D-MBA-ITM-403 Enterprise Resource Planning.pdf

Enterprise Resource
Planning
(D-MBA-ITM-403)

Advisory Committee
Prof. Ram Rattan, Pro President, JECRC University
Prof. Widhi Dubey, Director DDE
Prof. Avireni Srinivasulu, Director (Academics), DDE
Prof. Rajeev Jain, Director, Faculty of Management
Prof. Deepak Demla, HOD Faculty of IT & CA
SLM Review Committee
Dr. Suman Bhatnagar, Assoc. Professor (BCA & MCA), DDE
Dr. Ruchi Goyal, Assoc. Professor (BBA), DDE
Dr. Anamika Upadhyay, Assoc. Professor (B.Com & MBA), DDE
Dr. Gaurav Deep, Assoc. Professor (English), DDE
Dr. Bhavtosh Awasthi, Assoc. Professor (Mathematics), DDE
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CONTENTS
Unit 1: Introduction to Enterprise Resource Planning 1-12
1.1 Introduction
1.2 What is ERP?
1.3 Why ERP Required?
1.4 Definitions of ERP
1.5 Benefits of ERP
1.6 Summary
1.7 Keywords
1.8 Self Assessment Questions
1.9 Review Questions
Unit 2: Origin and Evolution 13-30
2.1 Introduction to Integrated Management Information
2.2 Overview of Enterprise
2.3 Concept of Enterprise System
2.4 Evolution of ERP
2.5 Applications areas of ERP
2.6 Scenario and Justification of ERP in India
2.7 Summary
2.8 Keywords
Unit 3: ERP Solutions & ERP Packages 31-49
3.1 Introduction
3.2 ERP for Small Business
3.3 ERP for Make to Order Companies
3.4 Business Process Mapping For ERP Module Design
3.5 ERP Packages
3.6 ERP Package Modules
3.7 Comparative Assessment and Selection of ERP Packages

3.8 Summary
3.9 Keywords
Unit 4: ERP and Related Technologies 50-73
4.1 Introduction
4.2 ERP and BPR
4.3 Management Information System (MIS)
4.4 Decision Support Systems (DSS)
4.5 Executive Information System (EIS)
4.6 Data Warehousing
4.7 Data Mining
4.8 Online Analytical Processing
4.9 Supply Chain Management
4.10 Summary
4.11 Keywords
Unit 5: Business Process Re-engineering (BPR) 74-87
5.1 Introduction to Business Process Re-engineering (BPR)
5.2 Importance of BPR
5.3 Objectives of BPR
5.4 Characteristics of BPR
5.5 ERP Implementation and BPR
5.6 Phases of BPR
5.7 Elements of BPR
5.8 Benefits of BPR
5.9 BPR Challenges
5.10 Summary
5.11 Keywords

Unit 6: ERP Modules 88-102
6.1 Introduction
6.2 Concept of ERP Modules
6.3 Finance
6.4 Plant Maintenances
6.5 Quality Management
6.6 Materials Management
6.7 Summary
6.8 Keywords
Unit 7: ERP Implementation 103-115
7.1 Introduction
7.2 ERP Lifecycle
7.3 Issues in Implementing ERP Packages
7.4 Pre-Evaluation Screening
7.5 Package Evaluation
7.6 Implementation
7.7 Summary
7.8 Keywords
Unit 8: Project planning 116-125
8.1 Phase
8.2 Gap Analysis
8.3 Reengineering
8.4 ERP and e-commerce
8.5 Summary
8.6 Keywords

Unit 9: ERP Training 126-136
9.1 Introduction
9.2 Training Cycle
9.3 Team Training
9.4 Testing
9.5Going Live
9.6 End-User Training
9.7 Post Implementation (Maintenances mode)
9.8 Summary
9.9 Keywords
Unit 10: ERP Market 137-153
10.1 Introduction
10.2 SAP AG
10.3 Baan Company
10.4 Oracle Corporation
10.5 People Soft
10.6 JD Edwards World Solutions Company
10.7 Summary
10.8 Keywords
Unit 11: Vendors, Consultants and User 154-169
11.1 Introduction
11.2 In-House Implementation- Pors and cons
11.3 Vendors
11.4 Consultants
11.5 End Users
11.6 Summary
11.7 Keywords

Unit 12: Future Directions in ERP 170-179
12.1 Introduction
12.2 Directions in ERP
12.3 New Markets
12.4 New Channels
12.5 Faster Implementation Methodologies
12.6 Summary
12.7 Keywords
Unit 13: New Business Segments 180-189
13.1 Introduction
13.2 New Business Segments
13.3 More Features of ERP
13.4 Web Enabling
13.5 Market Snapshot
13.6 Summary
13.7 Keywords

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1
Introduction to Enterprise
Resource Planning
CONTENTS
Objectives
1.1 Introduction
1.2 What is ERP?
1.3 Why ERP Required?
1.4 Definitions of ERP
1.5 Benefits of ERP
1.6 Summary
1.7 Keywords
Objectives
After studying this chapter, you will be able to:
 Describe enterprise resource planning.
 Explain the growth reasons of ERP.
 Explain the ERP benefits.
1.1 Introduction
Enterprise Resource Planning, or ERP, is a system that is used to combine all of the information or operations
of a company into a single unit. The standard ERP system will utilize both computer hardware and software in
order to achieve this. Perhaps one of the most important parts of the ERP system is the central database. This
database will be used to store information from various modules. When the term ERP was originally coined, it
was used to describe systems that were designed to use multiple resources. It was commonly connected to the
manufacturing industry. The term is used today in a much broader context.

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The goal of ERP is to unify the various functions of an institution. However, the use of Enterprise Resource
Planning is not simply limited to corporations. It is commonly used by non-profit organizations, government
agencies, and other institutions. A typical system integrates all these functions by allowing it is modules to
share and transfer information by freely centralising information in a single database accessible by all
modules. (See Figure 1.1)
Figure 1.1: The ERP System Module.
The various modules of ERP include engineering data control (bill of materials, process plan and work centre
data); sales, purchase and inventory (sales and distribution, inventory and purchase); material requirement
planning (MRP); resource flow management (production scheduling, finance and human resources
management); works documentation (work order, shop order release, material issue release and route cards for
parts and assemblies); shop floor control and management and others like costing, maintenance management,
logistics management and MIS. Also, the model of ERP includes areas such as finance (financial accounting,
treasury management, enterprise control and asset management), logistics (production planning, material
management, plant maintenance, quality management, project systems, sales and distribution), human
resources (personnel management, training and development an skills inventory) and workflow (integrates the
entire enterprise with flexible assignment of tasks and responsibilities to locations, positions, jobs, groups or
individuals). Although an ERP system is a pure software package, it embodies established ways of doing
business. Studies have illustrated that an ERP system is not just a pure software package to be tailored to an
organization but an organizational infrastructure that affects how people work and that it “imposes it is own
logic on a company’s strategy, organization, and culture”. For example, SAP R/3, as one of the major ERP
vendors, currently stores over 1,000 predefined processes that represent financial, logistics and human
resources best practices in a repository called “business engineer”. The evolution of ERP is described in the
next section in order to better comprehend the ERP planning and implementation issues.

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1.2 What is ERP?
Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the integrated
management of businesses by the effective use of management resources, to improve the efficiency of an
enterprise.ERP packages are integrated (covering all business functions) software packages that support the
above ERP concepts. Originally ERP packages were targeted at the manufacturing industry, and consisted
mainly of functions for planning and managing core businesses such as sales management, accounting and
financial affairs, etc. However in the recent years, adaptation not only to the manufacturing industry, but also
to diverse type of industry has become possible and the expansion of implementation and use has been
progressing on the global level ERP (enterprise resource planning) is an industry term for the broad set of
activities that helps a business manages the important parts of it is business. The information made available
through an ERP system provides visibility for key performance indicators (KPIs) required for meeting
corporate objectives. ERP software applications can be used to manage product planning, parts purchasing,
inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include
application modules for the finance and human resources aspects of a business. Typically, an ERP system uses
or is integrated with a relational database system.
Goals of the Quality Control Module included in ERP
The main objectives of the quality control module are the construction and maintenance of the filing of the
quality control. The control of reception, internal rejections, clients, claims, providers and evaluations of the
same corrective actions are related to their follow-up, and are also some of the goals that this module offers.
Furthermore, it is also helpful for internal auditory procedures and for the control of auditory providers.
Special Requirements of the Module
It is necessary to determine a whole series of data and values previously in order to make the proper follow-up
work and quality control under the context of ERP software. For that, there are some different characteristics
and contents:
 Value of Providers: include the values and qualifications of each provider; determine the qualification
criteria for delivery of supply with concerted quality.
 Type of internal and external incidences: determine the causes of bad quality (internal or external)
regarding the client; take into account where it has been made, the responsible parties and the origin;
reflect the decisions made in relation to it.
 Control Issues: determine the characteristics that will be registered in the evaluation; decide the size of the
sample, means and types of control that will be used.
 Auditory Procedures and corrective actions: state the methods of auditory and responsible parties;
determine the type of corrective actions; analyze the ranking of compliance with the processes through
checking; name the different departments that are responsible, and attach the documents and rules for
control support.
There are several documents associated with the quality control which have the main objective of detailing all
the aspects that may avoid the incorrect service offer.

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From the most basics to the more complete, this documentation will be classified as follows:
1. Control Issues: Detail the controls to be made from the reception of the merchandise to the moment of
manufacturing. These regulations are separated in three groups:
2. Reception Rules: With the objective to register all the controls made in the reception of materials and
purchase products, these rules are generally created to be related through a register of the different
versions and corresponding observations.
3. Procedure Rules: This involves making a group of controls responsible for all the operations needed for
the manufacturing of a product. At this point, it should be taken into account the internal operations as
well as the ones developed in the factory itself, as the external ones will be controlled with the same
format as the reception ones.
4. Final Control Rules: This is the group of controls that are to be made once the whole process of product
manufacturing is completed.
5. Control Plan: It make reference to all the controls identified for that purpose in the regulations.
1.2.1 ERP Application Tools
Large ERP vendors are competing with their smaller counterparts by either buying them out or forming
strategic alliances with them. A number of consultants within large firms are specializing in various areas.
They will analyze the process that needs to be reengineered, and once this is done, they will decide how the
ERP software must be used. It is important to realize that there is no such thing as a "perfect ERP tool" for any
organization. Each company will have a different need, and the decision will be dependent on the higher level
managers, especially those who are working in the IT department. These are the people who will be
responsible for making sure the software is maintained. To understand Enterprise Resource Planning, it is first
important to understand the applications that are associated with it. Much of the software that is used with ERP
is multi-module. This means that it will assist companies in properly integrating their various processes. The
most important areas for ERP applications are finance, human resources, and manufacturing. When a vendor
sells an ERP module to a company that is related to finance, it will be capable of combining a number of
different tasks. For example, some modules may deal with charts related to accounts and balances, while it
may also be used to maintain expenses that are connected to the organization.
1.2.2 ERP Benefits
Any company investing in any new tools or equipment will want to know that the investment will pay off—
have sufficient return on investment (ROI) to justify the expenditure. Most companies will identify inventory
reduction as one of the biggest benefits of an ERP system. Many companies actually achieve the savings that
they anticipate, but it is the implementation effort and the focus on procedures and discipline that generate
inventory reduction (without increasing shortages), not the software itself. Nevertheless, the software
implementation is the mechanism for the improvements so it’s not unfair to give the ERP system the credit.
Many companies also achieve significant cost savings through increased productivity, better control of
material acquisition, improved quality and reduced lead time. These are all direct and measurable
improvements that are often sufficient to fulfil most companies’ capital expense guidelines. But there are even
greater benefits available from ERP that are less easy to measure and therefore are often overlooked.

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Figure1.2: Benefits of ERP at Each Level of Management.
Key Benefits of ERP
Integration:
The first and far most benefit of ERP is integration. Our ERP solution helps in reducing data redundancy and
redundant data entry, which will lead to structured services approach and active project management.
Improved work efficiency:
Our solution helps in enhancing the efficiency of your organization as it integrates various processes very
smoothly. It will help in reducing your paper work. Our ERP module is designed for quick response to changes
in market conditions and improves the productivity of the company.
Reduction in cost:
The major benefit of ERP is improved coordination across functional departments. It reduces the operational
cost i.e. inventory control cost, production costs, Marketing costs and Help desk support costs.
1.3 Why ERP Required
A number of trends drove the growth of the enterprise software market. First, as discussed above, integrated
information architecture improves business performance. Once a major company in an industry adopts
enterprise software, competitors may be compelled to follow suit to stay competitive. Second, there has been a
major shift towards the use of packaged applications. This is partly related to the “Y2K bug” and the European
Union’s conversion to a single currency, which induced companies to replace their legacy systems with
packaged software effectively “outsourcing” the solution to the ERP vendor. Third, many companies were
abandoning legacy software due to the demands of electronic commerce and front office applications on the
front end and linking to suppliers and business partners at the back end. Similarly, the emergence of ERP-
based “vertical applications” that address the enterprise software needs of a specific industry have caused
many companies to purchase ERP packages.
Finally, rapid advances in computer and software technologies combined with the explosive growth of the
Internet have led many companies to rethink their business practices, to put a greater emphasis on their use of
IT, and to invest in more robust enterprise architecture. Competition in the enterprise software business is
fierce, with hundreds of software producers fighting for market share. The market has both companies that
offer an integrated suite of applications and those that address specific business process. The first group
consists of five companies known in industry parlance as JBOPS - J.D. Edwards, Baan, Oracle, PeopleSoft,

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and SAP AG. These companies attempted to create “end-to-end” solutions for the entire enterprise, hoping that
corporate customers will purchase almost all of their critical enterprise applications from a single vendor.
These firms produce software to help with customer support, product configuration, one-to-one marketing and
sales-force automation. Leaders in ecommerce software are too numerous to list (and the list changes on a
daily basis), but some examples are GE Information Systems, Sterling Communications. Supply chain
management software helps companies optimize their production processes and logistics across the entire
supply chain. The size of the packaged application market by category, and market forecasts for the years 2000
and 2003, are shown in Figure 1.3.
Figure 1.3: ERP and ERP-Related Packaged Application Market, 1998-2003
The “end-to-end” and “best-of-breed” approaches are not mutually exclusive. Some of the larger ERP
companies are acquiring smaller players to fill the gaps in their “end-to-end” solutions, whereas others focus
on developing interfaces at the front and back end of their ERP offerings.
Reasons for the Growth of the ERP Market
There is no doubt that the market for the Enterprise Resource Planning (ERP) systems isin great demand.
Industry analysts are forecasting growth rates of more than 30 % for at least the next 3 years. Now why are so
many companies replacing their key business systems?
The answer is:
 To enable improved business performance
a) Cycle time reduction: the time required to contact other department is reduced.
b) Inventory reduction: As the data is integrated there is no need to re enter the data and the paperless
transaction is done using EDI (Electronic Data Interchange).
c) Order fulfilment improvement: There are no conflicts between the departments like sales and production so
order can be made on time.
 To support business growth requirements
a) New Products and New Customers: we can grow our organization by implementing new Products in the
market and get the new customers for that product.
b) Globalize the product: We can Globalize the product for International customers

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 To provide flexible, integrated, real-time decision support
a) Managers get the integrated data of different departments at any time to analyze and to take important
decisions at the right time.
 To eliminate limitations in the legacy system:
a) Integration of the isolated departments
b) Decision support system
c) Availability of the right data at right time
d) Flexibility to change
e) Supporting latest technologies
1.4 Definition of ERP
The term ERP abbreviated from “Enterprise Resource Planning”, was introduced by the Gartner Group in the
early 1990s and represent computer and software systems that combine and integrate all related processes of
the enterprise, and serve users for the management of all functions within the enterprise.
Kumar et al. (2000) define enterprise resource planning (ERP) systems as “configurable information systems
packages that integrate information and information-based processes within and across functional areas in an
organization”.
Nah et al. (2001) defines ERP as “An enterprise resource planning (ERP) system is typically defined as a
packaged business software system that facilitates a corporation to manage the efficient and effective use of
resources (materials, human resources, finance, etc.) by providing a total integrated solution for the
organization’s information- processing requests, through aprocess-oriented view consistent across the
company.
Botta-Genoulaz and Millet(2006) described ERP system as an integrated software packages comprising of set
of functional modules (Production, Human resources, Sales, Finance etc.) and integrate all departmental
functions across organizations into one single system fulfilling the needs of all departments.
Davenport(1998) also described ERP an information strategy that merge all information within an organization
and create a comprehensive information infrastructure involving all organizational units and functions.
Based on the different viewpoints of the authors, the concept of ERP system may be expressed as “Business
management systems, comprises of set of integrated software packages, with a common database that controls
the flow of integrated information in real time and manage all processes across functional areas within the
organization.
1.5 Benefits of ERP
ERP Systems make it easier to track the work-flow across various departments and reduce the operational
costs involved in manually tracking, and perhaps duplicating data using individual & disparate systems. In this
article, let us have a look at the advantages and dis-advantages of implementing ERP (Enterprise Resource
Management) Systems. Installing an ERP system has many advantages - both direct and indirect. The direct
advantages include improved efficiency information integration for better decision-making, faster response
time to customer queries, etc. The indirect benefits include better corporate image, improved customer

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goodwill, customer satisfaction and so on. Some of the benefits are quantitative (tangible) while others are
non-quantitative (intangible). Tangible benefits are those measured in monetary terms and intangible benefits
cannot be measured in monetary terms but they do have a very significant business impact.
Tangible benefits:
 Improves the productivity of process and personnel
 Lowering the cost of products and services purchased
 Paper and postage cost reductions
 Inventory reduction
 Lead time reduction
 Reduced stock obsolescence
 Faster product / service look-up and ordering saving time and money
 Automated ordering and payment, lowering payment processing and paper costs
Intangible benefits:
 Increases organizational transparency and responsibility
 Accurate and faster access to data for timely decisions
 Can reach more vendors, producing more competitive bids
 Improved customer response
 Saves enormous time and effort in data entry ;
 More controls thereby lowering the risk of miss-utilization of resources
 Facilitates strategic planning
 Uniform reporting according to global standards
Installing an ERP system has many advantages both direct and indirect. The direct advantages include
improved efficiency, information integration for better decision making, faster response time to customer
queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer
satisfaction, and so on.
The following are some of the direct benefits of an ERP system:
1. Business Integration
2. Flexibility
3. Better Analysis and Planning Capabilities
4. Use of Latest Technology.
Did you know?
In 1990 Gartner Group first employed the acronym ERP as an extension of material requirements planning
(MRP), later manufacturing resource planning and computer-integrated manufacturing.
Caution
High switching costs associated with ERP can increase the ERP vendor's negotiating power which can result in
higher support, maintenance, and upgrade expenses.
Case Study-The Myth of Integration
The purchase and strategic use of enterprise resource (ERP) systems by organizations has been offered as the
solution to surviving in the emerging “e-based” economy by both practitioners and researchers alike. ERP

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systems have been heralded as the integrating mechanism for organizations, promising enhanced efficiency
and effectiveness. Yet, as the media has recently reported, many companies have not realized the promise of
this new technology. There is no dearth of trade and popular accounts depicting troubled and oftentimes failed
ERP implementations. Information systems (IS) implementations in general are notoriously difficult; however,
ERP implementations pose more difficult technological and organizational challenges than traditional
implementations. For instance, a typical ERP contains 8,000 to 10,000 configuration tables and 800 to 1,000
business processes. ERP systems require much tailoring or customization in order to configure the system to
fit the organizations’ requirements. Yet, despite the mounting challenges of a successful ERP implementation,
companies continue to purchase and install ERP systems to fit their organizations. By conservative estimates,
sales for 2000 are projected between $15.5 billion to $24 billion, with suggestions that this number could
easily be inflated by a factor of five. Clearly, understanding how an ERP system is perceived as being a fit and
thereby accepted by organizational members remains a critical challenge for both practitioners and researchers
alike. Given the relative newness of ERP systems, there is a dearth of literature comprehensively examining
how these systems fit the organization in which they are implemented.
However, we have recently begun to see the emergence of studies examining the implementation of ERP
systems. For instance, Scott and Kaindl examine variables that lead to an improved functionality enhancement
process. They found that “swift trust” from the occupational community, conflict resolution, reciprocity, and
informal networks impact functionality enhancement of an ERP system. In another study, Holland and Light
use critical success factors such as software configuration and project management to examine their influence
on formulating implementation strategies. And finally, Hirt and Swanson conduct an exploratory case study to
examine the factors which may influence actual decisions and outcomes during an ERP implementation.
Factors of importance include the relationship between restructuring and software adoption and
implementation, the choice of software package, the pros and cons of alternative implementation approaches,
the selection of hardware and the use of consultants. While these factor studies examining ERP
implementations have yielded interesting results, implementation problems and failures continue to be a
growing concern. “There now seems to be an emerging consensus that companies have failed to reap the
significant benefits that this massive investment in ERP warranted. We must therefore ask some serious
questions”. The research here asks some of these questions by examining how “fit” between the ERP system
and the organization is achieved such that successful implementation can be achieved.
The research presented investigates the implementation of an ERP system as a social process of mythmaking.
Myths are defined here as dramatic narratives of events used to explain the origins, transformations and
ultimate ends of something.
Myths and Stories
One theoretical tradition underpinning myths in organizational research is derived from the work of Meyer and
Rowan, who suggest that in order to understand and explain organizational structures and practices, we must
understand rationalized myths. The myths are rational in that they “explain” the way in which activities, whose
origins may be symbolic or social, are linked to appropriate technical objectives. Similarly, Trice and Beyer
define a myth as “a dramatic narrative of imagined events, usually used to explain origins or transformations
of something an unquestioned belief about the practical benefits of certain techniques and behaviours that are
not supported by demonstrated facts”. The position taken here renders no judgment as to the validity of myths.
Instead the focus is on how myths and symbols directly shape human understanding and action in an
organization.
Both perspectives would suggest that myths are important because their creation and reproduction make the
subjective seem objective and the non-rational appear rational. Myths tend to be communicated via the

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medium of stories or narratives. These stories are both a form of representing experience as well as a tool of
persuasion. Commenting on their persuasive nature, Mum by describes narratives as a “politically motivated
production of a certain way of perceiving the world which privileges certain interests over others”. They are
used to create believable explanations for the teller’s actions. In general, myths, stories or narratives, are
modes of representation that are selected and invoked by tellers for different reasons and vary in their power to
persuade; “they make us care about a situation to varying degrees as they pull us into the teller’s point of
view”.
ERP implementation as myth is depicted in Figure 1.6.
Figure 1.6: The ERP System Implementation as Myth
As the figure1.6 illustrates, myths are the links between symbolic purposes and technical objectives. For
example, the information system may serve the symbolic function of legitimating or enhancing the reputation
of the organization as a modern, cutting edge enterprise. Or still, it might simply fulfil consumerist desires of
individuals to purchase the latest and best for the sake of acquiring it. Yet, the purchase, as an activity, must be
rationalized such that it is linked to accomplishing the rational end goals such as more efficiently processing
information. In the area of information systems, research on myths and narratives has recently begun to
emerge. And finally Hirschheim and Newman contest information systems development as a rational process
by using the concept of myth to interpret social actions during information systems development. The research
here builds on this work by specifically examining an ERP implementation as mythmaking.
Question
1. Explain the ERP system implementation as Myth.
2. Define the information systems (IS).
1.6 Summary
 ERP system can be used as a tool to help improve the performance level of a supply chain network by
helping to reduce cycle times.
 Many multinationals restrict their business to only those companies that operate the same ERP software as
the multinational firm.
 Manufacturing enterprises involved in manufacturing, sales and distribution activities have been using
computers for 30 years to improve productivity, profitability and information flow across the enterprise.
 The production-oriented information systems were known by the name MRP in the 1970s.
1.7 Keywords
Business Integration: This is the first and most important advantage lies in the promotion of integration.

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Enterprise Resource Planning (ERP) System: It is a business management system that comprises integrated
sets of comprehensive software, which can be used, when successfully implemented, to manage and integrate
all the business functions within an organisation.
ERP Inventory: This module facilitates processes of maintaining the appropriate level of stock in a warehouse.
Information System Technology: It evolved from mainframe-based computing through the client/server era to
the Internet era.
1. ERP system can be used as a tool to help improve the performance level of a …………..
(a) supply chain (b) production
(c) organization (d) None of these
2. The model of ERP includes areas such as …………..
(a) banking (b) vendors
(c) MRP (d) finance
3. An inventory control system was the software designed to handle traditional …………..
(a) computer system (b) inventory processes
(c) ERP (d) one of these
4. The maturity stage of ERP occurred in the ……………….
(a) mid-1995s (b) end-1990s
(c) starting-1990s (d) mid-1990s
5. The information made available through an ERP system provides visibility for key performance indicators
(KPIs) required.
(a) True (b) False
6. …………………. is the advantage of the ERP packages.
(a) ERP Inventory (b) ERP finance module
(c) Flexibility (d) None of these.
7. The …………….. approaches are not mutually exclusive.
(a) “end-to-end” (b) “best-of-breed”
(c)Both a and b (d) None of these.
8. ERP provides the backbone for an enterprise-wide……….…...
(a) database (b) software
(c) information system (d) hardware
9. The integration among business functions facilitates communication and information sharing, leading to
dramatic gains in ……...….and speed.
(a) productivity (b) quality
(c) cost (d) None of these.
10. Which are some of the direct benefits of an ERP system?
(a) Business Integration (b) Flexibility
(c) Use of Latest Technology (d) All of the above

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1. Define ERP.
2. What do you understand by ERP?
3. Define the evaluation criteria.
4. What are the reasons for the growth of ERP?
5. What are the advantages of ERP?
6. What do you mean by better analysis and planning capabilities?
7. What do you understand by the flexibility of ERP?
Answers of Self Assessment Questions
1. (a) 2. (d) 3. (b) 4. (d) 5. (a)
6. (c) 7. (c) 8. (a) 9. (a) 10(c)

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2
Origin and Evolution
CONTENTS
Objectives
2.2 Overview of Enterprise
2.3 Concept of Enterprise System
2.5 Applications areas of ERP
2.7 Summary
2.8 Keywords
Objectives
 Explain Integrated Management Information
 Discuss overview of enterprise
 Understand the concept of enterprise system.
 Explain the evolution of ERP
 Explain scenario and justification of ERP in India
ERP system software is invaluable technology tools for companies all across the world. Earlier used in larger
and more industrial type companies, today the term Enterprise Resource Planning can be applied to even small
scale companies irrespective of it is field and magnitude. The concept of ERP Systems started growing in
1990s to provide the organizations with a user-friendly interface for both employees and the partners. ERP is a
centralized data processing system which gives an access to the accumulated information on all functional
departments of the organization such as the supply chain, customer relation management, finance, human
resource etc. It helps in streaming and distribution of geographically scattered information of a business house.

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Today the large scale businesses require massive systems to coordinate and integrate the organizational- wide
information into a single unified database repository. This is where the implementation of an ERP system
comes. Developing a comprehensive ERP system across the organization leads to increase in performance,
synchronized work flow, standardized information exchange formats, complete overview of the enterprise
functioning, global decision optimization, speed enhancement and much more.
One of the biggest challenges facing any organization today is how to manage and integrate an ever-increasing
amount of information, especially when this information is in a variety of data types and formats. Departments
and divisions within an organization usually have their own information systems, many of which were not
designed to be able to communicate and exchange information. In addition, Legacy information systems
contain years, if not decades, of historical organizational information that is typically stored in complex,
cumbersome and outdated information systems. Individuals generate still more data via e-mail, text
documents, spreadsheets, presentations, and a wide variety of other applications. Research being conducted in
Integrated Information Management Systems develops innovative techniques and applications for integrating
disparate information systems, whether their data is structured, semi-structured or unstructured. In ongoing
collaborative efforts with NASA and various industry and educational partners, integrated information
management systems technology is going from the research lab into widespread service across the agency and
to industry, academia and other government agencies as well. Data translation and transformation algorithms
are being used to integrate legacy information systems, relational database systems built on a variety of
platforms, and unstructured data such as text documents, spreadsheets, PDF documents and presentations.
Combined with advanced search algorithms that can perform searches based on both context and the content of
data, these systems are offering an unprecedented look at information within NASA. The result is that data
analysis, retrieval and reuse have been improved exponentially, while operational and support costs for system
maintenance have been substantially decreased.While this ground-breaking work is providing dramatic
benefits for NASA, it can also provide dramatic benefits for any organization that needs to integrate and
analyze information from disparate data sources.
Integrated Management Information (IMI) provides consulting services to assist it is clients in using
GNOMAE. A client will:
1. Utilize the Modeller to describe a network,
2. Optimize the resulting network with the Engine, and
3. Interface the resulting optimum solution with the client's existing ERP application.
GNOMAE (General Network Optima Modeller and Engine) is a general purpose algorithm that delivers
optimum solutions. The Modeller is used to describe a network which is uploaded to the Engine resulting in a
returned, optimum solution the Optima. Technically speaking, GNOMAE is a generalized optimizer of
Directed Acyclic Graphs. The implementation is geared to producing optimal solutions for three, specific, real-
world situations:
1. Site Selection
An additional warehouse is to be added to an existing physical distribution network. What geographic location
will result in the optimum increase in profitability across the entire network?
2. Shop Scheduling
At the beginning of each shift, a job shop has a schedule of work remaining from the previous shift plus a
backlog of jobs waiting to be processed. Which waiting jobs should be placed in production next, in what
order, and what should the workflow be by machine group?

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3. Vehicle Routing
Daily, a fleet of delivery vans is dispatched to deliver packages to customers. What arrangement of routes will
maximize corporate profitability?
GNOMAE is designed to easily interface with any existing ERP (Enterprise Resource Planning) application to:
1. Get the current state of operations,
2. Update the network model with the current status,
3. Deliver this network to the Engine for optimization,
4. Receive back the optimum solution, and
5. Update the ERP with the new schedule.
Integrated management provides a clear picture of all aspects of organization, how they affect each other and
their associated risks. It also means less duplication and makes it easier to adopt new systems in the future. An
integrated management system is aimed at organizations with a single management system which incorporate
two or more management system standards (for example, ISO 9001 Quality Management and ISO 14001
Environmental Management) and comply with PAS 99 Integrated Management.
Key Benefits
 Encourages risk management
 Gives a competitive edge
 Attracts investment
 Improves and protects brand reputation
 Raises stakeholder perception and satisfaction
ERP philosophy has evolved from MRPII philosophy. MRPII philosophy evolved from MRP philosophy. It is
important to understand the difference between each term. Effective ERP requires that integrated management
processes extend horizontally across the company, including product development, sales, marketing,
manufacturing, and finance. It must extend vertically throughout the company's supply chain to include the
acquisition of raw materials, suppliers, customers, and consumers. The fundamental purpose of ERP is to
establish a process that links projected demand plans to supply plans, so that the resources of manufacturers,
their suppliers, and especially their customers are utilized in the most efficient and cost effective way. To do so
requires a process for anticipating demand and planning and scheduling resources in a manner that supports a
company's strategic and financial goals.
There are five major elements in this:
1. An integrated business operating process that links strategic plans and business plans to sales plans and
operations plans.
2. A people-driven process that is supported by a computer system.
3. A formal resource planning process that involves all functions within a company.
4. Defined responsibilities and performance measurements for all functions in a company.
5. Communications among all functions in a company as well as communications among all divisions and
sister companies.
Strategies must be tied to tactics, supply is resolved with demand, the financial system is tied to the operating
system, aggregate planning is translated into detailed planning, and planning and execution are linked together

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via a two-way flow of information and a spirit of cooperation among all functions. ERP is a people process
supported by the computer, rather than the other way around. People and their behaviour and discipline in
utilizing the ERP process is vital. When people understand how to utilize the ERP process, tools, and
techniques, the data and information will be highly accurate, and they will make sound decisions.
2.2 An Overview of Enterprise
Organizations today depend on information systems that help them carry out their operations efficiently and
reliably and keep information updated and available. Some of these systems have been developed internally
and cover just a small fraction of the organization’s processes or data. They are often not well integrated with
other systems and require a substantial amount of manual work to complete the business processes.
Increasingly, however, large-scale standard packages are replacing the smaller and specialized solutions. From
1985 to 1997 the share of large organizations using packaged enterprise systems has risen from about 30% to
95%. When Hydro Agri Europe introduced it is SAP enterprise system in 1999, it replaced around 120
applications that were used all over Hydro’s 17 sites in Europe. With the introduction of light versions and
accelerated implementation tools in recent years this trend has continued and few organizations are now
running their businesses without packaged software. An enterprise system is a packaged application that
supports and automates business processes and manages business data. They come with pre-implemented and
customizable modules that reflect best practice for common business operations. Business data from different
functional areas are integrated and kept consistent across the organization. A characteristic of enterprise
systems is their complexities both in terms of business data and in the way they affect the organization’s
business the term “enterprise” has two common meanings. Firstly, an enterprise is simply another name for a
business. Secondly, and perhaps more importantly, the word enterprise describes the actions of someone who
shows some initiative by taking a risk by setting up, investing in and running a business."Enterprise" refers to
something that a medium or large company can use and not waste time using it. That is it was made
specifically for use by a large company. For example a small business solution to time cards might be to have
the 5 employees email a spreadsheet of their time each month which gets printed out and entered. While an
enterprise solution would be to use a computerized time clock that enters the data automatically and allows the
manager to pull up reports and such (added benefits of doing it wisely).
Look again at two key words above initiative and risk. A person who takes the initiative is someone who
“makes things happen”. A business opportunity is identified and the person does something about it. Showing
initiative is about taking decisions and being bold not everyone is like that! Risk-taking is slightly different. In
business there is no such thing as a “sure fire bet”. All business investments carry an element of risk which is
the chance or probability that things will go wrong. At the worst, the risk of an enterprise might mean the
person making the investment loses all his/her money or becomes personally liable for the debts of the
business. The trick is to take calculated risks, and to ensure that the likely returns from taking a risk are enough
to make the gamble worthwhile. Someone who shows enterprise is an “entrepreneur”.
2.3 Concept of Enterprise System (ES)
Enterprise systems (ES) are large-scale application software packages that support business processes,
information flows, reporting, and data analytics in complex organizations. In short, ES are packaged enterprise
application software (PEAS) systems. Types of enterprise systems include enterprise resource planning (ERP)
systems, enterprise planning systems, and customer relationship management software. Although data
warehousing or business intelligence systems are enterprise-wide packaged application software often sold by

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ES vendors, since they do not directly support execution of business processes, they are often excluded from
the term. The term enterprise system is often used synonymously with enterprise business application or with
the more restricted term enterprise resource planning (ERP) system.
Packaged Software
Enterprise systems closely mirror the typical operations of large corporations. They include electronic
documents for traditional paper documents like purchase orders, sales orders, plant maintenance orders, and
invoices.
There are enterprise system transactions that automate or support traditional manual tasks like creating
purchase orders, verifying invoices, and generating various reports. An analysis of all these traditional tasks
and documents reveals that there is little variation from one company to another. The companies tend to use
the same documents, carry out the same tasks, and structure the company along the same lines. This is not very
surprising, as these tasks and documents do not really depend on the products or services offered by the
organization. They refer to generic activities that any company needs to address to keep the company going
and satisfy various legal and business-imposed requirements.
For example, both a software company and a travel agency need to purchase products and services. Of course,
not all companies have exactly the same internal operations and documents. A consulting company may not
need to maintain a plant, though it is still the case that most activities of the consulting company are also found
in other kinds of companies. The idea of packaged enterprise software, thus, is to develop a solution that
incorporates common tasks and data in companies and reflect best practice in the industry. Many of the
modules of enterprise systems are implemented in close collaboration with industry partners to ensure that
they provide state-of-the-art functionality. In this way, the package is applicable in most organizations, and
less efficient organizations can use it to raise the standard of their internal business processes. It is not just for
automating tasks, but also for streamlining or reengineering processes according to what has proven successful
in other companies. Most enterprise systems address the typical backbone operations of organizations. These
do not constitute any competitive advantage for the organization in any way, and the only concern is to make
them as efficient as possible. Since they are of low strategic importance, it is unproblematic that the same
package is also used by competitors. For strategically important processes, organizations still tend to develop
in-house solutions that are not available to competitors. It has to be noted, though, that what is strategically
important to some may be of little concern to others. If they adopted a standard sales and distribution package,
they would lose this advantage and any other company could replicate the way they sell and distribute
products on the internet.
Integrated Solution
The same information is often needed in different departments of an organization. When the purchasing
department acquires a new material, it needs information about that material, about potential vendors, and
about how to allocate the costs of the material. The finance department afterwards needs information about the
material and the vendor to verify and pay the invoice they receive. The sales department needs information
about customers rather than vendors, but must also be able to relate revenues to the materials being sold. When
all the transactions are recorded in the general ledger, information about materials, invoices and organizational
units has to be made available to the finance department. In the past, there would be separate systems for each
of the major tasks to be carried out internally, where different systems keep track of the same business data
and exchange information over batch interfaces. The finance department, for example, would have a general
ledger system, an accounts receivable system, and an accounts payable system, and all of them receive data
from other departments’ systems. Aggregated data from the G/L system is then exported to a separate

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reporting system at regular intervals (See Figure 2.1). Each department defines it is data according to it is own
goals and priorities. They use the data for different purposes and may end up with slightly inconsistent records
with partly overlapping information.
For example, the purchasing department needs the names and addresses of vendors, price lists of all vendors’
products, and information about the vendors’ deliveries and reliabilities. To the finance department, a vendor
is associated with an account and linked to information about it is bank, payment conditions and other
financial data. Even if the same type of information is used in different system, thus, the perspectives are
different and the records are not necessarily compatible.
Figure 2.1: Batch interfaces connecting multiple systems.
Enterprise systems provide an integrated and harmonized view of business data across organizational
boundaries. All the relevant data is stored centrally, and no duplicates are used by locally developed systems.
There is not consistency issue, and all applications have access to data that is continuously updated and
checked for consistency and completeness. Data from new transactions are immediately included in all the
reports available in the system. The data dictionary provides a unified view of all the relevant business data
and gives the different departments a common terminology (See Figure 2.2).

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Figure 2.2: An integrated data-driven enterprise system.
System Complexity
Enterprise systems are among the largest and most complex IT systems on the market. The process thousands
of transactions every day and store information about all aspects of the business. Unified data about materials,
vendors and customers need to be defined and maintained as the business evolves. Parts of the organization
also have to be modelled in great detail, like the structure and materials used in production plants. There are
models of production plants, including locations and equipment that include more than 50,000 entities.
However, the most difficult complexity comes from the intricate relationship between enterprise system and
organization. Organizations with complex structures and processes will necessarily need enterprise systems
that are customized to deal with this type of complexity. As the organizational complexities grow, it will be
increasingly more difficult to analyze the organization’s needs and agree on the requirements to the enterprise
system. There are rarely any clear lists of requirements in enterprise systems projects. The organization has
vague ideas of how their operations can be made more efficient, but these ideas cannot be directly translated
into system requirements. They also depend on the way the organization works, their internal structures and
their business processes. An alternative to customizing a strict approval system for purchase orders, for
example, is to involve managers directly when purchase orders are created.
While defining the system requirements, thus, the project needs to define organizational structures and
business processes as well. The fundamental challenge is to find the combination of system customization and
business reengineering that optimizes business processes with respect to speed, quality and costs. This
involves knowledge of functional areas of the organization, enterprise system technology, technical issues,
management structures, and external factors like legal requirements and partnerships. Terminological
misunderstandings and cultural conflicts are not uncommon when people from so different backgrounds meet
to discuss project objectives.

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The Future of Enterprise Systems
The earliest enterprise systems, the pure ERP systems, only addressed the backbone operations of the
companies. It was common to employ third-party products or internally developed software for parts of high
strategic importance. The ERP systems were isolated to the company alone and could only support processes
that were internal to the company. They also had a very strong focus on operative data and were not always
providing analyses that helped managers to make the right decisions. In recent years the enterprise systems
have been extended to include more components or facilities for decision support and extra-company
collaboration. A wide range of business intelligence (BI) products help the managers analyze operative data
from ERP systems and make the appropriate decisions. As ERP systems structure business data according to
transactional needs, many organizations now employ data warehouses that reorganize the data according to
analytical needs. The data warehouses and other strategic components (like the Strategic Enterprise
Management component of SAP) supply the managers with up to-date analyses that reflect the way they want
to monitor and control the business. Balanced scorecard solutions are often delivered as part of these BI tools.
An exciting development in this market is the shifts from backbone operations to open collaborative
environments that help the company coordinate their tasks with other companies or customers. Business-to-
business systems, market places and portals all bring the company’s products and services to a wider audience
over the Internet.
When companies were small and all the different managerial functions managed by a single person, the
decisions were made, keeping in mind the overall company objectives. But as company grew, managing the
entire operations become impossible for a single person. More and more people were brought in and the
different business functions were given to different individuals. When organization becomes larger, each
person hired people to assist him/her and the various departments as we see now, evolved.
The size of the department began to increase more and more people were required to do the job. As the
departments become large, they become closed and water tight. Each had their own set of procedures and
hierarchy. People at most levels within a department, would just collect and pass the information upward. Thus
information was shared between departments only at the top level. Most developers ended up developing need-
based, isolated information systems that were incompatible and it is no wonder that IT implementations
automated only the existing applications and not the business functions. The system has work around the core
activities of the organization, and should facilitate seamless flow of information across departmental barriers.
The systems can optimally plan and manage all the resources of the organization and hence, they can be called
as Enterprise Resources Planning (ERP) system. An Enterprise is a group of people with a common goal,
which has certain resources at it, is disposal to achieve that goal. The group has some key functions to perform
in order to achieve it is goal. Resources included are money, manpower, material, and all the other things that
are required to run the enterprise. Planning is done to ensure that nothing goes wrong. Planning is
putting necessary functions in place and more importantly, putting them together. Therefore Enterprise Resources
Planning or ERP is a method of effective planning of all the resources in an organization. There are many
misconceptions about ERP.
The first one is that ERP is a computer system. Yes, computer and IT are integral parts of an ERP system,
but ERP is primarily an enterprise-wide system, which encompasses corporate mission, objectives,
attitudes, beliefs, values, operating styles and people who make the organization. The second
misconception is that ERP is for manufacturing organizations alone. This assumption is basically due
to the way in which ERP was historically developed from the manufacturing methods such as MRP

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(Material Requirement Planning) and MRP II (Manufacturing Resource Planning.) Manufacturing
enterprises involved in manufacturing, sales and distribution activities have been using computers for 30 years
to improve productivity, profitability and information flow across the enterprise. ERP system traces it is roots
commencing from standard inventory control packages to material requirements planning (MRP), and
manufacturing resource planning (MRP II). An inventory control system was the software designed to handle
traditional inventory processes. It was one of the early business applications, which did not belong to the
finance and accounting area. In the 1970s, the production-oriented information systems were known by the
name MRP. MRP at it is core is a time phased order release system that schedules and releases manufacturing
work orders and purchase orders, so that sub-assemblies and components arrive at the assembly station just as
they are required. Some of the benefits of MRP are reduction of inventories, improved customer service,
enhanced efficiency and effectiveness. As competitive pressures increased and users became more
sophisticated, MRP evolved and expanded to include more business functions such as product costing and
marketing. In the early 1980s, MRP expanded from a material planning and control system to a company-wide
system capable of planning virtually all the firm’s resources.
This expanded approach was MRPII. A major purpose of MRPII is to integrate primary functions (i.e.
production, marketing and finance) and other functions such as personnel, engineering and purchasing into the
planning process to improve the efficiency of the manufacturing enterprise. MRPII has certain extensions like
rough cut capacity planning and capacity requirements planning for production scheduling on the shop floor as
well as feedback from manufacturing shops on the progress of fabrication. Since the 1980s, the number of
MRPII installations has continued to increase, as MRPII applications became available on mini and micro
computers. Like MRP, MRPII focused on the manufacturing process. The next stage of MRPII evolution was
just-in-time (JIT) methodology that combined with the plummeting price of computing to create the islands of
automation in late 1980s. The Gartner Group of Stamford, CT, USA, coined the term ERP in the early 1970s
to describe the business software system that is the latest enhancement of an MRPII system (encompasses all
MRPII modules).
A key difference between MRPII and ERP is that while MRPII has traditionally focused on the planning and
scheduling of internal resources, ERP strives to plan and schedule supplier resources as well, based on the
dynamic customer demands and schedules. The maturity stage of ERP occurred in the mid-1990s. The scope
offered by ERP expanded to include other “back-office” functions such as order management, financial
management, warehousing, distribution production, quality control, asset management and human resources
management. The evolution of extended-ERP systems has further expanded in recent years to include more
“front-office” functions, such as sales force and marketing automation, electronic commerce and supply chain
management systems. The scope of ERP implementation encompasses what is often referred to as the entire
value chain of the enterprise, from prospect and customer management through order fulfilment and delivery.
An enterprise, to stay competitive, has to not only identify information needs but also ensure that the
information infrastructure provides the right support to serve the enterprise, it is customers and suppliers. If it
does not do so, then it runs the risk of being disconnected and excluded from future opportunities. The
technological evolution of ERP from MRP has been presented in detail by Chen and Chung and Snyder.
Information system technology evolved from mainframe-based computing through the client/server era to the
Internet era. Earlier the ERP systems were developed only to work with huge mainframe computers. Most of
the current ERP systems are based on the client/server solution model. In a client/server environment, the
server stores the data, maintaining their integrity and consistency and processes the requests of the user from
the client desktops. The load of data processing and application logic is divided between the server and the
client. Now, ERP vendors are as many other software vendors forced to move from a traditional client/server
to browser/Web server architecture in order to deliver e-business capabilities. These systems are built with a
clear separation of functional components. The user interface implemented using graphical user interface

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(GUI) techniques is deployed on client machines. Powerful server machines host the databases and business
logic written as server procedures. The databases are built using relational database technology. Relational
database systems have enabled the vendors to put in the necessary flexibility in terms of business logic and
data structures to support parallel business practice implementations. These technologies in general have
allowed the users to architect the system in such a way that installation, customization and extensions are
possible in shorter timeframes.
Evaluation Criteria
1. Some important points to be kept in mind while evaluating ERP software include
2. Functional fit with the Company’s business processes
3. Degree of integration between the various components of the ERP system.
4. Flexibility and scalability
5. User friendliness
6. Ease of implementation
7. Ability to support multi-site planning and control
8. Technology client/server capabilities, database independence, security
9. Availability of regular upgrades
10. Amount of customization required
11. Local support infrastructure
12. Reputation and sustainability of the ERP vendor
13. Total costs, including cost of license, training, implementation, maintenance, customization and hardware
requirements
Did you know?
ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements Planning (MRP) II.
From business perspective, ERP has expanded from coordination of manufacturing processes to the integration
of enterprise-wide backend processes
2.5Application Areas of ERP
ERP's scope usually implies significant changes to staff work processes and practices. Generally, three types
of services are available to help implement such changes—consulting, customization, and support.
Implementation time depends on business size, number of modules, customization, the scope of process
changes, and the readiness of the customer to take ownership for the project. Modular ERP systems can be
implemented in stages. The typical project for a large enterprise takes about 14 months and requires around
150 consultants Small projects can require months; multinational and other large implementations can take
years. Customization can substantially increase implementation time Besides that, information processing
influences various business functions e.g. some large corporations like Wal-Mart use a just in time inventory
system. This reduces inventory storage and increases delivery efficiency, and requires up-to-date data. Before
2014, Walmart used a system called Inform developed by IBM to manage replenishment Process preparation
Implementing ERP typically requires changes in existing business processes Poor understanding of needed
process changes prior to starting implementation is a main reason for project failure. The difficulties could be
related to the system, business process, infrastructure, training, or lack of motivation. It is therefore crucial that
organizations thoroughly analyze business processes before they implement ERP software. Analysis can
identify opportunities for process modernization. It also enables an assessment of the alignment of current

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processes with those provided by the ERP system. Research indicates that risk of business process mismatch is
decreased by:
 Linking current processes to the organization's strategy
 Analyzing the effectiveness of each process
 Understanding existing automated solutions
ERP implementation is considerably more difficult (and politically charged) in decentralized organizations,
because they often have different processes, business rules, data semantics, authorization hierarchies, and
decision centers.[41] This may require migrating some business units before others, delaying implementation
to work through the necessary changes for each unit, possibly reducing integration (e.g., linking via Master
data management) or customizing the system to meet specific needs A potential disadvantage is that adopting
"standard" processes can lead to a loss of competitive advantage. While this has happened, losses in one area
are often offset by gains in other areas, increasing overall competitive advantage. Configuration Configuring
an ERP system is largely a matter of balancing the way the organization wants the system to work with the
way it was designed to work. ERP systems typically include many settings that modify system operations. For
example, an organization can select the type of inventory accounting—FIFO or LIFO—to use; whether to
recognize revenue by geographical unit, product line, or distribution channel; and whether to pay for shipping
costs on customer returns.
ERP Industry Applications:
 Engineering
 Manufacturing
 Automobile / Automotive
 Die Casting
 Plot Developers / Builders
 Construction
 Retail
 Food and Bevera
ERP is much more than a piece of computer software. It has changed the way businesses were conducted in
India and at present, more and more organizations and industries are operating it. Many Indian organizational
performances have been greatly improved by the use of software applications like ERP that includes resource
planning, management control, and operational control. Today if anyone says that ERP holds a great promise
then many of us will certainly agree with this statement. ERP has brought some "core competence theory" into
many Indian organizations. ERP has brought new opportunities for many companies to trade with foreign
counter parts in the name of outsourcing, implementation and deployment of the existing ones. It has also
contributed in the growth of Indian economy. ERP has brought a new revolution in the thinking process, rules
and procedures in the organization. One perspective is that the problem with success in ERP or other systems
implementations is one of fuzzy models. CxO's, middle managers, line managers, staff, business analysts,
project managers, technical developers and users all have different TYPES of models. They are all doing
"input/process/output" of with these models, translating strategic objectives into MBO's, or designs into specs,

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or work assignments into keystrokes. The problem arises because there's too much generalization, i e. "Non-
specificity", at all but the most detailed levels. A CxO may say "We need a new CRM system to drive business
revenue", while a Sales Manager may say "We need better pipeline forecasting", and the sales reps says "I
need better leads from marketing”. This same pattern will show up in F&A, Supply Chain, Human Capital
Management, and so on. At what levels are the real issues and opportunities found, in terms of optimizing IT
investment?
The standard way to deal with this situation is to:
1) Build process models for what the organization really does
2) Use these to capture issues and opportunities for improvement
3) Scope projects for the issues and opportunities
4) And run those projects through portfolio management, and
5) Start the ones with highest value.
The challenge is not so much doing this particularly WELL, as it is doing it at ALL. Collective human
intelligence can drive through all of these steps quite well, even if the models are not perfect and the
algorithms for processing them are informal. However, with NO process models, NO issues and opportunities,
NO project sketches, NO portfolio evaluation and NO project selection, chances of success in IT investment
are a crap shoot. As Indian software industry is growing at great pace and so the growths of ERP packages
promise a strong future. They have greatly contributed to the growth, welfare and dynamism in many
companies, and stand out individually on account of it is scope and utilities. No doubt this is an industry which
has vast scope for development and great prospect in future in both software and non-software sectors. Having
ERP in India is like an investment that most business houses look up to. ERP or enterprise resource planning
can be defined as an integrated, multi-module system that assimilates all the data and processes of an
organization into a unified system. To attain this goal, it is essential to strike a successful combination of both
hardware and software. The whole concept of enterprise resource planning originated in the large industrial
types of companies where the system was used to simplify their processes and workflow. However, with the
passage of time, ERP has evolved as a more comprehensive system and now it is largely available to
companies of all types and sizes. It serves and supports a wide range of business functions like manufacturing,
order entry, accounts receivable and payable, general ledger, purchasing, warehousing, transportation and
human resources.
2.6.1 The ERP Scenario in India
There are several positive and negative factors as far as the ERP scenario in India is concerned. Though having
ERP in companies of India mostly provides a profitable source of income and quality customer service, there
are several challenges to the introduction of ERP in India. This includes change management, organizational
intervention, replacing outdated software, shifting from function view to process view, hiring ERP-literate
staff and faith in package software in the place of custom-built software. Certain concerns that have never used
ERP software are intimidated whereas some view ERP as a takeover to there IS professionals. Most of the
Indian corporations have large in-house IS shops and they consider ERP as a threat to their very existence.
Moreover, ERP places more value on the domain knowledge of functions rather than IT skills. The
communication infrastructure needed to implement ERP are lacking in some of the indigenous companies. In
spite of all these, the growth of ERP in India is quite promising. Several well-known business houses in India
like Cadbury India, Mercedes Benz India, Siemens, Haldia Petrochemicals, L&T, TISCO, and UTI use SAP
while Kellogg’s India Ltd., Maruti Udyog Ltd., Sony India Pvt Ltd. and CESC are Oracle users. India’s most
valuable contribution to ERP came in 1980s when the country launched the world class ERP product Marshall
from Ramco Systems, by using the technology of the 80’s. Marshall is the first successful large scale software

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from India and several companies like HDFC Bank, Hyundai, Nestle Limited and Standard Chartered Bank
use this ERP package. Actually, this product is a formative ERP called virtual splat. A virtual splat enables
merging of accounting and manufacturing practices in an easy-to-use, implemented package and is used by
small start-up companies.
2.6.2 The Benefits of ERP in India
ERP will provide the companies in India the facility to have information available freely, thus making the
generation of enquiry or report easier. These systems automatically adhere to most of the standard company
rules and compliances, making it easier for the organization to follow. The developed performance modules
help the businesses to develop refined analysis, insights, and innovative schemes for improvement. ERP
systems in India will also produce more dynamic jobs and improved customer care service and it will also
enhance product values. As more and more Indian companies become accustomed to ERP, they can develop a
successful broader scale of products for consumers. Last but not the least, having ERP in India implies not
having to go and develop software products in foreign countries and distributing them back to India. ERP
Implementations are worldwide known for their inherent implementation challenges, technological
complexities and soaring costs during implementation. Analysts often debate the benefits of ERP system over
the amount of effort and cost that an ERP implementation demands. Despite a few odds against ERP, due to
numerous tangible & intangible benefits of ERP software (even with the slightly high costs), not only large
enterprises but even small and medium size companies invest in implementation of ERP system. This article
explores the challenges that ERP software address and the benefits that organizations reap over the period after
implementing ERP software.
Managing Information – The New Challenge of Scaled Up Business
Up to long time after their establishment, businesses usually work on the paper based management systems
like books or registers, Microsoft Excel or in extreme cases some customized stand alone software developed
locally, which often costs a dime as compared to the cost of ERP software. For a small business or newly
established business, this is effective both in terms of cost as well as management needs. However, as business
grows up and expands to new locations, units or subsidiaries, these low cost arsenals often refuse to
troubleshoot the new problems of information management that rise-up with the economies of scale. In real
life the everyday struggle of a grown up businesses is mainly centred around managing the monstrously
growing information, whether it is financial transactions data, inventory data, production information, vendor
data, employee database or even emails.
The miss-management of this information can have serious business implications; like incorrect invoices leads
to delayed payments from customers or taxation issues; wrong inventory levels lead to hassles at production
bays; overstock locks up much needed working capital; inappropriate production schedules lead to wasted
man-hours, delayed productions and deliveries degrade customer satisfaction levels etc. each of these jolt the
customer trust and market position of the company. Scaled up business is an integrated huge mass of
information about man, machine and material where each function is inter-dependent on the information and
support from other functions. On large scales, seemingly simple task like generating correct Invoice become
strenuous say 1500 invoices a week based on 500 Purchase Orders with 10,000 items with multiple price
strategy is not that too complex?
Companies that try to meet this new challenge raised by business expansion with old techniques like
increasing manpower realize much sooner that not only did this cost them high but the problem also
snowballed to a dangerous level. This is where enterprise resource planning software ERP comes into the

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picture. The benefit of ERP is that it solves two basic problems of magnitude one, handling too much and too
complex data easily and two, integrating the fragmented pieces of information to build a significant and
manageable mass, which become basis of strategic analysis and decision making. Petra Schubert of Centre for
Applied Information and Communication Technologies (CAICT), Copenhagen Business School, Denmark and
Susan P. Williams, Institute for Information Systems Research, Germany conducted an empirical study on the
benefits from current ERP.
Some concrete findings are given below, for rest of the case study please visit here.
 Two e-commerce companies LeShop and Digitec were able to guarantee just-in-time deliveries efficiently
only after the introduction of the new version of their ERP system.
 At Weiss + Appetito all information is centrally available for all subsidiaries. eltromat has access to
accurate and current information to assist in the decision making process for management. The data
quality is particularly praised in this case.
 On the functional level benefits in the form of improved business intelligence are clearly in the
foreground. The generation of analyses and reports for corporate management, e.g. key performance
indicators (KPI), management cockpit (ad-hoc analyses) or the monitoring of contracts, purchase orders
and shipments are mentioned here.
Simple but Significant Question: Is ERP Costly?
Top Management often cites that implementing ERP system is often costly affair for the company. This used
to be true few years back, but no more. Owing to many innovative technologies developed in recent past, ERP
systems now offer more configuration options, robust technology for reduced support, and use Open Source
components to lower license fee for clients. These factors enabled the vendors to descend the base cost of ERP
software. However, the highest cost determinant in any ERP implementation is the cost of customization.
Though most modern ERP systems have ample customization options and vertical-specific variations to meet
the businesses needs, companies in their zeal (often to have higher employee buy-in) demand vendors to
customize the ERP to match their exact business processes (which may not be necessarily the best practices).
Heavy customization magnifies the ERP cost to large extent and also elongates the implementation time,
causing delay and frustrations. While the fact remains that much of customization can be avoided by training
employees to adapt to the business process available in the ERP. If a company can adapt the ERP software
with only essential customization, not only can it benefit by the global practices incorporated in the system,
but also save huge money and time. Thus cost of an ERP depends on the management’s willingness to go with
the ERP or the extent of customization it needs.
Can You Live without ERP Software?
For a business with lots of transactions as a daily routine, software is more than a necessity. In current
competitive scenario, business cannot operate without effective enterprise software. Whether that software
will be ERP or set of custom applications remains a matter of choice and available budgets. Business that do
not choose one integrated software like ERP often juggle with multiple software applications for different
functions i.e. one for finance, once for sales, one for production and so on. While it does solve some issues, it
creates another set of business problems integration issues between multiple applications, more IT manpower
software maintenance and above all lack of an integrated decision making system. These intangible costs and
lost opportunities are often ignored, which over time period cost much more than the price of implementing
ERP.

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Did You Know?
A survey of European mid-size companies shows that the adoption of packaged enterprise systems increased
from about 27% in 1998 to more than 50% in 2000
Caution
In order for a software system to be considered an ERP, it must provide a business with wide collection of
functionality like sales forecasting, order tracking etc.
Case Study-Social Enterprise: An Emerging Field
There is a global buzz about a new and dynamic field aimed at ensuring nonprofits sustainability and
achieving deep social impact. The lexicon varies, but whether referred to as “social venture,” “sustainability
strategy,” “nonprofits income-generating activity,” “social purpose business,” or “social enterprise,” as in this
report, this emerging field is receiving international attention and is increasingly becoming a global movement.
The likes of such household names as World Bank, USAID, Kellogg and Carnegie Foundations, Goldman
Sachs, Charles Schwab, Ben and Jerry’s, Ashoka, Share Our Strength, Yale and Harvard Universities have
joined the droves of other donors, practitioners, private companies and academics in this space where business
and public good converge. So what is social enterprise? Social enterprise is a generic term for a nonprofits
business venture or revenue-generating activity founded to create positive social impact while operating with
reference to a financial bottom line. Social enterprise financial objectives can range from diversifying grant
funds with a small percentage of earned income to making a profit, though frequently income-generation is
intended as a sustainability strategy either for a specific program or the institution.
Social objectives also run the gambit, depending on mission and sector of the nonprofits, from providing
economic opportunities to the disadvantaged, disabled or at-risk populations, to cleaning up the environment
or strengthening civil society. The common trait is that social enterprises are committed to achieving a double
bottom line their social mission and their financial objectives. Social enterprises are accountable for achieving
both types of outcomes; this requires managing priorities, resources and program goals in a way that balances
the two. For nonprofits practitioners who are accomplished in executing social programs this usually means
integrating business skills, practices and entrepreneurship into their operations. Nonprofits actors have been
attracted to the social enterprise field for a number of reasons. In an increasingly competitive fundraising
environment, social enterprises generate sustainable resources to support their organizational mission and
ensure long-term survival. Earned income allows for greater program flexibility and is a source of much-
coveted unrestricted funding for new program investments. It is also a means for organizations to stay mission-
focused rather than being derailed by a vaguely related prospect of donor funding, and ultimately, to reduce
their overall dependence on donor support. Currently, donors are taking on an “investment mindset,”
allocating grants according to their potential social return. As a result, a non profit is professionalizing, and
with this trend comes raised expectations and pressure on organizations to be “businesslike.” To this end, in
the social enterprise arena, organizations learn to engage market forces, think more strategically, use business
practices in their operations and productively leverage their assets. Practitioners, and their supporters, have
found that the social enterprise approach of amalgamating business and social disciplines strengthens mission
execution and organizational self-sufficiency. Planning processes, management tools and measurement
instruments essential in businesses but often lacking in nonprofits are easily adapted and framework to both
manage and be accountable for their social and business objectives. Many social enterprises monetize social
return on investments (SROI) to demonstrate economic value, social value, and the blended value that the
enterprise creates for it is target population, donor and society as a whole.

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Social enterprises' organizational structure and use of methods borrowed from business strengthen capacity-
building. The business-led, mission-driven organization develops similarly to private enterprise and applies
organizational development constructs to it is operations, financial management, and human resource and
leadership development. Nonprofits capacity is strengthened simultaneously, and as part of enterprise growth
rather than as a separate activity. Social enterprises may serve several purposes. They can be implemented as a
program strategy expressly to affect a specific population or a financial self-sufficiency strategy aimed at
generating income, but usually they are a combination of the two. Social enterprise purposes, illustrated vis-à-
vis examples, are:
Economic Development
Creating economic opportunities that either develop markets for small and underprivileged business, or that
foster self-employment or create jobs for low income people, enabling them to attain economic security for
themselves and their families. Microfinance institutions are the best-known example of economic development
social enterprises.
Workforce Development
Creating employment for disenfranchised or at-risk populations so “hard-to-employ” people can earn a livable
wage and develop marketable skills. Vocational training, disabilities programs and a host of social service
programs often create social enterprises for this purpose. Workforce development social enterprises are also
common in the U.S., but have proven successful in post-Soviet and transitional countries.
Nonprofits Sustainability
Increasing nonprofits ability to generate income to support their social programs without continued reliance on
donor funding. Used by all types of nonprofits to varying degrees, sustainability is achieved through a wide
range of commercial activities e.g. product sales, fee-for-service, government contracts, leasing, private sector
partnerships, membership and conference fees. A key differentiator is not in purpose, but in structure: Income
is earned through mission-related activities integrated within social enterprise operations i.e.
commercialization of social services, or alternatively through unrelated business or subsidiary activities where
earned income subsidizes social programs. A social enterprise can take many forms, which makes it an
applicable program vehicle or income-generating strategy for nonprofits working in a variety of sectors.
 An employer of at-risk, disenfranchised or low-income populations: an underwater eco-tourism business in
the Black Sea staffed by Roma orphans; a wheelchair manufacturing business run by victims of landmines
in Cambodia.
 A customer of goods produced by low-income entrepreneurs or disenfranchised people: a shop that sells
crafts and clothing made by low-income women in India; an ice cream company that purchases products
from a bakery that employs formerly homeless people in the United States.
 A seller of products or services to low-income or disenfranchised business owners to help them improve
their operations and income: a marketing cooperative that provides Asian producers access to more
profitable export markets for their goods in the U.S. and Europe; a financial services organization that
provides collateral-free, affordable loans to female entrepreneurs throughout the developing world.
 A for-profit subsidiary of a nonprofits organization whose revenue is used to subsidize it is nonprofits
programs: a Zimbabwean horticulture business that grows and sells hybrid roses in European markets,
while employing a large number of low income people. It also uses profits to subsidize a horticulture
school and hospital for indigent Zimbabweans. An Armenia hotel owned by a nonprofits drug and alcohol
treatment centre; the hotel provides transitional jobs to recovering addicts, and it is profits are shifted back

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to the nonprofits to cover costs of treatment programs.
The notion of social enterprise has been around for a long time. For years, nonprofits organizations have
employed methods of generating income through membership fees, fee for-service, and related ideas, and
“sheltered workshops” have created enterprises to support employment or vocational training programs.
What’s new is social enterprise’s emergence as a field that is attracting the best and the brightest from the four
corners of the globe. The field is developing a body of knowledge, studies, lessons, “good practices,” tools,
principles, and a diverse base of practitioners and funders committed to bringing social enterprise to the fore as
a viable methodology for nonprofits to achieve the dual objectives of financial sustainability and mission
accomplishment.
2.7 Summary
 ERP system software is invaluable technology tools for companies all across the world. Earlier used in
larger and more industrial type companies
 ERP is the abbreviation of Enterprise Resource Planning and means, the techniques and concepts for
integrated management of businesses as a whole from the viewpoint of the effective use of management
resources to improve the efficiency of enterprise management.
 ERP philosophy has evolved from MRPII philosophy. MRPII philosophy evolved from MRP philosophy
 Enterprise systems (ES) are large-scale application software packages that support business processes,
information flows, reporting, and data analytics in complex organizations. In short, ES are packaged
enterprise application software (PEAS) systems
 ERP will provide the companies in India the facility to have information available freely, thus making the
generation of enquiry or report easier. These systems automatically adhere to most of the standard
company rules and compliances, making it easier for the organization to follow
2.8 Keywords
Enterprise: It has two common meanings Firstly; an enterprise is simply another name for a business,
secondly, and perhaps more importantly, the word enterprise describes the actions of someone who shows
some initiative by taking a risk by setting up, investing in and running a business
GNOMAE: It stands for General Network Optima Modeler and Engine. It is a general purpose algorithm that
delivers optimum solutions.
Shop Scheduling: At the beginning of each shift, a job shop has a schedule of work remaining from the
previous shift plus a backlog of jobs waiting to be processed.
1. Departments and divisions within an organization usually have their own …...………..
(a) Information systems (b) ERP
(c) ERP model (d) None of these.
2. ………………….provides consulting services to assist it is clients in using GNOMAE.
(a) IMI (b) MRP
(c) ERP (d) None of these.

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3. GNOMAE is a general purpose …………..........that delivers optimum solutions.
(a) Register (b) computer system
(c) Algorithm (d) GNOMAE
4. MRP stands for:
(a) Material Requirement Planning (b) Management Requirement Planning
(c) Material Resource Planning (d) None
5. A wide range of business intelligence (BI) products help the managers analyze operative data from ERP
systems and make the appropriate decisions
(a) True (b) False
6 ERP philosophy has evolved from MRPII philosophy
(a) True (b) False
7 .........are among the largest and most complex IT systems on the market
(a) CRM (b)Integrated Information Management Systems
(c) Enterprise systems (d) GNOMAE
8 CRM are large-scale application software packages that support business processes, information flows,
reporting, and data analytics in complex organizations
(a) True (b) False
9 ERP is much more than a piece of computer software
(a) True (b) False
10 There are several positive and negative factors as far as the ERP scenario in India is concerned.
(a) True (b) False
1. Explain the scenario and justification of ERP in India.
2. Explain applications of ERP system?
3. Define the evaluation criteria.
4. Is ERP costly? Explain in own words.
5. What is GNOMAE?
6. What are the benefits of MRPII?
7. Describe the concept of enterprise.
8. Discuss the future of ERP systems.
9. What is the ERP software?
10. Explain evolution of ERP.
Answers for Self Assessment Questions
1. (a) 2.(a) 3.(c) 4.(a) 5.(b)
6. (a) 7.(c) 8.(b) 9.(a) 10.(a)

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3
ERP Solutions and ERP Packages
CONTENTS
Objectives
3.1 Introduction
3.3 ERP for Make to Order Companies
3.4 Business Process Mapping For ERP Module Design
3.5 ERP Packages
3.6 ERP Package Modules
3.7 Comparative Assessment and Selection of ERP Packages
3.8 Summary
3.9 Keywords
Objectives
 Explain the ERP for Small Business
 Understand ERP for make to order companies
 Describe the business process mapping for ERP module design
 Explain ERP Packages
3.1 Introduction
Defining requirements to business process modelling and setup in the ERP system is of key importance for the
efficient implementation. Companies specify requirements using business terms while developers “translate”
them in the system’s language. It is objectively possible for divergent meaning to be given and that to be found
out at a quite late stage of the project. One of the most difficult and milestone decisions to the project success
is finding the borderline between defining processes as they are before the implementation and the change in
processes themselves in order to utilise the best practices and capacities of the system.

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Among other, a very important point in specifying the requirements to the system is the Gaap-fit analysis,
which has to determine correctly the balance between:
 the need of changes (enhancement) to the system in order to achieve identity with the existing practice for
business process accounting management, and
 Effective changes (reengineering) of the accounts to allow for implementation of the standard functionality
and the ERP system best practice models.
Decision-making on additional developments is critical to the implementation success, the project budget,
future maintenance of the system and migration to new versions. We aim at minimising such developments,
the effect of which can be achieved through a standard functionality of the ERP system applicable in the
particular case.
In connection with the above, our services cover:
 Following thorough examination of current business processes, we are in a position to offer highly
professional assistance in identifying the optimal approach to their modelling in the system
 Organising the preparation of a formalised and uniform description of business processes in a manner
ensuring efficient automation in the system
 Assistance to your teams in filling out standard questionnaires for the relevant system as may be furnished
by the developers
 Participation in working meetings whereat requirements towards the developers are defined
 Check and control as to whether the requirements set by you have been properly “reproduced” and
recorded in the documents describing the future model in the system (Blueprints)
 Assistance in preparation of data for prototyping the system
 Assistance in preparation of data for migration of lists and balances in the format required by the system
 Review of the set-up prototype for compliance with the requirements defined by the business process
owners
 Support to your teams in preparing data and actual performance of functional and integration tests in the
system.
We are of the understanding that an implementation is successful just and only if the ERP system produces the
needed statements, reports, analyses and data for taking operational and management decisions at all
organizational levels. Our major advantage is the capability of assisting you at a very early stage of the project
to provide for the proper integration of the implemented functionality so that the result of business process
setups in the ERP system is expressed as anticipated in the financial and management accounts at an analytical
and summarized level.
While major multi-national companies enjoy the benefits and cost savings generated by their enterprise
resource planning (ERP) implementations, small and medium sized companies have been losing out. The cost
of implementing an Oracle or SAP system across a large enterprise can run into the tens of millions of dollars,
which obviously precludes the small and medium sized businesses. Over the last decade the leading ERP
vendors have tried to make their product scalable and cheap enough for small and mid-size businesses; all with
limited success. But today it is the minor ERP vendors who are courting the small and medium market.
Businesses who have limited cash and resources to spend on ERP systems are looking to reap the benefits,
such as lower inventory costs, lower production costs and a reduced headcount, but not at SAP or Oracle

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