Introduction to ERP

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Introduction to ERP

  1. 1. Welingkar’s Distance Learning Division ERP & WEB BASED SUPPLY Chain Management Chapter 1 Introduction to ERP Chapter1 1 We Learn – A Continuous Learning Forum
  2. 2. Welingkar’s Distance Learning Division 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. Chapter1 2 We Learn – A Continuous Learning Forum
  3. 3. Welingkar’s Distance Learning Division Introduction to ERP Concept We Learn – A Continuous Learning Forum
  4. 4. Welingkar’s Distance Learning Division ERP Simplified view We Learn – A Continuous Learning Forum
  5. 5. Welingkar’s Distance Learning Division ERP Simplified view We Learn – A Continuous Learning Forum
  6. 6. Welingkar’s Distance Learning Division Introduction to ERP Concept We Learn – A Continuous Learning Forum
  7. 7. Welingkar’s Distance Learning Division ERP’s Full potential Manufacturing units Customers Corporate Office Vendors Regional Office Chapter1 7 We Learn – A Continuous Learning Forum
  8. 8. Welingkar’s Distance Learning Division 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. Chapter1 8 We Learn – A Continuous Learning Forum
  9. 9. Welingkar’s Distance Learning Division 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. Chapter1 9 We Learn – A Continuous Learning Forum
  10. 10. Welingkar’s Distance Learning Division 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 Chapter1 10 We Learn – A Continuous Learning Forum
  11. 11. Welingkar’s Distance Learning Division 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. Chapter1 11 We Learn – A Continuous Learning Forum
  12. 12. Welingkar’s Distance Learning Division Introduction to ERP Concept We Learn – A Continuous Learning Forum
  13. 13. Welingkar’s Distance Learning Division 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 Chapter1 13 We Learn – A Continuous Learning Forum
  14. 14. Welingkar’s Distance Learning Division 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. Chapter1 14 We Learn – A Continuous Learning Forum
  15. 15. Welingkar’s Distance Learning Division 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 Chapter1 15 We Learn – A Continuous Learning Forum
  16. 16. Welingkar’s Distance Learning Division 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 Chapter1 16 We Learn – A Continuous Learning Forum
  17. 17. Welingkar’s Distance Learning Division 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 Chapter1 17 We Learn – A Continuous Learning Forum
  18. 18. Welingkar’s Distance Learning Division 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 Chapter1 18 We Learn – A Continuous Learning Forum
  19. 19. Welingkar’s Distance Learning Division 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”. Chapter1 19 We Learn – A Continuous Learning Forum
  20. 20. Welingkar’s Distance Learning Division 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 Chapter1 20 We Learn – A Continuous Learning Forum
  21. 21. Welingkar’s Distance Learning Division 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 Chapter1 21 We Learn – A Continuous Learning Forum
  22. 22. Welingkar’s Distance Learning Division 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. Chapter1 22 We Learn – A Continuous Learning Forum
  23. 23. Welingkar’s Distance Learning Division 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 Chapter1 23 We Learn – A Continuous Learning Forum
  24. 24. Welingkar’s Distance Learning Division 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 Chapter1 24 We Learn – A Continuous Learning Forum
  25. 25. Welingkar’s Distance Learning Division 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. Chapter1 25 We Learn – A Continuous Learning Forum
  26. 26. Welingkar’s Distance Learning Division 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. Chapter1 26 We Learn – A Continuous Learning Forum
  27. 27. Welingkar’s Distance Learning Division 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 Chapter1 27 We Learn – A Continuous Learning Forum
  28. 28. Welingkar’s Distance Learning Division 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. Chapter1 28 We Learn – A Continuous Learning Forum
  29. 29. Welingkar’s Distance Learning Division ERP maturity Levels Streaming Operations Strategic transformation Chaos Chaos Stage1 Optimization Optimization Stage2 Stagnancy Stagnancy Enhancement Enhancement Operational Improvements Chapter1 Stage3 29 We Learn – A Continuous Learning Forum
  30. 30. Welingkar’s Distance Learning Division 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 Chapter1 30 We Learn – A Continuous Learning Forum
  31. 31. Welingkar’s Distance Learning Division Introduction to ERP End of Chapter 1 Chapter1 31 We Learn – A Continuous Learning Forum
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