Information Technology

for Retail Management

UNIT – 3

ENTERPRISE RESOURCE PLANNING

Contents
• Introduction to ERP
• Concept of ERP
• Process of ERP
• History of ERP
• Trends in ERP
• Advantages of ERP
• Challenges of ERP
• Planning of ERP
• Constructing of ERP
• Bug deducting in ERP of constructed ERP
• Implementing ERP
• Implementing methodologies of ERP
• Approaches of ERP
• Stages of ERP
ENTERPRISE RESOURCE PLANNING -
Concept:

• Enterprise: A group of people with a common goal, utilizing resources to achieve it.
• The organization is considered one system, with all departments acting as sub-systems.
• Centralized Information System: Stores and shares data across all departments.
• ERP integrates all business functions into a single software system.
• Uses a centralized database to ensure seamless communication and transparency.
• Eliminates departmental isolation, aligning all teams towards a common goal.

Key Resources:
• Money (Financial resources)
• Manpower (Employees & skills)
• Materials (Raw materials & inventory)
• Machines (Equipment & tools)
• Technology (Software & infrastructure)
ERP - Definition
• ERP is the acronym for enterprise resource planning which provides infrastructure support for integration management of
businesses and function through various tools and techniques and concepts aimed at optimum utilization of organizational
resources.

• ERP is primarily an enterprise wide system which encompasses corporate vision, objectives, attitudes beliefs, values,
operating style and people who make the organization.

• ERP is a computerized environment with a holistic view of the enterprise, aimed at seamless flow of information across
the departmental barriers where by optimal planning and management of the resources is possible in the most efficient
manner.
Benefits of ERP Integration
• Smooth flow of information across departments
• Automation of business processes
• Better decision-making through real-time data
• Increased efficiency & collaboration

ERP Covers the Following Business Areas:

• Production Planning
• Finance
• Marketing
• Research & Development
• Production
• Sales & Distribution
• Logistics Management
• Human Resources
• Quality Management
Evolution of ERP
1. The Roots of ERP:
• Initially focused on automation and transactional efficiency.
• Designed as high-performance systems for specific functions like finance.
• Lacked a clear distinction between user interface, business logic, and data.

2. Traditional ERP Approach:

• Functional area-specific applications (e.g., General Ledger, Purchasing, Inventory).
• Developed as isolated systems, leading to:
• Redundant/inconsistent data
• Lack of real-time access to decision-making data
• Difficult system modifications in a changing business environment

3. Modern ERP Paradigm:

• Shift from isolated systems to integrated enterprise-wide management.
• ERP vs. MRP (Material Requirements Planning):
• MRP & MRP II focused on manufacturing.
• ERP integrates the entire enterprise, including Finance, HR, Logistics, etc.
• Eliminates redundant data and improves business process efficiency.
Evolution of ERP
Advantages & Disadvantages
• Advantages of ERP: • Disadvantages of ERP:
1. Integration & Data Accuracy 1. High Implementation Cost
1. Centralized system ensures real-time data sharing 1. Expensive software, training, and maintenance.
across departments. 2. Requires significant investment.
2. Reduces data redundancy and inconsistencies.
2. Complex Implementation Process
2. Improved Efficiency & Productivity 1. Time-consuming & resource-intensive.
1. Automates business processes, reducing manual 2. May disrupt daily operations during rollout.
workload.
2. Enhances workflow & decision-making. 3. Requires Employee Training
1. Employees need time to adapt to the new system.
3. Better Decision-Making
2. Resistance to change can slow down adoption.
1. Provides real-time insights with accurate data.
2. Enables strategic planning and forecasting. 4. Customization Challenges
1. Pre-built ERP solutions may not fit every business
4. Regulatory Compliance & Security perfectly.
1. Helps businesses comply with industry standards. 2. Customization can be costly & complex.
2. Strengthens data security & access control.
5. Dependence on Vendor Support
5. Scalability & Flexibility 1. Requires ongoing technical support & updates.
1. Can adapt as the business grows. 2. Vendor dependency can lead to downtime &
2. Supports multi-location & global operations. service delays.
PLANNING OF ERP

Planning

• Identification of the needs for implementing an ERP package.

• Evaluating the “as-is” situation of your business.
• Deciding upon the desired would be situation for your business.
• Reengineering of the business processes to achieve the desired results.
• Evaluation of the various ERP packages. Finalizing of the ERP package.
• Installing the requisite hardware and networks.
• Finalizing the implementation consultants.

Implementation of the ERP package.

Steps in ERP Implementation
1. Formation of Implementation Team
 Includes IT experts, business users, and external consultants.
 Assign roles: Project Manager, Module Leaders, Steering Committee.
2. Gap Analysis
 Identify business needs vs. ERP system capabilities.
 Document gaps and assess necessary customizations.
3. Customization & System Configuration
 Modify ERP settings to match business requirements.
 Develop additional user-specific reports & transactions if needed.
4. Data Migration
 Transfer master and transaction data from existing systems.
 Conduct test runs to ensure data accuracy.
5. Test Runs & User Training
 Conduct trial transactions to identify system errors.
 Train users on navigation, transactions, and reporting.
Steps in ERP Implementation
6. Parallel Run
 Execute business operations in both old and new ERP systems.
 Identify discrepancies and resolve issues before full transition.
7. Final User Approval
 Get confirmation from end-users on system satisfaction.
 Resolve any outstanding concerns or issues.
8. Go Live (Migration to New System)
 Fully switch from the old system to the new ERP system.
 Ensure business continuity and minimal disruptions.
9. Post-Implementation Support
 Address queries, minor adjustments, and format changes.
 Provide continuous monitoring and system fine-tuning.
Bug Detection Methods in ERP
1. Lack of Compatibility & Integration
 Legacy systems may not integrate with modern ERP solutions.
 Leads to disconnected data streams & inefficiencies.
2. Incorrect ERP Implementation
 Poor implementation results in restricted functionality.
 Example: Stock movements not recorded accurately.
3. Partial or Incomplete ERP Implementation
 Some companies only partially implement ERP.
 Legacy components fail to communicate with ERP.
4. Lack of Operational Validation
 Transactions remain on hold due to lack of approvals.
 Causes vendor disputes & ERP system format issues.
5. Missing Key Metrics & KPIs
 Essential data like rebates, accounts receivable, routing guides missing.
 Leads to poor financial tracking.
 5. Restricted Access to ERP Reports
 Critical reports are not accessible beyond their creators.
 Creates bottlenecks & delays in decision-making.
6. Insufficient Investment in ERP
 Businesses cut costs by buying partial ERP systems.
 Custom configurations prevent using ERP provider’s support.
7. Lack of ERP Training
 Users don’t know how to fully utilize ERP capabilities.
 Leads to human errors, miscommunication & data mishandling.
8. Misuse of ERP System
 Using incorrect data sources creates inaccurate reports.
 Example: Manufacturing ERP used for retail analytics.
9. Technical Issues in ERP
 Power outages, server failures, data loss, and transmission errors.
 Can lead to false reports, lost invoices & data leaks
ERP Implementation Strategies
• When it comes to the critical deployment stage, there are several
possible strategies, offering different potential advantages and risks.
While there are a few proven strategies for transitioning to new ERP
systems, each with advantages and disadvantages, successful
implementations always depend on the stakeholders working together
with a shared goal and vision of business success.
• These are the four most common Implementation Strategies:
 1. Big Bang
The Big Bang ERP implementation offers a fast realization of benefits, such as higher productivity, better insights, and lower
operating costs. However, once deployed, it is difficult to reverse, making accuracy crucial. Even minor errors can disrupt
employees, business partners, and customers. Additionally, organizations may experience a temporary productivity dip as users
adapt to the new system.

Pros and cons of the big bang approach:

Advantages
•The implementation timeline is shorter
•Cost can be much lower than any other implementation approach
•All training is completed for users before the initial roll-out
•ERP system roll-out happens on a planned go-live date

Disadvantages
•Details may be overlooked in the rush to change
•Employees are constrained to learn the new system before the designated implementation date
•Fall-back to a legacy system may be more difficult than originally perceived
•A failure in one area of the system could affect others
•Pronounced dip in performance after the implementation
 2. Phased Rollout
The phased rollout approach gradually deploys ERP features over weeks or months, reducing risk compared to the Big Bang
strategy. This method allows companies to focus on quick wins and apply lessons from initial phases to improve future
implementations. However, it delays full system benefits and requires maintaining both old and new systems, increasing costs.

Advantages

• Lessons learned can be used for a successive phased roll-out

• Ample time for adjustments to the planned deployment
• More time for users to adapt to the new system
• Project team members develop implementation skills for subsequent roll-out phases
• A step-by-step approach to implementation
• Less risk
Disadvantages

• Continuous changes over a longer period

• Fallback to legacy becomes more difficult if required
• Temporary solutions to legacy issues are created to support the phased roll-out
• Employee change fatigue
• Longer implementation timeline
• Delayed integration of the whole business process
• Potential rise in integration complexities
• A larger number of technical resources to create an interface program
 3. Parallel Adoption

The parallel adoption approach allows organizations to run both legacy and new ERP systems simultaneously for a period,
making it the least risky strategy since businesses can revert to the old system if needed. This method helps users gradually
adapt to the new ERP and ensures critical functions remain operational. However, it is resource-intensive and costly, requiring
additional staff time and effort. Additionally, dual data entry increases the risk of errors, making it crucial for businesses to
carefully manage the transition..

Advantages
•Minimises data integrity and migration issues
•Risk is moderate
•Increases users’ confidence to use the new system

Disadvantages
•Double keying of data is very labour intensive
•Greater risk for mistakes
•Increase potential for higher cost
4. Hybrid
As the name implies, this approach combines elements of the strategies above. For example, an organisation might switch on
core ERP modules using a big-bang strategy, then roll out other modules in phases to specific locations or departments.

Advantages

• Greater controls of the ERP implementation

• Moderate risk
• Disadvantages

Costly to implement
• Time intensive
• The full integration picture is compromised