Introduction to ERP (Enterprise Resource Planning)


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In this presentation, we will discuss the concept of ERP, scope and potentials of ERP software, meeting the business needs with ERP implementation, key terminologies and use of ERP across a complete business system.
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Introduction to ERP (Enterprise Resource Planning)

  1. 1. ERP & WEB BASED SUPPLYChain Management Chapter 1 Introduction to ERP
  2. 2. Introduction to ERPConceptERP is short of Enterprise ResourcePlanning,which is business management systemthat integrates all facets of the business such asmanufacturing operations,supply chain, customers,human resource & finance.
  3. 3. Introduction to ERP Concept
  4. 4. ERP Simplified view
  5. 5. ERP Simplified view
  6. 6. Introduction to ERP Concept
  7. 7. ERP’s Full potential Manufacturing Customers units Corporate Office Vendors Regional Office
  8. 8. Introduction to ERP ConceptThe salient features of above definition is that ERPrefers to in house developed or commerciallyavailable software solutions which provide anintegrated suit of IT applications.that support theactivities of the organization as a whole.ERP Systems are the information backbone of thecompany.It serves as central nervous system &termed as digital nervous system of the company.
  9. 9. Introduction to ERP ConceptERP (enterprise resource planning) is an industryterm for the broad set of activities supported bymulti-module application software that helps amanufacturer or other business manage theimportant parts of its business, including productplanning, parts purchasing, maintaining inventories,interacting with suppliers, providing customerservice, and tracking orders. ERP can also includeapplication modules for the finance and humanresources aspects of a business.
  10. 10. Introduction to ERP ConceptERP in manufacturing sector was primarily toaddress to know : 1) Stock of finished goods 2) Understand material movementIn 1970 the focus of manufacturing systems shiftedto MRP MRP Software applications have emerged totranslate the Master Schedule built for the endproducts into Time phased net requirement
  11. 11. Introduction to ERP ConceptIn 1980 the concept of MRPII was evolved All the resources such as People, Infrastructure,Process to various user group necessitate planning &utilization of such resourcesMRP was further extended to cover areas likeEngineering,Projects ,Management etc & led towhat is known as ERP
  12. 12. Introduction to ERP Concept
  13. 13. Introduction to ERP ConceptKey TermsIntegration: 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
  14. 14. Introduction to ERP ConceptKey TermsERP finds useful application in human resource management ,warehousing. ERP implies the use of the Shelf packedSoftware rather than proprietary software written for one customerThe cost of developing & maintaining ERP modules become cost prohibitive & Time Consuming
  15. 15. Introduction to ERP ConceptKey TermsERP 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 languagesA good business strategy drives everything that comes in its way including its IT & IS resource
  16. 16. Introduction to ERP ConceptKey TermsSystems:The systems view of business or enterprise is aholistic view.A system consists of Input,Process , Output &feedbackFor example production system has input ofMen(labor),material,money(finance).The output isgoods and or services.The processing converts input to value addedoutputs
  17. 17. ERP Across Business SystemFinancial Systems Operational logisticsAccounts receivables & payable Inventory ManagementCash planning & Management MRPCost accountancy Plant managementGeneral ledger Production PlanningProduct Cost accounting Project managementProfit center analysis PurchasingProfitability analysis Quality managementExecutive Information system RoutingAsset accounting DispatchingStandard costing vendor analysisHuman Resources Sales & MarketingPayroll,Manpower planning Sales Order,PricingTravel Expenses,HR accounting Sales planning Sales management
  18. 18. Process view/ Model of BusinessProcess Model defines entity or a set of activities that together respondto a set of inputs to produce desired outputThe process of converting input to desired output is governed byfactors such as performancestandards,knowledge,procedures,material,machine,,constraints,&control points Material Machines Input Processing Output Knowledge & Training Methods & procedures
  19. 19. Process view/ Model of BusinessThe fundamental rethinking and radicalredesign of business processes to achievedramatic improvements in criticalcontemporary measures of performance, suchas cost, quality, service, and speed”. process innovation,”encompasses the envisioning of new workstrategies, the actual process design activity,and the implementation of the change in all itscomplex technological, human, andorganizational dimensions”.
  20. 20. Process view/ Model of BusinessThe fundamental rethinking and radicalredesign of business processes to achievedramatic improvements in criticalcontemporary measures of performance, suchas cost, quality, service, and speed”. process innovation,”encompasses the envisioning of new workstrategies, the actual process design activity,and the implementation of the change in all itscomplex technological, human, andorganizational dimensions”.
  21. 21. Process view/ Model of BusinessDiagram illustrate basic philosophy of business processreengineeringUnderstand Simplifying Processes by AutomateExisting Eliminating The processProcesses wastes Methods Methods MethodsDiagramming Elimination EDIStory boarding Combination ERPBrainstorming Rearrangement
  22. 22. Preparing for the ERPInter Company IntegrationTo begin with ,an enterprise has frameddepartments,with some minimum interface with oneanother.organizations then adopt systems approachwhere the output of one system became input forother system and so on to form integrated system.The isolated systems of yester years were calledmanagement systems(MIS) later DSS or decisionsupport systems were developed.Executive Supportsystem is a step beyond both MIS & DSS thatcollates information from different sources
  23. 23. Preparing for the ERPBefore implementing ERP ,an organization has todecide where it is right now,where it would like tobe,& what methods could be used to get there.The data captured is of immense value in ERP inFinance,HR,SCM and enables such as datawarehousing,EIS,workflowERP is not just an IT project.It changes theorganization in terms of authority responsibilityrelationship It brings discipline to the organization.
  24. 24. Preparing for the ERPBusiness process reengineering focuses ontransformation of business process to make themmore efficient whereas ERP focuses on automatingThe business process using & some objective inmind.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 thingsbetter
  25. 25. Journey of ERPSYSTEM DESCRIPTIONMIS Management Information Systems.No decision supportIIS Integrated Information Systems.No decision supportEIS Executive Information Systems.Decision supportCIS Corporate Information Systems.Decision supportEWS Enterprise Wide System. No decision support Logistics are considered as part of systemEDI,JIT, Electronic Data Interchange,Just in Time,EFT Electronic fund transfer inter company integration
  26. 26. ERP maturity LevelsERP like living organization passes throughdifferent stages of development & maturity.athe business grows,ERP has to adopt itself tothe changing processes,organizationalstructure & demand patterns to delivereffectively.The ERP team takes a lot of effort after the“Go-Live”at three different stages of growth& maturity.
  27. 27. ERP maturity LevelsStage 1 ChaosThe organization takes the ‘Go-Live’ decision.It requires streamlining of the processesIn stage 1,the attention is focused on administrationand information stability.Roles and responsibilitiesare fixed.The organization starts utilizing theinformation generated through ERPIt has to cope with change in organization culture.It is likely that alignment between the ERP and theprocess prevailing is lost.
  28. 28. ERP maturity LevelsStage 2 StagnancyAfter the Implementation of the ERP organizationexpects a whole lot of benefit from it.However it does not happen immediately.Organizations expect higher ROI.There two ways to improve situationFirst manual activities are eliminated and arereplaced by automated ERP system.This results inoverall transaction complexity.Secondly ,theintelligence of the system is enhanced by usingAdvanced planning engines& schedules
  29. 29. ERP maturity LevelsStage 3 GrowthAt this stage ,Management seeks strategic supportfrom the ERP.The system is aligned with the overallCorporates vision & strategies.The focus is on profit and Working CapitalManagement.The organization is committed togrowth of human resources.This improves the value chain.Capital managementbecomes becomes better.There is optimizationbetween customer product mix.
  30. 30. ERP maturity LevelsStreaming Operations Strategic transformation Chaos Chaos Optimization Optimization Stage1 Stage2 Stagnancy Stagnancy Enhancement Enhancement Operational Improvements Stage3
  31. 31. Organization of ERP ProjectsThere are three common ways to implement ERPprojects.Big Bang is an approach that casts off all the legacysystem in one go & installs a single ERP systemacross the company.Franchising approach believes in implementingindependent ERP system in each unit while linkingcommon processes across the enterprise.It is one ofmost common method to install ERP.Slam dunk is an approach where the ERP dictatesthe process.A few key processes are selected forfocus
  32. 32. Introduction to ERP End of Chapter 1
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