You are on page 1of 12

ENTERPRISE RESOURCE PLANNING

1
CONTENTS

1. What is ERP

2. History of ERP

3. Why ERP

4. Market Leaders in ERP

5. Benefits of ERP

6. Overview of Popular ERP Products

7. The Future of ERP

WHAT IS ERP?
2
Enterprise Resource Planning or ERP is an industry term for
integrated, multi-module application software packages that are
designed to serve and support multiple business functions. An
ERP system can include software for manufacturing, order entry,
accounts receivable and payable, general ledger, purchasing,
warehousing, transportation and human resources. Evolving out
of the manufacturing industry, ERP implies the use of packaged
software rather than proprietary software written by or for one
customer. ERP modules may be able to interface with an
organization's own software with varying degrees of effort, and,
depending on the software, ERP modules may be alterable via the
vendor's proprietary tools as well as proprietary or standard
programming languages.

While the idea is easy to grasp in theory, the reality has


been different. Most companies have a conglomeration of
different systems and procedures (as well as hardware and
software) designed 'specifically' for their own needs. Employee
records (including payroll, medical and other benefits) are held by
Human Resources. Financial data and processing, which includes
payroll computations and employee compensation as well as
invoicing and billing for company products and services, are held
by the Finance Department. Production data is held by
manufacturing. Inventories are held by warehousing. Customer
orders are held by Customer Relations, and so on.

The 'dream' of ERP is to have a single software solution


integrating the different functions and activities into a seamless
whole where information needed for decision-making is shared
across departments, and the action taken by one department
results in the appropriate follow-up action up and down the line.
The most often-cited example of an ERP software is
customer ordering and delivery where a customer's order moves
smoothly from Sales, where the 'deal' is consummated, to
Inventory and Warehousing, which retrieves and packages the
order for delivery, to Finance, where invoicing, billing and
payments are handled, and on to Manufacturing, where
replacement of the bought-and-paid-for product is done.

3
BRIEF HISTORY OF ERP

The focus of manufacturing systems in the 1960's was on


Inventory control. Most of the software packages then (usually
customized) were designed to handle inventory based on
traditional inventory concepts. In the 1970's the focus shifted to
MRP (Material Requirement Planning) systems that translated the
Master Schedule built for the end items into time-phased net
requirements for the sub-assemblies, components and raw
materials planning and procurement.

In the 1980's the concept of MRP-II (Manufacturing


Resources Planning) evolved which was an extension of MRP to
shop floor and Distribution management activities. In the early
1990's, MRP-II was further extended to cover areas like
Engineering, Finance, Human Resources, Projects Management
etc i.e. the complete gamut of activities within any business
enterprise. Hence, the term ERP (Enterprise Resource Planning)
was coined.

WHY IS IT NECESSARY?

By becoming the integrated information solution across the


entire organization, ERP systems allow companies to better
understand their business. With ERP software, companies can
standardize business processes and more easily enact best
practices. By creating more efficient processes, companies can
concentrate their efforts on serving their customers and
maximizing profit.

MARKET LEADERS

The top five ERP vendors, SAP, Oracle Corporation,


Peoplesoft, Inc. (now Oracle Corp.), JD Edwards & Company, and
Baan International, account for 64 percent of total ERP market
revenue. These vendors continue to play a major role in shaping
the landscape of new target markets, with expanded product
functionality, and higher penetration rates. SAP dominates the
$6.7 billion ERP applications market in Europe with 39% market
4
share. Oracle and PeopleSoft come second and third respectively,
followed by SAGE Group and Microsoft Business Solutions.
PRIMARY BENEFIT
Prior to ERP, each department may be considered an
independent fiefdom. Once a department's particular function is
completed, it no longer cares for what happens afterwards. A
customer following up with Sales for his product will be told,
"Check with Warehouse", who will then say, "Check with
Delivery", who can tell the customer, "Please check with Finance
to see if your invoice has been cleared".

Efforts to integrate the system before always met with the


stumbling block of different software and procedures. A sales
person could not access the finance database to find out the
customer's billing status, nor can he easily access the warehouse,
inventory or delivery to find out the status of the customer's
order.

With ERP, all elements in the supply and production chain can be
easily accessed by all those who need the information. This leads
to efficiency in customer management and perceived company
effectiveness in delivering on customer expectations.

Other Advantages
An oft-overlooked advantage in having a workable and
efficient ERP system in place is savings in relation to energy
consumption and data management.

Having an ERP system in place implies having a single


hardware system to handle the different requirements, translating
into reduced power consumption operating off a single database
which translates into savings on storage.

The savings generated from a minimum of hardware and


storage, coupled with operational efficiencies created from a
single system across all departments, translates into measurable
profit for the company.

5
OVERVIEW OF POPULAR ERP
PRODUCTS
Oracle E- Business Suite

Oracle E-Business Suite is the industry's only


complete and integrated set of enterprise
applications, working together seamlessly to
streamline every area of your business—from sales,
service, and marketing, through financials and
human resources, to supply chain and
manufacturing. Oracle E-Business Suite is your
fastest path to high-quality enterprise intelligence,
bringing your company a true 360-degree view of
your finances, your customers, and your supply
chains, so you can make faster, better decisions
and grow profitability in a competitive marketplace.

Application software typically automates only


departmental business processes. Oracle E-
Business Suite is different; it automates all parts of
your business. From developing, marketing, selling,
ordering, planning, procuring, manufacturing,
fulfilling, servicing, and maintaining, to handling
finance, human resources, and project management
—Oracle E-Business Suite provides a comprehensive
and integrated offering. In the past, you had to
choose between an integrated suite and “best of
breed” for rich functionality. With Oracle, you can
now have an integrated suite built on unified
information architecture—with the functionality you
need in each individual application. These
applications connect business processes within and
across departmental, geographical, and line-of-
business domains. With Oracle E-Business Suite’s
depth of product functionality and breadth of
6
product offering, you can take your business further
by automating processes across the enterprise.

Oracle E- Business Suite - Industry


Applications

Oracle E-Business Suite 11i.10 offers over


2,100 new capabilities, half of which meet specific
industry needs, including:

Financial Services: SOP documentation and


auditing for compliance with Sarbanes-Oxley and
other regulations
Healthcare: Medication administration, patient
encounter-specific financial information, integrated
patient care and operational intelligence
Manufacturing/High Technology: Option-
dependent sourcing, automated spare parts return
and repair processing, international drop shipments,
distribution planning

SAP

WHAT IS SAP?
SAP (Systems, Applications, and Products in
Data Processing) is the leading ERP (Enterprise
Resource Planning) software package. SAP was the
first to integrate a corporation's worldwide functions
tightly into one application. SAP R/2 was released as
the first version of their software in 1979. Its
domination of the market occurred during the
1980s, expanding first throughout Europe (early
1980s) and then North America (1988). SAP R/3, an
advanced, client-server based version of the
7
popular R/2 product, was released in 1992 and
sparked a stunning takeover of America's largest
businesses — 44% of US companies were using it
within five years of its expansion. In 1999, SAP
introduced its newest major product upgrade.
Named mySAP.com to emphasize its shift to an e-
business focus, mySAP.com builds on the strengths
of the SAP R/3 product in a fully Internet enabled
architecture. MySAP.com also incorporates SAP's
newest business applications for CRM, Supply Chain
Management (SAP APO), and Data Warehousing
(Business Information Warehouse or BW).

Prior to the introduction of mySAP.com, these


applications had been incorporated as add-ons to
SAP R/3 and were known as New Dimension
products. Given below is a brief overview of both
the products from SAP – SAP R/3 and mySAP.

SAP R/3 Overview


SAP R/3 is SAP's integrated software solution
for client/server and distributed open systems.
SAP's R/3 is the world's most-used standard
business software for client/server computing. R/3
meets the needs of a customer from the small
grocer with 3 users to the multi-billion dollar
companies The software is highly customizable
using SAP's proprietary programming language,
ABAP/4. R/3 is scalable and highly suited for many
types and sizes of organizations.

The R/3 architecture is comprised of


application and database servers. The application
servers house the software and the databases
servers handle document updates and master file
databases. The system can support an unlimited
number of servers and a variety of hardware
configurations. For more information see SAP R/3
Architecture at SAP home page.

8
SAP R/3 is based on various hardware and
software architectures, running on most types of
UNIX, on Windows NT and OS/400. SAP R/3 runs on
several databases Oracle, Adabas D, Informix, DB2
for UNIX, DB2/400, and Microsoft’s SQL Server 6.0.
Since R/3 foundation, SAP has made significant
development and installed thousands of R/3
systems

HOW TO MAKE ERP COMPLIMENT YOUR


BUSINESS

To successfully utilize ERP, a company must be


skilled in making the program complement their
business. Vendors who sell ERP products have
worked to solve a number of problems over the last
few years, and one of these problems is scalability.
In addition to this, security issues are also
important, as well as the integration of the
organization.

One of the most powerful aspects of ERP is


that it allows thousands of workers to access the
same database, and they are not simply limited to
being the headquarters of the company. Authorized
users can access this database from anywhere on
the planet.

When ERP was first introduced, the goal was to


integrate the various elements of an organization
into a cohesive whole. However, this has changed
over the years, and companies are now using ERP
for a number of different applications, and some of
these applications are product planning, inventory,
and logistics. While all of these elements have
distinct functions, they must all be integrated with
the central ERP system. In the last ten years, the
cost of ERP has continued to decrease, and this has
allowed more companies to adopt it. The process of
properly implementing ERP requires companies to
9
spend a great deal of time training their employees.
In addition to this, a number of new guidelines must
be introduced.

To get your business to complement your ERP


system, you must be willing to conform with the
software. There is a great impact that will occur
when ERP is presented for the first time. The
process of a company changing the way the operate
in order to conform to ERP can be very challenging.
In some cases, this process is much more
challenging than the technical barriers that must be
overcome. It should be noted that not all ERP
systems have rigid structures. In order for vendors
to compete, they must give their applications a
certain degree of flexibility. At the same time, it is
important for a company to be able to adapt within
a short period of time.

If this does not occur soon enough, the project


can become a failure. There are a number of
companies that have found themselves in a no win
situation. When this happens, a company will be
faced with an event where they will need to change
their processes to adopt to the software, or they will
have to invest in connectivity programs. Both
options may have severe limitations. In addition to
this, the advent of ERP presents a number of other
challenges to companies that wish to utilize it. A
number of organizations have realized that in order
to stay competitive, they must make the change
from a company that is integrated in a vertical
manner into a company that is comprised of
multiple entities.

Many experts believe that this change may


lead to some systems becoming obsolete. A number
of studies suggest that corporations are moving
away from internal structures that are focused on
applications into institutions that are heavily

1
0
integrated and driven by external factors. A number
of people have presented new ideas about how an
ERP should be used. One of the industries that is
strongly aware of this changes are those that deal
with Information Technology. To solve many of the
problems that are present with contemporary ERP
solutions, many in the IT industry are placing an
emphasis on creating messaging pipes.

One thing that many companies realize that it


is very tedious to create an end-to-end process by
merely connecting various applications.

The biggest problem with these programs is


that they are limited by their approach, which in
most cases is either data centric or bottom-up. The
obvious problem with these approached is that they
require the business to conform to the needs of the
software. The numerous technological layers that
already exist within the company make introducing
an ERP system very complex. When you combine
these issues with the cost of the technology, it is
easy to see why a number of companies have failed
when attempting to implement it. While it is
possible to use ERP successfully, it must be done in
connection with other systems. When I use the term
"other systems" I’m referring to things such as
Business Services Orchestration.

THE FUTURE OF ERP

Industry analysts expect that every major


manufacturing company will buy the software,
which ranges in cost -- with maintenance and
training -- from hundreds of thousands of dollars for
a small company to millions for a large company.
AMR Research of Boston says consolidation among
the major players will continue and intensify. ERP
vendors are expected to put more effort into e-
commerce, CRM and SCM initiatives, with leaders
1
1
redirecting between 50% and 75% of their R&D
budget to these projects.

According to Gartner research group, the rapid


evolution of ERP has already lead to a new
corporate must-have, ERP II, which is supposed to
help businesses gain more competitive edge in the
future. The major difference is that ERP II involves
collaborative commerce, which enables business
partners from multiple companies to exchange
information posted on e-Commerce exchanges.

Overall, ERP has become an important tool in a


day and age when properly structuring and
processing information has become so important.
The integration of an organization's data can lead to
a number of useful applications.

1
2