Introduction to Enterprise Resource Planning - ERP

ERP: Enterprise Resource Planning

Enterprise

The enterprise is any organization that has a set of common goals.

Resource

Resources can be in the form of human resource (manpower), capacity(machine,  plants, warehouses, etc.), inventory resources (finished goods and raw materials stock),

Planning

For effective utilization of resources, needs to plan and undertake a variety of planning activities like demand planning, distribution planning, production planning, capacity planning, material planning, maintenance planning, financial planning and budgeting, quality planning, new product planning, etc.

Definition of ERP

ERP is an integrated information system built on a centralized database and having a common computing platform that helps in effective usage of enterprise’s resources and facilitates the flow of information between all business functions of the enterprise (and with external stakeholders).

Enterprise Resource Planning  (ERP)

1. ERP comprises of a commercial software package that promises the seamless integration of all the information flowing through the company – financial, accounting, human resources, supply chain and customer information” (Davenport, 1998). 
2. “One database, one application and a unified interface across the entire enterprise” (Tadjer, 1998). 
3. “ERP systems are configurable information systems packages that integrate information and information-based processes within and across functional areas in an organization” (Kumar & Van Hillsgersberg, 2000). 
4. “ERP systems are computer-based systems designed to process an organization's transactions and facilitate integrated and real-time planning, production, and customer response”9 (O'Leary, 2001). 
5. A method for the effective planning and controlling of all the resources needed to take, make, ship and account for customer orders in a manufacturing, distribution or service company“ (American Production and Inventory Control Society, 2001). 
6. Core software used by companies to coordinate information in every area of the business such as planning, manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, transportation and e-business” (Monk, 2009).

Why we need ERP System?

ERP 

       related to customer need 

ERP

       need becasue of managing information 

From Department to Enterprise: 

                                                  (multiple to single)Traditionally organisations are always structured around departments, i.e. sales department sell products, production department produces them, procurement department procure items and quality department does quality inspection. However, every department has their own set of objectives and sometime these may not be aligned. 

From Function to Process: 

                                          (one process many function)a process may have multiple function across an organization such as order fulfillment process cuts across several functions, i.e. orders are first taken by sales function, warehouse function checks whether the stock for the items are available, if not then the items need to be produced by production function, for this production if some components are needed from outside then that need to be produced from outside and finally the goods need to be transported to individual customer by transportation/shipping department of the company. 

From Information Silos to Integrated Information System: 

                                                                    ( Centerlized all information)Traditionally, every department used to have their own systems. For example, procurement department had a system for creating purchase order and vendor management; production/manufacturing department had a system for production planning and scheduling; sales department had a system for creating invoices and maintaining customer records; finance department had a system for financial accounting, and human resource department had a system for payroll.

Drawbacks of unintegrated System OR Silos

          Duplication of data No integration between these different systems Systems can not update online all relevant information

Integrated Information System or ERP

One of the greatest benefit of ERP systems is that it had broken all these information silos making information integration and seamless information flow across the enterprise a reality. For example a simple Goods receipt transaction in ERP system can trigger several activities, i.e. Stock and value of inventory get updated An inspection lot automatically gets created to trigger a quality inspection Stock and consumption account updated Purchase order history gets updated A transfer request is created to move the goods in the warehouse

Enterprise systems (ES)

1. are large-scale organizational systems which composed of people, processes and information technology built around packaged enterprise system software 
2. is a set of packaged application software modules, with an integrated architecture, that can be used by organizations as their primary engine for integrating data, processes, and information technology, in real time, across internal and external value chains; 
3. impound deep knowledge of business practices that vendors have accumulated from implementations in a wide range of client organizations, that can exert considerable influence on the design of processes within new client organizations 
4. Semi-finished product with tables and parameters that client organization and their implementation partners must configure, customize and integrate with other computer-based information system to meet their business needs

Enterprise” view.

An enterprise view means a large change from the traditional way of looking at organizations and these are 

1. The whole enterprise has a set of objectives. Any department can not have a separate/conflicting objective from that of the enterprise. 
2. Objective/KPI (Key Performance Indicator) of every department is derived from organizational objective. 
3. The whole enterprise works like a system where each department is a part/sub-system of this. Each of these sub-systems knows what others are doing, what is their objective/KPI and why they are doing.

Enterprise system software (ESS)

1. Enterprise system software (ESS) includes: 
2. Enterprise Resource Planning (ERP) 
3. Customer Relationship Management (CRM) 
4. Supply Chain Management (SCM) 
5. Product Life Cycle Management (PLM) 
6. Enterprise Application Integration (EAI) 
7. Data Warehousing 
8. Decision Support 
9. Intelligent Presentation Layer 
10. eProcurement/eMarketplace/electronic exchange software

Enterprise Resource Planning  system (ERP)

1. ERP programs help to manage company-wide business processes, using a common database and shared management reporting tools.
2. ERP software supports the efficient operation of business processes by integrating throughout a business tasks related to sales, marketing, manufacturing, logistics, accounting, and staffing.

Key Functional Areas of Operation

1. Marketing and Sales 
2. Production and Materials Management 
3. Accounting and Finance 
4. Human Resources

Business Process

1. A business process is a collection of activities that takes one or more kinds of inputs (raw material, information, etc.) and creates an output, such as a goods, report or forecast, that is of value to the customer 
2. A business process is a collection of activities that together add value

Characteristics of ERP Systems

1. ERP systems are large scale, end-to-end business processing systems. 
2. ERP systems provide easy and secure access to information in a real-time environment. 
3. ERP systems are function-rich and integrate majority of a business’s processes and operations. 
4. ERP systems affect major departments in a company and tend to create changes in many business processes of the organization. 
5. ERP systems are commercial software packages that are either designed as mainframe applications or designed to work on a client server environment. 
6. An ERP software package can be customized to suit the specific business’s needs of any organization. 
7. ERP systems provide support for multiple currencies and languages. 
8. An ERP system makes use of an enterprise-wide database to provide timely, relevant and shared information in an easy-to-use format.

Why we need ERP?

Integrate all information flow in the company and at the same time make an efficient use of  technology 

1. Integrating all the business functions of the enterprise. 
2. Integrating all the systems running in different locations. 
3. Transparency of information across the whole organization.

Materials Requirement Planning (MRP)

1970’s, MRP utilizes software applications for scheduling production processes. MRP generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation

Material Requirement Planning (MRP)

1. Which finished products are needed to be manufactured?   master production schedule 
2. What is the quantity of raw materials/components needed to make these finished products?      bill of material (BOM) that defines the requirement 
3. How much of this are available in stock inventory records 
4. How much to order? 
5. How much components/sub assemblies are to be manufactured in-house ?

Manufacturing Resource Planning (MRP II)-

1. 1980’s Manufacturing Resource Planning or MRP II utilizes software applications for coordinating manufacturing processes, from product planning, parts purchasing, inventory control to product distribution. 
2. The greatest strength of MRP II is its sales and operations planning (SOP) process    it integrates business plan, financial plan, production plan, capacity plan and material plan.
3. Also help in all supply chain execution processes creating purchase order, creating invoices and billing document, inventory management, etc.

              Top Keywords

 "Introduction to Enterprise Resource Planning - ERP" ,  "introduction to enterprise resource planning system" ,  "what is erp and how does it work" , "benefits of erp" , "characteristics of erp" ,  "erp examples" , "mrp vs erp" , "difference between mrp and erp pdf" , "mrp 1 vs mrp 2"