This action might not be possible to undo. Are you sure you want to continue?
ENTERPRISE RESOURCE PLANNING
Enterprise resource planning (ERP) is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores. An ERP system has a service-oriented architecture with modular hardware and software units or "services" that communicate on a local area network. The modular design allows a business to add or reconfigure modules (perhaps from different vendors) while preserving data integrity in one shared database that may be centralized or distributed what does this software do? Take the activities of a typical company or 'Enterprise', its purpose can be loosely described as 'to manufacture or procure products for sale'. These products may be tangible or intangible, but basically the company must 'Plan' and 'Control' the use of its entire resource base to meet these objectives. That is what 'E.R.P. software' does, it helps the managers and staff of an enterprise to manage its resources to manufacture/procure the products it sells within one software package. The single software package 'integrates' its elements or modules into one seamless package to control the enterprise activities. The most common activities being Purchasing, Manufacturing, Sales and Accounting.
ENTERPRISE RESOURCE PLANNING
ERP AND CYCLICAL STRUCTURE
Origin of the term:
MRP vs. ERP — Manufacturing management systems have evolved in stages over the past 30 years from a simple means of calculating 2
ENTERPRISE RESOURCE PLANNING materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as inflexible fixed system parameters, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP3) and finally the generic concept Enterprise Resource Planning (ERP) The initials ERP originated as an extension of MRP (material requirements planning; later manufacturing resource planning) and CIM (Computer Integrated Manufacturing). It was introduced by research and analysis firm Gartner in 1990. ERP systems now attempt to cover all core functions of an enterprise, regardless of the organization's business or charter. These systems can now be found in non-manufacturing businesses, non-profit organizations and governments. To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package Examples of modules in an ERP which formerly would have been standalone applications include: ♣ Product lifecycle management, ♣ Supply chain management (e.g. Purchasing, Manufacturing and Distribution), ♣ Warehouse Management, ♣ Customer Relationship Management (CRM), ♣ Sales Order Processing, ♣ Online Sales, Financials , ♣ Human Resources, and ♣ Decision Support System.
Overview of ERP Solutions:
Some organizations — typically those with sufficient in-house IT skills to integrate multiple software products — choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. For example, one may choose to use human resource management system from one vendor, and the financial systems from another, and perform the integration between the systems themselves. This is common to retailers where even a mid-sized retailer will have a discrete Point-of-Sale (POS) product and financials application, then a 3
ENTERPRISE RESOURCE PLANNING series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics. Ideally, ERP delivers a single database that contains all data for the software modules, which would include:
Engineering, bills of material, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow
Supply chain management
Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commission calculation
Financials Project management
Costing, billing, time management Human resources General ledger, cash management, accounts payable, accounts receivable, fixed assets and expense, performance units, activity
Human resources, payroll, training, time and attendance, rostering, benefits Customer relationship management Sales and marketing, commissions, service, customer contact and call center support Data warehouse and various self-service interfaces for customers, suppliers, and employees Access control - user privilege as per authority levels for process execution Customization - to meet the extension, addition, change in process flow Enterprise resource planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP) MRP evolved into ERP when "routings" became a major part of the software architecture and a company's 4
ENTERPRISE RESOURCE PLANNING capacity planning activity also became a part of the standard software activity. ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. ERP software can aid in the control of many business activities, including sales, marketing, delivery, billing, production, inventory management, quality management and human resource management. ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. Many companies took this opportunity to replace their legacy information systems with ERP systems. This rapid growth in sales was followed by a slump in 1999, at which time most companies had already implemented their Y2K solution ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems. ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information technology, this would include accounting, human resources, marketing and strategic management. ERP II means open ERP architecture of components. The older, monolithic ERP systems became component oriented EAS — Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business, using ordinary Internet browsers as thin clients
Prior to the concept of ERP systems, it was usual for each department within an organization - such as human resources, payroll and financial - to have its own customized computer system. Typical difficulties involved integration of data from potentially different computer manufacturers and systems. For example, the HR computer system (often called HRMS or HRIS) would typically manage employee information while the payroll department would typically calculate and
ENTERPRISE RESOURCE PLANNING store paycheck information for each employee, and the financial department would typically store financial transactions for the organization. Each system would have to integrate using a predefined set of common data which would be transferred between each computer system. Any deviation from the data format or the integration schedule often resulted in problems
ERP software combined the data of formerly separate applications. This simplified keeping data in synchronization across the enterprise as well as reducing the complexity of the required computer infrastructure. It also contributed to standardizing and reducing the number of software specialties required within IT departments
The ERP Challenges:
At one point in the past, many people believed that total management information systems were the way to answer all important management questions. Organizations invested many millions in the effort to develop their own total MIS system, and, with few exceptions, these attempts fell very far short of the mark. The widely accepted explanation was that the technology, that was then available, was not up to the task. Much of the same sort of thing seems to be happening today with enterprise resource planning (ERP) systems. These aim to provide an integrated, enterprise-wide information service that allows the organization to efficiently respond to any changes in level of market demand. And, just as they invested heavily in total MIS systems, many organizations are investing millions in the effort to install their own ERP system. While there have been some success stories, the evidence suggests that most organizations have failed to realize the expected benefits from their (all too expensive) efforts to install ERP. It is my contention that full-blown ERP systems are the right answer for only some organizations. To understand what ERP can and cannot deliver, it helps to go back to the manufacturing resource planning (MRP) systems that preceded ERP. Leading vendors like SAP and Baan offered MRP systems before they were reborn as ERP systems. And the current ERP- system logic has many parallels with the logic that was used with earlier MRP systems. The challenge facing manufacturing can be described in terms of buffer stock. It's easy to put a large buffer stock in front of every
ENTERPRISE RESOURCE PLANNING production stage. That work-in-progress allows the separate stages to run at peek efficiency. With everything at peek efficiency, overall factory productivity should be high. Nice theory, but it didn't work as planned. The stock of work-in-progress was expensive. Nothing moved very rapidly. More and more work became"expedited"orders. Successful MRP systems replaced the old buffer stocks with better information. The cost of production went down. Even more important, the response time of the factory improved, and the firm was much more responsive to changing markets.. This manufacturing transformation was relatively simple - everyone could see work-in-progress, and could see the "expedite" job tags. ERP systems take a similar approach, but now the buffer stocks are generalized to include men, money, material, and time. All efforts are focused on driving out the need for buffer stocks across the entire organization. When successful, the results from ERP can be even more dramatic than they were with MRP. Initially, people will not be very comfortable in the new ERP world. The ERP logic strips away buffer stocks and subjects everyone to an unrelenting and constant pressure to produce. The required social transformation is a major undertaking. It needs resources, and it needs constant support from the most senior people in the organization. People must believe the organization has no option but to undergo the change, however painful this may prove to be. Senior executives must find ways to make the required changes necessary and inevitable to the people who will have to live through the process. Some of the problems with ERP systems can be traced back to a failure to make the huge organizational and social changes that are required seem necessary and inevitable. In some cases, the problems with ERP can be traced back to a failure to recognize that a major organizational transformation was required. And in some cases, the technology used with the chosen ERP system was not up to the task - the organization was too large, or too diverse, or too whatever. However, my main concern is for organizations that should not strive for the efficiencies that can be provided by total ERP systems. There is a very real cost behind the focus demanded by ERP. Everything and everyone is focused on meeting the objectives set for the organization. If all the market demands is a continuing refinement in how those objectives are to be met, then ERP can fully deliver on its promise. Some markets, some of the time, demand fundamental change in how objectives are to be met.
ENTERPRISE RESOURCE PLANNING The problem, to my way of thinking, lies with the idea of a total ERP system. Most organizations would benefit from having ERP applied to their current "today" processes. It is almost always wise to keep the "tomorrow" part of the organization outside the relentless driving logic of ERP. A properly installed ERP system can buy an efficient "today." An effective "tomorrow" needs people with a vision for the future, and the freedom to make it happen.
Because of their wide scope of application within a business, ERP software systems are typically complex and usually impose significant changes on staff work practices, Implementing ERP software is typically not an "in-house" skill, so even smaller projects are more cost effective if specialist ERP implementation consultants are employed The length of time to implement an ERP system depends on the size of the business, the scope of the change and willingness of the customer to take ownership for the project .A small project (e.g., a company of less than 100 staff) may be planned and delivered within 3-9 months; however, a large, multi-site or multi-country implementation may take years. Some popular methods for implementation are as follows Joint ventures with the Respective Industry The company need not necessarily implement ERP all on its own. They can as well share it with leading players in the same industry. This will ensure that the risks will not be heavy in the case of loss. This practice is assuming greater significance in the current scenario. The sharing allows them to have an interface with the systems on the basis of a common platform. This is catching up in the market with the only trouble being reluctance of competitive firms to come together on a mutual agreement for fear of losing business tactics. It is also seen as ERP implementation problem solution. Though the companies are at liberty to create security for their respective information there will not be any protection for the (pool of) records in the common database. However this has helped largely in many aspects. For e.g. the medical history of a patient brought in an emergency condition can be immediately accessed though ERP. This particular fact has itself saved many lives. On the contrary they would have to go through the rigorous process of finding the patient's identity and the steps aftermath which brings down the chances of the patient's survival are very minimal, in the absence of ERP. This is one of ERP implementation support. Perhaps there are many risks for ERP implementation. 8
ENTERPRISE RESOURCE PLANNING Doing it all alone This is in fact one of the primitive methods and is no doubt followed till date. This method takes a lot of risks in this method. But if they are calculated properly then the regime would be inscribed as a golden period in the company's history. The simple formula behind this phenomenon is that the company should go for it subject to its financial potential, requirements, technical acumen management policy and similar facts. All these will help them to arrive at ERP implementation problem solution. Full/Partial Implementation It has always been said that ERP products and services are purely based on the needs and resources of the company. This is not a risk for ERP implementation. Hence the companies can choose to go for a full fledged ERP system and implement it throught the organization and thereby interlink the whole process and the people concerned. Otherwise they may prefer to go for an ERP system that performs a particular function of the company. This is an important step in choosing the appropriate ERP software but at the same time it also adds more value to the implementation process. It is also an important ERP problem solution. The following are steps of a data migration strategy that can help with the success of an ERP implementation: 1. 2. 3. 4. 5. 6. Identifying the data to be migrated Determining the timing of data migration Generating the data templates Freezing the tools for data migration Deciding on migration related setups Deciding on data archiving
Maintenance and support services:
Maintenance and support services involves monitoring and managing an operational ERP system. This function is often provided in-house using members of the IT department, or may be provided by a specialist external consulting and services company.
Latest trends in ERP:
Need based applications
ENTERPRISE RESOURCE PLANNING Organizations had to implement ERP through their systems irrespective of the fact whether they help in all the functions or in one particular function. This was proving to be a big hurdle to the firms. In addition this remained as the main disadvantage or setback of ERP. They had to purchase the whole applications even if it meant that most of them would be idle except for the core function. The latest ERP software programs have overcome this menace. They offer need based applications. The firms need not be worried even if these Software Programs were not available. They were given the liberty to purchase and install Software Programs pertaining to that particular function. This advantage has helped to increase the scope of ERP not only among large firms but also small and medium business as well. Expenditures ERP was a very costly affair. Thanks to the intrusion of internet and open source applications. This has helped S.M.E.'S to enter the market of prospective buyers. This has not only widened the horizon of S.M.E.'s but also increased the usage among large firms. These large firms were not able to invest huge money in spite of adequate funds. Now that the spending on ERP gets reduced there are no hesitations to show the green signal for fear of heavy monetary outlay. It is encouraging to notice the improving IT ERP trends. Reduction in implementation time ERP was discouraged by companies because they took such a long time to get installed and set the whole process into action. Since this resource was spent excessively there were chances for reduction in potential business and losing man-hours. The current day ERP applications are less complex to install and train. This has reduced the amount of time spent on ERP. Companies are thereby assured of spending lesser time for ERP. Open Source, Web enabled and wireless technologies These are three important elements that have rejuvenated the functioning of ERP. Open Source ERP has done away with the hassles of paying license fees not only during installation but also whenever a modification is made. The company is relieved from depending even for mince matters. Web enabled ERP helps in making the enterprise operations go online. Any stakeholder or third party can access the required information very 10
ENTERPRISE RESOURCE PLANNING easily and that too by sitting anywhere in the world. This proves to be of great help especially during emergencies when the details are to be sourced with immediate effect. Wireless ERP has helped organizations to make use of the communication channels effectively and efficiently. It has made it possible for many elements to operate in ERP which were otherwise not possible. Wireless ERP is nothing but sharing enterprise information through devices like internet and other devices making it possible for outsiders to access
All modules of ERP are scalable and interactive in a client/server environment. This wide selection enables the tailoring of solutions specific to the needs of individual companies and numerous vertical industry segments. If not used effectively however the result will be Erp Failures. The failures in one or more of those four components could cause the failure of an ERP project. The failures in hardware are easier to identify and to fix, we'll examine the failures in software implementation, business process and user acceptance. Failure of ERP Software Implementation Module-based ERP software is the core of ERP systems. Most ERP projects involve significant amount of customizations. Packaged ERP software modules have built-in functionality that work in a standard and simplified enterprise environment. However, every organization is unique in data requirements and business processes. It is the customizations that transform packaged ERP software into ERP software that meets organizations' individual business processes and operations. Long and expensive customization efforts often result the pass of release deadline and budget overrun. Customizations make the software more fragile and harder to maintain when it finally goes to production. Major changes may be required in the later stage of the implementation as a result of incomplete requirements and power struggles within organizations Failure of Accommodating Evolution of Business Processes Business processes fall into three levels - strategic planning, management control and operational control. Organizations continuously realign their business processes of all levels in response to the ever-changing market environment. Many ERP systems aren't 11
ENTERPRISE RESOURCE PLANNING flexible enough to accommodate evolution of business processes. AN ERP system that worked well last year may need major overhaul.
Failure of User Acceptance The users of ERP systems are employees of the organizations at all levels. ERP projects usually modify the company's business processes which create extra workload for employees who use them initially. They may not think that the workflows embedded in the software are better than the ones they currently use. Ongoing end-user involvement and training may ease the difficult in organization's adaptation of new systems and new processes.
In the absence of an ERP system, a large manufacturer may find itself with many software applications that neither talk to each other nor interface effectively. Tasks that need to interface with one another may involve:
• • • • • •
Integration among different functional areas to ensure proper communication, productivity and efficiency Design engineering (how to best make the product) Order tracking, from acceptance through fulfillment The revenue cycle, from invoice through cash receipt Managing inter-dependencies of complex processes bill of materials Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level. ERP Systems centralize the data in one place, example customer , financial data. This eliminates the problem of synchronising changes and can reduce the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure.
Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data-tampering scenario, for example, might involve a disgruntled employee intentionally modifying prices to below-the-breakeven point in order to attempt to interfere with the 12
ENTERPRISE RESOURCE PLANNING company's profit or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools
Problems with ERP systems are mainly due to inadequate investment in ongoing training for the involved IT personnel - including those implementing and testing changes - as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and the ways in which it is used. Disadvantages:
Customization of the ERP software is limited. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive (This has led to a new category of "ERP light" solutions) ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure. Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications. Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level). Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits. The system may be too complex measured against the actual needs of the customers. ERP Systems centralize the data in one place, example customer , financial data. This can increase the risk of loss of sensitive info, if there is any security breach
ERP is actually a process or approach which attempts to consolidate all of a company's departments and functions into a single computer system that services each department's specific needs. It is, in a sense, a convergence of people, hardware and software into an efficient production, service and delivery system that creates profit for the company. 13
ENTERPRISE RESOURCE PLANNING
E.R.P TO THE NEXT GENERATION:
E.R.P. 2 takes standard E.R.P. and extends it by providing for closer relationships between an enterprise and its customers and suppliers. An example of this closer relationship is that an enterprise will allow customers to directly interact with its computer system so allowing them to place orders and investigate the status of its account, outstanding deliveries and orders. Suppliers can be permitted to monitor stock levels and suggest when items need replenishing. Due to the level of system integration needed between enterprises to achieve E.R.P. 2, this remains, for the moment, the preserve of large companies with the I.T. resources to make it possible. File downloaded From Net. Thanks to Shoaib [www.xctvz.com].
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.