2. Intro to ERP

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Enterprise Resource Planning (Second Edition) By Alexis Leon (2008)Enterprise Resource Planning (Second Edition) By Alexis Leon (2008)

02. Introduction to ERP02. Introduction to ERP



Enterprise Resource Planning (Second Edition). Copyright 2008, Alexis Leon. All rights reserved.

Wha t is ERP?ERP is an abbreviation for Enterprise Resource Planning andmeans, 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 enterprisemanagement.ERP p a ck age s are integrated (covering all business functions)

software packages that support the ERP concepts.ERP softw a r e is a mirror image of the major business processes of an organization, such as customer order fulfillment andmanufacturing.ERP integrates all business functions into a single, integratedsoftware program that runs on a single database so that the various

departments can more easily share information and communicate with each other.� The integrated approach of ERP has tremendous power and

potential in improving the efficiency , productivity, andcompetitiveness of the organization.




C ommon Myt h s ab out ERP1 . ERP means more work and procedures2. ERP will make many employees redundant and jobless3. ERP is the sole responsibility of the management4. ERP is just for the managers/ decision-makers5. ERP is just for manufacturing organizations6. ERP is just for the ERP implementation team7. ERP slows down the organization8. ERP is just to impress customers9. ERP package will take care of everything10 . One ERP package will suit everybody 11 . ERP is very expensive1 2. Organizations can succeed without ERP




H istory of ERP

� Origins in the manufacturing industry� 1960·s ² Inventory management and control

systems� 1970·s ² Materials Requirement Planning

(MRP) and Closed-loop MRP� 1980·s ² Manufacturing Requirements

Planning (MRP II)� 1990·s ² Enterprise Resource Planning (ERP)� 21 st century ² ERP II




Inv e ntory M a n age m e nt a nd C ontrol

� Inventory management and control is thecombination of information technology andbusiness processes of maintaining theappropriate level of stock in a warehouse.

� The activities of inventory management includeidentifying inventory requirements, settingtargets, providing replenishment techniques andoptions, monitoring item usages, reconciling theinventory balances, and reporting inventorystatus.




C los e d-loop MRP

� Merger of capacity planning techniques with MRP� Tools developed to support the planning of sales and

production levels, development of production schedules,forecasting, sales planning, capacity planning and orderprocessing.� Various plant, production, and supplier schedulingtechniques for automating the processes inside andoutside the organization, were built into the MRP systemto create the closed-loop MRP .

� Closed-loop MRP is a series of functions for automatingthe production process .� It contains tools and techniques to address both priority

and capacity and supports both planning and execution .




M a nuf a cturin g R e sourc e Pl a nnin g (MRP II)

� Evolved from closed-loop MRP� Contains additional capabilities like sales and

operational planning, financial interface and simulationcapabilities for better decision-making� MRP II is a method for the effective planning of all the

resources of a manufacturing company

� Utilizes software applications for coordinatingmanufacturing processes, from product planning, partspurchasing, inventory control to product distribution.




Ent e rpris e R e sourc e Pl a nnin g (ERP)

� Fundamentals of ERP are the same as that of MRP II.� ERP is broader in scope and is capable of dealing with more

business functions and has a better and tighter integration with thefinance and accounting functions .

� ERP is an enterprise-wide set of forecasting, planning andscheduling tools, which links customers and suppliers into acomplete supply chain.

� The goals of ERP include high levels of customer service, improvedproductivity, cost reduction, better inventory turnover (just-in-timeinventory), etc.

� ERP is more powerful because it applies a single set of resourceplanning tools across the entire enterprise, provides real-timeintegration of sales, operating and financial data and connectsresource planning approaches, to the extended supply chain ofcustomers and suppliers.




R ea sons for t he Growt h of ERP

� ERP improves business performance ³cycle timereduction, inventory reduction, faster response times,streamlined and faster order fulfillment, etc.

� ERP supports business growth requirements like newproducts, product lines, customers, multiple languageand multiple currency support, etc.

� ERP provides flexible, integrated, real-time decisionsupport

� ERP eliminates limitations in the legacy systems� ERP takes advantage of the untapped mid-market of

medium-sized organizations




A dv a nt age s of ERP

� Business integration - ERP packages integrates the informationprocessing and automates data updating (automatic data exchangeamong applications) between related business components.

� Flexibility - Diverse multinational environments such as language,

currency, accounting standards, etc. are covered in one system,which makes the ERP systems very flexible.� Better analysis and planning capabilities ² ERP systems enables the

comprehensive and unified management of related businesses andits data. This unification makes it possible to fully utilize manytypes of decision support systems and simulation functions.

� Use of latest technology - ERP vendors uses the latest developmentsin the field of information technology. This technology adoptionbenefits the organizations using the packages as they get betterproducts and with better capabilities.




Wh y ERP?

Why ERP? ± ERP offers solutions for all business functions ± Packages available for organizations of all sizes and types ± Global nature (multi-lingual and multi-currency support)

Over Exp ectations abut ERP ( One of t he main reasons for failed im p lementations) ± Insufficient pre-implementation preparation ± Lack of awareness among employees ± Lack of awareness among management about costs ± Wrong concepts about ROI and payback period

S uccessful ERP I m p lementations ± Conduct Gap analysis to find out company requirements and the functions a package

possesses. ± Select experienced and professional consultants

± Select the right package ± Select employees with the right attitude for implementation team ± Ensure that knowledge transfer happens between consultants and employees as well as

between vendors and employees ± Ensure that there is enough in-house consultants and integrators during the operation and

maintenance phase

2. Intro to ERP

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