31 31 Enterprise Resource Plannig System | Enterprise Resource Planning | Business Process

A Project Report On

ENTERPRISE RESOURCE PLANNING
PREFACE
The present project, undertaken as a part of the partial fulfillment as a requirement for the award of MBA- MBL, is an honest attempt to study the concept of Enterprise Resource Planning Systems. The study undertaken in order to come up with the project has given me a good knowledge about the changing and developing methods being adopted by the big companies to meet the changing needs of the time. The project looks into the evolution and development of the concept of ERP and how it has contributed to the way the functioning of the organisations have changed over the past years.

The Enterprise Resource Planning (ERP) system plays a very important role. The major decision making and it execution is done through ERP. It’s the system of managing all functions of the business with information support coming through the ERP. It handles the operational systems to run business and provides the required inputs to planning and control systems handled by the middle management.

requiring an instant real time response wherever it occurs. The business needs today stretch beyond the transaction . actions and decision needs. The dependence on the information. as processing. Such an integrated solution is called Enterprise Management System (EMS). The word ‘Enterprise’ conveys that it encompasses the larger business community covering all the players and their participation in the business. It’s the system of managing all functions of the business with information support coming through the ERP.INTRODUCTION: The growing and the dynamic business environment of today is faced with lots of challenges and opportunities. Though the tools and technologies. It handles the operational systems to run business and provides the required inputs to planning and control systems handled by the middle management. In EMS. and the solutions for these needs are available but what is required is an integrated solution out of these technologies and the systems offering an enterprise. And these demands of the business are met by systems of information processing and communication. a driving energy source is increasing. The system has extended beyond corporate boundaries and the system that is being designed is an enterprise wide. the Enterprise Resource Planning (ERP) system plays a very important role. The major decision making and it execution is done through ERP. The business today is a paperless operation. a wireless communication as a result of fully transparent and automated operations at all centers in an integrated and coordinated manner taking care of the business.

and reporting across the functions. plans. The ERP is a package encompassing all major functions of a business. and the financial department) would have their own computer systems. decisions and actions in a time bound manner. Each system would have to rely on a set of common data to communicate with each other. materials. The resources are finance. non-profit organizations and governments now all utilize ERP systems. the human resources (HR)) department. It also helps to execute the strategies. manufacturing capacity and human resource. and personal details of employees. For the HRIS to send salary information to the payroll system. The payroll department would typically calculate and store paycheck information. The Enterprise planning system (ERP) deals with the planning and use of resources used in the business. and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database). departments within an organization (for example. reporting structure. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems. regardless of the organization's business or charter. Nonmanufacturing businesses. the payroll department. The financial department would typically store financial transactions for the organization. updation. an employee number . The ERP provides a support system in transaction processing. Prior to the concept of ERP systems. ERP systems now attempt to cover all basic functions of an enterprise. The ERP provides methodology of assessing the resource needs for a given business plan to achieve certain business objectives. The HR computer system (often called HRMS or HRIS) would typically contain information on the department.ENTERPRISE RESOURCE PLANNING The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning).

payments for employee benefits to providers. interfaced or assisted by the other systems in an organisation. for costing and for building the standards for the future. the manufacturing system module of the ERP is interfaced with drawing. For example. The key benefit of ERP id that it provides an integrated solution for all the requirements of the business.would need to be assigned and remain static between the two systems to accurately identify an employee. It standardized and reduced the number of software specialties required within larger organizations. For example. ERP software. stores. These systems may be stand alone or constitute a part of the manufacturing or commercial processing systems. Simultaneously . For instance. The financial system was not interested in the employee-level data. it provided capability to process the purchase order from ordering to bill processing. a person could not be paid in the payroll system without an employee number. seamless integration and information communication. The ERP is the main system. combined the data of formerly separate applications. such as the tax payments to various authorities. These systems provide the database to the ERP or support the ERP by the basic data input directly or through the data transfer. This made the worry of keeping numbers in synchronization across multiple systems disappear. viewing and usage of drawings and it accepts the data of work order by process operations. but only in the payouts made by the payroll systems. and so on. engineering database querry. information transparency. and also meets the information needs of purchase. The system design of ERP is integrated with the features and functions providing an enterprise wide solution to handle all the process functionalities. It addresses the issue of data integrity. among other things. This provided complications. manufacturing accounts and finance. The ERP packages build information base and provide knowledge base for planning and control of business function management.

ERP allows automatic introduction of latest technologies like Electronic Fund Transfer (EFT). Human resources. • The ERP solution provides ‘Drill Down’ and ‘Context sensitive’ helps to use the system. Accounts.. Customer service. Productivity enhancements. Payables. • ERP provides business intelligence tools like Decision Support Systems (DSS). • • ERP is the only solution for better Project Management. Data Mining and Early Warning Systems (Robots) for enabling people to make better decisions and thus improve their business processes. E-Commerce etc. Receivables. Reporting. while conducting the business transactions through the system. • ERP facilitates company-wide Integrated Information System covering all functional areas like Manufacturing. Intranet. Inventory problems.it respects the organisational hierarchy of authority. Selling and distribution. Inventory. • ERP not only addresses the current requirements of the company but also provides the opportunity of continually improving and refining business processes. and Video conferencing. Prompt delivery etc. Internet. Executive Information System (EIS). Electronic Data Interchange (EDI). Quality problems. FEATURES Some of the major features of ERP and what ERP can do for the business system are as below: • • • ERP performs core corporate activities and increases customer service and thereby augmenting the Corporate Image. The drill down helps to run through the system to locate the week . Purchases etc. Cash Management.. ERP bridges the information gap across the organization ERP provides for complete integration of Systems not only across the departments in a company but also across the companies under the same management. • ERP eliminates the most of the business problems like Material shortages.

guidance and understanding of the term or process or format. The context sensitivity help provides an access to help library which can be used by the user by calling help. The help could be for information. COMPONENTS Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing • • • • • Engineering Bills of Material Scheduling Capacity Workflow Management Quality Control • • • • Cost Management Manufacturing Process Manufacturing Projects Manufacturing Flow Supply Chain Management • • • • Inventory Order Entry Purchasing Product Configurator Supply Chain Planning .spot for action and control.

• • • • Supplier Scheduling Inspection of goods Claim Processing Commission Calculation Financials • • • • • General Ledger Cash Management Accounts Payable Accounts Receivable Fixed Assets Projects • • • • Costing Billing Time and Expense Activity Management Human Resources • • • • • Human Resources Payroll Training Time & Attendance Rostering Benefits Customer Relationship Management .

Breakdown. Analysis of quality by process. Enterprise Resource Planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP). preventive. material and work centre location. Monitoring performances fro maintenance action as all kind kinds of productive assets. Suppliers.• • • • • Sales and Marketing. conditional maintenance. and Employees Planning and Quality control: • • • • System of data gathering to assess quality and measure against standards. Analysis of quality by reasons and action taken Monitoring quality across the organisation from input to output for operating decisions and business decisions. Maintenance: • • • Plant maintenance planning. Commissions Service Customer Contact and Call Center support Data Warehouse • • • various Self-Service interfaces for Customers. MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the .

marketing. Enterprise Resource Planning or ERP software can aid in the control of many business activities. Implementation . inventory. All functional departments that are involved in operations or production are integrated in one system. and accounting for a company. ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. ERP systems typically handle the manufacturing. and human resource management. delivery. warehousing. quality management. this would include accounting. like sales. invoicing. production. ERPs are cross-functional and enterprise wide. human resources. inventory management. logistics. and information technology. shipping. distribution. logistics. In addition to manufacturing. marketing.standard software activity. and strategic management. billing.

a company of less than 100 staff) may be planned and delivered within 3-9 months. customization and support.g. A small project (e. Process preparation .Because of their wide scope of application within a business. a large. The length of time to implement an ERP system depends on the size of the business. companies often seek the help of an ERP vendor or of third-party consulting companies. the scope of the change and willingness of the customer to take ownership for the project. ERP software systems are typically complex and usually impose significant changes on staff work practices. To implement ERP systems.. multi-site or multicountry implementation may take years. Implementing ERP software is typically not an "in-house" skill. however. These firms typically provide three areas of professional services: consulting. so even smaller projects are more cost effective if specialist ERP implementation consultants are employed.

understanding the automated solutions currently implemented. Different vendors have different types of processes but they are all of a standard. . Begin by deciding which modules to install. enabling selection of an ERP vendor whose standard modules are most closely aligned with the established organization.ERP vendors have designed their systems around standard business processes. other cases show that following thorough process preparation ERP systems can actually increase sustainable competitive advantage. .analyzing the effectiveness of each process in light of its current related business capability. A disadvantage usually attributed to ERP is that business process redesign to fit the standardized ERP modules can lead to a loss of competitive advantage. then adjust the system using configuration tables to achieve the best possible fit in working with your company’s processes. It is therefore crucial that organizations perform a thorough business process analysis before selecting an ERP vendor and setting off on the implementation track. based upon best business practices. Firms that want to implement ERP systems are consequently forced to adapt their organizations to standardized processes as opposed to adapting the ERP package to the existing processes. While documented cases exist where this has indeed materialized. Research indicates that the risk of business process mismatch is decreased by: .linking each current organizational process to the organization's strategy. This analysis should map out all present operational processes. Configuration Configuring an ERP system is largely a matter of balancing the way you want the system to work with the way the system lets you work. Neglecting to map current business processes prior to starting ERP implementation is a main reason for failure of ERP projects. . Redesign can then be implemented to achieve further process congruence. modular nature.

Modules . Some common modules. Other times companies will not adopt a module because they already have their own proprietary system they believe to be superior. or distribution channel. Both options will add time and cost to the implementation process. an organization can select the type of inventory accounting – FIFO or LIFO – it will employ or whether it wants to recognize revenue by geographical unit. a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Configuration Tables – A configuration table enables a company to tailor a particular aspect of the system to the way it chooses to do business. It can re-write some of the enterprise system’s code. Generally speaking the greater number of modules selected. the greater the integration benefits. Additionally they can dilute the system’s integration benefits. For example. product line.Most systems are modular simply for the flexibility of implementing some functions but not others. risks and changes involved. Advantages In the absence of an ERP system. both of which are not ideal. or it can continue to use an existing system and build interfaces between it and the new enterprise system. such as finance and accounting are adopted by nearly all companies implementing enterprise systems. The more customized the system becomes the less possible seamless communication becomes between suppliers and customers. others however such as human resource management are not needed by some companies and therefore not adopted. Tasks that need to interface with one another may involve: • • • • Ease of use General Purpose Readymade solution for most of the problems Integration of all functions already established . A service company for example will not likely need a module for manufacturing. So what happens when the options the system allows just aren’t good enough? At this point a company has two choices. but also the increase in costs.

and Costing (what the vendor invoiced) the Accounting for all of these tasks. and that is how it will now be made. • Some security features are included within an ERP system to protect against both outsider crime. such as embezzlement. Disadvantages Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel. tracking the Revenue.• • • • • • • design engineering (how to best make the product) order tracking from acceptance through fulfillment the revenue cycle from invoice through cash receipt managing interdependencies of complex Bill of Materials tracking the 3-way match between Purchase orders (what was ordered). Effective dates can be used to control when the switch over will occur from an old version to the next one. both the date that some ingredients go into effect. Part of the change can include labeling to identify version numbers. and date that some are discontinued. including training about how to make the system work correctly. Cost and Profit on a granular level. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company. Managers cannot generate custom reports or queries without help from a . ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. such as industrial espionage. Limitations of ERP include: • • Success depends on the skill and experience of the workforce. and insider crime. Inventory receipts (what arrived). or other sabotage. including those implementing and testing changes. Change how a product is made. as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used. ERP vendors are also moving toward better integration with other kinds of information security tools. in the engineering details.

• • • Systems can be difficult to use. ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability. The system can suffer from the "weakest link" problem—an inefficiency in one department or at one of the partners may affect other participants.• • • • programmer.000 US Dollars to 500. for example when telling a non-programmer how to change a database on the fly. Systems are too restrictive and do not allow much flexibility in implementation and usage. This can create a backlog for the is department. ERP systems can be very expensive to install often ranging from 30. at a company that requires an audit trail of changes so as to meet some regulatory standards. Some customization may involve changing of the ERP software structure which is usually not allowed. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. companies can employ new managers lacking education in the company's ERP system. ERP systems provide current only such as open orders. proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP. .000 US Dollars for multinational companies.000. Computer security concerns arise. • 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. • • • • • Customization of the ERP software is limited. Managers often need to look past the current status to find trends and patterns that aid better decision-making • • Small enterprises are often undercapitalized & are also not updated about the latest offerings in the market Personnel turnover. Technical support personnel often give replies to callers that are inappropriate for the caller's corporate structure. This inhibits managers from obtaining information quickly so that they can act on to for competitive advantage.

The system may be over-engineered relative to the actual needs of the customer. Some large organizations may have multiple departments with separate. independent resources. and consolidation into a single enterprise may yield limited benefits. and employee morale.• Many of the integrated links need high accuracy in other applications to work effectively. etc. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. missions. . . • • • • 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). A company can achieve minimum standards. chains-of-command. • The data in ERP application is not integrated with other enterprise or division systems and dies not include external intelligence. lines of responsibility. The blurring of company boundaries can cause problems in accountability. then over time "dirty data" will reduce the reliability of some applications. • • There are frequent compatibility problems with the various legacy systems of the partners.

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