ERP Intro & History New

8/8/2019 ERP Intro & History New

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What is an

ERP(Enterprise Resource Planning)

An Introduction to ERP

BY

Ahsan ul Haq, IT Consultant


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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


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According to managerial levels

Executive IS

Long term

Future

Summarized

External

Operational IS Day to day

Historical

Detailed Internal

Exec

Middle

Operational


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Evolution of ERP Apps.1960S:

Inventory Systems: Economics Order Quantity (EOQ)

A reactive approach of Inventory management based on ordering cost & Inventory

carrying cost.


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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


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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.


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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.


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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.


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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.


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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


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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


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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.


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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


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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.


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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%.


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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.


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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.


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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


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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


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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


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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.


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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:


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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?


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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.


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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).


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Core Sub System of ERP

Sales and Marketing

Master Scheduling

Material Requirement Planning

Bill of MaterialsPurchasing

Shop Floor Control

Accounts Payable / ReceivableLogistics


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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


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Finance &

Accounts

Production &

Material Management

Human

Resource

ShippingCentralized ERP Database

Software & Servers

Example of an ERP System


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OracleApplication

Front Office FinancialHuman

Resource

Supply

ChainManufacturing

General Ledger

Assets

Receivable

Payable

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