Operations Management: Presente D by

Operations Management
• Rajiv Nair
• Kartike Khanna
Presente • Ruchita Harjai
d By: • Pronoy Kapoor
• Tejas Mukadam
Enterprise
Resource
Planning
What is ERP ?
 As a term derives itself from MRP
 Integrate and automate many of the practices associated with

the operations aspect of a company.
 ERP systems are often closely tied to supply chain

management systems.
 Implementation includes help from an ERP vendor or third

party consulting companies.
Why ERP is required ?
 Integrate Financial Information
 Integrate customer order information
 Standardize and speed up manufacturing process
 Reduce Inventory
 Standardize HR information
 Replaces old standalone computer systems in finance, HR,
manufacturing and the warehouse into a single unified
software program.
Evolution of ERP
FACTORS FOR COST
Indirect Cost Direct Cost

• Peer Support • SW and HW
• Casual learning • Support Costs
• Formal training • Staffing Costs
• Application development
Process Flows, Systems and Access before
ERP
• Old Process Flow and Models
Separate Data
Storage and
Access
Process Flows, Systems and Access after ERP
New Process Flow and Models
Central Relational
Database
Datawarehouse
ERP
ERP MODULES
 An ideal ERP system is when a single database is utilized and contains all
data for various software modules. These software modules can include:
Manufacturing: Some of the functions include; engineering, capacity, workflow

management, quality control, bills of material, manufacturing process, etc.
Financials: Accounts payable, accounts receivable, fixed assets, general ledger and
cash management, etc.Human Resources: Benefits, training, payroll, time and
attendance, etc.Supply Chain Management: Inventory, supply chain planning,
supplier scheduling,claim processing, order entry, purchasing, etc.Projects: Costing,
billing, activity management, time and expense, etc.Customer Relationship
Management: sales and marketing, service, commissions,customer contact, calls
center support, etc.
Data Warehouse: Usually this is a module that can be accessed by an

organizationscustomers, suppliers and employees.
ERP AND DATA INPUT PRINCIPLES
 Gather data only once
 Gather more data
 Gather data straight into the computer
 Gather data where it is generated
 Gather data with a process focus
 Negatives
• Data input may take longer(more screens)
ERP AND DATA OUTPUT
 Data Access through:

•Customized Reports
• Intranets
•Data Warehouses
 Trend to:
• Data Warehouses and Access through Portals
Implementation
DESIGN AND
DETAILED IMPLEMENTATION PRODUCTION
CUSTOMISATION
DISCUSSION PHASE PHASE PHASE
PHASE
• Project • Map • Create • Run trial
initialisation organisation documentation production
• Evaluation of and business • Integrate • Maintain
current process application systems
processes and • ERP software • Test ERP
business configuration customisation
practices • Build ERP • Train users
• Set up project system
organisation modifications
ERP CREATES VALUE BY:
 ERP integrates firm activities
 ERPs employ use of best practices
 ERP enables organizational standardization
 ERP eliminates information asymmetries
 ERP provides on-line and real-time information
 ERP allows simultaneous access to the same data for planning and
control
 ERP facilitates intra-organizational communication and
collaboration
 ERP facilitates inter-organizational communication and
collaboration
Benefit: Operational Efficiency
 Lower cost
• Data entered only once, used by all processes and departments
 Better customer service

• Current data accessible to all participants
• E.g. customer service rep can see stock levels in other divisions,
progress on order, etc. (see Darwin reading)
 Allows management of processes across organizational

boundaries
Benefit: Lower IT cost
 ERP is very expensive
 But expect long term savings from

• Elimination of legacy systems
o Upgrades, maintenance and licensing costs
• Future maintenance and upgrades cheaper
o Spread costs over a large base
• Biggest saving in integration?
o Huge costs for ad-hoc integration of aging applications
Benefit: Standard Process
 ERP is managerial means to force global standardization in
processes
• Technological enforcement coded into software
• Local variation, workarounds eliminated
 Centralization of control over procedures

• May bring efficiency
• Will sacrifice flexibility
 Lilly example:
• No customization for local traditions or cultures
• Only for legal or regulatory reasons
Benefit: Managerial Data
 Standardizing processes requires standardization of:

• Product codes
• Accounting methods
• Human Resources systems
 This allows comparisons between divisions

• Especially using financial measures of effectiveness – e.g. Economic
Value Added (EVA) analysis
• On global basis
Trends in ERP
 Increased modularization of suites
• Reduces scale of commitment
• Supposed to work better with other applications
 Shift to web based front ends

• Initially lagged in this area
• All major vendors now offer
o Issues with training users for direct access
April 2001, Hasso Plattner, SAP CEO says
• mySAP is “suite of freestanding components”
• Users will not be locked in, can mix with other apps
• Broadening of focus to corporate portals, external links
ADVANTAGES
 All aspects of an organization can work in harmony. A totally
integrated systemThe ability to streamline different processes
The ability to easily share data across various departments
Improved efficiency and productivityBetter tracking and
forecastingLower costsImproved customer service
DISADVANTAGES
 Customization is complex. The need to re-engineer business
processes. Expensive to purchase and maintain.
Major Suppliers
 SAP
 Oracle
 J.D Edwards
 PeopleSoft
 Siebel Systems
THANK YOU

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Operations Management

 Integrate and automate many of the practices associated with

 ERP systems are often closely tied to supply chain

 Implementation includes help from an ERP vendor or third

 Integrate customer order information

 Standardize and speed up manufacturing process

Indirect Cost Direct Cost

New Process Flow and Models

Manufacturing: Some of the functions include; engineering, capacity, workflow

Data Warehouse: Usually this is a module that can be accessed by an

 Data Access through:

 Better customer service

 Allows management of processes across organizational

 But expect long term savings from

 Centralization of control over procedures

 Standardizing processes requires standardization of:

 This allows comparisons between divisions

 Shift to web based front ends

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