MODULE 2

1. Define ERP Systems

ERP (Enterprise Resource Planning) Systems: These are integrated software platforms
that help organizations manage and automate core business processes. ERP systems
centralize data across different departments (like finance, human resources, production,
and supply chain) to provide a unified view of the business, enabling better decision-
making and efficiency.

2. Generations of ERP

Different Versions of ERP Systems:

• ERP I: The initial generation focused primarily on automating internal processes

within an organization, such as finance and production.
• ERP II: This generation expanded the functionality to include external interactions,
allowing businesses to collaborate with suppliers and customers, enhancing
supply chain management.
• ERP III: The latest evolution integrates even more aspects, including customer
participation in business processes, making the customer an active participant in
the operations.

3. Features of ERP Systems

Detailed Characteristics of ERP Systems:

• Integration: Combines various business functions into a single system, allowing

data to flow seamlessly between departments.
• Real-Time Data: Provides up-to-date information, improving decision-making and
operational efficiency.
• Automation: Reduces manual tasks by automating routine processes, saving time
and minimizing errors.
• Scalability: Can grow with the business, allowing for the addition of new
functionalities as needed.
• Customization: Offers the ability to tailor the system to meet specific business
needs.
• User-Friendly Interface: Provides intuitive dashboards and reporting tools for
easy access to data.
• Compliance and Security: Helps ensure that the organization meets regulatory
requirements while protecting sensitive data.
Roots of ERP Systems

• Expansion: ERP systems have evolved in data handling and application context.
• Technology Advances: Innovations have driven changes in ERP systems.
• Web Impact: The internet has opened new ways for remote interactions.
• Wireless Access: Technologies like WAP allow mobile access to ERP applications.

Importance of ERP

• Integrated Information: Critical for a company's survival.

• Application as Strategy Tool: ERP supports business strategy implementation.
• Technology & Strategy: Technology enables strategies that guide business
direction.

Competitive Advantage

• Adoption of Applications: How businesses use ERP systems differentiates them.

• Speed & Skill: Fast adoption and skilled application use lead to competitive
edges.

ERP Implementation Strategy

• Innovations: ERP has expanded beyond internal operations to include external

customer and supply chain processes.
• Functionality Growth: More features and better interfaces for broader operations.

Shortcomings of ERP Implementation

• Time: Long implementation durations.

• Efforts: Many tasks and activities needed.
• Costs: Higher resource use leads to increased costs.
• Lifecycle Misalignment: Old methods may not align with evolving ERP systems,
necessitating re-engineering.

Benefits of ERP Systems

• Operational Alignment: Improved strategy and operation alignment.

• Productivity & Insight: Enhanced operational efficiency.
• Cost Reduction: Increased flexibility and better risk management.
Implementation Phases

1. Model Business Processes: Visualize and define business processes.

2. Configuration of Application: Install and customize the software based on
defined processes.
3. Documentation: Maintain logs of each step for technical records.

Post-Go-Live Functionality

• Database Integration: Link database with software for access and permissions.
• Business Logic: Establish business processes according to database
configurations.
• Workflow: Create a technology-driven sequence of tasks.

Adaptation Phase

• Functionality Review: Reassess and refine system functionality for ongoing

improvement.

Introduction to ERP-II

• Emergence of ERP-II: Focus shifted from internal to external web-enabled

applications.
• Definition by Gartner Inc.: Combines business strategy with applications to
enhance collaborative processes.

Comparison of ERP Versions

1. ERP I: Focuses on internal operations.

2. ERP II: Extends to external supply chain functions.
3. ERP III: Integrates customers into business operations.

Key Differences (ERP vs. ERP-II)

• Application Role: ERP focuses on internal optimization; ERP-II includes external

collaboration.
• Business Domains: ERP addresses manufacturing; ERP-II covers broader
sectors.
• Architecture: ERP is closed and monolithic; ERP-II is open and web-based.
MODULE 3-1
1. Understand Reasons for Need

Organizations recognize the need for a new system for several reasons:

• Efficiency Improvement: Existing systems may be outdated or inefficient, leading

to slow processes.
• Integration Needs: New systems can integrate various functions, reducing data
silos and improving collaboration.
• Regulatory Compliance: Changes in laws or regulations may necessitate a new
system to ensure compliance.
• Technological Advancements: New technologies can offer better features and
capabilities than existing systems.
• Market Changes: Changes in market dynamics or customer expectations may
require an upgraded system to stay competitive.

2. Importance of New Systems

Implementing new information systems is significant because:

• Enhanced Performance: Modern systems can improve operational performance

and productivity.
• Informed Decision-Making: Real-time data access enables better strategic
decisions.
• Cost Savings: New systems can reduce operational costs by automating
processes and improving efficiency.
• Scalability: New systems can be designed to grow with the organization’s needs,
allowing for future expansion.

3. Benefits of Establishing Need

Defining the need for a new system offers several advantages:

• Clear Objectives: Establishing need helps clarify organizational goals and

objectives for the new system.
• Resource Allocation: Knowing the specific need allows for better planning and
resource allocation.
• Risk Mitigation: Clearly understanding the need helps identify potential risks and
challenges in the transition.
• Stakeholder Buy-In: A well-defined need can garner support from key
stakeholders, making implementation smoother.
4. Business Process Focus

Focusing on business processes rather than just functional areas is more beneficial
because:

• Holistic View: A process focus allows for a complete understanding of how

various functions interconnect and contribute to overall performance.
• Continuous Improvement: Emphasizing processes encourages ongoing
evaluation and enhancement, fostering a culture of continuous improvement.
• Customer-Centric: A process approach often aligns better with customer needs
and experiences, leading to better service delivery.
• Agility: Organizations that focus on processes can adapt more quickly to changes
in the business environment.

5. Cost Estimation

Assessing the need for a new system involves understanding different types of costs,
including:

• Direct Costs: These are costs directly associated with purchasing and
implementing the system, such as hardware, software, and training.
• Indirect Costs: These are less obvious costs, including employee time spent on
the transition, potential opportunity costs, and costs of postponed activities.
• Long-Term Costs: It’s important to consider not only one-time costs but also
ongoing maintenance and upgrade expenses over a longer time horizon.

6. Business Process Mapping

Using simple maps to analyze current business processes helps to:

• Visualize Operations: Maps provide a visual representation of how processes

flow, making it easier to identify inefficiencies or bottlenecks.
• Identify Improvement Areas: By mapping processes, organizations can pinpoint
specific areas that require enhancement or reengineering.
• Facilitate Communication: Process maps can be useful tools for communicating
with stakeholders about how processes work and where changes are needed.
• Support Training: New staff can better understand the processes through visual
aids, facilitating training and onboarding.
Why Initialize Need?

The initiation for a new information system arises from two main factors:

1. Correction: Aligning the system with the business strategy through strategic
evaluation.
2. Change: Addressing significant impacts on overall business performance.
Establishing need allows organizations to discover and define new opportunities.

Key Considerations for a New Information System

1. Costs: Evaluate costs related to system purchase, implementation time, and costs
incurred from system failures.
2. Risk: Assess potential negative impacts of system failure.
3. Opportunity Loss: Consider the risk of losing business opportunities during
system transitions.

Process vs. Functional Focus

• Process Focus: This approach affects system selection and software

specifications.
• It encourages continuous improvement and involvement beyond just the software's
"Go-Live" phase, extending to suppliers and customers.

Cost Breakdown for Need Estimation

A budget should account for both direct and indirect costs:

Types of Costs

1. Direct Costs:

◦ Hardware: Physical devices needed for the system.

◦ Operating System: Software required to run the system.
◦ Software: Core applications, additional modules, third-party tools, and
integration costs.
◦ Programming: Costs for customization and development.
◦ Consultancy & Project Management: Includes travel and accommodation
costs.
◦ Training: Educating staff on the new system.
◦ Data Conversion: Preparing data for the system's Go-Live.
◦ Maintenance & Upgrades: Ongoing costs for system upkeep.
2. Indirect Costs:

◦ Employee time and costs for temporary staff.

◦ Costs associated with delayed projects.
 ◦ Internal IT resources for ongoing support.
◦ Travel and training costs away from the workplace.

Long-Term Perspective

Planning should consider a meaningful time frame of about 5 years, including both one-
time and recurring costs.

Justifying Cost-Benefit Analysis

Justification strengthens the case for need by aligning estimated costs with measurable
benefits.

Challenges in Implementation

• Complexity: Coordinating complex ERP implementations can be challenging.

• Financial Evaluation Disagreements: Differences in methods for financial
evaluations (like payback periods vs. discounted cash flow) can create conflicts.

Integration with Business Processes

• ERP systems connect various functions (sales, manufacturing, purchasing) and

provide real-time data for monitoring and optimizing operations.

Business Process Mapping

Creating process maps can help pinpoint areas for improvement. Key elements in the
process map include:

• Supplier Master
• Material Master

Benefits Identified Through Mapping

• Customer Relations: Faster responses to inquiries.

• Production Scheduling: Adjust production based on demand, reducing excess
stock.
• Materials Requirements: Improved inventory visibility and proactive management.
• Supplier Management: Transition to blanket purchase orders and lower storage
costs.
• Materials Handling: Better tracking and fewer stock errors.
• Manufacturing: Enhanced progress tracking and lead-time management.
• Dispatch: Quicker document processing for faster deliveries.

Intangible Benefits
 • Increased problem-solving efficiency.
• A more engaged and proactive workforce.
• Enhanced capability for continuous improvement.

Technology Usage Focus

The real value comes from how the system is utilized, rather than the technology itself.

General Benefits of Information Systems

• Shorter Cycle Times: Workflow automation speeds up processes.

• Real-Time Data Access: Reduces reliance on paper documentation.
• Elimination of Duplicate Entries: Minimizes errors and recovery time.

Quality Improvements

• Online data collection improves quality management, leading to fewer returns,

repairs, and warranty costs.
MODULE 3-2
Defining Requirements

• Process Overview: Defining requirements is a detailed and often time-consuming

task that involves capturing every detail in comprehensive documentation.
• Change Management:
◦ Stability in Process: Once requirements are defined, changes in the
process must be avoided unless necessary, as any modifications require
updating the requirements document.
◦ Reasons for Changes:
▪ Ongoing changes to meet customer demands.
▪ Addressing problems that arise.
▪ Changes in personnel.
▪ Continuous improvements to processes.
◦ Changes can vary in scope from minor adjustments to major overhauls, and
tracking all changes can be challenging.

Cultural Change and Process Re-engineering

• Opportunity for Change: Implementation of a new system can serve as an

opportunity for cultural change within the organization, fostering workforce
mobilization and encouraging process re-engineering.
• Focus on Best Practices: Efforts should aim to align with best practices that are
sensible and relevant to the business.

Scope of Requirements

• Coverage: Requirements may apply to specific departments or the entire

organization, such as:
◦ Human Resource and Payroll: Need for satisfactory systems tailored to
their functions.
◦ Marketing: Development of a database using common packages.
◦ Quality Department: Implementation of sophisticated applications for
documentation and training management.

Key Considerations While Finalizing Requirements

• Integration: Consider the desirability of integrating standalone systems to

enhance overall functionality.
• Cost: Evaluate the total cost of the system, including potential costs associated
with migrating from legacy systems.

Getting Started
 • Establishing Requirements:
◦ Objectives: Identify business processes, define what they do, and outline
key issues that need to be addressed.
◦ Outcome: Compile a list of issues that require attention.

Main Perspectives for Defining Requirements

1. Business Perspective:
◦ Involves identifying higher-level organizational goals and objectives, and
understanding the business needs that the ERP system must fulfill.
2. Client/User Perspective:
◦ Focuses on the end-user requirements, addressing specific problems the
ERP system must solve and how users will interact with it.
3. Technical Perspective:
◦ Engineers and developers provide insights on how the project's objectives
will be achieved from a technical standpoint.

Major Requirement Types

• Project Requirements:
◦ Outline how the project will be managed, including budget, communication,
resources, quality assurance, risk management, and scope.
• Product Requirements:
◦ Specify high-level functions or features of the ERP system, categorized into:
◦ Functional Requirements: What the ERP system must do.
◦ Non-Functional Requirements: Quality of service aspects, including
usability, performance, and security.

Tools and Techniques for Defining Requirements

• Dataflow Diagrams (DFDs): Visual representations of the flow of data within a

system.
• Entity Relationship Diagrams (ER Diagrams): Illustrations of the relationships
between data entities.
• IDEF Models: A family of modeling languages used in systems and software
engineering, including various types of diagrams.

Analysis Approaches for Business Process Mapping

 1. Walkthrough Approach:
◦ Identifies who does what, what materials are used and generated, and the
flow of documents and reports. However, it may oversimplify processes and
overlook certain details.
2. Collage Method:
◦ Captures process details on charts using documentation samples. This
method encourages discussions around essential and desirable features,
highlighting requirements and statutory needs.

Balancing Requirements

• Distinguish between essential requirements (must-haves) and desirable features

(wish-list).
• Consider the stability of processes over time and their potential evolution, requiring
flexible software solutions.

Meeting the Defined Requirements

1. Single ERP Package:

◦ Advantages include integrated systems that reduce data entry and maintain
a single set of figures. However, time and cost considerations are crucial.
2. Modular Solutions:
◦ Vendors may offer modules for specific functionalities, though these may
lack the depth of specialist packages.
3. Best-of-Breed Packages:
◦ These specialized packages may offer superior functionality but can be
expensive and require additional integration efforts.