ERP Book Authored by Jyotindra Zaveri - Second Edition - Excerpts Only

ERP Book Excerpts
Second Edition July 2012
ENTERPRISE RESOURCE PLANNING
PROF. Jyotindra Zaveri
IT Consultant and Trainer Pune, India
Second Edition: 2012
Himalaya Publishing House
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Copyright 2007-2015 Zaveri Jyotindra. All rights reserved. No part of this book may be reproduced, translated, converted into audio-video media, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of Prof. Zaveri Jyotindra. Permission may be sought directly from Prof. Zaveri. Email j.zaveri@dnserp.com . The export rights of this book are vested with Prof. Zaveri Jyotindra. The DNS ERP Software is registered with the government of India and copyright law protects the same. Any use of unauthorized source or DNS software is illegal. All rights are reserved with Prof. Zaveri Jyotindra for the DNS ERP computer program. Limits of liability and disclaimer of warranty: Notice: The author and publisher of this book have tried best to ensure that the programs, procedures, and functions described in the book are correct. However, the author and publishers make no warranty of any kind, expressed or implied, with regard to these programs or documentation contained in this ERP book. The author and publisher shall not be liable in any event of any damages, incidental or consequential, in connection with, or arising of the furnishing, performance or use of the ERP software package, procedures, and functions. Product name mentioned are used for identification purposes only and may be trademarks of their respective companies. All trademarks referred to in the book are acknowledged as properties of their respective owners. No responsibility is assumed by the author for any damage to persons or property as matter of products liability, negligence or otherwise, or from any use or operations of any methods, instructions, or ideas contained in the material herein. Because of rapid advances in the Information Technology and business challenges, independent verification of methods should be made. The author has used its best endeavors to ensure that any URLs for websites referred to in this ERP book are correct and active at the time of going to press. However, the author or publishers has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain relevant. First edition : 2009 Second edition: 2012 Published by Himalaya Publishing House Pvt. Ltd., India.
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This ERP book is available from: Himalaya Publishing House Pvt. Ltd. Offices as follows Mumbai Head Office Anuj Pandey, Niraj Pandey, K N Pandey, D I R E C T O R S Himalaya Publishing House Pvt. Ltd 'Ramdoot', Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004, Maharashtra, India Tel : (91) (22) 23863863 / 23860170 Fax : (91) (22) 23877178 S K Srivastava, Sales Manager Email : srivastavask@himpub.com Email : himpub@vsnl.com Website : www.himpub.com Regional Offices
New Delhi Sudhir Joshi, Director, Vijay Rawat, Regional Manager "Pooja Apartments", 4-B Murari Lal Street, Ansari Road, Darya Ganj, New Delhi - 110 002, India Tel : (91) (011) 23270392, 23278631 Email : hphdel@yahoo.co.in Bengaluru Vijay Pandey, Regional Manager No 16/1 (Old 12/1), 1st Floor, Next to Hotel Highlands, Madhava Nagar, Race Course Road, Bengaluru - 560001 Tel : (91) (080) 22281541, 22385461 Fax : (91) (080) 22286611 Email : hphblr@vsnl.com Hyderabad Krishna Poojari, Regional Manager No-3-4-184, Lingampally, Besides Raghavendra Swamy Matham, Kachiguda, Hyderabad - 500027 Tel : (91) (040) 27550139 Email : hphhyd@hotmail.com Chennai Yeshwant Rao, Regional Manager Himalaya Publishing House Pvt. Ltd. No. 8/2, Madley 2nd Street, Ground Floor, T.Nagar, Chennai - 600 017 Tel : (91) (044) 32463737, 09380460419, 09345345051
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Email : Chennai@himpub.com Nagpur G N Pandey, Director Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur - 440 018 Tel : (91) (0712) 2738731, 3296733 Fax : (91) (0712) 2721215 Email : Nagpur@himpub.com Ernakulam K Sivadasan, Regional Manager 39/176 (New No: 60/251) 1ST Floor, Karikkamuri Road, Ernakulam, Kochi - 682011 Kerala Tel : (91) (0484) 2378012, 2378016 Email : ernakulam@himpub.com Lucknow House No. 731, Sekhupuram Colony , Near B.D. Convent School Lucknow 226 024 Tel : (91) (0522) 2339329, 4068914 Email : lucknow@himpub.com Pune K Surendra, Regional Manager First Floor, "Laksh" Apartment, No. 527, Mehunpura, Shaniwarpeth, (Near Prabhat Theatre), Pune - 411 030. Tel : (91) (020) 24496323, 24496333, 3232 6733 Fax : (91) (020) 2449 6333 Email : surendra@himpub.com Orissa Bijoy Ojha, Regional Manager Himalaya Publishing House Pvt. Ltd., 5 Station Square, Bhubaneshwar, Orissa- 751001. Tel : 0674-2532129, /(M) 9861046007 Email : bijoyojha@himpub.com Ahmedabad Nagendra Acharya, Regional Manager No. 114, Shail, 1st Floor, Opp. Madhu Sudan House, C. G. Road, Navrang Pura, Ahmedabad - 380009, Gujarat Tel : (91) (079) 26560126 Email : naganderacharya@himpub.com
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Indore
S K Srivastava Sales Manager Shyam Singh Thakur Sales Executive Kesardeep Avenue Extension, 73, Narayan Bagh, Flat No. 302, 3rd Floor, Near Humpty Dumpty School, Narayan Bagh, Indore - 452007, MP Tel : 09301386468 Email : srivastavask@himpub.com Kolkata N K Mitra Regional Manager 108/4, Beliaghata Main Road, Near ID Hospital, Opp. SBI Bank, Kolkata - 700010. Tel : 033-32449649 Email : kolkata@himpub.com Bhopal S K Srivastava Sales Manager Email : srivastavask@himpub.com Tel : 07498213322 Guwahati Himalaya Publishing House Pvt. Ltd. House NO. 15 Behind Pragjyotish College Near Sharma Printing Press P. O. Bharalumukh, Guwahati 781009.(Assam)
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Foreword
Dear Mr. Jyotindra Zaveri, I read carefully, and with keen interest your book on Enterprise Resource Planning so painstakingly written by you. It throws a new light on the concept of Enterprise Resource Planning and would be of great help to senior Managers as well as academicians. It covers all the aspects of Enterprise Resource Planning (ERP) and therefore, would be a great source of guidance to the readers concerned. This is a first ever kind of book I have come across written in a scientific manner and presenting the same in a lucid and simple language. ERP as a concept and as a business process model is of recent development. You have written the book specifically for the functional managers targeting the SME sector (Small and Medium size Enterprises). This book exhaustively covers different modules in the industries and actual data entry screens, reports, master files of the business processes and sufficient case studies to understand the ERP in practice. You have wonderful track record of rich and vast experience and knowledge of India and abroad. You have amply demonstrated it in the book. The book can be definitely used by business schools as a reference book for ERP. It is useful to corporate to follow the steps given by you in order to reap the benefits of ERP in their organization. The chapter regarding the Humor is an interesting addition to the book not to be found commonly in such reference books. I would certainly like everyone concerned to use this book for reference purposes. Please accept my appreciation and congratulations for writing this book on a valuable subject. Regards,
Dr. P. C. Shejwalkar,
Director IME, President ASM. Ex Dean Faculty of Management & Professor Emeritus of Commerce & Management Sciences, University of Pune.
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Preface
India Inc. is growing. SME are growing faster. In the midst of the Internet revolution, they are caught between the two methods of doing business. One is bullock cart method (legacy procedures) and the other is business process driven method. This book gives the reader the basic as well as advanced concepts of ERP. The business logic is prepared from the business rules approved by the top management. The entire organization, business partners, associates, employees, work as per the system defined by the business rules. The ERP captures these business rules. ERP software system will now ensure that everybody follows the same. ERP and ISO procedures go together. ERP is complete integrated business management software. This manual intends to define the concept and explain the logic on which ERP is designed and customized for a typical organization, especially the manufacturing business, as this poses the biggest challenge in deploying ERP on the shop floor. What is DNS? The name DNS or the Digital Nervous System is mentioned in the book Business @ speed of thought, written by Mr. Bill Gates. The ERP is like the nervous system of the human body for the business. Reader will find the word DNS used in the book as synonym to ERP. MIS or the Management Information System in the business organization is the result of good ERP software. All kinds of organizations are using ERP to get good MIS. For instance, hospitality industry, hospitals, airlines, institutes, etc. This book also deals with the manufacturing business, which is yet unexplored. The supply chain management (SCM) is also one of the key business processes that are integrated in a good ERP system. There is a need for ERP book that give practical guidelines. Managers do not understand the idea that manufacturing activity can be viewed as a process and then improved. Once I had a chance to talk to someone in an MNC food chain joint. He showed me a manual where it was clearly written serve the glass of the soft drink with four cubes of ice and put in the left side of the plate. There are not many SME organizations that have bothered to make a proper SOP (Standard Operating Procedures) manual. Sometimes the MD argues with me, what is there to write? In other words, hardly any document is available. This book does not discuss the hard-core programming used in the ERP software. Bits and bytes, tables of the backend RDBMS is not described in this book. This book is not for a developer who is looking for programming techniques used in ERP.
Jyotindra Zaveri, Pune j.zaveri@dnserp.com
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Acknowledgements
The author would like to thank the team at DNS e-Business Consultancy for their help in the creation of this book. Many thanks to the reviewers who have greatly assisted in developing the book. I thank Dr. P. C. Shejwalkar to read the book and write the foreword. I thank Mr. Shriniwas Rairikar (MCCIA), Dr. A. P. Ghose to give me guidance, especially stressing focus for the MBA students. I thank Dr. Milind Oka for taking his time for reviewing this book and give valuable suggestions. Care is taken to alter the actual data so that real name or actual information is not disclosed. However, in some case of screen dumps or showing graphics image of ERP input / output, some name may also appear, but the care is taken that the same does not harm the businesses. Especially while presenting case studies, organization may not like to publish the name directly, so I have avoided taking the name of the organization wherever possible. I would like to thank Ms. Sulochana, Ms. Poonam, (Mumbai) and Mr. Surendra K. (Pune) of Himalaya Publishing House for publishing this ERP book. Effort has been made to trace the owners of copyright material, in a few cases this has proved difficult. I take this opportunity to offer my apologies to any copyright holders whose rights I may have unwittingly infringed. Jyotindra Zaveri
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Learning Objectives
What is in it for me? Upon completion of this book, reader will be able to: 1. 2. 3. Describe the concept of ERP. Define key terms as they relate to ERP. Understand management. 4. 5. 6. State the benefits of ERP. State the pitfalls of ERP implementations. Understand the need for change management or Business Process the Material Requirement Planning and supply chain
Reengineering. 7. 8. 9. 10. 11. 12. Learn about the MIS or Management Information System. Understand the Total Cost of Ownership (TCO). Write a business case to justify an ERP implementation Align strategic goals, people, knowledge processes, and internal systems Concept of business processes linking with other processes. Understand a key business processes. process. Improve and simplify a business
Apply the result of business process analysis to an ERP
implementation. 13. Explain the interrelationships among the core business processes of sales order or Order Receipt Information or Order Acceptance, Bill of Materials (BOM), and work order to production. 14. 15. Describe the technological infrastructure requirements in implementing ERP. Describe project management and its use in implementing an ERP system. Describe steps necessary to successfully implement an ERP system 16. Describe the roles and responsibilities of the key organization players or stakeholders. 17. Describe how ERP can be used to achieve and sustain competitive advantage.
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About the book

Some companies use information to innovate, control costs, or capture new markets. Others gather and evaluate information, but seem unable to translate data into productivity. In this ERP book, the author examines how companies use the management information to gain the competitive edge. Enterprise Resource Planning (ERP) helps the organization, especially manufacturing companies to manage the growth. There will be one more w in the WWW that is wWWW, the wireless-World-Wide-Web. SME cannot keep on using the bullock cart method of doing business anymore. What is new in this ERP book? Unlike other ERP textbooks, this book gives actual data entry screens, reports, and master files details for practical learning. This book is a good reference for various key functions managers, such as accounts, purchase, sales, production, etc. It is not just a book but also a companion for corporate commandos. This ERP book might not seem extra-ordinary, but it is. Business processes integrated in ERP should have already been demystified, but it has not been. What does this ERP book offer to lecturers, faculties, consultants? The book is projected to be a comprehensive guide to all aspects of deploying ERP within an organization. Reader will find that this ERP book has a good range of case studies to support their teaching. Who should use this ERP book? This book is useful for existing ERP users and ERP power-users as well. Senior managers and directors, CEO, CFO, COO, seeking to deploy ERP to benefit their organization. For companies who have deployed ERP but not able to understand why real benefit is not seen. Study of this book will reveal the mistakes made by management, ERP coordinators, ERP task force, or ERP steering committee. Use this book before, during and after ERP is deployed, as a reference material. The knack to making informed decisions is necessary for success. Yet many times, managers make vital decisions without real information. Use this book to understand how you can use ERP to enhance your decision-making aptitude. This book will be of immense value to professionals dealing with ERP implementation, I. T. professionals, mangers handling sales and distribution, logistic, supply chain and finance.
MBA Students: This ERP book will be very useful to the B-Schools students who want to pursue their MBA. All these aspiring managers must know ERP well. In the interviews now on companies will not ask whether you know MS office or not, they will ask, Do you know ERP? This will be useful for managers working in small and medium size enterprises (SME).
ERP Case studies: The author has worked on live ERP projects for over 200 organizations, in India and abroad. This is result of some twenty years of practical ERP experience. The author had an opportunity to offer I. T. solutions to small and large organizations, private and Government organizations. The ERP book also includes several case studies to illustrate various points in the book. This important book gives tactics about ERP implementation. The need has
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never been more crucial. Global economic scenario is unpredictable. The competition is increasing. Business executives are challenged to leverage I. T., to improve the enterprise performance. This book attempts to answer questions such as, How do you become a strategic ERP consultant, that enables efficient business management and improve operational efficiency? ERP is also evolving. Author discusses the emerging developments and compelling Business Process Management (BPM) for success. What can ERP do for the SME? Act confidently. Improve operational efficiency. Give the enterprise the edge it needs to succeed. Study this book to see why even small and medium business (SMB) units are using ERP software to achieve a competitive advantage. The decision making process is enriched if additional, relevant information is available. However, collecting information is costly. Hence, cost of additional information need also to be controlled. ERP will help user in this aspect immensely. Decision making under uncertainly will be facilitated. ERP is synonym to the DSS or Decision support system. This ERP book explains how ERP as a management tool, in a SME is a powerful and strategic set of applications that provides business visibility with real-time personalized access to enterprise data, for the purpose of analyzing, and benchmarking customers, suppliers, and the overall business' performance. This book discusses the common questions asked, to run a manufacturing company efficiently: Do you get information when you want? Do you have islands of information? Is stores-in-charge able to give you correct quantity of raw material in stock, as of now? Is purchase order linked to material inwards? Is inventory and accounts integrated? The companion website: Faculty and students can use the online resource for this book at www.dnserp.com. This companion website will be helpful for students as well as lecturers. Make the most of your studies.
This book attempts to answer all questions about ERP that you wanted to ask, but did not know whom to ask.
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About the author

Prof. Jyotindra Zaveri (a.k.a. Jyoti) - IT consultant and trainer. Computer Engineer, (Germany). IT professional since...1975. Specialist in ERP and Digital Marketing. He has been always working with innovative technologies in IT to build a digital eco system, to empower users. He has mastered fifteen digital platforms and specializing in topics such as Social Media, ERP, CRM, and e-Commerce. He is specializing in digital platforms with a passion for tapping the power of the social media and related technologies and applying them for business development. Having lived through every avatar of Internet Marketing, he can bring a depth of online experience; rare among todays copy-paste culture. He is passionate about Business Process Re-engineering (BPR) and challenges the legacy methods. He enjoys working with motivated and inspiring people providing creative solutions to business needs. He offers business solutions rather than solving IT challenges. He lives on the web: Always found stuck with his Apple iPhone, laptop, airplane seat, or combination of all these. Visiting faculty in India and Germany. Over 36 years of experience in IT, combined with academic credentials in Electronics and Electrical Engineering from VJTI, Mumbai, India. See month-by-month and year-by-year track-record since ...1975 http://www.dnserp.com/track_record.htm He has written seven books. IT consultant with knowledge of computer hardware, software and Internet technologies; rather a unique combination. Travelled extensively around the word: Bahrain, France, Germany, Italy, Japan, Malaysia, Nederland, Singapore, Switzerland, Thailand, UAE, UK, and USA. After completing studies, his first job was in IBM (1975). He was specially trained in Leipzig, Germany. He was specially invited by Microsoft to meet Mr. Bill Gates in Mumbai (his first visit to India), on 5 March 1997. He receiving the Premium Channel Partner Award from Intel From Mr. Atul Vijaykar, President, Intel Asia Electronics Inc., May 1998. Specialties: Digital platforms for marketing and training, Web 2.0, SEO, E-business, E-commerce, ERP, Social media marketing strategies, Cyber branding, MIS, Supply chain management, Change management (BPR).
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Book review
I appreciate Prof. Jyotindra Zaveri for making immense efforts in authoring the book "Practical Guide to Enterprise Resource Planning". It reflects several years of experience and sincere efforts to present the complex subject in simple language loaded with live cases. Prof. Jyotindra Zaveri has been helping enterprises, especially from the Small and Medium Enterprises segment in implementing ERP to gain competitive advantage. Several cases in the book clearly reflect the dexterity. It is especially useful in the highly dynamic and demanding market environment of the 21st century that SME have to face. This book is a real treasure of the very best concepts from academics, relevant and insightful case studies, and powerful prescriptions for practicing managers. Prof. Jyotindra Zaveri has tried his best to keep away the hype and jargon. Reader can easily navigate the world of ERP. B-School students as well as practicing managers will certainly find this book very interesting especially with its own companion website. Dr. Milind M. Oka [Dr. Oka holds Ph.D. from University of Pune. He is Certified Assessor of Quality Systems. He has rich experience of over 35 years. He is an Academician, Management Consultant, Author, and Corporate Trainer.]
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Book review
The book on ERP by Prof. Jyotindra Zaveri presents in a very lucid way and simple language various aspects of ERP. Especially the highlights seamless integration of business processes in ERP by using more than 300 diagrams / pictures / tables and giving practical case studies and examples from purchase, accounts, exports, material management, HR and all departments, which has increased its usefulness and value. I can safely say that even a layman like me or anybody working in ERP system will get all practical hints and guidelines regarding what, why, where, when and why of ERP. Mr. Shriniwas Rairikar, M. Com., MPM, LLB, DLL & LW, ISO 9001-2000 Lead Auditor. ISO 9001-2000 Diploma (U.K.). Senior Director, MCCIA. Founder Director Dasbodh Management academy.
Book review
Dear Sir, At the very outset, I would like to congratulate you for the launch of your book. I have just one comment - being an institute in e-business, of all the books on ERP that I have gone through, yours might be in the top 10 books that I have read so far. Many of them are by international authors also. Once again, congratulations for the launch of the book. I am sure it will be a great success. Thanking you, With warm regards, Jai Singh Director IIeBM, Management Institute.
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Book review The recognition of ERP as a business application does deserve a special mention. The most crucial factor in the whole system of ERP is the implementation aspect. The implementation phase can decide the fate of ERP and its success. The success of an ERP implementation again lies on the speed at which it is introduced and applied. For this, necessary training needs to be imparted to all concerned who can implement ERP at the fastest speed. This training converted into practice by implementation of ERP would reveal the real advantages that an organization would receive in terms of cost control and cost reduction at every stage and improvement in profitability. The present work is the outcome of Prof. Zaveris hard work of over a period of nearly two decades in this area of ERP. The contents of this book depict his deep knowledge about the subject. His step-by-step approach with logical explanation at every stage leads a reader to end up with a thorough understanding of the subject. Even a nonprofessional can understand the language that he has used in his book. Prof. Zaveris interaction with various industries as well as students has helped him to assimilate his ideas in writing this book. I encourage and recommend SMEs, corporate, and others to read this book, understand the subject thoroughly and to implement ERP at their organizations. This book would also be extremely useful to students to understand the subject since it is written in a most lucid way. I wish all success to Prof. Zaveri in launching this unique book for the first time in the market. Dr. A. P. Ghosh Director Balaji Institute of Modern Management (BIMM) Sri Balaji Society, Pune
[Dr. A. P. Ghosh has a Ph. D. in Financial Management from University of Pune. He is certified corporate director from World Council for Corporate Governance London. He has authored many books on finance and management].
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CONTENTS PART I ..................................................................................................................................................................... 22 CHAPTER 1. INTRODUCTION ..................................................................................................................... 24 HOW TO USE THIS BOOK? ........................................................................................................................... 24 ERP Definition ................................................................................................................................................ 25 ERP vendors.................................................................................................................................................... 27 What is the difference between SAP and ERP? ................................................................................. 27 ERP customization ........................................................................................................................................ 28 ABOUT SMALL AND MEDIUM SIZE COMPANIES ............................................................................. 29 COMPUTER NETWORK SYSTEM SCHEMATIC ..................................................................................... 32 IT INFRASTRUCTURE RECOMMENDATIONS CHECKLIST ........................................................... 33 ERP IMPLEMENTATION PROJECT MANAGEMENT ........................................................................... 35 Implementation Strategy .......................................................................................................................... 36 Roadmap .......................................................................................................................................................... 41 CHAPTER 2. MASTERS DATA AND PRINTING CONCEPTS .......................................................... 45 MASTER DATA ENTRY FORMS.................................................................................................................... 45 PRINTING (HARDCOPY) ............................................................................................................................... 49 CHAPTER 3. CHANGE MANAGEMENT ..................................................................................................... 51 BPR OVERVIEW ................................................................................................................................................. 54 WHAT USER WANTS? ..................................................................................................................................... 57 CHAPTER 4. TCO OF ERP .............................................................................................................................. 58 CHAPTER 5. ERP IMPLEMENTATION ..................................................................................................... 60 OATH ........................................................................................................................................................................ 60 WHY ERP PROJECT FAILS ............................................................................................................................ 61 ERP IMPLEMENTATION TIPS FOR SUCCESS ..................................................................................... 66 IMPORTANT INSTRUCTIONS ..................................................................................................................... 67 CUSTOMIZATION .............................................................................................................................................. 69 IMPORTANCE OF QC DATA .......................................................................................................................... 73 CRP ........................................................................................................................................................................... 75 TEST RUN: CHECKING AND MARKING .................................................................................................. 77 PROOF OF CONCEPT FILE ............................................................................................................................ 79 DRAFT OF LETTER TO INFORM VENDORS / CLIENTS .................................................................. 83 CHAPTER 6. GETTING STARTED ............................................................................................................... 84 ERP CONCEPT ..................................................................................................................................................... 85 Material outward ........................................................................................................................................... 87
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CHAPTER 7. SCOPE OF ERP MODULES.................................................................................................. 88 CHAPTER 8. ERP DOCUMENT FLOW AND MATERIAL FLOW ................................................... 112 PART II ................................................................................................................................................................. 114 SECURITY MODULE & CLOSING BALANCE ....................................................................................... 116 CLOSING BALANCE ........................................................................................................................................ 116 CLOSING STOCK .............................................................................................................................................. 119 CHAPTER 9. PROCUREMENT MODULE ................................................................................................. 123 PURCHASE MASTER.............................................................................................................................................. 125 Vendor Type Master .................................................................................................................................. 125 Vendor Master ............................................................................................................................................. 126 PURCHASE TRANSACTIONS ................................................................................................................................. 129 GRN (Goods Receipt-cum-inspection) ................................................................................................ 138 Job Order ....................................................................................................................................................... 138 PURCHASE REPORTS ............................................................................................................................................ 139 CHAPTER 10. IMPORT PURCHASE MODULE .................................................................................... 139 CHAPTER 11. MATERIAL MANAGEMENT (MM) MODULE .......................................................... 141 INVENTORY MASTER ............................................................................................................................................ 142 Item Master .................................................................................................................................................. 143 Finished Goods (Products) ...................................................................................................................... 144 Location concept ......................................................................................................................................... 146 Subcategory Master................................................................................................................................... 147 UOM (Unit of Measurement) Master.................................................................................................... 148 INVENTORY TRANSACTIONS ................................................................................................................................ 149 Goods Receipt Note (GRN) / Purchase Bill data entry screen ................................................... 149 Stock Transfer Challan (STC) ................................................................................................................ 150 Purchase return ........................................................................................................................................... 150 Stock Adjustment Note ............................................................................................................................ 151 INVENTORY REPORTS........................................................................................................................................... 151 GRN OR PV Register .................................................................................................................................. 151 Item Ledger .................................................................................................................................................. 153 Stock Statement ......................................................................................................................................... 153 MIN Register: ............................................................................................................................................... 154 Stock Adjustment Note Register: ......................................................................................................... 154 CHAPTER 12. BOM MODULE ..................................................................................................................... 155 CHAPTER 13. SUBCONTRACTOR OUT MODULE ............................................................................. 175 CHAPTER 14. PRODUCTION MODULE ................................................................................................. 188 MAKE TO ORDER- MAKE TO STOCK .................................................................................................................... 191 E-MANUFACTURING.............................................................................................................................................. 193 ERP PRODUCTION MODULE LOGIC .................................................................................................................... 193 ASSEMBLY PRODUCTION ..................................................................................................................................... 194 PRODUCTION MASTER ......................................................................................................................................... 194 MACHINE MASTER................................................................................................................................................ 195 LOCATION ............................................................................................................................................................. 195 PRODUCTION TRANSACTIONS ............................................................................................................................. 195 WORK ORDER ...................................................................................................................................................... 195 PRODUCTION ENTRY ............................................................................................................................................ 196 SUBCONTRACTOR OUT ....................................................................................................................................... 196
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FAQ FOR PRODUCTION MODULE ......................................................................................................................... 198 PRODUCTION REPORTS........................................................................................................................................ 200 Work Order Register.................................................................................................................................. 200 PROCESS PRODUCTION .............................................................................................................................. 201 PRODUCTION MASTER ......................................................................................................................................... 202 MACHINE MASTER EXPORTED TO EXCEL SHEET IS SHOWN BELOW: ................................................................ 202 OPERATOR MASTER ............................................................................................................................................. 203 PROCESS PRODUCTION TRANSACTIONS ............................................................................................................ 203 WORK ORDER ...................................................................................................................................................... 203 Production Planning ................................................................................................................................... 204 Process Production Entry ......................................................................................................................... 205 STAGE WISE INSPECTION .................................................................................................................................... 206 PRODUCTION REPORTS........................................................................................................................................ 207 Work Order Register.................................................................................................................................. 208 Production Register.................................................................................................................................... 209 MRP .................................................................................................................................................................. 209 Production Indent ....................................................................................................................................... 211 CHAPTER 15. ORDER FULFILLMENT MODULE ................................................................................ 215 Customer Type Master ............................................................................................................................. 216 Coordinator master .................................................................................................................................... 218 Sales Engineer master.............................................................................................................................. 218 Dealer Master ............................................................................................................................................... 222 Delivery Mode Master ............................................................................................................................... 222 Lead ................................................................................................................................................................. 224 Delivery Schedule....................................................................................................................................... 229 Sales Menu .................................................................................................................................................... 230 Sales Invoice ................................................................................................................................................ 231 Commercial invoice.................................................................................................................................... 232 Sales Quotation ........................................................................................................................................... 233 Sales Invoice ................................................................................................................................................ 237 Return Goods note..................................................................................................................................... 240 Purchase Return (Excisable) Invoice. ................................................................................................. 241 ORDER FULFILLMENT (SALES) REPORTS ........................................................................................................... 242 Invoice Register .......................................................................................................................................... 247 Enquiry register ........................................................................................................................................... 248 Sales Invoice Register .............................................................................................................................. 248 Quotation Register ..................................................................................................................................... 250 OA (ORI) Register ...................................................................................................................................... 251 Reverse Invoice Register ......................................................................................................................... 251 ORI OR OA Status Register .................................................................................................................... 251 Ledger ............................................................................................................................................................. 251 Sales Analysis .............................................................................................................................................. 254 Dashboard ..................................................................................................................................................... 254 EXPORT MODULE ............................................................................................................................................ 256 CHAPTER 16. SUBCONTRACTOR IN ..................................................................................................... 260 MATERIAL INWARD TRANSACTION .................................................................................................... 262 CHAPTER 17. ACCOUNT MODULE .......................................................................................................... 263 CHART OF ACCOUNTS RECOMMENDATIONS ....................................................................................................... 267 ACCOUNT MASTER ............................................................................................................................................... 269
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Group (Schedule) Master ........................................................................................................................ 269 Subgroup Master ........................................................................................................................................ 270 GL Master ...................................................................................................................................................... 271 Details master: Narration Master ......................................................................................................... 271 ACCOUNT TRANSACTIONS ................................................................................................................................... 271 MONEY RECEIPTS ................................................................................................................................................. 273 ADJUSTMENT WINDOW ........................................................................................................................................ 274 JOURNAL VOUCHER .............................................................................................................................................. 275 PAYMENT VOUCHER ............................................................................................................................................. 276 CONTRA ENTRY .................................................................................................................................................... 277 ADJUST OPEN SALES INVOICE ........................................................................................................................... 277 ADJUST OPEN PAYMENT VOUCHER ..................................................................................................................... 277 CREDIT NOTE ....................................................................................................................................................... 278 DEBIT NOTE ......................................................................................................................................................... 279 EXPENSE VOUCHER .............................................................................................................................................. 281 ACCOUNT REPORTS ............................................................................................................................................. 282 CREDIT NOTE REGISTER ..................................................................................................................................... 282 DEBIT NOTE REGISTER ....................................................................................................................................... 283 SUB LEDGER TRIAL BALANCE ............................................................................................................................. 283 GENERAL LEDGER ................................................................................................................................................ 284 BANK BOOK .......................................................................................................................................................... 284 CASH BOOK .......................................................................................................................................................... 284 TRIAL BALANCE .................................................................................................................................................... 284 CONTRA ENTRY REPORT ...................................................................................................................................... 285 CREDIT NOTE REGISTER ...................................................................................................................................... 285 DEBIT NOTE REGISTER ........................................................................................................................................ 285 JOURNAL VOUCHER REGISTER ............................................................................................................................ 285 CUSTOMER FULL LEDGER .................................................................................................................................... 286 CHAPTER 18. ACCOUNTS POINTS ......................................................................................................... 287 CHAPTER 19. SALES TAX AND VAT ...................................................................................................... 291 CHAPTER 20. EXCISE INTEGRATION .................................................................................................. 294 DAILY STOCK ACCOUNT OR DSA REGISTER ................................................................................... 297 GAR 7 CHALLAN .......................................................................................................................................... 298 CHAPTER 21. SARBANES-OXLEY ........................................................................................................... 301 CHAPTER 22. AFTER SALES SERVICE MODULE ............................................................................. 302 MACHINE HISTORY CARD OR HC .......................................................................................................... 302 CHAPTER 23. PAYROLL MODULE ........................................................................................................... 308 CHAPTER 24. AUTOMATIC EMAIL ALERT .......................................................................................... 317 CHAPTER 25. ERP MAJOR TRANSACTIONS LIST .......................................................................... 319 CHAPTER 26. OTHER MASTERS .............................................................................................................. 321 CHAPTER 27. BACKUP .................................................................................................................................. 323 CHAPTER 28. ERP BLOG .............................................................................................................................. 329 PART III ............................................................................................................................................................... 331 CHAPTER 29. CASE STUDIES ................................................................................................................... 332 ERP FOR CONSTRUCTION INDUSTRY ................................................................................................................. 333
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ERP FOR A CORRUGATED BOX MANUFACTURING COMPANY .............................................................................. 334 ERP FOR VADA PAV COMPANY ........................................................................................................................... 342 ERP FOR LENS MAKING COMPANY ...................................................................................................................... 346 ERP FOR OEM SUPPLY OR MAKE TO ORDER ...................................................................................................... 353 ERP IN PRECISION MACHINING MANUFACTURING ............................................................................................. 355 ERP FOR CHEMICAL INDUSTRY ........................................................................................................................... 356 ERP FOR A UPS MANUFACTURING ..................................................................................................................... 357 ERP FOR ELECTRONIC CONTROL INSTRUMENTS MANUFACTURING................................................................... 359 ERP FOR AN INDUSTRIAL SYSTEM MANUFACTURING......................................................................................... 360 ERP FOR SPM MANUFACTURING ........................................................................................................................ 362 ERP FOR FURNITURE MANUFACTURING ............................................................................................................. 363 ERP FOR TOYS MANUFACTURING ....................................................................................................................... 365 CHAPTER 30. MC DONALDS STORY..................................................................................................... 368 CHAPTER 31. AUTOMOBILE ENTERPRISES ..................................................................................... 371 CHAPTER 32. RFID ......................................................................................................................................... 372 CHAPTER 33. QUESTIONS ......................................................................................................................... 373 CHAPTER 34. ERP DATA VALIDATION ............................................................................................... 379 CHAPTER 35. HUMOR ................................................................................................................................... 387 GLOSSARY........................................................................................................................................................... 391 INDEX .................................................................................................................................................................... 397
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ERP Book Excerpts
Part I Island of information
WHY E.R.P ? BECAUSE OF ISLANDS OF INFORMATION
My growth will be OK . No?
Material Management Finance
Corporate office Production Sales Group

Figure 1: Why ERP? Islands of information.
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ERP Book Excerpts
Seamless Integration of business processes in ERP

SECURITY ISO / Q C CRM
COST SHEET ESTIMATE
VAT
LOCAL PURCHASE
Accounts
Sub-Contractor OUT
PAYROLL
Order fulfillment
HR Import Purchase Production BOM

SUBCONTRACTOR
EXPORT IN After Sales Service
Material Management
Multilocation
Send / Receive data
PLANT MAINTENANCE
Automatic E-Mail
Alerts Resource Matrix Sales & Distribution E-Business
MRP
EXCISE
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ERP Book Excerpts
Chapter 1. Introduction
How to use this Book?
This ERP book gives overall scope of generic ERP software package. To understand the ERP in-depth the author has used a package called DNS. Hence, DNS appears in many screen shots. Actual print-screen of the data entry screen and the actual layout of the outputs are given for key procedures. The explanation of each ERP module gives the business blueprint where as the printouts shown gives the Proof of Concept (or POC). This Business Blueprint and POC will also be related to a particular avatar (or version) of ERP and make of the ERP. This may vary depending on the ERP vendor, versions, etc. This is a very important reference document and therefore it is necessary that the ERP implementer consultants, ERP coordinator, and ERP users all study the concepts well before embarking on to the ERP software deployment. This ERP book is a good companion during the software installation. This book is organized into three parts: 1. The first part discusses the ERP implementation methodology and overview of implementation of ERP system for effectiveness of ERP systems. 2. The second part discusses details about ERP modules or business processes such as accounts, purchase, sales, production, etc. These chapters are further divided into sections containing information about master, transaction, and report. 3. The third part gives some interesting case studies. Further learning resource: You will find many interesting PowerPoint presentations and video lectures of the author here in his free e-Learning website http://www.dnserp.com/erp_presentaions.htm Additional ERP groups and blogs to learn latest: https://www.facebook.com/groups/discuss.erp Join Facebook Group ERP. http://www.facebook.com/dnserp Like Facebook Page ERP. http://dnserp.wordpress.com Subscribe ERP Blog. http://www.twitter.com/followERP Follow on Twitter. http://linkd.in/lFj98r Join ERP, E-business Forum LinkedIn Group. Welcome to ERP This ERP book is meant for both Power User (ERP experienced user) as well as First Time User. This book will introduce all important concepts and features of this advanced ERP package. The ERP package versions (avatar) may undergo changes as the development, customization, and implementation take place. The book will also discuss many advanced concepts of ERP software.
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The DNS is short for Digital Nervous System. The word DNS is synonym with the word ERP. Throughout this book, reader will find the word DNS used instead of ERP. ERP is all about making smarter as well as faster decisions. To make well-informed and timely decisions, you need instant access to accurate information from every function in your enterprise. You need to focus on urgent tasks, instead of fire fighting. This book examines how to gain reliable, accessible information using ERP, and how to use that information to make better decisions, to a stronger competitive position. What is the relation of MIS and ERP? MIS (Management Information System) is a system to give information to managers for making decisions. ERP ensures the data capture in chronological order. ERP ensures that these managers get MIS. ERP is management software that will ensure correctness of input data and completeness of input data. Therefore, MIS is the output of ERP. What user will see on the computer screen is real time information. Behind the scene is business process management (BPM) done by the Enterprise Resource Planning software.
ERP Definition There seems to be no universally accepted definition of the ERP software, but Deloitte Consulting has defined ERP as follows: An Enterprise Resource Planning system is a packaged business software system that allows a company to: Automate and integrate the majority of its business processes Share common data and practices across the entire enterprise Produce and access information in a real-time environment
Source: Deloitte Consulting, New York, 1999.
ERP definition by the author: Enterprise Resource Planning software is complete integrated business management software, which captures data in chronological order, and is used to link businesses processes automatically, and give real time information, to authorized user. Enterprise Resource Planning System is a multi-user, multi-location, and multi-company, software solution.
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ERP-centric organization Understands that integrated business processes add significant value to the organization. Understands that business processes are a significant contributor to the fulfillment of an organizations strategy.
Non-ERP-centric organization Does not fully appreciate the contribution that integrated business process make to the organization and the realization of the organizational strategy.
Incorporates ERP into the management practices of the organization.
Management of business processes is not the primary focus.
ERP and Internet were probably the two most important information technologies to emerge into widespread use in the 1990s.
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In 1999, total revenue from the ERP software and services market was US$18.3 billion and US$ 19.9 billion in the year 2000. ERP implementation costs are often reported to be five to ten times the cost of software licenses. If so, organizations worldwide spent something like US$100 billion per annum on ERP software systems. In short, organizations around the world have made huge investments in ERP software systems in the past decade. Source: Second wave ERP published by Cambridge
ERP vendors There are hundreds of software companies offering ERP solutions. There are two kinds of ERP companies. (1) ERP software developing organizing and (2) ERP implementing partners. Some examples of ERP vendor companies: SAP, Oracle Apps (this includes PeopleSoft and JD Edwards), Microsoft Dynamics (Navision), Baan, etc. Some examples of the ERP implementer partners: Siemens InfoTech, PwC, Infosys (recent acquisition of Axon, for instance), etc.
What is the difference between SAP and ERP? This is wrong question. It is like asking, What is the difference between a car and Honda Accord? Honda Accord is one of the models of cars. Car is a generic name given to vehicle. Similarly, ERP is generic name given to enterprise management integrated software. Please note that SAP is a well-known, leading ERP company in the world. But, SAP is not the only ERP vendor. There are many ERP companies. SAP is one of the ERP companies in the world. There are hundreds of them. ERP is a generic name of the business management software. SAP is a specific name of the one of the companies, which has developed ERP software. Therefore, it is wrong way to ask, What is the difference between SAP and ERP? One may ask a question, What is the difference between SAP and MS Dynamics?? That makes more sense. SAP Certification: No doubt, SAP is considered as # 1and learning SAP ERP will be a feather in your cap, however, (first you need the cap). Many students in India unfortunately are carried away by the SAP brand name without understanding that, just by sitting in the Mercedes car, you cant learn driving. Make sure that ERP certificate is backed by adequate practical training and at least two years of work experience. A fresher with an SAP certificate is a sad joke!
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ERP Book Excerpts
Group 1
Group 2 (also referred as Tier II) Epicor Sage Infor IFS QAD Lawson CDC Software
Group 3
SAP Oracle Oracle eBusiness Suite Oracle JD Edwards Oracle Peoplesoft Microsoft Dynamics
ABAS Activant Solutions Inc. Bowen and Groves Compiere Exact NetSuite Visibility CGS Hansa World Consona Syspro
ERP customization Adding new requirements is called customization. This may be non standard feature. This non-standard involves changing software codes. It can range from relatively simple changes, such as developing very special reports, through major changes, such as changing the program , source code itself. ERP software is a semi-finished package The user organization must configure to their finished package! needs. This is also referred as parameterization, enabling, or disabling certain business process. This configuration or initial setup procedure will allow user to use the package as it ation is. An implementation that involves configuring but not customizing the ERP is called a Vanilla implementation. This is fastest and cheapest way to get into ERP for SME. . Although most ERP software are standard software package, in practice it is observed that 80% to 90% procedures are standard and can be used as it is. About 10% to 20% procedures need to be customized (changed) during the implementation. implementation. These changes (or fine-tuning) will depend on many factors such as final product, current tuning) legacy procedures, maturity level of senior executives, kind of customers, etc.
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ERP Book Excerpts
About Small and Medium size companies
Corrugated Box
Industrial springs n
Toys and games
Safety Valve
Special Purpose Machine
Firefighting equipment
Eye lens
Vada Pav
UPS and Inverter
Figure 2: Small and Medium Sized companies products
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ERP Book Excerpts
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ERP Book Excerpts
Small and Medium size companies are using ERP to gain competitive advantage. Many SME or small and medium size companies in India are growing. They all need complete integrated business management software to manage that growth. The company may be engineering, making plastic toys, making lenses, or discreet products, all need ERP software. Why ERP? Traditional accounting packages are Financial reports-centric. They are primarily designed to inform management of a companys financial condition long after it has conducted its business. On the other hand, ERP adopts a day-to-day perspective. It provides strategic information and tools in real-time, when you need it the most. ERP is answer to the following frequently asked questions Do you get information when you want? Do you have islands of information? Pune emerges as major hub for German companies: Pune has emerged as the city with the single highest concentration of German companies in India. A significant number of prospective new comers are likely to be from the area of advanced materials used in the automotive and machine building sectors. These companies will largely be SMEs. According to the Indo-German Chamber of Commerce. There are over 950 German companies in India, of which 100 are located in Pune. This may become 200 in about two years. Mercedes Benz and Volkswagen are already present in Pune. Source: Mr. Zubin Kabraji, regional director, Indo-German Chamber of Commerce, Pune.
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ERP Book Excerpts
COMPUTER NETWORK SYSTEM SCHEMATIC Local Area Network or LAN UPS SERVER HIGH PERFORMANCE COMPUTER (e.g. Xeon) With MS Windows 2003 Server Operating System MS SQL 2005 SERVER RDBMS ANTI-VIRUS SOFTWARE SERVER EDITION
Switch User PC Accounts User PC Purchase User PC Stores
User PC Production
User PC Sales
Printers as per requirement
ERP Network Server PC must have a CD / DVD Drive for Backup. Server network with Switch Gigabit LAN. CAT 5 LAN cables. Switch or Wi-Fi network, supported by UPS battery backup.
Figure 3: Server computer and users PC
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ERP Book Excerpts
IT infrastructure recommendations checklist
Checklist to plan hardware, software, and personnel for ERP deployment: 1. At head office, provide one High performance Processor Server (e.g. Intel Xeon CPU) e.g. with Minimum 2 GB RAM, minimum 80 GB HDD. (With CD or DVD writer for taking periodical backup). With at least two nodes (256 MB or 512 MB RAM) with Operating system WIN XP or Vista for your software Coordinator and our QC team to test EXE, prepare master data, give training, etc. Other client sides PC (nodes) with MS Windows XP (or later versions) with at least 256 MB RAM. ERP developm development team and implementation team will also use these computers during the initial phase. These nodes (client PC) should be networked with the ERP Server computer. MS Windows 98 is not recommended. 2. Recommended Memory: Minimum 512 MB RAM on client computer and 512 MB or 2 GB on Server. MS Excel on client PC For Microsoft Windows Vista Operating PC. System it is recommended to have 4 GB RAM. 3. For outputs (reporting): Inkjet or Laser Jet printer (A 4 size paper), or a Dot matrix printer with fanfold setting 8.5 X 12 selection. It is recommended that users should 8.5 phase out the dot matrix printer (if not done already). 4. The monitor resolution setting should be 800 X 600. 5. Arrange to deploy licensed software: MS Windows 2003 Sever Operating System and MS SQL 2005 Server RDBMS software. MS Excel. Check with ERP vendor for exact erver software requirements. 6. One PC with Internet connection for remote support from ERP vendors helpdesk. It is better to send email to helpdesk email ID instead of personal email id. 7. UPS (battery backup) for the Server and switch (hub) is required for at least two/three hours. Provide Generator set for power backup if necessary, for longer electric power shutdown. 8. You may add more PCs as the data entry work increases and as users s start being trained over a period. The PC (nodes) may be networked using wired LAN or wireless LAN technology. Wi-max solutions can also be considered if available in max your location. The V Pro CPU (Intel) based, PC may be considered for the client side computers. 9. Anti-virus software with facility to update the signatures is required (a) Sever virus version for the server computer and (b) client version for each user PC. 10. At least one LaserJet (or DeskJet) printer for hard copy printouts. You may add more printers as per requirements. This is a good time to phase out the Dot Matrix s Printer. 11. Appoint ERP Coordinator exclusively, who is available during the Software testing, implementation and deployment activity. Time commitment towards Software project is essential.
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12. There will be a Chief-of-Project (sponsor) to monitor and review the progress during the software implementation. (Usually a very senior person, like owner, with necessary authority to take crucial decisions). 13. Appoint network administrator to support the IT infrastructure, such as Server, networking, etc. He will also take care of anti-virus solutions, Firewall, Login and secret password, etc. (May be same person as ERP project Coordinator). 14. For remote access, provide Server with static IP address for out-locations to login. A good broadband connectivity at the server locations will be required. Internet / Email connectivity. The net connection is necessary for remote login for support. 15. Provide CD / DVD (or tape backup) for taking backup of database and important software programs. 16. UPS to supply electric power to the ERP Server. Battery backup for at least two / three hours. The same should also give uninterrupted power to the network-switch (or router). You may plan for separate UPS for each user PC. Generator power as per requirement. 17. Date and Time setting. a. Date and Time setting is done by the network support engineer (or the computer hardware support person). The ERP server date and time setting is important and it is used at the time of capturing and saving transactions, preparing reports, etc. b. The date format of each computer should be dd-mm-yyyy. This is set using regional setting option, of control panel. c. Do: 1. Set all clients PC's Timestamp to ERP Server Time Stamp. Time and Date should be same for all PCs connected to your ERP Server. 2. Setting of All "Time zones" of all the PCs should be GMT 5:30 New Delhi, (in India). Set this from Windows control panel, Time and date Properties-Time Zone. 3. Care should be taken to ensure that user is not allowed to temper with the system data and time. Necessary password control is required. d. Do not: Do not Change time and date of the server and any other client PC, in the network at any time.
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ERP Implementation project management ERP Implementation step-by-step strategy:
1. Scope as per ERP proposal and approval from ERP project organization
2. System Requirement Specifications as per SRS template
3. Legacy docume nts / Logic sheets
4. Database Setup, First-cut by DEC team
5. Make Server ready and deploy DNS EXE
6. CRP Checklist and POC printouts by DEC Team
7. QC Database Setup on ERP Server, deploy EXE
8. Training and Demo to the Task Force
9. First-cut by Task Force team
10. CRP Checklist and POC printouts by Task Force
11. Essential customizat ion, database changes
12. Complete CRP run by task force, complete CRP checklists, and print POC
13. Go Live. All ERP authorized users starts using ERP
14. Rollout Figure 4: Typical workflow for the implementation
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ERP Book Excerpts Implementation Strategy 1. 2.
3. 4.
5.
6.
7. 8.
9.
10.
11.
12. 13. 14. 15.
IT Infrastructure Readiness: Please prepare Server computers and other items of hardware and software as described above. Software Project Preparation: Defining exact scope with help of the Chief of project. Prepare the legacy documents (file containing existing transactions / reports). ERP implementer consultant will help you in preparing module wise legacy file (AS IS business process). Kick-off meeting: ERP implementation team makes Project kick-off presentation in presence of complete Steering committee (key users). Preparing the SRS: System Requirements Specifications. This is well documented in the manual (called ERP Business Blueprint). Based on the legacy data and standard best business practice a business cycle will be shown. The SRS may now be required to be documented to capture exceptional scenarios. Gap Analysis: Clearly defines business logic. The ref. manual based on the first cut end-to-end cycle is prepared, given to ERP Coordinators for approval. Once the same is received the changes / customization takes place. This will ensure user gets essential customization done. At the same time user may do BPR and accepts the ERP business logic. Appoint ERP Steering committee or the task force team. This is a team comprising of one or two persons from each business function (department). Headed by the chief of ERP project and ERP coordinator. These are the stake holders in the ERP project. Awareness / Training: To all ERP Users and the ERP Coordinator about ERP concept and menus and sub-menus. Business requirements: Discuss BPR (Business Process Reengineering) and decide the need to customize to meet your specific business requirements. Roles and Responsibility Matrix (what menu to whom). TO BE business process: Customization is carried out by our team (changing our programs) and preparing the Proof of concept file. This is configuring ERP software for you. The entire package is run on the server using test database (QC data) with sample master and transaction. CRP run: Conference Room Pilot. Task Force (and key users) is given training and asked to enter transactions and does the CRP run. ERP team will do necessary confidence building and handholding. A sample printouts of each transaction and report will be printed and kept in file called POC file (proof of concept), for sign off. Data Migration: One time data transfer from legacy (old) system to new (ERP) system may be considered. This will depend on the data format of the legacy data, accuracy, and completeness of the old records. Some time it is prudent to enter the data again in the new ERP software. Although, one time migration saves time (and money) it should be done with due diligence. Many times, it is observed that the data that was migrated in the new system was actually garbage data (not checked). Later to check and correct the masters took even more time (and money). E.g. in customer master, we need the contact persons name, city, etc. as separate fields. In legacy data if the same is not stored properly, how new ERP system will give benefit. Master data preparation for test run: E.g. Item master, customer master, vendor master, BOM master, etc. Ownership transfer from ERP Coordinator to end-users. Go-Live preparation: Cutoff date Inventory closing balance/account-closing balance in live database. Roll out Go-Live: Start using ERP for all business activities.
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ERP Book Excerpts 16.
Post implementation support: Support is provided by ERP team if and when require for about a month so that all users feel confident and system stabilizes
ERP project management This is very important for the success of ERP implementation. ERP project management life cycle consists of the following major phases: 1. Initiation. a. This includes deciding start date and finish date. b. Define working time and non-working time. c. Define the workweek, which days of the week are the usual workdays for this ERP project. Select a date that should be a nonworking day, such as a holiday (E.g., 15 August) or a day off for your organization. d. Define time units, such as 8 hours a day or 40 hours per week, or 25 days a month, etc. in the calendar. 2. Planning. a. b. c. d. e. f. 3. This includes defining major milestones, tasks Make a list of resources Mark dates to fix the training days, referred as ERP training calendar. ERP review meetings dates. Inform all stakeholders (resources). Define precedence of tasks. E.g., Task 2 can start after task 3 is finished. Make a base plan.
ERP implementation. a. Track and mange.
4.
Go-live. a. Discard legacy and use ERP for business management.
ERP task force team manages the implementation using Project management software, such as Microsoft Project.
Task: An activity that has a beginning and an end. ERP project implementation is made up of several tasks. One must enter duration for each task. Milestone: A reference point marking a major event in the ERP implementation. Milestone is used to monitor the ERP projects progress. In MS project, any task with zero duration is automatically displayed as a milestone. Note: Do not start with the unreasonable end date and work back reducing the project estimate. It is better to increase the amount of resources, reduce scope, or change the plan. A lot of time and pressure causes inefficiency with meetings to discuss why things are going wrong.
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Resource: The taskforce members are resources. ERP Implementation consultant and ERP developer are also resources i.e. ERP coordinators, ERP taskforce member, ERP user, are all resource. Ensure time is provided for planning, teambuilding, and ERP training. One may use a dated diary, calendar, or MS Outlook to block the dates and commit for a given task as per plan. The roles and responsibility matrix should be prepared. It is very important to assign login ID and passwords for using ERP software. If it is not done carefully, ERP server access is compromised. Predecessor: A task that must finish before another task can start.
ERP Tip: Please provide proper notebook for noting down the notes during training, clearly marked as ERP notes. Loose-leaf rough pad is not recommended.
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ERP Book Excerpts
Figure 5: Every member in ERP team has times when they need support. Helping ERP project team succeed.
I am sure the organization that is planning to use ERP, wants the ERP project manager to succeed. Creating an environment that supports success is a major step towards helping the ERP project teams succeed. Everybody needs to work together and support each other; this includes not only the ERP implementation team but also vendors (suppliers) and customers. Always encourage practice in planning. ERP roadmap is used to manage the implementation and therefore must be kept up-to-date. If the plans that are created at the beginning of the project are put in a file and forgotten, why bother creating them in the first place.
ERP Tip:
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ERP Book Excerpts
There should be focus on implementation control, not just reporting. Sometimes it is also necessary to report if things are going as per plan. This is called positive reporting. Keeping quiet and not reporting is not good. Most ERP project fails because of lack of communication or incomplete communication. Sometime people are afraid to tell that they have not done the task or failed to keep the deadline. In short, email should be sent about every activity, milestone, and status to all stakeholders. This will ensure that people (resources) know where their business unit or department fits into the plan.
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ERP Book Excerpts Roadmap If you fail to plan, may be you plan to fail.
Stakeholders: Individuals, ERP implementers, and ERP user organization are all stakeholders. They are actively involved in the ERP project. Their interest may be affected by the ERP project. Who will make the roadmap? The chief of ERP project, ERP coordinator along with ERP implementation team will prepare the roadmap. Prerequisites: 1. 2. 3. 4. 5. 6. List down tasks Mark milestones Fix the project start date Write duration for each task Identify resource for each task Define predecessor
The following is a sample plan showing various milestones and tasks. Please note the sequence of the task. The numbers of days are only for the example. This will depend on various factors such as resources allocated to task, data readiness, and availability of resource during the project implementation, IT infrastructure and so on.
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ERP Book Excerpts ID 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Task / Milestones Total project duration Planning Scope list printout and softcopy Install IT infrastructure ERP Preparation Prepare Legacy file and send to ERP Vendor Kick-off meeting System Requirement Specifications SRS Legacy received by ERP team Begin Implementation Prepare blank database to start ERP First cut by ERP team Business Blueprint - first draft POC spiral based on first cut Documents given to user- two spirals Training Training completed CRP by ERP team Start customization Internal CRP - S1 Internal CRP - S2 POC file S3 ERP EXE Ready for first cut First cut by Task force / users Essential customization CRP by task force / users Accounts Module General Ledger Accounts VAT / Sales Tax Module Excise Module Material Management (MM) Module Purchase Import Purchase CRM Module Subcontractor OUT Module BOM Module PPC process production Production Module Sales Export Sales Sales & Distribution - trading Plant Maintenance Module M. R. P. Costing Module CRP by all locations
Second Edition July 2012 Duration days 95 days 9 days 1 day 2 days 2 days 2 days 1 day 3 days 1 day 89 days 2 days 10 days 3 days 2 days 2 days 2 days 28 days 10 10 8 51 7 9 44 days days days days days days days Predecessors
2 2 4 4 6 5 6 4 8 8 8 12,13 13 15 11 11 11 19 20 21 21 11 23 23 23 23 23 29 29 29 31 31 31 31 31 31 38 38 38 38 38
5 days 3 days 3 days 8 days 4 3 4 3 5 3 5 3 3 3 3 3 3 8 days days days days days days days days days days days days days days
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ERP Book Excerpts ID 44 45 46 47 48 49 50 51 52 Task / Milestones CRP completed All testing over New exe with customization deployed ERP EXE freeze User Acceptance ceremony Go Live Post Go Live support Closure Post go-live review
Second Edition July 2012 Duration days Predecessors 43 44 45 1 1 10 10 1 1 day day day day day day 46 46 48 50
** Note: Date and resource names are assumed to illustrate the example. milestone / task may vary depending on number of modules etc.
Actual
Road map example is shown above.
The Gantt chart will be prepared automatically by the project management software as shown below:
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ERP Book Excerpts
Sample Gantt chart
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ERP Book Excerpts 9.
Hybrid centralized / decentralized operations are prevalent. IT allows organizations to gain the economies of scale of centralization while decentralizing decision-making to its operational units. Crow story: Once there was a Koel sitting on a branch. She saw a crow running. She asked him, why are you running? Crow said, I am fed up with people around here, I am going to a new place. She asked Why? Crow said, they are all not good, they do not allow me to seat at one place, they always shoo me away by throwing stone and all that, and so I am going to new place. She asked him, Oh, OK, but did you change the old habit of screaming Ka Ka Ka and disturbing people.. He said No. Then she said in new place also perhaps people will drive you away and you will not benefit by running away from this place.
The point is, are you ready to change? If not, ERP will also not give you the real benefit. As a senior person in the organization, you will have to ask question for every business process. Is there any better way of doing this activity? Is it necessary to continue the old method in new ERP also?
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ERP Book Excerpts Let me give you few examples:
We gave a link in PO to pickup rate from the Purchase quotation. Users reaction: I do not have time to prepare purchase quotations in ERP. Then, how ERP will help you with the pre-purchase module? You have to change. As a top person with authority, you should put your foot down and say, nothing doing, we have invested in ERP to improve our business processes and not mimic old way of working in new ERP business logic. Classic example: In one small company, the purchase officer was in habit of ordering material on phone. In ERP that is not allowed. If PO is not made, stores cannot enter data about material received. For about three months, everyone tried his or her best to resist change. Then the MD came to our rescue. He instructed security that if the truck comes without bill, or without our Purchase Order reference number: "Do not allow the material to come inside the factory". After a couple of incidents where the material was returned, all the suppliers understood that the company was serious. They started writing the PO reference number on their challan-cum-invoice. Challans alone is not accepted. Vendors and third party insisted on getting the PO or JO from the purchase officer. In other words, change was enforced by the top boss. Benefit: Return on investment realized.
Another example: In one project, the user insisted on making challan to give materials to customer. Our team said this is wrong and that you have to make CCI Challan cum Invoice. He did not budge. He made our programmer change. Now after six months he realized the mistake and again requested for the change back to the way it was. He was charged ` 50,000/- for making changes. This is a good example of sticking to bullock-cart: In one company accountant was using an old fashion account-centric program, where she was allowed to change / edit / delete a transaction. She expected ERP to do the same. Without realizing, the very benefit of ERP is lost. ERP is multi-user software. Now we are planning to give access to branch offices. The edit facility is a serious problem because user will misuse. You can go on and on..ask yourself a question: What are the opportunities for improvement? Please write down for each function, say in accounts, in purchase, and so on. Resistance to change is natural but we are intelligent human being, we have the reasoning mind. Take ERP implementation as opportunity to carry out changes.
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ERP Book Excerpts What user wants?
Figure 7: What user wants is a simple business management solution.
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ERP Book Excerpts Chapter 4. TCO of ERP Checklist of Total Cost of Ownership or TCO. TCO is budget planning for the ERP project.
Do your homework using the following guidelines before embarking on to the ERP project. TCO of ERP package is based on all of the following, and not only the cost of the ERP software. You may plan money and time for some of the following or all of the following depending on the requirements. Use the following checklist to ensure that the finance manager is allocating enough budgets for smooth implementation of the ERP project. 1. Computer Server. Find out from the ERP vendor about the server computer requirements and budget for the same. Desktop PC is not server. 2. Network: (a) LAN components such as Switch (or routers), LAN Cables, etc. (b) In case multi-location units consider cost of Wide Area Networking - WAN. 3. Computer used by users (called Client PC) as many required as many users are expected to be using ERP. Some existing PC may be used if configuration is suitable (not very old). Consider thin client PC. 4. License software: (a) Sever Operating System (b) Operating System on client PC (e.g. Windows XP or Windows Vista), (c) the RDBMS software, e.g. MS SQL Server 2008 or 2012 (d) Antivirus software. Consider Microsoft Small Business Server (SBS). 5. UPS or battery backup. Plan for the budget and install before server is installed. Server without UPS is not recommended. 6. Peripherals such as Dot Matrix Printer, Inkjet or Laser Jet Printers, Modem, etc. 7. ERP software package itself.
8. Implementation cost paid to implementing professionals. Customization or program changes charges. 9. Consultant fees paid to IT Consultant, who not only understands I. T. but also has functional knowledge of various business processes. 10. Budget enough time and money for ERP training.
11. Annual Maintenance charges to be paid after the CRP run (roll out) on ERP software to ERP software vendor. 12. Annual Maintenance charges to be paid to hardware vendor for computer and networking support. 13. Provide budget for additional data entry operators that may be required in the initial stage. E.g. preparing master database, parallel run, etc. 14. Budget for the small items like consumables such as printer cartridges, CD or DVD for taking backup, paper (stationery), etc. 15. It is recommended to give gift or reward to the task force team who is working hard (against all odds) to make the ERP project a success. Encourage them by reorganization and award. 16. If necessary involve consultants such as ISO consultants, Chartered Accountant, sales tax consultant, TQM consultant, BPR consultant, 6 sigma consultant, HR expert, etc. in the beginning of the ERP project implementation. Budget for their fees. Their
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ERP Book Excerpts CRP CRP run means Conference Room Pilot. Simulation expertise helps
The procedure given below should be followed while doing customization and implementing ERP. This will ensure that the ERP implementation team gets clear specification / requirements. Receive new procedures / changes / new requirements / improvements from users preferable through ERP Coordinators. We would appreciate if the same is received in writing by giving examples, sample excel sheets, relevant legacy documents, Tally printouts, examples, etc. This will be kept in a physical file for the ERP team reference. This file is called Logic Sheet file. This file will contain module wise pending points to be developed / to be implemented by ERP team. 1. 2. The ERP consultants will attend to the points available in the logic sheet file. The EXE under testing will be kept in Y: folder. This folder is NOT available to all users. Only Z: is available to all users. Access (share) of Y: is given to ERP coordinator or authorized person for testing only. For testing, demonstration, and training a QC database is prepared. This is different from the live database. Connection to QC data can be done by changing the UDL (Universal Data Link) connection. This is not necessary for common users. The point attended will be shown to ERP coordinator or concerned user for his / her approval. Related procedures would be thoroughly tested in QC database by concerned users in test database. The name will be defined in the role and responsibility matrix. Necessary login and secret password will be created for new user. The testing may require entering few master records, few transactions records in QC database. All OLP and outputs are to be printed. Note: Do not forget to change the UDL to connect to live database again for entering live data. This UDL change is not necessary for common users for day-to-day work. Verify and certify all OLP / input screen / outputs / printouts to get the necessary confidence that all scenarios are captured and processed as per requirement. Now the new EXE will be deployed on Z: for other users for day-to-day use.
3.
4.
5.
6. 7.
Changes carried out in hurry and under pressure sometimes gives rise to some other problem. Since above procedure will ensure that testing is done, approval is given before the EXE is actually used for LIVE data. Advantages of above procedure are obvious that the program will be deployed after approved by user. This procedure is also called CRP run (Conference Room Pilot). The other side of the coin is that this requires additional time for user to do the test data entry and has to take responsibility while approving the CRP run. The question of how much data to enter is debatable. There is no thumb rule. Some companies enter entire one-month data; some enter 10-15 transactions of various types, or carefully enter transactions that test various scenarios. In other words, one should enter as much data to ensure that after going on live, minimum problems and minimum program changes are required.
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ERP Book Excerpts Chapter 12. BOM MODULE
B.O.M EXAMPLE OF A PC
SA1 = SUB ASSEMBLY
Overhead @ Rs. 200 per piece
F= Finished Product PC
Sale@40,000
Cost of Mother board (10*1000)+700+80=10,780
MotherO r cto 00 tr a 1 ,0 on bc X@ u 10 UT
@10,780 1
board
CPU Case
20 GM=8,2
1 @ 8,000
FACTORY MADE
Monitor
1
Labor @ Rs. 80 per piece
Processor
IC
PCB
Material given out for Soldering
@ 700
c Ma
ne hi
o Sh
Cabinet
Overhead @ 400
MB(10,780)+Cabinet(1,000)+ Monitor(8,000)+KB(1,500) 1 +Mouse(1,000)+SMPS(1,500)+ @ 1,500 @1,000 HDD(7,000)+FDD(800) +OH(200)=31,780 Key = Total Cost
board
Bending
es
@ 1,000 1 1 1
Cutting
Pr oc s es
+ io n a t in e r er h o Op mac erat p +O
@ 800 @ 1,500 @ 7,000
Mouse
SMPS
HDD
DVD
S ITEM OUT GHT BO U
SHEET
2 K.G.
@ 600
Figure 23: Bill of Materials example. Child items required to make a PC
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ERP Book Excerpts
ERP FLOWCHART BOM MODULE

ITEM SUBCATEGORY MASTER ITEM MASTER U.O.M. MASTER BOM MASTER PRINTOUT
DNS
BOM Master -> BOM Master Entry BILL OF MATERIAL is master database giving relation of child item and father item for a given finished goods or semi-finished goods. The semi-finished goods are also called Factory made item.
FAQ: What is the use of BOM in ERP? Answer: The BOM is used in the following business process: 1. 2. MRP material requirement planning. Creating the work order automatically. This is communication to production what to produce and from what, because work order will automatically explode the BOM and show the child items required. Cost sheet. This gives material cost for a given FG. BOM can be used for stores issue to shop floor. a. Material issue note (MIN) link to BOM for stores issue to shop floor. Material is consumed at stores location. b. Or stock transfer challan (STC) link to work order for stores issue to shop floor (recommended) -> production entry will consume the material from shop floor. Production entry to consume raw material. This is linked to the work order that is in turn linked to the BOM.
3. 4.
5.
The following is a procedure to prepare Bill Of Material of factory made item and finished goods: 1. 2. Prepare the BOM of a factory made item, which will be made by R & D (or Design) department (competent user). Using factory made item prepare the BOM of finished goods. When factory made item in finished goods is dragged & dropped, all child item of factory made item will be displayed automatically in this BOM. While making BOM of finished goods you cannot edit the factory made item BOM.
Note: Only few selected users are given access to the BOM master menu for security reason. Only specially trained ERP user is allowed to use the BOM. This is not for sundry
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ERP Book Excerpts
Chapter 14. Production Module
ITEM MASTER U.O.M. MASTER BOM MASTER SUB LOCATION MASTER
DNS ERP FLOWCHART PRODUCTION MODULE
ITEM MASTER PRINTOUT BOM
DNS
ORI (SALES ORDER) SALES SCHEDULE STOCK TRANSFER CHALLAN
ITEM LIST ITEM LEDGER WIP (SHOP FLOOR) LOCATION - STOCK POSITION REPORT WORK ORDER REGISTER PRODUCTION PLANNING REGISTER PRODUCTION REGISTER STAGE WISE INSPECTION REPORT STC REGISTER
WORK ORDER
PRODUCTION ENTRY
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ERP Book Excerpts What is e-Manufacturing?
E Manufacturing: Frequently Asked Questions (FAQ): I have an existing factory, I am using Tally, it runs fine, and I am getting sales and so where is the need for ERP? Is it for me? Is ERP for all, or only for large corporate that are setting up new factories and production facilities? The answer is : The need part will be felt sooner or later as the marketplace becomes highly competitive and everyday saved in launching the product can mean thousand of rupees saved. ERP software can be used for new facilities as well as for optimizing existing facilities. Mr. Andy Grove (Intel founder) says, Either you do e-Business or you will be out of business.
In the era of shorter production cycles, more demand for new products and heightened competition, the manufacturing industry finds help in a trusted friend like ERP software.
After perfecting the CRM, sales, supply chain management, etc., it is necessary to integrate the missing link and that is the production floor. In a manufacturing company, typically, it is the operations or production that is the biggest cost center. The whole success of a product could hinge on how fast and efficiently the production is managed. ERP answers the question, 'what to make' and 'when to make'. That is possible because sales order (ORI OR OA) is used to create the work order (or job card) automatically by the ERP. In many cases new product launches have become necessary and to such an extent that they are being introduced every few months instead of years. If you dont obsolete your own product then competition will. This fact is also borne out by taking a cursory look through the performances of some of the major players in the automotive industry. Companies that are performing better and have grown in market share in the last couple of years are often the ones that have introduced maximum new product lines in that time. The reason is that the customer is more demanding today. What used to be custom-fitted by few of the customers is now factory-fitted for a whole line. Accessories or special features that were luxury additions are becoming standard now. Some companies like Dell have already integrated sale order with the production line. Dell has successfully put an ebusiness website, which is boasting of sales to the tune of $30 million per day (yes per day!). That is an ultimate example of the concept of the digital manufacturing. Just like the nervous system in a human body, user is able to tightly link all vital business processes automatically by the ERP Software. All products have to be of high quality and good on functionality as well as looks making innovation a business requirement, a survival mantra. Usually the R & D or design team prepares the Bill of Materials. The actual manufacturing should catch up with the pace set by the design and sales team. In ERP, the Bill of Materials (BOM) module is the important pivot around which ERP rotates. Therefore, we have the familiar story of a record-breaking demand, and yet the company would send email or advertise asking the customers to be patient while they bend over backwards to up their production and decrease the time to market. The production has become a bottleneck of sorts and the ERP is the answer to smoothen the flow.
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ERP Book Excerpts
ERP software not only helps in production in your own shop floor but also for third party production (outsourcing). Material transferred to subcontractor can be linked to the Job order (labor purchase order) and Bill of materials. It is possible to get an MIS to know what material is lying where. ERP takes care of work-in-process (WIP) inventory.
The production module is that missing piece of the jigsaw puzzle, when fit in; will allow the production to match design and sales. Information Technology is an enabler. When we talk about DNS role in manufacturing, we need to know what software used here can do to the companys bottom-line, how it can improve profitability. Here is what DNS does: it reduces time to market and enables integrated business processes, it facilitate compliances (statutory requirements such as excise), ISO procedures, ensures process quality and consistency, it achieves manufacturing optimizations and enables agility and flexibility. Thus, DNS helps user organization to meet the globalization challenges and provides visibility and control. Ultimately cost per piece should be reduced. DNS helps in managing the production processes track and trace specific customers order according to the process. The work order register and the production register are some key reports instantly prepared in ERP.
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ERP Book Excerpts Make to order- Make to stock
Make-to-order means the product is made as per the order (and specification) of a particular customer. Whereas make-to-stock means, you make, stock and sale. At the time of making (production) user may not know the exact name of the buyer (customer). This concept is repeated here in the production module. This is also discussed in the sales module.
Make-to-order Not much risk.
Make-to-stock Risk. Because after making, suppose there are no takers (no buyers), then item produced may be blocking the working capital. ORI or OA is of self that is own name. This is the internal ORI. Quantity produced is as per the projection or internal ORI quantity, therefore, there is a possibility of unnecessary finished goods inventory piling up. The Purchase officer is purchasing as per the internal ORI. Therefore, sometime the raw material is purchased and used for producing the goods but the same may not be sold as per original projection (or forecasting). Most FMCG suppliers are falling in this kind of production activity. E.g. company making toys and games, or standard products, mass production items.
ORI or OA is with name of customer Quantity produced is as per the ORI quantity, therefore, there is no unnecessary finished goods inventory piling up. The Purchase officer is purchasing as per the ORI.
Most OEM suppliers are falling in this kind of production activity. E.g. company making auto-parts for the automotive manufacturer.
There are companies where they have both kinds of products. They make as per sales order as well as they have some standard products also. Some company will have standard products but will make minor changes to suit specific requirements of the customer. ERP will take care of all these permutations and combinations. The main trigger for all activities is the sales order or the OA (order acceptance transaction) or the ORI (order receipt information).
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ERP Book Excerpts
The example of a company making sofa sets is interesting. They have 15 standard designs of sofa sets, such as, three plus two plus one, three plus one, two plus one, and so forth. In addition, there are 200 hundred varieties of fabric that goes on the sofa and various colors. Now the customer will select one of the standard design, but then the fabric type and color is selected. The ORI will capture the standard design of the sofa and in addition the fabric type and color. See case study for more details. The MRP module is used to make the work order automatically from the ORI or internal ORI.
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ERP Book Excerpts
e-Manufacturing Production is carried out as per the order received from customer, customer PO is our Sales Order; this is called ORI OR OA Order Receipt Information.
ERP Production Module Logic ERP captures two kinds of Production methods: 1. PROCESS PRODUCTION Only one input item (child item), which undergoes various manufacturing processes and finally another item (father item) is produced. 2. ASSEMBLY PRODUCTION Two or more items (child items) are assembled and third (father item) is produced. In general, (not specific to any one company), ERP Production module (business logic) is based on concept of JIT (just in time) inventory management. For instance, to ensure that excess material is not lying around on the shop floor, ERP links production module, as much as possible, with BOM (Bill of Materials) master data. However, in practice we find user finds it too sophisticated (complicated), because user is not used to work in a disciplined manner. For FMCG companies it is possible because it is making standard products. Some companies make as per order (as per sales order). Usually, legacy method of working is not tightly linked with BOM. In legacy, the material issued from stores is based on requisition from shop floor. Whereas, in ERP, we recommend users to change, but there are people do not like change. This change requires lot of commitment and positive attitude from the top management. Strong will power is crucial. Sufficient IT infrastructure is necessary. Lots of time (and money) needs to be invested in the training. Unfortunately, user is not prepared to do the CRP (parallel run), and starts asking for changes without understanding. These are generic observation and should not be taken as negative remarks. On the other hand, companies that are more progressive take up these issues very seriously and users are passionately ready to make 10 / 12 BOM and do trial entries. This section of the book, attempts to describe both kinds of methods in details. However, I have observed that the production module always needs more customization (relatively) than any other module. The time and effort will depend on to what extent management would like to implement. Not everything can be automated. One should approach customization of the production module carefully, in a phased manner. In ERP, there are number of ways material can be transferred from one location to another. Options, which are most suitable to users, are selected. Each has some pros and cons. E.g. I had explained how material can be issued from stores to shop floor User can use MIN, or Material Issue with BOM, Material Issue without BOM but at least ask the father item (or FG item name), or user can select simple STC like you have shown in the diagram or STC with BOM, etc. etc. Even in case of PE (Production Entry) ERP has many options that can transfer material from machine shop to FG locationinstead of using STC (Stock Transfer Challan). STC will be
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ERP Book Excerpts
Work Order is a passive document, which is a communication between marketing and production. Work Order does not change the inventory. Work order is prepared for the item to be produced (may be finished goods or semi-finished item). WO will also give raw material (child items) required to produce the father item. It is compulsory to prepare the BOM. Without work order, production entry cannot be entered. The OLP will be as follows: Corresponding work order register will be prepared automatically by ERP as follows: Marketing will save the ORI OR OA when the customer PO is received. At this time above specs may not be available. However, at the time of making the work order these specs have to be entered. The OLP will show the shop floor person details about the nozzle specification. Work order is a passive transaction. In case for some reason user does not want the item to be produced, then user can terminate the work order. Further production entry is not possible.
Production Entry Production entry can be done only if Work Order is prepared. 1. This is an active document. This will reduce the Raw Material / Packing Material from the consumed location and add item being produced (may be father item or FG) in the produced location. 1) Pending Work Order will be defaulted. 2) User will enter Work Order Number. 3) Work Order qty will be defaulted. BOM revision number will be defaulted automatically from the BOM master. Work order will be closed by production entry.
2. 3.
In short, work order means, marketing saying: .. make this item, this much quantity and production entry means, shop floor saying: .. I have made this item, this much quantity. PE will close the WO.
Subcontractor OUT Here the production takes place outside our shop floor (in Third Partys factory). The work order will be prepared automatically by ERP. This is made by linking it to BOM. This shows which child item will be sent to TP and which will be received from the TP after production. Transfer of material is to be made accord to the third party using Goods Delivery Note. Item ledger of the third party location:
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ERP Book Excerpts
In ERP, the TP name is added in the Address Master. ERP will automatically know this is not only a creditor but also an inventory location. After the father item is received the GIN (Goods Inward Note) is made. This will automatically do the Production entry to consume the child item from the TP location. Item ledger for the hold location (material under inspection) Item moved after the QC accepted in GIN:
ERP Tip: Prepare work orders from starting from the lowest level, that is, first produce the subassemblies. Lowest level factory made item is produced first and then the next upper level item.
Figure 33: Word Order
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ERP Business Blueprint
Part III
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Chapter 29. Case Studies Here are some Case studies of small and medium size (SME) manufacturing companies initiative to deploy ERP. Some are successfully using ERP some have found difficulties.
Figure 62: ERP Case Studies
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ERP for Construction industry ERP for a glass window providing and fixing enterprise
Figure 63: ERP for Construction Industry This company caters to every need in all areas of Aluminum Fabrication, especially Aluminum Flush Doors, Glass Windows, Partitions, Ceiling, Aluminum Composite Panel Cladding, Structural/Curtain Glazing, Tempered Glass Planner System, and Patch Glazing Units. Other Products: Architectural Aluminum Windows, Doors, and Partitions. Vertical Sliding Windows with Counter Balance Multipurpose Windows with opening, sliding mesh & guard bars Architectural Aluminum Composite Panel Cladding. Aluminum Glazing Aluminum Structural Glazing Aluminum Curtain Glazing Stick Glazing
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Chapter 35. Humor In 1997, a complaint letter was as follows: This letter is from Mr. X to Mr. Bill Gates of Microsoft Subject: Problems with my new computer Dear Mr. Bill Gates, We have bought a computer for our home and we have found some problems with your windows, which I want to bring to your notice. 1. There is a button 'start' but there is no 'stop' button. We request you to check this. 2. We find there is 'Run' in the menu. One of my friends clicked 'run ' he ran up to the neighboring town! Therefore, we request you to change that to 'sit', so that we can click that by sitting. 3. One doubt is whether anyre-scooter' is available in system? I find onlyre-cycle', but I own a scooter at my home. 4. There is 'Find' button but it is not working properly. My wife lost the door key and we tried a lot trace the key with this ' find' button, but was unable to trace. Please rectify this problem. 5. My child learnt 'Microsoft word' now he wants to learn 'Microsoft sentence', so when you will provide that? 6. I brought computer, CPU, mouse, and keyboard, but there is only one icon, which shows 'MY Computer': when you will provide the remaining items? 7. It is surprising that windows say 'MY Pictures' but there is not even a single photo of mine. So when will you keep my photo in that. 8. There is 'MICROSOFT OFFICE' what about 'MICROSOFT HOME' since I use the PC at home only. 9. You provided 'My Recent Documents'. When you will provide 'My Past Documents'? Regards, Abc
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Now, in 2007 ERP Complain letter. This letter is from Mr. Y to our ERP team: Dear Sirs, Subject: Problems with ERP software We have deployed ERP software for our factory management and we have found some problems, which I want to bring to your notice. 1. Sometime we will make PO, sometime not. For keeping track of the stock, it might also be enough if you feed the opening stock, receipt, and issue. Receipt can also be recorded with a proper GRN (It is not necessary to have a purchase order every time). We are not living in an ideal world. We have to be more practical to make ourselves a little more comfortable. We shall accept all positive suggestions from your side, when we are convinced about the logic and practicability of your suggestion. But we are not running our organisation for ERP. On the contrary, ERP should be a user-friendly tool for running our organisation more effectively with less strain. We expect value for the money we spend. 2. Editing in ERP: About the other points, like the data being editable for the administrators (in our case, we would be the administrators), I would insist on that. It would be highly impractical to assume that human errors would not occur while entering data. 3. We want daily trial balance in ERP but we cannot enter data daily. You see, we are busy with ISO, we are busy with export. We do not have time to enter data every day. Please do not insist on auto-date auto-number. Allow us to do backdated entry. You see, in Kelly accounting software it is allowed to change, edit, anything we want. It is much flexible software. We do data entry only when we are in mood. Your ERP is very rigid, and is enforcing discipline on me. 4. Why do you insist on sign-off? We do not want to commit any requirement specification. So, please make provision in the ERP. Answer from Mr. Z: Please invest time in training. There is no full stop to training. ERP will work fine on demo PC but may fail to give desired results, probably user is not trained. :-) .....Happy computing in Digital economy Humor in ERP implementation Conceiving the ERP project ERP Project Manager is a person, who thinks nine women can deliver a baby in One month. ERP programmer is a person who thinks, it will take 18 months to deliver a baby. ERP Coordinator is one who thinks single woman can deliver nine babies in one month. ERP Marketing manager is a person who thinks he can deliver a baby even if no man and woman are available. Resource Optimization team thinks they do not need a man or woman; they will produce a child with minimum resources. Documentation team thinks they do not care whether the child is delivered, they will just document 9 months. Quality Auditor is the person who is never happy with the business process to produce a baby. User is the one who does not know why he wants a baby! (or why he wants ERP)
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Glossary Active transaction Application Server ASP or Active Server Pages Active transaction is a transaction that affects either inventory or accounts or both. E.g., sales invoice is an active transaction. Main Server computer provides the ERP application program, may be away from the users computer. A technology developed by Microsoft that can be used for dynamic web pages, often related to database query and retrieval (using Internet). Avatar refers to the version of the computer program. When the source program is changed and a new program is given to user, usually it is referred as new version or new Avatar. E.g., Microsoft Windows new Avatar is Windows Vista. High-speed communications links used to enable Internet communications across a country and Internationally. The database (RDBMS) used by the ERP software. ERP uses MS SQL 2000 Server as Back-end. Indicates the speed at which data is transferred using a particular network media. It is measured in bits per second (bps). A way or method of accomplishing a business function or process that is considered superior to all other known methods. Bill of Materials. A list of direct materials required manufacturing a given product. The BOM defines father-child relation of item being produced and that being consumed during production. Business Process Reengineering is a radical improvement approach that critically examines, rethinks, and redesigns mission product and service processes within a given environment. It achieves dramatic mission performance and gains from multiple customer and stakeholder perspectives. It is key part while implementing ERP software. The root-drive of the computer. Challan cum Invoice. This is the sales invoice. Prepared at the time of parting the material while shipping the same to the customer. Also referred as Tax invoice. Child transaction or child document is prepared by ERP by defaulting the parent transaction. E.g. Purchase Order is a parent document and the GRN (Goods Receipt Note) is a child document. A distributed technology approach where the processing is divided by function. The server (PC) performs shared functions managing communications, providing database services, etc. The client performs individual user functions.
Avatar
Backbone
Back-end Bandwidth
Best Practice
BOM
BPR
C:\ CCI
Child transaction
Client / Server
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CRM
CRP
Customer Relationship Management. Some presales transactions are covered in the CRM module, such as, sales enquiry, sales quotation, order acceptance or Order Receipt Information. Conference Room Pilot. The term CRP denotes the activity of creating a prototype of the ERR solution and discussing with the key managers collectively. Since such an exercise is often carried out in a conference room (with LCD projector), it is called as Conference Room Pilot. Also referred as Parallel-run or test-run. Entire ERP is simulated in test environment using QC database. One time data transfer from legacy (old) system to new (ERP) system. Database can be defined as collection of related information. RDBMS is Relational DataBase Management System is an extension of a DBMS. For example, Microsoft SQL Server 2005 or Oracle 9i, etc. Digital Nervous System or DNS is a short name given to ERP. Mr. Bill Gates first coined DNS word in his book Business @ the speed of thought. DNS is used as a synonym to ERP. DNS also means Domain Name System. This is Internet system to translate names into IP addresses (Internet Protocol). DNS maps names to IP addresses of Internet domain servers.
Data migration
Database
DNS
Downstream supply chain ERP ERP Deployment plan
Transactions between an organization and customers and intermediaries (e.g. franchisees). Enterprise Resource Planning
its
A schedule that defines all tasks that needs to occur in order for changeover to occur successfully from legacy management to management using ERP. Often such plan is made and monitored using project management software. This is the first step in ERP implementation. Executable computer program. Application program usually will have filename extension as .exe or .com Finished Goods. Final product. Specialized software installed on the ERP server computer at the point it is connected to the internet. Its purpose is to prevent authorized access into the company from outsiders. Goods Delivery Note. This transaction is used at the time of sending material to the third party. GDN may
EXE
F. G. Firewall
GDN
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GIN
Go Live
GRN
Hacker
be linked to Job Order or may not be linked to the Job Order Goods Inward Note. This transaction is used at the time of receiving material from the third party. GIN is linked with the Job Order. Auto-production entry is done by ERP to consume child items from the third party location. This also credits the third party in the creditor ledger. Used to denote that the company has shifted to the ERP for its routine transaction processing or live environment and has stopped using the legacy system. Goods Receipt Note. This transaction is used at the time of receiving material from the vendor (or supplier). This also credits the vendor in the creditor ledger. Individuals who break into computer network system without proper permission. Hold is a location in the stores where material is kept at the time of receiving from the vendor. Material waiting for quality check. Internet Protocol address. Just in time inventory management. Just in time delivery. A goal of value chain management, in which carrying excessive levels of inventory are avoided. At the same time stock should not be less, so that next business process suffers. JIT inventory management is all about keeping optimum level of stock (raw material, or semi-finished goods or finished products). Job Order is prepared to instruct the third party to carry out the job working or proceeding / assembling in their factory. This transaction also fixes the labor charges rate to be paid to the third party. It is Purchase Order given to the subcontractor. Local Area Network. ERP is a Client / Server Architecture. Server is connected to users computers using cables (or wireless) usually within four walls of the organization. All ERP data is saved on Server using LAN. Existing program or traditional system, often manual or preparing report using Excel, etc. Using single user accounting program is an example of Legacy software. Items pertaining to maintenance, repairs, and operations. E.g. spares such as bearing or V belt Material Requirement Planning OnLine Printout. Hard copy of any transaction, such as Purchase Order. Order Receipt Information. This is the sales order data. Customers purchased order is our ORI. Also sometimes referred as OA or Order Acceptance or Order Acknowledgement. ORI or OA is used to
Hold
IP address JIT
Job Order
LAN
Legacy
MRO item MRP OLP ORI or OA
Page 393 of 400
Outsourcing
prepare the sales invoice. Subcontracting of functional tasks, productions, or service to a third party. The activity of transaction processing being done in legacy (existing) system AS WELL AS in the in parallel mode to confirm accuracy of results from ERP. Parent transaction or parent document is used to prepare the child document by automatically defaulting the information. E.g., Purchase Order is a parent document and the GRN (Goods Receipt Note) is a child document. Passive transaction is a transaction that affects neither inventory nor accounts is a passive transaction. E.g. Purchase Order. Purchase Order Proof of Concept. POC file contains sample input and output printouts from the latest avatar of ERP. This is used to establish users acceptance. A website that acts as a gateway to information and services available on the Internet by providing information, downloads, free newsletter subscription forms, etc. Production Entry or PE is a transaction used to report the production. Production Entry consumes the child items and produces the father item. PE is tightly linked to the BOM (Bill of Materials). Purchase Order is prepared to instruct the vendor or supplier to supply material. This transaction also fixes the rate at which we are purchasing the material. Return on investment. A method of evaluating the potential costs and benefits of a proposed capital investment. (Also see TCO) The term rollout denotes that the ERP software is being released for live use. (Otherwise, it is used in QC data or test data). The Rollout occurs after the final POC sing-off or User acceptance is formally signed by Director. This is go live stage. Structured Query Language for accessing relational database system Each database comprises of several tables. The data is stored in such tables. Total Cost of Ownership. Actual cost of investment is sum total of all cost. E.g., TCO of ERP is not only cost of software, but also includes cost of implementation, hardware, etc. The first tier is the client (user) that handles the display, second is application logic and business rules (ERP software application) and third tier is the
Parallel Runs
Parent transaction
Passive transaction PO POC
Portal
Production Entry
Purchase Order
ROI
Rollout
SQL Tables TCO
Three-tier client / server architecture
Page 394 of 400
database storage. TP Third party or subcontractor. Supplier where the material is sent OUT for processing / assembly. Also referred as outsourcing or offloading. Universal Data Link or UDL is a universal file that links to a specific database. Use the UDL program to define the database properties to connect to the Microsoft SQL Server database. Work Order is a transaction instructing the production manager, what to produce, and what quantity. This is communication between marketing to production. Work Order also shows the child items required to produce the father item. Work Order is tightly linked to BOM (Bill of Materials).
UDL
Work Order
Page 395 of 400
Reference
Book Title 1. Business @ the Speed of Thought. Succeeding in the Digital Economy 2. Business Process Management. Practical Guidelines to Successful Implementations 3. Comprehensive Guide for Tally 9 4. E-Business and E-Commerce Management 5. E-Commerce. An Indian Perspective 6. Emerging Issues in Supply Chain Management 7. ERP Demystified 8. McDonalds Behind the Arches
Author Bill Gates. John Jeston and Johan Nelis
AK Nadhani and KK Nadhani Dave Chaffey P. T. Joseph, S.J. Editor BS Sahay Alexis Leon John F. Love
Page 396 of 400
Index
A
accounts module, 373 Accounts payable, 268 Accounts receivable, 264 Activate serial number, 147 Adjustment Window, 274 after sales service, 302 Age wise, 251 assemble-to-order. See ATO ATO, 199 audit trail, 227, 228 automatic email, 318 automobile, 353, 354, 367, 371
E
electronic products, 359 enquiry, 232, 233 ERP coordinator, 75, 323 ERP customization, 28 ERP Definition, 25 ERP for a corrugated box manufacturing, 334 ERP for a vada pav, 342 ERP for lens, 346 ERP for OEM Supply, 353 ERP project management, 37 Excel, 163 Excess received percentage, 147 Excise Tariff Heading, 294 Expense voucher, 89, 105, 124, 265, 379, 380 export, 348, 360, 388
B
backup, 323, 324 Bill Of Material. See BOM blog, 330 Blog, 329 BOM, 155, 156, 163, 175, 176, 196, 206 BPR, 51, 53, 54, 66, 69, 330, 391 business process, 8, 51, 69, 80, 86, 87, 88, 115, 373 Business Process Reengineering. See BPR
F
FBT, 268 Feasibility flag, 233 Fixed Assets, 267 Form No. 16, 316 Franchisee, 342
C
case studies, 11 Case studies, 332 Central Sales Tax, 128, 293 Cess, 132, 267, 288 Challan problem, 301 Change management, 51 chemical company, 356 Closing balance rate, 288 closing stock, 119 coiling, 205, 206 contact person, 233 Contact person name, 128 Credit Note, 278, 282 CRP, 42, 43, 62, 75, 77, 80, 193, 358, 392 customer item code, 234 customers part number, 234 customization, 24, 69
G
Gantt chart, 43, 44 General Ledger, 42, 284, 291, 293 GIN, 176, 179, 180, 289, 290, 291 glass windows, 333 Goods Inward note cum inspection, 149 GRN register, 152
H
History Card, 302
I
internal ORI, 145 Invoice correction, 241 IT infrastructure, 33 Item master, 375, 378 item-code generator, 143, 336
D
Date and Time setting, 34 dealer, 222 Dealer Master, 222 Debit Note, 279, 283, 285, 375 Digital Nervous System. See DNS DNS, 3, 8, 24, 25, 392 Drucker, 82
J
Job Order, 179
L
Labor PO, 176, 179
Page 397 of 400
LAN. See Local Area Network landed cost, 288 LIVE data, 75 Live Database, 73 Local Area Network, 32, 393
M
Machine History Card, 302 Machine Master, 203 Make to order, 191 Make to stock, 191 Management Information System. See MIS, See MIS maser data entry form, 45 Material requirement planning, 212 Material Requirement Planning, 210 McDonalds, 368, 369, 396 Milestone, 37 MIS, 8, 144, 190, 342, 343, 347, 348, See , See , See , See , See , See MRP. See Material requirement planning
registers, 176 Rejection, 149 Replacement Challan, 320, 349, 351 Request For Quotation. See RFQ Resource, 38, 392 return goods note, 349 Return Goods Note, 151, 231, 240, 349 RFID, 372 RFQ, 130 RGN. See Return Goods Note, See Return Goods Note
S
sales coordinator, 218 Sales Engineer, 218, 219 sales enquiry, 232 Sales Invoice, 239 Sales schedule, 228, 234 Sales Tax, 42, 128, 291 Samosa, 342 Sarbanes-Oxley, 301 save, 206, 241 SCM, 8 Selecting ERP, 63 Server, 323, 391 Service Provider Bill, 289 Service Tax, 267, 290, 294 Shift Master, 203 small and medium size companies, 31 SME. See small and medium size companies SPM, 362 spring manufacturing, 353, 354 Stage wise inspection, 80, 206 supplier, 149, 179 supply chain management. See SCM Supply chain management, 189, 214, 372
O
OLP, 75, 176 Operator Master, 203 Order Acknowledgement, 234 Order Receipt Information, 210 ORI, 210, 242
P
paper less office, 49 Part no, 234 password, 60 Password, 116 Pay slip, 314 Payment terms, 128 PDF, 49 PFD. See Process Flow Diagram PLA, 294, 360 plastic, 31, 362, 367 precision machining, 355 previous stage quantity, 206 Process Flow Diagram, 201 Production Entry, 176, 196, 205 production process, 206 purchase rate, 288 PV, 138, 149
T
Task, 37 Tax Deducted at Source. See TDS TCO of ERP, 58 TDS, 289, 290 Terminate Qtn, 234 Testimony, 348, 361 Third Party, 124, 138, 175, 176, 179 Toyota, 371 toys, 31
U Q
QC, 75, 149, 179 QC Database, 73 quotation, 233, 234, 235 Quotation revision, 233 UDL, 75 UOM, 148, 203 UPS, 33, 34, 324, 358
V R
Vada Pav, 342 Valuation, 288 Vanilla implementation, 28 VAT, 42, 46, 288, 291
reason master, 183
Page 398 of 400
vendor. See supplier, See supplier, See supplier, See supplier Vendor, 150
W
WAR, 288
warranty management, 358 Weighted Average Rate, 288 What user wants, 57 WIP rate, 289 Work Order, 176, 196, 198, 200, 205, 208
Page 399 of 400
Page 400 of 400

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Second Edition July 2012

ENTERPRISE RESOURCE PLANNING

PROF. Jyotindra Zaveri

IT Consultant and Trainer Pune, India

Second Edition: 2012

Himalaya Publishing House

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Jyotindra Zaveri, Pune j.zaveri@dnserp.com

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Apply the result of business process analysis to an ERP

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About the book

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About the author

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Part I Island of information

WHY E.R.P ? BECAUSE OF ISLANDS OF INFORMATION

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Corporate office Production Sales Group

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Seamless Integration of business processes in ERP

HR Import Purchase Production BOM

EXPORT IN After Sales Service

Alerts Resource Matrix Sales & Distribution E-Business

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