ENTERPRISE RESOURCE PLANNING

MBA (EVE)

Zulfiqar Ali Shaikh

ENTERPRISE RESOURCE PLANNING
Lecture-3

ERP Concepts, Myths

Zulfiqar Ali Shaikh

 ERP CONCEPTS, MYTHS
Expensive Systems
As knowledge of ERP Systems has grown so too have the
misconceptions and many Myths have also emerged
Many of these Myths persist today and often discourage
potential purchasers of ERP Systems, despite significant
investments and innovative products
products..
ERP Systems are Expensive and Take a Long Time to Implement
– Truth - It is true that Sophisticated High-
High-end ERP Solutions with Large
Functionalities are very Expensive and having multi-
multi-year schedules
– Companies set an overly ambitious scope, over
over--engineer the solution, or
select the wrong Systems Integrator (to make the business case more
attractive)
– Consequently, the ERP Investment Grows, requires More Resources, and
takes Longer to deliver.
deliver.
– These Expenses should be Weighed against the Company
Requirements and Benefits of the ERP System
System..
– Thanks to the Technological Advancements like Cloud Computing and
Mobility Solutions, ERP is available in all sizes and shapes
 ERP CONCEPTS, MYTHS
Expensive Systems

• From the Setup of the Enterprise Structure in the System to establishing

Module--Specific parameters in the ERP Database Tables
Module
• Configuration can be Swift by assuming Specific Business Requirements
• Agreement with all Stakeholders
• There can be many deliverables at the time of Implementation, each
requires an Approval Process
• Only few were either relevant or usable a year after implementation.
• Such Inefficiencies cannot be completely eliminated but can be reduced
 ERP CONCEPTS, MYTHS
Expensive Systems

• Break down the underlying Work Structure

• Challenge the Scope and complexity of the first system release,
and ask why certain bells and whistles are needed and what is
Sufficient to get the Job Done Efficiently
Efficiently..
• Also, it is wise to confirm the Expertise of the Systems Integrator's
Resources
• Align the Commercial Strategy to the Delivery Strategy
• Establish a Lean Management Style that can make the Right
Decisions quickly (and use prototypes to minimize
documentation)
• Be clear about what the System is supposed to do, and make sure
Everyone involved understands and Agrees on the Requirements
 ERP CONCEPTS, MYTHS
Deliver Business Benefits

ERP Projects Deliver Business Benefits

ERP is a Project and that an ERP System Delivers Benefits,
(Two Interrelated
Interrelated——and entirely Misplaced)
– ERP is not a One-
One-Time Project
– It is a Platform for Continuous Improvement that requires a
Sustainable Change in mindset, Behaviors, and Ways of Working
– During an ERP project, departments teams work together to
define processes and resolve information dependencies
– These diverse players establish a common language, break down
functional silos, and create a culture that is responsive to change
– When the system goes live, business processes are simplified and
integrated, and islands of automation are all but gone
– System users are part of a continual workflow up and down the
Supply Chain, and Enterprise-
Enterprise-wide Information is available to
support Analytical and fact-
fact-based decision making
 ERP CONCEPTS, MYTHS
Deliver Business Benefits

ERP Projects Deliver Business Benefits

– When the period of vast insights, momentum, and change ends the
ability to leverage the opportunities diminishes
– The ERP System becomes just another IT application depreciating on the
asset register
– Benefits are derived because of the ERP System, not from it
– An ERP investment is founded on business returns that outweigh
implementation costs
– ERP does not print money - it only tells you where to find it
– ERP is a platform for future initiatives that improves business practices
and reduces inefficiencies
– To develop user capabilities to sustain the change and safeguard data
quality
– Intangible benefits result from Improved Compliance and Customer
Satisfaction
– Focus on benefits that are ERPERP--enabled and not just inherent to the
System, and detail these in project charters
 ERP CONCEPTS, MYTHS
Only Suits Larger Companies

ERP Only Suits Larger Companies

Initially, it was larger organizations that embraced ERP, as is
often the case with new technology
– Managers can minimize the impact on lead times, quality,
and cost
– Current ERP System Designs are highly Adaptable for a wide
range of customer sizes and effective equally for Large and
Small Firms
– Most Companies are more similar than they are different
– There is always a Purchasing function, an Accounting
function, a Manufacturing facility, Customer Service,
Transportation
– Irrespective of the size of an Organization, The basic
concept of integrating data from a variety of functions
across an Organization is Universal
 ERP CONCEPTS, MYTHS
Standardized Process

Standardized Processes" means One Way of Working

Standardization is one of the central reasons for Implementing
an ERP System to establish common ways of working that permit
Comparability and Interoperability
– Standardization is a means to simplify processes, eliminate
inefficiencies and unneeded variability, and reduce operating
costs
– Outputs become more consistent and repeatable and there are
fewer errors
– Standardization does not mean singularity
– ERP Systems are incredibly versatile and highly flexible
– They do not constrain business processing
– Order types, Planning strategies, and number ranges are used in
the same ERP solution to cater to a variety of Business Scenarios
– What's particularly vital to standardization is knowing how much
uniformity is needed and recognizing that most benefits are
derived from process simplification
 ERP CONCEPTS, MYTHS
Standardized Process

– Managers can minimize the impact on lead times, quality, and cost
– Use the ERP implementation as an opportunity to simplify Processes
and move toward Best Practices
– Take into account users' capabilities and the extent to which they can
realistically tolerate variability
– Incorporating ERP training into new-
new-hire orientation programs will
ensure that competency levels are embedded and sustained
 ERP CONCEPTS, MYTHS
Employee Resistance

Employees may be Resistance System Deployment

Most people, at least at first, is resistant to change
Even small changes in everyday life are often viewed warily
• The Resistance in the Implementation of an ERP is caused by
various reasons;
reasons
– Fear of not adapt to the New Platform
– Fear of Restructuring in their tasks and even layoffs due to
process optimization or past mistakes that can be evidenced
– It is important that the top management is committed and is
present, ensuring clear communication with the entire team
– Employees need to be educated and motivated for the change
 ERP CONCEPTS, MYTHS
Complicated Software

ERP Software is Complicated and cannot Be Modified Once

Implemented
ERP Systems are highly Complex and can’t be used by Non
Non--
Technical people, Once Implemented can’t be Changed
– Modern ERP solutions have Navigable and user user--friendly
Interfaces
– Most employees can easily work their way through ERP
Software with some initial training and IT support
– These are highly Customizable and can be Modified according to
your needs or any Changes in the Organizational Structure
 ERP CONCEPTS, MYTHS
IT Department System

ERP is an IT System that belongs in the IT department

Another IT system that gets relegated to the IT department, which
shifts the focus from value creation to cost management
– As a Packaged System, ERP minimizes the need for extensive
technical input and elevates attention to what the application
does, rather than its Technology
– Successful organizations recognize ERP's potential and migrate the
project into a more permanent entity, Center of excellence or
competency center to sustain the change and maximize the
investment
– These centers can become vehicles for educating the firm's future
business leaders, arming them with a crosscross--functional, process
process--
centric understanding of the company's operations
– Make ERP an integral part of the Business, working in conjunction
with the IT department or a Third-
Third-party service provider
 ERP CONCEPTS, MYTHS
One Data Base &
Improved Security

One Database
– ERP System unites all the information from different business units
and functional Areas in to one Database
– The information is available to all stakeholders in real time which
allows them to work faster and more effective
– One single database also reduces the risk of the human factor, since
there is no need to re-
re-enter the same information to several programs
or to transfer it using paper documents, e-e-mail or flash drives
Improved Security
– ERP System allow to provide or restrict access for certain departments
or employees
– Everyone sees only the information they need for work
– Sensitive data stays protected
 BUSINESS PROCESS RE-ENGINEERING (BRP)
Manual Process for Leave Application
Start
Employee
Leave
Form
Taken by Hand No
Necessary Process
Input by Dept. by AM Spared
1-Day Form Sent Manually
Approval Yes
1-2 Days by HOD
Form Sent Manually

HR Leaves No
1-2 Days Dept due
Check Leave Yes
Record Manually Leave Update
Granted Record

S
Stop

Manual Process Takes 3-

3-5 Days
 BUSINESS PROCESS RE-ENGINEERING (BRP)
New Business Process for Leave Application

Start
Employee
Leave
Form
Immediate

Leave Record Checked Leaves No

from Database due
Yes
Can be Spared checked Approval No
through available Staff by HOD

Yes
Leave Update
Granted Record HR Dept

S
Stop

New Process can be done on same day

 ERP BENEFITS & RISKS
Benefits
Scalability
• Most ERP Systems allow fast scalability in terms of new functionality
• You can simply add an already existing module or integrate a system
supported by this ERP
• No need to develop new functionality, rebuild the system or rewrite
existing code
Better Analytics and Planning
• ERP System can be easily Integrated with different Analytical
Applications which significantly simplifies analytics and improves
Forecasting and Planning
Competitive Advantage
• Implementing ERP helps to keep you ahead of the competition
because you no longer run the risk of making costly business
mistakes
• Organizations cannot afford to put off an ERP implementation while
their competitor invests in ERP and starts reaping the benefits
 ERP BENEFITS & RISKS
Benefits

• Improved Process Efficiency

– The benefits of implementing an ERP system in an
organization will also improve daily business activities by
streamlining business processes
– An ERP platform eliminates repetitive processes
– It eliminates the possibility of inaccurate data
• Accurate Forecasting
– ERP Software helps Managers to create more accurate
forecasts
– Since the information within ERP is as accurate as
possible, updating in real time
– Businesses can make realistic estimates and more
effective forecasts
– Decrease business costs, which saves money and become
proactive unit.
unit.
 ERP BENEFITS & RISKS
Risks

ERP implementation failure is a common problem, the reasons

may differ from company to company, but mostly they are the
following::
following
Lack of Senior Management Support
– The lack of Senior Management Support to give time away from
the desk, as they are too afraid to miss sales, delivery to
customer is one of the most common ERP implementation risk.
Failure to Redesign Business Processes to Fit the Software
– To redesign your Current Processes to fit to purchase an ERP
System
– It is very difficult in most Business to Change old or existing
Processes and to Customize the ERP System to fit to current
processes is a costly and Time-Consuming activity
 ERP BENEFITS & RISKS
Risks

Cost of ERP
– With most ERP solutions, there are multiple fees that are applied,
which can lead to higher costs
– From licenses to upfront cost, implementation and recurring
potential monthly fees, some ERP solutions may be too expensive
Lack of Ability to Recruit and Retain Qualified System Developers
– Many of the Organizations found it difficult to recruit and retain
good ERP Specialists because the market rates for these people
are high
Insufficient Training and Re
Re--skilling of End
End--Users
– Most ERP implementation comes with deadlines that need to
meet
– there is hardly enough time to train most people and give them
skills they need to reach the satisfactory performance
 ERP BENEFITS & RISKS
Risks

Lack of Integration
• ERP Implementations needs extensive Integration with other
Systems (for example Financial, Supply Chain or Quality Software
& tools)
tools)..
• Old metrics which was life blood to measure the business is no
more available
• Process and Systems functionalities must fit each other for
proper integration
Poor Technology Planning
• Lack of adequate Technical Expertise and adequate Technology
Infrastructure for supporting Project Requirements
• Application complexity and failure of Technology to meet
Specifications
 ERP BENEFITS & RISKS
Risks
Poor Project Management
– Implementing ERP is a highly technical Project and needs proper
handling
– The extent of Risk of Project Cost and Time overrun due to the Lack of a
Measurement System for Assessing and Controlling Project Risk
depends on Project Size, Experience with the new Technology and
Project Structure
• Maintenance costs
– The ERP system needs regular maintenance, includes revision and
updating as per the changing situations in the organization in order to
function properly
– Maintenance costs for an ERP system typically run between 10–20% of
the initial purchase price
– Maintenance cost can be lower by:
– Negotiate lower software license fees
– Limit software customization during ERP system implementation
– Explore third-party support and maintenance options
– Negotiate lower ongoing professional service rates
 ERP RELATED TECHNOLOGIES
Business Process Re-
Re-Engineering (BPR)
Management Information System (MIS)
Decision Support System (DSS)
Executive Information System (EIS)
Data Warehousing
Data Mining (DM)
On Line Analytical Processing (OLAP)
Supply Chain Management (SCM)
Customer Relation Management (CRM)
Geographical Information System (GIS).
ENTERPRISE RESOURCE PLANNING
MBA (EVE)

Zulfiqar Ali Shaikh

FUNCTIONAL AREAS OF ERP SYSTEM
Lecture--4
Lecture

Zulfiqar Ali Shaikh

 FUNCTIONAL AREA INFORMATION SYSTEM
• A Functional Area Information System provides detailed
information for a specific type of activity or related group
of activities, as well as summarized Information for
Management Control of such activities
 FUNCTIONAL AREA INFORMATION SYSTEM

• Marketing & Sales Function (M/S)

• Production & Manufacturing Function (P/M)
• Finance & Accounts Function (FAMIS)
• Human Resource Management Function (HR)
• Material & Procurement Function (M/P)
• Supply Chain Management Function (SCM)
 FUNCTIONAL AREA INFORMATION SYSTEM

• Marketing & Sales Function (M/S)

Information System that works with other functional Information
Systems to support the Management in solving Marketing & Sales
related problems of Products or Services
– Product or Service Development
– Product/ Service Pricing
– Products Promotions (Advertising and Marketing)
– Customer Orders
– Sales Forecasts
– Support Customers
 FUNCTIONAL AREA INFORMATION SYSTEM
• Production & Manufacturing Function (P/M)
Inputs are transformed to outputs that create value
The Manufacturing Function is a set of tools for managing
the flow of manufacturing production data throughout the
enterprise.
This IS was designed to provide tools for both IT &
Operations personnel who would deliver services to
anyone on the plant
– Receive Order
– Check Inventory
– Source Raw Material
– Schedule Production
– Allocate Resources
– Complete Job
– Quality Testing
– Send Order
 FUNCTIONAL AREA INFORMATION SYSTEM
• Finance & Accounts Function (F/A)
– Accounting and Finance (A/F) needs information from all the
other functional areas to complete its tasks accurately
– Integrate Financial & Operational Information from multiple
sources
– Annual Reports and Financial Statements
– Analyze Historical & Current Financial activities
– Monitor & Control the use of Funds over Time
– Provides information obtained in the routine processing of
Accounting Transactions
– Information on Accounts Payable & Accounts Receivable
– Payroll
– Data Manipulation
– Data storage & Document Preparation
– Process Recording
– Posting to Subsidiary Ledger & General Ledger
– Auditing (Internal & External)
Finance & Accounts Function
 FUNCTIONAL AREA INFORMATION SYSTEM
• Human Resource Management Function (HR)
– Activities related to Employees and Potential Employees of the
Organization
– Human Resource Planning
– Personnel Selection and Recruiting
– Training and Skills Development
– Scheduling and Job Placement
– Wage and Salary Administration
– Performance Evaluation
– Turnover & Absentee Analysis
– Personal Information & Privacy Issues
– Compensation & Benefits
HOW MANY TRIANGLES ARE THERE??

13
 FUNCTIONAL AREA INFORMATION SYSTEM
• Material & Procurement Function (M/P)
– Procurement involves every activity involved in obtaining the goods
and services a company needs to support its daily operations, including
sourcing, negotiating terms, purchasing items, receiving and inspecting
goods as necessary and keeping records of all the steps in the process
– Efficient Procurement System can ensure quality of Goods and Services
and reduce the production cost
• Supply Chain Management Function (SCM)
– The process of managing the flow of products and services from raw
material manufacture to customer consumption
– Supply chain management maintains the balance between the demand
and supply and involves activities right from procurement of materials
and converting them into finished goods to ensuring delivery at the
right time to reach the end-
end-consumer
– It needs to be efficient to keep the operations running like a well-
well-oiled
machine
– A streamlined supply chain management can enhance customer
relationships, lower down operational costs
 FUNCTIONAL AREA INFORMATION SYSTEM
Quiz # 1 Date: 17Th March, 2022

Plz. Re-Design the following Manual Process for Automation

Finance Manually Processing

Deptt..
Deptt
FUNCTIONAL AREA INFORMATION SYSTEM
FUNCTIONAL AREA INFORMATION SYSTEM
THANK YOU FOR NOW