11 Enterprise Resource Planning

P.G. Padma Gowri

epgp books

 

 

 

 

Introduction:

 

ERP is an acronym that stands for Enterprise Resource Planning. ERP software saw phenomenal interest from the corporate sector during the period 1995-2000.

 

Enterprise resource planning (ERP) has evolved as a strategic tool, an outcome of over four decades. This is because of continuous improvements done to the then available techniques to manage business more efficiently and also with developments and inventions in information technology field.

 

Objectives:

  • To understand basic concepts of Enterprise Resource Planning
  • To lean Evolution of ERP
  • To understand implementation of Enterprise resource planning

 

Implementation of ERP:

 

A case study of a largely successful ERP (Enterprise Resource Planning) implementation is presented and discussed in terms of these key factors.

 

The business environment is dramatically changing. Companies today face the challenge of Increase in competition, expanding markets, and rising customer expectations. This increases the pressure on companies to lower total costs in the entire supply chain, shorten throughput times, drastically reduce inventories, expand product choice, provide more reliable delivery dates and better customer service, improve quality, and efficiently coordinate global demand, supply, and production.

 

Salient features of implementation of ERP in a firm:

 

Implementation Enterprise resource planning solution would pay for the heavy investments handsomely and often reasonably fast.

 

Enterprise resource planning solutions address to the entire organizational needs, and not selected islands of the organization, ERP introduction brings a new culture in the organization.

 

Enterprise resource planning introduction leads to the line managers would no longer have to chase information, check compliance to rules or conformance to budget.

 

A well-implemented Enterprise resource planning can guarantee these benefits even if the organization is a multi-plant, multi- location global operation spanning the continents.

 

ERP System:

 

Enterprise resource planning (ERP) systems is a highly complex information system. The implementation of these systems is a difficult and high cost proposition that places tremendous demands on corporate time and resources.

 

Enterprise resource planning and Related Technologies:

 

The commercially available software packages promise seamless integration of all information flows in the company––financial and accounting information, human resource information, supply chain information, and customer information. For managers who have struggled, at great expense and with great frustration, with incompatible information Systems and inconsistent operating practices, the promise of a quasi ‘‘off-the-shelf’’ solution to the problem of business ERP related technologies are listed below.

  • Business Process Reengineering (BRP);
  • Management Information System (MIS);
  • ·Executive Information System (EIS); Decision support System (DSS);
  • Supply Chain Management (SCM).
  • ERP system: Plant Maintenance, Quality Management, Materials Management.

 

Need for ERP:

 

A true Enterprise Resource Planning system incorporates both internal and external information flows used by the organization within a single, comprehensive solution. An Enterprise resource planning solution incorporates the practical systems used by organizations to manage the basic business functions like planning, inventory/materials management, purchasing, manufacturing, finance, accounting, human resources, marketing and sales, services etc. The objective of the Enterprise resource planning solution is to drive the flow of information between all internal business functions as well as managing functions related to outside stakeholders.

 

ERP solutions address to the entire organizational needs and not selected islands of the organization, ERP introduction brings a new culture, cohesion and vigour to the organization.

 

ERP introduction leads to the line managers would no longer have to chase information, check compliance to rules or conformance to budget. What is striking is that a well-implemented ERP can guarantee these benefits even if the organization is a multi plant, multi- location global operation spanning the continents.

 

ERP business activities included:

  • Product planning and purchase,
  • Production Planning
  • Manufacturing and service delivery
  • Marketing and sales,
  • Materials management,
  • Inventory management,
  • Shipping and payment,
  • Finance

ERP and Related Technologies

                                                           

      Evolution of ERP

 

ERP Implementation Lifecycle:

 

ERP lifecycle is in which highlights the different stages in implementation of AN ERP.

 

There are different stages of the ERP implementation that are as give below:

  • Pre evaluation Screening
  • Evaluation Package
  • Project Planning
  • GAP analysis
  • Reengineering
  • Team training
  • Testing
  • Post implementation

1.  Pre evaluation Screening

 

Once the company has decided to go for the ERP system, the search for the package must start as there are hundreds of packages it is always better to do a thorough and detailed evaluation of a small number of packages, than doing analysis of dozens of packages. This stage will be useful in eliminating those packages that are not suitable for the business process

 

2. Evaluation Package

 

This stage is considered an important phase of the ERP implementation, as the package that one select will decide the success or failure of the project. Implementation of an ERP involves huge investments and it is not easy to switch between different packages, so the right thing is ‘do it right the first time’. Once the packages to be evaluated are identified, the company needs to develop selection criteria that permit the evaluation of all the available packages on the same scale.

 

3. Project Planning

 

This is the phase that designs the implementation process. It is in this phase that the details of how to go about the implementation are decided. Time schedules deadlines, etc for the projects are arrived at. The plan is developed, roles are identified and responsibilities are assigned. IT will also decide when to begin the project, to do and it committee by the team leaders of each implementation group usually does such as planning.

 

4. GAP analysis

 

This is considered the most crucial phase for the success of ERP implementation. This is the process through which the companies create a complete model of where they are now, and it which direction will they opt in the future. It has been estimated that even the best packages will only meet 80% of the company’s requirements. The remaining 20% presents problematic issues for the company’s reengineering.

 

5. Reengineering

 

It is in the phase that human factors are taken into consideration. While every implementation is going to involve a significant change in number of employees and their job responsibilities, as the process becomes more automated and efficient, it is best to treat ERP as an investment as well as cost cutting measure.

 

6.  Team Training

 

Training is also an important phase in the implementation, which takes place along with the process of implementation. This is the phase where the company trains its employees to implement and later run the system. Thus, it is vital for the company to choose the right employee who has the right attitude-people who are willing to change, learn new things and are not afraid of technology and a good functional knowledge.

 

7.  Testing

 

This is the phase where one tries to break the system. One has reached a point where the company is testing the real case scenarios. The system is configured and now you must come up with extreme cases like system overloads, multiple users logging on at the same time, users entering invalid data, hackers trying to access restricted areas and so on. This phase is performed to find the weak link so that it can be rectified before its implementation.

 

8.  Post Implementation

 

Once the implementation is over, the vendor and the hired consultants will go. To reap the fruit of the implementation it is very important that the system has wide acceptance. There should be enough employees who are trained to handle problems those crops up time to time. The system must be updated with the change in technology. The post implementation will need a different set of roles and skills than those with less integrated kind of systems

 

Successful Implementation of ERP:

 

However, an organization can get the maximum value of these inputs if it successfully adopts and effectively uses the system.

 

1.  Selection of Packages: this is the first step of the life cycle where the perfect ERP package has to be selected and testified. The right choice will determine the success of the ERP implementation. A proper study and research should be done before the selection.

 

ERP system selection

 

ERP system by its very nature, ERP will impose its own logic on a company strategy, organization, and culture it is imperative that the ERP selection decision be conducted with great care. The greatest enterprise system implementation failures seem to occur when the new technology capabilities and needs are mismatched with the organization existing business processes and procedures.

 

Most enterprises can expect to change or significantly

 

Upgrade their computer information systems at least every five to seven years. With the rapid development of new technology, the expansion of features and capabilities, and the proliferation of software vendors, there are numerous options for ERP systems. While most ERP packages have similarities, they also have substantial differences.

 

2.  Project Planning:

 

Proper planning of implementation process of the project shall be made and designed. Resources should be allocated and the team members have to be selected.

 

3.  Analysis Gap:

 

GAP analysis is an important step in the life cycle of ERP implementation step. GAP analysis is performed to analyze the current situation of the organization and its future position as needed.

 

Implementation of ERP:

 

Researchers identified a variety of factors that can be considered to be critical to the success of an ERP implementation. The most prominent of these are described below].

 

Clear understanding of strategic goals

 

ERP implementations require that key people throughout the organization create a clear Vision of how the company should operate in order to satisfy customers. There must also be clear definitions of goals. Empower employees and facilitate suppliers for the next three to five years Expectations and deliverables. Finally, the organization must carefully define why the ERP system is being implemented and what is the critical business needs the system will address.

 

Commitment by top management

 

Successful implementations require strong leadership, commitment, and participation by top Management .The implementation project should have an executive management planning committee that is committed to enterprise integration, understands ERP, fully supports the costs, demands payback, and champions the project. Moreover, the project should be spearheaded by a highly-respected, executive-level project.

 

Excellent project management

 

Successful ERP implementation requires that the organization engage in excellent project management. This include a clear definition of objectives, development of both a work plan and are source plan, and careful tracking of project progress. And the project plan should Establish aggressive, but achievable, have maintain a sense of urgency ERP implementations may trigger profound changes in corporate culture.

 

If people not prepared for the imminent changes, then denial, resistance, and chaos will be predictable consequences of the changes created by the implementation.

 

The organization must be flexible enough to take full advantage of implementation and modifications in ERP.

 

A great implementation team

 

ERP implementation teams should be composed of top-notch people who are chosen for their , past accomplishments, reputation, and flexibility.

 

Management should constantly communicate with the team, but should also enable empowered, rapid decision making.

 

The implementation team is important because it is responsible for creating the initial, detailed project plan or overall schedule for the entire project, assigning responsibilities for various activities and determining due dates. The team also makes sure that all necessary resources will be available as needed.

 

Data accuracy

 

Data accuracy is absolutely required for an ERP system to function properly. Because of the integrated nature of ERP, if someone enters the wrong data, the mistake can have a negative effect throughout the entire enterprise.

 

Extensive education and training

 

Education/training is probably the most widely recognized critical success factor.. ERP implementation requires a critical mass of knowledge to enable people to solve problems within the framework of the system

 

The full benefits of ERP cannot be realized until end users are using the new system properly. To make end user training successful, the training should start early, preferably well before the implementation begins.

 

There is also a need for post-implementation training. Periodic meetings of system users can help identify problems with the system and encourage the exchange of information gained through experience and increasing familiarity with the system.

 

Focused performance measures

 

Performance measures that assess the impact of the new system must be carefully constructed. The measures must also be designed so as to encourage the desired behaviours by all functions and individuals. Such measures included on-time deliveries, gross profit margin, customer order-to-ship time, inventory turns, vendor performance, etc.

 

ERP system selection Enterprise resource planning system is variable in nature. Enterprise resource planning will impose its own logic on a company strategy, organization, and culture it is imperative that the ERP selection decision be conducted with great care.

 

The greatest enterprise system implementation failures seem to occur when the new technology capabilities and needs are mismatched with the organization existing business processes and procedures.

 

Most enterprises can expect to change or significantly upgrade their computer information systems at least every five to seven years. With the rapid development of new technology, the expansion of features and capabilities, and the proliferation of software vendors, there are numerous options for ERP systems.

 

Advantages of ERP:

i)Business integration: The main Advantage of the ERP is the promotion of integration.

 

ERP packages are called integrated is the automatic data upgradation between related business components, since conventional company information systems were aimed to integrate the independent business functions in business units.

 

ii )Data updating:

 

Using the ERP packages the data of related business functions is also automatically updated at the time a transaction occurs. Anyone can able to grasp business details in real time, and carry out various types of management decisions in a timely manner based o that information.

 

ii)Flexibility.

 

If the company go for globalization and system unification (currency, other aspects), flexibility of the system is essential, ERP used for not simply for development and maintenance, but also in terms of management in diversification of data.

 

iii)Better analysis and planning capabilities:

 

Yet another advantage is the boosting of planning type functions. By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilize many types of decision support Enterprise Resource Planning Department of Management Science systems and stimulation systems. All the information related with decision making are quickly available by ERP.

 

iv) Latest technology:

ERP  user  are  quickly  adopted  their  systems  to  take  advantages  of  the  latest technologies like open systems, client server technology, internet/ intranet, computer aided acquisition and logistics support, electronic commerce etc. ERP software has a flexibility that makes the incorporation of the latest system customization, maintenance and expansion phases.

 

v)Reduced inventory cost:

 

The manufacturing department provides information to ERP makes the issue of process and material costs savings paramount. ERP system allows customers to obtain information on cost, revenues and margins, which allow it to better, manage its overall material cost structure.

 

vi)Reduced man power cost: using ERP manufacturing practices are improved and it lead to fever shortages and interruptions and to less rework and overtime. it reduces the man power requirement.

 

vii)Reduced material cost:

 

ERP Improves procurement practices lead to better vendor negotiations. Enterprise Resource Planning & Department of Management Science for prices, resulting in cost reductions of 5 per cent or better.

 

viii) Improves customer service and sales :

 

Using ERP Company have Improvements in managing customer contacts, making and meeting delivery promises, and shorter order to ship lead times, lead to higher customer satisfaction, goodwill and repeat orders.

 

ix) Efficient Financial Management:

 

ERP Improves cash collection procedures, it can reduce the number of days of outstanding receivables, thereby providing additional available cash. These improvements are fast, accurate invoice creation directly from shipment transactions, timely customer statements and follows through on delinquent accounts. ERP Improves credit management and receivable practices typically reduce the days of outstanding receivables by 18 per cent or better.

 

Conclusion:

 

Diverse multi-functional environments such as language, currency, accounting standards and so on are covered in one system and functions that comprehensively managed multiple locations that span a company are packaged and can be implemented automatically.

 

A successful ERP project can cut the operating costs, generate more accurate demand forecasts, speed production cycles, and greatly enhance customer service––all of which can save a company millions of dollars over the long run.

 

ERP systems reportedly also lead to improved cash management, reduction in personnel requirements, and a reduction in overall information technology costs.

 

Enterprise resource planning (ERP) has evolved as a strategic tool, an outcome of over four decades. This is because of continuous improvements done to the then available techniques to manage business more efficiently and also with developments and inventions in information technology field.

you can view video on Enterprise Resource Planning

 

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