ERP - DefinitionERP - Definition

ERP is a process of managing all ERP is a process of managing all resources and their use in the entire resources and their use in the entire enterprise in a coordinated mannerenterprise in a coordinated manner

Enterprise Resource Enterprise Resource Planning (ERP)Planning (ERP)

ERP is a way to integrate the ERP is a way to integrate the data and processesdata and processes of an organization into one single system. of an organization into one single system.

ERP systems will have many components including ERP systems will have many components including hardware and softwarehardware and software, and , and unified databaseunified database . .

The term ERP referred to how a large organization The term ERP referred to how a large organization planned to use organizationalplanned to use organizational wide resources. wide resources.

ERP systems are used in almost any type of ERP systems are used in almost any type of organization - large or small.organization - large or small.

History of ERPHistory of ERP

The first software that was developed in this The first software that was developed in this process happens to be MRP (material Resource process happens to be MRP (material Resource Planning) in the year 1975.This was followed by Planning) in the year 1975.This was followed by another advanced version namely MRP2 which is another advanced version namely MRP2 which is the acronym for Manufacturing Resource the acronym for Manufacturing Resource planning. None of them yielded the benefit of ERP.planning. None of them yielded the benefit of ERP.

These soft wares were helpful in manufacturing These soft wares were helpful in manufacturing process. Their benefits did not extend to other process. Their benefits did not extend to other Sectors. ERP was developed as multifaceted Sectors. ERP was developed as multifaceted software that gradually stretched its limits into software that gradually stretched its limits into other areas like human resource, finance, other areas like human resource, finance, marketing and so on.marketing and so on.

Function of ERPFunction of ERP

Human Resources, Human Resources, Supply Chain Supply Chain

Management,Management, Customer Relations Customer Relations

Management,Management, Financials Financials

management, management, Manufacturing and Manufacturing and

Warehouse Warehouse Management Management functionsfunctions

Functional Modules of ERP Functional Modules of ERP SoftwareSoftware ERP software is made up of many software modules. Each ERP software is made up of many software modules. Each

ERP software module mimics a major functional area of an ERP software module mimics a major functional area of an organization. Common ERP modules include modules for organization. Common ERP modules include modules for

product planningproduct planning parts and material purchasingparts and material purchasing inventory control, inventory control, product distributionproduct distribution order trackingorder tracking FinanceFinance accountingaccounting marketingmarketing HRHR

Organizations often selectively implement the ERP modules Organizations often selectively implement the ERP modules that are both economically and technically feasible. that are both economically and technically feasible.

Ideal ERP System ModuleIdeal ERP System Module These software modules which are integrated in software are:These software modules which are integrated in software are:

ManufacturingManufacturing: : FinancialsFinancials: : Human ResourcesHuman Resources: : Supply Chain ManagementSupply Chain Management: : ProjectsProjects: : Customer Relationship ManagementCustomer Relationship Management: : Data WarehouseData Warehouse

ManufacturingManufacturing: : ProductionProduction improve productivityimprove productivity eliminate costly reworkeliminate costly rework CapacityCapacity Workflow ManagementWorkflow Management Quality controlQuality control Bills of materialBills of material Manufacturing processManufacturing process

FinancialsFinancials: : Both for-profit organizations and non-profit Both for-profit organizations and non-profit organizations benefit from the implementation of organizations benefit from the implementation of ERP financial module. The financial module is the ERP financial module. The financial module is the heart of many ERP software systems. heart of many ERP software systems.

It can gather financial data from various It can gather financial data from various functional departments.functional departments.

generates valuable financial reports likegenerates valuable financial reports like balance sheet, balance sheet, general ledgergeneral ledger trail balancetrail balance quarterly financial statements. quarterly financial statements.

Human ResourcesHuman Resources Personnel Management: Personnel Management: IIt include HR master-data, t include HR master-data,

personnel administration, recruitment and salary personnel administration, recruitment and salary administration. administration.

Organizational Management:Organizational Management: includes organizational includes organizational structure, staffing schedules & job description. structure, staffing schedules & job description.

Payroll System:Payroll System: Salary management, attendance Salary management, attendance management for salary calculation. management for salary calculation.

Time Management:Time Management: includes shift planning, time includes shift planning, time recording, absence & leave management. recording, absence & leave management.

Personal Development:Personal Development: training and event training and event management, additional training determination and management, additional training determination and training assessment. training assessment.

Supply Chain ManagementSupply Chain Management InventoryInventory supply chain planningsupply chain planning supplier schedulingsupplier scheduling claim processingclaim processing order entryorder entry purchasingpurchasing

PProjectsrojects: : CostingCosting billingbilling activity managementactivity management time and expensetime and expense

Customer Relationship Customer Relationship ManagementManagement:: sales and marketing servicesales and marketing service commissions commissions customer contactcustomer contact calls center supportcalls center support

Data WarehouseData Warehouse:: Organizations customers, Organizations customers, suppliers suppliers employees.employees.

What makes ERP What makes ERP differentdifferent

Integrated modulesIntegrated modules Common definitionsCommon definitions Common databaseCommon database Update one module, automatically Update one module, automatically

updates othersupdates others ERP systems reflect a specific way of ERP systems reflect a specific way of

doing businessdoing business Must look at your value chains, Must look at your value chains,

rather than functionsrather than functions

Importance of ERP software Importance of ERP software for businesses:for businesses:

Three of the most important ERP tools available Three of the most important ERP tools available today are manufacturing, human resources, and today are manufacturing, human resources, and finance. It allow to maintainfinance. It allow to maintain

financial information like accounts, budgets and financial information like accounts, budgets and cash.cash.

Internal as well as external factors effect on Internal as well as external factors effect on organization.organization.

Process of buying materials and maintaining Process of buying materials and maintaining them. them.

Inventory management, Inventory management, production,production, Quality managementQuality management

Advantage of ERPAdvantage of ERP

integrating the many processes by which integrating the many processes by which business operate , saves time and cost.business operate , saves time and cost.

Decisions can be made more quickly and Decisions can be made more quickly and with fewer errorswith fewer errors

Data becomes visible across the Data becomes visible across the organization.organization.

better corporate imagebetter corporate image improved customer goodwillimproved customer goodwill customer satisfaction, and so on. customer satisfaction, and so on. faster response time to customer-queriesfaster response time to customer-queries

Disadvantages of ERP Disadvantages of ERP SystemsSystems

Takes time to implement.Takes time to implement. ExpensiveExpensive Training Training IntegrationIntegration Data analysis and conversionData analysis and conversion Security issuesSecurity issues The success of the system is fully dependent on how the The success of the system is fully dependent on how the

workers utilize it. This means they must be properly trained, workers utilize it. This means they must be properly trained, Even if a company has enough money to implement ERP, Even if a company has enough money to implement ERP, they may not be able to successfully use it if they do not they may not be able to successfully use it if they do not have enough money to train their workers on the process of have enough money to train their workers on the process of using it.using it.

Customization (modification) in many situations is limited. Customization (modification) in many situations is limited. Also too much customization may slow down the project and Also too much customization may slow down the project and make it difficult to upgrade. make it difficult to upgrade.

ERP systems can be unaffordable to install and run ERP systems can be unaffordable to install and run Technical support can be poor Technical support can be poor

VendorsVendors

Do you currently have an Do you currently have an ERP package? ERP package?

If your answer is "Yes", which ERP If your answer is "Yes", which ERP package(s) do you currently use? package(s) do you currently use?

Are you considering adding new Are you considering adding new modules to your existing ERP package? modules to your existing ERP package?

If your answer is "Yes", which modules If your answer is "Yes", which modules are you planning to add? are you planning to add?

Supply Chain Supply Chain Management Management

(SCM)(SCM)

10-21

Supply ChainSupply Chain

• All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows

• An integrated group of processes to “source,” “make,” and “deliver” products

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What Is the Supply Chain? What Is the Supply Chain?

Also referred to as the logistics network Also referred to as the logistics network (linked activity) of (linked activity) of

Suppliers, manufacturers, warehouses, Suppliers, manufacturers, warehouses, distribution centers and retail outlets – distribution centers and retail outlets – “facilities”“facilities”

and theand the

Raw materialsRaw materials Work-in-process (WIP) inventoryWork-in-process (WIP) inventory Finished productsFinished products

that flow between the facilitiesthat flow between the facilities

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts Transportation

CostsInventory CostsManufacturing Costs

23

The Supply ChainThe Supply ChainSuppliers Manufacturers Warehouses &

Distribution CentersCustomers

Material Costs

TransportationCosts

TransportationCosts

TransportationCostsInventory CostsManufacturing Costs

24

The Supply Chain – Another ViewThe Supply Chain – Another View

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts Transportation

CostsInventory CostsManufacturing Costs

PlanPlan Source Source Make Make Deliver Deliver Buy Buy

10-25

Supply Chain IllustrationSupply Chain Illustration

10-26

SupplSupply y

Chain Chain for for

DeniDenim m

JeansJeans

10-27

SupplSupply y

Chain Chain for for

DeniDenim m

Jeans Jeans (cont.(cont.

))

10-28

Supply Chain ProcessesSupply Chain Processes

10-29

Supply Chain Management (SCM)

Managing flow of information through supply chain in order to achieve the level of organization that will make it more responsive to customer needs while lowering costs

Keys to effective SCM information communication cooperation trust

30

What Is Supply Chain Management What Is Supply Chain Management (SCM)? (SCM)?

A set of approaches used to efficiently integrateA set of approaches used to efficiently integrate SuppliersSuppliers ManufacturersManufacturers WarehousesWarehouses Distribution centersDistribution centers

So that the product is produced and distributedSo that the product is produced and distributed In the right quantitiesIn the right quantities To the right locationsTo the right locations And at the right timeAnd at the right time

System-wide System-wide costscosts are minimized and are minimized and Service levelService level requirements are satisfied requirements are satisfied

Plan Source Make Deliver Buy

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Why Is SCM Difficult? Why Is SCM Difficult?

Uncertainty is natural to every supply chainUncertainty is natural to every supply chain Travel timesTravel times Breakdowns of machines and vehiclesBreakdowns of machines and vehicles Weather, natural disaster, warWeather, natural disaster, war Local politics, labor conditions, border issuesLocal politics, labor conditions, border issues

The complexity of the problem to globally The complexity of the problem to globally optimize a supply chain is significantoptimize a supply chain is significant Minimize internal costsMinimize internal costs Minimize uncertaintyMinimize uncertainty Deal with remaining uncertaintyDeal with remaining uncertainty

Plan Source Make Deliver Buy

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The Importance of Supply Chain The Importance of Supply Chain Management Management Dealing with uncertain environments – Dealing with uncertain environments –

matching supply and demandmatching supply and demand Boeing announced a $2.6 billion write-off in 1997 Boeing announced a $2.6 billion write-off in 1997

due to “raw materials shortages, internal and due to “raw materials shortages, internal and supplier parts shortages and productivity supplier parts shortages and productivity inefficiencies”inefficiencies”

U.S Surgical Corporation announced a $22 million U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals”inventories on the shelves of hospitals”

IBM sold out its supply of its new Aptiva PC in 1994 IBM sold out its supply of its new Aptiva PC in 1994 costing it millions in potential revenuecosting it millions in potential revenue

Hewlett-Packard and Dell found it difficult to obtain Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquakesuppliers in 1999 due to a massive earthquake

Supply Chain Management Supply Chain Management (SCM)(SCM)

Supply chain managementSupply chain management, is the , is the activeactive management of supply chain activities to maximize management of supply chain activities to maximize customer value and achieve a sustainable customer value and achieve a sustainable competitive advantage.competitive advantage.

Supply chain management (SCM) is the Supply chain management (SCM) is the combination of art and science that goes into combination of art and science that goes into improving the way your company finds the raw improving the way your company finds the raw components it needs to make a product or service components it needs to make a product or service and deliver it to customers. and deliver it to customers.

Information plays a crucial role in strategic Information plays a crucial role in strategic planning and managers' abilities to reduce planning and managers' abilities to reduce inventory and human resource requirement to a inventory and human resource requirement to a competitive level. competitive level.

They are going into the different They are going into the different faces:faces: SupplierSupplier ManufacturerManufacturer DistributorDistributor RetailersRetailers CustomerCustomer

Supply chain management (SCM) is Supply chain management (SCM) is concerned withconcerned with

- - The flow of products and information The flow of products and information between between

members' organizations.members' organizations. - Manage the supply chain.- Manage the supply chain. - Fast service as compare to paper based - Fast service as compare to paper based transaction.transaction. - Provide competitive positioning of business - Provide competitive positioning of business initiatives like cycle time reduction, initiatives like cycle time reduction, implementation, implementing redesigned implementation, implementing redesigned

cross- cross- functional processes.functional processes.

Components of SCMComponents of SCM

The following are five basic The following are five basic components of SCM. components of SCM. PlanPlan SourceSource MakeMake DeliverDeliver Return Return

The organizations that make up the supply The organizations that make up the supply chain are “linked” together through chain are “linked” together through Physical flows Physical flows Information flows.Information flows.

Physical flows:Physical flows: TransformationTransformation MovementMovement Storage of goods and materials..Storage of goods and materials..

Information flowsInformation flows supply chain partners to coordinate their long-supply chain partners to coordinate their long-

term plansterm plans control the day-to-day flow of goods and control the day-to-day flow of goods and

material up and down the supply chain. material up and down the supply chain.

For development and maintenance SCM For development and maintenance SCM

we need we need Software Software Hardware. Hardware.

Hardware Hardware computer's input/output devices computer's input/output devices storage media. storage media.

Software:Software: Entire system and application programmed Entire system and application programmed for processing transactions management controlfor processing transactions management control decision-making and strategic planningdecision-making and strategic planning..

Advantages of SCMAdvantages of SCM

Supply chain management will: Supply chain management will: improve customer service improve customer service achieve a balance between costs and achieve a balance between costs and

service service reduce costs throughout the supply reduce costs throughout the supply

chain chain improve relationships between buyers improve relationships between buyers

and suppliers and suppliers provide a competitive advantage to all provide a competitive advantage to all

the organizations in the supply chainthe organizations in the supply chain

Customer Customer Relationship Relationship

Management (CRM)Management (CRM)

Customer Relationship Customer Relationship ManagementManagement

““Process of creating and maintaining relationships Process of creating and maintaining relationships with business customers or consumers”with business customers or consumers”

““A holistic process of identifying, attracting, A holistic process of identifying, attracting, differentiating, and retaining customers”differentiating, and retaining customers”

““Integrating the firm’s value chain to create Integrating the firm’s value chain to create enhanced customer value at every step”enhanced customer value at every step”

““An integrated cross-functional focus on improving An integrated cross-functional focus on improving customer retention and profitability for the customer retention and profitability for the company.”company.”

CRM is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers”

Objectives of Customer Objectives of Customer Relationship ManagementRelationship Management

Uses Technology to: Uses Technology to: Collect Collect Sort Sort

Integrate customer data Integrate customer data The objectives are: The objectives are:

Understand customer needs better Understand customer needs better Maintain long term customer relationships Maintain long term customer relationships

long-long- Be able to pursue a strategy of Be able to pursue a strategy of

Relationship Marketing Relationship Marketing

CRM ObjectivesCRM Objectives

Lifetime Value (LTV)Lifetime Value (LTV) Refers to the net present value of the potential Refers to the net present value of the potential

revenue stream for any particular customer over revenue stream for any particular customer over a no. of yearsa no. of years

Starts with current purchase activity then Starts with current purchase activity then extrapolates to include potential additions from extrapolates to include potential additions from cross-selling, upgrades, total ownership, etc.cross-selling, upgrades, total ownership, etc.

Customer OwnershipCustomer Ownership Attempts to “own” the lionshare of customer Attempts to “own” the lionshare of customer

spending and/or “share of mind” in a particular spending and/or “share of mind” in a particular product categoryproduct category

Building brand equity, maintaining vigilant Building brand equity, maintaining vigilant customer contact, keeping current with the customer contact, keeping current with the market trends is criticalmarket trends is critical

Understanding Customer Relationship Management (CRM)?

CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations.

In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.

Determinants of CRM

In addition to trust and value, salespeople must:

Understand customer needs and problems;

Meet their commitments;

Provide superior after sales support;

Make sure that the customer is always told the truth

Have a passionate interest in establishing and retaining a long-term relationship

Managing Customer Relationships

The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Developing the relationship

Select an appropriate offering;

Customise the relationship;

Link the solutions with the customer’s needs;

Discuss customer concerns;

Summarize the solution to confirm benefits; and

Secure commitment.

Faced with the ever increasing demand to Faced with the ever increasing demand to solve customer problems, the real estate solve customer problems, the real estate sector turned to the customer centric sector turned to the customer centric strategy of the decade strategy of the decade

CRM software supplies homebuilders with CRM software supplies homebuilders with an avenue to an avenue to

It supports lead management, sales, It supports lead management, sales, marketing, customer care and service as marketing, customer care and service as well. well.

It also helps property professionals It also helps property professionals understand and manage their most understand and manage their most valuable asset - their customers and thus valuable asset - their customers and thus contributes to increased profitability. contributes to increased profitability.

Advantages of CRMAdvantages of CRM CRM increases customer loyalty and referrals.. CRM increases customer loyalty and referrals..

It increases sales effectiveness through its ability It increases sales effectiveness through its ability to boost sales and marketing functions. It to boost sales and marketing functions. It reduces sales, marketing and warranty costs. reduces sales, marketing and warranty costs.

CRM is its ability to provide for property and CRM is its ability to provide for property and market research.market research.

CRM improves the flow of information across the CRM improves the flow of information across the

various departments within the organization. various departments within the organization.

CRM is a powerful sales tool for home builders. CRM is a powerful sales tool for home builders. It facilitates cost reduction and provides various It facilitates cost reduction and provides various other services as well. other services as well.

Integrate Framework for CRMIntegrate Framework for CRM

Strategy development

process

Value Creation Process

Multi channel Integration

process

Performance assessments

process

Information Management Process

Strategy DevelopmentStrategy Development– – Assessment of business strategyAssessment of business strategy – – Business strategy guides development Business strategy guides development

ofofcustomer strategycustomer strategy Multi-Channel IntegrationMulti-Channel Integration

Serve customers well across manyServe customers well across many Integrated Framework for CRMIntegrated Framework for CRM Strategy: Multi-Channel IntegrationStrategy: Multi-Channel Integration

potential interfacespotential interfaces – – Offer a unified interface that deliversOffer a unified interface that delivers customization and personalizationcustomization and personalization

Value CreationValue Creation – – Translates business and customer strategies Translates business and customer strategies

into specific value propositions for both into specific value propositions for both customers and firmcustomers and firm

Integrated Framework for CRM Strategy: Value Integrated Framework for CRM Strategy: Value CreationCreation

• • Customers benefit from priority, tiered Customers benefit from priority, tiered services, loyalty rewards, and customizationservices, loyalty rewards, and customization

• • Company benefits from reduced customer Company benefits from reduced customer acquisition and retention costs, and increased share-of-acquisition and retention costs, and increased share-of-walletwallet

– – Dual creation of value: Customers need to Dual creation of value: Customers need to participate inparticipate in

CRM to reap value from firm’s CRM initiativesCRM to reap value from firm’s CRM initiatives

Performance AssessmentPerformance Assessment

– – Is CRM system creating value for Is CRM system creating value for keykey

stakeholders?stakeholders?

Integrated Framework for CRM Integrated Framework for CRM Strategy: PerformanceStrategy: Performance

AssessmentAssessment

Objectives Of CRM SystemsObjectives Of CRM Systems Data collectionData collection – – Customer data such as contact details, Customer data such as contact details,

demographics, purchasing history, service preferences, demographics, purchasing history, service preferences, and the likeand the like

Data analysisData analysis – – Data captured is analyzed and categorizedData captured is analyzed and categorized – – Used to tier customer base and tailor service Used to tier customer base and tailor service

delivery accordingly.delivery accordingly.

Sales force automationSales force automation – – Sales leads, cross-sell, and up-sell opportunities Sales leads, cross-sell, and up-sell opportunities

can be effectivelycan be effectively identified and processedidentified and processed – – Entire sales cycle from lead generation to close Entire sales cycle from lead generation to close

of sales and after- sales service can be tracked and of sales and after- sales service can be tracked and facilitated through CRM systemfacilitated through CRM system

It reduces the expenses of the IT department. It reduces the expenses of the IT department.

CRM offers are search engine optimization, CRM offers are search engine optimization, systems reviews, sales database design etc. systems reviews, sales database design etc.

CRM services facilitate Site and Unit CRM services facilitate Site and Unit Management and Sales and Inventory Management and Sales and Inventory Management. Document Creation and Management. Document Creation and Management are also facilitated. Management are also facilitated.

It is imperative if organizations want to build It is imperative if organizations want to build a lifelong relationship with their customers. a lifelong relationship with their customers.

CRM is the tool that helps you organize and analyze CRM is the tool that helps you organize and analyze customer data and thereby helping you to understand customer data and thereby helping you to understand customer preferences.customer preferences.

Understanding their likes and dislikes is the key to build Understanding their likes and dislikes is the key to build

lasting relationships and also to gain new customers.lasting relationships and also to gain new customers.

CRM tools provide easy access of information anywhere CRM tools provide easy access of information anywhere anytime. anytime.

It also helps in managing various business activities such as:It also helps in managing various business activities such as: - Sales and Marketing - Sales and Marketing - Billing and Expense - Billing and Expense - Project Management - Project Management - Human Resources - Human Resources