OVERVIEW OF ERP

- By Amit Gupta

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 JOURNEY OF ERP:
MANUAL BACK END
PROCESS
AUTOMATION OF PROCESSES THROUGH
SOFTWARES

FINANCIAL SOFTWARES SALES AND

HR SOFTWARES DISTRIBUTION
SOFTWARES

DATAPROCESSING OF DATAPROCESSING OF
FINANCE HR DEPARTMENT
DEPARTMENT DATA PROCESSING OF
SD AND INVENTORY DEPARTMENT

INTEGRATION OF
INTERDEPARTMENTAL
DATA
ERP
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 What is ERP?

ERP-A CONCEPT
 An ERP System is a fully integrated business management
system covering all the functions of
Logistics , Production , Finance and Human Resources.
 It is one of the most advanced business management
applications in the market today having been developed to
support all of these processes of manufacturing and
distribution companies in a wide variety of industries.

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Importance of ERP for Management
Students
 Reports for fast decision making.
 Coordination among the functional department.
 Work in a integrated way.
 Work in automated environment.

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The Necessity of ERP
 Aggressive cost control initiatives
 Need to analyze costs and revenues on a product or customer
basis
 More informed management decision making
 Changes in ways of doing business

Common Applications Developed:

 Management Information Systems (MIS)
 Integrated Information System (IIS)
 Executive Information System (EIS)
 Material Requirement Planning (MRP)

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Characteristics of ERP:
 ERP facilitates company wide Integrated Information system .

 ERP bridges the information gap across organization.

 ERP provides complete integration of the system not only across the
departments but also across the companies under the same
management.

 ERP allows automatic introduction of latest technology like electronic

fund transfer (EFT) , electronic data interchange (EDI) .

 Productivity enhancement ,customer service, cash management,

inventory management, quality control and prompt delivery
 Ex-Big Bazar,Tata motors,Cipla Pharmaceutical etc.

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Prerequisites of ERP:
 Business Process Reengineering (BPR) is a prerequisites for going
ahead with a powerful planning tool like ERP.

 An in depth BPR study has to be done before taking up ERP.

BPR involves following steps :

 Study the current System

 Design and develop new system
 Find the Gap between new and old system
 Define processes , organization structure and procedure
 Customize the Software
 Train People
 Implement New System

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 Guidelines for ERP Implementation:
 ERP Implementation is recommended to be done in the phased manner.

 A step by step method of implementation will yield a better result.

 The total time required for successfully implementing an ERP package would be
between 6 and 24 months.

Phases for ERP Implementation:

 Project Planning
 Business analysis
 BPR
 Installation and configuration
 Project and Training
 Business requirement mapping
 Module Configuration
 System Interfaces
 Custom Documentation
 End User Training
 Acceptance Testing
 Post Implementation and Audit Support
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PROJECT METHODOLOGY:
SAP PROJECTS
IT PROJECTS
AS IS STUDY
REQUIREMENT ANALYSIS
TO BE STUDY
DESIGN
BUSINESS BLUEPRINT

CODING REALIZATION

TESTING GOLIVE

DEVELOPME
INSTALLATION AND NT
TESTING
MAINTENANCE
PRODUCTION

INSTALLATION AND
MAINTENANCE 9
Benefits of ERP:

Tangible Benefits :-
 Provides greater and effective control on accounts payable by
having increased control on invoicing and payment processing
 Reduction of paper work
 Availability of timely information
 Greater Accuracy
 Improved cost control
 Enable quick response to change in business operations and
market consumption.
 Provides a unified customer database usable by all
applications

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Intangible Benefits :-

 Improved Customer Satisfaction.

 Improved vendor Performance.

 Increased flexibility.

 Improved information utility.

 Improved information accuracy

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ERP versus Traditional IS
(information system)

 ERP systems are package software.

 ERP systems handles the majority of the

enterprise’s information requirements.

 ERP systems facilitate the flow of information

across the enterprise.

 Uses a single database.

 Fits the organization’s business processes.

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ERP Employ Best Practices

 ERP employ processes that are known to work and that

integrate with each other
 Those processes can be used to improve the way that firms do
business.

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ERP Eliminate Information Asymmetries

 What is an “information asymmetry”?

 Since all information goes into a single database, accessible to
many, means that many information asymmetries disappear.
 “If you don’t do your job, I can see that something hasn’t been
done”

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ERP Provide On-Line and Real Time
Information

 Since data is widely available and available on-line and in real

time, all have access to the same information
 As a result,
 information is available
 Anytime!

 Anywhere! to

 Anyone!


which can facilitate more consistent planning.

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Growth of ERP Systems

 The market for ERP systems grew rapidly in the late 1990s. The major
reasons for this included:

 The client/server environment became a popular enterprise

computing platform for many organizations. Most ERP systems are
designed to take advantage of this platform.

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Disadvantages of ERP

 ERP implementation is very difficult. There is a change in the

way business is done. From a business function approach to a
process approach.

 ERP systems are very expensive to implement. Can take years

and huge cost .

 Training is also very expensive.

 It takes time to realize the benefits of an ERP system,

approximately 8 months after implementation.

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Disadvantages of ERP:
 Employee control issues:

 Share information that was once closely guarded. (i.e. “their

information”)

 Make decisions they were never required to make.

 Both of these issues lead to resistance, redundancies, and

errors.

 About 1/2 of ERP implementations fail to achieve the hoped for

benefits because of under estimates in change management.
These are referred to as unintended consequences.
 Emotional fallout.
 Resistance to further change.

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Consequences:
 ERP systems are strategic solutions. In essence you are
betting the company’s future on a successful ERP
implementation.

 If the implementation fails, the consequences to the company

can be disastrous.

 Companies have gone out of business as a result of a failed

ERP implementation effort.

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Evolution of ERP Systems

 ERP systems have evolved over the past 30 years.

 ERP systems grew out of MRP II systems.
 Thus to understand the history of ERP systems, we must review MRP
and MRP II systems.

MRP Systems:
Material Requirements Planning (MRP) is a computerized
inventory control and production planning system for
generating purchase orders and work orders of materials,
components, and sub assemblies.

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Components of a MRP System:

 MRP is designed to handle the ordering and scheduling of

dependent demand inventories.

 Major components of a MRP system:

 Bill of materials - composition of the finished product.
 Master schedule - how much of the finished product is
desired and when.
 Inventory records file - the amount of inventory in hand
or ordered.

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MRP II Systems:

 Manufacturing Resource Planning (MRP II) is an

expansion of MRP, originating during the early
1980s.

 MRP II helps to plan all the resources necessary

for manufacturing; including financial analysis,
feedback loops, and marketing plans.

ERP is an updated manufacturing resource planning

system (MRP II) with relational database management,
GUI, and client/ server architecture 22
 Recent ERP Trends:

 ERP systems are now linking groups and applications

external to the organization. Ex Dell, Maruti Vendor

 We are now linking ERP systems with web and E-

commerce applications, b-to-b, b-to-c.

 ERP systems are now beginning to use web browsers as

the GUI.

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Pre-Implementation Objectives

 To increase the chances of a successful ERP implementation,

companies should achieve the following objectives before ERP
implementation begins:

 Ensure alignment of the project to the company’s business

plan.

 Ensure ERP goals are clearly and widely understood.

 Develop a well established communication plan that

involves the entire organization.

 Obtain executive sponsorship.

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Factors affecting ERP
Implementation:
ERP implementations will be significantly influenced by 4 major criteria:
 Functional complexity.
 Size/type of user population.
 Geographical spread.
 Package modifications.

■ Functional complexity.
complexity. ERP Functionality can be grouped into five areas:
Finance, Manufacturing, Logistics, Sales, and HR/Payroll.

 Size/type of user population.

population. Complexity increases proportionately with users .
 Geographic spread.
spread. Single-site deployments are the simplest, while multiple
sites across multiple continents are the most complex.

 Package modification.
modification. Many companies make the mistake of trying to over
customize the application framework to fit their existing business process model,
rather than adjusting business processes to fit the application suite.

 During the package selection process, it is important to gauge the fit of the ERP
system with the existing business model. Minimizing customization and
modifications will result in a faster, more successful, deployment.

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ERP Costs:
ERP Implementation and Maintenance Costs

Cost Component Percentage

Implementation costs 70%

Two-year post-implementation costs 30%

Total cost of ownership (TCO) 100%

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Key Steps For Ensuring Maximum
Business Value from an ERP System:
 PROPER ERP VENDOR SELECTION

 BUSINESS PROCESS OPTIMIZATION

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Market Scenario of ERP and an
Overview of the Major Players:
 ERP market is dominated by a few large companies.

 The major companies we will study are as:

 SAP AG.
 Baan.
 Peoplesoft.
 J.D. Edwards.
 Oracle.
 Siebel

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SAP:
 SAP - Systems, Applications, Products in Data Processing.
 The world’s leading vendor of ERP systems.
 The company SAP AG was founded in 1972 by 4 former IBM employees.
 SAP makes 2 ERP software packages:
R/2, R/3.R/3 is the follower to the R/2 system and was introduced in 1992.
 The latest version that is ruling the market is ECC 6.0, a descendant of
ECC 5.0.
 Clients are mainly big international companies with revenues of at least
60 million dollars.
 SAP’s revenue shows a slight slow down from 1998 onwards. But after
y2k problem SAP provided the solution to business and grown very fast.

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R/3 System:
 The R/3 system has evolved from R/2 technology.

 R/3 is used in new applications as well as in companies converting

from a legacy mainframe system to a client/ server architecture.

 The major characteristics of R/3 are:

 ALE technology - allows R/3 to link to external systems and R/2
applications.
 Integration with standard PC applications - easy interaction
with excel, word, and access.

Very good GUI
 SAP has the strong hold in Manufacturing module

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Oracle:
 SAP’s nearest challenger, in terms of revenue, is Oracle
with its product Oracle Applications.

 Oracle established itself as the largest database vendor

before moving into the ERP market in 1989.

 One reason for Oracle not being so successful is that the

firm has prioritized marketing rather than functionality
or value for the money.
 Oracle they have the strength in financial domain

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People soft: (Oracle)
 The third largest ERP vendor is Peoplesoft.

 They produce Peoplesoft 7.5.

 Peoplesoft’s focus was in the area of Human Resources, which is still the
company’s strength.

 Some critics consider that Peoplesoft is not a complete ERP vendor, but
the company has today well-developed modules in manufacturing,
distribution and financials.

 Too US-centric to make a serious challenge to the market.

 Only 20 percent of its sales are derived from clients outside USA.

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J.D. Edwards: (oracle)

 US-based JD Edwards (JDE) was founded in 1977.

 JDE started as a custom software developer, then moved to

off-the-shelf (finance and logistics) packages.

 JDE mostly targets mid-size corporations and has enjoyed a

long-term growth rate in excess of 50% over its 20 years in
business.

 After three years of development, its ERP products are now

sold under the brand name One World.

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Siebel (Oracle)
 Siebel also the part of Oracle now
 Siebel they are the leaders in customer relationship
management
 Most of the BPO companies are working on Siebel.

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Baan:
 The Dutch company was founded in 1978 as a provider of
financial and administrative consulting services.

 Baan’s strategy concentrates on manufacturing and logistic

systems and operates on Unix and NT.

 Baan has already implemented Baan 4 in more than 280

companies.

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Microsoft Dynamics and Navision
 Microsoft acquire Navision which has good presence in SME
segment and very user friendly.
 Microsoft has come with Microsoft Dynamics to give the
competition to SAP.

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Some Other Major ERP Softwares:

 Ramco

 Microsoft Business Solutions – Navision

 Syspro

 Sage MAS 500.


Business Vision .

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Epicor:
 Targeted to medium-size companies with $50 - $250 Million in
revenues.
 Front office/CRM
 End to end solution in some ways similar to Tier One products
(SAP, PeopleSoft, Oracle) with much of the functionality but at
40% of the cost.
 Warehouse management
 Light manufacturing
 Multiple Currencies
 E Procurement.
 Consolidation and inter company processing

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Microsoft Business Solutions -
Navision
 Targeted to small, medium-sized and some large companies
with $10 - $500 Million in revenues.
 Customization.
 Rock solid performance.
 Dimensional reporting.
 Financial reporting.
 Navigation. Navision provides superior tools to easily drill
down for detailed information.
 Supply Chain.
 Inter-company transactions.

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Syspro:
 Revenues between $5 Million and $250 Million with 10 to
1,000 employees.
 Installation Base-12,000 worldwide.
 Inventory optimization.
 Advance Planning and Scheduling (APS) (manufacturing).
 Business Intelligence (BI) / Analytics.
 Wireless mobile applications.
 Embedded Crystal Reports.
 CRM.
 Work Flow.
 Rules-based Configurator.
 Trade Promotion Management.

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Comparison of ERP Softwares in
terms of Cost and Market Reputation:

 System Size:

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Overall Costs:

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Basic Modules of SAP R/3:
Functional Modules of SAP:
 Financial Accounting (FI)
 Controlling (CO)
 Assets Management (AM)
 Project System (PS) ABAP - CODING
 Human Resources (HR)
 Plant Maintenance (PM)
 Materials Management (MM)
 Quality Management (QM)
 Production Planning (PP)
 Sales and Distribution (SD)

BASIS – SYSTEM
ADMINISTRATION
SAP Technical Modules
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FI Financial Accounting:

Designed for automated management and external

reporting of general ledger, accounts receivable, accounts
payable and other sub-ledger accounts with a user defined
chart of accounts.

As entries are made relating to sales production and

payments journal entries are automatically posted. This
connection means that the "books" are designed to reflect
the real situation.
SD Sales and Distribution:

It helps to optimize all the tasks and activities

carried out in sales, delivery and billing. Key elements
are; pre-sales support, inquiry processing,
quotation processing, sales order processing,
delivery processing, billing and sales information
system. 44
CO Controlling:

It represents the company's flow of cost and revenue. It is a

management instrument for organizational decisions. It too is
automatically updated as events occur.

AM Asset Management:

It is designed to manage and supervise individual aspects of fixed

assets including purchase and sale of assets, depreciation and
investment management.

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HR Human Resources:

It is a complete integrated system for supporting the planning

and control of personnel activities.

PM Plant Maintenance:
In a complex manufacturing process maintenance means more
than sweeping the floors. Equipment must be services and
rebuilt. These tasks affect the production plans.

MM Materials Management:

It supports the procurement and inventory functions occurring

in day-to-day business operations such as purchasing,
inventory management, reorder point processing, etc.

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QM Quality Management:

It is a quality control and information system supporting

quality planning, inspection, and control for manufacturing
and procurement.

PP Production Planning:

It is used to plan and control the manufacturing activities of

a company. This module includes; bills of material, routings,
work centers, sales and operations planning, master
production scheduling, material requirements planning,
shop floor control, production orders, product costing, etc.

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