Enterprise Resource Planning

UNIT-1
SYLLABUS FOR UNIT 1
ENTERPRISE RESOURCE PLANNING
INTRODUCTION
• ERP integrates the information system of an
organization and automates most of the
functions.
• By definition, ERP system is a highly integrated
and enterprise wide information system that
covers all the functional areas or department in
an organization.
 NEED FOR ERP
• Integrate financial information
• Integrate customer order information
• Standardize and speed up operations
processes
• Reduce inventory
• Standardize Human Resources information
EVOLUTION OF ERP
• The evolution of ERP systems closely followed the
spectacular developments in the field of computer
hardware and software systems.
• During the 1960s most organizations designed,
developed and implemented centralized
computing systems, mostly automating their
inventory control systems using inventory control
packages (IC).
• These were legacy systems based on
programming languages such as COBOL, ALGOL
and FORTRAN.
• Material requirements planning (MRP) systems
were developed in the 1970s which involved
mainly planning the product or parts
requirements according to the master production
schedule.
• Following this route new software systems called
manufacturing resources planning (MRP II) were
introduced in the 1980s with an emphasis on
optimizing manufacturing processes by
synchronizing the materials with production
requirements.
• MRP II included areas such as shop floor and
distribution management, project management,
finance, human resource and engineering.
• ERP systems first appeared in the late 1980s and the
beginning of the 1990s with the power of
enterprise-wide interfunctional coordination and
integration.
• ERP systems integrate business processes including
manufacturing, distribution, accounting, financial,
human resource management, project management,
inventory management, service and maintenance,
and transportation, providing accessibility, visibility
and consistency across the enterprise.
• During the 1990s ERP vendors added more
modules and functions as “add-ons” to the core
modules giving birth to the “extended ERPs.”
• These ERP extensions include advanced planning
and scheduling (APS), e-business solutions such
as customer relationship management (CRM) and
supply chain management (SCM).
 ROLE OF ERP IN BUSINESS
INTEGRATION OF FUNCTIONAL AREAS:
It provides the common database for all functional areas for automatic
updation.
It improves
 Responsiveness across organization.
 Better decision making.
 Problem solving.
 Reduced lead time (the elapsed time between placing and receiving
the order).
 Reduced cycle time (the time between placing and delivering the
order).
 Efficient use of resources
 On-time delivery of products.
 Transparency and overall customer satisfaction.
REDESIGNING OF BUSINESS PROCESS

Business
ERP system
model

Business process
Reengineering(BPR)

• ERP system enables the organization to redesign its business

process which it turn enhances the efficiency of its operation.
STANDARDIZATION OF SYSTEMS ANDPROCEDURES:
• ERP systems based on the integration approach.
• It enables an organization to follow standardized
systems and procedures across the organizational
units.
NETWORKED BUSINESS
• The integration of ERP system is extended
beyond the boundaries of an organization leading
to network with business partners like Supply
chain management and customer relationship
management.
 SUPPLY CHAIN MANAGEMENT
• Supply chain management (SCM) is the process
of planning, implementing, and controlling the
operations of the supply chain as efficiently as
possible.
• Supply Chain Management spans all movement
and storage of raw materials, work-in-process
inventory, and finished goods from point-of-
origin to point-of-consumption.
CONCEPT OF SCM SUPPLIER

MANUFACTURER

DISTRIBUTER

RETAILER

CUSTOMER
The supply chain involves several elements:
Facilities
• Facilities are the places in the supply chain network
where product is manufactured, stored, or shipped.
• The two major types of facilities are production sites
(plants) and storage sites (warehouses).
• A company needs to decide how many suppliers,
manufacturing facilities, distribution centers, and
warehouses to have.
Information
• Information consists of data and analysis concerning
facilities, inventory, transportation, and customers
throughout the supply chain.
 Inventory:
• Each link in the supply chain has to keep a certain
inventory of raw materials, parts, subassemblies
and other goods on hand as a buffer against
uncertainties and unpredictabilities.
• Shutting down an assembly plant because an
expected parts shipment didn’t arrive is
expensive.
• But inventory costs money too, so it’s important
to manage deployment strategies, determine
efficient order quantities and reorder points, and
set safety stock levels.
Transportation:
• How do materials, parts and products get from one
link in the supply chain to the next? Choosing the
best way to transport goods often involves trading
off the shipping cost against the indirect cost of
inventory.
• For example, shipping by air is generally fast and
reliable. Shipping by sea or rail will likely be cheaper,
especially for bulky goods and large quantities, but
slower and less reliable.
• So if you ship by sea or rail, you have to plan further
in advance and keep larger inventories than you do if
you ship by air.
SUPPLY CHAIN OF TOY MAKING
DRIVERS OF SCM
Three Categories
• •Product Flow - The product flow includes the
movement of goods from a supplier to a customer,
as well as any customer returns or service needs.
• •Information Flow - The information flow involves
transmitting orders and updating the status of
delivery.
• •The finance Flow - The financial flow consists of
credit terms, payment schedules, and consignment
and title ownership arrangements.
SCM PROCESSES
• Procurement
Procurement is the business-to-business purchase and
sale of supplies and services.
• Outsourcing and Partnerships
An arrangement in which a company provides services
for another company that could also be done or have
usually been provided in-house.
• Manufacturing Flow Management
The manufacturing process is to produce and supply
products to the distribution channels based on past
forecasts or point of sales (POS) data.
• Order Fulfillment
Process that responds to customer demand by merging
several important functions: order management, storage,
and delivery of finished goods.
• Customer Service Management Process
Source of customer information and also provides the
customer with real-time information on promising dates and
product availability through interfaces with the company’s
production and distribution operations.
• Forecasting
Seeks to predict levels of weekly or monthly product activity
over a time horizon.
Benefits of SCM
• Reduce uncertainty along the chain
• Proper inventory levels in the chain 
• Minimize delays Minimize delays
• Eliminate rush (unplanned) activities
• Provide good customer service
Problems in SCM
• Delays in production, distribution etc. 
• Expensive Inventories 
• Lack of partners’ coordination 
• Uncertainties in deliveries 
• Poor demand forecast 
• Interference with production 
• Poor quality
 ERP versus SCM
Point of Comparison ERP SCM

Comprehensiveness Covers a wide range of Limited to specific supply

functionality chain functionality
Complexity Highly complex Relatively less complex
Sourcing tables Relatively static Relatively dynamic

All the demand, capacity, and

material constraints are Simultaneous handling of the
Constraints handling
considered in isolation of each constraints
other

Relatively more dynamic

Relatively less dynamic because because it performs
they are mainly concerned with
Functionality simulations of transaction
transaction processing speed and
capacity adjustments with regard to
the constraints in real time
Processing Speed Relatively slower Faster
 ERP and E-Commerce: A concept
• E-Commerce is the entire online process of developing,
marketing,selling,delivering,services and paying for
products and services transacted through the internet.
• It is to reduce transaction costs,improve customer
services,speed up the flow of information to enhance
coordination among manufacturers,suppliers and
customers.
BUILDING BLOCKS OF e-COMMERCE.
• ERP-A main repository for the information and thus
regarded as centre of e-commerce.
• Communication networks : This facilitates to access
information.
3.Wide availability and easy-to-use access:
This makes it possible to get ERP information over
the internet.
E-commerce performs the following tasks:
• Provides information about the product.
• Defining the requirements of the customer
• Helps in transaction, payment can also be done
online.
• Online delivery of product/services.
• Provide customer service electronically.
TYPES OF E-COMMERCE
1) Business to consumer
2) Business to Business
3) Consumer to Consumer
4) Business to Employee
5) Government to Citizen
6) Government to Government
ERP AND E-COMMERCE APPLICATIONS
ERP portal provides access to a number of other
related services, thus facilitating e-commerce.
• ERP AND CUSTOMER ORDERS
• ERP AND VENDOR-MANAGED INVENTORIES
• ERP AND BUILD-TO-ORDER
• ERP AND LINKS WITH RE-SELLERS
• ERP AND BANKING TRANSACTIONS
ERP ARCHITECTURE
• ERP system architecture is organized in layers or
tiers to manage system complexity in order to
provide scalability and flexibility.
• Three-layer architecture (the most reliable,
flexible, and scalable architecture) is the most
prevalent today and
– Web Servers.
– Application Servers.
– Database Servers.
• The Layered ERP architecture generalizes the functional
layers to allow it to change with newer technologies.
• A Web-based user interface is provided.
• Users can access the application via the Internet.
• The PC needs to be capable of running a Java-enabled
Web browser.
• The PC is connected to both Intranet and Internet to be
able to use one of Info.Net’s servers.
• The user interacts with the Java Virtual Machine
Interface layer to establish a secure connection via a
secure socket layer (SSL) connection.
• The user is then communicating with the server
through the applications software layer (ASL).
Three-Tier Architecture
• Most of the current ERP implementations follow a three
tiered architecture, which consists of a Web tier, an
application tier, and a data tier.
• Benefits
 Scalability - Easier to add, change, and remove applications.
 Reliability - Implementing multiple levels of redundancy.
 Flexibility - Flexibility in partitioning is very simple.
 Maintainability - Support and maintenance costs are less on
one server.
 Reusability - Easier to implement reusable components.
 Security - IT staff has more control system to provide higher
security.
Limitations
• Can be very expensive and complex.
Tiers
• The Web Tier
– Web-based portal allows users the ability to access and analyze
information through their Web browser.
• The Application Tier
– Consists of a Web browser and reporting tool where business
processes and end-users interact with the system.
– It shields the business users from the inner workings of an ERP
system, but still provides the information relevant to their job
and business process.
• The Data Tier
– Focus is on structure of all organizational data and its relationships
with both internal and external systems.
Web Services Architectures
• Web-based architecture often described as a fourth tier
where the Web tier is split into Web Services tier and
Web Browser tier.
• The ERP systems focus on the Internet to provide a
powerful new functionality for Internet-based access and
integration.
• This functionality is primarily supported through the
following Internet access technologies:
• Web Server.
• ERP Portal.
• Back-end Server Integration.
• Browse Plug-ins or Applets.
• BENEFITS
– Large numbers of end-users have access to ERP
applications over the Web.
– Easily integrate ERP applications with existing systems.
– Server-centric-No complex, expensive client software
installation.
– The server-centric architecture enables secure end-
user access to ERP application.
– Client-centric-architecture has better response time
because user requests are mostly processed on the
client’s computer.
– Web-based architectures also allow better system-to-
system integration.
• DRAWBACKS
– Client-centric architectures lack security.
– Server centric is slower.
• Service-Oriented Architectures
• Also known as object-oriented architectures for Web
platforms.
• Breaks the business tier into smaller, distinct units of
services, collectively supporting an ERP functional module.
• Allows message interaction between any service
consumer and service provider.
• A consumer from a device using any operating system in
any language can use this service.
• SOA is a software development model based
on a contract between a consumer (client) and
a provider (server) that specifies the following:
– Functional description of the service.
– Input requirements and output specifications.
– Precondition environment state before service
can be invoked.
– Post condition environment state after service
has been executed.
– Error handling when there is a breakdown
SOA Architecture
Benefits of Service-Oriented Architectures
• Business-level software services across
heterogeneous platforms.
• Complete location independence of business logic.
• Services can exist anywhere (any system, any
network).
• Loose coupling across application services.
• Granular authentication and authorization support.
• Dynamic search and connectivity to other services.
• Enhances reliability of the architecture.
• Reduces hardware acquisition costs.
Drawbacks of Service-Oriented Architectures
• SOA implementations are costly and time-consuming.
• Requires complex security firewalls in place to support
communication between services.
• Performance can be inconsistent.
• Requires enterprise-level focus for implementation to
be
successful.
• Security system needs to be sophisticated.
• Costs can be high because services needs to be junked
very often.
Enterprise Content Management and SOA
• Enterprise content management deals with enterprise
software products that usually store, preserve, manage,
and deliver content connected to business processes.
• Enterprise content management also about supporting
business goals, not just managing content.
• Vendors have come to an understanding that content
management takes advantage of technology and
information assets across the business and is no longer
application specific.
• Cloud computing is basically a software service
provided over the Internet, securely, by a service
provider on a monthly or yearly lease.
• Companies leasing CC services save money by
replacing their purchased software that requires a
license fee per seat.
• Some cloud computing providers also let you
build our own applications using their engines and
then they would host those applications for you as
part of the service.
Benefits of Cloud Computing
• Pay for subscription, not for licenses and upgrades.
• Reduced capital and operating expenditures for IT
equipment and support personnel.
• Accessed from everywhere, as long as you have an
Internet connection.
• No need to install anything on the user’s computer.
• Dynamic scalability available on demand.
• No maintenance fees for software or hardware.
• Promotes green computing environment as servers
in cloud run on clean energy.
• Guaranteed reliability.
Drawbacks of Cloud Computing
• Data security.
• Vulnerability.
• Possible conflict of interest, if the company who
stores your applications decides to create a
similar application to what you created on their
servers.
• Not suited for all highly competitive industries
like biotech where intellectual property cannot be
protected easily.
 CRM
Customer relationship management (CRM) is a model
for managing a company’s interactions with current and
future customers. It involves using technology to
organize, automate, and synchronize sales, marketing,
customer service, and technical support.
Definition:
CRM is concerned with the creation, development and
enhancement of individualised customer relationships
with carefully targeted customers and customer groups
resulting in maximizing their total customer life-time
value.
The purpose of CRM
• Help a business to keep customers.
• It helps the business to understand what it needs to
do to get more customers.
• Reduce costs by managing costly complaints and
finding out what services are useless for customers.
• Help a company figure out if its product is working
and, ultimately, increases profit.
• Prime reason is to log and manage customer
relationships.
 Stages of Customer Relationship
Visitor - The online CRM is the entry portal to your
company, however the visitor finds you. Whether they
visit with your representatives at a trade show, or fill out
a web form, they enter the front door of your virtual
company and into the online CRM to be greeted with a
welcome and offered something valuable to them.
Engaged Visitor - online CRM is able to engage the sales
lead and rescue your sales. The first place you engage the
visitor is in the welcome email. Be gracious and
welcoming.
Prospect - In some companies, just clicking on the link
to the first offer will convert the sales lead into a
prospect. It may be time to have your salespeople call
to offer help and guide the sale.
Customer- Way too many companies stop courting the
business after they have become a customer. Some feel
that customers are not loyal anyway, so what’s the
point? Others believe that if they concentrate their
effort on delivering good products and excellent service
– it will be enough to earn whatever loyalty is possible.
Advocate- In an online world where customers can post
their experience with your company to be seen by
anyone who may be interested – customers have the
enviable power to make or break your business.

As demonstrated by such companies as Apple, Amazon

and more, devout loyalty is possible when customers
feel important. They feel deeply attached to the
companies who make them feel valued and heard.
 CRM cycle
There are four phases to the customer life cycle. The
four phases include; marketing, customer acquisition,
relationship management, and loss.
Marketing - The marketing part of the customer life
cycle is when messages are sent to the target market to
attract prospect customers.
Customer Acquisition - The next phases is customer
acquisition which means prospects become customers
when they place an order.
Relationship Management - The third stage is
relationship management. Relationship management is
when resell processes increase the value of existing
customers.
Loss/Churn - The end stage of a customer life cycle is
loss/churn when inevitably in time a company may lose a
customer. The company then needs to establish a win-
back process. The company then needs to decide which
lost customers are of most value and try to win back their
business.
A CRM system integrates all four phases of the customer
life cycle into three major processes. These processes are
solicitation, lead-tracking, and relationship management.
The diagram above depicts the four phases and the three
major processes. It shows the flow of phases and what
each phase means.
CRM CYCLES
Types of CRM
Three major types of customer relationship management
systems, namely operational CRM, analytical CRM and
collaborative CRM are being used in many organizations.
Operational CRM
It provides support to front-office business processes that
involve direct interaction with customers through any
communication channel, such as phone, fax, e-mail, etc.
The details of every interaction with customers, including
their requirements, preferences, topics of discussion etc.,
are stored in the customers’ contact history and can be
retrieved by the organization’s staff whenever required.
•Thus, it presents a unified view of customers across the
organization and across all communication channels.
Examples of operational CRM applications are sales force
automation (SFA), customer service and support (CSS),
enterprise marketing automation (EMA),etc.
Analytical CRM
•It enables to analyze customer data generated by
operational CRM applications, understand the customers’
behavior, and derive their true value to the organization.
• This helps to approach the customers with related
information and proposals that satisfy their needs.
•The analytical customer relationship management
applications use analytical marketing tools like data
mining to extract meaningful information.
Collaborative CRM
• It allows easier collaboration with customers,
suppliers, and business partners and, thus, enhances
sales and customer services across all the marketing
channels. The major goal of collaborative customer
relationship management applications is to improve
the quality of services provided to the customers,
thereby increasing the customers loyalty. Examples of
collaborative CRM applications are partner
relationship management (PRM), customer self-service
and feedback, etc.
Benefits of CRM include
1. Reduced costs, because the right things are being done
(ie., effective and efficient operation) .
2. Increased customer satisfaction, because they are
getting exactly what they want (ie. meeting and
exceeding expectations) .
3. Ensuring that the focus of the organisation is external .
4. Growth in numbers of customers .
5. Maximisation of opportunities (eg. increased services,
referrals, etc.)
6. Increased access to a source of market and competitor
information.
7. Highlighting poor operational processes
8. Long term profitability and sustainability
Drawbacks of CRM
1. Lack of understanding and poor planning for CRM
implementation
2. Poor understanding of customer and business
3. Lack of financial incentives
4. Resistance to change and lack of organizational readiness for BPR
Following factors to be considered for monitoring the drawbacks
of CRM
1. Top management support
2. Understanding the business and customer
3. SWOT analysis
4. CRM system strategy for an organization
5. Business process re-engineering
6. CRM implementation planning
7. Develop a performance Score card