Enterprise Resource Planning Essays

Enterprise Resource Planning Essays Enterprise Resource Planning Essay Enterprise Resource Planning Essay Master of Business Administration MBA Semester 3 OM0011 – Enterprise Resource Planning Assignment Set 1 Q1. What is Enterprise Resource Planning (ERP)? What are the advantages of ERP? â€Å"Enterprise Resource Planning:  An accounting oriented information system for identifying and planning the enterprise-wide resources to make, ship and account for customer orders. † Again in Internet encyclopedia, it has defined as: â€Å"An enterprise planning system is an integrated computer based application used to manage internal and external resources, including tangible assets, financial resources, material and human resources†. Basically, an ERP combines several traditional management functions into a logical integrated system and facilitate flow of information across these functions. It is designed to model and automate basic processes across the organization over a centralized database and eliminates the need of disparate systems maintained by various units of the organization. The successful implementation of an ERP system will have many advantages, as indicated below: Business integration and Improved Data Accuracy:  ERP system is composed of various modules/ sub modules where a module represents a particular business component. If data is entered in one module such as receiving, it automatically updates other related modules such as accounts payable and inventory. This updating occurs at real time i. e. at the time a transaction occurs. Since, data needs to be entered only once at the origin of transaction, the need of multiple entries of the same data is eliminated. Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized structure of the data base also enable better administration and security provisions, which minimizes loss of sensitive data. Planning and MIS:  The various decision support tools like planning engines and simulations functions, form integral part of an ERP system which helps in proper utilization of resources like materials, human resources and tools. Constrained based planning help in drawing appropriate production schedules, thereby improving operation of plant and equipment. As a part of MIS, an ERP system, contains many inbuilt standard reports and also a report writer which produce ad hoc reports, as and when needed. Improved Efficiency and Productivity:  In addition to provision of improved planning, ERP system provides a tremendous boost to the efficiency of day to day and routine transactions such as order fulfillment, on time shipment, vendor performance, quality management, invoice reconciliation, sales realization, and cash management. Cycle time is reduced for sales to cash and procurement to pay sequences. Establishment of Standardized Procedures:  ERP system is based on processes of international best practices, which are adopted by the organizations during implementation. Department silos are purged and maverick practices are done away with. Because of top down view available to management, chances of theft, fraud and obsolescence are minimized. Flexibility and technology:  Due to globalized environment, where production units, distribution centers and corporate offices reside in different countries, organizations need multi currency, multi language and multi accounting modes, in an integrated manner. These provisions are available in most of the ERP systems, particularly in products offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest technologies, from mainframe to client server to internet. Unlike a bespoke system, Upgrading to latest technology for a running ERP system is uncomplicated, involving mostly adoption of service packs and patches. Q2. What is business modeling? Explain. Business modelling or creating a business model is one of the first activities in any ERP project. As mentioned earlier, the ERP systems should be a replica of the organisation’s business processes. A business model is not a mathematical model, but it is a representation of the business as one large system showing the interconnections and interdependencies of the various subsystems and business processes as shown in Figure. . 4. Figure 2. 4: Real World and the Business Model Based on the organisation’s goals, objectives, and strategic plans, a business model consisting of the business processes is developed. Different individuals in the organisation (the people) control these business processes to achieve common goals. Based on the business model the ERP system is developed with the aim of providing the required information and necessary assistance to the various individuals in an organisation. This helps them perform their business processes more effectively and efficiently. In business modelling, we model the business as an integrated system, taking the processes managing its facilities and materials as resources. Information is a very important resource and is very critical in managing all the other resources. Thus, the business model is a representation of the actual business, the various business functions of the organisation, the relation that exists between them, the manner in which they are interdependent, and so on, to achieve a common goal or objective. The business model is usually represented in the graphical form using flow charts and flow diagrams. The data model of the system is created from the business model. For example, in a small scale automation industry the order bagged by the marketing is passed on to planning department. From here the actual production starts and it has to be cautiously tracked by the planning department. It is the responsibility of the planning department to request the design department to release the drawings and the requirements for the production department. Once the released documents reach the production department, it has to ensure that it allocates man power and a time plan for the manufacturing of the product. Planning has a time schedule of its own for the manufacturing, which has to be planned in accordance to the production department, and has to be informed to the marketing department. Production has to check for the availability of the required items for production from stores and if in case there is any shortage it has to be informed both to the planning and purchase through a proper channel, so that the requirements can be brought in as early as possible. Once the product leaves from production to quality department and then to packing, the information about the status of work and the product description should be available to the planning department. Thus you can see how each department has to work coordinating to each other and the essence of communication between the departments. As important as process planning, market planning is very crucial phase of business modelling. Since, market planning also has an important role when it comes to decision making in large organisation on market strategy. So that it can enable the organisation to successful meet commercialisation requirements according to changing market trend. Its main concern is how decision taken on certain issues can change the company’s revenues and its profit margins. Hence, planning is a crucial element of business model for this to achieve an ERP system is suppose to be capable of handling information not only about the process of various departments but it needs to track the company’s market performance and the company’s product competency compared to its competitors in the market and allow the management to take decision quickly and effectively. Q3. Write short notes on ERP tools and softwares. Before the evolution of ERP model, each department in an enterprise had its own isolated software application that did not interface with any other system. Such isolated framework could not synchronise the inter-department processes and hence hampered the overall productivity, speed, and performance of the organisation. This situation led to issues such as incompatible market standards, lack of synchronisation, incomplete understanding of the complete enterprise functioning, unproductive decisions and so on. For example, the finance department could not coordinate with the procurement team to plan out purchases as per the availability of money. Hence, deploying a comprehensive ERP system across an organisation leads to performance increase, workflow synchronisation, standardised information exchange within departments, complete overview of the enterprise functioning, global decision optimisation, speed enhancement and so on. ERP system is built on a centralised database utilising a common computing platform. It consolidates all business operations into a uniform enterprise wide system environment. An ERP system can either reside on a centralised 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 and expensive computer systems in areas which will not use their full capacity. ERP systems integrate all the departments and functions across a company onto a single computer system that can serve all the departments needs. There are two types of ERP software packages. Open Source ERP software and Commercial ERP software. Some of the differences between the two software are as follows. Table 4. 1 shows the differences between commercial and open source ERP. Differences between Commercial and Open Source ERPs ERP Tools There are several ERP software manufacturers. Prominent manufacturers of ERP software are SAP, Oracle Corporation, PeopleSoft, JD Edwards, Lawson, etc. SAP has the major share in the ERP market and next comes the Oracle Corporation. Oracle has acquired JD Edwards, People Soft, and more recently Siebel and competes with SAP in the ERP market. Table 4. 2 lists the popular ERP Tools and their respective vendors. Table 4. 2: ERP Tools and respective vendors Q4. Describe Materials Requirement Planning (MRP). Initially, manufacturing industries viewed Materials Requirement Planning MRP as a better method for ordering components than the independent demand inventory models they had been using during the 1950s and 1960s. However, it has evolved into a comprehensive priority planning system. MRP provides a method that helps keep order due dates valid, even after the orders have been released to the shop floor or outside vendor. MRP systems can detect when is the order due date, the date the order is scheduled to arrive, is out of alignment with its need date, and the date the order is actually required. During the 80s, techniques for helping to plan capacity requirements were tied up with MRP. Tools were developed to assist the planning of aggregate production levels and the development of anticipated production schedules. Systems to aid in executing the plans were incorporated in shop floor control for the  Ã¢â‚¬Ëœin-house factory’  and vendor scheduling for the  Ã¢â‚¬Ëœoutside factories’. The expanded MRP system became known as closed loop MRP. Since, it provided feedback from the execution function to the planning functions, so manufacturers could change plans when necessary. Expanded-closed-loop MRP was practiced to provide the ability to translate the operating plan expressed in manufacturing terms of units (kilograms) into financial terms (rupees). They even have the potential to simulate the effects of various plans in terms of both units and rupees. The new system, which was called Manufacturing Resource Planning (MRP-II), was a comprehensive approach for the effective planning of all the resources of a manufacturing organisation. Materials and production planning is critical to the success of a manufacturing company. A company can have the best and the newest manufacturing facilities, product design, the latest equipment. Along with all the latest production technologies like CAD/CAM, robotics, automated guided vehicles (AGVs), and so on but the company had no ability to compete. MRP has proved to be an effective production and inventory planning system in a wide variety of environments. For a successful MRP system three types of information are very essential and they are:   Master Production Schedule (MPS)  · Bill of Material (BOM)  · Inventory Records (IR) Q5. Briefly explain the features of ERP – Purchase module. Features of Purchase Module The Purchase module helps to improve your purchasing function. This module controls the inventory purchasing side of your business. You can track purchase orders, supplier prices, and quantities on order. With the usage of Purchase module you can increase your inventory efficiency and eliminate costly shortages. Features of the purchase module include:  · Streamlining purchase and process cycles  · Capturing materials requirement  · Creating quotations from various suppliers  · Providing a detailed Supplier/Subcontractor/Service Provider database  · Recording Payment terms in PO Allowing order cancellation and order closing  · Enabling multiple delivery schedules, Quotation validity and multiple indents for multiple items in a single PO  · Enabling quality inspection of goods  · Containing complete import functionality with handling of custom details Purchase Bill for import, excise consideration in imports  · Providing Order tracking reports for complete control o n procurement cycle  · Providing Management Information System (MIS) for vendor evaluation based on quality, price and delivery time Efficient purchase management processes provide uyers with advanced tools for analysing supplier patterns in terms of price and delivery terms. This also enables them to adopt adequate measures once unfavourable circumstances are encountered. It assists in taking informed decisions and maintaining control throughout the procurement cycle. This module can handle all purchasing and subcontracting activities such as inviting quotations, supplier evaluation, placing purchase order, order scheduling, and billing. Q6. What are the benefits and limitations of ERP Inventory Management? Benefits and Limitations of ERP Inventory Management ERP inventory management system has many benefits. Some of them include:  · Tracking of orders from the point the order is received to its release.  · Facilitating appropriate communication between different areas.  · Reducing the threat of loss of information.  · Providing a ‘top down’ summary of the mechanism of a company.  · Setting up an outline of security to protect against theft from external or within a company. Replacing old and primitive paper based systems that improves efficiency. Limitations of ERP Inventory Management ERP inventory management helps an organisation in many ways. However, it also has some limitations. They are:  · Limited customisation  · Expensive  · Not friendly with every type of business like small organisations.  · Harder to fix responsibility as it is a company-wide system that connects all areas  · When all departments in a company are not willing to share informa tion, maintenance of sensitive data can disturb the work flow