Practical 1:AIM:-Introduction to ERP System and Identify ERP domain.

 Introduction to ERP System:y Enterprise resource planning (ERP) integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service,customer relationship management, etc. y ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. y ERP systems can run on a variety of hardware and network configurations, typically employing a database as a repository for information. y ERP is a way to integrate the data and processes of an organization into one single system. Usually ERP systems will have many components including hardware and software, in order to achieve integration, most ERP systems use a unified database to store data for various functions found throughout the organization. y Enterprise resource planning (ERP) is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores y ERP systems typically include the following characteristics:  An integrated system that operates in real time without relying on periodic updates.  A common database, which supports all applications.  Installation of the system without elaborate application/data integration by the Information Technology (IT) department. y ERP delivers a single database that contains all data for the software modules, which would include:  Manufacturing  Supply chain management  Financials  Project management  Human resources  Customer relationship management. y In one Sentence ERP can be defined as ERP is combination of Business management Practice and technology, where Information Technology integrates with your companys core business process to enable the achievement of Specifics business Objectives.

 Evolution of ERP:y ERP is an outcome of 40 years of trial and error. It has evolved as a strategic tool because of continuous improvement in the available techniques to manage business and the fast growth of information technology. y Prior to 1960s, business had to rely on the traditional ways of inventory management to ensure smooth functioning of the organization. These theories are called classical inventory management of scientific inventory control methods. The most popularly known amongst them is EOQ (Economic Order Quantity). y In this method, each item in the stock is analyzed for its ordering cost and the inventory carrying cost. A trade off is established on a phased out expected demand of one year, and this way the most economic ordering quantity can be decided. This technique in principle is a deterministic way of managing inventory. y In 1970s, a new technique of Material Requirements Planning, popularly known as MRP, was evolved. This was a proactive manner of inventory management. This technique fundamentally explodes the end product demand obtained from the Master Production Schedule (MPS) for a specified product structure (which is taken from Bill of Material) into a detailed schedule of purchase orders or production orders, taking into account the inventory on hand. y MRP is a simple logic but the magnitude of data involved in a realistic situation makes it computationally cumbersome. If undertaken manually, the entire process is highly time-consuming. y MRP successfully demonstrated its effectiveness in reduction of inventory, production, and delivery lead times by improving coordination and avoiding delays, thus making commitments more realistic. MRP proved to be a very good technique for managing inventory, but it did not take into account other resources of an organization.

Fig:-Evolution of ERP

y In 1980s, the need was felt to integrate the financial resource with the manufacturing activities. From this evolved an integrated manufacturing management system called Manufacturng Resource Planning (MRP II). y MRP II expands the role of MRP by linking together such functions as business planning, sales and operations planning, capacity requirements planning, and all related support functions. y The output from these MRP II functions can be integrated into financial reports, such as the business plan, purchase-commitment report, shipping budget, and inventory projections. MRP II is capable of addressing operational planning in units or financial planning in dollars, and has a simulation capacity that allows its users to analyze the potential consequences of alternative decisions. y Transition from MRPII to ERP happened during 1980-90. The basic MRP II system design was suffering from a few inherent drawbacks such as limited focus to manufacturing activities, assumption of the mass or repetitive production set ups, and poor budgetary and costing controls. y The shortcomings of MRP II and the need to integrate new techniques led to the development of a total integrated solution called ERP, which attempts to integrate the transactions of the organization to produce the best possible plan. y From 2000 onwards came the Web Enabled ERP.Web enabled erp services have helped to remove many drawbacks of the earlier applications. This has gained momentum as it has made ERP function more meaningful and dynamic with the latest inclusions such as Dependability, Convenience in reaching,Easy to use & Integrating technology and manual Data in public domain.

 Why We Need ERP:y ERP is an adaptable and information-rich approach that states have used to both assess and improve the performance of a variety of sectors. y States cite the following four key reasons for use ERP: cost-effectiveness, accountability, improved awareness and cooperation within a sector, and flexibility. y ERP can achieve performance at least as good as that of traditional compliance assurance approaches, with potentially fewer resources over time. ERP appears to be more cost-effective when it is applied over more than one ERP implementation cycle. y An ERP package should provide an organization with a solid foundation, incorporating all of the fundamental aspects of running a business. y ERP can also help regulators satisfy their stakeholders' demands for accountability by using a credible system of measurement. y Manual processes are automated, production scheduling is more efficiently managed and inventory is more accurately assessed.

Business performance can be measured in a much more holistic fashion than ever before. This gives executives real-time visibility into all business processes, enabling them to make better strategic decisions. y According to a survey an ERP implementation can reduce costs in three primary categories: inventory costs, manufacturing operating costs and administrative costs. The survey's best-in-class respondents reported a 21 percent decrease in inventory costs, a 17 percent decrease in manufacturing operating costs and a 16 percent decrease in administrative costs. The average respondents' reductions were 11 percent, 8 percent and 9 percent, respectively. y ERP can solve issues of interoperability among multiple manufacturing locations. It can standardize and accelerate manufacturing processes in all of a company's manufacturing sites. y

 ERP Features And Components:y ERP facilitates company-wide Integrated Information System covering all functional areas like Manufacturing, Selling and distribution, Payables, Receivables, Inventory, Accounts, Human resources, Purchases etc. y ERP performs core Corporate activities and increases customer service and thereby augmenting the Corporate Image. y ERP allows automatic introduction of latest technologies like Electronic Fund Transfer(EFT), Electronic Data Interchange(EDI), E-Commerce etc. y ERP eliminates the most of the business problems like Material shortages, Productivity enhancements, Customer service, Cash Management, Inventory problems, Quality problems, Prompt delivery etc. y Key to an ERP package is tight integration between modules, so that all of the core business modules are related. For instance, manufacturing operations are integrated with customer service, logistics and delivery.

 Business Intelligence: One of the newer components of most modern midmarket ERP packages, BI shines a bright light into the heart of a company's performance.  In general, an ERP suite's analytics or BI tools allow users to share and analyze the data that the ERP applications collect from across the enterprise from a unified repository.  The end result is more informed decision making by everyone from executives to line managers to human-resources professionals to accountants.

 CRM (Customer Relationship Management): CRM has long been a core component of any ERP offering, giving manufacturers a way to improve customer service by pulling together tools to fulfill customers' orders, respond to customers' service needs, and often, create marketing campaigns to reach customers.

 Financial Management: Of all the ERP modules, the financials applications tend to be the most frequently utilized.  The financial-management applications may also include tools for creating and adhering to budgets, cash-flow management, expense management, risk management and tax management

 HCM (Human Capital Management): HCM module includes tools for human-resources management, performance management, payroll, and time and labor tracking.  Some vendors also provide functionality for administering benefits, managing compensation, dealing with salary taxes, recruiting new employees and planning workforce needs.

 Manufacturing Operations: The manufacturing module is where much product differentiation happens, including industry-specific functionality.  In general, these applications are intended to make manufacturing operations more efficient and simple.  Applications often include PDM (Product Data Management), CRP (Capacity Requirements Planning), MRP (Materials Requirements Planning), forecasting, MPS (Master Production Scheduling), workorder management and shop-floor control.

 Implementing ERP in Organization:-

 Advantage of ERP:y Ther are number of Powerful advantage of ERP .It has been used to solve a number of problem that have plagued large organization in the past. y The main Advantage are: Information Integration.  Design Engineering.  Since all information available at a central location as soon as some transaction happens, no one has to wait for some other department to provide information.  ERP insure quicker processing of information and reduces the burden paperwork.  ERP elements redundancy in data entry, minimizes the errors and helps to do away with unwanted ambiguity.

 Disadvantage of ERP:y There are several disadvantage of ERP that describe below.  Higher Cost.  Improper utilization of the System  Huge investments in terms of time and money.  High risk implementation and Operation.  Customization of the ERP software is limited. Some customization may involve changing of the ERP software structure which is usually not allowed.  Systems are too restrictive and do not allow much flexibility in implementation and usage.

 Conclusion:y

The success of the system is fully dependent on how the workers utilize it. This means they must be properly trained, and a number of companies have attempted to save money by reducing the cost of training. Even if a company has enough money to implement ERP, they may not be able to successfully use it if they do not have enough money to train their workers on the process of using it. One of the biggest problems with ERP is that it is hard to customize. Very few companies can effectively use ERP right out of the box. It must be modified to suit their needs, and this process can be both expensive and tedious. Even when a company does begin changing the system, they are limited in what they can do.