ENTERPRISE RESOURCE PLANNING

Submitted By:-

Aman Harshvardhan(01)

Shreya Savarn(23)
WHAT IS ERP ?
ERP is short for ENTERPRISE RESOURCE PLANNING.
Enterprise resource planning (ERP) is a category of business-
management softwaretypically a suite of integrated applicationsthat an
organization can use to collect, store, manage and interpret data from
many business activities, including:

product planning, purchase

manufacturing or service delivery

marketing and sales

inventory management

shipping and payment

ERP provides an integrated view of core business processes, often in real-time,

using common databases maintained by a database management system. ERP
systems track business resourcescash, raw materials, production capacityand
the status of business commitments: orders, purchase orders, and payroll. The
applications that make up the system share data across various departments
(manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP
facilitates information flow between all business functions, and manages connections
to outside stakeholders.
Enterprise system software is a multibillion-dollar industry that produces components
that support a variety of business functions. IT investments have become the largest
category of capital expenditure in United States-based businesses over the past
decade. Though early ERP systems focused on large enterprises, smaller
enterprises increasingly use ERP systems.
The ERP system is considered a vital organizational tool ] because it integrates
varied organizational systems and facilitates error-free transactions and production.
However, developing an ERP system differs from traditional system
development. ERP systems run on a variety of computer
hardware and network configurations, typically using a database as an information
repository.
Diagram showing some typical ERP modules 1

ERP Software Modules

ERP software typically consists of multiple enterprise software modules that are
individually purchased, based on what best meets the specific needs and technical
capabilities of the organization. Each ERP module is focused on one area of
business processes, such as product development or marketing. A business can use
ERP software to manage back-office activities and tasks including the following:
Distribution process management, supply chain management, services knowledge
base, configure, prices, improve accuracy of financial data, facilitate better project
planning, automate employee life-cycle, standardize critical business procedures,
reduce redundant tasks, assess business needs, accounting and financial
applications, lower purchasing costs, manage human resources and payroll.
Some of the most common ERP modules include those for product planning,
material purchasing, inventory control, distribution, accounting, marketing, finance
and HR.
As the ERP methodology has become more popular, software applications have
emerged to help business managers implement ERP in to other business activities
and may incorporate modules for CRM and business intelligence, presenting it as a
single unified package.

The basic goal of using an enterprise resource planning system is to provide one
central repository for all information that is shared by all the various ERP facets to
improve the flow of data across the organization.

Why ERP is considered to be the

backbone of e-business?
Business enterprises in India are in the process of a major transformation due to
globalization and the deregulation of Indian economy, coupled with fundamental
changes in the business models due to the emergence of Information Technology
based business practices.

Most of the enterprises in developing countries, such as India, are in the process of
implementing Enterprise Resource Planning (ERP) system in alignment with
organizational transformation and process of re-engineering initiatives. ERP system
promise benefits that range from increased efficiency to transformation of quality,
productivity and profitability.

However, its implementation poses some unexpected organizational challenges and

changes that can be structural as well as cultural in nature. ERP not only helps
establish world-class best business practices and brings transparency to the
organization but also demands for empowerment and flexibility in decision making
process.

The most promising argument is that, to thrive in the e-commerce world companies
need to transform their internal business process with the deployment of ERP
system. Hence, ERP is considered to be the backbone of e-business.

What is Business Process

Reengineering (BPR)?
Business process re-engineering is a business management strategy, originally
pioneered in the early 1990s, focusing on the analysis and design
of workflows and business processes within an organization. BPR aimed to
help organizations fundamentally rethink how they do their work in order to
dramatically improve customer service, cut operational costs, and become world-
class competitors. In the mid-1990s, as many as 60% of the Fortune 500 companies
claimed to either have initiated reengineering efforts, or to have plans to do so.

BPR seeks to help companies radically restructure their organizations by focusing on

the ground-up design of their business processes. According to Davenport (1990) a
business process is a set of logically related tasks performed to achieve a defined
business outcome. Re-engineering emphasized a holistic focus on business
objectives and how processes related to them, encouraging full-scale recreation of
processes rather than iterative optimization of sub-processes. ]

Business Process Reengineering is also known as business process

redesign, business transformation, or business process change management.

What is ERP enabled Business

Process Reengineering (BPR)?
Business Process Reengineering (BPR) is the fundamental rethinking and radical
redesign of business processes of an organization to achieve dramatic improvement
in critical contemporary measures of performance such as cost, quality, service and
speed. In simple terms, the process of examining current processes and redesigning
those processes to increase the efficiency and effectiveness of an organization is
called BPR.
More precisely, BPR means the rapid and radical redesign of strategic, value-added
business processes and system, policies and organizational structure that support
them to optimize workflow and productivity in an organization.

BPR concurrently pursued breakthrough improvements in quality, speed, service and

cost by leveraging the potential of information technology while addressing the
issues of organizational strategies and vision for change. Breakthrough improvement
means quantum gains of 5 to 10 times compared to incremental improvements of
20-30 per cent. These improvements are generally characterized in terms of
improvement of product and service quality at low cost and less time lag between
product designs to marketing.

How BPR plays a critical role in ERP

implementation?
Processes, organization, structure and information technologies are the key
components of BPR, which automates business processes across the enterprise and
provides an organization with a well-designed and well-managed information system.
While implementing ERP, the organizations have two options to consider.

Either the organization must reengineer business processes before implementing

ERP or directly implement ERP and avoid reengineering.

In the first option of reengineering business processes, before implementing ERP,

the organization needs to analyze current processes, identify non-value adding
activities and redesign the process to create value for the customer, and then
develop in-house applications or modify an ERP system package to suit the
organizations requirements. In this case, employees will develop a good sense of
process orientation and ownership.

This would also be a customized solution keeping with line of the organization's
structure, culture, existing IT resources, employee needs and disruption to routine
work during the change programmer likely to be the least. It could have a high
probability of implementation. The drawback of this option is that the reengineered
process may not be the best in the class, as the organization may not have access
to world-class release and best practices. Moreover, this may be the only chance to
radically improve in the near future and most attention should be paid while choosing
the right ERP. Also, developing an in-house application or implementing a modified
ERP is not advisable.

The second option of implementing ERP package is to adopt ERP with minimum
deviation from the standard settings. All the processes in a company should conform
to the ERP model and the organization has to change its current work practices and
switch over to what the ERP system offers. This approach of implementation offers a
world-class efficient and effective process with built-in measures and controls, and is
likely to be quickly installed.
But if the employees do not have good understanding of their internal customer
needs or current processes, or if these processes are not well defined and
documented, then it is quite possible that while selecting the standard process from
the ERP package, employees may not be able to perceive the difficulties likely to be
encountered during the implementation stage. Employees would lack process
ownership and orientation. Other than technical issues, issues like organization
structure, culture, lack of involvement of people etc. can lead to major
implementation difficulties, and full benefits of standard ERP package may not be
achieved. It may lead to a situation where the organization may have to again
reengineer its processes. This could be a very costly mistake.

There is also a third option of reengineering business process during implementation

of ERP. But it does not considered to be a practical option and is likely to cause
maximum disruption to existing work. It should not be forgotten that during BPR and
ERP initiatives, routine work is still to be carried out and customers need to be
served.