CHAPTER – I

INTRODUCTION TO ERP SYSTEM

1.1 INTRODUCTION

Technological advancements and infrastructure facilities determine the progress

and prosperity of a nation. This is very true in case of educational institution.
Due to rapid globalization, the educational segment is getting tougher. There is
an urgent need of automation to improve the market base and productivity for
every institution. At the same time ensuring transparency and integration
between all the end users is also important. Enterprise Resource Planning (ERP)
system of educational institution have become popular because they can replace
older legacy systems, modernize the campus environment, improve efficiency
and provide new services to end users. Although, Enterprise Resource Planning
has many advantages, it has not been implemented in the academic institutions
for better workflow, effectiveness in work procedures and better integration of
various modules and sharing of resources. It would be an achievement, if
educational institutions utilized Enterprise Resource Planning system in
developing the integration of all the resources of educational institution.
Enterprise Resource Planning has successfully been used in various sectors like
industries, management, aviation, data warehousing etc. But, Enterprise
Resource Planning has not been used in the development of system at the
academic institute.

Enterprise Resource Planning (ERP) is a system that is used to combine all the
information or operations of a company into a single unit. The standard ERP
system will utilize both computer hardware and software in order to achieve
this. Perhaps one of the most important parts of the ERP system is the central
database. This database will be used to store information from various modules.

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When the term ERP was originally coined, it was used to describe systems that
were designed to use multiple resources. It was commonly connected to the
manufacturing industry. The term is used today in a much broader context. The
goal of ERP is to unify the various functions of an institution. However, the use
of Enterprise Resource Planning is not simply limited to corporations. The ERP
has attracted the interest of educational institutions which have many of the
same problems as commercial companies in areas such as customer (student),
financial and human resources management, library, student registration etc.
Hence, an attempt was made to examine the end user satisfaction and
implementation of ERP system in educational institutions. It is commonly used
by non-profit organizations, government agencies, and other institutions. For a
system to be recognized as an ERP, it must meet a certain requirement. The
software must be capable of giving functionality to one unit that would
commonly have to use multiple systems. For example, a system that was able to
combine two elements into a whole, such as a system that combined payroll
with accounting, would be an Enterprise Resource Planning system.

However, ERP can be much more complex than this. The reason why it is so
powerful is because it reduced the need to have an outside interface available
for two separate systems. In addition to this, the cost of maintenance is lower,
and a standard is created. Another powerful aspect of ERP is that the reporting
functions of the system are greatly improved. There are a number of
organizations that could greatly benefit from using ERP applications. Some of
these organizations are supply chains, educational institution, financial
companies, and human resources. The most important aspect of ERP is
integration. The information or data from various parts of an organization must
be compressed into a single entity.

Enterprise resource planning was introduced in the early 1990s by the Gartner
Group1. The term ERP was coined to describe an emerging category of

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hardware and software solutions that expanded upon and extended the scope of
traditional manufacturing resource planning (MRP) systems. Whereas the focus
of MRP is on manufacturing processes, ERP systems look at a much broader
integration of information or data management functions within the
organization. In education institution, ERP systems include not only the
traditional functions of finance, human resources, and payroll, but also the
unique functional operations of advancement, development, student
information, enrollment, recruitment, and financial aid, to name just a few.
Therefore, ERP is essentially defined as a multi-module packaged software
application, or system, in pursuit of the organization’s business processes and
information-processing needs. Furthermore, ERP utilizes a common centralized
database to provide organizations the opportunity for more efficient and
effective use of human, financial, material, and other organizational
informational resources. At its most basic level, ERP is simply using computer
technology, consisting of hardware and software components, to store and track
data and information in support of the institutional mission and objectives.

1.2 DEFINITION & ERP CONCEPTS

Enterprise: The enterprise is any organization that has a set of common goals.

Resource: Resources can be in the form of human resources (Manpower) ,

capacity ( machine, plants, warehouses , etc), inventory resources ( finished
goods and raw materials stock), etc. For any organization the biggest challenges
is the utilization of these resources effectively for creation of best possible value
for its stakeholders (i.e. its employees, shareholders etc).

Planning : for effective utilization of resources , an enterprise needs to plan and

undertaken a variety of planning activities like demand planning, distribution

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planning, production planning, capacity planning, material planning,
maintenance planning, financial planning and budgeting, quality planning, new
product planning etc. However, it is important to note that ERP software not
only helps in planning but also assists in a set of execution activities for the
organization like creating purchase order, raising invoices, managing accounts
or making deliveries of finished goods. Today’s ERP application help in
running an enterprise’s business functions like financial accounting, production
management, procurement, quality, asset management , sales, distribution, etc
and covers almost all the organization processes like procure to pay, order to
cash , human resource management etc 2.
Some definitions from the published literature
ƒ Enterprise Resource Planning (ERP) means, the technique and concept
for integrated management of businesses as a whole from the viewpoint
of the effective use of management resources to improve the efficiency
of enterprise management 3.
ƒ Information systems to support the functional units of an enterprise are
referred to as Enterprise Resource Planning or ERP systems 4.

ƒ Enterprise Resource Planning (ERP) is defined as an integrated

computer based system that manages internal and external
organizational resources. These resources include tangible assets,
financial resources, materials and human resources. ERP is an
application and software architecture that facilitates information flows
between various businesses functions inside and outside organization
and, as such, is an enterprise wide information system. Using a
centralized database and operating on a common computing platform,
ERP consolidates all businesses operations into a uniform system
environment 5.

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 An Enterprise Resource Planning system is a packaged business
software system that allows a company to;
• Automate and integrate the majority of its business processes
• Share common data and practices across the entire enterprise
• Produce and access information in a real-time environment 6.
ƒ Enterprise Resource Planning is an integrated information system that
serves all departments within an enterprise. Evolving out of the
manufacturing industry, ERP implies the use of packaged software
rather than proprietary software written by or for one customer. ERP
modules may be able to interface with an organization's own software
with varying degrees of effort, and, depending on the software, ERP
modules may be alterable via the vendor's proprietary tools as well as
proprietary 7.
ƒ Enterprise Resource Planning software applications to improve the
performance of organizations resource planning management control
and operational control. ERP software is multi-module application
software that integrates activities across functional department, from
product planning, parts purchasing, inventory control, and product
distribution, to order tracking 8.
ƒ ERP software as a set of customizable and highly integrative real time
business application software modules sharing a common databases,
which support core business, production and administrative functions,
such as logistics, manufacturing, sales distribution, finance and
accounting 9.
Enterprise Resource Planning or ERP is an industry term for integrated,
multi-module application software packages that are designed to serve
and support multiple business functions. An ERP system can include
software for manufacturing, order entry, accounts receivable and

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payable, general ledger, purchasing, warehousing, transportation and
human resources. Evolving out of the manufacturing industry, ERP
implies the use of packaged software rather than proprietary software
written by or for one customer. ERP modules may be able to interface
with an organization's own software with varying degrees of effort, and,
depending on the software, ERP modules may be alterable via the
vendor's proprietary tools as well as proprietary or standard
programming languages 10.

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1.3 STRUCTURE OF ERP SYSTEM

1.3.1 ISOLATED INFORMATION SYSTEM A PRE-ERP SCENARIO

Before ERP implementation, each department has its own computer system
optimized for the requirements that a department needs. Each department will
maintain separate databases and design application as per their functionalities.
These will result in local optima and overall very poor results across the entire
department or within the organization.

Figure 1.1 Showing, Isolated information system a Pre-ERP scenario

Stand Alone System

Source: Adapted from Enterprise wide Resource Planning Theory and Practice,
Rahul V. Altekar 11.

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1.3.2 INTEGRATED ERP SYSTEM
ERP systems are enterprise system which integrate data across and be
widespread in supporting all the major function of the organization. Enterprise
system is referred to as ERP system mainly because the term ERP is more
popular and commonly understood in the IT industry. ERPs shown in Figure
No. 1.2 basically integrated information system that support such enterprise
functions as Accounting , financial , marketing and production requirement of
organizations. ERP system allows real time data flow between the functional
applications.

ERP system is widespread software applications that support critical

organization functions. As shown in Figure No. 1.2, they integrate both the
various functional aspects of the organization as well as the system within the
organization with those of its partners and suppliers. Furthermore, these systems
are “web enabled” meaning that they work using web clients making them
accessible to all of the organizations employee’s clients, partners, and vendors
from anytime and anyplace, there by promoting the organization effectiveness.

An ERP’s goal is to make the information flow dynamics and immediate,

therefore increasing the usefulness and value of the information. ERP system
acts as a central repository eliminating data redundancy and adding flexibility.
A few of the reasons organization choose to implement ERP systems is the need
to “increase supply chain efficiency , increase customer access to products and
services, reduce operating costs, respond more rapidly to a changing
marketplace, and extract business intelligence from the data.

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 FIGURE 1.2 Showing, Integrated System - ERP system.

INTEGRATED SYSTEM - ERP

USERS

CLIENTS EMLPLOYEES VENDORS

INTERNET

GUI TOOLS (WEB ENABLES)

HRM FINANCE OTHER MODULES

ERP SYSTEM

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ERP is to integrate departments and functions across an organization into a
single infrastructure that serves the needs of each department. This is a difficult
task considering that employees in the each department will have very different
needs than will employees in the Accounting department. Each department
historically has its own computer system optimized for the particular ways that
the department does its work. An ERP system, however, combines them all
together into a single, integrated software environment that works on a single
database, thereby allowing various departments to share information and
communicate with each other more easily. To achieve this high level of
integration, however, department may sometimes give up some functionality for
the overall benefit of being integrated. The central idea behind data integration
is that clean data can be entered once into the system and then reused across all
applications.

ERP system is the mission critical information system in today’s business

organization. They replace a variety of systems that typically existed in that
organization (e.g. transaction processing system, materials planning system, and
management information system). Solving the critical problem of integrating
information from various sources inside and outside the organization
environment and makes it available, in real time, to all the employees and
partners of the organization 12.

Figure No. 1.3 showing how information is integrated within an

organization using an ERP system

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Figure 1.3 Showing information integration through ERP system

Source: Adapted from Enterprisewide Resource Planning Theory and Practice,

Rahul V. Altekar 13.

ERP combines all the business requirements of the company together into a
single, integrated software program that runs off a single database so that the
various departments can more easily share information and communicate with
each other. Conceptually ERP replaces the old standalone computer in finance,
HR, manufacturing, etc. with a single software program that facilities various
functional modules. Thus everybody from the finance, manufacturing,
purchasing, etc. will still get their own advantages of software, along with the
added feature of availability of information across other departments to improve
decision quality.

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ERP systems employed as either custom-built or off-the-shelf or hybrid system.
Since development is too costly and technology demanding, ERP systems
generally appear as off-the-shelf packages. There are some companies
developing their own systems or sub-systems as well.
Organizations employ information systems in three different ways:
Custom-built Systems
Off-the-shelf Systems
Hybrid Systems

Custom-built systems are originated from company’s own business processes.

Organization develops or has developed information systems customized to its
own processes. Off-the-shelf systems are standardized systems according to
common best business practices and developed to satisfy many (worldwide or
sector-wide) organizations’ business requirements. A Hybrid System can be
defined as a combination of others. Standard part of the information systems is
acquired, and the rest is developed custom. These two portions can be in
varying amounts.

1.4 REASONS FOR THE GROWTH OF ERP

There are some reasons for the explosive growth of ERP market and ERP
vendors. Following are the benefits which are reasons for the growth of ERP

1.4.1 BENEFITS OF ERP IMPLEMENTATION

ƒ Information Integration
ERP systems are called integrated because they have the ability to automatically
update data between related business functions and components. For example
when we update the status of an order at one place in the order processing
system all the other components will automatically get updated. So when a

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customer places an order and the order is entered into the system, it triggers a
lot of events and actions in a number of modules like finance, production
planning, production , inventory management and so on. The invoices are
automatically generated, material requirements are identified, production is
planned, the inventory is checked and any item can be expected. The beauty of
this system is that information updating happens instantly. This information
integration leads to better decision making and resolution of problems. The
other advantage of this integration is that the users of ERP system are also
connected to each other. This integration has tremendous potential for
improving productivity.

ƒ Reduction of lead time

The beyond time between placing an order and receiving is called the lead time.
It plays a significant role in purchasing and inventory control. ERP system helps
in automating this task and thus makes inventory management more efficient
and effective. ERP system is integrated and the material management module is
integrated with other modules like sales, marketing, purchasing, manufacturing
and production planning, the demand for a particular item can be known as soon
as the order is received. So the ERP system by its good feature of their
integrated nature, the use of latest technologies like electronic funds transfer
(EFT), electronic data interchange (EDI) reduce the lead times and make it
possible for organization to have the items at the time they are required.

ƒ Improve access to accurate & timely information

ERP system improved access to accurate and timely information. As

management attempt to understand a institutions overall performance with
existing legacy systems, it find many different versions of the truth. An ERP
system creates a single version of the truth because everyone uses the same
system. Furthermore, some legacy systems make developing reports or tapping

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into transaction data stored on the computer quite challenging. ERP systems
often improve upon this process by offering a strong foundation for moving to a
data warehouse that can provide even more capability to extract data from
administrative information systems.

ƒ Enhances workflow, increases efficiency, and reduces paper work

ERP system improves workflow and efficiency. On completion of online
requisitions, workflow processes can forward the form along the approval path
more rapidly than with traditional paper methods. This can shorten the time to
complete the process, reduce the likelihood of lost or missing documents, and
return quick feedback on the status of a request.

ƒ Tightens controls & automates e-mail alerts

ERP systems can also improve controls and program alerts. Alerts can use
automated e-mail to warn educational institution management about budgets in
danger of running out of funds. Similarly, controls can be implemented to
prevent individuals from overspending budgets.

ƒ User friendly web based interfaces

One exciting development in modern ERP systems is the availability of easy-
to-use Web interfaces. These interfaces now enhance some integrated portals
with one-stop shopping for a wide range of administrative functionality and
information.

ƒ Streamlines processes & eases adoption of best business practices

The ERP system often prompts significant process reengineering and can
breathe new life into ineffective and inefficient departments or processes.
During an ERP system implementation an opportunity to correct broken

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processes and replace them with modern, system-enabled, state-of-the-art
business practices.

ƒ Establishes a foundation for new systems & integrates existing systems

The ERP system also creates a foundation for new business processes, such as
e-procurement, that can yield significant returns on investment. Other
forthcoming applications that will be integrated into ERP systems include e-
commerce, customer relations management, and pre- and post-award grants
management. The ERP system not only as the foundation, but also as your
starter house, integrating a wide range of administrative system functionality
adds to over time. ERP vendors continue to develop new functionality can take
advantage of usually at additional cost 14.

ƒ Reduce operating costs

ERP software attempts to integrate institution function across departments onto
a single enterprise wide information system. ERP systems reduced operating
costs, such as lower inventory control cost, lower production costs, lower
marketing costs and lower help desk support costs.

ƒ Facilitated day to day management

An ERP system is facilitation of day-to-day management. The implementations

of ERP systems take care of the establishment of backbone data warehouses.
ERP systems offer better accessibility to data so that management can have up-
to-the-minute access to information for decision making and managerial control.

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ƒ Support strategic planning
Strategic Planning is planned steps that assess needs and resources; define a
target audience and a set of goals and objectives; plan and design coordinated
strategies with evidence of success; logically connect these strategies to needs,
assets, and desired outcomes; and measure and evaluate the process and
outcomes. ERP software systems are designed to support resource planning
portion of strategic planning. In reality, resource planning has been the weakest
link in ERP practice due to the complexity of strategic planning and lack of
adequate integration with Decision Support Systems (DSS).

1.5 ERP COMPONENTS

ERP system, like its information system counterpart, has similar components
such as hardware, software, database, information, process and people. These
components work together to achieve an Organization‘s goal of enhance
efficiency and effectiveness in their organization processes.

An ERP system depends on hardware (i.e. server and peripherals), software (i.e.
operating system and database), information (i.e. organizational data from
internal and external resources), process (i.e. business processes, procedures and
policies), and people (i.e. end user and IT staff) to perform the input, process,
and output phases of a system. The basic goal of ERP, likely any other
information system, is to serve the organization by converting data into useful
information for all the organization stakeholders.

The key components for an ERP implementation are hardware, software,

database, processes and people. These components must work together
seamlessly for the implementation to be successful. The implementation team
must carefully evaluate each component in relation to the others while

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developing an implementation plan. Hardware, software, and data play a
significant role in an ERP system implementation. Failures are often caused by
a lack of attention to the business processes and people components. Both
people involvement and process integration will need to be addressed from the
very early stages in the implementation plan. Staff must be allowed to play a
key role in the project from the beginning. As shown in Figure 1.4 each
component must be layered appropriately and each layer must support the
efficiency of the other layers. The layers approach also provides the ability to
change layers without significantly affecting the other layers. This can help
organization lower the long term maintenance of the ERP applications.

Figure 1.4(a) Showing ERP Components Integration.

Server (hardware) Software

Company
processes

Database People

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Figure 1.4 (b) Showing ERP Components Integration.

User

ERP

Database

Operating System Components

Hardware Instruction

Source:- Adapted from Luvai F. Motiwalla & Jeff Thompson,

“Enterprise system for management” Pearson Education India 15

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1.6 EVOLUTION OF ERP SYSTEMS
The evolution of ERP systems closely followed the spectacular developments in
the field of computer hardware and software systems. During the 1960s most
organizations designed, developed and implemented centralized computing
systems, mostly automating their inventory control systems using inventory
control packages (IC). These were legacy systems based on programming
languages such as COBOL, ALGOL and FORTRAN. Material requirements
planning (MRP) systems were developed in the 1970s which involved mainly
planning the product or parts requirements according to the master production
schedule. Following this route new software systems called manufacturing
resources planning (MRP II) were introduced in the 1980s with an emphasis on
optimizing manufacturing processes by synchronizing the materials with
production requirements. MRP II included areas such as shop floor and
distribution management, project management, finance, human resource and
engineering. ERP systems first appeared in the late 1980s and the beginning of
the 1990s with the power of enterprise-wide inter-functional coordination and
integration. Based on the technological foundations of MRP and MRP II, ERP
systems integrate business processes including manufacturing, distribution,
accounting, financial, human resource management, project management,
inventory management, service and maintenance, and transportation, providing
accessibility, visibility and consistency across the enterprise. During the 1990s
ERP vendors added more modules and functions as “add-ons” to the core
modules giving birth to the “extended ERPs.” These ERP extensions include
advanced planning and scheduling (APS), e-business solutions such as customer
relationship management (CRM) and supply chain management (SCM). The
Figure no. 1.5 summarizes the historical events related with ERP.

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Figure 1.5 Showing Evolution of ERP

Source : Adapted from Enterprise Resource Planning: Global Opportunities

16
&
Challenges by Liaquat Hossain, Jon David Patrick and M.A .




1.7 FEATURES OF ENTERPRISE RESOURCE PLANNING
SYSTEM

• ERP facilitates companywide integrated information system covering all

functional areas like manufacturing, selling and distribution, payable,
receivable, inventory, accounts, human resources, purchases etc.
• ERP performs core corporate activities and increases customer service.
• ERP bridges the information gap across the organization.
• ERP provides for complete integration of systems not only across the
department in a company but also across the companies under the same
management.
• ERP is the only solution for better project management.

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• ERP allows automatic introduction of latest technologies like Electronic
Fund Transfer (EFT), Electronic Data Interchange (EDI), internet, intranet,
Video Conferencing, E-Commerce etc.
• ERP eliminates the most of the business problems like material shortage ,
productivity enhancement, Customer service, Cash Management, Inventory
problems, Quality problems, prompt delivery etc.
• ERP not only addresses the current requirement of the company but also
provides the opportunity of continually improving and refining business
processes.
• ERP provides business intelligence tools like decision support system
(DSS), Executive Information System (EIS), Reporting, Data Mining and
Early warning Systems(Robots) for enabling people to make better
decisions and thus improve their business processes 17.

1.8 STAND ALONE SYSTEM Vs ERP SYSTEM

Sr. No Stand Alone System ERP System

01 Redundancy of data entry No redundancy
02 Ambiguity of information as No ambiguity as the data is
different software may show served from central location.
different values for same thing Same logic of processing keeps
away any such ambiguity.
03 No inter module communication. School ERP systems are specially
For example there will be no way designed for inter module
for the library software to know if information sharing. Since all

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 the caution money for the library is modules use the same database and
collected at fee counter for a business logic all the modules can
particular student interact with each other seamlessly.
04 Data security is generally an issue Generally the data is only accessible
with stand along software as the data only through the software interface
base is directly accessible by the in a controlled manner. The server
users. There are always chances for is not in direct access of the users.
accidental or deliberate loss of data. So critical information is always
intact.
05 Central backup for the entire system Backup can be managed centrally
is not possible with a great ease.
06 Different approach and interfacing Generally similar interfacing
for different modules. approach for all modules. Makes it
easy for the top level management to
interact.
07 Physical movement of data is Multiple access point can eliminate
required for reporting. physical movement of reports and
other data.

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08 The dependency level even for Routine information issues are
routine information is higher in generally available with required
standalone applications. users without dependency.
10 No possibility for developing Runs on common business logic for
common business logic. the institution. `
11 Easy to implement The implementation period is a bit
lengthy
12 Low initial investment but higher Comparatively high initial
recurring expenditure in terms of investment but low recurring
man hrs and usage of stationary for expenditure in man hrs and
sharing routine information. information sharing throughout the
institution.

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1.9 ERP POPULAR MODULES
There are two ways of getting an ERP mode, one: Customized version
developed on specific need of an organization and Two: Standardized version
developed by the major vendors of ERP s/w with comprehensive features. There
are many ERP modules in ERP software. Each module of ERP software
corresponds to a major functional area of an organization. ERP software is
designed to include modules so that it is easy to access a particular option, it is
easy to train staff, easy to provide security features. Such a module based design
is more intuitive to use and staff find it easy to understand. The number and
features of the modules vary with the ERP package some of the most common
modules available contain solution

™ Finance Module
™ Manufacturing and production planning
™ Sales and distribution,
™ Plant maintenance
™ Quality management
™ Material management
™ Human resource management.

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 Figure 1.6 Showing Framework of EPR System.

Human

Material
Financial

Manufacturing ERP
Quality

Sales
&
Distribution

25
There can be some additional features on sub-sets of the important functional
requirement too.
The entire concept of information technology is based on the premise that
providing the right information, to the right people, at the right time can make a
critical difference to the organization 18.

™ FINANCE MODULE

Introduction
Much of the key information pertains to the financial data. Such data
incorporate a set of processes and views in the form of up to the minute
financial information to be used to make that critical difference and help with
that crucial decision. Accounting software needs access to information in each
area of your organization, from R & D and market research through
manufacturing, distribution and sales. The financial solution must provide the
management with information that can be leveraged for strategic decisions, in
order to achieve competitive advantage.

The financial modules of most ERP system provide financial functionality and
analysis support to thousands of businesses in many countries across the globe.
These ERP systems include not only financial application components, but also
human resources, logistics, business workflow and links to the internet.
Hundreds of business processes are covered in these systems.

The finance modules of most ERP systems will have the following sub systems:

ƒ Financial Accounting
ƒ Investment management
ƒ Controlling

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 ƒ Treasury
ƒ Enterprise Controlling

¾ Investment Management:

Investment management provides extensive support for investment processes

right from planning through settlement. Investment management facilitates
investment planning and budgeting at a level higher than that needed for
specific orders or projects. Investment program can be define as hierarchy using
any criteria for example, department wise. As a result of subsequently assigning
specific investment measures, to positions in the hierarchy, you are kept up-to-
date about available funds, planned costs, and actual cost already incurred from
internal and external activities. The investment program allows you to distribute
budgets, which are used during the capital spending process. The system helps
to monitor, and there by avoid, budget overruns. Investment management
provides tools, enabling you to plan and manage your capital spending projects
right from the earliest stage. In the initial stage of the capital spending process,
user enter the application for the spending project as an appropriation request.
user define, its own evaluation and approval process, during which the system
keeps a detailed history of the status of the appropriation request. User transfer
the data from the appropriation request, to the investment measure, when the
request is approved for implementation. User enter detailed plan values in the
appropriation request, and are different variants, for use in the pre-investment
analysis.

Depending on their complexity, investment measures that need to be monitored

individually can be represented either as internal orders or projects. These
internal orders or projects provide the means for actually carrying out the capital
investment; that is, they serve as the object for collecting primary and secondary
costs, for calculating overhead and interest for managing down payments and

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commitments, and for handling other related tasks. As the result of having an
asset under construction assigned to it, the investment measure also benefits
from the entire required asset accounting functions. Settlement is both flexible
and almost fully automatic. This kind of settlement ensures a complete
integration with business planning and control, and provides consistently up-to-
date values. Investment management module recognizes the importance of the
asset accounting aspects of investment measures. The system automatically
separates costs requiring capitalization from costs that are not capitalized,
debiting the correct costs to the asset under construction. For different
accounting needs, the system can use different capitalization rules for making
the split. At its completion, the investment measure can be settled to various
receivers by line item. Asset accounting provides precise proof of origin for all
transactions affecting acquisition and production costs.

Budgeted balance sheets and cost planning are always based on current values.
Planned depreciation values for investment measures and appropriation requests
can be transferred directly to ongoing overhead cost planning. The system
recalculates expected depreciation amounts whenever planning data is updated.

¾ Controlling:

The controlling system gathers the function required for effective internal cost
accounting. It offers a versatile information system, with standard reports and
analysis paths for the most common questions. In addition, there are features for
creating custom reports to supplement standard reports.

ƒ Overhead cost controlling

ƒ Cost centre accounting
ƒ Overhead orders
ƒ Activity based costing

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 ƒ Product cost controlling
ƒ Cost object controlling
ƒ Profitability Analysis

¾ Treasury Module:

You can gain a significant competitive advantage by efficiently managing the

short, medium, and long term payment flows and the resulting risk exposure.
Tasks such as short term monitoring and concentration of bank account
balances, medium term planning and forecasting of incoming and outgoing
resources in accounts receivable and payable, to a long term view of areas such
as materials management and sales, underline the importance of integrating
information from various company divisions. Linking these operating divisions
to realized and planned financial transaction and positions in treasury, has a
significant impact on the company’s success. Such integration also facilitates
management and control of cash flows, and risk positions through all the
divisions in the company. The treasury component provides you with a basis for
effective liquidity, portfolio and risk management.

ƒ Treasury management
ƒ Funds management

¾ Enterprise Controlling

Enterprise controlling comprises of those functions that will optimize share

holder value, while meeting internal objectives for growth and investment.
These modules usually include executive information system, business planning
and budgeting, consolidation and profit centre accounting.

ƒ Executive information system

ƒ Business planning and budgeting

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™ MANUFACTURING & PRODUCTION PLANNING

This module enables an enterprise to marry technology with business processes

to create an integrated solution. It provides the information based upon which
the entire operation. It contains the necessary business rules to manage the
entire supply chain process whether within a facility, between facilities, or
across the entire supply chain. It provides the freedom to change
manufacturing and planning methods, as needs change. The manufacturing
modules of most ERP vendors do not limit businesses to a single
manufacturing method, such as make-to-stock or make-to-order. Instead, many
manufacturing and planning methods can be combined within the same
operation, with unlimited flexibility to choose the best method for each product
at each stage throughout its life cycle. Production planning optimizes the
utilization of manufacturing capacity, parts, component and material resources
using historical production data and sales forecasting.

™ SALES AND DISTRIBUTION

New competition pushes businesses to achieve higher levels of service, while

evolving technology compresses product life cycles and forces companies to
adopt new technologies or risk losing market share. In this ever changing
environment, keeping a competitive edge means being able to anticipate and
respond quickly to changing business conditions. To keep pace with these rapid
changes, companies need an integrated and flexible enterprise system that
supports all aspects of their business with state of the art functionality. This
innovative solution should upgrade effortlessly and interface easily with third
party applications, as well as have the ability to incorporate existing system
while extending its reach to the internet and e-commerce.

30
With today’s business environment characterized by growing competition,
shrinking cycle’s times and the accelerating pace of technological innovation,
companies are increasingly being forced to streamline business processes. In a
world in which it is no longer enough to simply have the best product, these
companies are focusing on core competencies and closer partnership over the
whole supply chain. Here, increase efficiency in sales and distribution is a key
factor to ensure that companies retain a competitive edge and improve both
profit margins and customer service. In helping business to ‘beat’ them on
delivery’, the sales and distribution modules of many ERP vendors offer a
comprehensive set of best of breed components for both order and logistics
management. Many of these systems are tightly integrated with the Distribution
Requirement Planning (DPR) engine of the ‘just-in-time’ deliveries. This
integration enables the mapping and supply of single-site or multi-site
organizations and the definition of relationships in a company’s internal supply
chains. Developing precise logistics planning for just-in-time deliveries, this
system can also generate replenishment orders by using defined warehouse
requirements.

The following are the sales related business transactions:

ƒ Sales queries, such as inquiries and quotations
ƒ Sales orders
ƒ Outline agreements, such as contracts and scheduling agreements
ƒ Delivery/ Shipments
ƒ Invoicing/ billing
ƒ After sales support
During sales order processing, the following basic function are carried out:

ƒ Inquiry handling
ƒ Quotation preparation and processing
ƒ Contracts and contract management

31
 ƒ Monitoring the sales transactions
ƒ Checking for availability
ƒ Transferring requirements to material planning (MRP)
ƒ Scheduling the delivery
ƒ Calculating pricing and taxes
ƒ Checking credit limits
ƒ Invoicing / billing
ƒ Creating printed or electronically transmitted documents.

™ PLANT MAINTENANCE MODULE

Plant maintenance provides technical and business reports and various
presentation options as per criteria. For example, organizational unit, location,
execution period for the tasks or system manufacturer. This information helps to
reduce the duration and costs of plant downtimes as a result of damage and to
recognize possible week points within technical system in good time.

™ MATERIAL MODULE
ERP supports all materials management processes, including controlling of purchase of
raw materials needed for building products, order entry and processing, and warehouse
management that can keep track of goods and process movements in corporate
warehouses.

™ HUMAN RESOURCE MODULE

This Module integrates human resources management for guiding personnel-

related tasks between managers and individual employees. There are many
tasks, including personnel planning and development, human resources
administration, automated personnel management, and business travel.

32
In addition, the following areas are covered: payroll-handling accounting and
preparation of checks related to employee salaries, wages, bonuses, employee
benefits and self-service Human Resource (HR) that allow employees to change
their personal information and beneficial allocation online

1.10 SUPPORTING PREMISES OF ERP

ERP in essence is a concept to practice management in an well manner

optimization of business efficiency by use of tools and techniques of integrated
system.

In its application, ERP system uses a sequence of technologies. In general

usage, they are used in isolation on different occasions for different proposes.
ERP however uses it in a package. These techniques may be listed as below

(i) Business Modeling (BM)

(ii) Integrated data modeling (IDM)
(iii) Business process Reengineering (BPR)
(iv) Management Information System (MIS)
(v) Decision Support System (DSS)
(vi) Executive information system (EIS)
(vii) Data Warehousing (DW)
(viii) Data mining (DM)
(ix) On-line analytical processing (OLAP)
(x) Customer relationship management (CRM)

Out of the above technologies MIS, DSS and EIS are forerunners of the ERP
system. Once the ERP system and the other technologies (like data
warehousing, data mining, OLAP, etc) are integrated, the MIS or DSS will

33
become redundant as their functions will be taken care of the new systems and
they will be slowly phased out from the scene 19.

With the competition in the ERP market getting hotter and hotter, and ERP
vendors searching for ways to penetrate new market segments and expand the
existing ones.

(i) Business Modeling

Creating a business model is one of the first activities in any ERP project. ERP
system mirror the business processes. A business model is not a mathematical
model, but it is a representation of the business as one large system showing the
interconnections and interdependencies of the various subsystems and business
processes.

Based on the organization goals, objectives and strategic plans, a business

model consisting of the business processes is developed. These business
processes are controlled by different individuals in the organization to achieve
common goals. Based on the business model, the ERP system is developed
with the aim of providing the required information and necessary assistance to
the various individuals, to help them perform their business processes more
effectively and efficiently.

In business modeling the business is modeled as an integrated system, taking

the processes managing its facilities and materials as resources. Information is a
very important resource and is very critical in managing all the other resources.

The business model is a representation of the actual business- what are the
various business functions of the organization. The business model is usually

34
represented in the graphical form using flow charts and flow diagrams. From
the business model, the data model of the system is created.

(ii) Integrated Data Model

Creation of an integrated data model is the second most critical steps in the
ERP implementation. One of the advantages of having an ERP system is that all
the employees from the different departments get access to the integrated data.
The company uses this integrated data for its analysis and decision making.

With the implementation of ERP system, the department information systems

and the departmental databases will have to go. There can no longer be isolated
databases, which cater to the needs of a particular departmental.

All the data flows from the integrated database. This approach will reduce data
redundancy and provide updated information about the entire organization to all
employees.

For the use of integrated database effectively:

(i) It has to clearly depict the organization

(ii) It has to reflect the day to day transactions
(iii) It has to update continuously. At any given time, the database should
give and snapshot of the organization at that point in time.

All these things have to happen instantaneously and automatically, that is the
challenge and that is the advantage of the integrated database and the integrated
data model. The integrated data model is derived from the business data model.

35
While designing the data model for the ERP system, the most important things
that should be kept in mind is the information integration and the process as
well as procedure automation. The data model should reflect the entire
organization and it should successfully depict and integrate the data structures
of the entire organization.

(iii) Business process Reengineering ( BPR)

Business process reengineering (BPR) is an IT enabled technique of controlling
human resources cost in an organization. There is a very interesting story of its
birth, associated with two giant MNC FORD of US and MAZDA of Japan.

Ford had 500 people in the accounts payable department and had planned a 20
percent downsizing of man power by investing in computers, but before
implementing the plan they checked out with Mazda- a Japanese manufacturer
of automobiles. Mazda had just five people handling the work in the same
department. Shocked at the differences, ford realized that there was something
fundamentally wrong with their system. They effected some radical changes in
their organizational setup. It was a complete shake up. The man power of 500
was reduced to 125; a 75% scale down. Michael hammer and James champy
captured this episode with a new buzzword- business process reengineering,
often abbreviated to BPR. BPR became the new American mantra. It promised
substantial in the manpower.

Mazda had organized their factories and offices according to two major
principles (i) Single piece flow (ii) Unification of labour the implication of this
finding is that BPR is really a result and not a cause 20. BPR result from
application of these principles to the business processes so that single piece flow
occurs and division of labour is avoided as far as possible of course, there will
usually be entered circumstances which will force some batching of jobs and

36
division of labour. To that extend some discount can be given but in general, it
must be organized enabling resources like equipment and people in a way that
facilitates rapid flow of the prime resources of the business process, usually
material order or document. Single piece flow and unification of labour are
unique to most Japanese companies. All the big names like Toyota, Mitsushita,
and their like more been following it for decades. These two principles
constitute them key cornerstones on which Japanese companies organize their
business processes. Around 1950, Taiichi Ohno, the great Japanese genius had
figured out that war vanquished Japan could turn the tables on the United States
only if Japanese industry switched to single piece flow and gave up division of
labour as much as possible. Ohno had launched a fully fledged crusade to
convert Japanese industry to this new way. His efforts bore fruit first in Toyota,
giving birth to the famed Toyota production system or just-in-time management
system.

Today, when a Japanese company is formed, it automatically chooses single

piece flow and unification of labour, not only in its manufacturing, operations,
but in virtually all aspects of business operations.

(iv) Management Information System (MIS):

Earlier payroll systems were data processing systems they did only process time
sheets, print payroll checks and keep totals of annual wages and deductions.
This was precisely what the most other departmental information system also
did. Demand given for better information about the working of the organization,
the data processing systems evolved into management information systems. A
human resource MIS system is capable of predicating the average number of
worker sick days, the amount that must be given as bonus or the overtime
allowances also.

37
MIS is computer based system that optimizes the collection, collation, transfer
and presentation of information throughout an organization, through an
integrated structure of databases and information flow.

The major differences between a management information system and a data

processing system are:

ƒ The integrated database of the MIS enables greater flexibility in meeting

the information needs of the management.
ƒ The MIS integrates the information flow between functional areas
whereas data processing systems tend to support a single functional area.

ƒ MIS caters to the information needs of all levels of management where

as data processing systems focus on departmental level support.

ƒ Management’s Information needs are supported on a more timely basis

with the MIS than with a data processing system.

The main characteristics of the management information system are:

ƒ The MIS supports the data processing functions of transaction handling

and record keeping.

ƒ MIS uses an integrated database and supports a variety of functional

areas.

ƒ MIS Provides operational, tactical and strategic levels of the

organization with timely, but for the most part structured information.

ƒ MIS is flexible and can be adapted to the changes needs of the

organization.

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(v) Decision Support System (DSS):
Decision making is the key managerial function. Decision support systems were
created to assist managers in their task. Decision support system are interactive
information systems; that rely on an integrated set of user friendly software and
hardware tools, to produce and present information targeted to support
management in the decision making process. On many occasions, decision
makers can rely on their experience to make quality decisions,. However,
decision makers, especially at the top management levels, are often confronted
with complex decisions. The analysis of such complex decisions which involve
many factors can be difficult for a human being. These types of decisions and
the need for complex information analysis required for such decision making,
led to the evolution of decision support system.

A DSS can help close the information gap and allows managers to improve the
quality of their decisions. To do this, the DSS hardware and software employ
the latest technological innovations, planning and forecasting models, 4th
generation languages and even artificial intelligence. In many cases, DSS
facilitates the decision making process, helping the decision makers to choose
between alternatives. Some decision support system can automatically rank the
alternatives, based on the criteria given by the decision maker. DSS also help in
removing the monotony and tedium of gathering and analyzing data.

Management Information System are best at supporting decisions that involve

structured problems such as when to reorder the raw materials, how much to
order and the like. In contrast, DSS are designed to support decision making
processes involving semi-structured and unstructured problems also. DSS are
capable of helping the managers in making such decisions.

39
The main characteristic of a DSS are:

ƒ A DSS is designed to address semi-structured and unstructured

problems.
ƒ The DSS mainly supports decision making at the top management level.
ƒ DSS is interactive, user friendly can be used by the decision maker with
little or no assistance from a computer professionals.
ƒ DSS makes general purpose models, simulation capabilities and other
analytical tools available to the decision maker.

A DSS does not replace the MIS; instead a DSS supplements the MIS. There
are distinct differences between them. MIS emphasizes on planned reports on a
variety of subjects; DSS focuses on decision making. MIS is standard
scheduled, structured and routine; DSS is quite unstructured and is available on
request. MIS is constrained by the organizational system; DSS is immediate
and user friendly. DSS is improved version over MIS. EIS is further linear
refinement.

(vi) Executive Information System (EIS):

The line dividing DSS and EIS is very thin. EIS can be considered as a better
and sophisticated DSS. Top-level executive and decision-makers face many
problems and pressures. They have to make the right decisions at the right time
to take the company forward. In today’s competitive world, reaction times are
shrinking and time to make decisions is very less. EIS is a decision support
system especially made for senior level executives. An EIS is a decision support
system especially made for senior level executives. An EIS is concerned with
how decisions affect an entire organization. EIS takes the following into
considerations:

40
 ƒ The overall vision and mission of the company and its goals.
ƒ Strategic planning and objectives
ƒ Organizational structure
ƒ Strategic control and monitoring of overall operations

Executive decision making also requires access to outside information from

Competitors, government regulations, trade groups, news gathering agencies
etc. A high degree of uncertainty and a future orientation is involved in most
executives decisions. Successful EIS are easy to use, flexible and customizable
and use the latest technological innovations. Efficient communication system
allows a free flow of information its velocity is very high. This cause may
have accumulation of information. This may create a different sort of problem
of data congestion 21.

(vii) Data Warehousing (DW):

The primary concept of data warehousing is that data stored for business
analysis and can be accessed effectively by separating it from the data in
operational system. The most important reason for separating data for business
analysis, from the operational data, has always been the potential performance
degradation on the operational system that can result from the analysis
processes. High performance and quick response time is almost universally
critical for operational systems. The reasons to separate the operational data
from the analysis data have not significantly changed with the evolution of the
data warehousing system, except that now they are considered more formally
during the data warehouse building process. Advances in technology and
changes in the nature of business have made many of the business analysis
processes much more complex and sophisticated. In addition to producing
standard reports, today’s data warehousing systems support very sophisticated
online analysis, including multi-dimensional analysis.

41
(viii) Data Mining ( DM):

The importance of collecting data that reflects ones business, or of activities that
achieve competitive advantage, are widely recognized now. Powerful systems
for collecting data and managing it in large databases are available in most
organization. However, the major bottleneck of converting this data into
effective information is the difficulty faced in extracting knowledge about the
system from the collected data. Modeling the investigated system discovering
relations that connect variables in a database are the subjects of data mining.

Data mining is the process of identifying valid, novel, potentially useful and
ultimately comprehensible information from databases that is used to make
crucial business decisions. Modern data mining system self learn from the
previously history of the investigated system, formulating and testing
hypotheses about the rules, which the system obeys. When concise and valuable
knowledge about the system of interest has been discovered, it can and should
be incorporated into some decision support system helps the manager make
wise and informed business decisions.

The main reason for needing automated computer systems for intelligent data
analysis is the enormous volume of existing and newly appearing data that
require processing. The amount of data accumulated each day by various
businesses, scientific and governmental organizations around the world is
daunting. Research organizations, academic institution and commercial
organizations create and store huge amounts of data each day. It becomes
impossible for human analyst to cope with such overwhelming amounts of data.

42
There are two problems that surface when human analyst process data are:
ƒ Art factorial dependencies in the data.
ƒ The lack of objectiveness in analyzing the data.
A human expert is always a hostage of the previous experience of investigating
other systems. Sometimes this helps, sometimes this hurts, but it is almost
impossible to get rid of this fact.

One additional benefit of using automated data mining systems is that this
process has a much lower cost than hiring an army of highly trained
professional statisticians. While data mining does not eliminate human
participation in solving the task completely, it significantly simplifies the job
and allows an analyst, who is not a professional in statistics and programming,
to manage the process of extracting knowledge from data.

(ix) Online-Line Analytical Processing (OLAP):

ƒ FAST means that the system is targeted to deliver most responses to

users within about five seconds, with the simplest analysis taking no
more than one second and very few taking more than 20 seconds.

ƒ ANALYSIS means that the system can cope with any business logic and
statistical analysis that is relevant for the application and the user, and
keep it easy enough for the target user.

ƒ SHARED means that the system implements all the security

requirements for confidentiality and, if multiple write access is needed,
concurrent update locking at an appropriate level.

43
 ƒ MULTIDIMENSIONAL means that the system must provide a
multidimensional conceptual view of the data, including full support for
hierarchies and multiple hierarchies.

ƒ INFORMATION is refined data that is accurate, timely and relevant to

the user.

OLAP describes a class of technologies that are designed for live ad-hoc data
access and analysis. While transactions processing (OLTP) generally relies
solely on relational databases. OLAP has become synonymous with
multidimensional views of business data. These multidimensional views are
support by multidimensional database technology and provide the technical
basis for calculations and analysis required by Business intelligence
applications.

OLAP technology is being used in an increasingly wide range of applications.

The most common are sales and marketing analysis; financial reporting and
consolidation; and budgeting and planning. Increasingly however, OLAP is
being used for application such as product profitability and pricing analysis;
activity based costing; manpower planning; and quality analysis; or for that
matter any management system that requires a flexible, top down view of an
organization 22.

1.11 TRENDS IN ERP SYSTEM


ERP is evolving technology and the demands of the market. The important
trends which are shaping ERP’s continuing evolution are as follows

ƒ Improvement in integration
ƒ Flexibility
ƒ Extensions to e-business application
ƒ Adoption of internet technologies.

44
Figure no. 1.7 illustrates four major development and trends that are evolving in
ERP applications. First, the ERP software packages that were the mainstay of
ERP implementation and were often criticized for their inflexibility, have
gradually been modified into more open flexible product. SAP R/3 enterprise,
released in 2002 by SAP AG as a successor to earlier versions of SAP R3. Other
leading ERP vendors including oracle, PeopleSoft and J.,D Edwards , have also
developed more flexible ERP products.

Figure 1.7 Showing Trends in Evolution of ERP application

e-business suites

Enterprise ERP

Web Enable ERP

Flexible ERP

Source:- Adapted from James A. Obrien & Geogre M. Marakas, “23

Management Information System”, TaTaMcGraw Hill .

Web enabling ERP software is a second development in the evolution of ERP.

The growth of the internet and corporate intranets and extranets prompted
software companies to use internet technologies to build web interfaces and

45
networking capabilities into ERP system. These features make ERP system
easier to use and connect to other internal application as well as to the systems
of a company business partners. This internet connectivity has led to the
development of inter enterprise ERP system that provide Web enabled links
between key business systems of a organization and its customers, suppliers,
distributor, and other. These external links signaled a move toward the
integration of internal facing ERP application with the external focused
application of supply chain management (SCM) and a company supply chain
partners. All of these developments have provided the business and
technological momentum for the integration of ERP functions into e-business
suites. The major ERP software companies have developed modular, web
enabled software suites that integrate ERP, customer relationship management,
supply chain management, procurement, decision support, enterprise portals and
other business application and function.

1.12 ERP: AN INFORMATION TECHNOLOGY (IT) – BY PRODUCT

The IT Boom of the last two decades of 20th century propelled two sub
technologies of IT.

¥ One : Web Spread

¥ Two : Internet

Together, they have spawned application software called Enterprise Resource

Planning (ERP). This ERP s/w, has almost revolutionaries the business structure
the world over. Many of the unsolved riddles of business world are being
effectively solved by this ERP. The automated practices have been re-fashioned
by this user friendly software that is reshaping the business structure.

46
Microsoft’s windows operating system are meant for back office operations.
ERP is the business operating system. It is not a single system but a framework
that embraces all the functional areas and sub-areas of a business organization –
finance , marketing, purchasing , accounting, human resources development ,
training, payroll accounting, taxation – related issues and what not the entire
range of activities within an organization are grouped in convenient departments
or sections or team groups. It is based upon the principles of departmentation
and decentralization. Their activities continuously generate information, which
any time may be of use to any other department, section of the organization. For
some reason, sometimes the flow of information is either interrupted or not
channeled at all. This hampers others decision making process. By some
mistake of conception, it is considered that decisions are made only by the top
management. The fact is that decisions are made at all levels of operations, and
perhaps the lower-hierarchy decisions often prove critical. Many of the
organizational, bottlenecks are found to be created by inadequacies of
information flow. Such flow has to be all directional – vertical, horizontal,
lateral and cross functional.

Communication of information form one department to another is always

necessary. This sort of communication is needed not only within the
organization, but also between multiple plant sites, distribution centers, and
points of sale etc. However, the fact remains that information is communicated
only at top levels. The need is also important for all dimensional transmission of
huge volumes of information horizontal.

For this IT has to be integrated into the corporate strategy. It has to be worked
around the crucial activities of the organization and an uninterrupted flow of
information has to be ensured, such system should be able to properly plan
manage all resources of the organization. In short, ERP is the method of

47
planning the organization’s resources effectively. Hence termed as Enterprise
Resource Planning (ERP) system.

1.13 NOVELTY OF ERP SOFTWARE:

ERP, on the other hands begins with a fresh relook at the existing business. In
fact it is the result of a happy marriage between Business Process Rethinking
(BPR) and Information Technology (IT). BPR is a fundamental rethinking or
radical redesign of business process to bring about dramatic improvement in
performance. It is enabling tool through which a business can achieve it. ERP
thus enables a business to re-engineer by providing a single system enterprise
wide application.
It enables a company to run its business in an integrates manner with a company
wide angle which leads to a better orientation towards the customer needs, the
company’s goals and how each operating supports them with this, companies
are able to develop and manufacture products more quickly and profitably.
Also, they can respond quickly to change as and when an external factor
necessitates change.

1.14 ERP SYSTEM – THE FUTURE

The internet represents the next major technology enabler which allows rapid
supply chain management between multiple operation and trading partners.
Most ERP system are enhancing their products to become “internet enabled” so
that customers worldwide can have direct to the suppliers ERP system. ERP
system are building in the workflow management functionality which provides
a mechanism to manage and control the flow of work by monitoring logistic
aspects like workload, capacity, throughout times, work queue length and
processing times.

48
Recognizing the need to go beyond the MRP-II and ERP, vendors are busy
adding to their product portfolio, BAAN for examples has already introduced
concepts like IRP ( Intelligence Resource Planning ), MRP-III ( Money,
Resources Planning ) and has acquired companies for strategic technology like
visual product configuration , product data management and finite scheduling.

49
1.15 GROWTH OF INDIAN ERP MARKET

Table No. 1.1

STATEMENT SHOWING GROWTH OF ERP MARKET IN INDIA
(1995 - 2011)

Year 1995 1996 1997- 1998- 1999- 2000- 2005- 2010-

-96 -97 98 99 00 01 06 11
Growth
of ERP
Market 12 27 62 134 250 460 508 1000
in Rs.
(crore)
%age - 125 130 116 87 84 10 97
growth
Source:- Adapted from ,“ A Study on Support of ERP systems for marketing in
Coimbatore based Industries”, S.Mohanavel, Dr. Sudharani
Ravindran 24.

Chart No. 1.1 GROWTH OF INDIAN ERP MARKET (1995-2011)

50
The ERP market in India has grown with leaps and bounds. The establishment
of World Trade Organization (WTO) on 1st Jan, 1995 to which India is a
signatory has opened new avenues for India for growth in all the sectors of
economy.

Educational Institutions are not an exception since 1995 the ERP market made a
significant mark with 12 crores at its inception in 1995-96 and subsequently
grow to 27 crores in 1996-97 a rise of 125% which shows the trend of growing
demand and this continued from 1997-98 130% to 1998-99 116% and 1999-
2000 registering satisfactory growth of 87% from 134 crores to 250 crores. This
steady growth increased to another 84% in the year 2000-2001 an increase of
84% to the lowest recorded so far, but then the challenges increased in post
liberalization era and a very average growth of 10% took place in the
cumulative 5 years from 2001 to 2005-06. This is mainly due to India’s
increased exports in software industry; the medium units had a chance to enter
new markets like Europe and china. The attraction of exports earnings gave
them motivation and this showed the Indian market but then it steadily picked
up in the second half of 1st decade in the new millennium showing a positive
trend with more and more sectors of economy adopting the ERP to plan their
future and work systematically. Hence there was a 97% increase in the second
half of 1st decade of new millennium i.e. from 2005-06 to 2010-2011.
Educational institution not being the exception adopted this effective tool for
management in the organization.

51
1.16 STATEMENT OF PROBLEM
It is a common belief that ERP provides a broad range of general benefits such
as improve employee efficiency, improved quality, and enhanced performance
of the organization. Organizations especially educational institutions are using
this ERP system to create efficiencies in their management that will hopefully
lead to a competitive advantage in the educational sector. The use of ERP
system in the educational sector (Specially in the particular geographical area
(Aurangabad) is limited. The use of ERP by educational system in the future
will go to increase. Therefore the users of the system should be satisfied with its
quality and performance.

Despite advantages claimed by ERP vendors, literature identifies some

problems which have been reported by some organizations especially
educational institutions like:

1. The ERP reduced the paperwork and simplified the work, but not
reduced work load of the employees.
2. Insufficient training to the employees about ERP system.
3. Insufficient supports and services from vendors

Thus this research investigates the quality and user satisfaction of ERP in the
selected Educational institutes of Aurangabad city so that problems should be
identified and further improvements should be done for user satisfaction.

52
1.17 OBJECTIVES
1. To study Information quality and System quality of ERP system in
educational institution.
2. To examine the satisfaction level of ERP users in educational institution.
3. To analyze the impact of ERP system on performance in educational
institution.

1.18 SCOPE & LIMITATIONS:

ERP system helps educational institutions to plan, execute and review the
working of an organization. Aurangabad being one of the fastest growing city in
India. Educationally it is not backward and use of ERP system in educational
institutions is a testimony to this like SAP, ERP is the need of the hour and have
a future for real time solution to the problems arising out of working in the
organizations. This study has further scope in use of ERP in curriculum
designing, distribution of work in the organization etc. Total (100%) ERP users
in Aurangabad city are taken i.e. 20 educational institutions.

The limitations of the study are as follows:

1) The study is limited to present general overview of ERP system.
2) The study may help the further researchers to continue further
investigation on this subject.
3) The study is limited to educational institution in Aurangabad City.
4) The end users of ERP system of educational institutions in Aurangabad
city are considered for survey and number of respondent varies with
institute.
5) The findings are based completely on the responses given by the end
users of ERP system.

53
6) The study is based on the survey conducted on sample unit of 20
educational institutions.

Hence, limitation of the study is on Aurangabad city which was considered in

mind. There is also physical limitation where the researcher alone had to do the
work, considering this; scope was limited to Aurangabad city only.

1.19 HYPOTHESIS
The hypothesis of study is as follows:
1. The information quality and system quality of ERP system of
Educational Institution in Aurangabad city is not effective.
2. There is no impact of ERP system on efficiency of educational
Institutions in Aurangabad city.
3. There is no significant relationship between age of ERP user and user
satisfaction.
4. There is no significant relationship between computer expertise and user
satisfaction.
5. Management does not provide adequate training to their employees
about ERP system.
6. There is no positive impact of ERP on performance of educational
institutions in Aurangabad city.

1.20 RESEARCH METHODOLOGY

The chapter gives the details about the Research Design used for this research.
The details about Questionnaire design, Sample Design and Statistical Design is
given in this section. Preparation of the research design is done with great care
as any error in it may upset the entire research. For the research design due
weight is given to various points such as the objective of research, desired

54
standard of accuracy etc. Research design, Empirical Research is also
considered for preparation of this research design.

In this Research an attempt is made to find out the end user satisfaction of ERP
system in the educational institutions. The Research is based on survey in
educational institutional of Aurangabad City.

Population for this research study is educational institution in Aurangabad city

& 20 institutes covered in the sample. Total 20 Educational institutions
implemented ERP model in Aurangabad city so the whole population i.e. 100%
sample was taken for the study. Pilot surveys with five educational institutions
are conducted to validate the Questionnaires. The Questionnaires is redesigned
after the feedback from the educational institutions. For data analysis and
hypothesis testing different statistical techniques are used like mean, Standard
deviation and F-Test.

LIST OF EDUCATIONAL INSTITUTIONS OF AURANGABAD CITY

WHERE ERP SYSTEM IMPLEMENTED DURING THE PERIOD 2007-
2011

55
 Year of
Sr. No Name of Educational Institution
Implementation
1. St. Xaviers English School 2007
2. Al-Irfan Residential School 2008
3. Iqra Urdu Boys High School 2008
4. Sarosh English High School 2008
5. Moin ul Uloom Urdu High School 2008
6. St. Francis De Sales English High School 2008
7. Mount Valley English School 2008
8. Ideal D.ED College of Education 2008
9. IAME, Govt Polytechnic 2008
10. CSMS Ayurved Mahavidyalaya & Rugnalaya 2007
11. CSMS Dental College & Hospital 2007
12. CSMS College of Agriculture 2007
13. CSMS Polytechnic College. 2007
14. Deogiri Science & Commerce College 2007
15. Shiv Chhatrapati Arts, Science & Commerce 2008
College.
16. Dr. Babasaheb Ambedkar College of Arts & Commerce 2008
17. Vivekanand Arts, Sardar Dalip Singh Commerce & 2007
Science College
18. Late. Pandharinath Patil Institute of 2007
Management Studies
19. Milind College of Arts & Science College 2008
20. Podar International English School 2007

1.20.1 Data Collection:-

Data is collected from both primary as well as secondary sources. Survey is

conducted using structured and closed questionnaire.

56
a. Primary Source:-
Data is collected from primary source through structured questionnaire. In the
process observation method is also followed which helped in collection of
information at source.

b. Secondary Data:-
Data is collected from secondary source through books, News papers, reports
and web portals.
c. Sample: - The primary data is collected from end users of ERP system from
20 educational institutional in Aurangabad city.

d. Questionnaires Design:-
Methodologies of the previous researches are referred for designing research
methodology of this research. Pilot survey with five educational institutes is
conducted to validate the Questionnaires. Very few suggestions are received in
pilot survey on questionnaire design and content. The Questionnaires are
redesigned slightly after the feedback from the educational institution.

Structured and close ended questionnaire is used for survey. The questionnaire
is administered to end users of the ERP system in the educational institutes.
Each item of this questionnaire is designed to analyze the effectiveness of the
ERP system. The respondents are expected to indicate their assessment on how
well that factor related to ERP system in their institute. The respondents were
expected to indicate their response on Five Point Rating scale.

57
The Five point rating scale as follows:

Strongly Disagree Neutral Agree Strongly

Disagree Agree

1 2 3 4 5

Almost Some of the About half of Most of the Almost

Never Time the time time always
1 2 3 4 5

e. Variable studied
In different variables related to ERP system are studies for
Questionnaire, 42

analyzing overall ERP system of the educational systems in Aurangabad city.

Demographic items were also drawn up to create a profile of each respondent.
In the first part of the questionnaire age, gender, computer expertise,
educational background of the respondent is checked. The 42 different
questions are designed in questionnaire related to ERP based on the following
variables:
1. Information Quality
2 System Quality
3. User Satisfaction
4. Ease of use
5. Performance
6. Technology Implementation
7. Cost
8. User Involvement & Training

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f. Sample Design

Sample Size : 84 respondents from 20 educational institutes

Sample Design : Census

A sample design is a definite plan for obtaining a sample from a given

population. It refers to the technique or the procedure the researcher would
adopt in selecting items for the sample. Sample design may as well lay down
the number of items to be included in the sample size. Thus sample design used
for this research study is census. Census means where the 100% of population
is considered for the study. Primary data is collected from end users of ERP
system from 20 educational institutions in Aurangabad city. For this research
study all the educational institutions who already implemented ERP model and
all end users (only administrative staff) of ERP in Aurangabad city are taken.
Personal and telephonic contacts are done with educational institutes in
Aurangabad city to know which institutes are having ERP system.

This is a small universe hence the whole population is selected, which comes to
100 end users. After the collection of data from primary source 16 end user out
of 100 sample size were found to be defective i.e. error in data was found in
these respondents. Hence a sample size of 84 respondents from among the end
users is selected for study.

59
g. Period:-
The present study covers five year period from 2007 – 2011. As field survey
was done from 2007 onwards.

1.20.2 Statistical Tools & Techniques used for Data Analysis

1. Mean is used to measure central tendency of Variables.

Mean (or X) = ࢳ‹ൌͳ൅ʹ൅ǥǤ൅



where X = The symbol we use for mean ( pronounced as X bar )

ࢳൌ›„‘Žˆ‘”•—ƒ–‹‘

 ‹ൌƒŽ—‡‘ˆ–Š‡‹–Š‹–‡ǡ‹ൌͳǡʹǡǥǤǡ

60
 ൌ–‘–ƒŽ—„‡”‘ˆ‹–‡•

2. Standard of Deviation is used to Measure Dispersion is commonly

denoted by the symbol ı. This measures the scatter of the values of
items of a variable in the series around the true value of average.

3. Pearson’s Coefficient of correlation is calculated to study the

Correlation of some variables.

4. Z-test & ANOVA( F- test) is used for the Hypotheses Testing.

5. Tables as well as Charts like Pie Charts, Bar Charts used to represent
data.
6. Coding is done to represent each Variable in short format.
7. SPSS 11.0 is used for analysis.

61
1.21 SIGNIFICANCE OF STUDY:-

All educational institutions require access to relevant and timely data that can be
utilized to make the difficult and hard decisions that will have consequences for
the daily and future institutional operations, structure, and culture. With the
advances in technology, the logical conclusion and expectation is that an ERP
system will provide the basis and foundation for any educational institution to
meet data requirements for decision making purposes. But there is need to find
out the problems of the present ERP system so that more improvements in the
system will be possible.

Thus this research investigates the in depth user satisfaction and quality of ERP
system they are using. Furthermore, an attempt is made to study the impact of
ERP implementation on the performance of educational institutions. Therefore,
the results from this study provide an additional insight into the issues related to
ERP system implementation in educational institutions in Aurangabad city. The
result from this study will be used in developing a practical set of guidelines
that may improve the functioning of ERP system. The findings of this study will
be helpful for upgrading the present ERP system. The suggestions of this study
will be useful for the educational institute to take decision about ERP
implementation.
As very few studies available on the user satisfaction towards ERP system in
educational system, this research will be academic contribution in this field.

62
1.22 CHAPTER SCHEME
The present study is divided into five chapters as follows:

1. The first Chapter focuses on introduction to ERP concept, evolution

of ERP need and benefits, ERP market, functional modules of ERP
System, objectives, scope and limitation, hypothesis, research
methodology, significance of study and chapter scheme of thesis given
at the end of chapter.

2. The second Chapter presents literature review of ERP system.

3. The third Chapter highlights the information quality and system

quality of ERP system. It elaborates factors of information and system
quality and its consequences of smooth functioning of ERP system. The
DeLone & McLean model of information system with evidence of case
studies. A model is proposed for user’s satisfaction level. The proposed
model is an output of detailed study of responses of respondent about
handling ERP.

4. In fourth Chapter the data collected through survey is tabulated and

graphically represented to have an overview of data. It deals with
statistical analysis carried out on the parameter of ERP system to test
validity of given hypothesis.

5 The fifth Chapter contains conclusion and suggestion on the basis of

study and survey undertaken at the end of thesis updated bibliography
on ERP is enlisted, references, sample questionnaire on ERP is enclosed.

63
REFERENCES
1. Arif M. Kulonda , D. Practor M Williams K. Before illustrated
framework to compare conceptual designs for an enterprise information
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2. Rajesh Ray, “Enterprise Resource Planning Text & Cases “, Tata
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Company Limited, New Delhi, 2008.

4. Sadagopan S.,”ERP A Managerial perspective, Tata McGraw Hill

Publishing Company Limited, New Delhi,1999.
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6. Jyotindra Zaveri, “Enterprise Resource Planning”, Himalaya Publishing
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12. Luvai F. Motiwalla & Jeff Thompson, “Enterprise system for
management” Pearson Education India, 2008.

64
13. Rahul V. Altekar, “Enterprisewide Resource Planning Theory and
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Learned” , EDUCAUSE QUARTERLY • Number 2 2001.
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17. Anjuman Momin, “ Enterprise Resource Planning (ERP) in Business”,

International Journal of Computer Applications & Business Intelligence,
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Publishing Company Limited, 1999, pp. 64.
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