Enterprise resource planning (ERP)

Submitted to: AMIT SHARMA Submitted by: HARPREET KAUR 709009

Enterprise resource planning (ERP)

Enterprise resource planning (ERP) is an integrated computer-based system used to manage internal and external resources including tangible assets, financial resources, materials, and human resources. It is a software architecture whose 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. Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate all business operations into a uniform and enterprise wide system environment. An ERP system can either reside on a centralized server or be distributed across modular hardware and software units that provide "services" and communicate on a local area network. The distributed design allows a business to assemble modules from different vendors without the need for the placement of multiple copies of complex, expensive computer systems in areas which will not use their full capacity In simpler words, an ERP is a massive software architecture that supports the streaming and distribution of geographically scattered enterprise wide information across all the functional units of a business house. It provides the business management executives with a comprehensive overview of the complete business execution which in turn influences their decisions in a productive way. At the core of ERP is a well managed centralized data repository which acquires information from and supply information into the fragmented applications operating on a universal computing platform.

The Ideal ERP System

An ERP system would qualify as the best model for enterprise wide solution architecture, if it chains all the below organizational processes together with a central database repository and a fused computing platform. Manufacturing Engineering, resource & capacity planning, material planning, workflow management, shop floor management, quality control, bills of material, manufacturing process, etc. Financials Accounts payable, accounts receivable, fixed assets, general ledger, cash management, and billing (contract/service) Human Resource Recruitment, benefits, compensations, training, payroll, time and attendance, labour rules, people management Supply Chain Management Inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration, procurement planning, transportation and distribution Projects Costing, billing, activity management, time and expense Customer Relationship Management Sales and marketing, service, commissions, customer contact and after sales support Data Warehouse Generally, this is an information storehouse that can be accessed by organizations, customers, suppliers and employees for their learning and orientation

Implementation of an ERP System

Implementing an ERP system in an organization is an extremely complex process. It takes lot of systematic planning, expert consultation and well structured approach. Due to its extensive scope it may even take years to implement in a large organization. Implementing an ERP system will eventually necessitate significant changes on staff and work processes. While it may seem practical for an in-house IT administration to head the project, it is commonly advised that special ERP implementation experts be consulted, since they are specially trained in deploying these kinds of systems. Organizations generally use ERP vendors or consulting companies to implement their customized ERP system. There are three types of professional services that are provided when implementing an ERP system, they are Consulting, Customization and Support.

Consulting Services - are responsible for the initial stages of ERP implementation where they help an organization go live with their new system, with product training, workflow, improve ERP's use in the specific organization, etc. Customization Services - work by extending the use of the new ERP system or changing its use by creating customized interfaces and/or underlying application code. While ERP systems are made for many core routines, there are still some needs that need to be built or customized for a particular organization. Support Services - include both support and maintenance of ERP systems. For instance, trouble shooting and assistance with ERP issues. The ERP implementation process goes through five major stages which are Structured Planning, Process Assessment, Data Compilation & Cleanup, Education & Testing and Usage & Evaluation.

1. Structured Planning: is the foremost and the most crucial stage where an capable project team is selected, present business processes are studied, information flow within and outside the organization is scrutinized, vital objectives are set and a comprehensive implementation plan is formulated. 2. Process Assessment: is the next important stage where the prospective software capabilities are examined, manual business processes are recognized and standard working procedures are constructed. 3. Data Compilation & Cleanup: helps in identifying data which is to be converted and the new information that would be needed. The compiled data is then analyzed for accuracy and completeness, throwing away the worthless/unwanted information. 4. Education & Testing: aids in proofing the system and educating the users with ERP mechanisms. The complete database is tested and verified by the project team using multiple testing methods and processes. A broad in-house training is held where all the concerned users are oriented with the functioning of the new ERP system.

Advantages of ERP Systems

1. Eliminates the problem of synchronizing changes between multiple systems consolidation of finance, marketing and sales, human resource, and manufacturing applications 2. Permits control of business processes that cross functional boundaries 3. Provides top-down view of the enterprise (no "islands of information"), real time information is available to management anywhere, anytime to make proper decisions. 4. Reduces the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure. 5. Shorten production lead-time and delivery time 6. Facilitating business learning, empowering, and building common visions 7. A perfectly integrated system chaining all the functional areas together 8. The capability to streamline different organizational processes and workflows 9. The ability to effortlessly communicate information across various departments 10. Improved efficiency, performance and productivity levels 11. Enhanced tracking and forecasting 12. Improved customer service and satisfaction

Disadvantages

Problems with ERP systems are mainly due to inadequate investment in ongoing training for the involved IT personnel - including those implementing and testing changes - as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and the ways in which it is used. 1. Customization of the ERP software is limited. 2. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage 3. ERP systems can be very expensive. 4. ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companiesthis is cited as one of the main causes of their failure. 5. Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, and then over time "dirty data" will reduce the reliability of some applications. 6. Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level). 7. The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale. 8. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.
9. Some large organizations may have multiple departments with separate, independent

resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.