Professional Documents
Culture Documents
1
Prepared for:
REPON MIA
Senior Lecturer
Prepared By:
2
Letter of Transmittal
Repon Mia
Senior Lecturer
Honorable sir,
This is a great pleasure for me to submit the report on “A Term Paper on Enterprise
Resource Planning” as a partial requirement for Management Accounting (ACT-303) course
with you. Writing this report has been a great pleasure & an interesting experience. It enabled
me to analyze a company in different corporate finance aspects specially analysis of five major
areas including corporate goal, valuation, financial statement analysis, capital structure and
dividend policy of a company. This project helped me tremendously to understand the
implication of theoretical knowledge in the practical field. It has also shaped some of my basic
views like how to communicate & carry oneself in the world of business.
I have undertaken sincere effort for successful completion of the report. It has to be mentioned
further that without your advice and cooperation it would not be possible for me to complete
this report. I shall be gratified to answer any sort of queries you think necessary regarding this
report.
Therefore, I expect your kind consideration in this regard, I will be very grateful if you accept
my report and oblige thereby.
Sincerely,
ID: 192-11-879
3
ACKNOWLEDGEMENT
The submission of project report is a very hard work and it is not possible under improper
guidance and suggestions and this project report itself is an acknowledgement to the sincere
efforts of all individuals who have contributed to it for its completion. I would like to
acknowledge our sincere thanks towards our institute, and its faculties for their valuable
guidance and suggestions that have resulted in the successful completion of the project. I want
to give my deep appreciation and regards to all those who have directly or indirectly helped me
in completion of the project.
4
Introduction
An Erp System Can Either Reside On a Centralized Server or Be Distributed Across Modular
Hardware and Software Units That Provide "Services" And Communicate On a Local Area
Network. The Distributed Design Allows a Business to Assemble Modules From Different
Vendors Without the Need for the Placement of Multiple Copies of Complex and Expensive
Computer Systems in Areas Which Will Not Use Their Full Capacity.
To Be Considered an Erp System, A Software Package Should Have the Following Traits:
➢ Should Be Integrated and Operate in Real Time with No Periodic Batch Updates.
➢ All Applications Should Access One Database to Prevent Redundant Data and Multiple
Data Definitions.
➢ Users Should Be Able to Access Any Information in the System Without Needing
Integration Work On the Part of the Is Department.
➢ Transactional Backbone
➢ Financials
➢ Distribution
➢ Human Resources
➢ Advanced Applications
5
➢ Purchasing
➢ Manufacturing
➢ Distribution
➢ Warehouse Management System
➢ Management Portal/dashboard
Prior Research has Shown That Conflict with Consultants Is One of the Main Managerial
Problems During the Implementation Period of Erp System (Themistocleous Et Al., 2001).
Consultants Can Bring to the Organisation Specialised Skills, Experience, And Know-How
That the Organisation Needs When It Is Both Time-Consuming and Expensive for It to Build
Internally (Gable, 2003). They Can Also Offer a Firm-Wide View, Encourage Unity Between
Members, And They Are Usually Neutral (Davenport, 1998). Erp Implementation Is by No
Means a Purely Technical System Implementation, And Will Include Business Process
Reengineering (Bpr). Consultants Can Perform the Role of Change Facilitator and Are
Involved in Very Important Knowledge Transfer. Consulting Firms Use Techniques Such As
Guided Learning, Formal Training and Knowledge Creation Activities to Direct Clients to the
Necessary Knowledge Required for a Successful Implementation. This Guidance Saves the
Client Considerable Time and Effort in Knowledge Search Costs (Gable, 2003).
➢ Lack Predictability
Erp Is Initially Synonymous with Budgeting. It Implies Cross Functional Planning, Breaking
Through the Silos That Impede Collaboration.
The Objective of Erp Is to Bring the Information On One Holistic View Under a Common
Platform.
MIS system. For business using an ERP system, the activities are coordinated and the
organization better functions as a whole (Gleim, 2014). Notice text of the MIS functions; they
are labeled as 'systems." This differs from the term 'module' used in the ERP diagram. The
6
difference in wording is not accidental. System is used to explain one unit with a relatively
small scope; contrarily, the term module is used to describe something larger and more
complex: it insinuates integration and interchangeability. Thus, the 'modules' of the ERP
system encompass much more than the 'systems of MIS.
Today, the implementation of an ERP system can provide the following for an organization. It
will integrate organizational processes to create a more associated company. It will also
integrate the organization with its customers and suppliers in ways that were not formally
possible. The future of ERP will facilitate growth for companies and allow them to expand
organizational goals and possibilities.
7
Evolution of Erp
8
Characteristics of Erp Systems
Businesses Have a Wide Scope of Applications and Processes Throughout Their Functional
Units, Producing Erp Software systems that Are Typically Complex and Usually Impose
Significant Changes On Staff Work Practices. implementing Erp Software Is Typically Too
Complex for In-House Developers, Lacking the Required Skills, So It Is Desirable and
Advisable to Hire Outside Consultants Who Are Professionally Trained to Implement These
Systems. this Is Typically the Most Cost-Effective Way. There Are Three Types of Services.
9
That May Be Employed - Consulting, Customization, And Support. the Length of Time to
Implement an Erp System Depends On the Size of the Business, The Number of Modules, The
Extent of Customization, The Scope of the Change, And the Willingness of the Customer to
Take Ownership for the Project. Erp Systems Are Modular, So They Don't All Need Be
Implemented at Once. Implementation Can Be Divided Into Various Stages, Or Phase-Ins. The
Typical Project Is About 14 Months and Requires Around 150 Consultants. a Small Project
(E.G. A Company of Less Than 100 Staff) Can Be Planned and Delivered Within 3–9 Months;
However, A Large, Multi-Site or Multi-Country Implementation Can Take Years. The Length
of the Implementations Is Closely Tied to the Amount of Customization Desired.
To Implement Erp Systems, Companies Often Seek the Help of an Erp Vendor or a Third-
Party consulting company. Consulting Firms Typically Provide Three Areas of Professional
Services: Consulting, Customization, And Support. The Client Organization Can Also Employ
Independent program Management, business Analysis, change Management,
And uat specialists to Ensure Their Business Requirements Remain a Priority During
Implementation.
10
During Erp Planning Phase, Companies Also Face a Question As to Whether to Implement the
Erp Software “as Is” And Adopt the Erp Systems Built in Procedure or Customize the Product
to the Specific Needs of the Company. Research Shows That Even the Best Application
Package Can Only Meet 70% Of the Organizational Needs and Thus Organizations Need to
Change Their Processes to Confirm to the Erp Package, Customize the Software to Suit Their
Needs Not Be Concerned About Meeting the Balance 30%. Infact This Need to Reengineer the
Organization’s Business Process Has Been Cited as One of Erp’s Major Benefits. The
Following Survey Reinforces the Research Findings.
Various Stages, Inquiries and Best Practices of an Erp Implementation Cycle Are Explained
Below.
11
➢ How Will an Erp Help Our Business?
Best Practices
➢ Identify What Benefits the Organization Needs to Get Out of an Erp, And Focus On
These Benefits Throughout the Implementation
➢ Establish Metrics to Measure How Well the Objectives of the Erp Effort Are Being
Met.
12
Best Practices
➢ Create the Business Case, Justification & Roi Scenarios to Determine the Most Feasible
➢ Approach
➢ Ensure That All Gaps Between Plans & Performance Are Closed Out
Best Practices
13
➢ Customize the Rfp to Include Features That Meet Your “to-Be”flows
• Functional Capabilities
• Technical Attributes
• Partnership’s Capabilities
• Cost
Methodologies
➢ Modular Implementation
14
Best Practices
• A Phased Approach
• Quality Plan
• Security Plan
Stage 5: Sandbox
Best Practices
➢ Create a Separate Dedicated Work Environment Specifically for the Project Team
➢ Implement a System of Sign Off’s & Hand Off’s for Deliverables and Work Products
➢ Ensure Complete Data Migration From the Old Software System to the New Begins
Early in the Implementation Process
15
Stage 6: Design & Deployment
➢ How Do We Ensure That the Project Team and the End Users Are in Sync?
Best Practices
➢ Conduct User Group Conferences & Prototype Sessions to Demonstrate the System’s
Capabilities
➢ Solicit Feedback From End Users and Ensure That All Concerns & Questions Are
Addressed
➢ Encourage End Users to Network with Peers at Other Institutions Undergoing Similar
Implementation Initiatives
Best Practices
➢ Design Interfaces (If Required) To Integrate Existing Applications (E.G. Crm, Hr)
Directly with the Erp System
16
Stage 8: It Infrastructure
Best Practices
➢ Ensure That the Infrastructure Can Handle the Load of Concurrent Transactions From
All Instances
Stage 9: Operations
Best Practices
➢ E-Commerce Solutions
17
Erp Implementation Performance Falling Short of Expectations
18
ERP Vendors
Microsoft:
Microsoft has no formal ownership experience program defined. Microsoft has developed its
cost management strategy based on a very low software price point and close to 100% out-of-
the-box deployments with little ability to customize the software. As a resuit, Microsoft
offers basic functionality that does not require extensive training, but it also does not
necessarily deliver the full value expected by the customer in view of the ownership
experience.
Oracle:
Addressing cost of ownership is at the heart of Oracle's philosophy for Enterprise
Applications. Based on the Oracle eBusiness Suite, an integrated suite of applications, Oracle
claims that it can lower implementation costs by avoiding unnecessary costs, such as those
associated with costly custom integration between applications. Although Oracle's approach
has some merit - some measurable benefits have been highlighted through ROI case studies,
serious concerns are still being raised regarding what Oracle has delivered to date.
PeopleSoft:
Structured in a formal program, PeopleSoft dedicated over 1,000 developers and $800 million
to improve the Total Ownership Experience for customers. Rather than focusing simply on
best practices that improve the ownership experience, PeopleSoft has rethought its entire set
of applications to ensure that they are buit from the ground up to minimize deployment and
maintenance costs.
SAP :
Many users of SAP applications have, over the years, noted the complexity of SAP
applications, the resuiting high implementation costs, and consequent budget overruns. In
response to these issues, SAP today highlights SAP NetWeaver as the centerpiece to SAP's
product strategy for decreasing the complexity and cost of ownership for SAP applications.
Currently, the impact of SAP NetWeaver on the overall SAP cost of ownership remains to be
proven. SAP has not yet provided proof points valdating that its customers benefit from
improved ownership experience through the implementation of SAP's latest technology.
Siebel:
Siebel's customer experience initiative was first focused on customer satisfaction and high-
level ROI measurements. It is only recently (12+months) that Siebel has focused more
specifically on cost-of-ownership issues (mainly in response to customers' complaints).
Siebel's improvements to its software development process are guided by the experience and
19
Structure of the ERP system
Ideally, ERP delivers a single database that contains all data for the software modules, which
would include:
Manufacturing: Engineering, Bills of Material, Scheduling, Capacity, Work flow
Management, guality Control, Cost Management, Manufacturing Process, Manufacturing
Projects, Manufacturing Flow.
Supply Chain Management: Inventory, Order Entry, Purchasing, Product Configurator,
Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing,
Commission Calculation.
Financial: General Ledger, Cash Management, Accounts Payable, Accounts Receivable,
Fixed Assets.
Projects: Costing, Billing, Time and Expense, Activity Management.
Human Resources: Human Resources, Payroll, Training, Time & Attendance, Rostering,
Benefits.
Customer Relationship Management: Sales and Marketing, Commissions, Service.
Features of ERP
Some of the major features of ERP and what ERP can do for the business system are as
below:
➢ ERP facilitates company - wide Integrated Information System covering all functional
areas like Manufacturing, Selling and distribution, Payables, Receivables, Inventory.
Accounts, Human resources, Purchases etc.
➢ ERP performs core Corporate activities and increases customer service and thereby
augmenting the Corporate Image.
➢ ERP provides for complete integration of Systems not only across the departments in
a company but also across the companies under the same management.
20
Need for ERP:
Most organizations across the world have realized that in a rapidly changing
environment, it is impossible to create and maintain a custom designed software
package which will cater to all their requirements and also be completely up - to -
date. Realizing the requirement of user organizations some of the leading software
companies have designed Enterprise Resource Planning software which will offer an
integrated software solution to all the functions of an organization. Need for ERP
Most organizations across the world have realized that in a rapidly changing
environment, it is impossible to create and maintain a custom designed software
package which will cater to all their requirements and also be completely up - to -
date. Realizing the requirement of user organizations some of the leading software
companies have designed Enterprise Resource Planning software which will offer an
integrated software solution to all the functions of an organization.
Components of ERP:
To enable the easy handling of the system the ERP has been divided into the following
Core subsystems:
➢ Master Scheduling
➢ Bill of Materials
➢ Purchasing
➢ Logistics
➢ Asset Management
➢ Financial Accounting
21
Advantages with ERP
It has now been ascertained that the integration of functions within the business structure is the
primary advantage of implementing an ERP system. However, there are many advantages that
may not at first be apparent with the integration of these functions. In order to more casily find
the advantages, it can first be worthwhile to acknowledge the many problems and risks that are
addressed and improved with the installation of an ERP system. Maintenance is one area that
can be greatly problematic within a Management Information System. When the system
becomes outdated or an update becomes available, the data can too casity be at risk. This is due
to the fact that each system requires its own update. ERP dissolves this issue altogether. Now
the entire company is on the same page, and adjustments can be made to one manually, and
then all are automatically updated as well. This is one example of the streamlining benefits of
ERP (Matys, 2012). A difficult user interface is another downside of MIS. The system may not
be used to its full potential if the employees find the system to difficult and cumbersome to
use. Not only does the system itself need to be user friendly, but the reports developed from
the system should be easily viewable and manipulated. This is often not the case with MIS.
ERP addresses this problem with a much more understandable interface. It also uses data
mining processes to create very accurate, efficient, and malleable reports (Matys, 2012). With
the implementation of ERP, many new abilities are now being given to organizations. A great
benefit is the incorporation of customers and suppliers needs with front- office functioning.
MIS and ERP alike have back-office functions such as operations, human resources and
finances. With the implementation of ERP, the business now gets front-office functioning,
which allows customer service and marketing to be included in the centralization of
information. With ERP, no function is left behind. All business functions become an integral
part of day-to-day operations. All activities are coordinated across the board and management
is able to view the organization as a whole rather than as separate processes.
22
23
Disadvantages with ERP
Like all good things, ERP systems also come with their fair share of disadvantages from
implementation. They key is to determine whether the advantages outweigh the disadvantages.
With ERP, this is quite often a definitive yes. One primary reason it may not be worthwhile is
a lack of monetary means. But as for the actual system, the advantages far supersede the
disadvantages. A knowledgeable ERP project manager will say that the number one issue with
the implementation of an ERP system is the vast size of the project (Trepper, 1999). The
integration of all functions does not come casily, and it uses the company's own employees in
order to be successful. While the project manager will be an external party, (s)he cannot come
close to managing the project without internal aid. It takes a lot of work; the problem is that
this work is not an organizations first priority. Keeping the business functioning normally while
serving customers must remain top on the list. This makes it difficult for employees to put in
the time and effort necessary for accurate implementation (NMATec, 2008). Other notable
disadvantages include the possibility of staffing turnover, risk management issues,
unreasonable deadlines, inadequate funding, and a resistance to change (Trepper, 1999).
Training must be implemented; therefore, if the employee turnover rate is high, it can be
difficult to adequately train all necessary employees. Without proper risk management, the
entire project can fall through. Unreasonable deadlines specifically are a problem because, as
mentioned above, the implementation is not an employee's primary concern. Lastly, there will
always be those employees who want to do things a certain way simply because that's bow
we've always done it." These employees can hinder the learning process during the
implementation (NMATec, 2008). A final disadvantage to mention, though definitely not least,
is that an unsuccessful conversion can hinder or cause damage to data. This is true of any
software system, but with the malfunction, rather than simply one sector or function. For this
reason, the implementation process of an ERP system is of utmost importance.
Before implementing an ERP system, an organization must weigh the costs and benefits for its
own specific entity. The high monetary cost may outweigh many of the possible advantages,
especially for smaller companies that do not have the means of purchase. However, once an
entity decides to install the system, many steps need to be carefully taken to ensure the
installation is successful and avoids exposure to as many risks as possible. It is different from
that of an MIS or MRP (Material Requirement Planning) system because of the integration of
24
the components. The integration of systems enhances the complexity of implementation. The
installation of one single system is not near as risky as the installation of an entire network of
functioning components working as one. The vast size of an ERP system leads to a very
complex installation process. The large scope of an ERP system encompasses more than one
function of the organization and causes the installation to have more risks to overcome.
Without first coming up with a plan, the implementation cannot be effective. This is
why "perhaps the single most decisive element of ERP success or failure is the knowledge,
skills, abilities, and experience of the project manager". An effective project manager knows
the top problems found in this process and knows how to effectively approach these problems.
Knowledge is not the only characteristic of a
good project manager. He must also be able to
work well with others be a quick decision maker
and know the ins and outs of the company in
question. In order to best achieve a successful
ERP system implementation, after acquiring the
project manager, is to establish an extensive
plan led by the project manager. While it is
important for the project manager to be an
enjoyable co-worker, it is also imperative to
have someone in top management that is agreeable with the implementation as a whole.
Without the manager, it would be difficult to surpass many of the problems and the
implementation would not be successful.
Overall Impact
The implementation of an ERP system will affect more than just the organization itself. It will
also affect the stakeholders of the business as well as the internal and external auditors. A
primary stakeholder affected by an ERP system is that of the organization's customers.
Customers will be served more efficiently and effectively with the integration of organization
processes. Auditors are also affected. They are required to leam and understand an ERP system
and how it works. New auditing processes need to be applied as an ERP system cannot be
evaluated the same as other systems. Auditors will also need to pay special attention to the
integrity of the business data and ensure that everything is running smoothly.
25
ERP systems will change with the ever-evolving technology of today's society. Cloud
technology will help ERP become much more advanced. An advantage that could evolve for
smaller companies would be a smaller, more cost-effective, version of ERP. In this way, it
would not only be useful for larger organizations. More organizations will make the switch to
ERP if it does become more financially possible for smaller organizations. Also in the future,
implementation may become more complex, which would cause implementation disadvantages
to become much more prominent. Once system processing is correctly implemented, however,
it will become more integrated, reliable, and will lessen the problems of ERP systems.
Conclusion
26
Works Cited
Bae, B. B., & Asheroft P. (2004). Implementation of ERP Systems: Accounting and Auditing
Implications. Retrieved from ISACA: http://www.isaca.org/journal past- issues/2004 volume-
5/documents/jpdf045-implementationoferpsystem.pdf
Matys, T. (2012, September 11). A Student Introduction to ERP. Retrieved from SlideShare:
http://www.slideshare.net/tmatys/erp-a-student-introduction
The Future of ERP: Top ERP Trends for 2014. (2014, April 25). Retrieved from Work Wise:
http://workwiselle.com/future-erp-top-erp-trends-2014
27