ENTERPRISE RESOURCE PLANNING

ENTERPRISE RESOURCE PLANNING

Introduction:

Enterprise resource planning (ERP) is a company-wide computer

software system used to manage and coordinate all the resources,
information, and functions of a business from shared data stores.

An ERP system has a service-oriented architecture with modular

hardware and software units or "services" that communicate on a local
area network. The modular design allows a business to add or
reconfigure modules (perhaps from different vendors) while preserving
data integrity in one shared database that may be centralized or
distributed

what does this software do?

Take the activities of a typical company or 'Enterprise', its purpose can

be loosely described as 'to manufacture or procure products for sale'.
These products may be tangible or intangible, but basically the
company must 'Plan' and 'Control' the use of its entire resource base to
meet these objectives. That is what 'E.R.P. software' does, it helps the
managers and staff of an enterprise to manage its resources to
manufacture/procure the products it sells within one software package.

The single software package 'integrates' its elements or modules into

one seamless package to control the enterprise activities. The most
common activities being Purchasing, Manufacturing, Sales and
Accounting.

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ERP AND CYCLICAL STRUCTURE

Origin of the term:

MRP vs. ERP — Manufacturing management systems have evolved in

stages over the past 30 years from a simple means of calculating

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materials requirements to the automation of an entire enterprise.

Around 1980, over-frequent changes in sales forecasts, entailing
continual readjustments in production, as well as inflexible fixed
system parameters, led MRP (Material Requirement Planning) to evolve
into a new concept : Manufacturing Resource Planning (or MRP3) and
finally the generic concept Enterprise Resource Planning (ERP)

The initials ERP originated as an extension of MRP (material

requirements planning; later manufacturing resource planning) and
CIM (Computer Integrated Manufacturing). It was introduced by
research and analysis firm Gartner in 1990. ERP systems now attempt
to cover all core functions of an enterprise, regardless of the
organization's business or charter. These systems can now be found in
non-manufacturing businesses, non-profit organizations and
governments.

To be considered an ERP system, a software package must provide the

function of at least two systems. For example, a software package that
provides both payroll and accounting functions could technically be
considered an ERP software package
Examples of modules in an ERP which formerly would have been stand-
alone applications include:

♣ Product lifecycle management,

♣ Supply chain management (e.g. Purchasing, Manufacturing
and Distribution),
♣ Warehouse Management,
♣ Customer Relationship Management (CRM),
♣ Sales Order Processing,
♣ Online Sales, Financials ,
♣ Human Resources, and
♣ Decision Support System.

Overview of ERP Solutions:

Some organizations — typically those with sufficient in-house IT skills

to integrate multiple software products — choose to implement only
portions of an ERP system and develop an external interface to other
ERP or stand-alone systems for their other application needs. For
example, one may choose to use human resource management system
from one vendor, and the financial systems from another, and perform
the integration between the systems themselves.

This is common to retailers where even a mid-sized retailer will have a

discrete Point-of-Sale (POS) product and financials application, then a

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series of specialized applications to handle business requirements such

as warehouse management, staff rostering, merchandising and
logistics.

Ideally, ERP delivers a single database that contains all data for the
software modules, which would include:

Manufacturing
Engineering, bills of material, scheduling, capacity, workflow
management, quality control, cost management, manufacturing
process, manufacturing projects, manufacturing flow

Supply chain management

Order to cash, inventory, order entry, purchasing, product
configurator, supply chain planning, supplier scheduling,
inspection of goods, claim processing, commission calculation

Financials
General ledger, cash management, accounts payable, accounts
receivable, fixed assets
Project management
Costing, billing, time and expense, performance units, activity
management
Human resources

Human resources, payroll, training, time and attendance, rostering,

benefits
Customer relationship management

Sales and marketing, commissions, service, customer contact and call

center support
Data warehouse and various self-service interfaces for customers,
suppliers, and employees

Access control - user privilege as per authority levels for process

execution

Customization - to meet the extension, addition, change in process

flow

Enterprise resource planning is a term originally derived from

manufacturing resource planning (MRP II) that followed material
requirements planning (MRP) MRP evolved into ERP when "routings"
became a major part of the software architecture and a company's

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capacity planning activity also became a part of the standard software

activity. ERP systems typically handle the manufacturing, logistics,
distribution, inventory, shipping, invoicing, and accounting for a
company. ERP software can aid in the control of many business
activities, including sales, marketing, delivery, billing, production,
inventory management, quality management and human resource
management.

ERP systems saw a large boost in sales in the 1990s as companies

faced the Y2K problem in their legacy systems. Many companies took
this opportunity to replace their legacy information systems with ERP
systems. This rapid growth in sales was followed by a slump in 1999, at
which time most companies had already implemented their Y2K
solution

ERPs are often incorrectly called back office systems indicating that
customers and the general public are not directly involved. This is
contrasted with front office systems like customer relationship
management (CRM) systems that deal directly with the customers, or
the eBusiness systems such as eCommerce, eGovernment, eTelecom,
and eFinance, or supplier relationship management (SRM) systems.

ERPs are cross-functional and enterprise wide. All functional

departments that are involved in operations or production are
integrated in one system. In addition to manufacturing, warehousing,
logistics, and information technology, this would include accounting,
human resources, marketing and strategic management.

ERP II means open ERP architecture of components. The older,

monolithic ERP systems became component oriented

EAS — Enterprise Application Suite is a new name for formerly

developed ERP systems which include (almost) all segments of
business, using ordinary Internet browsers as thin clients

Before:

Prior to the concept of ERP systems, it was usual for each department
within an organization - such as human resources, payroll and financial
- to have its own customized computer system.

Typical difficulties involved integration of data from potentially different

computer manufacturers and systems. For example, the HR computer
system (often called HRMS or HRIS) would typically manage employee
information while the payroll department would typically calculate and

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store paycheck information for each employee, and the financial

department would typically store financial transactions for the
organization. Each system would have to integrate using a predefined
set of common data which would be transferred between each
computer system. Any deviation from the data format or the
integration schedule often resulted in problems

After:

ERP software combined the data of formerly separate applications. This

simplified keeping data in synchronization across the enterprise as well
as reducing the complexity of the required computer infrastructure. It
also contributed to standardizing and reducing the number of software
specialties required within IT departments

The ERP Challenges:

At one point in the past, many people believed that total management
information systems were the way to answer all important
management questions. Organizations invested many millions in the
effort to develop their own total MIS system, and, with few exceptions,
these attempts fell very far short of the mark. The widely accepted
explanation was that the technology, that was then available, was not
up to the task.

Much of the same sort of thing seems to be happening today with

enterprise resource planning (ERP) systems. These aim to provide an
integrated, enterprise-wide information service that allows the
organization to efficiently respond to any changes in level of market
demand. And, just as they invested heavily in total MIS systems, many
organizations are investing millions in the effort to install their own ERP
system. While there have been some success stories, the evidence
suggests that most organizations have failed to realize the expected
benefits from their (all too expensive) efforts to install ERP.

It is my contention that full-blown ERP systems are the right answer for
only some organizations. To understand what ERP can and cannot
deliver, it helps to go back to the manufacturing resource planning
(MRP) systems that preceded ERP. Leading vendors like SAP and Baan
offered MRP systems before they were reborn as ERP systems. And the
current ERP- system logic has many parallels with the logic that was
used with earlier MRP systems.

The challenge facing manufacturing can be described in terms of

buffer stock. It's easy to put a large buffer stock in front of every

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production stage. That work-in-progress allows the separate stages to

run at peek efficiency. With everything at peek efficiency, overall
factory productivity should be high. Nice theory, but it didn't work as
planned. The stock of work-in-progress was expensive. Nothing moved
very rapidly. More and more work became"expedited"orders.

Successful MRP systems replaced the old buffer stocks with better
information. The cost of production went down. Even more important,
the response time of the factory improved, and the firm was much
more responsive to changing markets..

This manufacturing transformation was relatively simple - everyone

could see work-in-progress, and could see the "expedite" job tags. ERP
systems take a similar approach, but now the buffer stocks are
generalized to include men, money, material, and time. All efforts are
focused on driving out the need for buffer stocks across the entire
organization. When successful, the results from ERP can be even more
dramatic than they were with MRP.

Initially, people will not be very comfortable in the new ERP world. The
ERP logic strips away buffer stocks and subjects everyone to an
unrelenting and constant pressure to produce. The required social
transformation is a major undertaking. It needs resources, and it needs
constant support from the most senior people in the organization.
People must believe the organization has no option but to undergo the
change, however painful this may prove to be.

Senior executives must find ways to make the required changes

necessary and inevitable to the people who will have to live through
the process. Some of the problems with ERP systems can be traced
back to a failure to make the huge organizational and social changes
that are required seem necessary and inevitable. In some cases, the
problems with ERP can be traced back to a failure to recognize that a
major organizational transformation was required. And in some cases,
the technology used with the chosen ERP system was not up to the
task - the organization was too large, or too diverse, or too whatever.

However, my main concern is for organizations that should not strive

for the efficiencies that can be provided by total ERP systems. There is
a very real cost behind the focus demanded by ERP. Everything and
everyone is focused on meeting the objectives set for the organization.
If all the market demands is a continuing refinement in how those
objectives are to be met, then ERP can fully deliver on its promise.
Some markets, some of the time, demand fundamental change in how
objectives are to be met.

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The problem, to my way of thinking, lies with the idea of a total ERP
system. Most organizations would benefit from having ERP applied to
their current "today" processes. It is almost always wise to keep the
"tomorrow" part of the organization outside the relentless driving logic
of ERP. A properly installed ERP system can buy an efficient "today." An
effective "tomorrow" needs people with a vision for the future, and the
freedom to make it happen.

Implementation:

Because of their wide scope of application within a business, ERP

software systems are typically complex and usually impose significant
changes on staff work practices, Implementing ERP software is
typically not an "in-house" skill, so even smaller projects are more cost
effective if specialist ERP implementation consultants are employed
The length of time to implement an ERP system depends on the size of
the business, the scope of the change and willingness of the customer
to take ownership for the project .A small project (e.g., a company of
less than 100 staff) may be planned and delivered within 3-9 months;
however, a large, multi-site or multi-country implementation may take
years.

Some popular methods for implementation are as follows

Joint ventures with the Respective Industry

The company need not necessarily implement ERP all on its own. They
can as well share it with leading players in the same industry. This will
ensure that the risks will not be heavy in the case of loss. This practice
is assuming greater significance in the current scenario. The sharing
allows them to have an interface with the systems on the basis of a
common platform. This is catching up in the market with the only
trouble being reluctance of competitive firms to come together on a
mutual agreement for fear of losing business tactics. It is also seen as
ERP implementation problem solution.

Though the companies are at liberty to create security for their

respective information there will not be any protection for the (pool of)
records in the common database. However this has helped largely in
many aspects. For e.g. the medical history of a patient brought in an
emergency condition can be immediately accessed though ERP. This
particular fact has itself saved many lives. On the contrary they would
have to go through the rigorous process of finding the patient's identity
and the steps aftermath which brings down the chances of the
patient's survival are very minimal, in the absence of ERP. This is one
of ERP implementation support. Perhaps there are many risks for ERP
implementation.

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Doing it all alone

This is in fact one of the primitive methods and is no doubt followed till
date. This method takes a lot of risks in this method. But if they are
calculated properly then the regime would be inscribed as a golden
period in the company's history. The simple formula behind this
phenomenon is that the company should go for it subject to its
financial potential, requirements, technical acumen management
policy and similar facts. All these will help them to arrive at ERP
implementation problem solution.

Full/Partial Implementation
It has always been said that ERP products and services are purely
based on the needs and resources of the company. This is not a risk for
ERP implementation. Hence the companies can choose to go for a full
fledged ERP system and implement it throught the organization and
thereby interlink the whole process and the people concerned.
Otherwise they may prefer to go for an ERP system that performs a
particular function of the company. This is an important step in
choosing the appropriate ERP software but at the same time it also
adds more value to the implementation process. It is also an important
ERP problem solution.

The following are steps of a data migration strategy that can help with
the success of an ERP implementation:

1. Identifying the data to be migrated

2. Determining the timing of data migration
3. Generating the data templates
4. Freezing the tools for data migration
5. Deciding on migration related setups
6. Deciding on data archiving

Maintenance and support services:

Maintenance and support services involves monitoring and managing

an operational ERP system. This function is often provided in-house
using members of the IT department, or may be provided by a
specialist external consulting and services company.

Latest trends in ERP:

Need based applications

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Organizations had to implement ERP through their systems irrespective

of the fact whether they help in all the functions or in one particular
function. This was proving to be a big hurdle to the firms. In addition
this remained as the main disadvantage or setback of ERP. They had to
purchase the whole applications even if it meant that most of them
would be idle except for the core function.

The latest ERP software programs have overcome this menace. They
offer need based applications. The firms need not be worried even if
these Software Programs were not available. They were given the
liberty to purchase and install Software Programs pertaining to that
particular function. This advantage has helped to increase the scope of
ERP not only among large firms but also small and medium business as
well.

Expenditures
ERP was a very costly affair. Thanks to the intrusion of internet and
open source applications. This has helped S.M.E.'S to enter the market
of prospective buyers. This has not only widened the horizon of S.M.E.'s
but also increased the usage among large firms.

These large firms were not able to invest huge money in spite of
adequate funds. Now that the spending on ERP gets reduced there are
no hesitations to show the green signal for fear of heavy monetary
outlay. It is encouraging to notice the improving IT ERP trends.

Reduction in implementation time

ERP was discouraged by companies because they took such a long
time to get installed and set the whole process into action. Since this
resource was spent excessively there were chances for reduction in
potential business and losing man-hours.

The current day ERP applications are less complex to install and train.
This has reduced the amount of time spent on ERP. Companies are
thereby assured of spending lesser time for ERP.

Open Source, Web enabled and wireless technologies

These are three important elements that have rejuvenated the

functioning of ERP. Open Source ERP has done away with the hassles of
paying license fees not only during installation but also whenever a
modification is made. The company is relieved from depending even
for mince matters.

Web enabled ERP helps in making the enterprise operations go online.

Any stakeholder or third party can access the required information very

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easily and that too by sitting anywhere in the world. This proves to be
of great help especially during emergencies when the details are to be
sourced with immediate effect.

Wireless ERP has helped organizations to make use of the

communication channels effectively and efficiently. It has made it
possible for many elements to operate in ERP which were otherwise
not possible. Wireless ERP is nothing but sharing enterprise information
through devices like internet and other devices making it possible for
outsiders to access

ERP Failures:
All modules of ERP are scalable and interactive in a client/server
environment. This wide selection enables the tailoring of solutions
specific to the needs of individual companies and numerous vertical
industry segments. If not used effectively however the result will be
Erp Failures.

The failures in one or more of those four components could cause the
failure of an ERP project. The failures in hardware are easier to identify
and to fix, we'll examine the failures in software implementation,
business process and user acceptance.

Failure of ERP Software Implementation

Module-based ERP software is the core of ERP systems. Most ERP

projects involve significant amount of customizations. Packaged ERP
software modules have built-in functionality that work in a standard
and simplified enterprise environment. However, every organization is
unique in data requirements and business processes. It is the
customizations that transform packaged ERP software into ERP
software that meets organizations' individual business processes and
operations. Long and expensive customization efforts often result the
pass of release deadline and budget overrun. Customizations make the
software more fragile and harder to maintain when it finally goes to
production. Major changes may be required in the later stage of the
implementation as a result of incomplete requirements and power
struggles within organizations

Failure of Accommodating Evolution of Business Processes

Business processes fall into three levels - strategic planning,

management control and operational control. Organizations
continuously realign their business processes of all levels in response
to the ever-changing market environment. Many ERP systems aren't

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flexible enough to accommodate evolution of business processes. AN

ERP system that worked well last year may need major overhaul.

Failure of User Acceptance

The users of ERP systems are employees of the organizations at all

levels. ERP projects usually modify the company's business processes
which create extra workload for employees who use them initially. They
may not think that the workflows embedded in the software are better
than the ones they currently use. Ongoing end-user involvement and
training may ease the difficult in organization's adaptation of new
systems and new processes.

Advantages:

In the absence of an ERP system, a large manufacturer may find itself

with many software applications that neither talk to each other nor
interface effectively. Tasks that need to interface with one another may
involve:

• Integration among different functional areas to ensure proper

communication, productivity and efficiency
• Design engineering (how to best make the product)
• Order tracking, from acceptance through fulfillment
• The revenue cycle, from invoice through cash receipt
• Managing inter-dependencies of complex processes bill of
materials
• Tracking the three-way match between purchase orders (what
was ordered), inventory receipts (what arrived), and costing
(what the vendor invoiced)
• The accounting for all of these tasks: tracking the revenue, cost
and profit at a granular level.
• ERP Systems centralize the data in one place, example customer
, financial data. This eliminates the problem of synchronising
changes and can reduce the risk of loss of sensitive data by
consolidating multiple permissions and security models into a
single structure.

Some security features are included within an ERP system to protect

against both outsider crime, such as industrial espionage, and insider
crime, such as embezzlement. A data-tampering scenario, for example,
might involve a disgruntled employee intentionally modifying prices to
below-the-breakeven point in order to attempt to interfere with the

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company's profit or other sabotage. ERP systems typically provide

functionality for implementing internal controls to prevent actions of
this kind. ERP vendors are also moving toward better integration with
other kinds of information security tools

Disadvantages:

Problems with ERP systems are mainly due to inadequate investment

in ongoing training for the involved IT personnel - including those
implementing and testing changes - as well as a lack of corporate
policy protecting the integrity of the data in the ERP systems and the
ways in which it is used.
Disadvantages:

• Customization of the ERP software is limited.

• Re-engineering of business processes to fit the "industry
standard" prescribed by the ERP system may lead to a loss of
competitive advantage.
• ERP systems can be very expensive (This has led to a new
category of "ERP light" solutions)
• ERPs are often seen as too rigid and too difficult to adapt to the
specific workflow and business process of some companies—this
is cited as one of the main causes of their failure.
• Many of the integrated links need high accuracy in other
applications to work effectively. A company can achieve
minimum standards, then over time "dirty data" will reduce the
reliability of some applications.
• Once a system is established, switching costs are very high for
any one of the partners (reducing flexibility and strategic control
at the corporate level).
• Some large organizations may have multiple departments with
separate, independent resources, missions, chains-of-command,
etc, and consolidation into a single enterprise may yield limited
benefits.
• The system may be too complex measured against the actual
needs of the customers.
• ERP Systems centralize the data in one place, example customer
, financial data. This can increase the risk of loss of sensitive info,
if there is any security breach

ERP is actually a process or approach which attempts to consolidate all

of a company's departments and functions into a single computer
system that services each department's specific needs. It is, in a
sense, a convergence of people, hardware and software into an
efficient production, service and delivery system that creates profit for
the company.

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E.R.P TO THE NEXT GENERATION:

E.R.P. 2 takes standard E.R.P. and extends it by providing for closer

relationships between an enterprise and its customers and suppliers.
An example of this closer relationship is that an enterprise will allow
customers to directly interact with its computer system so allowing
them to place orders and investigate the status of its account,
outstanding deliveries and orders. Suppliers can be permitted to
monitor stock levels and suggest when items need replenishing.
Due to the level of system integration needed between enterprises to
achieve E.R.P. 2, this remains, for the moment, the preserve of large
companies with the I.T. resources to make it possible.

File downloaded From Net. Thanks to Shoaib [www.xctvz.com].

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