Enterprise Resource Planning (ERP)

BCA II Sem IV
Unit no 1 :- Introduction to ERP

Introduction:-

ERP stands for Enterprise Resource Planning . ERP systems are the kind of software tools
which are used to manage the data of an enterprise. ERP system helps different
organizations to deal with different departments of an enterprise. Different departments like
receiving, inventory management, customer order management, production planning,
shipping, accounting, human resource management, and other business functions.
Basically, it is the practice of consolidating an enterprise’s planning, its manufacturing, its
sales and marketing efforts into one management system. It combines all databases across
different departments into a single database which can be easily accessible to all employees
of that enterprise. It helps in automation of the tasks involved in performing a business
process.

Benefits of ERP:
1. This system helps in improving integration.
2. It is the flexible system.
3. There are fewer errors in this system.
4. This system improved speed and efficiency.
5. There is a complete access to information.
6. Lower total costs in complete supply chain.
7. This system helps in Shortening the throughput times.
8. There is sustained involvement and commitment of the top management.
9. Enhanced Decision-Making: ERP provides real-time access to critical business
data, enabling decision-makers to quickly identify and respond to issues, make
informed decisions, and improve business outcomes.
10. Improved Collaboration: ERP facilitates collaboration and communication
between different departments and stakeholders, enabling them to work together
effectively towards common business goals.
11. Standardization of Processes: ERP ensures that business processes are
standardized across the organization, reducing the risk of errors and
inconsistencies and improving efficiency.
12. Effective Resource Management: ERP enables efficient management of
resources such as personnel, equipment, and inventory, ensuring optimal
utilization and reducing wastage.
13. Scalability: ERP is highly scalable and can be customized to meet the evolving
needs of the business, ensuring that the system remains relevant and effective
over the long term.
14. Regulatory Compliance: ERP systems can help businesses comply with
regulatory requirements by providing accurate and timely reporting, ensuring
data privacy and security, and facilitating audits.
Limitations of ERP:
ERP system has 3 significant limitations:
1. Managers generate custom reports or queries only with the help from a
programmer and this will create a problem that they did not receive information
quickly, which is essential for making a competitive advantage.
2. There is no proper decision-making scenario i.e. this systems provide only the
current status, such as open orders. Whenever there is need to look for past
status to find trends and patterns it become difficult.that aid better decision-
making.
3. No doubt that data is integrated within the system, but there is no integration of
data with other enterprise or division systems and it does not include external
intelligence.
4. High implementation costs: Implementing an ERP system can be expensive and
time-consuming. It requires significant investment in hardware, software, and
personnel, as well as training and consulting costs.
5. Complex customization: Customizing an ERP system to meet the specific needs
of an organization can be complex and require specialized knowledge. This can
lead to delays and additional costs.
6. Resistance to change: ERP systems often require significant changes to an
organization’s processes and workflows, which can be met with resistance from
employees who are comfortable with existing practices.
7. Data security risks: Centralizing sensitive business data in an ERP system
creates potential security risks, especially if the system is not properly secured or
if there are vulnerabilities in the software.
8. Limited flexibility: ERP systems are designed to provide standardization and
control, which can limit the flexibility of an organization to respond to changing
business needs and market conditions.
9. Dependence on vendor support: Organizations that use ERP systems are often
heavily dependent on the vendor for support, maintenance, and upgrades. This
can create a risk of vendor lock-in and limit an organization’s ability to switch to
other systems or providers.

Evolution of ERP System :

1. Material Requirement Planning (MRP) –

Developed in 1970s, Material Requirement Planning is widely used approach for
production planning and scheduling in industry. It is the approach embedded in many
commercially available software applications.
The function of MRP is to provide material availability i.e, it is used to produce
requirement quantities on time. This process involves monitoring of stocks and demand,
leading to automatic creation of procurement proposals for purchasing or production. The
main objective of MRP is to determine which material is required, quantity required and by
when it is required.
2. Manufacturing Resource Planning (MRP II) –
Developed in 1980s, Manufacturing Resource Planning is an expansion of closed loop
MRP for managing an entire manufacturing company. This system provides an information
that is useful to all functional areas and encourages cross-functional interactions.
It supports sales and marketing by providing and orders promising capability. It is a broad-
based resource co-ordination system involving other areas of a firm in planning processes,
such as marketing, finance and HR.

3. Enterprise Resource Planning (ERP) –

Developed in 1990s, Enterprise Resource Planning is foundation system for domestic and
global operations, supporting most or all functional areas in their daily operations. is one of
more common categories of business software, especially with large-scale businesses.
It is a business strategy and a set of industry-domain-specific applications that build
customer and shareholder communities value network system by enabling and optimizing
enterprise and inter-enterprise collaborative operational and financial processes. ERP at its
core is an effective way of centralizing information and workflow processes through data
management. Because ERP keeps all of your workflow data in one place.

4. Enterprise Resource Planning (ERP II) –

Developed in 2000s, ERP II is name now use to describe ERP. Basically, it is successor of
ERP. It is a business strategy and set of collaborative operational and financial processes
internally and beyond enterprise.
These new business models reflect an increased business focus on internal integration. It’s
domain is in all sectors and segments. Data in this is internally and externally published and
subscribed. It includes departmental modules, CRM, SCM and other stakeholders modules.
It emphasis on intangible assists.
Master Software Testing and Automation in an efficient and time-bound manner by
mentors with real-time industry experience. Join our Software Automation Course and
embark on an exciting journey, mastering the skill set with ease

Reasons for the Growth of 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. 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 companies can keep track of orders more easily, and coordinate
manufacturing, inventory and shipping among many different locations simultaneously.

3. Standardise 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 transaction / recording / report using
different methods and computer systems. ERP systems come with standard methods for
automating some of the steps of a manufacturing process.
4. Reduce inventory: ERP helps the manufacturing process flow more smoothly, and it
improves visibility of the order fulfilment process inside the company. That can lead to
reduced inventories of the materials used to make products (work-in-progress inventory), and
it can help users better plan deliveries to customers, reducing the finished goods inventory at
the warehouses and shipping docks.

5. Standardise 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.

Conceptual model of ERP

ERP defines the five measures that govern business policies:

1. Process-based flat organization
2. Assemble-to-order or Make-to-order philosophy
3. Empowered employees
4. Customer and supplier integration
5. Sophisticated IT systems

Fig: Conceptual ERP Model: pillars of ERP

These business policies lead to critical elements for the ERP system. The success of ERP
depends on the level of its adoption in the organization.
ERP can be defined in the following ways by keeping the above-mentioned concept in mind
:
1. It is a planning methodology or philosophy that is based on the smooth
integration of all the business processes of an enterprise.
2. It is a set of software casing major business areas e.g. economics, plans, sales,
materials, manufacturing, distribution, all so tightly integrated with one another
that any business activity recorded at one place is immediately reflected in all
other places.
 3. It is the finest expression of the consistency of Info-tech and business. An
enterprise-wide system with enabling technology and effective managerial tool
for integrating all the levels and improving report ability.
The above definitions explain the fundamental design feature of ERP as a system-based
business solution. ERP integrates the various departments and functions throughout the
organization. It attempts to comprehend everything into a single system that can serve
every department and functional needs. While doing so, it focuses on the business plan
areas and addresses those problems with an integrated planning approach.

What is Business Process Reengineering (BPR) and how does it work?

Business Process Reengineering (BPR) is the process of optimizing business processes to

improve operational costs and customer service.

BPR is a step-by-step strategy that includes reviewing existing processes, incorporating team
members’ input, and implementing modern technology—such as an enterprise resource
planning (ERP) solution. Taking BPR steps and implementing the right ERP solution can
improve efficiency, increase productivity, and, ultimately, boost profitability.

Businesses ready to take advantage of these benefits have a decision to make: Should they
start BPR and implement the ERP solution separately or concurrently? There are pros and
cons to each method, but, before making a choice, businesses should first understand the
three phases and four major areas of BPR.

What Are the 3 Phases of BPR?

1. Planning
In the Planning Phase, leaders identify the scope and goals of the reengineering initiative.
They’ll begin mapping and analyzing current business processes while identifying problems
and areas for improvement. The Planning Phase also involves developing a detailed
implementation plan that includes resource allocation, timelines, approval processes, etc.

2. Design
The Design Phase involves redesigning the evaluated processes to eliminate non-value-added
activities, optimize workflows, and leverage technology. During this phase, businesses will
need to develop a prototype of the new processes and test it with a small group of users.

3. Implementation
Once the prototype has been tested and approved, the redesigned processes can be
implemented. The Implementation Phase includes comprehensive training and clear
communication across the organization. It also involves monitoring the performance of the
newly designed processes to ensure they add value in terms of operational success and
customer satisfaction.
What Are the 4 Major Areas of BPR?

BPR affects the entire business, from the top down. Executives initiating it must consider the
following four major areas:

1. Organization: How is the business structured, and what are the roles and
responsibilities of each team member?
2. Technology: Which technology will automate tasks, improve communication, and
provide better access to information? (Hint: A sophisticated ERP solution does all
this and more.)
3. Strategy: Is the BPR aligned with the company’s overall strategy?
4. People: Because BPR can have a major impact on employees, are business leaders
able to clearly communicate the changes and encourage employee buy-in?
(Hint: This should include highlighting how BPR offers the opportunity for
employees to learn new skills and be empowered to take on more responsibility.)