Enterprise Resource Plannig System

A Project Report On

ENTERPRISE RESOURCE PLANNING submitted in partial fulfilment of the requirements of the degree of MBA MBL/LLM for the course

Submitted by:

Submitted to:

Punita Sharma

Mr. Amit Banerjee

MBA- MBL Sem.- II

Faculty In Charge

FACULTY OF MANAGEMENT STUDIES NATIONAL LAW UNIVERSITY, JODHPUR

PREFACE The present project, undertaken as a part of the partial fulfillment as a requirement for the award of MBA- MBL, is an honest attempt to study the concept of Enterprise Resource Planning Systems. The study undertaken in order to come up with the project has given me a good knowledge about the changing and developing methods being adopted by the big companies to meet the changing needs of the time. The project looks into the evolution and development of the concept of ERP and how it has contributed to the way the functioning of the organisations have changed over the past years.

The Enterprise Resource Planning (ERP) system plays a very important role. The major decision making and it execution is done through ERP. It’s the system of managing all functions of the business with information support coming through the ERP. It handles the operational systems to run business and provides the required inputs to planning and control systems handled by the middle management.

ACKNOWLEDGMENT This project owes its accomplishments to the inputs, help, and assistance received from various website (www.). A great sense of gratitude is also expressed towards my guiding faculty Mr. Amit Banerjee, who very ably guided me in the completion of this project. Thanks are also the library staff of the National Law University. I also thanks the senior students of the University for their help. In the end I also extend my thanks to my classmates who have always helped me whenever I needed their help.

INTRODUCTION: The growing and the dynamic business environment of today is faced with lots of challenges and opportunities. The dependence on the information, as a driving energy source is increasing. The business needs today stretch beyond the transaction processing, requiring an instant real time response wherever it occurs. The word ‘Enterprise’ conveys that it encompasses the larger business community covering all the players and their participation in the business. The system has extended beyond corporate boundaries and the system that is being designed is an enterprise wide. The business today is a paperless operation, a wireless communication as a result of fully transparent and automated operations at all centers in an integrated and coordinated manner taking care of the business, actions and decision needs. And these demands of the business are met by systems of information processing and communication. Though the tools and technologies, and the solutions for these needs are available but what is required is an integrated solution out of these technologies and the systems offering an enterprise. Such an integrated solution is called Enterprise Management System (EMS). In EMS, the Enterprise Resource Planning (ERP) system plays a very important role. The major decision making and it execution is done through ERP. It’s the system of managing all functions of the business with information support coming through the ERP. It handles the operational systems to run business and provides the required inputs to planning and control systems handled by the middle management.

ENTERPRISE RESOURCE PLANNING The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning). ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organization's business or charter. Nonmanufacturing businesses, non-profit organizations and governments now all utilize ERP systems. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database). The Enterprise planning system (ERP) deals with the planning and use of resources used in the business. The resources are finance, materials, manufacturing capacity and human resource. The ERP provides methodology of assessing the resource needs for a given business plan to achieve certain business objectives. It also helps to execute the strategies, plans, decisions and actions in a time bound manner. The ERP provides a support system in transaction processing, updation, and reporting across the functions. The ERP is a package encompassing all major functions of a business. Prior to the concept of ERP systems, departments within an organization (for example, the human resources (HR)) department, the payroll department, and the financial department) would have their own computer systems. The HR computer system (often called HRMS or HRIS) would typically contain information on the department, reporting structure, and personal details of employees. The payroll department would typically calculate and store paycheck information. The financial

department would typically store financial transactions for the organization. Each system would have to rely on a set of common data to communicate with each other. For the HRIS to send salary information to the payroll system, an employee number would need to be assigned and remain static between the two systems to accurately identify an employee. The financial system was not interested in the employee-level data, but only in the payouts made by the payroll systems, such as the tax payments to various authorities, payments for employee benefits to providers, and so on. This provided complications. For instance, a person could not be paid in the payroll system without an employee number. ERP software, among other things, combined the data of formerly separate applications. This made the worry of keeping numbers in synchronization across multiple systems disappear. It standardized and reduced the number of software specialties required within larger organizations. The system design of ERP is integrated with the features and functions providing an enterprise wide solution to handle all the process functionalities. For example, it provided capability to process the purchase order from ordering to bill processing, and also meets the information needs of purchase, stores, manufacturing accounts and finance. The ERP packages build information base and provide knowledge base for planning and control of business function management. The ERP is the main system, interfaced or assisted by the other systems in an organisation. These systems may be stand alone or constitute a part of the manufacturing or commercial processing systems. These systems provide the database to the ERP or support the ERP by the basic data input directly or through the data transfer. For example, the manufacturing system module of the ERP is interfaced with drawing, engineering database querry, viewing and usage of drawings and it accepts the data of work order by process operations, for costing and for building the standards for the future.

The key benefit of ERP id that it provides an integrated solution for all the requirements of the business. It addresses the issue of data integrity, information transparency, seamless integration and information communication. Simultaneously it respects the organisational hierarchy of authority, while conducting the business transactions through the system. FEATURES Some of the major features of ERP and what ERP can do for the business system are as below: •

ERP performs core corporate activities and increases customer service and thereby augmenting the Corporate Image.

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ERP bridges the information gap across the organization

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ERP provides for complete integration of Systems not only across the departments in a company but also across the companies under the same management.

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ERP is the only solution for better Project Management.

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ERP allows automatic introduction of latest technologies like Electronic Fund Transfer (EFT), Electronic Data Interchange (EDI), Internet, Intranet, and Video conferencing, E-Commerce etc.

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ERP facilitates company-wide Integrated Information System covering all functional areas like Manufacturing, Selling and distribution, Payables, Receivables, Inventory, Accounts, Human resources, Purchases etc.,

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ERP eliminates the most of the business problems like Material shortages, Productivity enhancements, Customer service, Cash Management, Inventory problems, Quality problems, Prompt delivery etc.,

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ERP not only addresses the current requirements of the company but also provides the opportunity of continually improving and refining business processes.

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ERP provides business intelligence tools like Decision Support Systems (DSS), Executive Information System (EIS), Reporting, Data Mining and

Early Warning Systems (Robots) for enabling people to make better decisions and thus improve their business processes. •

The ERP solution provides ‘Drill Down’ and ‘Context sensitive’ helps to use the system. The drill down helps to run through the system to locate the week spot for action and control. The context sensitivity help provides an access to help library which can be used by the user by calling help. The help could be for information, guidance and understanding of the term or process or format.

COMPONENTS Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing •

Engineering

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Bills of Material

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Scheduling

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Capacity

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Workflow Management

Quality Control •

Cost Management

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Manufacturing Process

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Manufacturing Projects

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Manufacturing Flow

Supply Chain Management •

Inventory

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Order Entry

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Purchasing

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Product Configurator

Supply Chain Planning •

Supplier Scheduling

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Inspection of goods

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Claim Processing

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Commission Calculation

Financials •

General Ledger

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Cash Management

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Accounts Payable

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Accounts Receivable

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Fixed Assets

Projects •

Costing

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Billing

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Time and Expense

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Activity Management

Human Resources •

Human Resources

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Payroll

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Training

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Time & Attendance

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Rostering Benefits

Customer Relationship Management •

Sales and Marketing.

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Commissions

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Service

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Customer Contact and

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Call Center support

Data Warehouse •

various Self-Service interfaces for Customers,

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Suppliers, and

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Employees

Planning and Quality control: •

System of data gathering to assess quality and measure against standards.

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Analysis of quality by process, material and work centre location.

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Analysis of quality by reasons and action taken

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Monitoring quality across the organisation from input to output for operating decisions and business decisions.

Maintenance: •

Plant maintenance planning.

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Breakdown, preventive, conditional maintenance.

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Monitoring performances fro maintenance action as all kind kinds of productive assets.

Enterprise Resource Planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP). MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the standard software activity. ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, marketing, delivery, billing, production, inventory management, quality management, and human resource management. ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information technology, this would include accounting, human resources, marketing, and strategic management.

Implementation

Because of their wide scope of application within a business, ERP software systems are typically complex and usually impose significant changes on staff work practices. Implementing ERP software is typically not an "in-house" skill, so even smaller projects are more cost effective if specialist ERP implementation consultants are employed. The length of time to implement an ERP system depends on the size of the business, the scope of the change and willingness of the customer to take ownership for the project. A small project (e.g., a company of less than 100 staff) may be planned and delivered within 3-9 months; however, a large, multi-site or multicountry implementation may take years. To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies. These firms typically provide three areas of professional services: consulting, customization and support.

Process preparation

ERP vendors have designed their systems around standard business processes, based upon best business practices. Different vendors have different types of processes but they are all of a standard, modular nature. Firms that want to implement ERP systems are consequently forced to adapt their organizations to standardized processes as opposed to adapting the ERP package to the existing processes. Neglecting to map current business processes prior to starting ERP implementation is a main reason for failure of ERP projects. It is therefore crucial that organizations perform a thorough business process analysis before selecting an ERP vendor and setting off on the implementation track. This analysis should map out all present operational processes, enabling selection of an ERP vendor whose standard modules are most closely aligned with the established organization. Redesign can then be implemented to achieve further process congruence. Research indicates that the risk of business process mismatch is decreased by: - linking each current organizational process to the organization's strategy; - analyzing the effectiveness of each process in light of its current related business capability; - understanding the automated solutions currently implemented. A disadvantage usually attributed to ERP is that business process redesign to fit the standardized ERP modules can lead to a loss of competitive advantage. While documented cases exist where this has indeed materialized, other cases show that following thorough process preparation ERP systems can actually increase sustainable competitive advantage.

Configuration Configuring an ERP system is largely a matter of balancing the way you want the system to work with the way the system lets you work. Begin by deciding which modules to install, then adjust the system using configuration tables to achieve the best possible fit in working with your company’s processes.

Modules - Most systems are modular simply for the flexibility of implementing some functions but not others. Some common modules, such as finance and accounting are adopted by nearly all companies implementing enterprise systems; others however such as human resource management are not needed by some companies and therefore not adopted. A service company for example will not likely need a module for manufacturing. Other times companies will not adopt a module because they already have their own proprietary system they believe to be superior. Generally speaking the greater number of modules selected, the greater the integration benefits, but also the increase in costs, risks and changes involved. Configuration Tables – A configuration table enables a company to tailor a particular aspect of the system to the way it chooses to do business. For example, an organization can select the type of inventory accounting – FIFO or LIFO – it will employ or whether it wants to recognize revenue by geographical unit, product line, or distribution channel. So what happens when the options the system allows just aren’t good enough? At this point a company has two choices, both of which are not ideal. It can re-write some of the enterprise system’s code, or it can continue to use an existing system and build interfaces between it and the new enterprise system. Both options will add time and cost to the implementation process. Additionally they can dilute the system’s integration benefits. The more customized the system becomes the less possible seamless communication becomes between suppliers and customers.

Advantages In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve: •

Ease of use

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General Purpose

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Readymade solution for most of the problems

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Integration of all functions already established

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design engineering (how to best make the product)

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order tracking from acceptance through fulfillment

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the revenue cycle from invoice through cash receipt

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managing interdependencies of complex Bill of Materials

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tracking the 3-way match between Purchase orders (what was ordered), Inventory receipts (what arrived), and Costing (what the vendor invoiced)

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the Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a granular level.

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Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Part of the change can include labeling to identify version numbers.

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Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company, or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools.

Disadvantages Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used. Limitations of ERP include: •

Success depends on the skill and experience of the workforce, including training about how to make the system work correctly.

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Managers cannot generate custom reports or queries without help from a

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programmer. This inhibits managers from obtaining information quickly so that

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they can act on to for competitive advantage. This can create a backlog for the

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is department.

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ERP systems provide current only such as open orders. Managers often need to look past the current status to find trends and patterns that aid better decision-making

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Small enterprises are often undercapitalized & are also not updated about the latest offerings in the market

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Personnel turnover; companies can employ new managers lacking education in the company's ERP system, proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP.

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Customization of the ERP software is limited. Some customization may involve changing of the ERP software structure which is usually not allowed.

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Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.

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ERP systems can be very expensive to install often ranging from 30,000 US Dollars to 500,000,000 US Dollars for multinational companies.

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ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability.

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Technical support personnel often give replies to callers that are inappropriate for the caller's corporate structure. Computer security concerns arise, for example when telling a non-programmer how to change a database on the fly, at a company that requires an audit trail of changes so as to meet some regulatory standards.

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ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.

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Systems can be difficult to use.

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Systems are too restrictive and do not allow much flexibility in implementation and usage.

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The system can suffer from the "weakest link" problem—an inefficiency in one department or at one of the partners may affect other participants.

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Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.

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Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).

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The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.

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Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.

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Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.

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There are frequent compatibility problems with the various legacy systems of the partners.

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The system may be over-engineered relative to the actual needs of the customer.

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The data in ERP application is not integrated with other enterprise or division systems and dies not include external intelligence.

REFERENCES: •

W.S Jawedekar, Management Information Systems, ( Tata McGraw Hill, 2nd Ed, 2005)

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www.Wikipediia.com

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http://www.erpfans.com/erpfans/erpdefinition/erp042.html