Kerala Plus Two Computer Application Notes Chapter 10 Enterprise Resource Planning
The goal(aim) of the management of an enterprise(Proprietor of a Company or a Venture or an organization) is to handle the resources in a good manner and .make good profit. The resources include the employees, customers, raw materials, finished goods machinery etc… Hence an enterprise handles large amount of data(DataBase) such as employee data, customer data, raw material purchase, sales data, financial data etc. The size of data to be handle is large and hence the complexity is also high. To solve this problem .organizations use ERP packages
Overview of an enterprise
Let us consider a production unit in an enterprise. The activities involved are planning, purchasing raw material, production, storing finished goods(warehouse), sales, finance etc. These activities are performed by different departments and theirduties are interlinked. Altogether the resources are classified into four M’s, That is Man, Material, Money and Machine.
Concepts of Enterprise Resource Planning
An enterprise(organization) is considered as a system(A system is an orderly grouping of interdependent components linked together to achieve an objective, according to a plan. Human body is an example for System). All the departments of an enterprise are connected to a centralized data base. ERP consists of single database and a collection of programs to handle the database hence handle the enterprise efficiently and hence enhance the productivity.
Functional units of ERP
Different modules are given below:
Financial Module: It is the core. This is used to generate financial report such as balance sheet, general ledger, trial balances, financial statements etc.
Manufacturing Module: It provides information for the production and capable to change the methods in the manufacturing sector.
Production planning Module: This module ensures the effective use of resources and helps the enterprise to enhance productivity hence increase profit.
HR (Human Resource) Module: This model ensures the effective use of Human resources and Human capital.
Inventory control Module: This model is useful to maintain the appropriate level of stock(includes raw material, work in progress and finished goods)
Purchasing Module: This module is useful to make available the required raw materials in good condition and in the right time and price.
Marketing Module: It is used for handle the orders of customers.
Sales and distribution Module: The existence of a company is based on the income from sales. This module will help to handle the sales enquiries, order placement ans scheduling, dispatching and invoicing.
Quality (Ql & QC) management module: The quality of a product or service is very much important to a company.This module helps to maintain the quality of the product. Quality planning, inspection and control are the main activities involved in this module.
Business Process Re-engineering (BPR)
In this world, tight competition is based on price, quality, wide variety of selection and quick service. To increase the business and hence increase the profit of a Business firm various activities are involved. IT and Re-engineering play major roles to increase productivity.
In general, BPR is a series of activities such as rethinking and redesign the business process to enhance the enterprise’s performance such as reducing the cost(expenses), improve the quality, prompt, and speed(time-bound) service.
BPR enhances the productivity and profit of an enterprise.
A business process consists of three elements
- Input – Supply data for processing
- Processing – Series of activities to convert the input into output
- Outcome – After processing, we will get the result as output.
The connection between ERP and BPR
ERP and BPR will not make much change if they are stand-alone. To improve the efficiency of an enterprise integrate both ERP and BPR because they are the two sides of a coin. For better results conducting BPR before implementing ERP, will help an enterprise to avoid unnecessary modules from the software.
Implementation of ERP
Wonderful changes are shown if you select and implement the correct ERP. Right ERP implemented at the right time will enhance the productivity and profit of an enterprise.
The different phases of ERP implementation are given below
Pre-evaluation screening: Many ERP packages are available in the markets. At most care should be taken before implementing an ERP. Select a few from the available ERP packages.
Package selection: The selection of the right ERP to our enterprise is a laborious task and it needs huge investment. Various factors should be kept in mind before you purchase an ERP that should meet our complete needs.
Project planning: Good planning is essential to implement an ERP. From the beginning to the end activities are depicted in this phase.
Gap analysis: A cent percent(100%) problem-solving ERP is not available in the market. Most of them solve a maximum of 70% to 80% problems. The rest (30% to 20%) of the problems and their solutions are mentioned here.
Business Process Reengineering: In general BPR is the series of activities such as rethinking and redesign of the business process to enhance the enterprise’s performance such as reducing the cost(expense), improve the quality, prompt and speed(time-bound) service.
BPR enhances the productivity and profit of an enterprise
Installation and configuration: In this phase the new system are installing, before implementing the whole system a miniature of the actual system is going to be implemented as a test dose. Then check the reactions if it is good it is the time to install the whole system completely.
Implementation team training: In this phase the company trains its employees to implement and run the system.
Testing: This phase is very important. It determines whether the system produces proper result. Errors in design and logic are identified.
Going live: Here a change over is taken place to new system from old system. It is not an easy process without the support and service from the ERP vendors.
End-user training: This phase will start familiarising the users with the procedures to be used in the new system. It is very important.
Post-implementation: Once the system is implemented maintenance and review begin. In this phase repairing or correct previously ill-defined problems and upgrade or adjust the performance according to the company needs.
ERP solution providers / ERP packages
The selection of right ERP is a difficult task. Many ERP packages are available in the market. Most of them are too expensive and cannot afford by small enterprises. The reason behind the expensiveness is that the ERP companies investing huge amount of time, money and effort in the research and development of ERP packages.
Popular ERP packages are given below
Oracle
American based company famous in database(Oracle 9i-SQL) packages situated in Redwood shores, California.
ERP package is a solution for finance and accounting problems. Their other products are
- Customer Relationship Management (CRM)
- Supply Chain Management (SCM) Software
SAP
SAP stands for Systems, Applications and Products for data processing.
It is a German MNC in Walldorf and founded in 1972. Earlier they developed ERP packages for large MNC. But nowadays they developed for small scale industries also.
The other software products they developed are
- Customer Relationship Management(CRM)
- Supply Chain Management(SCM)
- Product Life cycle Management(PLM)
Odoo
Formerly known as OpenERP.
It is an open-source code ERP. Unlike other companies, their source code is available and can be modified as and when the need arises.
Microsoft Dynamics
- American MNC in Redmond, Washington
- ERP for midsized companies.
- This ERP is more user friendly
- Another s/w is Customer Relationship Management (CRM)
Tally ERP
Indian company situated in Bangalore.
This ERP provides a total solution for accounting, inventory and Payroll.
Benefits and risks of ERP
ERP packages have a lot of advantages as well as many drawbacks also.
Benefits of ERP system
1. Improved resource utilization: Resources such as Men, Money, Material, and Machine are utilized maximum hence increase productivity and profit.
2. Better customer satisfaction: Without spending more money and time all the customer’s needs are considered well. Because the customer is the king of the market. Nowadays a customer can track the status of an order by using the docket number through the Internet.
3. Provides accurate information: Right information at the right time will help the company to plan and manage future cunningly. A company can increase or reduce production based upon the right information hence increase productivity and profit.
4. Decision-making capability: Right information at the right time will help the company to make good decisions.
5. Increased flexibility: A good ERP will help the company to adopt good things as well as avoid bad things rapidly. It denotes flexibility.
6. Information integrity: A good ERP integrates various departments into a single unit. Hence reduce the redundancy, inconsistency, etc.
Risks of ERP implementation
1. High cost: Very huge investment is required to purchase and configure an ERP. Moreover, it requires up gradation or replacement of hardware(Man, computer, or machine) is an additional investment. So small-scale enterprises cannot afford this.
2. Time consuming: The full-fledged implementation of the ERP package needs one or two years. That is highly time-consuming.
3. Requirement of additional trained staff: The existing staff may not capable to work with ERP. To overcome this give proper training to them otherwise appoint trained and experienced employees to cop up.
4. Operational and maintenance issues: The first major problem is that the resistance from the existing employees. To overcome this give awareness to the existing employees. The second problem is that the ERP package is a cyclic process-oriented package. It is a continuous process and should be maintained well otherwise the correct output will not available.
ERP and related technologies
It is an all in one system. It integrates various functions such as raw material purchase, production planning, marketing, financial etc, into a single application.
Product Life Cycle Management (PLM): It manages the entire life cycle of a product. PLM consists of programs to increase the quality and reduce the price by the efficient use of resources.
Customer Relationship Management (CRM): As we know the customer is the king of the market. The existence of a company mainly the customers. CRM consists of programs to enhance the customer’s relationship with the company.
Management Information System (MIS): Management is the decision and policymakers. Good management can make a good decision and that will help to do the business well. A good relationship between Management and employees is a key to success. MIS will collect relevant data from inside and outside of a company. Based on this information produce reports and take appropriate decisions.
Supply Chain Management (SCM): This is deals with moving raw materials from suppliers to the company as well as finished goods from the company to customers. The activities include are inventory(raw materials, work in progress, and finished goods) management, warehouse management, transportation management, etc.
Decision Support System (DSS): It is a computer-based system that takes inputs as business data and after processing it produces good decisions as output that will make the business easier.