9/20/2019 Study Material-1: UNIT 1 ENTERPRISE RESOURCE PLANNING

Enterprise Resourse Managemane

Study Material-1

1 UNIT 1 ENTERPRISE RESOURCE PLANNING

UNIT 1

ENTERPRISE RESOURCE PLANNING

--Saurabh Shukla

Objective
In this unit, we shall cover the following topics in detail:
a. Basic concept & History of ERP
b. Necessity of ERP and Market leaders in ERP packages
c. Evolution and Future of ERP
d. Benefits of ERP
e. Business case of ERP
f. E-Business and its application
g. E-Business for Small and Mid-Sized Businesses
h. Existing market Scenario

Concept of ERP
Enterprise Resource Planning or ERP is an industry term for integrated, multi-module application
software packages that are designed to serve and support multiple business functions. An ERP
system can include software for manufacturing, order entry, accounts receivable and payable,
general ledger, purchasing, warehousing, transportation and human resources. Evolving out of the
manufacturing industry, ERP implies the use of packaged software rather than proprietary software
written by or for one customer. ERP modules may be able to interface with an organization's own
software with varying degrees of effort, and, depending on the software, ERP modules may be
alterable via the vendor's proprietary tools as well as proprietary or standard programming
languages.
It attempts to integrate all departments and functions across a company onto a single computer
system that can serve all those different departments’ particular needs. That is a tall order,
building a single software program that serves the needs of people in finance as well as it does the
people in human resources and in the warehouse. Each of those departments typically has its own
computer system optimized for the particular ways that the department does its work. But ERP
combines them all together into a single, integrated software program that runs off a single
database so that the various departments can more easily share information and communicate with x
each other.
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That integrated approach can have
9/20/2019 a tremendous
Study Material-1: payback
UNIT 1 ENTERPRISE if companies
RESOURCE PLANNING install the software

correctly.
Take a customer order, for example. Typically, when a customer places an order, that order begins
a mostly paper-based journey from in-basket to in-basket around the company, often being keyed
and rekeyed into different departments’ computer systems along the way. All that lounging around
in in-baskets causes delays and lost orders, and all the keying into different computer systems
invites errors. Meanwhile, no one in the company truly knows what the status of the order is at any
given point because there is no way for the finance department, for example, to get into the
warehouse’s computer system to see whether the item has been shipped. "You’ll have to call the
warehouse" is the familiar refrain heard by frustrated customers.

ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the
warehouse, and replaces them with a single unified software program divided into software modules
that roughly approximate the old standalone systems. Finance, manufacturing and the warehouse
all still get their own software, except now the software is linked together so that someone in
finance can look into the warehouse software to see if an order has been shipped. Most vendors’
ERP software is flexible enough that you can install some modules without buying the whole
package. Many companies, for example, will just install an ERP finance or HR module and leave the
rest of the functions for another day.

History of ERP

The focus of manufacturing systems in the 1960's was on Inventory control. Most of the software
packages then (usually customized) were designed to handle inventory based on traditional
inventory concepts. In the 1970's the focus shifted to MRP (Material Requirement Planning) systems
that translated the Master Schedule built for the end items into time-phased net requirements for
the sub-assemblies, components and raw materials planning and procurement.

In the 1980's the concept of MRP-II (Manufacturing Resources Planning) evolved which was an
extension of MRP to shop floor and Distribution management activities. In the early 1990's, MRP-II
was further extended to cover areas like Engineering, Finance, Human Resources, Projects
Management etc i.e. the complete gamut of activities within any business enterprise. Hence, the
term ERP (Enterprise Resource Planning) was coined.
Why ERP is required?
By becoming the integrated information solution across the entire organization, ERP systems allow
companies to better understand their business. With ERP software, companies can standardize
business processes and more easily enact best practices. By creating more efficient processes,
companies can concentrate their efforts on serving their customers and maximizing profit.
Market Leaders in ERP packages
The top five ERP vendors, SAP, Oracle Corporation, Peoplesoft, Inc. (now Oracle Corp.), JD
Edwards & Company, and Baan International, account for 64 percent of total ERP market
revenue. These vendors continue to play a major role in shaping the landscape of new target
markets, with expanded product functionality, and higher penetration rates. SAP dominates the
$6.7 billion ERP applications market in Europe with 39% market share. Oracle and PeopleSoft come
second and third respectively, followed by SAGE Group and Microsoft Business Solutions.

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Industry
9/20/2019 analysts expect that every major
Study manufacturing
Material-1: UNIT 1 ENTERPRISEcompany will buy the software, which
RESOURCE PLANNING

ranges in cost -- with maintenance and training -- from hundreds of thousands of dollars for a small
company to millions for a large company. AMR Research of Boston says consolidation among the
major players will continue and intensify. ERP vendors are expected to put more effort into e-
commerce, CRM and SCM initiatives, with leaders redirecting between 50% and 75% of their R&D
budget to these projects.
According to Gartner research group, the rapid evolution of ERP has already lead to a new corporate
must-have, ERP II, which is supposed to help businesses gain more competitive edge in the future.
The major difference is that ERP II involves collaborative commerce, which enables business
partners from multiple companies to exchange information posted on eCommerce exchanges
Business Benefits
ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your
company takes a customer order and processes it into an invoice and revenue—otherwise known as
the order fulfillment process. That is why ERP is often referred to as back-office software. It
doesn’t handle the up-front selling process (although most ERP vendors have recently developed
CRM software to do this); rather, ERP takes a customer order and provides a software road map for
automating the different steps along the path to fulfilling it. When a customer service
representative enters a customer order into an ERP system, he has all the information necessary to
complete the order (the customer’s credit rating and order history from the finance module, the
company’s inventory levels from the warehouse module and the shipping dock’s trucking schedule
from the logistics module, for example).
Business Case
People in these different departments all see the same information and can update it. When one
department finishes with the order it is automatically routed via the ERP system to the next
department. To find out where the order is at any point, you need only log in to the ERP system and
track it down. With luck, the order process moves like a bolt of lightning through the organization,
and customers get their orders faster and with fewer errors than before. ERP can apply that same
magic to the other major business processes, such as employee benefits or financial reporting
That, at least, is the dream of ERP. The reality is much harsher.
Let’s go back to those inboxes for a minute. That process may not have been efficient, but it was
simple. Finance did its job, the warehouse did its job, and if anything went wrong outside of the
department’s walls, it was somebody else’s problem. Not anymore. With ERP, the customer service
representatives are no longer just typists entering someone’s name into a computer and hitting the
return key. The ERP screen makes them businesspeople. It flickers with the customer’s credit rating
from the finance department and the product inventory levels from the warehouse. Will the
customer pay on time? Will we be able to ship the order on time? These are decisions that customer
service representatives have never had to make before, and the answers affect the customer and
every other department in the company. But it’s not just the customer service representatives who
have to wake up. People in the warehouse who used to keep inventory in their heads or on scraps of
paper now need to put that information online. If they don’t, customer service reps will see low
inventory levels on their screens and tell customers that their requested item is not in stock.
Accountability, responsibility and communication have never been tested like this before.
People don’t like to change, and ERP asks them to change how they do their jobs. That is why the
value of ERP is so hard to pin down. The software is less important than the changes companies
make in the ways they do business. If you use ERP to improve the ways your people take orders,
manufacture goods, ship them and bill for them, you will see value from the software. If you simply
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install
9/20/2019 the software without changing
Studythe waysUNIT
Material-1: people do their
1 ENTERPRISE jobs, PLANNING
RESOURCE you may not see any value at
all—indeed, the new software could slow you down by simply replacing the old software that
everyone knew with new software that no one does.
There are five major reasons why companies undertake ERP:
1.  Integrate financial information—As the CEO tries to understand the company’s overall
performance, he may find many different versions of the truth. Finance has its own set of revenue
numbers, sales has another version, and the different business units may each have their own
version of how much they contributed to revenues. ERP creates a single version of the truth that
cannot be questioned because everyone is using the same system.
2.  Integrate customer order information—ERP systems can become the place where the
customer order lives from the time a customer service representative receives it until the loading
dock ships the merchandise and finance sends an invoice. By having this information in one software
system, rather than scattered among many different systems that can’t communicate with one
another, companies can keep track of orders more easily, and coordinate manufacturing, inventory
and shipping among many different locations at the same time.
3.  Standardize and speed up manufacturing processes—Manufacturing companies—
especially those with an appetite for mergers and acquisitions—often find that multiple business
units across the company make the same widget using different methods and computer systems.
ERP systems come with standard methods for automating some of the steps of a manufacturing
process. Standardizing those processes and using a single, integrated computer system can save
time, increase productivity and reduce head count.
4. Reduce inventory—ERP helps the manufacturing process flow more smoothly, and it improves
visibility of the order fulfillment process inside the company. That can lead to reduced inventories
of the stuff used to make products (work-in-progress inventory), and it can help users better plan
deliveries to customers, reducing the finished good inventory at the warehouses and shipping docks.
To really improve the flow of your supply chain, you need supply chain software, but ERP helps too.
5. Standardize HR information—Especially in companies with multiple business units, HR may
not have a unified, simple method for tracking employees’ time and communicating with them
about benefits and services. ERP can fix that.
In the race to fix these problems, companies often lose sight of the fact that ERP packages are
nothing more than generic representations of the ways a typical company does business. While most
packages are exhaustively comprehensive, each industry has its quirks that make it unique. Most
ERP systems were designed to be used by discrete manufacturing companies (that make physical
things that can be counted), which immediately left all the process manufacturers (oil, chemical
and utility companies that measure their products by flow rather than individual units) out in the
cold. Each of these industries has struggled with the different ERP vendors to modify core ERP
programs to their needs

e-Business
e-Business is a term used to describe businesses run on the Internet, or utilizing Internet
technologies to improve the productivity or profitability of a business. In a more general sense, the
term may be used to describe any form of electronic business —- that is to say, any business which
utilizes a computer. This usage is somewhat archaic, however, and in most contexts e-business
refers exclusively to Internet businesses.
The most common implementation of e-business is as an additional, or in some cases primary, x
storefront. By selling products and services online, an e-business is able to reach a much wider
Please Ask
consumer base than any traditional brick-and-mortar store could ever hope for. This function
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business
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1 ENTERPRISE RESOURCEused interchangeably.
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An e-business may also use the Internet to acquire wholesale products or supplies for in-house
production. This facet of e-business is sometimes referred to as e-procurement, and may offer
businesses the opportunity to cut their costs dramatically. Even many e-businesses which operate
without an electronic storefront now use e-procurement as a way to better track and manage their
purchasing.
In addition to buying and selling products, e-business may also handle other traditional business
aspects. The use of electronic chat as a form of technical and customer support is an excellent
example of this. An e-business which uses chat to supplement its traditional phone support finds a
system which saves incredible amounts of time while providing opportunities unavailable through
traditional support. By using virtual computer systems, for example, technical support operators
can remotely access a customer's computer and assist them in correcting a problem. And with the
download of a small program, all pertinent information about the hardware and software
specifications for a user's computer may be relayed to the support operator directly, without having
to walk a customer through personally collecting the data.
Using email and private websites as a method for dispensing internal memos and white sheets is
another use of the Internet by e-business. Rather than producing time-intensive and costly physical
copies for each employee, a central server or email list can serve as an efficient method for
distributing necessary information.
In the past few years, virtually all businesses have become, to some degree or another, an e-
business. The pervasiveness of Internet technology, readily available solutions, and the repeatedly
demonstrated benefits of electronic technology have made e-business the obvious path. This trend
continues with new technologies, such as Internet-enabled cell phones and PDAs, and the trend of
e-business saturation will most likely continue for some time.
E-business (electronic business), derived from such terms as "e-mail" and "e-commerce," is the
conduct of business on the Internet, not only buying and selling but also servicing customers and
collaborating with business partners. One of the first to use the term was IBM, when, in October,
1997, it launched a thematic campaign built around the term. Today, major corporations are
rethinking their businesses in terms of the Internet and its new culture and capabilities. Companies
are using the Web to buy parts and supplies from other companies, to collaborate on sales
promotions, and to do joint research. Exploiting the convenience, availability, and world-wide reach
of the Internet, many companies, such as Amazon.com, the book sellers, have already discovered
how to use the Internet successfully.
Increasingly, much direct selling (or e-tailing) is taking place on the Internet of computer-related
equipment and software. One of the first to report sales in the millions of dollars directly from the
Web was Dell Computer. Travel bookings directly or indirectly as a result of Web research are
becoming significant. Custom-orderable golf clubs and similar specialties are considered good
prospects for the immediate future.
With the security built into today's browsers and with digital certificates now available for
individuals and companies fromVerisign, a certificate issuer, much of the early concern about the
security of business transaction on the Web has abated and e-business by whatever name is
accelerating.
IBM considers the development of intranets and extranets to be part of e-business. e-business can
be said to include e-service, the provision of services and tasks over the Internet by application
service providers (ASP).
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9/20/2019   
Study Material-1: UNIT 1 ENTERPRISE RESOURCE  
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Ref: http://www.ebstrategy.com/
E-Business for Small and Mid-Sized Businesses
Small and mid-size businesses (SMB) are everywhere:
Plastics industry - over 5,000 plastics suppliers and 18,000 plastic processors who trade in 30,000
grades of materials
Food Services industry - over 2,000 producers; 20,000 distributors, and 750,000
restaurants/operators
Chemicals industry - over 500 global producers of thousands of complex products; complicated
distribution through over 50,000 intermediaries
Healthcare industry - over 7,500 distributors selling complex, regulated products to 275,000
hospitals; fragmented, inefficient industry
Printing industry - hundreds of national printers and over 50,000 regional printers in the US alone
The pressure to adopt e-business apps and digitize business processes is growing steadily in the
fragmented SMB segment. However, SMB firms have unique needs:
Limited IT resources and sophistication
Continuous cost pressures
Limited discretionary capital for any long-term IT investments
Constant competitive threats that threaten their survival
That's the reality for SMB enterprises. They require cost-effective solutions that can be up and
running quickly -- and that will continue to meet their needs as the business grows.
Existing market Scenario: SMB Market Segmentation

Packaged Solutions for SMB Market

The shift away from building custom applications toward buying off-the-shelf is a long-term trend
that is picking up steam in the SMB segment. The replacement of legacy applications slowed with
the downturn in the economy as SMB enterprises locked down all discretionary spending. New
applications typically are good investments over the long term especially to maintain
competitiveness and facilitate growth.
That's why several vendors are creating customized e-business solutions specifically designed for
companies in the small and mid-size business marketplace. Mid-size e-business solutions sets give
smaller enterprises (with employees greater than 250 and typically revenues between $50 million
and $500 million) access to functionality similar to what their Fortune 500 counterparts have had
for years. Small business solutions are aimed at the emerging multibillion-dollar market: supplying
potent software to companies with 50 to 250 employees.
One of the biggest difference between traditional and SMB ERP implementations is customization or
the lack thereof. Traditional ERP packages are heavily customized, requiring hundreds of
consultants and millions of dollars. By contrast, most mid-size implementations range between
$300,000 to $500,000. The small business solutions tend to average around the $75,000 - $200,000
range.
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 1. Explain
9/20/2019 the brief history of ERPStudy
and list few
Material-1: UNITof the market
1 ENTERPRISE leaders
RESOURCE in ERP packages with their
PLANNING

brief description
2. Explain different reasons for which ERP are required by any company
3. Explain in brief the Evolution of ERP
4. What are different benefits that can be accrued by any ERP
5. What is e-business and its applications

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