ERP Introduction

ERP Introduction

• 1.
  Page  |  0         A   Project  Report  on           Submitted  By:  MBA  I  SEC  A       Anit  Kumar  Roy     11202008    
• 2.
  Page  |  1       Executive  Summary         To   survive,   thrive   and   beat   the   competition   in   today’s   brutally   competitive   supersonic   world   one   has   to   manage  the  future;  and  the  key  to  managing  future  lies  in  one’s  ability  to  effectively  manage  the  wide  influx   of   information.   In   order   to   deliver   high   quality   information   to   decision   makers   at   right   time,   in   order   to   automate  the  process  of  data  collection,  collation  and  refinement,  organizations  have  to  make  Information   Technology  an  ally.   Enterprise   Resource   Planning   (ERP)   is   an   extremely   powerful   tool   which   provides  a  seamless  information   system  to  support  various  functional  business  modules  of  an  enterprise.  ERP  packages  if  chosen  correctly,   implemented   judiciously   and   used   efficiently   will   raise   the   productivity   and   profits   of   companies   dramatically.      
• 3.
  Page  |  2       Table  of  Content       Executive  Summary  ............................................................................................................................................  1   Table  of  Content  .................................................................................................................................................  2   Introduction  ........................................................................................................................................................  3   Benefits  of  ERP  ...................................................................................................................................................  4   Risk  in  ERP  ...........................................................................................................................................................  4   Scope  of  ERP  .......................................................................................................................................................  5   ERP  Packages  ......................................................................................................................................................  5   ERP  in  Production  ...............................................................................................................................................  6   Features:  .........................................................................................................................................................  6   Detailed  description  .......................................................................................................................................  6   Departments  involved  in  process:  ..................................................................................................................  7   ERP  Modeling  ......................................................................................................................................................  8   Blueprint  of  a  Business  ERP  Model  .....................................................................................................................  9   ERP  IMPLEMENTATION  .....................................................................................................................................  12   ERP  IN  TISCO  .................................................................................................................................................  12   Why  ERP  in  TISCO?  .......................................................................................................................................  12   Information  Systems  for  a  Quickly  Changing  Steel  Industry  .........................................................................  12   Integrated  IT  Model  for  Steel  Plant  ..............................................................................................................  13   The  Outcome  ................................................................................................................................................  14   Conclusion  ........................................................................................................................................................  15          
• 4.
  Page  |  3       Introduction       Enterprise   Resource   Planning   (ERP)   covers   the   techniques   and   concepts   employed   for   the   integrated   management  of  business  as  a  whole,  from  the  viewpoint  of  the  effective  use  of  management  resources,  to   improve   the   efficiency   of   an   enterprise.   ERP   packages   are   integrated   (covering   all   business   functions)   software  packages  that  support  the  above  ERP  concepts.   In  this  brutally  competitive  supersonic  world,  the  only  permanent  thing  is  “Change”.  Winners  always  gather   crucial   information,   act   quickly   on   it   and   derive   complete   competitive   advantage   out   of   the   opportunity   against  their  counter  parts.   ERP   is   a   result   of   the   modern   organizations’   attitude   towards   how   their   information   systems   are   to   be   configured   to   the   new   business   focuses.   ERP   is   a   “Total”   solution   for   this   “Change”.   It   answers   all   the   traditional   problems   of   island   of   information,   lack   of   integration   and   difficult   data   consolidation   and   difficulty  in  managerial  control.            
• 5.
  Page  |  4       Benefits  of  ERP     Integrated,  uniform,  relevant,  and  up-­‐to  date  information  is  vital  for  the  very  existence  of  an  enterprise.  It   gives  the  power  to  the  right  person  to  make  decision  at  the  right  time.  This  is  only  possible  in  the  entire   organization   shares   the   same   information   and   views   in   the   same   perspective.   Lack   of   integration   affects   other  flows  like  men,  machines  and  money.   ERP  brings  together  people  who  work  on  share  tasks  within  the  same  enterprise  or  in  their  dealings  with   suppliers  and  customers.  Enterprises  have  to  ensure  a  smother  flow  of  information  at  all  levels  and  between   all  parts  of  their  organization;  to  access  up-­‐to  date  information.  Workflow  integrates  business  processes.   Some  of  the  tangible  benefits  reported  by  industry  are:   ü Reduction  of  lead  time  by  60%   ü 99%  on  time  shipment   ü Doubled  business   ü Increase  of  inventory  turns  to  over  30%   ü Cycle  time  cut  to  80%   ü WIP  reduced  to  70%   Apart  from  these  tangible  benefits,  there  are  intangible  benefits  like:   ü Better  customer  satisfaction   ü Improved  vendor  performance   ü Increased  flexibility   ü Reduced  quality  cost   ü Improved  resource  utility   ü Improved  information  accuracy  and  integrity   ü Improved  decision  making  capability   ü Best  business  practices  in  the  world   ü Best  solution  in  terms  of  E-­‐Commerce     Risk  in  ERP     ü Changed  business  processes   ü Hurried  implementation   ü User  adaptation   ü High  time  in  money  investment  
• 6.
  Page  |  5       Scope  of  ERP       v Financials   ü Financial  accounting   ü Treasure  management   ü Enterprise  control   ü Assert  management   v Logistic   ü Production  planning   ü Materials  management   ü Plant  maintenance   ü Quality  management   ü Project  system   ü Sales  and  distribution   v Human  resources   ü Personal  management   ü Training  and  development   ü Skill  inventory   v Work  flow   ü Flexible  assignment  of  task  and  responsibility       ERP  Packages     ü SAP   ü Oracle   ü JD  Edwards   ü PeopleSoft   ü Baan   ü SSA  (System  Software  Associate)   ü Indian  products      
• 7.
  Page  |  6       ERP  in  Production     Planning  system  and  production  tracking  has  the  purpose  to  maintain  the  production  functionality  in  quality,   quantity  and  time  limits  which  were  assign  by  the  fundamental  production  objectives.   The  main  objective  of  the  Production  application  is  to  aggregate  direct  and  discontinuous  elements  into  a   continuous   production   process   which   is   capable   to   ensure   the   efficient   use   of   production   capacities,   maximum  use  of  main  materials  base  and  superior  use  of  work  force.   Through   its   flexibility,   the   system   can   apply   successfully   in   different   industries   with   serial   production   or   unique  products,  continuous  production  or  work  projects  and  services.   The  main  features  of  the  application  are:  flexibility,  security,  easiness  in  use.  Production  flow  can  be  tracked   online.  To  be  fast  and  easy  to  use  this  production  application  is  based  on  catalogs.   This   application   can   be   used   through   standalone   client   application   or   through   web   browsers   like   Firefox,   Internet  Explorer,  Opera  or  Safari.   Features:   ü Production  orders  management   ü Automated  creation  of  production  order  history   ü Create  and  manage  technical  drawing  archives   ü Create  and  manage  technical  documents   ü Price  calculation  based  on  product  composition  specification   ü Planning  and  simulation  of  production  processes   ü Create  the  documentation  for  the  production  release   ü Complete  production  information  management   ü Monitoring  all  production  orders   ü Additional  modules  that  can  be  integrated  with  production:   ü Customers,  sales,  stocks,  assets,  accounting   Detailed  description   Production  module  includes  all  successive  situations  through  which  a  production  order  is  passing.   ü Production  order   ü Production  orders  planning   ü Product  design   ü Creation  of  technical  documentation   ü Cost/Price  calculation   ü Production  scheduling   ü Production  release   ü Product  execution   ü Execution  tracking  and  costs  management   ü Inventory   ü Product  delivery  
• 8.
  Page  |  7       Departments  involved  in  process:         Process  Overview:  Production  Planning  and  Control      
• 9.
  Page  |  8       ERP  Modeling     Before   we   go   ahead   with   ERP   modeling   we   should   know,   types   of   information   management   systems.   Basically  Information  system  can  be  widely  categorized  into  three:   v Transaction  processing  systems  (TPS)  collect  and  record  the  routine  transactions  of  an  organization.   Examples   of   such   systems   are   sales   order   entry,   hotel   reservations,   payroll,   employee   record   keeping,  and  shipping.   v Management  information  systems  (MIS)  produce  fixed,  regularly  scheduled  reports  based  on  data   extracted  and  summarized  from  the  firm’s  underlying  transaction  processing  systems  (TPS)  to  middle   and   operational   level   managers   to   provide   answers   to   structured   and   semi-­‐structured   decision   problems.   v Decision-­‐support  systems  (DSS)  are  computer  program  applications  used  by  middle  management  to   compile  information  from  a  wide  range  of  sources  to  solve  problems  and  make  decisions.   v Executive  support  systems  (ESS)  is  a  reporting  tool  that  provides  quick  access  to  summarized  reports   coming   from   all   company   levels   and   departments   such   as   accounting,   human   resources   and   operations.         A  Typical  information  system  model      
• 10.
  Page  |  9                     Blueprint  of  a  Business  ERP  Model        
• 11.
  Page  |  10       Planning   ü set  up  the  production  order     ü manage  the  production  order   ü tracking  the  production  order   ü create  reports  based  on  customer’s  production  orders   ü create  reports  of  open  production  orders   Design   ü set  up  drawing  catalogs  for:  products,  modules,  guide  marks   ü defines  the  product  composition  specification   ü establish  modules  structure,  defines  products  catalog  features   ü set  up  production  orders  documentation  in  design  stage   Technical   ü set  up  technical  documentation  for:  product,  module,  guide  mark   ü defines  material  and  necessary  quantity  for  production   ü set  up  production  orders  documentation  in  technical  stage   Price  calculation   ü calculate  cost  price  for  production  orders  in  cost/price  stage   ü calculate  product  cost  price  depending  on  lot   ü manage  calculated  prices   ü defines  costs  that  are  influencing  product  price   ü defines  fee/  hour   Programming   ü planning  production  order  by  each  department   ü program  order  execution  by  production  department   ü defines  execution  workshop   ü defines  time  line  for  order  completion   Release   ü create  synoptic  table   ü create  route  cards   ü create  materials  requirements   ü consumption  bills   Inventory   ü supply  scheduler  based  on  materials  requirements   ü processing  consumption  bills   ü bills  management   ü create  reception  notes  
• 12.
  Page  |  11       ü create  delivery  notes   ü manage  materials  stocks  by  locations   ü input-­‐output  balance     Production   ü product  execution  based  on  received  documentation   ü manufacturing  deduction  for  the  order   ü annex  number   ü operation  number   ü operator   ü pieces   Tracking   ü create  manufacturing  scheduler   ü tracking  departments  production  order  history   ü tracking  order  execution  stage:  released  pieces/  delivered/remained  to  be  executed  pieces   ü tracking  order  operations:  released/executed/  remained  to  be  executed   ü tracking  manufacturing:  released/  executed/  remained  to  be  executed   ü tracking  operators  deducted  manufacturing,  tracking  on  each  operator  the  deducted  manufacturing:   order,  document,  operation,  date   ü tracking  delivers  from  value  and  quantity  point  of  view   ü tracking  unfinished  production   ü tracking  the  post-­‐calculation  for  delivered  products   Setup  and  catalogs   ü production  orders  categories   ü production  orders  priorities   ü production  orders  situations   ü production  orders  types   ü rejected  products  catalog   ü costs  types   ü consumption  note  setup   ü departments   ü workshops   ü machines   ü operations   ü tools   ü measurement  and  control  tool   ü operators   ü qualifications   ü materials      
• 13.
  Page  |  12       ERP  IMPLEMENTATION   ERP  IN  TISCO     TISCO  deserves  lot  of  credit  for  implementing  ERP  because  of  the  fact  that  many  organizations  in  the  global   level  have  given  up  the  very  idea  of  ERP  due  to  the  fact  that  there  are  lots  of  failures  associated  with  it  even   in  the  implementation  stage.  ERP  implementation  did  in  wrong  manner  have  caused  havoc  to  organizations   more  than  bringing  profits.  This  being  the  case  it  is  natural  to  expect  a  large  company  (in  terms  of  Size  and   volume   of   operations)   like   TISCO   to   discourage   the   idea   of   Enterprise   resource   planning.   However   TISCO   proved  to  be  different  from  the  others  by  choosing  ERP  in  the  right  time  and  implementing  it  in  a  proper   manner.  They  have  also  reported  a  whooping  profit  and  reduction  of  costs  in  the  whole  process.  Another   amazing   fact   is   that   they   implemented   it   into   the   whole   systems   in   one   single   spree.   The   method   of   implementing  it  in  one  spree  carries  a  lot  of  risks  especially  for  a  bigger  company.  Infact  the  success  rate  of   this  method  itself  is  low  in  general  and  very  low  as  far  as  bigger  companies  are  concerned.  In  case  of  the  rare   success  organizations  will  experience  effective  results  in  their  enterprise  operations.  TISCO  has  achieved  that   by   way   of   meticulous   handling   and   professionalism.   The   net   results   of   their   ERP   software   have   been   described  to  be  path  breaking  and  a  trendsetting  one.     Why  ERP  in  TISCO?     TISCO   faced   two   major   problems   from   the   systems   that   existed   for   a   long   time.   Firstly   they   were   not   customer   friendly.   The   whole   system   was   tuned   to   the   process   and   very   little   attention   was   paid   to   the   customer  demands.  Secondly  the  systems  were  outdates  and  the  modalities  of  operation  were  too  complex   and  not  error  free.  In  order  to  rectify  these  issues  which  would  otherwise  prove  to  be  major  setbacks  to  the   company   the   organization   resolved   to   take   up   ERP.   This   was   instigated   by   the   concerned   departments.   Leading   consultants   were   hired   and   the   business   structure   was   studied   and   suitable   plans   were   drafted   accordingly.     Information  Systems  for  a  Quickly  Changing  Steel  Industry     In  a  quickly  changing  industry  like  steel,  one  need  information  systems  which  quickly  provide  them  the  data   they  need.  We  believe  that  ERP,  especially  in  its  mature  implementations  today,  is  the  crucial  component  for   a  company’s  IT  data  backbone.  ERP  can  play  an  essential  role  in:   ü Driving   accurate   and   fast   decisions   (product   profitability,   procurement   spend)   with   consistently   defined  data   ü Running  broadly  known  and  supported  applications   ü Harmonizing   and   optimizing   back-­‐office   processes   across   the   enterprise   that   comply   with   finance   requirements  such  as  SOX  and  IFRS   ü Enabling  best-­‐practice  demand  planning  for  supply-­‐chain  processes   ü Future-­‐proofing  global  applications  that  support  global  enterprises      
• 14.
  Page  |  13       Integrated  IT  Model  for  Steel  Plant     An  integrated  IT  model  as  in  Figure  3  is  important  because  it  lets  you  see  the  systems  involved  in  planning   and  production.  A  typical  flow  would  be:   ü The   Supply   Chain   Management   (SCM)   application   provides   the   rough-­‐cut   planning   in   “Demand   Planning.”   The   result   is   planning   blocks   of   similar   products   which   are   then   handed   over   to   production  planning.   ü When   orders   are   being   entered,   availability   checks   assign   the   order   to   a   block   (unless   inventory   already  exists  that  meets  the  order)  and  feeds  back  a  promise  date  (at  the  end  of  the  block  to  allow   for  the  flexibility  of  possibly  moving  to  an  earlier  date).   ü The   mill   optimizer   then   typically   would   re-­‐shuffle   orders   in   between   the   blocks,   and   feed   results   back  into  the  SCM  application  in  order  to  optimize  the  load  balancing.   ü Right   before   production   starts,   planned   orders   from   the   SCM   application   are   converted   into   production  orders  and,  via  the  ERP  system,  are  transferred  into  the  MES  layer.  It  is  at  that  time  when   quantities  are  being  translated  into  pieces  (slabs,  coils  etc.).   ü Detailed   scheduling   then   takes   place,   sequencing   and   combining   pieces   from   various   orders   throughout  the  mill  into  lots  for  optimization.   ü Production  completion  then  posts  an  updated  status  of  the  orders  into  the  ERP  system,  including   stock  receipts  of  finished  products,  and  so  forth.          
• 15.
  Page  |  14       The  Outcome     SAP   ERP   solutions   produced   a   remarkable   result   to   the   company   in   terms   of   financial   technical   and   managerial  parameters.  The  effective  handling  and  speed  delivery  resulted  in  greater  sales  .Similarly  there   was  a  drastic  fall  in  the  amount  owned  to  creditors.  The  systems  were  made  more  user  friendly  without  any   complexities   and   procedural   lacunas.   This   improved   the   quality   of   work   and   lessened   the   time   taken   for   work   and   thereby   increased   the   productivity.   This   was   followed   by   a   massive   change   in   terms   of   accountability  administration  and  control.     "Post  the  introduction  of  the  ERP  solution,  the  results  have  been  terrific.  Tisco  has  spent  close  to  Rs  40  crore   on   its   implementation   and   has   saved   Rs   33   crore   within   a   few   months,"   said   Ramesh   C.   Nadrajog,   Vice   President,  and  Finance.  "The  manpower  cost  has  reduced  from  over  $200  per  ton  two  years  ago,  to  about   $140  per  ton  in  2000.  The  overdue  outstanding  has  been  brought  down  from  Rs  5,170  million  in  1999  to  Rs   4,033  million  by  June  2000.  The  inventory  carrying  cost  has  drastically  deflated  from  Rs  190  per  ton  to  Rs  155   per  ton.  To  add  to  this,  there  have  been  significant  costs  savings  through  management  of  resources  with  the   implementation  of  SAP.  With  SAP's  solution  Tata  Steel  can  now  update  their  customers  on  a  daily  basis  and   provide  seamless  services  across  the  country  improving  customer  management.  The  availability  of  online   information   has   facilitated   quicker   and   reliable   trend   analysis   for   efficient   decision-­‐making.   Besides   the   streamlined   business   process   reduces   the   levels   of   legacy   system   and   also   provides   consistent   business   practices  across  locations  and  excellent  audit  trail  of  all  transactions.      
• 16.
  Page  |  15       Conclusion         ERP   is   a   key   backbone   application   for   companies.   Given   an   awareness   of   the   best   practices   and   a   good   understanding  of  the  project  complexities,  the  risks  in  an  ERP  implementation  are  usually  outweighed  by  the   benefits.  The  ERP  discussion  is  often  one  of  mindset  more  than  one  of  standalone  business  cases.  While   implementing  ERP  can  be  challenging  and  demands  sustained  commitment  from  top  executive  levels,  it  is   fundamental   to   enhancing   the   competitive   position   of   a   company   in   the   dynamic   environment   of   the   industry  today.