: This ERP book will be very useful to the B-Schools students who want to pursue their MBA. All these aspiring managers must know ERP well. In the interviews now on companies will not ask whether you know MS office or not, they will ask, “Do you know ERP”? This will be useful for managers working in small and medium size enterprises (SME). ERP Case studies: The author has worked on live ERP projects for over 200 organizations, in India and abroad. This is result of some twenty years of practical ERP experience. The author had an opportunity to offer I. T. solutions to small and large organizations, private and Government organizations. The ERP book also includes several case studies to illustrate various points in the book. This important book gives tactics about ERP implementation. The need has never been more crucial. Global economic scenario is unpredictable. The competition is increasing. Business executives are challenged to leverage I. T., to improve the enterprise performance. This book attempts to answer questions such as, ‘How do you become a strategic ERP consultant, that enables efficient business management and improve operational efficiency?’ ERP is also Page 4 of 374
  4. 4. ERP Business Blueprint evolving. Author discusses the emerging developments and compelling ‘Business Process Management’ (BPM) for success. What can ERP do for the SME? Act confidently. Improve operational efficiency. Give the enterprise the edge it needs to succeed. Study this book to see why even small and medium business (SMB) units are using ERP software to achieve a competitive advantage. The decision making process is enriched if additional, relevant information is available. However, collecting information is costly. Hence, cost of additional information need also to be controlled. ERP will help user in this aspect immensely. Decision making under uncertainly will be facilitated. ERP is synonym to the ‘DSS’ or Decision support system. This ERP book explains how ERP as a management tool, in a SME is a powerful and strategic set of applications that provides business visibility with real-time personalized access to enterprise data, for the purpose of analyzing, and benchmarking customers, suppliers, and the overall business' performance. This book discusses the common questions asked, to run a manufacturing company efficiently: Do you get information when you want? Do you have islands of information? Is stores-in-charge able to give you correct quantity of raw material in stock, as of now? Is purchase order linked to material inwards? Is inventory and accounts integrated? The companion website: Faculty and students can use the online resource for this book at www.dnserp.com. This companion website will be helpful for students as well as lecturers. Make the most of your studies. This book attempts to answer all questions about ERP that you wanted to ask, but did not know whom to ask…. Learning Objectives “What is in it for me?” [WIIIFM]. Upon completion of this book, reader will be able to: 1. Describe the concept of ERP. 2. Define key terms as they relate to ERP. 3. Understand the Material Requirement Planning and supply chain management. 4. State the benefits of ERP. 5. State the pitfalls of ERP implementations. 6. Understand the need for change management or Business Process Reengineering. 7. Learn about the MIS or Management Information System. 8. Understand the Total Cost of Ownership (TCO). 9. Write a business case to justify an ERP implementation 10. Align strategic goals, people, knowledge processes, and internal systems 11. Concept of business processes linking with other processes. Page 5 of 374
  5. 5. ERP Business Blueprint 12. Understand a key business processes. Improve and simplify a business process. Apply the result of business process analysis to an ERP implementation. 13. Explain the interrelationships among the core business processes of sales order or Order Receipt Information or Order Acceptance, Bill of Materials (BOM), and work order to production. 14. Describe the technological infrastructure requirements in implementing ERP. 15. Describe project management and its use in implementing an ERP system. Describe steps necessary to successfully implement an ERP system 16. Describe the roles and responsibilities of the key organization players or stakeholders. 17. Describe how ERP can be used to achieve and sustain competitive advantage. Page 6 of 374
  6. 6. ERP Business Blueprint About the author Prof. Zaveri Jyotindra, Computer Engineer, I. T. consultant…since 1975 He is a visiting faculty to many leading business schools for the last 10 years. He has made various presentations in conferences and seminars. His teaching and research interests are in the area of ERP, e-business, e-commerce, Information Technology, applying I. T. in business management. He is focusing on business process management in small and medium size manufacturing companies. He is sought after I. T. consultant & trainer for providing integrated approach towards computerization. Over 33 years of practical experience in the field of Information Technology, software development, ERP implementation, and I. T. training. Designed and developed ERP (Enterprise Resource Planning) software. Knowledge of networking, and fundamentals of computer systems architecture – a unique combination of expertise in computer networking, computer hardware, and software. Invited by Microsoft to meet Mr. Bill Gates on his visit to India in March 1997. Special Premium Award received from Mr. Atul Vijaykar, president of Intel Asia in May 1998. Formerly working with IBM (1975). Undergone training in Germany, in computer engineering. Specialization in computer hardware engineering. Troubleshooting and debugging of mainframe computer hardware. Supreme International exposure by taking part in I. T. shows like, COMDEX, in 1992, Chicago, USA. ‘Informatics 90’ in Singapore, as well as many InfoTech shows in India. Met Finance Minister Mr. Chidambaram, who guided Mr. Zaveri to focus on small and medium size companies in India. Traveled around the world for technology updates including USA, Japan, Germany, Singapore, etc. Visit the website www.dnserp.com to see the record of accomplishment since 1975. Year-by-year track record is like an almanac of the I. T. industry! Page 7 of 374
  7. 7. ERP Business Blueprint Foreword I read carefully, and with keen interest your book on “Enterprise Resource Planning” so painstakingly written by you. It throws a new light on the concept of Enterprise Resource Planning and would be of great help to senior Managers as well as academicians. It covers all the aspects of Enterprise Resource Planning (ERP) and therefore, would be a great source of guidance to the readers concerned. This is a first ever kind of book I have come across written in a scientific manner and presenting the same in a lucid and simple language. ERP as a concept and as a business process model is of recent development. You have written the book specifically for the functional managers targeting the SME sector (Small and Medium size Enterprises). This book exhaustively covers different modules in the industries and also actual data entry screens, reports, master files of the business processes and sufficient case studies to understand the ERP in practice. You have wonderful track record of rich and vast experience and knowledge of India and abroad. You have amply demonstrated it in the book. The book can be definitely used by business schools as a reference book for ERP. It is useful to corporate to follow the steps given by you in order to reap the benefits of ERP in their organization. The chapter regarding the Humor is an interesting addition to the book not to be found commonly in such reference books. I would certainly like everyone concerned to use this book for reference purposes. Please accept my appreciation and congratulations for writing this book on a valuable subject. Regards, Dr. P. C. Shejwalkar, [Director – IME, President ASM. Ex –Dean Faculty of Management & Professor Emeritus of Commerce & Management Sciences, University of Pune]. Page 8 of 374
  8. 8. ERP Business Blueprint Book review I appreciate Prof. Jyotindra Zaveri for making immense efforts in authoring the book "Practical Guide to Enterprise Resource Planning". It reflects several years of experience and sincere efforts to present the complex subject in simple language loaded with live cases. Prof. Jyotindra Zaveri has been helping enterprises, especially from the Small and Medium Enterprises segment in implementing ERP to gain competitive advantage. Several cases in the book clearly reflect the dexterity. It is especially useful in the highly dynamic and demanding market environment of the 21st century that SME have to face. This book is a real treasure of the very best concepts from academics, relevant and insightful case studies, and powerful prescriptions for practicing managers. Prof. Jyotindra Zaveri has tried his best to keep away the hype and jargon. Reader can easily navigate the world of ERP. B-School students as well as practicing managers will certainly find this book very interesting especially with its own companion website. Dr. Milind M. Oka [Dr. Oka holds Ph.D. from University of Pune. He is Certified Assessor of Quality Systems. He has rich experience of over 35 years. He is an Academician, Management Consultant, Author, and Corporate Trainer.] Page 9 of 374
  9. 9. ERP Business Blueprint Book review by Dr. A. P. Ghosh The recognition of ERP as a business application does deserve a special mention. The most crucial factor in the whole system of ERP is the implementation aspect. The implementation phase can decide the fate of ERP and its success. The success of an ERP implementation again lies on the speed at which it is introduced and applied. For this, necessary training needs to be imparted to all concerned who can implement ERP at the fastest speed. This training converted into practice by implementation of ERP would reveal the real advantages that an organization would receive in terms of cost control and cost reduction at every stage and improvement in profitability. The present work is the outcome of Prof. Zaveri’s hard work of over a period of nearly two decades in this area of ERP. The contents of this book depict his deep knowledge about the subject. His step-by-step approach with logical explanation at every stage leads a reader to end up with a thorough understanding of the subject. Even a nonprofessional can understand the language that he has used in his book. Prof. Zaveri’s interaction with various industries as well as students has helped him to assimilate his ideas in writing this book. I encourage and recommend SMEs, corporate, and others to read this book, understand the subject thoroughly and to implement ERP at their organizations. This book would also be extremely useful to students to understand the subject since it is written in a most lucid way. I wish all success to Prof. Zaveri in launching this unique book for the first time in the market. Dr. A. P. Ghosh Director Balaji Institute of Modern Management (BIMM) Sri Balaji Society, Pune [Dr. A. P. Ghosh has a Ph. D. in Financial Management from University of Pune. He is certified corporate director from “World Council for Corporate Governance” London. He has authored many books on finance and management]. Page 10 of 374
  10. 10. ERP Business Blueprint CONTENTS PART I ............................................................................................................................................................... 19  CHAPTER 1. INTRODUCTION.............................................................................................................. 20  HOW TO USE THIS BOOK? ................................................................................................................... 20  WELCOME TO ERP...................................................................................................................................... 20  ERP Definition.......................................................................................................................................... 21  ERP vendors ............................................................................................................................................. 22  What is the difference between SAP and ERP? ......................................................................... 22  ERP customization ................................................................................................................................. 22  ABOUT SMALL AND MEDIUM SIZE COMPANIES ..................................................................... 24  COMPUTER NETWORK SYSTEM SCHEMATIC............................................................................. 26  IT INFRASTRUCTURE RECOMMENDATIONS CHECKLIST .................................................. 27  CHAPTER 2. ERP IMPLEMENTATION PROJECT MANAGEMENT ...................................... 29  Implementation Strategy ................................................................................................................... 30  Roadmap ................................................................................................................................................... 35  CHAPTER 3. MASTERS DATA AND PRINTING CONCEPTS ................................................. 39  MASTER DATA ENTRY FORMS ............................................................................................................ 39  PRINTING (HARDCOPY)........................................................................................................................ 43  CHAPTER 4. CHANGE MANAGEMENT ............................................................................................. 45  BPR OVERVIEW........................................................................................................................................... 47  CHAPTER 5. BLOG OF AN ERP IMPLEMENTER ......................................................................... 50  WHAT USER WANTS? .............................................................................................................................. 52  CHAPTER 6. TCO OF ERP ....................................................................................................................... 53  CHAPTER 7. ERP IMPLEMENTATION.............................................................................................. 54  OATH .................................................................................................................................................................. 54  WHY ERP PROJECT FAILS..................................................................................................................... 55  ERP IMPLEMENTATION TIPS FOR SUCCESS ............................................................................. 60  IMPORTANT INSTRUCTIONS .............................................................................................................. 61  CUSTOMIZATION ....................................................................................................................................... 63  IMPORTANCE OF QC DATA................................................................................................................... 67  CRP ..................................................................................................................................................................... 69  TEST RUN: CHECKING AND MARKING .......................................................................................... 71  PROOF OF CONCEPT FILE ..................................................................................................................... 73  DRAFT OF LETTER TO INFORM VENDORS / CLIENTS ......................................................... 77  CHAPTER 8. GETTING STARTED ....................................................................................................... 78  ERP CONCEPT ............................................................................................................................................... 79  Material outward .................................................................................................................................... 81  CHAPTER 9. SCOPE OF ERP MODULES .......................................................................................... 82  CHAPTER 10. ERP DOCUMENT FLOW AND MATERIAL FLOW ....................................... 103  Page 11 of 374
  11. 11. ERP Business Blueprint PART II........................................................................................................................................................... 105  SECURITY MODULE & CLOSING BALANCE ............................................................................... 107  CLOSING BALANCE ................................................................................................................................. 108  CLOSING STOCK ....................................................................................................................................... 110  CHAPTER 11. PROCUREMENT MODULE ...................................................................................... 114  PURCHASE MASTER ....................................................................................................................................... 116  Vendor Type Master ........................................................................................................................... 116  Vendor Master....................................................................................................................................... 117  PURCHASE TRANSACTIONS .......................................................................................................................... 119  GRN (Goods Receipt cum inspection) ......................................................................................... 127  Job Order ................................................................................................................................................ 127  PURCHASE REPORTS ..................................................................................................................................... 128  CHAPTER 12. IMPORT PURCHASE ................................................................................................. 129  CHAPTER 13. MATERIAL MANAGEMENT (MM) MODULE ................................................. 130  INVENTORY MASTER ..................................................................................................................................... 131  Item Master ........................................................................................................................................... 132  Finished Goods (Products) ............................................................................................................... 133  Location concept .................................................................................................................................. 135  Subcategory Master............................................................................................................................ 136  UOM (Unit of Measurement) Master ............................................................................................ 136  INVENTORY TRANSACTIONS ......................................................................................................................... 138  Goods Receipt Note (GRN) / Purchase Bill data entry screen .......................................... 138  Stock Transfer Challan (STC) ......................................................................................................... 139  Purchase return .................................................................................................................................... 139  Stock Adjustment Note ..................................................................................................................... 140  INVENTORY REPORTS .................................................................................................................................... 140  GRN OR PV Register ........................................................................................................................... 140  Item Ledger ........................................................................................................................................... 142  Stock Statement .................................................................................................................................. 142  Item List .................................................................................................................................................. 143  MIN Register: ........................................................................................................................................ 143  Stock Adjustment Note Register: ................................................................................................. 143  CHAPTER 14. BOM MODULE .............................................................................................................. 144  CHAPTER 15. SUBCONTRACTOR OUT MODULE ..................................................................... 157  CHAPTER 16. PRODUCTION MODULE ......................................................................................... 165  MAKE TO ORDER- MAKE TO STOCK ............................................................................................................. 168  E-MANUFACTURING ....................................................................................................................................... 170  ERP PRODUCTION MODULE LOGIC ............................................................................................................. 170  ASSEMBLY PRODUCTION .............................................................................................................................. 171  PRODUCTION MASTER .................................................................................................................................. 171  MACHINE MASTER ......................................................................................................................................... 171  LOCATION ....................................................................................................................................................... 171  PRODUCTION TRANSACTIONS ...................................................................................................................... 172  WORK ORDER ................................................................................................................................................ 172  PRODUCTION ENTRY ..................................................................................................................................... 172  SUB-CONTRACTOR OUT .............................................................................................................................. 173  FAQ FOR PRODUCTION MODULE .................................................................................................................. 175  PRODUCTION REPORTS................................................................................................................................. 176  Work Order Register .......................................................................................................................... 176  PROCESS PRODUCTION ....................................................................................................................... 177  Page 12 of 374
  12. 12. ERP Business Blueprint PRODUCTION MASTER .................................................................................................................................. 178  MACHINE MASTER EXPORTED TO EXCEL SHEET IS SHOWN BELOW: ....................................................... 178  OPERATOR MASTER....................................................................................................................................... 179  PROCESS PRODUCTION TRANSACTIONS..................................................................................................... 179  WORK ORDER ................................................................................................................................................ 179  Production Planning ............................................................................................................................ 180  Process Production Entry.................................................................................................................. 181  STAGE WISE INSPECTION ............................................................................................................................ 181  PRODUCTION REPORTS................................................................................................................................. 182  Work Order Register .......................................................................................................................... 183  Production Register............................................................................................................................. 183  MRP ............................................................................................................................................................ 184  Production Indent ................................................................................................................................ 185  CHAPTER 17. ORDER FULFILLMENT MODULE ........................................................................ 189  Customer Type Master ...................................................................................................................... 190  Coordinator master............................................................................................................................. 192  Sales Engineer master ...................................................................................................................... 192  Dealer Master ........................................................................................................................................ 196  Delivery Mode Master ........................................................................................................................ 196  Lead ........................................................................................................................................................... 198  Delivery Schedule ................................................................................................................................ 203  Sales Menu ............................................................................................................................................. 204  Sales Invoice ......................................................................................................................................... 205  Commercial invoice............................................................................................................................. 206  Sales Quotation .................................................................................................................................... 207  Sales Invoice ......................................................................................................................................... 211  Return Goods note. ............................................................................................................................ 214  Purchase Return (Excisable) Invoice. ......................................................................................... 215  ORDER FULFILLMENT (SALES) REPORTS ................................................................................................... 216  Invoice Register ................................................................................................................................... 216  Invoice Register ................................................................................................................................... 221  Enquiry register .................................................................................................................................... 222  Sales Invoice Register ....................................................................................................................... 222  Quotation Register .............................................................................................................................. 224  OA (ORI) Register ............................................................................................................................... 225  Reverse Invoice Register.................................................................................................................. 225  ORI OR OA Status Register ............................................................................................................. 225  Ledger ...................................................................................................................................................... 225  Sales Analysis ....................................................................................................................................... 228  Dashboard .............................................................................................................................................. 228  EXPORT MODULE ..................................................................................................................................... 230  CHAPTER 18. SUB-CONTRACTOR IN ............................................................................................ 234  MATERIAL INWARD TRANSACTION ............................................................................................. 236  CHAPTER 19. ACCOUNT MODULE .................................................................................................. 237  CHART OF ACCOUNTS RECOMMENDATIONS ............................................................................................... 241  ACCOUNT MASTER ........................................................................................................................................ 243  Group (Schedule) Master ................................................................................................................. 243  Subgroup Master ................................................................................................................................. 244  GL Master ................................................................................................................................................ 245  Details master: Narration Master ................................................................................................. 245  ACCOUNT TRANSACTIONS ............................................................................................................................ 246  MONEY RECEIPTS .......................................................................................................................................... 247  ADJUSTMENT WINDOW ................................................................................................................................. 248  Page 13 of 374
  13. 13. ERP Business Blueprint JOURNAL VOUCHER........................................................................................................................................ 249  PAYMENT VOUCHER....................................................................................................................................... 250  CONTRA ENTRY .............................................................................................................................................. 251  ADJUST OPEN SALES INVOICE .................................................................................................................... 251  ADJUST OPEN PAYMENT VOUCHER ............................................................................................................. 251  CREDIT NOTE................................................................................................................................................. 252  DEBIT NOTE ................................................................................................................................................... 253  EXPENSE VOUCHER ....................................................................................................................................... 255  ACCOUNT REPORTS ....................................................................................................................................... 256  CREDIT NOTE REGISTER .............................................................................................................................. 256  DEBIT NOTE REGISTER ................................................................................................................................ 257  SUB LEDGER TRIAL BALANCE ...................................................................................................................... 257  GENERAL LEDGER.......................................................................................................................................... 258  BANK BOOK ................................................................................................................................................... 258  CASH BOOK ................................................................................................................................................... 258  TRIAL BALANCE ............................................................................................................................................. 258  CONTRA ENTRY REPORT ............................................................................................................................... 259  CREDIT NOTE REGISTER ............................................................................................................................... 259  DEBIT NOTE REGISTER ................................................................................................................................. 259  JOURNAL VOUCHER REGISTER..................................................................................................................... 259  CUSTOMER FULL LEDGER ............................................................................................................................. 260  CHAPTER 20. ACCOUNTS POINTS ................................................................................................. 261  CHAPTER 21. SALES TAX AND VAT ............................................................................................... 266  CHAPTER 22. EXCISE INTEGRATION .......................................................................................... 269  DAILY STOCK ACCOUNT OR DSA REGISTER ........................................................................... 273  GAR 7 – CHALLAN.................................................................................................................................... 274  57 F4 REPORT IS SHOWN ABOVE ................................................................................................. 275  CHAPTER 23. SARBANES-OXLEY .................................................................................................... 277  CHAPTER 24. AFTER SALES SERVICE MODULE ..................................................................... 278  MACHINE HISTORY CARD OR HC................................................................................................... 278  CHAPTER 25. PAYROLL MODULE.................................................................................................... 284  CHAPTER 26. SEND DATA / RECEIVE DATA ............................................................................ 293  CHAPTER 27. ERP MAJOR TRANSACTIONS LIST ................................................................. 296  CHAPTER 28. OTHER MASTERS ....................................................................................................... 298  CHAPTER 29. BACKUP........................................................................................................................... 300  CHAPTER 30. ERP BLOG ...................................................................................................................... 302  PART III ........................................................................................................................................................ 303  CHAPTER 31. CASE STUDIES ............................................................................................................ 304  ERP FOR CONSTRUCTION INDUSTRY: ........................................................................................................ 305  ERP FOR A CORRUGATED BOX MANUFACTURING COMPANY ..................................................................... 306  ERP FOR VADA PAV COMPANY .................................................................................................................... 314  ERP FOR LENS MAKING COMPANY ............................................................................................................... 318  ERP FOR OEM SUPPLY OR MAKE TO ORDER .............................................................................................. 326  ERP IN PRECISION MACHINING MANUFACTURING ..................................................................................... 328  ERP FOR CHEMICAL INDUSTRY .................................................................................................................... 330  ERP FOR A UPS MANUFACTURING .............................................................................................................. 332  ERP FOR ELECTRONIC CONTROL INSTRUMENTS MANUFACTURING .......................................................... 333  ERP FOR AN INDUSTRIAL SYSTEM MANUFACTURING................................................................................. 334  Page 14 of 374
  14. 14. ERP Business Blueprint ERP FOR SPM MANUFACTURING ................................................................................................................. 336  ERP FOR FURNITURE MANUFACTURING ...................................................................................................... 337  ERP FOR TOYS MANUFACTURING ................................................................................................................ 339  CHAPTER 32. MC DONALD’S STORY ............................................................................................. 342  CHAPTER 33. AUTOMOBILE ENTERPRISES ............................................................................. 345  CHAPTER 34. RFID .................................................................................................................................. 346  CHAPTER 35. QUESTIONS .................................................................................................................. 348  CHAPTER 36. ERP DATA VALIDATION........................................................................................ 354  CHAPTER 37. HUMOR ............................................................................................................................ 362  GLOSSARY .................................................................................................................................................... 366  REFERENCE .................................................................................................................................................. 371  INDEX.............................................................................................................................................................. 372  Page 15 of 374
  15. 15. ERP Business Blueprint Preface India Inc. is growing. SME are growing faster. In the midst of the Internet revolution, they are caught between the two methods of doing business. One is bullock cart method (legacy procedures) and the other is business process driven method. This book gives the reader the basic as well as advanced concepts of ERP. The business logic is prepared from the business rules approved by the top management. The entire organization, business partners, associates, employees, work as per the system defined by the business rules. The ERP captures these business rules. ERP software system will now ensure that everybody follows the same. ERP and ISO procedures go together. ERP is complete integrated business management software. This manual intends to define the concept and explain the logic on which ERP is designed and customized for a typical organization, especially the manufacturing business, as this poses the biggest challenge in deploying ERP on the shop floor. What is DNS? The name DNS or the Digital Nervous System is mentioned in the book ‘Business @ speed of thought’, written by Mr. Bill Gates. The ERP is like the nervous system of the human body for the business. Reader will find the word DNS used in the book as synonym to ERP. MIS or the Management Information System in the business organization is the result of good ERP software. All kinds of organizations are using ERP to get good MIS. For instance, hospitality industry, hospitals, airlines, institutes, etc. This book also deals with the manufacturing business, which is yet unexplored. The supply chain management (SCM) is also one of the key business processes that are integrated in a good ERP system. There is a need for ERP book that give practical guidelines. Managers do not understand the idea that manufacturing activity can be viewed as a process and then improved. Once I had a chance to talk to someone in an MNC food chain joint. He showed me a manual where it was clearly written “serve the glass of the soft drink with four cubes of ice and put in the left side of the plate.” There are not many SME organizations that have bothered to make a proper ‘SOP’ (Standard Operating Procedures) manual. Some times the MD argues with me, ‘what is there to write’? In other words, hardly any document is available. This book does not discuss the hard-core programming used in the ERP software. Bits and bytes, tables of the backend RDBMS is not described in this book. This book is not for a developer who is looking for programming techniques used in ERP. Zaveri Jyotindra, Pune j.zaveri@dnserp.com +91 98909 42042 Page 16 of 374
  16. 16. ERP Business Blueprint Chapter 1. Introduction How to use this Book? This ERP book gives overall scope of generic ERP software package. To understand the ERP in-depth the author has used a package called DNS. Hence, ‘DNS’ appears in many screen shots. Actual print-screen of the data entry screen and the actual layout of the outputs are given for key procedures. The explanation of each ERP module gives the business blueprint where as the printouts shown gives the ‘Proof of Concept’ (or POC). This Business Blueprint and POC will also be related to a particular ‘avatar’ (or version) of ERP and make of the ERP. This may vary depending on the ERP vendor, versions, etc. This is a very important reference document and therefore it is necessary that the ERP implementer consultants, ERP coordinator, and ERP users all study the concepts well before embarking on to the ERP software deployment. This ERP book is a good companion during the software installation. This book is organized into three parts: 1. The first part discusses the ERP implementation methodology and overview of implementation of ERP system for effectiveness of ERP systems. 2. The second part discusses details about ERP modules or business processes such as accounts, purchase, sales, production, etc. These chapters are further divided into sections containing information about master, transaction, and report. 3. The third part gives some interesting case studies. Welcome to ERP This ERP book is meant for both Power User (ERP experienced user) as well as First Time User. This book will introduce all important concepts and features of this advanced ERP package. The ERP package versions (avatar) may undergo changes as the development, customization, and implementation take place. The book will also discuss many advanced concepts of ERP software. The DNS is short for Digital Nervous System. The word DNS is synonym with the word ERP. Throughout this book, reader will find the word DNS used instead of ERP. ERP is all about making smarter as well as faster decisions. To make well-informed and timely decisions, you need instant access to accurate information from every function in your enterprise. You need to focus on urgent tasks, instead of fire fighting. This book examines how to gain reliable, accessible information using ERP, and how to use that information to make better decisions, to a stronger competitive position. What is the relation of MIS and ERP? MIS (Management Information System) is a system to give information to managers for making decisions. ERP ensures the data capture in chronological order. ERP Page 20 of 374
  17. 17. ERP Business Blueprint ensures that these managers get MIS. ERP is a management software that will ensure correctness of input data and completeness of input data. Therefore, MIS is the output of ERP. What user will see on the computer screen is real time information. Behind the scene is business process management (BPM) done by the Enterprise Resource Planning software. ERP Definition There seems to be no universally accepted definition of the ERP software, but Deloitte Consulting has defined ERP as follows: An Enterprise Resource Planning system is a packaged business software system that allows a company to: • Automate and integrate the majority of its business process • Share common data and practices across the entire enterprise • Produce and access information in a real-time environment Source: Deloitte Consulting, New York, 1999. ERP definition by the author: “Enterprise Resource Planning software is complete integrated business management software, which captures data in chronological order, and is used to link businesses processes automatically, and give real time information, to authorized user”. Enterprise Resource Planning System is a multi-user, multi-location, and multi- company, software solution. ERP-centric organization Non-ERP-centric organization Understands that integrated business Does not fully appreciate the contribution processes add significant value to the that integrated business process make to organization. Understands that business the organization and the realization of the processes are a significant contributor to organizational strategy. the fulfillment of an organization’s strategy. Incorporates ERP into the management Management of business processes is not practices of the organization. the primary focus. ERP and Internet were probably the two most important information technologies to emerge into widespread use in the 1990s. Page 21 of 374
  18. 18. ERP Business Blueprint In 1999, total revenue from the ERP software and services market was US$18.3 billion and US$ 19.9 billion in the year 2000. ERP implementation costs are often reported to be five to ten times the cost of software licenses. If so, organizations worldwide spent something like US$100 billion per annum on ERP software systems. In short, organizations around the world have made huge investments in ERP software systems in the past decade. Source: Second wave ERP published by Cambridge ERP vendors There are hundreds of software companies offering ERP solutions. There are two kinds of ERP companies. (1) ERP software developing organizing and (2) ERP implementing partners. Some examples of ERP vendor companies: SAP, Oracle Apps (this includes Peoplesoft and JD Edwards), Microsoft Dynamics (Navision), Baan, etc. Some examples of the ERP implementer partners: Siemens InfoTech, PwC, Infosys (recent acquisition of Axon, for instance), etc. What is the difference between SAP and ERP? It is like asking, “What is the difference between a car and Hyundai I 10?” Please note that SAP is a well-known, leading ERP companies in the world. But, SAP is not the only organization, there are many. SAP is one of the ERP companies. ERP is a generic name of the software. SAP is a specific name of the one of the companies, which has developed ERP software. Therefore, it is wrong way to ask, “What is the difference between ERP and SAP?” One may ask a question, “What is the difference between SAP and MS Dynamics?” I 10 is one of the cars. Car is a generic name given to vehicle. Similarly, ERP is generic name given to enterprise management integrated software. ERP customization Adding new requirements is called customization. This may be non-standard feature. This involves changing software codes. It can range from relatively simple changes, such as developing very special reports, through major changes, such as changing the program source code itself. ERP software is a semi-finished package! The user organization must ‘configure’ to their needs. This is also referred as parameterization, enabling, or disabling certain business process. This configuration or initial setup procedure will allow user to use the package as it is. An implementation that involves configuring but not customizing the ERP is called a ‘Vanilla implementation’. This is fastest and cheapest way to get into ERP for SME. Although most ERP softwares are standard software package, in practice it is observed that 80% to 90% procedures are standard and can be used as it is. Page 22 of 374
  19. 19. ERP Business Blueprint About Small and Medium size companies Corrugated Box Industrial springs n Toys and games Safety Valve Special Purpose Machine Fire fighting equipment Eye lens Vada Pav UPS and Inverter Glass windows Industrial oven Sofa-set Figure 2: Small and Medium Sized companies products Page 24 of 374
  20. 20. ERP Business Blueprint Small and Medium size companies are using ERP to gain competitive advantage. Many SME or small and medium size companies in India are growing. They all need complete integrated business management software to manage that growth. The company may be engineering, making plastic toys, making lenses, or discreet products, all need ERP software. Why ERP? Pune emerges as major hub for German companies. • has emerged as the city with the single reports-centric’. They are primarily PuneTraditional accounting packages are ‘Financialhighest concentration of German companies in management of a company’s financial condition long after it has designed to inform India. A significant number of prospective new comers are likelybusiness. conducted its to be from the area of advanced materials used in the automotive and machine building sectors. These companies will largely be • On the other hand, ERP adopts a day-to-day perspective. It provides strategic SMEs. According to the Indo-German Chamber of Commerce. There are information and tools in real-time, when you need it the most. over 950 German companies in India, of which 100 are located in India. • may is answer 200 in about two years.asked questions This ERP become to the following frequently Mercedes Benz and Volkswagen are already present in Pune. Do you get information when you want? Source: Mr. Zubin Kabraji, regional director, Indo-German Chamber of Commerce, Pune. Do you have islands of information? Page 25 of 374
  21. 21. ERP Business Blueprint ERP implementation Tips for success Team Work Here are some tips for implementation and customization for a successful ERP Project: 1. Appoint ERP coordinator who will exclusively focus on ERP implementation only. If possible, put two persons. The ERP coordinator should be sufficiently senior or backed up by the CEO / Director. 2. Appoint ‘Chief-of-ERP-project’. A senior person with full authority (usually owner) who will not hesitate to ‘exclude’ a person who is not ready to work in ERP (because such a person will always put a ‘spanner’ and ERP coordinator may not be able to speak up) should be appointed. 3. Education and training: Everyone should be educated to understand what is going to be achieved with the new system. Additional education should include Total Quality Management, Change Management Strategies. Process owners (department managers) should be trained in how to use the system and they should train the users. It is necessary to take time out from the routine and actually do hands-on training. 4. Do Business Analysis to streamline the current processes. 5. Planning, training and education for the IT Support staff to understand the new hardware, software, and network imperatives. 6. Business Process Reengineering – BPR: Match business processes with the new software. It is NOT necessary to do things as you were doing for last several years when ERP is used. For instance, when traffic increases in a town, road divider is required, but that means additional travel to reach home by taking a U-turn. Usually people do not like change. 7. Software modifications are to be done only when Business Processes that do not differentiate you in the marketplace are not supported by the software. Stick to essential customization. Chopping and changing of the program at every level should not be expected. Temporarily it may satisfy the demands, but it will lose maintainability and upgrade in the end. 8. Business Simulation should be done on a department level and an enterprise level. 9. Go Live: a phased approach may be indicated based on the amount of change dictated by the new system. 10. Patience. If unlimited customization is asked for, it will take unlimited time. Sufficient time should be given to ERP vendor to do the last minutes changes. If the changes are coming in bits and pieces then it will take time for ERP to stabilize. 11. Budget should be increased if the scope is enlarged. Usually users do not know what ERP is, and therefore they expect a lot. It is necessary therefore to provide enough money for the same. The reference guidelines also known as Business Blueprint are used to define the scope. Page 60 of 374
  22. 22. ERP Business Blueprint CRP CRP run means Conference Room Pilot. “Simulation expertise helps” The procedure given below should be followed while doing customization and implementing ERP. This will ensure that the ERP implementation team gets clear specification / requirements. Receive new procedures / changes / new requirements / improvements from users – preferable through ERP Coordinators. We would appreciate if the same is received in writing by giving examples, sample excel sheets, relevant legacy documents, Tally printouts, examples, etc. This will be kept in a physical file for the ERP team reference. This file is called ‘Logic Sheet’ file. This file will contain module wise pending points to be developed / to be implemented by ERP team. 1. The ERP consultants will attend to the points available in the logic sheet file. 2. The EXE under testing will be kept in Y: folder. This folder is NOT available to all users. Only Z: is available to all users. Access (share) of Y: is given to ERP coordinator or authorized person for testing only. 3. For testing, demonstration, and training a QC database is prepared. This is different from the live database. Connection to QC data can be done by changing the UDL (Universal Data Link) connection. This is not necessary for common users. 4. The point attended will be shown to ERP coordinator or concerned user for his / her approval. Related procedures would be thoroughly tested in QC database by concerned users in test database. The name will be defined in the role and responsibility matrix. Necessary login and secret password will be created for new user. 5. The testing may require entering few master records, few transactions records in QC database. All OLP and outputs are to be printed. Note: Do not forget to change the UDL to connect to live database again for entering live data. This UDL change is not necessary for common users for day- to-day work. 6. Verify and certify all OLP / input screen / outputs / printouts to get the necessary confidence that all scenarios are captured and processed as per requirement. 7. Now the new EXE will be deployed on Z: for other users for day-to-day use. Changes carried out in hurry and under pressure sometimes gives rise to some other problem. Since above procedure will ensure that testing is done, approval is given before the EXE is actually used for LIVE data. Advantages of above procedure are obvious that the program will be deployed after approved by user. This procedure is also called CRP run (Conference Room Pilot). The other side of the coin is that this requires additional time for user to do the test data entry and has to take responsibility while approving the CRP run. The question of how much data to enter is debatable. There is no thumb rule. Some companies enter entire one-month data; some enter 10-15 transactions of various types, or carefully enter transactions that test various scenarios. In other words, one should enter as much data to ensure that after going on live, minimum problems and minimum program changes are required. Page 69 of 374
  23. 23. ERP Business Blueprint Figure 12: ERP Coordinators are in a habit of using ‘Check Lists’. Page 70 of 374
  24. 24. ERP Business Blueprint The data entry screen for making the PO is shown below: Figure 22: Purchase Order Page 124 of 374
  25. 25. ERP Business Blueprint Page 125 of 374
  26. 26. ERP Business Blueprint Example: Valve (cast iron) is purchased in numbers and issued in numbers but payment is based on kg. For this purpose, UOM-pay is used in the item master along with associated conversion rate for payment. Please study the following illustrative example: Figure 23: Raw Material PO for item where Payment UOM is different Page 126 of 374
  27. 27. ERP Business Blueprint Chapter 14. BOM MODULE B.O.M Overhead F= Finished Product EXAMPLE OF A PC SA1 = SUB @ Rs. 200 per piece PC ASSEMBLY Sale@40,000 Cost of Mother board 20 GM=8,2 (10*1000)+700+80=10,780 CPU Mother- @10,780 1 1 Case OUT board @ 8,000 or FACTORY a ct 00 o ntr 1 ,0 MADE bc 10X @ Su Monitor Labor @ Rs. 80 1 MB(10,780)+Cabinet(1,000)+ Processor per piece 1 Monitor(8,000)+KB(1,500) 1 IC @ 700 +Mouse(1,000)+SMPS(1,500)+ @ 1,500 @1,000 HDD(7,000)+FDD(800) PCB +OH(200)=31,780 Material = Total Cost Key given out Cabinet for o p 1 board Soldering Sh ne c hi Overhead @ 1,000 Ma Bending @ 400 1 1 n + 1 Mouse tio @ 800 Cutting e r a hi n e o r @ 1,500 @ 7,000 es O p mac e r at e ss +O p oc SMPS HDD DVD Pr SHEET 2 K.G. E MS UT IT @ 600 HT O BOUG Figure 32: Bill of Materials example. Child items required to make a PC Page 144 of 374
  28. 28. ERP Business Blueprint ERP FLOWCHART BOM MODULE ITEM SUBCATEGORY BOM MASTER PRINTOUT MASTER ITEM MASTER U.O.M. MASTER DNS BOM Master -> BOM Master Entry BILL OF MATERIAL is master database giving relation of child item and father item for a given finished goods or semi-finished goods. The semi- finished goods is also called ‘Factory made item’. FAQ: What is the use of BOM in ERP? Answer: The BOM is used in the following business process: 1. MRP – material requirement planning. 2. Creating the work order automatically. This is communication to production what to produce and from what, because work order will automatically explode the BOM and show the child items required. 3. Cost sheet. This gives material cost for a given FG. 4. BOM can be used for stores issue to shop floor. a. Material issue note (MIN) link to BOM for stores issue to shop floor. Material is consumed at stores location. b. Or stock transfer challan (STC) link to work order for stores issue to shop floor – (recommended) -> production entry will consume the material from shop floor. 5. Production entry – to consume raw material. This is linked to the work order that is in turn linked to the BOM. The following is a procedure to prepare Bill Of Material of factory made item and finished goods: 1. Prepare the BOM of a factory made item, which will be made by R & D (or Design) department (competent user). 2. Using factory made item prepare the BOM of finished goods. When factory made item in finished goods is dragged & dropped, all child item of factory made item will be displayed automatically in this BOM. While making BOM of finished goods you cannot edit the factory made item BOM. Note: Only few selected users are given access to the BOM master menu for security reason. Only specially trained ERP user is allowed to use the BOM. This is not for sundry users. Here the word bill should not be confused with the account bill. Here, bill simply means list. BOM is list of material required to make another item. Page 145 of 374
  29. 29. ERP Business Blueprint Chapter 31. Case Studies Here are some Case studies of small and medium size (SME) manufacturing companies’ initiative to deploy ERP. Some are successfully using ERP some have found difficulties. Figure 74: ERP Case Studies Page 304 of 374
  30. 30. ERP Business Blueprint Conceiving the ERP project • ERP Project Manager is a person, who thinks nine women can deliver a baby in One month. • ERP programmer is a person who thinks, it will take 18 months to deliver a baby. • ERP Coordinator is one who thinks single woman can deliver nine babies in one month. • ERP Marketing manager is a person who thinks he can deliver a baby even if no man and woman are available. • Resource Optimization team thinks they do not need a man or woman; they will produce a child with minimum resources. • Documentation team thinks they do not care whether the child is delivered, they will just document 9 months. • Quality Auditor is the person who is never happy with the business process to produce a baby. • User is the one who does not know why he wants a baby! (or why he wants ERP) Go to Server Once there was a call from the user that there is some problem in ERP. The helpdesk was trying to give support on the phone. Helpdesk: “Please go to server”. User after couple of minutes a confused tone: “but server room is closed and I do not have the key”.. Helpdesk: “no, no, I mean go the server icon in your control panel…..” One American company decided to have some parts manufactured in Japan as a trial project. In the specifications, they set out that they will accept three defective parts per 10,000. When the delivery came in, there was an enclosed letter. "We, Japanese people, had a hard time understanding North American business practices. But the three defective parts per 10,000 have been separately manufactured and have been included in the consignment. Hope this meets your requirement." Page 364 of 374
  31. 31. ERP Business Blueprint Index A  E  accounts module, 348 electronic products, 333 Accounts payable, 242 enquiry, 206, 207 Accounts receivable, 238 ERP coordinator, 69, 300 Activate serial number, 136 ERP customization, 22 Adjustment Window, 248 ERP Definition, 21 after sales service, 278 ERP for a corrugated box manufacturing, 306 Age wise, 225 ERP for a vada pav, 314 assemble-to-order. See ATO ERP for lens, 318 ATO, 175 ERP for OEM Supply, 326 audit trail, 202 ERP project management, 31 automobile, 326, 328, 341, 345 ERP servers, 293 Excel, 150 Excess received percentage, 136 B  Excise Tariff Heading, 269 Expense Voucher, 265 backup, 300, 301 export, 321, 334, 363 Bill Of Material. See BOM blog, 302 Blog, 50, 302 F  BOM, 144, 145, 150, 157, 158, 173, 181 BPR, 45, 46, 47, 60, 63, 302, 366 FBT, 242, 263, 264 business process, 16, 45, 50, 63, 74, 80, 81, 82, 106, 348 FBT JV, 263 Business Process Reengineering. See BPR Feasibility flag, 207 Fixed Assets, 241 Form No. 16, 292 C  Franchisee, 315 Fringe Benefit Tax, 263 case studies, 4 Case studies, 304 Central Sales Tax, 119, 268 G  Cess, 122, 241, 262, 263 Challan problem, 277 Gantt chart, 38 Change management, 45 General Ledger, 36, 258, 264, 266, 268 chemical company, 330 GIN, 158, 160, 161, 264, 266 Closing balance rate, 262 glass windows, 305 closing stock, 110 Goods Inward note cum inspection, 138 coiling, 181, 182 GRN register, 141 contact person, 207 Contact person name, 119 Credit Note, 252, 256 H  CRP, 36, 56, 69, 71, 74, 170, 332, 367 customer item code, 208 History Card, 278 customer’s part number, 208 customization, 20, 63 I  D  internal ORI, 133 Invoice correction, 215 Date and Time setting, 28 IT infrastructure, 27 dealer, 196 Item master, 350, 353 Dealer Master, 196 item-code generator, 132, 309 Debit Note, 253, 257, 259, 350 Digital Nervous System. See DNS DNS, 3, 16, 20, 367 J  Drucker, 76 Job Order, 160 Page 372 of 374
  32. 32. ERP Business Blueprint Quotation revision, 207 L  Labor PO, 158, 160 R  LAN. See Local Area Network landed cost, 262 registers, 158 LIVE data, 69 Rejection, 138 Live Database, 67 Replacement Challan, 95, 297, 322, 324 Local Area Network, 26, 368 Request For Quotation. See RFQ Resource, 31, 367 return goods note, 322 M  Return Goods Note, 95, 140, 205, 214, 322 RFID, 346, 347 Machine History Card, 278 RFQ, 120 Machine Master, 179 RGN. See Return Goods Note, See Return Goods Note Make to order, 168 Make to stock, 168 Management Information System. See MIS, See MIS S  maser data entry form, 39 Material requirement planning, 186 sales coordinator, 192 Material Requirement Planning, 184 Sales Engineer, 192, 193 McDonald’s, 342, 343, 371 sales enquiry, 206 Milestone, 31 Sales Invoice, 213 MIS, 16, 133, 167, 315, 319, 320, 321, See , See , See , Sales schedule, 202, 208 See , See , See Sales Tax, 36, 119, 266 MRP. See Material requirement planning Samosa, 314 multi-location, 293 Sarbanes-Oxley, 277 save, 182, 215 SCM, 16 O  Selecting ERP, 57 Send and receive, 293 OLP, 69, 158 Server, 300, 366 Operator Master, 179 Service Provider Bill, 264 Order Acknowledgement, 208 Service Tax, 241, 265, 269, 270 Order Receipt Information, 184 Shift Master, 179 ORI, 184, 216 small and medium size companies, 25 SME. See small and medium size companies SPM, 336 P  spring manufacturing, 326, 328 Stage wise inspection, 74, 181 paper less office, 43 supplier, 138, 160 Part no, 208 supply chain management. See SCM password, 54 Supply chain management, 166, 188, 346, 347 Password, 107 Pay slip, 100, 290 Payment terms, 119 T  payment voucher, 263, 264 PDF, 43 Task, 31 PFD. See Process Flow Diagram Tax Deducted at Source. See TDS PLA, 269, 270, 334 TCO of ERP, 53 plastic, 25, 336, 341 TDS, 264, 265 precision machining, 328 Terminate Qtn, 208 previous stage quantity, 182 Testimony, 320, 334 Process Flow Diagram, 177 Third Party, 115, 127, 157, 158, 160 Production Entry, 158, 172, 181 Toyota, 345 production process, 181 toys, 25 purchase rate, 262 PV, 127, 138 U  Q  UDL, 69 UOM, 136, 179 QC, 69, 138, 160 UPS, 27, 28, 301, 332 QC Database, 67 quotation, 207, 208, 209 Page 373 of 374
  33. 33. ERP Business Blueprint V  W  Vada Pav, 314 WAR, 262 Valuation, 262 warranty management, 332 Vanilla implementation, 22 Weighted Average Rate, 262 VAT, 36, 40, 262, 266 What user wants, 52 vendor. See supplier, See supplier, See supplier, See Windows 2003 Server OS, 293 supplier WIP rate, 263 Vendor, 139 Work Order, 158, 172, 173, 175, 176, 181, 183 Page 374 of 374

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