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3/7/2012
ERP : An Overview
By:-
Ankit Mahindroo
(Lecturer)
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CONTENTS
3/7/2012
What is ERP?
Evolution of ERP
Components of ERP
Information Integration through ERP systems
Core ERP Components
Extended ERP Components
Reasons for growth of ERP Market
Advantages / Disadvantages of ERP
Why ERP over conventional apps?
ERP Implementation : Problem areas
Roadmap for successful ERP implementation
Feedback??
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WHAT IS ERP?
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y ERP integrates all departments and functions
throughout an organization into a single IT system (or
integrated set of IT systems) so that employees can
make enterprise wide decisions by viewing enterprise
wide information on all business operations.
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EVOLUTION OF ERP
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Types of Systems Time Purpose Systems
Reorder point systems 1960s Used historical data to forecast futureinventory demand; when an item falls
below a predetermined level additionalinventory is ordered.
Designed to manage high volumeproduction of a few products, with
constant demand; focus on cost.
Materials requirementplanning (MRP) systems
1970s Offered a demand-based approach forplanning manufacture of products andordering inventory.
Focused on marketing; emphasison grater production integrationand planning.
Manufacturing resourceplanning (MRP-II) systems
1980 Added capacity planning; couldschedule and monitor the execution ofproduction plans
Focus on quality; manufacturingstrategy focused on processcontrol, reduced overhead costsand detailed cost reporting.
MRP-II with manufacturingexecution (MES)systems
1990s Provide ability to adapt productionschedules to meet customers needs;provide additional feedback with respect
to shop floor activities.
Focus on the ability to create andadapt new pre-cuts and serviceson a timely basis to meet
customers specific needs
ERP(Enterprise Re-source
Planning Systems)
Late1990andonward
Integrate manufacturing with supply
chain processes across the firm;designed to integrate the firmsbusiness processes to create aseamless information flow fromsuppliers, through manufacturing todistribution to the customer.
Integrates supplier manufacturing
and customer data throughout thesup-ply chain.
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COMPONENTS OF ERP
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y Core ERP c omponent traditional components
included in most ERP systems and they primarily
focus on internal operations
y ExtendedERP component extra components that
meet the organizational needs not covered by the
core components and primarily focus on external
operations
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COMPONENTS OF ERP
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INFORMATION INTEGRATION THROUGH ERP SYSTEMS3/7/2012
Strategic & OperationalPlanning
Finance
Human Resources
Logistics Management
Maintenance Management
Sales & Distribution
Quality Management
Materials Management
Manufacturing
ERP
System
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CORE ERP COMPONENTS
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Three most common core ERP components
1. Accounting and finance
2. Production and materials management
3. Human resource
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Accounting and Finance ERP Components
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y Accounting and finance ERPcomponent
manages accounting data and financial
processes within the enterprise with functions
such as Journal ledger, accounts payable,
accounts receivable, budgeting, and asset
management
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Production and Materials
Management ERP ComponentsProduction and
materials management
ERPcomponent
handles the variousaspects of production
planning and execution
such as demand
forecasting, production
scheduling, job cost
accounting, and quality
control
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EXTENDED ERP COMPONENTS
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y Extended ERP components include:
yBusiness intelligence
yCustomer relationship management
ySupply chain management
yE-business
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BUSINESS INTELLIGENCE
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Business intelligence (BI) refers to skills,
technologies, applications and practices used to
help a business acquire a better understanding of
its commercial context.
BI applications include the activities of
decision support systems,
query and reporting,
online analytical processing (OLAP),
Forecasting
Data Mining
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CUSTOMER RELATIONSHIP MANAGEMENT
3/7/2012
y CRM consists of the processes a company uses to
track and organize its contacts with its current and
prospective customers.
y CRM software is used to support these processesy Typical CRM goals are:-
y to improve services provided to customers, and
y to use customer contact information for targeted
marketing.
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SUPPY CHAIN MANAGEMENT
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y SCM is the management of a network of
interconnected businesses involved in the ultimate
provision of product and service packages required by
end customers.
y It involves :-
y all movement and storage of raw materials,
y work-in-process inventory, and
y finished goods from point of origin to point of
consumption (supply chain).
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e-BUSINESS
3/7/2012
y E-business (electronic business), derived from such
terms as "e-mail" and "e-commerce," is the conduct of
business on the Internet, not only buying and selling
but also servicing customers and collaborating with
business partners.y Companies are using the Web to :-
y buy parts and supplies from other companies,
y to collaborate on sales promotions
y and to do joint research.
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REASONS FOR GROWTH OF ERP MARKET
3/7/2012
y To enable improved business performancey Cycle time reduction
y Increased business utility
y Inventory reduction
y
Order fulfillment improvementy To support business growth requirements
y New products/product lines, new customers
y Global requirements including multiple languages and
currencies
y To provide flexible, integrated, real-time decisionsupport
y Improve responsiveness across the organization
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REASONS FOR GROWTH OF ERP MARKET
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y To eliminate limitation in legacy systemsy Century dating issues
y Fragmenting of data and processing
y Inflexibility to change
y
Insupportable technologiesy To take advantage of the untapped mid-market
y Increased functionality at a reasonable cost
y Client server/open systems technology
y Vertical market solutions
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ADVANTAGES OF ERP
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BUSINESSINTEGRATION Automatic data updating is possible among related
business related components.
Communication and integration of information is strong
hence no obstacle in introducing new products or shifting to
new business classification.
FLEXIBILITY Different languages, currencies, accounting standards and
so on can be covered in one system.
Also helps to cope with company globalization and system
unification.
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ADVANTAGES OF ERP
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y BETTER ANALYSIS AND PLANNING CAPABILITIES
y It becomes possible to fully utilise decision support systems and
simulation functions due to comprehensive data integration.
y USE OFLATESTTECHNOLOGY
y Utilisation of the latest developments in Information Technology (IT)
enables ERP vendors to grow and also sustain the growth.
y Latest technologies include open systems, client/server technology,
Internet/Intranet, CALS (Computer-Aided Acquisition and Logistics
Support), electronic-commerce etc.
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ADVANTAGES OF ERP
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What benefit How
Reliable information access Common DBMS, consistent and accuratedata, improved reports.
Avoid data and operations redundancy Modules access same data from the centraldatabase, avoids multiple data input andupdate operations.
Delivery and cycle time reduction Minimizes retrieving and reporting delays
Cost reduction Time savings, improved control byenterprise-wide analysis of organizationaldecisions.
Easy adaptability Changes in business processes easy to
adapt and restructure.
Improved scalability Structured and modular design with add-ons.
Improved maintenance Vendor-supported long-term contract aspart of the system procurement.
Global outreach Extended modules such as CRM and SCM
E-Commerce, e-business Internet commerce, collaborative culture.
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DISADVANTAGES OF ERP
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DISADVANTAGES HOWTO OVERCOME?
Time-consuming Minimize sensitive issues, internal politics and raise general
consensus.
Expensive Cost may vary from thousands of dollars to millions. Businessprocess reengineering cost may be extremely high.
Conformity of the modules The architecture and components of the selected system shouldconform to the business processes, culture and strategic
goals of the organization.
Vendor dependence Single vendor vs. multi-vendor consideration, options for best of breeds, long-term committed support.
Features and complexity ERP system may have too many features and modules so the user needs to consider carefully and implement the needful only.
Scalability and global outreach Look for vendor investment in R&D, long term commitment to productand services, consider Internet-enabled systems.
Extended ERP capability Consider middle-ware add-on facilities and extended modules suchas CRM and SCM.
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WHY ERP OVER CONVENTIONAL APPS?
3/7/2012
y ERP handles individual business functions such as
yAccounts
y Inventory
y Sales and Distribution
y and also the entire range of business functions
y ERPpackages are targeted at everything from small
businesses to the largest organizations, and they can
be composed of a highly flexible decentralized
database and an information system cluster linked bya network.
y ERP packages have the ability to adapt globally since
it has multilingual and multi-currency
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ERP IMPLEMENTATION: PROBLEM AREAS
3/7/2012
y Attitude reform of the employees at all levels
y Companies not having time schedules and deadlines
do not succeed.
y Companies should be able to answer questions like
By when in what way can such-and-such thing be
achieved?, How should we do such-and-such
thing? etc
y Cost estimations should be done in an effective
manner for ERP implementation,y consultation,
y customisation,
y training and
yeducation.23
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ROADMAP FOR SUCCESSFUL ERP
IMPLEMENTATION
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y Most important step is the GAP ANALYSIS.
y What is GAP ANALYSIS?
y
It is the step of negotiation between the companyrequirements and the functions a package
possesses.
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STEPS IN GAP ANALYSIS
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y To make a note of the existing business system and list out the flaws andpositive aspects.
y Evaluate and decide the additions that need to be made to the business in
view of ERP implementation.
y Rating the existing level of performance to set a benchmark or standards for
the business as on date.
y Having an in-depth study of the regulations and statements in the
organizations and suggesting modifications.
y Clearly defining the roles of individuals in the organization.
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STEPS IN GAP ANALYSIS
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y Checking if the objective in discharging duties are met because it is theultimate solution to any issue.
y Ensuring that functions are executed properly and if need be personnel can
be rewarded to boost up and encourage performance.
y Gap Analysis either recommends the implementation of an ERPsystem or
rejects the idea in totality by taking all possible factors into consideration.
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