Enterprise Resource Planning (ERP) Systems

Enterprise Resource
Planning (ERP) Systems

What is ERP?
•The practice of consolidating an

enterprise’s planning, manufacturing, sales
and marketing efforts into one management
system.
•Combines all databases across

departments into a single database that can
be accessed by all employees.
Evolution of ERP
 1960s: software packages with inventory control
 1970s: MRP systems
Production schedule with materials management
 1980s: MRPII systems
Adds financial accounting system
 1990s: MRPII
Integrated systems for manufacturing execution
 Late 1990s: ERP
Integrated manufacturing with supply chain
Major Reasons for Adopting ERP
•Integrate financial information
• Integrate customer order information
•Standardize and speed up operations
processes
• Reduce inventory
• Standardize Human Resources
information
How do ERP System Work
Managers and
Stakeholders
Financial
Applications
Reporting
Applications
Human
Sales and
Resource
Delivery
Management
Applications
Applications Manufacturing
Sales Force Central Applications
Customers And Customer Database Back-office
Service Reps Administrators Suppliers
And Workers
Service Human
Applications Resource
Inventory
Management
And Supply
Applications
Applications
Employees
Components of ERP System
Finance: modules for book keeping 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
Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers
Checks for Parts

Calls back “Not in stock”
Accounting “We ordered the parts”
Files
Accounting
Invoices Sends report
Sends report accounting
Ships parts
Vendo
r Warehouse
Order is placed
“We Need parts #XX”
with Vendor
Inventory
Purchasing Files
Files “We ordered the parts”
Purchasing
An ERP Example: After ERP
Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting
Financial Data exchange;

Books invoice against PO
Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO
Order is placed
with Vendor
Warehouse
Vendo Purchasing
r
Ships parts
And invoices accounting
Potential Benefits of ERP
 Internal Benefits
 Integration of a single source of
data
 Common data definition
 A real-time system
 Increased productivity
 Reduced operating costs
 Improved internal
 communication Foundation for future
improvement
Potential Benefits of ERP
 External Benefits
• Improved customer service and
order fulfillment
• Improved communication with suppliers
and customers
• Enhanced competitive position
• Increased sales and profits
Benefits of ERP
Direct benefits include:
1. improved efficiency
2. information integration for better
decision making
3. Faster response time to customer
queries
Benefits of ERP
Indirect benefits include:
1. Better corporate image
2. Improved customer goodwill
3. Customer satisfaction
Potential Benefits are
1. Reduction of Lead-Time
2. On-Time Shipment
3. Reduction in cycle time
4. Better customer satisfaction
Others are
5. Improved supplier performance
6. Increased Flexibility
7. Reduction in quality costs
8. Improved resource utility
9. Improved information accuracy and decision-
making ability
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
Before ERP & After ERP
 Stand alone System.  Integrated System.
 Lack of coordination  Support coordination
among business among business functions.
function(Manufacturing  Integrated Data: Data
& sales) have the same meaning
 Non Integrated data: Data across multiple functions.
have different meanings.  Changes affect multiple
 System are maintained on functions or Systems
a procedural basis  Common interfaces across
 Redundant data and systems.
inconsistent information.
 Difficult to manage.
Modules of ERP
Finance
Material
Sales
Marketing
Personnel
Popular ERP
Modules
Finance
Sale
HR
ERP
Planning
Operation
Inventory
ERP Finance Module
In This Data is collected From

various functional departments
and generate financial reports
ledger, Trail Balance, Balance
Sheets etc.
ERP HR(Human Resource) Module
 HR Module routinely maintain a complete
employee database including contact information,
Salary details Attendance, Promotions of all
employees.
 Produce pay check Reports
 Maintain personnel Record
 Training
 Time and Attendance Benefits
ERP Purchasing
Module
Purchasing module is tightly
integrated with the inventory
control and production planning
Modules.
ERP Inventory Module
 Inventory Module facilitates processes of
maintaining the appropriate level of
stock in a warehouse.
BPR
ERP Implementation Approaches
 The big bang – install a single ERP system across
the entire organization
 Franchising – Independent ERP systems are
installed in different units linked by common
processes, e.g., bookkeeping.
 Slam dunk – install one or several ERP modules
for phased implementation of key business
processes
Major Phases of ERP
Implementation
 Initiation – develop business case, project scope,
and implementation strategy
 Planning – establish implementation team,
determine goals and objectives, establish metrics
 Analysis and process design – analyze and
improve existing processes, map new processes to
be adopted by the system
Major Phases of ERP
Implementation
Realization – install a base system,
customization, and test the system
 Transition – replace the formal system with
the new system, data conversion
 Operation – monitor and improve system
performance, provide continued training
and technical support
Major Challenges to ERP
Implementation
Limitations of ERP technical capabilities
 Inconsistency with existing business processes
 Costs - implementation (hardware, software,
training, consulting) and maintenance
 Changes in employee responsibilities
Major Challenges to ERP
Implementation
 Flexibility of software system upgrades
 Implementation timelines
 Availability of internal technical knowledge
and resources
 Education and training
 Implementation strategy and execution
 Resistance to change
New Developments In ERP
 Availability of web-based and wireless ERP
systems
 Adoption of easy-to-install ERP systems
 Linkage to other software systems, e.g., supply
chain management system, e-commerce, customer
relationship management system
Advantages of ERP
 Quicker completion of Processes
 Single system
 Modular software
 Database
 Easier to track various tasks
 Manage globally Data
Disadvantages of ERP
 Cost
 Time Consuming
 Training to employees

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Enterprise Resource

Planning (ERP) Systems

•The practice of consolidating an

•Combines all databases across

Checks for Parts

Financial Data exchange;

In This Data is collected From

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