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Welingkar’s Distance Learning Division

ERP & WEB BASED SUPPLY Chain
Management

Chapter 1
Introduction to ERP

Chapter1

1

We Learn – A Continuous Learning Forum
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
Welingkar’s Distance Learning Division

Introduction to ERP Concept

We Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division

ERP Simplified view

We Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division

ERP Simplified view

We Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division

Introduction to ERP Concept

We Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division

ERP’s Full potential
Manufacturing
units

Customers

Corporate
Office
Vendors

Regional

Office

Chapter1

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We Learn – A Continuous Learning Forum
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
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
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
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
Welingkar’s Distance Learning Division

Introduction to ERP Concept

We Learn – A Continuous Learning Forum
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Welingkar’s Distance Learning Division

Introduction to ERP
End of Chapter 1

Chapter1

31

We Learn – A Continuous Learning Forum

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Introduction to ERP

  • 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. 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. Welingkar’s Distance Learning Division Introduction to ERP Concept We Learn – A Continuous Learning Forum
  • 4. Welingkar’s Distance Learning Division ERP Simplified view We Learn – A Continuous Learning Forum
  • 5. Welingkar’s Distance Learning Division ERP Simplified view We Learn – A Continuous Learning Forum
  • 6. Welingkar’s Distance Learning Division Introduction to ERP Concept We Learn – A Continuous Learning Forum
  • 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. 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. 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. 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. 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. Welingkar’s Distance Learning Division Introduction to ERP Concept We Learn – A Continuous Learning Forum
  • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Welingkar’s Distance Learning Division Introduction to ERP End of Chapter 1 Chapter1 31 We Learn – A Continuous Learning Forum