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Enterprise Resource Planning

MODULE 1 : Learning Objectives

1) ERP system is an information system; more particularly, an integrated information

system. In this regard, the meaning of an information system and an integrated
information system will be explained to the students.
2) Students will learn how ERP gives an organization an integrated real-time view of its
core business processes like production, inventory management, order management, etc.
In addition, they will be able to understand that ERP system is a type of enterprise
applications.
3) There would be discussion on organizational business processes and their cross-
functional integration.
4) The evolution of ERP started from the foundations laid down in 1960s. Students will
learn the stage-wise evolution of ERP systems from that period.
5) There are several models to design and develop ERP systems. Students will be described
about the model, Architecture of Integrated Information System (ARIS), which is the
most suitable model for ERP system.
6) Along with business processes, students will be able to understand the business
workflows, business process models and related modelling languages.
7) With the help of some examples, the students will be able to understand that business
process management refers to the activities performed by an organization to manage and
improve its business processes.
8) An overview of supply chain management as an inter-enterprise system will be given.
9) The course covers concepts of supplier relationship management (SRM), customer
relationship management (CRM), and product data management (PDM) and product life
cycle (PLC) and the relation among them. By this, the students will be able to understand
the significance of enterprise applications from design to development stages of a
product.
10) By giving some industry examples, the students will be able to understand how ERP
systems contribute to the competitive advantage of organizations and meeting their
strategic business goals.
11) An overview of E-Business and E-Commerce will be given and their relation with ERP
systems will be explained.
12) Students will be able to understand the significance of business process reengineering in
implementing ERP systems in organizations. How the business processes can be
reengineered will also be explained.
13) An overview of SAP as an ERP software vendor will be given, followed by a brief
discussion on its various ERP packages.
14) The functioning of different SAP’s ERP modules like Financial Accounting (FI),
Controlling (CO), Sales & Distribution (SD), Materials Management (MM), Production
Planning (PP), etc. will be explained.
15) Implementation of ERP system in an organization is a complex task involving lot of
customisation, effort and cost. The employees that are going to use the ERP system
should be properly communicated about the changes that will take place in the workflow,
motivated and well trained about uses and operation of the ERP system. Students will be

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Enterprise Resource Planning

able to understand the change management in organizational workflows with some

business examples.

MODULE 2 : Overview of ERP

Topics

• Meaning of an information system?

• Meaning of an integrated information system.
• What is a cross-functional information system?
• What is the difference between ERP and ERP system?
• ERP, an enterprise application.
• Characteristics of ERP systems.
• Advantages of ERP systems.
• Challenges of ERP systems.
• Costs of ERP systems.

1) Meaning of an information system: An information system is a set of interrelated

components that collect, process, store and distribute information to support decision
making and control in an organization. A business information system plays a vital role
in an organization by providing right information to management to make appropriate
decisions for the prosperity of business. The components of an information system
include hardware, software, communication media, data and people. Information systems
support the organizational business processes and operations, business decision making
and strategies for competitive advantage. There are different types of information
systems – transaction processing systems (TPS), management information systems
(MIS), executive information systems (EIS), decision support systems (DSS), expert
systems (ES), etc. In an organization, a functional area represents a discrete area that
focuses on a specific set of business activities. A functional area information system
supports the business processes of a specific functional area and may be any of TPS,
MIS, EIS, DSS, ES and also office automation system (OAS).

2) Meaning of an integrated information system: An information system can be created

to automate the information related to a part of a business process, or the entire business
process, or across many business processes. When various information systems within a
functional area are integrated or the business processes across more than one functional
area are integrated, the resulting information system can be called an integrated
information system.

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Enterprise Resource Planning

3) What is a cross-functional information system? The integrated information system

developed across many functional areas within an organization in called as cross-
functional integrated information system. Example: An order management information
system covers the the functional departments of Sales & Marketing and Production to
deliver the product that is ordered by the customer. When the information system
integration takes place among two or more organizations, such systems are called inter-
enterprise integrated information systems. A business-to-business website is an example
for inter-enterprise integrated information system connecting more organizations.

4) What is the difference between ERP and ERP system? An enterprise is a complex set
of business processes designed to accomplish a specific set of business objectives.
Enterprise resources include costs, time, labour, production capacity, etc. Enterprise
resources planning gives an organization an integrated real-time view of its core business
processes, such as sales & marketing, inventory management, financial accounting,
production, distribution, etc. All the information of these business processes can be tied
together by the ERP application software and a common database management system.
The ERP application is also called an ERP system.

5) ERP, an enterprise application: Enterprise applications span functional areas of an

organization, focus on executing business processes across the organization, and include
all levels of management. They may extend outside the organization. Enterprise
applications include enterprise systems, supply chain management systems, customer
relationship management systems, and knowledge management systems. Enterprise
systems are also known as enterprise-wide information systems or simply, enterprise
resource planning (ERP) systems. ERP system supports, integrates and automates
various organizational business processes like sales & marketing, financial accounting,
production, distribution, etc. ERP systems collect data from various key business
processes and store it in a single central data repository, so that the information can be
easily shared across the enterprise to help different parts of the business work more
closely together. ERP systems track business resources such as cash, raw materials,
labour and production capacity and also the status of commitments made by the business,
such as customer orders, purchase orders, delivery, etc.

6) Characteristics of ERP systems: ERP applications

• link and automate all the concerned business processes.
• Maintain complete audit trial of all business transactions.
• Reduce inter-processing time.
• Utilize one common database and establish data integrity.
• Involve users in the entire business functional cycle.
• Unify data backups, recovery procedures and other system administration tasks.
• Secure the information system from unauthorised use.

7) Advantages of ERP systems: ERP systems help the organizations

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Enterprise Resource Planning

• Establish transparency and visibility of data and information across the

organization;
• Improve information accuracy;
• Reduce lead and cycle times;
• Reduce organization’s operating costs;
• Integrate all parts of the organization;
• Increase the operational efficiency;
• Better customer service;
• Improve resource utility;
• Improve decision-making capability; etc.

8) Challenges of ERP systems: Implementation of an ERP system in an organization is a

complex task. Identification of business processes, restructuring business processes to
facilitate proper integration, solid planning of linking resources and mapping business
processes, training the employees for smooth operation of the ERP system and smooth
workflow, etc. stand as challenges for the organizations in implementing ERP solutions.
If the ERP system is not properly implemented, entire business of the organization will
be disrupted leading to even shut-down of the business.

9) Costs of ERP systems: For successful implementation of an ERP solution in an

organization, first and foremost activities include identification of right business
processes, proper planning, design and even restructuring of the business processes. This
effort involves development of new business processes, preparing the employees for the
new system with proper training and change management. When compared to the costs to
be incurred on such effort, the costs of hardware and software will be treated as small.

Prepared by Dr. NASINA JIGEESH