Download - ERP Intro & History New
-
8/8/2019 ERP Intro & History New
1/29
What is an
ERP(Enterprise Resource Planning)
An Introduction to ERP
BY
Ahsan ul Haq, IT Consultant
-
8/8/2019 ERP Intro & History New
2/29
Computer Applications:
Overview
Three ways of classifying
According to organization level of users
According to functional area
According to type of problem
Types of applications
Transaction
Reporting
Simulation, Modeling
Office
Expert System
-
8/8/2019 ERP Intro & History New
3/29
According to managerial levels
Executive IS
Long term
Future
Summarized
External
Operational IS Day to day
Historical
Detailed Internal
Exec
Middle
Operational
-
8/8/2019 ERP Intro & History New
4/29
Evolution of ERP Apps.1960S:
Inventory Systems: Economics Order Quantity (EOQ)
A reactive approach of Inventory management based on ordering cost & Inventory
carrying cost.
-
8/8/2019 ERP Intro & History New
5/29
Evolution of ERP Apps. Contd.
1970S: Material Requirement Planning (MRP)
A proactive approach of Inventory Management.
Explodes end product demand
From Master Production Schedule (MPS)
On product structure. Bill of Material (BOM)
Generates a detailed schedule of Purchase orders or
productions orders based on inventory on hand
-
8/8/2019 ERP Intro & History New
6/29
1980s: Manufacturing Resource Planning. MRPII
Effective planning of all manufacturing resources
Operational planning in units.Financial planning in dollars or rupees
Simulation capability to answer what if questions.
Integrated manufacturing functions
Business Planning.
Production Planning.
Master Production Scheduling, Material Requirement Planning.
Capacity Requirements Planning and executive system on priority.
Outputs of manufacturing systems integrated with
Business plan, purchase commitments, shipping, budget, Inventory
production, etc.
-
8/8/2019 ERP Intro & History New
7/29
ERP Evolution
1990: Enterprise Resource Planning
MRP-II extended to cover other areas:
Engineering
Finance
Human Resources
Projects Management
SCM
CRM etc.i.e. the complete set of activities within any business enterprise
hence the term ERP (Enterprise Resource Planning)
Needs
Overcome shortcomming of MRP-II
Integrate process automation toolsIS should not be limited to Manufacturing organizations only.
-
8/8/2019 ERP Intro & History New
8/29
Summary of ERP Evolution
The focus of manufacturing systems in the 1960's was onInventory control. Most of the software packages then were
designed to handle inventory based on traditional inventory
concepts.
In the 1970's the focus shifted to MRP (Material Requirement
Planning) systems, which translated the Master Schedule, built
for the end items into time-phased net requirements for the sub-
assemblies, components and raw materials planning and
procurement.
In the 1980's the concept of MRP-II (ManufacturingResources Planning) evolved which was an extension of MRP to
shop floor and Distribution management activities.
-
8/8/2019 ERP Intro & History New
9/29
Summary of ERP Evolution (Cont)
In the early1990's, MRP-II was further extended to cover areas
like Engineering, Finance, Human Resources, Projects
Management etc i.e. the complete gamut of activities within any
business enterprise. Hence, the term ERP (Enterprise Resource
Planning) was coined.
In addition to system requirements, ERP addresses technologyaspects like client/server distributed architecture, RDBMS,
object oriented programming etc .
ERP Systems solutions address broad areas within any
business like Manufacturing, Distribution, Finance, ProjectManagement, Service and Maintenance, Transportation etc. A
seamless integration is essential to provide visibility and
consistency across the enterprise.
-
8/8/2019 ERP Intro & History New
10/29
Some of the modules of an ERP
Sales & Marketing Accounts Payable/Receivable
Master Scheduling Accounts, budgeting, financialMaterial Requirement control
Planning Logistics
Capacity Requirement Costing
Planning Maintenance
Bill of Materials Assets Management
Purchasing Quality Management
Shop floor Control SCM
WIP CRM
Financial Management Project costing management
-
8/8/2019 ERP Intro & History New
11/29
oUnderstanding ERP
ERP is a process-oriented software
Makes everyone aware of overall transaction flow and mutual
dependencies.
Removes processes from the realm of informality , adhocracy and
anarchy
Acts as a buffering ram that knocks down castle walls
Integration in the official defining characteristics of ERP
of functions and tasks into processesseamless interface across time and space
shared real-time and consistent data
between processes and ultimately, between companies
-
8/8/2019 ERP Intro & History New
12/29
Definition of ERPSoftware solution that addresses the enterprise
needs taking the process view of an organization
to meet the organizational goals tightly integrating
all functional areas of an enterprise.
40-60 modules covering the entire range of
business functional areas.
-
8/8/2019 ERP Intro & History New
13/29
Enterprise Resource Planning (ERP)
ERP is a packaged business software system that allow
companies to:
automate and integrate the majority of their businessprocesses
share common data and practices across the entire
enterprise
produce and access information in real-time
environment
-
8/8/2019 ERP Intro & History New
14/29
Enterprise Resource Planning (ERP) (Cont..)
ERP (Enterprise Resource Planning) is an industry term for the
broad set of activities supported by multi-module application
software that help a manufacturer or other businesses to manage
its important parts like product planning, parts purchasing,
maintaining inventories, interacting with suppliers, providing
customer service, and tracking orders.
ERP can also include application modules for the finance and
human resources aspects of a business. Typically, an ERP system
uses or is integrated with a relational database managementsystem. The deployment of an ERP system can involve
considerable business process analysis, employee retraining, and
new work procedures.
-
8/8/2019 ERP Intro & History New
15/29
Enterprise Resource Planning (ERP) (Cont.)
Studies show that 70% of Fortune 1000 firms have or will soon
install ERP systems, which will boost the global ERP market
from $15 billion now to $50 billion over the next five years.
ERP applications make up the largest portion of Information
Technology budgets. 39% of large companies and 60% of
smaller companies are deploying ERP systems. The expected
annual growth rate for the ERP market over the next 5 years is
37%.
-
8/8/2019 ERP Intro & History New
16/29
Principal ERP VendorsSAP
Oracle
SAP founded in 1972 by 5 former IBM engineers, is the biggest
of the group. SAPs software is R/3 and is designed to help
organize manufacturing processes and accounting. SAP also
offer modules for logistics and human resources. Recently, SAPhas expanded its product line by including supply chain
management, sales-force automation and data warehousing
software.
Oracle has been selling ERP applications designed to work withits databases since 1987. Oracle sells most of its applications to
manufactures and consumer goods companies, making them a
direct competitor with SAP.
-
8/8/2019 ERP Intro & History New
17/29
Advantages of ERP
The benefits accruing to any business enterprise on account of
implementing are unlimited. According to the companies likeNIKE, DHL, Tektronix, Fujitsu, Millipore, Sun Microsystems,
following are some of the benefits they achieved by
implementing ERP packages:
Accounts Payable personnel increased control of invoicing
and payment processing and thereby boosting their
productivity and eliminating their reliance on computer
personnel for these operations.
Reduce paper documentsby providing on-line formats for
quickly entering and retrieving information.
-
8/8/2019 ERP Intro & History New
18/29
Improves timeliness of informationby permitting, posting daily
instead of monthly.
Greater accuracy of information with detailed content, better
presentation, fully satisfactory for the Auditors.
Improved Cost Control
Faster response and follow up on customers
More efficient cash collection, say, material reduction in delay in
payments by customers.
Better monitoring and quicker resolution of queries.
Helps integrate multiple sites and business units
-
8/8/2019 ERP Intro & History New
19/29
Enables quick response to change in business operations and
market conditions.
Helps to achieve competitive advantageby improving its
business process.
Improves supply-demand linkage with remote locations and
branches in different countries.
Provides a unified customer database usable by all applications.
Improves information access and management throughout theenterprise.
Incorporates improved, redesigned best processes
-
8/8/2019 ERP Intro & History New
20/29
Disadvantages of ERP
is very expensive to purchase, and even more costlyto customize
requires major changes in the company and its
processes to implement
is such a complex program that many companiescannot adjust to it
involves an ongoing process for implementation,
which is often never completed
expertise in ERP is limited, with staffing an ongoingproblem
-
8/8/2019 ERP Intro & History New
21/29
ERP Systems -- Implementation
The success of an ERP solution depends on how quick thebenefits can be reaped from it.
This necessitates rapid implementations which lead to
shortened ROI periods. Traditional approach to implementation
has been to carry out a Business Process Re-engineering
exercise and define a ``TO BE'' model before the ERP system
implementation.
This led to mismatches between the proposed model and the
ERP functionality, the consequence of which was
customizations, extended implementation time frames, highercosts and loss of user confidence.
-
8/8/2019 ERP Intro & History New
22/29
ERP Systems -- Implementation
When a company determines that it would benefit fromestablishing an ERP system, most enter the process without first
planning the implementation of the new system, or even
determining if what they intend to implement will add value
where value is needed most.
The first step in ensuring a good fit between the organization and
the new information technology that will be used, is for managers
to ask and find concise answers as to the nature of the type of
information technology being used in their industry. Forexample:
-
8/8/2019 ERP Intro & History New
23/29
ERP Systems -- Implementation
What type of strategies are being used by industry leaders toincrease value?What type of information systems are being
used and how?
What type of changes to the industry are being predicted, and
how are firms already successfully managing information
technology pertaining for these upcoming changes?
What are the strategic opportunities to be gained by introducing
an ERP system and are these opportunities applicable to the
organization in question?
Will new systems need to be developed to meet the needs of theindustry or are current software applications adequate?
-
8/8/2019 ERP Intro & History New
24/29
Critical Success Factors for Implementation
First and foremost is the top management commitment. The
large investments needed to implement ERP ensure that the
decisions are invariably taken at the top management level. It
is fortunate, but not sufficient. This ensures top management
involvement, but it is not tantamount to top management
commitment.To be successful, the ERP team must consist of your "best"
people, not those that "can be spared" during the project team.
The management commitment involves the management of
change. ERP is likely to turn the organization "upside down"unleashing lots of energy from vested interests.
-
8/8/2019 ERP Intro & History New
25/29
ERP Systems - The Future
The Internet represents the next major technology enabler, which
allows rapid supply chain management between multiple operationsand trading partners. Most ERP systems are enhancing their products
to become "Internet Enabled'' so that customers worldwide can have
direct to the supplier's ERP system.
ERP systems are building in the Workflow Management functionallywhich provides a mechanism to manage and control the flow of work
by monitoring logistic aspects like workload, capacity, throughout
times, work queue lengths and processing times.
Recognizing the need to go beyond the MRP-II and ERP vendors are
busy adding to their product portfolio. BAAN for example has alreadyintroduced concepts like IRP (Intelligence Resource Planning), MRP-
III (Money Resources Planning).
-
8/8/2019 ERP Intro & History New
26/29
Core Sub System of ERP
Sales and Marketing
Master Scheduling
Material Requirement Planning
Bill of MaterialsPurchasing
Shop Floor Control
Accounts Payable / ReceivableLogistics
-
8/8/2019 ERP Intro & History New
27/29
ERP & BPR
in-depth business process re-engineering (BPR) study to bedone before taking up ERP
BPR brings out deficiencies of the existing system
BPR attempts to maximize productivity through re-structuring
and re-organizing the human resource as well as the divisionsand departments in the organization
-
8/8/2019 ERP Intro & History New
28/29
Finance &
Accounts
Production &
Material Management
Human
Resource
ShippingCentralized ERP Database
Software & Servers
Example of an ERP System
-
8/8/2019 ERP Intro & History New
29/29
OracleApplication
Front Office FinancialHuman
Resource
Supply
ChainManufacturing
General Ledger
Assets
Receivable
Payable