CHAPTER 1

INTRODUCTION TO ERP
INTRODUCTION Information Technology is revolutionizing the way in which we live and work. It is changing all aspects of our life and lifestyle. The amount of calculation power that is available to mankind is increasing at an exponential rate. Computers and communication are becoming integral part of our lives. To survive, thrive and beat the competition in today’s world, one has to manage the future. Managing the future means managing the information. IT has many roles to play in the organization. All organizations have certain objectives and goals to achieve. For any organization to succeed, all business units or departments should work towards these common goal. But each department or business function in the organization will have 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 production-planning department might want to reduce the inventory level, but the production people might want to reduce the inventory level, but the production people might want to have more stocks. To success of an organization rests in resolving the conflicts between the various business functions and making them do what is good for the organization as a whole. For this, information is critical. Everybody should know what is happening in other parts of the organization. It is not enough that each department manages its activities efficiently, it should also help other departments manage their functions efficiently. For these to happen, the organization should cease to function of islands of information, each working in isolation. Each and every employee should know what his/her counter-parts are doing, how his/her actions and decisions will affect the other departments. This kind of information sharing was difficult in the early days. Now with the advancement in Information Technology this is possible. IT has a crucial role to play, both at the organizational level and at the departmental level. At the organizational level, IT should assist in specifying objectives and strategies of the organization. IT should aid in developing and supporting systems and procedures to achieve them. At the departmental level, IT must ensure a smooth flow of information across departments, and should guide organizations to adopt the most viable business practices. At this level, IT ensures seamless flow of information across the different departments and develops and maintains an enterprise-wide database. This database will eliminate the need of the isolated data islands that existed in each department and make the organization’s data accessible across the departmental boundaries. The enterprisewide data sharing has many benefits like automation of the procedures, availability of high quality information for better decision making, faster response time and so on.

1.1. EVOLUTION OF ERP
When companies were small and all the different managerial functions managed by a single person, the decisions were made, keeping in mind the overall company objectives. But as company grew, managing the entire operations become impossible for a single person. More and more people were brought in and the different business functions were given to different individuals. When organization become larger, each person hired people to assist him/her and the various departments as we see now, evolved. The size of the department began to increase more and more people were required to do the job. As the departments become large, they become closed and water tight. Each had their own set of procedures and hierarchy. People at most levels within a department, would just collect and pass the information upward. Thus information was shared between departments only at the top level. Most developers ended up developing need-based, isolated information systems that were incompatible and it is no wonder that IT implementations automated only the existing applications and not the business functions.

The system has work around the core activities of the organization, and should facilitate seamless flow of information across departmental barriers. Such as systems can optimally plan and manage all the resources of the organization and hence, they can be called as Enterprise Resources Planning (ERP) systems. An Enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve that goal. The group has some key functions to perform in order to achieve its goal. Resources included are money, manpower, material, and all the other things that are required to run the enterprise. Planning is done to ensure that nothing goes wrong. Planning is putting necessary functions in place and more importantly, putting them together. Therefore Enterprise Resources Planning or ERP is a method of effective planning of all the resources in an organization. There are many misconceptions about ERP. The first one is that ERP is a computer system. Yes, computer and IT are integral parts of an ERP system, but ERP is primarily an enterprise-wide system, which encompasses corporate mission, objectives, attitudes, beliefs, values, operating styles and people who make the organization. The second misconception is that ERP is for manufacturing organizations alone. This assumption is basically due to the way in which ERP was historically developed from the manufacturing methods such as MRP (Material Requirement Planning) and MRP II (Manufacturing Resource Planning.)

1.2. WHAT IS ERP?
(OCT 04,10M)

Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the integrated management of businesses by the effective use of management resources, to improve the efficiency of an enterprise. ERP packages are integrated (covering all business functions) software packages that support the above ERP concepts. Originally ERP packages were targeted at the manufacturing industry, and consisted mainly of functions for planning and managing core businesses such as sales management, accounting and financial affairs, etc. However in the recent years, adaptation not only to the manufacturing industry, but also to diverse type of industry has become possible and the expansion of implementation and use has been progressing on the global level. ERP software is designed to model and automate many of the basic processes of a company, from finance to the shop floor, with the goal of integrating information across the company.

Fig: Integration of information through ERP system

1.3. REASONS FOR THE GROWTH OF THE ERP MARKET
(APR 07, 09, 10; 5M)

There is no doubt that the market for the Enterprise Resource Planning (ERP) systems is in great demand. Industry analysts are forecasting growth rates of more than 30 % for at least the next 3 years. Now why are so many companies replacing their key business systems? The answer is : • To enable improved business performance o Cycle time reduction : the time required to contact other department is reduced. o Inventory reduction: As the data is integrated there is no need to re enter the data and the paperless transaction is done using EDI (Electronic Data Interchange). o Order fulfillment improvement: There is no conflicts between the departments like sales and production so order can be made on time. • To support business growth requirements o New Products and New Customers : we can grow our organization by implementing new Products in the market and get the new customers for that product. o Globalize the product: We can Globalize the product for International customers • To provide flexible, integrated, real-time decision support o Managers gets the integrated data of different departments at any time to analyze and to take important decisions at the right time. • To eliminate limitations in the legacy system: o Integration of the isolated departments o Decision support system o Availability of the right data at right time o Flexibility to change o Supporting latest technologies There are some of the reasons for explosive growth rate of the ERP market and the ERP vendors. As more and more companies are joining the race, the ERP vendors are shifting their focuses from big fortune 1000 companies to different market segments like medium sized companies and small companies. The future will see the battle for market share and mergers and acquisitions for strategic and competitive advantage. The ultimate winner in this race will be the customer, who will get the better products and better services at affordable prices.

1.4. THE ADVANTAGES OF ERP
(OCT 04, 05, 07, 08, APR 08; 7M)

Installing the ERP system has many advantages, some of the direct advantages include improved efficiency, information integration for better decision making, faster response time for customer queries, etc. And the indirect benefits include better corporate image, improved customer goodwill, customer satisfaction, and so on. The following are some of the direct benefits of the ERP systems.

Business Integration: The reason why the ERP packages are considered to be integrated, is the automatic data updation (automatic data exchange among departmental applications) that is possible among the related business components. Since conventional company information systems was isolated departmental functions, almost all were weak in terms of communication and integration of information. In the case of ERP packages, the data of related business functions is also automatically updated at the time of transactions occurs. For this reason, one is able to grasp business details in real time, carry out the various types of management decisions in a timely manner, based on that information. Flexibility: o Multilanguage: It supports different languages so that the company can work in the language they want.

If the items are shipped. To cope with company globalization and system unification. our organization has made 35% more profit then the year 2006. the information is passed onto sales. and the effect of their efforts on the overall success of the program. client/server technology. maintenance and expansion phases. will raise the productivity and profits of companies dramatically. so there should be different accounting for calculation of profits. they had to embrace the latest developments in the field of IT. FOR Example: Problem: In 2007. The implementation should be planned well and executed perfectly. the order entry clerk became an action initiator. Internet/Intranet. wages. The distribution module checks whether the item is in stock and if available. As soon as he enters the order into the system. be transformed into decision makers. the finance module prepares the invoice and sends it to the customer. e-commerce. Use of the latest technology: The ERP vendors are very quick to realize that in order to grow and sustain that growth. Employees who were earlier doing the work of recording information will. REASONS FOR THE FAILURE OF ERP IMPLEMENTATION ERP packages if chosen correctly. implemented judiciously and used efficiently. It is this flexibility that makes the in-corporation of the latest technology possible during system customization. But many companies fails in this because of a wrong product. this flexibility is essential. With the implementation of the good ERP system. So the system will help the manager to do the Planning and also to take better decision to achieve the company’s goal. The introduction of the ERP system will dramatically change the job descriptions and functions of many employees. they quickly adapted their systems to take the advantage of the latest technologies like open systems. Better Analysis and planning capabilities: With the Integration of Information. now in 2010 the company want same 35% increment in the profit margins. this is the important task of the managers to cope with. one can get any information from the enterprise system. The vendor should be good and his package should be the one best suited for the company’s needs. The end-user training should be done so that the people understand the system. All these action takes place automatically as soon as the order entry clerk enters the information regarding the order into the system. Therefore. then the manufacturing module is given the information. incompetent and haphazard implementation and inefficient and ineffective usage. the item is dispatched and information is sent to the finance module. To analyze all these information the manager can take a help of DSS (Decision Support System) system to take the departmental decision and EIS (Executive Information System) to take the decision at the organizational level. Thus order entry clerk is transformed from data entry operator to a decision maker whose action can trigger a chain of action. For example. one is able to give the decision maker the information they want thus enabling them to make better decisions. If the items are not in stock.• Multi currency: It also support different currencies so that if the company is globalize (multinational) then it could have branches in many countries and for this it should support different currencies. in the past an order entry clerk’s job was to enter the order that came to him. he will analyze all the departmental duties assigned that time. There should be good people who know the business. Because of this it became possible to utilize the decision support system and analysis of data from a variety of dimensions. . o Multiple accounting Standards: Organization can have multiple products and it can have extremely different way of business and information flow for different products. It is this quick adaptation to the latest change in information technology that makes the flexible adaptation to change in future business environments possible. so that the production can start. Solution: Manager will first analyze the data of 2007 from the Archive such that he will get the information on the tasks to achieve 35% increment. The customer is informed about the status of his order. Here ERP provide Multiple Accounting Standards for this type of company. distribution and finance modules. o • 1.5. overnight. etc. The ERP consultants should be good. general ledger and so on.

But the same employees can be trained in the new system and can work in more challenging and stimulating environments. For this also. So it is quite natural to have resistance from the employees. then the system will fail. . well in advance. Another factor is the fear of unemployment. If the employees are not given proper training. in advance.Many employees find this transformation difficult to accept. well in advance. as to what will happen and should be given ample time and training to make the transformation. even the best system will fail. So it is very important that the management should take the necessary steps. to remove the fear of. Without support from the company. When procedures become automated. the employees have to be told. and provide necessary training to their employees. people who were doing those jobs become redundant.

are available only to the top management as a summary reports which is not available to other departments. This transparency and information access ensures that the departments no longer work in isolation pursuing their own independent goals. The information about all the aspects of the organization is stored centrally and is available to all the departments. INTEGRATED MANAGEMENT SYSTEMS (OCT 07. The minimal information system consist of three elements People. Each of these departments are compartmentalized and have their own goals and objectives. Each sub system knows what the other are doing why they are doing it and what should be done to move company towards the common goal. Also sometimes the departmental objectives can be conflicting. So the information that is created or generated by the various departments. displays and responses produced by such systems provide information . the various departments end up pulling it in different directions. For example the sales and marketing people will want product variety to satisfy the varying needs of the customer. the production planning department. This is because one department does not know what the other does. The result is that instead of taking the organization towards the common goal. hardware. software. But the production department will want to limit the product variety to cut down the production costs. 2. 7M) An Information Systems is an open system that produces information using the inputprocess-output cycle. 7M) It is also called as Information-Reporting systems produce information products that support many of the day to day decision making needs of the management. the finance department. thus disrupting the normal functioning of the organization. communication networks and data resources that collects. the R&D department and so on. automating business process and functions and thus. transforms disseminate(spread information) in an organization. the sales and distribution department. which from their point of view are in line with the organization’s objectives. But in enterprise.CHAPTER 2 ENTERPRISE – AN OVERVIEW INTRODUCTION (OCT 04. 2. the purchasing department. So unless all the departments know what the others are doing and for what purpose. the entire organization is considered as a system and all the departments are its subsystems. 6M) What is an enterprise? An enterprise is a group of people with a common goal. People follow procedures to manipulate data to produce information. which has certain resources at its disposal to achieve that goal. In the traditional approach the organization is divided into different units based on the functions they perform such as manufacturing or production department. helping the organization to work and move forward as a single entity. graphs.1. The ERP system helps to accomplish this task by integrating the information systems. procedures and data. in most cases. these kinds of conflicts will arise.1. Reports. Each of these departments function in isolation and have their own systems of data collection and analysis. enabling smooth and seamless flow of information across departmental barriers. Management Information Systems (APR 08.1. charts. Today Information system is defined as an organized combination of people. collates.

he would have lost the valuable time that could have been better spent in decision making. APR 08. The company uses these integrated data for its analysis and decision making. collecting and analyzing the data can be difficult task. a business model consisting of the business processes is developed. So if all the information islands. No business executives or decision makers can take good decisions with the isolated data that he gets from the various reports produced by each department. These systems will produce different reports of varying detail that were specified when the system were built. which were functioning in isolation. There can no longer be isolated databases. taking the processes managing its facilities and materials as resources. All the data has to be from the . Based on the business model the ERP system is developed with the aim of providing the required information and necessary assistance to the various individuals. which cater to the needs of a particular department. 06.2. were integrated into a single system. The three fundamental characteristics of information are accuracy. and so on. the departmental information system and the departmental databases will have to go. the integrated data. Each department will have its own database and information systems. 2. The business model is usually represented in graphical form using flowcharts and flow diagrams. There will be an accounting system for an finance department. To survive. how they are related. The purchasing details are required for the finance department and so on. BUSINESS MODELLING (OCT 05. An organization cannot function as islands of different departments. he has to get the necessary reports from both systems and then correlate and combine the data.3.e. 6M) One of the most critical steps in the ERP implementation is the creation of an Integrated Data Model. relevancy and timeliness. objectives and strategic plans. the organization must always be on its toes. what are their interdependencies. 09. The production planning data is required for the purchasing department. From the business model. May be at the top management level the summary reports are being circulated to other departments also. One people in one department do not have any information about what is happening in the other departments. All these system will perform in isolation. it must be relevant for the decision maker and it must be available to the decision maker when he need it. we model the business as an integrated system. With the implementation of the ERP systems.that managers have specified in advance. 2. but these summary reports often fail in capturing the real picture. 09. Information is very important resource and is very critical in managing all the other resources. a production planning system for the manufacturing department. and so on. The second drawback is that these system gives only the information that they were designed to produce at the time they were built. 08. Because the system works in isolation. These systems lack the integrated approach. Based on the organizations goals. the data model is created. Thus business model is a representation of the actual business—what are the various business functions of the organization. 07. In business modeling. As we have seen earlier. then the impact of that would be dramatic. since getting information on more than one department can be tedious. These business processes are controlled by different individuals in the organization to achieve common goals. This method of information gathering has two major disadvantages. to help them perform their business processes more effectively and efficiently. Today the time available for an organization to react to the changing market trends is very short. OCT 09. an inventory management system for the stores department. Even if he collates the data and produces the information that he requires. The information had to be accurate. 5M) Business Modeling is a representation of the business as one large system showing the interconnections and interdependencies of the various subsystems and business processes. INTEGRATED DATA MODEL (APR 09. one of the advantageous of having ERP systems is that all the employees from the different departments get access to the data i. So if a person wanted some information which has to be derived from any of these two systems.

reflect the day-to-day transactions and should be updated continuously. So when designing the data model for the ERP system. That is the challenge and that is the advantage of integrated database and the integrated data model. The data model should reflect the organization and it should successfully depict and integrate the data structure of the entire organization. the database should give a snapshot of the organization. the sale is done and the goods are dispatched. At a given time. then database should reflect those changes. All these thing have to happen instantaneously and automatically. The integrated data model is derived from the business model. it should clearly depict the organization. The inventory should be reduced and the account receivable should be increased. For the integrated database to be effective. . the most important thing that should be kept in mind is the information integration and the process or procedures automation. This approach will reduce the data redundancy and provide updated information about the entire organization to all employees.integrated database. So if the order is entered.

ERP systems provide current status only.1. ERP systems serve an important function by integrating separate business functions— materials management. 07. 3. 7M) . ERP systems will have most of these technologies integrated into them. Data Mining. In this session we will see how each of these technologies are related to ERP systems.CHAPTER 3 ERP AND RELATED TECHNOLOGIES INTRODUCTION ERP is an abbreviation for Enterprise Resource Planning and means. BUSINESS PROCESS REENGINEERING (BPR) (OCT. tomorrows. Managers often need to look past the current status to find trends and patterns that aid better decision-making. Some of these technologies are: • • • • • • • • Business Process Reengineering (BPR) Management Information System (MIS) Decision Support System (DSS) Executive Information Systems (EIS) Data Warehousing Data Mining On-line Analytical Processing (OLAP) Supply Chain Management Out of the above technologies MIS. 06. distribution. help the employees to make better decisions. such as open orders. The data in the ERP application is not integrated with other enterprise or division systems and does not include external intelligence. the MIS or DSS will become redundant as their functions will be taken care of by the new systems and they will be slowly phased out from the scene. There are many technologies that help to overcome these limitations.08.04. However. APR. OLAP. to improve the efficiency of an enterprise. ERP systems have three significant limitations: • • • Managers cannot generate custom reports or queries without help from a programmer and this inhibits them from obtaining information quickly. from the viewpoint of the effective use of management resources.) are integrated. finance and accounting and others—into a single application. sales. 09. 05. These technologies. Once the ERP system and the other technologies (like Data Warehousing. when used in conjunction with the ERP package. DSS and EIS are forerunners of the ERP systems. and ERP vendors searching for ways to penetrate new market segments and expand the existing ones. which is essential for maintaining a competitive advantage. product planning. help in overcoming the limitations of a standalone ERP system and thus. With the competition in the ERP market getting hotter and hotter. etc. 08. the techniques and concepts for the integrated management of businesses as a whole.

As managers began to demand more and better information about the working of the organization. the amount that must be given as bonus. marketing. In enterprise the reengineering offers advantages like information technologies.. DECISION SUPPORT SYSTEM (DSS) (OCT 04. if the organization will not bother for these effects then no doubt organization will crash during the initial phase itself. computer network. The major differences between a management information system and a Data Processing system are: (OCT 07. This was the case with most other departmental information systems. MIS is a computer-based system that optimizes the collection." Information technology is one of the most important tools. APR 10. The MIS supports many functional areas (accounting. Management's information needs are supported on a more timely basis with the MIS (with its on-line query capability) than with a data processing system. manufacturing. the data processing systems evolved into management information systems. While undergoing BPR. Business engineering makes the organization more customer focused and responsive to changes in the market. transfer and presentation of information throughout an organization. 7M) In the past. and so on. For example. This is achieved by reshaping corporate structure around business process. MIS is flexible and can be adapted to the changing needs of the organization. the overtime allowances. which can be used for making changes in business process.3.. 3. 6M) . service and speed. through an integrated structure of databases and information flow. 09.T. quality. APR 10. 3. 06. MIS uses an integrated database and supports a variety of functional areas. solution on employees. 06. a human resource MIS system is capable of predicating the average number of worker sick days. 08. The main characteristics of the Management Information System are: • • • • The MIS supports the data processing functions of transaction handling and record keeping. print payroll checks and keep totals of annual wages and deductions. most payroll systems were data processing systems that did little more than process time sheets..2. tactical and strategic levels of the organization with timely. MIS caters to the information needs of all levels of management whereas data processing systems focus on departmental-level support. MIS provides operational.Dr Michael Hammer defines BPR as ". etc.5M) • • • • The integrated database of the MIS enables greater flexibility in meeting the information needs of the management. but for the most part structured information (ad-hoc query facility is not available). powers of DBMS. any business organization should consider the effects of I. telecommunication and interfacing of computers at different locations. the fundamental rethinking and redesign of business processes to achieve improvements in performance such as cost.) whereas data processing systems tend to support a single functional area. MANAGEMENT INFORMATION SYSTEM (MIS) (OCT 05.

So there is no way the system can anticipate what the manager wants. planning and forecasting models. Here. instead a DSS supplements the MIS. A DSS does not replace the MIS. A DSS can help close the information gap and allow managers to improve the quality of their decisions. An EIS takes the following into consideration: • • • • • The overall vision and mission of the company and the company goals Strategic planning and objectives Organizational structure Crisis management/Contingency planning Strategic control and monitoring of overall operations . DSS focuses on decision-making. DSS also help in removing the monotony and tedium of gathering and analyzing data. structured and routine. DSS’s are capable of helping the managers in making such decisions. He might look at various facts like the availability of raw materials. and the need for complex information analysis required for such decision-making. Top-level executives and decision-makers face many problems and pressures. skilled personnel. In many cases. Decision support systems were created to assist managers in this task. and so on. However. There are distinct differences between them. 4th generation languages and even artificial intelligence. user-friendly can be used by the decision-maker with little or no assistance from a computer professional. decision-makers. The analysis of such complex decisions which involve many factors can be difficult for a human being. 07. the average machine down time. EXECUTIVE INFORMATION SYSTEM (EIS) (OCT 05.Managers spend a lot of time and effort in gathering and analyzing information before making decisions. DSS is interactive. For example. 3. a manager wants to reduce cycle time. based on the criteria given by the decision-maker. An EIS is concerned with how decisions affect an entire organization. The main characteristics of a DSS are: • • • • A DSS is designed to address semi-structured and unstructured problems. helping the decision-makers to choose between alternatives. the role of the DSS is to help managers in getting the information they want in the way they want. DSS facilitates the decision-making process. EIS is a decision support system especially made for senior-level executives. MIS emphasizes on planned reports on a variety of subjects. In today's competitive world. simulation capabilities and other analytical tools available to the decision-maker. EIS can be considered as a better and sophisticated DSS. The DSS mainly supports decision-making at the top management level. Decision support systems are interactive information systems. the DSS hardware and software employ the latest technological innovations. DSS makes general-purpose models. to produce and present information targeted to support management in the decision-making process. scheduled. especially at the top management levels. led to the evolution of decision support systems. DSS is quite unstructured and is available on request. 06. reaction times are shrinking and time to make decisions is very less. MIS is constrained by the organizational system. DSS are designed to support decision-making processes involving semi-structured and unstructured problems. These types of decisions. Some decision support systems can automatically rank the alternatives. are often confronted with complex decisions.4. 5M) The line dividing DSS and EIS is very thin. DSS is immediate and user-friendly. To do this. They have to make the right decisions at the right time to take the company forward. MIS is standard.

it should be removed from the operational databases. flexible and customizable and use the latest technological innovations. It is evident from the figure that even though the operational data volume is nearly the same each year. the daily transactional data can be archived. the archived data is useless. the amount of data will increase and this will affect the performance of the ERP system. Successful EIS are easy to use. performance in the operational database will go on increasing. it can create a lot of problems. it is one of the most valuable resources of the organization. Figure 3. 06.1 shows what happens if the data is not archived. Figure 3. it is evident that we should separate the operational data from the . trade groups.2 Data volume vs. When I say 'the use is over'. 08. and so on. A high degree of uncertainty and a future orientation is involved in most executive decisions. 09. 3. On the contrary. 8M) If operational data is kept in the databases of the ERP system. So it is better to archive the operational data once its use is over. since the data is not archived. it does not mean that. the total amount of data that is stored > Fig. From the above discussions. the performance of the database and the related applications decreases.2 shows the effect of keeping this huge amount of data in the operational database. DATA WAREHOUSING (OCT 05. APR 09. news gathering agencies.Executive decision-making also requires access to outside information from competitors. However once the operational use of the data is over. As time passes.5. For example. governmental regulations. 3. once the financial year is over. It is clear from the above graph that as the volume of the data in the database increases.

SHARED means that the system implements all . 6M) OLAP can be defined in five words—Fast Analysis of Shared Multidimensional Information. 3. Data mining is the process of identifying valid. But this data is a very valuable resource and is too precious to be kept in some archive. Advances in technology and changes in the nature of business have made many of the business analysis processes much more complex and sophisticated. academic institutions and commercial organizations create and store huge amounts of data each day.09.06.6. It is in this situation that a data warehouse comes in handy. DATA MINING (OCT. Research organizations. because if the non-operational data is archived. 3.non-operational data.10. the major bottleneck of converting this data into effective information is the difficulty faced in extracting knowledge about the system from the collected data. including multi-dimensional analysis. The reasons to separate the operational data from the analysis data have not significantly changed with the evolution of the data warehousing systems. there is little or no use for it. 8M) Powerful systems for collecting data and managing it in large databases are available in most organizations.7. Modeling the investigated system discovering relations that connect variables in a database are the subjects of data mining. It becomes impossible for human analysts to cope with such overwhelming amounts of data. 09. While data mining does not eliminate human participation in solving the task completely. who is not a professional in statistics and programming. and keep it easy enough for the target user. with the simplest analysis taking no more than one second and very few taking more than 20 seconds. One additional benefit of 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. today's data warehousing systems support very sophisticated online analysis. to manage the process of extracting knowledge from data. except that now they are considered more formally during the data warehouse building process. APR. ON-LINE ANALYTICAL PROCESSING (OCT. In addition to producing standard reports. FAST means that the system is targeted to deliver most responses to users within about five seconds. novel. ANALYSIS means that the system can cope with any business logic and statistical analysis that is relevant for the application and the user. it significantly simplifies the job and allows an analyst. potentially useful and ultimately comprehensible information from databases that is used to make crucial business decisions. APR.06. 07. I am not using the term archive data. Two other problems that surface when human analysts process data are: • • The inadequacy of the human brain when searching for complex multifactorial dependencies in the data The lack of objectiveness in analyzing the data. However.

the security requirements for confidentiality (possibly down to cell level) and.data. planning. there is a need for a mechanism through which these different functions can be integrated*together. OLAP describes a class of technologies that are designed for live ad-hoc data access and analysis. 7M) A supply chain is a network of facilities and distribution options that performs the function of procurement of materials. Simply put. including full support for hierarchies and multiple hierarchies. Traditionally. Supply chain management is a strategy through which such integration can be achieved. APR. and the distribution of these finished products to customers. The result of these factors is that there is not a single. These multidimensional views are supported by multidimensional database technology and provide the technical basis for calculations and analysis required by Business Intelligence applications. integrated plan for the organization—there are as many plans as businesses.8. SUPPLY CHAIN MANAGEMENT (OCT. marketing.08. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. INFORMATION is refined data that is accurate. concurrent update locking at an appropriate level. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. OLAP has become synonymous with multidimensional views of business . These organizations have their own objectives which are often conflicting. transformation of these materials into intermediate and finished products. if multiple write access is needed. Clearly. . manufacturing. Supply chains exist in both service and manufacturing organizations. 3. distribution. While transaction processing (OLTP) generally relies solely on relational databases. Marketing's objective of high customer service and maximum sales revenue conflict with manufacturing and distribution goals. MULTIDIMENSIONAL means that the system must provide a multidimensional conceptual view of the data. and the purchasing organizations along the supply chain operated independently.08. 10. timely and relevant to the user. although the complexity of the chain may vary greatly from industry to industry and firm to firm.

practitioners expanded closed loop MRP to provide the ability to translate the operating . However. so manufacturers could change plans when necessary.1. Eventually. MRP systems can detect when the due date of an order—the date the order is scheduled to arrive—is out of alignment with its need date— the date the order is actually required. manufacturers viewed MRP as a better method for ordering components than the independent demand inventory models they had been using during the 1950s and 1960s. because it provided feedback from the execution function to the planning functions. even after the orders have been released to the shop floor or outside vendor.CHAPTER 4 MANUFACTURING PERSPECTIVE 4. During the 1970s and 1980s. Tools were developed to support the planning of aggregate production levels and the development of anticipated production schedules. The expanded MRP system became known as closed loop MRP. MRP provides a method that helps keep order due dates valid. Systems to aid in executing the plans were incorporated—shop floor control for the 'in-house factory' and vendor scheduling for the 'outside factories'. techniques for helping to plan capacity requirements were tied up with MRP. it has evolved into a comprehensive priority planning system. MATERIALS REQUIREMENT PLANNING (MRP) Initially.

etc. An MRP system requires 3 types of information: • • • Master Production Schedule (MPS) Bill of Material (BOM) Inventory Records (IR) The MPS is a detailed production schedule for finished goods or end items that provides the major input to the materials requirement planning process. The new system.2. which was called Manufacturing Resource Planning (MRP-II). Associated with each finished product is a BOM. safety stock. subassemblies. and the order in which the components are assembled. Fig : Bill of material for a chair . MRP logic uses the MPS. and so on. the quantity required.plan—expressed in manufacturing terms such as units and kilograms—into financial terms —rupees—and have the capability to simulate the effects of various plans in terms of both units and rupees. wheels. base unit. adjuster mechanism. The entire set of BOMs for the company's finished products is called the BOM file. parts. consider an office chair. 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 release dates and the due dates taking into consideration the lead-times required to produce or procure the components and by recognizing the order in which they are assembled into the finished product. 4. For example. To manufacture the chair the wheels. base unit.— comprising the finished product. stock-on-order. re-order level. there are 11 of them for this chair. and fasteners. which describes the dependent demand relationships that exist among the various components—raw materials. which also contain planning factors like lead-time. back cushion. The BOM identifies all components used in the production of an end item. to which the base cushion and back cushion are attached. BILL OF MATERIAL (BOM) A BOM defines the relationship of components to end items. All the fasteners are identical. and adjuster mechanism are assembled into a chair frame. The chair is composed of a seat cushion. was a comprehensive approach for the effective planning of all the resources of a manufacturing organization. the production facility should have the capacity to complete the orders on time. If the MRP process is carried out in conjunction with capacity planning. Inventory status data for each product or component such as stock-on-hand. are provided by the inventory records. etc.

3. The lower level components are called child components. are components. MTS companies rely heavily on market analysis and . At the opposite end of the spectrum is the make-to-stock (MTS) company. The MTO company also bases its production planning on firm customer orders. A company can use MRP-II to simulate the effects of different master production schedules on material usage. It is now common for suppliers to directly access a customer's MRP-II system to receive up-to-date information on the customer's planned material needs. labor. The term. and capital requirements. For example. This company does not begin processing the material for the component or product until it has received an order from the customer. Shop floor control information is used to track workers' hours for payroll purposes. whether they are raw materials or component parts or subassemblies. MAKE-TO-ORDER (MTO) AND MAKE-TO-STOCK (NITS) One way to classify the manufacturing operations is by the amount of processing the product requires. Information in the MRP-II system is used to provide accounting with information on material receipts to determine accounts payable. after the company receives an order from a customer. MRP systems maintain accurate inventory information. in meaningful financial terms. At one end of the processing spectrum is the make-to-order (MTO) company. a company can expand MRP to meet the requirements of both the systems. MRP-II systems provide information that is useful to all functional areas and encourage cross-functional interaction.4. In the above figure. 4. MRP-II provides the purchasing department with more than just purchase requisitions. Combining this information with cost data. This allows sales personnel to have accurate information on product availability and gives them the ability to give customers accurate delivery dates. it became clear that MRP systems maintain extensive information that can be used for other company functions. As computer technology and MRP systems developed. MRP-II systems increase a company's efficiency by providing a central source of management information.All items appearing below the final product (office chair in this case) in a BOM. or the company ships the product 'off-the-shelf from the finished goods inventory at the factory or at a distribution centre. allows accounting personnel to have accurate inventory information. all items with the exception of the 'Office chair'. In some cases. Rather than having separate production and accounting systems. MRP-II is an expansion of closed loop MRP for managing an entire manufacturing company. MRP-II supports sales and marketing by providing an order-promising capability. Either the customer purchases the products directly from the inventory at a retail outlet. Manufacturing is the central function in a manufacturing company. MRP-II supports financial planning by converting materials schedules into capital requirements. The information required to successfully plan and schedule production is valuable to the other (supporting) functions in the company. 4. that is composed of components from the next lower level in the BOM.parent component describes a component at one level in the BOM. The long-range planned order release schedules can be used to provide the purchasing department with information for developing long-range buying plans. are referred to as components. This type of manufacturing operations is practiced when the company competes on the basis of product customization and serves its customer base by providing unique and/or highly specialized items. which manufactures products and places them in inventory before it receives customers' orders. Order promising is a method of tying customers' orders to finished goods in the MPS. the company may not even procure the material and components until after it receives the order. MANUFACTURING RESOURCE PLANNING (MRP-II) MRP was originally developed as a computer system that was limited to materials planning.

air conditioning.5. at a cost) environments. ASSEMBLE-TO-ORDER (ATO) Another variation of the manufacturing operations is the assemble-to-order (ATO) company. product customisation and flexibility. the manufacturer specifies the exact production schedule for the automobiles. . depending upon the customer's preferences. cloth or vinyl seating. So the manufacturer cannot keep anything in inventory. and so on. Obviously. the texture and feel of the cloth. Thus.7. The schedule is based on the options ordered by the customers—automatic transmission or manual transmission. This approach shortens the time between placement of the order and delivery of the product— cycle time 4. option modules according to the forecasts it has made and then assembles a specific combination. for example. The assemble-to-order company manufactures standardized. the size of the collar and so on will differ from one customer to another. After receiving orders from a host of dealers. CONFIGURE-TO-ORDER (CTO) Along the broad spectrum of make-to-order manufacturing. standard or digital control panel. there is a growing convergence between strictly assemble-to-order (limited options and features) and completely engineer-to-order (just about anything goes. after receiving the customer's order. configure-to-order (CTO) manufacturers are able to simplify the order entry process and retain engineer-to-order (ETO) flexibility. This evolving environment is often referred to as configure-to-order. he will have to order only once the customer has given his/her specifications. the color of the threads. Products are made for each customer and even the minute details. the major processing that remains when the orders come in is assembly. The classic example is the automobile manufacturer. ENGINEER-TO-ORDER (ETO) Yet another variation of the manufacturing operations is the engineer-to-order (ETO) company. or package of modules. without maintaining bills of materials for every possible combination of product options.demand forecasting in planning the production of their products with respect to the product mix and volume. The expensive clothing of the 'bold and beautiful' is an example of this kind of production. The engineer-to-order company is the ultimate in product variety. 4. Many components for assembling the automobiles would have been ordered or started into production before receiving the customer's order. based upon demand forecasts.6. Using a rules-based product configuration system. anything will be manufactured as per order—but at a price. the cost of production will be highest in this mode of production. leather. 4. In this mode of operation.

etc 5. The number and feature of the modules vary with the ERP package. The most common module we will see are: • • • • • • • Finance Sales & Distribution Human Resources Plant Maintenance Quality Management Material management Manufacturing management. FINANCE MODULE .CHAPTER 5 ERP MODULES INTRODUCTION All ERP packages contain many modules.1.

Within the ERP system. APR. Because the ERP system automatically links related areas. This is true because the financial functionality is tightly integrated across all business areas and all geographic areas. the system reduces quantity values in inventory and simultaneously. Legal Consolidation) (Investment Planning/Budgeting/Controlling. all areas work in concert. Through active integration with business processes in logistics and in the accounting sub-ledgers. Business Planning and Budgeting. You enter your data only once. currencies. and charts of accounts. Special □ Investment Management □ Controlling □ Treasury Ledgers. Hundreds of business processes are covered in these systems. The finance modules of most ERP systems will have the following subsystems: □ Financial Accounting (General Ledger. Most of the Financial Accounting modules comply with international accounting standards. such as GAAP and IAS. 6M) The General Ledger (GL) is essential to the financial accounting system and to strategic decision-making. from materials management to human resources to logistics. Activity-Based Costing. languages.a.1. because the most efficient way to get your enterprise to where you want it tomorrow is to know exactly where it is today.04. the GL serves as a central pool of financial data for financial . not numbers from records closed a month ago.1. gives you the ability to centrally track financial accounting data within an international framework of multiple companies. The Financial Accounting Module of an ERP system. Accounts Receivable /Payable. when raw materials move from inventory into manufacturing. For example. This tight integration includes all the other different modules. whether your enterprise stretches across a room or around the globe. Fixed Asset Accounting. Financial Accounting The objective of a good financial accounting system is to provide company-wide control and integration of financial information that is essential to strategic decision-making. In today's business enterprise. Funds Management) □ Enterprise Controlling (Executive Information System. creating a new level of efficiency in handling your financial data. or even a week ago. Treasury Management. 5. Logistics. 06. Profit Centre Accounting) 5. Whatever be the financial goals of your organization. subtracts values for inventory accounts in the balance sheet. but also Human Resources. General Ledger (OCT. These ERP systems include not only financial application components. And you need to know that this same 'today's' data represents every segment of your organization's activities. Market Risk Management. the financial application components of the ERP solutions work hand-in-hand to improve the bottom line. Profitability Analysis) (Cash Management. They also fulfill the local legal requirements of many countries.This section provides an overview of the financial solutions in most of the ERP packages. 05. Business Workflow and links to the Internet. Product Cost Accounting. Depreciation Forecast/Simulation/Calculation) (Overhead Cost Controlling.1.10.1. This is essential. it eliminates the need to repeat procedures. you need to know that your financial decisions are based on today's data. The finance modules of most ERP systems provide financial functionality and analysis support to thousands of businesses in many countries across the globe.

that can be used in planning. areas in Sales and Distribution and Materials Management. Asset Accounting serves as a sub-ledger to the General Ledger. enterprisewide credit management with workflow integration. The GL provides document parking.1. The Legal Consolidation sub-system is closely linked to the Financial Accounting system.1. and interactive reporting. and parallel views of data. The General Ledger supports all the functions needed in a financial accounting system. in both the general ledger and the managerial accounting applications. and an integrated financial calendar for automating periodic activities. posting.2 Controlling . the origin of centrally stored data can still be traced at any time by drilling down on data from a given transaction. This includes flexible structuring of the chart of accounts at the group and company level. when related processes take place in other modules. to processing payments and bank transactions. and document parking with various approval procedures. reporting. Legal Consolidation also allows you. it also stores information on due dates to credit the suppliers account. elimination of time-consuming reconciliation. document management. Asset Accounting also provides integration with Plant Maintenance for management of machinery and equipment. distributed application scenarios. mass processing with workflow integration. providing detailed information on asset-related transactions. management of leased assets and assets under construction. real-time simultaneous update of sub-ledgers and the general ledger. This eases the workload of the staff and reduces data entry errors. In addition to the consolidated statements required by law. With these views you can generate reports about legal entities or segments of your business.1. permitting direct data transfer.reporting as well as for other accounting areas. Accounts Receivable and Payable transactions are performed automatically. By creating combinations of entered data. 5. This module uses standard business rules for procedures ranging from data entry and reporting. 5. to create multiple views of your consolidation data. The system also provides summary information from other components at a user-defined level of detail. 5.d Legal Consolidation Consolidated financial statements need to be integrated effectively with operational data at the individual company level. including automatic integration with cash management and flexible reporting using customer and vendor information systems. These sub-ledgers are integrated.c Asset Accounting Asset accounting.1. Accounts Receivable and Payable functions include Internet integration. where financial data originates. allocation. By using different valuation methods.1.b. Within the Financial Accounting system. 5. from individual statements into the consolidated report. However.1. you can plan balance sheet strategies to suit the company's requirements. The module also provides. you generate data summaries. payment automation with EFT and check processing.1. It also provides the information about all outstanding debits (amount to be given) should be return to the supplier after purchase of raw material. ERP systems offer a financial overview of global business partner relationships. full support for EDI processing. both with the General Ledger and with. distribution and reporting. Accounts Receivable and Payable This module provides financial information about all outstanding credits that we have given to our customers the due dates for the credits and also the credit limit to particular customer. in the Accounts Receivable and Payable functions. manages the company's fixed assets.

In addition.2. the values in Product Cost Controlling. The system automatically determines the utilization of business processes by products. The Activity-Based Costing module. 5. which cannot be directly assigned to either the products manufactured. substantially enhances organizational transparency in overhead areas. and the plan costs resulting from Product Cost Planning.1.2. serve in valuating warehouse stock and for contrasting revenues received with costs. allowing ongoing costing calculations at any time. Costs are assigned to the sub-areas of the organization where they originated.a Overhead Cost Controlling Many organizations experience a significant increase in the percentage of indirect costs.1. in addition to functions and products. transparency is often lacking in overhead cost areas. based on cost sources and enabling assignments. The system offers a wide variety of methods for allocating posted amounts and quantities. Follow-up calculations determine and analyze the variances between actual manufacturing costs. This system can monitor and automatically check budgets assigned to each measure.b Cost Centre Accounting Cost centre accounting analyses where overheads occur within the organization.d. and other cost objects based on the cost drivers taken from the integrated accounting environment.1. Seeing costs from a new perspective. 5.1. 5. the costs arising from manufacturing a product. This. significantly reduces the effort involved in maintaining a business process model in a separate system. 5. While cost monitoring and optimization may be quite advanced in production areas. Overhead Orders Overhead orders subsystem collects and analyses costs. or providing a service. Integration with the logistics components results in a logistical quantity flow.f. Plan and standard values. the allocation of great many costs to products. is a response to the growing need for monitoring and controlling crossdepartmental business processes.The controlling system gathers the functions required for effective internal cost accounting. It offers a versatile information system. should come before the goals of individual departments. customers.2.2. In particular.c.e. . Activity-Based Costing The goals of the entire organization. which were not previously possible." In addition. based on individual internal measures. The Overhead Cost Controlling subsystem focuses on the monitoring and allocation of overheads. 5. with standard reports and analysis paths for the most common questions.1. that provides instant information on actual cost object costs. 5. when it comes to business process reengineering. are crucial for determining the lowest price limit for which a product is profitable. Product Cost Controlling Product cost controlling module determines. activity accounting permits. Cost Object Controlling Cost object controlling helps you monitor manufacturing orders.1. or to the services rendered.2. Simulations illustrate the effects of changes in production methods on the cost of goods manufactured.2. there are features for creating custom reports to supplement standard reports.

8M) You can gain a significant competitive advantage by efficiently managing the short. selecting customers. developing conditions and choosing distribution channels.4. Planned depreciation values for investment measures and appropriation requests. The system helps you monitor. The system recalculates expected depreciation amounts whenever planning data is updated.5. frames important decisions in areas such as determining prices. debiting the correct costs to the asset under construction. the investment measure can be settled to various receivers by line item.2. that is. and long-term payment flows and the resulting risk exposure.1. You enter detailed plan values in the appropriation request. planned costs. distribution channels and business areas—and evaluate it. Profitability Analysis is the last step in cost-based settlement. between products. medium. and provides consistently up-todate values. orders. the investment measure also benefits from all of the required asset accounting functions. Information from Profitability Analysis. This kind of settlement ensures a complete integration with business planning and control.g. when the request is approved for implementation. you enter the application for the spending project as an appropriation request. You transfer the data from the appropriation request. As part of sales controlling. The system automatically separates costs requiring capitalization from costs that are not capitalized. and actual costs already incurred from internal and external activities. according to contribution and revenue margins. for calculating overhead and interest.07. Asset accounting provides precise proof of origin for all transactions affecting acquisition and production costs. sales organizations. You define your own evaluation and approval process. during which the system keeps a detailed history of the status of the appropriation request. Investment Management module recognizes the importance of the asset accounting aspects of investment measures. 06. These internal orders or projects. customers. provide the means for actually carrying out the capital investment. and thereby avoid.1. Tasks such as . and its different variants. As a result of subsequently assigning specific investment measures (internal orders or projects). At its completion. 7M) Investment management provides extensive support for investment processes right from planning through settlement. Treasury Module (OCT. Settlement is both flexible and almost fully automatic. and for handling other related tasks. Depending on their complexity. they serve as the objects for collecting primary and secondary costs. 5. The investment program allows you to distribute budgets^ which are used during the capital spending process. 5. Investment Management (OCT. where revenues are assigned to costs according to the market segment.1. For different accounting needs. can be transferred directly to ongoing overhead cost planning.04. Budgeted balance sheets and cost planning are always based on current values. departmentwise. to positions in the hierarchy. Investment Management provides tools. In the initial stage of the capital spending process. you are kept up-to-date about available funds. for managing down payments and commitments. As the result of having an asset under 'construction assigned to it. for example. to the investment measure. investment measures that need to be monitored individually can be represented either as internal orders or projects. You can define an investment program hierarchy using any criteria—for example. for use in the pre-investment analysis. the system can use different capitalization rules for making the split.3. budget overruns. Investment management facilitates investment planning and budgeting at a level higher than that needed for specific orders or projects. Profitability Analysis Profitability analysis subsystem examines the sources of returns. You can define any market segment—distinguishing. enabling you to plan and manage your capital spending projects right from the earliest stage.

4. currency. The company's payment transactions are grouped into cash holdings. such as securities account transfers or corporate actions relating to securities. Position management functions.short-term monitoring and concentration of bank account balances. Cash Management. medium-term planning. and forecasting of incoming and outgoing resources in accounts receivable and payable.b. underline the importance of integrating information from various company divisions.1. positions and portfolios. from trading to transferring data to Financial Accounting. are also supported in the back office area. Cash Management also identifies.1. 5. and supplies the data required for managing short-term money market investments and borrowing.4. The process involves a complex feedback loop encompassing data collection. Treasury Management In your role as treasurer. or foreign exchange transactions. This process dovetails closely with other treasury and corporate functions. which also offers flexible payment processing functions in addition to valuation and accrual/ deferral methods. to a long-term view of areas such as materials management and sales. Linking these operating divisions to realized and planned financial transactions and positions in Treasury. The general ledger is updated in the accounting area. For short-term liquidity and risk management. Cash Management also monitors and controls incoming and outgoing payment flows. you enter the additional data required for processing deals (such as account assignment and payment details) and generate automatic confirmations. central risk control station with monitoring and management functions. The Cash Management component thus ensures that all information relevant to liquidity is available to you for analysis purposes. As a result. This also ensures full integration of Treasury ir*to other modules of the system. Depending on the time period under review.a. portfolio and risk management. and risk positions through all the divisions in the company. a distinction is made between cash position. before implementing concrete decisions in the form of financial instruments in Treasury Management. allows you to analyse financial transactions for a given period.c. option price calculator). Cash Management provides information on the sources and uses of funds to secure liquidity inorder to meet payment obligations when they become due. In back office processing. Market Risk Management acts as an integrated. is an absolute must. which pools all cash flows from the business sectors. various organizational structures can be represented in the system. risk measurement. exercising rights. By using common organizational elements throughout. you can use the money market. The Treasury component provides you with a basis for effective liquidity. The trading area contains functions for recording financial deals. Market Risk Management Market risk management plays a vital role within Treasury. such as sales and . 5. analysis and simulation as well as active planning of financial instruments. cash inflows and cash outflows. performing evaluations and calculating prices (for example. such as a central enterprise-wide treasury department or 'in-house banks'. Securities and loans come into play in the medium and long-term. has a significant impact on the company's success. in ensuring your company's competitiveness. Such integration also facilitates management and control of cash flows. you> take the results of your current liquidity. or to eliminate currency risks.1. Derivative financial instruments facilitate active management of interest rate and currency risks. The Treasury Management component offers functions for managing financial deals and positions.4. and records future developments for the purposes of financial budgeting. short-term cash management and medium and long-term financial budgeting. and risk positions and consider the conditions prevailing on the money and capital markets. Cash Management The cash management subsystem. 5. Access to information on current and future cash flows and on financial deals already processed. Treasury Management also supports flexible reporting and evaluation structures for analysing financial deals. creating a basis for the necessary cash management decisions. to smooth out liquidity squeezes and gluts.

using simulated transactions. The system enables you to control your various funds commitments and determine how much of your budget has already been utilized via availability checking. Analyses by responsibility area and commitment items allow you to identify any budget bottlenecks. This component integrates data from other ERP components. and Profit Centre Accounting.distribution or purchasing. By simulating market data. while meeting internal objectives for growth and investment. Funds Management Funds management subsystem supports your funds management process from budgeting all the way through to payments.b. as you require.1. Budgets are entered for areas of responsibility that can cover as many management levels. The component provides various measurements for analysing and assessing interest rate and currency risks. Funds centres and their hierarchical structure provide a base for top-down budgeting and represent responsibility areas within budget control. Furthermore. and provides extensive analysis functions for budget monitoring. including monitoring expenditures.1. budget release and tracking.5. Enterprise Controlling Enterprise controlling comprises of those functions that will optimise shareholder value. The drill-down reports can also be made available in the graphical report portfolio for less experienced users.d.4. 5. you can analyze the data interactively.5.5.1. 5. The information system can supply you with information at any time. You can also measure and compare the impact of alternative hedging strategies. where. This module automatically transfers data about investment requirements from transaction applications. Consequently. Executive Information System The executive information system provides an overview of the critical information necessary to manage the organization. on when. activities. Drill-down reporting and report portfolio are available to evaluate and present the data. Business Planning and Budgeting. 5. 5. This modules usually include executive-Information System. In drill-down reporting. uploaded via data feed.1. and financial transactions or positions. and how your funds commitments arose. Profit Centre Accounting . This module also supports central investment planning. such as return on investment. and non-ERP data sources both inside and outside the enterprise. The report portfolio is aimed at users with basic knowledge of the system who wish to access information put together for their specific needs. Exceptions can be defined in order to highlight areas of concern. you can determine the risk structure of 'what-if analyses (such as crash scenarios or worst case scenarios).a. 5. all financial transactions managed in Treasury Management can be evaluated together witlTthe cash flows generated by the various operating divisions. effective rate and effective yield calculations are based on up-to-the-minute market data. resources and revenues. Business Planning and Budgeting Business planning and budgeting supports the management teams of business units and groups in the calculation c "■ business targets. Consolidation.1. forms the basis.6. Mark-to-market. all cash flows from the company's operating business can be accessed for the purposes of risk management.

It is also possible to analyze selected balance sheet items by profit centre and use them for calculation of ratios (such as ROI). companies need an integrated and flexible enterprise system that supports all aspects of their business with state-of-the-art functionality. emphasize the integration aspect of corporate planning. the one thing companies can count on is rapid change—and the new opportunities and challenges that change is sure to bring. while evolving technology compresses product life cycles and forces companies to adopt new technologies or risk losing market share.Profit centre accounting analyses the profitability of internal responsibility centers. To keep pace with these rapid changes. A company's organizational structure is represented in the form of a profit centre hierarchy. Profit centre related postings can be analyzed through the system's standard reports and facility. 5. extended and altered in this module. companies' are . Asset Management. New competition pushes businesses to achieve higher levels of service. shrinking cycle times and the accelerating pace of technological innovation. to create custom reports for special analyses. as plans from other application areas can be combined. SALES AND DISTRIBUTION In today's global business environment.2. with the profit centre as the smallest unit of responsibility. in particular. Materials Management. There is also a provision to provide profitability information to appropriate management and controlling departments. Inquiry Quotation Sales Contract Order Shipping Delivery MATERIAL MANAGEMENT Billing Invoice FINANCIAL ACCOUNTING Fig: Sales and Distribution Module With today's business environment characterized by growing competition. and Sales and Distribution. as well as have the ability to incorporate existing systems while extending its reach to the Internet and e-commerce. All business transactions in Financial Accounting. This innovative solution should upgrade effortlessly and interface easily with third-party applications. Profit centers. are automatically reflected in Profit Centre Accounting. In this ever-changing environment. which affect profits. Profit centre planning is part of total corporate planning. keeping a competitive edge means being able to anticipate and respond quickly to changing business conditions.

In helping business to 'beat them on delivery'. Many of these systems are tightly integrated with the Distribution Requirements Planning (DRP) engine of the 'for just-in-time' deliveries. The sales and distribution module very actively interacts with the Material Management and Financial Accounting modules for delivery and billing. The following are the sales related business transactions: • Sales queries. This integration enables the mapping and supply of single-site or multi-site organizations and the definition of relationships in a company's internal supply chains.increasingly being forced to streamline business processes. such as contracts and scheduling agreements • Delivery/Shipment • Invoicing/Billing • After sales support During sales order processing. The data that results from these basic functions (for example: shipping dates. the sales and distribution modules of many ERP vendors offer a comprehensive set of best-of-breed components for both order and logistics management. Developing precise logistics planning for just-in-time deliveries. in some cases. prices and discounts) is stored in the system where it can be displayed and. changed manually during subsequent processing. Here. In a world in which it is no longer enough to simply have the best product. a Sales and Distribution module will contain the following subsystems: • Master Data Management • Order Management • Warehouse Management • Shipping • Billing • Pricing • Sales Support • Transportation • Foreign Trade . confirmed quantities. these functions may be completely automated or may also require some manual processing. these companies are focusing on core competencies and closer partnerships over the whole supply chain. Typically. 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. the following basic functions are carried out: • Inquiry handling • Quotation preparation and processing • Contracts and contract management (order management) • Monitoring the sales transactions • Checking for availability • Transferring requirements to materials planning (MRP) • Scheduling the delivery • Calculating pricing and taxes • Checking credit limits • Invoicing /Billing • Creating printed or electronically transmitted documents (confirmations. this system can also generate replenishment orders by using defined warehouse requirements. such as inquiries and quotations • Sales orders • Outline agreements. and so on) Depending on how your particular system is configured.

contracts and billing. 5. 5.5. 09. This information is made available to the decision makers whenever required. These applications allow a company to manage sales operations quickly and efficiently and provide comprehensive solutions for the management of quotes. prices and customer discounts.a. customers. Intelligent pricing and discount strategies that are accompanied by simulation capabilities to support 'what-if scenarios and are available for multi-currency environments. services and business partners provides the basis for sales processing. Master data management system also provide the automatic generation of reports. 7M) Credit Checking. With companies today being confronted with increasingly demanding customers and increasingly complex buying and selling organizations.2. The system can also customize and streamline order entry procedures to the specific requirements of both an individual business and its customers. 5. Master Data Management This is module which keeps all the information about products. if so.2. Built-in contract and release management system evaluates whether or not customer contract agreements are being met with and incorporates multilevel customer credit reviews and substantial order . Pricing & Discounting Inventory Availability Checking Material Management. to identify exactly where and when that product is available. On-line Available-to-Promise calculations ensure that there is sufficient product availability for a specific customer and. like accounting and material management also can access master data.2. Through the use of templates. contracts. The data about products.3) represent a company's most important point of contact with the customer.2. the system streamlines order entry procedures to manage products ranging in complexity from standard stocked items to those that are engineered-to-order. Automatic sales processing using ERP system. Sales Order Management (OCT. Order Management This module usually includes Sales Order" Management and Purchase Order Management and supports the entire sales and purchase processes from start to finish.07.1. orders. Warehousing and Invoicing Sales Order Entry Quotation/ Contracts Change Order Management/ return handling Order History Statics Applications in sales order management (Fig. both internally and externally. Order Management combines the provision of efficient management solutions with the possibility of anticipating and responding quickly to changes in global business conditions. required raw material and suppliers.2.

plus product and sales feasibility information. from customer to supplier. cancellations. along with general information such as project information and product specifications. schedules are fully linked with other modules of the system. In addition. centralized contract management.blocking functionality. Sophisticated vendor management tools allow companies to check the reliability and performance of vendors.b. where quality refers to supply lead-time as well as to the (to be purchased) product itself. Electronic Data Interchange (EDI). APR. The vendor rating system can handle both objective and subjective criteria. streamlines communication throughout a company's entire supply-chain. Rebate and commission control enables the automatic calculation of employee and supplier commissions to reward achieved targets based on predefined agreements and customer bonuses. Objective criteria are tracked and traced .2. in-time delivery and cost reduction are all-important—and can be sent through the supply chain by means of EDI communication. This information will help in supplier selection and provide an insight as to which suppliers can supply items with the right specifications. or rebates to reward customers for purchasing certain quantities.2. Offering access to an approved supplier list. instead of orders. Purchase Order Management (OCT. Purchase requisitions allow companies to enter non-systemplanned requirements for various types of items. Evaluation of sales performance is possible through extensive report capabilities that retrieve both current and past information that concern orders. A good system will have tools and features for Sales Force Automation (SFA) and customer service. purchase order management enables a purchase quotation to be sent to multiple suppliers. 7M) Requisition Schedule Definition Planning/ Shop Floor Source Information Request For Quotation Purchase Order Purchase Schedule Purchase Contract Warehouse Orders Fig: Purchase flow Purchase order management is increasingly essential in today's ever more competitive business environment because it enables a company to make the correct purchase decisions about quality and price.08. 5.08. These schedules are generated in contracts in just-in-time environments—in which customer service.. schedules and follow-ups. in the shortest period of time. just-in-time schedules and vendor management. These tools include the tracking and tracing of appointments. Purchase requisition is a function that is used in the purchase process. Schedules can be used. The system should support standard business documents such as orders and invoices. Requisitioning can be linked to workflow for authorization purposes and to approve suppliers. Purchase order management includes online requisitioning. The purchase contract information is made available to the people in the purchasing department.to provide detailed purchase and delivery information. The system will have facility to generate purchase contracts. budgets and revenues.

such as the mapping of internal goods flow within warehouses and the monitoring of all warehouse inventory transactions. Warehouse Management This module provides real-time information about inventory levels across the enterprise and tools to manage the daily operational needs of single-site or multiple-site four-wall warehouses. which enables shipments to be received and allocated ahead of time. picking and wave-picking optimization. Lot Control This facility offers lot tracking and tracing. Components of a good Warehouse Management Application include the following: □ Inventory □ □ □ □ □ □ Planning Comprises all planned inventory movements.3. sales. the number of goods on hand.areas that include production. inventory analysis supports inventory forecasting. which enable the accurate forecasting of trends and the consequent adjustment of reordering points. ABC analysis and slow-moving analysis. rules-based replenishment of inventory. The actual transfer of goods can be handled through the Warehouse Management application. which enable the storage of goods that are automatically inspected for quality and the detection of dedicated locations by criteria such as item. In addition. Inventory planning also allows the commitment of inventory to a specific customer order—'hard allocation'—so that customers receive the right order in the right quantity at the right time. Subjective criteria are determined by the user. assembly and multi-level packaging. these components are centralized for. Distribution Data Collection This is an essential element in paperless warehousing that provides the communications link between storage and shipping systems and warehousing equipment like bar-coding scanners. advanced shipping notifications can be received or sent by means of Electronic Data Interchange (EDI). Functions include the previously mentioned expanded capabilities such as cross-docking. inventory valuation. storage conditions. lot control helps to store product quality data and meet ISO9001 certification standards. Intelligent Location Assignment Used to create intelligent storage put-away lists.2. these criteria enable companies to make the right purchase decisions with regard to quality. Inventory Handling Allows for monitoring of all warehouse order scenarios such as the receipt. Coordination of an organization's warehouse network is one of today's most important business needs and requires an understanding of the relationship between the different organizational units such as warehouses.4. Inventory Analysis This module enables the analysis of information that result from warehousing activities and the use of feedback in process optimization.2. issue and transfer of inventory. safety stock. 6M) . 5. and purchase offices.automatically by the system and can include information about receipts. invoicing and purchase-order confirmation. production facilities. Inventory Reporting This function permits full visibility of inventory at single or multiple sites and provides a company with the tools to give customers accurate delivery dates. quality approval. The various components of a good Warehouse Management application will be designed to meet a wide range of warehousing needs. In addition. sales offices. size restrictions and location availability. price and delivery. packaging definitions. To ensure fast communication with suppliers and customers.09. In a business world where customers demand product responsibility. receipt by back-flushing. Together. Purchase Order Analysis enables historical as well as statistical data to be used to assist in the analysis of purchase activities. current storage conditions and projected delivery schedules. so that a company can trace all the raw materials and finished goods that its products require. purchase projects and service and provide companies with the tools to inform customers about where (the company's or the customer's) goods are located. lead-times for orders and service levels. The system's extensive reporting capabilities also enable consigned" goods management. 5. Shipping (APR.

The monitoring functions allow you to monitor created deliveries and outstanding sales activities.2. Transportation Transportation is an essential element of the logistics chain. in order to keep the price of a product competitive. for shipping activities. It effects both inward and outward movement of goods. at the same time. or manually. When a delivery is created (at the shipping point). since this information is available to all the sales people.6. and contact people. so that the documents are automatically generated. competitors and their products. Billing A business transaction is completed for Sales and Distribution once it has been billed. The 'Delivery note' is the central shipping document. delivery notes. transferring billing data to Financial Accounting. such as cost accounting). issuing of credit and debit memos based on corresponding requests and Performa invoices. On the basis of the sales information already stored in the system. 5. 5. The billing system is integrated with the other modules like Financial Accounting. Pricing The term pricing is used broadly to describe the calculation of prices (for external use by customers or vendors) and costs (for internal purposes. Also.5.2. 5. they can make better decisions thus improving the sales performance. Efficient planning and processing of transportation contributes to keeping these costs down. Information support for transportation planning. The Sales Support function has a rich tool set that will help in creating direct mailings to develop new business as well as to consolidate the existing customer base. The ERP systems support billing functions like issuing of invoices on the basis of goods and services. freight . Picking (can be linked to the Warehouse Management System) Packing deliveries. Effective transportation planning is required to ensure that shipments are dispatched without delay and that they arrive on schedule. Transportation costs play a considerable role in determining the price of a product. like transportation planning and processing. The pricing module keeps the information about the prices of the various items. You can make agreements with your customers for complete and partial deliveries and for order combinations. giving rebates. to develop new business. invoices and so on. It is important that these transportation costs are kept to a minimum. canceling billing transactions.8. shipping activities such as picking and delivery scheduling are initiated and monitored.The shipping module supports the following functions: • • • • • • • • • Monitoring dates of orders due for delivery Creating and processing deliveries Planning and monitoring work lists. you can create deliveries automatically using work lists. Monitoring material availability and processing outstanding orders. Purchasing and so on. Support for foreign trade requirements. The aim of the transportation element of the SD System is to provide basic functions for*transportation. you can create address lists of the customers and sales prospects whom you wish to target with your direct mailing campaign.2.7. the details about the quantity discounts. and the data generated during shipping processing is recorded Depending on your requirements. Sales Support The Sales Support component helps the sales and marketing department to support your existing customers and. Sales Support provides an environment where all sales personnel— both the field sales people and the staff in the sales office—can contribute to and access valuable information about customers. sales prospects. the discounts to the different customer categories and so on and enables the organization to generate documents like quotations.2. 5. Printing and sending shipping output Data update in goods issue.

Manufacturers must accomplish this task quickly.2. These main tasks in foreign trade processing can be carried out using the foreign' trade system.9. customer freight calculation. finished and unfinished goods. It must provide the information base upon which the entire operation should be run. Foreign Trade In domestic. Regardless of how manufacturers view their internal operations. These applications should provide a wealth of feature/function. as and when they need a change. it boils down to quick response to customer demand in two fundamental ways— Manufacturers either make products to stock prior to receipt of a customer order. from the import of raw materials. often unpredictable change in customer demand for their products and services. As a company's internal processes become more sophisticated or as market forces change. freight settlement. efficiently and cost effectively to remain profitable and competitive. The manufacturing module should enable an enterprise to marry technology with business processes to create an integrated solution. you are required by the authorities to adhere strictly to the laws and regulations. or at a single site within a company. companies must be able to deliver customer-specific products with the leadtime of standard. The entire logistics chain. Today. with unlimited flexibility to choose the best method—or combination of methods—for each product. for both inbound and outbound shipments. at each stage throughout its life cycle. or across the entire supply chain. do not limit businesses to a single manufacturing method. these solutions should be capable of meeting the challenge. You can control and monitor the entire transportation process from the planning stage right through to the dispatch of the goods from your shipping point (outbound shipment) or the vendor location (inbound shipment) and their arrival at the customer location (outbound shipment) or your plant (inbound shipment). off-the-shelf products. Manufacturing applications are focused on the customer. MANUFACTURING Manufacturers are measured by their ability to react quickly to sudden. The transportation functionality fulfills the requirements in the areas of transportation planning and processing. The Manufacturing modules of most ERP vendors. to the customer. broad scope of coverage. information throughout the entire global enterprise. adopt forwardthinking technologies and implement process reengineering. such as make-to-stock or make-to-order. The growing tendency towards the formation of trade areas is a further challenge to a company operating on4. to the sale of goods and the transfer of data to materials management and financial accounts. many manufacturing and planning methods can be combined within the same operation. the Manufacturing module provides the freedom to change manufacturing and planning methods. whether within a facility. These manufacturing applications should allow an easier exchange of. in international trade. between facilities. Instead. It should contain the necessary business rules to manage the entire supply chain process. 5. and increasingly. . is significantly influenced by foreign trade activities. These capabilities empower an enterprise to achieve productivity gains.3. a worldwide basis. 5.calculation. or they make and ship the products upon receipt of a customer order. customer freight invoicing as well as functions for service agent selection. To help manage product and market shifts. operational stability and a platform-independent architecture. The manufacturing system should be integrated with the other modules of the package.

.1. companies can implement Just-in-Time techniques to streamline material issue and production reporting. business process and execution capabilities. graphical reporting makes potential material and capacity problems easy to identify. Traditional Closed Loop MRP concepts have long heralded the importance of effective planning. With increasing emphasis being placed upon reducing . business process understanding. and timely execution. Most packages have features to generate recommendations for purchases and production and. 8M) Manufacturers must respond quickly and effectively to customer demands. Strategically. the company has the visibility necessary for managing lead-times and for carefully controlling the amount of work-in-process and the timely release of production orders. continuous improvement and quick response to process variability. The very heart of an enterprise manufacturing system centres on its integrated planning. 5. Meeting your business goals requires detailed production planning and effective execution control.3.How does manufacturing responds to customer? (OCT.06. Depending on the requirements of the company's product and processes. production can be scheduled using work orders or repetitive build schedules. increased productivity and improved return on assets. Customers want accurate shipment dates—sometimes to the hour—even when there are schedule and product changes. effective business processes provide improved customer satisfaction. planners can simulate alternative plans. gaining the information they need to determine which parts and assemblies to make. which to buy and when to manufacture or purchase. With the repetitive planning feature. run continuously. Shop Floor Control The Shop Floor Control means reducing the Manufacturing time to increase the product availability in the market. While agility is desirable. Some of the major subsystems of the Manufacturing module are: • Material and Capacity Planning • Shop floor control • Quality Management • JIT/Repetitive Manufacturing • Cost Management • Engineering Data Management • Engineering Change Control • Configuration Management • Serialization/Lot Control • Tooling 5. agility without an effective enterprise manufacturing system results in speed without purpose. Material and Capacity Planning Today's customer-focused business environment makes it more critical than ever for manufacturers to have an effective production plan for managing material and capacity. Most of these systems are flexible enough to enable the company to establish order-processing priorities that reflect business priorities. recommend changes to current plans to prevent under or over-utilization of work centres. If requirements change often. All three elements contribute to a management's decision to install an enterprise-wide manufacturing management system.3. quality assurance. effective-planning results in improved inventory turns. reduced time to market and improved market share. exceptionbased planning features can. With these systems. where necessary. The Planning systems of ERP packages are designed to provide the responsiveness your company needs to meet those customer requirements. Using the shop floor control facility. Tactically. The ERP packages give your company full control with flexible scheduling and sophisticated shop floor functionality.2. Effective execution provides short cycle time.

For example.4. manufacturers have turned greater attention to evaluating their shop floor activities. then a production schedule can be initiated even though the item may not be designated as rate-based. To reduce administrative overhead. 5. but also provide for the transition to rate-based production by allowing the use of repetitive scheduling. 5.3. prevent input errors and provide faster and more accurate information for planning. Just-In-Time/ Repetitive Manufacturing (OCT. Moreover. the item can be switched to full rate-based production scheduling. employees and order quantities while monitoring overtime. The Quality Management Systems usually support the bench-marking and use of optimal product design. employee empowerment work teams. thereby facilitating definition of repeatable processes. 5. as the item's demand pattern grows. these systems provide detailed records of time and materials data on the shop floor.09.08. Many systems have features that let your company compare estimates and production costs for different work centers. Quality Management With product quality under the microscope in all industries today. These systems allow a wide variety of characteristics and parameters to be specified in test and inspection operations and maintain an extensive history to improve product quality and identify recurring problems. They support multiple inventory valuation methods.manufacturing time in support of the need to reduce product time to market. user-friendly. 2. manufacturers must focus on identifying and correcting defects in underlying product designs and production methods and not simply inspect the in-coming material and finished goods. To achieve quality levels. This transition capability enables production facilities to adopt process reengineering. even for products that are not rate-based.3.5. Management needs timely. setup reduction programs. when the demand pattern for an item begins to stabilise and show a repeatable/predictable pattern. etc. All manufacturing modules track quality control activities across the enterprise—from intermediate producers to finished goods. with the confidence of knowing that the planning and control system will effectively support their efforts. Processes reengineering efforts and the elimination of waste have necessitated greater reliance upon powerful. 6M) Many systems not only provide high volume repetitive manufacturing functionality. Cost information must be flexible as well. APR. these systems can track material usage for each job. Factories are being realigned to reduce material travel time through a facility. Shop floor control systems must be flexible and adaptable to changing needs. root cause analysis and the continuous improvement of manufacturing methods.3.3. 1. . machines. flexible shop floor planning and control systems. For example. every company strives for superior quality in its products and services. so that you can choose the costing method that best reflects your company's business. single minute exchange of die (SMED) programs. to provide even more accurate production and inventory planning. indirect hours. accurate information and the ability to manage the shop floor by exception. subcontracted jobs and other costs. This allows a production facility to transition products from discrete manufacture into a JIT/ Repetitive focus. Over time. . Cost Management ERP packages provide extensive cost information at several levels that helps businesses identify cost drivers and reduce product costs. process engineering and quality assurance data by all functional departments within the manufacturing enterprise. A shop order can be reprinted at any time with user selection of whether to reallocate material.

calculate the remaining useful life of a tool and automatically route tools for maintenance. This feature is available throughout the product offering and includes MRP. order processing and JIT.3. They also provide visibility of tool use. shop floor control. When these steps are completed. Tooling For many manufacturers. Many vendors also support Activity Based Costing (ABC) with activity visibility by cost object as well as costs for user-defined groupings. must allocate production prior to its completion. Serialization / Lot control Many systems will provide the facility for the designation of raw material lots and the serialization of component parts made from those lots. such as departments. The knowledge base contains the sales and engineering expertise of the organization. such as height. Engineering Change Control By using Engineering Change Control. This serialization is applicable to commercial aviation. off road equipment and highway tractor/trailers. These systems help to ensure that tools and materials arrive together at scheduled operations by storing tools in inventory and planning and allocating the required tools as part of the production order. Configuration Management The Configuration Management dramatically reduces order cycle time by eliminating the lengthy engineering review.3. reduce errors and increase design productivity by providing an automated link between engineering and production information. This reduction is achieved by creating a flexible user-defined knowledge base that is accessed by a powerful analytic engine. 5. width.3. 5. businesses can gain effective control over engineering change orders. ensuring that proper tooling is available is just as critical to production schedules as the availability of material. Examples include heavy machinery. 5.7. based on usage. Manufacturers who use lot control often. the system automatically implements the change in the production database. Engineering Data Management Engineering Data Management is designed to help your company trim data transfer time. Your company can define the authorisation steps for approving and implementing an Engineering Change Order. 5. project information is automatically updated. typically associated with determining feasibility and the costs associated with the configured end item. 5. Product attributes and variables. or cubic pounds of pressure. The ERP systems extends capacity and inventory management to include these valuable resources.3.10.3. The lot control system provides for the pre-allocation of lot numbers. If the activity is associated with a project. .9.8.6. are entered in the knowledge base in the form of an option matrix.3. defense industry suppliers and capital equipment manufacturers who provide service over the life of their products on an individual unit by unit basis.

The various subsystems under the HR module are: □ Personnel □ Management (HR master data. Absence determination) Personnel Development (Career and succession planning. but also as standalone systems.4.4. reduces the chance for error and improves data accuracy. but is shared by multiple entities across an organization.4. accurately and efficiently. The HR modules of most ERP systems have a set of rich features and will integrate seamlessly with the other modules and are thus. accounting systems often vary from country to country as well. Apart from languages. will affect the HR department in the same way it will affect all the other areas of your enterprise. A flexible structure enables quick and easy customization of the system to suit your requirements. Tables with the relationships are created and values are inserted which provides information. Information systems.08. Salary administration) Organizational Management (Organizational structure. International solutions) □ Payroll □ Time □ Management (Shift planning. Profile comparisons. Personnel cost planning) Accounting (Gross/net accounting. 09. Planning scenarios. currencies and legal requirements. Personnel Management (OCT.1. Today. which allow you to deal with human resources tasks more quickly. History function. fully integrated data structure for the enterprise. 6M) Human resources management is an essential factor of any successful business. Dialog capability. The system should support the organization's international needs with country-specific versions of the HR components.08. 08. screens. Benefits administration.1. 5.07.b. APR. without compromising your control over individual segments of the operations.1. A human resource management system has to be adaptable to company-specific requirements. HR managers must continually review and optimize their business processes. Staffing schedules. with its economic and technological challenges. Personnel administration. Multi-currency capability. Work schedules. It should cover all the functions required in business practices.5. 5.a. In short. Additional training determination. They offer company-wide solutions for HR departments and make it possible for other departments to access specific employee data. messages and documents appear in the language you specify. Travel management.4. making this a vital feature. Personnel Administration A Global Data structure is created which gives the hierarchical structure of the organization. You can use these components not only as part of the company-wide ERP solution. The HR modules provide a global. Qualifications assessments. HUMAN RESOURCES INTRODUCTION (OCT. 7M) Personnel management includes numerous software components. Job descriptions. The competitive environment of the next millennium. invaluable aids in improving productivity. many businesses cross boundaries. Time recording. This eliminates duplicate entries. and should constantly grow with increasing HR requirements. Employee Master Data . Information is no longer owned by specific departments. Recruitment. It should be flexible enough to allow you to optimize your business processes by tailoring the ERP solution to suit your organization's needs. Training and event management) 5. When you log on in a particular language.

Human Resource module has a centralized database with integration to multiple components for processing employee information. This system can maintain an unlimited number of benefits types and individual plans that are offered to the employees. You can design the types of benefits plans that best fit your employee. . The Benefits Administration component gives you the capability to maintain both deferred and non-deferred options.4. Travel Management automatically calculates the tax. selection and hiring. 5. Integration with the other modules ensures correct posting. 5. Most systems have the facility to scan the original documents for optical storage. as laws change and employee requirements expand. trip destination and receipt). With Benefits Administration you can establish benefits groups based on specific employee demographics. applicant screening. The receipts can be entered in any currency and include supplementary receipt information.e. Travel Management provides multiple report formats. 5. using any and all employee data. These requirements are fulfilled only through effective automation of the entire recruitment process. The entry of a travel request automatically generates a workflow that makes the administrator's work much easier. The system can produce charts and reports—both standard and customer-defined. The HR module contains features for storing any desired information about your employees.4. The Benefits Administration component provides you with the capabilities and flexibility to effectively manage benefits programs for diverse employee populations. and with the right skills and education. correspondence. The HR Information System displays graphical information such as organization charts or employee data. project. You reimburse costs incurred during a trip through payroll accounting. It also automatically processes credit card transactions for a particular trip. The system provides tools to save time and help you tailor the system to fit your needs. order. The component tracks employee changes and investment histories. This component includes processes for managing open positions/ requisitions. In addition. taxation and payment of trip costs. Travel data can be entered by the person traveling. or by a secretary or by the relevant department. either before or after the trip. or by data medium exchange. Benefit Administration This system brings flexibility and power to your benefits program.1. employee-. Recruitment Management This function helps in hiring the right people with the right skills. Expenses can be posted to numerous account assignment objects. An optical archive is available for the long-term archiving of travel receipts. Travel Expense Accounting provides you with self-explanatory forms. Using the Benefits Administration component. This module furnishes you with real-time processing. and country-specific trip provisions can be implemented via system settings.4. in several currencies and formats. This includes any subsequent corrections and all retroactive accounting requirements.1.d. you need a flexible system to satisfy all your requirements. Business-. or cost object. With the Benefits Administration feature. reporting and cost analysis. You can determine the variables. Reducing the cost of recruiting and hiring new employees is a challenge for the HR professional. The recruitment component is designed to help meet every facet of this challenge. accounts payable accounting. rules and cost formulas for each benefits plan. at the right time. as well as employermatched and unmatched contributions. statements and an electronic approval process to improve communications and reduce unnecessary calls to the HR department. Benefits Administration uses a hierarchical structure that gives you the ability and flexibility to add new programs at any time. cost center. you can maintain an unlimited amount of savings plans for your employees to consider. Travel costs can be divided into different levels (employee. you can define eligibility groups and rules based on a wide range of factors. allowing you to prepare employee specific enrollment forms. who is responsible for placing people in the right job. HR Travel Management allows you to process a business trip from start to finish—from the initial travel request right through to posting in Financial Accounting and Controlling. You can enter receipts in any currency and then print reports in your native currency. Travel Management This module helps you in processing the travel expenses effortlessly.1. A company needs options for enrolling employees in benefits programs. for example.c. As organizations continue to grow.

2.4. 5.2. The Salary Administration module assists you in the salary review process by taking into account standard salary changes within the company. to detect non-compliance with relevant legislation.by headcount. . It is a flexible tool designed to handle complicated evaluation rules to fulfill regulatory requirements and determine overtime and other time-related data. you have the ability to tailor the system to your organization's requirements. Administration of salaries is an ongoing process within your human resources department. In many cases. Furthermore. 5. You can also create multiple simulations for the organization. graphical environments make it easy to review any moves. additions.1. The Time Evaluation component allows daily processing of employee time data. or changes in employee positions. Payroll Accounting The Payroll Accounting system can fulfill the payroll requirements and provide you with the flexibility to respond to your changing needs. Planning features designed to assist you include graphical organization charts. Shift Planning keeps you informed at all times of any staff excess or deficit. The Time Evaluation component stores your organizations' business rules and automatically validates hours worked and wage types.5. when your goal is to justly reward good performance. or decentralize the data based on country or legal entities. With Time Management.4. including absences due to leave or sickness. staffing schedules. You can plan your shifts according to your requirements.4. no matter how fast it changes. This component can simplify your efforts irrespective of whether the organization uses centralized or decentralized data to determine employee working hours.f.a. Time Management manages work schedules efficiently and effectively by automating schedule generation and allowing flexible definition of time models and schedules per location and organization level.3. as well as Individual compensation exceptions.4. The system automatically creates a history record for every payroll transaction. Time Management is a powerful tool that helps you administer and evaluate data related to the time your employees spend working. You are able to arrange a target plan that can be drafted for any given period. Most Payroll Accounting systems give you the options and capabilities to establish business rules without modifying the existing payroll. Payroll Accounting should address payroll functions from a global point-of-view. a convenient planning board is provided to guide you when entering and copying shifts for any designated period of time. Time Management This module assists you in simplifying the administration and evaluation of time data. as you explore your options for making adjustments in personnel. Most packages provide a review feature that will provide all necessary information and tools to review and maintain employee time data. Salary Administration This function helps you in simplifying the process of rewarding your employees.3. job and work center descriptions and job tasks and descriptions.a. 5. With Payroll Accounting. You should be able to centralize your payroll processing. and employee requests for time off. you can set flexible working hours and process work notices as times are recorded. taking into consideration all criteria. Individual and group piecework calculation for employee incentive wages is also available through the incentive wages feature. 5. for example.4. Organizational Management This module will assist you in maintaining an accurate picture of your organization's structure. you can check the plans at any time against rules governing employees' working time. percentage and working hours. The results of time evaluation can be shown on a time sheet that provides a detailed overview of daily balances and time wage types. Shift Planning This module helps you to plan your workforce requirements quickly and accurately. It is particularly important during the review process.

as well as calendar day frequency. On completion of a training course. working climate and employee morale. There should be tools to maintain information on the internal or external organizers of each event. The system provides advanced tools to automate the labor-intensive process of matching internal job requirements to qualified candidates. The Plant Maintenance module includes an entire family of products covering all aspects of plant/equipment maintenance and becomes integral to the achievement of process improvement. Appraisals can be carried out for instructors. There will be features for providing the training coordinator with reports on event data. The Preventive Maintenance module provides an integrated solution for supporting the operational needs of an enterprise-wide system.04.3. capacity. You can profile predefined tasks and prerequisites of each position in your organization. appraisal forms can be automatically issued. A good system should provide organizations with a method of modeling suitable career opportunities for employees within the company.3. These modes could include tracking by hours of operation. The reporting feature provides measurements of education and training performance. 10M) The achievement of world class performance demands delivery of quality products expeditiously and economically. units of production produced. or piece of equipment. Effective personnel development planning ensures that the goals of the organization and the goals of the employee are in harmony. component replacement and safety inspection can be planned scheduled. . Organizations simply cannot achieve excellence with unreliable equipment.5. staff quality. Once this is established. as well as details such as prerequisites. Today when a machine breaks down. A good HR system will have features to assist you with planning. 5.5. Just-in-Time reduction of work in process inventory and the elimination of wasteful manufacturing practices. 5. content.c.08. Resources such as instructors. you can then draw up individual plans for further education. business events and training courses.4. time schedule. saving you a great deal of data entry time. and monitored. PLANT MAINTENANCE INTRODUCTION (OCT. Machine breakdown and idle time for repair was once an accepted practice* Times have changed. Also.4. employee potential. Detailed information for each of the events is maintained to facilitate production of event catalogs and schedules. attendee billing information and budgets. prices. locations. training courses and business events. attendees. you can profile the qualifications of employees and external candidates under consideration for each position. Preventive Maintenance Control Preventive Maintenance Control provides planning.5. by two user-defined modes. faster than ever before. equipment and course materials can be automatically suggested.1. 09.b. Maintenance tasks can be tracked for each machine. scheduling and control of facilities and equipment. Equipment lubrication. Personnel Development This function helps in selecting the best people and enhancing careers more effectively. ranging from catering requirements to registrant qualifications for each business event. managing and analyzing your scheduled seminars. assists you in selecting individuals for further consideration. A comparison of the qualifications and profiles. objectives. APR. The major subsystems of a Plant Maintenance module are: 5. rooms. The attitude towards maintenance management has changed as a result of quick response manufacturing. The benefits of such planning include improvements in employee performance. there should be features to determine the areas in which employees need further training. Training and Event Management Every successful organization should plan the training and events. Additionally. it can shut down the production line and the customer's entire plant.

Planning component replacements. Component Tracking Components are. Component tracking enables equipment managers to identify components with chronic repair problems. 7M) The ISO 9000 series of standards defines the functions of quality management and the elements of a quality management system. All facets of plant location history and utilization history are described and tracked. months. Features include the ability to establish the type and length of warranty.5. to procurement and sales and distribution. Plant Maintenance Warranty Claims Tracking Plant Maintenance Warranty Claims Tracking is an administrative system designed to provide control of all items covered by manufacturer and vendor warranties. days. The functions in the Quality Management module support the essential elements of such a system. hours. All of this information can be used to create equipment specifications. It enables plant management to recover all of the warranty. along with higher production yields. or the number of days in operation since the last service interval. A complete history is performed for each item covered by the warranty. The ISO standards require that quality management systems penetrate all processes within an organization. 5.5. machine breakage and process variability. Component tracking includes repair/exchange history and component service life. Preventive Maintenance Control enables organizations to lower repair costs by avoiding downtime. rather than waiting for component failures to occur. 5.5.3.08.) are also provided. This history includes acquisition and disposition information and associations between different pieces of equipment to pinpoint operational dependencies.gallons of fuel consumed. elapsed day. APR. Equipment Tracking Equipment is an asset that needs to be monitored and protected.5. In many situations. etc. Companies achieve higher machine utilization and improved machine reliability and tolerance control. typically. the production process itself becomes the focus of attention. 5. shift from production (implementation phase) to production planning and product development (planning phase). Running totals for operation units to date (miles. units of production. Instead. quality assurance is no longer viewed in terms of inspection and the elimination of defects alone. They can determine whether a repair or replacement should be covered by warranty. In the area of production. as well as into the entire usage phase. for example. reimbursements to which they are entitled but have not been able to recover in the past. according to the quality loop.4. Each piece of equipment is defined by a model and serial number. The other integrated modules in the system complement this functionality. equipment maintenance costs constitute the single largest controllable expenditure of an organization. and complete information regarding the warranty service provider is generated. reduces unscheduled equipment downtime. 5. maintenance and transportation control. or operating units. The task priorities.2. subsets of larger equipment and deserve the same amount of cost controlling scrutiny. mileage stipulation.6. . Plant Maintenance Calibration Tracking Plant Maintenance Calibration Tracking allows organizations to leverage their investment in the Plant Maintenance module by providing for the tracking of equipment calibration in support of ISO9000 requirements 5. User-defined data sheets can be developed which allow for the grouping of user data into formats that can be linked to equipment records.08. QUALITY MANAGEMENT INTRODUCTION (OCT. which provide detailed information for technical specialists working in equipment operations.5.

. 5. if they find any flaws in quality. The ERP system takes this into consideration by integrating the quality management functions into the affected applications themselves (for example. Quality Management Information System for inspections and inspection results and quality notifications) : while inspection. quality inspection and quality control. it supports quality management in procurement. for example. for that what kind of materials will be required?. Record results and defects.04. Application of statistical process control techniques using quality control charts. what should be the criteria for each type of inspection. CAQ / CIQ (APR. product verification. inspection of machines. Inspection is started right from purchasing of raw material. the term Computer-Aided Quality Management (CAQ) must also be redefined. the. For example. Inspection planning) : Here the planning will be done that how should be the product quality. Quality notifications for processing internal or external problems and initiating corrective action to correct the problems. 3M) Just as the requirements for quality management systems have changed as a result of the ISO 9000 standards.08. the Controlling module handles the management of quality-related costs and the Plant Maintenance module handles the monitoring of test equipment. the Quality Management module handles the traditional tasks of quality planning. Instead.6. warehouse management. inspection of workers. production and sales/distribution). Print shop papers for sampling and inspection. inspection of tools. As a part of the Logistics application. The representation of the elements of a quality management system within the ERP system is not only the responsibility of the Quality Management module. Inspection lot processing and problem processing. selection of the supplier. ERP system must be considered as a whole. quality documentation and in the processing of problems. Inspection processing with in- spection plan selection and sample calculation. procurement. Material specifications. Within the framework of the system. controlling can be done by replacing faulty items. □ Quality Inspection (Trigger inspections. Quality scores for inspection lots. □ Quality Control (Dynamic sample determination on the basis of the quality level history. The Quality Management module's internal functions do not directly interact with the data or processes of other modules. Computer-Integrated Quality Management (CIQ) is a more appropriate term because an isolated CAQ system cannot carry out the comprehensive tasks of a quality management system. the Human Resources module handles personnel-related matters. inspecting raw material. how the Inspection should take place?. that time quality control should be done. instead of delegating them to isolated CAQ systems. 8M) The Quality Management module fulfills the following functions: □ Quality Planning (Management of basic data for quality planning and inspection planning. As a result of this approach.5. Make the usage decision and trigger followup actions): here the actual Inspection starts.1. in which all integrated modules contribute their part.6. Quality Management Module Functions (OCT.2. the processes described in the quality manual can be implemented and automated in the electronic data processing (EDP) system.

warehouse management. APR. An inspection that is triggered automatically upon goods receipt is an example of this. such as materials management.6. production. creation of quality certificates) The Quality Management module supports the exchange of data with other applications in order to prevent related data from being recorded and stored redundantly! For example. purchasing quality tools. 8M) The Materials Management module optimizes all purchasing processes with workflowdriven processing functions. having excellent 5. sales/distribution and cost accounting.10. inventory management.7. vendor and lot size is automatically transferred to the inspection lot data record when an inspection is triggered. 08.06. enables automated supplier evaluation. Computer Integrated Quality Management (CIQ) (OCT. 5. etc. thereby affecting all phases of a product's life cycle.appointing specialized machinery. shop floor control) • Sales and distribution (delivery. MATERIAL MANAGEMENT (OCT. 8M) The integration of Quality Management in the ERP systems provides considerable advantages because only an integrated system can support all the elements of a quality management system.3. The integration allows the quality management functions to influence all processes within a company.04. The Quality Management module uses the system's integration to link the tasks of quality management with those of the other applications. the information provided by a goods receipt posting relating to the material. workers. material requirements planning) • Production (work scheduling. The Quality Management module is integrated with the master data and processes of the following applications: • Materials management (purchasing. The main modules of the Materials Management module are: • Pre-purchasing Activities • Purchasing • Vendor Evaluation • Inventory Management • Invoice Verification and Material Inspection Requirements Calculations Requisition for Contract Vendor Selection Quotation Evaluation Quotation Vendor Rating . lowers procurement and warehousing costs with accurate inventory and warehouse management and integrates invoice verification. according to ISO 9000.

The manual entry effort is reduced to a minimum. Purchasing communicates with other modules in the system to ensure a constant flow of information. The Materials Management module is fully integrated with other modules in the system. 5M) This system supports the complete cycle of bid invitation. You can set a value limit at the uppermost level (for example. Purchasing (OCT. This allows you to exercise a degree of cost control in such situations.000 for masonry works and Rs 150. 5 crores for the construction of the office building). have no descriptions. purchasing. It supports all phases of materials management: materials planning and control. They are entered in the form of money value limits. goods receiving.000 rupees for electrical installations). Planned service specifications mean that service whose precise nature and intended scope are already known at the beginning of a procurement project. 5M) Purchasing is a very important component of the Materials Management module.07. award of contract and acceptance of services. Sets of service specifications may include.fig : Pre-purchasing Activities 5. which you initially cannot or do not wish to specify in detail (for example. in which the descriptions of all services that are to be procured can be stored. Service specifications may be specified in terms of an upper limit. the construction of an office building).7. . or set out in service specifications as short or long texts. the user does not have to list individual services manually. Good communication between all participants in the procurement process is necessary for purchasing to function smoothly. Rs 100.2. When creating such specifications. the data is simply copied from the master data. inventory management and invoice verification. There are two ways of entering service specifications—planned and unplanned. both items with services and items with materials. The pre-purchasing activities include maintaining a service master database.7. A procurement project may constitute or include a number of individual services. In addition. you can set limits for individual contracts within the project (for example. Instead. The system also keeps a separate set of service specifications that can be created for each concrete procurement project or proposed procurement in the purchasing document. Such initial undefined services specifications are termed 'unplanned service specifications' and thus.1. Pre-Purchasing Activities (OCT. Prices and quantities are stipulated in both cases. At the time they are requested for.07. 5. they are either entered with the aid of a service master record. Use of this technique means that data only has to be entered once.

plan. the performance of the vendors is measured and points are given. one batch per lot is possible. Purchasing can also specify which G/L accounts are to be charged in the financial accounting system. 5. 8M) Inventory Management system allows you to manage your stocks on a quantity and value basis. and so on. It provides you with accurate information on prices. In the case of procurement services. Information such as delivery dates.10. it works side by side with the following modules: □ □ □ Cost Accounting System Orders for materials and services consumed directly illustrate the interface to the cost accounting system. In the Inventory Management system. Special stocks from the vendor or from the customer (for example. in updated inventory levels. which contains both accounting and purchasing information. The vendor evaluation system ensures that evaluation of vendors is objective. With every goods movement. delivery. The main criteria that are usually used are price. Using these criteria. lead times. Sales and Distribution Within the framework of material requirements planning (MRP). reserved for production or for a customer.7.09. APR. enter and check any goods movements and carry out physical inventory.For example. Information on each vendor is stored in a vendor master record. and terms of payment and delivery. The vendor master record represents the vendor account in financial accounting. In the case of procurement of materials the system helps you select sources of supply and facilities the continue monitoring of existing supply relationships. customer requirements from Sales can be passed on. This is because they can be assigned to a cost center directly. Vendor Evaluation (OCT. the following values are updated: . You can quickly determine and resolve any procurement problems. not only are the stocks in the warehouse shown. but also the stocks ordered but not yet delivered. consignment stocks) are managed separately from the company's own stock. APR. For each material. Vendor evaluation also uses data from Quality Management. It also accesses basic data in Material Management such as goods receipt data from Inventory Management. prices and quantities can be taken from purchase orders.09.3. Through Purchase Order account assignment. 8M) The Vendor Evaluation component has been completely integrated into the Material management module. you can improve your enterprise competitiveness. Most systems have their own predefined set of criteria. These batches are then managed individually in the stock.4. The Vendor Evaluation System supports the optimization of the procurement process in the case of both material and services. replacement of returns.7. Inventory Management (OCT. The user can easily obtain an overview of the current stocks of any given material. quality. service and support. By evaluating Vendors. The stocks are managed not only on a quantity basis but also by value— a prerequisite for cost accounting. You can determine and compare the performance of the vendors by reference to their overall scores. Financial Accounting Purchasing and Accounting both maintain information on vendors. the physical stocks reflect all transactions resulting in a change in stock and thus. and the stocks in quality inspection can be monitored. but will allow the user defined criteria also. since all vendors are accessed according to uniform criteria and the scores are computed automatically.10. such as results of incoming inspection or quality audits. 5. you can check the reliability of vendors Most of the vendor evaluation system offers you a point based evaluation system based on certain selection criteria. If a further subdivision by lots is required for a material.

the system will not allow the invoice to be posted. every material must be counted. Goods receipt/issue slips are printed to facilitate physical movements and the monitoring of the individual stocks in the warehouse. During counting. including the vendor.• Stock value for inventory management • Account assignment for cost accounting • Corresponding G/L accounts for financial accounting via automatic account assignment Both the quantity and the value are updated automatically when entering a goods movement. Invoice Verification and Material Inspection The Invoice Verification component is part of the Materials Management system.5.7. The invoice must then be released in a separate step. if necessary. you only need to enter the number of the purchase order. Automatic postings for sales tax. Controlling and Asset Accounting components. The system proposes this information as default data so that you only need to compare it and. 5. you must enter this information into the system. As soon as the invoice is posted. . withdrawals of material for internal purposes. material. all stocks of the company are physically counted on the balance sheet key date. In this case. stock transfers and transfer postings). etc. such as the average price of the material ordered and the purchase order history is updated in the system. If there are variances between the purchase order or goods receipt and the invoice. terms of delivery and terms of payment. If an invoice refers to an existing transaction. cash discount clearing and price variances are also generated and the posting records displayed. quantity ordered. overwrite this default data if there are variances.) to be processed discounts Invoice verification does not handle the payment or the analysis of invoices. continues with purchasing and goods receipt and ends with the invoice receipt allows invoices that do not originate in materials procurement (for example. If the variances are within the preset tolerance limits. the system will allow the invoice to be posted but will automatically block it for payment. allows credit memos to be processed. for example. Each invoice contains various items of information. of course. for example. To post an invoice. It provides the link between the Materials Management component and the Financial Accounting. In a periodic inventory. If the variances are not within the tolerances. Goods movements include both 'external' movements (goods receipts from external procurement. The adjustment between the physical stocks and the book inventories can be carried out automatically. the system also finds the relevant account. Invoice Verification in Materials Management serves the following purposes: • It • It • It completes the materials procurement process—which starts with the purchase requisition. Inventory sampling and Cycle counting. Continuous inventory. You can. When the invoice is entered. goods issues for sales orders) and 'internal' movements (goods receipts from production. the user is required to make corrections. as an invoice can only be posted if the balance equals zero. The system selects the right transaction and proposes data from the purchase order. the system will issue a warning on the screen. If a balance is created. Most inventory management systems support inventory methods like Periodic inventory. either as invoice cancellations or services. The information required for these processes is passed on to other departments. expenses. course costs. If an invoice refers to a purchase order. You can display the purchase order history to see. the entire warehouse is usually blocked for material movements. certain items of information will already be available in the system. For each goods movement a document is created which is used by the system to update quantities and values and serves as a proof of goods movements. correct any possible variances. which quantities have been delivered and how much has already been invoiced. certain data.

09. According to AMR Research Inc. 6M) The ERP market is a very competitive and fast growing market.. The accounting department can retrieve the data and make the appropriate payments with the aid of the Financial Accounting component. CHAPTER 6 ERP MARKETS INTRODUCTION (OCT.08. the Enterprise Resource Planning (ERP) software market will grow at a compound annual growth rate of 37 per cent over the next five . The data necessary for the invoice to be paid is now contained in the system. the leading industry and market analysis firm specializing in enterprise applications and enabling technologies.The invoice posting completes Invoice Verification.

According to the firm's Enterprise Resource Planning Software Report. Oracle and People Soft are each expected to approach or exceed $1 billion in total revenue in 1998. sales force automation. Edwards.e. ERP vendors will try to sell more licenses into their installed base. In addition. new target markets and higher penetration rates. on the basis of the total projected company revenue for 1998. While ERP originated in the manufacturing market. total company revenue will top $52 billion by the year 2002. while SAP will approach $5 billion. Baan. often for the first time. AMR Research attributes the continued growth to three primary factors. PeopleSoft. Edwards. customer support and human resources.years. ERP vendors have a 10-20 percent penetration (i. ERP usage has spread to nearly every type of enterprise including retail. These are: • ERP • • vendors are continuing to expand market presence by offering new applications such as supply chain management.D. J. 1997-2009. Oracle Applications and J. The top tier consists of five vendors—SAP AG.D. To sustain their rapid growth. are shown in Fig. The top five ERP vendors. These companies—The Big 5—account for 64 per cent of the ERP market revenue and have grown over the past year at a furious pace of 61 percent. This conclusion is in marked contrast to other forecasters. Currently. utilities. percentage of total employees currently using the ERP system). Baan. Most will purchase new ERP systems over the next five years. fig: Top five Vendors by projected company’s revenue In US $ millions Fig: Top 5 ERP Vendors by total projected company revenue . the public sector and healthcare organizations. The vendors in the ERP market are segmenting into two tiers and are focusing on expanded product functionality. who believe that ERP demand has been artificially stimulated by Year 2010 concerns. This will grow to 40-60 percent within the next five years.

SAP has developed an extensive library of more than 800 predefined business processes. after tailoring the application solution to suit the user's exact requirements. enabling SAP customers to add state-of-art solutions to meet ever changing business demands. Most prominent among SAP's product range is the enterprise application suite R/3 for open client/server systems. Products and technology SAP products feature a sophistication and robustness unmatched by other business software solutions. SAP is the Most Successful vendor of standard business-application software and is the fourth-largest independent software supplier in the world. Other familiar stalwarts like Oracle Financials. there is also an undeniable presence of lesser-known breeds like J.Fig: Global ERP Market share According to the. Dataquest survey (Dataquest. . This is indicated by the proliferation of solutions. New business processes and technology becomes available regularly. 6.750 sites worldwide. which have been implemented. ERP does not appear to be new to the Indian market. SAP customers have chosen to install SAP's client/server suite in more than 19. Applications and Products in Data Processing). According to the survey. 1999). SAP's ERP package comes in two versions: the mainframe version (SAP R/2) and the client/server version (SAP R/3). The SAP group employs a work force of over 19. The System is accepted as the standard in key industries such as oil. While SAP R/3 and 'QAD's MFG/PRO continue to dominate the Indian market scene.1. consumer products and high technology and electronics. based in Walldorf. chemicals. Edwards and SSA's BPCS. Today. SAP AG COMPANY’S PROFILE Founded in 1972.300 and has offices in more than 50 countries worldwide. These processes may be selected from the SAP library and included within installed SAP applications.D. in India also.1. is the leading global provider of client/ server business application solutions. SAP has installations in more than 107 countries. customers can opt to install the core system and one or more of the functional components. April 15. spanning each functional software requirement. Germany. Ramco Marshal and Baan also dominate the second and third rungs of the domestic ERP market. 6. With SAP Systems.1. SAP (Systems. or purchase the software as a complete package. SAP is the market leader with a 20% market share.

over 2. R/3 runs on the hardware platforms of leading international vendors. It is open enough to allow interoperability with third-party solutions and services. Both internally and together with its partners.10. The R/3 System is an unbeatable combination of functionality and technology.1. Its applications also link your business processes with those of customers and suppliers to create complete logistical chains. the company is defining and creating a number of Internet standards-based interfaces. linking a company’s business processes and applications. typically on personal computers. human resources management and project management. The international strength of the products extends to every aspect of the application. 6. The R/3 System is ideal for companies of all sizes and industries. You can expand it in stages to meet the specific requirements of your business. and supporting immediate responses to change through the organization on a departmental. R/3 lets you integrate banks and other business partners into inter-company communications. The database layer resides on central servers or mainframe host computers. Although designed as an integrated system.2. The three-tired architecture separates a system into three functional layers. APR. R/3 – An Overview R/3 employs a three-tier client/server architecture widely recognized by SAP customers. tax. preparing and formatting data for individual offices or departments The presentation layer.2. 10M) R/3's applications are modules.The power of SAP software lies in real time integration. including user interfaces that enables easy access to complex application and data.1. handles all the tasks related to the presentation of data. 1. each structured to support the demands of its function. From a process-oriented perspective. both nationally and internationally. R/3 overcomes the limitations of traditional hierarchical and function-oriented structures like no other software. The following are the R/3 modules: . SAP has also incorporated and integrated the intranet and Internet technologies into business solution for its customers. At R/3's core are powerful programs for accounting and controlling.1. technology partners and industry analysts as a winning approach to solving some of today’s most demanding information-management challenges. It is quick and efficient to install. . applications business processes that will extend the usefulness of SAP software in entirely new ways and to new classes of customers. It gives them both a forward-looking information management system and the means to optimize their business processes.000.2.06. R/3 Modules (OCT. such as support of multiple currencies simultaneously and the automatic handling of country-specific import/export. The application layer holds the processing logic of the system. R/3's modules can also be used individually. sales and distribution. Employees receive the right information and documents at the right time at their desktops. greater integration of applications increases the benefits derived. divisional or global scale. R/3 enables you to respond quickly by making you more flexible—so you can leverage changes to your advantage. production and materials management. They can either be used alone or in combination with other solutions. Already. covering the entire route from supply to delivery.000 users put R/3 business applications to the test every day. R/3 does more than just opening up completely new IT solutions within your company. 3.a. 6. 2. quality management and plant maintenance.b. legal and language requirements 6. The R/3 Systems SAP's R/3 System is the world's most-used standard business software for client/ server computing.

and is at the same time an up-to-the-minute basis for enterprise-wide control and planning. Production Planning Provides comprehensive processes for all types of manufacturing: from repetitive. in direct cooperation with Purchasing and Controlling. Human Resources Management Provides solutions for planning and managing your company's human resources. plus optional interfaces for PDC. Materials Management Optimises all purchasing processes with workflow-driven processing functions. ■ 6.3. coordinates inspection processing. from quotation to design and approval. Treasury A complete solution for efficient financial management that ensures the liquidity of your company worldwide. through process. including preinvestment analysis and depreciation simulation. to integrated supply chain management with functions for extended MRP-II and electronic Kanban. Investment Management Offers integrated management and processing of investment measures and projects from planning to settlement. inspection. SAP Advantages R/3 unlocks the client/server world for you. lowers procurement and warehousing costs with accurate inventory and warehouse management and integrates invoice verification. Plant Maintenance and Service Management Provides planning. The benefit: cooperative client/server processing distributes applications and computing capabilities almost at will across multiple levels.or three-tier client/server architectures. process control systems. damage-related maintenance and service management to ensure availability of operational systems. where the end users work. At the client level. to resource management and cost settlement. R/3 offers integrated solutions for client/ server information processing that combine a variety of products and services. database systems take care of managing enterprise data. Whether you use R/3 in two. Sales and Distribution Actively supports sales and distribution activities with outstanding functions for pricing. SAP's partnerships «with hardware manufacturers. structures financial assets profitably and minimises risks. prompt order processing and on-time delivery. provides complete documentation and comprehensive information. In client/server architectures. Project System Coordinates and controls all phases of a project. They communicate with application servers that coordinate the actual applications and control communication with the database. captures and manages all processes relevant to your quality assurance along the entire supply chain. and systematically takes advantage of the strengths of different hardware and software components. using integrated applications that cover all personnel management tasks and help simplify and speed the processes. lot and make-to-stock manufacturing. including plants and equipment delivered to customers. applications are distributed across a number of computers that communicate with each other through a network. but also network administration and backup solutions. initiates corrective measures and integrates laboratory information systems. Enterprise Controlling Continuously monitors your company's success factors and performance. CAD and PDM. to create a smoothly functioning communications network.1.■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Financial Accounting Collects all the data in your company relevant to accounting. indicators on the basis of specially prepared management information. locally or worldwide choose the . Quality Management Monitors. control and processing of scheduled maintenance. database providers and technology and service companies play a significant role here. In these open architectures. R/3 incorporates not only system management. interactive multilevel variant configuration and a direct interface to Profitability Analysis and Production. enables automated supplier evaluation. make-to-order and assemble-to-order production. Controlling A complete array of compatible planning and control instruments for company-wide controlling systems. with a uniform reporting system for coordinating the contents and procedures of your company's internal processes. the cycle of tasks is appropriately distributed across various computers and concludes with a presentation of the results on the desktop.

Products also support major relational database systems (Oracle. the Company has significantly expanded its sales and service presence in North America. Tool Requirements. Baan ERP Modules BaanERP. R/3 is infinitely expandable. Three advantages distinguish each component element within the BaanSeries-based family of products including: best-in-class components. DB2. Baan Company products reduce complexity and cost. The flexibility within BaanERP allows customers to maximize the benefits of both best-in-class solutions and a fully integrated. □ Manufacturing Module (includes Bills of Material. and version independent integration. corporate office and back office automation.2. Informix. Since 1995. Europe and Asia. United States of America. Baan Company offers a comprehensive portfolio of best-in-class. Master Production Scheduling and Material Requirements Planning) . Engineering Change Control. BaanERP consists of a number of interdependent components that can be deployed to meet business needs. The Netherlands and Reston. component-based applications for front office. Latin America. Products and technology Over the past 14 years.000 customer sites worldwide. Cost Price Calculation. and can be used in client/server architectures with anywhere between 30 and several thousand end users. and was the first solution provider in its class to earn the 'Designed for Microsoft® BackOffice' logo certification. Built on a commitment to reduce the complexity of IT solutions. Baan Company supports popular Unix platforms as well as Microsoft NT. finance. are faster to implement and use. keeps them "evergreen" through on-going release cycles. Engineering Data Management. 6.2. Project Budgeting. improve core business processes. It is fully integrated and provides exceptional functionality across the enterprise. project and distribution. Product Configuration. 6. Routings. and enables enterprises to update their information infrastructure in manageable. Project Control. BAAN COMPANY COMPANY’S PROFILE Baan Company is a leading global provider of enterprise business software. incremental initiatives. is a proven enterprise resource planning software application. Shop Floor Control. Baan Company has dual headquarters in Barneveld.best solution for your needs. highperformance system.2.1. Founded in the Netherlands in 1978 by brothers Jan and Paul Baan. and are Year 2000 compliant. This scalability ensures that R/3 can always grow with your requirements. are more flexible in adapting to business changes and optimize the management of information throughout the entire value chain. Virginia. Repetitive Manufacturing. Sybase and Microsoft SQL Server). These applications are in use at over 7.2. BaanERP includes the following components: manufacturing. Production Planning. Planning and Control Capacity Requirements Planning. The number of workstations you include with R/3 in your client/server solution is determined solely by your particular needs. Baan Company has evolved from pioneering the Enterprise Resource Planning (ERP) software market to now offering the most complete set of singlevendor enterprise business applications. Product Classification. Hours Accounting. evergreen delivery. the successor to Baan IV. the Baan product portfolio assembles best-of-class components. 6. Production Control.

application development and decision support tools and enterprise business applications. Project Invoicing. End users benefit from intuitive tools that provide easy access to business data and fast answers to any question. Cost Accounting and Sales Invoicing) Project Module (includes Project Budget. Project Estimating. from any client device. Oracle's family of database. mainframes and massively parallel computers. Headquartered in Redwood Shores. workstations. personal digital assistants.2. California. advanced technologies. education and support services. Oracle's award-winning ad-hoc query and analysis tool.3. along with related consulting.OCT. 6. Financial Budgets System. Oracle Applications' strategy is to offer all the enterprise solution components—proven applications. Cash Management. Project Monitoring. Oracle's industry-leading enterprise online analytical processing (OLAP) engine. Financial Reporting System. tools and applications products. at any time. Technology Oracle software runs on network computers. 09. Oracle-optimized products and streamlined support as they build data warehouses. PCs.05. one of the fastest growing and most comprehensive alliance programs in the data warehousing industry. set-top devices. Oracle is the first software company to implement the Internet computing model for developing and deploying enterprise software across its entire product line: databases and relational servers. Oracle Discoverer. ORACLE CORPORATION COMPANY’S PROFILE (OCT. specialized tools.□ Finance □ Module (includes Accounts Payable. and Oracle Express. is the database for Internet Computing. With annual revenues exceeding $ 8.3. minicomputers. 06. 07.0 billion. Oracle's integrated Business Intelligence solutions deliver powerful capabilities to users anywhere in the enterprise. the company offers its database.05.3. Accounts Receivable. Oracle employs more than 41. Oracle's enterprise reporting tool. business expertise and partnerships required—to . networking and gateway products enable corporations to access any data. Project Definition. Purchase Management and Warehouse Management) □ Distribution 6. Project Planning. the latest version of Oracle industry's leading database. Oracle also offers pre-built OLAP applications— Oracle Financial Analyzer and Oracle Sales Analyzer—to further reduce implementation time and costs. provide customers with greater choice. the world's second-largest software company and the largest supplier of software for information management. Oracle's Business Intelligence family of products includes integrated releases of Oracle ^Reports. based on the industry-leading Oracle database and more than 60 complimentary third-party software products and services. Oracle8i. over any network. WTI is designed to increase the quantity and quality of Oracle-based data warehousing solutions. on any server. 6. 5M) Oracle Corp. Oracle's Warehouse Technology Initiative (WTI).000 people in more than 145 countries around the world. General Ledger. provides customers with a complete data warehousing solution. (founded in 1977) is the world's second largest software company and the leading supplier of software for enterprise information management. 8M) It is a leading provider of packaged and integrated front office and ERP solutions for the enterprise and a division of Oracle Corporation.1. Project Progress and Project Requirements Planning) Module (includes Sales Management. Oracle Applications (MODULES . Fixed Assets.

single-facility environments to multi-plant. The Oracle Human Resource Management System (HRMS) provides comprehensive facilities for organizations to achieve such goals. decrease sales and service costs. revenue. by providing a set of applications specifically designed for secure. manage the risk of change and lead their respective industries. These applications are integrated with Oracle Workflow to completely automate business processes.enable customers to execute strategies quickly. Manufacturing Oracle Manufacturing Applications are the industry-leading mixedmode manufacturing solution that enables companies to achieve market leadership by becoming more customer-responsive and efficient. Oracle Projects Applications provide a central repository of validated cost. From your suppliers' suppliers to your customers' customers. Oracle Supply Chain Management Applications help in increasing market share while improving customer service and minimizing costs across the networked supply chain. global manufacturers with complex requirements. Oracle Manuacturing Applications help companies increase revenue. allowing you to better understand your customer relationships. Oracle Front Office Applications increase top-line revenues. The ability to hire. In today's fast-moving corporate arena. Projects Oracle Projects Applications improve operational efficiency by providing an integrated project management environment that supports the full lifecycle of every project in your enterprise. Human Resources Well-managed human resources directly improve the bottom line and contribute to competitive advantage. and provide comprehensive and up-to-date workforce information for management—on a global basis—are a few of the characteristics important for success. self-service business transactions across the Internet and corporate intranets. which are divided into the following categories: • Oracle Financials • Oracle Human Resources • Oracle Projects • Oracle Manufacturing • Oracle Supply Chain • Oracle Front Office A brief overview of the Oracle Application modules categories is given below: • • Financials Oracle Financial Applications can transform a finance organization into a strategic force. Front Office Oracle Front Office Applications provide a true customer-centric approach. engage employees and line managers directly in managing their skills and careers. This product family supports companies from small. lower their administrative costs. Oracle Applications comprise of 45-plus software modules. planning the extended enterprise in one rapid step and by ensuring that the most efficient manufacturing process is used to produce each product.' motivate and retain the most capable workforce. Oracle enables effective trading partner collaboration and supply-chain optimization capabilities that are vital to gaining and sustaining competitive advantage. and maintain customer retention and ■ ■ ■ ■ . profitability and customer loyalty by universally capturing demand. As the bridge between operations systems and corporate finance. their value and profitability. integrated environment for managing the extended enterprise. organizations require access to critical financial management functions. billing and performance data associated with your business activities or projects. increasing top-line revenue growth and bottomline profitability. Oracle Applications further exploit the low-cost and universal access inherent in the Internet Computing model. close their books faster and improve cash management—while providing the strategic information required for making timely and accurate decisions. Supply Chain Oracle Supply Chain Management Applications simplify supplychain processes by providing a single. With Oracle Financial Applications. companies will be able to work globally.

hardware and services to address the needs of medium-sized organizations. including Compaq. 6. product support. financial services. from human resources and finance to supply chain management. The flexible design lets you tailor the applications to your specific needs. The company also offers PeopleSoft Select. The company's products are sold through direct sales offices and distributors in the United States. healthcare. PeopleSoft provides industry-specific enterprise solutions to customers in select markets. retail. Business Management solutions PeopleSoft solutions extend across the globe.000 people worldwide. PeopleSoft dedicates approximately 47 per cent of its staff to customer service in the areas of account management. education services and communication services. Europe.3 billion. accounting and control. services. PeopleSoft products support clients running both Microsoft Windows and popular Web browsers. PEOPLESOFT COMPANY’S PROFILE PeopleSoft Inc. The applications help in managing a broad set of business processes. Sybase. It employs more than 7. PeopleSoft's Mission is to provide innovative software solutions that meet the changing business demands of organizations worldwide. midrange and LAN relational database server platforms. One can* implement a single application. online analytical processing (OLAP). a complete packaged solution including software. manufacturing. Canada. Based on a multi-tier client/server architecture and using advanced workflow technology. workflow. Informix. Latin America and Africa. including communications. IBM. or a complete enterprise-wide solution. PeopleSoft delivers Web-enabled applications. US federal government and utilities.4. 6. treasury management. Hewlett-Packard. The PeopleSoft's business management solutions are in the areas given below: • • • • • • • • Human Resources Management Accounting and Control Treasury Management Performance Measurement Project Management Sales and Logistics Materials Management Supply Chain Planning . transportation.1. marketing and service solutions provide deep integration with the entire enterprise suite of applications. project management. The sales. The annual revenue for the year 1998 was $ 1. public sector. including Web mobile and call center. DB2 and others.satisfaction. etc. Asia/Pacific. as well as a range of mainframe. including a large cross-section of the Fortune 1000. was established in 1987 to provide innovative software solutions that meet the changing business demands of enterprises worldwide. performance measurement and supply chain management. PeopleSoft's innovative use of technology empowers individuals to make informed decisions and delivers the flexibility that allows dynamic organizations to manage constant change. PeopleSoft has over 2. and enable you to attract and retain profitable customers through a unified set of deployment channels. PeopleSoft develops markets and supports enterprise-wide software solutions to handle core business functions including human resources management.4. Sun Microsystems. professional services. higher education. PeopleSoft solutions run on a variety of leading hardware and database platforms.900 customers in nearly every industry and geographic region in the world. With award-winning customer service. Microsoft SQL Server.

integrated software for distribution. first in Dallas and then in Newport Beach. As JD Edwards began to outgrow its headquarters in Denver.200 employees. which lends consistency across the broad range of JD Edwards' integrated applications. manufacturing and supply chain management. JD Edwards is a leading provider of Idea to Action enterprise applications. California. It was in this effort that JD Edwards pioneered the CASE software development and design tool. JD Edwards maintains its focus on what truly matters to its customers. Beginning in 1988. Colorado. as well as expense and receivables processing. On March 17. payables and expense processing. JD Edwards was formed. Three men left the accounting world to form a software company that would specialize in midrange computing solutions. Houston. JD Edwards is a publicly traded company that has more than 4. • Solutions Business doesn't live by software alone.2.5. it started opening branch offices. encompassing flexible. Service Industry Solutions—PeopleSoft also provides a complete commercial support solution for service industries. JD Edwards offers technology and service options tailored to your unique industry and network of certified service and support providers complements directly available from JD Edwards to ensure timely implementation quality of the solution. it could become an industry leader in enterprise software. Belgium. JD Edwards designed software for several small and medium-sized computers.• • Service Revenue Management Procurement 6.EDWARDS WORLD SOLUTION COMPANY COMPANY’S PROFILE 1977. they provided the pathway to success. Denver. eventually focusing on the IBM System/38 in the early 1980s. and Bakersfield. JD. finance. with a breakthrough in technology. using both real-time and historical information. As JD Edwards' business continued to grow. A suite of Procurement modules is also available supporting purchasing. In the early years. UK. Each of the three founders—Jack Thompson. the company began to concentrate its efforts on international expansion and opened its European headquarter in Brussels. A the services and ongoing . inventory management. Dan Gregory and Ed McVaney—lent a small portion of his name for the company name. payroll processing. When McVaney and Thompson began to design and implement WorldSoftware. Today. a balance of processes. and asset management. 6. human resources. The Service Revenue Management suite features modules supporting the tracking of time and labor. which has since been moved to Buckinghamshire. The company could either remain small and serve customers on an individual basis or. project management and billing. San Francisco. it became obvious that servicing a large number of customers was creating challenges. Commercial Solution Supply Chain Management—PeopleSoft has the industry's only complete enterprise resource planning solution that is built around supply chain optimization. California. PeopleSoft's complete suite of Supply Chain Management products provides comprehensive support for any organization that produces or markets a physical product.700 customers with sites in over 100 countries and more than 4. A Demand Planning module enables sophisticated forecasting.4.

Strong Financial Results This means that SSA can continue to invest in the improvement of its software and professionals. Enterprise Solutions Leadership It means that the company is focused on building and delivering solutions. This mission statement is underwritten by six key goals: 1. an architecture open to third-party technologies. (SSA) COMPANY’S PROFILE SSA was founded in December 1981 and has its headquarters in Chicago. Highly skilled and motivated professionals It means that SSA is committed to having the best professionals and resources in the application software business. paying attention to business fundamentals and ensuring customer participation in the development process. support and training are tuned to meet your current and evolving needs. so your solution grows as your business grows. you have a partner committed to ushering you through changes in business and technology. is currently live or being implemented in more than 1. JD Edwards provides you with an appreciating software asset—one with the potential to increase in value over the life of your business. Best Client Satisfaction This means that the company wants their clients to achieve the greatest possible business benefit from their relationship with SSA. Proven Leading Technology This means that every piece of technology applied by SSA will already be proven for high transaction volume enterprise-wide applications. 6. 2. 5. SSA's mission statement.000 major industrial sector firms in over 4. The company's product development. SSA's vision is to be the best global«partner to the world's industrial sector companies. Technology JD Edwards offers its solutions primarily for the AS/400 platform. SYSTEM SOFTWARE ASSOCIATES INC. and will be a stable partner in the long run. provide comprehensive supply chain management functionality across the technology continuum. JD Edwards work to protect the customer's investment with solutions that evolve with their business. USA. Through continual enhancements in features and functionality. SSA has its presence in 91 countries and employees more than 2000 employees. All three can run concurrently on the same AS/400. 6. By understanding the customers' industry. is to provide competitive advantage for Clients through the implementation of their business enterprise information system. BPCS Client/Server V6. JD Edwards also offer multi-currency. from hostcentric. JD Edwards's two application suites.1. 6. 3.8 Million. which has been the same since SSA was founded in December 1981. multi-language and multi-location capabilities. Single Image Worldwide Means that the clients get the same high level of support and expertise all around the world. .000 sites worldwide. OneWorld and WorldSoftware/WorldVision. Value In enabling Idea to Action. The 1998 revenues of the company was $420.5. 4. share data and interact with each other as a unified solution. which bring together the entire enterprise. you can capitalize on new ideas and maintain your flexibility in the face of change. to network-centric computing. The Company's product line. to thin-client.6.• • Relationships With JD Edwards. and the real-time adaptability afforded by ActivEra.

MFG/PRO (OCT.08. It is available in 26 languages and has more than 4. Planning and Manufacturing modules to report the financial implications of the company's activities. It is appropriate for process. provides multinational organizations with an integrated Global Supply Chain Management solution that includes manufacturing. configure-to-order and repetitive manufacturing environments.7. QAD's flagship product. On/Q. The various modules of MFG/PRO are: □ □ □ □ □ □ Distribution The Distribution Modules of MFG/PRO are used to monitor inventory balances and manage purchasing and sales order entry activities. financial. but also offer after-sales service and support. 05. 6. and now has a presence in 21 countries and employs more than 1100 people. Multiple Database configurations and Manager Functions . The company's flagship product is its ERP solution—MFG/PRO. 08. With world class supply chain management tools. 8M) MFG/PRO is a fully integrated software package available on a module by module basis. consumer products. QAD software optimises your enterprise by increasing the speed of internal processes and by synchronising distributed operations.6. Addresses/Taxes. it is particularly useful for multinational companies.000 installed sites in over 80 countries. Manufacturing The Manufacturing Modules are used to regulate all manufacturing activity within the various types of production environments. Supply Chain Supply Chain Management is the control of goods and information from supplier to customer. 07.Products QAD offers a variety of supply chain and Enterprise Resource Planning (ERP) software products to manufacturing industries within the automotive. and Qwizard. MFG/PRO addresses the entire manufacturing spectrum from repetitive to configure-toorder.7. Financials The Financial modules interface with the Distribution. The company got the ISO certification in 1995. make-to-stock. Master Files Master Files functions provide access to a series of foundation modules that are used by the rest of the MFG/PRO applications.1. QAD COMPANY’S PROFILE QAD was founded in 1979. Service/Support Service/Support Modules are designed for companies which not only manufacture and sell their products. industrial products and medical sectors. Service/Support Management. Physical Inventory. distribution. The company's products include MFG/PRO. Inventory Control Settings. These master files include: Items/Sites. and service/support management applications within an open system environment. Internet-Enabled MFG/PRO allows you to share information and conduct commercial transactions over the Internet. Decision Support. electronics. APR.04. food and beverage. MFG/PRO software. batch process.

06. then the pre-selection screening and package evaluation phases are not done.09. For example. in some cases. the organization might have already identified a particular package. as shown in Fig. 8. Also. in reality. 8M) Like any other project. the ERP implementation project also has to go through different phases. companies go through many implementations—in different business . may seem very linear and distinct from each other. throughout an actual implementation. In many cases. But the logical order is followed. APR.CHAPTER 7 ERP IMPLEMENTATION LIFE CYCLE INTRODUCTION (OCT.1. all the phases that we are discussing in this session may not be applicable in all cases. one phase will start before the previous one is completed. 05. The different phases of the ERP implementation are given below: • • Pre-evaluation Screening Package Evaluation • • • • • • • • • Project Planning Phase Gap Analysis Reengineering Configuration Implementation Team Training Testing Going Live End-user Training Post-implementation Although these phases. the phases are in fact quite fluid. There are no clear separating lines between these phases and in many cases.04.

One can zero in on the few best packages by looking at the product literature of the vendors. getting help from external consultants and most importantly. while other companies favor sequential rollouts—each company has different needs. But whether it is the 'Big Bang' method or sequential rollout. PRE-EVALUATION SCREENING (OCT. or manufacturing locations. Some companies opt for the one and only 'Big Bang'. Not all packages are equal—each has its own strengths and weakness. But there are hundreds of ERP vendors—of all sizes and shapes—all claiming to have the solution that is ideal for you. It is generally accepted that most ERP packages are stronger in certain areas than in others. It is always better to do a thorough and detailed evaluation of a small number of packages.1. So at any given time. it soon becomes evident that every ERP package grew out of the experience or opportunity of a group. So it is better to limit the number of packages that are evaluated to less than five. on the other hand. Pre-Evaluation Screening Package Evaluation Project Planning Gap Analysis Reengineering Configuration Implementation Team Training Testing End-User Training Going Live Post Implementation Phase Fig: ERP Implementation Life cycle. Baan. and each one is madly trying to add functionality in areas where they have been lacking. by finding out what package is used by companies which are similar. the lifecycle phases are the same.units. For example. APR. the search for the perfect package starts. It is also a very time consuming process.09. working in a specific business. It is always better to find out how the different packages are performing in environments similar to yours. different modules. 6M) Once the company has decided to go in for the ERP system. The pre-evaluation process should eliminate those packages that are not at all suitable for the company's business processes. than doing a superficial analysis of dozens of packages. Hence. If one studies the history of the ERP packages and finds out how each package evolved. PeopleSoft is strong in HR and less so in manufacturing. is historically stronger in manufacturing than in finance and so on. more than one of the phases may be operational. who created systems that could deal with certain business segments. .04. the company should do a preevaluation screening to limit the number of packages that are to be evaluated 'by the committee.different phases 7. Analyzing all the packages before reaching a decision is not a viable solution. of people. 05.

even though they are capable of catering to the needs of other sectors. the company needs to develop a selection criteria that will permit the evaluation of all the available packages on the same scale. exactly as the company does business. While making the analysis it would be a good idea to investigate the origins of the different packages. once a package is purchased. 07. 09. It would be wrong to say that a system that was developed initially for manufacturing.08. Since ERP systems involve huge investments. some important points to be kept in mind while evaluating ERP software include: • Functional fit with the company's business processes • Degree of integration between the various components of the ERP system • Flexibility and scalability • Complexity • User friendliness • Quick implementation • Ability to support multi-site planning and control • Technology—client/server capabilities.04. Once you select a few packages after the screening. the need to enter into new markets and the pressure from competitors forced most ERP vendors to redefine and expand the scope of the activities and functionality of their products. But still. new functions were introduced. most packages cater to almost all business and service sectors. Senior Consultant with Baan Infosystems India Pvt Ltd. it is not "an easy task to switch to another one. APR. good ideas were copied from others. database independence. 10. The objective of the selection process^ is not to identify a package that covers each and every requirement (a perfect fit). Once the packages to be evaluated are identified.As the companies grew over time the ERP packages evolved. you can start the detailed evaluation process. According to S Shankarnarayanan. 8M) The evaluation/selection process is one of the most important phases of the ERP implementation. software development. It is impossible to get a system that will perform. The concepts were expanded upon. security • Availability of regular upgrades • Amount of customization required • Local support infrastructure • Availability of reference sites . the company should identify the system that meets the business needs. Now. that matches the business profile and that which identifies with the business practices of the company. to find a package that is flexible enough to meet the company's needs. because the package that you select will decide the success or failure of the project. (ERP Systems—Using IT to gain a competitive advantage). a software that could be customized to obtain a 'good fit'. say. each package has a history (or origin) that determines in which type of business it is best suited for. 05. The idea that there is no perfect package needs to be understood by everyone in the decision-making team. There is little room for error. and so on. To choose the best system. But it should be remembered that many ERP packages are still very good in some areas. So it is a 'do it right the first time' proposition. is now not capable of catering to the needs of another business sector. The experience gained from implementation. or in other words. 06. the feedback by the users. 7. PACKAGE EVALUATION (OCT. The system would have been thoroughly revamped and redesigned to cater to the needs of the diverse business sectors that it is catering to.2. but the aim should be to get the system that has the least number of differences. The most important factor that should be kept in mind when analyzing the different packages is that none of them are perfect.

4. for the project are arrived at. The organizational resources that will be used for the implementation effort are decided and the people who are supposed to head the implementation are identified.5. The package experts or the consultants can act as mediators. a company can simply agree to live without a particular function (the cheap but annoying solution). Time schedules. arguably. The implementation team members are selected and task allocation is done. APR. It is always better to form a selection or evaluation committee that will do the evaluation process. REENGINEERING .3. how to do it and when the project is supposed to be completed. 10. and in which direction they want to head in the future. keeping interfacing to a minimum) • Designing a custom program Altering the ERP source code. etc. (the most expensive alternative. 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. deadlines. This committee should comprise of people from the various departments (the functional experts). 7. The trick is to design a model which both anticipates and covers any functional gaps. custom tailored to a company's needs. The remaining 20% of these requirements present a problematic issue for the company's BPR (business process reengneering). 07.08. PROJECT PLANNING PHASE This is the phase that designs the implementation process. This is the phase which will plan the 'what to do' in case of contingencies. 7. Since all business functions are represented and the management is involved. GAP ANALYSIS (OCT. One of the most affordable.• Total costs. what control measures should be installed and what corrective actions should be taken when things get out of control. 6M) This is. including cost of license. how to monitor the progress of the implementation. The project plan is developed. The committee will meet periodically (during the entire implementation lifecycle) to review the progress and chart the future course of actions. It has been estimated that even the best ERP package. the package that is selected will have company-wide acceptance. meets only 80% of the company's functional requirements. Of course. The committee will be headed by the ERP incharge (usually the CIO or COO). 09. 06. implementation. This phase will decide when to begin the project. solutions entails altering the business to 'fit' the ERP package. the most crucial phase for the success of the ERP implementation. usually reserved for mission-critical installations) 7.04. maintenance. 09. albeit painful. The project planning is usually done by a committee constituted by the team leaders of each implementation group. Put very simply. the top management (preferably the CIO or COO) and consultants (package experts). It is in this phase that the details of how to go about the implementation are decided. training. customization and hardware requirements. or play the role of explaining the pros and cons of each package. The selection committee should be entrusted with the task of choosing a package for the company. this is the process through which companies create a complete model of where they are now. Roles are identified and responsibilities are assigned.

and an ability to work with people throughout the company. business processes have to be understood and mapped in such a way that the arrived-at solutions match up with the overall goals of the company. As the ERP market shifts to a mid-market focus. 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. but should not endanger the jobs of thousands of employees. it is best to treat ERP as an investment as well as a cost-cutting measure. or justified by the purchase of an ERP package. reengineering has two different connotations. has developed Orgware. And there have been occasions where high-level executives have invoked the reengineering slogan. But adherents of the BPR approach to ERP. involving the use of ERP to aid in downsizing efforts. The BPR approach emphasizes the human element of necessary change within organizations. and as all implementations are becoming more cost-sensitive. as processes become more automated and efficient. and where the gaps in functionality occur. some will be involved in financials and so forth.6. It's 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 won't fit into the package. would argue that there is no way that you can ignore the human element in an implementation that involves significant changes in responsibilities. CONFIGURATION This is the main functional area of the ERP implementation. The second use of the word reengineering in the ERP field [or business process reengineering (BPR) as it is usually called]. an automated configuration tool. . and has received its share of criticism for creating bloated budgets and extended projects. while SAP has pre-configured industry-specific templates that can be tweaked for each individual company (Accelerated SAP Solutions). So. the BPR approach has come under some real scrutiny. rather than as a downsizing tool.09. The BPR approach to an ERP implementation implies that there are really two separate. But. Configuring a company's system reveals not only the strengths of a company's business process but also—and perhaps more importantly—its weaknesses. 7. In order to do so. There is a bit of mystique around the configuration process and for good reason: the Holy Grail or unwritten rule of ERP implementation is. While every implementation is going to involve some change in job responsibilities. ERP should engender business change. but it should not be cloaked within the glossier slogan of 'reengineering'. companies can't just shut down their operations while the mapping processes take place. Hence the prototype—a simulation of the actual business processes of the company—will be used. As the ERP consultants configure and test the prototype. and purchased an ERP package with the aim of reducing significant numbers of employees. In ERP implementation settings. in most large implementations. As a rule. Finding out what will work and what won't requires a knowledge of the business process itself. they attempt to solve any logistical problems inherent in the BPR before the actual go-live implementation. ERP vendors are constantly striving to lower configuration costs. The company obviously needs to know which processes have to change in the process of implementation. 'Downsizing' is a business practice that may have its place.(APR. Strategies currently being pursued include automation and pre-configuration. The first connotation is the controversial one. 7M) It 'is in this phase that the human factors are taken into account. people with such skills should be assigned to these tasks. but closely linked implementations involved on an ERP site: a technical implementation and a business process implementation. the functional configurations are split between the different areas within the company. refers to an ERP implementation model initially designed and used with much success by the 'Big Six' consulting firms. For example. synchronizing existing company practices with the ERP package rather than changing the source code and customizing it to suit the company. Baan for instance. so some will attend to HR. The prototype allows for thorough testing of the "to be" model in a controlled environment. This approach is generally more time consuming.

learn new things and are not afraid of technology—and good functional knowledge. GOING LIVE This is it.06. users entering invalid data. This is the phase where the company trains its employees to implement and later. not so much how to use the system. 09.8. 10. APR. By creating a custom pre-configured ERP module for a particular industry—say a shoe software-manufacturing prototype created for a shoe manufacturer—the need for handson custom configuration is reduced. But once the system is 'live'. This phase starts much before the system goes live. encouraging the sought-after mid-range companies to feel they can afford to implement a top-of -the -line ERP package. The system is officially proclaimed operational. The test cases must be designed specifically to find the weak links in the system and these bugs should be fixed before going live. TESTING This is the' phase where you try to break the system. but how to implement it. Then each group is given training on the new system. 7. The system is configured and now you must come up with extreme-case scenarios—system overloads. the prototype is fully configured and tested and ready to go operational. but every business is unique and at least some configuration is unique to each project. and the new system is used for doing business. In theory. databases are up and running.04. run the system. thereby keeping the costs down. The employees who are going to use the new system are identified. IMPLEMENTATION TEAM TRAINING (OCT.10.The current ERP industry push towards developing the mid-range market in turn creates an added incentive {o reduce costs.08. It is hoped that a kind of "question and answer" format can be used to find out the kinds of business process information hitherto addressed through the hands-on configuration process. You have reached a point where you are testing real case scenarios. the implementation team is being trained. they are divided into groups. The ERP vendors and the hired consultants will leave after the implementation is over. 05. END-USER TRAINING (OCT. 6M) This is the phase where the actual users of the system will be given training on how to use the system.9. 7. the old system is removed. multiple users logging on at the same time with the same query. But for the company to be self-sufficient in running the ERP system. 7M) Around the same time that the configuration is taking place. 7.7. it should have a good inhouse team that can handle the various situations. This training is very important as the success of the ERP system is in the . the work is almost complete—data conversion is done. Lights on. it is very vital that the company recognizes the importance of this phase and selects those employees who have the right attitude—people who are willing to change. Thus. even though the implementation team must have been testing it and running it successfully for some time. hackers trying to access restricted areas and so on. switches thrown. On the technical side. gloves off. and on the functional side. 07. 7. these pre-configured tools should save time and money. Their current skills are noted and based on the current skill levels.

POST-IMPLEMENTATION (MAINTENANCE MODE) (OCT. . Just as courtships and honeymoons are different from marriages. 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. each employee is trained on the job or task that he/she is supposed to perform once the system goes live. The post-ERP organization will need a different set of roles and skills than those with less integrated kinds of systems. Companies are beginning to take this phase seriously. Another factor is that not all people will be successful in making the changeover. the vendors and the hired consultants will go. Once the implementation is over. Here the organization should think in terms of the incremental benefits of the new enhancements. So these training sessions should give the participants an overall view of the system and how individual actions would affect the entire system. At a minimum. To reap the full benefits of the ERP system. It is human nature to resist change. Because with any upgradation or enhancements. There should be people. Also many people are afraid of computers and other new technologies.06. 7. In addition to these general topics. within the company. So there will be resistance to change.5M) One important factor that should be kept in mind is that the post-implementation phase is very critical. how they relate to the business process and how a transaction ripples through the entire company whenever they press a key. an organization can only get the maximum value of these inputs if it successfully adopts and effectively uses the system. as there is statistical evidence now.hands of the end-users. it is an ongoing process. it is very important that the system should get enterprise-wide acceptance. The system must be upgraded as and when new versions or new technologies are introduced. living with ERP systems will be different from installing them. who have the technical prowess to make the necessary enhancements to the system as and when required. The company management should address these concerns and take necessary actions to avoid failure. The training will never end. So instead of going in for upgradation as and when a new version is announced by the vendor. everyone who uses these systems needs to be trained on how they work. there will be a lot of other aspects like user training that have to be considered. new people will always be coming in. the organization should first analyze the costs and benefits. and new functionality will always be entering the organization.11. However. which shows that most implementations fail because of a lack of end-user training. There should be enough employees who are trained to handle the problems that might crop-up. Projects for implementing the ERP systems get a lot of resources and attention.

It has to be completed within a reasonable time period.08. Implementing the ERP software means. 07. Since designing and implementing integrated software packages is not the business of most. They should be directing all their available resources into improving their own products or services so that they can remain competitive. It might put the organization out of business. You have to have practical implementation experience. IN-HOUSE IMPLEMENTATION—PROS AND CONS (OCT. the company should have people who are familiar with the ERP package and with the technical issues. 7M) The next question that many people ask is: why can't the company carry out the ERP implementation by itself? To successfully set up and implement as ERP package. functionality or technology those systems created by software firms whose business this is. Also. To successfully carry out the implementation within a reasonable timeframe. 09. serve their customers better and continue to grow. The problem is that such specialized computer work is not the main business of these companies. Experience has proven that a good professional needs at least one year to become reasonably good in an ERP system and that this one year should be hands-on practical experience.1. To start with. 8.04. One cannot go in for a trial-and-error method of implementation strategy due to the huge amount of investments involved. APR. which functions perfectly. profits and shareholder returns.CHAPTER 8 VENDORS. These software firms (ERP vendors) can produce sophisticated packages and provide their clients with products that allow them to maintain a focus on their own chief activities. . The consequences of a failed ERP implementation can be quite catastrophic. the ERP implementation process cannot go on for a long time. is not an easy task. scope. the systems that their in-house team come up with will never equal in quality. 10. 08. the in-house people who are designated to do the job should possess a certain amount of knowledge and skill. which needs a lot of skilled manpower and other resources. It is not possible to become an expert by reading product brochures and on-line help files.companies. Many companies have personnel in their IT/IS departments who can absorb the necessary knowledge and who have experience in developing sophisticated systems. or a focus of their executives. assigning the optimum values to the various parameters and the variable elements of the system. CONSULTANTS AND USERS INTRODUCTION Why can't companies develop their own ERP packages? Developing an ERP package is a very complex and time-consuming process. thus improving revenues.

But. follows a standard approach or methodology.Many software vendors have their own team of consultants. team management skills and knowledge of scientific methods of software project management. functional training for the implementation team members and end-user training. This calls for good organizational skills. Hence. fear of unemployment. these people know the product and can be of great value during implementation. If the company is planning to do the ERP implementation in-house. then it will be wasting a lot of its resources and spending a lot of money on training—most of which are not needed after the package implementation. developing a good software package and successfully implementing it are two entirely different propositions. inhouse team. • Good leadership skills. Once these employees have been trained— during the course of the implementation—they can help the company in its implementation efforts in other units of the company. it becomes ever more difficult to take the total responsibility of the ERP implementation and get it done using in-house resources. be executive programs for the top management. it can create problems when a conflict arises. Every ERP project involves considerable amount of training at various levels and in various details. if the vendor is doing the implementation. • Good In today's business environment. fear of technology and so on. consultants. it might have to hire experts and have them on the company's rolls. This is an expensive proposition because once the implementation is over. If the same party is performing multiple roles. adept at diffusing crisis situations. The resistance could be due to ignorance about the product. So it is very important that the people in the implementation team are very good diplomats. • Excellent training skills. where the trend is to reduce manpower and focus more on the company's core competencies. fear of training. users and so on) have definite roles to play in the implementation. Also. each group of people in an implementation project (vendors. because the vendor's consultants will have a mindset which will prevent them from seeing the other side's perspective. whose responsibility is to ensure that their software package. Definitely. may be a few of them in each functional area. For example. the people who are to implement the ERP system should possess the following skills: • Knowledge of how to organize and run a project of this magnitude. or provide training to the employees in using the system . project management skills. the vendor's consultants may not be as open to the ideas of the in-house team as third-party consultants. you won't need that many experts to keep the system running—the postimplementation phase. A good package vendor need not be good at implementing its own product. people skills: Any ERP implementation will face resistance from the employees. it is always a better idea to leave the implementation—most part of it—to the people who are specializing in it and focus the company's efforts on preparing its personnel to administer the package after it is implemented. Besides having a very good knowledge of the product. to effectively handle the post-implementation scenario. ERP implementation will involve dealing with a lot of people and good leadership and communication skills are very effective. You will need only a handful of people. If the company is planning to do the ERP implementation all by itself. There will be familiarization programs for all the employees.

the Vendor should supply the Product and Documentation to them. working in a specific business. In summary. today's ERP packages have features and functionality to cater to the needs of businesses in almost all sectors. 2. By getting the employees trained during the implementation.1. First and the foremost role of all the vendors is to sell their ERP package in the organization. The Vendors should provide Post Implementation Support (Maintenance) to the Organization. 8.and so on.05. 3. The Vendors should provide training to the key users such as Organizational experts 5. The vendor should supply the product and its documentation as soon as the contract is signed. The company should plan the participation so that its people play an appropriate role in the implementation project so that it has enough experts in-house. The Vendors are responsible for product customization during the implementation 4. But to get maximum benefit out of a packaged solution.2. VENDORS Vendors are the people who have developed the ERP packages. Now with the ERP market place becoming crowded with more and mcrre players entering the market and the competition becoming hot. 8M) 1. The ERP vendors spent billions of rupees in research to come up with innovations that make the packages more efficient. Only after the software is delivered. the company can save a lot of money that otherwise would have been spent on hiring trainers. flexible.2. the company personnel should participate fully during the implementation of the package. If one studies the history of the ERP packages and finds out how each package evolved. and easy to implement and use. can the company develop the training and testing . Role of the vendors (OCT. the vendors have to constantly upgrade their product to be able to use the best and latest advancements in technology. once the implementation is over. who created systems that could deal with certain business segments. They are the people who have invested huge amounts of time and effort in research and development to create the packaged solutions. Also with the evolution of new technologies. 07. As soon as the contract is signed with the organization. The company should bring in the know-how and experience that will guarantee the best possible use of the acquired package. it is better for companies to concentrate on their business and leave the job of ERP implementation to people who are in that business. it soon becomes evident that every ERP package grew out of the experience or opportunity of a group of people. 8.

what are the limitations. mostly in an advisory capacity. Vendor's training should achieve the goal of showing the key users how the package works. But we are hiring the consultants for implementing the system. how the data and information flows across the system. 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. So it is very critical that these key users are given a thorough training on the features of the package. This is the best way to present the real picture to the users and it will also prevent the vendors from making false claims. So the vendor will continue to participate in all the phases of the implementation. There will be 'gaps' between the package and the actual business processes. together with the consultants. The vendor is responsible for fixing any problems in the software that the implementation team encounters. It is also in the best interests of the vendor that this participation continues. Consultants should also ask questions that the vendors are trying to avoid and the users are unaware of. what can be configured and what cannot. The objective of the vendor training is to show how the system works. 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. The choice of whether to customize or not is the one that can have enormous impact on the . The role of the package vendor does not end with the training. what are the major components. Also a successful implementation means another satisfied client. what are the strengths and weaknesses and so on. as well as how to use or adapt the product to suit the company's unique requirements. The trainees should use these training sessions to question the vendor on all aspects of the system. 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.environment for the implementation team. Customizing means altering the product so that it is suited for the company's purposes. most of the blame will fall on the vendor. what is flexible and what is not. addressing specific technical questions about the product and technology. This means that the vendor demonstrates the product as it exists and highlights what are the possible options available. Another role the vendor has to play is that of the trainer—to provide the initial training for the company's key users. not to show how it should be implemented. The vendor also plays an important project support function and must exercise the quality control with respect to how the product is implemented. how the software is to serve the company. 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. people who will play lead roles in the implementation of the system. The vendor has other responsibilities also. These key users are the ones who will define. The software might have to be customized to suit the company's needs. because if the implementation fails. it is these in-house functional experts who will decide how the functionalities are to be implemented. improved goodwill and good referrals and so on. what can be customized and what should not. So the vendor should have a liaison officer who should constantly interact with the implementation team. In other words.

worked by the side of the ERP vendors. They will be good at all phases of the implementation lifecycle. management and control of these types of projects. but it is true and it is also true that the software will pay for itself— the software cost. Moreover. 8. of money and manpower for that purpose.project and it often constitutes a point of conflict between the consultants and users. it is the vendor's duty to carry out the necessary modifications. Sounds amazing. we can see that a well-selected. right from package evaluation to end-user training. The only problem with them is that they are expensive—very expensive. 09.5 to 3 times for every rupee invested in the software product. confirmed that the vendor's package worked and learned the tricks and techniques of the trade-. If we study the statistics. the first question that will be asked is—"Are they going to be expensive?" The answer is a definite YES. But the catch is that the product has to be the right one and the implementation has to be successful.09. They are experts in the administration. Thus. The consultants will be expensive. That is why the expertise of the consultants becomes invaluable and the money spent on good consultation is never wasted. you will find that the most expensive part of the implementation was the consultation charges. having forecasted the ERP boom. integrated system that was successfully implemented and which is successfully working. the cost of consultants is 1. So when you want to get the services of these consultants. This is because only the vendor knows the product well enough to make the necessary changes without affecting the other parts. If you analyze the cost break-up. But if the decision to customize has been taken. the consultant's charges and other expenses incurred during implementation—in the above mentioned period (10-30 months).3. 10M) Business consultants are professional who specialize in developing techniques and methodologies for dealing with the implementation and with the various problems that will crop up during the implementation. . developed an in-depth understanding of each product's strengths and weaknesses. so the company will have to formulate a plan regarding best optimum utilization of the money spent on consultants. who will work well with the company personnel. CONSULTANTS (OCT. found out the pitfalls and mistakes that should be avoided and thus created a pool of experts who could handle the ERP implementation without failure. Each of them will have many years of implementation experience with various industries and would have time-tested methodologies and business practices that will ensure successful implementation. invested a great deal of money in developing a range of consulting services in this field and assigned many of their professionals to become specialists in the various aspects of ERP packages and their implementation. Many of the big consulting firms. APR. it will be able to benefit from the future software improvements introduced by the vendor. So finding the right consultants— people who have the necessary know-how.08. For a typical ERP implementation. consultants are people who have made the business of ERP implementation their business and have invested huge amount. 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. the company should get a guarantee (in writing) from the vendor that despite the customization. These firms researched the various products. usually pays for itself in a relatively short period—between 10 and 30 months.

when the Vendors are Providing Training to them. Thus by eliminating the trial-and-error method of implementation. 3. Refining the company's processes can only optimizes the performance of the system and maximize future user satisfaction. so that Vendors cannot cheat organization (the vendors will never show there weakness. The time schedule for each phase and each task has to be determined and the project plan has to be finalized. 4. They should strive to improve the company's business processes so that the software package can be used as it was originally intended by its developers. Consultants are responsible for administering each of the phases of the implementation. The Consultants should guarantee for the success of the ERP implementation. The Consultants are responsible for solving all the functionality and technical problems arrived during the Implementation. The consultants should guarantee the success of the project and should be able to show the results (quantifiable results like reduction in cycle time. the consultants help in saving huge amounts of money. time and effort. Consultants should add value to the project.3. so the consultants should be there to determine there weakness) THEORY: The role of the consultants is very familiar to all of us because we have seen many of them in action.8. increased response time. The methodology will have to be converted into tasks and should be allocated to the right people. improved productivity and so on) to the satisfaction of the company management. They bring the know-how about the package and about the implementation—the know-how that is not included in the standard documentation. that its business objectives will be achieved. The company places its trust in the consultants. For keeping the promises that the consultants have made during the negotiations. it is a better practice that the contract between the company and the consultants should have all the performance clauses in place. The consultants are also responsible for analyzing and clearly addressing the . This know-how (also know as practical knowledge) is derived from their expertise which stems from practical experience. The Consultants should provide support to Organization. Role of the consultants 1. Because the consultants have seen many projects and have made or seen many mistakes. Consultants should also know how to remain impartial while questioning current company processes in an effort to promote better businesses practices and better implementation results.1. The first role of the Consultants is to help organization in selecting the best ERP Package for implementation in Package Evaluation Phase 2. In fact. and by doing it right the first time. They will know what will work and what will not. they have to transform their approaches and methodologies into detailed work plans. they can avoid the phenomenon of 'reinventing the wheel'. so that the required activities occur at the scheduled time and at the desired level of quality and with effective participation of all those who must participate.

in a new and challenging working environment using modern technology. If the company can succeed in making its employees accept this fact and assist in making the transformation (by giving them training). calculate. 6M) These are the people who will be using the ERP system once it is in place. The consultants will leave once the project is complete. They must be able to distinguish between the 'must have' and 'nice to have' items and decide on the level of customization. 8. can eliminate the jobs of many employees whose function it is to record. Maintaining technical documentation on the project also falls within the duty of the consultant. 06. it will cause trouble for the organization. as the company people might want to customize all the aspects.09. with that of defending the package vendor. file or prepare reports. These are the people who were doing the functions that are being automated or computerized by the ERP system. control. analyze. the nature of the job will undergo drastic transformation. the old job descriptions will change. which should also be the right one. When we are talking about implementing an ERP system we are talking about change in a very massive scale. APR. With the implementation of the ERP system. because they can get away from the monotonous clerical work and transform themselves into highly valued individuals. that while the ERP systems eliminate many existing jobs. it creates many new ones—ones with more responsibilities and value addition. Job profiles will change. and people will be forced to develop new skill sets. This is indeed a very difficult job (like a tight-rope walk) and that is why consultants are being paid such huge amounts for their services. 05.customization issues. but the knowledge of the project must stay within the organization. Consultants need to position themselves in such a way as to balance their loyalty to the client and the project. job responsibilities will undergo drastic alterations. This is an area where the consultants have to use their diplomatic skills. It is easy to see that the automation of the business processes. Employees. as many functions will be automated. through technology. So the consultants should create a knowledge base and should train enough people so that the work they have started is continued. END-USERS (OCT. will fear that system will replace existing jobs. If these fears are not addressed and alleviated well in advance.04. It should be worth noting the fact. then the major (and most critical) obstacle in the path of an ERP implementation is solved. But it must be pointed out to the employees that the same automation creates many more opportunities for them. 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. when such defense is technically correct. It is the duty of the consultants to present the advantages and drawbacks of each area and reach a consensus decision.4. It is human nature to resist change. It is the duty of the consultant to understand the total context and scope of the envisioned work and to know when to alert the company management about actions and decisions that must be undertaken so that the job will not be compromised. .

and now there is increasing demand for investment in innovative applications such as electronic commerce and supply-chain and HR/customer self-service (sometimes referred to as Front-Office applications). but not quite as attractive. The Y2K problem has dominated the market because of its pressing nature. or. No more so than high-speed world of technical innovation. been fueled by its ability to provide solutions to Y2K problems. Therein lies part of the dilemma for ERP vendors. Human Resources and basic manufacturing. . the enormous surge in ERP implementations over the last several years has. while the dynamic.CHAPTER 9 FUTURE DIRECTIONS IN ERP INTRODUCTION (OCT. and competitive new business practices involving supply chain and customer self-service. and to a certain extent still is. As revolutionary as the ERP concept was. But as industry experts have pointed out for some time. industry-specific Front-Office market will be captured by best-ofbreed niche applications. commanded by existing applications. forcing cutting-edge projects to take a back seat to Y2K solutions. to a certain extent. it is doubtful whether it can hold onto its overall position as the 'hottest' dominating technology in the face of competition from new cutting-edge technologies such as Internet commerce and EDI (Electronic Date Interchange).06. take over the Front-Office and leave ERP in Back-Office maintenance—upgrade mode—still lucrative and stable to be sure. 8M) The only constant is change. emerging. no one doubts ERP's ability to continue dominating Back-Office practices in areas of traditional strength such as Financial Management. Top-tier ERP vendors can expect to continue to make healthy inroads into these markets. the question is: How will ERP industry watchers are agreed on at least one point: 'one-size-fits-all'. will smaller companies with a faster response time and less investment resources. Forrester Research group look at the market five years from now and suggest that the current top-tier ERP vendors will continue their supremacy in the global core applications market. these inevitable changes affect the ERP market? in the constantly evolving. particularly into the mid-market sector. given the number of companies yet to implement it. Therefore. across the board integration is no longer seen as the unwritten law. As the market stands now. That mindset is changing rapidly. The question then becomes: can ERP afford the kind of investment needed to maintain both their Back-Office supremacy and develop the technology and the market it needs in the FrontOffice.

But just how likely is it that the ERP behemoths will roll over and play dead? Given the inevitable slowing of the growth rate in the basic core applications market (expected to drop from its current rate of 50% to about 33%, five years from now), won't the Big 5—SAP, Baan, Oracle, PeopleSoft and JD Edwards—refocus their energies into Front-Office areas such as customer management and supply chain? That is what the Hurwitz Group anticipate. They predict that the top-tier ERP vendors will move into new technologies while preserving their current market share, albeit with slower growth rates. There is lots of evidence for the view that the Big 5 ERP vendors are finding it hard to resist the siren song of the Web. And let us not forget the supply chain buzz. The future of the supply chain market seems all set. The problems are logistical, reflecting the fluid state of the market as developers strive for market share, rather than any inherent problems in supply chain itself. The Hurwitz Group expects supply chain to shake out and fuel significant business growth. Enterprise resource planning (ERP) applications are the complex, multi-module suites of business management software that handle accounting, distribution, manufacturing, human resources, and payroll. Typically targeted at Fortune 1000-level enterprises, these are the applications that, before client/server, would have been run on IBM mainframe, AS/400, DEC, or HP minicomputer platforms.

10.1. NEW MARKETS
As larger enterprises become saturated with new-generation client/server ERP systems, vendors are being forced to find new markets for their product' suites in order to grow. This pressure is causing ERP vendors to increase their appeal to small business clients through a number of initiatives. These initiatives include the following:

• Supplementing their direct sales force with reseller channels • Lowering the entry price point of their software to make it financially viable • Stratifying their software offerings to appeal on the basis of reduced functionality • Improving the implementation methodologies for faster deployment • Porting the products to platforms such as Microsoft Windows NT. 10.2. NEW CHANNELS
Vendors such as SAP AG Inc., Oracle Corporation, and Baan Co. have been building reseller channels—both in the US and worldwide—to reach the smaller businesses that are looking for the complete-one-stop shopping for their ERP solutions. The ERP software is made more financially attractive by lowering the entry price point for each module and by ramping up the total costs by basing price on user licenses. Oracle is being particularly aggressive in this respect with software pricing, comparing favorably with middle-market client/server offerings from companies such as Platinum Software and Great Plains Software. Although JD Edwards ventured in these waters by complementing its OneWorld suite with a lower-cost line called Genesis, most of the vendors

have avoided producing less-expensive 'lite' versions of their software. SAP abandoned its SAP Lite project some time ago and it looks as if the lite versions will have to wait for some more time.

10.3. FASTER IMPLEMENTATION METHODOLOGIES
(OCT.05, 06, 07, 08, 09, APR.09; 6M)

All ERP vendors have suffered from the perception that their software is difficult and costly to implement. This perception has provided huge profits to the 'Big 6' accounting firms (now Big 5 with the merger of Price Waterhouse and Coppers & Laybrand) that have generated billions in fees from their ERP software implementation 'practices.' Even though only 10-15% of the implementations have taken years to complete and have eaten up millions of dollars of consulting costs, the fact remains that implementing ERP packages is difficult. An ERP system may consist of dozens of modules that are deployed on a multinational basis to service hundreds of users from many different business departments. There may also be a complete change of IS infrastructure—say from a mainframe to a UNIX platform—while a number of core business processes are being simultaneously reengineered. ERP vendors have thus begun to focus their effort on making the implementation process easier by providing more effective tools and methodologies to speed up the process, creating elite consulting teams to intensify resources when required, and using model-based approaches and opening up their systems for easier integration. For example, SAP has introduced a program called Accelerated SAP (ASAP) that takes the knowledge gained from thousands of R/3 implementations to date and consolidates this expertise in a product called the Business Engineer. This product helps implementation teams configure the SAP modules to conform to the processing style of some 100 business operating scenarios. Methodologies such as ASAP help reduce SAP implementation times to less than six months in many cases. Oracle recently introduced a similar program called Fast Forward, to help speed up implementations of Oracle Applications suites and nail down the costs up-front. Despite the availability of new channel partners and implementation methodologies of the major consulting firms, ERP systems have often been difficult to implement because of a dearth of skilled consultants. As a result, initiatives such as Oracle's OracleOne or SAP's Platinum consulting services are leading the way in creating highly skilled consulting teams and are charged with delivering fully trained and experienced consultants on a worldwide basis to push implementations through faster.

10.4. BUSINESS MODELS AND BAPI’S
(OCT.05; 5M)

Using products such as Intellicorp Inc.'s LiveModel, implementation teams can review and simulate changes to the SAP R/3 application Reference Model that provides views of R/3 processes, data models and functions. The Reference Model and any changes made to it are stored in the LiveModel repository and can thus be audited and changed on demand.

Furthermore, because LiveModel is OLE compliant, the R/3 models can be manipulated and documented through desktop OLE applications such as Microsoft Word. SAP has attacked the notion that the R/3 system is not open by releasing the. specifications for some 170 business application programming interfaces (BAPIs), which help third-party applications interact with R/3 directly. BAPIs are simply, sets of methods that allow external applications to collaborate with specific R/3 business objects, such as customers, accounts, or employees. The fact that the R/3 data is addressable through these callable methods, (BAPIs) gives the third party application vendors a lot of flexibility to build supporting applications for the RV3 system. In a similar manner, Baan provides an offering called OrgWare that is based on the use of a tightly integrated business-modeling tool, combined with business-specific templates that help to automatically configure the software to suit specific operational needs. Baan is currently in the process of enhancing this tool with new setup wizards to accelerate software implementation on the Windows NT platform.

10.5. CONVERGENCE ON WINDOWS NT
The growing popularity of Windows NT has forced almost all ERP vendors to offer products that cater to this segment. SAP R/3 has been available since April 1994 on NT and since October 1995 on SQL Server—while Baan, Oracle, and PeopleSoft have announced the general availability of their applications on the BackOffice platform in 1997. SAP claims to have over 2,000 R/3 installations on NT and holds Microsoft itself as the company's best customer. Baan sports the 'Designed for Microsoft BackOffice certification. Oracle touts its support for its own NT-based clustering technology, and PeopleSoft shows off its recent switch to BackOffice as its primary development and initial rollout platform. As Microsoft scales up its enterprise versions of NT and SQL Server to support more processors as well as failover clustering and row-level locking, BackOffice is simply becoming a more viable platform for running demanding ERP applications. The BackOffice platform is already the platform of choice among the middle market vendors of accounting and distribution software, with the NT/SQL Server combination grabbing market share from the popular Novell/Btrieve platform.

10.6. APPLICATION PLATFORMS
ERP vendors already deliver comprehensive suites of application modules that support multinational deployment, Year 2000 compliance, and the Euro (European single currency). But each vendor is trying to extend the reach of its software and make it more like an application platform than a suite of modules. SAP is already ahead in this race; its R/3 product

Baan is linking its applications to the Gentia product (from Gentia Software Inc. The company is also focusing on the automation of supply-chain relationships via the Internet. 09. SAP has also previewed its own Business Information Warehouse product for synchronizing the R/3 transaction system with a data warehouse that can manage both R/3 and non-R/3 data. the client-based Cognos Corp. and for the setup and monitoring of key performance indicators. charting and reporting data from Oracle's Applications suite. such as supply chain management and demand forecasting or sales automation and marketing. APR. ERP vendors are being forced to move from a client/server to browser/server architecture to Web-enable their software and thus.) to provide OLAP capabilities. Oracle provides a data mart designer and builder tool for creating data marts. Some vendors are also moving into more specialized areas. MORE FEATURES.04. 10. deliver self-service and electronic commerce capabilities. JD Edwards teamed up with Information Builders to deliver a data mart. NEW BUSINESS SEGMENTS All the ERP vendors are now capable of delivering specialized variants of their applications to service vertical markets such as government. To strengthen its financial modules.'s multidimensional Essbase server.08. Baan is working to deliver a Java-based Web interface to all its products. PeopleSoft bought Red Pepper Software to enhance its supply chain offering. based on Information Builders Inc. while Baan recently acquired Aurum Software for its Aurum Customer Enterprise suite of customer relationship management tools. healthcare. data transformation. WEB ENABLING (OCT.'s SmartMart suite of database access middleware. The next version of PeopleSoft will include closer integration between PeopleSoft applications and both. an end-user tool for querying.. 10. and Oracle also offers Oracle Discoverer.9.8. through use of a metadata repository and a front-en«J OLAP engine.is one of the few that can be managed. and on using Hyperion Software Corp. budgeting and reporting solutions to Baan's distribution and manufacturing modules. or retail environments.7. and OLAP tools. PowerPlay multidimensional OLAP tool and Arbor Software Corp. reporting. centrally using popular platform management tools from vendors such as Computer Associates (UniCenter TNG) and Tivoli (TME).'s Spider-Man technology for report and . Baan also teamed up with Hyperion Software to link Hyperion's financial accounting.. 6M) As with every other software market. on e-commerce via the Microsoft Merchant Server (now known as Site Server). 10. Improving decision support has been another focus of almost all the ERP vendors. financial service. 08.

We can expect to see many more acquisitions along the lines of the Baan/Aurum deal. JD Edwards seem to be in the most vulnerable position. the ERP vendors are all using Java. and Oracle Web Suppliers modules. coupled with their need for transition to new product lines and platforms.10. One reason why implementing solutions from SAP and PeopleSoft can be expensive is because the tools for customising their products—ABAP4 and PeopleTools—are proprietary. Whereas many lower-tier software vendors have built their application front ends using popular commercial tools—such as PowerBuilder. In 1997. rather than Microsoft's ActiveX. it would still take any competitor a couple of years of triple-digit growth to overtake the German giant.alert distribution across the Web. Driven in part by the huge impact of Internet-based commerce. could just envy functionality available to those with deeper pockets. no one wants 'just ERP' anymore. focused more attention on its applications business as a growth engine and seem to be reaching. and Baan is also showing that it has the mentality and results to become a top-three player. most aggressively. Oracle has lately. instead of leveraging the PowerScript or Visual Basic expertise that they may already have in-house. MARKET SNAPSHOT Even with zero growth at SAP. JD Edwards is also using Java to allow its OneWorld functionality to be available either through a Windows client or a Web browser. SAP released 25 Web applications for version 3. Because Oracle is already a tool vendor. As a result. during the transition from client/server through browser/server to the promised land of distributed components. an increasing focus on the Microsoft BackOffice platform. such as sales force automation (SFA) and customer management.1 of the R/3 and recently previewed links to online catalogs for Web-based procurement. Developer 2000. Visual Basic. PeopleSoft is set to deliver its Universal Applications—Javabased self-service applets—with its PeopleSoft 7. into the territory targeted by the middle-market client/server accounting players. and Designer 2000 to develop its Oracle Applications. where their previous market-leading positioning was less than clear cut. cutting-edge technologies. Oracle Web Customers. . The move by the ERP vendors to embrace Java as a means to deliver and deploy their Web functionality. while Oracle has used Java to deliver its Oracle Web Employees. One thing is clear. ERP vendors are definitely extending their reach as they fight to maintain their growth momentum. and ERP packages turning up more and more in businesses that previously. these new applications are leading to a seeming divergence between so-called Back Office and Front Office functionalities. the customer will have to pay a premium for ABAP4 and PeopleTools programmers. PeopleSoft has not made a wrong move so far. the company uses Oracle Forms. The emerging trends in the enterprise packaged application industry are its integration with new. with their continued reliance on the momentum of IBM's AS/400 line. 10. is the first move away from proprietary technologies to more open tools. or Microsoft Access—the-ERP vendors have not taken this route. for their first generation of Web-enabled applications. Unlike the Microsoft-centric middle market applications.

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