ERP systems integrate planning, manufacturing, sales, marketing and other business functions into a single system. This document provides an overview of ERP, including what ERP is, how it works, key components like finance, HR and manufacturing modules, benefits like improved integration and efficiency, challenges of implementation like costs and time, and major ERP vendors like SAP, Oracle and PeopleSoft. The document uses examples to illustrate how ERP streamlines processes and information sharing across departments before and after implementation.

1. Lecture #6:Lecture #6:
ERP- Enterprise Resource Planning
( An Introduction)
Humayun Akhtar

2. 2
What is ERP?
• The practice of consolidating an enterprise’s
planning, manufacturing, sales and marketing
efforts into one management system.1
• Combines all databases across departments into a
single database that can be accessed by all
employees.2
• ERP automates the tasks involved in performing a
business process.1

3. 3
Evolution of ERP

4. 4
Employees
Managers and
Stakeholders
How Do ERP Systems Work?
Central
Database
Reporting
Applications
Human
Resource
Management
Applications
Financial
Applications
Manufacturing
Applications
Inventory
And Supply
Applications
Human
Resource
Management
Applications
Service
Applications
Sales and
Delivery
Applications
Sales Force
And Customer
Service Reps
Customers Back-office
Administrators
And Workers
Suppliers

5. 5
ERP Components
• Finance: modules for
bookeeping and making sure
the bills are paid on time.
Examples:
– General ledger
– Accounts receivable
– Accounts payable
• HR: software for handling
personnel-related tasks for
corporate managers and
individual employees.
Examples:
– HR administration
– Payroll
– Self-service HR
• Manufacturing and Logistics: A
group of applications for
planning production, taking
orders and delivering products
to the customer. Examples:
– Production planning
– Materials management
– Order entry and processing
– Warehouse management

6. 6
An ERP Example: Before ERP
Customers
Customer
Demographic
Files
Sales Dept.
Vendor
Orders
Parts
Accounting
Accounting
Files
Purchasing
Purchasing
Files
Order is placed
with Vendor
Invoices
accounting
Inventory
Files
Warehouse
Checks for Parts
Calls back “Not in stock”
“We ordered the parts”
“We Need parts #XX”
“We ordered the parts”
Sends report
Sends report
Sends report
Ships parts

7. 7
An ERP Example: After ERP
Database
Customers Sales Dept.
Purchasing
Warehouse
Accounting
Vendor
Inventory Data
If no parts,
order is placed
through DB
Orders
Parts
Order is submitted
to Purchasing.
Purchasing record
order in DB
Order is placed
with Vendor
And invoices accounting
Financial Data exchange;
Books invoice against PO
Books inventory
against PO
Ships parts

8. 8
Who are the main ERP
vendors?
• Baan
• JD Edwards
• Oracle
• PeopleSoft
• SAP

9. 9
Why ERP?
3 Major Reasons:
• To integrate financial data.
• To standardize manufacturing
processes.
• To standardize HR information.

10. 10
ERP Project and Time
• Real transformational ERP efforts will usually run
between 1 to 3 years, on average.
• Short implementations (3 to 6 months):
– small companies,
– implementation limited to a small area of the company, or
– the company only used the financial pieces of the ERP
system.
• The important thing is not to focus on how long it will
take but to understand why you need ERP and how
you will use it to improve your business.

11. 11
Total Cost of Ownership of
ERP
Total cost of ownership (TCO) is a model developed by
Gartner Group to analyze the direct and indirect costs of owning
and using hardware and software. TCO essentially helps a
company determine whether it wins or loses from specific
technology implementations.
• Metagroup study among 63 companies surveyed showed
that:
– the average TCO was $15 million (the highest was $300
million and lowest was $400k),
– the average TCO per user was $53,320.

12. 12
Total Cost of Ownership of
ERP
• It also found that:
– it took 8 months after the system was in to see any benefits,
– but that the median annual savings from the system was $1.6
million per year.

13. 13
Hidden Costs of ERP
• Training
• Integration and testing
• Data conversion
• Data analysis
• Consultants
• Replacing best and brightest staff after implementation
• Implementation teams can never stop
• Waiting for ROI
• Post-ERP depression

14. 14
Benefits of ERP Systems
• Improving integration, flexibility
• Fewer errors
• Improved speed and efficiency
• More complete access to information
• Lower total costs in the complete supply chain
• Shorten throughput times
• Sustained involvement and commitment of the
top management

15. 15
Benefits of ERP Systems (cont’d)
• Reduce stock to a minimum
• Enlarge product assortment
• Improve product quality
• Provide more reliable delivery dates and
higher service to the customer
• Efficiently coordinate global demand,
supply and production

16. 16
Risks with ERP
Implementation
• Expensive (can costs 100 thousands to
millions of dollars)
• Time-consuming (can take months to years)
• Great risk for the organization
• Transfer of Knowledge
• Acceptance with the company

17. Definition Of ERP
Software solution that addresses all the needs of an
enterprise with the process view of an
organization to meet the organizational goals and
integrate all the functions of the enterprise

18. What is ERP ?
• Facilitates Company-wide integrated Information
Systems Covering all functional Areas.
• Performs core Corporate activities and increases
customer service augmenting Corporate Image.
• Organizes & Optimizes the data input
methodologies systematically.

19. • MIS - Management Information Systems
Decision Support - No
• IIS - Integrated Information Systems
No Decision Support - No
• EIS - Executive Information Systems
Decision Support - Yes
• CIS - Corporate Information Systems
Decision Support - Yes
• EWS - Enterprise Wide Systems
Decision Support - No
Logistics are considered as a part of system
Evolution of Business Applications

20. • Materials Requirement Planning (MRP)
• Manufacturing Resource Planning ( MRP II)
• Enterprise Resource Planning ( ERP)
• Distribution Resource Planning ( DRP)
Other terminologies are :
• Money Resource Planning (MRP III)
• Supply Chain Management
• Value Chain Management
Evolution of Planning Systems

21. Is It Only a Jargon ?
No. MRP and MRP II were there for a long
time.
ERP is an enhancement over these.
Introduction of ERP provides you a chance to
have a new look at your working.

22. Is It Going to be there long?
Yes and No.
ERP will be there for a long time, if you are willing
to upgrade to new versions with new features as and
when the are released in the market
Your ERP may still work after a long time without
enhancements, if your company is not growing!
Moral : Upgrading the systems are a must!

23. Can We wait ?
Wait if you have :
• Good systems running.
• No immediate threat of Y2K, Euro and
other known/unknown problems.
• No management commitment.
• Financial problems.
Do not wait if you have :
• Tough competition in the market.
• Multiple location operations.
• Plans to grow Globally.
• Management Commitment for change.

24. Why ERP ?

25. ProfitabilityProfitability
You have Two Choices :
Increase in sales - Say 30%
OR
Reduce Procurement Cost - say by 5-10 %

26. What IT Dept. shall look into?What IT Dept. shall look into?
 Automatic Identification System
 Hardware & Networking
 Software DBMS/RDBMS
 Communication
 ERP
 Supply Chain Management
 EDI
 Intranet
 Internet

27. For Healthy Operations
• Integration of Systems across the Functional Departments
in a Company as well as across the Enterprise as a Whole.
• Better Customer Service.
• Introduction of Latest Technologies as and when the are
ready for the Industry acceptance
• Expertise database
• Avoids data redundancy

28. Competition In the Market!
Manufacturing Challenges.
• Manufacturing Globally.
• Distribution network spread.
• New Product introduction.
• Lower manufacturing lead time.
Focus on industry markets.
• Satisfying the needs of customers.
• Develop specific business methods and
processes.
• Integration with third party products.

29. • Better products at lower costs
• Tough competition
• Need to analyze costs / revenues on a product or
customer basis
• Flexibility to respond to changing business
requirements
• More informed management decision making
Demands on the Industry

30.  Unable to get accurate, timely information
 Applications not complete for existing business
practices
 Modifications are time consuming or not feasible
What are your Problems ?

31. A Typical IT Story
Manufacturing
location 1
Manufacturing
location 2
Sales Group
Finance
Corporate office
My growth
will be OK . No?

32. ERP - The Enabler

33. What is that ERP enables ?
Systematic Look into your Systems & procedures
Optimizing the processes
Enables you to adapt yourself to new technologies
Discipline across the functions

34. What does ERP integrate ?
• Database
• Applications
• Interfaces
• Tools

35. What drives ERP ?
• Business
• Customer Satisfaction
• Business Development - new areas, products, services
• Ability to face competition
• Efficient processes required to push the company to
top gear
• IT
• Present Software does not meet business needs
• Legacy systems difficult to maintain, Y2K Problem ,
Euro currency
• Obsolete hardware/software difficult to maintain

36. Problems Taken Care of
 Availability check at the time of Accepting Sales order
 On-line Material Status & Shortages
 Productivity Enhancements
 Material Planning
 Customer Service
 Cash Management
 Inventory
 Quality

37. Subsystems of ERP
• Logistics
• Bill Of Materials
• Sales & Marketing
• Master Scheduling
• Materials Requirement Planning
• Capacity Requirements Planning
• Purchasing
• Shop Floor Control
• Accounts Payable/Receivable
• HR

38. Software Market Share
SAP15.6
Peoplesoft 4.9
Oracle 4.8
Baan 3.0
CA 3.0
JDE 2.2
SSA 2.1
GEAC 2.0
IBM 1.8
JBA 1.7
Others 59.0

39. Understanding ERP

40. Integration of Information
Systems
Local purchasing,
invoice verification
Inventory management
Internal sales,
shipping and billing
Profit/loss
Capacity utilization
Information Systems:
Project Mgmt
Inventory
 Purchasing
 Sales
Budget
Cash Management
Manufacturing Head Quarters Marketing/Sales
IS messages
Sales, shipping
and billing
Purchasing of
trading goods
Inventory
Management
Customer service
IS messages

41. Definition of Business Intelligence
Any tools enabling people to make better decisions
and thus improve their business processes
• Decision support systems (DSS)
• Executive information systems (EIS)
• Reporting
• Data mining
• Early warning systems (robots)
Examples:

42. Enabling Best Business Practices
Business
Engineering
Workbench
New
Technologies
Best Business Practices
New Business
Concepts
Customer
Supplier’s
Reference Model
Customer
Require-
ments

43. Changes of Customer Information
Customer
Representative
Change customer
master data
Sales Manager
Schedule
customer
visit
Credit Manager
Increase
credit limit
Product Manager
Prepare
production
Please Accept my
new order for 1000
more sets
Launch
Workflow

44. The Integrated Supply Chain
Finance Balance sheetCapital Costs
Machines Operating resources Human resources
Purchasing Production Sales.Procurement
market
Managing Resources
Control
Profit/Loss

45. Process Automation and Lead Time
Workflow for
exception handling, Trigger for mail, transactions, EDI
EDI
noteBlocked
EDI
entry
ATPATP Credit limitCredit limit
PickingPicking
TransportTransport
PricingPricing
AllocationAllocation
Standard functionsStandard functions
Scan
log
Loading
list
EDI Sales order
entry
Delivery Billing EDI

46. Go Ahead with ERP

47. Business Process Re-Engineering ( BPR)
• In-depth study of existing systems/processes is
required before ERP is considered.
• This study brings out deficiencies of the
existing system/process.
• This study is called BPR
• BPR attempts to re-structure and re-organize the
human resources, functional areas, Man-
Machine interfaces in the organization.
• Hence BPR attempts to maximize productivity

48. Re-engineering
• Study the current system & Processes
• Design and develop new systems
• Define Process, organization structure, procedures
• Develop/Customize the software
• Train people
• Implement new system

49. ERP without Re-engineering
• Advantages
– No visible changes in Functionality
– Users find it more acceptable
– Can be completed within time frame.
– Cost can be with in your control
– Impact on Organization will be moderate
• Disadvantages
– Best Business practices would have been ignored
– Stability of the system is known only in long run
– May not achieve Corporate wide systems integration
– New technologies have to be studied your self
– Some functionality may be lost

50. Re-Engineering -a part Life with ERP!
• Re-engineer process before going for ERP
• Re-engineer during implementation of ERP
• Re-engineer after implementing ERP
• Continuous re-engineering through ERP

51. If It is a Big Change, don’t do it!
If the Modifications are
small and important to the
business, you may
customize and implement.
If the proposed changes are
more, discuss with all
concerned . Else you may
be going towards a
dead-end!

52. The USA Principle
• Understand, Simplify, Automate
Understand
Existing
Practices
Simplify
Processes
by
Eliminating waste
Automate
the
Process
EDI
ERP
Eliminating
Combining
Rearranging
Diagramming
Story-boarding
Brain storming

53. ERP Selection
• Check whether all functional aspects of your
Business are covered
• Check whether all the business functions and
processes are integrated
• Check whether all latest IT trends are covered
• Check whether the vendor has customizing &
implementing capabilities
• Check the Service options available
• Check your purse & calculate ROI

54. Prepare Base for ERP
• Do not start without Management commitment
• Allocate sufficient funds
• Identify Core Project Team
• Select specialists from all functional areas
• Evaluate and select ERP package
• Evaluate Implementation Partner
• Make an Implementation Plan
• Present plan to Management Committee for sanctions
• Present plan to Employee groups for feedback/acceptability
• Plan for User Training
• Plan for Future upgrades

55. Define Requirements
• Determine the hardware required
• Analyze the existing Processes
• Fine tune the processes to be in line with those of
ERP defined
• Analyze effect of system changes.
• Prototype and present
• Refine the prototype & freeze the specifications

56. ERP Implementation
• Commitment from Management
• Form a task force with personnel from all
functional Areas
• Take care of Hardware requirements
• Step-by-step rather than big-bang introduction
• Be patient. ERP implementation takes Time.

57. • Project Planning
• Business & Operational Analysis, including Gap Analysis
• Business Process Re-engineering (BPR)
• Installation & Configuration
• Project Team Training
• Business Requirements Mapping to Software
• Module Configuration
• System Modification and Interfaces
• Data Conversion
• Custom Documentation
• End User Training
• Conference Room Pilot
• Acceptance Testing
• Production
• Post-Implementation Audit/Support
ERP Involves

58. Implementation Approach
Detailed
Discussions
Design &
Customization
Implementation/
Prepare to Go Live
Production/
Go Live
Project Initialization
Evaluation of current processes,
business practices, requirements
Set-Up Project Organization
Map Organization
Map Business Processes
Define Functions and Processes
ERP S/w Configuration
Build ERP System Modifications
Create Go-Live Plan & Documentation
Integrate Applications
Test the ERP Customization
Train Users
Run Trial Production
Maintain systems
Accepted norms & Conditions
Project Organization Chart
Identify Work Teams
Organization Structure
Design Specification
Process Flow Diagrams
Function Model
Configuration Recording
Systems Modification
Testing Environment report
Customization Test Report
Implementation Report
Reconciliation Reports
Conversion Plan Execution
Tasks DeliverablesPhase

59. Advantages Of ERP

60. Advantages Of ERP Package
 Highly Graphics based User Interface.
 Zero Down time/ planned down time.
 Readymade solutions for most of the Problems.
 Only Customization required.
 Integration of all functions ensured.
 ROI earlier than the software developed in-house.
 Easy enterprise wide information sharing.
 Suppliers and Customers can be on-line communication.
 Knowledge transfer between industries guarantees innovation.
 Automatic adaptation to new technology.

61. Decide
Make Or Buy !

62. Inhouse Development ERP package
Project Development takes time . Ready made Projects.
Reinventing the wheel. Needs only customization
Process specific to your industry Best Business practices followed
are implemented
Documentation may not be present Documentation is part of system
EDI implementation modifications EDI Compatible. Universally accepted
to be taken care of
Enterprise implementation is The package itself is designed as
difficult as each unit follows Enterprise Package.
different S/W option
Latest Developments to be studied Constant Updates on Technology
as and when they are introduced. and Processes assured

63. Embrace
New Technologies

64. Internet/Intranet enabled

65. TransportersTransporters
BanksBanks VendorsVendors
CustomsCustoms RetailersRetailers
Electronic Data Interchange
EDI

66. Video Conferencing

67. Summary
• Optimum utilization of resources
• Customer satisfaction
• Seamless integration between Functions
• Reduced overheads & inventory
• Timely responsiveness
• Market share & image enhancement
• Faster design to manufacturability
• Keep up with technology changes
• Only way for integrated systems for a client
with multiple locations

68. THANK YOUTHANK YOU