Enterprise Resource Planning (ERP) Systems

What is ERP?
An ERP system is an attempt to integrate all functions

across a company to a single computer system that can serve all those functions specific needs.
Integration is the key word for ERP implementation.

What is ERP?
It may also integrate key customers and suppliers as

part of the enterprises operation.

It provides integrated database and custom-designed

report systems.
It adopts a set of best practices for carrying out all

business processes.

Major application components of ERP

The following application components are integrated in

ERP .They demonstrate the cross functional approach of ERP system.

Applications

Production planning

Accounting & finance Human resource

sales distribution

Order management

Major Reasons for Adopting ERP

Integrate financial information Integrate customer order information Standardize and speed up operations processes Reduce inventory Standardize Human Resources information

Potential Benefits of ERP

Internal Benefits

Integration of a single source of data

Common data definition

A real-time system Increased productivity

Reduced operating costs

Improved internal communication Foundation for future improvement

Potential Benefits of ERP

External Benefits

Improved customer service and order fulfillment

Improved communication with suppliers and

customers
Enhanced competitive position

Increased sales and profits

Major Challenges to ERP Implementation

Limitations of ERP technical capabilities Inconsistency with existing business processes

Costs - implementation (hardware, software, training,

consulting) and maintenance Impact on organizational structure (front office vs. back office, product lines, etc.) Changes in employee responsibilities

Major Challenges to ERP Implementation

Flexibility of software system upgrades Implementation timelines

Availability of internal technical knowledge and

resources
Education and training

Implementation strategy and execution

Resistance to change

Approach to ERP implementation

1.

Phased approach: In this type , implementation of each functional module is implemented in a sequential manner.

The integration of functions is done at a later stage where one function is fully integrated. 2. Big bang approach: Here all the functions will be integrated in a single, major event.

All modules are installed across the entire organization all at once.

3. Parallel approach: This approach is also known as parallel conversion or parallel running.
It is the least risky implementation process. It includes running both the old and new ERP system

at the same time.

This way user can learn the new system while

performing regular work activities on the old system.

Costs of ERP implementation:

The following are typical costs of ERP implementation: a. Reengineering: 43% b. Hardware: 12% c. Software: 15% d. Training and change management: 15% e. Data conversions: 15%

Causes of ERP failures:

Complexity of the system Failure to involve affected employees Insufficient training Overreliance by company/IT management on the claim

of ERP software vendors.

Trends /New Developments In ERP

Flexible ERP: Adoption of easy-to-install ERP systems Web enabled ERP: Availability of web-based and

wireless ERP systems

Inter-enterprise ERP E-business suites Linkage to other software systems, e.g., supply chain

management system, e-commerce, customer relationship management system