MANAGEMENT INFORMATION SYSTEMS

Project Report on

New Trends in Information Systems

Topic – ENTERPRISE RESOURCE PLANNING
(ERP)

PGDM 2017-19

Course facilitator: Prof. Vikas Kumar

Submitted by:
Name - Ashwin Narendra Wagh
Section - A
Roll No. - 2017112031

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Introduction

What is 'Enterprise Resource Planning - ERP?'

Enterprise resource planning (ERP) is a process by which a company (often a manufacturer)

manages and integrates the important parts of its business. An ERP management information
system integrates areas such as planning, purchasing, inventory, sales, marketing, finance
and human resources.

ERP is most frequently used in the context of software. As the methodology has become more
popular, large software applications have been developed to help companies implement ERP.

Enterprise resource planning (ERP) is the integrated management of core business processes,
often in real-time and mediated by software and technology .ERP is usually referred to as a
category of business-management software — typically a suite of integrated applications—that
an organization can use to collect, store, manage and interpret data from these many business
activities.

ERP provides an integrated and continuously updated view of core business processes using
common databases maintained by a database management system. ERP systems track business
resources—cash, raw materials, production capacity—and the status of business commitments:
orders, purchase orders, and payroll. The applications that make up the system share data across
various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data.
ERP facilitates information flow between all business functions and manages connections to
outside stakeholders.

The ERP system integrates varied organizational systems and facilitates error-free transactions
and production, thereby enhancing the organization's efficiency. ERP systems run on a variety
of computer hardware and network configurations, typically using a database as an information
repository.

ERP is an industry term for the broad set of activities supported by multi-module application
software that help a manufacturer or other business mange the important parts of its business,
including product planning, parts purchasing , maintaining inventories, interacting with
suppliers, providing customer service, and tracking orders. ERP cans also include application
modules for the human resources aspects of a business. Typically, an ERP system uses or is
integrated with a relational database system.

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 What does ERP software do?

ERP can be fully integrated or customized to specific processes. A typical ERP system covers
key business processes and consists of the following modules:

 Financial management
 Customer Relationship Management (CRM)
 Sales & Marketing
 Human Resource Management (HRM)
 Manufacturing
 Supply Chain Management (SCM)
 Inventory
 Purchasing

The more advanced ERP today also include business intelligence, asset management and e-
commerce. Also, ERP can be vertical with industry-specific features for, among others, retail,
healthcare, government and nonprofit. Let’s break down the basic modules and how they serve
your needs.

1. Financial management. -This module manages your capital inflow and outflow. It covers
standard Accounting & Finance transactions like expenditures, general ledger, balance sheet,
bank reconciliation, tax management and payments. The module also generates financial
reports for different departments and business units.

2. CRM. -The CRM module helps you to boost customer service and, eventually, profit per
capita. It manages leads, opportunities and customer issues. Likewise, it provides a 360-
degree profile of your customers by consolidating data like their social media activities,
purchase history and past interactions with support reps. In an ERP setup, CRM is closely
integrated with Sales module to fast track conversions.

3. Sales & Marketing. -The module handles sales workflows like sales inquiries, quotations,
sales orders and sales invoices. The more advanced ERP also features taxation rules and
shipping tracker. The Sales and CRM modules work together to speed up the sales cycle and
earn the company more profits.

4. HRM. -This module features standard HRMS tools like time tracker, timesheet, and database
for employee records, job profiles and skills matrix. HRM module may also include
performance reviews and payroll system. The latter is closely integrated with the financial
management module to manage wages, travel expenses and reimbursements. Some ERP
solutions also feature a training or LMS function under HRM.

5. Manufacturing. -This modules is sometimes referred to as Engineering or Production. It

helps businesses make manufacturing more efficient in areas, such as, product planning,
materials sourcing, daily production monitoring and product forecasting. Some of the key

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 functionalities in this module are: Bill of Material, Master Production Schedule, Shop Floor
Control and Sales & Distribution Plan. The module is tightly integrated with SCM and
Inventory modules especially in areas like product planning and inventory control.

6. Supply Chain Management (SCM). - This modules covers key aspects in your supply
chain including purchase order management. It manages product flow from production to
consumer and, occasionally, vice-versa for returns or recalls. A key feature of the SCM
module is process automation, which streamlines your entire supply chain and makes it
adaptive to sudden market shifts.

7. Inventory. - Also called material management module, it helps you measure stock targets,
standardize replenishments and other inventory goals. It uses product serial numbers to track
and locate items in your organization. This module is closely integrated with the Purchase
module.

8. Purchasing. -This module manages the processes involved in materials procurement. These
include: supplier listings; quotation requests and analysis; purchase orders; Good Receipt
Notes; and stock updates. As such, it functions closely with SCM or Inventory modules.

Characteristics of ERP Systems

Modular Design

The modular design of an ERP system incorporates various distinct business modules such as
manufacturing, financial, accounting and distribution, with each module taking care of the
functions of a particular section or department of an organization. Although these modules
are totally separate, they're integrated in such a manner as to provide a seamless flow of data
between the various modules. This enlarges the operational transparency provided for by the
standard interface. The separate modules work in real-time with online and batch-processing
capabilities.

Central Common Database

Having a common centralized database management system, also called a DBMS, is an

important characteristic of a good ERP system. All the data is entered and stored only once
and then used by all the departments and modules simultaneously. This helps eliminate the
inherent flaws associated with using a distributed database. The distributed database structure
creates a lot of duplicity and redundancy of data, with risks of inconsistencies in the data
increasing exponentially.

Flexible and Open Design

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 Because organizations are almost always dynamic in nature, ERP systems offer a lot of
flexibility to respond to the ever-changing needs of the enterprise. These systems have an
open system architecture, allowing them to attach or detach any module as and when
required without affecting the other modules. A good ERP system should support
connectivity to other business entities in the organization and shouldn't be confined within
the boundaries of the organization. The system should also be Internet-enabled.

Automatic Generation of Information

An ERP system provides business intelligence tools such as executive information systems,
decision support systems, easy warning systems, data mining and reporting to enable people
to improve decision making, resulting in overall enhancement of business processes. All
financial and business information is generated automatically from the data already entered
once into the common centralized database of the ERP system, without any further
instructions. A good ERP system has a collection of all the best business practices that are
applicable worldwide.

What are the latest ERP trends?

The hype around Internet-of-Things and artificial intelligence notwithstanding, ERP trends
revolve around predictable tech developments. This niche is playing catch up to other SaaS
solutions, possibly due the more complex setup of ERP. The following are trends that are gaining
traction among ERP vendors, both legacy and startups.

1. Mobile ERP. - Some ERP solutions now offer native apps for iOS, Android and Windows.
Most of these however are pared-down version featuring only the most important KPIs like
sales, leads and web traffic. Still, this means you can remain connected and productive
outside of the office.
But mobile access can be a double-edged sword. Security risk is heightened when sensitive
data is accessed anywhere and via a device not issued by the company. A good mobile ERP
allows a separate user permission to help you manage who can access company data on their
phones.

2. Social ERP. - Billed as ERP 2.0, social ERP adds social media data like Twitter and
Facebook profiles and posts into the system. The integration is mainly a CRM initiative as
businesses leverage online customer engagement, brand mentions, public data, friend
network and likes and shares to gain tacit customer knowledge. An IFS North America and

Affinity Research Solutions study pointed out a number of social ERP benefits, mainly to
increase customer engagement and, ultimately, conversion rates.

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3. SaaS and On-Premise Hybrid. - ERP, because of its complexity, has a lot of grey shades
in between SaaS and on-premise. There are companies that prefer a hybrid approach,
integrating cloud inventory management into their on-premise accounting-centric ERP or a
cloud payroll into a local HR-focused ERP. From a cost and process perspective, this
strategy makes sense, driving vendors both legacy and startups to offer hybrid ERP. For
example, Oracle isn’t replacing its on-premise licensing, but co-opting it with cloud
solutions. Similarly, Salesforce, a pioneer enterprise cloud platform, offers integration with
legacy on-premise solutions like SAP and Siebel.

4. Two-tier ERP. - Large multinational companies are favoring a two-tier ERP approach. In
this setup, two ERP systems are in place, tier 1 at the corporate level and tier 2 at the
subsidiary level. This strategy is borne out of the limitations realized by big corporations in
building an overarching ERP system across a multi-country organization replete with stark
regulatory, cultural, geopolitical and market difference.

ERP through Technical Perspective

Technology behind ERP Systems

The IT infrastructure needed to support an ERP system needs to be robust and diverse with
many components able to interact seamlessly. The ERP software itself has to be deployed on
an application server, which provides the runtime services and connections to the back-end
database. The application server, along with other key components like a Web server and
identity management server, falls under the category of middleware. Depending on the
capacity needed, the database may be clustered with several database instances taking up the
load. All these considerations can make a corporate ERP system and its supporting
infrastructure extremely large and complex.

ERP through Business Perspective

Every business has its own set of processes, products and services that makes it unique.
However, most businesses face similar operational problems as they grow. Here are a few
such issues that ERP such as ERP Next can help in resolving for your business and
contribute in its growth and progress. Change has made several businesses fail to adapt and
reach their goals. In times such as these, Implementation of Enterprise Resource Planning
(ERP) in an organization can be immensely conductive in optimizing business operations to
improve efficiency and boost growth.

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ERP is an automation software. It automates business by performing various tasks more
efficiently with information that otherwise would not be had been available. ERP simplifies
most of the functions for the users ultimately improving the fundamental process which is
order fulfillment wherein a company takes order from a customer, ships it, bills it and
provides after-sales service. Which is more or less covers all the processes of the business.
That is why ERP is often referred to as back-office software. It provides a software road map
for automating the different steps along the path to fulfilling an order.

In this fast-changing world and growing competition ERP is not just a tool to improve
performance but has become a necessity for the survival of the business. Running reports in
real time, hands-on information from all the departments, numbers with charts and results
ready for analysis, having hidden data is now essential wherein there was a day in history
when having any of these accessible to you would have paved your way to the zenith in your
field of business. Ultimately, for a small business ERP could help leverage time and
resources and help cut cost and stay the head of competition, however for any SME, SMB
and large company, an ERP is as essential as any other software in the company. In an age
where all business technology applications should provide some competitive advantage, 76
percent of IT chiefs said operational efficiency was the goal of their organization’s ERP
investment, followed by support of global business (12%), growth (5%) and IT cost
reduction (4%).

Benefits of ERP in business;

1. Better Information Management through Business Automation

Performance metrics and Measurements are vital in evaluating business progress and also aid
in setting up future goals. However, as a business grows, it will become increasingly difficult
to manually calculate sales margin, profit ratios and other such metrics. ERP bring a degree
of automation to the business by allowing employees across the organization to access shared
data without the need to maintain manual records. This also enables generation of
synchronized reports on key business metrics. Immediate access to data is significant to take
timely decisions.

2. Improved Workflow

Workflow is improved all processes gets streamlined and access is simplified through user-
friendly interfaces, employees are better able to acquire the relevant information that is
necessary to do their job. Whether it's extracting a custom or standard reports or formulating
a report for presentation, ERP software makes each employee's job easier, which leads to
increased productivity.

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3. Streamlining Of Processes

The principle objective of any ERP is to integrate all the functions of a business into a
unified platform. Many businesses are still stuck in the unenviable position where their data
is stored in multiple locations and systems. By centralizing this data and streamlining the
means of accessing (as well as adding to) data, ERP contributes to greater efficiency within a
business model.

4. Modular Yet Integrated Approach

ERP software integrates various processes that are essential to run a business enterprise into
one single database. These processes include inventory and order management, accounting,
human resources, customer relationship management (CRM), among others. By streamlining
all the processes into one effective system, ERP provides your business with a shared
database that supports multiple functions across your enterprise.

5. Simplicity in Business Accounting

A growing business will struggle with its accounting procedures if they are still either
manual or if the sales, accounting, finance and HR departments do not have access to shared
data. Financial reporting and everyday accounting will particularly require a lot of time and
effort which can be easily reduced with the use of ERP. Using ERP to integrate and analyze
financial data will improve employee productivity and reduce delays considerably.

6. Transparency throughout Organization

For any business, information and data are extremely essential business assets. Data security
and integrity is extremely important to ensure that strategic business information is processed
and accessed by the right people. With an ERP, while the data is maintained safely, access of
data can also be given only to people who have the authority. Also, strategic information can
be maintained at one place while updates to such information can be done by one or more
authorized people. Thus Role based system makes ERP transparent as well as secure.

7. Elimination of Redundancies

One of the biggest problems with a non-centralized data management system is the continued
occurrence of redundant data. Redundant data is simply data that has been repeated twice,
which can lead to inconsistencies and confusion down the line. It's a common problem with
businesses that have multiple data storage locations and is something which can be rectified
with the use of ERP.

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8. Mingled Operational, Financial and Strategic Insight

ERP systems tie data and processes together so you always have a 360-degree view. Whether
you’re viewing costing amounts on a sales order, pulling up a customer’s record and seeing
their sales interactions and orders/shipments side-by-side, or forecasting sales using
historical sales orders and production data, ERP gives you the “big picture”.

9. Better Customer Satisfaction

Keeping your customers satisfied while managing your sales and inventory efficiently can be
a herculean task if you have your customer and inventory data housed on different platforms.
There could be times when you will have to report product related information to your
customer and if you lack updated inventory data, this could spell trouble. ERP helps in
maintaining up-to-date information and will also facilitate real-time updating of all data. This
will help customer representative’s access accurate, updated data and deal with your
customers efficiently.

10. High Security without Added Barriers for Your Employees

A good ERP makes it easy for staff to manage common processes like order entry, stock
counts, shipping, and receiving. But while off the shelf software often gives your staff full
access to your sensitive accounting and payroll records, ERP systems allow you to restrict
employees’ accounts only to the processes that are relevant to their roles.
This type of role-based security means that you can extend access to all your employees,
while keeping their permissions locked down so they can only access what they need to do
their jobs.

SWOT Analysis of ERP

Strengths

Better Analytics

The right ERP can make it easier and faster for your team to generate various reports, and this
may include everything from income and expense statements to customized reports based on
metrics and trends. The ability to have access to these reports quickly enables you and your
team to make better decisions more quickly. You will not need to rely on your IT staff to
generate the reports that you need.

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Improved Productivity

Without an ERP, you and your staff members may have redundancies in operations, or you
may have to waste time completing repetitive tasks manually. This can ultimately have a
negative impact on your bottom line. An ERP will eliminate this time waste, and this can
ultimately have a positive affect on your organization’s productivity, efficiency and
profitability.

Simplified Regulatory Compliance

If your organization is like most, your team may spend a considerable amount of time trying
to comply with regulations related to the Federal Information Security Management Act, the
Sarbanes-Oxley Act and others. Successful execution of your ERP project can help you to
gain and maintain compliance through the improved ability to manage and secure data and to
generate suitable reports.

Improved Inventory and Production Management

If your organization utilizes inventory and has a production process, you can also benefit from
improved management in these areas. An ERP can be used to simplify the task of reducing
overages, improving production and delivery schedules and more. It makes it simple and easy
to optimize your efforts rather than to create an informed guess about volumes, processes and
more.

Weaknesses

1. The cost of ERP Software, planning, customization, configuration, testing,

Implementation, etc. is too high.
2. ERP deployments are highly time-consuming – projects may take 1-3 years (or more)
to get completed and fully functional.
3. Too little customization may not integrate the ERP system with the business process
& too much customization may slow down the project and make it difficult to
upgrade.
4. The participation of users is very important for successful implementation of ERP
projects – hence, exhaustive user training and simple user interface might be critical.
But ERP systems are generally difficult to learn (and use).
5. There may be additional indirect costs due to ERP implementation – like new IT
infrastructure, upgrading the WAN links, etc.
6. Migration of existing data to the new ERP systems is difficult (or impossible) to
achieve. Integrating ERP systems with other stand-alone software systems is equally
difficult (if possible). These activities may consume a lot of time, money & resources,
if attempted.
7. ERP implementations are difficult to achieve in decentralized organizations with
disparate business processes and systems.
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 8. Once an ERP systems is implemented it becomes a single vendor lock-in for further
upgrades, customizations etc. Companies are at the discretion of a single vendor and
may not be able to negotiate effectively for their services.
9. Evaluation prior to implementation of ERP system is critical. If this step is not done
properly and experienced technical/business resources are not available while
evaluating, ERP implementations can (and have) become a failure.

Opportunities

Big Data ERP

Over time, successful, growing companies embrace technology across the enterprise. For
finance and HR executives, benefitting from big data means leveraging Enterprise Resource
Planning (ERP) solutions.

With ERP solutions, big data opportunities including everything from accounts receivable,
cash management, bank reconciliation and budgeting to employee lifecycle management,
recruitment and resourcing and more are automated and streamlined.

Powerful performance management, reporting and analytics functionality are tailored for HR
and finance pros to optimize data – contributing to better workforce management. For today’s
HR and finance professionals, selecting the right ERP software solution can usher in a new
era of data understanding and executive decision empowerment – all it may take is a little
collaboration.

ERP Software Market

Global ERP Software Market is expected to garner $41.69 billion by 2020, registering a
CAGR of 7.2% during the forecast period 2014 – 2020. Competitive Intelligence on
prominent manufacturers of ERP software provide key insights in terms of strategies
implemented to gain significant share in the ERP software market.

Threats

1. Security Risk

 Outdated, unsupported software can lead to crashes and integration issues

 Insufficient reporting capability can lead to external reporting and a loss of data
control
 Delayed updates can lead to software vulnerabilities
 Lack of compliance with security standards

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 2. The module chosen by a company sometimes may not be customized. Hence the
company cannot use the erp system for their working as per their policies.
3. Malfunctioning of the data in the ERP system may affect the company or the
organization.
4. Complex form of ERP systems may not be user-friendly for some employees in the
company. This will reduce the productivity of the company. On the other hand
training cost will also increase.
5. Virus attacks may crash the ERP systems. Hence if there is no proper backup there
may be a loss of database.

Conclusion

The ERP software functions like some a central nervous system for a business. It collects
information about the activity and state of different divisions of the body corporate and makes
this information available to other parts where it can be used productively. Information on the
ERP is added in real time by users. Any authorized user with a valid password and access to
the network can access the system any time.

ERP resembles the human central nervous system. Its capacity transcends the collective
ability of the individual parts to form what is known as consciousness. It helps a corporation
become more self-aware by linking information about production, finance, distribution and
human resources. ERP connects different technologies used by each individual part of a
business, eliminating duplicate and incompatible technology that is costly to the corporation.
This involves integrating accounts payable, stock-control systems, order-monitoring systems
and customer databases into one system.

But also a company could experience cost overruns if its ERP system is not implemented
carefully. An ERP system doesn't always eliminate inefficiencies within the business. The
company needs to rethink the way it is organized, or else it will end up with incompatible
technology.

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