Chapter : 1 Introduction to ERP

1.0 Objective 1.1 Introduction 1.2 ERP: An Overview 1.3 Enterprise - An Overview 1.4 What is ERP? 1.5 Benefits of ERP 1.6 Business Integration 1.7 Better Analysis and Planning Capabilities 1.8 ERP And Related Technology 1.9 Why Do Many ERP Implementations Fail? 1.10 Why Are ERP Packages Being Used Now? 1.11 Business Process Reengineering (BPR) 1.12 Management Information Systems (MIS) 1.13 Decision Support System 1.14 Executive Information Systems (EIS) 1.15 Data Warehousing 1.16 Data Mining 1.17 On-Line Analytical Processing (OLAP) 1.18 Supply Chain Management 1.19 Summary 1.20 Check your Progress - Answers 1.21 Questions for Self Study Introduction to ERP / 1

1.0 Objectives Friends after reading this topic you will be able to l State what is meant by ERP? explain its benefits. 1.1 Introduction Information Technology is changing totally the way in which we live and work. It is changing all sides of our life and lifestyle. Thedigital revolution has given mankind the ability to use information with mathematical precision, to transmit it with very high speed and accuracy and to manipulate it at will and wish. These capabilities are bringing into change, a whole world within and around the physical world. The amount of power that is available to man-kind is increasing at an exponential rate. Computers and communications are becoming integral parts of our lives. To survive, thrive and beat the competition in today's brutally competitive world, one has to manage the future. Managing the future means managing information. In order to manage information, in order to deliver high quality information to the decision-makers at the right time, in order to automate the process of data collection, collation and refinement, organizations have to make Information Technology (IT) the base, harness its full potential and use it in the best possible manner. IT has many roles to play in any organization. All organizations have cer-tain goals to achieve. For any organization to succeed, all business units or departments should work towards this common goal. But each department or business function in the organization will have its own goals and procedures. The departmental objectives can sometimes be con-flicting. For example, the production-planning department might want to reduce the inventory level, but the production people might want to have more stocks. The 2 / Enterprise Resource Planning

success of an organization depends on resolving the conflicts between the various departments and making them do what is good for the organization as a whole. For this, information is essential and critical. Everybody should know what is happening in other parts of the organization. It is not enough that each department manages its own activities efficiently; it should also help other departments manage their functions efficiently. For this to happen, the organization should stop to function as islands of information, each working in isolation. Each and every employee should know what his/her counterparts are doing, how his/her actions and decisions will affect the other de-partments. This kind of information sharing was difficult in the early days. Now with the advancements in Information Technology this is possible. 1.2 ERP : An Overview IT has a critical role to play, both at the organizational level and at the departmental level. At the organizational level, IT should assist in specifying objectives and strategies of the organization. IT should also aid in developing and supporting systems and procedures to achieve them. At the departmen-tal level, IT must ensure a smooth flow of information across departments, and should guide organizations to adopt the most viable business practices. At this level, IT ensures uniform flow of information across the different departments and develops and maintains an enterprise-wide database. This database will eliminate the need of the isolated data centres that existed in each department and make the organization's data accessible across the departmental boundaries. This enterprise-wide data sharing has many ben-efits like automation of the procedures, availability of high quality information for better decision making, faster response times, and so on. When companies were small and all the different managerial functions man-aged by a single person, the Introduction to ERP / 3

decisions were made, keeping in mind the overall company objectives. But as companies grew, managing the entire operations became impossible for a single person. More and more people were required in and the different business functions were given to different individuals. When the organization became larger, each person hired people. The size of the departments began to increase as more and more people were required to do the job. As the departments became large, they became closed and watertight. Each had their own set of procedures and hierarchy. People, at most level within a department, would just collect and pass information upward. Thus information was -shared between departments only at the top level. Although IT provided the perfect answer, in the haste, most developers ended up developing need-based, isolated and piecemeal information systems that were non compatible (Fig. 1.1). And it is no wonder then that IT imple-mentations automated only the existing applications and not the business functions. Most of this happened because IT was not integrated into the corporate strategy. To draw real benefits from a technology as powerful as IT, one has to devise a system with a holistic view of the enterprise. Such a system has to work around the core activities of the organization, and should facilitate seamless flow of information across departmental barriers. Such systems can optimally plan and manage all the resources of the organization and hence, they can be called as Enterprise Resource Planning (ERP) systems. 1.3 Enterprise : An Overview An Enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve that goal. The group has some key function to perform in order to achieve its goal. Resources included are money, man-power, 4 / Enterprise Resource Planning

material_, and all the other things that are required to run the enter-prise. Planning is done to ensure that nothing goes wrong. Planning is putting necessary functions in place and more importantly, putting them together. Therefore, Enterprise Resource Planning or ERP is a method of effective plan-ning of all the resources in an organization. There are many misconceptions about ERP. The first one is that ERP is a computer system. Yes, computers and IT are integral parts of an ERP system; but ERP is primarily an enterprise-wide system, which encompasses corporate mission, objectives, attitudes, beliefs, values, operating style, and people who make the organization. The second misconception is that ERP is for manufacturing organizations alone. This assumption is basically due to the way in which ERP was histori-cally developed from the methods of Material Requirement Planning (MRP) and Manufacturing Resource Planning (MRP-II), which are relevant to manu-facturing organizations. In the manufacturing industry, MRP became the fundamental concept of production management and control in the mid 1970s. (At this time BOM (Bills of Materials)-which is purchase order man-agement that utilises parts list management and parts development-was the prevailing trend.) And this concept unfolded from order inventory manage-ment of materials to plant and personnel planning and distribution planning, which in turn became MRP-II. This incorporated financial accounting, human resource management functions, distribution management functions and management accounting functions. It came to globally cover all areas of enterprise mainstay business and eventually, began to be called ERP. 1.4 What is ERP Enterprise Resource Planning (ERP) covers the techniques and concepts em-ployed for the integrated management of businesses as a whole, from the viewpoint of Introduction to ERP / 5

the effective use of management resources, to improve the efficiency of an enterprise. ERP packages are integrated (covering all business functions) software packages that support the above ERP concepts. Originally, ERP packages were targeted at the manufacturing industry, and consisted mainly of functions for planning and managing core businesses such as sales management, production management, accounting and financial affairs, etc. However, in recent years, adaptation not only to the manufactur-ing industry, but also to diverse types of industry has become possible and the expansion of implementation and use has been progressing on a global level. ERP software is designed to model and automate many of the basic pro-cesses of a company, from finance to the shop floor, with the goal of integrat-ing information across the company and eliminating complex, expensive links between computer systems that were never meant to talk to each other. Figure shows how infor-mation is integrated within an organisation using an ERP system. Strategic & Operational Planning Manufacturing Materials Management Quality Management Sales & Distribution Finance Human Resource Logistics Management Maintenance Management Fig. Information integration through ERP systems ERP software is a mirror image of the major business processes of an organization, such as customer order fulfilment and manufacturing. Its success depends upon reacha circumscribed ERP system isn't much better than the legacy system it replaces. In many cases, it is worse, because the old code at least was written specifically for the company and the task. ERP systems' set of generic processes, produce the 6 / Enterprise Resource Planning

dramatic improvements that they are capable of only, when used to connect parts of an organization and inte-grate its various processes seamlessly. When a warehouse in Noida enters a customer order, for example, the data flows automatically to others in the company who need to see it-to the finance department at the company headquarters in Mumbai and to the manufacturing plant in Chennai. The lure of information integration struck a chord with CEOs and CEOsERP vendors' primary targets-and sales of ERP took off in the early 1990s There is no doubt that the market for Enterprise Q.1. Fill in the Blanks. 1] An .............. is a group of people with a common goal, which has certain .............. at ifs disposal to achieve that goal. 2] ERP is primarily an enterprise-wide system which encomposses .............., .............., .............., .............., .............., .............. and .............. who make the organisation. Q. 2. Answer in one sentense. 1] What do you mean by ERP packages? _____________________________________________ 2] ERP packages were targeted at which industry originally? ______________________________________________ Check Your Progress. 1.3 & 1.4 Benefits Of ERP 1.5 Resource Planning (ERP) systems is in great demand. Industry analysts are forecasting growth rates of more than 30% for at least the next five years. Why are so many companies replacing their key business systems? The answer is : Introduction to ERP / 7

. To enable, improved business performance . Cycle time reduction . Increased business agility . Inventory reduction . Order fulfilment improvement . To support business growth requirements . New products/product lines, new customers . Global requirements including multiple languages and currencies . To provide flexible, integrated, real-time decision support . Improve responsiveness across the organization . To eliminate limitation in legacy systems . Century dating issues . Fragmentation of data and processing . Inflexibility to change . Insupportable technologies . To take advantage of the untapped mid-market (medium size organi-zations) . Increased functionality at a reasonable cost . Client server/open systems technology . Vertical market solutions These are some of the reasons for the explosive growth rate of the ERP markets and the ERP vendors. As more and more companies are joining the race, the ERP vendors are, shifting their focus from big-Fortune 1000-companies to different market segments (medium size companies, small com-panies, etc.). The future will see fierce battle for market share and mergers and acquisitions for strategic and competitive advantage. The ultimate win-ner in this race will be the customer, who will get better products and better service at affordable prices. Installing an ERP system has many 8 / Enterprise Resource Planning

advantages-both direct and indirect. The direct advantages include improved efficiency, information integration for better decision making, faster response time to customer queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction, and so on. The following are some of the direct benefits of an ERP system : l Business Integration l Flexibility l Better Analysis and Planning l Use of Latest Technology 1.6 Business Integration The first and most important advantage lies in the promotion of integration. The reason why ERP packages are considered to be integrated is the auto-matic data updation (automatic data exchange among applications) that is possible among the related business components. Since conventional company information systems were aimed at the optimization of independent business functions in business units, almost all were weak in terms of the communication and integration of information that transcended the different business functions. In the case of large companies in particular, the timing of system construction and directives differs for each product and department/function and sometimes, they are disconnected. For this reason, it has become an obstacle in the shift to new product and business classification. In the case of ERP packages, the data of related business functions is also automatically updated at the time a transaction occurs. For this reason, one is able to grasp business details in real time, and carry out various types of management decisions in a timely manner, based on that information. Flexibility The second advantage of-ERP packages are their Introduction to ERP / 9

flexibility. Different languages, currencies, accounting standards and so on can be covered in one system, and functions that comprehensively manage multiple locations of a company can be packaged and implemented automatically. To cope with company globalisation and system unification, this flexibility is essential, and one can say that it has major advantages, not simply for development and mainte-nance, but also in terms of management. 1.7 Better Analysis and Planning Capabilities Yet another advantage is the boost to the planning functions. By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilise many types of decision support systems and simulation functions. Furthermore, since I it becomes possible to carry out, flexibly and in real time, the filing and [analysis of data from a variety of dimensions, one is able to give the decision-makers the information they want; thus enabling them to take better and informed decisions. The fourth advantage is the utilisation of the latest developments in Informa-tion Technology (IT). 1.5, 1.6 & 1.7 Check Your Progress. Q. 1. Fill in the Blanks. 1] Industry analysts are forecasting growth rates of more than .............. % for at least the next five years. 2] The first & most important advantage of ERP lies in the promotion of .............. Q. 2. Answer in two-three sentences. 1) State direct benefits of an ERP system. 10 / Enterprise Resource Planning

1.8 ERP And Related Technology The ERP vendors were very quick to realise that in order to grow and to sustain that growth, they had to embrace the latest develop-ments in the field of Information Technology. Therefore, they quickly adapted their systems to take advantage of the latest technologies like open systems, client/server technology, Internet/Intranet, CALS (ComputerAided Acquisi-tion and Logistics Support), electroniccommerce, etc. It is this quick adap-tation to the latest changes in Information Technology that makes the flexible adaptation to changes in future business environments possible. It is this flexibility that makes the incorporation of the latest technology possible during system customisation, maintenance and expansion phases. As has been stated above, ERP includes many of the functions that will be necessary for future systems. However, undertaking reforms to company structures and business processes, so as to enable the full use of these major features, is the greatest task for companies that will use them. It is necessary to take note that casually proceeding with the implementation of ERP, merely for reasons of system reconstruction or preparation for the year 2000, is likely to result in turning the above mentioned advantages into disadvan-tages. 1.9 Why Do Many ERP Implementations Fail? ERP packages, if chosen correctly, implemented judiciously and used effi-ciently, will raise the productivity and profits of companies dramatically. But many a company fails in this because of a wrong product, incompetent and haphazard implementation and inefficient or ineffective usage. To work successfully, the ERP solutions need a lot of factors to click. There should be good people who know the Introduction to ERP / 11

business. The vendor should be good and his package should be the one best suited for the company's needs. The ERP consultants should be good. The implementation should be planned well and executed perfectly. The end-user training should be done so that the people understand the system, and the effect of their efforts on the overall success of the program. The introduction of the ERP system will dramatically change the job descriptions and functions of many employees. Employees who were earlier doing the work of recording information will, overnight, be transformed into decisionmakers. For example, in the past an order entry clerk's job was to enter the orders that came to him. With the implementation of a good ERP system, the order entry clerk becomes an action initiator. As soon as he enters the order into the system, the information is passed on to the sales, distribution and finance modules: The distribution module checks whether the item is in stock and if available, the item is dispatched and the information is sent to the finance module. If the items are not in stock, then the manufacturing module is given the information, so that production can start. The customer is informed about the status of his order. If the items are shipped, the finance module prepares the invoice and sends .it to the cus-tomer. All these actions take place automatically as soon as the order entry clerk enters the information regarding the order into the system. Thus the order entry clerk is transformed from a data entry operator to a decision-maker whose actions can trigger a chain of actions. Many employees find this transformation difficult to accept. If the employ-ees are not given proper training, well in advance, then the systems will fail. Another factor is the fear of unemployment. When procedures become auto-mated, the people who were doing those jobs become redundant. So it is quite natural to have resistance from the employees. But the same employees can be trained in the new system and can work in more challenging and stimulating environments. For this also, the employees have to be told, in advance, as to what 12 / Enterprise Resource Planning

will happen and should be given ample time and training to make the transformation. Without support from the employees, even the best system will fail. So it is very important that the management should take the necessary steps, well in advance, to alleviate the fears of, and provide necessary training to their employees. 1.10 Why Are ERP Packages Being Used Now? In regard to the application packages, many products have been developed thus far and are selling well. So, how do conventional application packages and ERP packages differ? The first answer to this question is that ERP packages cannot only handle individual business functions such as accounts and inventory, but also the entire range of business functions necessary for the company's operations. The second difference is that ERP packages are targeted at everything from small businesses to the largest organizations, and that they can be composed of a highly flexible decentralised database and an information system cluster linked by a network. The third difference is global adaptation, represented by ERP packages' multilingual and multi-currency capacity. In the present day, when compa-nies, irrespective of their size and market share, are manufacturing and selling in various areas of the world, the globalisation of management plat-forms is being hastened, along with the global adaptation of enterprise infor-mation systems. Introduction to ERP / 13

1.8, 1.9 & 1.10 Q. 1. State true or false. 1] Many componies fail in ERP implementation due to wrong product. 2] The end-usertraining is nessecery for a company to implement ERP properly. 3] ERP packages can handle entire range of business functions necessory for company's operations. 4] ERP packages are targeted at everything from small businesses to large organisations. 5] ERP has multilingual & multicurrency capacity. Check Your Progress. Business Process Reengineering (BPR) 1.11 BPR has been around for quite some time and a lot has been written about it in b oth, the practitioner trade press and the academic research journals. However, t he controversy still remains about whether there is any accurate description of BPR, or BPR is just a fad-an appealing label to tag on to whatever your company is doing, to suggest that your latest and greatest work is 'in vogue.' But if re engineering is to continue in the long run, then it must do more than advertise its considerable successes to date. It must become more proactive and inclusive with regard to human, organizational and motivational change issues. Dr Michael Hammer defines BPR as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed." One of the main tools for making this change is the Information Technolo gy (IT). Any BPR effort that fails to understand the importance of IT, and goes through the pre 14 / Enterprise Resource Planning

BPR analysis and planning phases without consid-ering the various IT options available, and the effect of the proposed IT solutions on the employees and the organization, is bound to crash during takeoff. We have seen that the ERP systems help in integrating the various busi--ness processes of the organization with the help of modern developments in IT. With a good ERP package, the organization will have the capability of achieving dramatic improvements in critical areas such as cost, quality, and speed and so on. So many BPR initiatives end up in the ERP implementation. 1.12 Management Information Systems (MIS) In the past, most payroll systems were data processing systems that did little more than process time sheets, print payroll checks and keep totals of an-nual wages and deductions. This was the case with most other departmental information systems. As managers began to demand more and better infor-mation about the working of the organization, the data processing systems evolved into management information systems. For example, a human re-source MIS system is capable of predicating the average number of worker sick days, the amount that must be given as bonus, the overtime allowances, and so on. MIS is a computer-based system that optimises the collection, collation, transfer and presentation of information throughout an organization, through an integrated structure of databases and information flow. The major differences between a management information system and a Data Processing system are : . The integrated database of the MIS enables greater flexibility in meet-ing the information needs of the management. Introduction to ERP / 15

l The MIS integrates the information flow between functional areas (ac-counting, marketing, manufacturing, etc.) whereas data processing systems tend to support a single functional area. l MIS caters to the information needs of all levels of management whereas data processing systems focus on departmental-level support. l Management's information needs are supported on timely basis with the MIS (with its on-line query capability) than with a data pro-cessing system. The main characteristics of the management information system are: l The MIS supports the data processing functions of transaction han-dling and record keeping. l MIS uses an integrated database and supports a variety of functional areas. l MIS provides operational, tactical and strategic levels of the organiza-tion with timely, but for the most part structured information (ad-hoc query facility is not available). l MIS is flexible and can be adapted to the changing needs of the organization. 1.13 Decision Support Systems (DSS) Managers spend a lot of time and effort in gathering and analysing information before making decisions. Decision support systems were created to assist managers in this task. Decision support systems are interactive informa-tion systems', which rely on an integrated set of user-friendly software and hardware tools, to produce and present information targeted to support management in the decisionmaking process. On many occasions, decision -makers can rely on their experience to make quality decisions. However, decision-makers, especially at the top management levels, are 16 / Enterprise Resource Planning

often con-fronted with complex decisions. The analysis of such complex decisions which involve many factors can be difficult for a human being. These types of decisions and the need for complex information analysis required for such decisionmaking, led to the evolution of decision support systems. A DSS can help close the information gap and allow managers to improve the quality of their decisions. To do this, the DSS hardware and software employ the latest technological innovations, planning and forecasting models, 4th generation languages and even artificial intelligence. In many cases, DSS facilitates the decision-making process, helping the decision-makers to choose between alternatives. Some decision support systems can automatically rank the alternatives, based on the criteria given by the decision-maker. DSS also help in resolving the monotony and tedium of gathering and analysing data. Management Information Systems are best at supporting decisions that involve structured problems such as when to reorder the raw materials, how much to order and the like. In contrast, DSS are designed to support deci-sion-making processes involving semi-structured and unstructured problems. Here, the role of the DSS is to help managers in getting the information they want in the way they want. For example, a manager wants to reduce cycle time. He might look at various facts like the availability of raw materials, skilled personnel, the average machine down time, and so on. So there is no way the system can anticipate what the manager wants. DSSs are capable of helping the managers in making such decisions. The main characteristics of a DSS are : . DSS is designed to address semi-structured and unstructured prob-lems. . The DSS mainly supports decision-making at the top management level. Introduction to ERP / 17

. DSS is interactive, user-friendly can be used by the decision-maker with little or no assistance from a computer professional. . DSS makes general-purpose models, simulation capabilities and other A DSS does not replace the MIS; instead a DSS supplements the MIS. There are distinct differences between them. MIS emphasises on planned reports on a variety of subjects; DSS focuses on decision-making. MIS is standard, scheduled, structured and routine; DSS is quite unstructured and is available on request. MIS is constrained by the organizational system; DSS is immediate and user-friendly. 1.14 Executive Information Systems (EIS) The line dividing DSS and EIS is very thin. EIS can be considered as a better and sophisticated DSS. Top-level executives and decision-makers face many problems and pressures. They have to make the right decisions at the right time to take the company forward. In today's competitive world, reaction times are shrinking and time to make decisions is very less. EIS is a decision support system especially made for senior-level executives. An EIS is con-cerned with how decisions affect an entire organization. An EIS takes the following into consideration : . The overall vision and mission of the company and the company goals. Strategic planning and objectives . Organizational structure . Crisis management/Contingency planning . Strategic control and monitoring of overall operations executive decision-making also requires access to outside information from competitors, governmental regulations, trade groups, news gathering agen-cies, and so on. A high degree of uncertainty and a future 18 / Enterprise Resource Planning

orientation is involved in most executive decisions. Successful EIS are easy to use, flexible and customisable and use the latest technological innovations Q. 1. State true or false. 1] EIS is a better and sophistocated DSS. 2] DSS means decision support system. 3] Crisis management and contingency planning are considered by EIS. 4] EIS means executive information system. 5] DSS is designed to address semistructured and unstructured problems. 6] DSS supports decision making at top management level. Check Your Progress. 1.11, 1.12, 1.13 & 1.14 Data Warehousing 1.15 If operational data is kept in the databases of the ERP system, it can create a lot of problems. As time passes, the amount of data will increase and this will affect the performance of the ERP system. So it is better to archive the operational data once its use is over. When I say 'the use is over', it does not mean that the archived data is useless. On the contrary, it is one of the most valuable resources of the organization. However once the operational use of the data is over, it should be removed from the operational databases. For example, once the financial year is over, the daily transactional data can be archived. Figure shows what happens if the data is not archived. Introduction to ERP / 19

1999 2000 2001 2002 2003 2004 Archive Data Operational Data Fig. Operational data V5. archive dat It is evident from the figure that even though the operational data volume is nearly the same each year, since the data is not archived the total amount of data that is stored in the operational database will go on increasing. Figure shows the effect of keeping this huge amount of data in the operational database. It is clear from the above graph that as the volume of the data in the database increases, the performance of the database and the related applications decreases. 1999 2000 2001 2002 2003 2004 Database Performance Fig. Data volume V5. performance From the above discussions, it is evident that we should separate the operational data from the non-operational data. I am not using the term archive data, because if the nonoperational data is archived, there is little or no use for it. But this data is a very valuable resource' and is too precious to be 20 / Enterprise Resource Planning

kept in some archive. It is in this situation that a data warehouse comes in handy. The primary concept of data warehousing is that the data stored for busi-ness analysis can be accessed most effectively by separating it from the data in operational systems. The most important reason for separating data for business analysis, from the operational data, has always been the potential performance degradation on the operational system that can result from the analysis processes. High performance and quick response time is almost universally critical for operational systems. The reasons to separate the op-erational data from the analysis data have not significantly changed with the evolution of the data warehousing systems, except that now they are consid-ered more formally during the data warehouse building process. Advances in technology and changes in the nature of business have made many of the business analysis processes much more complex and sophisticated. In addi-tion to producing standard reports, today's data warehousing systems sup-port very sophisticated online analysis, including multi-dimensional analysis. 1.16 Data Mining We are living in the information age. The importances of collecting data that reflects ones business, or of activities that achieve competitive advantage, are widely recognised now. Powerful systems for collecting data and managing it in large databases are available in most organizations. However, the major bottleneck of converting this data into effective information is the difficulty faced in extracting knowledge about the system from the collected data. Modelling the investigated system discovering relations that connect variables in a database are the subjects of data mining. Data mining is the process of identifying valid, novel, potentially useful and ultimately comprehensible information Introduction to ERP / 21

from databases that is used to make crucial business decisions. Modern data mining systems self learn from the previous history of the investigated system, formulating and testing hypoth-eses about the rules, which the system obeys. When concise and valuable knowledge about the system of interest has been discovered, it can and should be incorporated into some decision support system which helps the manager make wise and informed business decisions. The main reason for needing automated computer systems for intelligent data analysis is the enormous volume of existing and newly appearing data that require processing. The amount of data accumulated each day by vari-ous businesses, scientific and governmental organizations around the world is daunting. Research organizations, academic institutions and commercial organizations create and store huge amounts of data each day. It becomes impossible for human analysts to cope with such overwhelming amounts of data. Two other problems that surface when human analysts process data are : l The inadequacy of the human brain when searching for complex multifactor dependencies in the data l The lack of objectiveness in analysing the data A human expert is always a hostage of the previous experience of inves-tigating other systems. Sometimes this helps, sometimes this hurts, but it is almost impossible to get rid of this fact. One additional benefit of using automated data mining systems is that this process has a much lower cost than hiring an army of highly trained (and paid) professional statisticians. While data mining does not eliminate human participation in solving the task completely, it significantly simplifies the job and allows an analyst, who is not a professional in statistics and program-ming, to manage the process of extracting knowledge from data. 22 / Enterprise Resource Planning

1.17 On-Line Analytical Processing (OLAP) According to Business Intelligence Ltd (http://www.OLAPReport.com), OLAP can be defined in five words-Fast Analysis of Shared Multidimensional Information. FAST means that the system is targeted to deliver most responses to users within about five seconds, with the simplest analysis taking no more than one second and very few taking more than 20 seconds. ANALYSIS means that the system can cope with any business logic and statistical analysis that is relevant for the application and the user, and keep it easy enough for the target user. SHARED means that the system implements all the security requirements for confidentiality (possibly down to cell level) and, if multiple write access is needed, concurrent update locking at an appropriate level. MULTIDIMENSIONAL means the system must provide a multidimen-sional conceptual view of the data, including full support for hierarchies and multiple hierarchies. INFORMATION is refined data that is accurate, timely and relevant to the user. Simply put, OLAP describes a class of technologies that are designed for live ad-hoc data access and analysis. While transaction processing (OLTP) generally relies solely on relational databases, OLAP has become synonymous with multidimensional views of business data. These multidimensional views are supported by multidimensional database technology and provide the tech-nical basis for calculations and analysis required by Business Intelligence applications. OLAP technology is being used in an increasingly wide range of applications. The most common are sales and marketing analysis; financial reporting and consolidation; and budgeting and planning. Increasingly however, OLAP is being used for applications such as product profitability and pricing analy-sis; activity based costing; manpower planning; and Introduction to ERP / 23

quality analysis, or for that matter any management system that requires a flexible, top down view of an organization. 1.18 Supply Chain Management A supply chain is a network of facilities and distribution options that per-forms the function of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives which are often conflicting. Marketing's objective is high customer services and maximum sales revenue conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximise throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization-there is as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved. 24 / Enterprise Resource Planning

Check Your Progress. 1.15, 1.16, 1.17 & 1.18 Q. 1. Answer in 2-3 Sentenses. 1] What do you mean by data were housing? 2] What is data mining? 3] What is OLAP? 4] What is a supply chain? 1.19 Summary 1) Enterprise resource planning covers the techniques and concepts employed for the integrated management of business as a whole. 2) Originally ERP packages were targeted of the manufactoring industry. 3) However in recent years, adaptation not only to the manufactoring industry but also diverse types of industry has become possible. 4) It has various benefits, so that companies now a days are implementing ERP solutions. Introduction to ERP / 25

5) Some discussios about faiures of ERP packages. 6) The seasons, why should companies implement ERP systems. Q.1 -1] Enterprise. Check Your Progress - Answers 1.3 & 1.4 1.20 2] Corporate mission, objectives, attitudes, beliefs, values, operating style & peope. Q.2 1] ERP packages are integrated (covering all businessfunctions) softwere packages that support ERPconcept. 2] Originally ERP packages were targeted at the manufactoring industry. 1.5, 1.6 & 1.7 Q.1 1) 30% 2) integration. Q.2 1) a) Business Integration b) Flexibility c) Better Analysis & Planning d) Use of latest technology. 1.8, 1.9 & 1.10 1) True 2) True 3) True 4) True 5) True 1.11, 1.12, 1.13 & 1.14 1) True 2) True 3) True 4) True 5) True 6) True 1.15, 1.16, 1.17 & 1.18 1) The concept of data warehousing is that the data stored for business analysis can be accessed most effectively by seperating it from the data in operational systems. 26 / Enterprise Resource Planning

2) Data mining is the process of idetifying valid, novel, potentially useful and ultimately comprehensible information from databases i.e. used make crucial business decisions. 3) OLAP means online analytical processing. 4) Supply chain is a network of facilities & distribution options that parforms the function of procurement of materials transformation of it into intermidiate & finished products & distributing those to customers. Questions for Self-Study 1.21 1. What is the critical factor that decides the success of an enterprise I today's competitive environment? 2. What is ERP? What are the limitations of ERP? 3. Discuss the evolution of ERP. 4. What were the disadvantages of the pre-ERP information model- the isolated islands model 5. What are the advantages of ERP systems 6. How was business integration achieved by ERP systems? 7. Why are ERP system said to be flexible? 8. Why do many implementations fail? 9. What are reasons for the growth of ERP market? 10. How do conventional application packages and ERP packages differ? 11. What is BRP? 12. What is MIS? 13. What is EIS? 14. What do you mean by OLAP? q q q Introduction to ERP / 27

Notes 28 / Enterprise Resource Planning