erp unit i 2013-14

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E nterprise R esource P lanning

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UNIT I - INTRODUCTION

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E nte rpr i se R esource P l ann ing

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1. Overview of Enterprise System

2. Evolution

3. Risks and benefits

4. Fundamental technology

5. Issues to be consider in planning design andimplementation of cross functional integrated ERP systems

6. Case studies

UNIT I - INTRODUCTION

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1. Overview of E nterprise System

Introduc on

The business environment has changed more in the last five years that it did over the previous five

decades. The pace of change continues to accelerate and corporations around the world seek to

revitalize, reinvent and resize in an effort to position themselves for success in the 21 st century. The

ability to respond to new customer needs and seize market opportunities as they arise is crucial.

Successful companies today recognize that high level of interaction and coordination along the

supply chain will be a key ingredient of their continued success. Enterprise are continuously

striving to improve themselves in the areas of quality, time to market, customer satisfaction,

performance and profitability.

To make it possible for the companies to execute this vision, there is a need for an infrastructure

that will provide information across all functions and locations within the organization. The

Enterprise Resource Planning fulfills this need.[1]

Enterprise

The enterprise is often used in general business situations to describe a corporate entity, anything

from a small to large organization. An enterprise is the group of people with a common goal, which

has certain resources at its disposal to achieve this goal.

The enterprise acts as a single entity. Traditionally, the

organization is divided into different units based on the

functions they perform, like manufacturing, purchasing, sales

& distribution, finance, R&D and so on. These departments are

compartmentalized and have their own goals and objectives,

which from their point of view is in line with the organization’s

objectives. These departments function in isolation and have

their own systems of data collection and analysis. The information that is created or generated by

the various departments is available only to the top managements. Hence, one department does not

know what the other does. The result is that, instead of taking the organization towards the

common goal the various departments end up pulling it in different direction.

For example, the sales and marketing people will want more product variety to satisfy the varying

needs of the customers. But the production department will want to limit the product variety to cut

down production costs. Unless and until all the departments know what the others are doing andfor what purpose, these kinds of conflicts will arise thus disrupting the

normal functioning of the organization.

But in the enterprise way the entire organization is considered as a system

and all the department are its sub -systems. Information about all the

aspects of the organization is stored centrally and is available to all

departments. This transparency and information access ensures that each

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sub -system knows what others are doing, why they are doing it and what should be done to move

the company towards the common goals. ERP systems help to make this task easier by integrating

the information systems, enabling smooth and seamless flow of information across departmental

barriers, automating business process and functions and thus helping the organization to work and

move forward as a single entity. [2]

ERP De ni on

ERP is an abbreviation for Enterprise Resource Planning and means, the

techniques and concepts for integrated management of businesses as a

whole from the viewpoint of the effective use of management resources

to improve the efficiency of enterprise management. ERP packages are

integrated software packages that supports the above ERP concepts ERP

package are integrated software packages that support the above ERP

concept [3]

Enterprise Systems

An ES or enterprise system is a large scale system which includes packages like ERP and CRM. ERP

is a subset of Enterprise System. It contains a variety of solutions. ES contains applications and

packaged solutions which can be directly used in an enterprise. [4]

The latest generation ERP systems also known as ERP – II or enterprise systems extend beyond the

organization by capturing inter -organizational processes such as supply chain management (SCM),

supplier relationship management (SRM), customer relationship management (CRM), employee life

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What are the items that need to be purchased?

MRP uses the master production schedule (MPS) to find out the answer to the first question, what

products are going to make? It gets the details of the materials required to make the products from

the bill of materials (BOM). It searches inventory records to find out what items are in stock. It then

calculates the items that need to be purchased for producing the goods. [3] MRP successfully

demonstrated its effectiveness in reduction of inventory, production and delivery lead times byimproving coordination and avoiding delays, thus making commitment more realistic. MRP proved

to be a very good technique for managing inventory, but it did not account other resources of an

organization. [7]

Closed -loop MRP

MRP evolved into something more than merely a better way to order and the evolution was very

fast as there were many followers for MRP, and they want more. Along with producing material re -

ordering schedule, MRP maintained the order due dates and could be used to detect and warn when

an item did not arrive on the due date. This new capability helped in reducing the uncertainty that

is part of any production process.

Soon, techniques for planning capacity requirement were merged with MRP. Tools were developed

to support the planning of sales and production levels, development of production schedules,

forecasting, sales planning, capacity planning and order -processing. Closed -loop MRP is not merely

material requirements planning but a series of functions for automating the production process. It

contains tools and techniques to address both priority and capacity and supports both planning and

execution.

Manufacturing Resource Planning (MRP II)

The next stage in the evolution of ERP is called MRP II. It is the next logical step of closed –loop MRP

and contains the following additional capabilities -sales and operational planning, financial interface

and simulation capabilities.

Thus, MRP II is a method for effective planning of all the resources of a manufacturing company. It

addresses operational planning in units, financial planning in Rupees and has a simulation

capability to answer ‘what if’ questions. MRP II is made up of a variety of functions, each linked

together: business planning, sales & operations planning, demand management, production

planning, master scheduling, material requirement planning, capacity requirement planning and

the execution support systems for capacity and material.

Enterprise Resource Planning (ERP)

The final step in the evolution is the emergence of ERP. The fundamental ERP are the same as that

of MRP II. However, the enterprise software makes ERP a set of business processes that is broader

in scope, is capable of dealing with more business function and has a better and tighter integration

with the finance and accounting functions. ERP predicts and balances demand and supply. It is an

enterprise -wide set of forecasting, planning and scheduling tools, which links customers and

suppliers into complete supply chain, employs proven processes for decision -making and

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coordinates sales, marketing, operations, logistics, purchasing, finance, product development and

human resources.

Its goals include high -levels of customer service, productivity, cost reduction and inventory

turnover. It does this by developing plans and schedules so that the right resources – manpower,

materials, machinery and money – are available in the right amount when needed. [3]

Extended ERP or ERP II

ERP II includes applications such as SCM and CRM, which helps in consolidating an organization’s

entire value chain.

Reference

[1] Vinod Kumar Garg & N K Venkitakrishnan, “ERP – A Curtain Raiser,” in Enterprise Resource Planning

Concepts and Practice, 2 nd ed. PHI Learning, New Delhi, 2011, pp. 3 -9

[2] Alexis Leon, “Enterprise - An overview,” in ERP Demystified, 2 nd ed. TATA McGraw Hill, 2010, pp. 3 -11

[3] Alexis Leon, “Introduction to ERP,” in ERP Demystified, 2 nd ed. TATA McGraw Hill, 2010, pp. 12 -24

[4] Dr Andrew Napier, http://ezinearticles.com/?What -Is-The -Difference -Between -ERP-And -Enterprise -

System?&id=6114179 , accessed August 2013

[5] Mahadeo Jaiswal & Ganesh Vanapalli, “Understanding ERP – Based Enterprise Systems,” in The Text Book

of Enterprise Resource Planning, 1 st ed. MacMillan, 2010, pp. 5

[6] http://www.sysoptima.com/erp/history_of_erp.php , accessed August 2013

[7] Rahul V. Altekar, “Origin, Evolution and Structure”, in Enterprise wide Resource Planning: Theory and

Practice, PHI Learning, pp 10

[8] Ashim

http://ezinearticles.com/?What-Is-The-Difference-Between-ERP-And-Enterprise-System?&id=6114179


















http://www.sysoptima.com/erp/history_of_erp.php






erp unit i 2013-14

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