eBooks Dump Archive Enterprise+Resource+Planning+-+a+Managerial+and+Technical+Perspective+(S.parthasarathy +2007)+-+Book

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ISBN (10) : 81-224-2298-5ISBN (13) : 978-81-224-2298-6

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NEW AGE INTERNATIONAL (P) LIMITED, PUBLISHERS4835/24, Ansari Road, Daryaganj, New Delhi - 110002Visit us at www.newagepublishers.com

Dedicated

to

My Beloved Mother

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Enterprise Resource Planning (ERP) is primarily an enterprise-wide system, which encompassescorporate mission, objectives, attitudes, beliefs, values, operating style and people who make theorganization. In recent times more and more organizations have started looking into ERP packagedsolutions. The reasons for this shift are the inadequacy of the existing systems to address the changingbusiness requirements and the organizations’ need to focus on the core business in today’s competitiveenvironment. This textbook Enterprise Resource Planning (ERP) - A Managerial and TechnicalPerspective will address both managerial issues and technical issues along with some case studies. ERPis a packaged software and it needs to be addressed both from the view point of technology and ofmanagement. There are only a few text books on ERP and all these textbooks are presented only fromthe managerial point of view. This motivated us to prepare this textbook which focuses ERP both fromthe managerial and the technical points of view. This is the significant feature of the book.

This textbook is presented as follows. There are twelve chapters. They are: Evolution of ERP,ERP Modules, ERP Software Selection, ERP Implementation Lifecycle, Impact of Operating Systemon ERP, Supply Chain Management (SCM), Customer Relationship Management (CRM), .NETTechnology, an overview of ERP Vendors, Business Modeling using UML and ERP Case Studies. Thefirst chapter provides a brief introduction to ERP. Then the evolution of the ERP system is discussed.Then the various modules in an ERP software package, the various phases in ERP implementation, theneed for an operating system to provide an efficient integrated system, the scope of Supply ChainManagement in an integrated system, the concept of Customer Relationship Management, buildingpackaged software using .NET technology, constructing business models using Unified ModelingLanguage are all presented. A few case studies are also included to enable the readers to get betterunderstanding and better insight into the subject.

Each chapter consists of review questions which are left to the readers as an exercise. Due care istaken to figure, all the concepts and features behind ERP in this textbook. Being the first edition, thisbook is prepared and presented in such a way that everybody, even a beginner, will find it easy to havea quick glimpse of the various concepts associated with ERP. The book is targetted at the under-graduate and post-graduate students of any branch, those who aspire to enter the field of InformationTechnology (IT) and get positioned as IT solution architect, Business Analyst, Functional and TechnicalConsultants etc. This textbook will cover the syllabus of the subject Enterprise Resource Planning(ERP) prescribed to the students of the following courses: B.E/B.Tech/M.Sc/MBA/MCA/B.Com/M.Com.A list of books, research papers and websites that helped us to prepare this textbook is given in thereferences. Though great care has been taken in editing this book, I would wholeheartedly accept

Preface

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suggestions for improvement offered by the readers. If you have the patience to go through all thechapters, I am hopeful that the purpose of the book would be served.

My wholehearted thanks and acknowledgements are due in no small measure to Dr. (Mrs.) RadhaThiagarajan, Chairman, Thiagarajar College of Engineering (TCE), Mr. T. Kannan, Vice-Chairman& Correspondent of the College, Dr. V. Abhaikumar, Principal, Dr. R. Rajaram, Head of the Departmentof Computer Science & Engineering and my colleagues of the TCE, friends and family. I am thankfulto Professor V. Sankarasubramanian, Head of the Department of English, The Madura College, Madurai,for his invaluable comments and suggestions during the preparation of this book. I sincerely acknowledgethe support extended by my father, who is the motivating force behind this project. Finally, I amthankful to New Age International (P) Limited, Publishers, New Delhi, for their support andencouragement.

S. Parthasarathy

Contents

Preface ............................................................................................................... vChapter-1 Introduction to ERP ...................................................................................... 1

1.1 Benefits of an ERP System .......................................................................................................................21.2 Limitations of the ERP System ...............................................................................................................51.3 What do ERP systems cover? ..................................................................................................................51.4 Challenges for Small and Midsize businesses today ..........................................................................7

Chapter-2 Evolution of ERP ........................................................................................... 92.1 Manufacturing Strategies ...................................................................................................................... 102.2 Material Requirements Planning (MRP) ............................................................................................ 102.3 Manufacturing Resource Planning (MRP II) ..................................................................................... 122.4 Conceptual Framework of ERP ............................................................................................................ 14

Chapter-3 ERP Modules ................................................................................................ 173.1 Finance Module ...................................................................................................................................... 183.2 Human Resource Management (HR) Module ................................................................................... 213.3 Materials Management (MM) Module ............................................................................................... 233.4 Sales and Distribution Module ............................................................................................................ 26

Chapter-4 ERP Software Selection .............................................................................. 314.1 Issues in ERP Software Selection ......................................................................................................... 314.2 ERP Software Selection Criteria .......................................................................................................... 314.3 Methods in ERP Software Selection ................................................................................................... 324.4 Cost Benefit Analysis ............................................................................................................................. 324.5 ERP Software Selection Process ........................................................................................................... 32

Chapter-5 ERP Implementation ................................................................................... 355.1 Approaches to Study ERP Implementation ....................................................................................... 365.2 Different Perspectives in ERP Implementation ................................................................................. 365.3 Minimizing Customization .................................................................................................................. 385.4 Characteristics of ERP Systems ............................................................................................................ 395.5 Critical Success Factors for ERP Implementation ............................................................................ 405.6 Astonishing Facts in ERP Implementation ........................................................................................ 405.7 ERP Implementation Strategy .............................................................................................................. 415.8 Phases in ERP Implementation ............................................................................................................ 435.9 Benefits Realization in ERP Implementation ................................................................................... 475.10 Change Management Issues ............................................................................................................... 47

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Chapter-6 Impact of Operating System on ERP ......................................................... 506.1 Functions of an operating system ........................................................................................................ 506.2 Unix and Linux – An Overview ............................................................................................................ 516.3 Linux in an ERP World .......................................................................................................................... 51

6.3.1 ERP Users in Linux Environment ............................................................................................ 536.4 How ERP vendors view different operating system? ....................................................................... 546.5 Migrating the ERP from one operating system to another ............................................................. 556.6 Managing new ERP environment ........................................................................................................ 566.7 Impact of operating system on ERP .................................................................................................... 56

Chapter-7 Supply Chain Management (SCM) ............................................................. 597.1 Objectives of Supply Chain Management ......................................................................................... 597.2 Computer-Integrated Supply Chain Management Systems ........................................................... 607.3 CAD and CAM ........................................................................................................................................ 607.4 Elements in Supply Chain Management ............................................................................................ 617.5 Roadmap to Better Supply Chain Management ............................................................................... 617.6 Decision Making in Supply Chain Management ............................................................................. 627.7 Supply Chain Management Model ..................................................................................................... 637.8 Impact of ERP on SCM .......................................................................................................................... 647.9 ERP, SCM and E-Business .................................................................................................................... 657.10 SCM and IT ............................................................................................................................................. 657.11 ERP and SCM - A Comparison ............................................................................................................ 66

Chapter-8 ERP and CRM ............................................................................................... 688.1 Introduction to CRM .............................................................................................................................. 688.2 Need for CRM .......................................................................................................................................... 698.3 Components of CRM ............................................................................................................................. 708.4 Different Dimensions of CRM .............................................................................................................. 718.5 CRM Environment .................................................................................................................................. 728.6 Data Mining and Data Warehousing in CRM ................................................................................... 738.7 Features of Dynamic CRM system ...................................................................................................... 758.8 Features of CRM from SAP ................................................................................................................... 768.9 An ERP- CRM Business Solution ....................................................................................................... 77

Chapter-9 ERP and .NET............................................................................................... 819.1 .NET Technology -- An overview ........................................................................................................ 829.2 Why .NET software is better software? ............................................................................................... 829.3 What makes a good ERP system? ........................................................................................................ 839.4 The fusion of .NET technology and ERP ........................................................................................... 849.5 Impact of .NET technology on ERP .................................................................................................... 859.6 An ERP product built using .NET - A Discussion ............................................................................ 86

Chapter-10 ERP Vendor ................................................................................................ 9110.1 SAP ........................................................................................................................................................ 9110.2 Oracle Corporation ............................................................................................................................. 9410.3 J.D. Edwards ......................................................................................................................................... 9410.4 The Baan Co. ....................................................................................................................................... 9410.5 System Software Associates (Ssa) .................................................................................................... 9410.6 MK Group/Acacia Technologies ..................................................................................................... 9510.7 JBA International ................................................................................................................................ 95

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10.8 Marcam Corp./Mapics Inc. ................................................................................................................ 9510.9 Intentia .................................................................................................................................................. 9610.10 QAD Inc. ............................................................................................................................................... 9610.11 Intuitive Manufacturing Systems .................................................................................................... 9610.12 Compiere .............................................................................................................................................. 9710.13 Ramco Systems ................................................................................................................................... 97

Chapter-11 ERP Case Studies ..................................................................................... 101

Chapter-12 Business Modeling Using UML ............................................................... 12012.1 Business Modeling ........................................................................................................................... 12012.2 Business Modeling with the UML ................................................................................................ 12112.3 UML Business Use Case .................................................................................................................. 12212.4 UML Business Activity Diagram ................................................................................................... 12312.5 UML Class Diagrams ....................................................................................................................... 12312.6 UML Sequence Diagram ................................................................................................................. 12412.7 Application ........................................................................................................................................ 124

Acronyms and Abbreviations ..................................................................................... 127

Glossary ....................................................................................................................... 131

References ..................................................................................................................... 137Index ....................................................................................................................... 139

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Introduction to ERP

1

OBJECTIVE

• To introduce the concept of Enterprise Resource Planning (ERP).

• To describe benefits of ERP.

• To describe the limitations of ERP.

• To describe “What an integrated system is.”

EXPECTED OUTCOME

The readers will be able to:

üü Understand the concepts behind an ERP system.

üü Visualize ERP as packaged software.

üü Understand the information integration through the ERP system.

Enterprise Resource Planning Software or ERP doesn't live up to its acronym. Forget about planning-it doesn't do much of that-and forget about resource, a throwaway term. But remember the enterprisepart. This is ERP's true ambition. It attempts to integrate all departments and functions across a companyonto a single computer system that can serve all those different departments' particular needs. That isa tall order, building a single software program that serves the needs of people in finance as well asanswering the needs of the people in human resources and in the warehouse. Each of those departmentstypically has its own computer system optimized for the particular ways in which the department doesits work.

But ERP combines them all together into a single, integrated software program that runs off asingle database so that the various departments can more easily share information and communicatewith one another. That integrated approach can have a tremendous payback if companies install thecorrect software. Enterprise Resource Planning (ERP) covers the techniques and concepts employedfor the integrated management of businesses as a whole, from the viewpoint of the effective use ofmanagement resources, to improve the efficiency of an enterprise.

ERP packages are integrated software packages that support these ERP concepts. In the beginning,they were targeted at the manufacturing industry, and consisted mainly of functions for planning andmanaging core businesses such as sales management, production management, accounting and financial

2 Enterprise Resource Planning

affairs, etc. However, in recent years, adaptation not only to the manufacturing industry, but also todiverse types of industry has become possible and the expansion of implementation and use has beenprogressing on a global level.

ERP software standardizes an enterprise's business processes and data. The software convertstransactional data into useful information and collates the data so that they can be analyzed. In this way,all of the collected transactional data become information that companies can use to support businessdecisions. The perspective that ERP software is simply a means of cutting cost is still prevalent. As aresult, organizational resistance to ERP implementation has often been high, and not all ERPimplementation programs delivered the promised enterprise improvements.

1.1 BENEFITS OF AN ERP SYSTEM

Installing an ERP system has many direct and indirect advantages. The direct advantages includeimproved efficiency, information integration for better decision making, faster response time to customerqueries, etc. The indirect benefits include a better corporate image, improved customer goodwill,customer satisfaction, and so on. The following are some of the direct benefits of an ERP system:

• Business Integration• Flexibility• Better Analysis and Planning Capabilities• Use of Latest Technology

Integration is the first and most important advantage of implementing ERP. The reason why ERPpackages are considered to be integrated is the automatic data updation that is possible among therelated business components. Since conventional company information systems were aimed at theoptimization of independent business functions in business units, almost all of them were weak interms of the communication and integration of information that transcended the different businessfunctions. In the case of large companies in particular, the timing of system construction and directivesdiffers for each product and department/function and sometimes, they are disconnected. For this reason,it has become an obstacle in the shift to new product and business classification. In the case of ERPpackages, the data of related business functions are also automatically updated at the time a transactionoccurs. For this reason, one is able to grasp business details in real time, and carry out various types ofmanagement decisions in a timely manner, based on that information.

The second advantage of ERP packages is their flexibility within the business functions. Differentlanguages, currencies, accounting standards and so on can be covered in one system, and functions thatcomprehensively manage multiple locations of a company can be packaged and implementedautomatically. To cope with company globalization and system unification, this flexibility is essential,and one can say that it has major advantages, not simply for development and maintenance, but also interms of management.

Another advantage is the boost to the planning functions. By enabling the comprehensive andunified management of related business and its data, it becomes possible to fully utilize many types ofdecision support systems and simulation functions. Furthermore, since it becomes possible to carryout, flexibly and in real time, the filing and analysis of data from a variety of dimensions, one is ableto give the decision makers the information they want, thus enabling them to make better and informeddecisions.

The fourth advantage is the utilization of the latest developments in Information Technology(IT). The ERP vendors were very quick to realize that in order to grow and to sustain that growth, they

Introduction to ERP 3

had to embrace the latest developments in the field of Information Technology. Therefore, they quicklyadapted their systems to take advantage of the latest technologies like open systems, client/servertechnology, Internet/Intranet, electronic-commerce, etc. It is this quick adaptation to the latest changesin Information Technology that makes the flexible adaptation to changes in future business environmentspossible. It is this flexibility that makes the incorporation of the latest technology possible duringsystem customization, maintenance and expansion phases. ERP includes many of the functions thatwill be necessary for future systems. However, undertaking reforms to company structures and businessprocesses, so as to enable the full use of these major features, is the greatest task for companies that willuse them. It is necessary to take note that casually proceeding with the implementation of ERP merelyfor reasons of system reconstruction is likely to result in turning the advantages into disadvantages.

The most important aspect to consider when installing an ERP system in a company is the attitudeto reform of the employees at all levels of the company. How managers use information systems andinformation technology as strategic management methods is likely to become the turning point of thechange.

Other benefits of an ERP system include reduction of lead-time, on-time shipment, reduction incycle time, better customer satisfaction, improved supplier performance, increased flexibility, reductionin quality costs, improved resource utility, improved information accuracy and enhanced decision-making capability.

The elapsed time between placing an order and receiving it is known as the lead-time. It plays asignificant role in purchasing and inventory control. In order to reduce the lead-time, the organizationshould have an efficient inventory management system, which is integrated with the purchasing,production planning and production departments. In this era of just-in-time manufacturing, the knowledgeof the exact lead-time for each and every item is of paramount importance for uninterrupted production.For a company dealing with hundreds and thousands of raw materials and components, keeping trackmanually of the lead-time for each and every individual item is practically an impossible task.

Companies must be able to deliver customer-specific products (make-to-order). The ERP systemsprovide the freedom to change manufacturing and planning methods as needs change, without modifyingor reconfiguring the workplace or plant layouts. With ERP systems, businesses are not limited to asingle manufacturing method, such as make-to-stock or make-to-order.

Cycle time is the time between receipt of the order and delivery of the product. It can be reducedby the ERP systems, but the reduction will be more in the case of make-to-order systems. In the caseof make-to-stock, the items are already manufactured and kept in warehouses or with distributors forsale. Here, the cycle time is reduced not on shop floor, but during order fulfillment. In earlier days,even for the make-to-stock items, the cycle time used to be high. This was because the process wasmanual and if computerized, not integrated. In the case of make-to-order items, the ERP systems savetime by integrating with CAD/CAM systems.

The creation of an accurate, achievable production schedule requires the availability of bothmaterial and capacity. It is useless, and indeed wasteful, to have financial resources tied up in material,if the capacity is insufficient or improperly planned. Waste not only raises costs, it also affects customerservice levels and customer good will.

The capacity planning features of most ERP systems offer both rough-cut and detailed capacityplanning. The system loads each resource with production requirements from Master ProductionScheduling, Material Requirements Planning, and Shop Floor Control (detailed capacity planning).The ERP systems also have simulation capabilities that help the capacity and resource planners tosimulate the various capacity and resource utilization scenarios and choose the best option.


ERP systems have proved that they can produce goods at the flexibility of make-to-order approachwithout losing the cost and time benefits of make-to-order operations. This means that the customerwill get individual attention and the features that he/she wants, without spending more money orwaiting for long periods. Also, with the introduction of the web-enabled ERP systems, customers canplace the order, track the status of the order and make the payment sitting at home. The customer couldget technical support by either accessing the company's technical support knowledge base (help desk)or by calling the technical support. Since all the details of the product and the customers are availableto the person at the technical support department, the company is able to provide better support to thecustomer. All this is possible because of the use of the latest developments in Information Technologyby the ERP systems, and this will go a long way in improving customer satisfaction.

ERP systems provide vendor management and procurement support tools designed to coordinateall aspects of the procurement process. They support the organization in its efforts to effectivelynegotiate, monitor, and control procurement costs and schedules while assuring superior product quality.The supplier management and control processes comprise of features that will help the organization inmanaging the supplier relations, monitoring the vendor activities and managing the supplier quality.

Flexibility is a key issue in the formulation of strategic plans in companies. Sometimes, flexibilitymeans quickly changing something that is being done, or completely changing to adjust to new productdesigns. At other times, flexibility is the ability to produce in small quantities, in order to produce aproduct mix that may better approximate actual demands and reduce work-in-progress inventories.

Quality is defined in many different ways--excellence, conformance to specifications, fitness foruse, value for the price, and so on. ERP packages support the benchmarking and use of optimal productdesign, process engineering, and quality assurance data by all functional departments within themanufacturing enterprise, thereby facilitating definition of repeatable processes, root cause analysis,and the continuous improvement of manufacturing methods. This documentation supports the jobfunctions of the quality assurance and production managers in validating the manufacturer's conformanceto ISO 9000, Good Manufacturing Practices (GMP) worldwide, and a variety of country specificstandards of quality assurance.

We have seen that in today's competitive business environment, the key resource of everyorganization is information. If the organization does not have an efficient and effective mechanismthat enables it to give the decision-makers the right information at the right time, then the chances ofthat organization succeeding in the next millennium are very remote.

ERP relates to the software infrastructure that holds the entire company together internally, onthe one hand, and supports the external business processes the company engages in, on the other. ERPsolutions are designed to grow with the company. Unlike some stand-alone applications, they do not"top out" without transition paths to other solutions, leaving us to start over from scratch with a newand different application. And there are some key traits in ERP solutions:

• Scalability.• Vendor management.• Functionality.• Reliable service and support.• Integrated modules.

The beauty of an ERP application is that it is a suite in which all work together--without thiscapability, we can't have seamless business processes. Modularity comes to play mainly in how wepurchase and implement our ERP system. We may not need all applications at once, or we may want to


deploy one application at a time. They are different from separate applications in that when more thanone is implemented, they fit together and work automatically.

1.2 LIMITATIONS OF THE ERP SYSTEM

ERP applications have succeeded in integrating data from multiple functional areas, resulting in anincremental addition of value over previous "legacy" point solutions. However, their scope is limitedto the single enterprise, they are typically slow and they are transaction-based, not intelligence based,so they fail to encapsulate the complexity required in cases where multiple courses of action areavailable. In contrast to ERP systems, APS (Advanced Planning & Scheduling) systems are “intelligent”(that is, they provide modeling and analysis capabilities for intelligent decision support). Some of theshortcomings of the ERP software are given below:

• ERP systems are basically meant for recording what has already happened, rather thanplanning for what will be. These systems can process orders, but they do not analyze businesssituations to provide insight into future courses of action.

• ERP systems allow an enterprise to design complex and sophisticated workflows, but are fartoo rigid in their ability to continually reshape and restructure workflows as business challengesand opportunities arise.

• While ERP systems integrate multiple business functions, they lack the ability to expandtheir scope to multiple enterprises. This gap has to be filled.

Some risks to watch out for in implementing an ERP system include:• User Resistance/Revolt - Users who fear being downsized may sabotage the system.• Mismatch between ERP system and Organizational Culture--If a system attempts to implement

best practices inappropriate to the organization, the system may suffer from "culture clash"consequences.

• Inability to manage technology.• Illogical processing.• Inability to stop processing quickly.• Cascading errors.• Repetition of Errors.• Concentration of data.

The limitations and pitfalls of the Enterprise Resource Planning are as follows. The systems canbe too expensive to install and maintain. ERP is often seen as too rigid and difficult to adapt to thespecific Workflow and Business process of some companies. This is cited as one of the main cause oftheir failure.

1.3 WHAT DO ERP SYSTEMS COVER?

A fully integrated ERP system will satisfy the following features:• Reduces the complexity in the business processes.• Delivers requirements satisfactorily.• Has common “ways of working” (uses standard processes for transactions).• Adheres to a common set of financial standards and product coding.


• Integrated across a large portion of the organizations internal procedures, i.e. covers themain internal functions such as finance, distribution, manufacturing, sales and HR.

ERP is a packaged software solution that addresses the enterprise needs taking the process view ofan organization to meet the organizational goals, tightly integrating all functions of an enterprise. It isa set of application software that integrates manufacturing, finance, sales, distribution, HR and otherbusiness functions with a single comprehensive database that collects data from and feeds data intomodular applications supporting all the company's business activities, across these functions, acrossbusiness units, across the world.

An information system is an open, purposive system that produces information using the 'input-process-output' cycle. The minimal information system consists of three elements--people, proceduresand data. People follow procedures to manipulate data to produce information. In today's computerworld, the definition of information systems has undergone a slight change. Today, an informationsystem is an organized combination of people, hardware, software, and communication networks anddata resources.

ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping,invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in thecontrol of many business activities like sales, delivery, billing, production, inventory management, andhuman resources management.

ERPs are often called back-office systems indicating that customers and the general public arenot directly involved. This is contrasted with front-office systems like customer relationship managementsystems that deal directly with the customer. ERPs are cross-functional and enterprise wide informationsystem. All functional departments that are involved in operations or production are integrated in onesystem. In addition to manufacturing, warehousing, and shipping, this would include accounting,human resources, marketing, and strategic management.

In the early days of business computing, companies used to write their own software to controltheir business processes. This is an expensive approach. Since many of these processes occur in commonacross various types of businesses, common reusable software may provide cost-effective alternativesto custom software. Thus some ERP software cater to a wide range of industries from service sectorslike software vendors and hospitals to manufacturing industries and even to government departments.


ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and thewarehouse, and replaces them with a single unified software program divided into software modulesthat roughly approximate the old standalone systems. Finance, manufacturing and the warehouse allstill get their own software, except that now the software is linked together so that someone in financecan look into the warehouse software to see if an order has been shipped. Most vendors' ERP softwareis flexible enough for us to install some modules without buying the whole package. Many companies,for example, will just install an ERP finance or HR module and leave the rest of the functions foranother day.

1.4 CHALLENGES FOR SMALL AND MIDSIZE BUSINESSES TODAY

Smaller enterprises ducked the ERP wave of the mid--1990s and did not succumb to the cost structuresor the risks that their larger brethren undertook. Now, these firms often have outdated or overloadedapplications and need to invest in new technology to achieve or retain competitiveness in their markets.Today, many small and midsize businesses are in need of upgrades, more or different softwareapplications, more current or robust technology, and often more sophisticated business solutions.

SUMMARY

At its simplest level, ERP is a set of best practices for performing different duties in a company,including finance, manufacturing and the warehouse. To get the most from the software, we have toget people inside our company to adopt the work methods outlined in the software. If the people in thedifferent departments which will be using ERP don't agree that the work methods embedded in thesoftware are better than the ones they currently use, they will resist using the software or will want ITto change the software to match the ways they currently do things. This is where ERP projects breakdown. Customizations make the software more unstable and harder to maintain when it finally doescome to life. The horror stories we hear everyday about ERP can usually be traced to the changes thecompany made in the core ERP software to fit its own work methods. Because ERP covers so much ofwhat a business does, a failure in the software can bring a company to a halt, literally.

REVIEW QUESTIONS

1. What is ERP?2. Carefully examine the technological and nontechnological limitations of ERP software.3. Is ERP packaged software?4. “ERP software is meant for manufacturing industries.”- Comment.5. Distinguish between conventional application packages and ERP packages.6. How does ERP software standardize the existing business processes?7. Why do ERP projects fail so often?8. “ERP has got nothing to do with planning.”- Justify.9. “ERP is known for information integration.” Explain.


10. What are the issues to consider when we go for an integrated system?11. How will you ensure that ERP software purchased will fit into your organization?12. What are the gaps in the development of packaged software?13. Will ERP software eliminate clerical jobs? If so, how can the existing man power be effectively

utilized?14. How will you measure the performance of an organization before and after ERP

implementation? Propose suitable metrics.15. “ERP is a catalyst of fundamental changes in organizations.” - Comment.16. What are the salient features of an integrated system like ERP?17. Select an organization of your choice (say a school, college, software company, etc) and

identify their major functions. Classify their functions into various modules. Now, developa diagram that shows the information integration of the organization and propose an ERPsolution.

Evolution of ERP

2

OBJECTIVE

• To discuss the evolution of ERP.• To describe benefits of ERP.

EXPECTED OUTCOME

The readers will be able to:üü Understand the concepts of Materials Requirements Planning (MRP),

Manufacturing Resource Planning (MRP-II), Enterprise Resource Planning (ERP)and Supply Chain Management (SCM).

One way of looking at ERP is as a combination of business processes and information technology. Forinstance, J.D. Edwards, an American ERP system vendor, defines ERP as an umbrella term for integratedbusiness software systems that power a corporate information structure, controlling a broad range ofactivities, from the procurement of supplies to shop floor control and financial accounting. It providesthe glue that binds management functions across geographic sites and complex heterogeneous networks.From a more strategic perspective, JBA, a British consulting firm, views ERP as a business approachthat starts in the boardroom and permeates the entire organization. Figure 1 shows the evolution ofEnterprise Resource Planning (ERP).

Figure 1


2.1 MANUFACTURING STRATEGIES

The following are the three manufacturing strategies in practice. They are:1. Make-to-Stock2. Make-to-Order3. Assemble-to-Order

In Make-to-Stock, the production process allows the user to complete the products before thereceipt of an order from the customer. Customer orders can be filled from the existing stocks and thepurchase orders are used to replenish those stocks. The production department will keep track of thefinished goods, components and raw materials. Optionally, back flushing provides efficient relievingof component inventory.

In Assemble-to-Order system, all the components used in the assembly, packaging or finishingprocess are planned and stocked in anticipation of an order from the customer. The receipt of order willinitiate the assembly of products. In this system, the customer demand is converted to a suitable assemblywork order, which is then finished to the specifications of the customer. The planning is primarilydriven by forecasts of the features and models.

In Make-to-Order system, the product is developed and delivered only when the customer placesan order. The final product is usually a combination of standard items and items custom designed tomeet the special needs of the customer. Upon receipt of the sale order, planning is triggered to finishthe items to the specifications of the customer.

2.2 MATERIAL REQUIREMENTS PLANNING (MRP)

Material Requirements Planning (MRP) is a software based production planning and inventory controlsystem used to manage manufacturing processes. An MRP system is intended to simultaneously meetthree objectives:

• Ensure materials and products are available for production and delivery to customers.• Maintain the lowest possible level of inventory.• Plan manufacturing activities, delivery schedules and purchasing activities.

In a typical manufacturing environment, the Master Production Schedule (MPS) specifies thequantity of each finished product required in each planning period; it is a set of time-phased requirementsfor end items. The firm, however, also needs a set of time-phased requirements for the parts and rawmaterials that make up those end items. Therefore, MRP is a production planning and control techniquein which the MPS is used to create production and purchase orders for lower-level components. In the1970s, manufacturers began to use techniques such as MRP in recognition of the importance of thedistinction between independent and dependent demand items.

MRP is continually evolving and expanding to include more business functions. In the early1980s, MRP expanded from a material planning and control system to a company-wide system capableof planning and controlling virtually all the firm's resources. This expanded approach was alsofundamentally different from the original concepts of MRP. A main purpose of MRP-II is to integrateprimary functions (i.e. Production, Marketing and Finance) and other functions such as personnel,engineering and purchasing into the planning process.

MRP is a technique for determining the quantity and timing for the acquisition of dependentitems needed to satisfy master schedule requirements. The basic inputs for Material Requirements


2.3 MANUFACTURING RESOURCE PLANNING (MRP II)

Manufacturing Resource Planning (MRP II) is defined as a method for the effective planning of allresources of a manufacturing company. Ideally, it addresses operational planning in units, financialplanning in dollars and has a simulation capability to answer "what-if" questions. Manufacturing resourceplanning is a direct outgrowth and extension of closed-loop MRP.

It is made up of a variety of functions, each linked together:• Business planning• Sales and operations planning• Production planning• Master scheduling• Material requirements planning• Capacity requirements planning• Execution support systems for capacity and material

Output from these systems is integrated with financial reports such as:• Business plan• Purchase commitment report• Shipping budget• Inventory projections in dollars

In the 1990s, MRP-II was further expanded into ERP. It is intended to improve resource planningby expanding the scope of planning to include more of the supply chain than MRP-II. Thus, the keydifference between MRP-II and ERP is that while MRP-II has traditionally focused on the planningand scheduling of internal resources, ERP strives to plan and schedule supplier resources as well, basedon the dynamic customer demands and schedules.

The popularity of ERP systems started to soar in 1994 when SAP, a Germany based company,released its next generation software known as R/3. In the following years, companies began to pourbillions of ERP systems offered by SAP and its major competitors such as Oracle, Baan, J.D. Edwards,etc. By the late 1990s, industry prognosticators were forecasting that the ERP market would sustain anindustry growth rate of 30 to 40 percent.

From a technical perspective, ERP can be seen as the logical extension of Material RequirementsPlanning (MRP) systems of the 1970's and of Manufacturing Resource Planning (MRP II) systems ofthe 1980's. ERP's impact, however, has been much more significant. A recent survey by Fortunemagazine revealed that seven out of the top ten global pharmaceutical and petroleum companies, nineout of the top ten global computer companies, and all of the top ten global chemical companies areusing SAP’s R/3.

The number of local IT systems to be replaced by an integrated ERP system usually runs into thedozens upto a hundred or more in multinational companies. ERP systems provide an enterprise transactionbackbone that constitutes the glue between all kinds of best-of-breed solutions for specific processes,business areas, etc. It allows these best-of-breed solutions to leverage the investments made in the ERPsystems, and partly explains the impressive ROI's achieved by these solutions. ERP systems can beinstrumental in transforming functionally oriented organizations into process oriented ones. The verynature of the ERP system forces one to think process-wise, rather than department-wise. Indeed, someof the unexpected benefits of ERP implementations may well stem from improved communicationbetween different departments across business processes.

Evolution of ERP 13

In 1997 approximately 20,000 companies world-wide paid $10 billion to ERP vendors, whichwere up by 40% from 1996. The market is dominated by SAP, Oracle, JD Edwards, Peoplesoft andBaan who between them enjoy greater than 60% of the total market. ERP software automates corecorporate activities such as manufacturing, human resource, finance and supply chain management.The benefit of such software is that it can speed decision making, reduce costs and give managerscontrol over the whole business. Implementing a fully integrated ERP system requires the organizationto be process oriented and for all parts of an organization to adhere to the same precise processes. Thisforces the organization to undergo organization-wide reengineering, with ERP software merely beingan enabler of the change.

The actual benefits that can be achieved from a successful ERP implementation come from whatis changed in the business and therefore ERP should be considered a business project rather than atechnology initiative. There is a growing recognition that business and IT strategies should be linkedand a high degree of alignment created between them. An ERP system links IT with a new, processoriented business model that is required in order for a business to remain competitive in today's unstablebusiness environment. Globalization, deregulation and new technology are all interrelated businesspressures, which were not present to the same extent in the 1970s and 1980s and are changing thecompetitive environment for organizations.

It is estimated that at least 90% of ERP implementations end up late or over budget. However,this may be due to poor cost and time estimation rather than a failure in project management. The veryconcept of ERP software being integrated makes it complex. Enterprise consensus is required toreengineer an organization's core business processes and to take advantage of the software. Softwareconfiguration is also more complex and intricate. There are as many different methodologies forimplementing ERP as there are consultants who will partner an organization through an ERP project.It has been recognized that the track record for IT implementation is not good and it is believed that thebenefits of IT are not being attained because investment is biased toward technology rather than managingchanges in processes, organization structure and culture. IT-enabled change is different from otherforms of change in that technology, business processes and the organization must be integrated in orderto achieve the goals expected from the technology.

In MRP systems, the Master Production Schedule (MPS) represents a plan for the production ofall end-items over a given planning horizon. It specifies how much of each end-item will be producedin each planning period so that future component production requirements and materials purchases canbe calculated using MRP component-explosion logic. As such, the MPS has to be feasible so thatcomponents can be produced within the capacity available in each time period. It is clear that there isa role here for a planning tool that efficiently takes capacity and the MRP explosion into account at thesame time. MPS must be optimizers, balancing conflicting goals such as low inventories and efficientutilization of capacity. In this spirit, the MIP model aims to minimize the total cost of component &end-item inventory and backorders while keeping within available production capacity. The decisionvariables are primarily the MPS production quantities, but an MRP plan is also identified at the sametime. The capacity requirements of the MPS depend upon the MRP component production plan whichin turn depends on the lot-sizes used in the MRP explosion.

Manufacturing is the transformation, by means of a tool and/or processing medium of raw materialsinto finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. It is a large branch of industry and of secondary production. Some industries, likesemiconductor and steel manufacturers use the term fabrication. Although handicraft production hasbeen with us for many millennia, modern-style manufacturing is generally regarded as beginning


around 1780 with the British Industrial Revolution, spreading thereafter to Continental Europe andNorth America, and subsequently around the world. Originally, the term applied to commodities orartifacts which were “made by hand”. While it remains a huge part of the modern world economy-perhaps a quarter of aggregate world production of goods and services-many of the world's wealthiernations devote an ever smaller proportion of their workforce to manufacturing activity owing torelocation of enterprises to lower-wage countries and the rising proportion of economic activity devotedto service activity.

2.4 CONCEPTUAL FRAMEWORK OF ERP

A typical ERP application supports cross-functional business processes by linking the following sixprimary business functions:

1. Accounting and Controlling2. HR Management3. Production and Materials Management4. Project Management5. Quality Management and Plant Maintenance6. Sales and Distribution.

Recently, ERP vendors are branching into new areas such as supply chain management (SCM), e-commerce, customer relationship management (CRM) and business intelligence (BI). The arrival ofERP systems introduced a new software concept. A data structure was added to the software packages,which eliminated the redundancy within organizations created by departmental software. Instead ofinterfacing information between departmental systems, a central repository was developed to storetransactions from one department that could automatically be used by another department.

Figure 4

Evolution of ERP 15

Supply Chain Management (SCM) is perhaps the most critical logistics issue in the majority oftoday's businesses. The challenge of SCM is to integrate and to coordinate activities across organizationalboundaries in order to manage the entire supply chain as a whole. Various enterprise systems (ES) andabove all the most recent ERP systems from the major vendors include new technologies to integratethe supply chain. The ERP system provides a platform for SCM and businesses can adopt the newfunctions offered by the new generation of enterprise systems, thus taking advantage of the technologicalinnovations.

Figure 4 shows the Conceptual Framework of ERP II. The relations between the followingcomponents are highlighted in the figure 4.

Central Components

• Enterprise Resource Planning (ERP)

Corporate Components

• Supply Chain Management (SCM)• Customer Relationship Management (CRM)• Supplier Relationship Management (SRM)• Product Lifecycle Management (PLM)• Employee Lifecycle Management (ELM)• Corporate Performance Management (CPM)

Collaborative Components

• Business-to-consumer (B2C)• Business-to-business (B2B)• Business-to-employee (B2E)• Enterprise Application Integration (EAI)

The ERP market experienced a hype triggered by companies rushing to solve the Y2K problem,but after Y2K the ERP market soured. Back in those days the Internet boomed and the Gartner Group,which originally named ERP, redefined ERP into ERP II. ERP II includes six elements that touch onbusiness, application and technology strategy. They are:

(i) The role of ERP II.(ii) Its business domain.

(iii) The functions addressed within a domain.(iv) The kinds of processes required by those functions.(v) The system architectures that can support those processes and the way in which data are

handled within those architectures.These ERP II elements represent an expansion of traditional ERP and ERP II is essentially

componentized ERP, e-business and collaboration in the supply chain.


SUMMARY

The fundamental structure of ERP has its origin in the fifties and sixties with the development ofthe early inventory control (IC) systems and bill of material (BOM) processors. The progress continuedduring the seventies and eighties with the development of the material requirement planning (MRP)systems and the manufacturing resource planning (MRP II) systems. Traditional MRP and MRP-IIapplications may not be up to the challenges presented by manufacturers seeking to capitalize on thecompetitive advantage offered by an integrated supply chain, ERP, therefore, has evolved from itspredecessors to play an integrated role in the creation of a value chain.

REVIEW QUESTIONS

1. What is the origin of ERP?2. What are the pros and cons of MRP and MRP II?3. Compare and Contrast MRP and MRP II.4. How does ERP aid in better Supply Chain Management?5. What is Master Production Schedule?6. What are the functions of MRP and MRP II?7. How does the Bill of Materials influence MRP?8. What are the technical requirements of ERP?9. How is CRM related to ERP and SCM?

10. Is ERP the same as SCM? Explain.11. What are the inputs to MRP and MRP II?12. Propose a model to integrate ERP, SCM and CRM enabled with Internet.13. What is the purpose of Bills of Materials?14. What will be the next evolution to SCM in your opinion? Explain.

MRP MRP II ERP SCM ?

ERP Modules

3

OBJECTIVE

• To highlight the various modules in an ERP system.• To describe the functions of various ERP modules.

EXPECTED OUTCOME

The readers will be able to:üü Understand the Business Environment.üü Utilize the functionality of various ERP modules.üü Effectively use ERP software through appropriate modules.

All the ERP software is provided with either a single module or a set of modules based on the requirementsof the client/customer. It all depends on the organization going for ERP implementation. The numberof modules will also vary from one ERP package to another. If the organization decides to completelyreplace its existing system with a complete integrated system it will pick up an ERP package with allfunctionalities. If it decides to replace a part of its existing system, then it will pick up the requiredERP module enabled with the required functionality. Then due customization is done to the selectedmodule to meet the exact requirements of the customer. This is how the ERP modules selection takesplace. Among the ERP vendors also, there is huge competition in developing specialized individualmodules with excellent features for all the functions of the organization like finance, sales, HR etc.

The important reasons for selecting a particular ERP module and not preferring a completeintegrated system with all the ERP modules are as follows:

• Cost reduction• Specialized module• Reduced project duration• Less risk• Reduced resistance to change• The possibility of purchasing different modules from different vendors• More features, less training and easy maintenance


In the following sections we will discuss the functionalities of some of the important and commonERP modules offered by all the ERP vendors. They are Finance Module, Materials ManagementModule, Human Resource Management (HRM) Module and Sales and Distribution Module.

3.1 FINANCE MODULE

Finance pervades all activities of business - production, marketing, planning and the like. A knowledgeof economics, accounting, production and marketing is necessary to understand the finance function ofthe business. Finance includes investment decision, finance decision and dividend decision. There aretraditional and modern approaches to financial management. Financial management is concerned withnot only the adequate acquisition of funds at the appropriate time but also its proper utilization in theinterest of one and all.

Financial management as an independent discipline has become important in recent years. Thesize of the business and the importance of financial management of business go hand in hand. Thehealth of a business can be compared with the health of human beings. Blood is required to keep thehuman body in good health. In a similar way business requires finances to maintain its financial health.Hence, the study of the finance of the business and the management of finances become significant. Allaspects of the business may be broadly classified into finance, production and marketing.

Profit maximization is the financial objective of the firm wherein it takes into considerationtotal operating profit, accruing to shareholders which are in other words emphasis on total earnings pershare, which is financial welfare only without considering the owners economic welfare which isultimately objective of any shareholders. The Wealth maximization brings in economic welfare tothe shareholders. The wealth maximization means maximizing the net present value. Financialmanagement is an integral part of the overall management and is not a totally independent area. Itdraws heavily on related descriptions and fields of study, namely, economics, accounting, marketing,production and quantitative methods.

A knowledge of economics is necessary for financial managers to understand both the financialenvironment and the decision theories which underlie contemporary financial management. The outputof the financial management is the financial statements such as the balance sheet, the income statement,the statements of funds acquired, etc. This information will help the finance manager to assess the pastperformance and the future directions of the firm.

3.1.1 Financial Management and Other Related DisciplinesFigure 1 shows the relationship of financial management with the Accounting and other disciplines. Italso highlights the functions of financial management. The marketing, production and quantitativemethods are, thus, only indirectly related to day-to-day decision making by financial managers and aresupportive in nature while economics and accounting are the primary disciplines on which the financialmanager draws substantially. Although the importance of the financial management depends largely onthe size of the firm, financial management is an integral part of the overall management of the firm.

Figure 2 shows the organization of the financial management function in a large typical firm.Since finance is a critical functional area, the ultimate responsibility for carrying out financial managementfunctions lies with the top management. However, the exact nature of the organization of the financialmanagement function differs from firm to firm depending upon factors such as the size of the firm, thenature of its business, the type of financing operations, the ability of financial officers and the financialphilosophy and so on.


2. Investment management3. Cost controlling4. Treasury management5. Planning and forecasting

Accounting deals with ledger, trial balance, balance sheet, fixed asset, liabilities, accounts receivableand accounts payable, etc. Investment management deals with investment planning, investment budgeting,depreciation, simulation, monitoring the investment and controlling investment, etc. Cost controllingdeals with controlling the cash flow, funds flow, overhead cost, product cost and profitability analysis,etc. Treasury management deals with cash management, risk analysis, risk planning, risk management,funds management, etc. Planning and forecasting deals with preparation of budget, forecasting thebusiness expenditure, capital required, decision making, better business planning, and financial reportof the company to top management, etc.

Of all the subsystems of the Finance Module, treasury management and cost controlling are verymuch essential. The report provided by the software on these two domains of financial managementwill help the top management in decision making and creates a path for the organization to move in theright direction and to improve its financial strength. The main concern of the treasury management iswith the financing activities of the firm. The functions of the treasury management are:

(i) Financial report preparation(ii) Banking relationship

(iii) Investor relationship(iv) Short-term and Long-term financing(v) Cash management

(vi) Credit administration(vii) Investments and

(viii) Insurance.The cost controlling subsystem of the Finance Module provides the necessary information to the

top management at the right time. It monitors the accounting activities and controls it through propermeasures. The functions carried out by this module are:

(i) Financial accounting(ii) Internal Auditing

(iii) Tax calculation(iv) Introducing various cost control parameters and monitoring them(v) Preparation of Budget

(vi) Planning for future investments(vii) Economic appraisal

(viii) Controlling cash flow and funds flow(ix) Maintenance of accounts, and so on.Every enterprise will be interested to find its financial position and operational results periodically.

This module provides a platform to get this information very easily and accurately. The data initializationis done through voucher entry. This further helps to create quotations and order acceptance. There is afacility for creating and deleting the entries. Once the data is entered, the cash account is updated andwe can find the balances every day readily. Another advantage in the Finance Module of ERP software

ERP Modules 21

is that if an enterprise has multi-currency dealings one can monitor and record them separately. Thisalso helps in report to various agencies which are an obligation of the enterprise. The recorded transactionby virtue of the software gets posted automatically into the respective account heads in the ledger.While ledger accounts are posted, the trial balance report can be generated any time.

The advantage of Finance ERP Module is that the operating results of an enterprise can beascertained department-wise and product-wise. The break up of profit and loss can also be maintainedand reports can be generated. The assets and liabilities can be measured through this module. Effectivebudgetary control can be maintained using this module. Effective financial management also helps usto know where the money is due and payable which was very difficult in manual operations. Ratioanalysis can be done as per the needs of the enterprise and the performance of the enterprise can bedetermined. Further, a good security system is available wherein data entered in computer cannot beaccessed or modified without authorization. The finance module also accounts for quick and effectivepreparation of the payroll as and when there is a need. The significance of the finance module is that ithelps the top management in evaluating their impact and provides suitable guidelines. Several financialdecisions are taken based on timely and reliable data. The finance module enables the top managementfor decision making. It also enables the management to ascertain its financial status. It provides thefeatures to maintain the records, processes and provides reliable information whenever required.

3.2 HUMAN RESOURCE MANAGEMENT (HR) MODULE

An HR module is an important module in an ERP package. Many organizations prefer to replace theirexisting system by an HR module of ERP package. The HR module aims at automating the HumanResource Management activities and helps the organization to have a continuous monitoring overthousands and thousands of their employees. The HR module of an ERP package also helps theorganization to speed up the process, reduce the manpower in the HR team, effective decision making,significant forecast of human resource requirements, and interface with financial management, appraisingthe employees, training, and career advancement and so on. The HR module can do wonders to theorganization if it is used effectively. Human resources are heterogeneous. Human beings behave inwidely different and complicated ways. Hence the need for packaged software like the HR ERP Modulewhich reaches the organization as a pack and provides all that it requires and deserves.

3.2.1 Functions of HR ModuleTwo kinds of functions are carried out by HR module. They are: (1) Managerial functions (2) Operativefunctions. The Managerial functions of HR involve the following:

1. Planning2. Organizing3. Directing4. Controlling

The Operative functions of HR involve the following:(a) Employment(b) Human Resource Development (HRD)(c) CompensationPlanning is an outline of the future course of action. Failure to plan is equivalent to planning to

fail. Planning in HR involves determination of personnel programmes and changes in advance that

ERP Modules 23

Employment is the first operative function of the HR module. It covers functions such as jobanalysis, human resource planning, recruitment, selection, placement, induction and internal mobility.Job analysis is the process of study and collection of information relating to the operations andresponsibilities of a specific job. Human Resource Planning is a process for determining and ensuringthat the organization will have an adequate number of qualified persons, available at proper times,performing jobs which would meet the needs of the organization and which would provide satisfactionfor the individuals involved.

Recruitment is the process of searching for prospective employees and stimulating them to applyfor jobs in the organization. Selection is the process of ascertaining the qualifications, experience,skill, knowledge, etc of an applicant with a view to appraising their suitability to a job. Placement is theprocess of assigning the selected candidate to the most suitable job. Induction and orientation are thetechniques by which a new employee is introduced to the practices, policies, purposes, people, etc. ofthe organization.

HRD is the process of improving, changing and developing the skills, knowledge, creative ability,aptitude, attitude, etc. based on present and future job and organizational requirements. Performanceappraisal is the symbolic evaluation of individuals with respect to their performance on the job andtheir potential for development. Training is a systematic process by which employees learn skills,knowledge, abilities or attitudes to further organizational and personal goals.

Management development is the process of designing and conducting suitable executabledevelopment programmes so as to develop the managerial and human relations skill of employees.Career Planning and Development is the planning of one's career and implementation of career plansby means of education, training, job search and acquisition of work experience. Incentive is the processof formulating, administering and reviewing the schemes of financial incentives in addition to regularpayment of wages and salary. Fringe benefits include housing facilities, educational facilities, conveyanceallowance, etc. The management provides social security to its employees in addition to the fringebenefits.

Nowadays, the trend in project management is toward people management. Today, HumanResources Management (HRM) plays a strategic role in business. Implementing an ERP project involvesnumerous individuals, internal and external experts, and integrates different interest groups acrosslocations. Companies agree that people challenges are more difficult to manage than any technicaldifficulties they encounter. Today, HRM is being renewed in organizations and becoming one of thefundamental functions of project management. HRM has changed from an inactive and problem-solving role to a strategic, focusing on the retention and development of the best human resources.Traditional HR practices consisted of activities such as payroll, hiring activities, records management,and reporting and termination activities and their similar activities. Nowadays, HRM takes more of afull service role providing employee support beyond pension planning and career development. Withthe arrival of ERP systems, HR functions became fully integrated with the other operations of theorganization.

3.3 MATERIALS MANAGEMENT (MM) MODULE

The Materials Management (MM) Module is the preferred module for most of the manufacturingcompanies than any other ERP module. The main difficulties faced by these organizations are the poormaintenance of stock, inabilities to meet the deadlines and to provide smooth services to the suppliers


and to ensure proper service to the customers and so on. The MM Module of the ERP package isprovided with all these features and helps the organization to have its inventory properly managed andmonitored. Based on the MM Module reports, the top management can take suitable steps to improveits position to retain suppliers and customers, who are the backbone of any manufacturing company.The MM Module is the central point of operating logistics containing the essential integrated functionsfor:

• Inventory management• Material requirements planning (MRP)• Purchasing• Warehouse management• Vendor evaluation• Invoice verification• Product costing

Materials Management could be regarded as the function responsible for the co-ordination ofplanning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so asto provide a predefined service to the customer at a minimum cost. The objective of the MaterialsManagement module is:

(a) Reducing cost of material(b) Extending full support to suppliers(c) Ensuring right quantity, right quality and right price at right time for purchase(d) Effective controlling of inventories leading to release of working capital to other useful

purposes without disturbing the production schedule for want of materials(e) Materials planning(f) Purchasing of materials(g) Receiving and warehousing(h) Store administration(i) Inventory control(j) Standardizing variety reduction(k) Simplification, product development(l) Make or buy decisions

(m) Quality control for inspection(n) Disposal of scrap surplus and obsolete materialsMaterials Management is an area of management which helps the manager to improve the

productivity of capital by reducing material costs, preventing or minimizing large amounts of capitalbeing blocked up for long periods and improving the overall capital turnover ratio. If MaterialsManagement is done poorly then it has the potential to eat away a major portion of the capital of thecompany leading to a loss situation and eventually to winding up the company.

The Materials Management Module helps in Inventory planning. Inventory planning is theinformation repository for all planned material transactions. It has information on all expected receiptsand demands. This information is the basis for planning supplies to meet future demand. All materialtransactions that affect the stock either by inventory, sales, purchase, production, maintenance affectthe disposition. Disposition facilitates the supply of material against expected demand and this acts as

ERP Modules 25

an aid to JIT (Just-in-Time). Using disposition the user can address the business needs like online stockavailability, earliest available date for a given quantity, viewing the demand and supply details for anitem or variant. All the organizations are striving to have a balance between inventory levels andcustomer satisfaction.

The Inventory management of any enterprise needs to ensure the following:1. Adequate inventories of finished goods to meet the demand for prompt customer services.2. Adequate inventory of materials to maintain smooth flow of production operations and3. Keeping the money blocked in inventories at a reasonable level.

Poor inventory management can cause much drain on profits. Funds frozen in excessive stocksare denied for current operations which have to be finished by borrowing at substantial costs. Extrainventories would involve additional storage space and extra costs on insurance, handling and inspection.These categories of costs known as 'carrying costs', tend to move in proportion to the quantity ofinventory holdings and excess inventories will necessarily depress the profits, Inadequate levels ofinventories can cause stoppages of production affecting sales and profits.

The objectives of effective inventory management are as follows:• Ensuring regular supply of materials to facilitate uninterrupted production• Maintaining adequate stocks of raw materials to meet situations of scarcity or mounting

prices• Ensuring prompt delivery to the customer through ensuring adequate stock• Optimizing inventory ordering, carrying and stock-out costs

There are three motives identified behind holding inventories. They are:• Transactions motive• Precautionary motive• Speculative motive

The transactions motive is to facilitate smooth production and sales operations. The Precautionarymotive is meant for protection against unexpected changes in demand and supply. The Speculativemotive is meant for utilizing the advantage of price fluctuations by increasing or reducing inventories.

Effective inventory management can be carried out by the following procedures. They are:(a) Preparing a list of classified items in inventories.(b) A.B.C (Always Better Control) analysis of inventory items.(c) Maintaining stock levels for all items.(d) Continuous process management and monitoring(e) Introducing evaluation process through inventory ratios.

3.3.1 Organization of Materials ManagementThere are three ways of organizing the materials department. They are:

(a) Based on commodities(b) Based on locations(c) Based on functionsIn (a) the classification is based upon the nature of the items like raw materials, spares, finished

goods, imported items, etc. In (b) there are two ways of organizing the materials department namelycentralized, decentralized and the combination of the two. In (c) the internal structuring of the materials


department is done keeping in mind the function to be carried out. The basis can be (i) stores, (ii)purchase, (iii) transport, etc. In an integrated set up, the materials manager who is responsible formany interrelated functions is in a position to exercise control and to coordinate. This will result inproper balance of conflicting objectives of individual functions.

The Materials Management Module accounts for proper Inventory Management. Inventorymanagement is a continuous process. Inventory control is the process of maintaining the optimumneeded quantity that is sufficient for smooth operation of the organization. Once the items that are tobe manufactured are identified, and once the production planning system has prepared a productionplan, the material management module will prepare purchase orders for each and every item takinginto account the lead-times and when the items are required for production. If the purchasing processhas to go through the invitation of quotations, vendor selection etc. the system also does that. Sincemost suppliers are also connected to the organization's system as soon as a purchase order or requisitionis issued, the supplier's system is updated with that information. Hence the supplier knows what itemsare to be supplied and when. Since activities like preparation of contracts, issuing of purchase ordersand payments happen through the system electronically, the time saved is phenomenal. ERP 'systems,by virtue of their integrated nature and by the use of latest technologies, reduce the lead-times andmake it possible for the organizations to have the items at the time they are needed.

3.4 SALES AND DISTRIBUTION MODULE

The Sales and Distribution Module of an ERP package helps the organization to achieve its businesstargets through its key elements mentioned below. The organization needs to maintain its customers'details, order details and supplier details. Then, the product once billed, it has to be properly delivered.Determining the cost of the product involves pricing strategies adopted by the company. Based on thecustomer's order suitable purchase orders have to be placed to the suppliers at right time to ensureproper delivery to the customers. All these activities will take place continuously and should be monitoredand necessary directions have to be given to the concerned departments of the organization for smoothfunctioning of the sales and distribution process. The key elements of the Sales and Distributionmodule are:

(i) Selling(ii) Shipping

(iii) Billing of Product/Service to Customer(iv) Master Data Management(v) Customer's Order Management

(vi) Pricing StrategiesFigure 6 shows the activities involved in the Sales and Distribution Module. It shows the relationship

of the Sales and Distribution Module with the Materials Management Module and the Finance Module.The three major processes involved in the Sales and Distribution Module are: [1] Sales [2] Shippingand [3] Billing. In this process, the shipping activity is linked to Materials Management and the billingis linked to the Finance Module. The set of events that takes place between a customer and a supplieris coined as Sales.

From figure 6, we find that the customer first conducts an inquiry about a product. Then, he getsthe quotation from the supplier. After scrutinizing the quotation, he places an order with the supplier.Then the supplier delivers the product through the materials management department and billing is


The task of the marketing manager is to make use of the Sales and Distribution Module of ERPpackage to decide the objectives of pricing. Pricing objectives provide guidance to decision makers informulating price policies, planning pricing strategies and setting actual prices. The most importantobjective of the companies is to have maximum profits. The sales and distribution module of the ERPpackage will enable the top management evaluate the following: (1) Market penetration (2) Pricestabilization (3) Market share (4) Profits maximization (5) Cash flow (6) Funds flow (7) Forecastingdemand (8) Analyzing the market and (9) Discounts etc.

The sales department receives orders from customers. Generally for a manufacturing organization,there are one or more sales points for receiving customer orders from different geographical locations.All these sales orders are routed to the production department. It may also take orders that are expectedwithin a short time from prospective customers. These orders are segregated under the following typesand sent to production as demands for the current period. Sales orders are usually classified as NormalSales Orders, and Abnormal Sales Orders.

The role of the sales department is vital. The effective utilization of the Sales and Distributionmodule of the ERP package depends solely on how these people scrutinize the orders from the customers.Sales team members may take all the orders that are almost finalized from the customers or expected tobe finalized in the near future and raise sales orders from them. These are translated into sales demandsand are placed on production. Even though the orders are still in a planned stage, the productiondepartment would make itself ready to service these demands. They are firmed up once the usersconfirm their orders. The planning done based on the sales forecast is used to service these demands.

The Sales and Distribution module of the ERP package also accounts for forecasting the demandfrom the customers. Only based on this forecast, the Sales Department can give necessary directions toother relevant departments in the organization. The Sales Department also classifies the orders fromthe customers to provide them better services and to retain the bulk orders from the customer and givethem higher importance than the usual orders. Sometimes there can be a sudden rise in the demand forproducts. There could be more customers' orders than forecasts. Such orders are termed as abnormalsales orders. These orders may be given priority over the planned and firmed up sales orders. Based onthe importance of the customer also, we can classify a sales order from a customer as an abnormal salesorder.

SUMMARY

ERP is very complex, as a subject. It marries technology, business practices and organizationalstructures. ERP systems are commercially developed software applications that integrate a vast arrayof activities and information necessary to support business operations and operations planning at thetactical level. ERP is software and not a business process or a set of business processes. Although oftenpresented as a single package, an ERP system is an envelope around numerous applications and relatedinformation. For manufacturers, those applications typically support the operation processes of materialssourcing, manufacturing planning, and product distribution. Given their broad organizational andfunctional scope, ERP systems are unlike any other contemporary commercial manufacturing applications.They provide transaction management from both the business perspective and a database perspective.Additionally, they enable the top management for decision making at right time.

ERP Modules 29

REVIEW QUESTIONS

1. Name the various ERP modules and their significant features.2. Why are the HR module and the Finance Module of ERP package preferred mostly by the

customers?3. How does the Finance ERP module help the top management in decision making?4. What are the functions of the Finance Module?5. What are the activities in the Sales and Distribution Module?6. What is Material Management? How does this module help the organization to increase its

profitability?7. What are the objectives of Inventory Management?8. How does an effective Inventory Management system aid an organisation?9. What is HRM? How does it differ from HRD?

10. What are the subsystems of an HR Module? Explain.11. What are the functions of an HR Module? How does it execute the recruitment process?12. List the applications of Information Technology in Financial Management.13. Suggest suitable measures to evaluate a particular ERP module.14. What are the factors influencing customers while selecting an ERP module?15. Prepare guidelines for improving the functionality of the various ERP modules.16. What are the factors influencing the Sales and Distribution module?17. What are the major types of Financial Management decisions that business firms take?

Explain.18. What are the limitations of Finance Module?19. What is the role of Financial Manager in Management of Inventory?20. Arrange the following modules of ERP software in terms of complexity, cost, features/

importance and percentage of usage.(a) Finance Module (b) HRM Module(c) Sales and Distribution Module (d) Materials Management Module

ERP Software Selection

4

OBJECTIVE

• To highlight the issues in selecting an ERP software

• To learn the guidelines in ERP software selection

EXPECTED OUTCOME


üü Address the challenges in ERP software selection

üü Provide consultancy to customers in the process of ERP software selection

ERP software selection has become a buzz word in the IT industry. Earlier there were only a few ERPvendors. But nowadays there are so many ERP vendors providing solutions to the companies at lesscost. Hence the question of selecting a right ERP vendor is becoming complex. Selecting the rightvendor will solve most of the problems and will also help the customer to very easily get through thevarious phases of ERP implementation. There are customers doing different business and using differentERP products for each one of them. This shows the competition that exists among various ERP vendors.The customers are of the opinion that it is difficult to have a single vendor to provide solutions to alltheir businesses and hence the selection of ERP vendors includes the main criterion as the area ofspecialisation of the various ERP vendors.

There is general agreement in the industry that software components will bring profound changesin the way that software is delivered. The application package vendors have started to respond to thischallenge and those that are successful will in time become true component providers themselves,having rearchitected their products into sets or kits of components. The service layers that many of thevendors have introduced to date will rapidly become inadequate, as componentized products exhibitvastly superior adaptability characteristics demanded by the fast-moving e-business and e-commerceenvironments. Tomorrow's customers will demand the ability to buy, reuse, and build their competitiveedge solutions to fit their needs, because they know this is a key business differentiation.Componentization will become a key business productivity action for suppliers and consumers in theapplication market.

ERP Software Selection 31

4.1 ISSUES IN ERP SOFTWARE SELECTION

The consultants have got a major role to play in selecting the ERP product offered by various ERPvendors. The company deploys functional consultant and technical consultant in this process. Thefunctional consultant takes up the role of looking into the business processes of the organization goingfor ERP implementation. The technical consultant takes up the role of resolving the technical defectsarising during the ERP implementation. In order to make the ERP software selection process simpler,more peopler at various capacities are deployed namely the solution architect, the functional consultantand the technical consultant. These people work together and ensure that the ERP product chosen forimplementation will meet the challenges put forth by the customer and will serve their needs. As thecost of the project is high and the volume of the project when compared to the traditional softwareproject is high, these resource people's role is becoming mandatory. There are various reasons thatmake the ERP software selection process complex. They are:

• Lack of clarity about the customers' requirements.• Complexity in the business processes.• Increased number of ERP vendors.• Lack of better planning.• Resistance to change.• Project cost.• Integration, Upgradability, Adaptability and Applicability of software.

4.2 ERP SOFTWARE SELECTION CRITERIA

The ERP software selection criteria vary from one organization to another based on their size (small,medium and large). Based on the existing system, exact requirements, project cost, and nature ofbusiness process, the ERP software selection will vary. There are numerous factors to consider whilechoosing an ERP product from an ERP vendor. They are:

• Increased transparency and better information flow.• Easy maintenance, adaptability and flexibility of software.• Reduced cycle time and lead time.• Process improvement.• Enabled with multi-lingual and multi-currency features.• Increased customer satisfaction.• Modular architecture of software.• Higher software reliability.• Market position of vendor.• Implementation of desired business processes.• Operating system independency.• Ergonomic software.• Highly user friendly.• Improved innovation capabilities.• Meeting Customer Needs.• Improved E-Commerce support and Improved Internet services.• Reduced customization.


4.3 METHODS IN ERP SOFTWARE SELECTION

There are four different ways by means of which an ERP product can be selected. They are:1. The decision is made by top management with the inclusion of external consultants.2. There is a centralized type of selection process in place, characterized by a strong focus on

the IT and organizational department with only little participation of other internal departmentsand no employment of consultants.

3. The decision is made taking into considerations the suggestions given by several departmentsof the organization whether they are going to be a user of the ERP system or not.

4. Using a combination of all the three steps given above as when there is a need.

4.4 COST BENEFIT ANALYSIS

As soon as the top management is confident that they have a reasonable understanding of the newplanning process in an overall sense, it is time to carry out a cost and benefits analysis. It should bestressed that this is an analysis, not a justification, because the team will not proceed if the analysis isunfavourable. It should also be made clear that they will re-visit the analysis after the project iscomplete to ensure they have cashed all the benefits. First there will be hardware and software costs. Atthis stage the choice of the system may not have been made. It would do no harm to put in a fairly highestimate obtained by talking to any of the software companies. There will be a one time capital cost andan on-going annual fee for new releases. Every effort should be made to resist the temptation tocustomize the package. There will also be an ongoing maintenance cost to install the upgrades alongwith further customization. The programming cost will depend on the size of the company. Manycompanies do not go any further than these costs to arrive at the cost of the project. It would, indeed,be possible to change the current planning system for the new planning system without any additionalcosts. Unfortunately, such implementations fail to reap the benefits of the ERP system.

Allowance should be made for external education and training in the initial phase. As well as theinitial cost of education and training, there will be an on-going cost of training new recruits and foradjusting the process as the business changes. An allowance of 25% per annum of the start up trainingand education cost is a good estimate. Many companies start out with the intention of not having a fulltime project leader. As a rule of thumb, a project team of three people is necessary for companies withupto 300 employees. One more project team member is needed for every 200 employees. Finally thereshould be a miscellaneous allowance of about 10% of the cost so far. This is one cost that is almostalways overspent! One of the most common causes of delay is the decision on which software packageto use. The fact is that success or lack of it has almost nothing to do with software. It all depends on theguidelines that we follow in selecting an ERP software package.

4.5 ERP SOFTWARE SELECTION PROCESS

The ERP software selection process is divided into four phases:Phase 1 - Initial requirements.Phase 2 - Developing the short list of candidate solutions.Phase 3 - Final selection.Phase 4 - Implementation planning.

ERP Software Selection 33

Phase 1 - Initial requirementsWe first want to get to know our team, tour the plant, and discuss the big picture concerning theproject. Next, we administer a series of questionnaires and conduct interviews with our project team.The information gathered during these sessions is used to develop a profile of the requirements of ourbusiness. This profile will be used in later phases, as we determine specifications to be used in selectingfrom the literally hundreds of ERP products available.

The outcome for Phase 1 is the “Top Ten List”. This is a list of the ten ‘best’ ERP systems for ourcompany. The great thing about this process is that, after we have created our requirements profile, itcan be used to help us evaluate any software product. Phase 1 should take less than 3 weeks, dependingon the availability of our management staff and project team.

Phase 2 - Developing the short list of candidate solutionsThis phase helps us establish a list of high-level differentiators, which will be used to compare thecandidate solutions. These will include quantitative factors, drawn from the critical requirements gatheredduring the questionnaire and interview process, as well as qualitative factors, drawn from more generalconcerns. Examples of qualitative factors could be: a number of installations of the product, availabilityof training, availability of support, etc. These differentiators will then be applied to all candidatesolutions.

The intent is to narrow the field from 10 candidates to 2-4. These remaining 2-4 candidates willbe the ones that will be scheduled for detailed demonstrations. Phase 2 should take less than 1 month,once again depending on the availability of staff.

Phase 3 - Final selectionDemonstrations are arranged and conducted, negotiations take place, and the final selection is made.The requirements profile, established in Phase 1, comes into play strongly here. When it's time toarrange for software demonstrations we take control from the beginning. We tell the vendor whatfunctionality we expect to see demonstrated based on our high-level requirements. This puts us incontrol of the demonstration process. We can let it be known up front that our list of 50, 75, or 100functions must be included in the demonstration. Phase 3 could take between 1 and 2 months dependingon how aggressively we go about demonstrations and negotiations.

Phase 4 - Implementation planningEvery software vendor has a plan to make their implementation succeed. And after going through thefirst three phases, they will have a better understanding of their business processes and the challengesthat lie ahead. Although no one can predict how long the ERP implementation will take, one can saywith confidence that it will happen faster, safer and more accurately if suitable methods are used duringthe ERP software selection phase.

The following factors are identified as the important factors influencing the ERP vendor selection.(Source: ERP Vendors)

Factors considered Percentage of importance

Functionality of the ERP package 24Vendor’s reputation 26Vendor’s ability to provide a complete solution 16Project costs 23

Future software maintenance provided by the ERP vendor 11


SUMMARY

In this chapter, we have highlighted the issues in selecting the right ERP package. There are somany ERP vendors' available nowadays providing effective ERP solutions. Both the role of functionaland technical consultants seems to be of higher importance and holding knowledgeable consultants willhopefully provide solutions to so many issues discussed here. As there are so many factors to considerin selecting an ERP package from an ERP vendor, it is suggested that the customers stick to themethods/guidelines generated through research conducted in this context and use it to reap the fullbenefits of ERP implementation. The ERP software selection also gets its importance from the viewpoint of the cost benefit analysis. Thus it is evident that ultimately it is the right ERP team which isgoing to guide us starting from planning till implementation during the ERP project. We also find thatthe criteria for selection of a particular ERP system also show different priorities. Further research isneeded to detail the differences in the implementation process and the actual usage of the selectedpackage later on.

REVIEW QUESTIONS

1. Define the term "software".2. What is cost benefit analysis?3. What are the different phases in ERP software selection?4. List the critical success factors in ERP software selection.5. Examine the role of technical and functional consultant in ERP implementation.6. List the factors influencing the ERP vendor's selection.7. What are the different ways by which ERP software selection is carried out?8. What is meant by candidate solution? How will you identify it?9. What makes the ERP software selection process critical?

10. What is the role of solution architect in ERP implementation?11. Visit the websites of a few ERP vendors and find out how they convince and impress their

customers' during the ERP software selection process.12. If you happen to be the top management for an organization, list the factors and issues which

you will consider while selecting an ERP package.13. What are the check points you have identified to ensure that you are on the right track during

ERP implementation?

ERP Implementation

5

OBJECTIVE

• To describe the different phases in ERP implementation.

• To discuss the issues and challenges in ERP implementation.

• To describe “What is customization in ERP?”

EXPECTED OUTCOME


üü Understand the ERP implementation lifecycle.

üü Visualize ERP implementation from three perspectives-Organization, Businessand Technology.

üü Turbo charge the ERP system.

The rules for doing business are redefined; the need for new business concepts have emerged and newbusiness goals are changing the demand towards the organization, the planning and the IT systemsthemselves. This raises a need for extending our understanding of the implementation process of the ITsystems. Organizational change has always been the barrier for the application of new technology, andthe full yield cannot be expected unless new integrated work processes are implemented as well. Theconcept of implementation is ordinarily related to installation of hardware and software. In the worldof ERP systems, “implementation” is often used as a term to describe a well-defined project spanningfrom the choice of the systems through the configuration and the training until going live, where thesystem is becoming operative. This is in reality the vendors and the consultant's view on theimplementation. In the company's view, implementation means a continuous learning cycle where theorganizational process supported by the ERP systems is gradually aligned with the business objectives.Concurrently the business objectives are taken even further, driven by the market dynamics but also bythe new internal opportunities.

The practice of implementation of ERP systems is flooded with stories of devastatingimplementation. It seems to be an accepted fact that ERP implementations never are on time, withinthe budget, and meeting the desired business outcome. This fact is supported by a number of surveys,and at the same time, we see increasing attention to the extended implementation process, the so called


“second wave”. This is why an understanding of the phenomena of implementation is an importantissue in the industry. Going live is not the end of the ERP journey.

The comparies claim that change management, training and BPR are deemphasized over the hardtechnical issues like project management, configuration and IT architecture. Only 20% of the companiessee Cost/Benefit analysis as a relevant activity and evidently 96% have difficulties in estimating thesuccess of the project. The main positive results from the implementations are the foundation forimproving the internal integration and the possibilities for business improvements.

5.1 APPROACHES TO STUDY ERP IMPLEMENTATION

There are mainly three different approaches to ERP implementation. They are:[1] ‘BIG BANG’ APPROACH.[2] LOCATION-WISE APPROACH.[3] MODULE-WISE APPROACH.In the ‘Big Bang’ approach, the organization decides to implement all relevant modules at the

same time. This approach will help the organization to reap the full benefits of the ERP system,because all the required modules to reflect the business processes of an organization are included in thisapproach. On the other hand, when we use this approach, the risk factors are also high. As the organizationis going to be completely replaced with a complete integrated system, the risk factors are high when thenew system fails. Hence due care is necessary to ensure that the ERP implementation goes successfully.This approach is also preferred by a few companies as they can bring in new business processes as wellas refine their existing system through the installation of a complete integrated system.

In the ‘Location-wise’ approach, the organization chooses a specific location, say, regional office,zonal office, head office, etc. This approach will enable the organization to reduce the cost of theproject and risk factors also. The duration of the project will also be considerably less as only a part ofthe organization is to be replaced by a new system. An advantage of this approach is that the companygets the feedback on the installation of the new ERP system into one of their branches/offices and onthis basis, the company will be able to make its future decisions on further investments on the ERPproject.

In the ‘Module-wise’ approach, individual modules are considered for ERP implementation.After reviewing the existing system, cost of the project, project duration, exact requirements, etc. thecompany shall decide to choose any individual module, say, the Finance module, the HR module, theMaterials Management module, etc. of their choice to suit their organization.

5.2 DIFFERENT PERSPECTIVES IN ERP IMPLEMENTATION

Now we shall discuss the ERP implementation from three different perspectives. They are:[1] Organizational perspective[2] Business perspective[3] Technological perspective

Organizational PerspectiveThe implementation of an ERP system is often said to be more organizational development thantechnological development, and it is more about people than about processes and technology. This

ERP Implementation 37

implies that seeing the implementation from an organizational perspective will contribute to a broaderunderstanding of the implementation process. Required skills and competencies are different fromwhat they were before the implementation, which implies that learning and knowledge are interestingissues to elaborate. Another issue within the organizational perspective is the understanding of the ERPsystem as an actor participating in the interaction within the organization, representing another discoursethan the ones existing in the organization, and thereby results in organizational changes. The powerand culture are a part of the implementation context and an implementation cannot be fully understoodseparated from the context from which the system emerged. The term context will be used to cover thehistorical, the organizational and the economical issues.

Business PerspectiveThe Implementation of ERP can change the processes and the organization, and/or it can lead tocompletely new business. This implies that seeing the implementation from a business perspective canbe a valuable contribution in the process of getting an understanding of the complexity. Theimplementation of ERP systems paves the way for a BPR. BPR is not a process done without problems,and a critical evaluation of BPR will take place. The implementation of ERP changes the organization,both radically and continuously. Managing these changes or Change Management (CM) can be difficult,and is often neglected by companies when implementing ERP systems. Change management is oftenused in the literature, but a clear definition is hard to find.

Instead of giving a clear definition of the term, we will present the themes within CM we findvaluable in relation to ERP implementation. The implementation of ERP systems is done withincompanies which have visions, and the system can support those visions. This implies that the systemsshould be planned, prioritized, designed and built according to the vision of the organization or an IT/IS strategy. The final issue within the business perspective, which we want to elaborate on, is thereforeIT/IS strategies.

Technological PerspectiveThe technological challenges when implementing ERP systems are great and an elaboration on whathas been written about technological issues in regard to ERP implementation is believed to contributeto a better understanding of the complexity in ERP implementation. The companies face challenges inregard to the architecture, infrastructure, configuration, customization, and the system itself. Thetechnological perspective will therefore elaborate on the system, the architecture and the infrastructure,the configuration and the customization of the systems and finally on how to organize the implementationbefore the system can go into operation.

Not all processes can be supported by the ERP system, which means that other software applicationsare necessary to add to the system. The architecture and infrastructure of the system has to do with howthe IT systems should be designed and built and since the ERP system easily becomes a large infrastructurethe architecture of the system should be sufficient. The configuration of the systems can later on causeproblems, because when once set it can be almost impossible to change it. The configuration of thesystem can then be a disabler for organizational change. The customization of the system can prolongthe time it takes to set-up the ERP system, raise the costs and last but not least make the updating andcollaboration with other systems more difficult. In relation to the technical set-up of the system ProjectManagement is needed. This will be the final issue elaborated on in the technological perspective.


Technology sees business as a set of performance objectives to be used as a design criterion fordeveloping a purposive system. Organization sees the business as one contextual parameter of theorganization. Business sees technology as a means to create competitive advantage. Organization seesthe technology as a tool for automating working procedures. Business sees the organization as somethingwhich should be modeled and managed to serve the processes, the strategy and the overall business.Technology sees the organization as a structural parameter in the systems design. The underlyingassumption is that a given organizational behavior can be designed using the proper mechanisms.

5.3 MINIMIZING CUSTOMIZATION

Customization is the core process for adjusting the software to fit the organization. In general, the teamshould avoid more radical approaches such as building interfaces to legacy systems or adding bolt-onsystems, although these measures are sometimes unavoidable. The team should never modify the baseof the system. More drastic forms of customization are critical because changes move the system awayfrom a packaged solution–and the organization away from the benefits it seeks to achieve. Also, technicalchanges are costly and can lead to schedule slippage because they are complex and need significanttesting. In addition, the team must reimplement them for each package release, which increases long-term maintenance costs.

After the blueprints creation, the customization phase of the ERP platform begins. Through thecustomization procedure, corporations are allowed to customize the deployment of the ERP platformto a sufficient level of detail, in order to meet their specific business needs. As in the blueprints creationstage, a number of problems exist here as well. A limited amount of available project time is again thebig issue. Problems that may occur can be summarized thus: During the customization stage, consultantsare tailoring the system according to the blueprints, while employees keep conducting their usualbusiness tasks. As it is the case, consultants are a unique source of information regarding the ERPplatform, mainly due to their experience. It would be best for employees to have the chance to take fulladvantage of them.

As the employees are not allowed to devote the necessary time to cooperate with consultants,important details that could be drawn from their knowledge are lost. It is also highly possible that theend users would not even be able to work productively with the new system in a majority of cases.Effectively, the limited training that would be offered during the training stage (the stage that followscustomization) would not be able to cover all the ERP system details. Because of that, external helpfrom consultants may be asked again, something that will cost time, effort and possibly money. Employeesdue to their workload may not allow themselves to test the system at this preliminary stage and findcustomization problems or blueprints mistakes.

Employees may easily become afraid that they will not be able to understand and use the ERPplatform. In addition, they may become more afraid that they will not be able to finish a number ofcritical business tasks on time. In the HR module for example, there isn't any way to postpone taskssuch as calculation of the employees' overtimes, and effectively not allow payroll to pay on time. Sincein such a case the impact on the organization's normal operation may be severe, fears such as thepreviously described ones may bring significant problems to the deployment phase since employeesmay not cooperate correctly with consultants. Even worse, they may not even try to use the new systemand continue to contact their business tasks with the proprietary systems previously employed.


Consultants, on their side, have deadlines to keep in order to honor the contract. This fact maytempt them to omit correcting errors that should be done in the system or in the blueprints, in order notto allow any project delays (of course they may come back to correct mistakes after the project end, butthen, time would be on their side and the possibility of a negotiation about a small contract aboutcustomization may arise as well). Common errors include minimal or no ERP customization at all, inthe business tasks that seem to be not very much in use. System limitations are an additional factor thatmay delay the project considerably. Sometimes, for example, organizations in order to be able tooperate in critical situations, may not take into account law legislation to its strictest limit.

It is a strong case that customization errors would be discovered constantly, since customizationis based on blueprints which are limited to the point of specifications that each employee had in mindat the particular time of the interview. Effectively, after sales support if allowed will ensure, that anyproblem concerning the ERP platform will not distract normal business operation and a good workingsystem would be used to realize the business process.

5.4 CHARACTERISTICS OF ERP SYSTEMS

When most people refer to the “core” ERP applications or “modules,” they mean the back-officecapabilities to manage human resources, accounting and finance, manufacturing, and project-managementfunctions. However, major ERP suites from Oracle, PeopleSoft, and SAP now provide much more–including modules for sales force automation, business intelligence, customer relationship management,and supply chain management. Although the objectives of our review, evaluation, and testing of thecontrol framework are the same, there are some significant differences between ERP and non-ERPsystems. These differences are:

• In ERP systems, certain control procedures leave no documentary evidence of performance.For some other procedures, the evidence of performance is indirect; it may be included inthe program logic or in the operator's instructions. Therefore, compliance tests may have tobe structured differently in an ERP environment and the observation of the client's proceduresmay become more important.

• In ERP systems, information is often recorded in a form that cannot be read without the useof a computer.

• Financial and business information is often generated automatically by ERP systems basedon data previously entered, without further human instructions.

• Errors that might be observed in non-ERP systems may go undetected because of the reducedhuman involvement in computerized processing. There is a danger that errors in processingmay be applied to a large number of transactions without being noticed.

• With proper controls, ERP systems can be more reliable than non-ERP systems. Non-ERPsystems are subject to random human error. Although computer processing will usually beconsistent, errors may still occur; for example, if the computer is incorrectly programmed.

• It is difficult to make changes after an ERP system has been implemented. Therefore, weshould be aware of the organization's plans to introduce significant new systems or to makemajor modifications to existing systems.

• It is advisable to review new systems or modifications before implementation so that apreliminary assessment can be made of the adequacy of control procedures, in order toensure an adequate audit trial, and to plan any necessary changes in the audit approach. ERP


systems vary from the simplest, batch-controlled type to complex integrated applicationsthat perform a number of functions simultaneously.

5.5 CRITICAL SUCCESS FACTORS FOR ERP IMPLEMENTATION

Companies are radically changing their information technology strategies by purchasing prepackagedsoftware instead of developing IT systems in-house. It was predicted that by 2000, two-thirds of allbusiness software will be bought off the shelf. More specifically, organizations prefer to replace legacysystems with enterprise resource planning systems. According to AMR Research, the ERP systemsmarket was $15.68 billion in 1997 and $72.63 billion in 2002. These statistics clearly indicate a shiftin the ERP market. There are mixed reports concerning the outcome of ERP projects.

ERP software automates core corporate activities, such as manufacturing, human resource, finance,and supply chain management, by incorporating best practices to facilitate rapid decision-making, costreductions, and greater managerial control. These factors make ERP software integration complex,because consensus is required from an entire enterprise to reengineer a core business process and takeadvantage of the software.

ERP systems are now the most common IT strategy for all organizations, and this framework hasbeen designed to help management plan this difficult and complex task. There are different approachesto ERP strategy ranging from skeleton implementations to full functionality. There are also importantdifferences in how organizations manage the gap between their legacy systems and the ERP businessprocesses. It appears easier to mould the organization to the ERP software rather than vice versa.Managers considering an ERP project should address the following issues:

Ø Status of the company's legacy systems.Ø Impact of new ERP system on their business processes.Ø Whether all the business processes are well defined and could be delivered through the ERP

system.Ø Whether to go for a complete integrated system or to implement any one ERP module for

the time being.Ø Duration of the ERP project and expected service from the ERP system to the customers.Ø Level of cooperation from the top management throughout the project.Ø Resource availability.Ø Project Scheduling and Change Management.

5.6 ASTONISHING FACTS IN ERP IMPLEMENTATION

Some companies implemented ERP software because they were concerned about Y2K Compliance.Others wanted to replace their aging IT infrastructure. One firm found that spending $30 million toimplement SAP would meet their Y2K-compliance goals and also support future business needs. Forother companies, systems integration was the critical issue. Mergers and acquisitions had left them withan inefficient and unreliable collection of incompatible systems. For example, one company found thatit had 23 different accounting systems, while another had 14 bills of material. This incompatibilitymade competing in a global environment almost impossible.

Most companies expected an ERP to reduce their operating costs. They also expected it to produceimprovements in specific processes, such as logistics, production scheduling, or customer service. In


other companies, management was more concerned about customer responsiveness. They wanted tostandardize processes to ensure quality and predictability in their global business interests by reducingcycle times from order to delivery.

Figure 1 shows the performance of the organization before and after ERP implementation andthe time taken to achieve the performance. All ERP packages provide choices about how to configurethe software, but they also make some assumptions about data flow through the system. During thedesign stage, you have to decide whether to accept these assumptions. This is different from traditionalsystems development in which you decide on processes and then build systems to support them. Mostlegacy transaction processing systems have linkages that serve as a bridge between systems. Systemusers control the access to the bridge and determine when and how systems share data. But ERP assumeprocess integration. The system absorbs the data, and users lose control over its flow. Managementsometimes resists the process changes an ERP requires. They may want to change their technologyplatform but not their organizational processes. But process change is inevitable with an ERP becauseyou have to fit the organization around the software.

Even with careful planning and training, going live usually is highly disruptive. Don't expect toimplement the system and then go back to life as usual; an ERP is a commitment to a new way of doingbusiness. Employees need training beforehand to understand how the ERP will change business processes.They may say, "Go away and let me do my job." But they need to know that's not going to happen.Because ERP implementation is expensive, the management is usually anxious to declare victory andmove on to other things. But the post-implementation stage is your opportunity to redesign and reengineerprocesses to make them more functional. Some of these changes could be viewed as hurting the businessin the short run. For example, sometimes processes that were automated become manual, which actuallyincreases resource requirements in some areas. Throughout the stages of ERP implementation, expectto encounter resistance. It's hard for people to change from doing things they know well and are goodat.

5.7 ERP IMPLEMENTATION STRATEGY

Now we will look into the ERP implementation strategy for small and medium sized companies. Formany companies, implementing an ERP package gives the impression that it is the answer to theirprayers because it promises so much-higher sales, better management, and reduced cost. On the contrary,implementing an ERP package could bring more headaches to the company because it may involvemany internal changes that require new business processing and employees have a hard time breakingtheir old habits. It is not recognizing the environmental and human factors that cause failure in ERPimplementation. The major reasons for failure of an ERP project are as follows:

• Most companies experience failure in their implementation because they had ambiguousobjectives and unclear expectations on what the implementation would bring to them.

• Lack of management commitment can occur because the top management has littleunderstanding of information technology and the value it could bring to the workplace.

• One of the key responsibilities of a project manager is to execute the project to its completionand meet deadlines through timely resolution of a multitude of conflicts.

• If the project manager fails to persuade the resisting party into providing support or at leastinto remaining neutral during the project, there will be constant introduction of issues andconflicts, and the project will fail.


• Inadequate levels of skill, experience, or teamwork of the project team members impedeprogress.

Deploying an ERP solution means that the company will no longer depend on existing businessprocesses and will adopt new and improved methods and processes offered by the ERP system. Toachieve successful ERP implementation, the project team must persuade the top management for theirfull support with the following guidelines in mind:

1. The top management must declare that all departments unconditionally adopt the processesand functions provided by the ERP system.

2. The top management must approve all major modifications to existing functionality, and thecorresponding section head must submit the reasons for modification and the plan directly tothe top management.

3. To consider the following factors for process innovation:(a) Adding new business processes(b) Eliminating existing business processes(c) Modifying the business processes

Figure 1

These three guidelines will help the organization to have a successful ERP implementation.When a new integrated system is to be introduced, applying these guidelines will help the company toidentify the redundant processes, refine the existing processes and modify the existing processes to getbetter features and value. Thus we find that it is the sole responsibility of the top management to ensurethat the different phases of ERP implementation go smoothly and successfully.

Normally in case of small and medium sized companies, the employees will show resistance touse new systems like ERP software, which includes new business processes and require adequatetraining to carry out their operations. As the system is capable of reducing the human resources, theemployees' may not like the system. It is quite natural, but the top management has to bring into their


minds that the new system is meant for improving the performance of the organization and not forreducing the manpower. Also until adequate training is provided to the employees, it is difficult to reapthe benefits of the new ERP system. It is the sole responsibility of the top management to bring theiremployees into their fold and ensure that they feel comfortable with the new system.

5.8 PHASES IN ERP IMPLEMENTATION

The System Development Lifecycle (SDLC) used for developing a software consists of the followingfour phases. (1) Analysis (2) Design (3) Coding and (4) Testing. The ERP implementation is differentfrom the SDLC. In ERP implementation, the software is not going to be developed from the scratch.The software exists as a pack and all that is required is to customize as per the requirements to someextent. The most important aspects considered are identification of the ERP vendor who could delivera right ERP package, evaluating the package, suitability of the package to meet the requirements,identification of ERP project team, identification of consultants, training, maintenance, etc.

The different phases in ERP implementation are:• Project Planning• Identification of ERP Vendor• Evaluation of ERP Package• Gap Analysis• Reengineering• Customization• ERP Team Training• Testing the Product• Going Live• Training to End-Users• Maintenance

Project PlanningThis is the first phase in the ERP implementation. In this phase the top management will prepare theproject plan for ERP implementation. This phase will provide the details on the commencement of theproject, project duration, project cost, budget, ERP team to be deployed from the organization, technicaland functional consultants, ERP vendors in the market, ERP packages available, training requirements,change management, etc. It is the top management which will be the motivating force behind the ERPimplementation. The top management cooperation and ability to execute decisions dynamically willhelp the implementation to go smoothly and healthily.

Planning is an outline about the future course of action. There is a statement "Failure to plan isequivalent to planning to fail". Most of the ERP projects fail miserably because of poor planning andimproper coordination from the top management. The planning must be done ahead of the implementationand the last minute preparation will not work out in case of the larger software projects like ERPsoftware implementation. Most of the projects fail as the project extends beyond the fixed date anddeviates from the project schedule. Whenever the project schedule is not maintained, most probablythe team will crash the various activities and compress the rest of the activities to meet the deadlinefixed for going live. This is the area where the project is getting weakened and starts reacting as andwhen the project is completed and delivered to the end-users.


ERP has to provide timely and accurate production-oriented information for long-range planningand day-to-day operational planning and control. It has to improve productivity and enhance thecompetitive edge by optimizing the use of resources. A well-designed and implemented ERP systemshould help reduce the production manager's problem. However, not all ERP implementations succeedfully. The top management should involve itself in all the stages of the implementation of ERP, reviewthe results and take appropriate follow-up actions. Only then ERP will be effective in any organisation.

It is essential to have a 'road map' in mind in terms of how and when ERP would address eachpart of the organisation. The factors to be considered in this process are: the organisation's readinessand willingness to change, top management's commitment, data status and readiness, competencydevelopment, strategic planning and vision for the project, ability to deploy top class professional forimplementation.

"Understanding the problem" is the first phase in ERP implementation and the goal of this phaseis to establish the foundation that permits the software package to be implemented in the best possiblemanner. It is necessary to understand the kind of business the company conducts and how the packagewill fit in with the business's processes. The most common reason that companies walk away frommultimillion-dollar ERP projects is that the software does not support one of their important businessprocesses. At that point they can change the business process to accommodate the software, which willmean deep changes in long-established ways of doing business and shake up important people's rolesand responsibilities. Or they can modify the software to fit the process, which will slow down theproject.

Identification of ERP VendorThere are so many ERP vendors nowadays in the market. Each and every vendor has his own way ofdeveloping packaged software and some of them are known for certain ERP modules also. Hence atough competition exists and identifying the right ERP vendor will provide solutions not only to thebusiness process of the organization but also will help the ERP team to carry out the ERP implementationsuccessfully. The following factors are considered while choosing an ERP vendor. They are:

[1] Reliability of the vendor[2] Ability to meet customer’s requirements[3] Functionality of the ERP package[4] Vendor’s reputation[5] Vendor’s ability to provide a complete solution[6] Project costs[7] Future software maintenance provided by the ERP vendor[8] Ability to handle customization[9] Project duration

[10] Training facilities

Evaluation of ERP PackageThis phase enables the top management and the ERP team to evaluate the ERP product from variousERP vendors from the organizational, technical and business perspectives. The role of technical andfunctional consultants will be on a large scale during this phase and the evaluation has to be donecarefully. Proper evaluation will lead to the identification of the right ERP package and will help theERP team to carry all the rest of the phases in ERP implementation successfully.


Gap AnalysisGap Analysis is the step of negotiation between the company requirements and the functions a packagepossesses. In order for persons with differing viewpoints involved in a project to function as a team,and to push ahead smoothly, it is effective to invite outside consultants who can act as a neutral personto resolve conflicts and can push the project ahead, while giving direction on the whole.

Gap Analysis is a phase in the ERP implementation, where the organisation tries to find out thegaps between the company's existing business practices and those supported by the ERP package.Solutions for Gap analysis exist in different forms like identifying a third-party product that might fillthe gap, designing a custom program and altering the ERP source code.

Figure 2

Reengineering and CustomizationDr. Michael Hammer defined Business Process Reengineering (BPR) as the fundamental rethinkingand radical redesign of business processes to achieve dramatic improvements in critical, contemporarymeasures of performance, such as cost, quality, service, and speed. One of the most important membersof the reengineering effort is the executive leader. The leader must be a high-level executive who hasthe authority to make people listen, and the motivational power to make people follow.

Without the commitment of substantial time and effort from executive-level management, mostBPR projects cannot overcome the internal forces against them and will never reach implementation.After having completely studied the existing system, the business process of the organization will berefined during the reengineering phase. The additions of new processes, elimination and/or modificationof existing processes are all possible during reengineering phase.

Customization is the most important process which has to be executed very carefully. One of themain causes for the high degree of customization is the poor change management adopted by thecompany. Resistance to change will always be there in any organization and it is the sole responsibilityof the top management to ensure that the new systems like ERP software are deployed with littlecustomization, failing which the ERP product at one stage will be turning into a non-ERP product andthe implementation will not help the organization to reap the full benefits of an integrated system. Thepoor customization is another reason for ERP failure.

The customization process has to take into account the following parameters;1. End-users’ requirements2. Technical requirements of the product and3. Vision of top management.

The higher the degree of customization, the lower will be the benefits from the ERP system,because the packaged software is purchased and installed mainly to refine the existing business processes,


standardize the existing system and to improve the overall performance of the organization. Highercustomization will close the doors for the organization to enjoy these features of integrated software.

ERP Team TrainingFigure 3 shows the organization of the ERP Implementation team. The Project Management Teamcomprises of the technical leader and the executive committee head. The team can also have a seniorrepresentative from the vendor's team. These people are responsible for conducting the scheduledwork, administering the project, communicating with the in-house team and the consultants, and reportingto the executive committee. The executive committee head should monitor the implementation team'sprogress, assess the amount and quality of the contribution of the team members-and discuss the issueswith the consulting team's head. This person should also ensure that the company personnel and theconsultants are working together as a team.

Each implementation project is different and will have its own characteristics. To get the mostfrom the software, we have to get people inside our company to adopt the work methods outlined in thesoftware. If the people going to use the ERP find that the work methods embedded in the software arenot better than the ones they currently use, then they will resist using the software or will want IT tochange the software to match the ways they currently do things. This is where ERP projects breakdown.

Figure 3

Delivery and Going AliveAfter the reengineering and customisation phase, the product will be getting ready for going livethrough the testing phase. The product will be put into test to check for its consistency, integrity,validating and verifying the requirements of the customers, reliability, etc. Once the going live date isidentified, the product will be delivered and the necessary training will be given to the end-users. Oncethe product starts functioning the maintenance activity will also commence in parallel at the site of theorganisation. After a few months from the date of going live, the organisation will be able to reap thebenefits of the ERP software.


5.9 BENEFITS REALIZATION IN ERP IMPLEMENTATION

Figure 4

The end users will not be able to reap the full benefits of the ERP software immediately after theimplementation. It will take some time and even a year to realize the benefits. When the end users arein the going live phase of the ERP implementation, the first and foremost realization of ERPimplementation will be the automation of existing processes.

Unlike the existing manual system with so many redundant processes, the new system will enablethe end users to complete a particular process in a short time and even some of the procedures followedearlier could be avoided. This is the visible and tangible benefit an employee can expect from the ERPsoftware immediately after its implementation. Step by step as the days go the other benefits can berealized.

At the second level, the end users will be able to see the improved processes getting reflectedfrom the ERP software. All the existing processes will be pumped through ERP software only aftercomplete refinement and re-engineering. Hence the employees will be visualizing the improvement inthe existing business processes.

At the third level, the end users will get the directions from their ERP software in the process ofdecision making. Now, the middle and top levels of management are enabled with decision supportsystem to make suitable decisions for the benefit of the organisation based on records and data availablefrom the ERP system. Once an integrated system like ERP software is installed, the employees will beable to fetch any data at any point of time at their door step and can make suitable decisions as andwhen there is a requirement. This is an added advantage in an integrated system.

Only after passing through all these three levels, the end users will be able to recognise thetangible and intangible benefits of ERP software. Once it is realized, the employees can do wonderswith it and can get data from the software at any point, at any level from anywhere and can use it toarrive at a decision. This will also help them to monitor a set of activities, to meet the deadlines ofcustomers' orders, to reduce the cycle time, to reduce the lead time, to increase the speed of varioustasks, to eliminate the duplications and in total, this will help the organisation to take InformationTechnology (IT) to all their employees'.

5.10 CHANGE MANAGEMENT ISSUES

Whenever a change has to be made, it is necessary to analyze its impact on various parts of thesoftware. Imagine modifying the value of a global variable. Every function that accesses the variablewill be affected. Unless care is taken to minimize the impact, the software may not behave as expected.Change management is one of the core problems of software development. Management of changes to


any software document means (1) managing the process of change as well as (2) managing all artifactsof an evolving software system. Both aspects serve as motivation for an integrated modeling approachto support process and configuration management in a process-centered software engineeringenvironment.

The technical view of Software Configuration Management (SCM) provides mechanisms andfunctions to control versions of software objects, to build derived versions, and to construct consistentsoftware configurations. On a technical level, it supports performing changes by different mechanismslike workspace control, long transactions, or sub-databases. But all of them lack sophisticated processsupport, although some process-oriented features have sometimes been added. Currently, process supportis of growing interest in software configuration management.

The management view of SCM focuses on the organizational and administrative aspects of SCM.As part of the overall management of a software project, SCM provides methods to handle changerequests, and to perform changes in a controlled manner by introducing well-defined change processes.Furthermore, it supports monitoring the status of the software components.

SUMMARY

The purpose of the ERP implementation is to shed light on the processes of an organisation inorder to gain competitive advantages of new technologies and to improve the performance. The processfocus allows us to say something about the plethora of problems and challenges that managers face andhave to solve in order to gain sustained ERP advantages. We need to know more about the processes,which the organisations go through when they invest in, nurturing and exploiting ERP systems. ERPhas to provide timely and accurate production-oriented information for long-range planning and day-to-day operational planning and control. It has to improve productivity and enhance the competitiveedge by optimizing the use of resources.

REVIEW QUESTIONS

1. How will you minimize the resistance and manage the process of change during ERPimplementation?

2. What is BPR?3. What is change management?4. How will you evaluate ERP software?5. How will you rate an ERP vendor? What are the factors considered?6. List the critical success factors for ERP implementation.7. What are the three approaches in ERP implementation? Explain them.8. What are the challenges and opportunities for small and medium sized companies when they

go for ERP implementation?9. What is meant by customization?

10. “The higher the degree of customization, the lower will be the benefits from ERP system."-Comment.


11. What are the responsibilities of top management in an ERP project?12. How will you ensure that the ERP package purchased will fit into your organization?13. What is gap analysis? How do you overcome gap analysis?14. Will ERP software enable the top management in decision making?15. How will you carry out identification of new processes and the implementation of them?16. How should the system be configured to be able to handle flexibility?17. What are the different phases in ERP implementation? Explain.18. Which is the most crucial phase in ERP implementation? Why?19. What are the factors behind the failure of ERP projects?20. Select an organization of your choice and discuss its ERP implementation from three

perspectives–Organization, Technology and Business.21. What are some common pitfalls during an ERP implementation? How were these problems

solved? How could they have been prevented?22. Which are the factors that mostly influence the ERP system?23. What are the effective strategies for addressing an organization's reluctance to embrace a

new system?24. What key factors are transforming ERP systems and the solutions they are providing to

clients?25. When can you say that the ERP implementation is done?

Impact of Operating System on ERP

6

OBJECTIVE

• To introduce the concept of operating system.

• To describe the impact of operating system on ERP software.

• To discuss the issues in migrating from one operating system to another.

EXPECTED OUTCOME

The readers will be able to address the following:

üü What an operating system is.

üü ERP software under different operating system environments.

üü Scope for packaged software in migrating from one operating system to another.

An operating system may be viewed as an organized collection of software extensions of hardware,consisting of control routines for operating a computer and for providing an environment for executionof programs. The primary objective of an operating system is to increase the productivity of a processresource. The two services provided by an operating system are command-language users and system-call users irrespective of the type of operating system being used. An operating system is a softwareprogram designed to act as an interface between a user and a computer. It controls the computerhardware, manages system resources, and supervises the interaction between the system and its users.The operating system also forms a basis on which application software is developed and executed.

6.1 FUNCTIONS OF AN OPERATING SYSTEM

An operating system is expected to perform the various functions given below:(a) Command Interpretation(b) Peripheral Management(c) Memory Management(d) Process ManagementThe CPU cannot understand the commands keyed in by a user. It is the function of the operating

system to translate these commands into a language that the CPU can understand. Operating systems

Impact of Operating System on ERP 51

are of two types: single-user and multi-user. Multi-user operating system handles users as well asmultiple devices simultaneously. Such an operating system is more efficient and more sophisticatedthan a single-user operating system.

6.2 UNIX and LINUX - An overviewUnix is a multi-user operating system and has a number of features that make it ideal as a multi-useroperating system. It is a multi-programming, time-sharing and multi-tasking system. The threecomponents of Unix are kernel, utilities and application programs. For organizing data on the disk,Unix provides a file system which allows us to group files in a convenient manner. The Unix filesystem has a hierarchical structure where the files can be stored under directories.

Unix was designed to be portable, multi-tasking and multi-user. The Unix systems are characterizedby various concepts: plain text files, command line interpreter, hierarchical file system, treating devicesand certain types of inter-process communication as files, etc. Unix provided the TCP/IP networkingprotocol on relatively inexpensive computers, which later resulted in the Internet explosion of world-wide real-time connectivity. This quickly exposed several major security holes in the Unix architecture,kernel, and system utilities.

Linux was originally developed for Intel 386 microprocessors and now supports all popularcomputer architectures. It is deployed in applications ranging from embedded systems to personalcomputers to supercomputers. In 1983, Richard Stallman founded the GNU project which today providesan essential part of most Linux systems. In the past, the difficulty of installation was a barrier to wideadoption of Linux-based systems, but the process has been made easier in recent years. Many distributionsare at least as easy to install as a comparable version of Windows. It is unnecessary to file licensenumbers and enter them during installation. Also, personal computers that come with Linux distributionsalready installed are readily available from numerous vendors including large mainstream vendors likeHewlett-Packard and Dell.

6.3 LINUX IN AN ERP WORLD

For those who are looking for inexpensive automation tools, Linux can provide various point solutionstoward a more comprehensive ERP capability. Even complete ERP systems are beginning to be built inthe Linux and Open Source communities. An example is Compiere, an open source ERP softwareapplication developed by Jorg Janke in 1999. The current version of the system is 2.5.1c.

The major ERP vendor SAP believes that Linux and the Open Source movement will change thenature of all software development including their own. While some aspects of their ERP product suitemay remain forever proprietary, they see clear advantages for both their customers and themselves inadopting Open Source practices. Advantages include practical cost-effectiveness as well as global-scalecooperation between developers, vendors and customers for building better and more accessible software.Linux users are accustomed to standards and a culture of software collaboration, but these trends areonly now slowly beginning to permeate the rest of the software industry.

The entire ERP trend does pose some tough questions for Linux advocates. First of all, Linux'sinfiltration into enterprise has often come at the departmental level, usually on departmental webservers. As more companies adopt ERP systems and insist that internal and public web content feedinto the same enormous data stream, Linux may be harder to push in the workplace. Also, for Linux tomove from the web server to the application server environment, it will often need to go head-to-head


edge. This is a strong argument for decentralized computing. If Linux is to use this argument, it willhave to provide a powerful system for managing business rules and incorporating them into enterprisesystems, as described in Figure 1.

Note that once broken down to the departmental level, Linux has the capability and competitivenessto host all of the functions displayed. ERP is a very profitable business, in contrast to the plummetingmargins in shrink-wrap software. Much of the recent effort in the Linux world has gone towardmaking Linux a feasible desktop replacement.

To observers of modern enterprise-wide computing, this seems almost like misplaced energy.Intranets and other such developments are slowly turning front ends into commodities, and the realpower is shifting from the client back to the server, although the server does not have to be as monolithicas a mainframe. It is important for Linux developers to turn their attention to the infrastructure whichis increasingly being demanded by enterprise-class computing and the executives who demand it.

To ensure the encouraging growth of Linux and the associated improvements in business attitudestoward information technology, developers would best address some of the needs of enterprise computing.Commercial developers will certainly fill in the gaps. Then perhaps the promise offered by the client/server movement, more flexible and decentralized computing, will stand in a little less danger fromhuge, single-source ERP systems.

6.3.1 ERP users in LINUX environmentLinux is beginning to expand beyond its traditional role as an edge server into the core of the enterpriseapplications stack. Although Unix and Windows server will retain their majority share through at leastthe middle term future, evidence demonstrates conclusively that from the customer point of view theserver operating system choice for ERP is now a three way race.

The ERP partisans of Linux believe that the open source operating system has achieved roughtechnological parity with Unix and Windows Server. It runs on cheaper hardware than Unix and costsless to buy than Windows server. It is more secure than Windows server. It enjoys the active technicalsupport and strategic commitment of such major vendors as IBM, Hewlett-Packard and Oracle.

The belief among our respondents that Linux has fewer security vulnerabilities than the Windowsserver is also significant, although we note that there is no obvious technical reason why there shouldbe a fundamental difference between the two operating systems, at least not over the long term. Thesecurity issues that have persistently dogged Windows appear in part to be a sociological phenomenon,driven by widespread anti-Microsoft sentiments in the hacker sub-culture sentiments that unfortunatelymotivate a criminal minority to put their animus into practice. Microsoft very rightly argues thatsecurity is everyone's concern and then goes on to suggest that as Linux market share grows it too islikely to be struck by hacker attacks.

There are reasons cited by the ERP users for not considering Linux for their ERP stack. Some ofthem are really significant barriers to Linux growth. If the obstacles to Linux will diminish in importance,the result could very well be a pronounced acceleration in Linux adoption sometime between late 2005and mid 2006. Some of the reasons cited by the ERP users regarding the usage of Linux are:

• ERP users worry about the propriety of using "free" software to run their business.• Scalability of Linux, particularly for large back end transactional databases.• Linux sometimes has a higher total cost of ownership (TCO) than one would expect for a

nominally free operating system, due to the high cost and relative scarcity of experiencedLinux system administrators.


center. The survey results showing the shares of the various operating systems among the ERP vendorsdetermined by the Peerstone research group (www. peerstone.com) are given above. Among the operatingsystems Unix, Windows and Linux, in 2004 Unix has performed well. Of course, the producers of eachof these operating systems are releasing new versions with increased features to overcome the competition.

6.5 MIGRATING THE ERP FROM ONE OPERATING SYSTEM TO ANOTHER

IT organizations face significant challenges and business requirements as they move key applicationsto new platforms. Enterprise resource planning systems bind together various company functions -including human resources, inventories, and financials - while simultaneously linking the company tocustomers and vendors. The Migration of these systems poses specific issues for both the informationtechnology organization and the business functions.

Carrying out the process of migration in an ERP environment is a little bit tedious task and hencethe different phases involved in the migration process have to be carefully executed. It requires cooperationboth from the IT professionals and business analyst. There are various reasons for migrating from oneoperating system to another. There exists a huge competition among the various operating systems andnew versions are being introduced every year. This brings the pressure among the ERP vendors toutilize the features of these new versions resulting in migration from one operating system to another.The six migration phases identified by the META group (www.metagroup.com) are:

Ø Analysis of current systems, processes, staff requirements, and costs against businessrequirements and alternative solutions.

Ø Definition of the scope and budget requirements of the ERP migration, taking intoconsideration the skill, process, and culture fit of existing and alternative technologies.

Ø Coordination and completion of the migration effort up to the point of deployment includingdevelopment, tuning and quality assurance.

Ø The point of transition to the new ERP platform.Ø Ongoing management of the ERP system on the new platform.Ø Meeting Change Management requirements.

The first and foremost step in the process of migration is to consider the overall organizationalinvolvement in the ERP migration effort. The highest percentage of IT staff resources is committedduring the deployment phase of migration. IT management stated that time requirements to manage theUnix platform took more staff time than preferred across the areas of support, training, performancemonitoring and vendor management. After the migration, time savings were achieved in all areas. Theaverage migration period was only about seven months, which is in line with expectations.

In order to recommend ERP migration, each organization faces the need to justify its pursuit.The major reason is found to be the upgradation of ERP application, which stands as the key motivatingfactor behind this migration process. For the most part, the IT organization approaches justification ofthe migration from a technology-centric view, pointing at operational issues and outdated technologyas primary motivators. The major reasons for migrating from one operating system to another from theperspective of IT professionals as found by META group is presented below:


Ø First, the Unix leavers. They are already leaning to Linux rather than Windows and Linuxwill probably make it impossible for Microsoft to recapture its lost ground here.

Ø Second, new enterprise application installations. Here, it is believed that Windows serverwill continue to hold its own, but Linux competition will pressure its pricing model and itsmargins, putting a ceiling both on growth and profitability.

Ø Finally, the existing Windows installed base itself.We find that the Linux will unquestionably be the fastest growing server operating system in the

enterprise applications market for the future. The ERP server operating system market is movingtowards a permanent state of diversity where Unix, Windows server and Linux will have substantialuser bases. To ensure the encouraging growth of various operating systems and the associatedimprovements in business attitudes toward Information Technology, developers would best addresssome of the needs of enterprise computing. Commercial developers will certainly fill in the gaps. Thenperhaps the promise offered by the client/server movement, more flexible and decentralized computing,will stand in a little less danger from huge, single-source ERP systems.

SUMMARY

With the increase in the tendency in the organizations to measure customer profitability andretain customers, many customer-focused applications and analyses have begun moving from theory toimplementation through creative, innovative and motivated organizations that aim to provide atremendous and unbeatable strategic advantage. Some of the ERP issues with respect to the operatingsystem are discussed and it is hoped you will also agree that much research is still needed to betterunderstand the ERP phenomenon from an operating system perspective. Both IT organizations andbusiness units should plan to spend more time on migration projects. The IT organization has seenimprovements in many areas, including performance and scalability, while the business functions gainflexibility and cost savings in support of ERP systems. Therefore, as the evolution of ERP continues ata rapid pace, platform decisions add an additional dimension to consider for organizations that want tomaximize ERP manageability and business impact.

REVIEW QUESTIONS

1. What is an operating system?2. Examine the limitations of the migration process in an ERP environment.3. Why are ERP users choosing Linux?4. Compare and contrast any two operating systems of your choice and do a little bit of research

on how they could influence an ERP system.5. Is the operating system an issue from the customer's point of view?6. Highlight the features of an operating system of your choice (say, Windows/Linux/Unix)

from three perspectives namely business, organizational and technological.7. What is meant by migration? How is it carried out?


8. Which of the following keeps a high pressure on the ERP vendor to migrate from oneoperating system to another? Justify.(a) Customer(b) Competition(c) Performance(d) Technical issues

9. Discuss the impact created by the different operating systems on ERP software.10. If you are an ERP vendor or ERP consultant, will you recommend carrying out the process

of migration from one operating system to another? If so, why?11. Do you really think that the operating system is an issue for packaged software like ERP?12. How will you measure the performance of ERP software under different operating systems?13. What are the salient features of the Linux operating system?14. Select an operating system of your choice and list its features. Identify an ERP product

which is using your operating system. Evaluate the ERP product from the view point of anoperating system and present the pros and cons of the ERP product. Based on your study, thevendor must be able to customize his product and add better features, thereby making theusers reap the full benefits of his product (i.e.) the ERP software.

Supply Chain Management (SCM)

7

OBJECTIVE

• To introduce the concept of Supply Chain Management (SCM).

• To describe the benefits of SCM.

• To describe the modeling approaches in SCM.

EXPECTED OUTCOME


üü Reap the benefits of an ERP system coupled with SCM.

üü Use ERP and SCM to generate optimal solution.

Supply Chain Management (SCM) is the practice of coordinating the flow of goods, services, informationand finances as they move from raw materials to parts supplier to manufacturer to wholesaler toretailer to consumer. This process includes order generation, order taking, information feedback andthe efficient and timely delivery of goods and services.

The rapid pace of today's business, the giant strides made in the field of Information Technology,the ever-increasing expectations of the customer and the stiff competition among firms have resulted inthe evolution of several new paradigms. One of the widely used paradigms is Supply Chain Management(SCM). Integrating operations from sourcing to customer via manufacturing, packaging, warehousing,distribution and retailing, SCM has emerged a powerful tool for a wide variety of manufacturing andservice industries.

For most businesses, greater profitability and better customer service are important goals. However,there is a long list of benefits that can be derived through SCM. These include faster time to market,lower development costs, and common business framework with partners, rapid exchange of information,availability of analytic and management tools, reduced inventories and assured delivery schedules. "Atthe highest level, SCM is helping companies make their own operations more efficient," said thePresident of a software company.

7.1 OBJECTIVES OF SUPPLY CHAIN MANAGEMENT

• Decrease inventory cost by more accurately predicting demand and scheduling production tomatch it.


• Reduce overall production costs by streamlining production process and by improvinginformation flow between enterprise, suppliers and distributors.

• Improve customer satisfaction by offering better quality, variety and speed.

7.2 COMPUTER-INTEGRATED SUPPLY CHAIN MANAGEMENT SYSTEMS

Information Technology (IT) plays a vital role in coordinating various activities between companies,which form a supply chain. In a supply chain, materials move downstream from the initial supplysource to the end customers and the information moves upstream from the end customers to the initialsupply source. IT helps to convey precise demand data from one member to another in the supply chainin a hierarchical manner.

Manufacturers (members of supply chain) need to concentrate on core competencies, and outsourceproducts/services to other companies, to make their products cost effective. Manufacturers need tochange focus from their computer-integrated manufacturing systems to computer-integrated supplychain management systems. They need to install programmable hardware, which is able to respondquickly to changes. The hardware used for automation is as follows:

• Computerised Numerical Control (CNC) machine tools to manufacture individual parts of aproduct. It utilises software for automatic control of machine operations. It is important forautomation because it reduces production time and provides improved quality.

• Specialised robots to load and unload machine tools, inspect parts, assemble products, or toperform manufacturing tasks like painting and welding. Material transfer systems such as anetwork of Automated Guided Vehicles (AGVs) to move raw materials, work pieces, finishedand partly finished components, and tools across the manufacturing facility.

• Automated Material Transfer System (AMTS) to move finished parts into Automated Storageand Retrieval System (ASRS) and various materials, components, and tools out of it.

• A storage and retrieval system to organise storage space by providing high-rise and high-density storage.

7.3 CAD AND CAM

The Computer-Aided Design (CAD) systems are interactive computer graphics systems used for productdesign. The parts, products, or systems can be simulated using an interactive computer animated model.CAD technology therefore significantly reduces the time required for product design, and providestremendous flexibility in design. Computer-Aided Manufacturing (CAM) software integrates theoperations of all computer-controlled machines. CAM can have on-line and off-line applications. On-line applications involve control and integration of all operations on computer-controlled hardware forproduct manufacture.

Offline applications involve preparation of software for the above, planning activities that influencethe manufacture of a product such as production, inventory, materials and cash flow planning.Manufacturers can therefore shorten the time between product conception and product completion byintegrating automated manufacturing process with the programmable design of a product. Swift changeslead to cost reduction and increased profitability. Manufacturers can therefore integrate themselves tothe dynamics of the supply chain.

Supply Chain Management (SCM) 61

7.4 ELEMENTS IN SUPPLY CHAIN MANAGEMENT

A supply chain is a network of facilities and distribution options that performs the functions ofprocurement of materials, transformation of these materials into intermediate and finished products,and the distribution of these finished products to customers. Supply chain exists both in service andmanufacturing organizations and the complexity varies from one industry to another. There are variouselements influencing the SCM:

[1] LocationIt's important to know where production facilities, stocking points and sourcing points are located;these determine the paths along which goods will flow.

[2] ProductionAn organization must decide what products to create at which plants, which suppliers will service thoseplants, which plants will supply specific distribution centers, and, sometimes, how goods will get to thefinal customer. These decisions have a big impact on revenue, costs and customer service.

[3] InventoryEach link in the supply chain has to keep a certain inventory of raw materials, parts, subassemblies andother goods on hand as a buffer against uncertainties and unpredictabilities. Shutting down an assemblyplant because an expected part shipment doesn't arrive is expensive. But inventory costs money too,and so it's important to manage deployment strategies, determine efficient order quantities and reorderpoints, and set safety stock levels.

[4] TransportationHow do materials, parts and products get from one link in the supply chain to the next? Choosing thebest way to transport goods often involves trading off the shipping cost against the indirect cost ofinventory. For example, shipping by air is generally fast and reliable. Shipping by sea or rail will likelybe cheaper, especially for bulky goods and large quantities, but slower and less reliable. So if you shipby sea or rail, you have to plan further in advance and keep larger inventories than you do if you shipby air.

7.5 ROADMAP TO BETTER SUPPLY CHAIN MANAGEMENT

Managing the supply chain involves three main paths: (i) Product flow which includes the movementof goods from a supplier to a customer, as well as customer returns. (ii) Information flow whichinvolves transmitting orders and updating the status of delivery. (iii) Financial flow which consists ofcredit terms, payments and payment schedules, plus consignment and title ownership.

Supply Chain Management falls into the following four main areas: with a number of sub headingsthat can be used alone or integrated.

(a) Supply Chain NetworkingThis utilises the Internet and the new Microsoft. NET technology, to enable your supply chain andprovide visibility of the business ecosystem, in a collaborative environment with your customers,suppliers and business partners. This framework needs to be more flexible than the traditional sequential,linear relationships and relies on the use of e-business tools to adapt to this networked dynamic model.


(b) Supply Chain PlanningSupply Chain Planning allows us to synchronise our supply chain to leverage the best value for thebusiness by optimising procurement, lead time, purchasing and pricing decisions.

(c) Supply Chain ExecutionSupply Chain Execution relies on the visibility through the supply chain of all components fromsupplier's inventory and delivery capabilities, to materials management, warehousing and distributionpolicies, procurement timing and pricing.

(d) Supply Chain Co-ordinationSupply Chain Co-ordination is primarily the conjoint of all the above elements in a collaborativeframework with suppliers, which not only relies on the supplier becoming a partner, but also relies onan integrated information network which allows the rapid evaluation of supplier performance.

7.6 DECISION MAKING IN SUPPLY CHAIN MANAGEMENT

Supply Chain Management can broadly be classified into strategic, tactical and operational decisionmaking. Strategic decisions are long-term decisions that are linked to top-level strategy and guide thesupply chain policies from a design perspective. Tactical decisions are resource allocation decisionsover medium-term planning horizons. Operational decisions are short-term decisions focusing on day-to-day decision making. Operational decisions are designed to effectively manage the product flow inthe strategically planned supply chain.

The four main areas of decision making in supply chain management are as follows:

Step 1The first step in creating a supply chain is the choice of the geographical placement of productionfacilities, stocking points and sourcing points. This decision has long-term consequences. Since itgoverns the basic strategy for accessing customer markets it has an impact on revenue, cost and level ofservice.

Step 2The second step concerns classical production planning decisions such as “what to produce”, “when toproduce” and “how much to produce”. Strategic decisions include the choice of production facilitiesand sourcing points. Tactical decisions concern aggregate production planning. Operational decisionsinclude detailed production scheduling, quality control measures and workload balancing.

Step 3The third step is to determine how the finished or semi-finished goods will be stored. Since holding ofinventories can cost anywhere between 20-40 percent of their value, their efficient management iscritical in SCM. While policies that guide inventory management may be viewed as strategic decisions,day-to-day management of incoming and outgoing materials/products constitute operational decisions.

Step 4The final step is the choice of the mode of transportation of the finished goods to the customer market.These decisions are closely linked to the inventory control decisions since the best choice of transport


(c) Financial flowsIt represents credit terms, payment schedules and consignment and title ownership arrangements.

The network, in turn, is supported by three pillars:

(a) ProcessesThis embeds the firm's capabilities in logistics, new product development and knowledge management.

(b) Organizational structuresThese encompass a range of relationships from total vertical integration to networked companies aswell as management approaches and performance measurement and reward schemes.

(c) Enabling technologiesThis include both process and information technologies.

7.8 IMPACT OF ERP ON SCM

First, we will look into the following key SCM issues for the coming years:1. Further integration of activities between suppliers and customers across the entire supply

chain.2. On-going changes in the supply chain needs flexibility from IT.3. More mass customization of products and services leading to increasing assortments while

decreasing cycle times and inventories.4. The locus of the driver's seat of the entire supply chain and5. Supply chains consisting of several independent enterprises.

It is identified that only a modest role exists for ERP in improving future supply chain effectivenessand a clear risk of ERP actually limiting progress in supply chain management. ERP seem to providea positive contribution to the following issues only:

1. More customization of products and services2. More standardized processes and information3. The need for worldwide IT systems and4. Greater transparency of the marketplace.

The limitations of ERP systems in providing effective SCM support are as follows:1. Insufficient extended enterprise functionality in crossing organizational boundaries,2. Inflexibility to ever-changing supply chain needs,3. Lack of functionality beyond managing transactions, and4. Closed and non-modular system architecture.

These limitations stem from the fact that the first generation of ERP products has been designedto integrate the various operations of an individual firm. In modern supply chain management, however,the unit of analysis has become a network of organizations, rendering these ERP products inadequatein the new economy.

Thus we find that one should not expect too much from ERP for supply chain management inextended enterprises. ERP systems have become a de facto standard in business because they replace apatchwork of local legacy systems. But ERP systems were never designed just to support SCM and


cover all the tools used to deliver software, including project management packages. Without integrationbetween the software development lifecycle and the IT ERP capability

• Effective portfolio and program management will remain elusive,• Development will continue in fragmented and nonstandard ways,• Deployment and software inventory processes will continue to be haphazard, and• Traceability between software projects and their delivered runtime code will remain weak,

perpetuating poor quality software.Managers can no longer abdicate the responsibility of leveraging IT for supply chains to products

currently available in the market. Generic products only use information and insights publicly availableor known and hence cannot be a source of competitive advantage. The key is to look deep within ourown supply chain ecosystems, understand how the technological advances could be applied and buildcustomized solutions. It is important to understand that a single company could adopt different strategiesfor the inbound supply chain and a separate strategy for outbound supply chain. Within the sameenterprise, collaboration strategies could vary, depending on the category of products it buys or sells.Hence, it is important that an enterprise adopts a portfolio approach to collaboration, choosing the setof tools most relevant to its supply chain ecosystem.

Internet has reduced the costs of integrating, coordinating and transacting across organizations.This has forced enterprises to reevaluate their strategies, processes and organizational structures inorder to enable effective collaboration and move away from inefficient activities that do not add value.The most significant impact of the internet has been to change the way enterprises relate to theirtrading partners and customers. The new Internet enabled business model is based on collaboration.

Technologies that enable increased collaboration within and across businesses reduce integrationcosts, transaction costs and redundancies, thereby enabling them focus on their core competencies,outsource non-core activities and build strong differentiators based on Quality of Service (QoS)parameters. An optimal IT solution for an optimal supply chain has to integrate decision-makingprocesses, collaborative opportunities with existing business processes and systems. Various technologytrends enable companies to realize this vision of a real-time, responsive and collaborative supply chain.

7.11 ERP AND SCM - A COMPARISON

Enterprise Resource Planning (ERP) is a software solution that addresses the enterprise needs takingthe process view of an organization to meet the organizational goals tightly integrating all its functions.ERP is a set of application software that integrates manufacturing, finance, sales, distribution, HR andother business functions with a single comprehensive database that collects data from and feeds datainto modular applications supporting all the company's business activities, across these functions, acrossbusiness units, across the world. Supply Chain Management (SCM) is the method of creating productsfor the end user. It spans the suppliers of raw materials, the manufacturing units, warehouses, transporters,distributors, retailers and finally selling.

ERP excels in transaction management. SCM affords forecasting and decision support. ERP linksprocesses within the organization. SCM spans the entire supply chain. ERP’s primary function is togenerate transaction data whereas SCM can make sense out of the data to help you make decisions.ERP Systems are linear and interactive, whereas SCM is constraint based and optimized. SCM's optimizeProcesses, increases revenue, reliability and responsiveness, whereas ERP automates processes, reducecost, cycle time and inventories. SCM differentiates the processes, strategic in nature, applicable to

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more than one organization at a time, whereas ERP standardizes the processes. SCM is prescriptive,enables decision support and is a bi-directional planning process whereas ERP is evaluative, transactionfocused and is a unidirectional process.

SUMMARY

Supply Chain Management is a paradigm that is popular in the business world today. It represents athought process that emphasizes customer service. It requires a break from a mindset that does notrecognize globalization, the role of IT in managing businesses or the importance of the customer.Incredible as it may seem, much of this has actually happened.

In order to have a successful Supply Chain Management policy, the retailer needs to be able tomonitor key data historically in order to be able to forecast requirements that can be shared withsuppliers and allow both parties to gain from planned economies of scale and reduced inventory costs.Computer-Integrated Supply Chain Management Systems provide the ability to deliver timely, accurateinformation to the manager's desktop to enable the correct decisions to be taken at the right time. Thishas to be implemented in the knowledge that the organisation can generate Key Performance Indicatorsbased on historical data that can be refined over time.

REVIEW QUESTIONS

1. What is SCM?2. Examine the limitations of SCM.3. Is ERP the same as SCM?4. How can Information technology be effectively used for SCM optimization?5. Distinguish between CAD and CAM.6. Explain briefly Computer Integrated SCM.7. Name the elements of Supply Chain Management.8. Prepare the roadmap to successful Supply Chain Management.9. What are the steps involved in the process of decision making in SCM?

10. Explain briefly the Supply Chain Management model.11. What is the impact of ERP on SCM?12. Propose a model to reap the benefits of ERP, SCM and E-Business.13. Who are most benefited from SCM - Customers or Suppliers?14. How will you manage the flows in Supply Chain?15. What is the role of Information Technology in SCM?16. How will you achieve an Integrated Supply Chain?

ERP and CRM

8

OBJECTIVE

• To introduce the concept of Customer Relationship Management (CRM)

• To describe the benefits of the CRM enabled ERP software

• To highlight the features of CRM coupled with Data Mining and Data Warehousing

EXPECTED OUTCOME

The readers will be able to:üü Use CRM with the latest technologies

üü Provide CRM consultancy to an organization

üü Use CRM with ERP

In today's business application market, focus has shifted from internal business process and resourceintegration to external sales, procurement and supplier resources. SCM and CRM are the enlargedconcept of ERP and they embrace a much broader sense of business management. Sales with the mostleading companies are very sluggish. However, there are still a score of local players that are doingwell in this market. The objective of CRM is to add value for customers through those processes thatinvolve direct contact with customers before, during and after sales.

CRM encompasses marketing and sales activities related to the identification and characterizationof markets, the characterization of product opportunities within those markets that are consistent withthe strategies and expertise of the enterprise and the development of those markets into a customer basethat generates recurring demand for the products of the enterprise. ERP systems may support demandplanning activities which make projections for existing products with target volumes and timerequirements as well as projections for new products or product modifications. ERP systems may alsosupport customer inquiries as to product lines and company capabilities as well as inquiries andnegotiations for alternative supply arrangements. ERP systems always support customer orders forexisting products, customer order changes and cancellations and inquiries about customer order status.

8.1 INTRODUCTION TO CRM

The customer is the backbone of any organization. The objective of any business done by an organizationis to meet the requirements of the customers. The customers' details, their requirements, their

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expectations, etc. have to be taken care by the organization to get their goodwill. With this broaderobjective, the CRM evolves and it improves marketing effectiveness. CRM is nowadays coupled withthe other systems like ERP, SCM and so on. These new integrated systems are able to perform betterthan earlier as they take care of all the business operations, technical requirements, resource optimizationand the customer. In fact the requirements of the customer are broadly classified as: (1) Normalrequirements (2) Expected requirements and (3) Exciting requirements. Customer relationships can bemaintained effectively only if the organization is able to understand their requirements and meet theirneeds at the earliest.

The fundamental theory behind CRM is to identify profitable customers, attract and retain them,and maximize their useful life span and the profits from them by establishing and fostering goodrelationships with them. This theory is similar to relationship marketing but CRM adds the aspect of ITto implement relationship marketing. Besides retaining profitable customers, the theory espousesremoving unwanted customers from the organization, as these customers not only cause administrativehassle for the organization but also reduce its overall profits.

8.2 NEED FOR CRM

CRM works by gathering information about customers and analyzing the information collected. Anexample of this would be supermarket discount cards. When a consumer scans the cards and then theiritems, the items that the customers have bought are entered into a database. This gives an accurate ideaof which customers buy what. This enables the organization to analyze these data later. Based on thisanalysis, the organization can change their marketing strategy; thereby the Customer RelationshipManagement (CRM) brings the company closer to the customer. There are many goals that businesseshave when implementing CRM techniques and applications. The organization wants to improve customerservice which will subsequently improve customer satisfaction. The business also wants to maximizerevenue by advertising the right products to the right people. In other words, the organization isinterested to find what the exact requirements of the customers are. Once this is done then the organizationnot only can retain the existing customers but also can gain new customers. CRM processes are designedto monitor all of the contacts between customers and companies. Maintaining a positive relationshipwith the customers is an essential element in any business. Customer relationships are vital businessassets and the benefits of CRM to customers are increased convenience and speed of service and theyhelp the organization to increase their ability to develop profitable customer-focused strategies. Thefirst and foremost step for establishing CRM lies in establishing the required changes and planning fortheir implementation.

CRM is a strategy used to learn more about customers' needs and behavior in order to developbetter relationships with them. Customer relationships are at the core of business success. CouplingCRM with other technologies like (Enterprise Resource Planning) ERP, Supply Chain Management(SCM), Management Information System (MIS) and Decision Support System (DSS) will yield betterresults to the organization. The concept of CRM is that it helps businesses use technology and humanresources to gain insight into the behavior of customers and the value of those customers. With aneffective CRM strategy, a business can increase revenues by:

• providing services and products that are exactly what the customers want• providing better customer service• selling products more effectively• retaining existing customers and gaining new customers


• providing guidelines to explore new marketing strategy• expanding the business and reaching all the customers through the web.

The following factors account for successful CRM implementation:• Developing a customer-focused strategy first before considering the kind of technology we

need.• Developing prototypes and making use of business models to understand the business processes

effectively.• Ensuring that the CRM provides a scalable architecture framework.• Ensuring that necessary data is available to make analysis and change the business strategy

accordingly to meet the expectations of the customers.• Storing unwanted and useless data wastes time and money which CRM eliminates.• Addressing the CRM system from three perspectives--Business, Technology and Customer.

8.3 COMPONENTS OF CRM

Pleasing the customers has been the priority of most organizations. CRM is that face of businessprocess that aims to establish enduring and mutually beneficial relationship with the customers in orderto derive customer retention, value and profitability. CRM entails acquiring and developing knowledgeof one's customers and using this information across various touch points to balance revenue and profitwith maximum customer satisfaction. CRM aims at capturing pertinent data about the current andprospective customers.

The objective of Customer Relationship Management (CRM) is the optimization of profitability.It focuses the issue that not all the customers are equal and need priority while providing services to thedeserving customers. The company grows only if it has reliable customers and it is in the hands of thecompany to catch and retain valuable customers. This can be done once the company identifies theneeds of the customers, their desire and the area where the company has to improve to fulfill the needs.Executing this process is not such an easy task and those who have done that lead the market in theindustry. CRM provides a solution to address these points through the following components:

(a) Operational CRM(b) Analytical CRM(c) Collaborative CRMThe operational CRM looks at the business processes of an organization. It considers the automation

of various business processes and providing a smoother interface among these processes. This willinvolve integration of the front-office and the back-office of an organization. The analytical CRM willanalyze the data and provide effective reports for decision making. This is the component of CRMwhich will help the organization to improve its system and provide better services to the customers.Techniques like data mining and data warehousing are used to aid the CRM to analyze the collecteddata and generate reports to the top management. The combination of CRM with ERP is also important.Resource allocation for everything like maintaining sufficient product stock, satisfying customer demandand sufficient inventory for marketing direct mail promotions will eventually be important constraintsto incorporate into any CRM system that is trying to optimize customer profitability. This will alsohelp the organization to change its marketing strategy to improve the business. Collaborative CRMdeals with applications of collaborative services including email, chat, websites, e-communities, internet,intranet, e-commerce, e-business and similar other vehicles driving the organization. These three

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components of CRM not only help to retain the existing customers and add new customers; it aids theorganization to define its marketing strategy, pricing, introducing new products, identifying thecompetitors, locating valuable customers and above all keeping a database of customer informationwhich is an asset to any organization.

8.4 DIFFERENT DIMENSIONS OF CRM

The CRM can be viewed from three perspectives namely Business, Technology and Customer. CustomerRelationship Management aims at improving the relationship of the customer with the organization.The existing CRM literature focuses heavily on the technology and business perspectives of CRM. Yetthe importance of the customer perspective of CRM cannot be neglected. As customers develop loyaltyand opinions of an organization through interactions with it, organizations would need to pay attentionto these interactions and understand what customers want to see in a CRM system.

Technology PerspectiveFrom the view point of technology, the Customer Relationship Management (CRM) must be enabledwith latest technologies like Data Mining, Data Warehousing and OLAP. Technology forms the basefor any system and if this technology is applied effectively the users can reap the full benefits of CRM.The technology helps the CRM system to achieve information integration, collection of data, analyzingthe data, preparing reports, providing suitable guidelines to the top management for decision makingand so on. Usage of Information Technology (IT) will bring greater impact of CRM on the customers.From the organization point of view, introducing new latest technologies will require training to begiven to the employees' and changing management is required to streamline the system and re-engineerthe business process. Usage of Information Technology with CRM will help both the organization andthe customer.

Business PerspectiveFrom the business perspective we find that the strategy of CRM must be identifying, understanding andpredicting consumer behavior to foster long-term profitable relationships. The organization must usethe CRM to identify the requirements of the customer, predict the expectation of the customer, todesign new business strategy and to evolve new marketing strategy. Recording the needs of customersalone is insufficient; analyzing it, conveying it to the different levels of employees through properchannel and generating action plan to overcome the defects identified is the most essential and desiredoutcome of a successful CRM system. It is recommended to have medium-level use of InformationTechnology to analyze consumer patterns, customer segmentation and one-to-one marketing to generatewin-win situations for both parties. It is necessary to bring into the minds of the employees that thecustomer is the inner core for any business.

Customer PerspectiveFrom the customer perspective, the CRM stands focusing on all interaction points between the customerand the organization. The CRM is mainly established in an organization to bring the customers andorganization into one fold. Customer perspective requires the CRM system to take into the servicesrequired by the customers, to estimate the required level of customization of products and services forthe customers. It also requires the organization to change the mindset of the employees to providebetter services to the customers. It requires that the changes in organizational structure is allowed formore value-adding interaction points for customers thereby bringing mindset changes like employee

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SYSPRO CRM can develop, execute and track marketing campaigns encompassing fivecomponents: target audience, offer, content, channel and call to action. All can be tested or re-used."Triggers" automatically generates communication pieces, or fulfillments, based on responses. TheCRM Marketing features include analytics for measuring results and developing new strategies. CRMfacilitates total collaboration of inside and outside sales teams and streamlines sales strategies to achievesales objectives. SYSPRO CRM is a critical link in enabling and empowering a true extended enterprisestrategy. The 3600 view of all contact touch-points coupled with the strategic advantage of an integratedsolution deliver tangible, intrinsic and bottom line value to the enterprise.

From this discussion on the CRM environment supported at the back-end by ERP, it is identifiedthat a perfect CRM system must possess the following properties:

Ø Integrated Accessible DataØ Eliminating Duplicate Data EntryØ Automating and Increasing ProductivityØ Internet enabled and Wireless Access featureØ Flexible CustomizationØ Secure & User FocusedØ ScalableØ Enabled with Dynamic Selling ToolsØ Scope for Easy Data IntegrationØ Dynamic Sales ManagementØ Automated Marketing ProcessØ Integrated Knowledge BaseØ Complete Customer ServiceØ Ability to manage Remote Users

8.6 DATA MINING AND DATA WAREHOUSING IN CRM

A data warehouse is a subject-oriented, integrated, time-variant, nonvolatile collection of data in supportof management decisions. Data mining is the process of efficient discovery of nonobvious valuablepatterns from a large collection of data. A data warehouse can be viewed as an information system withthe following attributes:

• It is a database designed for analytical tasks, using data from different applications• It contains current as well as historical data to provide a historical perspective of information• It contains a set of tables• Every query results often in a large result set and involves frequent full table scan and multi-

table joinsData mining is not specific to any industry. It requires intelligent technologies and the willingness

to explore the possibility of hidden knowledge that resides in the data. Most organizations engage indata mining to do the following: (a) Discover knowledge (b) Visualize data (c) Correct data. From theCRM point of view, data mining applications include the following:

• Retaining the existing customers and gaining new customers• Enhanced Sales and customer service• Effective marketing


• Reduction of risk• All operations scanned for fraud detection

There is an opportunity today given the new technologies like Data Warehousing with analyticalextensions to refocus accounting systems to reflect what measures of performance are important toyour organization. The development of data warehouses is just one of the technological advances thathave improved the ability of marketers to tailor marketing strategies to customers. Data warehousescollect, clean and store customer information for later analysis. A survey conducted by the consultantsreveals that 83% of clients in the IT industry are expected to have a data warehouse by 2008, more thandouble the number who considered it relevant in 2002. Data warehouses are normally dedicated to 'offline' analysis and not the day-to-day processing of transactions. They contain existing customer transactionrecords and may also incorporate information from other sources, both within and outside theorganization.

Once the data warehouse is built, the next step is to mine the data and try to discover previouslyunknown patterns. Data mining comprises a range of data analysis techniques, including cluster analysisand neural networks. Patterns uncovered in the data can be used to develop new marketing strategies.Data mining helps end users extract useful business information from large databases. Data mining isthe process of finding trends and patterns in data. The objective of this process is to sort through largequantities of data and discover new information. The benefit of data mining is to turn this newfoundknowledge into actionable results, such as increasing a customer's likelihood to buy or decreasing thenumber of fraudulent claims.

A Data Warehouse can also help a company to get a view of its entire relationship with a customer.This can be revolutionary, particularly in organizations that are organized along product lines ratherthan by customer. It also allows an organization to track the history of its relationship with eachcustomer and thereby increase its customer responsiveness. CRM involves building a relationship withyour customers and prospects by understanding their needs and responding with products and servicesthrough multiple channels. CRM will thereby enable a targeted, ongoing, mutually beneficial, profitablerelationship with individuals and groups.

Most companies' CRM approaches are therefore characterized by understanding CRM as a long-term business strategy, focusing on individual customer demand, aligned to a customer's value, allowingfor segmentation and analysis of customer needs, preferences and behavior, and being based on anorganization-wide database. Accordingly, the key problems to be solved within such a CRM approachare:

• Differentiation of customers• Focus on retaining existing customers• Maximizing customer lifetime value• Increasing customer loyalty

Although several new technological solutions have been developed, there is still no general problemsolver for Data Warehousing in CRM. Soon after the first users started entering data, analytical CRMwas only a step away. Implementing an analytical database using Data Warehouse and Online AnalyticalProcessing (OLAP) technology in a CRM environment leads to:

(a) Number of stakeholders and people affected(b) Many data sources(c) Different ways of doing business

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(d) Diversification and acquisitions(e) Different possible views on customer dataThe most commonly used techniques in Data Mining are Neural networks, Rule induction,

Evolutionary programming, Case based reasoning, Decision trees, Genetic algorithms and Nonlinearregression methods. Neural network is a complex nonlinear modeling technique based on a model of ahuman neuron. Rule induction is based on the extraction of useful if-then rules from data based onstatistical significance. Evolutionary programming is that system which automatically formulateshypotheses about the dependence of the target variable on other variables, in the form of programsexpressed in an internal programming language. Case based reasoning is used to forecast a futuresituation or to make a correct decision. This method is also called the nearest neighbour method. Thedecision tree represents sets of decisions which will involve classification of data set. The geneticsalgorithm is a computer-based method of generating and testing combinations of various input parametersto find an optimal solution. The various methods involved here are genetic combination, mutation andnatural selection. Nonlinear regression methods are based on a Non-Linear model which is an analyticalmodel that does not assume linear relationships in the coefficients of the variables being studied.

8.7 FEATURES OF DYNAMIC CRM SYSTEM

In this section, the Dynamic CRM product from Microsoft (www.microsoft.com) is discussed to enablethe readers to realize the better services and support extended by the CRM system. Microsoft DynamicsCRM 3.0 was designed to give businesses what they want most in a CRM system–a customer relationshipmanagement that people will use. It works the way your business does. Your information technology(IT) staff can integrate Microsoft CRM with existing systems. Your sales force can use Microsoft CRMwithout ever leaving Microsoft Outlook. The Microsoft CRM has the following features:

(a) Improved Microsoft Office Outlook integration(b) Creating sales and marketing campaigns fast(c) Helping your staff sell more while improving customer service(d) Easier customization(e) Drilling into the details fastThe Microsoft Dynamics CRM 3.0 is enabled with the features sought by the customers. The

purpose of a CRM system is to provide improved sales and customer service. This target has beenachieved by the Microsoft Dynamics CRM 3.0. Provision for changing the marketing strategy andenabling the sales under different patterns will help the organization to grow faster. Customization is amajor factor deciding the fate of a product. Reduced customization will help the end users to reap thefull benefits of a software product. Getting information out of Microsoft CRM is just as easy as puttingit in. It is possible to export any subset of Microsoft CRM data to Microsoft Office Excel spreadsheetsoftware for analysis. Microsoft CRM also provides a number of reports using Microsoft SQL ServerReporting Services as the underlying report engine. You can create custom reports that are accessiblefrom within Microsoft CRM through an e-mail subscription service. Users can save frequently usedreports, which are refreshed with current data every time they're opened. Best of all, security is wellstructured and users only have access to the data they're authorized to see. This will help the organizationto maintain data integrity and data are secured.

Microsoft Dynamics CRM 3.0 includes a built-in Service Scheduling and dispatch system thatprovides a centralized, consolidated view of your professional service workers' calendars and schedules.


Your service dispatcher and service delivery staff can use the Service Scheduling functionality to easilysearch for available time slots, specialized talents and capital resources and to promptly scheduleservice appointments for customers. Microsoft CRM 3.0 helps you reduce resource inefficiencies anddeliver prompt, accurate service to customers, strengthening customer satisfaction. The following arethe features of Service Scheduling in Microsoft CRM:

• Automating service scheduling and centralizing dispatching of resources and services• Enhancing productivity, optimization of resources and lower operational costs• Improving customer satisfaction through timely delivery of products• Keeping customers informed by setting initial expectations and keeping them apprised of

scheduling updates if circumstances change• Adjusting resource assignments in real time to meet high priority requests

Microsoft CRM lets the user work the way they want to work with features such as:• Allowing employees to easily pull information from Microsoft CRM into any other office

applications such as Microsoft Excel spreadsheet software and Word• Quick and easy access to data without changing screens a number of times• Customized workspaces that allow users to create, save and reuse favorite views of customer

data without the distraction of unwanted information.• A service calendar that allows service schedulers and dispatchers to schedule activities• Powerful reporting and analysis tools• Enabled with mobile support that allows field workers to get instant access to customer data

from any personal digital assistant (PDA), laptop or browserThe customer service module of Microsoft CRM includes the following features:

• Customer service requests can be created, assigned, and managed from a central location• Complete view of customer information promotes better understanding of specific customer

needs and other account-related issues• Automated routing and queuing of service requests is achieved using customizable workflow

rules• Automatic responses to customer requests• E-mail management automatically records customer communications and associates e-mail

messages with appropriate customer records• Service scheduling makes it easy to manage service resources and to better understand resource

and equipment allocation, usage and effectiveness• Service contracts can be created, maintained, and updated automatically

8.8 FEATURES OF CRM FROM SAP

The previous section explained the features of the CRM product from Microsoft. The present sectionwill address the features of CRM product from the major ERP vendor SAP (www.sap.com).Transforming the business into a customer-centric enterprise is essential to derive revenue and profit.mySAP CRM is a CRM product from the major ERP vendor SAP. It is a solution that can reliablyenable customer-centric, end-to-end business processes to deliver value around each customer. Thesolution enables integrated industry-specific processes to support customer-facing departments inmarketing, sales and service. In addition, it gives us a 360-degree view across all customer touch

ERP and CRM 77

points. mySAP CRM is enabled with the following features:1. It orchestrates all customer-related tasks across departmental boundaries, seamlessly

incorporating activities such as fulfillment, shipping, invoicing and accounts receivable2. It brings together all relevant sources of customer data across the enterprise for faster and

better decision-making3. Enables us to accomplish business objectives quickly

mySAP Customer Relationship Management (mySAP CRM) includes the following functions tosupport core business processes in the following areas:

• MarketingmySAP CRM provides comprehensive support for marketing resource management, segmentand list management, campaign management, trade promotion management, lead management,and marketing analytics.

• SalesmySAP CRM empowers sales professionals with comprehensive support for sales planningand forecasting, territory management, account and contact management, lead and opportunitymanagement, quotation and order management, configuration, contract management, incentiveand commission management, time and travel management, and sales analytics.

• ServiceTransforms service into a profitable line of business with a broad range of functionality toenable customer service and support, service-contract management, warranty and claimsmanagement, depot repair, channel service and service analytics.

• E-commercemySAP CRM delivers broad functionality to enable business processes in the areas of e-marketing, e-selling, e-service and e-analytics.

• Channel managementIt optimizes the indirect channels with support for partner management, channel marketing,channel sales, channel service and channel commerce.

8.9 AN ERP- CRM BUSINESS SOLUTION

In this section, an ERP-CRM business solution provided by a company “compiere” (www.compiere.org)is presented. The ERP-CRM business solution provided by this company is named COMPIERE. Thisproduct is based on open source software. Hence all the features of open source software are availablein this ERP-CRM business solution. The CRM as an independent system has got only a few functionsto carry out, whereas after getting enabled with an integrated system like ERP, the new businesssolution gets additional flavour and is able to meet the expectations of the customers. An ERP-CRMbusiness solution will address these two questions, “How well can we see our customers?” and then,“How well can they see us?” The solution to these two questions will bring the company and thecustomer into the same circle and reduces the gap. The goal is to achieve barrier-free visibility betweenthe company and the customers.

The benefits of CRM enabled ERP systems are as follows:• Enhanced operational efficiency• Increased productivity


• Reduced cost• Easy to deploy• Ability to push enterprise data to departments that have been isolated from ERP functionality• Forecasting the demand for certain products• Smooth interface among all the departments of an organization

Technology behind ERP- CRM Business SolutionThis section will address the technology behind ERP - CRM Business Solution with the help of opensource software Compiere. Compiere is an open source ERP software application with fully integratedCRM software solutions. It is an ERP-CRM business solution developed using J2EE. It requires anoracle database installation. The database independence will reduce the system's cost of deployment.This product provides a combination front-office/back-office suite that offers sales and contactmanagement and customer support capabilities. The product can be installed on Windows or Linuxsystems. It is highly customizable and incorporates work rules that can be modified to meet particularbusiness needs and practices. The product offers two parallel user interfaces: a browser based DynamicHypertext Markup Language (DHTML), a web based interface designed to reach our application fromanywhere on the Internet and a high performance Windows application with a rich user interface-allowing high speed data entry.

This ERP-CRM business solution provides integrated CRM, Partner Relations Management (PRM),SCM, ERP and Online Analytical Processing (OLAP). The application was designed to be web hosted.Compiere provides multiple views of business information based on the transactions that have takenplace. The product is enriched with easy customization by the customers as the business evolves. Theapplication integration modes considered by this product are as follows:

• Data can be imported from XML, fixed records in specified formats• A scanner interface is provided for data entry and inventory transactions• Java Enterprise Edition Connectors are available for integrating EIS applications• Support Electronic Data Interchange (EDI) to execute various transactions• Easy customization through external development toolkits• Ability to develop your own information structure• Usage of SQL-based tools to generate custom reports

Functions of ERP- CRM Business SolutionThe ERP-CRM business solution will have all the functionality required by the customers and completelyintegrated with one another for seamless transaction data flows. The various functions of an ERP-CRMbusiness solution found in the product compiere. They are:

v AuthenticationThe users are properly classified and separate user id and password are provided. Theadministrator will have control over all the users.

v Quote to CashIt covers the business process for creating a quotation for a customer, order management,invoicing and cash receipt and is also integrated with SCM and customer management.

v Requisition to payIt involves creating requisitions, purchase order, invoice receipt and payment processing.

ERP and CRM 79

v Customer serviceIt forms part of all the business processes.

v Partner relations managementIt connects different clients to each other, allowing them to manage lead distribution andmarketing expenses. It enables the system to have centralized services.

v Supply Chain ManagementIt involves material management and smoothens the activities between suppliers and customers.

v Report generationIt involves the generation of reports to analyze the performance and covers the costing andaccounting dimension of the application.

v Internet enabledAll the processes can be carried out by the users staying at any place at any time.

SUMMARY

Business moves at lightning speed today, requiring that every company continuously re-examinedirection, strategies, suppliers, partners–literally every variable and relationship that might lead tocomplacency. For any business, successful Customer Relationship Management Navigation is becomingincreasingly important in today's competitive business world. Customer expectations are increasingday by day and business services must increase along with these expectations. It is the sole responsibilityof the organization to meet the requirements of the customer through latest technologies like CRM,ERP, etc. CRM is the method through which businesses can connect with their customers and thereforeserve them better. Businesses with successful CRM strategy and applications will be able to record alarge increase in sales, customer satisfaction and profit thereby improving the performance of theorganization. A CRM system will fail if corporate culture and organisation are not part of planning.Companies are increasing customer value through successfully gathering, analyzing and understandingcustomer data. To manage these data efficiently, data mining and data warehousing tools are used toincrease customer value and help to initiate new opportunities.

REVIEW QUESTIONS

1. What is CRM?2. Carefully examine the limitations of a CRM product.3. How can CRM be effectively used with packaged software?4. "CRM is product oriented and not process oriented."- Comment.5. Distinguish between conventional application packages and CRM.6. Will CRM help the organization to standardize the existing business processes?7. Why do CRM projects fail so often?8. What are the three dimensions of a CRM system?9. Will CRM account for information integration? Explain.


10. What are Data Mining and Data Warehousing? Explain it in the context of CRM environment.11. What is the need for CRM? How was it managed by the companies earlier?12. Describe the CRM environment with ERP as back-office and CRM as front-office.13. Describe the features of SYSPRO's CRM product. How does it handle remote users?14. Compare the CRM from Microsoft and SAP. Identify the features that could be added to

these products to provide better services to the customers.15. What is Dynamic CRM?16. What are the salient features of an integrated system like ERP enabled with CRM?17. What are the advantages in choosing open source software for a CRM environment?18. List the various CRM vendors and describe the significance of their CRM product.19. How can a CRM system be enabled with Internet? Propose a suitable architecture with its

features.20. Study the operations of an organization of your choice and present your CRM Business

Solution through business models.

ERP and .NET

9

OBJECTIVE

• To explain what .NET is.

• To describe the features of .NET

• To illustrate the usage of .NET in ERP platform.

EXPECTED OUTCOME


üü Understand the benefits of using .NET

üü Visualize an ERP product build using .NET

üü Spell the impact of .NET on today's business

Enterprise resource planning (ERP) is designed to manage and automate vast swaths of business activity,but it's an incomplete solution. For instance, ERP may handle most transactions with aplomb, butwhen problems do crop up, ERP systems may not be able to access crucial documents needed to clearthings up. In some instances, planning and collaboration take place before ERP comes into the picture,yet the activities must be managed as part of the complete transaction lifecycle. Filling yet another gapis archiving, which is at the core of document technologies. Many ERP users are finding archiving avaluable asset for offloading data, yet keeping it accessible.

One of the most compelling reasons to marry ERP and document technologies is to link theinternal (generally back-office) processes of ERP to the outside world. According to ERP vendors,during the past decade, ERP focused inside the four walls of the enterprise. “In this century, we willstart to move out of the four walls, into the extended enterprise that requires us to work virtually,connected to external organizations, to create strategic partnerships,” a CEO of an ERP vendor says.This means we need to move ERP, and also all the processes of content management, out to theextension. But even inside the boundaries of ERP, actual business practices do not always map preciselyonto the ERP model. These systems sometimes fail to include all the people who are part of a process.

Expert opinion is that “Everybody in finance and accounting will have an SAP [ERP system]seat, but the manager of engineering who reviews and approves purchase invoices for the departmentprobably isn't going to be an SAP user. Business processes have many touch-points, many of which


will not have access to the ERP system.” There are many critical operations--human resources, supplychain management, customer relations--that need to be connected to both structured ERP data and theunstructured realm of documents, email, faxes and Web content.

9.1 .NET TECHNOLOGY -- AN OVERVIEW

.NET is a comprehensive family of products, built on industry and Internet standards that provide foreach aspect of developing (tools), managing (servers), using (building block services and smart clients)and experiencing (rich user experiences) XML Web services. .NET will become part of the Microsoftapplications, tools, and servers you already use today - as well as new products that extend XML Webservice capabilities to all of your business needs. The .NET platform enables the creation and use ofXML-based applications, processes, and Web sites as services that share and combine information andfunctionality with each other by design, on any platform or smart device, to provide tailored solutionsfor organizations and individuals.

Business benefits include increased integration through rapid development and deployment ofbusiness applications; creating new revenue streams by turning existing processes into XML Webservices as well as finding new business by exposing those services; and by empowering employeesthrough access to information when and where they need it.

Microsoft .NET (pronounced “dot net”) is a completely new approach to how software willoperate. Microsoft defines .NET as “a set of software technologies designed to connect your world ofinformation, people, systems, and devices.” While Microsoft .NET is a huge global change, there areseveral specific benefits for the manufacturing industry:

(a) promise of lower IT costs(b) new features that will allow manufacturing companies to leverage the Internet and(c) more efficient manufacturing software development. In essence, by choosing .NET you are

choosing software systems to run your business that are more innovative and robust, faster,less costly to administer, safer and more secure, and easier to use.

Don Richardson, group manager of .NET evangelism at Microsoft Corp. further explains thesignificance of this new technology: “The change to the Microsoft .NET Platform is as dramatic as thechange from DOS to Windows. The software vendors that get in on the ground floor of this shift willhave a huge advantage over the competition, and Intuitive has been on board from the start.” Theexpected impact on the manufacturing industry is significant. “Within two years, educated manufacturerswill not buy an enterprise solution that is not one-hundred percent .NET-based,” said Chuck Gillam,president of Intuitive.

The essence of Microsoft .NET is a relatively small bundle of software that you install on yourcomputer. It is about 21MB in size, and installing it is about like installing a new version of InternetExplorer. In fact, by installing .NET, you will be installing Internet Explorer 6.0. It takes just a fewminutes for your computer to join the .NET age. You can download the whole package free fromMicrosoft.

9.2 WHY .NET SOFTWARE IS BETTER SOFTWARE?

.NET is not another version of Microsoft Windows; it is the next-generation computing platform fromMicrosoft. At the core of the .NET hype is a new layer of software that sits above the Windows

ERP and .NET 83

operating system. This new .NET platform is a better platform for building and running applicationssoftware than the Windows operating system that we know today. .NET insulates software developersand computer users from the deficiencies and incompatibilities of operating systems. And .NET providesa new set of tools and prefabricated components of unprecedented power that can be used to write anew type of software called "managed code." Over time, managed code will become recognized asclearly superior because it

• is more robust• is has side-by-side versions• is has better security• is has better connectivity• is faster software with easier deployment• has lower cost of ownership

.NET managed code is about better software. It's faster, smaller and lighter, more hacker-resistant,and easier to deploy, install, maintain, upgrade and (if necessary) remove from your computer. Managedcode side-steps the root causes of many of the bugs and security problems we suffer from today. Soapplications written in managed code, like Intuitive ERP, will not only be better software, but they willalso be cheaper to own, providing you with the strategic advantage you'll need in the years ahead. Lesscode, faster development time, new toolsets and managed code are the key features of .NET.

NET software minds its own business. It stays together in one place rather than smearing itself allaround our systems. And in doing so, it sidesteps the old Component Object Model (COM) -basedmechanisms that allowed software packages to collide with and harm one another. In fact, .NET allowstwo versions of a managed code application to run side by side on the same computer without anyinteraction or conflict. .NET thus eliminates the need to remove an old version of a software productjust to install and try out a new version. .NET is a completely new software technology, created fromscratch, both to leverage groundbreaking technologies such as XML and to eliminate the old inefficientinternal layers that have been built up over the last 20 years in Windows software. Managed code islean, speedy, and lightweight. These traits enable innovation in application development and deployment.

9.3 WHAT MAKES A GOOD ERP SYSTEM?

A good ERP system should be able to provide you with solid, measurable financial benefits, even inthe first year. Customer satisfaction should measurably increase based on improved on-time delivery,increased quality, shortened delivery times, etc. Inventory carrying costs generally decrease substantiallydue to better planning, tracking and forecasting of requirements. Shop Floor down time should beminimized based on visibility into how to best schedule the floor. Vendor pricing should decrease bytaking better advantage of quantity breaks and tracking vendor performance. Collections should beturned faster based on better visibility into accounts and fewer billing and/or delivery errors. In addition,there are many less tangible benefits, including a reduced time to close a fiscal period, more expedientdata entry across the board, immediate management visibility into critical data elements, etc.

An ERP system provides the solid operational backbone manufacturers need to improve thevolume of production and fulfillment of orders while reducing costs. By optimizing your manufacturingoperations with ERP, you'll also be able to focus on new business opportunities. Please note that it isimportant to select and use the right system for your business in order to achieve the full benefits ofERP.


Modern software architecture for ERP is all about efficiently implementing business rules. It's allabout how those rules are packaged and invoked within the system and how easily they are exposed topartner systems. That’s why .NET and the new standards-based world warrant a redesign of ERPsystems from the ground up.

The characteristic features of a perfect ERP system are given below:• 100% managed code• Standardized business rules• Bundle validation rules with processing rules• Dynamic choreography of business rules• Distributed processing• Readily customizable• Native support for standards-based connectivity• Loosely coupled• Expose a rich standards-based set of data to the outside world• Single focal point for inbound data• Provide event-based communication• Easy maintenance• Data integrity

9.4 THE FUSION OF .NET TECHNOLOGY AND ERP

Today’s ERP systems integrate all business management functions, including planning, inventory/materials management, engineering, order processing, manufacturing, purchasing, accounting andfinance, human resources and more. One characteristic is common to all software: the software must beinstalled – somewhere. While it is readily possible to put a modern face on old technology, the softwareinstallation process must land all the components of the software product on the target computerhardware. Even web browser-based and Web Service applications need to be installed; they're installedon a server. As the licensee of an ERP software product, you are entitled to ask exactly what softwarecomponents will be installed on your hardware systems. These questions should be asked when you areshopping for your new system to allow you to learn the true nature of the technology you are purchasing.

.NET presents a platform-independent target for software development, with many built-in featuresincluding Internet integration and features intended to enhance security. It relies fully on softwarecomponents and the component-oriented programming paradigm. The two primary components of.NET are the common language infrastructure (CLI) and the common language runtime (CLR). TheCLI is a set of specifications for a runtime environment, including a common type system, base classlibrary, and a machine-independent intermediate code known as the common intermediate language(CIL).

.NET is a mammoth undertaking by the world’s largest software company. It will impact all usersof Microsoft products over the next few years as it ushers in a new wave of software innovation.Unfortunately, like many of the Microsoft technical initiatives before it, the shift in core thinking thatis central to .NET may become lost in the marketing hype. As the various Microsoft divisions jump onthe bandwagon, everything at Microsoft will quickly become .NET-this and .NET-that. This dilutionof the message has already begun with Microsoft’s release of new .NET versions of its family of

ERP and .NET 85

enterprise server products. As soon as a Microsoft product becomes friendly with Extensible MarkupLanguage (XML), it seems to get the .NET label.

The epicenter of the .NET world is a small chunk of exotic software called the Common LanguageRuntime (CLR) and a bundle of foundation components and basic services called the .NET Framework.Together, the CLR and Framework provide the powerful infrastructure and rich set of built-in featuresnecessary for objects to readily and securely communicate over the Internet. This year, Microsoft andits partners will release new versions of all the popular computer languages and compilers to supportthe CLR and Framework.

The beauty is that software developers can continue to write software code in their favoritelanguage. The code they write, in their chosen language are then compiled by the new .NET compilersinto a standard format called Intermediate Language (IL). The IL is then executed at runtime by theCLR. Objects written and compiled in one of these new .NET languages will be able to run on anyoperating system platform that supports the CLR and Framework.

Let’s consider the more specific benefits that .NET is intended to deliver and how the manufacturingindustry in particular will benefit.

• Lower cost of system administration• Installed by Copying Files• Reach and Rich at the Same Time• Better internal systems through better tools

Improvements in processing speeds will be particularly applicable to manufacturing planning.Old approaches to MRP and CRP concepts will yield to previously unthinkable computing power. Inthe end, .NET will enable blindingly fast executions of production planning, shop floor tracking, andorder handling processes, order promising, dynamic inventory status, and order status analysis. Couplethese advances with web services developed using .NET and we will see a new wave of dynamic real-time simultaneous material and capacity planning that may span the boundaries of individual companies,forming integrated planning webs across the supply chain.

9.5 IMPACT OF .NET TECHNOLOGY ON ERP

In the mid-1990’s, it became clear to Microsoft that the Internet would change the computing landscapein a big way. While the public was being dazzled by new websites and the promise of dotcom businessplans, the architects at Microsoft were envisioning the next generation of Internet usage. As they saw it,software that operates independently on individual computers would give way to a future filled withcooperating applications running in a rich soup of web-based services. Microsoft formed a grand planto rework the core languages and tools used to develop Windows software. Microsoft aimed to leverageWindows to stake the high ground in the new computing landscape.

The task for Microsoft and other software companies will be to recompile their applications usingthe new .NET tools and components and then enhance their applications to make use of the newfoundfreedom to roam the Internet landscape. In addition to the business pressures that most businesses arecurrently facing the technology environment in which businesses operate is also undergoing somefundamental transformations. The ongoing increases in computing power and connectivity, theproliferation of devices, and the desire for standardization are combining to create a tidal wave offundamental change that will sweep over virtually every industry and change the underlying structuresand assumptions of every business.


Microsoft is creating the .NET platform to help you transform your business to respond to theseimperatives. It is based on the XML Web services model, which is a natural outgrowth of the increasesin computing power, connectivity, and movement towards standards that characterize the wholetechnology industry. Microsoft .NET allows users to quickly establish connections and completetransactions that until now have required hours of time and the frustrating re-entry of data from oneapplication to the next. By allowing multiple secure data feeds to be merged into a single user interfacethe .NET architecture frees users from the limitations imposed by the data silos that populate the Webtoday. This radically new approach to constructing applications illustrates a key concept.

Today, application development usually involves integrating existing applications. You don'twant to have to develop lots of new code. Instead, application development involves the integration ofexisting applications such as email, Customer Relationship Management (CRM) systems, EnterpriseResource Planning (ERP) applications, mainframe applications, and so on. It also often involvestechnologies such as message queuing, components, and Web services that you might develop using theVisual Studio. Companies must compete on their ability to adapt quickly to changing business conditions.Microsoft .NET supports high levels of integration with existing infrastructures and applications. Itprovides new technologies and develops existing ones, enabling you to draw upon the existing experienceof your staff. It also uses your existing hardware and supports scaling up and scaling out as your needsdemand.

• SOAP (Simple Object Access Protocol) is a protocol defining the way that applications(Web services) communicate with one another over the Internet. A SOAP request includesall the information required to call a remote procedure over the Internet. It is transmitted tothe server, using HTTP as the transport protocol. As firewalls are generally configured toallow HTTP requests to pass through, SOAP requests will also usually be allowed to passthrough firewalls. A key premise of Microsoft .NET is integrating applications. As a resultmanaging integration is critical to its success. By enabling customers to better monitor andcontrol their computing resources, Microsoft is providing the basis for managing distributedcomputing as an integral part of all Windows-hosted environments.

This Management Platform for Windows consists of:• Microsoft Operations Manager.• .NET Management Services. This is an extended range of infrastructure services including

a management portal supporting XML and SOAP, created for the development of solutionsthat integrate with the .NET platform.

9.6 AN ERP PRODUCT BUILT USING .NET - A DISCUSSION

Intuitive Manufacturing Systems offers intuitive and flexible enterprise solutions that help small andmidsize manufacturers achieve greater operational efficiency and profitability by integrating businessprocesses on an enterprise-wide level. Since 1994, Intuitive has been a technology leader, dedicated toproviding customers with software solutions that add value to their business. Intuitive's enterprisesolution is designed to deliver superior functionality, rapid implementation, high levels of usabilityand a technology standard that is unmatched in the industry.

To better understand an ERP product developed based on .NET technology, an ERP productdeveloped by Intuitive Manufacturing Systems called “Intuitive ERP” is discussed below. Theinformation on the ERP software “Intuitive ERP” presented below is found from their website

ERP and .NET 87

www.intuitivemfg.com to enable the readers to get better clarity on ERP developed using .NETtechnology.

The first ERP released on a 100 percent Microsoft .NET architecture is Intuitive ERP 6.0.Intuitive ERP v6.0 is built on Microsoft .NET architecture and includes Intuitive CRM, Service andRepair module, Freight Management system and Ad Hoc Report Wizard. CRM includes ability tocreate and track opportunities and prospects to manage all contacts and to integrate fully with Outlook.Web Catalog allows orders to be placed over the internet. Report Wizard includes field layouts, calculationsand presentation options.

The new Service and Repair module allows for incident tracking, warranty tracking, and fullvisibility into the life of a product. The freight management functionality allows customers toautomatically calculate freight amounts, "shop" for freight rates based on different carrier options, etc.The Freight Manager is integrated into scales and label printing as well to complete the suite of freightneeds. The Ad Hoc Report Wizard offers another dimension of ease of use in reporting to our customers.You can report on any field in any table without knowing a single query or table layout. This extremelyeasy reporting tool includes field layouts, calculations, presentation options, and more. Perhaps themost exciting of all is the new form layout.

Now that the architecture of Intuitive is complete in .NET, With each new release, more andmore functionality is now offered in the new .NET format. This revolutionizes the user's experiencewith an extremely intuitive user interface. Ease of use, speed, and dramatic new functionality areavailable as each Intuitive function is adopted into the .NET world. The release of 6.0 laid thegroundwork, but also put out the first feature set in the .NET framework. These exciting new formsare just the beginning of the functionality coming from Intuitive in the coming months.

More importantly, the fusion of .NET and ERP technology will enable dramatic changes in howcommerce is conducted in the manufacturing industry. Small and mid-sized manufacturing organizationswill gain new competitive advantages as commercial enterprise software packages introduce new .NET-enabled features. Intuitive ERP's Microsoft .NET-based software technology marks a quantum leapforward in enterprise software. Exclusive use of Microsoft technology establishes a seamless interactionbetween all elements of the Intuitive ERP architecture. Coupled with the administrative tools fromMicrosoft, a set of intuitive system tools restricts administration chores to an absolute minimum.

Source code for the software is included in the cost of the system, giving you full control overany customizations you might desire. Intuitive ERP utilizes an automated deployment process thatinstalls all server and client systems from a single CD-ROM. Any custom modifications are alsoautomatically deployed. Intuitive ERP provides a rich, highly visual client user interface experience.The familiar Windows interface reduces the learning curve and makes Intuitive ERP extremely easy touse.

Intuitive ERP also takes advantage of the power and performance of common Microsoft desktopapplications, seamlessly integrating with Microsoft Office, Internet Explorer for enterprisecommunication and access to the Internet. The Intuitive ERP AlertMessenger tool allows you to automatethe process of sending e-mails and/or on-screen messages to employees, customers, and partners inresponse to specific events. Import Wizards quickly and efficiently load your legacy data into theIntuitive ERP database.

The Intuitive ERP system provides an intuitive and flexible tool set that can handle all the front-office and back-office operations of a discrete manufacturing company. The Intuitive ERP offers thefollowing functions: Planning, Inventory, Engineering, Purchasing, Manufacturing, Finance, Quoting/


Estimating, Order Processing, Advanced Configurator, Quality, Intuitive SPC (Statistical ProcessControl), Return Material Authorization, Intuitive Forecasting, Payroll/Human Resources,AlertMessenger, Project Management and Intuitive Mobile. These functions are described briefly below.

• PlanningGenerates plans on demand, analyzes material requirements, controls production costs andscheduling, and manages resource efficiency.

• InventoryManages detailed inventory records, maintains optimal inventory levels, simplifies inventorytransactions, automate frequently performed tasks, ships and receives goods, tracks materiallocation/lot information, track serial numbers, utilize bar coding, and performs cycle countingand physical inventories.

• EngineeringCreates and maintains multi-level visual bills of material, manages product data, designsroutings and standard processes, and tracks and controls engineering changes.

• PurchasingManages procurement, organizes and maintains detailed vendor information, maintains abid matrix, creates purchase orders or generates purchase orders from planned orders, managesrequisitions, and receives and inspects vendor shipments.

• ManufacturingPlans and schedules production enters and tracks work orders, controls the shop floor, monitorsproduction status, manages material and equipment capacity, promises deliveries, and tracktime and attendance.

• FinanceCreates budgets and monitors cash flow, processes accounts payable and accounts receivable,generates general ledger activities, reconcile financial accounts, and tracks material, laborand production costs, creates professional presentations with your financial statements.

• Quoting/EstimatingProvides quotes and estimates to customers and automatically converts quotes to sales orders.Easily create new items (and associated bills of material and routings), copies and modifiesexisting items, or quickly configure an item on-the-fly.

• Order ProcessingProvides quotes and estimates, enters and maintains complex sales orders or converts quotesdirectly to sales orders, creates new items, bills of material and routings on-the-fly, maintainsprice matrices, and ship finished product.

• Advanced ConfiguratorQuotes, sells and delivers complex, custom-configured products, compresses the quote todelivery cycle, views design and pricing changes automatically, and simplifies the collectionand management of critical product data.

• QualityInspects incoming (purchased) and outgoing (manufactured) materials, inspects returnedmaterials, traces defective parts to their original location/lot, and maintains data on instrumentsand equipment.

ERP and .NET 89

• Intuitive SPC (Statistical Process Control)Performs real-time Statistical Process Control at all inspection points throughout the system,including work-in-process, purchasing, and material review/return.

• Return Material AuthorizationHandles the return of materials, automatically de-books sales, commissions and taxes, andcreates customer credits and request and document RMA samples.

• Intuitive ForecastingGenerates forecasts based on usage data and multiple forecasting methodologies, generatesdemand requirements based on forecasts, and analyzes forecasts compared to actual data.

• Payroll/Human ResourcesManages your employees' salary and job histories, benefit eligibilities and uses, and processespayroll.

• AlertMessengerMaintains real-time workflow communication by automating customized messages to vendorsand customers as well as employees for specific system events, via e-mail, on-screen messaging,or pager.

• Project ManagementEstablishes projects and master projects, associates Project IDs with all facets of the system,maintains a Project ID in multi-level manufacturing and procurement orders tied to a givensales order, reports on revenues, expenses and profit/loss for any project, and reports onprogress billing.

• Intuitive MobileUses wireless handheld devices for shop floor and inventory transactions.

SUMMARY

With .NET, the Internet becomes a platform for business. Microsoft .NET addresses most oftoday's computing deficiencies to realize the vision of enabling access to all user's data and applicationsanywhere and from any device; allowing users to interact with their data through handwriting, speech,and vision technologies. Businesses benefit from radically increased efficiency and productivity as.NET brings employees, customers, data, and business applications intelligently interactive. TheMicrosoft .NET makes is explicitly designed to enable the rapid development, integration, andorchestration of any group of XML Web services and applications into a single solution.

The opportunities and advantages for manufacturing companies and ERP software companiesthat embrace .NET will be outstanding. Companies that quickly harness .NET will gain clear advantages..NET will bring new competitive capabilities to smaller manufacturing organizations. Largermanufacturing organizations will apply their corporate IT muscle to leverage .NET in-house. Theywill reduce their administration costs and solve old business problems in new and innovative ways.


REVIEW QUESTIONS

1. What is .NET?2. Evaluate the features of an ERP product using .NET technology.3. List the salient the features of .NET.4. How does the .NET technology influence the business process reengineering?5. How do ERP vendors view the .NET Technology?6. “The impact created by the fusion of ERP and .NET on the manufacturing industry is

significant.” - Comment.7. What about the failure of ERP projects with respect to .NET?8. How is customization handled in .NET based ERP system?9. Suppose you are provided with a few technologies including .NET to develop an ERP

system. With which technology, will you proceed? Why?10. What are the issues to consider when we select a technology for a large scale project like

ERP software development?11. Develop a list of technical ingredients of an ERP product based on .NET.12. What are the specific benefits enjoyed by the manufacturing industry using ERP software

based on .NET?13. ".NET acts as a catalyst in the development of packaged software." - Comment.14. What are the characteristic features of a good ERP system?15. Determine your business needs and the appropriate solution both from a functional and a

technological standpoint. There are many ERP vendors available. Select an ERP vendorwho could meet your challenges and add value to your business.

16. What are your suggestions and guidelines to the technical and functional consultants of ERPin the process of choosing a technology for developing ERP software?

17. Provide guidelines to the customers/organizations to enable them to select a right ERPvendor/ERP system which will suit to their business best.

ERP Vendors

10

OBJECTIVE

• To give an overview of the various ERP vendors and their products.

EXPECTED OUTCOME

The readers will be able to:üü Understand the features of ERP products from various ERP vendors.

Note: The details on various ERP vendors presented here are compiled from various sources includingthe Internet and the ERP vendors' websites. The main purpose of this presentation is to enable thereader to get a focus on the ERP market. The main players in the ERP market are SAP, Oracle, Baan, JDEdwards, QAD, Ramco, etc. SAP is the market leader and its ERP products are SAP R/2 for the mainframeenvironment and SAP R/3 for the client/server environment. Hence, an overview of the various ERPvendors and the features of the major ERP vendor SAP's ERP product mySAP are discussed below.

10.1 SAP

SAP (Systems, Applications and Products in Data Processing) has been selling manufacturing softwarefor 25 years. It operated in relative obscurity before introducing in 1993 its R/3 product, the first three-tiered client/server enterprise resource planning (ERP) software to hit the market. The technologicalbreakthrough quickly propelled SAP to the number one spot in terms of ERP software sales.

The next version of R/3 released recently is expected to be easier to install and use. SAP islaunching several initiatives that are geared toward making its products more customer-focused. Theseprograms include the expansion of R/3's supply-chain management functions and the broadening of itselectronic commerce and internet capabilities. SAP also is developing business templates containingfeatures, functions, and configuration tools to make R/3 easily adaptable to businesses in specificvertical markets. SAP R/3 is the market leader for integrated business administration systems. It integratesall business processes of a company and provides modules for finance, human resources, materialmanagement, etc. SAP R/3 is based on a relational database system which serves as an integrationplatform for all components of SAP R/3.

mySAP ERP

mySAP ERP (Source:www.sap.com) combines the world's most complete, scalable, and effectivesoftware for enterprise resource planning (ERP) with a flexible, open technology platform that can


leverage and integrate SAP and non-SAP systems. mySAP ERP includes four individual solutions thatsupport key functional areas:

[a] mySAP ERP Financials[b] mySAP ERP Human Capital Management[c] mySAP ERP Operations[d] mySAP ERP Corporate ServicesmySAP ERP is enhanced by industry-specific features and best practices based on three decades

of SAP experience. The solution enables organizations to reduce total cost of ownership, achieve afaster return on investment, and benefit from a more flexible IT infrastructure that helps drive innovation.And mySAP ERP offers complete solutions designed to support international operations so that businessescan efficiently and successfully operate and compete on a global scale.

[a] mySAP ERP FinancialsmySAP ERP Financials provides a complete financial management solution for a broad range ofindustries. It's the leading enterprise software solution for accounting, financial reporting, performancemanagement, and corporate governance. With mySAP ERP Financials, you can transform financefrom an administrative department into a strategic business partner. It is a system that provides deepoperational insight, unifies strategic action, and measures results quickly. The solution offers a depthof functionality in accounting, reporting, analysis, financial supply chain, and treasury management.Robust financial and management reporting, plus internal controls and documentation of all financialprocesses and transactions, ensure the highest levels of business analysis and governance. mySAP ERPFinancials provides industry-leading support for local market requirements, languages, and currencies.It also supports a broad range of industry-specific processes and is compatible with all SAP industrysolutions. Its scalable and open architecture is built for multinational organizations and connects financialmanagement with existing business systems. mySAP ERP Financials powers the highest-performingfinance organizations in the world. It offers a unique advantage to companies by providing market-leading financial management tools that work harmoniously with your operational systems.

[b] mySAP ERP Human Capital ManagementTo compete effectively, you need to align all corporate resources, including employees, with businessobjectives. You need to transform traditional HR functions into a comprehensive program for HumanCapital Management (HCM). With mySAP ERP Human Capital Management (mySAP ERP HCM),you can maximize the value of your most important asset--your employees--aligning their skills, activitiesand incentives with business objectives and strategies. mySAP ERP HCM also provides the tools tomanage, measure, and reward individual and team contributions. With mySAP ERP HCM, you canfind the best people, develop and leverage their talent, align their efforts with corporate objectives,maximize the impact of training efforts, and retain top performers. The solution provides integrated,enterprise wide functionality that

• Automates HCM processes and seamlessly integrates them across global operations;• Provides real-time information access that accelerates workforce decision-making;• Allows you to assign the right people to the right projects at the right time;• Supports both employees and managers throughout the employee life cycle; and• Empowers employees to manage processes in a collaborative environment

ERP Vendors 93

Designed for global business, mySAP ERP HCM supports payroll functions, regulatoryrequirements and best practices for more than 50 countries. It integrates with existing business systemsand can be customized to meet your requirements. It's no wonder more than 9,000 companies aroundthe world rely on mySAP ERP HCM to manage more than 54 million employees.

[c] mySAP ERP OperationsmySAP ERP Operations provides an extensive operations solution for automating and streamliningprocurement and logistics execution, product development and manufacturing, and sales and service.The solution also provides powerful analytic tools for better decision-making, as well as innovativeself-services and role-based functionality for increased productivity.

With mySAP ERP Operations, you can• convert time-consuming manual steps into streamlined, online processes to improve overall

enterprise planning;• support the planning and deployment of assets, manage assets over their complete life cycle,

and reduce order cycle times and excess inventories;• streamline processes at warehouses and distribution facilities;• manage transportation and distribution efficiently;• extend collaboration with both customers and suppliers;• enable a collaborative project management environment that includes external parties to

manage both simple and complex projects;• provide personalized interfaces, portals, mobile applications, and tools that enable employees

to do their jobs more effectively;• enable enterprise-wide visibility, forecasting, and performance management--reducing

planning cycles and lead times, and enabling continuous process improvements and fasterresponse to new opportunities; and

• improve customer service and respond quickly to customer demand;

[d] mySAP ERP Corporate ServicesmySAP ERP Corporate Services supports and streamlines the administrative processes that are standardto most businesses--those business-critical support processes that you must execute with maximumefficiency and control. You can tailor mySAP ERP Corporate Services to meet your requirements fortransparency and control, as well as reduced financial and environmental risk, in the following areas:

• Real estate management--mySAP ERP Corporate Services supports the administration ofcommercial and residential real estate, enabling automation and process control to help youavoid vacancies and reduce the costs associated with real estate development, rentals, andproperty management. Real estate management is enabled by the SAP Real Estate Managementapplication.

• Project and portfolio management--mySAP ERP Corporate Services provides a flexible andcomprehensive solution for managing a portfolio of projects--from strategic portfoliomanagement to project planning, execution, and accounting.

• Travel management--mySAP ERP Corporate Services helps you reduce costs, streamlinetravel administration processes, monitor compliance with travel policies, and manage changesin compensation and pricing models from suppliers, global distribution systems, and travelagencies.


• Environment, health, and safety (EH&S) management--mySAP ERP Corporate Serviceshelps you manage complex, rapidly changing EH&S regulations and their consequencesacross your organization.

• Quality management--mySAP ERP Corporate Services enables a unified approach to totalquality management, delivering efficiencies that result from fewer product returns andimproved asset utilization.

10.2 ORACLE CORPORATION

Since introducing its first application modules approximately three years ago, Oracle Corp. has vaultedto the top of the manufacturing software market both in terms of revenues, and in the depth andbreadth of its product offerings. Oracle now has more than 35 modules covering every facet of enterprisecomputing-from manufacturing and production control to human resources and sales force automationfunctions. Oracle expects the Windows NT announcement to enhance its efforts at winning morecustomers among the ranks of mid-sized manufacturers, while its supply-chain initiative should helpits overall manufacturing marketing efforts.

10.3 J.D. EDWARDS

Historically restricted to being an AS/400 shop, J.D. Edwards now offers all its software products onmultiple platforms--including Unix, Windows NT and MVS, as well as a variety of databases. Thisbranching out is directly attributable to the One World philosophy, which is based on a programmingstructure that J.D. Edwards calls configurable network computing (CNC).

With the one world methodology gaining market acceptance, J.D. Edwards is now focusing onadding value to its product suites, primarily in terms of new functions. That initiative is expected tobegin showing results with the release of a full compliment of Java applets and a browser screen thatwill enable the use of J.D. Edwards' applications over the Internet.

10.4 THE BAAN CO.

The Baan Co. appears to subscribe to the adage that actions speak louder than words. Baan's action overthe last three years is clearly indicative of its desire to be the dominant force in the worldwidemanufacturing software market. Baan launched its quest for worldwide market dominance in 1994.Since then Baan has established its presence in every possible sector of the manufacturing world. ItsBaan IV enterprise resource planning suite is used in the automotive industry, by numerous processmanufacturers, as well as various types of discrete manufacturers, in addition to make-to-order andcontract manufacturing companies. Baan also unveiled the first of its Web-based products, a suite ofsupply-chain functions that includes a Web-enabled sales configuration. Baan, on the other hand, ishistorically stronger in manufacturing than in finance and so on.

10.5 SYSTEM SOFTWARE ASSOCIATES (SSA)

A company with a long history of success, SSA shows great resilience by swiftly overcomingunanticipated problems with the revamped version of its widely known BPCS enterprise resourceplanning package. Released in April 1996, the object-oriented version of BPCS, officially known asBPCS 6.0, easily surpassed its predecessors in terms of the number of functions and features offered.

ERP Vendors 95

But BPCS 6.0 lacked the horsepower necessary to drive the large networks on which many of its earlycustomers wanted to run. SSA expects most of its client base to make the switch to the object-basedversion of BPCS eventually. The tools are in place to support those customers who cannot make thejump right away.

10.6 MK GROUP/ACACIA TECHNOLOGIES

Following a buying binge that spanned much of the late 1980s and early 1990s, Computer Associates(CA) had accumulated more than 500 software products covering every facet of business computing.CA had enterprise applications, systems and network management programs, databases, applicationdevelopment tools, and individual manufacturing and financial applications.

In the enterprise resources planning arena, the CA reorganization effort spawned two new businessunits designed to tackle the market for mid-sized manufacturers-loosely defined as companies with $50million to $500 million in annual revenues. Acacia Technologies has taken control of all of CA's AS/400-based manufacturing and distribution packages. These include CA-PRMS, a broad-based systemdesigned to handle a variety of manufacturing modes: CA-KBM, a comprehensive, knowledge-basedpackage designed for engineer and make-to-order manufacturers; and CA-Warehouse Boss, whichcovers the full spectrum of warehouse management functions. CA will officially drop the CA prefixfrom these product names to reflect Acacia's status as a separate business, even though it will remain awholly owned subsidiary of Computer Associates.

The CA prefix has already been removed from the names of the products offered by theManufacturing Knowledge, or MK Group. MK offers MK Manufacturing, a suite of software modulesprimarily for discrete, repetitive manufacturing environments; MK Logistics, which is designed forwarehouse and distribution management functions; and MK Enterprise, a 40-module package designedto run every aspect of a manufacturing enterprise.

10.7 JBA INTERNATIONAL

JBA International has posted record revenues and corresponding profits, each year for the past 15years. This is attributed to JBA's focus on meeting its customers' needs. The technology piece startswith JBA's flagship System 21, a complete set of manufacturing, financial, customer service andlogistics applications. Originally designed for IBM's AS/400, System 21 is now available on the Unixand Windows NT platforms as well. In keeping with its customer-centric approach, JBA has equippedSystem 21 with a complement of market-specific solutions for key vertical markets like food andbeverage, automotive, footwear and apparel, and service management.

10.8 MARCAM CORP./MAPICS INC.

Marcam Corp. has a history of setting trends, particularly in the development of ERP solutions forprocess manufacturers. But this year, the company decided to follow a broad industry trend and divideitself into two separate companies. In establishing distinct companies for its products aimed at processand discrete manufacturers, Marcam is merely placing an official stamp on a business practice that ithas been following for years.

Marcam recently combined the organizations that had managed its Prism and Protean process-manufacturing suites into a single business unit. Prism, primarily a AS/400 based offering, remains


Marcam’s flagship product, currently running in more than 1100 process manufacturing sites worldwide.MAPICS, an AS/400-based solution that Marcam purchased from IBM in 1993, is believed to be themost widely used manufacturing software in the world today, with various versions of it operating inmore than 14,000 manufacturing sites around the world.

10.9 INTENTIA

Intentia has been experiencing rapid growth in USA and worldwide in recent years. The company’spackage, Movex, is supposed to be a very broad and very deep product that provides benefits not oftenprovided by standard enterprise resources planning offerings. Among these benefits are rapid deploymentand quick return on investment. With the AS/400 as a primary operating platform, Intentia has builtMovex into a 62-module package that addresses every aspect of a manufacturing operation--fromactual manufacturing and production control to distribution, financials, human resources and executivedecision-support functions. While taking this broad approach to functionality, Intentia has also managedto equip Movex with modules that meet the specific needs of various vertical markets. The verticalsIntentia focuses on include process--industries like apparel, food and beverage, pulp and paper, as wellas several discrete manufacturing industries.

10.10 QAD INC.

For several years, QAD Inc. has been doing all the things that are essential for enterprise resourcesplanning Software Company to sustain a healthy growth rate. It has clearly identified its target markets.It has concentrated on expanding the functionality of its products to meet the specific needs of companiesin those markets. And it has continually broadened its products' technology base, offering its client/server-based systems on a variety of platforms, including Unix, Novell and Windows NT. QAD hasdispatched its research and development team to work on a new product line, tentatively called On/Q.This series of modules would extend the research of QAD's product offerings into the supply-chain.On/Q which is built with object-oriented technology, will add functions, such as logistics, ordermanagement, advanced pricing, procurement, and vendor/ supplier relations to QAD's product arsenal.

Such functions would provide a complement to the broad ERP functionality users now get fromQAD’s MFG/PRO and MFG/NT suites. Each of these systems contains over three dozen modulescovering various manufacturing and distribution management functions. MFG/PRO is a multisite systemthat runs on either Unix or Novell Netware. MFG/NT is a full 32-bit, object-oriented system that canrun either single- or multisite installations on the Windows NT platform. QAD has established asterling reputation in the marketplace by tailoring these products to run mixed-mode manufacturingcompanies in five key vertical markets: automotive, food and beverage, electronics/industrial, consumerpackaged goods, and medical/pharmaceuticals.

10.11 INTUITIVE MANUFACTURING SYSTEMS

Intuitive Manufacturing Systems (http://www.intuitivemfg.com) offers intuitive and flexible enterprisesolutions that help small and midsize manufacturers achieve greater operational efficiency andprofitability by integrating business processes on an enterprise-wide level. Since 1994, Intuitive hasbeen a technology leader, dedicated to providing our customers with software solutions that add valueto their business. Intuitive’s enterprise solution is designed to deliver superior functionality, rapid

ERP Vendors 97

implementation, high levels of usability and a technology standard that is unmatched in the industry.Intuitive develops full-integrated ERP software for discrete manufacturers.

Intuitive ERP v6.0 is built on Microsoft .NET architecture and includes Intuitive CRM, Serviceand Repair module, Freight Management system, iCustomer Web catalog, and Ad Hoc Report Wizard.CRM includes the ability to create and track opportunities and prospects, to manage all contacts, and tointegrate fully with Outlook. Web Catalog allows orders to be placed over the Internet. Report Wizardincludes field layouts, calculations, and presentation options. Intuitive is committed to making IntuitiveERP the first ERP software product on the market to be 100 percent “pure” .NET. Only a goal of beinga “pure” .NET solution will deliver to customers all the benefits of .NET. To reach this goal, Intuitivestarted from the ground up and spent 18 months designing a new architecture that takes full advantageof .NET, XML, Web Services and the new features of Microsoft SQL Server. Current product has apure .NET managed code framework and 50% of the standard product functionality has been completelyrewritten in .NET.

10.12 COMPIERE

The software Compiere was originally designed and written by Jorg Janke. Jorg has 20+ years experiencein packaged ERP systems, is an Oracle Certified DBA and Java Certified. In 1982, Jorg founded hisfirst company “SoftCream” developing and distributing an integrated retail solution. Compiere Inc. isthe lead developer of the Compiere product and is solely funded by providing Support and Services forCompiere. As a (profitable) Professional Open Source company it concentrates on providing “backoffice” services to its partners and users of Compiere. Compiere, Inc. is a private company based inPortland, Oregon, USA.

Compiere provides a comprehensive solution for small-to-medium sized enterprises (SME) indistribution and services on a global basis and covers all areas from customer management and supplychain to accounting. Compiere makes Fortune 500 functionality accessible to companies of all sizes.Quite a few benefits come automatically with Open Source environment, but Compiere has significantproduct benefits over its traditional, older competitors. Compiere is an Open Source software and bydefinition is free. Implementation services, training, support and documentation are available as extrasif you need them.

10.13 RAMCO SYSTEMS

Founded in 1938, Ramco Group is a well-diversified industrial conglomerate. Ramco Group has seenits turnover multiply ten-fold and also become one of India's most respected business groups, achievinginternational recognition for its quality products and services. The group is one of the most efficientlymanaged Indian business houses with a track record of high and consistent profitability. Highly respectedfor its consistent rewards to its shareholders, the group employs over 7000 people.

Established in 1989, Ramco Systems is a part of the Ramco Group. Ramco's Adaptive EnterpriseSolutions, developed using Ramco VirtualWorks®, a Virtual Software Factory, allows organizations toaddress their Unique & Next Practices over and above standard Best Practices. Ramco VirtualWorks isa Process to Application Platform that incorporates several breakthrough concepts (multiple patentsfiled), a first for an Indian Software company. Ramco is a global provider of Enterprise Solutions andServices in key areas such as Manufacturing, Aviation, Asset Management, Trading & Logistics,Healthcare, eGovernance, Banking & Financial Services, Corporate Performance Management and


Human Resources Management. It is also a Siebel Alliance Partner and provides CRM implementationservices to global customers.

Ramco provides Converged Networking Solutions, Information Security Services and total ContactCentre Solutions. In the Factory Automation space, Ramco provides Engineering Process Optimizationsolutions to the Cement, Chemical and Power sectors. Ramco Systems is listed on BSE, NSE & MSE.Its software development practices are ISO 9001 Certified and Development Centers assessed at SEICMMI-SW Level 5. Ramco has a global presence with 16 offices in 9 countries across USA, Europe,Asia-Pacific, Middle East and South Africa.

Ramco employs more than 1,700 professionals serving in 1,000 customer locations across 40countries, representing 70 industry segments. Its customers include Citigroup, Conair, ICI, PHI, Intel,ICICI, Ericsson, Moser Baer, Philips, Reliance Energy, Revertex, AEC, Seagate, eThekwini, SavageArms, Amara Raja Batteries, Schlumberger, Rakbank, Ruag Aerospace, Swatch Group, GOAP,CavinKare, MJB Wood, Essex Crane, MMTC, Columbia Helicopters, Kardex, Madras Cements, TropicalCheese, Preferred Meals, Agilent, Radisson Edwardian, Bemis and more.

SUMMARY

Table 1 shows the “Top 5” Worldwide ERP Software Application New License Revenue MarketShare Estimates. It (Source: IJEIS International Journal) illustrates the “top 5” ERP vendors, 2001 and2002 market shares and we see one dominant actor, a handful of major vendors and a large number ofinsignificant vendors. To conclude the discussion on enterprise systems we believe that ERP has evolvedfrom being a state of the art technology towards being a state of practice. The new package offered bythe major vendors has been extended by adoption of the e-business technologies into the ERP systems.Thus we have got some new insight into the ERP market. We find that ERP is an institutionalizedcomponent of enterprise infrastructure. The implications to research are that the time is now ripe torethink the concept of enterprise systems.

Table 1

ERP Vendor 2002 Market share 2001 Market share

SAP AG 25.1% 24.7%

ORACLE 7.0% 7.9%

PEOPLESOFT 6.5% 7.6%

SAGE 5.4% 4.6%

MICROSOFT BUSINESS SOLUTIONS 4.9% 4.6%

OTHERS 51.1% 50.3%

TOTAL MARKET SHARE 100% 100%

ERP Vendors 99

REVIEW QUESTIONS

1. What is the role of an ERP vendor?2. Carefully examine the features of all the ERP vendors and rank them in the order of their

strengths and weaknesses.3. Project the market share of the top ERP vendors for the next five years.4. Name the various products of all the vendors and specify their pros and cons.5. How does ERP vendor ensure reliability to their product?6. Suggest a methodology to enable the ERP vendors to measure the performance of their

product.7. What are the reasons for ERP failure? Propose suitable solutions.

ERP Case Studies

11

OBJECTIVE

• To enable the readers to visualize ERP implementation.

• To describe the benefits of ERP.

• To describe the challenges faced by the organization.

• To discuss how the various organizations utilizes the ERP solution.

EXPECTED OUTCOME


üü Understand the features of an ERP system.

üü Understand how an ERP system can improve the performance of an organization.

Note: The case studies presented here are compiled from various sources including theInternet, the ERP Vendors' Websites, and the websites of organizations who implementedthe systems. The purpose of these case studies is to enable the reader to get hands onexperience in various ERP projects. The readers are directed to visit the websites of allthe major ERP vendors like SAP, Intuitive, Baan, etc to get the details about their ERPproduct and its implementation in various organizations.

CASE – 1

About the CompanyABC Private Limited, an electronics contract manufacturer specializing in high mix, low volumecircuit board assemblies, faced a daunting challenge. In a short period, the company needed to launcha brand new production facility and implement a business infrastructure that would support CRM.

Challenges faced by the CompanyABC Private Limited provides an outsourcing solution to other manufacturing companies that do notwant to tie up assets and overhead in electronics manufacturing, but still need high quality, complexassemblies. To meet the demands of manufacturers in the industrial systems, medical instruments,

ERP Case Studies 101

networking systems and telecommunications industries, ABC Private Limited built a state-of-the-artSurface Mount Technology (SMT) production facility in Bothell, Washington. And, to pull it alltogether, to manage accounting and manufacturing activities, keep their own costs down and provideflexibility in meeting customer demands, they needed an infrastructure.

SolutionABC Private Limited selected Intuitive ERP by Intuitive Manufacturing Systems for material planning,procurement, inventory and production management, shop floor scheduling and general accountingfunctions. A team consisting of members of executive management and key personnel from materialsand IT selected Intuitive ERP after reviewing several other ERP systems. Their decision is based onfive major criteria: production and inventory control, functionality, ease of use, integration of accountingand manufacturing functions, system scalability and technical support services.

Outcome of ERP ImplementationIntuitive ERP implementation only took about 60 days. The inventory and planning functions ofIntuitive ERP, including integration of forecasts, detailed MRP analysis, vendor management reportingand inventory control, provided the information needed to make the right business decisions quicklyand accurately. Integrating accounting and manufacturing was also a high priority for the company.General ledger, product costing capabilities and management reporting were all major requirements.The ERP implementation was more focused towards quality and excellence. Those two elements enabledthe company to be extremely efficient and provided the ability to respond quickly to customer needs.

REVIEW QUESTIONS

1. What does a SWOT analysis reveal about ABC Private Limited?2. Is the company in your opinion in an attractive position and situation? Why or why not?3. Does the company require ERP software?4. How did the company select Intuitive ERP?5. Assess the performance of the company before and after ERP implementation.

CASE – 2

About the CompanySince 1985, ABC Private Limited has provided the agriculture, construction and transportation industrieswith state-of-the-art trailer equipment. Manufacturing approximately 2,500 units a year, ABC's 90employees were experiencing growing pains. BOM (Bill of Material) inaccuracies created inventorydiscrepancies, material shortages, manufacturing bottlenecks, missed delivery dates and substandardproductivity. Employee frustration over BOM inaccuracies created a tense working environment.


Challenges faced by the CompanyABC Private Limited needed an ERP package that provided accurate real-time information to keep upwith the rapid sales growth. Existing software did not provide ABC's engineers with an efficientmethod to create Bill of Materials. An inaccurately engineered Bill of Materials negatively affected theentire manufacturing process. Inventory inaccuracy due to bad Bill of Materials led to material shortagesand panic purchasing. Inefficient use of machinery caused unnecessary shop floor bottlenecks. Finishedgoods were not coming off the production line on time, creating consistent delinquent delivery dates.Resulting financial statements did not accurately reflect a true picture of the company. As the companygrew, without an adequate business system, ABC's problems were growing with it.

SolutionAfter three months of system evaluation the selection committee opted for Intuitive’s 100 percentMicrosoft Technology-based solution. The fully integrated functionality along with the layout of theuser interface assured ABC Private Limited of a quick and easy learning curve. A diligent referencereview provided additional assurance of system reliability and support. It was imperative for ABCPrivate Limited to implement a system capable of accurate and timely BOM creation. With accurateBOM information available, dramatic improvements in inventory levels and production on the shopfloor were possible.

Outcome of ERP ImplementationAfter implementing Intuitive ERP, ABC Private Limited enjoyed a reduction in the manufacturingcycle. Intuitive ERP provided ABC’s engineers with the ability to create BOMs quickly and accurately.This allowed ABC Private Limited to install an orderly release of work orders to the shop floor,making production more consistent. “Within a month we could see considerable improvements on shopfloor flow,” said the general manager of the company. The production bottlenecks of the past have beeneliminated. ABC Private Limited delivery dates are now shorter and more reliable. Additionally, customercomplaints of delinquent deliveries have been dramatically reduced, improving stress levels throughoutthe plant. Improved inventory accuracy has resulted in reduced inventory shortages and the eliminationof panic purchasing.

Financial Statements now reflect a more accurate view of sales growth and the resulting bottom-line improvement. With Intuitive ERP in place, both ABC's customers and employees have felt itsimpact. “We were experiencing a lot of frustration prior to implementation. Delivery promises to ourcustomers were not being met. This created a tense work environment,” said the general manager of thecompany. “All of our customers appreciate the increased reliability of delivery dates,” he added. Theimpact has also been felt at the higher levels of the organization. “Senior management is appreciativeof the stability of production, the reliability of delivery dates and the increased accuracy of the financials,”said the general manager of the company.

In addition to the operational benefits, ABC’s management is now able to accurately track thehealth of their company with Intuitive ERP's reporting and Business Intelligence tools. The generalmanager added that the reports that the system can generate are excellent. The ease with which queriescan be created and converted into Pivot tables or OLAP cubes is also a great feature. ImplementingIntuitive ERP has helped ABC Private Limited to stabilize their growth. Now, they can focus onenabling new business and growth strategies.


REVIEW QUESTIONS

1. What is the primary objective of ABC Private Limited?2. What is the outcome of ERP implementation?3. What are the challenges faced by the company before ERP implementation?4. What are the features of ABC's ERP software?5. Assess the performance of the ERP software chosen by ABC with other ERP software.

CASE – 3

About the CompanyFounded in 1984, medical device manufacturer XYZ Private Limited is a provider of Lacrimal OcclusionTherapies to physicians, hospitals and distributors around the world. Lacrimal Occlusion is a treatmentfor Dry Eye Syndrome and related Ocular Surface Diseases.

Challenges faced by the CompanyWhen XYZ Private Limited decided to replace their accounting and manufacturing systems, theywanted an integrated enterprise resource planning (ERP) solution that would support their growth andaddress a number of operational problems. After 15 years in business, inventory was growing fasterthan revenue, on-time delivery was slipping and a general lack of information was negatively impactingfinancial and operational performance. A successful ERP implementation, and for that matter a successfulbusiness, not only requires a vision, but also a plan. According to the Director of Operations for XYZPrivate Limited, “a vision without a plan is only an illusion.” Any solution would ultimately have tosupport three important corporate objectives: the ability to rapidly respond to customer needs, deliverhigh quality products and empower employees. Adding more challenges to the project, XYZ PrivateLimited operates in a heavily regulated industry and has to comply with FDA Quality SystemRequirements (QSR), ISO9000 requirements and European EN46001 requirements.

SolutionXYZ Private Limited looked at several ERP systems targeted at small and mid-sized manufacturersand systems from industry giants SAP, Baan and J.D. Edwards. The systems were judged based onoverall functionality, ease of use, scalability and underlying technology. “Cost plus utility equals' valueand Intuitive ERP from Intuitive Manufacturing Systems provided the best value by offering the rightfeatures at a very affordable price,” said a Director of the company. “The company is looking at areturn on investment of over 200 percent and we are very happy with the choice”, he added. For XYZPrivate Limited, the core functionality relating to purchasing, materials management and sales operationshad the most impact.


Outcome of ERP Implementation

More than ten Key Performance Indicators (KPIs) were established to measure improvements. Theyincluded metrics for inventory, delivery, supplier performance, financial performance and quality.Significant improvements were realized in all areas. Total inventory, including external locations, hasdeclined from 90 days on-hand to 15 days on-hand. On-time delivery improved from 75 to 99 percent.Another area experiencing improvement has been supplier performance. With in-house and externaloperations, integrating sales forecasts and managing inventory in multiple locations became critical.The ERP implementation has given them much better visibility and allowed the suppliers to improvetheir own scheduling. According to a Director of this company, on-time supplier delivery performancehas improved from 30 percent to more than 80 percent in less than a year.

Implementation was dominated by two main factors. First, the company had a very aggressivetimeline. It was moving to a new facility and everything needed to come together at the right timewithout impacting revenue. Second, implementation and maintenance of the system had to fit anenvironment with very little IT resources available. Intuitive ERP implementation actually took only45 days and required only one day of consulting services. All employees were asked to keep track ofprocedures and reports from their old system in case the new system did not meet all their needs. In theend, literally no modifications were required.

XYZ Private Limited believes strongly in empowering its employees. Financial and operationalinformation is shared with all employees, not just the management staff. "If employees have access tothe information, they can make better decisions", says a Director of the company. Unique for acompany of its size, XYZ Private Limited has geographically diverse operations and remote access hasbecome an important part of the business. "We needed a system that would allow us to work any timeof day, from anywhere in the world," said the President of XYZ Private Limited. Intuitive offers anoption that gives users a direct, real time connection to the system. Sales executives can review theiraccount histories and have the ability to enter orders remotely. The management team can track andanalyze the overall company performance from any country in the world. "As the company grows, wesee more and more benefits from the integrated solution Intuitive provides," said a Director of theXYZ Private Limited. After ERP implementation, the company has become very successful and continuesto experience at least 10 percent revenue growth year to year, added the executive director of thecompany.

REVIEW QUESTIONS

1. What are the critical success factors of ERP implementation?2. What is the feedback given by the director and the president of XYZ Private Limited?3. Propose suitable metrics for measuring the performance of ERP implementation.4. Evaluate the growth of the company after ERP implementation.5. How did the company choose Intuitive as their ERP software?


CASE – 4

About the CompanyAn aerospace industry decided to go for an ERP system. When the manual inventory managementprocess and stand-alone accounting system failed to keep up with the company's growth, the industrydecided it was time to implement an integrated enterprise resource planning application. It needed asystem that could survive and thrive in an environment regulated by the Federal Aviation Administration(FAA). They selected Intuitive ERP from Intuitive Manufacturing Systems.

Challenges faced by the CompanyAs the aerospace industry began to experience rapid growth it realized they were facing a number ofproblems. They had no clear view of product costs, productivity was frequently impacted by stock outson the production floor, accounting accuracy was poor and inventory turnover was exceedingly slow.

SolutionThe aerospace industry moved forward implementing the core modules of Intuitive ERP, includinggeneral ledger material planning and procurement capabilities, as well as the optional modules forShop Floor Control and Location/Lot Tracking for 25 concurrent users. Intuitive ERP's MRP and billof material capabilities have provided material planners with a better view of requirements and morecontrol over inventory management for the company's 4,000 parts and 2,500 bills of material. Workorder functionality and shop floor scheduling allow production controllers to better manage labor andequipment capacity and also react to changing customer needs without disrupting the entire factory.

Outcome of ERP ImplementationOne measure of the impact Intuitive ERP has had on the aerospace industry is the number of inventoryturns they experience. Prior to implementation, inventory turned over about twice per year. Afterimplementing Intuitive ERP, inventory turns increased to six times per year, allowing the company toimprove cash management, reduce scrap, and rework write-offs as well. With the improved inventorymanagement, the aerospace industry is also now able to offer just-in-time delivery of product withoutexcessive inventory levels. The Location/Lot tracking option is critical to the aerospace industry. Onlinetraceability proved to be beneficial recently when one of its customers received some products thatfailed upon assembly. They found the root cause was a bad batch of adhesive that had degraded overtime.

The aerospace industry was able to quickly trace the original lot and take corrective action toprevent the problem from recurring. Ease of customization and access to data were also issues for theteam at the aerospace industry. While standard Intuitive ERP reports satisfy most of their needs, theindustry has been able to create additional reports easily, customized to specific job functions, withunique selection and sorting criteria. Additionally, Intuitive ERP's use of 100 percent Microsofttechnology provides users with a familiar interface and user-friendly architecture that can be easilymanaged and modified without specialized IT resources. Short implementation time was one keyfactor in the decision to go with Intuitive ERP. The ERP team completed the system implementation inless than one month with only two days of consultation from an Intuitive implementation serviceprovider (ISP). Here even more impressive is the fact that within a month after implementation theemployees were comfortably using the system without any major training. The impact of the


implementation of Intuitive ERP was felt almost immediately. In accounting, for example, operationalbenefits were apparent within the first month. “From an accounting point of view, we have been ableto dramatically reduce the time it takes to close the books each month,” an employee said. “What usedto be a painful three week ordeal is now easily completed in less than one week.”

The accounting group also found that the financial drill down capabilities of Intuitive ERPprovided a way to easily perform financial analysis and resolve issues. Prior to implementation, it wasnearly impossible to dig into the details of issues. Since Intuitive ERP was implemented, the aerospaceindustry's sales revenues have doubled. During that time, production and administrative efficiencieshave enabled the aerospace industry to maintain the same level of staffing–effectively doubling thesales per employee.

REVIEW QUESTIONS

1. Does the aerospace industry really require an ERP system?2. What are the factors influencing the ERP software selection process?3. What is the impact created by ERP implementation in the aerospace industry?4. What sort of training is required to the employees of the aerospace industry to use ERP

software?5. List the features of Intuitive ERP in the context of the aerospace industry.

CASE – 5

About the CompanyXYZ private limited is a leading supplier of 3D/6D measurement products used in industries as diverseas image guided surgery, robotics, aeronautics and biomechanics. The company employs 90 and generatesover $20 million in annual revenue.

Challenges faced by the CompanyXYZ Private Limited faced a challenge when rapid growth and aging technology threatened to stand inthe way of company goals. Instead of enabling operational improvements, XYZ's existing systemswere impeding progress. Existing technology was causing missed deliveries and creating a high numberof back orders. With customer satisfaction at risk and internal morale slipping, the management teamat XYZ decided it was time to act.

SolutionThe decision to invest in a new system was not undertaken lightly. With almost twenty years in business,XYZ Private Limited has firmly established a reputation for high quality, high performance products.


The company is a past winner of the Canada Export Award and the Global Traders Award. XYZ'sselection of Intuitive ERP™ from Intuitive Manufacturing Systems was based on factors that directlysupported corporate objectives. Intuitive ERP provided a level of system functionality that couldimmediately improve inventory management and the expandability and flexibility to support XYZ’sgrowth. Equally important was the system's level of ease of implementation and ease of use.

Outcome of ERP ImplementationAfter implementing Intuitive ERP, XYZ Private Limited has experienced continued success in improvinginventory management and increasing revenue. Prior to implementation, the company struggled toachieve even two inventory turns per year. Inventory turns have now more than doubled and expectationsare that the company will better that in the near future. Since implementation, XYZ's revenue hasincreased from $10 million to over $20 million with little increase in inventory value. In addition, thecompany has reduced their order cycle time for their flagship product from four months to four weeks,an improvement of almost 80 percent. Improvements in production control and inventory managementhave had a direct impact on customer delivery. The Material Requirements Planning and Forecastingcapabilities of Intuitive ERP have allowed XYZ Private Limited to better service their customers.

With some customers expecting shipment in early nine months and others expecting shipment inas little as nine days or even less, more sophisticated and accurate planning had been critical. Theaddition of better planning capabilities had an immediate impact on labor and materials. “We were ableto better understand what was in stock, what we were buying and what was needed,” said the ProductionManager. He also added that “Improved planning has made a huge difference in improving delivery.”Ease of use and system scalability have been important in utilizing Intuitive ERP to improve operations.When the system was first implemented, only five user seats were required. As the company grew, thatnumber increased to twenty-five. Significantly increasing the number of users, and doing so without alot of training, allowed the company to expand without worrying about putting constraints on theirbusiness infrastructure.

XYZ Private Limited was interested in upgrading their operations by leveraging Intuitive ERP'sstandard functionality but also had some unique conditions that required modification of the system.With a relatively small IT staff, it was important that modification and customization could be donewith limited resources. According to the Systems Administrator for XYZ Private Limited, IntuitiveERP's “ability to customize easily” made the implementation process go smoothly. “The system is easyto modify and customize to make it work for your business,” added the Production Manager.

For XYZ Private Limited, improving operations is more than just a way to reduce expenses. Withthe implementation of the Intuitive ERP, the company has found a way to increase the value theyprovide to customers while also improving financial performance. “Intuitive ERP was instrumental inassisting XYZ Private Limited to achieve the growth that we have seen over the past three years,” saidthe Production Manager.

REVIEW QUESTIONS

1. How did the production manager rate the Intuitive ERP software?2. Apply cost-benefit analysis to the ERP implementation of XYZ Private Limited.


3. What are the various modules used in the ERP implementation of XYZ?4. What are the challenges and opportunities of XYZ Private Limited? How did they manage

them using ERP software?5. Discuss the pros and cons of ERP implementation in XYZ Private Limited from the view

point of the employees.

CASE - 6

About the CompanyA Company has been exporting machines all around the world, including Brazil, Germany, the UnitedKingdom and the United States. But with growth, their manual systems started breaking down. Theyhad no centralized purchasing department or means of sharing information. So groups were payingdifferent amounts for the same part from the same vendor. Delivery dates were missed because of lackof inventory control, and top management had so little visibility to the manufacturing process theycouldn't set pricing that was competitive. Hence the company decided to go for an ERP system.

Challenges faced by the CompanyThe Company needed a complete information system built around an ERP solution that would helpmanage every aspect of their manufacturing process - from purchasing and inventory to manufacturingand planning - as well as prepare them for ISO certification.

SolutionThe company commissioned a comprehensive survey of the ERP market and Intuitive ERP softwarewas selected for four major reasons: 1) a 100 percent Microsoft platform, 2) an easy-to-use graphicalinterface, 3) excellent support, and 4) scalable open-architecture features that permitted the addition ofusers at any time. The consultants that evaluated Intuitive ERP concluded: “Intuitive ERP is easy toinstall, interface, customize, and maintain. It can be integrated seamlessly into any manufacturingenvironment and has a good scheduling flexibility and versatile options. It also has a definite ISO 9000facilitation orientation.”

Outcome of ERP ImplementationThe company started module-wise implementation of Intuitive ERP in four phases, which were completedin just four months. Intuitive ERP's graphical interface and integration with Microsoft Office andAccess made it easy for staff-who prior to this had virtually no computer experience–to learn and usethe new system. Using the Microsoft SQL Server as the database engine delivered the speed androbustness necessary for their mission-critical applications. “We transformed the company from apractically nil computer culture to a total computerized system,” said the General Manager of thecompany. “The learning curve for Intuitive ERP is reduced to well below that of other manufacturing


systems because of graphical and interactive flow charts and complete context-sensitive online help”,he added.

Implementing Intuitive ERP has led to the following advantages:• Intuitive ERP provides accurate data for making manufacturing decisions through reports

that include online machine utilization, online work order status monitoring, online laborutilization, etc.

• Planning has improved. With the previous manual planning system, it was difficult tocoordinate customer requirements and design changes with production and assembly functionsto meet the manufacturing schedule. Now there is seamless coordination between alldepartments.

• Prior to Intuitive ERP, there had been virtually no inventory management; information onnon-moving or slow-moving items and stock values was unavailable. With the new tools inplace, the manufacturing inventory has been reduced by 20 percent.

• With reports such as Purchase Price Variance, there is visibility of the cost of every purchaseditem. This has resulted in better price negotiation with suppliers resulting in a 20 percentprice reduction.

• Managers now have the most current inventory and costing models available to them at alltimes, and so they can set competitive pricing that ensures profitability as well. They arealso able to monitor online the status of work orders for components, sub-assemblies andfinal assemblies.

REVIEW QUESTIONS

1. How was the ERP software selection process carried out?2. What are the advantages the company enjoys due to ERP implementation?3. What were the problems faced by the company before ERP implementation?4. How did the consultants rate the Intuitive ERP software?5. What are the technical requirements in ERP implementation?

CASE – 7

About the CompanyA leading producer of copper components and brazed copper assemblies for use in the air conditioningand refrigeration industries decided to go for ERP implementation. With revenues exceeding $10million, the company is a make-to-order shop with more than 150 employees, producing parts toindividual customer specifications and prints.


Challenges faced by the CompanyPrior to implementing Intuitive ERP, the company faced a problem familiar to many manufacturers–scheduling. Customers were demanding shorter lead times and the company's existing ERP system wasnot capable of providing the information necessary to respond quickly. As a result, the company waslosing business. The company was also moving their equipment away from manual operation towardautomation and they required a system that could schedule efficiently and had machine loading capability.It was imperative for the company to view their shop floor load at any point in time, allowing them todetermine where potential problems existed and to create corrective solutions on the production linebefore slowdowns occurred.

SolutionThe management of the company contemplated rewriting their existing system in-house while theysearched for other system solutions. Then they learned about Intuitive ERP from Intuitive ManufacturingSystems–an ERP software system that offered a 100 percent Microsoft solution. Because the Microsoftplatform was already in place at the company and employees were accustomed to the interface, themanagement realized implementation and training would be quick and straightforward. These factors,coupled with the price, ease of maintenance and administration, and the ability to make modificationson their own convinced the management that Intuitive ERP would have a substantially lower total costof ownership than any other system. After a visit to Intuitive Manufacturing Systems, the companydetermined the system functionality of Intuitive ERP would be a perfect fit for their business andlicensed the Intuitive ERP base system with the Location/Lot Tracking and Shop Floor Control (SFC)options for 25 concurrent users.

Outcome of ERP ImplementationThe company believed it was important for their own growth to be involved with the technology fromthe beginning. "To date, there has not been an upgrade made available that we have not consideredtaking the time to install as soon as we could," said the General Manager of the company. "Newversions are always faster and more feature-rich," he added. Within the first year of implementingIntuitive ERP, the company experienced a dramatic drop in overtime. Intuitive ERP gave the companythe ability to view their shop floor load at any given point in time and allowed them to schedule hoursby department, rather than the entire shop.

Additionally, Intuitive ERP enabled the company to prepare better reports. The system previouslyused by the company did not assist managers in the preparation of consistent reports for schedulingpurposes, whereas Intuitive ERP supports report consistency throughout the system. The companyconsiders the Intuitive ERP a perfect fit to their business. It is a dynamic system that can expand as thecompany grows. The company finds the ERP implementation to be a thorough system that considersthe various ways of going about its business. It is also a very flexible system, allowing the company tocustomize without compromising data.

REVIEW QUESTIONS

1. Define the business process of the company.2. What made the company to go for an ERP system?


3. If you happen to be a consultant, how will you carry out the ERP software selection process?4. Perform the cost-benefit analysis and present your report to the company to enable it assess

its performance.5. List the various functions of the ERP system of the company.

CASE – 8

About the CompanyA company produces high quality, hand-made, salt-glaze pottery and tiles for commercial and residentialuse. The company decided to have an ERP system and purchased the Intuitive ERP software.

Challenges faced by the CompanyAs the company grew, the accounting and manufacturing systems they had in place could not supporttheir needs. “We knew that if we were going to survive as a company, we needed to upgrade ourbusiness systems,” said the President of the company.

SolutionAfter mapping out company objectives and analyzing several ERP solutions, the company selectedIntuitive ERP from Intuitive Manufacturing Systems. The main criteria for selecting Intuitive ERPincluded integrated accounting and manufacturing functionality, product costing capabilities, strongshop floor control features and the ability to easily make modifications.

Outcome of ERP ImplementationPrior to implementation of Intuitive ERP, the management team found it difficult to get the informationthey needed to make good business decisions. There was no real integration of manufacturing data andaccounting information. With Intuitive ERP, the integration of accounting and manufacturing informationprovided the company with new insights into product line profitability. Company managers were ableto see that one of their product lines was not pulling its weight and they made a decision to outsourcethat line so they could expand in other areas. “Intuitive ERP enabled us to identify issues and makebetter product decisions,” said the President of the company.

Manufacturing pottery and tiles is a delicate balance of materials, labor and curing time. Theright kind of clay, the perfect glaze, experienced craftsmanship and the appropriate time in the kilncontribute to the end product–and the end cost. Determining accurate costing had been a serious problemfor the company prior to Intuitive ERP. Intuitive ERP product costing capabilities have allowed thecompany to distribute costs more accurately across different products. “The system is verystraightforward and the data is now very accurate,” the general manager of the company added. Thisnot only allows the company to do a better job of product costing, but also a much better job of settingprices.

The cumulative impact of Intuitive ERP has been significant. Work instructions are more clearlycommunicated, scheduling is more accurate, and, more importantly, rescheduling can be done without


completely disrupting the whole factory. Intuitive ERP Material Planning and Shop Floor Controlcapabilities have also had a major impact on quality and productivity at the company. Intuitive's workorder process, multi-level bills of material, and detailed routings have provided structure and disciplinewhile adding flexibility at the same time. The result is two-fold. The company's old process formanufacturing frequently required that data be entered two or three times. Now, information is enteredonce and it is available throughout the system. This allowed the company to free a full-time employeefor other duties. A second benefit is that fewer errors are made in the production of pottery and tilesand custom projects are handled with ease.

One of the reasons the company selected Intuitive ERP was the underlying technology. Evenmore important for the company is the ability to make minor modifications without outside resources.Developed solely with 100 percent Microsoft technology, Intuitive ERP is easy to implement andrequires very little system administration. One report provided by the ERP software provided informationon production efficiency that gave the company greater insight into daily operations and helped identifyopportunities for improvement.

REVIEW QUESTIONS

1. Define the business process of the company.2. What made the company to go for an ERP system?3. If you happen to be a consultant, how will you carry out the ERP software selection process?4. Perform the cost-benefit analysis and present your report to the company to enable it assess

its performance.5. List the various functions of the ERP system of the company.

CASE – 9

About the CompanyManufacturing approximately 800 make-to-order units a year, a company with 200 employees wasconducting duplicate data entry to standalone sales order, MRP and financial systems. Data integritywas compromised due to a lack of system integration. The inconsistent data integrity created excessinventories, production delays and customer shipping delays. Hence the company decided to have ERPsoftware to improve their business.

Challenges faced by the CompanyThe company needed a fully integrated ERP package that would provide accurate real-time informationand alleviate duplicate data entry. It was also imperative to include a product configurator to ensureaccurate production builds. The lack of accurate builds resulted in the company having to give away


options installed that were not selected. The loss of data integrity between the incompatible existingMRP system and existing Sales Order Entry system adversely affected purchasing. Resulting inventoryerrors caused delays in both production and shipment to customers. The existing financials did notintegrate with the other existing systems, again resulting in inconsistent data integrity.

SolutionAfter six months of system evaluation, the company's selection committee opted for the 100 percentMicrosoft solution of Intuitive ERP. The fully integrated functionality along with Intuitive ERP'srobust Advanced Configurator assured the company the ability to produce units accurately. Additionally,Intuitive ERP's ability to handle multi-currency and the flexibility of costing were also key considerations.Intuitive ERP met 80 percent of the company's requirements out of the box with the lowest cost ofownership. By working with their local Intuitive representative, system modifications were easilymade to tailor the system to the company's particular requirements.

Outcome of ERP ImplementationIntuitive’s Advanced Configurator provided the company the ability to create accurate bills of material,which reduced 26,000 lines of BOM down to 13,000. The company expects to further optimize itsBOMs in the future. The Advanced Configurator has also helped the company streamline production.“It allows us to set the rules necessary to make sure a configured unit can actually be built,” said theManager, Materials Management section, of the company. With the Intuitive ERP system integratingtheir sales, finance, materials and production information, the company has completely eliminated theduplicate entry of data. Fewer order entry errors have been a result of orders entered only once throughthe Advanced Configurator. It is important to note that the company now has the ability to pull out anyinformation needed, from one source, for decision making.

The integration of information has also resulted in operational benefits across the organization.The visibility of information gives the company the ability to streamline their business processes.From eliminating data entry to implementing configuration rules, an integrated enterprise system hasprovided the company with the opportunity to restructure its business for optimum efficiency andgrowth opportunity.

REVIEW QUESTIONS

1. Develop a business model to reflect the business process of the company.2. How does the ERP software benefit the company?3. Is the ERP software meant for reducing clerical jobs and automating the business process?4. How did the company improve its financial position after the ERP implementation?5. Perform the feasibility analysis for deploying the ERP software and present your report.


CASE – 10

About the CompanyAn electronics manufacturer earned $2.85 million in revenue. Just one year later, after implementing anew business model and the Intuitive ERP system, the company's revenue exploded 471 percent to$12.89 million. The company decided to update their technology using Intuitive ERP software.

Challenges faced by the CompanyBefore that 10 million-dollar increase in revenue, the company's revenue had been growing 30 to 40percent a year, but their existing systems weren't expandable or comprehensive enough to support newbusiness strategies and as a result the company couldn't keep up with growing demand.

SolutionAfter considering several mid-range ERP packages, the company selected Intuitive ERP from IntuitiveManufacturing Systems. Intuitive ERP's one hundred percent Microsoft technology infrastructure initiallyprompted company's decision to implement Intuitive ERP. The benefits of Intuitive ERP's Microsoft-standardized architecture include an extremely flexible and easy to use interface and integration withother Microsoft programs. Also important to the company was Intuitive ERP's high level ofconfigurability and ease of modification. These factors ensure efficient implementation and on-goingmanagement of the company's Intuitive ERP system.

Outcome of ERP ImplementationOther contributing factors included Intuitive's low total cost of ownership, planning and procurementfeatures, and the functionality to enable a turnkey business strategy. Implementing Intuitive ERP wasa significant step in the company's strategy to modernize their operations. Implementing Intuitive ERPenabled the company to make a dramatic change to their business model. In January of 2001, theybegan entering one million dollars' worth of turnkey orders. And, instead of relying on customers tosupply materials (as they had done in the past), the company began to procure and manage their ownmaterials with the planning and purchasing features of Intuitive ERP, in addition to assembling theproducts.

With the infrastructure in place to keep up with new demand, the company has been able toreduce costs, increase customer satisfaction, shorten cycle times, and is experiencing faster inventoryturns. They can now forecast demand to suppliers, and even send suppliers forecasts out to a year. Theyhave dramatically reduced lead times, and increased on-time delivery to ninety percent, up from thirtypercent beforehand. These kinds of benefits have resulted in increased profitability and have allowedthe company to provide more competitive services to their customers.

Intuitive ERP provided new ways for the company to improve their business processes. Thecompany can now use multi-level bills of material, something they weren't able to do before. Theyimplemented Intuitive's Shop Floor Control module and now utilize bar coding in their operations.The company was also pleased with how smoothly Intuitive ERP data could be exported to MicrosoftExcel or Word. In addition to the operational and procedural benefits provided by Intuitive ERP, themost significant measure of the company's success with their new system was the quadrupling of thecompany's revenue in just one year. For the company, however, implementing Intuitive ERP was morethan just a way to increase revenue.


REVIEW QUESTIONS

1. Compare the existing system and proposed ERP system of the company.2. What is meant by multi-level bills of material?3. What is the impact of the new ERP system over the employees of the company?4. What are the technical requirements for an ERP system?5. What is the purpose of Intuitive's Shop Floor Control module?

Note: Read the following two cases (CASE 11 & CASE 12) carefully. For each case prepare acomprehensive report in the following format by addressing the review questions.

1. About the Company

2. Challenges faced by the Company3. Solution4. Outcome of ERP Implementation

CASE – 11

A company dealing with giant food and pharmaceuticals carried out its operations through its branchesopened all over the world. The company had in 1999 revenues of $50 billion and more than 250,000employees at 500 facilities in 90 countries. Best known for its chocolate, coffee and milk products, thecompany sells thousands of other items, most of which are adapted to fit local markets and cultures.

Traditionally this huge firm has allowed each local organization to conduct business as it saw fit,taking into account the local conditions and business cultures. To support this decentralized strategy, ithas had 80 different Information Technology units that run nearly 1000 IBM AS/400 midrange computers,20 main frames and 200 UNIX systems, enabling observers to describe its infrastructure. Interestingly,despite its size, the company has had no corporate computer center.

However, the company's management has found that allowing these local differences createdinefficiencies and extra costs that could prevent the company from competing effectively in E-Commerce.The lack of standard business processes prevented the company from growing to a large scale thoughthey had better resources. Several years ago, the company embarked on a program to standardize andcoordinate its information systems and business processes. The company initially installed ERP(Enterprise Resource Planning) software to integrate material, distribution and accounting applicationsin the United States, Europe and Canada.

The company is working on extending its enterprise systems to all its facilities to make its 500facilities act as a single-minded e-business. Once this project is completed the company will be able touse sales information from retailers on a global basis to measure the effectiveness of its promotional


activities and reduce overstocking caused by letting products sit around too long on grocery shelves.At first the project team decided not to use supply chain software available with their ERP

package because that module was brand new and appeared to be risky. The team decided to use thefollowing ERP modules: purchasing, financials, sales and distribution modules. All of these moduleswould be installed throughout every division of the company. The company later contracted with amajor ERP vendor to purchase and deploy the new version of their software. The new system will notonly standardize and coordinate the whole company's information systems and business processes, butit also will extend the ERP software to the web. The new system will allow each employee of thecompany to start work from a personalized webpage linked to his or her job function. The employees'job is structured to conform to the "best practices" defined by the ERP software for 300 work roles.The company decided to create up to five computer centers around the world to run the new ERPpackage containing financial, accounts payable, accounts receivable, planning, production management,supply chain management and business intelligence software.

The problem started when the stakeholders of the company at abroad failed to realize how muchthe project would change their business processes. They could not reap the real benefits of an integratedsoftware system. The ERP implementation also suffered a lot due to change management and Y2Kproblem. Many of the employees’ do not want to learn new processes. Training given to the end userswas also insufficient. The lower level workers did not understand how to use the new system and didnot understand the changes. Nobody had been prepared for the new ways of doing things, and theironly hope was to call the project help desk. As the implementation took place in full swing, the teamfailed to integrate the various modules completely.

The ERP team then decided to halt the project. The team members’ roles were also shuffled.They also agreed to educate those affected so that all employees would know not only what changeswere taking place but also why, how, and when those changes would happen. The team also begantaking repeated surveys of the effect of the project on employees and how they were dealing with it.They needed to take care of all the employees' spread all over the world. The process of ERPimplementation continues.

REVIEW QUESTIONS

1. What were the problems and issues that caused the company to choose an ERP system?2. How is the company managed by the top management in your opinion?3. Do you think it was appropriate for the company to distribute the decision making so widely?4. Why did the company’s enterprise system project encounter so many problems? What

management, organization and technology factors contributed to those problems?5. If you had been director of the company’s enterprise system project, what could you have

done to implement the system successfully?


CASE – 12

The ABC Private Limited was started in 1933. Today it is a Rs:750 crore enterprise with diversebusiness lines. In 1964 the company began manufacturing, in technical collaboration with the UK,steam turbines for mill drives and power generation. It now has over 2,500 installations across a rangeof industries including sugar, fertilizers, petrochemicals, chemicals, carbon black, solvent extraction,paper, pig iron and sponge iron. Deploying SAP R/3 has enabled ABC Private Limited to controlinventory costs, track projects online and estimate the total project cost. With a production capacity ofover 300 turbines a year, the company has emerged as a leader in the Indian market for turbines ratedat a capacity of up to 6 MW. The company now manufactures turbine models up to 15 MW. It alsomakes high-speed gearboxes.

The Spares Sales Division of the company sells spares for steam turbines that are used in powerplants of companies. These businesses directly depend on keeping their power plants available 24x7x365/6. An hour of downtime could cost them pots of money. Since the shelf-life of the machines is high-between 25-30 years-they need to be supported by new spares and maintained on a regular basis (atleast every three months).

The task was not easy. There were three areas where the company wanted to improve. The firstarea of concern was customer support. Critical information such as the case history of spares at thecustomers’ premises was maintained manually, and the systems were paper-based. Occasionally, spareschanged were not recorded. Other areas such as the number of complaints closed, number of opencomplaints and preventive maintenance schedule were all paper-based. In the absence of the engineerwho attended to the last problem, follow-up action could not be planned in advance, nor could the rootcause of the problem be traced. Since data was not available online the company could not analyze theroot cause of the problem.

The second area of concern was systems for tackling projects. A purchase order is issued againsteach item/spare bought directly. The company had to deal with a large number of items at a time (on anaverage, 80 to 90); there was no means of tracking these projects. The cost of the project was the thirdarea that the company wanted to calculate. It was necessary to determine how much the company wasinvesting in a given project. The director of the company explains, “It was easy for us to calculate thecost of the spares, but because of their longer shelf life (25-30 years), it was difficult for us to calculatethe travel expenses incurred while getting to the customers’ premises, the value of spares suppliedduring warranty conditions, etc.”

For over a decade the company spent money on in-house legacy applications prepared by asoftware company with Sybase on UNIX. These applications (such as inventory, production planning,purchase and spares) were not integrated with finance. Tally 6.3 version was used for accounting.While the range of applications covered almost every facet of business operations, the mechanism tointegrate islands of computing was rather crude. No standard or unifying process could be establishedto provide seamless integration; besides, the methodology was paper-based and depended on manualentries. Because of this, every application system became function-specific. This resulted in a greatdeal of resources being spent on reconciling functional figures. Due to non-integration of data acrossvarious functions, sometimes an item was booked twice or it was difficult to trace where material waslying.


In 1999, with the help of a software company, ABC Private Limited decided to go in for businessprocess re-engineering to improve its customer support and project systems, and to analyse projectcosts. The company took the decision to have an ERP system in place to solve business problems.Three enterprise application software vendors were identified-SAP, Baan and Oracle.

Although the solutions from SAP, Baan and Oracle were equally good, the company was lookingfor a solution that needed the least amount of customization. The director of the company says:"Customization of the package meant shelling out more money and delaying the implementation,which we wanted to avoid. Besides, we wished to deal with a company that could provide futureupgrades and whose solution gelled with our future plans. Hence SAP was the natural choice since wehad plans to invest in a PLM and CRM solution soon after implementing ERP."

SAP R/3 was identified as the ERP package that could provide the company with the following:(i) Ability to provide full visibility of information as against pockets of information.

(ii) Modular, scalable and integrated architecture based upon the best practices in the consumerproducts industry.

(iii) In-built features to support optimization of the supply chain, richness in functionality(including India-specific requirements of excise and taxation), and a growth platform.

After the first round of assessment, the company took a call on the modules it wanted to implement.It was decided that the company would implement 11 modules taking the Big Bang approach. Themodules picked were sales, distribution, project systems, financial, cost accounting, product planning,quality management, customer support, executive information, workflow and payroll. Theimplementation began in January 2001. The first step of the implementation was to convert all existingdata from the legacy applications into SAP's preferred format. Due to a large inventory of bill ofmaterials (60,000-70,000 items), it took five months for data conversion. Nearly 120 people fromvarious departments (and their functional heads) were trained on the new SAP environment. Thecompany went live with the SAP R/3 on March 2003 after an implementation that took all of twoyears.

The director of the company justifies the delay stating that the company is into the ETO(engineering to order) business, and very little has been done to understand its requirements. "It tooktime for SAP to understand our requirements and make adjustments accordingly. Additionally, wepicked up 11 full-fledged modules to implement in one go instead of implementing fewer modules inphases. We wanted to avoid unnecessary costs and delays, and hence decided to take the Big Bang routefor implementation," says the director of the company. The company invested Rs 2 crore, including thecost of the package, hardware, software, training and implementation of ERP software SAP.

Seven months into implementation, the company started noticing the benefits. Since data is nowavailable online, the company can trace where its materials are lying in the factory. The company nolonger needs to overstock spares; this has led to a reduction in inventory cost. Duplication of entries hasstopped. The core objective–to improve project systems, project cost analysis and customer supportexperience–is already being attained. The company is now able to get to the root cause of a particularproblem, rectify it, and leave behind follow-up instructions that need to be looked at during the nextvisit.

From the time a tender is floated till the time an item is manufactured, each item is tracked onlineon a project basis, thus helping to calculate the total cost of the project. The company is now able toreduce inventory costs, to identify the root cause of any problem and troubleshoot, the company is nowable to track projects online and avoid duplication of entries in the bill of materials. The ERP


implementation has helped the company to calculate the total lifecycle cost of a project, includingtravel trips to customer premises, warranty replacements and the like.

REVIEW QUESTIONS

1. Discuss the existing system of ABC private limited.2. How does the director of the company describe the benefits of their ERP implementation?3. Describe the business processes of the company using a business model.4. How did the company choose SAP as their ERP software?5. What forced the company to go for ERP implementation?6. What is meant by customization in ERP?7. What is the significance of the Big Bang route of ERP implementation?8. How did the company improve its performance after ERP implementation?9. Describe the hardware and software configurations of the new system.

10. Perform Cost-Benefit Analysis and SWOT analysis for ABC Private Limited before andafter ERP implementation and present a report.

Business Modeling using UML

12

OBJECTIVE

• To briefly state the concept of Business Modeling

• To give an overview of the Unified Modeling Language (UML)

EXPECTED OUTCOME


üü Understand the concepts behind a Modeling Language

üü Develop Business Modules using the UML

üü Execute Enterprise Modeling using the UML

Enterprise Resource Planning (ERP) is an integrated system and business modeling forms the basis forpackaged software like ERP. The underlying concept of ERP is based on the holistic nature of theorganization. This requires a systemic perspective where the enterprise is not viewed as the sum of itscomponent elements, but the product of their interactions. A systems approach to business decisions isa prerequisite to ERP implementation. It is critical to understand how different decisions affect andinfluence one another. In this chapter, the business modeling using the Unified Modeling Language(UML) is discussed through UML diagrams.

Business processes are defined with varying degrees of flexibility and precision, from unstructuredadhoc processes to precisely defined production processes. The Unified Modeling Language defines astandard notation for object-oriented systems. Using UML enhances communication between domainexperts, workflow specialists, software designers and other professionals with different backgrounds.Using the UML to build a Business Model provides ways of expressing the business processes in termsof business activities and collaborative behaviour, thereby reducing the complexity of the businessprocesses.

12.1 BUSINESS MODELING

Business modeling is a technique to model business processes. Business models provide ways ofexpressing the business processes in terms of business activities and collaborative behaviour. Modelsare helpful to document and comprehend complexity. The systems that we build are deployed intoorganisations that already have business processes in place. Whether we sell a Customer Relationship

Business Modeling using UML 121

Management System, a Library Information System, a Billing System, Online Analytical Processing(OLAP) system, Online Transaction Processing (OLTP) system, or any other, that system will be usedby an individual during the course of a specific task-interacting with a customer, looking for articles,billing a customer, etc. One of the great benefits of business modeling is the possibility of elicitingbetter system requirements. Once business models are specified, establishing relationships between thesystem requirements and the business models enables business change to be incorporated in the definitionof the system to build.

12.2 BUSINESS MODELING WITH THE UML

One of the primary requirements to build a perfect integrated system like ERP is modeling the businessprocesses and refining it. The UML acts as an interface between the business analyst and the systemanalyst. The UML possesses all the notations required to model a business process. It has the capabilityto provide all the details to the developer, customer and the business analyst. Only if the existingbusiness process is studied, analysed and understood by the ERP development team, Reengineering canbe executed and the existing system can be enhanced. Otherwise only automation of the existing systemwill take place and no optimisation could be seen. The end users cannot reap the benefits of packagedsoftware. Hence the needs for modeling language like UML which has all the features required tomodel a system. Modeling the business is not something new. However, a problem that frequentlysurfaces is how difficult it can be for business analysts to effectively communicate their findings to thesystem folks on the team. The Unified Modeling Language (UML) has been providing system architects,working on system analysis and design, with one consistent language for specifying, visualising,constructing and documenting software systems.

The UML is used to model a broad range of systems (software systems, hardware systems,databases, real-time systems and real-world organisations). By sharing a single notation and a singletool across system and business, business analysts and system analysts can better communicate theirneeds, which is the key to building a system that solves the customers' problems. Table 1 that followsdescribes the business modelling notation and the icons used in the UML. The business-specific iconshelp distinguish business elements from system elements in the visual models.

Table 1 UML Business Modeling Notation

Modeling Icon Name UML Definition

Business actor Someone or something, outside the business thatinteracts with the business.

Business worker Role or set of roles inside the business. A businessworker interacts with other business workers andmanipulates business entities.

Business entity A “thing” handled or used by business workers.

Business use case A sequence of actions a business performs that yieldsan observable result of value to a particular businessactor.

Organizational unit A collection of business workers, business entities,relationships and business use case realizations andother organization units. Used to structure thebusiness model by dividing it into smaller parts.


The value of using the UML to model a business is to reuse an established standard notation (theUML) to provide a common language and potentially a common tool (a UML visual modelling tool)for all modeling needs. The UML provides different diagrams. Each UML diagram provides a differentview of the business as follows:

Table 2

Use Case Diagram Describes the business context

Activity Diagram Describes the business workflows

Class Diagram Describes the static structure in thebusiness

Sequence Diagram Describes the interaction between aprocess step and other business objects

12.3 UML BUSINESS USE CASE

The broad requirements of a business process may be elicited and documented with “use cases”. UseCase models describe what is required of a system by defining how it will be used by external actors.An actor, which is usually but not necessarily human, causes the system to perform its functions bymeans of use cases. A business use case may be thought of as a collection of related process steps, andactors may be thought of as the organisation roles that execute the process steps. Because a businessprocess defines how a purpose is to be achieved, a business use case should also be directed to satisfy abusiness purpose. In Figure 1, the process is initiated by a sales inquiry from a customer, to which thesupplier responds with a quotation. This in turn may result in an order from the customer, and subsequentdelivery and invoicing by the supplier. The process involves two distinct kinds of actors namely acustomer and a supplier–who play different roles with respect to the process.

Figure 1 Business Use Case

Inquire

Quote

Customer Role

Supplier RoleOrder

Deliver

Business Modeling using UML 123

12.4 UML BUSINESS ACTIVITY DIAGRAM

A Business Activity Diagram provides a graphical way to document a business workflow. It provides asimple and intuitive illustration of:

• What happen in a workflow• What activities can be done in parallel?• Whether there are alternative paths through a workflow?

Activity diagrams also describe the roles and areas of responsibilities in the business (i.e.) todescribe who is responsible for doing what in the business. Roles and areas of responsibilities aredocumented as columns (UML swimlanes) in the activity diagram. Swimlanes show which businessworkers participate in the realisation of the workflow.

From figure 2, we note that the activities are assigned to roles that correspond to the actors in theuse case diagram and are in swimlanes separated by the dashed vertical line. A diagram that hasactivities partitioned between roles in this way is a role activity diagram.

Figure 2 Role Activity Diagram

12.5 UML CLASS DIAGRAMS

Business class diagrams document the internal structure of the business. Each class in this diagrameither represents a business worker (employee of the business) or a business entity (a 'thing' that thebusiness manipulates). The purposes of business class diagrams are to document the relationshipsbetween business workers and business entities. It provides a way to visualise who interacts with whomand who is responsible for what. Business class diagrams are used for two main purposes:

• To show which business workers and business entities are collaborating to implement abusiness process

• To show static structure and relationships among business entities. A class diagram would beused to represent the organisation chart of a business (using organisation units and businessworkers)


maintenance, description of work flow, bringing the development environment and the businessenvironment into the same circle, defining the business processes, fixing the roles of various actors,and so on.

REVIEW QUESTIONS

1. What is UML?2. List the various notations of the UML.3. Is the UML a designing language OR a modeling language? Explain.4. Is Enterprise Modeling same as Business Modeling? Explain.5. What is a Class Diagram?6. Which of the UML diagrams describes the business processes? Explain.7. “UML is process oriented and not product oriented.”–Comment.8. What is need for business Modeling?9. Explain the UML Sequence diagram for an Inventory Management system.

10. Apply the UML Business Case diagram to the sales and distribution process of an organizationand explain its merits.

11. How will you ensure that all the business processes of an organization are included in abusiness modeling?

12. How do UML diagrams help you to identify the business objects of an organization?

Acronyms and Abbreviations

API Application Programming InterfaceATM Automatic Teller Machine

ATO Assemble-to-Order

BAM Business Activity MonitoringBI Business Intelligence

B2B Business-to-Business

B2C Business-to-ConsumerBOM Bill of Material

BPR Business Process Reengineering

C2B Consumer-to-BusinessCTO Configure-to-Order

C2C Consumer-to-Consumer

CAD Computer Aided DesignCAM Computer Aided Manufacturing

CASE Computer Aided Software Engineering

CBD Component Based Development ModelCBSE Component Based Software Engineering

CGI Common Gateway Interface

CMM Capability Maturity ModelCMMI Capability Maturity Model Integration

COM Component Object Model

COQ Cost of QualityCPM Critical Path Method

CRC Class Responsibility Collaborator Modeling

CRM Customer Relationship ManagementCSPM Certified Software Project Manager

CSQA Certified Software Quality Analyst

CSQE Certified Software Quality Engineer


CSTE Certified Software Testing EngineerDBA Database Administrator

DBMS Database Management System

DES Data Encryption StandardDDBMS Distributed Database Management System

DDL Data Definition Language

DES Data Encryption StandardDFD Data Flow Diagram

DHTML Dynamic Hypertext Markup Language

DLL Dynamic Link LibraryDML Data Manipulation Language

DRP Distribution Requirements Planning

DNS Domain Name SystemDOM Document Object Model

DSN Data Source Name

DSS Decision Support SystemETO Engineer-to-Order

EDI Electronic Data Interchange

EFT Electronic Funds TransferEII Enterprise Information Integration

EFT Electronic Funds Transfer

EIA Enterprise Integration ApplicationEIS Executive Information System

ERP Enterprise Resource Planning

FTP File Transfer ProtocolFTR Formal Technical Review

GIS Geographical Information System

GUI Graphical User InterfaceHTML Hypertext Markup Language

HTTP Hypertext Transfer Protocol

IDC Internet Database ConnectorIIS Internet Information Server

ISDN Integrated Service Digital Network

ISO International Organization for StandardizationISTQB International Software Testing Qualifications Board Certified

IT Information Technology

KM Knowledge ManagementJIT Just-in-Time Delivery

Acronyms and Abbreviations 129

LAN Local Area NetworkMTO Make-to-Order

MPS Master Production Schedule

MTS Make-to-StockMIS Management Information System

MODEM Modulator-Demodulator

MRP Materials Requirements PlanningMRP-II Manufacturing Resource Planning

NSP Network Service Provider

OLAP On Line Analytical ProcessingOSI Open System Interconnection

PCMM People Capability Maturity Model

PDT Partition Description TablePDM Product Data Management

PERT Program Evaluation and Review Technique

PSP Personal Software ProcessPSPEC Process Specification

QFD Quality Function Deployment

QOS Quality of ServiceRAD Rapid Application Development

RAID Redundant Arrays of Inexpensive Disks

RDBMS Relational Database Management SystemRIP Routing Information Protocol

RIS Risk Information Sheet

RMMM Risk Mitigation Monitoring and Management PlanSADT Structured Analysis and Design Technique

SAP Systems, Applications and Products in Data Processing

SCM Supply Chain ManagementSCM Software Configuration Management

SDLC Software Development Lifecycle

SEI Software Engineering InstituteSGML Standard Graphic Markup Language

SMS Short Messaging Service

SQA Software Quality AssuranceSQL Structured Query Language

SRS Software Requirements Specification

SSL Secure Socket LayerSOAP Simple Object Access Protocol


SSPI Statistical Software Process ImprovementSTD State Transition Diagram

TCL Transaction Control Language

TCP/IP Transmission Control Protocol/Internet ProtocolTQM Total Quality Management

TSL Test Script Language

TSP Team Software ProcessUDP User Datagram Protocol

UML Unified Modeling Language

URL Uniform Resource LocatorVAN Value Added Network

VPN Virtual Private Network

VRML Virtual Reality Model LanguageWAN Wide Area Network

WMS Warehouse Management System

WBS Work Breakdown StructureWML Wireless Markup Language

WMS Warehouse Management System

XML Extensible Markup LanguageXSL Extensible Style Language

Glossary

Application Consolidation – It deals with merging two or more applications together to reduce thenumber of applications in an enterprise.

Application Programming Interface (API) – The formally defined programming language interfacebetween a program and its user.

Assemble-to-Order (ATO) – In Assemble To Order system, all the components used in the assembly,packaging or finishing process are planned and stocked in anticipation of an order from thecustomer.

Business Activity Monitoring (BAM) –It deals with monitoring of all of an enterprise’s businessprocesses and IT activities through the use of specialized software components. BAMsolutions can be used to alert individuals to changes in the business that may require action.

Bill of Material (BOM) – Bill of Material provides a hierarchical classification of the items whichform a product.

Biometric Controls – Biometric controls provide access procedures that match every valid user with aunique user identifier (UID). They also provide an authentication method to verify that usersrequesting access to the computer system are really those whom they claim to be.

Browser – It is a client program used to access the web and other internet resources.

Business Intelligence (BI) –Business intelligence is a category of applications and technologies forgathering, storing, analyzing, and providing access to data to help enterprise users makebetter business decisions. BI applications include decision support systems, query and reporting,online analytical processing, statistical analysis, forecasting and data mining.

Business Model –Business modeling is a technique to model business processes. Business models provideways of expressing the business processes in terms of business activities and collaborativebehavior.

Business Process Reengineering (BPR) – Business Process Reengineering is defined as the fundamentalrethinking and radical redesign of business processes to achieve dramatic improvements incritical, contemporary measures of performance, such as cost, quality, service, and speed.

Business-to-Business E-Commerce (B2B) – Business-to-Business EC is an electronic trading whereboth the buyers and the sellers are organizations.

Business-to-Consumer E-Commerce (B2C) – Business-to-Consumer EC is a situation where a businessis selling online to an individual consumer.


Computer-Aided Software Engineering (CASE) – Computer-Aided Software Engineering tools assistsoftware engineering managers and practitioners in every activity associated with the softwareprocess. Project managers and software engineers use CASE.

Computer-Aided Design (CAD) – The Computer-Aided Design systems are interactive computergraphics systems used for product design.

Computer-Aided Manufacturing (CAM) – Computer-Aided Manufacturing software integrates theoperations of all computer-controlled machines.

Change Management – Change management is one of the core problems of software development.Management of changes to any software document means (1) managing the process of changeas well as (2) managing all artifacts of an evolving software system.

Closed Loop MRP – It is a Materials Requirements Planning (MRP) process that uses capacity planningand feedback to improve the ability of the production system to complete work as per schedule.

Consumer-to-Business (C2B)– This category includes individuals who sell products or services toorganizations as well as individuals who seek sellers, interact with them, and conclude atransaction.

Consumer-to-Consumer (C2C) – In this category, consumer sells directly to consumers. Examples areindividuals selling in classified ads and selling residential property, cars, and so on.

Configure-to-Order (CTO) – It is the convergence of Assemble-to-Order and Engineer-to-Order. Thiswill simplify the order entry process and retain Engineer-to-Order easily.

Customer Relationship Management (CRM) – The fundamental theory behind CRM is to identifyprofitable customers, attract and retain them, and maximize their useful life span and theprofits from them by establishing and fostering good relationships with them.

Customization – Customization is the core process for adjusting the software to fit the organization.

Cycle time – Cycle time is the time between receipt of the order and delivery of the product.

Data Encryption Standard (DES) – Data encryption standard is a published federal encryption standardcreated to protect unclassified computer data and communications.

Data Dictionary – It is an organized listing of all data elements that are pertinent to the system, withprecise, rigorous definitions so that both user and system analyst will have a common under-standing of inputs, outputs, components of stores and intermediate calculations.

Data Flow Diagram (DFD) – The data flow diagram enables the software engineer to develop modelsof the information domain and functional domain at the same time. The DFD takes an input-process-output view of a system.

Data Integration (DI) – The process of combining two or more data sets together for sharing andanalysis, in order to support information management inside a business.

Data Mart – A database, or collection of databases, designed to help managers make strategic decisionsabout their business. Whereas a data warehouse combines databases across an entire enterprise,data marts are usually smaller and focus on a particular subject or department. Some datamarts, called dependent data marts, are subsets of larger data warehouses.

Data Mining – Data mining is the process of efficient discovery of valuable patterns from a largecollection of data. It requires intelligent technologies and the willingness to explore thepossibility of hidden knowledge that resides in the data.

Glossary 133

Data Warehousing – A data warehouse is a subject-oriented, integrated, time-variant, nonvolatilecollection of data in support of management decisions.

Database – The Collection of data, usually referred to as the database, contains information about oneparticular enterprise.

Decision Support System (DSS) – Decision support system is an information and planning system thatprovides the ability to interrogate computers on – ad hoc basis, analyze information andpredict the impact of decisions before they are made.

Distribution Requirements Planning (DRP) – Distribution Requirements Planning provides thecapability to model distribution bills, and translates time-phased demand into supplyrequirements.

E-Business – It is the entire transformation of the whole value chain of the business into an electronicform of business. E-Commerce becomes E-Business when a company connects its businesssystem directly to its critical constituents.

E-Commerce – Electronic commerce (E–Commerce) means doing business online or selling and buyingproducts and services through web.

Electronic Data Interchange (EDI) – Electronic Data Interchange is the electronic communication oftransactions between organizations such as orders, confirmations and invoices.

Enterprise Information Integration (EII) – An integration technology that pulls and combines datafrom multiple systems “real time”, without storing it on a disk, creating a “virtual” datawarehouse; eliminating the need to store or move data.

Electronic Funds Transfer (EFT) – Transferring funds from one account to another through Internet.

Engineer-to-Order (ETO) – This process of manufacturing will involve developing any product as perthe order at a price. Products are manufactured for each customer in ETO.

Enterprise Application Integration (EAI) – Enterprise Application Integration is a pertinent approachto integrating core business processes and data processing in the organization.

Enterprise Resource Planning (ERP) – The ERP package aims to integrate all key business activitiesthrough improved relationships at all levels to achieve a competitive advantage. ERP systemscan be considered as an IT infrastructure with the ability to facilitate the flow of informationbetween all business processes in an organization.

Executive Information System (EIS) – An Executive Information System is an information systemthat consolidates and summarizes the ongoing transactions within an organization.

Extranet – An Extranet is an extended intranet, which links the remote intranets, or individuals, overthe virtual private network built on the internet.

Firewall – Firewalls (software or hardware) protect a server, a network and an individual PC fromattack by viruses and hackers.

Forward Engineering – It not only recovers design information from existing software, but uses thisinformation to alter or reconstitute the existing system in an effort to improve its overallquality.

Gap Analysis – Gap Analysis is the step of negotiation between the company requirements and thefunctions an ERP package possesses.


Genetic Algorithm – It is referred as the optimization techniques that use processes such as geneticcombination, mutation and natural selection in a design based on the concepts of evolution.

Grid Computing – Grid computing is a model for allowing companies to use a large number ofcomputing resources on demand, no matter where they are located.

Information System – An information system is an open, purposive system that produces informationusing the ‘input-process-output’ cycle.

Intelligent Agent – Intelligent Agents and their subset software agents are computer programs that helpthe users to conduct routine tasks, search and retrieve information, support decision makingand act as domain experts.

Internet – A collection of interconnected networks is called an INTERNET.

Intranet – It is a corporate LAN (Local Area Network) or WAN (Wide Area Network) that functionswith internet technologies behind the company’s firewall.

Just-in-Time Delivery (JIT) – It refers to delivering the ordered items at a designated time. This isessential as it will aid the suppliers to go for Just-in-time manufacturing.

Knowledge Management (KM) – Knowledge is a derivative of symbols, data, and information.Knowledge management is defined as the management of information and knowledge andtheir usage in organizational routines/processes within organizations.

Lead Time – The elapsed time between placing an order and receiving it is known as the lead-time.

Logistics – Logistics is that part of the supply chain process that plans, implements, and controls theefficient, effective flow and storage of goods, services, and related information from thepoint-of-origin to the point-of-consumption in order to meet customers’ requirements.

Make-to-Order (MTO) – In Make To Order system, the product is developed and delivered only whenthe customer places an order.

Make-to-Stock (MTS) – In Make To Stock, the production process allows the user to complete theproducts before the receipt of an order from the customer.

Management Information System (MIS) – Management information system is a computer–basedsystem that optimizes the collection, collation, transfer and presentation of informationthroughout an organization through an integrated structure of databases and informationflow.

Master Production Schedule (MPS) – In a typical manufacturing environment, the Master ProductionSchedule specifies the quantity of each finished product required in each planning period; itis a set of time-phased requirements for end items.

Materials Requirements Planning (MRP) – MRP is a technique for determining the quantity andtiming for the acquisition of dependent items needed to satisfy master schedule requirements.

Manufacturing Resource Planning (MRP II) – Manufacturing Resource Planning is defined as amethod for the effective planning of all resources of a manufacturing company.

Microsoft .NET – Microsoft defines .NET as “a set of software technologies designed to connect yourworld of information, people, systems, and devices”.

Network Topology – It is the representation of physical connectivity of the computers.

Glossary 135

On Line Analytical Processing (OLAP) – It is used for applications such as product profitability,activity based costing, manpower planning and quality analysis.

Operating System – An operating system may be viewed as an organized collection of software extensionsof hardware, consisting of control routines for operating a computer and for providing anenvironment for execution of programs.

Product Data Management (PDM) – This system allows us to create and maintain multiple revisionsand versions of any design in the database.

Quality – Quality is defined in many different ways—excellence, conformance to specifications, fitnessfor use, value for the price, and so on.

Reliability – The amount of time that the software is available for use as indicated by the followingattributes: maturity, fault tolerance and recoverability

Reengineering – The process of Reengineering normally occurs at two levels: At the business level,reengineering focuses on the business process with the intent of making changes to improvecompetitiveness in some area of business. At the software level, reengineering examinesinformation systems and applications with intent of restructuring or reconstructing them sothat they exhibit higher quality.

Reverse Engineering – It is a process of design recovery. Reverse engineering tools extract data,architectural and procedural design information from an existing system.

Risk Management – Risk Analysis and Management are a series of steps that help a software team tounderstand and manage uncertainty. Everyone involved in the software process participatesin risk analysis and management.

Software Quality – Software quality is defined as conformance to explicitly stated functional andperformance requirements, explicitly documented development standards, and implicitcharacteristics that are expected of all professionally developed software.

Software Quality Assurance (SQA) – Software Quality Assurance is an umbrella activity that isapplied throughout the software process.

Simple Object Access Protocol (SOAP) – Simple Object Access Protocol is a protocol defining theway that applications (Web services) communicate with one another over the Internet.

Software Engineering – It is a discipline that integrates process, methods and tools for the developmentof computer software.

Software Process – It is the step-by-step procedure to convert a problem definition into a softwareproduct. This procedure is divided into different stages such as requirements engineeringdesign, coding, testing and maintenance.

Software Project Management – It is an umbrella activity within software engineering. It beginsbefore any technical activity is initiated and continues throughout the definition, developmentand support of computer software.

Shopping Cart Technology – It is a virtual shopping cart that enables consumers to collect items asthey browse an online sales site until they are ready to purchase the items.

Software Configuration Management (SCM) – Software Configuration Management is an umbrellaactivity that is applied throughout the software process. SCM is developed to identify change,


to control change, to ensure that change is being properly implemented and to report changesto concerned member in the development team.

Supply Chain Management (SCM) – Supply chain management is the practice of coordinating theflow of goods, services, information and finances as they move from raw materials to partssupplier to manufacturer to wholesaler to retailer to consumer.

Software Testing – It is a critical element of software quality assurance and represents the ultimatereview of specification, design and code generation.

Total Quality Management (TQM) – Total Quality Management is both a philosophy and a set ofguiding principles that represent the foundation of a continuously improving organization. Itis a strategic, integrated management system for achieving customer satisfaction.

Unified Modeling Language (UML) – Unified Modeling Language defines a standard notation forobject-oriented systems. Using UML enhances communication between domain experts,workflow specialists, software designers and other professionals with different backgrounds.

Uniform Resource Locator (URL) – It is a way of naming resources and is used mainly to link pagesin the World Wide Web (WWW). This gives us the type and the location of the resource.

Warehouse Management System (WMS) – Warehouse Management System is software that integratesmechanical and human activities with an information system to effectively manage warehousebusiness processes and direct warehouse activities.

Web Engineering – It is the process that is used to create high-quality web application.

Webcasting – It is an internet-based broadcasting of audio and video content.

References

1. Enterprise Resource Planning Systems : A Research Agenda, Majed Al Mashari, IndustrialManagement & Data Systems, 2003

2. A Stage Maturity Model for Enterprise Resource Planning Systems Use, Christopher P. Holland,The DATA BASE for Advances in Information Systems, Springer, 2001

3. How i2 Integrates Simulation In Supply Chain Optimization, P. A. Farrington, H. B. Nembhard,D. T. Sturrock, and G. W. Evans, Proceedings of the 1999 Winter Simulation Conference

4. Planning for ERP: Analysis and Future Trends, Injazz J. Chen, Business Process ManagementJournal, 2001

5. Componentizing the Enterprise Application Packages, David Sprott, Communications of ACM,2000.

6. A Research Framework for Studying the Implementation of ERP systems, Pernille Krammergaard& Charles Moller, Proceedings of IRIS 23, 2000.

7. Is Supply Chain Management the same as ERP, Jim Ayers, Project Management, Springer,2001.

8. Focusing the Customer: A Critical Approach Towards Design and Use of Data Warehousing inCorporate CRM, Martin Schwartz, Experience Paper for the DMDW’2002 Workshop, May27, 2002.

9. An Exploratory Case Study of Enterprise Resource Planning Implementation, Girish H.Subramanian, Christopher S. Hoffer, International Journal of Enterprise Information System(IJEIS), 2005.

10. Customer Perspective of CRM Systems: A Focus Group Study, Shan L. Pan, International Journalof Enterprise Information System (IJEIS), 2005.

11. Enterprise Modeling with UML, Chris Marshall, Addison-Wesley, 2001

12. UML in an Instant, Thomas A. Pender, WILEY- Dreamtech India Pvt. Ltd., 2002

13. Introduction to Business Modeling with UML from www.therationaledge.com

14. Software processes are Business Processes Too, Peter Henderson, 3rd International Conferenceon the Software Process, IEEE Computer Society Press, 1994.

15. ERP II extended enterprise resource planning, Moller, C, The Seventh World Multi-Confer-ence on Systemics, Cybernetics and Informatics, Orlando, U.S., 2003.


16. Financial Management, M Y Khan, P K Jain, Tata McGraw-Hill, 2000

17. Building Data Mining Applications for CRM, Tata McGrawHill, 2001

18. www.bitpipe.com

19. www.bizentro.com

20. www.bpic.co.uk

21. www.computer.org

22. www.informatica.com

23. www.intuitivemfg.com.

24. www.linuxjournal.com

25. www.metagroup.com

26. www.microsoft.com

27. www.sap.com

28. www.softselect.com

29. www.syspro.com

Index

Accounting 19AGVs 60AMTS 60Analytical CRM 70Approach 36APS 72ASRS 60Assemble-to-Order 10

BAAN 94BIG BANG 36BIG BANG APPROACH 36Bill of Material (BOM) 11Business 38Business Activity Diagram 123Business Integration 2Business Modeling 120Business Perspective 37Business Process Reengineering (BPR) 45

Candidate solutions 32CHANGE MANAGEMENT 47Change Management (CM) 37CHANGE MANAGEMENT ISSUES 47CLI 84CNC 60Collaborative CRM 70COM 83Common Intermediate Language (CIL) 84Common Language Runtime (CLR) 85compiere 77

COMPIERE 97Computer-Aided Design (CAD) 60Computer-Aided Manufacturing (CAM) 60Controlling 22Cost Benefit Analysis 32Cost controlling 20CRM 68Customer Relationship Management (CRM) 14Customization 31Customization 38, 45Cycle time 3

Data mining 73Data warehouse 73Decision Support System (DSS) 69DHTML 78Directing 22Dynamic CRM 75

E-Business 65e-commerce 14E-Commerce 31E-Commerce 65Economic Order Quantity (EOQ) 11EDI 78Effective inventory management 25EIS 78Employment 23Enterprise Resource Planning (ERP) 1Enterprise Systems (ES) 15ERM 65


ERP environment 56ERP IMPLEMENTATION 43ERP Package 44ERP software 2ERP software 30ERP software selection 30ERP Software Selection Process 32ERP systems 6ERP Team Training 46Extensible Markup Language (XML) 85

Failure 41Finance 18Finance Module 18financial objective 18

GAP Analysis 45

HR module 21HRD 21, 23HTTP 86Human Resource Management (HR) Module 21Human Resources 6

Information System 6Information Technology (IT) 65INTENTIA 96Intermediate Language (IL) 85Intranet 70INTUITIVE 96Intuitive ERP 87Inventory 11Inventory management 25Investment management 20IT 60

J.D. EDWARDS 94J2EE 78

Lead-time 3Linux 51LOCATION-WISE APPROACH 36

Maintenance 43Make-to-Order 10Make-to-Stock 10Management Information System (MIS) 69Manufacturing 13Manufacturing Resource Planning (MRP II) 12Marketing 6Master Production Schedule (MPS) 10Material Requirements Planning (MRP) 10Materials Management (MM) 23Memory Management 50MODULE-WISE APPROACH 36mySAP CRM 77

.NET 81, 82, 91

Objectives 25OLAP 71Online Analysis Processing (OLAP) 78Operating System 50Operational CRM 70ORACLE 94Organization 22Organizational Perspective 36

Packaged Software 6Peripheral Management 50Personal Digital Assistant (PDA) 76Planning 2Planning 21Planning and forecasting 20PLM 15PRM 78Process Management 50Profit maximization 18Project Management 14Project Management 89

Quality 4Quality of Service (QoS) 66RAMCO 97

Index 141

Recruitment 23Reengineering 45Requirements 32

Sales and Distribution 14Sales and Distribution Module 26SAP 51Selection Criteria 31SOAP (Simple Object Access Protocol) 86Software Reliability 31SPC 89Supply Chain 61Supply Chain Co-ordination 62Supply Chain Execution 62Supply Chain Management (SCM) 14Supply Chain Model 63

Supply Chain Networking 61Supply Chain Planning 62SYSPRO CRM 72System Development Lifecycle (SDLC) 43

Technological Perspective 37Treasury Management 20

UML Class Diagrams 123UML Sequence Diagram 124Unified Modeling Language (UML) 120

Unix 51

Wealth Maximization 18

XML 78XML 82

Documents

eBooks Dump Archive Enterprise+Resource+Planning+-+a+Managerial+and+Technical+Perspective+(S.parthasarathy +2007)+-+Book