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What is an erp system?
- 1. Prepare by: Dr.Usman Tariq 17 January 2019
- 2. What is anERP System? • At its most basic level, ERP software integrates various functions into one complete system to streamline processes and information across the entire organization. • The central feature of all ERP systems is a shared database that supports multiple functions used by different business units. • In practice, this means that employees in different divisions—for example, accounting and sales—can rely on the same information for their specific needs.
- 3. What is anERP System? (cont.) • ERP software also offers some degree of synchronized reporting and automation. Instead of forcing employees to maintain separate databases and spreadsheets that have to be manually merged to generate reports, some ERP solutions allow staff to pull reports from one system. • For instance, with sales orders automatically flowing into the financial system without any manual re-keying, the order management department can process orders more quickly and accurately, and the finance department can close the books faster. • Other common ERP features include a portal or dashboard to enable employees to quickly understand the business' performance on key metrics.
- 4. Common myths aboutERP 1. ERP is too expensive 2. ERP is only for Big Business 3. ERP slows down the organization 4. ERP only benefits executives, and management (Decision-makers) 5. ERP solutions are only used to impress customers 6. One ERP solution fits all 7. ERP, SCM, CRM and MRP are all the same 8. ERP takes too long to implement • Customization is Difficult 9. ERP is an IT system and belongs in the IT department • Implementation Cannot be Handled Internally 10. Organization can succeed without ERP 11. You get immediate results 12. ERP is all about optimizing internal processes 13. On-Premise ERP solutions are outdated
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- 6. ERP History (cont.) •In the 1980s, MRP grew to encompass more manufacturing processes, prompting many to call it MRP-II or Manufacturing Resource Planning. • By 1990, these systems had expanded beyond inventory control and other operational processes to other back-office functions like accounting and human resources, setting the stage for ERP as we've come to know it. • Today, ERP has expanded to encompass business intelligence (BI) while also handling "front-office" functions such as sales force automation (SFA), marketing automation and ecommerce. • With these product advancements and the success stories coming out of these systems, companies in a broad range of industries—from wholesale distribution to ecommerce— use ERP solutions.
- 7. Material requirements planning(MRP) system • Material requirements planning (MRP) is a system for calculating the materials and components needed to manufacture a product. • It consists of three primary steps: 1. taking inventory of the materials and components on hand, 2. identifying which additional ones are needed and then 3. scheduling their production or purchase. • MRP breaks down inventory requirements into planning periods so that production can be completed in a timely manner while inventory levels—and related carrying costs—are kept to a minimum. • Implemented and used properly, it can help production manager’s plan for capacity needs and allocate production time.
- 8. Material requirements planning(MRP) system
- 9. What can MRPDo?
- 10. The Advantages ofMRP • On time availability of the right materials required for production. • Reduce inventory • Timely delivery of manufactured goods to customers • Optimal use of manufacturing resources (equipment downtime reduction). • Decrease in capital cost due to decreased inventory levels and optimal use of production resources. • Collecting the busiess data for analysis and better planning.
- 11. Manufacturing resource planning(MRP II) • Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses. • MRP II evolved from early Materials Requirement Planning (MRP) systems by including the integration of additional data, such as employee and financial needs. • The system is designed to centralize, integrate and process information for effective decision making in scheduling, design engineering, inventory management and cost control in manufacturing.
- 12. MRP | MRP2| ERP MRP I included the following three major functionalities: • Master Production Scheduling; • Bill of Materials; and • Inventory Tracking. MRP II includes those three, plus the following: • Machine Capacity Scheduling • Demand Forecasting • Quality Assurance • General Accounting MRP II Software
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- 15. The Business Valueof ERP 1. Gives a global, real-time view of data that can enable companies to address concerns proactively and drive improvements 2. Improves financial compliance with regulatory standards and reduces risk 3. Automates core business operations such as lead-to- cash, order-to-fulfillment, and procure-to-pay processes 4. Enhances customer service by providing one source for billing and relationship tracking
- 16. The Business Valueof ERP (cont.) • No matter what type of business you're in, implementing an ERP solution is a critical project that must be taken seriously. • From concerns about cost and demonstrating ROI, to practical considerations about who will manage the process at your company, ERP implementation efforts require commitment by a project team and support by business leaders to ensure success. • With proper planning and execution, implementing an ERP system should be a smooth process and quickly improve efficiency across your business.
- 17. Select the BestERP Implementation for Your Business
- 19. Benefits of ERPsystem • Scalability: An ERP system is easily scalable. That means adding new functionality to the system as the business needs change is easy. This could mean easy management of new processes, departments, and more. • Improved reporting: Much of the inefficiency in operational work stems from improper reporting. With an ERP system, this possibility is eliminated as reporting follows an automated template system, allowing various departments to access information seamlessly. • Data quality: As compared with manual record-keeping or other traditional approaches, an ERP system improves data quality by improving the underlying processes. As a result, better business decisions can be reached.
- 20. Benefits of ERPsystem (cont.) • Lower cost of operations: An ERP system introduces fundamental innovations in managing resources, which eliminates delays and thus reduces cost of operations. For instance, use of mobility allows real- time collection of data, which is indispensable to lowering costs. • Better CRM: A direct benefit of using a good ERP system is improved customer relations as a result of better business processes. • Business analytics: Having high-quality data allows businesses to use the power of intelligent analytics tools to arrive at better business decisions. In fact, many good ERP systems have built-in analytics functionality to allow easier data analysis.
- 21. Benefits of ERPsystem (cont.) • Improved data access: Controlling data access properly is always a challenge in organizations. With an ERP system, this challenge is overcome with the use of advanced user management and access control. • Better supply chain: Having the right ERP system in place means improved procurement, inventory, demand forecasting, etc., essentially improving the entire supply chain and making it more responsive. • Regulatory compliance: Having the system in control means organizations can better comply with regulations. Further, the most important and recurring regulatory requirements can be built right into the system.
- 22. Benefits of ERPsystem (cont.) • Reduced complexity: Perhaps the most elegant argument in the favor of ERP systems is that they reduce the complexity of a business and introduce a neatly designed system of workflows. This makes the entire human resource chain more efficient. • IT savings for Cloud ERP is quite high when compared to Premise ERP.
- 23. Disadvantages of ERPSystem • The cost of ERP Software, planning, customization, configuration, testing, implementation, etc. is too high. • ERP deployments are highly time-consuming – projects may take 1-3 years (or more) to get completed and fully functional. • Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade. • The cost savings/payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same.
- 24. Disadvantages of ERPSystem (cont.) • The participation of users is very important for successful implementation of ERP projects – hence, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to learn (and use). • There may be additional indirect costs due to ERP implementation – like new IT infrastructure, upgrading the WAN links, etc. • Migration of existing data to the new ERP systems is difficult (or impossible) to achieve. Integrating ERP systems with other standalone software systems is equally difficult (if possible). These activities may consume a lot of time, money & resources, if attempted.
- 25. Disadvantages of ERPSystem (cont.) • ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems. • Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc. Companies are at the discretion of a single vendor and may not be able to negotiate effectively for their services. • Evaluation prior to implementation of ERP system is critical. If this step is not done properly and experienced technical/business resources are not available while evaluating, ERP implementations can (and have) become a failure.
- 26. ERP (yes /no) • Despite the disadvantages outlined above it is unlikely that organizations will go back to traditional and more archaic methods of corporate management. Instead these disadvantages are likely to be dealt with through technical, organizational and individual changes.
- 27. Risks of ERP •Number of integration points. Projects that attempt to integrate everything at once, sometimes called “the big bang approach,” are prone to adverse results due to the extreme complexity and large number of interdependencies. Scale down the scope of your first few projects and focus on quick, easy wins while your team increases its capabilities. • Changing Requirements. When the use case has been poorly thought through, requirements can change frequently and create chaos in an ERP integration project. Make sure you spend enough time in the requirements gathering and process planning phases to gather the best possible set of requirements for your project. There is nothing wrong with using agile methodology, but it still helps to have a clear vision before you begin.
- 28. Risks of ERP(cont.) • Inadequate integration infrastructure. Undertaking an ERP integration project with the wrong infrastructure to support your team can lead to serious issues and excessive costs. Avoid solutions that rely on manual programming or overly complex, heavy middleware software sets. Focus on single stack, single studio solutions with an integration platform for enterprise class integration projects. • Impossible Schedules. Aggressive schedules are fine but impossible schedules must be avoided. Set realistic expectations by establishing an accurate estimate of the integration efforts required for your project. If necessary, bring in an outside firm to provide an estimate of the effort required.
- 29. Risks of ERP(cont.) • Staff Turnover. Changes in project management, business analysts, developers, and stakeholders can complicate completion of a project. Try to avoid turnover by gaining commitments from participants that they are available for the expected duration of the project. • Inadequate Change Management Procedures. Some organizations lack the formal methodology to handle change orders. In addition, changes to the ERP and other systems being integrated may not be locked down during the integration project. The result can be chaotic from a requirements, implementation and testing perspective.
- 30. Risks of ERP(cont.) • Lack of Staff and Management Experience. ERP integration may be new territory for your IT staff and management. Try supplementing your experience with proven consultants or consulting firms that can leverage experience across a wide array of ERP integration projects. • New Business Processes. Introducing change to an organization always carries with it the risk of institutional or market resistance. Make sure the processes have been vetted by stakeholders and customers and that they are introduced properly so as to gain maximum adoption and adherence. • New integration infrastructure. New or unproven integration infrastructure represents a risk factor. Make certain vendor experts are available to back up your team not only with technical bugs but with implementation experience and best practice advice and or services. • Inadequate testing plans. Test plans should introduce testing early and often. Test scripts and automated testing may be able to help ensure accelerated and more complete discovery of problems early in the ERP integration project.
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