ERP Session 1:

Overview, Evolution

Kedareshwaran S
 History of ERP

• Origins in the manufacturing industry

• 1960’s – Inventory management and control systems
• 1970’s – Materials Requirement Planning (MRP) and Closed-loop MRP
• 1980’s – Manufacturing Resource Planning (MRP II)
• 1990’s – Enterprise Resource Planning (ERP)
• 2000’s – ERP II
• 2010 onwards – ERP III
 Inventory Management and Control

• Inventory management and control is the combination of information technology

and business processes of maintaining the appropriate level of stock in a
warehouse.

• The activities of inventory management include identifying inventory requirements,

setting targets, providing replenishment techniques and options, monitoring item
usages, reconciling the inventory balances, and reporting inventory status.
 Materials Requirement Planning (MRP)

• Outgrowth of bill of material (BOM) processing

• Uses the master production schedule (MPS) to find out what products are going to
manufactured.
• Gets the details of the materials required to make the products from the bill of
materials (BOM).
• Searches the inventory records to find out what items are in stock.
• Calculates the items that need to be purchased for producing the goods.
• MRP solves manufacturing and production planning problems and made
manufacturing of goods easier.
History of ERP
 Closed-loop MRP
• Merger of capacity planning techniques with MRP.

• Tools developed to support the planning of sales and production levels,

development of production schedules, forecasting, sales planning, capacity planning
and order processing.

• Various plant, production, and supplier scheduling techniques for automating the
processes inside and outside the organization, were built into the MRP system to
create the closed-loop MRP.
• Closed-loop MRP is a series of functions for automating the production process.

• It contains tools and techniques to address both priority and capacity and supports
both planning and execution.
 Manufacturing Resource Planning (MRP II)

• Evolved from closed-loop MRP

• Contains additional capabilities like sales and operational planning, financial

interface and simulation capabilities for better decision-making

• MRP II is a method for the effective planning of all the resources of a manufacturing
company

• Utilizes software applications for coordinating manufacturing processes, from

product planning, parts purchasing, inventory control to product distribution.
 Enterprise Resource Planning (ERP)

• Fundamentals of ERP are the same as that of MRP II.

• ERP is broader in scope and is capable of dealing with more business functions and
has a better and tighter integration with the finance and accounting functions.

• ERP is an enterprise-wide set of forecasting, planning and scheduling tools, which

links customers and suppliers into a complete supply chain.
Enterprise Application Architecture
 Enterprise Resource Planning (ERP)

• The goals of ERP include high levels of customer service, improved productivity, cost
reduction, better inventory turnover (just-in-time inventory), etc.

• ERP is more powerful because it applies a single set of resource planning tools
across the entire enterprise, provides real-time integration of sales, operating and
financial data and connects resource planning approaches, to the extended supply
chain of customers and suppliers.

• Enterprise Resource Planning (ERP) System: Support and integrate all the functional
areas of the business – finance, sales & marketing, operations, and human
resources.
• Video: https://www.youtube.com/watch?v=UGuO7MbEFHE
Cross Functional Approach of ERP
 Limitations of ERP

• Managers cannot generate custom reports or queries without help from a

programmer and this inhibits managers from obtaining information quickly so that
they can act on it for competitive advantage.

• ERP systems provide current status only, such as open orders. Managers often
need to look past the current status to find trends and patterns that aid better
decision-making.

• The data in the ERP application is not integrated with other enterprises or division
systems and does not include external intelligence.
 Overcoming the Limitations

• There are many technologies that help ERP systems to overcome the limitations,
that reduces its usefulness.

• These technologies, when used in conjunction with the ERP package will help in
overcoming the limitations of a standalone ERP system and thus help the employees
in making better decisions.

• Organizations are constantly innovating methods to improve operational efficiency,

reduce costs, provide high-quality and personalized customer service, improve
customer satisfaction and increase profit margins.
Transition from ERP to ERP II
ERP and Related Technologies
 Supply Chain Management (SCM)

• Supply chain management (SCM) is the process of planning, implementing, and

controlling the operations of the supply chain as efficiently as possible.

• SCM spans all movement and storage of raw materials, work-in-process inventory,
and finished goods from point-of-origin to point-of-consumption.

• SCM is the oversight of materials, information, and finances as they move in a

process from supplier to manufacturer to wholesaler to retailer to consumer.

• SCM involves coordinating and integrating these flows both within and among
companies.
Managing Complex Supply Networks
 Supply Chain Management (SCM)

• The ultimate goal of any effective supply chain management system is to reduce
inventory (with the assumption that products are available when needed).

• A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into
intermediate and finished products and the distribution of these finished products
to customers.

• Supply chains exist in both service and manufacturing organizations, although the
complexity of the chain may vary greatly from industry to industry and firm to firm.

• Link: https://www.youtube.com/watch?v=XSqIRH2WjuI
 Customer Relationship Management (CRM)

• CRM is an information industry term for methodologies, software, and usually

Internet capabilities that help an enterprise manage customer relationships in
organized way.

• Helping an enterprise to enable its marketing departments to identify and target

their best customers, manage marketing campaigns with clear goals and
objectives, and generate quality leads for the sales team.

• Assisting the organization to improve telesales, account, and sales management

by optimizing information shared by multiple employees, and streamlining
existing processes (for example, taking orders using mobile devices).
Customer Relationship Management (CRM)
 Customer Relationship Management (CRM)

• Allowing the formation of individualized relationships with customers, with the

aim of improving customer satisfaction and maximizing profits; identifying the
most profitable customers and providing them the highest level of service.

• Providing employees with the information and processes necessary to know their
customers, understand their needs, and effectively build relationships between
the company, its customer base, and distribution partners.

• Link : https://www.youtube.com/watch?v=hmc4kF4o6Ek
 ERP II – ERP III (2010 onwards) – ERP IV (2020 onwards)

• ERP II along with applications covering one or more of SMAC technologies.

S : Social Media
M : Mobile
A : Analytics/ Machine Leaning / Artificial Intelligence
C : Cloud

• Recent emerging technologies such as Robotic Process Automation (RPA), Internet

of Things (IOT) and Blockchain are also being explored as part of ERP IV.