introduction to erp
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Welingkar’s Distance Learning Division
We Learn – A Continuous Learning Forum
ERP & WEB BASED SUPPLY Chain Management
Chapter 1Introduction to ERP
Chapter1 1
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Chapter1 2
Introduction to ERPConcept
ERP is short of Enterprise Resource Planning, which is business management system that integrates all facets of the business such as manufacturing operations, supply chain, customers, human resource & finance.
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Welingkar’s Distance Learning Division
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Introduction to ERP Concept
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Welingkar’s Distance Learning Division
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ERP Simplified view
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Welingkar’s Distance Learning Division
We Learn – A Continuous Learning Forum
ERP Simplified view
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Welingkar’s Distance Learning Division
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Introduction to ERP Concept
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ERP’s Full potential
Corporate Office
Regional Office
Customers
Vendors
Manufacturingunits
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Chapter1
Introduction to ERP Concept
The salient features of above definition is that ERP refers to in house developed or commercially available software solutions which provide an
integrated suit of IT applications. That support the activities of the organization as a whole.
ERP Systems are the information backbone of the company. It serves as central nervous system &
termed as digital nervous system of the company.
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Introduction to ERP Concept
ERP (enterprise resource planning) is an industry term for the broad set of activities supported by multi-module application software that helps a manufacturer or other business manage the important parts of its business, including 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.
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Introduction to ERP Concept
ERP in manufacturing sector was primarily to address to know :
1) Stock of finished goods
2) Understand material movement
In 1970 the focus of manufacturing systems shifted to MRP
MRP Software applications have emerged to translate the Master Schedule built for the end products into Time phased net requirement
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Introduction to ERP Concept
In 1980 the concept of MRPII was evolved
All the resources such as People, Infrastructure, Process to various user group necessitate planning & utilization of such resources
MRP was further extended to cover areas like Engineering, Projects ,Management etc & led to what is known as ERP.
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Introduction to ERP Concept
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Introduction to ERP Concept Key TermsIntegration:Integration of operations with accounting result in converting thephysical units into rupee value.ERP integrates all facets of business including
1) Planning 2) Manufacturing
3) Sales
Software applications have emerged to help business managersimplement ERP in business activities such as Inventory Control, Order tracking, Customer service
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Introduction to ERP Concept Key Terms
• ERP finds useful application in human resource management, warehousing.
• ERP implies the use of the Shelf packed
• Software rather than proprietary software written for one customer
• The cost of developing & maintaining ERP modules become cost prohibitive & Time Consuming.
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Introduction to ERP Concept Key Terms
ERP modules are generally expected to have the capability to interface
with organizations own software.
Depending upon business requirement, ERP modules may be altered using vendor’s Proprietary tools ,Programming languages.
A good business strategy drives everything that comes in its way including its IT & IS resource
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Introduction to ERP Concept Key Terms
Systems:
The systems view of business or enterprise is a holistic view.A system consists of Input, Process , Output & feedback For example production system has input of Men(labor),material,money(finance).The output is goods and or services.
The processing converts input to value added outputs
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ERP Across Business SystemFinancial Systems Operational logistics
Accounts receivables & payable Inventory ManagementCash planning & Management MRPCost accountancy Plant managementGeneral ledger Production PlanningProduct Cost accounting Project managementProfit center analysis PurchasingProfitability analysis Quality managementExecutive Information system RoutingAsset accounting DispatchingStandard costing vendor analysisHuman Resources Sales & MarketingPayroll, Manpower planning Sales Order, PricingTravel Expenses, Sales management HR accounting Sales planning
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Process view/ Model of Business• Process Model defines entity or a set of activities that together
respond to a set of inputs to produce desired output • The process of converting input to desired output is governed by
factors such as performance standards,knowledge,procedures,material,machine,,constraints,& control points
ProcessingInput Output
Knowledge & Training
Methods & procedures
MachinesMaterial
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Chapter1 19
Process view/ Model of Business
The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed”
Process innovation, ”encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions”.
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Chapter1 20
Process view/ Model of Business
Methods MethodsMethods
UnderstandExisting
Processes
SimplifyingProcesses by
Eliminatingwastes
AutomateThe process
DiagrammingStory boardingBrainstorming
EliminationCombination
Rearrangement
EDIERP
Diagram illustrate basic philosophy of business process reengineering
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Chapter1 21
Preparing for the ERPInter Company Integration
To begin with ,an enterprise has framed departments, with some minimum interface with one another. organizations then adopt systems approach where the output of one system became input for other system and so on to form integrated system.
The isolated systems of yester years were called management systems(MIS) later DSS or decision support systems were developed. Executive Support system is a step beyond both MIS & DSS that collates information from different sources
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Chapter1 22
Preparing for the ERP
Before implementing ERP ,an organization has to decide where it is right now, where it would like to be,& what methods could be used to get there.
The data captured is of immense value in ERP in Finance, HR, SCM and enables such as data warehousing, EIS, workflow etc.
ERP is not just an IT project. It changes the organization in terms of authority responsibility relationship It brings discipline to the organization.
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Chapter1 23
Preparing for the ERP
Business process reengineering focuses on transformation of business process to make them more efficient whereas ERP focuses on automating
The business process using & some objective in mind.A project team is drawn from IT, Sales, Purchase, Production & Finance.
The outside consultant can be hired.ERP being an enabling tool help us to do things better
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Journey of ERPSYSTEM DESCRIPTION
MIS Management Information Systems. No decision support
IIS Integrated Information Systems. No decision support
EIS Executive Information Systems. Decision support
CIS Corporate Information Systems. Decision support
EWS Enterprise Wide System. No decision support
Logistics are considered as part of system
EDI,JIT,
EFT
Electronic Data Interchange, Just in Time,
Electronic fund transfer inter company integration
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Chapter1 25
ERP maturity Levels
ERP like living organization passes through different stages of development & maturity the business grows, ERP has to adopt itself to the changing processes, organizational structure & demand patterns to deliver effectively.
The ERP team takes a lot of effort after the “Go-Live” at three different stages of growth & maturity.
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Chapter1 26
ERP maturity LevelsStage 1 Chaos
The organization takes the ‘Go-Live’ decision. It requires streamlining of the processes
In stage 1,the attention is focused on administration andinformation stability. Roles and responsibilities are fixed.
The organization starts utilizing the information generated throughERP, It has to cope with change in organization culture.It is likely that alignment between the ERP and the processprevailing is lost.
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Chapter1 27
ERP maturity LevelsStage 2 Stagnancy
After the Implementation of the ERP organization expects a whole lot of benefit from it. However it does not happen immediately. Organizations expect higher ROI.
There two ways to improve situation
First manual activities are eliminated and are replaced by automated ERP system. This results in overall transaction complexity.
Secondly ,the intelligence of the system is enhanced by using Advanced planning engines& schedules
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Chapter1 28
ERP maturity Levels
Stage 3 Growth
At this stage ,Management seeks strategic support from the ERP. The system is aligned with the overall Corporate vision & strategies.
The focus is on profit and Working Capital Management. The organization is committed to growth of human resources.This improves the value chain. Capital management becomes better. There is optimization between customer product mix.
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Chapter1 29
ERP maturity Levels
ChaosChaos
EnhancementEnhancementStagnancyStagnancy
OptimizationOptimization
Stage1 Stage2
Stage3
Streaming Operations
Operational Improvements
Strategic transformation
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Organization of ERP Projects
There are three common ways to implement ERP projects.Big Bang is an approach that casts off all the legacy system in onego & installs a single ERP system across the company.
Franchising approach believes in implementing independent ERP system in each unit while linking common processes across the enterprise. It is one of most common method to install ERP.
Slam dunk is an approach where the ERP dictates the process. A few key processes are selected for focus
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Chapter1 31
Introduction to ERP
End of Chapter 1