MI0038 - Enterprises Resource Planning -ERP

Assignment Set 1
1.Why are ERP systems said to be flexible? Explain with an example. Ans:ERP packages is their flexibility. Different languages, currencies, accounting standards, and so on can be covered in one system, and functions that systematically manage multiple locations of a company can be packaged and implemented automatically. To cope with company globalisation and system unification, this flexibility is essential, and we can say that it has major advantages, not simply for development and maintenance, but also in terms of management. The package should have the flexibility of interfacing with other systems that the company is dealing with, for example: banks, suppliers, customers, and so on. The package must be customisable and the customisation process should be easily done and should be able achieve it in-house. The vendors policy and practices regarding updates, versions, and so on, should be should be verified and it should be acceptable to your company norms. Since selection of the package is very crucial, the companys committee should sit together and analyse these issues and assign points to these items and draw down the layout for the implementation process. 2. Explain with an example the concept of supply chain management? Ans:Supply Chain Management A supply chain can be defined as a network of facilities and distribution options that performs the function of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Both in service and manufacturing organisations supply chains system exist. However, the complexity of the chain may vary greatly from industry to industry and firm to firm. Traditionally, the departments like the marketing, distribution, planning, manufacturing, and purchasing of an organisation operated independently along the supply chain. This kind of traditional organisations each departments had their own objectives, which often conflict with other departments objectives. For example, Marketing's objective of high customer service and maximum sales revenue conflicts with manufacturing and distribution goals. Many manufacturing operations are designed to maximise throughput and lower costs, but very little concern was given for the impact of this on inventory levels and distribution capabilities. With the very little information and based on the historical buying patterns purchasing contracts were often negotiated. This resulted in chaos and there was not a single, integrated plan for the organisation there were plans as many as services the company offered. This clearly demanded a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved. If the SCM has to be successful their must be a change from managing individual functions to integrating activities into key supply chain processes. For example, the purchasing

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department places orders as requirements become known. In case of marketing department, it has to respond to customer demand, communicate with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply chains partners can only be fully leveraged through process integration. The integration process of Supply chain business process involves collaborative work between buyers and suppliers, joint product development, common systems, and shared information. But one has to understand that continues information flow is required to operate an integrated supply chain. Top management of many companies have reached the conclusion that optimising the product flows cannot be accomplished without implementing a process approach to the business. An organisations supply chain or logistics network is affected because of supply chain sustainability. This is a major business issue and is frequently quantified by comparison with SECH ratings like social, ethical, cultural and health records. Today consumers have become aware of the environmental impact of their purchases and companys SECH ratings. Along with this non-governmental organisations ([NGO]s), are setting the agendas for focusing on transitions to organically-grown foods, anti-sweatshop labor codes, and locally-produced goods that will support independent and small business groups. Because supply chains frequently account for over 75% of a companys carbon footprint many organisations are exploring how they can reduce this and thus improve their SECH rating. Companies can improve their overall competencies with the help of supply chain specialisation, in the same way that outsourced manufacturing and distribution has done. It allows them to focus on their core competencies and assemble networks of specific, best-inclass partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The leading reason why supply chain specialisation is gaining popularity is just because of the companys ability to quickly obtain and deploy this domainspecific supply chain expertise without developing and maintaining an entirely unique and complex competency in house. 3. Differentiate between Open Source and Commercial ERP. Briefly explain the key principles to a proper ERP system selection process. Ans:Before the evolution of ERP model, each department in an enterprise had its own isolated software application that did not interface with any other system. Such isolated framework could not synchronise the inter-department processes and hence hampered the overall productivity, speed, and performance of the organisation. This situation led to issues such as incompatible market standards, lack of synchronisation, incomplete understanding of the complete enterprise functioning, unproductive decisions and so on. For example, the finance department could not coordinate with the procurement team to plan out purchases as per the availability of money. Hence, deploying a comprehensive ERP system across an organisation leads to performance increase, workflow synchronisation, standardised information exchange within departments, complete overview of the enterprise functioning, global decision optimisation, speed enhancement and so on. ERP system is built on a centralised database utilising a common computing platform. It consolidates all business operations into a uniform enterprise wide system environment. An ERP system can either reside on a centralised server or be distributed across modular hardware and software units that provide "services" and communicate on a local area network. The distributed design allows a business to assemble modules from different vendors

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without the need for the placement of multiple copies of complex and expensive computer systems in areas which will not use their full capacity. ERP systems integrate all the departments and functions across a company onto a single computer system that can serve all the departments needs. There are two types of ERP software packages. Open Source ERP software and Commercial ERP software. Some of the differences between the two software are as follows. Table 4.1 shows the differences between commercial and open source ERP. Differences between Commercial and Open Source ERPs

The differences between commercial and open source ERP applications show the edge open source ERP players enjoy. However, the fact remains that open source ERPs are not received well in the market due to fear of failure. ERP software has been traditionally used by large corporations to integrate and automate diverse departments across the enterprise. For a long time, smaller companies purchased individual accounting and payroll packages and then migrated to expensive ERP solutions as they grew. They did not have many options as ERP solutions were costlier and required business magnitude and use by many employees to justify the investment.

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But now with many open source ERP software available, it is now possible for small companies to go in for ERPs at an earlier stage. There are several open source software in the market including Compiere, ERP5, and Fisterra. Compiere is suitable for small and medium sized ERP enterprises, especially in the business and service sector. It is designed to follow changes as business evolves. The hallmark of this software is that the customer companies, and even their production personnel, can modify the information structure at any given point of time. This software also provides multiple views of business information based on the detail of the actual transactions. Microsoft Dynamics AX from Microsoft Business Division is one of Microsofts flagship ERP systems. It is a commercial business solutions software. Its primary strengths are ease of use, customisation, internationalisation, and cutting edge technology. Microsoft Dynamics NAV is an ERP computer program from Microsoft Corporation. It is intended to assist with Finance, Manufacturing, Customer Relationship Management (CRM), Supply Chains, Analytics, and Electronic Commerce in Small and Medium-sized Enterprises. mySAP ERP is yet another commercial ERP software. It is produced by SAP AG and was formerly known as SAP R/3. This is a client/server-based application that uses a 3-tier model. The first layer is the presentation or client layer, which interfaces with the user. The second layer is the application layer which houses all the business-specific logic. The third layer is the database layer which records and stores all the information about the system, including transactional and configuration data. The success of any ERP package depends on its ease of customisation and implementation process. Proper ERP system selection methodology It is important to apply key principles to the process to address common mistakes that lead to an improper ERP system selection, they include: Structured approach The first step in selection of a new system is to adopt a structured approach to the process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements, invitation to tender, how potential vendors are selected, the format of demonstrations, and the process for selecting the vendor. Focused demonstrations Demonstrations by potential vendors must be relevant to the business. However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business. Therefore, it is imperative that vendors are treated equally in requests for demonstrations. It is incumbent on the company to identify sufficient demonstrations that allow a proper decision to be made and also ensures that vendors do not opt out of the selection process due to the extent of preparation required. Objective decision process "Choosing which ERP to use is a complex decision that has significant economic consequences, thus it requires a multi-criterion approach."[4] There are two key points to note when the selection criteria used in evaluating potential vendors. First, the criteria and the scoring system must be agreed prior to viewing any potential systems. Secondly, in no circumstance should people with affiliations to one or more systems be allowed to advise in this regard.

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Full involvement by all personnel The stakeholders within the enterprise must decide on the system. "It requires top management leadership and participation it involves virtually every department within the company"[5]. Representatives should: ? Be involved in the project initiation phase ? Assist in the gathering of requirements ? Attend the Vendor Demonstrations ? Have a significant participation in the short-listing and final selection of a vendor. ERP Selection Process The ERP selection process is an important step for the future growth of any manufacturing or distribution organisation. ERP selection process has helped numerous manufacturers and distributors to find the software provider and solution that best meets their organisations unique business software requirements. The actual process of evaluating and selecting an ERP System is never the same for any two companies. However some common steps and exercises that a company and its evaluation team should take to evaluate the companys requirements are: 1. Selecting and empowering a cross-functional Evaluation Team that includes the best and the brightest individuals from each functional area of the company. They need to understand the importance of information sharing and integration, and champion positive change. The individual representing a functional unit can fairly and accurately represent and communicate the needs of his functional unit regarding the need of a new enterprise system. 2. The members of the team need to learn the business reasons and conditions that exist within the company. Additionally, each member of the team needs to educate other members about the functional area of the company he/she represents. 3. The companys resources need to be identified and assessed. In addition to those areas that may be unique to business, the following also need to be assessed: ? Personnel determining how the company presently uses its personnel; define the organisations strengths and key areas that need improvement. ? Technology understanding the businesss current information management infrastructure. ? Workflow analysing the critical processes and workflow issues within the company. Consideration to be given to not only how these processes actually work today, but also how they should work as the company grows. ? Performance Measurements defining a business model for success needs along with the metrics that are used to measure business performance. 4. The elements required to meet the companys goals, and in turn the companys success, have to be defined. These requirements are then used as the guideline for selecting an ERP solutions provider. The steps involved in this process include: ? Identifying the limitations with the current business approach

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? Identifying the organisations core competencies factors that give the organisation a competitive edge over competitors. ? Identifying the requirements for a solutions partner regarding implementation, features, functionality, service, tools, ongoing customer care and support. 5. Identifying the most important system functionality when selecting the right enterprise solution for the organisation. 6. Some of the additional questions that need to be pondered over when evaluating potential ERP solutions are: ? Is the vendors product scaleable to accommodate rapid or unexpected growth? ? Are the solutions that are under consideration configurable to meet existing specific needs and business processes as well as new ones that may arise in future? ? Is the solution flexible enough to operate on a variety of IT platforms? ? Are the product functions and features available now? If not, when will they be available and how important is it to have that function? Following and executing these steps of the ERP selection process provides the organisation the necessary information to make a well-informed, quantitative ERP software selection. 4. What is ATO and how is it different from ETO? List the advantages of CAD/CAM. Ans:Assemble-to-Order (ATO) company is another variation of the manufacturing operations. The ATO company manufactures standardised, option modules according to the forecasts it has made and then assembles a specific combination, or package of modules, after receiving the customer's order. The classic example is the automobile manufacturer. After receiving orders from a host of dealers, the manufacturer specifies the exact production schedule for the automobiles. The schedule is based on the options order by the customers, like automatic transmission or manual transmission, air-conditioning, standard or digital control panel, leather, cloth or vinyl seating, and so on. Many components for assembling the automobiles would have be ordered or started into production before receiving the customer's order based upon demand forecasts. Thus, the major processing that remains when the orders come in is assembly. This approach shortens the time between placement of the order and delivery of the product cycle time. Yet another variant in the manufacturing operations is the Engineer-to-Order (ETO) company. The ETO Company is the ultimate in product variety, product customisation and flexibility. In this mode of operation, as per customer order the company manufactures anything, but at a higher price. The expensive clothing of the 'bold and beautiful' is an example of this kind of production. Products are made for each customer and even the minute details, for example, the feel of the cloth and the texture, the colour of the threads, the size of the collar and so on will differ from one customer to another, depending upon the customer's preferences. So the manufacturer cannot keep anything in inventory, he will have to order only once the customer has given his/her specifications. Obviously, the cost of production will be highest in this mode of production.

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Computer Aid Design/Computer Aid Manufacturing (CAD / CAM) are the other major focus area for the manufacturing sector. Traditionally, the automotive and aerospace industries are the largest consumers of CAD/CAM. With the automotive sector in the depression, vendors were not able to meet their expectations from this industry. On the other hand, the farm auto sector did better in comparison. Mahindra & Mahindra (Tractor Division) has grown considerably in the last three years and their manufacturing capacity has doubled. This is accompanied with significant improvement in design capacity. Increasing design capacity is also a competitive edge for a company. For example, Tata Johnson Controls, which makes seating systems, started off by designing seats solely for Ford. With increased design capacity using advanced CAD/CAM, they went on to supply seating systems to many other auto majors. The major focus area in CAD/CAM is on design analysis, development, and manufacturing. Styling and ergonomics are the refinement areas to achieve design excellence. There were only marginal investments in modelling. There is also a trend developing for reverse engineering, especially in the engineering and appliances industry. Manufacturing, companies in the BPL Group have taken up reverse engineering. Product data management (PDM) is another leading edge of the CAD/CAM philosophy. TELCO and Mahindra Ford have integrated many of their suppliers. For the supplier, it means enhanced competence and improved competitiveness. Many of these suppliers, with their improved design capacity and integration with OEMs, have also started exporting. Brakes India is supplying brakes to many of the European auto manufacturers. Another reason, which forces a company to make design an imperative, is the improved alignment that many manufacturing organisations have acquired. This is because of business process reengineering. An important thing is the integration of tier 1 and tier 2 suppliers with OEMs, for standard product information. Many companies in heavy engineering sector have signed up multiyear contracts with global majors like SDRC and PTC. BHEL has a CAD/CAM contract across all units with SDRC for a term of five-year. Similarly Lakshmi Machine, L&T and Siemens works are investing in CAD/CAM to beef up their research capability. 5. How does the plant maintenance module help in achieving competitiveness? Write a note of Quality Management. Ans:Plant Maintenance The achievement of outstanding performance demands delivery of quality products expeditiously and economically. Organisations simply cannot achieve excellence with unreliable equipment. The approach towards maintenance management has changed as a result of quick response manufacturing. Just-in-Time (JIT) reduction of work in process inventory and the elimination of wasteful manufacturing practices. Before breakdown in machine and idle time for repair was once an accepted practice. Times have changed. Today, when there is a break down in a machine, it can shut down the production line and the customer's entire plant. The Preventive Maintenance (PM) module provides an integrated solution for supporting the operational needs of an enterprise-wide system. The Plant Maintenance module includes an entire family of product; covering all aspects of plant/equipment maintenance. It becomes vital to the achievement of process improvement. The major subsystems of a Plant Maintenance module are: 1. Preventive Maintenance Control 2. Equipment Tracking 3. Component Tracking 4. Plant Maintenance Calibration Tracking 5. Plant Maintenance Warranty Claims Tracking

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Quality Management The ISO 9000 series of standards defines the elements of a quality management system and the functions of quality management. The functions in the Quality Management (QM) module support the essential elements of such a system. The other integrated modules in the QM system complement this functionality. The ISO standards require that QM systems must be an essential part in all processes within an organisation. According to the quality looping method, it is not only during the production or manufacturing (implementation phase) but also during production planning and product development (planning phase) quality control must be carried out. Quality must be monitored starting from procurement of materials to sale and distribution of the finished product, and it must be monitored in the entire usage phases of an organisation. In the areas of production, quality assurance is no longer viewed in terms of inspections that are the elimination of defects alone. Instead, the production process itself becomes the focus of attention. CAQ and CIQ Just as the requirements for quality management systems have changed a result of the ISO 9000 standards, the term Computer-Aided Quality Management (CAQ) must also be redefined. 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. Takings this into consideration, ERP system integrates the quality management functions into the affected applications themselves. For example, instead of making separate CAQ system holding responsibility of various functions likes procurement of materials, warehouse management, production, and sales/distribution, they all can be integrated into a single CAQ system As a result of this, the processes described in the quality manual can be implemented and automated in the electronic data processing (EDP) system. The representation of the elements of a quality management system within the ERP system is not only the responsibility of the Quality Management module. Instead, the ERP system must be considered as a whole, in which all integrated modules contribute their part. Within the framework of the system, for example, the Human Resources module handles personnelrelated matters, the Controlling module handles the management of quality-related costs, and the Plant Maintenance module handles the monitoring of test equipment. As a part of the Logistics application, the Quality Management (QM) module handles the traditional tasks of quality planning, quality inspection, and quality control. For example, it supports quality management in procurement, product verification, quality documentation, and in the processing of problems. The Quality Management (QM) module's internal functions do not directly interact with the data or processes of other modules. Quality Management Module Functions 1.The Quality Management module fulfils the following functions: 2.Quality Planning: Its main objective is to provide a insight on the effectiveness of the process planning at every stage of the process It involves the various process responsibilities like Management of basic data for quality planning, Material specifications, Inspection planning and so on. For example, as an order is placed from the marketing department to the planning, it decides the way and the time schedule for the process to start and obtain the final product. To execute the schedule planned the planning department has to make sure that it will not interfere with the other production activity in progress. It should make sure all the required items necessary for production is available and other very essential things that might hurt the production has to be addressed. For this to happen, information is very essential. This is where Quality planning steps in and help planning to execute its decision it to result 3.Quality Inspection: Its main objective is to continuously monitor the process and record every activity for verification. The verification can be daily basis, weekly, monthly or yearly basis depending up on the process requirement and management decision. It involves various

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activities like It can be achieved using trigger inspections, Inspection processing with inspection plan selection and sample calculation, Print shop papers for sampling and inspection, Record results and defects, Make the usage decision and trigger follow-up actions. For example, during the production of a television it will be necessary to check each and every circuit board and the test results has to be maintained, not only before it is assembled in side but also after it is assembled inside the setup. Every test result along with failure result has to be recorded for future inspection of the default items. 4.Quality Control: Its main objective is to look for the desired quality in the finished product. The product has to meet the certain defined quality requirements. This has to be checked before the product is despatched out to the customer. This can be achieved using Quality Control use using various tools and procedure like dynamic sample determination on the basis of the quality level history, Application of statistical process control techniques using quality control charts, Quality scores for inspection lots, Quality notifications for processing internal or external problems and initiating corrective action to correct the problems, Inspection lot processing and problem processing, Quality Management Information System for inspections and inspection results and quality notifications. For example, once a product reaches the quality control department, a series of tests have to be conducted to ensure that the product is meeting the required or demanded quality standards. Every test that is carried out has to be recorded, and even report on failure has to be kept for analysing the cause of the failure and address the issue. This is possible only if the information is tracked and monitored carefully. To achieve this Quality Control proves very effective. 6. Explain the working of Warehouse Management and Purchase department with an example. ANS:Data Warehousing A lot of problems are created when the operational data is kept in the databases of the ERP system. Over a period of time, the amount of data will increase and this will affect the performance of the ERP system. Therefore it is better to archive the operational data once its use is over. When I say 'the use is over', it does not mean that the archived data is useless, of course, it is one of the most valuable resources of the organisation. However, once the operational use of the data is over, it must be removed from the operational databases. For example, once the financial year is over, the daily transactional data can be archived. Figure 3.1 shows what happens if the data is not archived.

Operational Data vs. Archive Data As you can see from the Figure it is evident that even though the operational data volume is nearly the same each year, the data is not archived. The total amount of data that is stored in the operational database will go on increasing. Figure 3.2 shows the effect of keeping this huge amount of data in the operational database. It is clear from the above graph that, as the volume of the data in the database increases, the performance of the database and the related applications decreases. Since the data that has

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to be processed by the system is more and increases every year, resulting in the decrease in the performance of the ERP system.

Data Volume vs. Performance From the above discussions, it is evident that we must separate the operational data from the non-operational data. Here the term archive data is not used, because if the non-operational data is archived, there is little or no use for it. But this data is a very valuable resource, and is too precious to be kept in some archive. It is in this situation that a data warehouse comes in handy. Data warehousing has become an essential module in every ERP package. In order to track the performance of the company and to plan for the future, the current data and the data from the previous years are very essential for the managers. They come in handy for managing the non operational data and help in reducing the large and growing data base of an organisation. The basic principle of data warehousing system is that, the data stored for business analysis can be accessed most effectively by separating it from the data in operational systems. The potential performance degradation on the operational system can result during the analysis processes. To overcome this business analysis and the operational data are stored separately High performance and quick response time is very essential feature for operational systems. The reason for separating the operational data from the analysis data has no significant changes with the evolution of the data warehousing systems. Except that now they are considered more formally during the data warehouse building process. The advancement in technologies and changes in the nature of business have made many of the business analysis processes much more complex and sophisticated. The latest technologies in data warehousing systems support very sophisticated online analysis, including multi-dimensional analysis in addition to producing standard reports.

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