|
|
|
|
|
|
Lesson#43
|
Enterprise Resource Planning
|
|
|
|
Enterprise Resource Planning
Following are various modes of integration:
1. Connect Existing modules/system
2. Use Supply Chain Management (SCM) Software
3. Use ERP Software
The material on first two modes is available in the handouts of
lecture 42. The third way of
integrating is using an ERP software. Before we start of with
what ERP is, I would like to touch
a previously discussed linkage between IT and business
objectives.
43.1 Business Objectives and IT
The goals set by the business strategy are always of supreme
importance. Some of these goals
are meeting customer requirements, reaching customer where he is
--- online, scattered
locations, achieving distinctive competence and winning brand
loyalty. IT function in an
organization is set up in order to support the business goals
set at all levels of the organization.
IT objectives should be flexed according to the business needs
of the organization. This helps in
efficient use of IT resources for the achievement of business
objectives.
Text in above clips related to IT objectives
Technology for the sake of it serves no purpose. It needs to be
driven by objectives and these
need to be cleared ahead of time if any organization wants to
embark on the journey of
advancement in technology. So we were very clear and we have
been very clear in our business
objectives and tools that are required for advancement e.g.
equipment, technology. So that
objectives which are profitable can be constantly managed. The
objective of any business is to
operate in a manner to create value, to create value for itself
and for the company. There are of
course other subsidiary objectives like social responsibility.
And I fully concur that whatever the
available technology that must be used in an economic manner so
that it can create value for the
company as a whole.
Gist of the clips
The corporate objectives define the IT objectives. The IT
objectives should be of help in
achieving business objectives as IT is tool being used for the
purpose of achieving the
corporate objectives. It is not as end by itself. Technology for
the sake of technology is futile.
43.2 Using ERP Software
ERP is an abbreviation for
Enterprise Resource Planning. In this three
word term, resource and
planning may seem as least relevant, but the most relevant part
is “Enterprise” since the
software aims to take an enterprise level view of the entire
organization. ERP can be defined as
“ERP (enterprise resource planning) is an industry term for the
broad set of activities supported
by multi-module application software that helps a manufacturer
or other business manage the
important parts of its business, including product planning,
parts purchasing, maintaining
inventories, interacting with suppliers, providing customer
service, and tracking orders.”
There are some reasons attracting companies to take up ERP.
1. Planning the operations
186
2. Integrated customer related information – order tracking with
customer database, inventory
and shipment at different locations.
3. Standardized HR information – A company with multiple
business units will require a
comprehensive and all-encompassing method of locating employees
and communicating
with them.
4. Integrated financial information and analysis
5. Monitoring the operations including those of sub-vendors and
manufacturers
6. Standardization analysis of financial and non financial
information for decision making
control/regulation.
7. We will now listen to the views of the State Bank Of
Pakistan’s CIO on the subject.
Gist of the clips
The CIO, State Bank is talking about how they came to the
decision of having an integrated
system to help the institution provide a modern environment for
not only conducting its
business but also by using the latest in technology, achieve the
corporate objectives through
better speedier accumulation of data, analysis, thereof to
assist in the regulatory function. The
system being used by them not only had to cater for data
relating to the central bank’s own
activities but also data of all commercial banks in Pakistan.
This necessitated a system of data
warehousing.
43.3 ERP Compared to integrated Software
The concept of ERP is that of an integrated software. An
integrated software can be defined as
a software package that combines many applications in one
program. Previously, the user
needed various utilities to operate the program and provide
suitable interfaces. Today these
utilities are an integral part of the software. Thus the receipt
of a confirmed customer order
should provide the start of a number of activities that are
essential to complete and deliver the
order. There is no need to separately enter data for each of the
other related activities.
Integrated packages can move data among several programs
utilizing common commands and
file structures. In effect, there are multiple applications
using the same data simultaneously. An
integrated package is recommended when identical source
information is to be used for varying
purposes and activities.
Most of the software modules can be integrated to provide a
complete picture. Generally,
customized integrated software/lays stress on meeting the needs
of an organization without
causing change or too much change in the business processes.
ERP’s on the other hand
incorporate industry best practices. Thus ERP’s are a generic
solution requiring business
process chances. The presence of best industry practices makes
ERP a highly generic software.
ERP though can be customized for a business, but at very high
costs. Hence the benefits are
better earned in implementing the ERP as a generic software and
spending time realigning the
business processes and synchronize with it.
Gist of the clips
Once the decision to adopt the ERP route is made and a product
selected, it is imperative to
establish what is demanded by the software, what is the
requirement the business and how the
two above can be reconciled for the benefit of organization.
Thus a gap analysis is conducted
and the realignment of the existing procedures with the
requirements of the ERP have to be
undertaken. There may be some element of customization of the
ERP, but it is generally
minimal. Stress is therefore on the realignment of the business
process.
187
Text in the clips (Packages)
When we compare an ERP with an integrated software, an ERP
offers much more than just
being an integrated software. The reason behind it is that it
has been developed after studying
hundreds of different industries and based on best practices.
ERP standardizes in itself the best
practices that are available.-and practiced the world over. So a
customized integrated software
may be serving the needs of the organization very well. There
business information flows and
efficiencies adopting good practices of the best ERP is indeed
very helpful. An ERP gives you
the flexibility to add on new functionalities and modes of doing
business.
Text in the clips (State Bank)
The concept of ERP started in Early 90’s when we had MRP-I and
MRP-II which purely
focused on manufacturing side. Then later on, the financials
were added to it. Then the rest of
the business i.e. sales, inventory, receivables, payables all
were added as part of the software.
ERP is across the enterprise, that is why they call is
Enterprise Resource Planning System. The
other thing is that it has a central database. What ever you are
dealing with, be it sales or
manufacturing, the data base is the same. So the paradigm of the
way you use the system is the
same. The look and feel is the same, though the training issues
should be taken care of. The
programming and parameterization of the system is quite similar
across the board and those
benefits don’t come in if let us say we are having integration
at a limited scope. There are
interfaces for each module which help to reconnect with other
modules, so if we don’t have a
system implemented across the board, benefits don’t start coming
in as expected.
Gist of the clips
Standardization of processes based on best practices makes an
ERP a more effective tool. The
generic characteristic of an ERP with all-inclusive tools turns
it into an effective means of
doing business efficiently.
43.4 Evolution of ERP
The current form and version of ERP has evolved over time. It
took nearly four decades for the
ERP model to mature. Let’s take a look at the brief history of
ERP development.
188
Attributes of an ERP software
ERP applications address the complete business process. ERP
applications are modular
generally covering all aspects of the business as each aspect is
dependant upon the other. Thus
you will generally find certain standard modules as part of ERP
software which are
manufacturing, supply chain, financials, CRM, human resources
and warehouse management. It
may also be stated that depending upon business size , phased
approach may be opted to
• Enterprise Resource Planning or ERP uses multimodule
application software for improving the
performance of the internal business processes.
• ERP systems often integrates business activities across
functional departments, from product planning, parts
purchasing, inventory control, product distribution,
fulfillment, to order tracking.
• ERP software systems may include application modules
for supporting marketing, finance, accounting and
human resources.
Enterprise
Resource
Planning
(ERP)
1990s
• Manufacturing Requirements Planning or MRP utilizes
software applications for coordinating manufacturing
processes, from product planning, parts purchasing,
inventory control to product distribution.
Manufacturing
Requirements
Planning
(MRP II)
1980s
Inventory Management and
control is the combination of
information technology and business processes of maintaining the
appropriate level of stock in a warehouse.
The activities of
inventory management include
o identifying inventory
requirements,
o setting targets, providing
replenishment techniques and
options,
o monitoring item usages,
reconciling the inventory balances,
and reporting inventory status.
Inventory
Manageme
nt & Control
1960s
Timeline System Description
• Materials Requirement Planning (MRP) utilizes software
applications for scheduling timely material procurement.
• MRP generates schedules for the operations and raw
material purchases based on the production requirements
of finished goods, the structure of the production system,
the current inventories levels and the lot sizing procedure
for each operation.
Material
Requirem
ent
Planning
(MRP)
1970s
189
implement the ERP. A phased approach becomes necessary because
of business process
realignment and implementation issues particulars relating to
change in habits of the users.
During the past, the software laid greater stress on financial
transactions and their cumulative
result with information for other department being provided as a
secondary objective. ERP is
extended to the enterprise level, encompassing not only the
organization but also the entities
external to organization i.e. suppliers and customer.
Text in the clips (Packages)
The perception was correct in the past. But as economy is
growing, finance is not the only
important field. Supply chain, production, marketing they all
are very important parts of
industry whether in form of goods or services. So for this
purpose information should be
available as soon as possible through out the company e.g. about
the stock levels, processes
used to produce finished goods till packing and dispatching it
to customers and recovering.
ERP is a system that helps in making information available live
throughout the system at one
time and it is available to all. So now a days it is no longer a
finance driven. It is basically a
company driven idea and the idea is to serve the customer well.
Gist of the clips
ERP is across the enterprise in its literal sense. ERP is a
package that builds in itself at facets of
a business.
43.5 ERP & Customer relationship management
Integration involves a broader view of various soft wares being
used by the organization. Now
CRM is also being used in connection with the ERP for efficient
planning and effective control.
Text in the clips (Packages)
Some of the world’s good ERP system, they do have planning and
interpretation methodology
embedded in them. When we went under the procedure of
implementing, we were told that
there are two modes to do the same: long procedure and short
procedure. The long procedure
is spread over two years. The short procedure is spanned over
nine month’s time. The short
procedure can also be termed as the quick methodology. In short
procedure, the organization
needs to have a certain time line, certain procedures and
certain things are to be done. The logic
of having this short implementation procedure is that the human
natures if it is too long people
lose interest, things change, people change, processes change,
so we need to do it in a very quick
implementation mode. For this we have to form what we call a
project team. The project team
is further headed by the steering committee in which members are
taken from various
functions. We don’t need to have all people present at the same
time but at a time we need to
have four or five people to be present for every function which
is being configured to align with
the ERP system and connected by the ERP consultants.
Gist of the clips
ERP should be seen as an independent project. Like with every
other project, this must have
an independent project team. The project team is made up of
generally heads of departments
of various functions. This team is led by a steering committee
comprising those charged with
policy making to ensure that any decisions are taken
expeditiously. |
|
|
|
|
|
|