OM0011 – Enterprise Resource Planning


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OM0011 – Enterprise Resource Planning

  1. 1. MBA (OPERATIONS MANAGEMENT) SEMESTER 3 OM0011 – ENTERPRISE RESOURCE PLANNING - 4 CREDITS (BOOK ID B1233) ASSIGNMENT- 60 MARKS Note: Answer all questions. Kindly note that answers for 10 marks questions should be Approximately of 400 words. Each question is followed by evaluation scheme. Q1. Describe Executive Information Systems (EIS) and list their advantages and disadvantages. (Description of EIS including definition-1 mark, what it takes into consideration-2 marks, user interface-2 marks, advantages and disadvantages-5marks) 10 marks Answer. EIS EIS can be considered as a better and sophisticated DSS. Top-level executives and decision-makershave to face many problems and face enormous work related pressures. Inspite of that, they have to make the right decisions, at the right time, toresolve the problems and take the company forward keeping the profitmargins high. In today's competitive world, reaction times are shrinking, andtime to make decisions is very less. EIS is a decision support systemespecially made for senior-level executives. The main concern of an EIS ishow decisions can affect the entire organisation. Two Consideration An EIS takes the following into consideration: The overall vision and mission of the company, and the company’s goals Strategic planning and objectives Organisational structure Crisis management/Contingency planning Strategic control and monitoring of overall operations The user interface is very important as an EIS needs to be efficient to getback the relevant data for decision makers. Several types of interfaces areavailable for the EIS structure, such as scheduled reports, questions/answers, menu driven, command language, natural language, andinput/output. The most important aspect is that the interface must fit thedecision maker’s decision-making style. If the executive is not comfortablewith the final information style, the EIS will not be fully utilised. Advantages of EIS Some of the advantages of EIS are: Easy for top management to use as extensive computer experience is not required in operations Provides timely delivery of company summary information Information that is provided is understood better Filters data for management Improves to tracking information Offers efficiency to decision makers Disadvantages of EIS Some of the disadvantages of EIS are: It is system dependent It has limited functionality, with respect to design Its information overload for some managers
  2. 2. Its benefits are hard to quantify It has high implementation costs Its system may become slow, large, and hard to manage It needs good internal processes for data management It may lead to less reliable and less secure data Q2. Evaluate different and popular modules of an ERP package like finance, manufacturing and materials management. (A Brief description of the modules Assessment of features-4 mark, support to business function including decision making-4 mark, Conclusion including rationale behind conclusion-2 mark) 10 marks Answer. There are many packages that are developed depending on the requirement of an organisation requirement. These packages help not only in maintaining the data but also effectively handle the data as per the requirement of the various needs that arise in the organisation. Finance The entire concept of Information Technology (IT) is based on the principlethat provides the right information, at the right time, to the right people.Since, it plays a crucial role in an organisation’s decision making. Financialdata provides much of this key information, but simply having the financialdata is not enough. You need a set of processes and views of your data thatprovides up to date information, in exactly the form you need it to make thatcritical difference. This will help in formulating a crucial decision. From eacharea of your organisation accounting software needs access for information;for example, the software should be able to access information from R&Dand market research through manufacturing, distribution and sales. Yourfinancial solution must provide the top management with information thatcan be leveraged for strategic decisions, in order to achieve competitiveadvantage. Manufacturing and Planning A good manufacturing system should provide multi-mode manufacturingapplications that include full integration of resource management. Thesemanufacturing applications must allow an easier exchange of informationthroughout the entire global enterprise, or at a single site within a company.Regardless of how big or small an enterprise is, these applications shouldprovide a wealth of feature/function, broad scope of coverage, operationalstability, and a platformindependent architecture. These capabilitiesempower an enterprise to achieve productivity gains, adopt forwardthinkingtechnologies, and implement process re-engineering. As a company'sinternal processes become more sophisticated or as market forces change,these solutions must be capable of meeting the challenge. Themanufacturing system must be integrated with the other modules of thepackage. Material Management The Materials Management module optimises all purchasing processes with workflow-driven processing functions. It also enables automated supplier evaluation, lowers procurement and warehousing costs with accurate inventory and warehouse management, and integrates invoice verification. The main modules of the Materials Management module are: Pre-purchasing Activities Purchasing Vendor Evaluation Inventory Management Invoice Verification and Material Inspection Pre-purchasing Activities This system supports the entire cycle of bid invitation, award of contra, and acceptance of services. The pre-purchasing activities comprises of maintaining a service master database, in which the descriptions of all services that are to be procured can be stored. The system also keeps a separate set of service stipulation. Purchasing Purchasing is a very important component of the Materials Management
  3. 3. module. The Materials Management module is fully integrated with other modules in the system. It supports all phases of materials management like planning, control, purchasing/receiving goods inventory management, and invoice verification is also performed. Vendor Evaluation The Vendor Evaluation System supports the optimisation of the processes of procurement in the case of both materials and services. In the case of procurement of materials, Sources of supply can be selected with the help of this system. Inventory Management Inventory Management (IM) system allows you to manage your stocks on a quantity and value basis, plan, enter and check any goods movements and carry out physical inventory. Q3. Describe the functioning of various sub module of Sales and Distribution module. (Description of the following sub modules with need, task, features, application wherever applicable: Master data management-0.5 mark, Order management-2 mark, Warehouse management-2 mark, Shipping & transportation-2 mark, Billing and sales support-2 marks, Foreign trade-1.5 mark) 10 marks Answer. Typically, Sales and Distribution module contains the following subsystems: Master Data Management Order Management Warehouse Management Shipping & Transportation Billing & Sales Support Foreign Trade 1. Master Data Management Each company has its own products and customers. It also has thesuppliers to supply required raw materials. The task of the Master Datamanagement module is to keep information about all these entities, so thatthis information is available to the decision-makers and also for theautomatic generation of reports, contracts and invoices. 2. Order Management This module usually includes Sales Order Management and Purchase Order Management. This module supports the entire sales and purchase processes from start to finish. Order Management combines the provision of efficient management solutions with the likelihood of anticipating and responding quickly to changes in global business conditions. 3. Warehouse Management This module provides real-time information about inventory levels across the enterprise and tools to manage the daily operational needs of warehouses. Coordination of an organisation's warehouse network is one of today's most important business needs and requires an understanding of the relationship between the different organisation units such as warehouses, production facilities, sales offices, and purchase offices. 4. Shipping & Transportation Shipping The shipping module supports the following functions: Monitoring dates of orders due for delivery Creating and processing deliveries Planning and monitoring work lists for shipping activities Monitoring material availability and processing outstanding orders Picking & Packing deliveries Supporting transportation planning Transportation
  4. 4. Transportation is an essential element of the logistics chain. It effects both inward and outward movement of goods. Effective transportation planning is required to ensure that shipments are dispatched without delay and that they arrive on schedule. 5. Billing & Sales Support Billing A Sales and Distribution business transaction is completed once it has been billed. The ERP systems support billing functions such as issuing of invoices on the basis of goods and services, issuing of credit and debit memos, cancelling billing transactions, giving rebates, transferring billing data to Financial Accounting, and Purchasing and so on. The billing system is integrated with the other modules like Financial Accounting, so that the documents are automatically generated. Sales Support The Sales Support component helps the sales and marketing department to support existing customers and, at the same time, to develop new business. The Sales Support component functions both as a source of information for all other areas of Sales and Distribution and as an initiating force for acquiring business. 6. Foreign Trade In domestic, and increasingly, in international trade, you are required by the authorities to adhere strictly to the laws and regulations of the land. The growing tendency towards the formation of trade areas is a challenge to a company operating on a worldwide basis. As markets become increasingly more global and business structures more complex, the need for accuracy in handling the foreign trade needs of a business is gaining rapidly in importance. Q4. Describe the types and sub modules of CRM. (Types of CRM: Description of Operational CRM Collaborative CRM and Analytical CRM Sub modules-5 mark, Description of Marketing, Service and Sales sub modules with purpose and application-5 mark) 10 marks Answer. CRM software supports front office operations and the customer service, sales, and marketing functions. CRM software is available as stand-alone software package also. Types of CRM Operational CRM: This CRM deals with providing complete front officesupport to sales, marketing and similar services. Each customerinteraction is recorded and added to customer's history. This can beeasily retrieved from database for future reference. The benefit ofmaintaining this customer interaction history is that the customers caneasily communicate with the service personnel without having to repeatany of the earlier communication or information. This CRM is mainlyuseful in automating customer-centric processes and providingappropriate support to sales and marketing services. Hence, this CRMsoftware is used popularly in call centres or Business ProcessOutsourcing (BPO) companies for supporting the call centre staff. Collaborative CRM: This CRM directly communicates with customers without the involvement of any sales or service representatives. This direct communication can be carried out through a variety of channels such as email, phone, SMS etc. Collaborative CRM includes: o Providing efficient communication with customers across a variety of communications channels o Providing online services to reduce customer service costs Analytical CRM: This CRM analyses data (gathered as part of Operational CRM, or from other sources) in an attempt to identify means to enhance a company's relationship with its customers. The results of this analysis can be used to design targeted marketing campaigns, for example: o Acquisition: Cross-selling, up-selling o Retention: Retaining existing customers o Information: Providing timely and regular information to customers
  5. 5. Sub Modules in CRM We already know that CRM is the process of managing relationships with customers by capturing, analyzing, and storing customer information. The functionality of a CRM system can be studied under three sub modules. They are Marketing, Service and Sales. All these modules are Operational, Collaborative and Analytical. Marketing Module The functionalities of marketing module of CRM comprises short term execution of marketing related activities and long term planning within a company. It also helps in activities like campaign management, lead management, and planning. Marketing module enables your company to run marketing campaigns using different communication channels. Service Module The service module of CRM focuses on managing planned and unplanned customer service. This module helps in activities such as Service Order Management, Service Contract Management, Planned Services management, Warranty Management, Installed Base (Equipment) Management, Service-Level Agreement Management, Resource Planning and Scheduling and Knowledge Management Sales Module The sales module of CRM focuses on managing and executing the presales process of the company by making it more organised. The sales teams in most companies are responsible for capturing opportunities and customer interaction. Each of these modules can be stand alone applications depending on organisational need. It is important that the right software is selected and implemented correctly. Then only any CRM can be effective. Q5. Explain any 5 phases phases/steps of the ERP implementation (Description of any five of the following phases/steps: Pre-evaluation Screening Package Evaluation Project Planning Phase Gap Analysis Reengineering Configuration Implementation Team Training Testing Going Live End-user Training Post-implementation (2 marks each)) 10 marks Answer. Steps in ERP Implementation PeopleSoft country head Mr Thiru Vengadam says1 “Phasedimplementation is the right way as the risks are controllable. It is a goodmanagement practice to build a roadmap for the overall project, but breakthem into logical phases. Take one logical phase at a time, give it the rightfocus and ensure the success of that phase before taking up on the next. Itis also critical to have a high level of design of the overall system is doneupfront, such that even when the project is driven in phases, there is aframe of reference ensuring an integrated system at the end of the overallproject,”.The different phases of the ERP implementation are given below: Pre-evaluation Screening Package Evaluation Project Planning Phase Gap Analysis Reengineering Configuration Implementation Team Training Testing Going Live End-user Training Post-implementation Pre-Evaluation Screening Once the company has decided to go in for the ERP system; the search forthe perfect package starts. But there are hundreds of ERP vendors of allshapes and sizes, all claiming to have the solution that is ideal. Analysing allthe packages before reaching a decision is not a viable solution. It is also avery time consuming process. So it is a better practise to limit the number ofpackages that are evaluated to less than five.
  6. 6. Package Evaluation The evaluation/selection process is one of the most important phases of the ERP implementation. Since, the package that you select will decide the success or failure of the project. ERP systems involve huge investments, once a package is purchased, it is not an easy task to switch to another one. So it is a 'do it right the first time' proposition. There is little room or no room for error. Project Planning Phase This is the phase that designs the process of ERP implementation. In thisphase the particulars of how to go about the implementation process aredecided. The time schedules, deadlines, and so on for the project areformulated. The project plan is developed. Roles are identified andresponsibilities are assigned. The organisational resources that will be usedfor the implementation effort are decided. At the same time the people whoare supposed to head the implementation are also identified. Theimplementation team members are selected and task allocation is done. Gap Analysis This is the most crucial phase for the success of the ERP implementation.This is the process through which organisations create a complete model ofwhere they are now, and in which direction they want to head in the future.The trick is to design a model which both anticipates and covers anyfunctional gaps. It has been estimated that even the best ERP package,custom tailored to a company's needs, meets only 80% of the company'sfunctional requirements.a Reengineering It is in this phase that the human factors are taken into account. In ERPimplementation settings, reengineering has two different connotations.The first connotation is the controversial one, involving the use of ERP to aidin downsizing efforts. There have been occasions where high-levelexecutives have invoked the reengineering slogan, and purchased an ERPpackage with the aim of reducing significant numbers of employees. Configuration This is the main functional area of the ERP implementation. There is a bit ofmystique around the configuration process. For good reason, the unwrittenrule of ERP implementation is synchronising existing company practiceswith the ERP package. Instead of, changing the source code andcustomising it to suit the company‟s demand. In order to do so, you have toanalyse and map the business processes. Implementation Team Training Around the same time that the configuration is taking place, theimplementation team is being trained, not so much how to use the system,but how to implement it. This is the phase where the company trains itsworkforce to implement and later, run the system. The ERP vendors and thehired consultants will leave after the implementation is over. But for thecompany to be self-contained in running the ERP system, it must have agood in-house team that can handle the various situations. Testing This is the phase where you try to break the system. You have reached apoint where you are testing real case scenarios. Once the system isconfigured, you must come up with extreme-case scenarios for example,system overloads, multiple users logging on at the same time with the samequery, users entering invalid data, hackers trying to access restricted areasand so on. The test cases must be designed specifically to detect the weaklinks in the system and these bugs must be fixed before going live. Going Live On the technical side, the work is almost complete. The process of data conversion is done, databases are up and running. The prototype‟s functional side is fully configured and tested, and ready to go operational. The system is officially proclaimed operational. End-User Training This is the phase where the actual users of the system will be given trainingon how to use the system. This phase starts much before the system goeslive. The employees who are going to use the new system are identified.Their current skills are noted and based on the current skill levels, they aredivided into groups. Then each group is given training on the new system. Post-Implementation (Maintenance Mode) One important factor that must be realised is that the post-implementationphase is very critical. Once the implementation is over, the vendors and thehired consultants will go. To reap the full benefits of the ERP system, it isvery important that the system must get enterprise-wide acceptance. Theremust be enough employees who are trained to handle the problems thatmight crop-up.]
  7. 7. Q6. Describe the ERP market (Segmentation of vendors-2 mark, Description of global market share for ERP-2 mark, Description of Indian market for ERP-4 mark, Analysis of the market’s preference for a particular ERP package-2 mark) 10 marks Answer. The ERP market is fast growing and very competitive. AMR Research Inc. isa leading industry and market analysis firm specialising in enterpriseapplications and enabling technologies. They had analysed in 2002 thatEnterprise Resource Planning (ERP) software market will grow at acompound annual growth rate of 3.7% over the next five years. During 2007this revenue growth reached double figures.The vendors in the ERP market are segmented into two levels.They are focusing on expanding product functionality, new market targetsand higher penetration rates. The top level consists of five vendors (1998) –SAP AG, Baan PeopleSoft, Oracle Applications, and J.D. Edwards. Thesecompanies, account for 64 % of the ERP market revenue and have grownover the past year at a furious pace of 61 %. In addition, Oracle, People SoftJ.D Edwards, and Baan are each expected to approach or exceed $1 billionin total revenue in 1998, while SAP will approach $5 billion. In the surveyconducted by ARM during the year 2005 the list had few changes with newplayers entering into the huge market of ERP. Some of the companies were not able keep up with the technology and losttheir market like Baan. Some even went for merger like PeopleSoft and J.D.Edwards. The figure1 shows the total revenue of the top five ERPvendors of 2005 survey. The graph in the figure shows the totalrevenue in millions of the top five companies in ERP market (2005). Thegraph also shows the strength of each company in terms of revenue and themonopoly they have in the ERP market. Fig: Top Five ERP Vendors The efforts these companies (SAP AG, Baan PeopleSoft, OracleApplications, and J.D. Edwards) made as start-ups, created a new marketfor ERP. Although ERP was considered only for manufacturing large scaleindustries, they penetrated into new smaller markets during 90’s.It is evident from the figure2 13.2 that the SAP had conquered the majorportion of the market with 29% of the total global market. This showcasedthe efficiency and the strength of the company in handling customers andtechnology. Oracle stood next to SAP followed by JD Edwards andPeopleSoft. The most important aspect noticed is that 27% of the marketsoccupied by other vendors were local vendors. They had a better picture oftheir local conditions and benefited from it.
  8. 8. Fig: Shows the global market share of the major ERP vendors. Compared to the global market the scenario in India is slightly different. The Indian ERP package Ramco's Marshal accounted for 9% of the market share as shown in Figure. Fig: Indian market share for ERP This proved the capability of Indian companies to penetrate the Indian market in spite of the presence of some global giants. According to the Dataquest survey (Dataquest, April 15, 1999), of the Indian ERP market, SAP is the market leader with 20% market share. The survey also showed that ERP does not appear to be new to the Indian market. This is indicated by the large number of solutions, which have been implemented.