UNIT 3

ERP
I. ERP & DIFFERENT MODULES OF ERP
ANS. ERP
i. ENTERPRISE RESOURCE PLANNING(ERP) is a cross-functional enterprise system
driven by an integrated suite of software modules that supports the basic internal business
processes of a company
ii. ERP is the practice of consolidating an enterprises planning, manufacturing, sales and
marketing Human Resource, Finance efforts into one management system.
iii. Enterprise resource planning (ERP) is business process management software that allows
an organization to use a system of integrated applications to manage the business and
automate many back office functions related to technology, services and human
resources.
iv. Enterprise resource planning refers to the systems and software packages used by
organizations to manage day-to-day business activities, such as accounting, procurement,
project management and manufacturing.
v. ERP is category of business-management software typically a suite of integrated
applicationsthat an organization can use to collect, store, manage and interpret data
from these many business activities.
vi. ERP provides an integrated and continuously updated view of core business processes
using common databases maintained by a database management system. ERP systems
track business resourcescash, raw materials, production capacityand the status of
business commitments: orders, purchase orders, and payroll.

MODULES/FUNCTIONAL AREAS - An ERP system covers the following common functional

i. Finance & Accounting: General Ledger, Fixed Assets, payables including vouchering,
matching and payment, receivables Cash Management and collections, cash management,
Financial Consolidation
ii. Management Accounting: Budgeting, Costing, cost management, activity based costing
iii. Human resources: Recruiting, training, rostering, payroll, benefits, retirement and
pension plans, diversity management, retirement, separation
iv. Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity,
workflow management, quality control, manufacturing process, manufacturing projects,
manufacturing flow, product life cycle management
v. Order Processing: Order to cash, order entry, credit checking, pricing, available to
promise, inventory, shipping, sales analysis and reporting, sales commissioning.
 vi. Supply chain management: Supply chain planning, supplier scheduling, product
configurator, order to cash, purchasing, inventory, claim processing, warehousing
(receiving, put-away, picking and packing).
vii. Project management: Project planning, resource planning, project costing, work
breakdown structure, billing, time and expense, performance units, activity management
viii. Customer relationship management: Sales and marketing, commissions, service,
customer contact, call center support CRM systems are not always considered part of
ERP systems but rather Business Support systems (BSS).
ix. Data services: Various "selfservice" interfaces for customers, suppliers and/or
employees
x. Inventory management - gathers data and generates reports about non-capitalized assets
and stock items.
xi. Sales & Marketing - Typical sales process includes processes like Sales queries &
enquiry analysis & handling, quotation drafting, accepting sales orders, drafting sales
invoices with proper taxation, dispatch/Shipment of material or service, tracking pending
sales order . All these sales transactions are managed by sales module of ERP.
xii. Purchase - purchase modules take care of all the processes that are part of procurement
of items or raw materials that are required for organization. Purchase module consist of
functionalities like supplier/vendor listing, supplier & item linking, sending quotation
request to vendors, receiving & recording quotations, analysis of quotations, preparing
purchase orders, tracking the purchase items, preparing GRNs(Good Receipt Notes) &
updating stocks & various reports . Purchase module is integrated with Inventory module
& Engineering/production module for updating of stocks.
xiii. Engineering/ Production - Production module is great help for manufacturing industry
for delivering product. This module consist of functionalities like production planning,
machine scheduling, raw material usage,(Bill of material)preparation, track daily
production progress production forecasting & actual production reporting.
xiv. Warehouse management systems (WMS) software is a must-have for manufacturers.
ERP WMS modules follow the distribution process involved with finished goods or
materials from delivery into the warehouse for storage through replenishment and picking
for shipment to fulfill orders. WMS modules also help synchronize and control stock on
the shop floor.

BUSINESS ACTIVITIES CAN INCLUDE/IMPORTANCE

i. product planning,
ii. purchase planning
iii. production planning
iv. manufacturing or service delivery
v. marketing and sales
vi. materials management
 vii. inventory management
viii. shipping and payment
ix. finance
x. Distribution process management
xi. Supply chain management
xii. Services knowledge base
xiii. Configure prices
xiv. Improve accuracy of financial data
xv. Facilitate better project planning
xvi. Automate the employee life-cycle
xvii. Standardize critical business procedures
xviii. Reduce redundant tasks
xix. Assess business needs
xx. Accounting and financial applications
xxi. Lower purchasing costs
xxii. Manage human resources and payroll

ADVANTAGES
i. Improving integration, flexibility
ii. Fewer errors
iii. Improved speed and efficiency
iv. More complete access to information
v. Lower total costs in the complete supply chain
vi. Improve product quality
vii. Provide more reliable delivery dates and higher service to the customer
viii. Efficiently coordinate global demand, supply and production

DISADVANTAGES
i. The installation of the ERP system is costly. ERP consultants are very expensive take
approximately 60% of the budget.
ii. The success depends on the skills and experience of the workforce, including education
and how to make the system work properly.
iii. Resistance in sharing internal information between departments can reduce the efficiency
of the software.
iv. The systems can be difficult to use.
v. Change of staff, companies can employ administrators who are not trained to manage the
ERP system of the employing company, proposing changes in business practices that are
not synchronized with the system.
 vi. Having an ERP system has many advantages, but does not guarantee the total success of
the company. Organizational culture, know how to involve staff and anticipate changes
that will suffer the organization using this system of administration, are important
elements for the completion of the implementation.
vii. The effectiveness of the ERP system may decrease if there is resistance to share
information between business units or departments. Due to strong changes that
implementation of the ERP system brings in the culture of work, there may be poorly
trained or disinterested in making use of the same staff
viii. The benefits of having an ERP system are not presented immediately with the
implementation of the software, they will be evident long after the system is running.
ix. The culmination of the implementation depends on the ability and skill of the workforce,
also involves education and training, to make the system is correctly applied.
x. The high cost of implementation and maintenance. (High initial investment)
xi. Adaptation to the hardware in the company.
xii. It is necessary to train all employees in the company so that the system is used efficiently.
This is a cost for the company as well as the time and effort needed for it.
xiii. Integration with other applications in the enterprise needed.
xiv. Inflexibility of the system, because this is a generic system.
xv. There are few experts in this system.
xvi. If the system is not applied correctly, it can be very detrimental to the company.
xvii. Migration of existing data to the new ERP systems is difficult (or impossible) to achieve.
Integrating ERP systems with other stand alone software systems is equally difficult (if
possible). These activities may consume a lot of time, money & resources, if attempted.
xviii. ERP implementations are difficult to achieve in decentralized organizations with
disparate business processes and systems.
xix. Once an ERP systems is implemented it becomes a single vendor lock-in for further
upgrades, customizations etc. Companies are at the discretion of a single vendor and may
not be able to negotiate effectively for their services.
xx. Evaluation prior to implementation of ERP system is critical. If this step is not done
properly and experienced technical/business resources are not available while evaluating,
ERP implementations can (and have) become a failure.

II.