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ERP- Enterprise Resource Planning ( An Introduction)

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

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 .

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

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

Is It Only a Jargon ? No. MRP and MRP II were there for a long time. ERP is an enhancement over these. It is true that Year 2000 problem accelerated the sales and acceptance of ERP. Introduction of ERP provides you a chance to have a new look at your working.

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!

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.

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

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

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

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.

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

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

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

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

What does ERP integrate ? Database Applications Interfaces Tools

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

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

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

Software Market Share SAP 15.6 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 Note : These are Mar 1998 figures

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

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:

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

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

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

Process Automation and Lead Time Workflow for exception handling, Trigger for mail, transactions, EDI ATP Credit limit Picking Transport Pricing Allocation Standard functions EDI Sales order entry Delivery Billing EDI EDI note Blocked EDI entry Scan log Loading list

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

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

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

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

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!

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

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

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

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

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.

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

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 Deliverables Phase

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.

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

Transporters Banks Vendors Customs Retailers Electronic Data Interchange EDI

Value Chain Management Supply Chain Management Demand Chain Management

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

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