ENTERPRISE RESOURCE PLANNING

WHAT IS ERP

ENTERPRISE

RESOURCE

PLANNING

ERP........

Enterprise resource planning (ERP) is business process

management software that allows an organization to use a
system of integrated applications to manage the business and
automate many back office functions related to technology,
services and human resources.

ERP software integrates all facets of an operation, including

product planning, development, manufacturing, sales and
marketing.

ERP MYTHS
ERP........
Means more work & Procedures
Make many employees redundant & jobless
Sole responsibility of the management
Just for Managers/ Decision makers
Just for the ERP implementation team
Slows down the organization
Just to impress customers
Take care of everything
Very expensive

EVOLUTION OF ERP

MATERIAL REQUIREMENTS PLANNING (MRP)

An outgrowth of Bill of Materials processing.

MRP asks the following questions:

What products are we going to make?

What are the materials needed to make these products?
What are the materials that are presently available in stock?
What are the items that need to be purchased?

MRP solved the great manufacturing & production problems &

made manufacturing of goods easier

CLOSED LOOP MRP

MRP evolved into something more than merely a better way

to order

MRP system maintained the order due dates, detect & warn
when an item did not arrive on the due date

Tools were developed to support the planning of sales &

production levels, development of production schedules,
forecasting, sales planning, order-processing

MANUFACTURING RESOURCE PLANNING (MRP II)

Next logical step of closed loop MRP

Additional capabilities incorporated Sales & operational planning,

financial interface, demand management, and simulation capabilities
(for better decision making)

MRP-II is a method for effective planning of all the resources of a

manufacturing company

MRP-II has a simulation capability to answer what if questions.

Output from the system is integrated with financial reports, such as

business plan, shipping budget, purchase commitment report

ENTERPRISE RESOURCE PLANNING

The fundamentals of ERP are the same as that of MRP II.

ERP is broader in scope, capable of dealing with more business

functions, & has a better & tighter integration with the finance
& accounting functions.

ERP coordinates sales, marketing, operations, logistics,

purchasing, finance, product development and human resources

Capable of integrating with other tools like CRM, SCM, thereby

supporting business across company boundaries

Timeline
1960s

1970s

1980s

1990s

System
Inventory Management & Control

Description
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
Material Requirement Planning
Materials Requirement Planning (MRP)
(MRP)
utilizes software applications for
scheduling production processes. MRP
generates schedules for the operations
and raw material purchases based on
the production requirements of finished
goods, the structure of the production
system, the current inventories levels
and the lot sizing procedure for each
operation.
Manufacturing Requirements
Manufacturing Requirements Planning
Planning (MRP II)
or MRP utilizes software applications for
coordinating manufacturing processes,
from product planning, parts
purchasing, inventory control to product
distribution.
Enterprise Resource Planning (ERP) Enterprise Resource Planning or ERP
uses multi-module application software
for improving the performance of the
internal business processes. ERP
systems often integrates business
activities across functional departments,
from product planning, parts
purchasing, inventory control, product
distribution, fulfillment, to order
tracking. ERP software systems may
include application modules for
supporting marketing, finance,

DATA INETGRATION & INTERFACE

INTEGRATION : A popular computer buzzword that refers to

two or more components merged together into a single system.

A fully integrated system means that the products are one.

This happens when two or more products work closely

together to combine different functionalities into one product.

DATA INETGRATION & INTERFACE

INTERFACE :A boundary across which two independent systems meet and

act on or communicate with each other. Also known as a bridge
To connect with or interact with by means of an interface.
In computer technology, there are several types of interfaces.

USER INTERFACE - the keyboard, mouse, menus of a computer system.

The user interface allows the user to communicate with the operating system.

SOFTWARE INTERFACE - the languages and codes that the applications

use to communicate with each other and with the hardware.

HARDWARE INTERFACE - the wires, plugs and sockets that hardware

devices use to communicate with each other.

NEED FOR DATA INTEGRATION

Data integration means combining information from various sources into

something useful. Its about efficiently managing data and making it available to
those who need it.

Both a technical and a business process, IBM defines it as discovery, cleansing,

monitoring, transforming and delivery of data from a variety of sources.
REASONS WHY INTEGRATING DATA IS ESSENTIAL

EVERY DATA TYPE HAS ITS STRENGTHS :

Every data format was designed for a reason. Each one represents information in a way
no other format can, with unique attributes, metadata, structure, and schema. Integrating
data from different formats adds various levels of specialty to the dataset.

For instance, CAD and GIS data can be integrated to enhance a CAD drawing with
specialized GIS information and attributes.

NEED FOR DATA INTEGRATION, contd.......

TAKE ADVANTAGE OF SPECIALIZED APPLICATIONS

Every piece of software that works with data represents, analyzes, and transforms
information in a specialized way. By integrating data into a format accepted by
that application, youre giving yourself the power to open and use your data in
that software.
REDUCE DATA COMPLEXITY
The number of potential interfaces between applications in an organization is an
exponential function of the number of applications. Thus, an organization with
one thousand applications could have as many as half a million interfaces
Thrashing around in that web of connections will only get you tangled. Forming a
data integration plan, on the other hand, is like entering that web with a machete.
Data integration is about managing complexity, streamlining these connections,
and making it easy to deliver data to any system.

NEED FOR DATA INTEGRATION, contd.......

INCREASE THE VALUE OF DATA THROUGH UNIFIED SYSTEMS

Bringing disparate datasets together increases the value of the information

Examples include:
Integrating various spatial, non-spatial, and web-based sources.

Merging with and leveraging external data (e.g. from vendors);

Combining data of varying natures (structured, unstructured, spatial, tabular,

web, raster, big data, etc.);

Applying spatial information to non-spatial data;

Combining databases from different repositories

NEED FOR DATA INTEGRATION, contd.......

MAKE DATA MORE AVAILABLE

Centralizing your data makes it easy for anyone at your company (or outside of
your company, depending on your goals) to retrieve, inspect, and analyze it.
Easily accessible data means easily transformed data. People will be more
likely to integrate the data into their projects, share the results, and keep the
data up to date.
This cycle of available data is key for innovation and knowledge-sharing.

UNDERSTANDING DATA MEANS SMARTER BUSINESS DECISIONS

Integrated data means transparent processes within your company. By giving
people the flexibility to use your data in whatever system, youre giving them
the opportunity to better understand the information. Its much easier and
more informative to navigate through organized repositories that contain a
variety of integrated datasets.

NEED FOR DATA INTEGRATION, contd.......

DATA INTEGRITY

Data integration technology should cleanse and validate the information

passing through.
we all want our data to be robust and high quality. An integration strategy
ensures data is free of errors, inconsistencies, and duplication.
MAKE YOUR DATA LIVE
An integrated data solution makes it easy to keep information up to date. One
input can propagate across all integrated systems, keeping your data current.

ERP SYSTEMS DATA INTEGRATION

DATA INTEGRATION FOR MANUFACTURING COMPANIES

THE PHYSICAL
FLOW
Sales Transactions

THE
ADMINISTRATIVE
FLOW

Data in inventory &

financial records

Before the implementation of an ERP system

After the implementation of an ERP system

ERP SYSTEMS DATA INTEGRATION, contd...

During 1980s ERP expanded over the full value chain including all secondary
processes of manufacturing companies. Important steps were set to enable integration
of the various secondary processes. Example(s);
HUMAN RESOURCE MANAGEMENT WITH FINANCE
HUMAN RESOURCE MANAGEMENT WITH MANUFACTURING
TECHNOLOGY MAINTENANCE WITH PRIMARY PROCESSES
PROCUREMENT WITH FINANCE

Financial service providers have different value chains . An insurer can be

modelled as a company with two types of primary processes: Policy Processing &
Claims Processing. ERP can realise data integration between these two primary
processes and the financial records

EARLY ERP PACKAGES (DEVELOPERS)

Relied upon by more than 90 percent of Fortune 100 companies, enterprise
resource planning (ERP) systems integrate accounting, human resources
distribution, manufacturing, and other back-end process-esthose that do not
directly involve customersfor businesses of all sizes. In recent years, they have
also evolved to include front-end processesthose that involve customerssuch
as customer relationship management (CRM), supply chain management, and ecommerce. In the early 1990s, most major corporations began upgrading their
mainframe systems with the new client/server-based ERP systems developed by
industry leaders like SAP AG, People-Soft Inc., and J.D. Edwards & Co.

In the early 1990s, most major corporations began upgrading their mainframe
systems with the new client/server-based ERP systems developed by industry
leaders like SAP AG, People-Soft Inc., and J.D. Edwards & Co. As the World Wide
Web began to replace client/server platforms later in the decade, ERP firms began
working to enable their technology to operate via the Web.

EARLY ERP PACKAGES,CONTD....

SAP AG

The world's largest provider of ERP software, Germany's SAP AG, was
founded in 1972 by five German engineers working for a branch of
IBM.

SAP's first project was to develop integrated enterprise software

applications that could run on a mainframe; the five engineers had been
working on a similar project for IBM, and when IBM moved the
enterprise software project to a different unit, the partners decided to
form their own company and continue working on the software.

Originally, SAP was an acronym for systems analysis and program

development; however, the wording was later changed to systems,
applications, and products in data processing.

EARLY ERP PACKAGES, CONTD....

PEOPLESOFT,

INC.

One

of SAP's first true rivals in the ERP market emerged in 1987, when software developers
Dave Duffield and Ken Morris left their posts at Integral Corp. to establish PeopleSoft, a maker
of human resources software that could run on the increasingly popular client/server computer
systems.

The

following year, the company introduced People-Soft HRMS, the market's first viable human
resources software application for a client/server platform. Eastman Kodak became the first large
client to purchase HRMS. Sales in 1989 reached $1.9 million

The

firm also began selling its products in France, England, and South America. Earnings grew
nearly twofold, to $8.4 million, on $320 million in revenues. In 1994, the firm launched
PeopleSoft Distribution and PeopleSoft Financials products.

In

1996, PeopleSoft began to compete directly with SAP when it acquired Red Pepper Software
Co., a maker of ERP software, which it folded into its new PeopleSoft Manufacturing unit.

EARLY ERP PACKAGES, CONTD....

J.D.

EDWARDS & CO.

An ERP systems provider targeting smaller clients than SAP and PeopleSoft, Denver, Coloradobased J.D. Edwards was founded in 1977 by Jack Thompson, Dan Gregory, and Edward McVaney.
Originally a designer of software for small and mid-sized computers, J.D. Edwards evolved into a
developer of ERP systems after it began focusing its efforts on software for IBM's System/38 machine
in
the
early
1980s.

The firm's flagship ERP product, World Software, eventually ran on IBM's AS/400
computer. The application was designed to integrate the back-end functions, including
accounting and manufacturing, of businesses with $50 million to $1 billion in sales.
In 1996, after recognizing that its software's dependency on a single platform was limiting
its reach, J.D. Edwards released One World, a client-server-based suite of applications that
could run on a variety of platforms, such as Unix and Windows NT. The firm completed its
initial public offering (IPO) the following year. By then, customers exceeded 4,000.

EARLY ERP PACKAGES

SAP AG ERP product, R/2, was launched in 1979

Redesigned as client/server software R/3 in 1992
System R/3 was a breakthrough and by 1999 SAP AG
became the third largest software vendor in the world and
the largest in the ERP sector with a market share of about
36% serving over 17,000 customers in over 100 countries.
SAP has also invested significantly in its R&D sector with
the result of newer versions of R/3 3.1, 4.0, 4.6 including
Internet functionalities and other enhancements.
SAPs Internet-enabled ERP solutions are provided by the
recently launched ERP product called mySAP.COM.

PeopleSoft Inc.Flagship Product PeopleSoft8

PeopleSoft is one of the newest ERP software firms started in 1987 in Pleasanton,
California, with specialization in human resource management and financial services
modules.

PeopleSoft version 1, released in the late 1980s

Enterprise solutions from PeopleSoft include modules for manufacturing, materials

management, distribution, finance, human resources and supply chain planning.

The flagship application PeopleSoft8 (2000) with scores of applications was

developed by PeopleSoft with an expenditure of $500 million and 2,000 developers
over 2 years

PeopleSoft with about 10% market share, is the third largest ERP vendor after SAP
AG and Oracle.

The Baan CompanyFlagship Product BaanERP

Founded in 1978 in The Netherlands, Baan started with expertise in

software for the manufacturing industry and by 1997 claimed an ERP
market share of roughly 5%.

ERP solution areas that Baan covers include finance, procurement,

manufacturing, distribution, integration and implementation, planning,
sales, service and maintenance, business portals, collaborative commerce
and business intelligence.

Banns flagship product is BaanERP (formerly called Triton, then Baan

IV), launched in 1998.

Baans ERP software is best known in the aerospace, automotive,

defence, and electronics industries.

J.D. Edwards & Co.Flagship Product OneWorld

J.D. Edwards flagship ERP product called OneWorld (late

1996) is capable of running on multiple platforms and with
multiple databases

The product includes modules for finance, manufacturing,

distribution/logistics and human resources, quality
management, maintenance management, data warehousing,
customer support and after-sales service.

J.D. Edwards Internet-extended version of OneWorld was

launched recently (2001) as One World Xe (Xe stands for
extended enterprise).

MARKET OPPORTUNITIES & TRENDS

One

Size does not fit all

Customized
One

products to survive

stop application to the organization

MARKET OPPORTUNITIES & TRENDS, contd....

NEW MARKETS

Vendors are being forced to find new markets for their product in order to
continue to drive their growth. They are pressurized to increase their
appeal to small business clients through a number of initiatives such as ;

Supplementing their direct sales force with re-seller channels

Lowering the entry price point

Improving the implementation methodologies for faster deployment

MARKET OPPORTUNITIES & TRENDS, contd....

NEW CHANNELS

Vendors such as SAP AG, ORACLE CORPORATION, etc

have been building re-seller channels to reach the smaller
business that are looking for a complete one-stop shopping for
their ERP Solution.

The ERP software is made more financially attractive by

lowering the entry price point for each module and ramping up
the total costs by pricing based on user licenses

MARKET OPPORTUNITIES & TRENDS, contd....

FASTER IMPLEMENTATION METHODOLOGIES

Implementing the ERP package is difficult

ERP system consists of dozens of modules that are deployed on a

multinational basis to service hundreds of users from many
different business departments.

Complete change of IS infrastructure

ERP Vendors Focus on making the implementation process easier

MARKET OPPORTUNITIES & TRENDS, contd....

EASIER CUSTOMIZATION TOOLS

Customization is one of the hidden costs of any ERP

implementation

Consulting firms charge huge sums

To lower the customization costs, most ERP Vendors offer

customization tool kits along with their products

MARKET OPPORTUNITIES & TRENDS, contd....

NEW BUSINESS SEGMENTS

ERP vendors are now capable of delivering specialised

variants of their applications to service vertical markets such
as government, healthcare, financial, retail etc.

Some vendors are moving into more specialised areas such as

supply chain management, demand forecasting, or sales
automation & marketing.

MARKET OPPORTUNITIES & TRENDS, contd....

NEED BASED APPLICATIONS

ERP vendors offer need based applications, even if these

programs are not available.

Liberty to purchase & install software programs pertaining to

one particular function.

Increase the scope of ERP Large firms, small and medium

business

MARKET OPPORTUNITIES & TRENDS, contd....

REDUCTION IN IMPLEMENTATION TIME

Companies discouraged ERP because it took such a long time

to install them & set the whole process into action

Current day ERP applications are less complex to install &

train.

MARKET OPPORTUNITIES & TRENDS, contd....

OPEN SOURCE, WEB-ENABLED & WIRELESS TECHNOLOGIES

Three important elements have rejuvenated the functioning of ERP

OPEN SOURCE
No hassles of paying license fees not only during installation but also whenever a
modification is made.

WEB ENABLED ERP

Helps an organization to go online , details can be sourced immediately anytime ,
anywhere

WIRELESS ERP
Sharing enterprise information through the internet and other devices making it possible
for outsiders to access the same

MARKET OPPORTUNITIES & TRENDS, contd....

ENTERPRISE APPLICATION INTEGRATION

ERP vendors are offering applications such as SCM, CRM,

BI, analysis and reporting as part of their offerings.

If not part of the ERP software, then features and capabilities

to integrate these applications seamlessly with the ERP
software are provided.

Improving decision support the focus of all the ERP vendors

ERP PACKAGE SELECTION

More than hundred ERP packages are available in different

sizes, with different features & for different pockets.

Selecting the right ERP package can be a make or break for

success of ERP project. No package will meet a particular
companys 100% need as these packages were not created
particularly for this company but for a wide variety of
companies.

The idea of selection is to find a good fit with the

companys business requirement & can support the
companys long term goals

SELECTION WHO WILL DO

A company's small team comprising of different department

heads & companys top management (CIO or CFO), is a part
of the selection committee.

The selection committee also has few consultants who know

the leading packages well.

The selection committee defines the selection process,

selection criteria, attends all presentations by the vendor,
makes a comparative analysis of different ERP vendors &
finally selects the ERP package

DEAL WITH ERP VENDORS???

It is important to do a good preparation & keep a game plan

ready before attending such presentations.

Have your list of requirements ready

Ask the vendor to give a demo & run some of your critical
business scenarios in their ERP system

Ask for reference sites

Ask the vendor how different are their ERP packages from that
of other ERP vendors?

ERP SELECTION A TWO STEP PROCESS

1. SCREENING

Evaluation process can start with large number of packages (for e.g 5)
& based on a set of criteria few of them are shortlisted (for e.g 2).
2. CONTRACT WITH VENDOR
Shortlisted packages are compared against the list of the requirements
of the company. After the detailed evaluation of the shortlisted
packages, one package is selected and the company enters into
contract with the vendor

ERP PACKAGE SELECTION PROCESS

HAVING ERP SELECTION TEAM IN PLACE

DECIDING SELECTION CRITERIA & WEIGHTS FOR

EACH CRITERIA

SCREENING THE INITIAL LIST OF VENDORS

& SHORTLISTING A FEW

MAKING A DETAILED & FINAL EVALUATION OF

SHORTLISTED VENDORS

FINALISING THE ERP VENDOR & ENTERING INTO

CRITERIA FOR INTIAL PACKAGE SCREENING

FINANCIAL
VIABILITY

CUSTOME
R
SERVICE/
SUPPORT

ERP
SOFTWAR
E COST

TECHNOLO
GY
MATURITY

PRODUCT
STRATEGY,
VISION,IN
NOVATION

FUNCTIONALITY FIT

CONSULTIN
G
PARTNERSH
IP

INDUSTRY
EXPERIENCE

LOCAL
PRESENCE

INTEGRATION WITH 3RD

PARTY APPLICATIONS

ERP PACKAGE SELECTION PROCESS

INTIAL PACKAGE SHORTLISTING
Wieghtage & criteria for short listing packages are done .

Based on the total Wieghtage, top ranking packages are shortlisted &
are taken for the next level of evaluation

FINAL PACKAGE SELECTION

The top three packages shortlisted earlier are taken up for a detailed
functionality evaluation against the business requirements of the
company.

Against the functional requirements as mentioned in RFP, different

package vendors indicate whether the application can straight away
meet the requirements, or can be met in an alternate way or whether the
requirement can not be met at all.

RFP PROCESS FOR PACKAGE SELECTION

RFP Request for proposal process for selecting an ERP package is quite common for large projects
& mandatory for all government organizations who intend to go for ERP

DIFFERENT SECTIONS OF A RFP DOCUMENT

How and when the proposal /bid need to be submitted.
Overview of companys business, current operations, locations from where it operates etc.
Current IT systems (legacy systems) the company is using & which of them need interface with ERP
systems
Scope of the project
Benefits the company is expecting from the implementation
The details of the payment schedule
Bids are first evaluated technically & then financially . The first bidders are awarded the contract

FINALISING THE CONTRACT

The final step in the ERP package selection process is completing the contract formalities with the ERP vendor.
Contract is a legal obligation for both the parties
STANDARD PACKAGE VENDOR CONTRACT CLAUSES

Payment term
Intellectual property or copyright clauses
List of deliverables along with software
How training for the software will be handled
How the software maintenance will be handled, what will be included in the maintenance, different support
mode onsite, telephonic, etc, yearly maintenance costs
How future upgrades for the software will be provided & at what cost
Software installation help to be provided
Prerequisite to install the software- the hardware specification, operating system needed, database needed etc,.
Licence cancellation costs

CONSULTANT - SELECTION
Selecting the right consulting partner is another
important decision for ERP implementation.
Consulting partners can be selected for different
phases of the project
It is common to break a large implementation project
among several consulting companies, the main reason
is to bring down the overall implementation cost .
Most of the consulting service providers use an onsiteoffshore model

PARTNER SELECTION - FACTORS

PROCESS
CONSULTING
EXPERIENCE

CLIENT
REFERENC
ES

END-TOEND
SERVICE

INDUSTRY
EXPERIEN
CE

QUALITY
OF
PROJECT
MANAGE
MENT

GLOBAL PRESENCE

CLIENT
SATISFACTI
ON

PRICE &
VALUE FOR
MONEY

REPUTATI
ON

QUALITY OF TOOLS &

METHODOLOGY

RFP METHOD FOR CONSULTANT SELECTION

RFP Request for proposal process for selecting an ERP package is quite common for large projects & mandatory
for all government organizations who intend to go for ERP

DIFFERENT SECTIONS OF A RFP DOCUMENT

How and when the proposal /bid need to be submitted.
Overview of companys business, current operations, locations from where it operates etc.
Current IT systems (legacy systems) the company is using & which of them need interface with ERP systems
Scope of the project
Benefits the company is expecting from the implementation
High level project duration that the company is looking for the implementation
The details of the payment schedule
Confidential information
Bids are first evaluated technically & then financially . The best bidders are awarded the contract