ENTERPRISE RESOURCE

PLANNING (EPR)

Milind Sawant (41)

Nadeem Usmani (54)
 Supply Chain Problems
UNCERTAINTY POOR COORDINATION
 in demand forecast  with internal units & business partners
 in delivery times &  poor customer service
production delays  high inventory costs,
 loss of revenue
 extra cost for expediting services.

Bull Whip Effect

 persistent SCM problem.
 erratic orders up/down supply chain.
 distributor orders fluctuate: poor
demand forecast, price
changes, order batching &
rationing
 avoidable with Intranet/Extranet
eComm & groupware
 What is ERP?
 ERP is abbreviation for Enterprise Resource Planning and means, the
technique and concept of integrated management of businesses as a
whole from the view point of effective use of management resources to
improve the efficiency of enterprise management.
 EPR packages are integrated (covering all business) software packages
that supports EPR concepts.
 ERP software is mirror image of the major business processes of an
organization, such as customer order fulfillment and manufacturing.
 ERP Integrates all business functions into single, integrated software
program that runs on single database so that the various department can
share information and communicate.
 ERP has a tremendous power and potential in improving the efficiency,
productivity and competitiveness of organization.
 Common myths about ERP
 EPR means more work and procedures
 ERP will make many employees redundant and jobless
 ERP is a sole responsibility of management
 ERP is just for managers/ decision makers
 ERP is just for manufacturing organizations
 ERP slows down the organizations
 ERP packages will take care of everything
 One ERP package will suit everybody
 ERP is very expensive
 Organizations can succeed without ERP
 History of ERP
 Origins in the manufacturing industry
 1960’s – Inventory management and control systems
 1970’s – Material requirement planning and closed
loop MRP
 1980’s – Manufacturing requirement planning
(MRPII)
 1990’s – Enterprise resource planning (ERP)
 21st century – ERPII
History Contd…
Inventory Management and Control
 Inventory management and control is the
combination of information technology and
business processes of maintaining the
appropriate level of stock in a warehouse.
 The activities of inventory management
includes identifying inventory requirements,
setting targets, providing replenishment
techniques and options, monitoring item usage
and reporting inventory status.
Material Requirement Planning (MRP)
 Outgrowth of bill of materials (BOM) processing
 Uses master production schedule (MPS) to find out what
products are going to be manufactured.
 Gets the details of material required to make products from
the bill of materials.
 Searches the inventory records to find out what items are in
stock.
 Calculates the item that needs to be purchased for producing
goods.
 MRP solves manufacturing and production planning problems
and made manufacturing of goods easier.
 Closed loop MRP
 Merger of capacity planning techniques with MRP
 Tools develop to support planning of sales and production
levels, development of production schedule, forecasting, sales
planning, capacity planning and order processing.
 Various plan, production and supplier scheduling techniques
for automating the process inside and outside of the
organization were built in into MRP system to create the
closed loop MRP.
 It is a series of function to automate the production process.
 It supports both planning as well as execution.
 Manufacturing Resource Planning
(MRPII)
 Evolved from closed loop MRP
 Contains additional capabilities like sales planning,
operational planning, financial interface and simulation
capabilities for decision making.
 MRP II is a method for the effective planning of resource of
manufacturing company
 Utilizes software application for coordinating manufacturing
processes, from product planning, part purchasing, inventory
control to product distribution.
Enterprise Resource Planning (ERP)
 Fundamentals of ERP are the same as that of MRPII.
 ERP is broader in scope and can deal with more business functions
and had better and tighter integration with finance and accounting
function.
 ERP is and enterprise-wide set of forecasting, planning and
scheduling tools, which links customers and supplier into complete
supply chain.
 The goal of ERP is high level of customer service, improved
productivity, cost reduction and better inventory turnover.
 ERP is more powerful because it applies a single set of resources
planning tools across entire enterprise and provides real time
integration of sales.
Value Chain Integration
 Reason for growth of ERP
 ERP improves business performance – cycle time reduction,
inventory reduction, faster response time, faster order
fulfillment etc.
 ERP supports business growth requirement like new products,
product lines, customers, multiple language and multiple
currency support etc.
 ERP provides flexible, integrated, real time decision making.
 ERP takes advantage of the untapped mid-market of medium
sized organizations
 Advantages of ERP
 Business integration – ERP packages integrates the
information processing and automates the data updating (data
exchange among applications) between related business
component.
 Flexibility – Diverse multinational environments such as
language, currency and accounting standards.
 Better analysis and planning capabilities – ERP system
enables comprehensive and unified management of related
business and its data.
 Use of latest technology – Better products with better
capabilities.
 ERP Vendors
 SAP
 PeopleSoft
 Baan
 Oracle
 QAD
 I2
 Ramco
 ERP Opportunities
Tangibles Other
 reduced  information visibility
 inventory
 customer satisfaction
 staff
 procurement cost  modularisation &
 improved standardization
 productivity & business processes
 lean and flexibility
 order mgt
 financial cycle  globalization & business
 innovation performance
 Revenue/profit increases etc
 sourcing of requirements
How ERP contributes to SCM?

 digital products (software) - flow  nature and structure of supply

of materials is expedited chain moves from linear to hub.

 replaces paper documents with  shorter supply chain and

e-documents e.g. order copies,
invoices minimum stock

 replaces fax, phone with e-  aids sales response & customer

messaging service

 support network organisations:  buying & sales efficiencies thru.

collaboration & information e-marketplaces.
sharing e.g. seller and distributor
 ERP Challenges
Some of the challenges faced by organizations are:
 Dearth of expertise in ERP
 Limited budget
 Support for executive lacking
 Fear of past implementation failures of others
 Difficulty in configuration
 Time taken to implement
 Is not customly developed.
 ERP Challenges Contd.
 Ethical
SCM project may  lay-offs & transfers of work to other countries
- matters of employment contracts. Are they ethical matters?
 Data sharing
data & programs - intellectual property - may be shared - a matter
of trust
 Do we integrate or hold ourselves in reserve? Total integration
thru. ERP, SCM, and e-commerce, makes us vulnerable to partner
failure - big risk. Do we keeping matters under our own control?
 IT complexity
major SCM projects exploit advanced IT. We need to know that
 we have the capability (expertise)
 the systems are reliable and there is a fail-safe
 we can sustain the systems and up-grade them.
 Conclusion
Due to high competition and globalisation, need
for price-reductions, cost-cutting and efficient
customer service, integration of supply chain
has become imperative. But, care must be
taken to analyse the feasiblity and reliability
of the system and its sustenance.