Enterprise Resource Planning

What is ERP? An ERP or Enterprise Resource Planning system integrates

information and business processes to enable information entered once to be shared throughout the organization.

ERP had its origins in manufacturing and production planning. In the mid-90’s it was extended to other back-office functions such as financial management and human resource management.

More recently these systems have addressed applications specific to higher education such as student systems and grants management.

Enterprise Resource Planning (ERP)

• Software designed for organizing and managing business processes• Modules share information across all business

functions• Can share customer sales data with the supply

chain to help with global replenishment• All modules are fully integrated and use a common

database – some PC base

Integration of ERP

Evolution of ERP

First generation ERP◦ Managed all internal business activities

Second Generation ERP◦ Late 1990’s software integrated supply chains◦ Systems focused on decision-making◦ SCM (supply chain management) modules include LP and

simulation support◦ SCI (supply chain intelligence) capability allows collection of

intelligence along the entire supply chain◦ ASP (application service provider) suppliers set-up and run

systems for others

Evolution of ERP

• 1960’s - Systems Just for Inventory Control

• 1970’s - MRP – Material Requirement Planning• (Inventory with material planning & procurement)

• 1980’s - MRP II – Manufacturing Resources Planning• (Extended MRP to shop floor & distribution Mgnt.)

• Mid 1990’s - ERP – Enterprise Resource Planning• (Covering all the activities of an Enterprise)

• 2000 onwards – ERP II – Collaborative Commerce• (Extending ERP to external business entities)

Benefits of ERP

• Reduce time

• Business integration

• Process re-engineering

• Foundation of new process

• Better analysis & planning capabilities

Challenges of ERP

• Daunting Implementation

• Large initial cost

• Inflexibility

• Failure to achieve strategic benefit

Objectives

• For Management – to know what is happening

in the company• One solution for better Management• For cycle time reduction• To achieve cost control & low working capital• To come up with latest technologies• To shun the geographical gaps• To satisfy the customers with high expectations• To be Competitive & for survival

ERP Vendors• SAP

• PeopleSoft

• Sage Group

• Oracle etc.

•The components of an ERP system are the common components of a Management Information System (MIS).

•ERP Software - Module based ERP software is the core of an ERP system. Each software module automates business activities of a functional area within an organization. Common ERP software modules include product planning, parts purchasing, inventory control, product distribution, order tracking, finance, accounting and human resources aspects of an organization.

•Business Processes - Business processes within an organization falls into three levels - strategic planning, management control and operational control. ERP has been promoted as solutions for supporting or streamlining business processes at all levels. Much of ERP success, however, has been limited to the integration of various functional departments.

ERP Components

•ERP Users - The users of ERP systems are employees of the organization at all levels, from workers, supervisors, mid-level managers to executives.

•Hardware and Operating Systems - Many large ERP systems are UNIX based. Windows NT and Linux are other popular operating systems to run ERP software. Legacy ERP systems may use other operating systems.

Contd…

ERP Applications•Finance and accounting

Investment, cost, asset, capital, and debt managementBudgets, profitability analysis, and performance reports

•Sales and marketingHandles pricing, availability, orders, shipments, & billing

•Production and materials managementProcess planning, BOM, product costing, ECN’s, MRP, allocates resources, schedules, PO’s, & inventory

•Human resourcesWorkforce planning, payroll & benefits, & org. charts

NeedsAssessment

SoftwareSelection

ProcessReengineering

ConferenceRoom Pilot

Training

PhasedImplementation

ERP Project

PHASES

ERP Product selection Phase

• ERP Team formation for selection

• Appointment of Consultants [if needed]

• Scoping study

• Product selection

• Cost estimation

Preparation Phase

• Framing ERP Implementation Strategies• Functional & IT team formation• Training on ERP functions & features• Scope finalization• GAP analysis• Action plan to resolve the gaps

ERP product acceptance

• Adapting directly, all the functions available in the ERP Product [Applicable for startup companies]

• Change the way the firm does the business to fit the product [Compromising]

• Customize the ERP product to suit the business Processes. [Customization]

• This is the process to identity the gaps by mapping the expectations of the company with the capabilities of the ERP product

GAP Analysis

Production Phase

• Installing the software & hardware

• Tuning the software to meet the Customization needs.

Implementation Phase

• Conference Room Pilot [Parallel run]

• Resolving the Parallel run issues

• Training the end users

• Live run

Post-Implementation Phase

• Regular monitoring

• Maintenance

BPR IntroductionWhy does so much IT investment seem not produce

corresponding increase in productivity and performance?

1. Faulty measurements2. Information Technology3. Organizational process, structure and design

Hammer & Champy – radically redesign key business processes “Reengineering The Corporation: A Manifesto for Business Revolution”

Davenport & Short – highlight the relationship between IT and BPR relationships: “The New Industrial Engineering: Information Technology and Business Process Redesign”

Business Process Reengineering (BPR)

Making processes • effective - producing the desired

resulted

• efficient - minimising the resources used

• adaptable - to changing customer & business needs.

BPR Philosophy

Radical, cross functional, dramatic

Focus on & organise around outcomes

Provide direct access to customers (internal & external)

Harness technology Control through policies,

practices and feedback Enable independent and

simultaneous work Build in feedback channels

Hammer and Champy, Re-engineering the Corporation, Harper Collins, 1993

BPR FocusOn end-to-end business process that extends all to the way to a customer

(external or internal) who receives some value from the process

On essential processes that deliver outcomes

- moving flow

- cross-functional in scope within enterprise

- cross-enterprises

Assumptions about performance improvement thru. reengineering

1. clean-sheet rethinking

2. quantum improvements > incremental improvements

3. use IT to re-engineer process in qualitatively different ways

4. maximum value-added in process, minimize everything else

5. measure value thru. surrogate performance measures

6. Change work environment to fit reengineered process

ERP and BPR

• Implementation goes closely with business process reengineering and organizational remodelling

• Understanding the full import of going for ERP; whether enough organizational resilience and flexibility to undertake the project.

• Mismatch between the management aspirations and organizational compliance.

Material Requirements Planning (MRP)

• Computer-based information system that schedules and orders dependent-demand inventory components.

• Uses the master production schedule, bills of materials, and inventory records as inputs.

• Outputs recommendations:–When to release new orders.–When to reschedule open orders.

Objective of MRP

• Determines the quantity and timing of material requirements– Determines what to order (checks BOM), how

much to order (lot size rules), when to place the order (needed date minus lead time), and when to schedule delivery (on date needed)

Input/Output - MRP Process

Business Needs

• Recognizing that innovation is the key to gaining competitive advantage.

• Investing in the latest advanced automation technologies capable of adapting to new requirements quickly while keeping costs under control.

Solution

• Adopting the IBM IT Resource Optimization approach.

• Through virtualization, provisioning and orchestration technologies, IT resources and workloads are optimized for more efficient usage, yet offer improved response times.

Key-Benefits• Reduced IT operational costs by ten percent annually

despite a higher workload.

• Estimated IT workload increase of 15 percent while reducing cost by 70 percent.

• Estimated storage need increase of 30 percent while reducing cost by 60 percent.

• Enabled dynamic reallocation of server capacity.

ERP Models

• Hardware: Blade Center, Blade Center JS20, System p:eserver p5 595

• Software: Lotus Notes, Tivolic Business System Manager.

• Operating System: AIX, AIX 5C

Financial Growth

• The gross profit was increased to $3 million, $100 million and $196 million in 2004, 2005 and 2006 respectively.

• These increased gross profit margin by a percentage of net sales by 10 basis points, 90 basis points and 160 basis points in 2004, 2005 and 2006 respectively.

Thank You!!!