Enterprise resource planning

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Enterprise resource planning

  1. 1. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH STUDY MATERIAL ENTERPRICE RESOURCE PLANNING DEPARTMENT OF IT R S Vel Tech Vel Tech Multi Tech Dr.Rangarajan Dr.Sakunthala Engineering College Vel Tech High Tech Dr. Rangarajan Dr.Sakunthala Engineering College SEM - VIIIVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 1
  2. 2. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH INDEXUNITS PAGE NO.I. Introduction 06II. ERP Implementation 25III. The Business Modules 40IV. The ERP Market 64V. ERP – Present and Future 89 # 42 & 60, Avadi – Veltech Road, Avadi, Chennai – 62.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 2 R S
  3. 3. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH Phone : 044 26840603 email : veltech@vsnl.com 26841601 website : www.vel-tech.org 26840766 www.veltechuniv.edu.in∗ Student Strength of Vel Tech increased from 413 to 10579, between 1997 and 2010.∗ Our heartfelt gratitude to AICTE for sanctioning highest number of seats and highest number of courses for the academic year 2009 – 2010 in Tamil Nadu, India.∗ Consistent success on academic performance by achieving 97% - 100% in University examination results during the past 4 academic years.∗ Tie-up with Oracle Corporation for conducting training programmes & qualifying our students for International Certifications.∗ Permission obtained to start Cisco Networking Academy Programmes in our College campus.∗ Satyam Ventures R&D Centre located in Vel Tech Engineering College premises.∗ Signed MOU with FL Smidth for placements, Project and Training.∗ Signed MOU with British Council for Promotion of High Proficiency in Business English, of the University of Cambridge, UK (BEC).∗ Signed MOU with NASSCOM.∗ Signed MOU with INVICTUS TECHNOLOGY for projects & Placements.∗ Signed MOU with SUTHERLAND GLOBAL SERVICES for Training & Placements.∗ Signed MOU with Tmi First for Training & Placements.VELTECH, VEL TECH MULTI TECH engineering colleges Accredited by TCSVEL TECH, VEL TECH MULTI TECH, VEL TECH HIGH TECH, engineering colleges & VEL SRI RANGA SANKU(ARTS & SCIENCE) Accredited by CTS.Companies Such as TCS, INFOSYS TECHNOLOGIES, IBM, WIPRO TECHNOLOGIES, KEANE SOFTWARE & TINFOTECH, ACCENTURE, HCL TECHNOLOGIES, TCE Consulting Engineers, SIEMENS, BIRLASOFT,MPHASIS(EDS), APOLLO HOSPITALS, CLAYTON, ASHOK LEYLAND, IDEA AE & E, SATYAM VENTURES,UNITED ENGINEERS, ETA-ASCON, CARBORANDUM UNIVERSAL, CIPLA, FUTURE GROUP, DELPHI-TVSDIESEL SYSTEMS, ICICI PRULIFE, ICICI LOMBARD, HWASHIN, HYUNDAI, TATA CHEMICAL LTD, RECKITTBENKIZER, MURUGAPPA GROUP, POLARIS, FOXCONN, LIONBRIDGE, USHA FIRE SAFETY, MALCO,YOUTELECOM, HONEYWELL, MANDOBRAKES, DEXTERITY, HEXAWARE, TEMENOS, RBS, NAVIA MARKETS,EUREKHA FORBES, RELIANCE INFOCOMM, NUMERIC POWER SYSTEMS, ORCHID CHEMICALS, JEEVANDIESEL, AMALGAMATION CLUTCH VALEO, SAINT GOBAIN, SONA GROUP, NOKIA, NICHOLAS PHARIMAL,SKH METALS, ASIA MOTOR WORKS, PEROT, BRITANNIA, YOKAGAWA FED BY, JEEVAN DIESEL visit ourcampus annually to recruit our final year Engineering, Diploma, Medical and Management Students. Preface to the First EditionVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 3
  4. 4. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH This edition is a sincere and co-ordinated effort which we hope has made agreat difference in the quality of the material. “Giving the best to the students,making optimum use of available technical facilities & intellectual strength” hasalways been the motto of our institutions. In this edition the best staff across thegroup of colleges has been chosen to develop specific units. Hence the material, as awhole is the merge of the intellectual capacities of our faculties across the group ofInstitutions. 45 to 60, two mark questions and 15 to 20, sixteen mark questions foreach unit are available in this material.Prepared By : Mr. Einstein. J. Asst. Professor.IT1006 ENTERPRISE RESOURCE PLANNINGUNIT 1 INTRODUCTION 9ERP: An Overview, Enterprise – An Overview, Benefits of ERP, ERP and Related Technologies,Business Process Reengineering (BPR), Data Warehousing, Data Mining, OLAP, SCMUNIT II ERP IMPLEMENTATION 9VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 4
  5. 5. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHERP Implementation Lifecycle, Implementation Methodology, Hidden Costs, Organizing theImplementation, Vendors, Consultants and Users, Contracts with Vendors, Consultants andEmployees, Project Management and MonitoringUNIT III THE BUSINESS MODULES 9Business modules in an ERP Package, Finance, Manufacturing, Human Resources, PlantMaintenance, Materials Management, Quality Management, Sales and DistributionUNIT IV THE ERP MARKET 9ERP Market Place, SAP AG, Peoplesoft, Baan, JD Edwards, Oracle, QAD, SSAUNIT V ERP – PRESENT AND FUTURE 9Turbo Charge the ERP System, EIA, ERP and e-Commerce, ERP and Internet, Future DirectionsTEXT BOOK1. Alexis Leon, “ERP Demystified”, Tata McGraw Hill, New Delhi, 2000REFERENCES1. Joseph A Brady, Ellen F Monk, Bret Wagner, “Concepts in Enterprise Resource Planning”,Thompson Course Technology, USA, 2001.2. Vinod Kumar Garg and Venkitakrishnan N K, “Enterprise Resource Planning – Concepts andPractice”, PHI, New Delhi, 2003 UNIT – I PART – A1. What is ERP? Enterprise Resource Planning (ERP) covers the techniques and concepts employed for theintegrated management of businesses as a whole, from the viewpoint of the effective use ofmanagement resources, to improve the efficiency of an enterprise. Ideally the data for variousbusiness functions are integrated.2. Write the advantages of ERP.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 5
  6. 6. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH Installing an ERP system has many advantages – both direct and indirect. The directadvantages include improved efficiency, information integration for better decision making, fasterresponse time to customer queries, etc. The indirect benefits include better corporate image,improved customer goodwill, customer satisfaction, and so on.3. Direct benefits of ERP.The following are some of the direct benefits of an ERP system: ♦ Business Integration ♦ Flexibility ♦ Better analysis and planning capabilities ♦ Use of latest technology4. Discuss evaluation of ERP. As the department become large, they became closed & water tight. Each had their own setof procedures & hierarchy, each & every department maintain information separately whichcauses waste of resources. Hence ERP is implemented to integrate all the department together and limit the waste ofresources.5. How business integration achieved by ERP system? ERP packages are considered to be integrated, is the automatic data updation (automaticdata exchange among applications) that is possible among the related business components.6. Why are ERP systems said to be flexible? Different languages, currencies, accounting standards and so on can be covered in onesystem, and functions that comprehensively manage multiple locations of a company can bepackaged and implemented automatically.7. Why do many ERP Implementation fails? Many a company fails in this because of a wrong product, incompetent and haphazardimplementation and inefficient or ineffective usage.8. What are the reasons for the growth of the ERP market? ♦ To enable, improved business performance ♦ To support business growth requirements ♦ To provide flexible, integrated, real-time decision supportVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 6
  7. 7. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH ♦ To eliminate limitation in legacy systems ♦ To take advantage of the untapped mid – market (medium size organizations)9. How do conventional application packages and ERP packages differ? The first answer to this question is that ERP packages cannot only handle individualbusiness functions such as accounts and inventory, but also the entire range of business functionsnecessary for the company’s operations. The second difference is that ERP packages are targeted at everything from smallbusinesses to the largest organizations, and that they can be composed of a highly flexibledecentralised database and an information system cluster linked by a network. The third difference is global adaptation, represented by ERP packages’ multilingual andmulti-currency capacity. In the present day, when companies, irrespective of their size andmarket share, are manufacturing and selling in various areas of the world, the globalization ofmanagement platforms is being hastened, along with the global adaptation of enterpriseinformation systems.10. What is an integrated information system? An information system is an open, purposive system that produces information using the‘input – process – output’ cycle. The minimal information system consists of three elements –people, procedures and data. People follow procedures to manipulate data to produceinformation. In today’s computer world, the definition of information systems has undergone aslight change. Today, an information system is an organized combination of people, hardware,software, communication networks and data resources that collects, collates, transforms anddisseminates in an organization.11. What is MIS? MIS or Management Information System is a computer – based system that optimises thecollection, collation, transfer and presentation of information throughout an organization throughan integrated structure of databases and information flow.12. Why are the integrated information system important for the organization’s success? ERP system that treats the organization as a single entity and caters to the informationneeds of the whole organization. If this is possible, and if the information that is generated isaccurate, timely and relevant, then these systems will go a long way in helping the organization inrealizing its goals.13. What is business modeling? In business modeling, we model the business as an integrated system, taking the processesVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 7
  8. 8. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHmanaging its facilities and materials as resources. Information is a very important resource and isvery critical in managing all the other resources. Thus, the business model is a representation of the actual business – what are the variousbusiness functions of the organization, how are they related, what are their interdependencies,and so on. The business model is usually represented in the graphical form using flow charts andflow diagrams. From the business model, the data model of the system is created.14. What is integrated data model? It should clearly depict the organization; it should reflect the day-to-day transactions and itshould be updated continuously. At any given time, the database should give a snapshot of theorganization at that point in time. So if an order is entered, the sale is done and the goods aredispatched, then the database should reflect those changes. The inventory should be reduced andthe account receivables should be increased. All these things have to happen instantaneously andautomatically. That is the challenge and that is the advantage of the integrated database and theintegrated data model.15. What are the limitations of ERP? 1. Managers cannot generate custom reports or queries without help from a programmer and this inhibits them from obtaining information quickly, which is essential for maintaining a competitive advantage. 2. ERP systems provide current status only, such as open orders. Managers often need to look past the current status to find trends and patterns that aid better decision – making. 3. The data in the ERP application is not integrated with other enterprise or division systems and does not include external intelligence.16. How to overcome the limitations of ERP?Some of these technologies are: ♦ Business Process Reengineering (BPR) ♦ Management Information System (MIS) ♦ Decision Support Systems (DSS) ♦ Executive Information Systems (EIS) ♦ Data Warehousing ♦ Data Mining ♦ On-line Analytical Processing (OLAP) ♦ Supply Chain Management ♦ Customer Relationship Management (CRM)17. What is BPR? The fundamental rethinking and radical redesign of business processes to achieve dramaticVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 8
  9. 9. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHimprovements in critical, contemporary measures of performance such as cost, quality, serviceand speed.18. What is data warehousing? The primary concept of data warehousing is that the data stored for business analysis canbe accessed most effectively by separating it from the data in operational systems. The mostimportant reason for separating data for business analysis, from the operational data, has alwaysbeen the potential performance degradation on the operational system that can result from theanalysis processes.19. What is Data mining? Data mining is the process of identifying valid, novel, potentially useful and ultimatelycomprehensible information from databases that is used to make crucial business decisions.20. What do you mean by OLAP? OLAP can be defined in five words – Fast Analysis of Shared MultidimensionalInformation. FAST means that the system is targeted to deliver most responses to users within about fiveseconds, with the simplest analysis taking no more than one second and very few taking morethan 20 seconds. ANALYSIS means that the system can cope with any business logic andstatistical analysis that is relevant for the application and the user, and keep it easy enough for thetarget user. SHARED means that the system implements all the security requirements forconfidentiality (possibly down to cell level) and, if multiple write access is needed, concurrentupdate locking at an appropriate level. MULTIDIMENSIONAL means that the system mustprovide a multidimensional conceptual view of the data, including full support for hierarchiesand multiple hierarchies. INFORMATION is refined data that is accurate, timely and relevant tothe user.21. Explain the concept of supply chain management? A supply chain is a network of facilities and distribution options that performs the functionof procurement of materials, transformation of these materials into intermediate and finishedproducts, and the distribution of these finished products to customers. Supply chains exist in bothservice and manufacturing organizations, although the complexity of the chain may vary greatlyfrom industry to industry and firm to firm.22. What is the use of common database? The common database can allow every department of a business to store and retrieveVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 9
  10. 10. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHinformation real time. The information should be reliable, accessible and easily shared.23. List the Reasons for the growth of the ERP Market  To improve business performance  To support business growth requirements  To eliminate limitations in legacy system PART – B1. Describe the overview of ERP. Enterprise Resource Planning (ERP) covers the techniques and concepts employed for theintegrated management of business as a whole, from the viewpoint of the effective use ofmanagement resources, to improve the efficiency of an enterprise. ERP packages are integrated(covering all business functions) software packages that support the above ERP concepts. Originally, ERP packages were targeted at the manufacturing industry, and consistedmainly of functions for planning and managing core businesses such as sales management,production management, accounting and financial affairs, etc. However, in recent years,adaptation not only to the manufacturing industry, but also to diverse types of industry hasbecome possible and the expansion of implementation and use has been progressing on a globallevel. ERP software is designed to model and automate many of the basic processes of acompany, from finance to the shop floor, with the goal of integrating information across thecompnayand eliminating complex, expensive links between computer systems that were nevermeant to talk to each other. Strategic & Operational Figure shows how information is integrated within an organization using an ERP system. Finance Planning Human Manufacturing Resource ERP System Logistics Management Materials Management Maintenance ManagementVEL TECH Quality Management VEL TECH MULTI TECH VEL TECH HIGH TECH 10 Sales & Distribution
  11. 11. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH Figure. Information integration through ERP systems. ERP software is a mirror image of the major business processes of an organization, such ascustomer order fulfillment and manufacturing. Its success depends upon reach-a circumscribedERP system isn’t much better than the legacy system it replaces. In many cases, it is worse,because the old code at least was written specifically for the company and the task. ERP systems’set of generic processes, produce the dramatic improvements that they are capable of only, whenused to connect parts of an organization and integrate its various processes seamlessly. When awarehouse in Noida enters a customer order, for example, the data flows automatically to othersin the company who need to see it-to the finance department at the company headquarters inMumbai and to the manufacturing plant in Chennai. The lure of information integration struck achord with CEOs and CFOs and CFOs-ERP vendors’ primary targets-and sales of ERP took off inthe early 1990s.REASON FOR THE GROWTH OF THE ERP MARKET The is no doubt that the market for Enterprise Resource Planning (ERP) systems is in greatdemand. Industry analysts are forecasting growth rates of more than 30% for at least the next fiveyears. Why are so many companies replacing their key business systems? The answer is: ° To enable improved business performance  Cycle time reduction  Increased business agility  Inventory reduction  Order fulfillment improvement ° To support business growth requirements  New products/product lines, new customers  Global requirements including multiple languages and currencies ° To eliminate limitation in legacy systems  Century dating issues  Fragmentation of data and processing  Inflexibility to change  Insupportable technologiesVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 11
  12. 12. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH ° To take advantage of the untapped mid-market (medium size organizations)  Increased functionally at a reasonable cost  Client server/open systems technology  Vertical market solutions These are some of the reasons for the explosive growth rate of the ERP markets and theERP vendors. As more and more companies are joining the race, the ERP vendors are shiftingtheir focus from big-Fortune 1000-companies to different market segments (medium sizecompanies, small companies, etc). The future will see fierce battle for market share and mergersand acquisitions for strategic and competitive advantage. The ultimate winner in this race will bethe customer, who will get better products and better service at affordable prices.2. Benefits of ERP.The Advantages of ERP Installing an ERP system has many advantages-both direct and indirect. The directadvantages include improved efficiency, information integration for better decision making, fasterresponse time to customer queries, etc. The indirect benefits include better corporate image,improved customer goodwill, customer satisfaction, and so on. The following are some of thedirect benefits of an ERP system, ♣ Business Integration ♣ Flexibility ♣ Better Analysis and Planning Capabilities ♣ Use of Latest TechnologyBusiness Integration The first and most important advantage lies in the promotion of integration. The reasonwhy ERP packages are considered to be integrated, is the automatic data updation (automatic dataexchange among applications) that is possible among the related business components. Sinceconventional company information systems were aimed at the optimization of independentbusiness functions in business units, almost all were weak in terms of the communication andintegration of information that transcended the different business functions. In the case of largecompanies in particular, the timing of system construction and directives differs for each productand department/functions and sometimes, they are disconnected. For this reason, it has becomean obstacle in the shift to new product and business classification. In the case of ERP packages,the data of related business functions is also automatically updated at the time a transactionoccurs. For this reason, one is able to grasp business details in real time, and carry out varioustypes of management decisions in a timely manner, based on that information.FlexibilityVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 12
  13. 13. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH The second advantage of ERP packages is their flexibility. Different languages, currencies,accounting standards and so on can be covered in one system, and functions that comprehensivelymanage multiple locations of a company can be packaged and implemented automatically. Tocope with company globalization and system unification, this flexibility is essential, and one cansay that it has major advantages, not simply for development and maintenance, but also in termsof management.Better Analysis and Planning Capabilities Yet another advantage is the boost to the planning functions. But enabling thecomprehensive and unified management of related business and its data, it becomes possible tofully utilize many types of decision support systems and simulation functions. Furthermore, sinceit becomes possible to carry out, flexibly and in real time, the filling and analysis of data from avariety of dimensions, one is able to give the decision-makers the information they want; thusenabling them to make better and informed decisions.Use of Latest Technology The fourth advantage is the utilization of the latest development in Information Technology(IT). The ERP vendors were very quick to realize that in order to grow and to sustain that growth,they had to embrace the latest developments in the field of Information Technology. Therefore,they quickly adapted their systems to take advantage of the latest technologies like open systems,client/server technology, Internet/Intranet, CALS (Computer-Aided Acquisition and LogisticsSupport), electronic-commerce, etc. It is this quick adaptation to the latest changes in InformationTechnology that makes the flexible adaptation to changes in future business environmentspossible. It is this flexibility that makes the incorporation of the latest technology possible duringsystems customization; maintenance and expansion phases. As has been stated above, ERP includes many of the functions that will be necessary forfuture systems. However, undertaking reforms to company structures and business processes, soas to enable the full use of these major features, is the greatest task for companies that will usethem. It is necessary to take note that casually proceeding with the implementation of ERP,merely for reasons of system reconstruction or preparation for the year 2000, is likely to result inturning the above mentioned advantages into disadvantages.3. Describe Integrated Management Information.Integrated Management Information An information system is an open, purposive system that produces information using the“input-process-output’ cycle. The minimal information system consists of three elements-people,procedures and data. People follow procedures to manipulate data to produce information. Intoday’s computer world, the definition of information systems has undergone a slight change.Today, an information system is an organized combination of people, hardware, software,VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 13
  14. 14. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHcommunication networks and data resources that collects, collates, transforms and disseminates inan organization. Management Information System(MIS) is a planned system of the collecting, processing,storing and disseminating data in the form of information needed to carry out the functions ofmanagement. Information system include systems that are not intended for decision making. ButMIS intended for decision making also.Figure. An enterprise where all departments know what the others are doing Management Information Systems, also called information-reporting systems, were theoriginal type of management support systems, and they still are a major category of informationsystems. MIS produce information products that support many of the day-to-day decisionmaking needs of the management. Reports, charts, graphs, displays and responses produced bysuch systems provide information that managers have specified in advance. Such predefinedinformation satisfies the needs of managers at the operational levels of the organization who arefaced with the structured type of decision-making. But the problem with these information systems is that they only give information that hasbeen predefined. So each department will have its own database and information systems. Thesesystems will produce different reports of varying detail that were specified when the systemsVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 14
  15. 15. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHwere built. This method of information gathering has two major disadvantages. One, people in onedepartment do not have any information about what is happening in the other departments. Maybe at the top management level the summary reports are being circulated to other departmentsalso, but these summary reports often fail in capturing the real picture. The second drawback isthat these systems give only the information that they were designed to produce at the time theywere built. Suppose a manager wants some information which is not in the reports, then thesesystems are of no help. These systems lack the integrated approach. There will be an accounting system for thefinance department, a production planning system for the manufacturing department, aninventory management system for the stores department, and so on. All these systems willperform in isolation. So if a person wanted some information which has to be derived from any ofthese two systems, he has to get the necessary reports from both systems and then correlate andcombine the data. Because the systems work in isolation, collecting and analyzing the data needed for onedepartment’s functioning, can be a difficult task, since, getting information about some aspect thatis dependent on more than one department can be tedious. No business executive or decision-maker can take good decisions with the isolated data that he gets from the various reportsproduced by each department. Even if he collates the data and produces the information that herequires, he would have lost valuable time that could have been better spent in decision-making. In reality, an organization cannot function as islands of different departments. Theproduction planning data is required for the purchasing department. The purchasing details arerequired for the finance department and so on. So if all the information islands, which werefunctioning in isolation, were integrated into a single system, then the impact of that would bedramatic. For example, if the purchase department can see the production planning details, it canmake the purchasing schedule accordingly. If the finance department can see the purchase detailsas soon as it is entered in the system, they can plan for the cash flow that will be necessary for thepurchases. We have seen that in today’s competitive business environment, the key resource of everyorganization is information. If the organization does not have an efficient and effectivemechanism that enables it to give the decision makers the right information at the right time, thenthe chances of that organization succeeding in the next millennium are very remote. The three fundamental characteristics of information are accuracy, relevancy andtimeliness. The information has to b e accurate, it must be relevant for the decision-maker and itmust be available to the decision-maker when he needs it. Any organization that has themechanism to collect, collate, analyze and present high quality information to its employees, thusenabling them to make better decisions, will always be one step ahead of the competition. Today,the time available for an organization to react to the changing market trends is very short. Tosurvive, the organization must always be on its toes, gathering and analyzing the data – bothVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 15
  16. 16. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHinternal and external. Any mechanism that will automate this information gathering and analysisprocess will enhance the chance of the organization to beat the competition. So, what is needed is a system that treats the organization as a single entity and caters tothe information needs of the whole organization. If this is possible, and if the information that isgenerated is accurate, timely and relevant, then these systems will go a long way in helping theorganization in realizing its goals.4. Describe Business Modeling in ERP.Business Modeling: Business modeling or creating a business model is one of the first activities in any ERPproject. As said earlier, the ERP systems should mirror the business processes. A business modelis not mathematical model, but it is a representation of the business as one large system showingthe interconnections and interdependencies of the various subsystems and business processes asshown in figure. Based on the organization’s goals, objectives and strategic plans, a business modelconsisting of the business processes is developed. These business processes are controlled bydifferent individuals in the organization (the people) to achieve common goals. Based on thebusiness model, the ERP system is developed with the aim of providing the required informationand necessary assistance to the various individuals, to help them perform their business processesmore effectively and efficiently. Figure: Real world Processe Interrelationsh s ip & Interdependen cies Plant Material Customer Order Contract InvoiceVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 16
  17. 17. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH Figure: Business Model In business modeling, we model the business as an integrated system, taking the processesmanaging its facilities and materials as resources. Information is very important resources and isvery critical in managing all the other resources. Thus, the business model is a representation of the actual business – what are the variousbusiness functions of the organization, how are they related, what are their interdependencies,and so on. The business model is usually represented in the graphical form using flow charts andflow diagrams. Form the business mode, the data model of the system is created.5. Describe Integrated Data Model.Integrated Data Model: One of the most critical steps in the ERP implementation is the creation of an IntegratedData Model. As we have seen earlier, one of the advantages of having an ERP system is that allemployees from the different departments get access to the data – the integrated data. Thecompany uses this integrated data for its analysis and decision-making. With the implementation of ERP systems, the departmental information systems and thedepartmental databases will have to go. There can no longer be isolated databases, which cater tothe needs of a particular department. All the data has to be from the integrated database. Thisapproach will reduce data redundancy and provide updated information about the entireorganization to all employees. For the integrated database to be effective it should clearly depict the organization; itshould reflect the day-to-day transactions and it should be updated continuously. At any giventime, the database should give a snapshot of the organization at the point in time. so if an order isentered, the sale is done and the goods are dispatched, then the database should reflect thosechanges. The inventory should be reduced and the account receivables should be increased. Allthese things have to happen instantaneously and automatically. That is the challenge and that isthe advantage of the integrated database and the integrated data mode. The integrated datamodel is derived from the business model as shown in figure. So, when designing the data model for the ERP system, the most important thing thatshould be kept in mind is the information integration and the process/procedure automation.The data model should reflect the entire organization and it should successfully depict andintegrate the data structures of the entire organization.6. Describe Business Process Reengineering.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 17
  18. 18. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHBusiness Process Reengineering (BPR) BPR has been around for quite some time and a lot has been written about it in both, thepractitioner trade press and the academic research journals. However, the controversy stillremains about whether there is any accurate description of BPR, or BPR is just a fad – anappealing label to tag on to whatever your company is doing, to suggest that your latest andgreatest work is ‘in vogue’. But if reengineering is to continue in the long run, then it must domore than advertise its considerable successes to date. It must become more proactive andinclusive with regard to human, organizational and motivational change issues. Dr Michael Hammer defines BPR as “…… the fundamental rethinking and radical redesignof business processes to achieve dramatic improvements in critical, contemporary measures ofperformance such as cost, quality, service and speed.” One of the main tools for making thischange is the Information Technology (IT). Any BPR effort that fails to understand the importanceof IT, and goes through the pre-BPR analysis and planning phases without considering thevarious IT options available, and the effect of the proposed IT solutions on the employees and theorganization, is bound to crash during takeoff. We have seen that the ERP systems help in integrating the various business processes of theorganization with the help of modern developments in IT. With a good ERP package, theorganization will have the capability of achieving dramatic improvements in critical areas such ascost, quality, speed and so on. So many BPR initiatives and up in the ERP implementation.7. Describe Data Warehousing.Data Warehousing: If operational data is kept in the databases of the ERP system, it can create a lot ofproblems. As time passes, the amount of data will increase and this will affect the performance ofthe ERP system. So it is better to archive the operational data once its use is over. When I say “theuse is over’, it does not mean that the archived data is useless. On the contrary, it is one of themost valuable resource of the organization. However once the operational use of the data is over,it should be removed from the operational databases. For example, once the financial year is over,the daily transactional data can be archived. Figure shows what happens if the data is notarchived.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 18
  19. 19. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH Figure: Operational data vs. archive data It is evident from the figure that even though the operational data volume is nearly thesame each year, since the data is not archived, the total amount of data that is stored in theoperational database will go on increasing. Figure shows the effect of keeping this huge amountof data in the operational database. It is clear from the above graph that as the volume of the data in the database increases, theperformance of the database and the related applications decreases. Figure: Data volume vs. performance From the above discussions, it is evident that we should separate the operational data fromthe non-operational data. I am not using the term archive data, because if the non-operationalVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 19
  20. 20. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHdata is archived, there is little or no use for it. But this data is a very valuable resource and is tooprecious to be kept in some archive. It is in this situation that a data ware house comes in handy. The primary concept of data warehousing is that the data stored for business analysis canbe accessed most effectively by separating it from the data in operational systems. The mostimportant reason for separating data for business analysis, from the operational data, has alwaysbeen the potential performance degradation on the operational system that can result from theanalysis process. High performance and quick response time is almost universally critical foroperational systems. The reasons to separate the operational data from the analysis data have notsignificantly changed with evolution of the data warehousing systems, except that now they areconsidered more formally during the data warehouse building process. Advances in technologyand changes in the nature of business have made many of the business analysis processes muchmore complex and sophisticated. In addition to producing standard reports, today’s datawarehousing systems sup port very sophisticated online analysis, including multi-dimensionalanalysis.8. Explain the concept of Data Mining.Data Mining: We are living in the information age. The importances of collecting data that reflects onesbusiness, or of activities that achieve competitive advantage, are widely recognised now.Powerful systems for collecting data and managing it in large databases are available in mostorganizations. However, the major bottleneck of converting this data into effective information isthe difficulty faced in extracting knowledge about the system from the collected data. Modelingthe investigated system discovering relations that connect variables in a database are the subjectsof data mining. Data mining is the process of identifying valid, novel, potentially useful and ultimatelycomprehensible information from databases that is used to make crucial business decisions.Modern data mining systems self learn from the previous history of the investigated system,formulating and testing hypotheses about the rules, which the system obeys. When concise andvaluable knowledge about the system of interest has been discovered, it can and should beincorporated into some decision support system which helps the manager make wise andinformed business decisions. The main reason for needing automated computer systems for intelligent data analysis isthe enormous volume of existing and newly appearing data that require processing. The amountof data accumulated each day by various businesses, scientific and governmental organizationsaround the world is daunting. Research organizations, academic institutions and commercialorganizations create and store huge amounts of data each day. It becomes impossible for humananalysts to cope with such overwhelming amounts of data. The other problems that surface when human analysts process data are:VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 20
  21. 21. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH  The inadequacy of the human brain when searching for complex multifactorial dependencies in the data  The lack of objectiveness in analyzing the data A human expert is always a hostage of the previous experience of investigating othersystems. Sometimes this helps, sometimes this hurts, but it is almost impossible to get rid of thisfact. One additional benefit of using automated data mining systems is that this process has amuch lower cost than hiring an army of highly trained (and paid) professional statisticians. Whiledata mining does not eliminate human participation in solving the task completely, itsignificantly, it significantly simplifies the job and allows an analyst, who is not a professional instatistics and programming, to manage the process of extracting knowledge from data.9. Describe OLAP.On-Line Analytical Processing (OLAP): According to Business Intelligence Ltd (http://www.OLAPReport.com), OLAP can bedefined in five words – Fast Analysis of Shared Multidimensional Information. FAST means that the system is targeted to deliver most responses to users within about fiveseconds, with the simplest analysis taking no more than one second and very few taking morethan one second and very few taking more than 20 seconds. ANALYSIS means that the systemcan cope with any business logic and statistical analysis that is relevant for the application and theuser, and keep it easy enough for the target user. SHARED means that the system implements allthe security requirements for confidentiality (possibly down to cell level) and, if multiple writeaccess is needed, concurrent update locking at an appropriate level. MULTIDIMENSIONALmeans that the system must provide a multidimensional conceptual view of the data, includingfull support for hierarchies and multiple hierarchies. INFORMATION is refined data that isaccurate, timely and relevant to the user. Simply put, OLAP describes a class of technologies that are designed for live ad-hoc dataaccess and analysis. While transaction processing (OLTP) generally relies solely on relationaldatabases, OLAP has become synonymous with multidimensional views of business data. Thesemultidimensional views are supported by multidimensional database technology and provide thetechnical basis for calculations and analysis required by Business Intelligence applications. OLAP technology is being used in an increasingly wide range of applications. The mostcommon are sales and marketing analysis; financial reporting and consolidation; and budgetingVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 21
  22. 22. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHand planning. Increasingly however, OLAP is being used for applications such as productprofitability and pricing analysis; activity based costing; manpower planning; and qualityanalysis, or for that matter any management system that requires a flexible, top down view of anorganization.10. Explain the concept of Supply Chain Management.Supply Chain Management: A supply chain is a network of facilities and distribution options that performs the functionof procurement of materials, transformation of these materials into intermediate and finishedproducts, and the distribution of these finished products to customers. Supply chains exist in bothservice and manufacturing organizations, although the complexity of the chain may vary greatlyfrom industry to industry and firm to firm. Traditionally, marketing, distribution, planning, manufacturing, and the purchasingorganizations along the supply chain operated independently. These organizations have theirown objectives which are often conflicting. Marketing’s objective of high customer services andmaximum sales revenue conflict with manufacturing and distribution goals. Many manufacturingoperations are designed to maximize throughput and lower costs with little consideration for theimpact on inventory levels and distribution capabilities. Purchasing contracts are often negotiatedwith very little information beyond historical buying patterns. The result of these factors is thatthere is not a single, integrated plan for the organization- there are as many plans as businesses.Clearly, there is a need for a mechanism through which these different functions can be integratedtogether. Supply chain management is a strategy through which such integration can be achieved.Lambest and cooper identified that SCM having the following management components : • Planning and control • Work structure • Organization structure • Production flow facility structure • Information Flow facility structure • Management methods • Risk and reward structure • Culture and attitudeVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 22
  23. 23. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH UNIT – II PART – A1. Write different phases of the ERP implementation.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 – implementation2. Define Pre – evaluation Screen. The Company should do a pre-evaluation screening to limit the number of packages thatare to be evaluated by the committee. Not all packages are equal – each has its own strengths andweakness. The pre-evaluation process should eliminate those packages that are not at all suitablefor the company’s business processes.3. Describe package evaluation. The evaluation / selection process is one of the most important phases of the ERPimplementation, because the package that you select will decide the success or failure of theproject. Since ERP systems involve huge investments, once a package is purchased, it is not aneasy task to switch to another one. So it is a ‘do it right the first time’ proposition.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 23
  24. 24. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH4. Write the important points for evaluating ERP software. ♦ Fundamental fit with the company’s business processes ♦ Degree of integration between the various components of the ERP system ♦ Flexibility and scalability ♦ Complexity ♦ User friendliness ♦ Quick implementation ♦ Ability to support multi – site planning and control ♦ Technology – client / server capabilities, database independence, security ♦ Availability of regular upgrades ♦ Amount of customization required ♦ Local support infrastructure ♦ Availability of reference sites ♦ Total costs, including cost of license, training, implementation, maintenance, customization and hardware requirements.5. Describe the project planning phase for ERP. This is the phase that designs the implementation process. It is in this phase that the detailsof how to go about the implementation are decided. Time schedules, deadlines, etc. for the projectare arrived at. The project plan is developed. Roles are identified and responsibilities areassigned. The organizational resources that will be used for the implementation effort are decidedand the people who are supposed to head the implementation are identified. The implementationteam members are selected and task allocation is done. This phase will decide when to begin theproject, how to do it and when the project is supposed to be completed. This is the phase whichwill plan the ‘what to do’ in case of contingencies; how to monitor the progress of theimplementation; what control measures should be installed and what corrective actions should betaken when things get out of control. The project planning is usually done by a committeeconstituted by the team leaders of each implementation group. The committee will be headed bythe ERP incharge (usually the CIO or COO). The committee will meet periodically (during theentire implementation lifecycle) to review the progress and chart the future course of actions.6. Why is the pre-evaluation screening required? There are hundreds of ERP vendors – of all sizes and shapes – all claiming to have thesolution that is ideal for your company. Analyzing all the packages before reaching a decision isnot a viable solution. It is also a very time consuming process. So it is better to limit the numberof packages that are evaluated to less than 5. It is always better to do a through and detailedevaluation of a small number of packages, rather than doing a superficial analysis of dozens ofpackages. It is to identify these packages that we need the pre – evaluation screening.7. What are the factors to be considered when selecting an ERP package?VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 24
  25. 25. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH When selecting an ERP package, the following factors should be considered:  Functional fit with the company’s business processes  Degree of integration between the various components of the ERP system  Flexibility and scalability  Complexity  User friendliness  Quick implementation  Ability to support multi – site planning and control  Technology – client / server capabilities, database independence, security  Availability of regular upgrades  Amount of customisation required  Local support infrastructure  Availability of reference sites  Total costs, including cost of license, training, implementation, maintenance, customisation and hardware requirements.8. What is Gap analysis? Gap analysis is a phase in the ERP implementation, where the organization tries to find outthe gaps between the company’s existing business practices and those supported by the ERPpackage. Put very simply, this is the process through which companies create a complete mode ofwhere they are now and where they are heading. The trick is to design a model, which bothanticipates and covers any functional gaps. It has been estimated that even the best ERP package,customer tailored to a company’s needs, meets only 80% of the company’s functionalrequirements.9. How are the ‘gaps’, found out during the gap analysis phase filled? This can be done in different ways. One of the most affordable, but most difficult, solutionsentails altering the business to ‘fit’ the ERP package. Another solution is that the company cansimply agree to live without a particular function (the cheap but annoying solution). Othersolutions include: ♦ Pinning your hopes on an upgrade (low cost but risky) ♦ Identifying a third – party product that might fill the gap (hopefully it also partners with the ERP packages, keeping interfacing to a minimum) ♦ Designing a custom program ♦ Altering the ERP source code, (the most expensive alternative; usually reserved for mission – critical installations)10. Define Reengineering. Reengineering Business Process Reengineering. The radical transformation of a businessVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 25
  26. 26. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHprocess to achieve orders of magnitude and improvement in one or more performance measuresrelating to fitness – for – purpose, quality, cycle – time and cost; usually requiring the applicationof technology enablers. Reengineering projects typically take a minimum of two years tocomplete.11. Explain the main functional area of ERP implementation. Rule of ERP implementation is, synchronising existing company practices with the ERPpackage rather than changing the source code and customising it to suit the company. In order todo so, business processes have to be understood and mapped in such a way that the arrived atsolutions match up with the overall goals of the company.12. Define Testing. This is the phase where you try to break the system. You have reached a point where youare testing real case scenarios. The system is configured and now you must come up withextreme-case scenarios-system overloads, multiple users logging on at the same time with thesame query, users entering invalid data, hackers trying to access restricted areas and so on. Thetest cases must be designed specifically to find the weak links in the system and these bugs shouldbe fixed before going live.13. Explain End User Training. This phase starts much before the system goes live. The employees who are going to usethe new system are identified. Their current skills are noted and based on the current skill levels,they are divided into groups. Then each group is given training on the new system. This trainingis very important as the success of the ERP system is in the hands of the end – users. So thesetraining sessions should give the participants an overall view of the system and how individualactions would affect the entire system.14. Explain Maintenance mode. The post – ERP organization will need a different set of roles and skills than those with lessintegrated kinds of systems. At a minimum, everyone who uses these systems needs to be trainedon how they work, how they relate to the business process and how a transaction ripples throughthe entire company whenever they press a key. The training will never end; it is an ongoingprocess; new people will always be coming in, and new functionality will always be entering theorganization.15. Who are ERP vendors? Vendors are the people who have developed the ERP packages. They are the people whohave invested a huge amount of time and effort in research and development, to create thepackaged solutions.16. Write important skills that ERP should possess. ♦ Knowledge of how to organize and run a project of this magnitudeVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 26
  27. 27. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH ♦ Enough experience in handling problems and issues that arise during the implementation ♦ Good people skills ♦ Good leadership skills ♦ Excellent training skills17. Describe Vendors. Vendors are the people who have developed the ERP packages. They are the people whohave invested huge amounts of time and effort in research and development to create thepackaged solutions. If one studies the history of the ERP packages and finds out how eachpackage evolved, it soon becomes evident that every ERP package grew out of the experience oropportunity of a group of people, working in a specific business, who created systems that coulddeal with certain business segments.18. Write the role of vendor. The vendor should supply the product and its documentation as soon as the contract issigned. Only after the software is delivered, can the company develop the training and testingenvironment for the implementation team. The vendor is responsible for fixing any problems inthe software that the implementation team encounters. So the vendor should have a liaison officerwho should constantly interact with the implementation team. Another role the vendor has to play is that of the trainer – to provide the initial training forthe company’s key users, people who will play lead roles in the implementation of the system.19. Write briefly about consultants. Business consultants are professional who specialize in developing techniques andmethodologies for dealing with the implementation and with the various problems that will cropup during the implementation. They are experts in the administration, management and controlof these types of projects. Each of them will have many man – years of implementation experiencewith various industries and would have time – tested methodologies and business practices thatwill ensure successful implementation. They will be good at all phases of the implementationlifecycle, right from package evaluation to end – user training.20. Write the role of the consultant. The consultants should guarantee the success of the project and should be able to show theresults (quantifiable results like reduction in cycle time, increased response time, improvedproductivity and so on) to the satisfaction of the company management. Consultants are responsible for administering each of the phases of the implementation, soVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 27
  28. 28. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHthat the required activities occur at the scheduled time and at the desired level of quality and witheffective participation of all those who must participate.21. Who is an end users and why are the so critical for the success of the ERP implementation? End users are the people who will be using the ERP system once it is in place. These are thepeople who were doing the functions that are being automated or computerised by the ERPsystem. With the implementation of the ERP system, the old job descriptions will change, thenature of the job will undergo drastic transformation. It is human nature to resist change. Whenwe are talking about implementing an ERP system we are talking about change in a very massivescale. Employees will fear that system will feat that system will replace existing jobs, as manyfunctions will be automated. Also people will be afraid of the amount of training they have toundergo and learning they have to do to use the new system. Job profiles will change, jobresponsibilities will undergo drastic alterations, and people will be forced to develop new skillsets. If these fears are not addressed and alleviated well in advance, it will cause trouble for theorganization.22. Explain the steps of data migration strategy. • Identifying the data to be migrated • Determining the timing of data migration • Generating data templates • Freezing the tools for data migration • Deciding on migration related steps • Deciding on data arching PART – B1. Explain ERP implementation lifecycle. The different phases of the ERP implementation are given below: • Pre-evaluation Screening • Package Evaluation • Project Planning Phase • Gap Analysis • ReengineeringVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 28
  29. 29. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH • Configuration • Implementation Team Training • Testing • Going Live • End-user Training • Post-implementation Vendors Pre-Selection Company Pre-Selection Managemen Screening Screening t Package Evaluation Package Evaluation Project Planning Project Planning Gap Analysis Testing Configuration Gap Analysis Testing Configuration Re- engineering Implementation End-user Training Re- engineering Implementation End-user Training Tram training Tram training Going Live Going Live Post Implementation Post Implementation Phase Phase Fig. ERP implementation lifecycle – different phasesPRE - EVALUATION SCREENING Once the company has decided to go in for the ERP system, the search for the perfectpackage starts. But there are hundreds of ERP vendors – of all sizes and shapes – all claiming tohave the solution that is ideal for you. Analyzing all the packages before reaching a decision is nota viable solution. It is also a very time consuming process. So it is better to limit the number ofpackages that are evaluated to less than five. It is always better to do a thorough and detailedevaluation of a small number of packages, than doing a superficial analysis of dozens of packages.Hence, the company should do a pre-evaluation screening to limit the number of packages thatare to be evaluated by the committee. Not all packages are equal – each has its own strengths andweakness. The pre-evaluation process should eliminate those packages that are not at all suitablefor the company’s business processes. One can zero in on the few best packages by looking at theproduct literature of the vendors, getting help from external consultants and most importantly, byfinding out what package is used by companies which are similar. It is always better to find outhow the different packages are performing in environments similar to yours.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 29
  30. 30. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHPACKAGE EVALUATION The evaluation / section process is one of the most important phases of the ERPimplementation, because the package that you select will decide the success or failure of theproject. Since ERP systems involve huge investments, once a package is purchased, it is not aneasy task to switch to another one. So it is a ‘do it right the first time’ proposition. There is littleroom for error. The most important factor that should be kept in mind when analyzing the differentpackages is that none of them are perfect. The idea that there is no perfect package needs to beunderstood by everyone in the decision-making team. The objective of the selection process is notto identify a package that covers each and every requirement (a perfect fit). The objective is to finda package that is flexible enough to meet the company’s needs, or in other words, a software thatcould be customized to obtain a ‘good fit’. Once the packages to be evaluated are identified, the company needs to develop a selectioncriteria that will permit the evaluation of all the available packages on the same scale. To choosethe best system, the company should identify the system that meets the business needs, thatmatches the business profile and that which identifies with the business practices of the company.It is impossible to get a system that will perform, exactly as the company does business, but theaim should be to get the system that has the least number of differences. According to S. Shankaranarayanan, Senior Consultant with Baan Infosystems India Pvt.Ltd. (ERP Systems-Using IT to gain a competitive advantage), some important points to be kept inmind while evaluating ERP software include: • Functional fit with the company’s business processes. • Degree of integration between the various components of the ERP system. • Flexibility and scalability • Complexity • User friendliness • Quick implementation • Ability to support multi-site planning and control • Technology –client/server capabilities, database independence, security • Availability of regular upgrades • Amount of customization required • Local support infrastructure • Availability of reference sites • Total costs, including cost of license, training, implementation, maintenance, customization and hardware requirements.2. Explain implementation Methodology.IMPLEMENTATION TEAM TRAININGVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 30
  31. 31. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH Around the same time that the configuration is taking place, the implementation team isbeing trained, not so much how to use the system, but how to implement it. This is the phasewhere the company trains its employees to implement and later, run the system. The ERP vendorsand the hired consultants will leave after the implementation is over. But for the company to beself-sufficient in running the ERP system, it should have a good in-house team that can handle thevarious situations. Thus, it is very vital that the company recognizes the importance of this phaseand selects those employees who have the right attitude – people who are willing to change, learnnew things and are not afraid of technology – and good functional knowledge.TESTING This is the phase where you try to break the system. You have reached a point where youare testing real case scenarios. The system is configured and now you must come up with extreme-case scenarios – system overloads, multiple users logging on at the same time with the samequery, users entering invalid data, hackers trying to access restricted areas and so on. The testcases must be designed specifically to find the weak links in the system and these bugs should befixed before going live.GOING LIVE This is it. Lights on, switches thrown, gloves off. On the technical side, the work is almostcomplete – data conversion is done, databases are up and running; and on the functional side, theprototype is fully configured and tested and ready to go operational. The system is officiallyproclaimed operational, even though the implementation team must have been testing it andrunning it successfully for some time. But once the system is ‘live’ the old system is removed, andthe new system is used for doing business.END-USER TRAINING This is the phase where the actual users of the system will be given training on how to usethe system. This phase starts much before the system goes live. The employees who are going touse the new system are identified. Their current skills are noted and based on the current skilllevels, they are divided into groups. Then each group is given training on the new system. Thistraining is very important as the success of the ERP system is in the hands of the end-users. Sothese training sessions should give the participants an overall view of the system and howindividual actions would affect the entire system. In addition to these general topics, eachemployee is trained on the job or task that he/she is supposed to perform once the system goeslive. It is human nature to resist change. Also many people are afraid of computers and other newtechnologies. So there will be resistance to change. Another factor is that not all people will besuccessful in making the changeover. The company management should address these concernsand take necessary actions to avoid failure. The end-user training is much more important andmuch more difficult (since most end-users are not thrilled at having to change) than theimplementation, team training. Companies are beginning to take this phase seriously, as there isVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 31
  32. 32. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHstatistical evidence now, which shows that most implementations fail because of a lack of end-usertraining.POST- IMPLEMENTATION (MAINTENANCE MODE) One important factor that should be kept in mind is that the post-implementation phase isvery critical. Once the implementation is over, the vendors and the hired consultants will go. Toreap the full benefits of the ERP system, it is very important that the system should get enterprise-wide acceptance. There should be enough employees who are trained to handle the problems thatmight crop-up. There should be people, within the company, who have the technical prowess tomake the necessary enhancements to the system as and when required. The system must beupgraded as and when new versions or new technologies are introduced. Here the organizationshould think in terms of the incremental benefits of the new enhancements. Because with anyupgradation or enhancements, there will be a lot of other aspects like user training that have to beconsidered. So instead of going in for upgradation as and when a new version is announced bythe vendor, the organization should first analyse the costs and benefits. The post-ERP organization will need a different set of roles and skills than those with lessintegrated kinds of systems. At a minimum, everyone who uses these systems needs to be trainedon how they work, how they relate to the business process and how a transaction ripples throughthe entire company whenever they press a key. The training will never end; it is an ongoingprocess; new people will always be coming in, and new functionality will always be entering theorganization. Just as courtships and honeymoons are different from marriages, living with ERP systemswill be different from installing them. Projects for implementing the ERP systems get a lot ofresources and attention. However, an organization can only get the maximum value of theseinputs if it successfully adopts and effectively uses the system.3. Who is an ERP vendors and what are his roles?VENDORS Vendors are the people who have developed the ERP packages. They are the people whohave invested huge amounts of time and effort in research and development to create thepackaged solutions. If one studies the history of the ERP packages and finds out how eachpackage evolved, it soon becomes evident that every ERP package grew out of the experience oropportunity of a group of people, working in a specific business, who created systems that coulddeal with certain business segments. Now with the ERP market place becoming crowded withmore and more players entering the market and the competition becoming hot, today’s ERPpackages have features and functionality to cater to the needs of businesses in almost all sectors.The ERP vendors spent billions of rupees in research to come up with innovations that make thepackages more efficient, flexible, and easy to implement and use. Also with the evolution of newtechnologies, the vendors have to constantly upgrade their product to be able to use the best andVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 32
  33. 33. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHlatest advancements in technology.Role of the Vendor First and foremost, the vendor should supply the product and its documentation as soon asthe contract is signed. Only after the software is delivered, can the company develop the trainingand testing environment for the implementation team. The vendor is responsible for fixing anyproblems in the software that the implementation team encounters. So the vendor should have aliaison officer who should constantly interact with the implementation team. Another role the vendor has to play is that of the trainer-to provide the initial training forthe company’s key users, people who will play lead roles in the implementation of the system.These key users are the ones who will define, together with the consultants, how the software is toserve the company. In other words, it is these in-house functional experts who will decide how thefunctionalities are to be implemented, as well as how to use or adapt the product to suit thecompany’s unique requirements. So it is very critical that these key users are given a thoroughtraining on the features of the package. Vendor’s training should achieve the goal of showing thekey users how the package works, what are the major components, how the data and informationflows across the system, what is flexible and what is not, what can be configured and what cannot,what can be customized and what should not, what are the limitations, what are the strengths andweaknesses and so on. Now some of you might ask: we are hiring consultants who are experts in the package sowhy can’t we get training from the consultants? This is true. Most of the consultants are capable ofproviding sound training for the packages. But we are hiring the consultants for implementing thesystem. The objective of the vendor training is to show how the system works, not to show how itshould be implemented. This means that the vendor demonstrates the product as it exists andhighlights what are the possible options available. The company’s employees who areparticipating in the vendor training should try to understand the characteristics of the packageand the impact of the system on their business processes. The trainees should use these trainingsessions to question the vendor on all aspects of the system. The consultants also have a role to play during this vendor training. They shouldparticipate in the training sessions to evaluate how the users react to the reality that is starting totake shape from the detailed presentations and demos. Consultants should also ask questions thatthe vendors are trying to avoid and the users are unaware of. This is the best way to present thereal picture to the users and it will also prevent the vendors from making false claims. The role of the package vendor does not end with the training. The vendor also plays animportant project support function and must exercise the quality control with respect to how theproduct is implemented. It is the vendor who understands the finer details and subtleties of theproduct and can make valuable suggestions and improvements that could improve theperformance of the system. It is also in the best interests of the vendor that this participationcontinues, because if the implementation fails, most of the blame will fall on the vendor. Also aVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 33
  34. 34. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHsuccessful implementation means an- other satisfied client, improved goodwill and good referralsand so on. So the vendor will continue to participate in all the phases of the implementation,mostly in an advisory capacity, addressing specific technical questions about the product andtechnology. The vendor has other responsibilities also. There will be ‘gaps’ between the package andthe actual business processes. The software might have to be customized to suit the company’sneeds. Customizing means altering the product so that it is suited for the company’s purposes.The choice of whether to customize or not is the one that can have enormous impact on the projectand it often constitutes a point of conflict between the consultants and users. But if the decision tocustomize has been taken, it is the vendor’s duty to carry out the necessary modifications. This isbecause only the vendor knows the product well enough to make the necessary changes withoutaffecting the other parts. Moreover, the company should get a guarantee (in writing) from thevendor that despite the customization, it will be able to benefit from the future softwareimprovements introduced by the vendor.4. Who are consultants and what are their roles?CONSULTANTS Business consultants are professional who specialize in developing techniques andmethodologies for dealing with the implementation and with the various problems that will cropup during the implementation. They are experts in the administration, management and control ofthese types of projects. Each of them will have many man-ears of implementation experience withvarious industries and would have time-tested methodologies and business practices that willensure successful implementation. They will be good at all phases of the implementation lifecycle,right from package evaluation to end-user training. The only problem with them is that they areexpensive-very expensive. Many of the big consulting firms, having forecasted the ERP boom,invested a great deal of money in developing a range of consulting services in this field andassigned many of their professionals to become specialists in the various aspects of ERP-packagesand their implementation. These firms researched the various products, developed an in depthunderstanding of each product’s strengths and weaknesses, worked by the side of the ERPvendors, confirmed that the vendor’s package worked and learned the tricks and techniques of thetrade, found out the pitfalls and mistakes that should be avoided and thus created a pool ofexperts who could handle the ERP implementation without failure. Thus, consultants are people who have made the business of ERP implementation theirbusiness and have invested huge amount, of money and manpower for that purpose. So whenyou want to get the services of these consultants, the first question that will be asked is –“Are theygoing to be expensive?” The answer is a definite YES. The consultants will be expensive, so thecompany will have to formulate a plan regarding best optimum utilization of the money spent onconsultants. If we study the statistics, we can see that a well-selected, integrated system that wassuccessfully implemented and which is successfully working usually pays for itself in a relativelyshort period – between 10 and 30 months. If you analyze the cost break-up, you will find that theVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 34
  35. 35. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHmost expensive part of the implementation was the consultation charges. For a typical ERPimplementation, the cost of consultants is 1.5 to 3 times for every rupee invested in the softwareproduct. Sounds amazing; but it is true and it is also true that the software will pay for itself-thesoftware cost, the consultant’s charges and other expenses incurred during implementation – inthe above mentioned period (10-30 months). But the catch is that the product has to be the rightone and the implementation has to be successful. That is why the expertise of the consultantsbecomes invaluable and the money spent on good consultation is never wasted. So finding theright consultants – people who have the necessary know-how, who will work well with thecompany personnel, people who will transfer their knowledge to the company’s employees andpeople who are available in case their services are required again – is very important.Role of Consultants The role of the consultants is very familiar to all of us because we have seen many of themin action. The company places its trust in the consultants, that its business objectives will beachieved. In fact, it is a better practice that the contract between the company and the consultantsshould have all the performance clauses in place. The consultants should guarantee the success ofthe project and should be able to show the results (quantifiable results like reduction in cycle time,increased response time, improved productivity and so on) to the satisfaction of the companymanagement. Consultants are responsible for administering each of the phases of the implementation, sothat the required activities occur at the scheduled time and at the desired level of quality and witheffective participation of all those who must participate. For keeping the promises that theconsultants have made during the negotiations, they have to transform their approaches andmethodologies into detailed work plans. The methodology will have to be converted into tasksand should be allocated to the right people. The time schedule for each phase and each task has tobe determined and the project plan has to be finalized. Consultants should add value to the project. They bring the know-how about the packageand about the implementation-the know-how that is not included in the standard documentation.This know-how (also know as practical knowledge) is derived from their expertise which stemsfrom practical experience. Because the consultants have seen many projects and have made orseen many mistakes, they can avoid the phenomenon of ‘reinventing the wheel’. They will knowwhat will work and what will not. Thus by eliminating the trial-and-error method ofimplementation, and by doing it right the first time, the consultants help in saving huge amountsof money, time and effort . Consultants should also know how to remain impartial while questioning current companyprocesses in an effort to promote better businesses practices and better implementation results.They should strive to improve the company’s business processes so that the software package canbe used as it was originally intended by its developers. Refining the company’s processes can onlyoptimize the performance of the system and maximize future user satisfaction. The consultants arealso responsible for analyzing and clearly addressing the customization issues. They must be ableVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 35
  36. 36. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECHto distinguish between the ‘must have’ and ‘nice to have’ items and decide on the level ofcustomization. This is an area where the consultants have to use their diplomatic skills, as thecompany people might want to customize all the aspects. It is the duty of the consultants topresent the advantages and drawbacks of each area and reach a consensus decision, which shouldalso be the right one. Consultants need to position themselves in such a way as to balance theirloyalty to the client and the project, with that of defending the package vendor, when suchdefense is technically correct. This is indeed a very difficult job (like a tight-rope walk) and that iswhy consultants are being paid such huge amounts for their services. It is the duty of the consultant to understand the total context and scope of the envisionedwork and to know when to alert the company management about actions and decisions that mustbe undertaken so that the job will not be compromised and the implementation will not bejeopardized. Maintaining technical documentation on the project also falls within the duty of theconsultant. The consultants will leave once the project is complete, but the knowledge of theproject must stay within the organization. So the consultants should create a knowledge base andshould train enough people so that the work they have started is continued.5. Explain End users in detail.End-Users: End users are the people who will be using the ERP system once it is in place. These are thepeople who were doing the functions that are being automated or computerized by the ERPsystem. With the implementation of the ERP system, the old job descriptions will change, thenature of the job will undergo drastic transformation. It is human nature to resist change. Whenwe are talking about implementing an ERP system we are talking about change in a very massivescale. Employees, will fear that system will replace existing jobs, as many functions will beautomated. Also people will be afraid of the amount of training they have to undergo andlearning they have to do to use the new system. Job profiles will change, job responsibilities willundergo drastic alterations, and people will be forced to develop new skill sets. If these fears arenot addressed and alleviated well in advance, it will cause trouble for the organization. It should be worth noting the fact, that while the ERP systems eliminate many existing jobs,it creates many new ones-ones with more responsibilities and value addition. It is easy to see thatthe automation of the business processes, through technology, can eliminate the jobs of manyemployees whose function it is to record, control, calculate, analyze, file or prepare reports. But itmust be pointed out to the employees that the same automation creates many more opportunitiesfor them, because they can get away from the monotonous clerical work and transform themselvesinto highly valued individuals, in a new and challenging working environment using moderntechnology. If the company can succeed in making its employees accept this fact and assist inmaking the transformation (by giving them training), then the major (and most critical) obstacle inthe path of an ERP implementation is solved. UNIT – IIIVEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 36
  37. 37. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH PART – A1. What are the modules available in ERP Package? ♦ Finance ♦ Manufacturing and Production Planning ♦ Sales and Distribution ♦ Plant Maintenance, ♦ Quality Management ♦ Materials Management, etc.2. What is financial data? The entire concept of information technology is based on the premise that providing theright information, to the right people, at the right time can make a critical difference to theorganization. Much of this key information could be taken from the financial data. But merelyhaving the financial data is not enough. You need a set of processes and views of your data thatprovides up-to-the-minute financial information in exactly the form you need it to make thatcritical difference and help with that crucial decision. Accounting software needs access toinformation in each area of your organization, from R & D and market research throughmanufacturing, distribution and sales. Your financial solution must provide the managementwith information that can be leveraged for strategic decisions, in order to achieve competitiveadvantage.3. Define financial module in ERP module. The finance modules of most ERP systems provide financial functionality and analysissupport to thousands of businesses in many countries across the globe. These ERP systemsinclude not only financial application components, but also Human Resources, Logistics, BusinessWorkflow and links to the Internet. Hundreds of business processes are covered in these systems.4. Write the types of subsystem in financial module.  Financial Accounting (General Ledger, Accounts Receivable / Payable, Special Ledgers, Fixed Asset Accounting, Legal Consolidation)  Investment Management (Investment Planning/Budgeting/ controlling, Depreciation Forecast/ Simulation/ Calculation)  Controlling (Overhead Cost Controlling, Activity-Based Costing, product Cost Accounting, Profitability Analysis)  Treasury (Cash Management, Treasury Management, Market Risk Management, Funds Management).  Enterprise Controlling (Executive Information System, Business Planning and Budgeting, Profit Centre Accounting).VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 37
  38. 38. VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH5. Describe financial accounting. The objective of a good financial accounting system is to provide company wide controland integration of financial Accounting Module of an ERP system, gives you the ability tocentrally track financial accounting data within an international framework of multiplecompanies, languages, currencies, and charts of accounts. For example, when raw materials movefrom inventory into manufacturing, the system reduces quantity values in inventory andsimultaneously, subtracts values for inventory accounts in the balance sheet. Most of the FinancialAccounting modules comply with international accounting standards, such as GAAP and IAS.They also fulfill the local legal requirements of many countries.6. Define Investment Management. Investment Management provides extensive support for investment processes right fromplanning through settlement. Investment management facilitates investment planning andbudgeting at a level higher than that needed for specific orders or projects.7. Define Controlling. The controlling system gathers the functions required for effective internal cost accounting.It offers a versatile information system, with standard reports and analysis paths for the mostcommon questions. In addition, there are features for creating custom reports to supplementstandard reports.8. Define Treasury. You can gain a significant competitive advantage by efficiently managing the short,medium, and long – term payment flows and the resulting risk exposure. Tasks such as short –term monitoring and concentration of bank account balances, medium – term planning, andforecasting of incoming and outgoing resources in accounts receivable and payable, to a long –term view of areas such as materials management and sales, underline the importance of inter-grating information from various company divisions. Linking these operating divisions torealised and planned financial transactions and positions in treasury, has a significant impact onthe company’s success. Such integration also facilities management and control of cash flows, andrisk positions through all the divisions in the company. The treasury component provides youwith a basis for effective liquidity, portfolio and risk management.9. Define Enterprise Controlling. Enterprise controlling comprises of those functions that will optimise share holder value,while meeting internal objectives for growth and investment. This module usually includeexecutive information system, business planning and Budgeting, Consolidation, and Profit CentreAccounting.VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH 38

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