Enterprise Resource
Planning (ERP) Systems
What is ERP?
• The practice of consolidating an
enterprise’s planning, manufacturing, sales
and marketing efforts into one
management system.
• Combines all databases across
departments into a single database that
can be accessed by all employees.
Evolution of ERP
1960s: software packages with inventory control
1970s: MRP systems
Production schedule with materials management
1980s: MRPII systems
Adds financial accounting system
1990s: MRPII
Integrated systems for manufacturing execution
Late 1990s: ERP
Integrated manufacturing with supply chain
Major Reasons for Adopting ERP
• Integrate
financial information
• Integrate customer order information
• Standardize and speed up operations
processes
• Reduce inventory
• Standardize Human Resources information
How do ERP System Work
Managers and Stakeholders
Financial Applications
Reporting
Applications
Human
Sales
and
Resource
Delivery
Management
Applications
Applications
Customers
Sales Force
And Customer
Service Reps
Service
Applications
Central
Database
Human
Resource
Management
Applications
Employees
Manufacturing
Applications
Back-office
Administrators
And Workers
Inventory
And Supply
Applications
Suppliers
Components of ERP System
Finance: modules for book keeping and making
sure the bills are paid on time. Examples:
General ledger
Accounts receivable
Accounts payable
HR: software for handling personnel-related
tasks for corporate managers and individual
employees. Examples:
HR administration
Payroll
Self-service HR
Orders
Parts
Sends report
Sales Dept.
Customer
Demographic
Files
Customers
Checks for Parts
Calls back “Not in stock”
“We ordered the parts”
Accounting
Files
Accounting
Sends report
Sends report
Invoices
accounting
Vendor
Order is placed
with Vendor
Purchasing
Files
Purchasing
Ships parts
Warehouse
“We Need parts #XX”
“We ordered the parts”
Inventory
Files
An ERP Example: After ERP
Orders
Parts
Sales Dept.
Customers
Inventory Data
If no parts,
order is placed
through DB
Accounting
Financial Data exchange;
Books invoice against PO
Order is submitted
to Purchasing.
Purchasing record
order in DB
Database
Books inventory
against PO
Order is placed
with Vendor
Warehouse
Vendor
Purchasing
Ships parts
And invoices accounting
Potential Benefits of ERP
 Internal Benefits

Integration of a single source
of
data
Common
data definition A real
time system Increased

productivity Reduced

operating costs


Improved internal
communication

Foundation for future improvement
Potential Benefits of ERP
 External Benefits
• Improved customer service and order
fulfillment
• Improved communication with suppliers
and customers
• Enhanced competitive position
• Increased sales and profits
Benefits of ERP
Direct benefits include:
1.improved efficiency
2.information integration for better
decision making
3.Faster response time to customer
queries
Benefits of ERP
Indirect benefits include:
1. Better corporate image
2. Improved customer goodwill
3. Customer satisfaction
Potential Benefits are
1.
2.
3.
4.
Reduction of Lead-Time
On-Time Shipment
Reduction in cycle time
Better customer satisfaction
Others are
1. Improved supplier performance
2. Increased Flexibility
3. Reduction in quality costs
4. Improved resource utility
5. Improved information accuracy and decision-
making ability
Risks with ERP Implementation
Expensive (can costs 100 thousands to
millions of dollars)
Time-consuming (can take months to years)
Great risk for the organization
Transfer of Knowledge
Acceptance with the company
Before ERP & After ERP
Stand alone System.
Lack of coordination
among business
function(Manufacturing &
sales)
Non Integrated data: Data
have different meanings.
System are
maintained on a
procedural basis
Redundant data and
inconsistent information.
Difficult to manage.
Integrated System.
Support coordination
among business functions.
Integrated Data: Data have
the same meaning across
multiple functions.
Changes affect multiple
functions or Systems
Common interfaces across
systems.
Modules of ERP
Finance
Material
Sales
Marketing
Personnel
Popular ERP Modules
Finance
Sale
HR
ERP
Planning
Operation
Inventory
ERP Finance Module
In This Data is collected From
various functional departments
and generate financial reports
ledger, Trail Balance, Balance
Sheets etc.
ERP HR(Human Resource) Module
HR Module routinely maintain a complete
employee database including contact information,
Salary details Attendance, Promotions of all
employees.
Produce pay check Reports
Maintain personnel Record
Training
Time and Attendance Benefits
ERP Purchasing Module
Purchasing module is
tightly integrated with the
inventory control and
production planning
Modules.
ERP Inventory Module
Inventory
Module
facilitates
processes
of maintaining the
appropriate level of
stock in a
warehouse.
BPR
ERP Implementation Approaches
The big bang – install a single ERP system across
the entire organization
Franchising – Independent ERP systems are
installed in different units linked by common
processes, e.g., bookkeeping.
Slam dunk – install one or several ERP modules
for phased implementation of key business
processes
Major Phases of ERP Implementation
Initiation – develop business case, project scope,
and implementation strategy
Planning – establish implementation team,
determine goals and objectives, establish metrics
Analysis and process design – analyze and
improve existing processes, map new processes to
be adopted by the system
Major Phases of ERP Implementation
Realization – install a base system,
customization, and test the system
Transition – replace the formal system with
the new system, data conversion
Operation – monitor and improve system
performance, provide continued training and
technical support
Major Challenges to ERP Implementation
Limitations of ERP technical capabilities
Inconsistency with existing business processes
Costs - implementation (hardware, software,
training, consulting) and maintenance
Changes in employee responsibilities
Major Challenges to ERP Implementation
Flexibility of software system upgrades
Implementation timelines
Availability of internal technical
knowledge and resources
Education and training
Implementation strategy and execution
Resistance to change
New Developments In ERP
Availability of web-based and wireless ERP
systems
Adoption of easy-to-install ERP systems
Linkage to other software systems, e.g., supply
chain management system, e-commerce, customer
relationship management system
Advantages of ERP
Quicker completion of Processes
Single system
Modular software
Database
Easier to track various tasks
Manage globally Data
Disadvantages of ERP
Cost
Time Consuming
Training to employees