Necessity of ERP in Business - @ IISWBM by self

1. ERP in Business

2. What is ERP ?
ERP is acronym of ‘Enterprise Resource Planning.’ ERP is a way to
Integrate data and processes of an organization into a single system.
Usually ERP will have many components including Hardware & Software,
in order to achieve integration. Most ERP systems use a unified database
to store data for various functions found throughout the organization.
ERP helps manufacturing companies to do a better job in managing the
key resources
• Manpower
• Material
• Machines

3. These key resources are needed to manufacture quality products for
customers.
ERP provides software to help us in :
1. Process Sales Order
2. Purchase Material
3. Production Scheduling
4. Manage Accounting
more effectively and efficiently. There are many ERP software packages
available in market today and many of them might do a good job but
it is not a one size that fits in all prepositions. ERP is a companywide
approach that will help employees in many areas of our business to do
our jobs better, such as :

4. 1. Accounting
2. Purchasing
3. Scheduling
4. Manufacturing
5. Shipping & Receiving
When implemented properly, ERP gives us the tools needed to improve
our :
• Delivery Performance
• Reduced Inventory Cost
• Build Bottom Line Profits
The term ERP originally referred to how large organization planned to use
Organizational wide resources.

5. In the past, ERP systems were used in large more industrial type companies.
However, the use of ERP has changed and is extremely comprehensive, today
the term can refer to any type of company, no matter what type of
Industry it falls in.
Infact, ERP Systems are used nowadays in any scale of organization
Whether large or SME’s (Small and Medium Scale Establishments)
Characteristics of ERP Systems :
• Integrated System that Operates in real time, without relying on periodic
updates.
• A common database that supports all applications
• A consistent look and feel throughout each module.
• Installation of the system without elaborate application / data integration
by Information Technology (IT) Department

6. Today's ERP System helps in integrating key functional area of an
Organization. The function areas are as follows:
• Finance / Accounting
• Human Resource
• Sales Forecasting & Demand
• Manufacturing
• Supply Chain Management
• Project Management
• Customer Relationship Management
• Inventory Management
• Access Control
Of all these we will discuss only few basic details of Manufacturing /
Production, Inventory Management and Sales Forecasting

7. DEMAND FORECASTING :
One must do something about your demand planning processes before
losing any more sales. Demand planning is often thought of as some
type of voo-doo magic that sometimes works and sometimes doesn't
for the supply chain . In fact, demand planning is extremely effective when
one understands how best to apply the numerous variables and algorithms
for specific situations. Major distributors of goods in all industries leverage
demand planning best practices with phenomenal results. Ideally, demand
planning will work as an active part of our enterprise resource planning
(ERP) system in order to forecast purchase and stock requirements and
Predict customer buying habits so that inventory levels are optimized while
meeting customer demands. There are several types of inputs required
including:

8. • Historical Sales Trends - using a two to five year period is ideal for
most systems in order to analyze sales activities.
• Manufacturer forecasts - knowing what our supplier trends have been
and will be help in the analysis.
• Seasonal factors – carefully review all products for seasonal activity.
Also note if there are other factors besides the season that could be
affecting the trend.
For example could a semi-annual sale trigger a jump in sales?
Constraints or business rules - does our business always purchase at certain
levels to maximize a discount or reduce freight expenses? Are there limitations
in warehouse space to consider? Once the inputs are available, it is now time
to put our demand planning system to work. The following are five key
techniques to use in order to maximize our results:

9. 1. Include customers in our analysis - by also receiving customer planning and
forecasting information we can reduce forecast errors and have a more
predicable demand model. Ideally we would like monthly or weekly inputs
regarding customer stock planning and know in advance about promotional
opportunities.
2. Include suppliers in our analysis - often manufacturers and suppliers have
additional insights and information about product availability and new products
is valuable data.
3. Apply demand sensing and shaping techniques - this relatively new approach
examines demand from a more holistic viewpoint, grouping items into segmen
with common demand requirements. The shaping process can have influence
on downstream supply chain activities and help to balance our stock for the
best ROI.

10. 4. Frequent measurement and quality reviews - once we have our demand
algorithms in place, it's time to change them. There is a constant flow of
activities that can influence our results, so it is important to routinely review
and compare our demand predictors against reality and then tune our
processes accordingly.
5. Consider external influences - the economy, raw material availability and
other factors should be utilized to help with the tuning process. Our
demand planning system can be an extremely helpful tool to help us lower
our stock while maximizing item availability.

11. INVENTORY MANAGEMENT :
Of course, most modern ERP systems process transactions in real time, often
including accounting transactions (where there is no urgent need for real time
processing), so in a purely practical sense we could skip the ‘why’ question
or real time inventory management. In most cases the functionality is already
there! However, there are practical reasons why achieving accurate real time
inventory data is not quite as simple as that.
To explore this further, let’s concentrate on the relationship between real time
processing and the (sometimes manual) work following the real time transactions
• Say for instance a client orders an article online. During the confirmation
process by the sales module the inventory module will be consulted about the
availability of the ordered article. There are a number of possible scenarios:

12. • The ordered item is in stock: The customer will receive an order
confirmation, stating when the order will be delivered, at what price
and quantity. This can be done in real time via email. The inventory
module will record the sales order for this particular stock item and
Takes it into account when any following availability checks occur.
• The ordered item is not in stock: The customer must be notified
of this and asked if he or she accepts a backorder. If so the inventory
module sends a purchase advice to the purchase module. So far it
is all done rea l time . The purchase department then processes the
purchase advice – and from the perspective of the original sales
order, this process does not occur in real time.

13. In ERP based System
The purchase department issues purchase orders.
The inventory module will record (real time) the individual purchase items
and relate them to the particular stock items involved. Data such as the
expected date of delivery and quantity are important for availability checks
as mentioned above.
The supplier confirms the purchase order. For the inventory module this is
relevant as far as the confirmed date of delivery and the quantity and price
Are concerned. This data is stored on inventory at article level.
Individual purchased articles are received. When this event is recorded, the
relevant article records in the inventory are updated, real time.

14. Sales orders are delivered. When the sold articles are being picked for
Delivery (automatically or manually) the corresponding inventory records are
updated, at the same time or shortly afterwards.
The inventory management module produces a purchase advice list, based
On minimum stock levels and/or purchase alerts caused by availability checks
in the sales process. When the purchase advice list is accepted (entirely or
partially) this fact can be recorded and the relevant inventory records will be
updated accordingly.
The full purchase orders are received. The inventory clerk, who receives the
goods and puts them in stock, can record this fact by merely accessing the
purchase order and log it as received. The relevant inventory records will be
updated real time.

15. Stock Movements – We can track all inventory transactions made in
The past or planned in the future. Every transaction goes from one
location to another, one due to the double entry inventory management of
ERP. From the product form, we can also obtain the future stock forecast.
Tracking Lots are used to track logistical units which can be containers for
a set of products, for example. Every transaction line can belong to one
tracking lot that refers to the related box, the pallet or the container. We
can get the complete upstream or downstream traceability for each
tracking lot.
With Production Lots (usually identified by bar codes stuck on the
products) you can efficiently track a single product (in this case, it's often
called Serial number) or a set of similar products. We can specify the
production lot on every product used in the inventory transactions. We
can get the complete upstream or downstream traceability for each
production lot.

16. PLANING / SCHEDULING:
Manufacturing in ERP allows us to manage our supply chain in a complete
and accurate way.
We can manage resources like human resources or machines
We will be able to create multi-level bills of materials and their
corresponding routing for assembling or manufacturing finished products.
A scheduler tool will then deliver the planning and will launch all
manufacturing orders and purchase orders when necessary.
A control system will inform you in case of problems during the supply
process.
Finally, we can analyze our supply chain efficiency thanks to a list of useful
Reports.

17. They includes:
• Resources
• Master Data
• Planning
• Manufacturing
• Control
Resources: ERP allows us to manage two types of resources; materials and
human resources. Resources are defined by their working time and/or their
capacity (number of operations done in parallel in a work center, time to
complete a production cycle).
Working period allows us to define the period of activity by day.
With Resources Leaves we can specify the days or periods of inactivity
for any resource.

18. Master Bills of Materials describe the list of raw materials or sub-
products used to make a finished product.
The hierarchical structure allows us to manage multi-level bill of materials.
Bills of materials components are components and sub-products used in
Master bills of materials.
Routings define the list of operations to be done in a work center to
Manufacture or assemble a given product.
One bill of material can be linked to one routing, which describes how to
Manufacture or assemble the product
Work Centers are independent units within the manufacturing facility,
consisting of one or several people and/or machines. Work centers are used
For the purpose of forecasting and capacity planning.

19. Compute schedulers: the scheduler is the heart of the ERP system in
terms of planning. It organizes manufacturing orders based on priorities (sub
products manufacturing, dates required, etc.), launches purchase orders for
missing components and assigns products in stock.
The scheduler tool is usually planned to be launched automatically once a
Day. This frequency can be adjusted depending on your company's sector and
Needs. You can also run it manually should you need to
Manufacturing Orders describe the list of raw material that will be used
for each stage of production. Raw material can be consumed all at once or
progressively during the production process. In addition ERP provides scrap
management. Partial production is also possible.
The procurement order will schedule a proposal for automatic procurement
for the product which needs replenishment.
This procurement will start a task, either a purchase order form for the
supplier, or a production order depending on the product's configuration

20. Work Orders are manufacturing operations required to produce or
assemble products.
The different work orders will have different impacts on the costs of
manufacturing and planning, depending on the available workload.
Procurement Exceptions: in the MRP process, procurements orders are
created to launch manufacturing orders, purchase orders, stock allocations,
etc. Procurement orders are generated automatically by the system and unless
there is a problem, the user will not be notified
In case of problems, the system will raise some procurement exceptions to
inform the user about blocking problems that need to be resolved manually
(like, missing BOM structure or missing supplier)

21. Work Center Load is a projection of loads in a work center for a given a
period.
The load is expressed in hours (for human resources) or cycles (for
machines)
Weekly Stock Value Variation enables you to track the evolution of the stock
value, according to the level of manufacturing activities (consumption of raw
materials, production of finished goods, added accounting value of stock) as
they progress in the transformation process.

22. THANK YOU
As per instruction from
Prof. S Kumar Gupta
By Amitava Sen Gupta
IIIrd Semester, 2012-15,
IISWBM, Kolkata