ERP- Enterprise Resource Planning

1. ERP- Enterprise Resource Planning Prepared for B. Com 4th Semester, 2009 St. Xavier’s College IT DEPT, B.COM, ST. XAVIER'S COLLEGE

2. Concept • ERP systems provide an integrated suite of information technology applications that support the operations of an enterprise and are not, as the acronym ERP implies, limited to planning functions. • The activities supported by ERP systems include all core functions of an enterprise, including financial management, human resources management, and operations. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

3. What is ERP? • 1. It is an integrated multi-dimensional system for all functions. • 2. It is not merely the import and export of data across the functional modules. The integration ensures that the logic of a process that cuts across the function is captured genuinely. This in turn implies that data once entered in any of the functional modules (whichever of the module owns the data) is made available to every other module that needs this data. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

4. 3. It seeks to standardize, streamline and integrate the various operations and information flows in a company by synergizing its resources, that is, men, material, money and machinery, through information technology. • 4. ERP allows information to enter at a point in the process and updates a single, shared database for all functions that directly or indirectly depend on this information. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

5. 5. Integration takes place in real time and once placed into the system, the information is available in all the necessary forms through which it may be accessed throughout the system. • 6. Many of the processes implemented in an ERP software are core processes such as order processing, order fulfillment, shipping, invoicing, purchase order processing, preparation of Balance Sheet, Profit and Loss statement etc., that are common to all industry segments. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

6. Definition • 1. ERP can be defined as an integrated suite of application software modules, providing operational, managerial and strategic information for an enterprise to improve productivity, quality and competitiveness. • 2. ERP is package software solution that addresses the enterprise needs of an organization by integrating the various functions of an organization using a process view of the organization. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

7. Organisation – before and after ERP IT DEPT, B.COM, ST. XAVIER'S COLLEGE

8. Major characteristics IT DEPT, B.COM, ST. XAVIER'S COLLEGE

9. 1. Integration • It provides seamless integration of all the information flowing through a company – financial and accounting, human resource information, supply chain information, and customer information. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

10. 2. Packages • Enterprise systems are not developed in house. • IS life cycle is different: 1)mapping organizational requirements to the processes and terminology employed by the vendor and 2) making informed choices about the parameter setting. • Organizations that purchase enterprise systems enter into long-term relationships with vendors. Organizations no longer control their own destiny. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

11. 3. Assembly Requirement • Only the software is integrated, not the computing platform on which it runs. Most companies have great difficulty integrating their enterprise software with a package of hardware, operating systems, database management systems software, and telecommunications suited to their specific needs. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

12. 4. Best Business Practices • ERP vendors talk to many different businesses within a given industry as well as academics to determine the best and most efficient way of accounting for various transactions and managing different processes. The result is claimed to be “industry best practices”. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

13. 5. Evolving system • Enterprise Systems are changing rapidly. • Architecturally the changes are: Mainframe, Client/Server, Web-enabled, Object-oriented, Componentization (Baan). • Functionally the changes are: front-office (ie. Sales management), supply chain (advanced planning and scheduling), data warehousing, specialized vertical industry solutions, etc. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

14. Levels of ERP IT DEPT, B.COM, ST. XAVIER'S COLLEGE

15. 1. Planning: • This level includes supply chain planning, manufacturing planning and other planning operations like budgeting and sales planning. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

16. 2. Execution • This level includes production systems (involving process modeling, statistical process control, inventory etc.); logistics (including order entry, shipping, transportation, etc.); and other activities like procurement, maintenance and human resources. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

17. 3. Analysis • : This level includes costing (like product costing); financials (consisting of payables, receivables, general ledger, etc.); and other activities like sales analysis. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

18. Benefits of ERP IT DEPT, B.COM, ST. XAVIER'S COLLEGE

19. 1. Integration of financial information • Finance has its own set of revenue numbers, sales has another version, and the different business units may each have their own version of how much they contributed to revenues. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

20. 2. Integration of customer order information • By having all aspects of customer order information in one software system, rather than scattered among many different systems that can't communicate with one another, companies can keep track of orders more easily, and coordinate manufacturing, inventory and shipping among many different locations at the same time. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

21. 3. Standardisation and speeding up manufacturing processes • ERP systems come with standard methods for automating some of the steps of a manufacturing process. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce head count. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

22. 4. Reduction of inventory • ERP helps the manufacturing process flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories of the stuff used to make products (work-in-progress inventory), and it can help users better plan deliveries to customers, reducing the finished good inventory at the warehouses and shipping docks. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

23. 5. Standardisation of HR information • Especially in companies with multiple business units, HR may not have a unified, simple method for tracking employees' time and communicating with them about benefits and services. ERP can fix that. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

24. Enterprise potentials of ERP IT DEPT, B.COM, ST. XAVIER'S COLLEGE

25. 1. Enterprise integration • ERP enables integration of different functional and geographically dispersed enterprise units through cross-functional, process-oriented and virtually integrated enterprise. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

26. 2. Business Process Reengineering • Business Process Reengineering is a pre-requisite for going ahead with a powerful planning tool, ERP. An in depth BPR study has to be done before taking up ERP. Business Process Reengineering brings out deficiencies of the existing system and attempts to maximize productivity through restructuring and re-organizing the human resources as well as divisions and departments in the organisation . IT DEPT, B.COM, ST. XAVIER'S COLLEGE

27. 3. Standardization of systems and procedures across the enterprise • Multiple business units of large companies can be standardized by using a single integrated system that can save time, reduce cost and increase productivity. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

28. 4. Business Networking Systems (BNS) • It is concerned with the exchange of business documents (like purchase orders, sales orders, invoicing and billing) electronically among business partners. ERP systems can easily be enhanced into BNS by combining them with Web technology using standards such as XML and EDI. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

29. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

30. Modules of ERP • 1. Financial modules: These modules support the accounting and finance functions. • 2. Manufacturing and logistics modules: These modules consist of a group of applications for planning production, taking orders and delivering products to the customer. • 3. Human resource modules: These modules handle personnel related tasks for corporate managers and individual employees. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

31. Phases of ERP implementation IT DEPT, B.COM, ST. XAVIER'S COLLEGE

32. The Chartering Phase • Comprises the decisions leading up to the funding of an enterprise system. • Key Players: Vendors, Consultants, Company Executives, IT specialists. • Key Activities: Build a business case for ERP, Select a software package, Identify a project manager, Approve a budget and schedule. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

33. The Project Phase • Comprises the activities performed to get the system up and running in one or more organizational units. • Key Players: Project Manager, Project team members, Internal IT specialists, Vendors, and Consultants. • Key Activities: Software configuration, system integration, testing, data conversion, training, and rollout. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

34. The Shakedown Phase • The organization is coming to grips with the ERP System. Ends when “normal operations” have been achieved. (Or they give up and pull the plug on the system) • Key Players: Project Manager, Project team members, Operational Managers, and End users. • Key Activities: Bug fixing and rework, system performance tuning, retraining, staffing up to handle temporary inefficiencies. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

35. The Onward and Upward Phase • Continues from normal operation until the system is replaced with an upgrade or a different system. This is where the organization is able to ascertain the benefits (if any) of its investment. • Key Players: Operational Managers, End-users, IT support personnel (Vendors and consultants may be involved – upgrades) • Key Activities: Continuous business improvement, additional user skill building, post implementation benefit assessment. Most of these activities are not performed. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

36. SAP IT DEPT, B.COM, ST. XAVIER'S COLLEGE

37. What is SAP? • The original name for SAP was German: Systeme, Anwendungen, Produkte, German for "Systems Applications and Products." • SAP is the leading Enterprise Information and Management Package worldwide. Use of this package makes it possible to track and manage, in real-time, sales, production, finance accounting and human resources in an enterprise. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

38. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

39. SAP Application Modules • (FI )Financial Accounting--designed for automated management and external reporting of general ledger, accounts receivable, accounts payable and other sub-ledger accounts with a user defined chart of accounts. As entries are made relating to sales production and payments journal entries are automatically posted. This connection means that the "books" are designed to reflect the real situation. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

40. (CO )Controlling--represents the company's flow of cost and revenue. It is a management instrument for organizational decisions. It too is automatically updated as events occur. • (AM )Asset Management--designed to manage and supervise individual aspects of fixed assets including purchase and sale of assets, depreciation and investment management. • (PS) Project System--is designed to support the planning, control and monitoring of long-term, highly complex projects with defined goals. • (WF) Workflow--links the integrated SAP application modules with cross-application technologies, tools and services IT DEPT, B.COM, ST. XAVIER'S COLLEGE

41. (IS) Industry Solutions--combine the SAP application modules and additional industry-specific functionality. Special techniques have been developed for industries such as banking, oil and gas, pharmaceuticals, etc. • (HR) Human Resources--is a complete integrated system for supporting the planning and control of personnel activities. • PM Plant Maintenance--In a complex manufacturing process maintenance means more than sweeping the floors. Equipment must be services and rebuilt. These tasks affect the production plans. • (MM) Materials Management--supports the procurement and inventory functions occurring in day-to-day business operations such as purchasing, inventory management, reorder point processing, etc. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

42. (QM) Quality Management--is a quality control and information system supporting quality planning, inspection, and control for manufacturing and procurement. • (PP )Production Planning--is used to plan and control the manufacturing activities of a company. This module includes; bills of material, routings, work centers, sales and operations planning, master production scheduling, material requirements planning, shop floor control, production orders, product costing, etc. IT DEPT, B.COM, ST. XAVIER'S COLLEGE

43. (SD) Sales and Distribution--helps to optimize all the tasks and activities carried out in sales, delivery and billing. Key elements are; pre-sales support, inquiry processing, quotation processing, sales order processing, delivery processing, billing and sales information system. IT DEPT, B.COM, ST. XAVIER'S COLLEGE