E.R.P
ENTERPRISE RESOURCE PLANNING
Normally all these departments works independently. They have their own goal which is in line with objectives of organization. They have their own system (IT) of data collection & analysis. So the information, which is generated by various departments, will be available to that department only or to the top management only & to the other departments. It might lead to conflict with in organization. For example Marketing people wants more variety of product to satisfy the need of customer while Production department want to minimize the type so that they can reduce production cost.
To avoid this conflict there is need for flow of data among various departments
Hence there is need for central data base so that one department can access information for other department through central database.
Now consider organization with ERP system that is central data base. An organization with common database
Advantage of this system is that now one department can easily access the information of other department.
Now all these modules are linked internally with the help of ERP system.
If some query or data or information is there then it has to enter just once in to the system.
ERP also supports Multi language & Multi currency, which plays important role in world of globalization.
VENDORS: Leader vendors are SAP, JD EDWARD, ORACLE, BAAN ETC.
TECHNICAL ASPECT OF ERP
IT IS THREE TYRE STRUCTURE.
That means it is consisting of three layers.
Front end: Operating System
Back end: Data Base System
Application Layer: Layer in between Front End & Back End
OPERATING SYSTEM: ERP SUPPORTS ONLY HIGH END Operating System
High end operating system means, operating system That supports multi threading, multi Tasking & multi user application to support high performance.
APPLICATION LAYER: IMPLIMANTATION LOGIC (ERP)
This is main logic layer between Operating system & data base. Where all programs are written for operation of different modules. It is a package & not a custom made software.
DATABASE: ORACLE, INFORMIX, MS SQL, IBM DB2
These are different data base software, which ERP supports.
Normally SQL is cheaper than oracle.
PROGRAMING FOR EVENT MANAGEMENT:
ERP is package & not customize software but it can be programmed for specific event like PLC means programmable logic control using fourth generation language like ABAP\4, c, c++ etc.
ABAP\4 using Pascal type structure, which is powerful language to program Business application.
HARDWARE: Server must have at least 1GB RAM, 100GB Hard Disk capacity & 64 bit microprocessor so that ERP system functions smoothly. For users normal PC configuration can work.
Only that user in which ERP system is installed can access main server.
For which hardware connection is necessary. Normally user is connected to main server with the help of intranet. If user is at remote location than he can
Access main server with the help of Internet.
ERP IMPLEMENTATION LIFECYCLE
The different phases in a Erp implementation process are :--
Pre-evaluation Screening--
Once the company has decided to go for a Erp system, the search for the perfect package starts. But since there are so many Erp vendors in the market , the company has to conduct a Pre-evaluation screening in order to eliminate those packages which are not suitable for the company’s business. It is generally accepted that most Erp packages are stronger in one sector and weaker in the other, for e.g – Peoplesoft strong in Hr and weak in manufacturing. Therefore the company has to investigate the origins of the packages which determines which type of business it is best suited for.
Package Evaluation--
The Package evaluation process is a very important phase because the package that the company determines the success or failure of the project. The objective here is to find the package which covers each and every requirement of the company.
Now some important points to be kept in mind while selecting a Erp software are --
Functional fit with the company’s business processes.
Degree of integration between the various components of the Erp system
Flexibility and scalability
Complexity
User Friendliness
Quick Implementation
Ability to support multi-site planning and control.
Local support infrastructure
Total costs , including cost of license , training , impementation ,maintenance,customization and hardware requirements.
It is always better to have a separate evaluation committee
for conducting the evalution process consisting of the CIO or COO and consultants.
Project Planning Phase--
This is the phase that designs the implementation process .Time schedules , deadlines , etc for the projects are arrived . The project plan is developed . Roles are identified and responsibilities are assigned .The implementation team members and task allocation is done. This phase will decide when to begin the project, how to do it , and when the project is to be completed .the decisions are taken by the committee which is headed by the Erp in – charge usually the CIO or COO.
Gap Analysis--
This is a very important phase because it determines the success of the Erp implementation . During this phase the company creates a model to compare where they stand in the implementation process and in which direction they have to head in the future.
Reengineering--
It is in this phase that the human factors are taken into account .There have been occasions where high level executives have invoked the reengineering slogan, and purchased an Erp package with aim of reducing the numbers of employees. While every implementation is going to involve some change in job responsibilities, as processes become more automated and efficient , it is best to treat Erp as an investment as well as a cost cutting measure , rather than a downsizing tool.
Configuration--
This is the main functional area of the Erp implementation. The business processes have to be understood and mapped in such a way that that the arrived –at solutions match up with the overall goals of the company. ,But companies cannot just shut down their operations while the mapping processes take place. Hence is designed which allows the thorough testing of the “to be” model in a controlled environment .Configuring a company’s system reveals not only the strengths but also the weakness so that the weaknesses can be worked upon.
Implementation Team Training--
Along with the configuration process ,the implementation team is also being trained ,not just to use the system but how to implement it. The Erp vendors and the hired consultants will leave the company so the company should have a good in house team that can handle the various situations.
Testing--
This is the face where you try and break the system. You have reached a point where you are testing real case scenarios. The final testing of the system is done to find out the weaknesses and solve them before going live.
Post Implementation (Maintenance Mode)--
After going live post implementation phase is very important process because once the implementation process is over , the vendors and hired consultants leave the company. Therefore to reap the benefits of the Erp system The company should have enough employees to handle problems as and when they arise and also the employees should be able to upgrade the system as and when they arise.
Just as courtships and honeymoons are different from marriages, living with Erp systems will be different from installing them. Projects for implementing The Erp systems get a lot of resources and attention .However , an organisation can only get the maximum value of these inputs if it successfully adopts and effectively uses the system.
The term E.R.P stands for Enterprise Resource Planning. This E.R.P Package contains many modules. The number & features of the module vary with the requirements of an organisation. The most common modules of an E.R.P Package are
Finance
Manufacturing & Production Planning
Sales & Distribution
Plant Maintenance
Quality Management
Materials Management
Human Resource Management
Marketing
Finance Module
The concept of information technology is based on the premise that providing the right information to the right people at the right time can make a critical difference to the success of an organisation. Much of the key information is financial data. The E.R.P Package connects the Accounts information to other areas such as Manufacturing & Production Planning, Human Resource Management, Marketing, Materials Management. Because it links the related areas it eliminates the need for repeat procedure.
The Finance Module can be divided into the following sub systems
Financial Accounting
This covers the preparation & presentation of the following statements & accounts
General Ledger
Accounts Receveiable
Accounts Payable
Fixed Asset Accounting
Investment Management
This covers the preparation & presentation of the following statements
Investment Planning
Budgeting
Planning
Simulation
Controlling
This covers the preparation & presentation of the following statements
Overhead Cost Controlling
Activity Based Costing
Production Cost Accounting
Treasury
This covers the preparation & presentation of the following statements
Cash Management
Treasury Management
Funds Management
Enterprise Controlling
This covers the preparation & presentation of the following statements
Executive Information System
Profit Centre Accounting
The financial accounting module of the E.R.P Package gives you the ability to centrally track the financial accounting data within the international framework of multiple companies, languages, currencies.
Eq. When the raw materials move from the inventory into the manufacturing the system reduces quantity values in the inventory & simultaneously subtracts value from inventory accounts in the balance sheet.
Warehouse Management Module
This module provides real time information about the inventory levels across the enterprise & tools to manage the daily operational needs. The various components of a warehouse module explain the mapping of internal goods flow within warehouses & monitoring all warehouse inventory transaction. It also provides information to the customer about where the company’s goods are located, the number of goods on hand, current storage condition & projected delivery schedule.The Warehouse Management Module can be divided into the following sub systems
Inventory Planning
It comprises of all planned inventory movements & forecasting of trends. It contains information for the safety stock, lead time, reordering levels. . It also provides information to the customer about where the company’s goods are located, the number of goods on hand, current storage condition & projected delivery schedule.
Inventory Handling
Inventory Reporting
This function permits full visibility of inventory at single & multiple sites & provides the company with the tools to give customers accurate delivery dates the systems extensive reporting capabilities also enable consigned goods management.
Inventory Analysis
This module enables the analysis of information that result from warehousing activities & the use of feedback in process optimization. In addition inventory analysis support inventory forecasting, inventory valuation.
Materials Management Module
The Materials Management Module optimizes all purchasing processes with the workflow driven processing functions, enables automated supplier evaluation, lowers procurement cost, warehousing cost with accurate inventory & materials management & integrates invoice verification
The Warehouse Management Module can be divided into the following sub systems
Pre Purchasing Activites
This system supports the complete cycle of bid invitation, award of contract & acceptance of services.
Purchasing
It performs tasks like procurement of materials & services, determination of possible sources of supply for a requirement identified by the materials planning & control system or arising directly within a user department monitoring of deliveries & payment to vendors.
Vendor Evaluation
The vendor evaluation system ensures that evaluation of vendors is objective since all vendors are assessed according to uniform criteria & the scores are computed automatically.
Inventory Management
This system allows you to manage your stock on a quantity & value basis, plan, enter & check any goods movements & carry out physical inventory
Invoice Verification & Materials Inspection
Example
The following example will clearly suggest the functioning of an ERP Package & how each of the modules of the ERP Package are interdependent
Suppose a customer approaches for the purchase of 100000 units of goods X from Reliance Limited, which operates using an ERP Package SAP. As soon as the order is entered into the system a lot of actions are triggered.
The system will check whether the goods are lying as finished goods inventory. If they are lying as finished goods inventory it will check for a warehouse closet to the customer using the warehouse management module where the goods are lying so as to reduce the delivery time as well as reduce the transportation cost.
However if the goods are not lying as finished goods inventory then it will check whether the materials necessary for producing the product are available in stock with the company. Once the items required are identified the production planning system prepares a production plan for the goods after which the production of the goods can commence & also inform the customer of likely delivery date.
However if the goods are not lying as finished goods inventory then it will check whether the materials necessary for producing the product are available in stock with the company & if they are not available with the company the materials management module will prepare the purchase order for each item after taking into consideration the lead time for each items required.
The materials management module will prepare the purchase order for each item after taking into consideration the quotation from suppliers & vendor evaluation & selection.
All this activities can be done by the click of few keys & immediate information can be available to the organization. However if manual records were maintained then to collect this information a few weeks would be required & hence an E.R.P Package saves a lot of time & since time is like money in today’s competitive world an E.R.P Package is a necessity for expanding businesses & large organizations.