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Introduction to Enterprise Resource Planning
Semester - VI
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GENERAL ERP IMPLEMENTATION METHODOLOGY
1. Identification of the needs for implementing an ERPpackage.
2. Evaluating the As-Is situation of your business.
3. Deciding upon the desired Would-Be situation of our
business.4. Re-engineering of the business processes to achievedesired results.
5. Evaluation of various ERP packages
6. Finalizing of the ERP package.
7. Installing requisite hardware and networks8. Finalizing the implementation with consultant.
9. Implementation of ERP package.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 1
Identification of the needs for implementing an ERPpackage
Why should I implement an ERP package?
Will it significantly improve my profitability?
Will it lead to reduced delivery times for my products?
Will it enhance my customers satisfaction level in termsof cost, delivery time, service and quality?
Will it help reduce the costs of my products?
Will it enable me to achieve the same business volumewith reduced manpower?
Will it enable me to reengineer my business processes?
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 1 - Contd.
The other factors that should be taken intoconsideration are:
Need for quick flow of information between
business partners. Effective management information system for
quick decision-making.
Elimination of manual preparation of various
statutory statements. Need for a high level of integration between the
various business functions.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 2
Evaluating the As-Is situation ofyour business
The various business functions should befirst enumerated.
For example, procurement, production,sales, etc. Now the processes used to
achieve the business transactions shouldbe listed in detail. The technique ofprocess mapping can be used here.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 2Contd.
The process map should give you the following details forany business process:
The total time the business process takes tocomplete.
The total number of decision points involved.
The number of departments/geographical
locations that the business process involves. The flow of information.
The number of reporting points.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 3
Deciding upon the desired Would-Besituation for your business
In this step, we decide on what we want ourbusiness processes to finally look like. Here weuse the techniques of benchmarking to ensurethat the targets set are comparable to the best in
the industry. Benchmarking can be done onvarious aspects of the business like cost, quality,lead time, service, etc.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 4
Re-engineering of the businessprocesses to achieve desired results.
In order to achieve the new business processes,
we reengineer the existing processes in such amanner that:
The business process cycle time is reduced significantly.
The number of decision points is reduced to the bare
minimum.
The flow of information is streamlined, i.e., there is no
unnecessary to-and-fro flow of information between
departments.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 5
Evaluation of the various ERP packages Global Presence
Local Presence
Investment in R & D
Target Market Price
Modularity
Obsolescence
Ease of Implementation
Cost of Implementation
Post-Implementation Support
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 6
Finalizing of the ERP package
After a thorough evaluation of all the ERP
packages vis--vis the key factors of your
business, the package best suited to your
business needs is selected. The process
of finalizing can be simplified by making a
matrix of the key factors. You can thenrate all the packages under these heads.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 7
Installing the requisite hardware and networks
In this step, one has to install the hardware and
networks required for the chosen ERP package.
The installation of the hardware has to be well-planned because generally the hardware arrives
in time and lies idle due to the delays in
implementation. Also, the induction of the
hardware should be in a phased manner toavoid blocking of capital.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 8
Finalizing the Implementation Consultants
The factors which go into the selection of theconsultant are:
Skill-set available with the consultant(application area)
Installation base of the consultant
Industry-specific experience (knowledge of the
various industry-specific business processes) Finances involved in hiring the particular
consultant.
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 9
Implementation of the ERP Package
The broad steps involved in the implementation of the ERPpackage are:
Formation of Implementation Team
Preparation of Implementation Team Mapping of business processes on to the package
Gap Analysis
Customization
Development of User-specific reports andtransactions
Uploading of data from existing systems
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GENERAL ERP IMPLEMENTATION METHODOLOGY
Step 9Contd.
Test runs
User Training
Parallel run
Concurrence from user on satisfactoryworking of the system
Migration to the new system
User Documentation
Post-Implementation support
System Monitoring and Fine Tuning
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Formation of Implementation Team
Implementation Team consists of:
IT personnel
Implementation consultants Project Manager, Project Leaders and the
Module Leaders
Steering committee
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Functions of the Steering
Committee To monitor the progress of the
implementation
To see to it that the schedule of theimplementation is adhered to
Resolve any problems that come up in the
due course of the implementation Allocation of resources for implementation
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Preparation of The Implementation Plan
The implementation plan should have clear componentsand should include the schedule for the following:
Training of the Project Team
Mapping of business processes onto the software
Function-wise implementation
Customization
Uploading of Data
Test Runs
Parallel Run
Cross-Over
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Mapping of Business Processes on to the
PackageThis is a crucial step where the re-engineered
business processes are mapped on to the
software. In mapping, the implementation team
tries to fulfill the user requirements by making
use of the standard functionality available in the
software. However, if the requirements cannot
be covered fully by the standard system, thenthe next step of implementation, ie, gap analysis
comes into picture.
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Gap Analysis
The user requirements that cannot be directly mappedon to the standard system from the basis of gapanalysis. Here, all such uncovered requirements arecompiled into a gap analysis report. The gaps are then
classified into the following three heads:
Gaps which can be taken care of with a littleprogramming effort.
Gaps which involve an extensive programming effort andhence require extra resources.
Gaps which cannot be taken care of in the system.
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Customization
Once the process mapping and gap
analysis have been done, the actual
customization starts. In this step, first the
customizing needs are chalked out andthen the actual job is handed over to the
respective functional teams.
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Development of User-specific
Reports and TransactionsAs part of gap analysis, any user
requirements not covered by the standard
system need to be provided by extraprogramming effort. In this step, the
required reports and transactions are
created.
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Uploading of data from Existing
SystemsWith customization in place, the system is now
ready to receive the master and transaction data
from the existing system. In this step,programmed transfer of data takes place from
the existing system to the new system. In order
to avoid wrong tabulation of master data, the
transfer process needs to be thoroughlychecked in the trial runs. At times it too involves
a lot of programming effort.
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Test Runs
In this step, the test runs on the system
are started. Sample transactions are tried
to see whether the customizing and
master data uploading has been error-free. The result of the sample transactions
is evaluated and any changes required in
settings to get the desired results areincorporated.
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Parallel Run
With the successful test runs and user
training in place, the parallel run of the
system can be now started. In parallel run,
the business transactions are carried outboth through the existing system as well
as through the new system. The
implementation team then takes care ofany lacunae which come to light during the
parallel run.
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Concurrence from User on satisfactory
working of the SystemIf the parallel run is satisfactory and error-
free, or errors that may have come up
have been resolved, the users may beasked for their final approval.
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Migration to the New SystemWhen the parallel run has been
successfully tried for a reasonable length
of time and when the users and theimplementation team feel absolutely
confident, it is time to Go Live.
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User Documentation
User documentation includes the detailson how to carry out the various
transactions. It is different from the regularERP package documentation in the sensethat it is more specific in nature thangeneral documentation. It only covers
alternatives that are being used in theparticular business so as to make it easyfor the user to understand and use them.
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Post-Implementation Support
Post-Implementation support generally
involves queries from the user, minor
changes in the report formats, as well as
small changes in layouts of various printed
formats like purchase orders, etc.
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System Monitoring and Fine Tuning
In this phase, the IT people monitor the
system closely to see the performance
aspects and fine tune the database and
other administrative aspects of the systemso that the user can derive the best
performance from it.
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VANILLA IMPLEMENTATION
A Vanilla implementation is the decision toimplement an ERP As-Is and modifybusiness processes to match the ERP
system. It is fundamental to make thisdecision prior to starting animplementation. A Vanilla implementationis when the company chooses not to
modify (i.e., customize) the ERP system,but instead to change business practicesto fit the ERP system.
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Need for Vanilla Implementation
Businesses with relatively straightforwardbusiness practices that are not unique shouldconsider a Vanilla implementation.
Businesses that are not skilled or experienced at
building or changing systems should consider aVanilla implementation.
In Vanilla implementations all of a company'sbranches are running the same system in a
single instance, and entering and retrieving datain a similar fashion, thereby reducing hardware,software licensing, implementation, and trainingand support costs. This is a cost-control factor.
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Need for Vanilla Implementation
Contd. For a company using a purchased ERP system where
the financial component is critical for reporting, a Vanillasystem will more than likely pass the financial audits in atimely fashion.
Last, for a competitive advantage, it is important to knowthe ability of what and where things are around the worldwith your business in terms of parts inventory,maintenance agreements, and processes. Again, and asan example, if everyone is entering and retrieving thesame information, the ability to know inventories andwhat is needed in a timely fashion without needing tocontact others around the world creates a competitiveadvantage for a business that needs to react toinformation in a timely manner.
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Need for ERP Customization
Even though there are many reasons toimplement a Vanilla ERP, many businesseschoose to customize or modify the system tomeet business needs (i.e add-in some
Chocolate) and are very successful. Businessesthat have highly skilled IT developers and aproven process for managing modifications cancertainly choose to change the system in areaswhere a business already has a competitive
advantage. In a situation like this, an ERPsystem is too generic to fit the specializedbusiness or specialized process.
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GUIDELINES FOR ERP IMPLEMENTATION Very few companies succeed in the first instance after implementing
ERP.ERP is not a fortune but a technology that delivers results onlyafter effective execution of the laid down procedures.
ERP is not an answer to the errors in business plans and tactics. Infact ERP consultants are reluctant to attend to it because they don'twant it to disturb the purpose of ERP. It should therefore be
understood that ERP is an I.T. tool that assists and facilitates thebusiness process by being a part of it. On the contrary it ismisunderstood that ERP can rejuvenate the business. The answerto the popular question "What companies use Enterprise ResourcePlanning?" will help in clearing this trouble.
ERP gap analysis and business process reengineering should be
performed properly. This will ensure that other steps are followedsystematically and in accordance to the company's need. They areotherwise referred as enterprise resource planning phases.
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GUIDELINES FOR ERP IMPLEMENTATION
Contd. IT facilities in the organization should be at par with market
standards and international reputation. This will enable the operationpeople to constantly modify and update as and when it is necessaryin order to stay in tune with the competition. Research on enterpriseresource planning will reveal this.
The process of ERP implementation should be carried on by a team
of competent personnel so as to ensure perfection, accountabilityand transparency.
Readiness for change and the capability to implement that changewill be the first step towards successfully choosing the right ERP-based business solution. The top management team along-with thevarious departments must be prepared to accept that change, and to
implement the ERP package.
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GUIDELINES FOR ERP IMPLEMENTATION
Contd. The organization should first use the ERP implementation process
to identify the changes in business processes and in skills andattitudes that must be made. It will be useful for the organization toengage in a brief business process redesign exercise prior to theimplementation.
Obtaining support from executives is the key criterion for success.
Successful feedback and a forum for top management are requiredto address their concerns and is also vital. Employees at all levelswho are affected by the new system need to be informed by arigorous communications program. The key to success in this effortis repetition and a realistic setting of expectations.
It is very crucial for a successful project manager to appreciate and
apply strong Leadership. The difference between informal supportand active leadership can be the difference between success andfailure. It is imperative to develop a steering team which must becapable of change management and the process of redesign andintegration.
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GUIDELINES FOR ERP IMPLEMENTATION
Contd.
Ideally, the project team must include members of the ITdepartment, sales, materials, manufacturing, plant maintenance andfinance. Additionally, the company may hire and outside consultant-from an ERP consulting / implementation partner firm to provideknowledge in the concerned modules and in the project
management. It is not necessary to follow every step of the General ERP
Implementation methodology. But, it is extremely helpful to have aroad map. It is advisable for the project leaders to set out clear,measurable objectives at the very outset, and review the progress atintervals, as the implementation progresses.
An ERP implementation should not be looked upon as a shortdistance run. It has wide implications, and will impact the future ofthe company for many years to come. All the above factors have tobe kept in mind for successful implementation.
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BUSINESS PROCESS REENGINEERING
Business process is defined as "a set of logically related tasksperformed to achieve a defined business outcome."
A process is "a structured, measured set of activities designed toproduce a specified output for a particular customer or market. Itimplies a strong emphasis on how work is done within anorganization."
Re-engineering is now a business process or set of processes thatessentially dismantles existing processes into individual activitiesand puts them back together in a new set of business flows or setsof business flows. This is done to increase efficiencies and improveservices with greater returns. When ERP systems are built to applybest practices you can easily understand how BPR is likely to occur
during the ERP implementation.
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BUSINESS PROCESS REENGINEERING
Business process re-engineering is the analysis anddesign of workflows and processes within anorganization. Business process re-engineering (BPR)began as a private sector technique to help
organizations fundamentally rethink how they do theirwork in order to dramatically improve customer service,cut operational costs, and become world-classcompetitors. A key stimulus for re-engineering has beenthe continuing development and deployment of
sophisticated information systems and networks.Leading organizations are becoming bolder in using thistechnology to support innovative business processes,rather than refining current ways of doing work.
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BPR and ERP
BPR within a single unit is difficult and requires efficientand effective change management. BPR with an ERPimplementation will require crossing organizationalboundaries and require a much more extensive changemanagement process. Resistance to change will be high
and require a significant level of change management tosucceed. This resistance to change comes from severalareas, including loss or change in job and change in thepower structure. In addition to that, BPR has beenequated to downsizing, new technology, and quality,therefore increasing anxiety of staff both involved andnot involved in an ERP implementation. The creation ofteams and development of good teamwork is essential tomaking BPR changes work for the organization.
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BPR METHODLOGY
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BPR METHODLOGY
The BPR Methodology, as shown in Figure below,includes:
Preparation - set goals and vision, identify teams, anddevelop an inventory of processes that need to be
evaluated. Define the "As-Is" process and evaluate cross-
organizational issues
Map out "To-Be" processes based on best practices(i.e., related to ERP)
Test and measure new processes based on meetinggoals and vision
Re-evaluation - revise, adjust to improve processes
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BPR MethodologyStep 1 -
PreparationHere are some of the drivers behind the need for BPR:
Implementing a current purchased ERP system
Automating current manual or error prone processes
Improving service to customers
Streamlining current processes to decrease time tomarket
Participating in or conducting e-Marketplaces
Reducing costs Addressing accountability
Conducting e-Procurement
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BPR MethodologyStep 2As-Is
Working with the vision and goals, the
functional teams must define the existing
processes. The processes will need both a
written description and graphical depictionof each and every process. Each process
will likely have predecessors and
successors linking processes together forfuture analysis in the "To-Be" phase.
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BPR MethodologyStep 3To-Be
This phase must address timing of processesand the changes needed to meet the original setof goals. This phase requires much thought andanalysis. The questioning of current processes is
a must. A team member will often say thingssimilar to, "we've always done it like that." Theunderstanding of why a process does what itdoes need to be uncovered, irrespective of whodoes it. Some processes will even be eliminatedand all new processes must have estimates oftiming and who is responsible. This sets thestage for the measurement phase.
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BPR MethodologyStep 4Test &
MeasureThe testing and validation of each process isnecessary to ensure that a step was not missedor that a process not achievable. It is essential to
set up measurement processes that aremeaningful and measure the goals set out in thepreparation phase. It may take a coupleiterations of BPR to realize the goals fully, but
continuing to examine processes and to makeadjustments creates a sustainable ERP systemenvironment.
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CURRENT BPR TOOLS
Corporate Modeler, CASEwise Systems,Waltham,M A: The software is comprised of sixdiagramming modules that enable organizationsto depict: Organizations, Locations, Processes,Technologies, Applications, and Data fromdifferent perspectives.
iGrafx, iGrafx, Tualatin, O R: Features processmodeling, simulation, and reporting capabilities.
Designed for the front end of re-engineeringprojects. Teams can quickly create and editpresentation quality process maps.
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General Model of ERP
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General Model of ERP
The General Model of ERP as given in the figure
above is assumed to consist of four quadrants.
The circle at its centre represents the entities
that constitute the central database shared by allfunctions of the enterprise. The border
represents the cross-enterprise functionality that
must be shared by all systems. The most
important part of this cross-enterprise border willbe known as multi, representing the capability
required by it to compete and succeed globally.
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Multi-lingual
Must be flexible enough to have customer
service representatives in different
countries taking orders in different
languages and at the same time on asingle host platform. Orders must be
printed or returned to customers in their
native languages.
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Multi-currency functionality
Must be capable of, for instance, receiving
invoices in Indian Rupees, splitting the
payment into German Mark and Belgian
Francs, billing in Italian Lire, receivingcash in British Pounds, with the general
ledger stated in US Dollar or Japanese
Yen.
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Multi-mode or Mixed-mode
ManufacturingIn the enterprise of today, grown throughalliance and merger, a single manufacturing
strategy of either discrete or continuous processis no longer practical. Enterprises now employ amix of approaches including make-to-stock,highly-repetitive, assemble-to-order or design-to-order. A single integrated software solution, and
not satellite software, should handle all theseconcurrently, efficiently passing data from one tothe other.
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Multi-facility
The total solution must support multiple division orcompanies under a corporate banner. Multiple facilitiesare logical or physical entities linked to divisions. Each ofthese may or may not have independent stores,production units, assembly lines, overhead centre, andplanning units but each usually has a set of accounts.Each and every transaction must flow seamlessly to bedivisions or corporate set ofbooks. The software shouldalso seamlessly integrate operating platforms as the
corporate database and departmental level applicationsmay be required to run on a variety of hardware andsoftware platforms.
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Electronic Data Interchange or EDI
Todays users require flexible reporting tools to
extract the information as and when they need it
without depending on an information systems
department to produce the report. And they alsoneed Electronic Data Interchange (EDI) to
electronically accept customer information like
purchase orders, schedule amendments or cash
and electronically send data such as orderacknowledgement and invoices to customers.
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Imaging
Integration of information systems can be
further enhanced through imaging.
Imaging provides the ability to display
drawings or specifications. In addition, itprovides the ability to store original sales
orders, purchase orders, quotations,
contracts, etc.
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E-Mail
In order to reduce paperwork, e-mail
should be tied to the electronic approval
process for purchase orders and
engineering change orders. All this addsup to the effective workflow automation.
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T i l ERP M d l
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Typical ERP Modules
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ERP Modules From Three Vendors
Function SAP Oracle/PeopleSoft
MicrosoftDynamics
Sales Sales and
Distribution, Sales
Opportunity
Marketing and
Sales, Supply
Chain
Management
Retail POS
(point of sale),
Field Service
ManagementProcurement Purchasing,
Supplier
Relationship
Management
Procurement and
Supplier
Relationship
Management
Supply Chain
Management
Production MRP, Product LifeCycle Management
Manufacturing Manufacturing
Accounting Financial
Accounting
Financial
Management
Financial
Management
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ERP Modules From Three Vendors (Contd)
Function SAP Oracle/
PeopleSoft
MicrosoftDynamics
Distribution Warehouse
Management
Supply Chain
Management
Distribution
Management
CustomerService
CRM CRM CRM
Corporate
Performance &
Governance
Governance, Risk,
and Compliance
Management
Corporate
Performance
Management
Analytics
HumanResources
Human CapitalManagement
Human CapitalManagement
HRManagement
Miscellaneous Banking Campus
Solutions
E-commerce,
Portals
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Overview of Modules (Contd)
Sales and MarketingRevenues from the sales are the life blood of the organizations.
Implements functions of order placement, order scheduling,shipping, and invoicing
The marketing module support lead generation, direct mailingcampaign
Finance
Can gather financial data from various functional departments andgenerate valuable financial reports( p/l,trial bal, ledgers, bal sheetsetc)
Human Resource
Streamlines the management of human resources and humancapitals.
Other modules business intelligence, self services modules.
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Benefits of Key ERP Modules
Self Services Flexible support for employees business functions
Simplified access to relevant information
Performance Management
Delivery of real-time, personalized measurements and metrics Access to such information as business statistics and key
performance measurements
Financials
Ensure predictability of business performance Gain deeper insight across the enterprise
Automate accounting and financial SCM
Rigorous support for financial reporting.
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Benefits of Key ERP Modules (Contd)
HR Management Attract the right people, develop and leverage talents, align
efforts with corporate objectives, and retain top performers
Enable creation of project teams based on skills and availability,monitor progress on projects, track time, and analyze results
Procurement and Logistics Execution Cost savings for all spending categories by automation
Reduce costs through process automation, integration ofsuppliers, and better collaboration
Improve resource utilization (RFID and bar codes)
Enhance productivity of incoming and outgoing physical goodsmovements
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Benefits of Key ERP Modules (Contd)
Product Development and Production Shorten time to market
Deliver higher quality products and ensure timely delivery
Improve visibility in real time (availability check)
Sales and Service Higher number of sales orders processed and reduced
administrative costs
Easy access to accurate, timely customer information
Cost-effective mobile access for field employees Reduce travel costs by using online functions
Adhere to environmental, health, and safety reportingrequirements
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Q & AMultiple Choice Objective Questions:
1. Customization of an ERP package is enhanced if theERP Package is:
a. Modular
b. Inflexible
c. Both a and bd. Either a or b
2. Which of the following statements is true about ERPImplementation:
a. As-Is stage follows To-Be stage.b. To-Be stage follows As-Is stage.
c. Go-Live stage and As-Is stage can proceedsimultaneously.
d. None of the above.
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3. Which of the following statement(s) is/are falsewith respect to ERP Implementationmethodologies:
a. The emphasis on the ERP software life cycle is whether tocustomize the software or to change the organizationsprocesses to match those embedded in the software.
b. The implementation strategy can be a comprehensiveone, vanilla, or middle-of-the road strategy.
c. ERP life cycle must incorporate traditional SDLC stages.
d. Rapid Implementation methodologies have beendeveloped by ERP consulting firms.
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4. The decision to implement an ERP As-Is and modifybusiness processes to match the ERP system isknown as:
a. Vanilla Implementation
b. Business Process Reengineering
c. Chocolate Implementationd. Generic Implementation Methodology
5. An implementation with considerable modifications tothe ERP software package is referred to as:
a. Vanilla Implementationb. Business Process Reengineering
c. Chocolate Implementation
d. Generic Implementation Methodology
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6. Which of the following is not a BPR Tool?a. Visual BPR
b. mySAP
c. iGrafx
d. iThink
7. Which of the following statements about BPR is false?a. The business process cycle time is reduced significantly.
b. The number of decision points is reduced to the bareminimum.
c. The flow of information is streamlined, i.e., there is nounnecessary to-and-fro flow of information betweendepartments.
d. It helps in duplication of inter-departmental effort for similarprocesses.
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Q & A8. ______________________ functionality of ERP makes it flexible
enough to have customer service representatives in different
countries taking orders in different languages and at the sametime on a single host platform. These orders are then printed orreturned to customers in their native languages.
a. Multi-lingual
b. Multi-currency
c. Multi-mode manufacturing
d. Multi-facility
9. ERPs that have the capability of allowing enterprises to employ amix of approaches including make-to-stock, highly-repetitive,assemble-to-order or design-to-order for manufacturing have the
following functionality built into their underlying models:a. Multi-lingual
b. Multi-currency
c. Multi-mode manufacturing
d. Multi-facility
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10. ________________________________functionality of ERP makes it capable of, forinstance, receiving invoices in Indian Rupees,splitting the payment into German Mark and
Belgian Francs, billing in Italian Lire, receivingcash in British Pounds, with the general ledgerstated in US Dollar or Japanese Yen.
a. Multi-lingual
b. Multi-currencyc. Multi-mode manufacturing
d. Multi-facility
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Thank You