ERP

CH1
1. ERP is a high-end, sophisticated software solution that reduces the pressure and
workload of the managers and provides accurate, timely information for taking
appropriate business decisions.

2. Enterprise Resource Planning is the latest high-end solution that information

technology has lent to business applications.

ERP Success Factors

1. People
2. Process
3. Technology

ERP Overview
ERP software consists of multiple software modules that integrate activities across
functional departments from production planning, parts purchasing, inventory control,
and product distribution to order tracking.

ERP is much more than just computer software, components, or parts. An ERP system
includes ERP software, business processes, users, and hardware that runs the ERP
software, which helps streamline and improve business processes.

The most important factor for an ERP system is the intelligent users who have great
knowledge of each entity of the system.

What is ERP?

It serves as the enterprise backbone that integrates and automates business processes
and covers all functional areas.

ERP Eliminates

 The need for external interface

 Standardization and lower maintenance
 Easier and Greater Reporting Capabilities
3 Types of Professional Services

1. Consulting Services
 Initial Stages
 Product Training
 Workflow
 Improve ERP’s Use
2. Customization Services
 Extending Use of ERP
 Change Use of ERP
 Creation of needs that need to be built
3. Support Services
 Support and Maintenance
 Troubleshooting and assistance

ERP Benefits

Tangible Intangible
1. Reduction of lead time 1. Customer satisfaction
2. Cycle time cut 2. Increase flexibility
3. On time shipment 3. Better analysis and planning
4. Increase of inventory capabilities (decision-making).
5. Doubled business
4. Reduce quality cost by
implementing latest technology
5. Proper utility of resources
6. Improved information accuracy

Advantages and Disadvantages Of ERP

Advantages Disadvantages
 Improved efficiency The use of software that will manage the
 Business integration activities of a firm can affect
 Better decision making  The workflow
 Quick response time to  competitive advantage
customers  employee morale
 Analysis and planning Since the files, activities, and corporate
capabilities reports are centralized, there is a high
 Technology support possibility that some important and
confidential files could be lost.
Ideal ERP System

An ideal ERP system is when a single database is utilized and contains all data for
various software modules.

These software modules can include:

1. Manufacturing: Some of the functions include engineering, capacity, workflow

management, quality control, bills of material, and manufacturing process.
2. Financials: accounts payable, accounts receivable, fixed assets, general ledger,
and cash management.
3. Human Resources: Benefits, training, payroll, time, and attendance.
4. Supply Chain Management: Inventory, supply chain planning, supplier
scheduling, claim processing, order entry, purchasing.
5. Projects: Costing, billing, activity management, time, and expense.
6. Customer Relationship Management: Sales and marketing, service, commissions,
customer contact, and call center support.
7. Data Warehouse: Usually this is a module that can be accessed by an
organization's customers, suppliers, and employees.

Integrated management information

In any information system there is a logical flow of information; that is, in any
information system, data supplied to the system (input) are manipulated (processed)
and transformed into information (output).

The simple IPO model:

 Input (Data)
 Processed (Processing Technology)
 Output (Information)

has been used.

The Management Information Systems (MIS) elements are TP (transaction process), RS

(reporting system), and DSS (decision support system).

 TP is a collection, storage, and processing of data and day-to-day operational

systems.
 RS is providing report based on business rules and procedures
 DSS is a system for providing information to help the management with new
unstructured decision-making.

ERP and Business Modeling

ERP is nothing but a total business solution.

Before integrating the whole organizational functions, a business model is planned.

Business modeling is developed based on:

 The organization’s goals

 Objectives
 Strategic plans

The business model is represented in graphical form using

 Data flow diagrams

 System diagrams
 Flowcharts

A business model focuses on the representation of the business as one large system,
showing the interconnections and interdependencies of various subjects and business
processes.

Creating an integrated data model is a critical step in the ERP implementation.

While designing the data model for an ERP system, one should keep in mind the
information integration and process procedure automation.

CH2

Business process reengineering (BPR) is the fundamental rethinking and radical

redesign of strategy, business processes and systems, policies, and organizational
structure to:

 Optimize workflow and productivity in an organization

 Increase the efficiency and effectiveness
 Contemporary measures of performance such as cost, quality, service, and
speed.
Why Process Reengineering?

Over the last few years, organizations have been forced to improve their business
processes because customers are demanding better products and services.

Another apparent trend is the opening of world markets and increased free trade.

Such changes bring more companies into the marketplace, and competing becomes
harder and harder.

In today’s marketplace, major changes are required to just stay even. It has become a
matter of survival for most organizations.

Organizations re-engineer when the management feels that a significant gap exists
between the actual and desired results, creating a business problem.

Typically, process improvements fall into three categories:

1. Quick Hits: These are typically low-risk, easily achievable efforts that provide
immediate payback opportunities (typically within a few months).

2. Incremental Improvement: This focuses on closing small performance gaps and

delivers small degrees of change that achieve small but meaningful business results.

3. Re-engineering: This demonstrates breakthrough thinking and aims at dramatic

business results. Unlike quick hits and incremental improvement, reengineering is a
form of organizational change characterized by dramatic process transformation.

Continuous Process Improvement Model

Re-Engineering Model

Process Improvement versus Process Innovation (BPR)

Improvement Innovation
(Quick Hints & (Re-Engineering)
Incremental)
Level of Change Incremental Radical
Starting Point Existing Process Clean Slate
Frequency of Change One-time/Continuous One-time
Time Required Short Long
Participation Bottom-Up Top-Down
Typical Scope Narrow, within functions Broad, cross-functional
Risk Moderate High
Primary Enabler Statistical Control Information Technology
Type of Change Cultural Cultural/Structural

What Is a Business Process?

Business process as “a set of logically related tasks performed to achieve a defined

business outcome.”

A process is “a structured, measured set of activities designed to produce a specified

output for a particular customer or market.

It implies a strong emphasis on how work is done within an organization” (Davenport

1993). In their view, processes have two important characteristics:

(i) They have customers (internal or external),

(ii) They cross organizational boundaries, i.e., they occur across or between
organizational subunits.
One technique for identifying business processes in an organization is the value chain
method proposed by Porter and Millar (1985).

Processes are generally identified in terms of beginning and end points, interfaces, and
organization units involved, particularly the customer unit.

Example: Processes include developing a new product, ordering goods from a supplier,
creating a marketing plan, processing and paying an insurance claim, etc.

Processes may be defined based on three dimensions:

Entities Processes take place between organizational entities. They could be

interorganizational (e.g., electronic data interchange), interfunctional, or interpersonal
(e.g., computer-supported cooperative work).

Object processes result in manipulation of objects. These objects could be physical or

informational.

Activities Processes could involve two types of activities: managerial (e.g., developing a
budget) and operational (e.g., filling a customer order).

The BPR Life Cycle

represents a closed-loop learning system for the organization to promote continuous

improvement and organizational learning.

The major components of a business process re-engineering life cycle include the
following:

1. Identification of current business processes

2. Review, update and analysis of “As-is” processes
3. Design of “To-Be” processes
4. Test and implementation of “To-Be” processes

BPR is generally regarded as consisting of four elements to be considered, as there are

strategies, processes, technology, and humans.

where strategies and processes are building the ground for the enabling utilization of
technologies and the redesign of the human activity system.