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ENTERPRISE RESOURCE PLANNING
Enterprise resource planning (ERP) is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores. An ERP system has a service-oriented architecture with modular hardware and software units or "services" that communicate on a local area network. The modular design allows a business to add or reconfigure modules (perhaps from different vendors) while preserving data integrity in one shared database that may be centralized or distributed what does this software do? Take the activities of a typical company or 'Enterprise', its purpose can be loosely described as 'to manufacture or procure products for sale'. These products may be tangible or intangible, but basically the company must 'Plan' and 'Control' the use of its entire resource base to meet these objectives. That is what 'E.R.P. software' does, it helps the managers and staff of an enterprise to manage its resources to manufacture/procure the products it sells within one software package. The single software package 'integrates' its elements or modules into one seamless package to control the enterprise activities. The most common activities being Purchasing, Manufacturing, Sales and Accounting.
ERP — Manufacturing management systems have evolved in stages over the past 30 years from a simple means of calculating 2 .ENTERPRISE RESOURCE PLANNING ERP AND CYCLICAL STRUCTURE Origin of the term: MRP vs.
These systems can now be found in non-manufacturing businesses. Purchasing. and perform the integration between the systems themselves. ♣ Online Sales. Overview of ERP Solutions: Some organizations — typically those with sufficient in-house IT skills to integrate multiple software products — choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. This is common to retailers where even a mid-sized retailer will have a discrete Point-of-Sale (POS) product and financials application.ENTERPRISE RESOURCE PLANNING materials requirements to the automation of an entire enterprise. To be considered an ERP system. as well as inflexible fixed system parameters. For example. Around 1980. a software package must provide the function of at least two systems. ♣ Human Resources. later manufacturing resource planning) and CIM (Computer Integrated Manufacturing). For example. non-profit organizations and governments. ♣ Sales Order Processing. one may choose to use human resource management system from one vendor. over-frequent changes in sales forecasts. entailing continual readjustments in production. regardless of the organization's business or charter. ♣ Supply chain management (e. It was introduced by research and analysis firm Gartner in 1990. Financials . a software package that provides both payroll and accounting functions could technically be considered an ERP software package Examples of modules in an ERP which formerly would have been standalone applications include: ♣ Product lifecycle management. and ♣ Decision Support System. ERP systems now attempt to cover all core functions of an enterprise. Manufacturing and Distribution). and the financial systems from another. ♣ Customer Relationship Management (CRM). ♣ Warehouse Management.g. led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP3) and finally the generic concept Enterprise Resource Planning (ERP) The initials ERP originated as an extension of MRP (material requirements planning. then a 3 .
cash management. purchasing. order entry. supplier scheduling. merchandising and logistics. fixed assets and expense. accounts payable. addition. activity Human resources. quality control. commissions. benefits Customer relationship management Sales and marketing. suppliers. service. supply chain planning. change in process flow Enterprise resource planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP) MRP evolved into ERP when "routings" became a major part of the software architecture and a company's 4 . manufacturing flow Supply chain management Order to cash. Ideally. time and attendance. capacity. training. which would include: Manufacturing Engineering.ENTERPRISE RESOURCE PLANNING series of specialized applications to handle business requirements such as warehouse management. rostering. time management Human resources General ledger. cost management.user privilege as per authority levels for process execution Customization . staff rostering. manufacturing process. performance units. billing. workflow management. product configurator. claim processing. manufacturing projects. customer contact and call center support Data warehouse and various self-service interfaces for customers. ERP delivers a single database that contains all data for the software modules. accounts receivable. payroll. scheduling. commission calculation Financials Project management Costing. bills of material.to meet the extension. and employees Access control . inventory. inspection of goods.
eGovernment. Many companies took this opportunity to replace their legacy information systems with ERP systems. at which time most companies had already implemented their Y2K solution ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. and accounting for a company. inventory management. The older. the HR computer system (often called HRMS or HRIS) would typically manage employee information while the payroll department would typically calculate and 5 . monolithic ERP systems became component oriented EAS — Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business. human resources. Typical difficulties involved integration of data from potentially different computer manufacturers and systems. including sales. production. it was usual for each department within an organization . All functional departments that are involved in operations or production are integrated in one system. and eFinance. billing. eTelecom. and information technology. delivery. ERPs are cross-functional and enterprise wide. shipping. using ordinary Internet browsers as thin clients Before: Prior to the concept of ERP systems. ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. For example. This rapid growth in sales was followed by a slump in 1999. In addition to manufacturing. this would include accounting. or the eBusiness systems such as eCommerce. payroll and financial . warehousing.such as human resources. marketing. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers. logistics.to have its own customized computer system. quality management and human resource management. logistics. or supplier relationship management (SRM) systems. ERP II means open ERP architecture of components. invoicing.ENTERPRISE RESOURCE PLANNING capacity planning activity also became a part of the standard software activity. distribution. inventory. marketing and strategic management. ERP systems typically handle the manufacturing. ERP software can aid in the control of many business activities.
Much of the same sort of thing seems to be happening today with enterprise resource planning (ERP) systems. just as they invested heavily in total MIS systems. It's easy to put a large buffer stock in front of every 6 . Organizations invested many millions in the effort to develop their own total MIS system. And the current ERP. It also contributed to standardizing and reducing the number of software specialties required within IT departments The ERP Challenges: At one point in the past. these attempts fell very far short of the mark. enterprise-wide information service that allows the organization to efficiently respond to any changes in level of market demand. This simplified keeping data in synchronization across the enterprise as well as reducing the complexity of the required computer infrastructure. many people believed that total management information systems were the way to answer all important management questions. And. it helps to go back to the manufacturing resource planning (MRP) systems that preceded ERP. It is my contention that full-blown ERP systems are the right answer for only some organizations. was not up to the task. The challenge facing manufacturing can be described in terms of buffer stock. and the financial department would typically store financial transactions for the organization. the evidence suggests that most organizations have failed to realize the expected benefits from their (all too expensive) efforts to install ERP. with few exceptions. Any deviation from the data format or the integration schedule often resulted in problems After: ERP software combined the data of formerly separate applications. and.system logic has many parallels with the logic that was used with earlier MRP systems. To understand what ERP can and cannot deliver. Each system would have to integrate using a predefined set of common data which would be transferred between each computer system. that was then available.ENTERPRISE RESOURCE PLANNING store paycheck information for each employee. The widely accepted explanation was that the technology. many organizations are investing millions in the effort to install their own ERP system. While there have been some success stories. These aim to provide an integrated. Leading vendors like SAP and Baan offered MRP systems before they were reborn as ERP systems.
Senior executives must find ways to make the required changes necessary and inevitable to the people who will have to live through the process. The required social transformation is a major undertaking. material. If all the market demands is a continuing refinement in how those objectives are to be met. the problems with ERP can be traced back to a failure to recognize that a major organizational transformation was required. Nice theory. And in some cases. and the firm was much more responsive to changing markets. overall factory productivity should be high. The cost of production went down. However. It needs resources. Nothing moved very rapidly. and it needs constant support from the most senior people in the organization. but it didn't work as planned. Everything and everyone is focused on meeting the objectives set for the organization. some of the time. That work-in-progress allows the separate stages to run at peek efficiency. Even more important. or too whatever. and time. Some of the problems with ERP systems can be traced back to a failure to make the huge organizational and social changes that are required seem necessary and inevitable. More and more work became"expedited"orders. The stock of work-in-progress was expensive. money. or too diverse. but now the buffer stocks are generalized to include men. The ERP logic strips away buffer stocks and subjects everyone to an unrelenting and constant pressure to produce. the response time of the factory improved. When successful.everyone could see work-in-progress.ENTERPRISE RESOURCE PLANNING production stage. my main concern is for organizations that should not strive for the efficiencies that can be provided by total ERP systems. however painful this may prove to be. then ERP can fully deliver on its promise. People must believe the organization has no option but to undergo the change. the results from ERP can be even more dramatic than they were with MRP. With everything at peek efficiency. Initially. people will not be very comfortable in the new ERP world. There is a very real cost behind the focus demanded by ERP. demand fundamental change in how objectives are to be met. Some markets. ERP systems take a similar approach. 7 .. Successful MRP systems replaced the old buffer stocks with better information. In some cases. This manufacturing transformation was relatively simple . and could see the "expedite" job tags. the technology used with the chosen ERP system was not up to the task .the organization was too large. All efforts are focused on driving out the need for buffer stocks across the entire organization.
This practice is assuming greater significance in the current scenario. however. multi-site or multi-country implementation may take years. the scope of the change and willingness of the customer to take ownership for the project .g. This is one of ERP implementation support. This is catching up in the market with the only trouble being reluctance of competitive firms to come together on a mutual agreement for fear of losing business tactics. Most organizations would benefit from having ERP applied to their current "today" processes.. Perhaps there are many risks for ERP implementation. Implementing ERP software is typically not an "in-house" skill. This particular fact has itself saved many lives. a large. and the freedom to make it happen. ERP software systems are typically complex and usually impose significant changes on staff work practices. to my way of thinking. in the absence of ERP. This will ensure that the risks will not be heavy in the case of loss. For e. It is also seen as ERP implementation problem solution. 8 . A properly installed ERP system can buy an efficient "today. Though the companies are at liberty to create security for their respective information there will not be any protection for the (pool of) records in the common database. It is almost always wise to keep the "tomorrow" part of the organization outside the relentless driving logic of ERP. Some popular methods for implementation are as follows Joint ventures with the Respective Industry The company need not necessarily implement ERP all on its own. However this has helped largely in many aspects. so even smaller projects are more cost effective if specialist ERP implementation consultants are employed The length of time to implement an ERP system depends on the size of the business. They can as well share it with leading players in the same industry.g. Implementation: Because of their wide scope of application within a business." An effective "tomorrow" needs people with a vision for the future. lies with the idea of a total ERP system. The sharing allows them to have an interface with the systems on the basis of a common platform. On the contrary they would have to go through the rigorous process of finding the patient's identity and the steps aftermath which brings down the chances of the patient's survival are very minimal. the medical history of a patient brought in an emergency condition can be immediately accessed though ERP. a company of less than 100 staff) may be planned and delivered within 3-9 months.A small project (e.ENTERPRISE RESOURCE PLANNING The problem.
requirements. 5. technical acumen management policy and similar facts. All these will help them to arrive at ERP implementation problem solution. Latest trends in ERP: Need based applications 9 . Identifying the data to be migrated Determining the timing of data migration Generating the data templates Freezing the tools for data migration Deciding on migration related setups Deciding on data archiving Maintenance and support services: Maintenance and support services involves monitoring and managing an operational ERP system. This is an important step in choosing the appropriate ERP software but at the same time it also adds more value to the implementation process. 3. This is not a risk for ERP implementation. Hence the companies can choose to go for a full fledged ERP system and implement it throught the organization and thereby interlink the whole process and the people concerned. 4. 2. But if they are calculated properly then the regime would be inscribed as a golden period in the company's history. The following are steps of a data migration strategy that can help with the success of an ERP implementation: 1. It is also an important ERP problem solution. 6. Full/Partial Implementation It has always been said that ERP products and services are purely based on the needs and resources of the company.ENTERPRISE RESOURCE PLANNING Doing it all alone This is in fact one of the primitive methods and is no doubt followed till date. Otherwise they may prefer to go for an ERP system that performs a particular function of the company. The simple formula behind this phenomenon is that the company should go for it subject to its financial potential. This method takes a lot of risks in this method. This function is often provided in-house using members of the IT department. or may be provided by a specialist external consulting and services company.
Open Source. It is encouraging to notice the improving IT ERP trends. The latest ERP software programs have overcome this menace. This has not only widened the horizon of S. In addition this remained as the main disadvantage or setback of ERP.E. Thanks to the intrusion of internet and open source applications. This has reduced the amount of time spent on ERP. Since this resource was spent excessively there were chances for reduction in potential business and losing man-hours. The company is relieved from depending even for mince matters. Companies are thereby assured of spending lesser time for ERP. Web enabled and wireless technologies These are three important elements that have rejuvenated the functioning of ERP. Open Source ERP has done away with the hassles of paying license fees not only during installation but also whenever a modification is made. This was proving to be a big hurdle to the firms. Reduction in implementation time ERP was discouraged by companies because they took such a long time to get installed and set the whole process into action. This advantage has helped to increase the scope of ERP not only among large firms but also small and medium business as well. They were given the liberty to purchase and install Software Programs pertaining to that particular function.M. The firms need not be worried even if these Software Programs were not available. Any stakeholder or third party can access the required information very 10 .E. They offer need based applications.ENTERPRISE RESOURCE PLANNING Organizations had to implement ERP through their systems irrespective of the fact whether they help in all the functions or in one particular function. The current day ERP applications are less complex to install and train. Expenditures ERP was a very costly affair. They had to purchase the whole applications even if it meant that most of them would be idle except for the core function. These large firms were not able to invest huge money in spite of adequate funds.'S to enter the market of prospective buyers. Now that the spending on ERP gets reduced there are no hesitations to show the green signal for fear of heavy monetary outlay. This has helped S.'s but also increased the usage among large firms.M. Web enabled ERP helps in making the enterprise operations go online.
The failures in hardware are easier to identify and to fix. Customizations make the software more fragile and harder to maintain when it finally goes to production. Failure of ERP Software Implementation Module-based ERP software is the core of ERP systems.strategic planning. every organization is unique in data requirements and business processes. It is the customizations that transform packaged ERP software into ERP software that meets organizations' individual business processes and operations. management control and operational control. Long and expensive customization efforts often result the pass of release deadline and budget overrun. The failures in one or more of those four components could cause the failure of an ERP project. This wide selection enables the tailoring of solutions specific to the needs of individual companies and numerous vertical industry segments. Major changes may be required in the later stage of the implementation as a result of incomplete requirements and power struggles within organizations Failure of Accommodating Evolution of Business Processes Business processes fall into three levels . Wireless ERP has helped organizations to make use of the communication channels effectively and efficiently. Packaged ERP software modules have built-in functionality that work in a standard and simplified enterprise environment. It has made it possible for many elements to operate in ERP which were otherwise not possible. Organizations continuously realign their business processes of all levels in response to the ever-changing market environment. Many ERP systems aren't 11 . business process and user acceptance. Wireless ERP is nothing but sharing enterprise information through devices like internet and other devices making it possible for outsiders to access ERP Failures: All modules of ERP are scalable and interactive in a client/server environment. Most ERP projects involve significant amount of customizations.ENTERPRISE RESOURCE PLANNING easily and that too by sitting anywhere in the world. If not used effectively however the result will be Erp Failures. This proves to be of great help especially during emergencies when the details are to be sourced with immediate effect. we'll examine the failures in software implementation. However.
from invoice through cash receipt Managing inter-dependencies of complex processes bill of materials Tracking the three-way match between purchase orders (what was ordered). and insider crime. example customer . productivity and efficiency Design engineering (how to best make the product) Order tracking. for example. a large manufacturer may find itself with many software applications that neither talk to each other nor interface effectively. financial data. AN ERP system that worked well last year may need major overhaul. such as industrial espionage. such as embezzlement.ENTERPRISE RESOURCE PLANNING flexible enough to accommodate evolution of business processes. Ongoing end-user involvement and training may ease the difficult in organization's adaptation of new systems and new processes. inventory receipts (what arrived). This eliminates the problem of synchronising changes and can reduce the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure. and costing (what the vendor invoiced) The accounting for all of these tasks: tracking the revenue. might involve a disgruntled employee intentionally modifying prices to below-the-breakeven point in order to attempt to interfere with the 12 . ERP Systems centralize the data in one place. from acceptance through fulfillment The revenue cycle. ERP projects usually modify the company's business processes which create extra workload for employees who use them initially. Tasks that need to interface with one another may involve: • • • • • • • • Integration among different functional areas to ensure proper communication. They may not think that the workflows embedded in the software are better than the ones they currently use. cost and profit at a granular level. Advantages: In the absence of an ERP system. Some security features are included within an ERP system to protect against both outsider crime. Failure of User Acceptance The users of ERP systems are employees of the organizations at all levels. A data-tampering scenario.
Some large organizations may have multiple departments with separate. ERP systems can be very expensive (This has led to a new category of "ERP light" solutions) ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. ERP Systems centralize the data in one place. a convergence of people. service and delivery system that creates profit for the company.including those implementing and testing changes . Many of the integrated links need high accuracy in other applications to work effectively. switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level). then over time "dirty data" will reduce the reliability of some applications. ERP vendors are also moving toward better integration with other kinds of information security tools Disadvantages: Problems with ERP systems are mainly due to inadequate investment in ongoing training for the involved IT personnel . etc. hardware and software into an efficient production. Disadvantages: • • • • • • • • • Customization of the ERP software is limited. Once a system is established.as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and the ways in which it is used. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. and consolidation into a single enterprise may yield limited benefits. independent resources. chains-of-command. financial data. in a sense. 13 .ENTERPRISE RESOURCE PLANNING company's profit or other sabotage. A company can achieve minimum standards. The system may be too complex measured against the actual needs of the customers. example customer . It is. if there is any security breach ERP is actually a process or approach which attempts to consolidate all of a company's departments and functions into a single computer system that services each department's specific needs. This can increase the risk of loss of sensitive info. missions.
R. 2 takes standard E. and extends it by providing for closer relationships between an enterprise and its customers and suppliers. resources to make it possible.P TO THE NEXT GENERATION: E. Suppliers can be permitted to monitor stock levels and suggest when items need replenishing. An example of this closer relationship is that an enterprise will allow customers to directly interact with its computer system so allowing them to place orders and investigate the status of its account.com].R. File downloaded From Net. for the moment.ENTERPRISE RESOURCE PLANNING E.P.T. this remains. the preserve of large companies with the I. 14 . Thanks to Shoaib [www. 2. Due to the level of system integration needed between enterprises to achieve E.R.xctvz.P. outstanding deliveries and orders.P.R.
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