Professional Documents
Culture Documents
Unit 2
Enterprise An Overview
20
Unit 3
ERP and Related Technologies
37
Unit 4
ERP Tools and Software and Selection Methodology
60
Unit 5
ERP Modules
84
Unit 6
ERP A Manufacturing Perspective
116
Unit 7
ERP A Purchasing and Sales Perspectives
152
Unit 8
ERP An Inventory Control Perspective
Edition: Spring 2010
th
173
Unit 9
ERP CRM Perspective
187
Unit 10
ERP HR Perspective & Finance Perspective
208
Unit 11
ERP Implementation Lifecycle
229
Unit 12
Benefits of ERP
251
Unit 13
ERP Market
275
Unit 14
ERP Vendors, Consultants, and Users
320
Unit 15
Future Directions in ERP
338
Dean
Directorate of Distance Education
Sikkim Manipal University (SMU DDE)
Board of Studies
Chairman
HOD Management & Commerce
SMU DDE
Additional Registrar
SMU DDE
Controller of Examination
SMU DDE
Dr. T.V. Narasimha Rao
Adjunct Faculty & Advisor SMU DDE
Prof. K.V. Varambally
Director, Manipal Institute of
Management, Manipal
Content Review
Mr.Manoj S G
Senior Lecturer
SMUDDE, First Floor, Manipal
Towers, 14 Airport Road,
Bangalore 560 008
Language Editing
Ms. Neelam Singh
Curriculum Revised
Printed
: Spring 2010
: November 2010
SUBJECT INTRODUCTION
Enterprise Resource Planning (MI 0038)
Enterprise Resource Planning (ERP) system is an iterative system for
identifying, analysing, evaluating, testing, and monitoring the entire process
of an organisation or a company. In every Organisation, Enterprise
Resource Planning is recognised as, an essential contributor to business
and project success. Enterprise Resource Planning mainly focuses on
addressing business or project uncertainties, in a proactive manner in order
to minimise threats, maximise opportunities, and optimise achievement of
objectives. There is wide convergence and international consensus on the
necessary elements for an Enterprise Resource Planning system. This
course covers these aspects of Enterprise Resource Planning, along with
the various technologies it has, the various vendors in the market, the
various phases of implementation, and the benefits an organisation can
obtain from the system.
Analysis and handling of resource, is a very important aspect addressed by
the ERP system, these aspects are covered in detail, to give a complete
understanding of the process. The course also highlights the techniques,
commonly used by organisations in the ERP implementation. There are
some strategies that organisations need to adopt, to be able to succeed in
the effective implementation of ERP system. These guidelines are also
included in this course. It also speaks about the market condition, the major
vendors, and the future of ERP.
Unit 1: Introduction to ERP
This Unit explains the concept of ERP, gives brief history of evolution of
ERP, assesses the benefits of ERP, and analyses the reasons for failure of
ERP.
Unit 2: Enterprise An Overview
This unit defines the role of Enterprise, assesses the need of an Enterprise,
evaluates the business modelling approaches, and the method to integrate
the management information to the enterprise
installed and implemented, explains Web ERP and its benefits, illustrates
the types of inventory management, and the process of transactions in an
organisation, and also describes Inventory ERP software module.
Unit 9: ERP CRM Perspective
This unit explains the concept of CRM, describes the types and sub
modules of CRM, lists out the benefits and challenges of CRM, and
elucidates the implementation of CRM.
Unit 10: ERP HR Perspective & Finance Perspective
This unit explains the concept of Human Resources (HR), describes the
activities of Human Resource Management systems, lists out the benefits
and features of Human Resources Management module. It elucidates the
role of ERP in Human Resource Management systems, and explains the
role and workflow of ERP in the financial module of an organisation.
Unit 11: ERP Implementation Lifecycle
This unit describes the implementation lifecycle for an ERP package, assess
the various approaches for implementation of ERP, and select the right
methodology for ERP implementation.
Unit 12: Benefits of ERP
This unit compares the direct and indirect benefits of ERP implementation. It
explains how integration of information and automation of business
processes make improvements possible.
Unit 13: ERP Market
This unit describes the ERP market, explains the major player in it, and their
respective market share. It assesses the various market trends in ERP,
recognises the target market of ERP, analyses and tells how to potentially
use ERP in the market driven economy, and assess the seven major ERP
vendors SAPAG, Baan, PeopleSoft, JD Edwards, Oracle, QAD and SSA.
Unit 14: ERP Vendors, Consultants, and Users
This unit evaluates the three major players in an ERP implementation and
their profiles. It describes the roles of each of these players, and elucidates
the reasons for success of an ERP implementation.
Unit 1
Unit 1
Introduction to ERP
Structure:
1.1
Introduction
Objectives
1.2
Evolution of ERP
1.3
What is ERP
1.4
Reasons for the Growth of the ERP Market
1.5
The Advantages of ERP
Business integration
Flexibility
Better analysis and planning capabilities
Use of latest technology
1.6
Why Do ERPs fail?
1.7
What is the ERP Packages Used Now?
1.8
Summary
1.9
Terminal Questions
1.10 Answers
1.11 Case Study
1.12 Glossary
1.1 Introduction
This unit familiarises you with Enterprise Resource Planning (ERP) and its
history. Information handling and sharing has become a vital process for
efficient and effective working of any organisation. The digital revolution has
given us the ability to treat information with mathematical precision, to
transmit it with very high accuracy, and to manipulate it at will. This
Information Technology (IT) has revolutionised the way we live and work. It
is changing all aspects of our life and lifestyle, and transforming the world
we live into one small global village. The amount of calculation power that is
available to us is increasing at an exponential rate. Communication and
computers are becoming integral parts of our lives.
However, we need to manage the future not just to survive but also to
succeed and to beat the competition in today's highly competitive world.
Managing the future means managing information. Organisations have to
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make IT an ally, harness its full potential, and use it in the best possible way
in order to:
Manage information.
All organisations have certain objectives and goals to achieve. For any
organisation to succeed, all business units or departments should work
towards this common goal. However, in an organisation, each department or
business function has its own goals and procedures. The departmental
objectives can sometimes be conflicting. For example, the finance
department might want to cut down the advertising budget, whereas the
marketing department might want more money. Similarly the productionplanning department might want to reduce the stock level in stores, but the
production people might want to have more stocks. Here, information
becomes critical not only for resolving the conflicts but, also to make them
collectively work for the company as one unit, to meet the companys
objectives and goals. Each department managing its activities efficiently is
not enough; it should also help other departments to manage their functions
efficiently. This can be achieved only if departments in an organisation stop
functioning as discrete units and working in isolation. Every employee
should know what the counterparts are doing and how their actions and
decisions affect other departments. This kind of information sharing was
difficult in the early days. Now with the advancements in IT, this is possible.
IT plays a crucial role, both at the organisational level and at the
departmental level. At the organisational level, IT assists in specifying
objectives and strategies of the organisation. IT also aids in developing and
supporting systems and procedures to achieve them. At the departmental
level, IT ensures a smooth flow of information across departments, and
guides organisations to adopt the most practical business practices. At this
level, IT ensures faultless flow of information across different departments
and develops and maintains an enterprise-wide database. This database
eliminates the need of the isolated data units that was limited to one
department earlier and now makes the organisation's data accessible
across the departmental boundaries. This enterprise-wide data sharing has
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Data Base
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These are some of the reasons for the unpredictable growth rate of the ERP
markets and the ERP vendors. As more and more companies are joining the
race, the ERP vendors are shifting their focus from big Fortune 1000
companies to different market segments (medium size companies, small
companies, and so on.). The future will see fierce battle for market share,
and mergers and acquisitions for strategic and competitive advantage. The
ultimate winner in this race is the customer, who gets better products and
better service at affordable prices.
Activity 2
Conduct a study and collect the information on the growth of market in
various sectors of ERP for the last two decades and various sectors
available for ERP market in the coming days.
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Business integration
Flexibility
Better analysis and planning capabilities
Use of latest technology
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from the employees, even the best system is liable to fail. So it is very
important that the management should take the necessary steps, well in
advance, to ease the fears of, and provide necessary training to their
employees.
Activity 3
Contact an ERP vendor or a consultant and collect the details of the
structure of planning before providing a package for a company
Self Assessment Questions
9. The system developers should ____________ perfectly the
implementation.
10. Employees who were earlier doing the work of recording information are
transformed into____________________.
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Once you have decided to implement the ERP system, you have to find a
package that is best suited for your company. In ERP implementation,
package selection is one of the most important phases, because the
package that you select will decide the success or failure of the
implementation process. Since implementation of these ERP systems
requires huge investment of money and time, it is a very difficult process to
switch over to another package after a package is purchased by an
organisation. So choosing a right package is of the highest priority in the
implementation process. The company might have to face disastrous
consequences by choosing a wrong package, often resulting in the shut
down of the company for an indefinite period of time.
In the market there are many ERP packages available from many vendors.
Before reaching to a conclusion, it is better to analyses a maximum five
packages, since it is always better to do a thorough and detailed evaluation
of a small number of packages, than to do a superficial analysis of dozens
of packages. A pre-evaluation screening has to be conducted by the
company to limit the number of packages that are to be evaluated by the
committee. The pre-evaluation process should eliminate those packages
that are not at all suitable for the companys business processes. Looking at
the product literature of the vendors one can select the few best packages.
The company can get help from the external consultants and, can conduct a
survey and find out the packages use by the companies similar to their own.
Since, it will provide a better look around and find out how the different
packages are performing in environments similar to yours. You can call the
respective vendors for presentations/demos, once you select a few
packages after the screening.
Some of the key things that can be searched before choosing an ERP
package are:
The package should come with multi-language and multi-currency
support.
The package should be international and should have installations in
countries where the company have offices. The vendor should also have
a local presence in those countries.
The package should have at least A number of installations out of
which at least B should be in your business sector.
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The cost of the package with all the necessary modules should be less
than C Rupees.
The package should provide the company the facility to buy the core
modules initially and then go in for the additional modules as and when
desired.
The vendor should provide support during the implementation and also
post implementation.
The vendor should give a commitment on training the company
employees on the package.
The package should have the flexibility of interfacing with other systems
that the company is dealing with, for example: banks, suppliers,
customers, and so on.
The package must be customisable and the customisation process
should be easily done and should be able achieve it in-house.
The vendors policy and practices regarding updates, versions, and so
on, should be should be verified and it should be acceptable to your
company norms.
1.8 Summary
Enterprise Resource Planning. (ERP) is one of the means to integrate the
data and processes of an organisation into one single system. Usually ERP
systems have many components including hardware and software. Most
ERP systems make use of a unified database to store data for various
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1.10 Answers
Answers to Self Assessment Questions
1. Information handling and sharing
2. Information Technology
3. Fragments
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4.
5.
6.
7.
8.
9.
10.
11.
12.
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switched to Big Bang implementation. To meet the time line the company
planned for simultaneous implementation of several modules. Due to lack
of time, some of the modules implemented were not tested properly.
Several problems related to order management and fulfilment resulted
due to this. Even though the Cashe company company had the finished
product stocked in its warehouses, it was not able to fulfil orders from
many of its retailers and distributors. The failure in the implementation of
ERP immediately resulted in an adverse affect. The company recorded
annual revenues for 1999 reduced; there was a drop of 12% when
compared to that in 1998.
In the third quarter of 2000, the company announced that its revenues
increased by 12% as compared to the revenues in the third quarter of
1999. During the same period, profits increased by 23%.
Questions:
1. Study the circumstances that led to ERP implementation failure at the
Cashe company.
2.Evaluate the role played by top management in ERP implementation.
3.Examine the factors that lead to success or failure of ERP projects.
1.12 Glossary
Term
Cluster
Imminent
Description
A small group of people or things that are closely packed
together but not connected to each other
The assembling of pieces of paper in the right order,
particularly the sections of a book prior to binding
The process of arriving at an abstract idea or belief or the
moment at which such an idea starts to take shape or emerge
Some thing that is about to happen in the near or distant future
Legacy
Scenario
Collation
Conceptions
Bill of materials
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References
1. The Internet Encyclopedia by Bidgoli & Hossein.
2. Enterprise Resource Planning by Mary Sumner.
3. Maximising Your ERP system by Scott Hamilton.
4. Concepts in enterprise Resource Planning by Ellen F. Monk, Bret J.
Wagner.
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Unit 2
Enterprise An Overview
Structure:
2.1 Introduction
Objectives
2.2 Integrated Management of Information
2.3 Business Modelling
2.4 Integrated Data Model
2.5 Summary
2.6 Terminal Questions
2.7 Answers
2.8 Case Study
2.9 Glossary
2.1 Introduction
By now you must be familiar with the concept of Enterprise Resource
Planning (ERP) and the evolution of ERP systems. We have discussed the
advantages and the reasons for failure of ERP systems during the
implementation. The methods to over come this failure and the concept of
ERP packages are also discussed in the previous unit.
As you are familiar with the concept of ERP, let us now define an Enterprise.
The Enterprise is the term often used in general business conditions to
describe a corporate entity; you can call anything from a sidewalk coffee
shop to an organisation as large as TCS or Wipro as an Enterprise. Figure
2.1 is an example of an enterprise.
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Each of these departments has their own methods of data collection and
analysis, and functions in isolation. Various departments create or generate
information that, in most cases, are available only to the top management
(that too as summary reports) and not to the other departments. The result
is that instead of taking the organisation towards the common goal, the
various departments end up pulling it in different directions. This is because
no department has a clear idea of what other departments status was, and
obtaining this information was difficult. Also, sometimes the objectives of
each department may be conflicting. For example, the sales and marketing
people want more product variety to satisfy the varying needs of the
customers. But the production department want to limit the product variety to
cut down production costs. So unless all the departments know what the
others are doing and for what purpose, these kinds of conflicts arise, thus
disrupting the normal functioning of the organisation.
But when you look from enterprise point view, the entire organisation is
considered as a system and all the departments are its subsystems. The
information about all the aspects of the organisation is stored centrally and
is available to all departments as shown in Figure 2.3.
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As you can see, this transparency in information access ensures that all
departments work in cooperation which each other and no longer work in
isolation pursuing their own independent goals. Each department knows
what the others are doing, why they are doing it, and what should be done
to move the company towards achieving that goal. The ERP system helps in
achieving this task by integrating the information systems, enabling smooth
and seamless flow of information across departmental barriers, automating
business process and functions, and thus, helping the organisation to work,
and move forward as a single entity.
Learning Objectives
This unit familiarises you with the organisation structure function of an
Enterprise.
After studying this unit, you will be able to:
Assess the need of an Enterprise.
Explain the idea of integrated information management.
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Various departments have their own system serving for their needs like an
accounting system for the finance department, a production planning system
for the manufacturing department, an inventory management system for the
stores department, and so on. Systems using this method lag behind to
obtain an integrated approach for all the departments. Systems working
based on these methods perform in isolation. In case, you want some
information which has to be obtained from any of the other two systems, you
have to get the necessary reports from both systems and then correlate and
combine the data before using it. This method leads to misinterpreting of the
information and some time incomplete and false information being circulated
for decision making.
When systems work in isolation, it becomes difficult for you to collect and
analyse the data needed for your department's functioning, since, getting
information about some aspect that is dependent on more than one
department can be tedious. No business executive or decision-maker can
take good decisions with the isolated data that received from each
department in the form of various reports. Even if you verify the data
produces the information that you require, you would have lost valuable time
that could have been better spent in decision-making.
In reality, an organisation cannot function as islands of different departments.
Every department needs information inputs form other departments for its
functioning like, the purchasing department requires production planning
data, the finance department requires purchasing details for some of its
process, and so on. The impact of integrating all the information islands,
which were functioning in isolation, into a single system would be dramatic.
For example, if the purchase department can see the production planning
details, it can make the purchasing schedule accordingly. If the finance
department is able to see the purchase details as soon as it is entered in the
system, they can plan for the cash flow that is necessary for the purchases.
In todays competitive business environment information is one of the key
resource, the key resource of every organisation. If the organisation does
not have an efficient and effective mechanism that enables it to give the
decision-makers the right information at the right time, then the chances of
that organisation succeeding in the next millennium are very remote.
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information not only about the process of various departments but it needs
to track the companys market performance and the companys product
competency compared to its competitors in the market and allow the
management to take decision quickly and effectively.
Activity 2
Conduct a survey in any manufacturing industry and study the different
departments and people both internal and external of an organisation
who are involved in process from order acquirement to the deliver of the
finished product to the customer.
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Figure 2.5: Data Model and its Relationship with the Real World
When designing the data model for the ERP system, the most important
thing that should be kept in mind is the information integration, and the
process / procedure automation. The data model should reflect the entire
organisation, and it should successfully depict and integrate the data
structures of the entire organisation.
For example, when a customer needs to check the performance of the
company before he places an order, the marketing department has to be in
a position to provide the necessary information. It should not depend on the
finance department to provide the necessary information, but at the same
time the ERP must also help the marketing department to establish an easy
communication link between he finance and marketing for queries.
The data flow between the functions of an organisation has to be smooth
and faultless.
Importance has to be given not only for communication but also to data
management. The system has to be flexible in handling every, day to day
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2.5 Summary
Integration is an extremely important part to Enterprises. Enterprises main
goal is to integrate data and processes from all areas of an organisation and
unify it for easy access and work flow. ERPs usually accomplish integration
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2.7 Answers
Self Assessment Questions
1. Single entity
2. Collection and analysis, and functions in isolation
3. Information
4. Information-reporting systems
5. Collect and analyse
6. Accuracy, relevancy, and timeliness.
7. Business modelling
8. Goals, objectives, and strategic plans
9. Actual
10. Flow charts and flow diagrams
11. Market planning
12. Departmental information systems and the departmental databases
13. Database
Terminal Questions
1. Refer to 2.2
2. Refer to 2.3 and Figure 2.4
3. Refer to 2.4
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2.9 Glossary
Term
Description
Cater
Compartmentalises
Entity
redundancy
Quires
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References
1. Emerging Trends and Challenges
Management by Khosrow-Puor, Mehdi.
in
Information
Technology
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Unit 3
Unit 3
Structure:
3.1
Introduction
Objectives
3.2
Business Process Re-engineering
3.3
Management Information systems
3.4
Decision Support Systems
3.5
Executive Information Systems
Advantages of EIS
Disadvantages of EIS
3.6
Data Warehousing
3.7
Data Mining
3.8
On-Line Analytical Processing
3.9
Supply Chain Management
3.10 Summary
3.11 Terminal Questions
3.12 Answers
3.13 Case Study
3.14 Glossary
3.1 Introduction
By now you must be familiar with the Concept of enterprise and importance
of decision making during the implementation of an Enterprise Resource
Planning (ERP) system. ERP is commonly defined as the technique and
concept for the integrated management of businesses as a whole, and the
effective use of management resources, to improve the efficiency of an
enterprise are known as ERP.
In an organisation, ERP systems serve an important function by integrating
separate business functions like materials management, product planning,
sales, distribution, finance and accounting; and others into a single
application. However, ERP systems do have certain limitations as listed
below:
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More often, managers need to look past the current status to find trends
and patterns that help them to make better decisions. But ERP systems
provide current status only, such as open orders, limiting the resources
for managers
There are no applications in ERP systems that integrate the data with
other enterprise or division systems. They also fail to provide external
intelligence support.
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Learning Objectives
After studying this unit you will be able to:
Analyse and know the technologies that are related to ERP systems
Explain how technologies like BPR enables organisations to analyse
their business functions better, thereby facilitating a more efficient ERP
implementation
Analyse how predecessors of ERP like MIS, DSS and EIS will slowly
phase out
Explain how new technologies and concepts like data warehousing, data
mining, OLAP and supply chain management help increase the power,
usefulness, efficiency, and effectiveness of ERP systems.
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We have seen that the ERP systems help in integrating the various
business processes of the organisation with the help of modern
developments in IT. With a good ERP package, the organisation will have
the capability of achieving dramatic improvements in critical areas such as
cost, quality, speed, and so on. Many BPR initiatives end up in the ERP
implementation.
Initially, the concept of BPR was started as a technique in private sector to
help their organisations to re-think, how they do their work in order to
improve customer service, cut operational cost, and to stay ahead of their
competitors. Later some of the big companies adopted this to redesign their
business processes, rather than re-adjusting current ways of doing work.
In the concept of reengineering, Information Technology (IT) plays an
important role. Some experts consider BPR as a major enabler for new
forms of working and collaboration within their organisation, and across
organisational borders. It has enabled in increasing organisational efficiency.
With the experience and lessons learned from the early adopters, some
BPR practitioners advocated a change from IT-centric and emphasis to a
customer-centric approach. This enables the developer, to develop
technology keeping in mind the customer and the organisation norms rather
than the technology and the organisation requirements. These processes
are characterised by process ownership, customer focus, value adding, and
cross-functionality.
Most of the time reengineering has not lived up to its expectation, the main
reasons are:
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Activity 1
Conduct a survey and list out the various support technology for ERP
systems designed by various companies and their application in various
sectors.
Self Assessment Questions
1. More often managers need to look past the current status to find
___________________ which help them in better decision making.
2. BRP must become more proactive and inclusive with regard to
__________________ issues.
3. Reengineering process is carried out with a view point that the
________________ processes
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The MIS integrates the information flow between functional areas like
accounting, marketing, manufacturing, and so on, whereas, data
processing systems tend to support a single functional area.
Any successful MIS must support a business five year plan or its equivalent.
It must be flexible enough to provide reports based up on performance
analysis in specific areas critical to that plan. The reports include feedback
loops that allow for titivation of every aspect of the business, including
recruitment and training regimens. MIS must not only point out how things
are carried out, but why they are not able to perform as planned. These
reports also include performance related to cost centres and projects that
drive profit or loss. This must be done in such a way that it identifies
individual accountability in virtual real-time.
Professor Allen S. Lee states that2 "research in the information systems field
examines more than the technological system, or just the social system, or
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even the two side by side; in addition, it investigates the phenomena that
emerge when the two interact."
The MIS is so flexible that it can adapt very well to the changing needs of an
organisation.
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information they want, in the way they want. For example, if a manager
wants to reduce cycle time. He might look at various facts like, the
availability of raw materials, skilled personnel, the average machine down
time, and so on. So there is no way the system can anticipate what the
manager wants. But DSS is capable of helping the managers in making
such decisions.
The main characteristics of a DSS, are:
It is designed to address semi-structured and unstructured problems.
It mainly supports decision-making at the top management level.
It is interactive, user-friendly, and the decision-maker can use it with little
or no assistance from a computer professional.
It makes general-purpose models, simulation capabilities and other
analytical tools available to the decision-maker.
A DSS does not replace the MIS; instead supplements the MIS. There are
distinct differences between them. MIS emphasises on planned reports on a
variety of subjects; DSS focuses on decision-making. MIS is standard,
scheduled, structured, and routine; DSS is quite unstructured, and is
available on request. The organisational system constrains the MIS; DSS is
immediate and user-friendly.
There are several ways to classify DSS applications. However, not all DSS
will fit neatly into one category, but a mix of two or more architecture in one
will neatly fit into the category.
Based on the kind of supports provided by DSS, it can be classified into
three distinct, interrelated categories like the Personal Support, Group
Support, and Organisational Support.
DSS components may be classified as:
Inputs: It includes factors, numbers, and characteristics to analyse.
User Knowledge and Expertise: It covers the area where there is a
requirement of a user for manual analysis of the inputs.
Outputs: It helps in transforming data from which DSS "decisions" are
generated.
Decisions: These are the results produced by the DSS based on user
criteria.
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DSS which perform selected and related decision-making functions and are
based on artificial intelligence or intelligent agents technologies are called
Intelligent Decision Support Systems (IDSS).
DSS is extensively used in business and management like the executive
dashboard, business performance software, and so on. It allows faster
decision making, identification of negative trends, and better allocation of
business resources. For example, the software might obtain information
from the local operating system in a computer, from one or more
applications that may be running. Information is also obtained from one or
more remote sites on the Web and is presented as though it all came from
the same source.
Activity 2
Visit a manufacturing industry and analyse the training methods adopted
by the management to get their employees work in the new technological
environment and the strategies developed by the company to enhance
the efficiency of their system with the new technology.
Self Assessment Questions
4. MIS is a computer-based system that optimises the collection, collation,
transfer, and _______________ of information throughout an
organisation.
5. The MIS supports the data processing functions of ________________
and _______________.
6. DSS is designed to address ___________ and ______________
problems.
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daily transactional data can be archived. Figure 3.1 shows what happens if
the data is not archived.
As you can see from the Figure 3.1, it is evident that even though the
operational data volume is nearly the same each year, the data is not
archived. The total amount of data that is stored in the operational database
will go on increasing. Figure 3.2 shows the effect of keeping this huge
amount of data in the operational database.
It is clear from the above graph that, as the volume of the data in the
database increases, the performance of the database and the related applications decreases. Since the data that has to be processed by the system is
more and increases every year, resulting in the decrease in the performance
of the ERP system.
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8. If the data is not archived the total amount of data that is stored in the
__________________ will go on increasing.
9. _________________ has become an essential module in every ERP
package.
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The major cause of concern with a human expert is that, most of the results
he draws are always with the help of the previous experience of
investigating other systems. However, this may or may not help sometimes
under certain new conditions, but it is almost impossible to get rid of this
reality.
One additional benefit that you can find using automated data mining
systems is that, this process has a much lower cost than hiring an army of
highly trained and paid professional statisticians. However, data mining will
not completely eliminate the human participation in solving the task but it
significantly simplifies the job. This system allows an analyst, who is not a
professional in statistics and programming, to manage the process of
extracting knowledge from data stored in the data base.
Data mining commonly involves four classes of tasks:
Regression: This task tries to find the function which models the data
with the least error.
Association rule learning: This task performs the search for relationships
between variables. For example, consider a supermarket that gathers
data on their customer purchasing habits. With the help of association
rule learning task, the supermarket can determine which products are
frequently bought together and use this information for marketing
purposes. This is sometimes referred to as market basket analysis.
The verification of the patterns produced by the data mining algorithms that
occur from wide data set is the last leg of knowledge discovery from data. In
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most case the patterns that data mining algorithms find may not be true and
valid. It is usual for the data mining algorithms to find patterns in the training
set which are not present in the general data set, this is called over fitting.
This can be overcome if the evaluation uses a set of test data, which the
data mining algorithm was not trained on. The patterns obtained are applied
to this test set and the resulting output is compared to the desired output.
For example, a data mining algorithm trying to separate spam from valid
emails would be trained on a training set of sample emails. Once trained,
the patterns obtained would be applied to the test set of emails which it had
not been trained on. The correctness of these patterns can then be
measured from how many emails they correctly classify.
http://www.OLAPReport.com
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Activity 4
Conduct a survey in a manufacturing industry, to know how much time
and the training was required for the company to bring their employees to
work with the new technology being implemented in their existing ERP
package.
Self Assessment Questions
10. Data mining is the process of identifying Valid, new, potentially useful,
and ultimately clear ______________ from databases.
11. INFORMATION is refined data that is _________, timely, and relevant
to the user
12. __________________ is a strategy through which such integration can
be achieved.
3.10 Summary
Before ERP systems, each department in an organisation would most likely
have their own computer system, data, and database. Unfortunately, many
of these systems would not be able to communicate with one another or
need to store or rewrite data to make it possible for cross computer system
communication. For instance, the financials of a company were on a
separate computer system than the HR system, making it more intensive
and complicated to process certain functions.
Once an ERP system is in place, usually all aspects of an organisation can
work in harmony, instead of every single system needing to be compatible
with each other. For large organisations, increased productivity, and less
types of software are a result.
Implementation of an ERP System
Implementing an ERP system is not an easy task to achieve, in fact it takes
lots of planning, consulting and in most cases 3 months to 1 year. Moreover
ERP systems are extraordinary wide in scope and for many larger
organisations can be extremely complex. Implementing an ERP system will
ultimately require significant changes on staff and work practices. While it
may seem reasonable for an in house IT staff to head the project, it is widely
advised that ERP implementation consultants be used, as consultants are
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What is EIS?
What is data warehousing?
What is data mining?
What do you mean by OLAP?
Explain the concept of supply chain management?
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3.12 Answers
Self Assessment Questions
1. Trends and patterns
2. Human, organisational, and motivational change
3. Organisations
4. Presentation
5. Transaction handling and record keeping.
6. Semi-structured and unstructured
7. Decision support
8. Operational database
9. Data warehousing
10. Information
11. Accurate
12. Supply chain management
Terminal Questions
1. Refer 3.5
2. Refer 3.6
3. Refer 3.7
4. Refer 3.8
5. Refer 3.9
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Most of the production estimates for the next production plan was taken
based on these reports. Even though the production managers were
grateful for the information they received from the sales department. The
delay had a sever effect on the efficiency of the production planning.
However, the production managers could avoid costly production
overruns and also shortages in product, if information was readily
available for them during their production planning meetings.
For over coming this and improving the efficiency in the system, Gold
Rush Corporation decided to implement an Executive Information System
(EIS). This system possessed information regarding real time sales and
orders of Gold Rushs products. The system was designed so that it was
available to all senior level managers of the company, including the
production managers. With the help of this new system production
managers were able to estimate more accurately the inventory levels
they must realise in order to meet the market demand. Since the
Executive Information System provides managers with valuable and
accurate real time information that help production managers to cut down
on holding costs, if they move to real time inventory model with the help
of EIS.
As you can analyse in this case study how efficiency of an organisation
can be enhanced with this king of open distribution of information method
with the help of executive information system designed for a companys
specific needs. Every company should realises that bottom line should
improve for achieving better efficiency levels. Many of the large
organisations find it difficult when it comes in handling widespread
distribution of information. However, with implementation of and
Executive Information System can help in over coming some of the
problems that these large organisation face when it come to information
management.
Questions:
1. Discuss the reasons why the managers of Gold Rush Company
where not able to plan efficiently the production output for the coming
production period.
2. Explain how Executive Information System (EIS) helped in resolving
the problems faced by the managers.
3. Do you think the companies can carry out the production planning
efficiently with the help of EIS? Discuss.
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3.14 Glossary
Term
Description
Archive
Caters
Conjunction
Constraint
Contingency
Forerunners
Inhibits
References
1. Data Mining: Concepts, Models, Methods, and Algorithms by Kantardzic,
Mehmed (2003).
2. WareHouse Information Prototype at Stanford (WHIPS) by Yang & Jun.
3. Supply Chain Management: More Than a New Name for Logistics by
Cooper. M.C., Lambert. D.M. & Pagh. J.
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Unit 4
Unit 4
Structure:
4.1 Introduction
Objectives
4.2 ERP Tools and Software
ERP Tools
4.3 ERP Selection Methods and Criteria
ERP Software Selection Criteria
Improper ERP system selection
Proper ERP system selection methodology
4.4 ERP Selection Process
Features and functionalities of ERP solution
4.5 ERP Vendor Selection
Vendor Selection
4.6 ERP Implementation
4.7 Summary
4.8 Terminal Questions
4.9 Answers
4.10 Case study
4.11 Glossary
4.1 Introduction
By now you must be familiar with the concept of ERP related techniques
and the need for ERP in an organisation. This unit familiarises you with ERP
tools / software and the selection methodology followed for selecting an
ERP tool.
Enterprise Resource Planning (ERP) software is a common phrase in
business. Many small and big companies have already implemented ERP
software. Yet many other companies are on a fast-track to implement ERP
software in order to effectively meet business challenges. In the past,
companies used paper-based processes or separate software packages to
manage multiple functions of their business, such as Accounting, HR,
Quality, Customer Service, Order Entry, and so on. ERP, on the other hand,
integrates all functions of a company into a single software package.
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There are dozens of ERP software providers in the market. They range from
globally reputed vendors to small, industry-specific vendors. Some of the
well-known providers include SAP, Oracle, Microsoft, NetSuite and Epicor.
There are several business reasons for the shift from fragmented systems to
an integrated ERP. Some of them include:
Easier and faster to train employees on a single ERP software package
than on multiple systems.
Provides business executives with more transparency of their business
operations since all business information is stored at one location.
Enables managers perform business functions and processes in a
standard way.
It is important to realise that there is no perfect ERP tool / software for any
organisation. Each company has its own business-specific needs.
To identify the right ERP tool / software, it is of prime importance to
understand the associated applications. Much of the software that is used
with ERP is multi-module. It can assist companies integrate various
processes. The most important areas for ERP applications are Finance,
Human Resources, and Manufacturing. When a vendor sells Finance
related ERP module to a company, the module is capable of combining a
number of different tasks. For example, some modules may deal with charts
related to accounts and balances, while it can also be used to maintain
expenses that are connected to the organisation.
One of the most impressive features of ERP tools is that they can be used
to monitor the depreciation and appreciation of company assets. This tool
can also be useful for the maintenance of receivables and payables.
Learning Objectives:
After studying this unit, you will be able to:
Analyse the methodology and criteria used in ERP selection.
Explain the ERP selection process.
Analyse the ERP tools available in the market.
Identify different ERP vendors.
Explain the ERP vendor selection process.
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Commercial ERP
Expensive
Always backed by well known
brands
Assured training and after
sales support
Suitable only for bigger
corporations
Non flexible
Usage modalities are rarely
liberal and cause troubles
when they are modified
Deployment is costly and
inconvenient
Companies might have to
change
their
business
process to adapt to this ERP
Enhancements in the product
is intimated to its customers
Consumes a lot of time during
implementation
Lots of training is required for
the employees. It calls for lots
of investments in terms of
time and money
Less secure
Free of cost
Usually not backed by well
known brands
Training and after sales support
is not guaranteed
Suitable for small companies
and bigger corporations
Can be modified as licenses are
available along with the source
code
Companies
can
do
the
necessary modifications in code
rather than changing their
business policies
Does not interfere with the
regular
schedule
of
the
company during implementation
Enhancements in the product is
not known
Implementation time is very less
Procedures
for
training
employees are very easy does
not require much training as
source code is more than a
training manual
More secure and indicate
whenever
something
goes
wrong
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Company Name
SAP R/3
SAP
Oracle Corporation
Oracle Corporation
PeopleSoft
Oracle Corporation
MicroSoft Dynamics
MicroSoft Corporation
Lawson Financials
Lawson Software
Sage Group
NetERP
NetSuite
Visual Enterprise
Unit 4 Agresso
Epicor Enterprise
Epicor
IFS Applications
MFG/PRO
QAD
Ramco e.Applications
Ramco Systems
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predicted cash flows help you get an accurate result from the NPV
calculation.
o Budgetary constraint is the most used method when considering IT
projects. The Internal Rate of Return (IRR) and payback period
methods are also very popular for many firms dealing with IT
implementations.
Management Considerations : On the management side, there are
more variables to consider than simply money. For example, managers
may differentiate between implicit and explicit business needs,
competitive pressures, legal needs, and environmental concerns. This
can make the management side of valuation very difficult to quantify.
Generally, companies take a few factors and try to create a scoring
system that can be objectively applied across the options. Sometimes
probability of achieving the intended benefits is included in this part of
the calculations else it is included in the financial part of the process.
However, the probability of achieving the benefits instead of simply
succeeding in implementation takes on a different look. This sort of
probability may be more directly tied with a softer science such as
management.
Development Considerations: Development is usually the least
important decision factor in these processes. One of the most important
factors is the probability that a project finishes on time. This simply does
not happen very often, so it is important to determine what sort of
adverse effects this could have on business operations.
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Are the help files easily assessable and easy for users to
understand?
Can you customise help to meet the needs of the organisation?
Is the product too complex?
Are there standard reports available, and are they useful?
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4
5
Oyku Alanbay, 'ERP Selection using Expert Choice Software', ISAHP 2005, Honolulu, Hawaii
Thomas F. Wallace and Michael H. Kremzar, ERP: Making it Happen
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4. The elements required to meet the companys goals, and in turn the
companys success, have to be defined. These requirements are then
used as the guideline for selecting an ERP solutions provider. The steps
involved in this process include:
Identifying the limitations with the current business approach
Identifying the organisations core competencies factors that give
the organisation a competitive edge over competitors.
Identifying the requirements for a solutions partner regarding
implementation, features, functionality, service, tools, ongoing
customer care and support.
5. Identifying the most important system functionality when selecting the
right enterprise solution for the organisation.
6. Some of the additional questions that need to be pondered over when
evaluating potential ERP solutions are:
Is the vendors product scaleable to accommodate rapid or
unexpected growth?
Are the solutions that are under consideration configurable to meet
existing specific needs and business processes as well as new ones
that may arise in future?
Is the solution flexible enough to operate on a variety of IT
platforms?
Are the product functions and features available now? If not, when
will they be available and how important is it to have that function?
Following and executing these steps of the ERP selection process provides
the organisation the necessary information to make a well-informed,
quantitative ERP software selection.
4.4.1 Features and functionalities of ERP solution
The ERP evaluation team must also check on the following features and
functionalities of the ERP system before selecting an ERP solution:
Customisation Since different organisations need different software
based on specific needs, customisations should not cause difficulties in
updating to future releases.
Implementation Different ERPs have different implementation
requirements. Thus, it is important to choose an ERP that serves the
organisation best and easy to implement.
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Maintenance The software should support multi-company, multidivision, and multi-currency environments.
Real-Time Changes The modules should work in real time with online
and batch-processing capabilities. So that no errors would occur
because of the system being not up-to-date and information available to
a department would not be different from the information available to
other departments.
Back-up System The back-up unit of the system should be more than
reliable. Besides, the back-up unit should also offer a solution for
restoring the system within the shortest possible time.
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You have now identified the unique needs of the organisation and the critical
functional requirements necessary in a new enterprise solution. The next
step is to define the process to be followed in evaluating and finally selecting
the right ERP software package for the company. By defining the path to
follow, you can avoid extended and potentially costly delays in the
evaluation process. These steps should include:
1. Reviewing potential ERP software products that suite your organisation
2. Eliminating packages that do not meet the specific needs and
requirements
3. Creating a manageable list of vendors for final review typically three to
five
4. Scheduling detailed product demonstrations
5. Checking your vendors references
6. Visiting a like customer site of the final short-listed vendors
Activity 2
Consider that you own a small company with around 50 employees.
Develop an ERP selection process to select an ERP solution for your
company.
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Advantage
Generic/Horizontal
Vertical
Custom
There is typically more risk associated with Vertical and Custom vendors.
However, the benefits could outweigh the potential risks. To obtain lists of
potential vendors, you can:
Contact consultants
Use internet searches
Contact industry associations
Look at trade journals for articles and advertisements
Contact colleagues
Attend trade shows
Once you obtain the list of potential vendors that serve your requirement,
perform the following process to select one from the list of potential vendors:
Call references - Make sure that you are talking to a company in the
same or similar industry. Have a checklist of questions to ask so that you
dont forget anything.
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Carry out a Boardroom Pilot You need to work with the system to
understand it better. Use the boardroom pilot as a way for the vendor to
understand your requirements and for you to better understand the
system purchasing the software.
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4.7 Summary
In todays increasingly competitive business environment, many companies
are driven to seek various ways to increase their effectiveness and ability to
have a competitive advantage. This situation drives many companies to
invest in a new ERP system as a step toward this goal.
Irrespective of whether the company is a multi-national, multi-million dollar
organisation or a small company, the goal of system selection is to source a
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system that can provide functionality for all its business processes. The
system should also get complete user acceptance; management approval
and, most importantly, provide significant return on investment for the
shareholders.
It is not uncommon for companies to choose an ERP system that is not the
best fit for the business and this normally leads to a more expensive
implementation. Thus, it is understandable that "ERP Costs can run as high
as two or three percent of revenues" 6 . A proper ERP System Selection
Methodology delivers, within time and budget, an ERP system that is best fit
for the business processes and the user in an enterprise.
The implementation of an ERP system takes a significantly longer time and
level of resource than the selection process. However, the extent of the
implementation is profoundly influenced by the level of resource and
objectivity within the selection. Companies that use a proper System
Selection Methodology reap the benefit not only during the implementation
phase but also during the life of the ERP System.
4.9 Answers
Answers to Self Assessment Questions
1. Open Source ERP software and Commercial ERP software
2. The reasons for companies to the shift from fragmented systems to ERP
are:
It is easier and faster to train employees on a single ERP software
package than on multiple systems
6
C. Escalle, M. Cotteleer, and R. Austin, Enterprise Resource Planning (ERP), Report No 9-699-020,
Harvard Business School, Cambridge, MA, USA, 1999
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A lot of time was spent in planning and deciding upon the right software.
And the entire proceedings were conducted in an elaborate and phased
manner to ensure efficiency. The company laid down three ground rules
for vendors willing to participate. They were:
The vendor had to conduct a three-month Business Process Reengineering (BPR) exercise at EI-AMG.
Functionality
Presence in India
Localisation of modules
Cost
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With the help of the new tools, the company was able to perform better
workflow processes, easier generation of MIS reports, bug-free
performance of systems, and timely closing of accounting cycles.
Questions
1. What do you think were the drawbacks of Avalon ERP?
2. Explain the selection process adapted by EL-AMG to select the new
ERP vendor/product
4.11 Glossary
Term
Description
Application layer
Client layer
Database layer
MySAP ERP
3-tier model
References
1. http://www.exforsys.com/tutorials/erp/erp-application-tools.html
2. Issues in Global Business and Management Research: Proceedings of
the 2008. By Mehran Nejati, Azadeh Shafaei, Mostafa Nejati
3. Enterprise Resource Planning by Alexis Leon
4. http://www.implement-erp.com/erp-vendor-selection.html
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Unit 5
Unit 5
ERP Modules
Structure:
5.1
Introduction
Objective
5.2
Finance
5.3
Sales and Distribution
5.4
Manufacturing and Production Planning
Material and Capacity Planning
Shop Floor Control
Quality Management
JIT/Repetitive Manufacturing
Cost Management
Engineering Data Management
Engineering Change Control
Configuration Management
Serialisation / Lot Control
Tooling
5.5
Human Resources
5.6
Plant Maintenance
Preventive Maintenance Control
Equipment Tracking
Component Tracking
Plant Maintenance Calibration Tracking
Plant Maintenance Warranty Claims Tracking
5.7
Quality Management
CAQ and CIQ
Quality Management ModuleFunctions
5.8
Materials Management
Pre-purchasing Activities
Purchasing
Vendor Evaluation
Inventory Management
Invoice Verification and Material Inspection
5.9
Summary
5.10 Terminal Questions
5.11 Answers
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5.12
5.13
Unit 5
Case Study
Glossary
5.1 Introduction
This unit gives a brief description about the ERP Modules. All ERP
packages contain many modules. The features and number of the modules
vary with the ERP package. In this chapter, we will see some of the most
common modules available in almost all packages.
Finance: It provides solution in handling the financial activities of an
organisation. It helps to maintain all the financial records starting form
the product manufactured cost to the employees financial details.
Manufacturing and Production Planning: It provides solution to
production and the planning functions of an organisation to efficiently
maintain share and utilise the data generated during the processes and
assist the management.
Sales and Distribution: It provides solution in handling the most vital
reports sales and distribution function produces and maintained very
systematically and efficiently
Plant Maintenance: It provides solution for an organisation helping it to
establish an effective communication link with in the various functions of
the organisation. It acts as a network helps to maintain the information
flow across the organisations functions.
Quality Management: It provides solution to maintain the required quality
demanded by the customer, ISO, and the company standards. It helps
the organisation to handle the test reports in a very efficient manner and
helps to assist the management to identify the potential pit fall in quality.
Materials Management: It provides solution it handling the inventory of
an organisation. It helps to track and maintain records of every item that
comes in and goes out of the organisation. It also maintains a detailed
record of the quantity, quality and dates of every item in the inventory
and items borrowed and utilised by the other function of the organisation.
This is by no means a comprehensive list. Some packages will have the
subset of this, and some will have more modules and/or features. For
detailed information, you will have to consult the product literature of the
specific ERP system.
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There are many packages that are developed depending on the requirement
of an organisation requirement. These packages help not only in
maintaining the data but also effectively handle the data as per the
requirement of the various needs that arise in the organisation. Since these
packages are fool proof, and provide high security for data it is able to
penetrate not only the large scale industries but also most of the small scale
industries.
Learning Objectives:
After studying this chapter one will be able to learn
Evaluate different and popular modules of an ERP package like finance,
manufacturing, plant maintenance, materials management and so on.
Describe subsystems or sub-modules of these models.
Describe how these modules function together.
5.2 Finance
The entire concept of Information Technology (IT) is based on the principle
that provides the right information, at the right time, to the right people.
Since, it plays a crucial role in an organisations decision making. Financial
data provides much of this key information, but simply having the financial
data is not enough. You need a set of processes and views of your data that
provides up to date information, in exactly the form you need it to make that
critical difference. This will help in formulating a crucial decision. From each
area of your organisation accounting software needs access for information;
for example, the software should be able to access information from R&D
and market research through manufacturing, distribution and sales. Your
financial solution must provide the top management with information that
can be leveraged for strategic decisions, in order to achieve competitive
advantage.
You need to know that in todays market environment, your financial
decisions are based on today's data, not numbers from records closed a
month ago, or even a week ago. And this today's data must represent every
segment of your organisation's activities, whether your enterprise stretches
across a room or around the globe. This is essential, to plan for the future
growth of your enterprise, which is possible only if you know exactly where it
is today. The ERP solutions financial application components work hand-inSikkim Manipal University
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hand to improve the result, no matter what financial goals are drawn in your
organisation. This is true because, across all business areas and all
geographic areas the financial functionality is tightly integrated. This rigid
integration includes all the other different modules, from materials
management, to human resources to logistics. The ERP system
automatically links related areas, eliminating the need to repeat procedures.
You enter your data only once. Within the ERP system, all areas work in
concert, creating a new level of efficiency in handling your financial data.
In many countries across the globe the finance modules of most ERP
systems provide financial functionality and analysis support to thousands of
businesses. These ERP systems include not only the components of
financial application, but also Human Resources, Logistics, and Business
Workflow. It also links this to the Internet and hundreds of business
processes covered in these systems.
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the visibility, necessary for managing lead-times and for carefully controlling
the amount of work in process, and the timely release of production orders.
5.4.2 Shop Floor Control
With increasing emphasis being placed upon reducing manufacturing time,
and reduce products time-to-market. The manufacturers have turned
greater attention in evaluating their shop floor activities. Process
reengineering efforts and the elimination of waste are greatly dependent
upon powerful, user-friendly and flexible shop floor planning, and control
over this system. Management needs accurate information, timely and the
ability to manage the shop floor by exception. Cost information must be
flexible as well. Factories are being realigned to reduce material travel time
through a facility, adding burden upon the supporting systems due to
realignment of places. Managers must often experiment with trial and error
approach, the never-ending search for process improvement. Shop floor
control systems must be flexible and adaptable to changing needs.
A shop order can be reprinted at any time with user selection of whether to
reallocate material. This reprinting gives a shop foreman flexibility to print a
duplicate copy when an order is split between operators. This feature also
gives the shop scheduler, the ability to reprint the shop packet and to reflect
new material allocations that correct previous shortages. Every shop order
can be maintained throughout its life. All systems provide a full function
shop order maintenance capability. This allows the user to evaluate and
adjust operation steps and components. Orders can be rescheduled either
backward or forward. For example, an operation's start date can be
overridden to reflect changed events and then, the order can be forward
scheduled to reflect the impact upon future operations.
5.4.3 Quality Management
With product quality under the microscope in all industries today, every
company strives for superior quality in its products and services. All
manufacturing modules track quality control activities across the enterprise,
from intermediate producers to finished goods. These systems allow a wide
variety of characteristics and parameters to be specified in test and
inspection operations. They also maintain an extensive history of data, to
improve product quality and identify recurring problems.
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comes with strong analytic capabilities. A JIT work list compares the
production plan to the capacity plan for rate-based items. This tool quickly
identifies discrepancies based upon actual performance, so that production
rates and/or daily output goals can be adjusted proactively and monitored
on a timely basis. Reports covering employee efficiency and detailed cost by
item are also provided together with lot tracing status for lot controlled items.
5.4.5 Cost Management
With market competition increasing the pressure on margins, a business
needs accurate and detailed manufacturing cost reporting for effective
business management. ERP packages provide extensive cost information at
several levels that helps businesses identify cost drivers and reduce product
costs. They support multiple inventory valuation methods, so that you can
choose the costing method that best reflects your company's business. You
can choose standard, LIFO (Last in First Out), FIFO (First in First Out),
moving average unit, or lot costing method and these costing methods can
be assigned by item. To reduce administrative overhead, prevent input
errors, and provide faster and more accurate information for planning, these
systems provide detailed records of time and materials data on the shop
floor. For example, many systems have features that let your company
compare, estimates and production costs for different work centres,
machines, employees, and order quantities while monitoring overtime,
indirect hours, subcontracted jobs, and other costs. Moreover, to provide
even more accurate production and inventory planning, these systems can
track material usage for each job. And, if the activity is associated with a
project, project information is automatically updated. Many vendors also
support Activity Based Costing (ABC) with activity, visibility by cost object as
well as costs for user-defined groupings, such as departments. There will be
provisions that allow employees to report non production activities such as
maintenance, holidays, and illnesses. Manufacturing system provides
extensive information about production costs at several levels that gives you
the visibility that you need to identify cost drivers and reduce product costs.
Self Assessment Questions
5. __________ and _____________ can be performed at strategic,
tactical, .and operational levels within the business.
6. _____________ reporting makes potential material and capacity
problems easy to identify.
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customer-specified product can be built and sold. As a result, the order entry
process is a dynamic conversation between the order taker and the
customer, who culminates with a fully priced product on the sales order. And
also the related manufacturing detail necessary to move the order directly
into production.
The process starts with an attribute master containing configuration related
questions and answers. Attributes are the building blocks of a configuration
structure. The configuration structure categorises and sequences attributes
to create a flow of questions and possible answers, during the entry of sales
orders for configured products.
5.4.9 Serialisation/Lot Control
Many systems will provide the facility for the designation of raw material lots
and the serialisation of component parts made from those lots. This
serialisation is applicable to commercial aviation, defence industry suppliers,
and capital equipment manufacturers, who provide service over the life of
their products on an individual unit by unit basis. Examples include heavy
machinery, off road equipment, and highway tractor/trailers. Manufacturers,
who use lot control often, must allocate production prior to its completion.
The lot control system provides for the pre-allocation of lot numbers. This
feature is available throughout the product offering and includes MRP, shop
floor control, order processing, and JIT. Many systems allow production
orders to be pre-assigned with lot numbers for the parent item. When the
shop order is released, the lot master record will be created and allocations
to higher level parents will be permitted. The manual pre-allocation of pre
assigned lots is possible, for both customer orders and shop orders with
visibility to planned and actual production, as well as existing inventory.
5.4.10 Tooling
For many manufacturers, ensuring that proper tooling is available is just a
critical to production schedules, as the availability of material. The ERP
system extends capacity and inventory management to include these
valuable resources. These systems help to ensure that tools and materials
are together at scheduled operations, by storing tools in inventory, planning,
and allocating the required tools as part of the production order. They
always provide visibility of tool use. Calculate the remaining useful life of a
tool and automatically route tools for maintenance, based on usage.
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Make the usage decision and trigger follow-up actions. For example,
during the production of a television it will be necessary to check each
and every circuit board and the test results has to be maintained, not
only before it is assembled in side but also after it is assembled in side
the setup. Every test result along with failure result has to be recorded
for future inspection of the default items.
Quality Control: Its main objective is to look for the desired quality in the
finished product. The product has to meet the certain defined quality
requirements. This has to be checked before the product is despatched
out to the customer. This can be achieved using Quality Control use
using various tools and procedure like dynamic sample determination on
the basis of the quality level history, Application of statistical process
control techniques using quality control charts, Quality scores for
inspection lots, Quality notifications for processing internal or external
problems and initiating corrective action to correct the problems,
Inspection lot processing and problem processing, Quality Management
Information System for inspections and inspection results and quality
notifications. For example, once a product reaches the quality control
department, a series of tests have to be conducted to ensure that the
product is meeting the required or demanded quality standards. Every
test that is carried out has to be recorded, and even report on failure has
to be kept for analysing the cause of the failure and address the issue.
This is possible only if the information is tracked and monitored carefully.
To achieve this Quality Control proves very effective.
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service master record, or set out in service stipulation as short or long texts.
Prices and quantities are stipulated in both cases. A procurement project
may constitute or include a number of individual services, which you initially
cannot or do not wish to specify in detail (for example, the construction of an
office building). Such initial undefined services stipulations are termed
'unplanned service stipulation' and thus, have no descriptions.
They are entered in the form of money value limits. Service stipulation may
be specified in terms of an upper limit. This allows you to exercise a degree
of cost control in such situations. You can set a value limit at the uppermost
level, for example, Rs 5 crores for the construction of the office building.
In addition, you can set limits for individual contracts within the project, for
example, Rs 100,000 for masonry works and Rs 150,000 rupees for
electrical installations and so on. The system checks adherence to both
these sub-limits and the overall limit. When the services have been
performed, they are recorded in entry sheets and then accepted.
The accepted service entry sheet constitutes the basis for subsequent
invoice verification in the case of services. The pre-purchasing activities are
shown in Figure 5.4 above.
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5.8.2 Purchasing
Purchasing is a very important component of the Materials Management
module. The Materials Management module is fully integrated with other
modules in the system. It supports all phases of materials management like
planning, control, purchasing/receiving goods inventory management, and
invoice verification is also performed. Good communication between all
players in the procurement process is necessary, for purchasing to function
smoothly. Purchasing also communicates with other modules in the system,
to ensure a constant flow of information. For example, it works along with
the following modules:
Cost Accounting System Orders (CASO) for materials and services
consumed directly. As CASO can be assigned to a cost centre directly, it
illustrates the interface to the cost accounting system.
Financial Accounting Purchasing and Accounting (FAPA) both maintain
information on vendors. In vendor master record, information on each
vendor is stored that contains both accounting and purchasing
information. The vendor master record represents the vendor account in
financial accounting. Through Purchase Order account assignment,
Purchasing can also specify which General Ledger accounts are to be
changed in the financial accounting system.
Sales and Distribution (SD) with in the framework of material
requirements planning (MRP). However, customer requirements from
Sales can be passed on to Purchasing. Besides, when creating a
requisition, you can assign it to a sales order.
Purchasing system executes tasks like procurement of materials and
services, determination of possible sources of supply for a requirement
identified by the materials planning and control system or arising directly
within a user department, monitoring of deliveries and payments to
vendors, and so on.
5.8.3 Vendor Evaluation
The Vendor Evaluation System supports the optimisation of the processes
of procurement in the case of both materials and services. In the case of
procurement of materials, Sources of supply can be selected with the help
of this system. It also facilitates the continuous monitoring of existing supply
relationships. It provides accurate information on prices, and terms of
payment and delivery. Evaluation of vendors can improve your enterprise's
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Each invoice contains various items of information. You must enter this
information into the system, to post an invoice. If it refers to a transaction
that exists, then certain items of information will already be available in the
system. The system presents this information as default data so that, you
only need to compare it and, if necessary, correct any possible variances.
Consider an invoice refers to a purchase order, for example, you only need
to enter the number of the purchase order. The system selects the correct
transaction and proposes data from the purchase order, including the
vendor, material, quantity ordered, terms of delivery, and terms of payment.
You can, of course, rewrite this default data if there are variances. You can
display the history of the purchase order, for example, which quantities have
been delivered and how much has already been invoiced. If there are
variances between the goods receipt or purchase order and the invoice, the
system will issue a warning on the screen. If the variances are within the
preset acceptance limits, the system will allow the invoice to be posted but
will automatically block it for payment. The invoice must then be released in
a separate step. If the variances are not within the acceptance limit, the
system will not allow the invoice to be posted.
When you enter an invoice, the system also finds the relevant account.
Automatic postings for price variances, cash discount clearing and sales tax
are also generated and the posting records displayed. If a balance is
generated, the user is required to make corrections, as an invoice can only
be posted if the balance equals zero. Once the invoice is posted, some data,
such as the average price of the material ordered and the purchase order
history is updated in the system. The invoice posting completes Invoice
Verification. The data required for the invoice to be paid is now contained in
the system. The department of accounts can retrieve the data and make the
appropriate payments with the aid of the Financial Accounting component.
Self Assessment Questions
18. The _____________ activities comprises of maintaining a service
master database
19. Communication between all players in the ________________ process
is necessary for purchasing to function smoothly.
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5.9 Summary
ERP software is made up of many software modules. Each ERP software
module mimics, a major functional area of an organisation. General ERP
modules include modules for product planning, parts and material
purchasing, inventory control, product distribution, order tracking, finance,
accounting, marketing, and HR. Organisations often selectively implement
the ERP modules that are both economically and technically feasible.
ERP Production Planning Module
From Manufacturing Requirements Planning (MRP) II into ERP evolution
process, vendors have developed more robust software for production
planning. And consulting firms have collected and stored vast knowledge on
implementing production planning module. It also optimises the utilisation of
manufacturing capacity, parts, components and material resources using
historical production data, and sales forecasting.
ERP Purchasing Module
Purchase module contours procurement of required raw materials. It
automates the processes of negotiating price, awarding purchase order to
the supplier, identifying potential suppliers, and billing processes. It is
closely integrated with the inventory control and production planning
modules. It is often integrated with Supply Chain Management (SCM)
software.
ERP Inventory Control Module
Inventory module helps processes of maintaining the appropriate level of
stock in a warehouse. The activities of inventory control comprises of
identifying inventory requirements, setting targets, providing replenishment
techniques and options, monitoring item usages, reconciling the inventory
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5.11 Answers
Self Assessment Questions
1. Information Technology (IT)
2. Today's
3. Supply chain
4. Automated.
5. Control, execution
6. Graphical
7. Just-in-Time
8. Rate-based
9. Design, development
10. Boolean rules
11. Pre-allocation
12. Company-specific
13. Manufacturing
14. Downtime
15. Equipments
16. ISO
17. Internal
18. Pre-purchasing
19. Procurement
20. Point-based
21. Relevant account
Terminal Questions
1. Refer to 5.4
2. Refer to 5.4
3. Refer to 5.6
4. Refer to 5.7
5. Refer to 5.8
6. Refer to 5.8
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Once this level of saving reached the ears of top management, more
focus was put on rationalising vendors. In a number of cases, single
sourcing was found to be appropriate when, one vendor offered even
more significant levels of saving. The shared services function, operated
on their ERP system fifteen months after the start of the task force. The
combined seven businesses had minimised their total number of vendors
from 34,000 to around 900. The number of items they purchased was
reduced to 15,000 from 110,000. A team was allotted to monitor and
approve new items and new vendors as they were required. Although the
company estimated they would save 10% in the first and subsequent
years, the estimate was raised to 23% for the first year and 15% for
subsequent years based on the results of the task force.
The company came to conclusions that after making such large savings,
they would continue implementing best practices in the purchasing
function. They had a plan for adopting procurement cards and introducing
evaluated receipt settlement, where they would pay vendors based on
goods received, to gain vendor discounts for prompt payment.
Questions:
1. Explain how the company prepared it self for the implementation of
the new system.
2. How was the software development team assisted by the company
management?
3. Explain why the implementation process was a success.
5.13 Glossary
Term
Description
Premise
Leverage
Procurement
Vigilant
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Reference
1. Production Planning by Mixed Integer Programming by Wolsey and
Laurence.
2. Concepts in Enterprise Resource Planning by Monk, E. and Wagner, B.
3. World-class Warehousing and Material Handling by Frazelle, E.
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Structure
6.1
Introduction
Objectives
6.2
Enterprise Resource Planning (ERP)
6.3
Computer Aid Design/Computer Aid Manufacturing (CAD/CAM)
6.4
Materials Requirement Planning (MRP)
Master Production Schedule (MPS)
Bill of Material (BOM)
Inventory Records
Closed Loop MRP
Manufacturing Resource Planning (MRP-II)
6.5
Distribution Requirements Planning (DRP)
6.6
Just-in-Time(JIT) & KANBAN
Kanban
Benefits of JIT
Potential Pitfalls of JIT
6.7
Product Data Management (PDM)
Data Management
Process Management
Process Management
Process Management
Benefits of PDM
6.8
Manufacturing Operations
Make-to-Order (MTO) and Make-to-Stock (MTS)
Assemble-to-Order (ATO)
Engineer-to-Order (ETO)
Configure-to-Order (CTO)
6.9
Summary
6.10 Terminal Questions
6.11 Answers
6.12 Case Study
6.13 Glossary
Unit 6
6.1 Introduction
By now you must be familiar with the ERP Modules. This unit familiarises
you with the various methods and techniques used in the industry. This unit
gives an overview of ERP in manufacturing perspective.
The manufacturing segment accounts for nearly 25% of the total Information
Technology (IT) spending in the country, which makes it the largest segment.
The process and discrete manufacturing segments spent a total of Rs 2,605
crore on IT in the year 1997-98. Discrete manufacturing accounted for
nearly 11.3% of the total segment spending and the rest came in from
process manufacturing.
The process manufacturing sector traditionally spends more on Information
Technology (IT). This is because the larger population of companies is
engaged in this activity as well as their scale of operations is also increasing.
In general, the business and IT priorities of both process and discrete
manufacturing are the same. It consists of controlling inventory, production
costs, marketing costs, and improving supplier and delivery channel
relationships on the business front.
It also helps in improving IT infrastructure, automating internal and external
processes, and better decision-making. At the same time, there are
differences in the emphasis given to the various aspects of IT usage. In this
analysis, we take the segments together when discussing the areas where
they exhibit similarity. However, when areas show dissimilarities between
each other we discuss them separately.
IT investments by large manufacturing organisations were on the decline in
1998. Since, many industries like automobiles, steel, cement, and others
were facing a downturn in their business. Overall, many of the smaller
manufacturing organisations, which have been traditionally poor in IT usage,
turned towards IT. Traditional large buyers like TISCO, Ashok Leyland, and,
Bajaj Auto to name a few did not have any major IT project underway.
Public sector steel companies slowed down the IT investments. However,
their counterparts in the private sector spent on ERP and plant automation.
In the industry of Pharmaceuticals, the WTO agreement on patents has
forced companies to get patents on their formulations. A very data-intensive
area the clinical trials, are fast emerging as an application in the
pharmaceutical industry.
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scheduled to arrive, is out of alignment with its need date, and the date the
order is actually required.
During the 80s, techniques for helping to plan capacity requirements were
tied up with MRP. Tools were developed to assist the planning of aggregate
production levels and the development of anticipated production schedules.
Systems to aid in executing the plans were incorporated in shop floor control
for the in-house factory and vendor scheduling for the outside factories.
The expanded MRP system became known as closed loop MRP. Since, it
provided feedback from the execution function to the planning functions, so
manufacturers could change plans when necessary. Expanded-closed-loop
MRP was practiced to provide the ability to translate the operating plan
expressed in manufacturing terms of units (kilograms) into financial terms
(rupees). They even have the potential to simulate the effects of various
plans in terms of both units and rupees. The new system, which was called
Manufacturing Resource Planning (MRP-II), was a comprehensive approach
for the effective planning of all the resources of a manufacturing
organisation.
Materials and production planning is critical to the success of a
manufacturing company. A company can have the best and the newest
manufacturing facilities, product design, the latest equipment.
Along with all the latest production technologies like CAD/CAM, robotics,
automated guided vehicles (AGVs), and so on but the company was not the
ability to compete. MRP has proved to be an effective production and
inventory planning system in a wide variety of environments.
For a successful MRP system three types of information are very essential
and they are:
Master Production Schedule (MPS)
Bill of Material (BOM)
Inventory Records (IR)
6.4.1 Master Production Schedule (MPS)
The MPS is a detailed production schedule for end items or finished goods
that provides the major input to the materials requirement planning process.
Associated with each finished product is a BOM It describes the dependent
demand relationships that exist among the various components, raw
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materials, parts, subassemblies, and so on. The entire set of BOMs for the
company's finished products is called the BOM file. Inventory records
provide inventory status data for each product or component such as stockon-hand, stock-on-order, and so on. It also contains planning factors like
lead-time, safety stock, re-order level, and so on.
MRP logic uses the MPS, the BOM file and the inventory records to
determine the following for all components:
Planned order quantities
Planned order release dates (to shop floor/suppliers)
Planned order due dates
The MRP system calculates the due dates and release dates taking into
consideration the lead-times required to produce or procure the components.
It also recognises the order in which they are assembled into the finished
product. If the MRP process is carried out in conjunction with capacity
planning, the production facility must have the capacity to complete the
orders on time.
6.4.2 Bill of Material (BOM)
A BOM defines the relationship of components to end items. The BOM
identifies all components used in the production of an end item, the quantity
required, and the order in which the components are assembled.
For example, consider an office chair. The chair is composed of a seat
cushion, back cushion, adjuster mechanism, base unit, wheels, and
fasteners. To manufacture the chair the wheels, base unit, and adjuster
mechanism are assembled into a chair frame, to which the base cushion
and back cushion are attached. All the fasteners are identical and there are
11 of them for this chair.
Figure 6.1 shows a BOM for an office chair. To simplify the discussion, this
BOM does not show all purchased raw materials (paint, steel tubing and so
on). This form of the BOM is frequently called a product structure diagram.
All items appearing below the final product in a BOM are referred to as
components, whether they are raw materials or component parts or
subassemblies. In the above figure, all items with the exception of the
'Office chair are components. The term- parent component describes a
component at one level in the BOM that is composed of components from
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the next lower level in the BOM. The lower level components are called child
components.
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before they are needed. It must be the correct material and must satisfy
the quality specifications.
Increased quality: When operating a JIT system, disruption has a
minimum impact. Therefore, quality problems need to be eliminated.
Benchmark: Quality Function Deployment and service design can be
used for device operations. Service employees need to learn the value
of providing defect free services.
Simplicity of system: Product mix or volume changes as planned by
Master Production Schedule (MPS), can be accomplished by adjusting
the number of cards in the system. Production orders are prioritised by
the cards on a post. Production orders for parts that are running low are
moved in front of parts that have more supply.
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Activity 3
Find out the process in the assembly chain of an automobile
manufacturing industry and asses the kind of planning they could do
using an ERP system to handle the inflow of material and components
for manufacturing.
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and effort in pursuing a design, which has already been invalidated by the
work someone else has done in another part of the project. Bringing order to
this highly complex workflow is what product data management systems do
best. In particular, they keep track of the thousands of individual decisions
that determine who does what next.
Most PDM systems permit the project leader to control the progress of the
project via 'states' using pre-determined 'triggers'. It also provides a routing
list which may vary according to what type of organisation or development
project is involved. The way systems differ is in how much flexibility they
allow within the framework discipline. The most rigid systems are based on
procedures. Every individual or group of individuals is made to represent a
state in a procedure 'Initiated', 'Submitted', 'Checked', 'Approved', and
'Released'; a file or record can't move from one individual or group to the
next without changing states. Some systems make it possible to give an
identity of its own to the task, separate from the people working on it.
For example, consider an engineer working on a design wants to confer with
colleagues as to the best way to approach the design. As long as the master
model and all the associated reference files are contained in and controlled
by a packet, it is simple to pass the entire job across to any number of other
people without triggering a change of state. The formal workflow procedure
is not compromised by this informal rerouting because the authority to
change the file's state doesn't move around with the packet. It remains with
the designated individual.
Communication within the development team is enhanced too. When
packets of data and files are passed around, they can be accompanied by
instructions, notes and comments. Some systems have 'redlining' capability;
others even have provision for informally annotating files with the electronic
equivalent of 'post-it' notes.
In other words, a Process Management (PM) system could be seen as a
way of: 'loosening up' the working environment, instead of constraining it.
The challenge is how far you can allow informal teamwork and crossfertilisation to carry on, and still keep overall management control of project
costs and deadlines. Most systems allow the current status of the entire task,
with all supporting data, to be tracked and viewed by authorised individuals
at al times.
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company will be making products in lots and the cost of the products will be
less as the economies of scale will be at work and there will not be any
waiting period for the customer after placing the order.
6.8.2 Assemble-to-Order (ATO)
Assemble-to-Order (ATO) company is another variation of the
manufacturing operations. The ATO company manufactures standardised,
option modules according to the forecasts it has made and then assembles
a specific combination, or package of modules, after receiving the
customer's order. The classic example is the automobile manufacturer. After
receiving orders from a host of dealers, the manufacturer specifies the exact
production schedule for the automobiles.
The schedule is based on the options order by the customers, like automatic
transmission or manual transmission, air-conditioning, standard or digital
control panel, leather, cloth or vinyl seating, and so on. Many components
for assembling the automobiles would have be ordered or started into
production before receiving the customer's order based upon demand
forecasts. Thus, the major processing that remains when the orders come in
is assembly. This approach shortens the time between placement of the
order and delivery of the product cycle time.
6.8.3 Engineer-to-Order (ETO)
Yet another variant in the manufacturing operations is the Engineer-to-Order
(ETO) company. The ETO Company is the ultimate in product variety,
product customisation and flexibility. In this mode of operation, as per
customer order the company manufactures any thing, but at a higher price.
The expensive clothing of the 'bold and beautiful' is an example of this kind
of production. Products are made for each customer and even the minute
details, for example, the feel of the cloth and the texture, the colour of the
threads, the size of the collar and so on will differ from one customer to
another, depending upon the customer's preferences. So the manufacturer
cannot keep anything in inventory, he will have to order only once the
customer has given his/her specifications. Obviously, the cost of production
will be highest in this mode of production.
6.8.4 Configure-to-Order (CTO)
MTO manufacturers traditionally had to choose between ATO and ETO.
ATO suppliers face the need to extend product lines, add features, and
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Figure 6.2: Relation between output variety and the type of manufacturing
process
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This is very use full for identification and verification process during
manufacturing and quality control.
Key considerations for production and material planners are the modularity
of the real bills of material that will be combined in the configured end item,
and the level at which sales analysis records will be stored. Many times, the
structure (if bills and routings exist at all) needs to be re-examined in light of
how it will support the CTO model.
The ability of the configuration to automatically create new part numbers,
generate bills and routings, and assign prices has greatly reduced the
process of product introduction. However, unless the manufacturing bills
have been reviewed and contoured to a CTO model, the result is often
inaccurate/inadequate information, faster!
With the architecture of the CTO, and the ability to capture sales analysis
information at the option level, planners have a tool to improve their
planning models. The ability to capture sales analysis records on the options
provides the ability to accrue data for use in forecasting software. For
example, within the option accessories, each occurrence of a mouse,
modem NIC, sound card and CD-ROM selection is captured as a sales
analysis record. This information is available for summarisation at a month
or year end. The data, can be reviewed and massaged, then input to the
forecasting algorithms. Automatically information is monitored and
maintained at the detail level, instead of forecasting it at the accessory level
with the use of percentage Bills of Material (BOM),.
The configuration software also provides features to quickly develop
accurate part, bill, and routing information. In addition to maintaining sales
analysis information at the configured item level, detail information by option
is also available. This provides a powerful database for the dissection of
market data. It also becomes the foundation for improving forecasting and
planning capabilities.
Self Assessment Questions
18. Historically, a design engineer would spend as much as 25-30% of his;
time simply_____________________.
19. The __________no longer needs to know where to look for release
designs or other data, since it is all there on demand.
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6.9 Summary
The manufacturing sector always faces troubles in allocating raw materials
and deciding the outputs. The ERPs forefathers namely material resource
planning and manufacturing resource planning have solved these problems.
They were designed with tools that helped to provide the calculations in an
accurate manner. This has helped a lot through retail ERP.
However these applications were not able to tackle similar problems in other
departments like finance and human resources. ERP however helped in
overcoming that trouble also by using software programs that calculated
more than billion permutations and combinations in a millisecond. Turnkeys
ERP manufacturing is like providing total solutions to the sector as the first
word in the phrase will indicate. German ERP solutions are very famous.
The CAD/CAM systems assist engineers in designing, examining, and
upgrading drawings required for manufacturing. Being a part of Product
Data Management it enables high degree of precision in both during design
phase and the actual manufacturing phase. It also enhances the capacity of
the company by reducing the time consumed in converting the drawings into
actual working models.
Materials and production planning is critical to the success of a
manufacturing company. Material Resource Planning (MRP) provides a
method that helps keep order due dates valid, even after the orders have
been released to the shop floor or outside vendor. It provides a complete
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and comprehensive view about all the activities like the master pproduction
schedule (MPS), Bill of Material (BOM), Inventory Records (IR). This system
provides a complete view about the flow of materials, with in the company. It
also monitors all the materials that come in and moves out of the company.
Distribution Requirement Planning (DRP) provides a mechanism for
integrating the physical distribution system with the production planning and
scheduling system. DRP records are is similar to MRP records. DRP plays a
central coordinator role in the physical distribution system similar to MRPs
role in coordinating materials in the manufacturing system. DRP system also
creates significant logistics saving through improved planning of
transportation capacity needs, vehicle loading, vehicle dispatching and
warehouse receipt planning. DRP acts as a critical link between the
marketplace, demand forecasting and master production scheduling.
Just-in-Time (JIT) means to produce goods and services when needed, not
too early and not too late. JIT system aims to make goods available just in
time and these can be parts, products or subassemblies. It ensures to
eliminate the things that are not required for production from the site. It also
takes care of the quality of the product. At the same time it makes sure that
all the employees are involved in the work yielding the complete benefit from
the companies work force. Kanban concept makes sure that unnecessary
items that are not meant for production will not be a part of production line.
This process can be described as simple JIT. Kanban is a chain process
system in which orders flow from one process to another, the production or
delivery of components is pulled to the production line. This pulling of
components takes place only when requirement arises. Hence preventing
the excess usage or wasting the materials.
Product Data Management (PDM) has to maintain the data. Check the flow
of data between the various departments of the organisation. It must ensure
that the data is made available to the people who need the data in time.
Process management systems normally have three broad functions work
management, workflow management and work history management. This
method enabled proper classification of data according to the function, time
and the requirements. This system has given high flexibility in handling and
maintaining the huge data an organisation generates every day.
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6.11 Answers
Self Assessment Questions
1. Process manufacturing
2. Design
3. Business
4. Enterprise Resource Planning
5. Materials, production
6. Bill of Material
7. MRP-II
8. Feedback
9. Coordinating
10. Total Quality Management
11. Just-in-Time management
12. Inventory
13. Disruption
14. Component, assembly drawings
15. Authorised
16. Framework
17. Informal teamwork
18. Handling information
19. Designer
20. Central vault
21. Make to Order
22. Assemble to Order, Engineer-to-Order
Terminal Questions
1. Refer section 6.7
2. Refer section 6.6
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3.
4.
5.
6.
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6.13 Glossary
Term
Description
Deploy
Enchanted
Inventories
Realm
Solely
References
1. Manufacturing & Service Operations Management by WJ Hopp, ML
Spearman.
2. "The Kanban Evolution" by Drickhamer, David.
3. A Relational Model of Data for Large Shared Data Banks" by Codd, E.F.
Unit 7
Unit 7
Structure:
7.1
Introduction
Objectives
7.2
Overview of Purchase Department
7.3
Purchase module
Features of Purchase Module
Benefits of ERP Purchase Module
7.4
Functioning of ERP Purchase System
Purchasing process
7.5
Sales and Distribution
7.6
Sub Modules of Sales and Distribution
Master Data Management
Order Management
Warehouse Management
Shipping & Transportation
Billing & Sales Support
Foreign Trade
7.7
Summary
7.8
Terminal Questions
7.9
Answers
7.10 Case Study
7.11 Glossary
7.1 Introduction
By now you must be familiar with the concept of ERP and a few modules of
ERP. This unit familiarises you with ERP Purchase and Sales Perspective.
Purchase
Purchase involves procurement of all sorts of items or products required by
the company. Purchase refers to a business or an organisation attempting
to acquire goods or services to accomplish the goals of the enterprise. The
purchase department of an organisation provides items required by all the
departments, keeps track of the quantity of the different items, and deals
with the suppliers in an endeavour to procure new stock. In a manufacturing
company, purchase also plays a very important role.
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and small organisations. This module provides tools that any organisation
can use to reduce costs, increase profitability, and improve competitiveness.
7.3.1 Features of Purchase Module
The Purchase module helps to improve your purchasing function. This
module controls the inventory purchasing side of your business. You can
track purchase orders, supplier prices, and quantities on order. With the
usage of Purchase module you can increase your inventory efficiency and
eliminate costly shortages. Features of the purchase module include:
Streamlining purchase and process cycles
Capturing materials requirement
Creating quotations from various suppliers
Providing a detailed Supplier/Subcontractor/Service Provider database
Recording Payment terms in PO
Allowing order cancellation and order closing
Enabling multiple delivery schedules, Quotation validity and multiple
indents for multiple items in a single PO
Enabling quality inspection of goods
Containing complete import functionality with handling of custom details
- Purchase Bill for import, excise consideration in imports
Providing Order tracking reports for complete control on procurement
cycle
Providing Management Information System (MIS) for vendor evaluation
based on quality, price and delivery time
Efficient purchase management processes provide buyers with advanced
tools for analysing supplier patterns in terms of price and delivery terms.
This also enables them to adopt adequate measures once unfavourable
circumstances are encountered. It assists in taking informed decisions and
maintaining control throughout the procurement cycle. This module can
handle all purchasing and subcontracting activities such as inviting
quotations, supplier evaluation, placing purchase order, order scheduling,
and billing.
7.3.2 Benefits of ERP Purchase Module
The ERP Purchase module provides a complete purchasing control to
generate and track purchase orders from PO issue to receipts. It provides
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control for the complete procurement process, from vendor quoting through
receiving, inspection, costing accrual and vendor payment.
Vendor quotes are collected against items with multiple vendor price
comparisons. The purchase module system recommends vendor for each
purchase order. Requisitions can be generated automatically from M.R.P. or
can be entered by users. Once approved, requisitions can be automatically
converted to Pos. The ERP Purchase module is beneficial in many ways to
your organization. Some of the major benefits include:
Streamlining purchase processes: It takes control of your purchase
process, improves accuracy, and increases employee productivity by
automating routine purchasing tasks. It implements a workflow approval
process for existing purchase orders over designated purchasing limits.
Reducing operational costs: It reduces repetitive data entry and helps
eliminate costly mistakes by moving your requisition process online.
Accessing mission-critical information: It provides instant answers to
questions and maintains complete purchasing audit control with detailed
information and tracking and management capabilities. It tracks and
analyses purchase activity with a comprehensive selection of reports.
Establishing long-term contracts with vendors: It uses blanket
purchase orders to record and track extended purchases, giving you
greater negotiating power with your vendors and simplifying contract
purchase processes.
Monitoring landed costs more effectively: It maintains tight tracking
control over costs associated with inventory items and modify costs on a
purchase order as items are received.
Other benefits include:
Easy management of Purchase and Sales order details
Efficient management of customers, vendors, and company Pos
database
Preparation of accurate sales, purchase and item transaction reports
Tracking purchase and sale order number and payment details in the
easiest way
Elimination of manual purchasing process and stock outs
Reduced material and inventory costs
Automated reordering of stock inventory
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You can enter multiple items on one purchase order and each item can
have multiple deliveries with separate quantity for each delivery.
Receiving: You can combine the functions of recording the receipt of
material and then verifying quantity into one transaction, or splitting them
into multiple steps if they are performed by different users or at a
different time.
Supplier Returns: You can return a receipt to the supplier either during
the receiving process or after the receipt has been made. The Supplier
return can only be done prior to vouchering of the invoice for the related
purchase order or receipt.
Vouchering Invoices: You can create vouchers with a three-way
matching of invoices between the purchase order with the price, receipt
quantity, and invoice (with price and quantity) from the supplier.
Supplier file: The Purchase module contains a supplier file for
accounting and purchasing. The Supplier file includes information such
as payment terms, purchasing information, addresses and tolerance for
receiving and invoicing.
7.4.1 Purchasing process
The standard purchasing flow in any organisation is as follows:
Determination of requirements: Materials requirements are identified
either in the user departments or via materials planning and control. This
is done either manually or automatically using the materials planning
and control system.
Source determinations: The purchasing components identify potential
sources of supply based on past orders and existing longer-term
purchase agreements. This initiates the process of creating Requests
For Quotation (RFQs), which are sent to vendors electronically.
Vendor selection and comparison or quotations: The Purchase
module system is capable of simulating pricing scenarios. It allows one
to compare a number of different quotations. Rejection letter is sent
automatically.
Purchase order processing: The Purchase module system adopts
information from the requisition and the quotation in creating a purchase
order. These POs are automatically generated or manually created.
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Purchase order follow-up: The system checks the reminder period one
has specified. It also provides one with an up-to-date status of all
purchase requisitions, quotations and POs.
Goods receiving and inventory management: Goods receiving
personnel confirm the receipt of goods simply by entering the PO
number. By specifying permissible tolerances, buyers limit over and
under-deliveries of ordered goods.
Invoice verification: The system supports the checking and matching
of invoices. This facilitates the process and auditing and clearing
invoices for payment.
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Provides
simulation
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Figure 7.3 shows shipping process. The 'Delivery note' is the central
shipping document. When is a delivery created (at the shipping point),
shipping activities such as picking and delivery scheduling are initiated and
monitored, and the data generated during shipping processing is recorded.
A delivery note can refer to a sales order or to a transportation order for
stock transfer. Depending on the requirements, you can manually create
deliveries and automatically using work lists. You can make agreements
with your customers for complete or partial deliveries and for order
combinations.
Transportation
Transportation is an essential element of the logistics chain. It effects both
inward and outward movement of goods. Effective transportation planning is
required to ensure that shipments are dispatched without delay and that
they arrive on schedule.
Costs of transportation play a considerable role in determining the price of a
product. It is important that these transportation costs are kept to a minimum
in order to keep the price of a product competitive. The aim of the
transportation element is to provide basic functions for transportation such
as transportation planning and processing, freight calculation, freight
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7.7 Summary
ERP Purchase module streamlines procurement of required raw materials. It
automates the processes of identifying potential suppliers, negotiating price,
placing purchase order to the supplier, and billing processes. This module
manages vendors (often referred as suppliers) and hence this module is
also referred to as Supply Chain Management (SCM) module. The
Purchase module helps to improve your purchasing function. ERP Purchase
module handles all of the Purchase Requisitions, Purchase Orders,
Receiving and Vouchering of Invoices for raw materials, MRP purchases,
Maintenance and other MRO purchases and one-time purchases
Increased efficiency in sales and distribution is a key factor to ensure that
companies retain a competitive edge and improve both profit margins and
customer service. Sales order management is a company's most important
point of contact with its customers. To keep pace with rapid changes,
companies need an integrated and flexible enterprise system that supports
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all aspects of their business. The sales order applications help companies
manage sales operations quickly and efficiently.
7.9 Answers
Self Assessment Questions
1. Goods, services
2. Company's position
3. The purchase department raises the purchase order to initiate the
purchase process.
4. Supply Chain Management
5. Streamlines
6. The purchase process emphasises to ensure that materials with correct
quality specifications are available at right prices at right time.
7. Supplier file
8. The Purchasing system adopts information from the requisition and the
quotation to create a purchase order.
9. Different ways of creating purchase requisition are:
Directly from a maintenance requirement
Easily by copying an existing requisition, using the same as/except
capability
Automatically from MRP for suggested raw material purchases
Easily by entering multiple items or lines on a single requisition
10. The sales related business transactions are:
Sales queries, such as inquiries and quotations
Sales orders
Outline agreements, such as contracts and scheduling agreements
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Delivery/Shipment
Issue invoice/bill
After sales support
11. Order management
12. Financial Accounting
13. Transportation
Terminal Questions
1. Refer section 7.3.2
2. Refer section 7.3.1
3. Refer section 7.4
4. Refer section 7.6.2
5. Refer section 7.6
6. Refer section 7.6
7. Refer section 7.6.3
8. Refer section 7.2
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7.11 Glossary
Term
Description
Freight
Logistics
Requisitions
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Streamlining
Voucher
References
1. http://www.simplesoftindia.com/projects_erp_purchasemodule.htm
2. Master data management by David Loshin
3. Warehouse management by Michael Hompel, Thorsten Schmidt
4. ERP systems and organisational change by Grabot, Anne Mayere,
Isabelle Bazet
Unit 8
Unit 8
Structure:
8.1
Introduction
Objectives
8.2
ERP Inventory Management
Features of ERP Inventory Management
Benefits and Limitations of ERP Inventory Management
Installing ERP Inventory Systems
8.3
Web ERP
Benefits of Web ERP
8.4
Sub Modules of ERP Inventory Management
8.5
Inventory ERP Software Module
8.6
Summary
8.7
Terminal Questions
8.8
Answers
8.9
Case Study
8.10 Glossary
8.1 Introduction
By now you must be familiar with ERP modules like purchasing and sales.
This unit familiarises you with how inventory is processed in a warehouse.
In large organisations, information is often extended across various
departments, resulting in declined performance due to lack of integration.
Also considerable cost is involved in maintaining these systems. For
example, Boeing depends on many suppliers to supply the components
required to build an airplane. The manufacturing process involves fixing the
right parts in the right order at right time. This process was managed using
400 separate systems, which were integrated but were not synchronised
properly. This resulted in various miscommunications such as parts that
were ordered were not delivered on time, forcing Boeing to run into a huge
business loss. Later Boeing replaced these primitive systems with integrated
Enterprise Resource Planning (ERP) systems.
With the need to centralise multiple sources of information, systems that
deploy ERP management has emerged as the preferred solution in
business organisations.
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Customer
Information
Customer
Inquiry
Materials and
Capacity Availability
Quote
Sales Order
Delivery
Billing document
From the figure 8.1 you can make out that, whenever a customer makes an
enquiry about the inventory (1). A quote is prepared by SAP along with the
finance information and date of delivery (2). The quote takes into report
what it already knows about the consumer (3). A check is performed to
determine the amount of stock or inventory that is available for maintenance
(4), and thus resulting in an instant and automatic update of information in
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ERP management uses bar codes to maintain inventory items. A bar code is
a small image that has bars (lines) and spaces fixed on the store items and
used as an identification mark of a particular product. This makes tracking
stock much easier. Once the items are bar-coded, they get scanned and
their product information is entered into the ERP inventory management
system.
Introducing bar code labels on stock helps companies save money as it
keeps the list of stock updated. Employees can easily see when certain
quantities are low and need to re-stock. Customers also benefits from this
as customers can see what products are currently in stock.
The main purpose and benefit that the organisation can derive from ERP
management system is that the ERP system is company-wide and has a
single software system, where as organisations that do not employ ERP
management will have dissimilar and diverse software applications that may
not be compatible with one another.
8.2.2 Benefits and Limitations of ERP Inventory Management
ERP inventory management system has many benefits. Some of them
include:
Tracking of orders from the point the order is received to its release.
Facilitating appropriate communication between different areas.
Reducing the threat of loss of information.
Providing a top down summary of the mechanism of a company.
Setting up an outline of security to protect against theft from external or
within a company.
Replacing old and primitive paper based systems that improves
efficiency.
Limitations of ERP Inventory Management
ERP inventory management helps an organisation in many ways. However,
it also has some limitations. They are:
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Limited customisation
Expensive
Not friendly with every type of business like small organisations.
Harder to fix responsibility as it is a company-wide system that connects
all areas
When all departments in a company are not willing to share information,
maintenance of sensitive data can disturb the work flow
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Web ERP Inventory system has many benefits. Some of them include:
It runs on any web server and suitable for both high speed and low
speed internet connections.
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Inventory order assessment: Once the form is filled, inputs are taken
from the form and processed. The inventory wanted by the various
departments is compared with the minimum inventory required. Once
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Inventory bills and challans: In order to ensure safe payment, bills and
challans are chosen to represent the amount paid, payment mode along
with the ID of supplier and Receipt ID.
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8.6 Summary
Inventory or stock is an important asset of a successful business. Therefore,
managing inventory becomes a crucial part for carrying out error free
transactions.
ERP Inventory management allows various methods and modules to
maintain the required amount of stock in a warehouse. One of the major
benefits of it is that changes are automatically updated in the inventory.
Thus, by deploying ERP Inventory systems in organisations, companies are
able to integrate information from various units, there by increasing the
order issues and providing faster sales and hence proving better customer
service by making the systems standardised and centralised.
Thus systems that deploy ERP Inventory management provide a cross
functional suite that supports various kinds of transactions, increasing
quality and efficiency of supply with decreased costs.
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8.8 Answers
Self Assessment Questions
1. Automatically/mechanically
2. Image to identify a product number
3. True
4. Location transfers
5. Minimum amount of stock required to work
6. Inventory Bills and Challans
7. Inter-warehouse transfer
8. False
9. Material request management
10. True
Terminal Questions
1. Refer section 8.2
2. Refer section 8.2
3. Refer section 8.2
4. Refer section 8.3
5. Refer section 8.4
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8.10 Glossary
Term
Inventory
Warehouse
Web ERP
Bar code
Description
Stock/supply in the business. It is a list for goods and materials that
are held available in stock by an organisation. They are the raw
materials, work in process goods and finished goods that are
essential for the business of the organisation.
Stock room, room where stock is deposited. It is a commercial
building for storing the goods. They are used by manufacturers,
importers, exporters, wholesalers, transport businesses, customs
etc.
Deploying inventory management online. It is a complete web based
ERP system that requires only a web browser and a PDF reader to
use. It is developed as an open source application and is also
available as a free download to use.
A bar code is the small image of lines (bars) and spaces that is
affixed to retail store items, to identify a particular product number. It
is an optical machine readable representation of information. It
shows certain data on certain products.
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References
1. ERP: Tools, techniques, and applications for integrating the supply chain
by Carol A. Ptak, Eli Schragenheim
2. http://www.nickmutt.com/web-based-erp.htm
3. Enterprise resource planning (ERP): The dynamics of operations
management by Avraham Shtub
Unit 9
Unit 9
Structure:
9.1
Introduction
Objectives
9.2
Customer Relationship Management (CRM)
Components of CRM System
Features of CRM
9.3
Types of CRM
Sub Modules in CRM
Variations in CRM
9.4
Implementation of CRM
Choosing a CRM system
Implementation Issues
CRM Adoption Issues
9.5
Benefits of CRM
Business Benefits of CRM
9.6
Challenges of CRM
9.7
Summary
9.8
Terminal Questions
9.9
Answers
9.10 Case Study
9.11 Glossary
9.1 Introduction
By now you must be familiar with the concept of ERP and a few modules of
ERP such as purchase, sales, quality management and so on. This unit
familiarises you with ERP - CRM module.
Organisations continuously strive for increased sales performance, superior
customer service and enhanced customer relationship management. In
order to accomplish these objectives, organisations need solutions that
provide rapid access to centralised customer and prospect information. Also,
to ensure competitive advantage, an analysis of customer oriented
processes and data as well as strategies for improving them are required.
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Users: The primary users of CRM systems are workers that perform
management control and operational control. In an extended enterprise
environment, the CRM users may include customers and business
partners.
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should look for when you select an ERP CRM module for your organisation.
The CRM should be:
A centralised communication platform
Either a standalone or integrated module
User-friendly
Platform-independent
Remotely accessible
Capable of seamlessly integrating with other ERP modules
Integrated with the service and sales management
To further enhance the service delivery proposition, the CRM module can be
integrated with mobile devices (smart phones and Personal Digital
Assistants (PDAs)), enabling field personnel to access, administer and enter
data directly into the system.
CRM is not merely a technology; it is in fact the move towards serving your
customers better and more efficiently. The top management should utilise
CRM's complete potential to maximise the benefits for their organisation.
Self Assessment Question
1. CRM software system automates _______________ business tasks.
2. Name the components of a CRM system.
3. The CRM module provides a platform for enhanced ______________
and _____________________.
Activity 1
A Customer Product Call Centre wants to add a short customer survey at
the end of each customer call. Create a questionnaire for the customer
based on the business processes.
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Operational CRM: This CRM deals with providing complete front office
support to sales, marketing and similar services. Each customer
interaction is recorded and added to customer's history. This can be
easily retrieved from database for future reference. The benefit of
maintaining this customer interaction history is that the customers can
easily communicate with the service personnel without having to repeat
any of the earlier communication or information. This CRM is mainly
useful in automating customer-centric processes and providing
appropriate support to sales and marketing services. Hence, this CRM
software is used popularly in call centres or Business Process
Outsourcing (BPO) companies for supporting the call centre staff.
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This Collaborative CRM reduces the company costs and improves the
services provided.
Analytical CRM: This CRM analyses data (gathered as part of
Operational CRM, or from other sources) in an attempt to identify means
to enhance a company's relationship with its customers. The results of
this analysis can be used to design targeted marketing campaigns, for
example:
Acquisition: Cross-selling, up-selling
Retention: Retaining existing customers
Information: Providing timely and regular information to customers
Other examples of the applications of analyses include:
Contact optimisation
Evaluating and improving customer satisfaction
Optimising sales coverage
Fraud detection
Financial forecasts
Price optimisation
Product development
Program evaluation
Risk assessment and management
Strategic marketing
Operational marketing
Data collection and analysis is a continuous and iterative process. Ideally,
business decisions are refined over time, based on feedback from earlier
analyses and decisions. Most analytical CRM projects use a data
warehouse to manage data.
Analytical CRM is used in management decisions, predicting future trends,
analysing customer behaviour, planning and executing marketing
campaigns and so on.
9.3.1 Sub Modules in CRM
We already know that CRM is the process of managing relationships with
customers by capturing, analyzing, and storing customer information. The
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Consider web based CRM: Internet has become a global tool and
being used by more and more people everyday, companies that do not
use it to their advantage are left behind.
Implementation time: The best CRM solutions are those which can be
deployed within a short period of time. The sooner the system is
implemented, the faster the company can improve both its quality and
profits.
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Planning: Initiatives can easily fail when efforts are made only to
choose and deploy software, without an accompanying rationale,
context, and support for the workforce. In other instances, enterprises
simply automate flawed customer-facing processes rather than redesign
them according to the best practices.
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Choose a system that is easy to use: All CRM solutions are not
created equal. Some vendors offer more user-friendly applications than
others. However, while choosing a system, simplicity must be an
important decision factor as much as functionality.
Provide training: Changing the way people work is not a simple task.
Even with todays more usable CRM systems, many staffers still need
assistance with learning and adoption. Provide consistent support.
Prompt, expert, easily-accessible and round the clock technical support
goes a long way in encouraging the staffers to use new system willingly
and confidently.
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The CRM systems help in collecting data that help in enhanced customer
satisfaction. The types of data CRM systems can collect are:
Responses to campaigns
Shipping and fulfilment dates
Sales and purchase data
Account information
Web registration data
Service and support records
Demographic data
Web sales data
9.5.1 Business Benefits of CRM
Implementing a CRM solution might involve considerable time and expense.
However, there are many potential benefits. A major benefit can be the
development of better relations with your existing customers. This can result
in:
Increased sales through better timing by anticipating needs based on
historic trends
Identifying needs more effectively by understanding specific customer
requirements
Cross-selling of other products by highlighting and suggesting
alternatives or enhancements
Identifying profitable customer companies
This in turn can lead to better marketing of your products or services by
focusing on:
Effective targeted marketing communications aimed specifically at
customer needs
A more personal approach and the development of new or improved
products and services in order to win more business in the future
Ultimately this could lead to:
Enhanced customer satisfaction and retention, ensuring that your good
reputation in the marketplace continues to grow
Increased value from your existing customers and reduced costs
associated with supporting and servicing them. This increases your
overall efficiency and reduces total cost of sales
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Once your business starts to look after its existing customers effectively,
efforts can be concentrated on finding new customers and expanding your
market. The more you know about your customers, the easier it is to identify
new prospects and expand your customer base.
Customer needs change over time, and technology can make it easier to
find out more about customers and ensure that everyone in an organisation
can exploit this information.
Activity 2
A Television marketing company intends to implement a CRM to have
better customer relationship. How do you go about the implementation
process with respect to the marketing company? Also, list the benefits of
the new proposed CRM.
Self Assessment Questions
9. ________________ is the core of a CRM
10. What are the aspects that result in failure of CRM system?
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9.7 Summary
In todays world, ERP CRM can bring numerous business advantages to
an organisation. Though the model is not entirely without risks, with a wellplanned strategy and implementation framework companies can implement
CRM successfully. This results in better productivity and customer
satisfaction.
CRM helps businesses use technology and human resources to gain insight
into the behaviour of customers and the value of those customers. CRM
begins with knowing your customer.
The CRM module provides the perfect platform for enhanced customer
service and customer satisfaction. All features, from order acceptance,
execution, delivery, and invoice issue to after-sales service can be routed
through the CRM module. To further enhance the service delivery
proposition, the CRM module can be integrated with mobile devices (smart
phones and PDAs), enabling field personnel to access, administer and enter
data directly into the system while on the move.
One of the primary functions of CRM software is to collect information about
customers. As such, a company must consider the desire for customer
privacy and data security as well as the legislative and cultural norms. Some
customers prefer assurances that their data will not be shared with third
parties without their prior consent and that safeguards are in place to
prevent illegal access by third parties.
The boundary of a CRM system is the boundary of extended enterprise that
implements the CRM system.
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9.9 Answers
Self Assessment Questions
1. Customer-related
2. The components of a CRM system are: CRM Software, Business
Processes, Users and Hardware and Operating Systems
3. Customer service, customer satisfaction.
4. The three types of CRMs are: Operational CRM, Collaborative CRM
and Analytical CRM
5. Analytical
6. The customers can easily contact with the service personnel without
having to repeat any of the earlier communication or information.
7. Collaborative
8. Sales Force Automation
9. Business processes
10. The aspects that result in failure of CRM system are: Poor planning,
Not working toward a solution and Poor integration
Terminal Questions
1. Refer section 9.2
2. Refer section 9.5
3. Refer section 9.4.2
4. Refer section 9.3
5. Refer section 9.3.1
Unit 9
Description
Acquisition
Automation
Collaborative
Contemporaneous
Demographic
Unit 9
References
1. Inside CRM (2007) Get It Together with Collaborative CRM.
2. Customer relationship management by Kristin Anderson, Carol Kerr.
3. CRM in real time: Empowering customer relationships by Barton J.
Goldenberg.
4. Management of a sales force by Spiro.
Unit 10
Unit 10
Structure:
10.1 Introduction
Objectives
10.2 Human Resource management Module
Activities of Human Resource management system
Benefits of Human Resource management system
Features of Human Resource management system
10.3 Role of ERP in Human Resources
Advantages of deploying ERP systems in Human Resources
10.4 Workflow of ERP Human Resource management
10.5 ERP financial module
Features of ERP Financial module
Benefits of ERP financial module
10.6 Summary
10.7 Terminal Questions
10.8 Answers
10.9 Case study
10.10 Glossary
10.1 Introduction
By now you must be familiar with the concept of ERP systems and a few
modules of ERP. This unit familiarises you with Human Resources and
Finance modules.
Human Resource is an essential part of every successful organisation. It is
responsible for managing human assets. It deals with how employees are
managed in an organisation. Traditionally, it derived from economics, where
it was called labour. Human resources are mainly concerned with
recruitment, training, payroll, attendance and any other personal issues of
employees in an organisation. The managing of human asset in an
organisation is termed as Human Resource Management.
The financial module in ERP provides financial functionality and analyses
reports for different departments and cost centres. Both profit and non-profit
organisations benefit from the implementation of ERP Financial module.
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This module gathers financial data from various functional departments, and
generates valuable financial reports.
Learning Objectives
After studying this unit you will be able to:
Explain the concept of Human Resources
Describe the activities of Human Resource Management systems
List out the benefits and features of Human Resources Management
module
Elucidate the role of ERP in Human Resource Management systems
Explain the role and workflow of ERP in the Financial module of an
organisation.
List out the benefits and features of Financial module
Nadler L Ed., 1984, The Handbook of Human resources Development, John Wiley and Sons, New York.
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It defines enterprise planning for work and job roles with respect to
specific language.
It deploys effective search engine to easily find and sort out the profiles
that is filtered with respect to the companys criteria.
McLean, G. N., Osman-Gani, A. M.,& Cho, E. (Eds.). Human resource development as national policy.
Advances in Developing Human Resources, August (2004). 6 (3). Monk, Ellen and Wagner,
Brett."Concepts in Enterprise Resource Planning" 3rd.ed.Course Technology Cengage Learning.Boston,
Massachusetts.2009
Unit 10
Activity 1
Visit a small organisation and find out the activities performed by the
Human Resources Department. Analyse the process of recruiting the
candidates to the organisation.
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Human
Resource
Planning
Travel
Recruitment
Over Plan
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Employees
Training
Employees
Self Service
Appraisal
Leave
Shift Plan
Attendance
Claims
FRM
Discipline
MRP
Resignation
Payroll
Personnel
Management:
Personnel
management
module
encompasses various software components. This module deals with
responsibilities of human resources quickly, precisely and proficiently.
These components are also used as stand-alone systems being a part
of the ERP solution which is company wide.
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Shift Planning: This module facilitates planning and fixing shifts for
employees. The module takes the decision by keeping various
constraints under consideration such as leave taken or employee
requests for time off. The major benefits that shift planning provide is
that it allows assigning an employee to other unit of an organisation on a
temporary basis when require.
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Consumption
Finance
Suppliers
Manufacturers
Distributors
Logistics
Consumption
Deploying ERP systems for finance module eliminates the need to repeat
procedures. Data can be entered only once. Within the ERP systems, all
areas work in concert, creating a new level of efficiency in handling financial
data.
ERP Financial module keeps track of finance accounts and their utilisation.
It decides the budget and the total expenditure required .Based on this
information, the management of the organisation takes the final decision on
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Meigs and Meigs. Financial Accounting, Fourth Edition. McGraw-Hill, 1983. pp.19-20.
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General Ledger also allows employees to create own database tables and
define non-standard fields, that suits accounting and reporting requirements.
Typical ERP systems also facilities feature such as grouping information
selectively.
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ensures that the goals of the organisation is vital than the goals of
individual units of an organisation. Activity based costing reduces the
burden required to maintain the organisations units as a separate
system.
Treasury: This module keeps track of the liquidity and manages risk
effectively. Liquidity is defined as the ability of an asset that can be sold
without causing a noticeable change in the price and with minimum loss
of value of the product. The process of exchanging lower liquid asset
with higher liquid asset is called liquidation. Thus, Treasury module
maintains liquidation processes effectively.
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10.6 Summary
Man power is the biggest asset of any organisation. However, managing of
human assets becomes a crucial part to ensure positive workflow in an
organisation.
Every organisation tends to attract, motivate and retain the most suited and
qualified employees in the company. Human resource is the department
which acts like a thread that links the employees to the organisation. The
human resources thus encompass effective recruitment and training strictly
adhering to organisations policies.
However, manual processing of all the transactions and workflow is tedious
and increases the burden and frustration of the Human Resources team.
Therefore, deploying ERP systems serves a great deal by making the
process automatic and instantaneous.
ERP Financial management software packages are powerful and provide
feature-rich solutions that provide a broad range of functionality. With
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10.9 Answers
Self Assessment Questions
1. True
2. Payroll activities
3. Employee self service
4. True
5. By maintaining an automatic centralised database
6. The system that maintains the financial information from various units
of an organisation.
7. Legal Consolidation
8. Advanced reporting and analysis
9. False
10. Organisations accounting records.
Terminal Questions
1. Refer section 10.1
2. Refer section 10.2
3. Refer section 10.2
4. Refer section 10.4
5. Refer section 10.3
6. Refer section 10.5
7. Refer section 10.5
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10.7 Glossary
Term
Description
Demographics
General Ledger
Document parking
Unit 10
References
1. en.wikipedia.org/wiki/Human_resource_management_system
2. www.scribd.com/doc/23722870/Human-Resources-Management 3. en.allexperts.com Human Resources
4. www.istegy.com/PDF%20Files/IST_Human_Resources.pdf
5. www.sysoptima.com/erp/erp_modules.php
6. The NEW SAP Blue Book Michael Doane
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Structure:
11.1 Introduction
Objectives
11.2 Steps in ERP Implementation
Pre-evaluation Screening
Package Evaluation
Project Planning Phase
Gap Analysis
Reengineering
Configuration
Implementation Team Training
Testing
Going Live
End-user Training
Post-implementation
11.3 Summary
11.4 Terminal Questions
11.5 Answers
11.6 Case Study
11.7 Glossary
11.1 Introduction
By now you must be familiar with the concepts of HR Perspective & Finance
Perspective. This unit familiarises you with the implementation lifecycle of
ERP.
Businesses have a wide range of applications and processes throughout
their functional units. ERP software system is usually complex, and imposes
significant changes on employee work practices. Implementing ERP
software is too complex for "in-house" skill. So it is necessary and highly
advised to hire outside consultants, who are professionally trained to
implement these systems. This is typically the most cost effective way.
The types of services that may be employed during implementation are
Consulting, Customisation, and Support.
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The time required to implement an ERP system depends on the size of the
business, the number of modules, and the extent of customisation. One
more important factor governing the time is the scope of the change and the
compliance of the customer to take ownership for the project. ERP systems
are in the form of modules, so there is no need to carry out the
implementation at once.
It can be divided into various phases or stages. The normal project is about
14 months and requires around 150 consultants. A small project, for
example, an enterprise of less than 100 staff, can be planned and delivered
within three to nine months. However, implementation process in a large,
multi-site or multi-country can take years. Most of the time the length of the
implementations is closely bonded to the amount of customisation the
organisation demands.
The organisation has to choose a package from a wide range of ERP
packages available in the market, depending on their strategies.
The ERP package which the organisations select should:
Meet the organisation standards.
Provide industry functionality the organisation demands.
Support constantly changing business environment.
Easily integrate with other information systems that already exist in the
organisations.
Provide vendor implementation support both during and after the
implementation.
Assist the organisation with implementation support system such as
training materials, user procedures, help text, process models and so on.
Provide good support after implementation in case of trouble shooting.
A lot of ERP implementations fail, because the companies opt for ERP
solutions thinking that ERP implementation is a technological and not
management issue. This statement is completely a wrong perception, since
the management must actively and completely get itself involved in every
process of the implementation of the ERP system. At the same time the
management must monitor and supervise the implementation closely and
personally.
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Managers have the responsibility to make fast and effective decisions. They
have the responsibility of resolving the conflicts and bring everyone to the
same thinking to promote company-wide acceptance of the project. It is also
crucial for them to build co-operation among the diverse groups in the
organisation for achieving effective implementation.
This unit gives an idea about the ERP Implementation methodology and
process. Like any other project, the ERP implementation project also has to
go through different phases. There are no clear separating lines between
these phases and in many cases, one phase will start before the previous
one is completed. But the logical order is followed. Also, all the phases that
we are discussing in this session may not be applicable in all cases. For
example, in some cases, the organisation might have already identified a
particular package; then the pre-selection screening and package evaluation
phases are not done.
Learning Objectives
After studying this unit, you will be able to:
Describe the implementation lifecycle for an ERP package.
Assess the various approaches for implementation of ERP.
Select the right methodology for ERP implementation.
www.expressindia.com
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Gap Analysis
Reengineering
Configuration
Implementation Team Training
Testing
Going Live
End-user Training
Post-implementation
As shown in Figure 11.1, these phases seem very linear and distinct from
each other. But in reality, throughout an actual implementation process, the
phases are in fact quite flexible. In many cases, companies go through
many implementations in different modules, business units, or
manufacturing locations. So at any given time, more than one of the phases
may be operational. Some companies choose for the one and only 'Big
Bang' i.e. implement in one stretch and change the entire system, while
other companies favour sequential rollouts i.e. implement in phased
approach module after module. This is because each company has different
needs of its own. But whether it is the 'Big Bang' method or sequential
rollout, the lifecycle phases are the same.
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areas than in others, and each one is intensely trying hard to add
functionality in areas where they have been lacking. For example,
PeopleSoft is strong in HR and less in manufacturing. Baan, on the other
hand, is historically stronger in manufacturing than in finance and so on.
As the companies grew over time the ERP packages evolved. The
experience gained from previous implementation, the feedback by the users,
the need to enter into new markets and the pressure from competitors has
forced most ERP vendors to redefine their strategies. They are also trying
hard on expanding the scope of the activities and functionality of their
products. To achieve this, design concepts of the software is expanded.
Along with this new functions are introduced, and good ideas were copied
from others to meet the new challenges in todays market environment. But
still, each package has a history (or origin) that determines in which type of
business it is best suited for.
While making the analysis it would be a good idea to investigate the origins
of the different packages. Now, most packages cater to almost all business
and service sectors. It would be incorrect to say that a system that was
developed initially for manufacturing is now not capable of catering to the
needs of another business sector, for example, software development.
The system would have been thoroughly revamped and redesigned to cater
to the needs of the diverse business sectors that it is catering to. But it must
be kept in mind that many ERP packages are still very good in some areas,
even though they are capable of catering to the needs of other sectors. After
the screening process you select a few packages and then you can start the
detailed evaluation process.
11.2.2 Package Evaluation
The evaluation/selection process is one of the most important phases of the
ERP implementation. Since, the package that you select will decide the
success or failure of the project. ERP systems involve huge investments,
once a package is purchased, it is not an easy task to switch to another one.
So it is a 'do it right the first time' proposition. There is little room or no room
for error.
The most important factor that must be kept in mind when analysing the
different packages is that none of them are perfect. The idea that there is no
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www.ialgroup.com/pdf/Synergy
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This phase will decide when to begin the project, how to do it and when the
project is supposed to be completed. This is the phase which will plan the
what to do' in case of contingencies. It includes how to monitor the progress
of the implementation, what control measures must be installed and what
corrective actions must be taken when things get out of control. The project
planning is usually done by a committee constituted by the team leaders of
each implementation group. The committee will be headed by the ERP incharge (For example, the CIO or COO). The committee will meet
periodically (during the entire implementation lifecycle) to review the
progress and chart the future course of actions.
11.2.4 Gap Analysis
This is the most crucial phase for the success of the ERP implementation.
This is the process through which organisations create a complete model of
where they are now, and in which direction they want to head in the future.
The trick is to design a model which both anticipates and covers any
functional gaps. It has been estimated that even the best ERP package,
custom tailored to a company's needs, meets only 80% of the company's
functional requirements.
The remaining 20% of these requirements present a problematic issue for
the company's BPR (business process re-engineering). One of the most
affordable, albeit painful, solutions entails altering the business to fit the
ERP package. Of course, a company can simply agree to live without a
particular function (the cheap but annoying solution).
Other solutions include:
Pinning your hopes on an upgrade (low cost but risky).
Identifying a third-party product that might fill the gap (hopefully it also
partners with the ERP packages, keeping interfacing to a minimum).
Designing a custom program.
Altering the ERP source code, (the most expensive alternative; usually
reserved for mission-critical installations).
11.2.5 Reengineering
It is in this phase that the human factors are taken into account. In ERP
implementation settings, reengineering has two different connotations.
The first connotation is the controversial one, involving the use of ERP to aid
in downsizing efforts. There have been occasions where high-level
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11.2.6 Configuration
This is the main functional area of the ERP implementation. There is a bit of
mystique around the configuration process. For good reason, the unwritten
rule of ERP implementation is synchronising existing company practices
with the ERP package. Instead of, changing the source code and
customising it to suit the companys demand. In order to do so, you have to
analyse and map the business processes. This has to be done in such a
way that the arrived solutions must match up with the overall goals of the
company. But, companies can't just shut down their operations while the
mapping processes takes place. Hence the prototype, for example a
simulation of the actual business processes of the company must be used.
The prototype allows for thorough testing of the "to be" model in a controlled
environment. As the consultants of ERP configure and test the prototype,
they attempt to solve any logistical problems inherent in the BPR before the
actual go-live implementation.
Configuring a company's system reveals not only the strengths of a
company's business process and most importantly its weaknesses. It is vital
to the health of the company and to the success of the ERP implementation
that those configuring the system are able to explain what will not fit into the
package. They must also explain where the gaps in functionality occur and
possible solution.
For example, a company might have an accounting practice that cannot be
configured into the system or some shipping process that won't conform to
the package. The company obviously needs to know which processes have
to change in the process of implementation. Finding out what will work and
what won't, requires knowledge of the business process itself, and an ability
to work with people throughout the company. So, people with such skills
must be assigned to these tasks.
As a rule, in most large implementations, the functional configurations are
split between the different areas within the company, so some will attend to
HR; some will be involved in financials and so forth.
ERP vendors are constantly striving to lower configuration costs. Strategies
currently being pursued include automation and pre-configuration. Baan for
instance, has developed Orgware, an automated configuration tool, while
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11.2.8 Testing
This is the phase where you try to break the system. You have reached a
point where you are testing real case scenarios. Once the system is
configured, you must come up with extreme-case scenarios for example,
system overloads, multiple users logging on at the same time with the same
query, users entering invalid data, hackers trying to access restricted areas
and so on. The test cases must be designed specifically to detect the weak
links in the system and these bugs must be fixed before going live.
11.2.9 Going Live
On the technical side, the work is almost complete. The process of data
conversion is done, databases are up and running. The prototypes
functional side is fully configured and tested, and ready to go operational.
The system is officially proclaimed operational. Even though the team for
implementation must have been testing it and running it successfully for
some time. But once the system goes 'live', the old system is removed, and
the new system is used for doing business.
11.2.10 End-User Training
This is the phase where the actual users of the system will be given training
on how to use the system. This phase starts much before the system goes
live. The employees who are going to use the new system are identified.
Their current skills are noted and based on the current skill levels, they are
divided into groups. Then each group is given training on the new system.
This training is very important as the success of the ERP system is in the
hands of the end-users. So these training sessions must give the
participants an overall view of the system and how individual actions would
affect the entire system.
In addition to these general topics, each employee is trained on the job or
task that he/she is supposed to perform once the system goes live. It is
human nature to resist change. Also many people are afraid of computers
and other new technologies. So there will be resistance to change.
Another factor is that not all people will be successful in making the
changeover. The company management must address these concerns and
take necessary actions to avoid failure. The end-user training is much more
important and much more difficult (since most end-users are not thrilled at
having to change) than the implementation team training. Companies are
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Activity 3
Consider you own a departmental store with the ERP system monitoring
various activities of the store. Develop a training procedure for your new
employee so that he can familiarise with the system and work with out
having much difficulty.
Self Assessment Questions
17. The test cases must be designed specifically to detect the __________
in the system and these _________ must be fixed before going live.
18. The ___________training is much more important and much more
difficult than the implementation team training.
19. The organisation must think in terms of the incremental benefits of the
new_________________.
20. Projects on the ERP system implementation get a lot of
_____________and______________.
11.3 Summary
The process of ERP implementation is referred as ERP Implementation
Life Cycle.
The following are the steps involved in completing the lifecycle:
Shortlist on the Basis of Observation
Selecting an ERP package for the company can be compared with the
process of "Selecting the right Person for the Right Job". This process will
involve choosing few applications suitable for the company from the whole
many.
Assessing the Chosen Packages
A team of Experts with specialised knowledge in their respective field will be
asked to make the study on the basis of various parameters. Each expert
will test and certify if the package is appropriate for the range of application
in their field. They also confirm the level of coordination that the software will
help to achieve in working with other departments. They will verify if the
synergy of the various departments in simple terms due to the advent of
ERP will lead to an increased output. A choice is to be made from ERP
implementation models.
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11.5 Answers
Self Assessment Question
1. In-house
2. Organisation
3. Big Bang
4. Phased
5. Viable
6. Pre-evaluation
7. Origins
8. Package
9. Selection
10. Project planning
11. Team leaders
12. Gap analysis
13. Business
14. Mapping
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15.
16.
17.
18.
19.
20.
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Company
Reduce costs
Weak links, bugs
End-user
Enhancements
Resources, attention
Terminal Questions
1. Refer section 11.2.1 & 11.2.2
2. Refer section 11.2.3
3. Refer section 11.2.6
4. Refer section 11.2.11
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They wanted the migration of the existing ERP system to a new ERP
system from Microsoft called Microsoft Axapta. There was a need to
check the viability of the implementation against existing business
processes. The ERP was a client server based system based on Morphx
technology.
The large challenge was in terms of defining the adequate set of
business test cases which ensure coverage and completeness of testing.
The end users were not used to work with new system software tools and
hence a lot of training was required to take care of the same.
A test case generator was created to prepare test cases permutation and
combinations from various parameters that influence the business
process. A testing process was defined to document the viable
permutations and combinations. So that Business Users can execute the
test cases for the final run. OpenSource freeware tool Bugzilla was
installed for defect tracking and a comprehensive training was conducted
for management and business users.
The implementation was tested for various business processes during
appropriate phase of the release. This was done in comparison with an
established process for Regression Testing and Retesting wherever
applicable.
Periodic metrics were circulated to the key stakeholders and the project
steering committee to enable project management decisions. The final
decision was enabled via informed decision making of the management
and the developer. This was derived from metrics published at the end of
the overall activity.
The ERP has been working stably for functionality for the last two years.
The implementation is being extended to more offices outside India after
implementation of localisation parameters were a grand success.
Some of the business benefits that the company could reap were
Key defects in major business processes identified before the system
was made live.
Enabled a team of business users with proper testing processes and
tools.
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Questions:
1. What were the factors that lead the company to switch for an ERP
system implementation?
2. Explain in brief how the entire implementation process was carried
and tested.
3. What makes you think that the implementation was a success,
explain.
11.7 Glossary
Term
Description
Bloated
Catering
Contingencies
In-house
Synergy
Tweaked
Big Six
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References
1. Management of ERP solutions by Samo Bobek & Simona Sternad.
2. Information Systems Management by King. W.
3. Concepts in Enterprise Resource Planning by Monk, Ellen, & Wagner
Brett.
4. The Internet Encyclopedia by Bidgoli & Hossein.
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Benefits of ERP
Structure:
12.1 Introduction
Objectives
12.2 Benefits of ERP System
Reduction of lead-time
On-time shipment
Reduction in cycle time
Better customer satisfaction
Improved supplier performance
Increased flexibility
Reduction in quality costs
Improved resource utility
Improved information accuracy and decision-making capability
12.3 Summary
12.4 Terminal Questions
12.5 Answers
12.6 Case Study
12.7 Glossary
12.1 Introduction
By now you must be familiar with the concept of an enterprise and its wide
variety of its application. Now let us study the benefits you can get by going
for a suitable ERP implementation required by your company.
An ERP system helps your company to streamline your business processes.
In order to have a successful implementation of your ERP system, you need
to make sure you have your information in line to help make the process
swift. It doesnt matter what product your company manufactures, ERP
provides your company with the right system and performance that you
need.
ERP can help your company decrease the operating cost and it is a benefit
when running company analytics. It improves the coordination of your
companys process into one streamlined process where everything can be
accessed through one enterprise wide information network. It helps to
reduce additionally operating costs. This is achieved by controlling inventory
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costs, lowering production costs, and marketing costs. ERP system also
helps to reduce the requirement of help desk support. ERP systems can
also benefit the company by facilitating day-to-day management activities. It
encourages the establishment of backbone data warehouses and allows
employees to access the information in real time. This helps with research,
decision making, and managerial control. It tracks actual cost of the daily
activities and can perform activity based costing functions.
ERP systems with real time capabilities and the ability to see what is going
on with your company as it happens. ERP systems are handy when you
deal with high volume of information. With an ERP system, your company
will never have shortages in inventory or wasted time spent transferring files.
You can test out an ERP system before buying it and see how it will work
with your business.
Installing an ERP system has many advantages, both direct and indirect.
The direct advantages include improved efficiency, information integration
better decision-making, faster response time to customer queries, and so on.
Indirect benefits include better corporate image, improved customer goody
customer satisfaction, and so on. In this chapter we will see some of
benefits of the ERP systems.
Learning Objectives:
After studying this unit you will be able to:
Compare the direct and indirect benefits of ERP implementation.
Know how integration of information and automation of business
processes makes improvements possible.
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Reduction of lead-time
On-time shipment
Reduction in cycle time
Better customer satisfaction
Improved supplier performance
Increased flexibility
Reduction in quality costs
Improved resource utility
Improved accuracy of information and decision-making capability
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or
exceeding
customers'
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introduction of the web-enabled ERP systems, the customers can place the
order, track the status of the order and make the payment sitting from home.
The customer could get technical support by either accessing the
company's technical support knowledge base (help desk) or by calling the
technical support. All the details of the production and the customer are
available to the person at the technical support department. With this data
the company will be able to support the customers even better. All this is
possible because of the use of the latest developments in information
technology by the ERP systems. However, this will go a long way in
improving the customer satisfaction.
12.2.5 Improved Supplier Performance
The quality of the raw materials or components and the capability of the
vendor to deliver them on time, are of critical importance for the success of
any organisation. So, an organisation needs to choose its suppliers or
vendor: very carefully. You have to monitor vendor activities closely, so that
problems can b corrected before it can disrupt the functioning of the
company. To realise these benefits, corporations depend heavily on supplier
management, and control systems. They help to plan, manage, and control
the complex processes associated with global supplier partnerships.
The ERP systems provide vendor management and procurement support
tools designed to coordinate all aspects of the procurement process. They
support the organisation in its efforts to effectively negotiate, monitor, and
control procurement costs and schedules. They also assure superior
product quality. The supplier management and control processes are
comprised of features that help the organisation. They manage the supplier
relations, monitor the vendor activities and manage the supplier quality.
There is a growing trend for organisations to establish partnership
agreements with their suppliers. Through such business relationships,
mutually beneficial results have been achieved in the areas of quality,
delivery, and cost. To realise these benefits, companies rely heavily on
procurement support systems to help manage and control processes
associated with supplier partnership agreements. Request for quotations,
contract negotiation and control, purchase order release, and delivery are
process steps considered when formalising such partnerships. Complexities
arise in the areas like services being procured, quantity and price breaks,
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terms of the agreement, and methods employed for tracking and controlling
the process. The procurement support system provides immediate feedback,
flexibility, and comprehensiveness in managing supplier partnerships. This
will provide a clear, competitive advantage to the enterprise.
The ERP systems have features that will enable the companies to realise
the benefits associated with established partnership agreements. Supplier
quotations and contracts can be created to support the procurement of all
products and services required by the enterprise. Examples of this include
both inventory and non-inventory products, office supplies, and services, as
well as products requiring direct shipment to customers. Each agreement
must stand on its own merit, multiple quantity and price breaks, this must be
supported by the system. Along with terms specifying when the quotation or
contract becomes effective, and when it expires are also supported by the
system. To address the methods companies employ when tracking and
controlling these agreements, these systems provide a number of
alternatives.
First, after contracts are established, purchase orders and requisitions are
tracked as they are released against a corresponding contract. The ERP
system searches for the best-fit supplier contract and automatically assigns
it to the corresponding purchase order or requisition. If changes are
necessary, the user can override the contract selection made by the system.
Since it is imperative to know the status of a supplier quotation or contract,
the system provides immediate feedback to the organisation. Detailed
history provides for the deployment of in-depth procurement analysis tools.
The supplier management professional can easily compare total quotation
or contract commitments to actual purchasing activities.
Organisation needs the flexibility and comprehensiveness of the system's
supplier quotation, and contract management capabilities. So that
organisations can efficiently manage their supply-side trading partners. As a
result, the organisation gains significant cost and delivery procurement
benefits for their business.
Most suppliers have their systems connected to the company's system.
Therefore the information regarding an order is transmitted to the supplier's
systems almost instantaneously. This saves a lot of time and gives the
supplier more time in fulfilling the orders.
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defect goes undetected and the company releases the product or service to
the public, it will incur a much greater cost to resolve the problems that
result.
Elimination of defects in standard product designs and manufacturing
methods before production is just as important as eliminating defects during
production. In fact, to achieve quality levels, manufacturers must focus on
identifying and correcting defects. Especially in product designs and
production methods, not simply inspect incoming material or finished goods.
The Quality Management Systems in ERP packages support the
benchmarking and use of optimal product design, process engineering, and
quality assurance data. But this data is collected from all functional
departments within the manufacturing enterprise. Hence, facilitates
organisations in areas like definition of repeatable processes, root cause
analysis, and the continuous improvement of manufacturing methods. This
documentation supports the job functions of the quality assurance and
production managers in validating the manufacturer's conformance. The
validation is in accordance to ISO9000, Good Manufacturing Practices
(GMP) worldwide, and a variety of country specific standards of quality
assurance.
Specification Control Systems in ERP packages offer a state-of-the-art
approach for documenting specifications. They also enable an organisation
to standardise and simplify its quality assurance and control functions.
Sample types, sample rules, and testing levels are completely user-defined
for maximum flexibility and ease of use. Maintenance of standard
specifications, detailed sampling instructions and testing procedures are
performed on-line. Cyclic, subsequent, and repeat testing options are
available to support the material acceptance function. However, with
provision for the breakdown of test procedures into multiple dispositions,
improves inventory turnover and reduce inspection lead-times. The ERP
system's central database eliminates unnecessary specifications. It ensures
that a single change to standard procedures takes effect immediately
throughout the organisation. The ERP systems also provide tools for
implementing Total Quality Management programs within an organisation.
Original manufacturers may be defined independently from vendors, so that
businesses can strictly obey to quality assurance and control functions. This
is achieved without preventing their buyers from seeking the best possible
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back to the orders comprising the load. Capacity definitions are provided
from work centre and machine records. Work centres can be facility-specific
or enterprise-wide. Any work centre can be designated as a critical work
centre for evaluation by rough-cut capacity planning. This capability
provides an easy and efficient way to designate bottleneck operations that
act as system constraints. As the constraints change over time, the user can
re-designate the work centres as critical or non-critical. High volume
repetitive environments are further supported with both 'from and to material
movement location designations. These locations are used for pull system
back flushing/replenishment and can be designated by individual machines
within the work centre. These systems provide further refinement of
available capacity by providing definition for specific machines or pieces of
equipment. Each work centre also has user-defined input/output control
tolerance factors to control the level of action message sensitivity. For
example, a factor for average efficiency, separate speed factors for labour
and machine, designation of shift/hours schedule, and maximum desired
load percentage'(with 100% as the default). Capacity minimums can also be
designated for processes involving vessel size constraints and fixed cycle
constraints (heat treating, pickling, plating, sand blasting and paint dipping,
and so on.).
The ERP systems also have simulation capabilities. This helps the capacity
and resource planners to simulate the various capacity and resource
utilisation scenarios. After which they can choose the best option depending
up on their requirement. The efficient functioning of the different modules in
the ERP system like manufacturing, materials management, plant
maintenance, sales and distribution ensures that the inventory is kept to a
minimum level. The machine down time is maintained low. Along with that
the goods are produced only as per the demand. It also has to ensure that
the finished goods are delivered to the customer in the most efficient way.
Thus, the ERP systems help the organisation in drastically improving the
capacity and resource utilisation.
12.2.9 Improved Information Accuracy and Decision-Making Capability
One has to manage the future to survive, thrive and beat the competition in
today's brutally competitive world. Managing the future means managing the
information. In order to manage the information, deliver high quality
information to the decision-makers at the right time. ERP has to automate
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purchase department can see the production planning details, it can make
the purchasing schedule. The finance department can check the details of
the purchase as soon as it is entered in the system. It can also plan for the
cash flow that will be required for the purchases.
Since the systems work in isolation, collecting and analysing the data
needed for the functioning departments. It also gets information about some
characteristic that is dependent on more than one department, which is
difficult manually. But no business executive or decision-maker can take
good decisions with the isolated data that he will get from the various
reports produced by each department. Even if you collate the data and
produces the information that you require, you would have lost valuable time
that would have been better spent in decision-making for that process.
So we need a system that treats the organisation as a single entity, and
caters to the information needs of the whole organisation. With the help of
this system we can generate the information that is accurate, timely, and
relevant. These systems will play vital role in helping the organisation to
realise its goals. This is the strong point of ERP systems that is integration
and automation. This is the reason why implementation of ERP systems will
help in improving the accuracy of information and thus help in better
decision-making.
Activity 2
Visit a small manufacturing industry with a new ERP system in place.
Enquire the management and the employees and list out the various
benefits that they were able to find with the new system.
Self Assessment Questions
17. The creation of an accurate, achievable product schedule requires the
availability of ___________ and ____________.
18. Each ______________ also has user-defined input/output control
tolerance factors to control the level of action message sensitivity.
19. The ERP systems also have ___________ capabilities.
20. The ____________ available for an organisation to react to the
changing market trends is very short.
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12.3 Summary
ERP system software attempts to integrate business processes across
various departments onto a single enterprise-wide information system. The
major benefits of ERP are improved coordination across various functional
departments of an organisation, and increased efficiencies of doing
business. The immediate benefit that we can expect from implementing
ERP systems is reduced operating costs, such as lower inventory control
cost, lower production costs, lower marketing costs, and lower help desk
support costs.
Reduction of lead time plays a significant role in purchasing and inventory
cost. Most purchasing departments use the managers to anticipate material
demands well ahead of actual need. In order to reduce the lead-times, the
organisation must have an efficient inventory management system.
Monitoring and keeping track of the lead-times for each and every individual
item manually, is practically an impossible task. The ERP systems help in
automating this task and thus, make the inventory management more
efficient and effective.
The companies must be able to change the mode of production from maketo-stock make-to-order. Today, the ERP systems provide the freedom to
change manufacturer and planning methods as needs change. Products
that assembled to order can be planned using the extensive production
planned capabilities of these ERP packages. The company can define the
authorisation steps for approving and implementing an Engineering Change
Order (ECO). ERP systems are designed to help your company trim data
transfer time, reduce errors and increase design productivity.
The time between receiving of the order and delivery of the product is
known as Cycle time. Cycle time can be reduced by the ERP systems, but
the reduction will be more in the case of make-to-order systems. In the case
of make-to-order items, the ERP systems save time by integrating with
Computer Aided Design/ Computer Aided Manufacturing (CAD/CAM)
systems. Efficiency achieved through the plant maintenance and production
systems the ERP packages helps in reducing the cycle times.
ERP systems have proved that they can produce goods at the flexibility of
make-to-order approach without loosing the cost and time benefits of made-
Unit 12
to-order operations. This means that the customer will get individual
attention and the features that he/she wants
The ERP systems provide vendor management and procurement support
tools designed to coordinate all aspects of the procurement process.
Organisation needs the flexibility and comprehensiveness of the system's
supplier quotation, and contract management capabilities which is provided
by the ERP system. The Quality Management System in the ERP systems
provides all the tools needed to implement Total Quality Management
programs.
Typically, the quality costs are in the range of 20% of the cost of goods sold.
Carefully planning quality improvement activities not only improves quality,
but lowers quality-related costs. Specification Control Systems in ERP
packages offer a state-of-the-art approach for documenting specifications
which help to track and monitor the components and material. Thus, ERP
systems play a vital role in ensuring that the company has an efficient and
effective quality assurance and management system.
The capacity planning features of most ERP systems offer, both rough-cut
and detailed capacity planning. Capacity definitions are provided from work
centre and machine records. Work centres can be facility-specific or
enterprise-wide. Each work centre also has user-defined input/output control
tolerance factors to control the level of action message sensitivity. The
efficient functioning of the different modules in the ERP system like
manufacturing, materials management, plant maintenance, sales and
distribution ensures that the inventory is kept to a minimum level.
The three basic characteristics of information are accuracy, relevancy and
timeliness. The information has to be accurate and must be relevant for the
decision-maker and it must be available to the decision maker when he
needs it. An organisation cannot function as islands of different departments.
ERP systems will help in improving the accuracy of information and thus
help in better decision-making.
The other benefits from implementing ERP systems are facilitation of day-today management. The implementation of ERP systems looks after the
establishment of backbone for data warehouses. ERP systems offer better
and easy access to data so that management can have up-to-the-minute
access to information for decision making and managerial control. ERP
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software helps monitor and track actual costs of activities and perform
activity based costing.
Strategic Planning is defined as 1 "a deliberate set of steps that assess
needs and resources; define a target audience and a set of goals and
objectives; plan and design coordinated strategies with evidence of success;
logically connect these strategies to needs, assets, and desired outcomes;
and measure and evaluate the process and outcomes." Part of ERP
software systems is designed to assist resource planning portion of strategic
planning. But, resource planning has been the weakest area in ERP practice
due to the complexity of strategic planning and lack of adequate integration
with Decision Support Systems (DSS).
12.5 Answers
Self Assessment Questions
1. Lead-time
2. Supplier's delivery
3. Material Management
4. Finished
5. Make-to-order
6. Make-to-stock
7. Warehouse
8. Computerised
9. Customer
10. Supplier management, control systems
11. Purchase
12. Total Quality Management
13. Flexibility
1
http://www.sysoptima.com/erp/erp_benefits.php
14.
15.
16.
17.
18.
19.
20.
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Assemble-to-order
Quality
Material acceptance
Material, capacity
Work centre
Simulation
Time
Terminal Questions
1. Refer section 12.2
2. Refer section 12.2.3
3. Refer section 12.2.5
4. Refer section 12.2.9
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The process started with external education for the project team. The
Business Excellence implementation was then spread internally to all
levels with varying levels of intensity and scope. With the help of this the
workforce gained the self-confidence to take part in the decision making
processes. For the first time, employees realised not only where their
company was heading, but also their place within it. The attitude that
always made them say 'It's not MY problem' simply evaporated. The
Managing Director of Wrigley was delighted by the change this made to
his role. The Introduction of Sales and Operation planning slowly
eliminated the problems that were recurring. Many other senior managers
in the company were able find more time to make more use of their
creative skills and take advantage of market opportunities.
Only two years into the process the changes were dramatic. With greater
accuracy of forecasts meant that Wrigley was able to cut down raw
material safety stock levels. This in turn enabled them to enhance the
quality control of goods from suppliers. This resulted in cost cuts while
the level of customer satisfaction rose.
The Business Excellence principles are driven by philosophy of
continuous improvement. The pace of the improvement in process
continues to drive the company to higher levels of achievement. Recent
improvements consist of continuing to drive up the customer service. For
example, the system helped in improving their ability to forecast, the
extensive use of bar codes to improve inventory record accuracy, and so
on. The management believes everyone is proud of their excellent
results.
Although it has been hard work, the process has been simple. Together
MRP Ltd and the Wrigley team took an important look at where they were
Company I. They were able to identify its strengths and weakness and
built on them to create Company II, exactly where they want to be.
Questions:
1. What was the major concern that bothered the top management of
the company?
2. Do you think the companys management was vigilant enough to
identify the problem and brought corrective measures? Justify.
3. What all benefits do you think the company achieved with the new
system?
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12.7 Glossary
Term
Description
Conformance
Consolidation
Convergence
Quotation
Typology
Validating
References
1. Emerging Trends and Challenges in
Management by Khosrow-Puor and Mehdi.
Information
Technology
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Unit 13
ERP Market
Structure:
13.1 Introduction
Objectives
13.2 ERP Market
13.3 SAP AG
Products and Technology
R/3 Overview
SAP Advantage
13.4 BAAN Company
Products and Technology
Baan ERP Modules
Global Support, Education, and Consulting
13.5 Oracle Corporation
Products and Technology
Oracle Applications
Vertical Solution
13.6 People Soft
Business Management Solutions
Commercial Solutions
Industry Solutions
Applications
13.7 J D Edwards World Solutions Company
Products and Technology
Modules
13.8 Systems Software Associates Inc (SSA)
Products and Technology
BPCS Applications
13.9 QAD
Application MFG/PRO
Modules
13.10 Summary
13.11 Terminal Questions
13.12 Answers
13.13 Case Study
13.14 Glossary
Unit 13
13.1 Introduction
By now you must be familiar with the concept of ERP, its essence in an
organisation, its market and application in a wide variety of industries. This
unit familiarises you with some of the vendors and the market space that
various vendors have occupied with respect to ERP.
The ERP market is fast growing and very competitive. AMR Research Inc. is
a leading industry and market analysis firm specialising in enterprise
applications and enabling technologies. They had analysed in 2002 that
Enterprise Resource Planning (ERP) software market will grow at a
compound annual growth rate of 3.7% over the next five years. During 2007
this revenue growth reached double figures. The findings of the AMR report
indicate the continued growth of three primary factors. These are:
ERP vendors to sustain their rapid growth will try to sell more licenses
into their installed base. Currently, ERP vendors have a 10-20%
penetration (i.e. %age of total employees currently using the ERP
system). This will grow to 40-60% within the next five years.
In this unit, we will study some of the top vendors in the ERP market, their
profile, their product offerings, and product features.
The companies featured here are SAP AG, Baan Company, Oracle
Corporation, People Soft, J.D. Edwards, SSA and QAD.
Learning Objectives:
After studying this unit you will be able to:
Describe the ERP market.
Explain the major players in ERP and their respective market share.
Assess the various market trends in ERP.
Recognise the target market of ERP.
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Analyse and know how to potentially use ERP in the market driven
economy.
Assess the seven major ERP vendors SAPAG, Baan, PeopleSoft, JD
Edwards, Oracle, QAD and SSA.
www.amrresearch.com
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www.amrrresearch.com
Baan
5%
SSA
5%
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JBA
4%
Marcam
3%
Intentia
2%
QAD
2%
Others
27%
PeopleSoft
6%
JD Edwards
7%
Oracle
Applications
10%
SAP AG
29%
Figure 13.2: Shows the global market share of the major ERP vendors.
Compared to the global market the scenario in India is slightly different. The
Indian ERP package Ramco's Marshal accounted for 9% of the market
share as shown in Figure3 13.3.
This proved the capability of Indian companies to penetrate the Indian
market in spite of the presence of some global giants. According to the
Dataquest survey (Dataquest, April 15, 1999), of the Indian ERP market,
SAP is the market leader with 20% market share. The survey also showed
that ERP does not appear to be new to the Indian market. This is indicated
by the large number of solutions, which have been implemented.
While SAPs R/3 and QADs MFG/PRO continued to dominate the Indian
market, the presence of some of the lesser-known brands like J.D. Edward
and SSAs BPCS cannot be ignored. Other familiar and strong competitors
like Oracles Financials, Ramcos Marshal, and Baan also dominate the
second and third level of the domestic ERP market.
Dataquest Magazine
Oracle
7%
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Baan
7%
MAMIS
4%
Others
23%
Ramco
9%
SSA
10%
JD Edwards
10%
QAD
10%
SAP
20%
13.3 SAP AG
Systems, Applications and Products in Data Processing popularly known as
SAP or Systemanalyse und Programmentwicklung was founded in the year
1972, in Germany. It is the leading global provider of solutions for
client/server business application. SAP has installations in over 107
countries.
SAPs ERP package is available in two versions the mainframe version
(SAP R/2) and client/server version (SAP R/3). Most prominent among
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SAPs product range is the enterprise application suite R/3 for open
client/server systems. With SAP Systems, customers can opt to install the
core system and one or more of the functional components. You can even
purchase the software as a complete package.
SAP customers have chosen to install SAPs client/server suite in more than
19,750 sites worldwide. The System Software is accepted as the standard in
key industries such as oil, chemicals, consumer products, and high
technology and electronics.
SAP has work force strength of over 19,300 and has offices located in more
than 50 countries across the world. SAP is the most successful vendor of
software on standard business applications. It is also ranked as the fourth
largest independent software supplier in the world.
During the fiscal year, ending December 31, 1998, SAP AG reported
revenues of DM 847 billion, a 41% increase over 1997s revenues. In the
same period, sales of R/3 rose by 31%.
13.3.1 Products and Technology
SAP products feature a sophistication and robustness unmatched by other
business software solutions. SAP has developed a huge library of more than
800 predefined business processes, spanning each functional software
requirement. These processes can be selected from the SAP library. It is
then included within the installed SAP applications, after modifying the
application solution to suit the user's exact requirements. New business
processes and technologies become available regularly to the customers.
This enables the SAP customers to add state-of-the-art solutions to meet
their ever-changing business demands. The power of SAP software lies in
real-time integration. It has the ability to link a company's business
processes and applications. It also supports immediate response for any
change throughout the organisation on a departmental, divisional or global
scale. The international strength of the products extend to every aspect of
the application, such as the support of multiple currencies simultaneously,
and the automatic handling of country-specific import/export, tax, legal, and
language requirements. The complete suite of the applications on R/3 is
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Manufacturing: Oracle Manufacturing Applications are the industryleading mixed mode manufacturing solution. It enables companies to
achieve market leadership by becoming more customer-responsive and
efficient. This product family supports companies from small, singlefacility environments to multi-plant, global manufacturers with complex
requirements. Oracle Manufacturing Applications help companies
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Front Office: Oracle Front Office Applications provide a true customercentric approach. Allowing you to better understand your customer
relationships, their value and profitability. Oracle Front Office
Applications increase revenues, decrease sales and service costs, and
maintain customer retention and satisfaction. The sales, marketing, and
service solutions provide deep integration with the entire enterprise
collection of applications. Hence, enabling you to attract and retain
profitable customers through a unified set of channels, including Web,
mobile, and call centre.
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has provided an edge over other ERP vendors to firmly hold on to the ever
changing ERP market.
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Treasury Management
Performance Measurement
Project Management
Sales and Logistics
Materials Management
Supply Chain Planning
Service Revenue Management
Procurement
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Make a safe move to client/server by leveraging your existing hostcentric WorldSoftware applications.
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reached $3.9 million. This growth continued rapidly through the mid 1980s
with the services they offered to medium-sized companies. Since these
companies often needed to expand their computer system capacities and
software capabilities. However, they wanted to achieve this without hiring
programming personnel as a part of their work force. Since hiring program
developers was not only costly but also required resources to support it.
SSA was able to make use of this opportunity and establish its market is
these medium sized companies.
SSA by 1989 had a workforce of 400 employees with over 4,000 customers
in 30 countries. The company was producing software in eight languages,
including French, German, Italian, Chinese, and Japanese. They were
offering twenty-six integrated software products for their customers. At a
price rang varying from $50,000 to $500,000, depending on the size of the
computer on which the applications were to run. Network of associates
working for SSAs had grown to 52 by the middle of 1989, penetrating nearly
every major market in the world. The competition became tough when IBM's
improved integrated software package was released to the market. However,
the market for integrated software for medium-sized companies remained
somewhat under-penetrated, and SSA was able to sustain its rapid growth
rate through the year. The company's sales increased to $95 million, with
net income reaching $11.1 million in 1989. SSA had made its presence felt
in the ERP market.
After Covey's resignation, his place was filled by Larry J. Ford. Larry J. Ford
was the vice-president of IBM, in charge of marketing the AS/400. Ford, who
had been with IBM for 28 years, had occupied the posts of president,
chairman, and chief executive of SSA. Under leadership of Ford, SSA
continued to prosper. Increasing stress was placed on the company's CASE
products, which assist clients in adapting software for their own purposes as
business conditions change. SSA had over 4,000 customers, more than half
of them were overseas customers. The company's net income finally began
to stabilise during that year, although sales continued to climb, reaching
$146 million.
SSA concentrated its attention on a new strategy for supporting opensystem client server computing environments. Using its CASE technology, it
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13.9 QAD
QAD was founded in 1979 and now has a presence in 21 countries and
employs more than 1100 people. The company's products include
MFG/PRO, On/Q, Service/Support Management, Decision Support, and
Qwizard. The company's flagship product is its ERP solution MFG/PRO. It is
available in 26 languages and has more than 4,000 installed sites in over 80
countries. The company got the ISO certification in 1995. QAD offers a
variety of supply chain and Enterprise Resource Planning (ERP) software
products to manufacturing industries within the automotive, consumer
products, electronics, food and beverage, industrial products and medical
sectors. QAD software optimises your enterprise by increasing the speed of
internal processes and by synchronising distributed operations.
QADs flagship product, MFG/PRO software, provides multinational
organisations with an integrated Global Supply Chain Management solution.
It includes financial, manufacturing, distribution, and service/support
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management applications within an open system environment. InternetEnabled MFG/PRO allows you to share information and conduct commercial
transactions over the Internet.
QAD's On/Q Extended Supply Chain Applications manage the complex
demand and fulfilment transactions of large multinational corporations with
dynamic, collaborative relationships spanning multiple enterprises. Service/
Support Management are designed for companies who not only
manufacture and sell their products but also offer after-sales service and
support. QADs Decision Support is a tool designed to provide
manufacturers with access to information necessary for informed decisionmaking. Qwizard, QADs interactive mentor for users of MFG/PRO software,
is a value-added tool that provides easy-to-use business modelling,
implementation, and interactive learning tools.
QAD has currently developed a number of business arrangements with
Product Alliance Partners to enhance the effective functionality of QADs
products.
13.9.1 Application
MFG/PRO software is one of the successful client/server ERP applications
as it dramatically increases the internal efficiencies of distributed operations
within months of purchase. The software is complete, open, flexible,
scalable, interactive, and designed to address the operations requirements
of today's manufacturers. It is available in 26 languages, is year-2000
compliant, and supports multiple currencies including the Euro.
MFG/PRO includes a large set of solution components for manufacturing,
distribution, financial, supply chain, and service /support management.
Configurable and interoperable, it is open to best-of-breed components,
uses either Oracle or Progress databases, and runs in UNIX, Windows and
Windows NT environments.
MFG/PRO can be implemented at multiple locations and it easily scales to
meet the changing business requirements. MFG/PROs user interface is an
ultra-thin Java browser. MFG/PRO is also available with a Windows
Character User Interface (CUI).or Graphical User Interface (GUI).
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13.10 Summary
Analysing ERP market share is quiet different when compared with
reviewing the market segments for any other product or service. The
segmentations in that case will be numerous and in the form of many criteria
like physical, geographical, functional, distribution level and many more
factors. ERP the segmentation falls in than three main categories namely
type of the industry, size of the industry and geographical areas in terms of
the nations where the product is demanded. This helps in arriving at ERP
market and ERP software market share. (Instead use ERP Market can be
segmented into three major segments/Categories).
While discussing size of industry it refers to the volume of business
transacted and the capacity of the firm in terms of large sized or mid sized
or low rung. When it comes to the question of type it refers to the mode of
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13.12 Answers
Self Assessment Questions
1. AMR Research Inc.
2. System Software
3. Client/server
4. Business Engineer
5. Database
6. Baan Company's
7. Multi-level
8. Applications
9. Baan Education
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10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
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Terminal Questions
1. Refer section 13.2
2. Refer Section 13.2
3. Refer Section 13.3
4. Refer Section 13.5
5. Refer Section 13.4
6. Refer Sections 13,6 and 13.7
Unit 13
The sales and service department will be able to fill jobs faster with
temporary employees by using sales support applications. This was
supposed to be configured in to the new system based on best practices
identified and propagated throughout the organisation's distribution
network. New business acquisition and retention of existing customers is
going to be enhanced through customer management software and
customer information reporting.
With the use of the packaged applications the field offices will be able to
reduce operating margins. This is meant to support field office functions,
such as billing, payroll, time accounting, and collections. The definition
of flow of activities, core business processes, and decision support
needs will ensure the proper configuration of the packaged software to
take advantage of reengineered processes with the latest technologies.
The pre-integrated nature of the ERP-packaged software that is going to
be implemented will provide a new baseline for all the company's
systems. Plans were made to include those that will not be involved in
the initial installation. These included systems that were isolated without
integration requirements, systems that were not included in the available
ERP functions and some special in-house applications and customised
applications. Systems will be modified into the new order on a
scheduled basis, and new development will target the standards
established by the new ERP implementation. Integration will increase as
all application of the company move into the new ERP environment.
Therefore, the company will begin to develop superior knowledge
management at the corporate level to be used for decision-making.
But the CIO's main problem was the seemingly overwhelming gap
between what he knew (the fragmented puzzle of the company's current
systems) and what he needed to know (business requirements for the
new systems). The CIO had minor information about how the existing
systems were actually being used to conduct business in the company.
His field managers, technical managers, and the headquarters staff that
supported them all wanted the package installation to succeed. All the
managers held a piece of the information needed to make it a success,
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but none could see the whole picture. Without the crucial analysis of the
use of current systems as a basis for defining future business
requirements, the implementation project risked missing the mark.
Questions:
1. Do you think the companys management was clear about the
implementation process that it wanted to carry out?
Is their any requirement of the companys top manager to take the
responsibility of the implementation process?
2. What were the results the company was expecting from the new
implementation?
3. How do you think the CIO has to overcome the problem that he is
facing in this situation?
13.14 Glossary
Term
Description
Attributes
Best-of-breed
Leverage
Mainframe
Obsolescence
Application Suite
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References
1. ERP Demystified 2/E by Alexis Leon.
2. ERP Market by M.H. Lakdawla.
3. www.amrresearch.com.
Unit 14
Unit 14
Structure:
14.1 Introduction
Objectives
14.2 In-House Implementation Pros and Cons
14.3 Vendors
Role of the Vendor
14.4 Consultants
Role of the Consultants
14.5 End Users
14.6 Factors for the Success of an ERP Implementation
14.7 Summary
14.8 Terminal Questions
14.9 Answers
14.10 Case Study
14.11 Glossary
14.1 Introduction
By now you must be familiar with the concept of ERP and the ERP market.
This unit familiarises you with various roles of vendors, consultants and
users of ERP in the market. The main question that many people ask is:
Why can't companies develop their own ERP packages?
ERP package is very complex and needs a lot of skilled manpower and
other resources to develop. Many companies have personnel in their
Information Technology departments who can absorb the necessary
knowledge and who have experience in developing sophisticated systems.
But then such specialised computer work is not the main business of these
companies. They should direct all their available resources into improving
their own products or services so that they can remain competitive, serve
their customers better and continue to grow instead of trying to develop an
EPR system for which they will need to invest more resources and time.
Software firms who are specialised in designing and implementing these
integrated software packages provide better quality systems than any other
companies whose in-house team come up with an idea to develop these
software packages. These software firms (ERP vendors) can produce
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sophisticated packages and provide their clients with products that allow
them to maintain a focus on their own chief activities, thus improving
revenues, profits and shareholder returns.
ERP consultants are very crucial players in ERP implementation. They
provide professional services including IT strategy planning, software
evaluation, and ERP system implementation experience. The ability of
consultant's service is the source of providing customer satisfaction. With
proper training on ERP, end-users can make effective use of this system
and provide maximise business benefits to the company.
Learning Objectives
After studying this unit you will be able to:
Evaluate the three major players in an ERP implementation and their
profiles.
Describe the roles of each of these players.
Elucidate the reasons for success of an ERP implementation.
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should plan the participation so that its people play an appropriate role in the
implementation project so that it has enough experts in-house, once the
implementation is over. The company should bring in the know-how and
experience that will guarantee the best possible use of the acquired
package.
Self Assessment Questions
1. __________ will face resistance from the employees.
2. Mention any two skills that people should possess to implement the ERP
system.
3. The Company cannot go in for a __________ method of implementation
strategy due to the huge amount of investments involved.
14.3 Vendors
Vendors are the people who invest huge amounts of time and effort in
research and development of the ERP package. They come up with
innovations that make the packages more efficient and flexible to implement
and use. If one studies the history of the ERP packages and finds out how
each package evolved, it soon becomes evident that every ERP package
grew out of the experience or opportunity of a group of people, working in a
specific business, who created systems that could deal with certain
business segments.
ERP market place is crowded with more and more players and competitor
entering the market to provide ERP packages that have features and
functionality to cater to the needs of businesses in almost all sectors. The
ERP vendors spent billions of rupees in research to come up with new ideas
that make the packages more efficient and flexible. With the evolution of
new technologies, the vendors constantly upgrade their product to make the
best and latest advancements in technology available in the market.
For example, SAP is the global market leader in ERPs with approximately
30 to 60 percent of the world market; The company spends a large
percentage of its revenue in research and development of new technologies.
14.3.1 Role of the Vendor
As soon as the company signs the contract, the vendors should supply the
product and its documentation. Once the software is delivered, the company
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can develop the training and testing environment for the implementation
team. The roles of the vendors during and after implementation of ERP are:
The vendor is responsible for fixing any problems in the software that the
implementation team encounters. The vendor should have a liaison officer
to constantly interact with the implementation team.
The vendors provide initial training for the company's key users. These key
users are the ones who will define, together with the consultants, how the
software is to serve the company. They are also called as in-house
functional experts who decide how the functionalities are implemented to
adapt the product to suit the company's unique requirements. It is very
important to provide these in-house experts a through training on the
features of the package.
Vendor's training should include showing the key users how the package
works, what are the major components, how the data and information flows
across the system, what is flexible and what is not, what can be configured
and what cannot, what can be customised and what should not, what are
the limitations, what are the strengths and weaknesses and so on.
The objective of the vendor training is to show how the system works, not to
show how it should be implemented. This means that the vendor
demonstrates the product as it exists and highlights what are the possible
options available. The company's employees who are participating in the
vendor training should try to understand the characteristics of the package
and the impact of the system on their business processes. The trainees
should use these training sessions to question the vendor on all aspects of
the system.
Now some of you might ask, we are hiring consultants who are experts in
the package so why can't we get training from the consultants? This is true.
Most of the consultants are capable of providing sound training for the
packages. But we are hiring the consultants for implementing the system.
However, the consultants also have a role to play during this vendor training.
They should participate in the training sessions to evaluate how the users
react to the reality that is starting to take shape from the detailed
presentations and demos. Consultants should also ask questions that the
vendors are trying to avoid and the users are unaware of. This is the best
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way to present the real picture to the users and it will also prevent the
vendors from making false claims.
Vendors play an important role in project support function and exercise the
quality control with respect to how the product is implemented. It is the
vendor who understands the finer details and subtleties of the product and
can make valuable suggestions and improvements that could improve the
performance of the system. It is also in the best interests of the vendor that
this participation continues, because if the implementation fails, most of the
blame will fall on the vendor. Also a successful implementation means
another satisfied client, improved goodwill and good referrals and so on. So
the vendor will continue to participate in all the phases of the implementation,
mostly in an advisory capacity, addressing specific technical questions
about the product and technology.
Vendors help to fill gaps between the package and the actual business
processes. The software might have to be customised to suit the company's
needs. Here, customising means altering the product so that it is suited for
the company's purposes. The choice of whether to customise or not is the
one that can have enormous impact on the project and it often constitutes a
point of conflict between the consultants and users. But if the decision to
customise has been taken, it is the vendor's duty to carry out the necessary
modifications. This is because only the vendor knows the product well
enough to make the necessary changes without affecting the other parts.
Moreover, the company should get a guarantee (in writing) from the vendor
that despite the customisation, it will be able to benefit from the future
software improvements introduced by the vendor.
ERP integrates business process reporting for the different business
divisions. It creates transparent data exchange and facilitates timely and
informed decision making for senior managers. The successful
implementation of the enterprise resource planning software improves the
management and planning of a business corporation. It increases the
performance of the organisation. This increasing trend has enhanced the
value of ERP vendors in the market.
ERP vendors are continuing to expand market presence by offering new
applications. The top three players namely SAP AG, Oracle, Baan
PeopleSoft account for 64 per cent of the ERP market revenue.
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14.4 Consultants
Business consultants are professional who specialise in developing
techniques and methodologies for dealing with the implementation .They are
the experts in the administration, management and control of various
problems that crop up during the implementation. Each of them has many
man-years of implementation experience with various industries and would
have time-tested methodologies and business practices that ensure
successful implementation. They are good at all phases of the
implementation lifecycle, right from package evaluation to end-user training.
The only problem with these business consultants is that they are very
expensive. Many of the big consulting firms invest a great deal of money in
developing a range of consulting services and assign many of their
professionals to become specialists in the various aspects of ERP packages
and their implementation.
These firm develop an in-depth understanding of each product's strengths
and weaknesses, work by the side of the ERP vendors to confirm that the
vendor's package actually works, learn the tricks and techniques of the
trade, find out the pitfalls and mistakes that should be avoided and thus
create a pool of experts who could handle the ERP implementation without
failure.
Thus, consultants are people who have made the business of ERP
implementation their business and have invested huge amount, of money
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and manpower for that purpose. So when you want to get the services of
these consultants, the first question that will be asked is "Are they going to
be expensive?" The answer is a definite YES.
The consultants will be expensive, so the company will have to formulate a
plan regarding best optimum use of the money spent on consultants. If you
study the statistics, you can see that a well-selected, integrated system that
was successfully implemented and which is successfully working usually
pays for itself in a relatively short periodbetween 10 and 30 months. If you
analyse the cost break-up, you will find that the most expensive part of the
implementation was the consultation charges. For a typical ERP
implementation, the cost of consultants is 1.5 to 3 times for every rupee
invested in the software product. Sounds amazing; but it is true and it is also
true that the software will pay for itself the software cost, the consultant's
charges and other expenses incurred during implementation in the above
mentioned period (10-30 months). But the catch is that the product has to be
the right one and the implementation has to be successful. That is why the
expertise of the consultants becomes invaluable and the money spent on
good consultation is never wasted. So finding the right consultantspeople
who have the necessary know-how, who will work well with the company
personnel, people who will transfer their knowledge to the company's
employees and people who are available in case their services are required
again is very important.
14.4.1 Role of the consultants
The role of the ERP consultants is known to all of us as we have seen many
of them in action. The company places its trust in the consultants, that its
business objectives will be achieved. The consultants ensure the success of
the project. This produces quantifiable results to the satisfaction of the
company management.
Consultants administer each of the phases of the implementation. This
ensure that the required activities occur at the scheduled time and at the
desired level of quality with effective participation of all those who must
participate. The consultants are responsible to convert the planned
methodology into task and allocate right resource to complete that task.
Consultants add value to the project. They bring the know-how about the
package and about the implementation the know-how that is not included
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14.5 End-Users
ERP end-users are the people who will be using the ERP system once it is
implemented. Most of the functions that the end users used to perform are
being automated by the ERP system. ERP system brings drastic
transformation in the actual work process which leads to change in old job
descriptions.
It is human nature to resist change. Implementation of an ERP system
brings change in a very massive scale. Employees will fear that system will
replace existing jobs, as many functions will be automated. Also people will
be afraid of the amount of training they have to undergo and learning they
have to do to use the new system. Job profiles will change, job
responsibilities will undergo drastic alterations, and people will be forced to
develop new skill sets. If these fears are not addressed and alleviated well
in advance, it will cause trouble for the organisation.
The automation of the business processes, through technology, can
eliminate the jobs of many employees whose function it is to record, control,
calculate, analyse, file or prepare reports. Even though ERP systems
eliminate many existing jobs, it creates many new ones with more
responsibilities and value addition. Employees get away from the
monotonous clerical work and transform themselves into highly valued
individuals, in a new and challenging working environment using modern
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The six dimensions that comprise the business productivity frameworks are:
Usability:
Ease of the application to use.
Ease in command of application.
Easy to navigate in the software.
User enjoys using the software.
Familiarity:
Intuitiveness of the system.
Easy to learn.
Comfortable with application.
Proficient with the application.
Transactional Efficiency:
Easy to execute common and repetitive tasks.
Efficiency of user interface.
Speed and reliability of system
Flexibility:
Ease of completing infrequent tasks.
Easy to adapted specific business needs and processes.
Quick in handling unexpected issues.
Business Insight:
Ease of comprehensive reporting.
Ease to access real-time information.
Ease to gauge the impact of business decisions.
Collaboration:
Ease of collaboration with colleagues.
Efficiency of application workflow.
Ease of communication with suppliers, partners, customers.
Productivity is crucial in maintaining profitable business. The business
productivity measurement framework1 used in this study provides a useful
mechanism to study the perceptions of actual end users and to standardise
the applications according to the six productivity dimensions. Thus it
encourages the company as a whole to dedicate itself to encourage enduser productivity in all its dimensions.
1
Reference: ERP End-User Business Productivity: A Field Study of SAP & Microsoft
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14.7 Summary
Enterprise resource planning (ERP) is the term used to describe the
automation of core business functions, including production, accounting,
distribution, supply chain and human resources.
A well-implemented ERP system creates significant efficiencies across your
business. This results in timely business information, better customer
relationships, a more cost-effective supply chain, improved internal process
and, ultimately, increased profitability. ERP implementation strategy needs
huge amount of investments. Hence, one cannot go for trial-and-error
method of implementation process. A company should be familiar with ERP
package and with all the technical issues. Hence, it is always a better idea
to leave the implementation to the people who are specialising in it and
focus the company's efforts on preparing its personnel to administer the
package after it is implemented.
Vendors are the people who develop ERP package and come up with
innovations that make the packages more efficient and flexible to implement
and use. The vendors provide initial training for the company's key users.
They play an important role in project support function and exercise the
quality control with respect to how the product is implemented. They also
help to fill gaps between the package and the actual business processes.
Business consultants are the experts in the administration, management
and control of various problems that occur during the implementation.
Consultants administer each of the phases of the implementation. They
bring the practical knowledge about the package and about the
implementation. Consultant alerts the company management about actions
and decisions to be taken.
Even though ERP systems eliminate many existing jobs, it creates many
new ones with more responsibilities and value addition. Employees get
away from the monotonous clerical work and transform themselves into
highly valued individuals.
ERP system enables you to enter the customer order information once and
then make it available throughout the business. This in turn helps you to
have clear and timely information to take critical business decisions.
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14.9 Answers
Self Assessment Questions
1. ERP Implementation
2. The two skills that people should possess to implement the ERP
system are:
Good people skills
Good leadership skills
3. Trial-and-error
4. Vendors
5. Liaison officer
6. True
7. Package and the actual business processes
8. Business consultants
9. Planned methodology
10. False
11. ERP system
12. Monotonous clerical work
13. Productivity
14. True
Terminal Questions
1. Refer section 14.2
2. Refer section 14.3
3. Refer section 14.4
4. Refer section 14.5
5. Refer section 14.5
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14.11 Glossary
Term
Description
Adept
Catastrophic
Diplomats
Jeopardised
Liaison
Strategy
References
1. Aladwani, A.M., 2001, Change Management Strategies for Successful
ERP Implementation, Business Process Management Journal, Vol. 7
no.3 pp. 266-275.
2. ERP Tools, Techniques, and Applications for Integrating the Supply
Chain. Second Edition by Carol A. Ptak ISBN 0-203-59294-8 .
3. ERP: Making It Happen: The Implementers' Guide to Success with
Enterprise Resource Planning By: Wallace, Thomas F.; Kremzar,
Michael H. Published By: John Wiley & Sons, Inc.
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Structure:
15.1 Introduction
Objective
15.2 New Markets
ERP Trends
15.3 New Channels
15.4 Faster Implementation Methodologies
15.5 Business Models and Business Application Programming Interface
(BAPI)
15.6 Application Platforms
15.7 New Business Segments
15.8 Summary
15.9 Terminal Questions
15.10 Answers
15.11 Case Study
15.12 Glossary
15.1 Introduction
By now you must be familiar with the various roles of vendors, consultants
and the users of ERP in the market. This unit familiarises you with the future
trends and technologies in the ERP market. It also helps you to take
decisions with respect to these trends and technologies. The movement
towards a global ERP system is a key factor in shaping the future of
Enterprise Resource Planning (ERP).
ERP industry watchers agree on at least one point: 'one-size-fits-all', across
the board integration, i.e. the goal of ERP system is to provide single
application that can monitor all the business functions. To achieve this, ERP
vendors are advancing their system by adding more features to their
products and integrating new applications to deliver a one-stop application
to the organisations.
ERPs are dominating Back-Office practices such as Financial Management,
Human Resources and basic manufacturing. ERP vendors are expected to
advance in mid-market sector. There are now increasing investment in
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years. ERP vendors have to sell more licenses into their installed base to
maintain this growth rate.
For example, at present the vendors have a 10-20 per cent penetration that
is percentage of total employees currently using the ERP system. This is
expected to grow to 40-60 per cent within the next five years.
As larger enterprises become saturated with new-generation client/server
ERP systems, the vendors strive to find new markets for their product suites
to have a rapid growth in the business. ERP vendors have increased their
appeal to small business clients through a number of initiatives. These
initiatives include the following:
Increasing their direct sales force with the resellers channels.
Lowering the entry point of their software to make it financially feasible.
Arranging their software offerings on the basis of reduced functionality.
Improving the implementation methodologies for faster operation.
Modifying the products to platforms such as Microsoft Windows NT.
While ERP initiated in the manufacturing market, ERP usage has gradually
spread in almost every type of enterprise such as retail, the public sector
and healthcare organisation. The following growth is expected to come from
software that enables companies to link up their back offices with those of
partners, automating a process which is largely done via human contact
such as procurement officers.
ERP Trends
According to the advancement in technologies, ERP requires constant
modifications and up gradations. This has increased pressure on ERP
developers to fulfil the demands of both vendors and companies. Hence it is
vital to analyse the ERP's trends.
The latest trends that have rejuvenated the functioning of ERP are:
Open Source ERP: This has cut down the hassle of paying the license
fees not only during installation but also whenever a modification is
made.
Web enabled ERP: This has made enterprise operations go online. This
trend has helped stakeholder or the third party to easily access the
required information by sitting anywhere in the world. It also helps during
emergencies when the details are to be sourced with immediate effect.
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To study the future trends of ERP we must first look at the present state of
ERP software industry. ERP software was earlier developed and
manufactured from MRP (Manufacturing Resource Planning) and MRP II.
However, it is now being used for CRM (Customer Relationship
Management) and SCM (Supply Chain Management). Most of the ERP
companies are catering to SMEs (Small and Medium Enterprise) to expand
the capacity and efficiency of their product.
Internet and E-commerce are the two important aspects to shape the future
ERP products. Many companies are in the process to combine their SCM
functions with Internet. This helps the suppliers to easily access the
information from anywhere in the world.
Most of the ERP companies are focusing on SME as their future trend. As
many large companies are implementing integrated software system, the
market will gradually decrease for large companies. Thus the growth for the
ERP will be in SME segment only, which will enable ERP companies to
provide better products and service at lower cost and reduce the complexity
of implementation. The vendors will have to understand the need of SME to
obtain superior quality products from ERP companies. Thus to sustain in the
future ERP market, companies must be able to adapt the new technologies.
ERP trends bring positive signals for the ERP vendors and companies
availing their services. Only through proper coordination, teamwork and
nurturing a cordial atmosphere both vendors and the company will be able
to make use of these modern services.
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helps
http://www.ssaglobal.com/documents/SSAPD_SOIGEENA4.pdf
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implemented and stored in the R/3 system as remote function call (RFC)
modules.2
BAPI is the most dominant tool in the SAP consultants toolkit. It is one of a
set of tools for interfacing with an SAP R/3 system. The priority of BAPI is
calling data in and out of SAP. For the SAP consultant, BAPIs are the small,
powerful ships that keep these barges of data moving. SAP's R/3 system is
now open by releasing the specifications for some 170 business application
programming interfaces (BAPIs). This helped third-party applications
interact with R/3 directly. BAPIs can be called as sets of methods that allow
external applications to collaborate with specific R/3 business objects such
as customers, accounts, or employees. As R/3 data is addressable through
callable methods, BAPIs gives flexibility to the third party application
vendors to build supporting applications for the R/3 system.
In similar way, Baan offers OrgWare which is based on integrated businessmodelling tool, combined with business-specific templates that automate the
configuration of the software to suit specific operational needs. Baan is in
the process of advancing this tool with new setup wizards to accelerate
software implementation on the Windows NT platform.
Self Assessment Questions
5. Oracle has introduced ____________ method to speed up
implementations of Oracle Applications suites.
6. A company's business model is usually referred as ______________.
7. ERP Business Modelling can be called as ____________.
8. _______ is the most dominant and commanding tool in the SAP
consultants toolkit.
http://searchsap.techtarget.com/sDefinition/0,,sid21_gci845424,00.html
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Any experience with ERP: The company should check if the platform,
which is successfully experimented in an ERP environment, provides
greater credibility. As the platform has demonstrated competence in
ERP, it increases the comfort zone and provides better results.
Proper designs: ERP applications are the complex concept and can
create a worse condition if the preferred ERP platforms are also of the
same status. Hence the designing part of the platform should be in a
manner that can be used freely either in integrated or distributed
applications.
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As the new ERP business segment, the PeopleSoft has bought Red Pepper
Software in the business to enhance its supply chain offering. Baan has also
developed Aurum Software for its Aurum Customer Enterprise suite of
customer relationship management tools. Baan strengthen its financial
modules by linking Hyperion's financial accounting and budgeting solutions
with Baan's distribution and manufacturing modules.
With new technological innovations ERP vendors are striving to make their
products more efficient. They focus mainly on decision support. Baan is
associating its applications with Gentia product to provide OLAP capabilities
for monitoring of key performance indicators. JD Edwards grouped with
Information Builders to deliver a data mart, based on Information Builders
Inc.'s SmartMart suite of data transformation and OLAP tools. With the help
of data mart designer and builder, Oracle has created data marts. For
querying, charting and reporting data from Oracle's Applications suite,
Oracle offers an end-user tool called Oracle Discoverer. PeopleSoft will
integrate PeopleSoft applications with Arbor Software Corp.'s
multidimensional Essbase server and client-based Cognos Corp. PowerPlay
multidimensional OLAP tool. To improve the product efficiency, SAP has
previewed its Business Information Warehouse product for synchronising
the R/3 transaction system with a data warehouse. This enables SAP to
manage both R/3 and non-R/3 data, by using metadata repository and a
front-end OLAP engine.
Table 15.1: Major ERP Vendors and their Products
Vendor
Product
SAP AG
R/3
Oracle Corporation
Oracle Applications
OneWorld
PeopleSoft Inc.
PeopleSoft
Baan Co.
Baan IV
Web Enabling
ERP vendors are now being forced to move from a client/server to
browser/server architecture to Web-enable their software. This helps them
to deliver self-service and electronic commerce capabilities. ERP vendors
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are using Java rather than Microsoft's ActiveX for their first generation of
Web-enabled applications. Baan is working to distribute a Java-based Web
interface to its products. Automating supply-chain relationships via the
Internet, offering e-commerce via the Microsoft Merchant Server and using
Hyperion Software Corp.'s Spider-Man technology for alert distribution
across the Web are the main focus of Baan. PeopleSoft is set to deliver
Java-based self-service applets with its PeopleSoft 7. JD Edwards is using
Java OneWorld functionality to make it available either through a Windows
client or a Web browser. Oracle has already used Java to deliver its Oracle
Web Employees, Oracle Web Customers, and Oracle Web Suppliers
modules.
ERP vendors are using Java as a means to deliver and deploy their Web
functionality. This is considered as the first move away from proprietary
technologies to more open tools. Implementing solutions from SAP and
PeopleSoft can be expensive because the tools for customising their
products such asABAP4 and PeopleTools are proprietary. However, many
lower-tier software vendors are using commercial tools such as
PowerBuilder, Visual Basic, or Microsoft Access to build the front ends of
the application. Oracle is a tool vendor, which uses Oracle Forms,
Developer 2000, and Designer 2000 to develop its Oracle Applications.
Market Snapshot
Even with zero growth at SAP, it would still take any competitor a couple of
years of triple-digit growth to overtake the German giant. PeopleSoft has not
made a wrong move so far, and Baan is also showing that it has the
mentality and results to become a top-three player. Oracle has lately
focused more attention on its applications business as a growth engine and
seem to be reaching, most aggressively, into the territory targeted by the
middle-market client/server accounting players. JD Edwards seem to be in
the most vulnerable position, with their continued reliance on the momentum
of IBM's AS/400 line, coupled with their need for transition to new product
lines and platforms, where their previous market-leading positioning was
less than clear cut.
Even during the transition from client/server through browser/server, ERP
vendors are striving to maintain their growth momentum in the market. We
can see many achievements in the lines of the Baan/Aurum deal, an
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15.8 Summary
ERP is an industry that always shows various prospects of investment
rather than just technology. It is basically considered as an investment in the
business and its people. The most challenging part is implementing the
system into a companys culture, where it is necessary to develop a
business and fulfil a vision. Despite these challenges, the movement toward
a global ERP system is a key factor shaping the future of enterprise
resource planning. The future of the ERP holds certain demands in the
national and global level. Here, ERP trends also reflect positive signals for
the ERP vendors and companies availing their service. ERP product and
ERP software will always be on great demand.
As the ERP market is very competitive and fast growing, vendors are
striving to find new markets for their product suites to have a rapid growth in
the Business. ERP vendors have increased their appeal to small business
clients through a number of initiatives. According to the advancement in
technologies, ERP requires constant modifications and upgradations.
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15.10 Answers
Self Assessment Questions
1. True
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2.
3.
4.
5.
6.
7.
8.
9.
10.
Web enabled
Wireless ERP
True
Fast Forward
Revenue Architecture
Process Facilitation Approach
Business Application Programming Interface (BAPI)
False
The two factors to be considered while choosing application platform
are:
Prior experience with ERP
Networking facilities
11. Java
12. Sales Force Automation (SFA) and customer management
13. True
Terminal Questions
1. Refer section 15.2
2. Refer section 15.3
3. Refer section 15.4
4. Refer section 15.5
5. Refer section 15.6
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15.12 Glossary
Term
Description
Business Information
Warehouse
Dearth
Metadata Repository
Procurement Officers
Proprietary Technologies
References
1. Enterprise Resource Planning Second Edition by Alexis Leon
ISBN(13): 978-0-07-065680-2.
2. ERP in Practice, ERP strategies for steering organisational
competence and competitive advantage by Jagan Nathan Vaman ISBN
13: 9780070621077.
3. ERP Tools, Techniques, and Applications for Integrating the By: Ptak,
Carol A; Schragenheim, Eli Published By: CRC Press Edition: 2.
4. Enterprise Resource Planning (Paperback), Third Edition by Bret
Wagner (Author) and Ellen Monk (Author).