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ERP (Enterprise Resource Planning


Today's Topic ‡Introduction of Teacher ‡Introduction of Class ‡Course Outline ‡Method of Teaching

Introduction of Teacher
‡ Name: Sohaib Jamal ‡ Qualification: ACMA, ACA (Finalist), CIMA-England (Finalist) ‡ ERP Consultant ‡ 5 years working experience ‡ 2 Implementation of Oracle Financial ‡ Currently working on ERP software

Introduction of Students
‡ Name of the Student ‡ Any knowledge of ERP ? ‡ If yes, of which ERP

Course Outline
‡ About ERP ‡ ERP Application

About ERP ‡ What is ERP? ‡ How ERP Evolved ‡ Principal ERP Vendors ‡ Advantages and Disadvantages of ERP ‡ ERP Systems -- Implementation ‡ Critical Success Factors for Implementation ‡ ERP Systems - The Future ‡ Core Sub System of ERP ‡ ERP and BPR ‡ Example of an ERP System

Enterprise Resource Planning (ERP) ‡ packaged business software systems that allow companies to: ‡ automate and integrate the majority of their business processes ‡ share common data and practices across the entire enterprise ‡ produce and access information in real-time environment ERP is a Software solution that addresses the enterprise needs taking the process view of organization to meet the organizational goals tightly integrating all functions of an enterprise

What is ERP?
ERP (Enterprise Resource Planning) is an industry term for the broad set of activities supported by multi-module application software that help a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business. Typically, an ERP system uses or is integrated with a relational database system. The deployment of an ERP system can involve considerable business process analysis, employee retraining, and new work procedures. Studies show that 70% of Fortune 1000 firms have or will soon install ERP systems, which will boost the global ERP market from $15 billion now to $50 billion over the next five years. ERP applications make up the largest portion of Information Technology budgets. 39% of large companies and 60% of smaller companies are deploying ERP systems. The expected annual growth rate for the ERP market over the next 5 years is 37%. With the power ERP has over business, it is important to see who the key vendors of ERP software are.

How ERP Evolved
The focus of manufacturing systems in the 1960's was on Inventory control. Most of the software packages then were designed to handle inventory based on traditional inventory concepts. In the 1970's the focus shifted to MRP (Material Requirement Planning) systems, which translated the Master Schedule, built for the end items into time-phased net requirements for the sub-assemblies, components and raw materials planning and procurement. In the 1980's the concept of MRP-II (Manufacturing Resources Planning) evolved which was an extension of MRP to shop floor and Distribution management activities. In the early1990's, MRP-II was further extended to cover areas like Engineering, Finance, Human Resources, Projects Management etc i.e. the complete gamut of activities within any business enterprise. Hence, the term ERP (Enterprise Resource Planning) was coined. In addition to system requirements, ERP addresses technology aspects like client/server distributed architecture, RDBMS, object oriented programming etc . ERP Systems - Bandwidth ERP solutions address broad areas within any business like Manufacturing, Distribution, Finance, Project Management, Service and Maintenance, Transportation etc. A seamless integration is essential to provide visibility and consistency across the enterprise.

Principal ERP Vendors
‡SAP - R2 System - R3 System Baan Oracle Peoplesoft SAP, the forerunner of ERP, founded in 1972 by 5 former IBM engineers, is the biggest of the group. SAP¶s software is R/3 and is designed to help organize manufacturing processes and accounting. SAP also offer modules for logistics and human resources. Recently, SAP has expanded its product line by including supply chain management, sales-force automation and data warehousing software. PeopleSoft is the number two ERP vendor. PeopleSoft made its mark with human resource software. The company currently targets the service sector with products designed to help companies handle their intangible costs. SAP and PeopleSoft have seen continued success due to the fact that they offer added features to existing customers as well consistently attracting large, brand name customers.

Principal ERP Vendors (Contd..)
The other players in the ERP vendor market are Oracle, Baan and J. D. Edwards. Oracle has been selling ERP applications designed to work with its databases since 1987. Oracle sells most of its applications to manufactures and consumer goods companies, making them a direct competitor with SAP. Baan is a 19-year old Dutch company and sells manufacturing software to companies wary of SAP. They have recently, like some of the other large vendors, stocked up on small software suppliers, which has resulted in a wider variety of product offerings. The last of the major vendors is J. D. Edwards. Although they have been selling software for decades, they just went public one year ago. Since they launched their product, One World open-systems ERP package, they have become a viable contender for a slot among the other big 4 vendors. These companies make up the majority of the $7 billion, ERP software industry. ERP refers to enterprise-wide systems that knit together the operations of whole companies. Generally speaking, they encompass a range of applications that permit corporations to manage critical business functions. A major corporation might spend $30 million over several years for a gigantic system that permits managers to monitor inventory levels, customer service, operating/financial data, and human resources.

Advantages of ERP
The benefits accruing to any business enterprise on account of implementing are unlimited. According to the companies like NIKE, DHL, Tektronix, Fujitsu, Millipore, Sun Microsystems, following are some of the benefits they achieved by implementing ERP packages: ‡Accounts Payable personnel increased control of invoicing and payment processing and thereby boosting their productivity and eliminating their reliance on computer personnel for these operations. yReduce paper documents by providing on-line formats for quickly entering and retrieving information. yImproves timeliness of information by permitting, posting daily instead of monthly. yGreater accuracy of information with detailed content, better presentation, fully satisfactory for the Auditors. yImproved Cost Control yFaster response and follow up on customers yMore efficient cash collection, say, material reduction in delay in payments by customers. yBetter monitoring and quicker resolution of queries. yEnables quick response to change in business operations and market conditions. yHelps to achieve competitive advantage by improving its business process. yImproves supply-demand linkage with remote locations and branches in different countries. yProvides a unified customer database usable by all applications. yImproves information access and management throughout the enterprise. yIncorporates improved, redesigned best processes yHelps integrate multiple sites and business units

Disadvantages of ERP
‡ is very expensive to purchase, and even more costly to customize ‡ requires major changes in the company and its processes to implement ‡ is such a complex program that many companies cannot adjust to it ‡ involves an ongoing process for implementation, which is often never completed ‡ expertise in ERP is limited, with staffing an ongoing problem

ERP Systems -- Implementation
The success of an ERP solution depends on how quick the benefits can be reaped from it. This necessitates rapid implementations which lead to shortened ROI periods. Traditional approach to implementation has been to carry out a Business Process Re-engineering exercise and define a ``TO BE'' model before the ERP system implementation. This led to mismatches between the proposed model and the ERP functionality, the consequence of which was customizations, extended implementation time frames, higher costs and loss of user confidence. When a company determines that it would benefit from establishing an ERP system, most enter the process without first planning the implementation of the new system, or even determining if what they intend to implement will add value where value is needed most. The first step in ensuring a good fit between the organization and the new information technology that will be used, is for managers to ask and find concise answers as to the nature of the type of information technology being used in their industry. For example, ‡ What type of strategies are being used by industry leaders to increase value? What type of information systems are being used and how? ‡ What type of changes to the industry are being predicted, and how are firms already successfully managing information technology pertaining for these upcoming changes? ‡ What are the strategic opportunities to be gained by introducing an ERP system and are these opportunities applicable to the organization in question? ‡ Will new systems need to be developed to meet the needs of the industry or are current software applications adequate?

ERP Systems -- Implementation (Contd«)
With the completion of these questions pertaining to the use of ERP systems in the industry, the organization will have an empirical knowledge of what types of systems are the most beneficial to the organization¶s industry. The BAAN approach is to conduct a concurrent Business Process Re-engineering during the ERP implementation and aim to shorten the total implementation time frame. Two scenario's can be distinguished: Firstly, comprehensive Implementation Scenario: Here the focus is more on business improvement than on technical improvement during the implementation. This approach is suitable when: Improvements in business processes are required. Customizations are necessary Different alternative strategies need to be evaluated High level of integration with other systems are required Multiple Sites have to be implemented. Secondly, compact Implementation Scenario: Here the focus is on technical migration during the implementation with enhanced business improvements coming at a later stage. This approach is suitable when; Improvements in business processes are not required immediately Change-minded organization with firm decision making process Company operating according to common business practices. Single site has to be implemented. The worldwide ERP (Enterprise Resource Planning) consulting and integration services market is expected to expand at a compound annual growth rate (CAGR) of 17%, while the client/server segment will exceed a CAGR of 25% over the next 5 years. IDC estimates that the U.S. ERP education and training services market was $770 million in 1997 and will exceed 30% growth over the next 5 years. ERP application suites are popular in businesses for offering an integrated view and reporting of information from all areas of an enterprise. These applications also reduce costs, improve business processes as well as replace legacy, non-year-2000-com pliant custom applications. Training must be conducted as an integral part of the ERP project, and the earlier the knowledge transfer occurs in the implementation process, the better the chances for successful ERP adoption.

Critical Success Factors for Implementation
An organization decides to take the plunge into the ERP route. A lot has been said about the competitive advantage provided by ERP. The particular software, say, SAP R/3 is being touted as the "best of the breed". The consultants, probably from the "big five" will be hired to bring the "best practices" in the industry. The air is thick with excitement. Right from the top man or woman all the way up to the field worker is awaiting with bated breath the arrival of the "black magic" called ERP. First and foremost is the top management commitment. The large investments needed to implement ERP ensure that the decisions are invariably taken at the top management level. It is fortunate, but not sufficient. This ensures top management involvement, but it is not tantamount to top management commitment. Here is an example. To be successful, the ERP team must consist of your "best" people, not those that "can be spared" during the project team. Unlike top management takes a conscious decision to take out the "best" people for an extended period of time (several months) at the cost of "losing the best people" during implementation, ERP has little chance of success. The management commitment involves the management of change. ERP is likely to turn the organization "upside down" unleashing lots of energy from vested interests. Unless top management is involved directly, it is impossible for any line manager to face the opposition to such changes. Another real test of top management commitment is the resistance to over-customization. It is better to follow the "standard" way and concentrate on "innovative" ways of doing "better business ".

ERP Systems - The Future
The Internet represents the next major technology enabler, which allows rapid supply chain management between multiple operations and trading partners. Most ERP systems are enhancing their products to become "Internet Enabled'' so that customers worldwide can have direct to the supplier's ERP system. ERP systems are building in the Workflow Management functionally which provides a mechanism to manage and control the flow of work by monitoring logistic aspects like workload, capacity, throughout times, work queue lengths and processing times. Recognizing the need to go beyond the MRP-II and ERP vendors are busy adding to their product portfolio. BAAN for example has already introduced concepts like IRP (Intelligence Resource Planning), MRP-III (Money Resources Planning).

Core Sub System of ERP ‡Sales and Marketing ‡Master Scheduling ‡Material Requirement Planning ‡Bill of Materials ‡Purchasing ‡Shop Floor Control ‡Accounts Payable / Receivable ‡Logistics

‡ in-depth business process re-engineering (BPR) study to be done before taking up ERP ‡ BPR brings out deficiencies of the existing system ‡ BPR attempts to maximize productivity through re-structuring and re-organizing the human resource as well as the divisions and departments in the organization

Example of an ERP System
Finance & Accounts

Production & Material Management

Centralized ERP Database Software & Servers


Human Resource

ERP Application
Oracle Application
Front Office Financial Human Resource Supply Chain Manufacturing

General Ledger Assets Payable Receivable

Detail Course will be Taught Overview Overview Overview

Detail Course Outline of General Ledger ‡Introduction ‡Set of Books ‡Creating Chart of Account ‡Creating Set of Books ‡Journals ‡Creating Basic Journals ‡Creating Recurring and Formula Journals ‡Budgeting ‡Creating Budget ‡Entering Budget Amount ‡Reviewing and Updating Budget ‡Advance Account Structure and Control ‡Using Balance Account ‡Setting up Financial Controls ‡Reports and Analysis Tools ‡Running Standard Report ‡Creating Basic FSG ‡Creating Optional FSG

Detail Course Outline of General Ledger (Contd..) ‡Accounting for Foreign and Multiple Currencies ‡Creating Foreign Currency Journals ‡Reporting in Multiple Currencies ‡Multiple Company Accounting ‡CENTRA ‡Assignments Overview of Assets Overview of Accounts Receivable Overview of Accounts Payable

Teaching Method
‡ Class sessions ‡ Class Quizzes ‡ Monthly Test (3) ‡ Final Test (1)