What is Enterprise ResourceWhat is Enterprise Resource
Planning (ERP)?Planning (ERP)?
ERP is an enterprise-wide information systemERP is an enterprise-wide information system
designed to coordinate all thedesigned to coordinate all the
activities neededactivities needed
to complete business processes such asto complete business processes such as;;
A typical ERP system would use multipleA typical ERP system would use multiple
component of computer software andcomponent of computer software and
hardware to achieve integrationhardware to achieve integration
ERP delivers aERP delivers a single databasesingle database that containsthat contains
all data for the software moduleall data for the software module
Some organizations - typically those with sufficient in-house IT skills
to integrate multiple software products - choose to only implement
portions of an ERP system and develop an external interface to
other ERP or stand-alone systems for their other application needs.
This is very common in the retail sector, where even a mid-sized
retailer will have a discrete Point-of-Sale (POS) product and
financials application, then a series of specialized applications to
handle business requirements such as warehouse management,
staff rostering, merchandising and logistics.
Ideally, ERP delivers a single database that contains all data for the
software modules, which would include:
Manufacturing: Engineering, Bills of Material, Scheduling, Capacity,
Workflow Management, Quality Control, Cost Management,
Manufacturing Process, Manufacturing Projects, Manufacturing
Supply Chain Management: Inventory, Order Entry, Purchasing,
Product Configuration, Supply Chain Planning, Supplier Scheduling,
Inspection of goods, Claim Processing, Commission Calculation
Data Warehouse: and various Self-Service interfaces for
Customers, Suppliers, and Employees
ERPs are cross-functional and enterprise wide. All functional
departments that are involved in operations or production are
integrated in one system. In addition to manufacturing,
warehousing, logistics, and Information Technology, this would
include accounting, human resources, marketing, and strategic
How ERP systems are implementedHow ERP systems are implemented
within companies?within companies?
ERP Software Companies start analysing theERP Software Companies start analysing the
prospective company(s), identifing theirprospective company(s), identifing their
individual needs.individual needs.
Setup of ERP systemsSetup of ERP systems
For Mid-size companies 5-12 monthsFor Mid-size companies 5-12 months
Large Companies 6-18 monthsLarge Companies 6-18 months
Companies before ERP SystemsCompanies before ERP Systems
Industrial Engineering Faculty wants to buy aIndustrial Engineering Faculty wants to buy a
new Printer.new Printer.
For this reason Secretary gives a purchasingFor this reason Secretary gives a purchasing
order by filling purchasing order forms.order by filling purchasing order forms.
Next slide shows how this purchasing requestNext slide shows how this purchasing request
process flow was working before ERPprocess flow was working before ERP
New Printer Purchasing ProcessNew Printer Purchasing Process
1. Purchase order form for a new printer
2. Head of Department Confirmation- Faculty Head
3. Purchase order document sent to E.M.U. Account Office
4. Account Office Secretary sents the purchase order to the Responsibles
5. Purchase order- Responsible personal Confirmation
6. Purchasing department- Manager Confirmation
7. Transfer to Finance Department Secretary for processing
8. Finance Department Responsible’s Confirmation
9. Transfer to Secretary Office
11.Confirmation Transfer, to Purchase Department Secretary
12.Purchase Responsible personal commends with Purchase:
Secretary’s New printer
Transfer to Finance
Transfer to Accounting
Transfer to Manager
Example: Before ERP Systems
Companies after ERP SystemsCompanies after ERP Systems
E.M.U. After ERP SystemsE.M.U. After ERP Systems
Online Data Flow decreases the process timeOnline Data Flow decreases the process time
Fast & Online ConfirmationFast & Online Confirmation
Less PaperworkLess Paperwork
No need for folder storageNo need for folder storage
Database SecurityDatabase Security
Less Employee neededLess Employee needed
Easy Financial ManagementEasy Financial Management
Better Inventory ManagementBetter Inventory Management
In this real case there the benefits of the
What is SAPMM?What is SAPMM?
SAPMM(Materials Management)SAPMM(Materials Management)
SAP MM iSAP MM is a module is used for Procurement Handling ands a module is used for Procurement Handling and
Inventory Management.Inventory Management.
The module has two important master data -The module has two important master data - materialmaterial andand
Broadly, the various levels that can be defined for a SAP MMBroadly, the various levels that can be defined for a SAP MM
implementation are:implementation are:
Company Code,Company Code,
Storage LocationStorage Location,,
Purchase Organization.Purchase Organization.
Material ManagementMaterial Management ((MMMM))
LOGICAL STRUCTURELOGICAL STRUCTURE
SAP FICOSAP FICO
Financial AccountingFinancial Accounting (FI) Module(FI) Module
The SAP FICO module includes 2 major categoriesThe SAP FICO module includes 2 major categories;;
Financials (FI)Financials (FI)
Controlling (CO)Controlling (CO)
FIFI (Financial Accounting) module(Financial Accounting) module includesincludes;;
AAccounts payableccounts payable
AAccounts receivableccounts receivable
GGeneral ledgereneral ledger
ControllingControlling (CO) Module(CO) Module
TheThe COCO (Controlling) Module has multiple configuration steps that(Controlling) Module has multiple configuration steps that
must be followed for complete implementation of this module.must be followed for complete implementation of this module.
Cost CenterCost Center
Order ManagementOrder Management
Commitment MgtCommitment Mgt
Profit AnalysisProfit Analysis
ActActivityivity-Based Costing-Based Costing
OUTPUTS of ERP Systems
Warehouse check list
Dept & credit doc.
ERP delivers a single database that contains all data for the
software modules across an entire company. People in different
departments all see the same information and can update it.
Computer security is included within an ERP system to protect
against both outsider and insider crime
ERP systems tie together varied processes using data from across
the company. For instance, a typical ERP system manages
functions and activities as different as the bills of materials, order
entry, purchasing, accounts payable, human resources, and
inventory control, to name just a few of the modules.
ERP software combined the data of formerly separate applications.
This made the worry of keeping information in synchronization
across multiple systems disappear. It standardized and reduced the
number of software specialties previously required.
ERP systems allow companies to replace multiple complex
computer applications with a single integrated system.
ERP systems replace two or more independent applications and
eliminate the need for external interfaces previously required
between systems and provide additional benefits that range from
standardization and lower maintenance to make reporting
There are several disadvantages to enterprise
Implementing ERP is very expensive, price can range from
$30,000 - $500,000, depending on the size of the company.
ERP vendors can charge a license renewal fee annually which
can also be costly for any business.
Consultants may need to be used for installation or to maintain
Employees may need to be trained in ERP so they can fully
utilize the system. Training times takes away from work time and
can also cost additional funds.
Success of ERP depends on the skill level and experience of the
company’s work force.
Enterprises view cutting training funds as a way to cut costs.
Smaller companies may even need to under fund training this
means their ERP system is often operated by personnel with
inadequate education in ERP and the ERP vendor package
Proper training of the workforce is dependent to success with
New employees must be trained before they can properly start
working because of the ERP system
ERP’s can be very rigid and may not fit the business flow of the
company trying to use it.
Company’s may need to customize their ERP package which
isn’t allowed by most ERP vendors.
Employees may be needed to change the way they work to
become more efficient. They may feel resistant to change which
can be a negative.
It is difficult and expensive to tailor an ERP system to the way a
specific company does business.
Part of the challenge of building an ERP system for a company is
training. The ERP system is going to drastically change the way
many employees perform their jobs. This means they must be
trained to use the software efficiently and this will not occur
equipment (trucks, planes, trains, boats, pipeline),
people (drivers, loaders & un-loaders), and
decisions (routing, timing, quantities, equipment size, transport
When deciding the transport mode for a given product
there are several things to consider:
Transit time and variability (reliability)
Potential for loss or damage.
NOTE: In developing countries we often find it necessary to locate
production close to both markets and resources, while in
countries with developed distribution systems people can live in
places far from production and resources.
Most important component of logistics cost.
Usually 1/3 - 2/3 of total cost.
Routes of Goods
•Rapidly growing segment of transportation industry
•Lightweight, small items [Products: Perishable and time sensitive
goods: Flowers, produce, electronics, mail, emergency shipments,
•Quick, reliable, expensive
•Often combined with trucking operations
•Low cost, high-volume [Products: Heavy industry, minerals, chemicals,
agricultural products, autos, etc.]
•Most used mode
•Flexible, small loads [Products: Medium and light manufacturing, food,
clothing, all retail goods]
•Trucks can go door-to-door as opposed to planes and trains.
Single-mode Service Choices and Issues
•One of oldest means of transport
•Low-cost, high-volume, slow
•Bulky, heavy and/or large items (Products: Nonperishable bulk
cargo - Liquids, minerals, grain, petroleum, lumber, etc )]
•Standardized shipping containers improve service
•Combined with trucking & rail for complete systems
•Primarily for oil & refined oil products
•Slurry lines carry coal or kaolin
•High capital investment
•Low operating costs
•Can cross difficult terrain
•Highly reliable; Low product losses
Single-mode Service Choices and Issues (Contd.)
Transport Cost Characteristics
High fixed costs, low variable costs
High volumes result in lower per unit (variable) costs
Lower fixed costs (don’t need to own or maintain roads)
Higher unit costs than rail due to lower capacity per truck
Terminal expenses and line-haul expenses
High terminal (port) costs and high equipment costs (both fixed)
Very low unit costs
Substantial fixed costs
Variable costs depend highly on distance traveled
Highest proportion of fixed cost of any mode due to pipeline ownership
and maintenance and extremely low variable costs