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“ENTERPRISE RESOURCE PLANNING (ERP)”
Submitted By: Submitted To: Chitra dadlani Neha Sharma
Apex Institute of management & Science, Jaipur
ACKNOWLEGEMENT The beatitude, bliss and euphoria that accompany successful completion of any task would not be complete without the expression of appreciation of simple virtues to the people who made it possible. So, with reverence, veneration honor I acknowledge all those whose guidance and encouragement has made successful in winding up this. I take this opportunity to thank Ms. Neha Sharma for her support and encouragement which helped me in the completion of this report. I extend my gratitude and thankfulness to apex institute of management & science. Last but not the least I’m also grateful to my parents for providing me the continuous support to motivate me to successfully complete my report.
Submitted By: Chitra Dadlani
by inserting a section of “Example of an Indian ERP packages” that includes the integrated features of the ERP and explains the ERP III architecture in brief.PREFACE In this report. Also two case studies have been inserted which demonstrate the successful implementation of the ERP packages in India. I fervently hope that this report on ERP will make the text more useful and reader friendly. Chitra Dadlani 4 . I have tried to highlight the Indian ERP packages.
5. 2.TABLE OF CONTENT S.N O 1. 16. 15. 21. 14. 4. INTRODUCTION TO ERP DEFINITION AND FUNCTIONING OF ERP FEATURES OF ERP IMPLEMENTATION OF ERP STEPS IN IMPLEMENTION OF ERP ERP DEPLOYMENT. 12. 18. 6. 20. 17. 11. 7.MAJOR ISSUE PRESENT SCENERIO ERP DOMAIN ADVANTAGES AND DISADVANTAGES WHY TO MODEL ENTERPRISE FUTURE GROWTH OF ERP NEED TO QUANTIFY ERP BENEFITS ERP COST BENEFIT ANALYSIS ERP EVALUATION. 13. 9. 10. VENDORS AND USERS EXAMPLE OF AN INDIAN ERP PACKAGE CASE STUDY CONCLUSION BIBLIOGRAPHY CONTENT PG. 19. 8. 3.N O 5 6 7 9 10 11 11 13 15 17 18 19 20 22 24 25 26 27 29 34 35 INTRODUCTION 5 .AN ALTERNATE APPROACH WHERE ERP COMES IN BUSINESS MODELING IN PRACTICE ROLE OF CONSULTANTS.
there is a need to integrate manufacturing with all other functions of the firm. Globalization also meant multiple handling of various functions like marketing. covering all the functions of management is the Enterprise Resource Planning (ERP) system. sales. MRP-I and MRP-II will be a subset of the above objective. As such. Such an enterprise wide system that would meet the information and decision needs of the enterprise as a whole. But the information available on various functions was so disintegrated and scattered that it was almost impossible to consolidate the information. Traditionally. Therefore.To be successful in today’s global competitive market. Materials Requirement Planning (MRP-I) and Manufacturing Resource Planning (MRP-II) were developed basically to take care of requirements of manufacturing. manufacturing etc. it is 6 . marketing and manufacturing needed to have close interaction/coordination including accounting and finance and these are to be integrated. ERP allows various functional departments to share information and to communicate. rules and regulations. finance and accounting. planning etc. companies developed isolated computer applications to suit and satisfy each of their functional segments such as sales. marketing. Due to globalization. production. finance. multiple currencies. The need was to integrate all functions of an enterprise from the product development and design to marketing in a closed loop. purchase.Companies all over the world use ERP to integrate their business processes and thereby reduce cost and improve productivity.
CONCEPTUAL FRAMEWORK Definition and Functioning of ERP: 7 . customer satisfaction/communication. The ERP software meets these expectations and can handle all activities from customer enquiry to the realization of the revenue of the entire process in an interactive manner. performance and monitoring.necessary for business enterprises to continuously strive for developing a high level of integration and coordination along the elements of supply chain and improve in the areas such as time to reach the market.
human resource development and finance etc. Features of ERP: The general ERP Model has a central data base shared by all functions of the enterprise. Functioning of ERP: Functioning of ERP can be best “Suppose an order for a product/good is placed by a customer. It should always offer a total solution and there should be seamless integration across all functions of an enterprise. as ERP integrates production logistics distribution. then it places hold on the order -All these functions are carried out instantaneously. then ERP -Checks for the stock -Reserves the quantity for dispatch -Opens the customer account to verify the credit -Processes the order. ERP integrates entire organization and enable the enterprise to increase its productivity. ERP has a central data base and a cross-enterprise interfacing facility shared by all functions of the organization. -If the credit limits exceeds.ERP is a software package developed for optimum use of resources of an enterprise in a planned manner. marketing. ERP provides almost instantaneous access transactional information through out the organization. Some features of ERP are as follows: 8 .
This feature is useful to manage engineering change management. 3. and evaluations. applicant tracking. and automatic generation of product structures. The intelligence resource planning of ERP system facilitates to optimize the overall flow of demand and supply data and to rebuild relationships between various activities to optimally identify the demand supply chain. etc. maintenance costs and operating costs to effectively manage the equipment/resources. ERP software package works out and provide the numerous functions related to management of human resources. career and succession planning creating alternate organization structure. These are employee data base. routing change order process routing revision level control. Seamless Integration: ERP data base system provides total solution and seamless integration across functions and across different divisions of the enterprise. This includes electronics approval.1. ERP also provides on line records of machines/equipments location and status. 9 . performance review. machine and materials) are to be effectively managed. 2. Supply chain management: The end to end supply chain management is vital for an enterprise having multiple manufacturing divisions and distribution network. Resource management: The resources (man. job descriptions. The crucial function of integrating new product in production or change in existing products fully into the enterprise system is possible through the feature of seamless integration of ERP. training needs.
7. 9. customer orders. Strategic business planning: ERP facilitates management for strategic business planning useful in multi product and multi-division and multi location enterprise. etc. 6. For imaging to provide the ability to display drawings/specifications. purchase orders. As electronic data interchange (EDI). Integrating management information: ERP is capable and used: As a flexible reporting tool to extract information as and when needed without depending on any one. Manufacturing/operations planning and implementation: ERP provides this capability for the management by planning all manufacturing facilities.4. Logistic management: ERP software also has capability for logistic management of inbound/outbound. IMPLEMENTATION OF ERP 10 . Multimode manufacturing and multifacility provide the capability required to compete successfully globally. As data base creation for various activities. internal nature. ability to store original quotations. etc. 8. sale orders. Accommodating variety: ERP has a feature of multi-lingual and multi-currency capabilities. 5. Order management: This feature of ERP is used to handle the incoming customer orders.
5. Obsolescence of the software package. Document and evaluate old process and the new process planned. Awareness training to employees to change in their attitude as required by ERP philosophy and creates willingness in them to accept the new way of doing the job. The emphasis is not to expect a revolution but a gradual transformation. The organization has to keep on improving its policies. the ERP may be a hindrance to the smooth running of the operations. 6. Identify need for having ERP system. the attitude of people has to change i. if people’s attitude is not changed. Create a nucleus of people who will work as a team to interact with ERP consultants. Within commitment management to implement ERP system. It should be realized. This would involve parameters like: Global and local presence of software and its vendor. and ways of transacting business with ERP as an enabler. that the results from ERP are not instantaneous. procedures and systems. People in general resist to any change. Select the software and the vendor who would do the desired job. 3. 4.The way the ERP is implemented is very important to gain benefits. and foremost. Type of industry that the software attempts to target. to change the way they do their job. 2. First. STEPS IN IMPLEMENTATION OF ERP 1. 11 . Clarify roles and jobs. In fact.e.
and the people who install it). For a successful ERP implementation. a consultant and the firm itself. 12 . the success of a process cannot just be industry-specific but will depend on the kind of environment and culture that the company operates in. In addition. many firms believe that the investment is done to fix problems.Schedule for the test run. The consultants claim to be having the knowledge of the best practices. If the process does not exist in the system then the process is Re-engineered. its modularity. The consultants will help you to map the processes to the actual application. Training of team personnel of the enterprise. There is a belief that IT can fix some of the issues. it is important that the implementation should not be either vendor-driven or consultant-driven. Draw up a plan of implementation which may include: Team formation for implementation. Price of package and cost of implementation. but one should understand that this is a strategic investment. Training of user. ERP DEPLOYMENT: MAJOR ISSUES The present process of implementation involves the vendor. After sales support/service. 7. its design. Ease of implementation (nature of package. . there should be an in-house understanding of all the processes and issues. Nevertheless.
The reason being one of the partners had the ERP package and was asking the other to implement the same. many of the multinational firms are restricting their business to partners who have the same ERP.PRESENT SCENERIO The concept of ERP has been popular since the last decade. with an annual turnover of Rs. 120 million and was Planning to implement an ERP system.12. Leading ERP software vendors: 1. 3. (Baan IV) (Mento Park . BaaN: The Baan Company operates from the motherland as well as from USA. a firm in Small and Medium Enterprises (SMEs) sectors. For example.5 million. (SAP R/3) 2. SAP: Sap is a German Company having a large share of ERP software. where they have to spend Rs. more than 10% of the turnover. 70-80% of the large firms are already on the ERP system.California). i. Now.e. Some of the other companies in ERP software package are: (i) People soft Oracle ID Edwards Gartner (ii) (iii) (iv) 13 . as a result.
SAP provides the opportunity to replace large number of independent systems that have been developed and implemented in established organization with one single modular system. leave no stone unturned to capture this holy grail. SAP Introducing SAP SAP was founded in 1972 and has grown to become the world’s fifth largest software company. IFS. which cover every aspect of business management. Ramco systems. but is designed to work with 14 .(v) (vi) (vii) (viii) Scala Ramco Marshal SSA (Systems Software Associates) QAD (MFG/PRO) etc. The system has been developed to meet the increasing needs of commercial and other organizations that are striving for greater efficiency and effectiveness. SAP AG. SAP is both the name of the company and the computer system. Baan. They offer a unique system that supports nearly all areas of business. The SAP system comprises a number of fully integrated modules. Qad. Each module performs a different function. to name a few of the leading vendors. THE ERP DOMAIN Companies like.
aerospace. SAP is a German company but operates all over the world.other modules. mining and agriculture • Oil and gas • Chemical • Pharmaceuticals • Building materials. and train construction • Transportation services and tourism • Electronic/optic and communication equipment 15 . steel • Industrial and commercial machinery • Automotives industry • Ship-building. as well as to government and educational institutions and hospitals. SAP’S MARKET SAP markets its products all over the world to almost every industry imaginable. It is fully integrated. The following is a list of industries served by SAP: • Raw materials. metal products. offering true compatibility across business functions. with 28 subsidiaries and affiliates and six partner companies maintaining offices in 40 countries. clay and glass • Building and heavy construction • Primary metals.
• Museums and associations • Health care and hospitals • Educational institutions and research • Consulting and software • Services. 16 . public administration. distribution and shipping • Utilities • Financial services. and services. banks and insurance • Government.• Wood and paper • Furniture • Consumer packaged goods-foods • Clothing and textiles • Retail and wholesale trading • Communication services and media • Storage.
and comprehensive to all segments. 4. 5. systems and procedures. Facilitates to take appropriate decisions with speed and accuracy. On time delivery 17 . ERP software emboids the best practices followed by corporations 3. bottlenecks. Reduction of work in progress inventory 8. The organization is also able to look at the inefficiencies. ERP’s strength lies in its ability to provide information that it up-todate. Integration of workflow to enable to respond quickly and appropriately to market demand and situation and to attend customer. Increase of inventory turnover 6. Reduction in lead time 9. Availability of information’s that are: (i) (ii) (iii) (iv) across the world. Reduction in Cycle time 7. Some of the benefits of ERP system are as follows: 1. and deficiency in communication across various functions.ADVANTAGES / DISADVANTAGES ADVANTAGES OF ERP ERP enables enterprises to look at it self inwards as well as outwards towards markets. instantaneous. Up-to-date Uniform Comprehensive Integrated 2. The organization has better insight into its own policies.
Improved resource utilization 13. Enterprise integrated system 15. System inputs lack logic and are complex at times 3. It is very difficult to extract data from the sources and there is a requirement of additional tools in the form of business intelligence software. DISADVANTAGES OF ERP 1. Enterprise forms a “High performance starts moving on the path of team structure” 14. Lack of integration with non-ERP systems 2.Reduce quality cost 12. 4. The reporting systems are not adequate.Enterprise starts building new relationship with external organization and becomes an extended enterprise. 18 . After the project is over the vendor is no more associated with the project and there is very less or limited help available in case the client needs any.10.Enhanced customer satisfaction 11.
WHY TO MODEL THE ENTERPRISE • More agile enterprise • Helps in eliminating redundant or non-value added activities. 1. Material 3. Money 4. Information 2. • Empowerment of employees to take action 19 . • More efficient system after being enabled by IT. improvement such as customer satisfaction & quality • Stream lines 5 important flows in the enterprise. Intangibles. Control 5.
the SMEs have made a huge contribution to the IT industry. 20 .FUTURE GROWTH DRIVERS OF ERP The future growth of ERP vendors will depend on the SMEs. It is now that the bigger firms are thinking of moving into this industry since the capabilities of SMEs are limited. the implementation will take place in steps. In addition. This year. In any country. if we see in India. SMEs are the largest contributors to the economy. it would mean deployment of resources in phases and this will give a chance to correct any problem detected during the initial stages. When we say capabilities. The Business Process Outsourcing (BPO) industry is a classic example of the success of SMEs. So. skilled labor with knowledge of processes. we mean capabilities in terms of financial resources. etc. These will help to bring down the total cost of ownership. providing scalable models. providing web-based applications. The vendors understand these and are trying to come out with new strategies such as the ownership of the system to be shared by a group.
Decrease inventory. Shorten order-to-delivery cycle time. Questions to be asked How. Many of the companies have reported dissatisfaction about the performance of ERP system after its implementation. how much and when? How. how much and when? 21 . TABLE: ERP’s Goals and objectives Objective Improved customer satisfaction. which is already very high.THE NEED TO QUANTIFY ERP BENEFITS The cost of ERP is 3-7 times more than that of purchasing the software license. how much and when? How. To avoid this. there is a lot of customer dissatisfaction. Due to this. Vendor management. This can be carried out by setting the required objectives and goals. It is equally essential to ask questions related to those objectives and goals. how much and when? How. License cost of a SYSTEM ANALYSIS AND PROGRAMME DEVELOPMENT (SAP) R/3 is between $ 1-5 mn. it is necessary to identify and quantify the benefits of ERP implementation right in the beginning.5 mn. Reduce material cost through improved. There is a need to clearly quantify and work out a ROI in the beginning of the installation itself. The total cost required to implement ERP can be as high as $14. how much and when? How.
the cost of the software. support and maintenance contracts. training personnel. On the investment side. network upgrades. maintenance. but there should not be speculative measures to measure the same. up gradations. The following are the measure cost of ERP systems. To measure the intangible part there are measures available. we need to know the benefits accrued that outweighs the cost involved. 22 . Many people are of the view that ROI on ERP is very difficult to calculate. customization and development cost. it is very important to conduct preimplementation ROI analysis. A rough estimation shows that the percentage of tangible and non-tangible benefits could be 50-50%. but in the end. Implementation cost This would include items such as software licenses and hard wares such as servers. The intangibles on the cost side could be the actual cost of the workforce that can be taken as weighted Cost of labour needed to install and customized the system. ongoing support and administration cost. ROI calculation may not be science. To make cost benefit analysis of an ERP system there is a need to study the areas. Companies that actually measures ROI report a significant performance improvement. The benefits might be tangible and intangible.ERP COST BENEFIT ANALYSIS To Zero in on a particular strategy. Now what is very hard to measure? The intangible part of returns and cost seems to be too hard to measure. customization can be measure. Majority of the customers believe that ROI is difficult to measure.
As there is a shortage of trained labour for such specialized application. are in great demand. There is a lot of internal human resource attached to ERP.. who gain experience in such an implementation. Consequently. firm employees. no. these are the people who understand the processes deeply. Savings can be categorized under 4 different headings. better capital 23 . The other costs could be budget overruns. in turn.Personnel Cost The cost attached to personnel is almost as high as the license cost. depending on the size of the firm. Productivity. may call for change management and business process reengineering (BPR). Costs. functionality shortcomings etc. etc. it puts pressure on remaining employees also. They are IT staffing. The other aspect is that a large amount of resources spent on employee training and this. people handling some or the other functions are now dedicated completely for ERP implementation. of functions. the company has to assign employees to represent different functional group and. it is very important to have a clear understanding of the functionalities. The implementation team can be anywhere ranging from 50 to 150 people. such as user training. On the other hand. This will bring down per user cost and the benefits can be achieved fast. Considering the fact. change management. To avoid such costs. can be measured by using surrogate measures. redeployment of manpower. of locations and the no. there is a increased chance of employee turnover. The overall benefit side includes operating efficiencies that help the company improve productivity. Operational efficiencies and Revenue Improvements. a quick move to exploit the complete functionalities and to add as many users as possible.
saving in travel costs for meetings.utilization. There will be a reduction in people required to monitor systems. better control and increased certainty in decision making. ERP Evaluation An Alternate Approach 24 . operations related savings such as time saved on e-mails and phones. Talk with different users and find out what amount of time is saved now. improved order to delivery cycle time. because not all time saved will be used productively. Intangible benefits would mean greater reliability of the firm. reduction in inventory levels.
In addition. there is a need to find out different tools and techniques. during and after implementation to examine how the effects of 25 . They have devised a research design where in they have asked for the impact of information systems such as inventory management. there is a limitation to the traditional tools being used for the ROI calculations. One of the methods being "Assessing the value provided by ERP applications through organizational activities" by Arik Ragowsky. The problem is that only a few companies actually do an ROI study for purchases. There were some methods that were proposed by different people. Toni M "Somers and Denis A Adams through their paper in "Communication of the Association for information Systems". project management and customers’ orders budgeting on different aspects such as: • Inventory holding cost • Retention of customers • Reduction in cost of after sales services The methodology used has been conducting personal interviews with senior manager of each organization. The study is more focused on the value provided in terms of subject perception and the benefits that the organization derived out of the use of specific individual IT applications to ERP.ERP offers many opportunities for ROI calculation. One of the methods that were proposed by different people. Therefore. The longitudinal dimension is used to study the relative performance of firms before. They selected companies that have all the five Porter's value chain elements. up gradation or customization.
These studies will always indicate a positive outcome. A suitable strategy would be to pick up few companies from different industry verticals and conduct interviews with actual users across different functions. so it is very unlikely that he has in depth knowledge of the impact of ERP on all functions. when. but initial question s like how much. The drawback with the questioner method is that such studies will have very low feedback and a single form would be filled by one person. are not answered. We feel that the balance scorecard approach would be the best approach. 26 . If we are to conduct a pre-deployment ROI analysis (to be more realistic probability of achieving those returns and payback period can also be taken into account) to evaluate expected returns and costs then comparison studies will not suffice.ERP implementation appear over time.
Disparate elements of the organization have to be linked together so that whenever a change in an external ‘pull’ takes place. human resource is as relevant to the whole scheme of things as distribution. The major bottleneck is getting to build software and system solutions for emerging BPR needs is integration. In fact. the enterprise is able to adjust to it immediately and effectively. 27 . ERP systems enable this to happen. The areas of ERP deals with manufacturing as well as with finance.WHERE ERP COMES IN ERP is a result of modern organizations attitude towards how their information systems are to be configure to the new business focuses. The trend today is that many organizations are changing from function oriented businesses to process driven entities. For an ERP solution. the various vendors who provide ERP solutions do so in a modular manner. Merely automating systems is no longer the cure. ERP packages are mostly built on the Objective Oriented Programming (OOP) approach.
It is thus. SAP uses the Event Driven Process Chain (EPC) methodology. In addition. ROLE OF CONSULTANTS. a suitable data model and a MIS report substantiate the process model. a standard data model is provided by the ERP package. By suitable analysis of the data model. VENDORS AND USERS 28 . these ERP packages also provide standard template for each of the processes. obvious that business modeling is the base for successful ERP package selection and implementation. For example. By connecting all the users. the idea being that the difference between the template and the actual process can be easily identified. task/function. At the time of actual implementation. organization information. process and MIS requirements. The business model also plays a very important role in selecting an ERP package as it becomes possible to identify how the package actually fits the business model under consideration. event. they can analyze even very complex business processes.BUSINESS MODELING IN PRACTICES Most of the ERP packages available today facilitate flowcharting these processes using standards symbols.
analyzing the business realities and designing solutions that meet the basic objective of the company. and this in turn benefits the users who have collectively improved their way of working. An ERP package is expected to improve the flow of information and formulize all the business processes and workflow that exist in an organization. they were expecting miracles. this doesn’t happen most of the time. Unfortunately. the company starts performing better. understanding their needs. They can do so by working closely with key users. they started looking at ERP as the solution to their problem. The consultants by virtue of their industry. In their urgency. Leads to poor participation and costly delays. organizations were skeptical about ERP since they felt that their businesses were unique and their cultures differ. As time passed and their business problems became more pressing. but this may not always happen. but the benefit is that this information is properly stored. flow of information throughout the organization improves. If one has to have more information in assistance. It is important to understand that an ERP package cannot fit in completely with the existing business practices of an organization. experience and package expertise should pitch in and set the expectation of the user at various levels keeping in mind the overall business objective of the client. it entails more work from some users. a consultant plays a useful role. Many users expect their workload to decrease after an ERP implementation.Initially. In order to avoid setbacks in an ERP project. 29 .
Business Intelligence. comprising ERP. CRM. Sara ERP has `been successfully implemented in diverse companies in India. Today. Sara ERP is one such package from Mumbai based Sara InfoTech. Interface with DCS. etc.EXAMPLE OF AN INDIAN ERP PACKAGE During the 1990s. this company has developed over a dozen packages. Some of these packages have even been successfully implemented overseas. to take into account their front-office functions. Sara has also enhanced its ERP package for certain verticals like hospitals. J D Edwards. meters. instruments. etc. SCADA and other equipment. Sara IEMS is a comprehensive ERP III package. and other countries. many Indian software companies developed ERP packages which were sold and implemented at hundreds of companies across India. Siebel and PeopleSoft. Later it developed CRM. functionality and cost. The company was established to create software products that would compete globally in terms of quality. hotels. Thailand. Sara IEMS modules can also be integrated with other Enterprise applications such as SAP. insurance. BAAN. Malaysia. including flagship package Sara Intelligent Enterprise Management System (Sara IEMS). all in one single application and one database. 30 . Business intelligence and Interface with various equipment and instruments. Sara started developing its ERP package in 1995 and it was ready by 1999. Indonesia. SCM.
Based on the needs of the organization and understanding of the criteria that the customer will look at before buying ERP system. Criteria for ERP system Services 14% 14% 11% 18% Technical architecture 22% 21% Ability to execute Vision Cost Function 31 . Here are some criteria based on which the company takes the decision regarding selection of ERP systems.
Mercedes-Benz is one of the leading suppliers of automobiles in the world. Within Mercedes-Benz Inc. which produces complete engines as well as engine parts. One department of this factory is in charge of the reconditioning of old engines (approx. The reconditioning in terms of dismantling. With more than 650 engine variation. some production sites hold the position of suppliers in order to achieve an efficient division of labor. Mercedes-Benz uses Baan software at its engine remanufacturing factory in Berlin. Since the engine is not only the heart of the automobile but also a very cost intensive component. 450 employees). The product range includes a large variety of vehicles from exclusive cars to universal commercial vehicles. the requirements for manufacturing applications software were quite complex. chemistry and reconditioning of individual parts is quite similar to the operations in a 32 . identification. the reconditioning of usable parts is especially important from the ecological and economical points of view. One of these sites is the engine factory in Berlin (2600 employees). They primarily opted for Baan’s software as they realized that Baan fulfilled the specific customization as it provides flexible customization capabilities.CASE STUDY MERCEDES-BENZ Known worldwide for producing automobiles of the highest quality..
but when it comes to the assembling of engines. The standby system on a HP 9000/i50 with a 448 MB main memory is linked to the operational computer by a switchover concept and is used as a development computer. TRITON appeared to be the best suited PPS system. 36 terminals. handle the multiple requirements of the manufacturing of rebuilt engines (variants and alternative parts issues). optimum PPS procedures were taken as the guideline. In 1993. 33 . therefore.2 on a HP 9000 system. during which the PPS system was chosen in accordance with the target business. to a large extent. Step by step. low transparency of the manufacturing process. 15 Alpha terminals and 15 laser printers are available for the users. Workshops were organized with the PPS suppliers. Sixty PCs. manual calculation of requirement were the most significant weaknesses of the former manufacturing procedure. The modified TRITON 2. TRITON was chosen because it is very flexible and can.workshop. absence of uniform information about bills of materials and. These weaknesses were identified through a profound analysis of the actual procedure. The operational system is installed on HP 9000/h50 with a 448 MB main memory and 2 X 9 GB mirrored disks. In the development of the target procedure. the engine parts reconditioning department of the production site in Berlin had to decide whether an individual or a standard software solution should be used to achieve more economical manufacture of rebuilt engines. it is more like small-lot production. Long machining time.
In May 1994. Management and IT people at Benz were convinced that choosing TRITON standard software plus adaptations was the right decision. they gained control of most of the problems. Then the routing were defined and drastically reduced (by 85%) due to the definition of parts families. It was observed that after only a few weeks of operation. The costs involved in individual programming would have been much higher and they would have integrated some of the old concepts into the software which they have now avoided by means of very good organization. it can be stated that as a result of using TRITON and the simplified and made more 34 .After only six months of using TRITON. the former standard situation of incorrectly issued parts became less tense. all item masters and the 6500 construction kits of 850 engine variants were registered. The transfer from a pure manual disposition to a machine-controlled disposition was the most difficult task. required quantities started to be calculated by means of an extended MRP. During operation there were some problems resulting from the always new constellations in the complex algorithms. and in Autumn 1994 the production order control started. All in all. The required quantities are then used by the planners tests of these customized functions were more complex than anticipated. The milestone reports have led to transparency of the manufacturing process. The costing control is to be added in the future. Since January 1995. but in the meantime. The extended MRP calculates the required quantities on its won by using the complex structures of the bills of materials with their multiple possibilities of alternative parts. which again facilitates early recognition of problematic parts and an early adoption of accelerating measures. the system is in operation and completed by the addition of the inventory control and machine-aided disposition.
The costs involved in individual programming would have been much higher which they have integrated some of the old concepts into the software in all. the modules that will be automated at Essar Steel will be 35 . their business operations were simplified and made more secure and transparent. and this number is expected to go up to 2000 to 2500 users within a few years. In what is probably one of the largest ERP projects in India. The employees now have a better view of the whole process chain and the targeted rationalization goal was surpassed. Essar Steel is spending a whopping Rs. the company felt the need for an integrated and live information system. 20crore. These users would be spread over twenty sites. Consequently. ESSAR STEEL With an investment of Rs.secure and transparent. Already there are 600 users working on SAP at Essar Steel. Essar has signed up with SAP for a 1000-user license to begin with. With this upcoming SAP implementation. Management and IT people at Benz were convinced that choosing TRITON standard software plus adaptations was the right decision. To produce high quality steel with the best ingredients. CIO claims payback will be within one year. it can be stated that as a result of using TRITON and the accompanying organizational procedures. The employees now have a better view of the whole process chain and the targeted rationalization goal was surpassed. this project was envisaged and driven by the top management. 20crore on its SAP R/3 implementation and other IT and consultancy requirement.
reduce the inventory carrying cost. Essar Steel also has other custom built solutions for specific areas. Also. Earlier. in turn. product planning. The company also has an in-house developed integrated marketing and product system (IMPS) which handles order entry production planning. Already. asset management. dispatches and invoicing. All of these will be dovetailed into the SAP implementation. with SAP. which will be near 100 per cent. the lead time for delivery and procurement of materials and products has been shortened which will. The other benefits that Essar Steel envisages are transparency and accuracy of data. The benefit arising from the SAP implementation is expected to be tremendous and Essar expects that by the end of 1998. plant maintenance. quality management control and commitment accounting. Essar Steel had also implemented a payroll/administration and management system (PAMS). sales and distribution. quality. 36 . Specifically.finance. In fact. they would save on implementation time and would be deploying proven software which fortune 500 companies use. Why then did Essar decide to go in for an ERP solution at all? Essar for IT services was huge. the company can close its books within seven days of the given period closing date and the cost reduction will result in improved bottom lines. the company’s Return-On-Investment (ROI) would be 100 per cent. it has been integrated into SAP. Since this (IMPS) is custom built. and optimization of plant operations in terms of manpower and finance. at Essar Steel. even after the full implementation of these three applications only 80 per cent of the company’s business requirements would have been met. which too will tie in with this SAP implementation.
either single vendor or best of the breed kind of applications and to what extent. is that a firm would like to consider the four perspectives:• Financial Perspective. quality problems. finance and materials. because that will them the power to take decisions on ERP. • Customer Perspective. The reasons for implementation for ERP. It cannot be a solution to the customer services problems. It is meant for optimal utilization of organizational resources from man to machine. • Internal Perspective. That is why it is very important for SMEs to understand the role of ERP. 37 . • Innovation ad learning Perspective. This can be translated to ERP effectiveness parameters that can be measured through KPI's. It is meant to accurately track the processes for disciplined usage of the resources. ERP provides a base for implementation of specific solutions such as supply chain management. product life cycle management and customer relationship management. It is not the ultimate solution to all the problems.CONCLUSION The ERP is not a total solution to operational and strategic concerns. For such issues.
Venkitakrishnan. Chapter 13. Ltd. The icfai University Press Dec 2007. Jaipur. Pg.K. Prentice Hall of India Pvt. Khandelwal. Jain. First Edition: Jan’07 Part 2. Second Edition: Jan’03. E-Business. Enterprise Resource Planning Concepts and Practice.BIBLIOGRAPHY Production and Operation Management. Gupta. 38 . Vinod Kumar Garg. Ajmera Book Co. New Delhi. N. 37-44.