Computers in Management Assignment Articles related to Enterprise Resource Planning Implementation in Business Organizations

SAP IMPLEMENTATION IN DELHI METRO RAIL CORPORATION LIMITED

SUBMITTED BY: KINSHOOK CHATURVEDI ROLL NO N-35 FMS PART TIME MBA 2009-12 SECOND SEMESTER

Enterprise Resource Planning System: Enterprise resource planning (ERP) is an integrated computer-based system used to manage internal and external resources including tangible assets, financial resources, materials, and human resources. It is an application and software architecture whose purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate all business operations into a uniform and enterprise wide system environment. An ERP system can either reside on a centralized 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 without the need for the placement of multiple copies of complex, expensive computer systems in areas which will not use their full capacity Enterprise Resource planning system is a fully integrated business management system covering all departments of the business like Finance, Accounting, Human Resources, Production and Logistics. The ERP solutions seek to streamline and integrate operation processes and information flows in the company to synergies the resources of an organization namely men, material, money and machine through information. ERP is the latest business, Information Technology (IT) tool in the corporate world today. ERP is a high-end solution offered by IT to effectively tackle the problems of a business. Advantages and disadvantages of ERP Advantages In the absence of an ERP system, a large manufacturer may find itself with many software applications that cannot communicate or interface effectively with one another. Tasks that need to interface with one another may involve. ERP systems connect the necessary software in order for accurate forecasting to be done. This allows inventory levels to be kept at maximum efficiency and the company to be more profitable. Integration among different functional areas to ensure proper communication, productivity and efficiency Design engineering (how to best make the product) Order tracking, from acceptance through fulfillment The revenue cycle, from invoice through cash receipt

Managing inter-dependencies of complex processes bill of materials Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level. ERP Systems centralize the data in one place. Benefits of this include: Eliminates the problem of synchronizing changes between multiple systems consolidation of finance, marketing and sales, human resource, and manufacturing applications Permits control of business processes that cross functional boundaries Provides top-down view of the enterprise (no "islands of information"), real time information is available to management anywhere, anytime to make proper decisions. Reduces the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure. Shorten production leadtime and delivery time Facilitating business learning, empowering, and building common visions Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data-tampering scenario, for example, might involve a disgruntled employee intentionally modifying prices to below-thebreakeven point in order to attempt to interfere with the company's profit or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools. Disadvantages Problems with ERP systems are mainly due to inadequate investment in ongoing training for the involved IT personnel - including those implementing and testing changes - as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and the ways in which it is used Disadvantages Customization of the ERP software is limited. Re-engineering of business processes to fit the "industry standard" prescribed by

the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive (This has led to a new category of "ERP light" solutions) ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companiesthis is cited as one of the main causes of their failure. Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications. Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level). The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. Some large organizations may have multiple departments with separate, independent resources, missions, chainsof-command, etc, and consolidation into a single enterprise may yield limited benefits.

SAP implementation in DMRC: SAP stands for Systems, Applications and Products in Data Processing. It uses the concept of modules ("individual programs that can be purchased, installed, and run separately, but that all extract data from the common database"). SAP AG, the company that provides the enterprise resource planning solution has upgraded the package and launched it as SAP ECC 6.0 in 2005. ECC stands for ERP Central Component. The purpose of positioning it as ECC is to enable SAP to build and develop an environment of other products that can function upon the foundation of the central component. SAP's ERP solution includes several modules that support key functional areas - some of them are SAP ERP Financials SAP ERP Logistics SAP ERP Human Resource Management SAP India partnered with Siemens Information Systems for the implementation of its ERP solution at Delhi Metro Rail Corporation (DMRC); a significant part of the ERP implemented

at the DMRC was for project management. SAPIndia and Siemens Information Systems limited implemented ERP for DMRC from 14th November 2002. Financial Accounting/controlling module, Material Management Module, Real Estate Module, Human Resource Module has been implemented. DMRC is building a Mass Rapid Transit System (MRTS) in Delhi, the objective being to provide a safe, reliable and integrated transport network that will meet the rising demand for inter-city transport in the capital. An IT system was required to smoothen the flow of information, support planning tools, provide vital reports for decision making, reduce administration time, better utilize the organizations resources, and let DMRC concentrate on its core competence. The programmed, code-named Shikhar, is an Enterprise Resource Plan (ERP) programmed whereby human resources, maintenance, stores, accounts, project execution and property development activities will be inter-linked and fully computerized, thus avoiding manual delays, heavy Documentation and duplication of interdepartment activities. This will establish a databank of information within the DMRC, which will be Available to all departments round the clock and will thus help in improving efficiency and increasing productivity of the corporation. The software used for the ERP is SAP and a dedicated team is involved in implementing the project currently in the DMRC. The best ERP Software, which is implemented in DMRC, is SAP R/3, which is provided by worlds largest enterprise software company SAP AG. SAP R/3 is acronym for Systems Applications and Products in data processing. R/3 means Runtime System, Three Tier Architecture. Advantages and disadvantages of SAP ERP: Advantages: ERP allows easier global integration (Barriers of currency exchange rates, language, and culture can be bridged automatically) Updates only need to be done once to be implemented company wide Provides real-time information, reducing the possibility of redundancy errors Creates a more efficient work environment making it easier for employees to do their job which leads to effectiveness[8] Vendors have past knowledge and expertise on how to best build and implement a system No hardware purchase or maintenance costs No developer training costs and the vendor will train the users Disadvantages:

Locked into relationship by contract and manageability with vendor - a contract can hold a company to the vendor until it expires and it can be unprofitable to switch vendors if switching costs are too high Inflexibility- vendor packages may not fit a company's business model exactly and customization can be very expensive Return on Investment may take too long to be profitable SAP ERP implementations have a risk of project failure

Greater accuracy and timeliness of information Comprehensive information available across functional areas and locations Improved communication and networking across the organization Improved networking and knowledge sharing within the organization Better utilization of system resources Increase in productivity of people

The process began with the selection of SAP software after benchmarking it against various ERP packages available in the market to see which of them met DMRCs requirements; soon after, Siemens was chosen to implement and manage the solution. The SAP system deployed by DMRC supports multiple functions such as general ledger, accounts receivable & payable, fixed asset management, project planning, company structure management, funds control, procurement management, real estate management, materials & warehouse management, maintenance and human resource management. The systems core modulesFinancial, Costing, Materials Management, Human Resources, Maintenance, project Systems and Real Estate Management were tightly integrated and implemented in record time. The SAP solution went live in nine months by November 2002, as planned. It involved setting up the software to meet DMRCs requirements and a complete change management process to handle the change in traditional patterns of thought and behavior at DMRC. Major benefits After going live, the entire project is being handled through SAP Project Systems. All the material and labor consumed is accounted for online, and project systems are capable of creating automatic indents for procurement of material and services against existing contracts. DMRC can now have a detailed view of activities and schedules, and it gets advance warning of any slippage on time lines, material or labor so that corrective action can be taken. It also gets an accurate costing of all project elements, and measures budgeted costs against actual. Finally, DMRC is now able to predict the exact time lines for upcoming phases, and rapidly execute project activities while saving time. The other benefits are summarized as follows:TOP-LINE BENEFITS Effective decision making due to Easier access to information

Finance: Tangible Benefits Higher returns on Treasury operations through better funds management Increased control over Fixed Assets through proper identification & linkages Reduction in overheads through effective cost control & monitoring Faster closing of books due to better financial information Allows automatic reconciliation with banks Updates cash book automatically by matching receipts/ payments with AP/ AR Performs automatic generation of cheque for payments made through the system Intangible Benefits Tracks if customer exceeds credit limit Supports analysis of future cash flows, variances, discounts taken Provides reports on bad debts, ageing and bounced checks Human Resources:Tangible Benefits Manages automation of the entire cycle of salary/ benefit administration. Improves accuracy of data one point data entry through integration of payroll & HR systems. Reduces work effort in maintaining and reporting HR data. Tracks manpower budgets and determines number of people to be recruited/ trained. Allows automation of manpower scheduling and improves manpower planning. Intangible Benefits: Assists in Retention of best people Provides ability to identify and track top performers Ability to automatically identify potential successors and candidates for promotion Improves employee skill development Integration of employee skills with career planning, staffing, performance management and training

Materials:Tangible Benefits: Reduces procurement lead time through On-line documentation generation Automatic generation of PRs for stock items On line approval of PRs and POs Reduces in inventory costs Improved inventory planning and forecasting Reduction in purchase prices through better negotiations with vendors On-line consolidation of purchases Improved vendor performance analysis Supports efficient management of termsupply agreements and service contracts Plant Maintenance:Tangible Benefits Reduces maintenance costs due to Improved estimation & control of maintenance costs Better planning of maintenance activities Improves manpower productivity Reduced time and effort in consolidating and reporting all equip maintenance and performance data Reduced time and effort for planning preventive maintenance Supports generation of work order automatically based on user-defined trigger Allows linkage of usage statistics for the purpose of condition monitoring and corrective maintenance Intangible Benefits: Maintains reports on equipment downtime, ABC analysis, trend analysis Manages the maintenance history of all equipments Maintains vendor analysis reports Project System Maintaining WBS, Networks and activity Planning and Monitoring of Project Cost & time of the project at the WBS Level Various plan versions Budgeting -Shifting with in Project Structure Budget supplement Real Estate Maintaining property rental unit Easy identification of a space for rentingout Invoice generation