Enterprise Resource Planning (ERP)

For everything you wanted to know on building leadership and management, refer Shyam Bhatawdekar’s website: http://shyam.bhatawdekar.com

(Refer our High Quality Management Encyclopedia “Management Universe” at: http://management-universe.blogspot.com/)

Evolution

1970s: MRP (Initially, material requirement planning; later, manufacturing resource planning)
1980s: MRP II
1990s: ERP (Enterprise resource planning; it's genesis is traced to a research and analysis firm Gartner)

What is ERP?

These systems are basically management systems and are supported by the computer software packages called ERP packages designed and marketed by many software vendors.
Basic most ERP system qualifies to be called ERP if it's related software package provides at least two functions say, materials function and accounting function.
Currently, ERP is an enterprise-wide system that is supposed to coordinate all the resources, information, and activities pertaining to all the business processes of an organization.
Computerized ERP provides a common integrated data base on the computer.
Earlier to advent of ERP systems, each function of an organization used to have its own, usually, stand alone, non-integrated customized computer system, mostly developed by in-house information technology professionals. For example, payroll system, purchase order system, material accounting system, financial accounting system, sales order processing system etc.
ERP is an extension of MRPII (and not the replacement of MRP II) for businesses.
ERP addresses the needs of multi-division, multi-location and multi-currency nature of businesses which was not the case with MRP or MRP II and also, with the earlier computerized functional systems for each function.
ERP systems now cover all the functions of an organization/company, regardless of the nature of businesses whether manufacturing, service, non-manufacturing, profit and non-profit organizations, governments etc.

ERP : Functionality

Sales order processing provides the inputs on what and how much needs to be manufactured and delivered to customers and when.
Building of Master Production Schedule (MPS).
MPS drives MRP by taking inputs from the bill of material (BOM).
MRP explodes the gross requirement and planning for the dependent demand is done.
At the same time it gets the feedback from the stores and production in terms of scheduled receipts.
Depending on this and the time frame (lead time ), it suggests Purchase Requisition (in case of bought out items) and Production Order (in case of make in-house items).
Purchase Requisitions get converted into Purchase Orders which lead to Goods Receipt Note.
In case of make in-house items, Production Orders are passed to shop-floor control.
At the time of releasing the Production Orders to the shop, it ensures that the resources required are available and are subsequently allocated.
Capacity requirement planning (CRP) ensures that capacity in terms of machine hours and man-power is available.
Scheduling of Production Orders enables that bottle-necks are minimized by following the optimum algorithm of sequencing.
Inspected goods, which make way to the finished goods stores, are in turn made available for the next MRP run.
Plant maintenance module will interface with the shop floor control system.
Human resources and payroll processing will interface with shop floor control, general ledger and costing.
Provides office automation tools like E-mail, EDI.
Provides business work flow system which supports processing of vendor invoices no matter how they arrive by EDI, fax or normal mail.
Management information system (MIS) models the data available from the core modules on various filters and presents the same in much simpler, graphical way.
MIS provides a ‘what if’ kind of analysis and exception reporting (early warning system).

ERP is Not.....

Magic potion to solve your business problems.
Resource optimization tool.
Merely computerization.
Merely a tool to automate business transaction processing.
Merely a tool to reduce inventory:
- Inventory is your score board, not the game.
- You implement ERP to orchestrate your business and improve business efficiency, which reflects in reduced inventory.

Some Misconceptions

This is IT Department’s project.
We don’t have time.
This is not suitable for us.
Our problems can not be addressed.
Our business is different.
Our organization is different.
Our people are different.

ERP Modules

Computerized ERP software package should have the modules given below. Many software vendors provide them.

Financial Accounting and Controlling
Capital Investment Management
Enterprise Controlling
Treasury
Project Management
Logistics Management
Human Resources
Production Planning and Control
Materials Management
Plant Maintenance
Quality Management
Sales and Distribution
International Management
Management Information System

For More Guidance, Assistance, Training and Consultation

Contact: prodcons@prodcons.com

Also refer: (Prodcons Group) http://prodcons-group.blogspot.com/, (Training Programs by Prodcons Group) http://training-development-function.blogspot.com/, (Productivity Consultants) http://productivity-consultants.blogspot.com/

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Enterprise Resource Planning (ERP)

Wednesday, January 28, 2009

Enterprise Resource Planning (ERP)

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