A study on

Enterprise Resource Planning

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Introduction

What is ERP?

- ERP or Enterprise Resource Planning is a software system that

attempts to integrate all the departments and locations across a
company onto a single computer system.

- It attempts to create one single database structure for the entire

company and it serves the needs of different departments particular
needs.

- Few major ERP vendors – SAP, BAAN, JD Edwards, Oracle,

PeopleSoft.

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 ERP System Model

Finance and
Accounting

Centralized ERP
Production & Material
Shipping
management Database, Software
and servers

Supply chain Distributors,

Human Resources Retailers & End
Integration users

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Benefits of using ERP

Holistic View:

- Enables transparency between the departments

- Enables easy sharing of standardized data

- Enables key decisions to be made without difficulty based on facts

Best of Practices:

- They incorporate the best of practices in the industry in almost every possible
area of operation

- For example, Sales forecasting methods like exponential smoothing, moving

averages. Inventory control methods like ABC analysis, MRP, Calculating
Economic order quantity etc.

- Incorporating these practices in the ERP system leads to

re-structuring of company’s processes.

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Benefits of using ERP

Customer and supplier relations:

- They incorporate supply-chain soft wares

- It enables customers to do stock check, order status, product pricing etc.

- It improves the visibility of order fulfillment processes.

- It enables the companies to recognize the needs of the customers.

- It enables them to plan deliveries thereby saving finished goods inventories

cutting inventory costs.

- Ability to track actual costs of activities and perform activity based costing

- Newer ERP systems incorporate e-business features, which are gaining

popularity.
 

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Benefits of using ERP
Standardizing manufacturing processes:

- Companies often have their various business units using different methods
and computer systems but ERP systems integrates all of them in a single
software system.

- It incorporates standardized steps for automating many manufacturing

processes.

- It produces production orders, allocates assembly time, calculates product

price taking into account multiple cost components like labor, production,
assembly, taxes etc.

- It eliminates the need for interfacing multiple systems.

- Standardizing and automating the processes using a single, integrated

software system saves time and increases productivity.

- It enables easy investigation and identification of bottlenecks and other

problematic areas.

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Benefits of ERP
Specific to To Employers
- To retain quality/loyal employees

- To use this program as a means to motivate staff, increase

morale, increase productivity and reduce turnover

- To cultivate saving habits among employees

- To enhance team work among employees

- To enhance corporate image

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Steps to determining the need,
budgeting & choosing the ERP System
Short-list available software
- Research on type/brand of ERP software
- Acknowledge software that are customized for particular businesses

Forming an ERP implementation team

- Highly experienced employees from various departments
- Committed participation of top management

Choosing the software

- Determine the business or operation strategies
- Decide which areas supporting these strategies need improvement
- Research on software features that support these strategies
- Compare software with the desired features
- Choose software that requires minimal or no customization

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Steps to determining the need,
budgeting & choosing the ERP System
Estimating the budget for ERP
- Acknowledge difficulty in estimating the monetary benefits of ERP usage
- Determine easily measurable qualities that can justify ERP usage
- Benchmark companies that have experience in ERP implementation

Recognizing hidden costs during implementation and long-term basis

- Acknowledge costs other than software and hardware
- Account for hiring external consultants
- Account for expenses on training the employees to the ERP system
- Account for dedicating few employees in the testing phases
- Account for the time and complications in transferring data from the old
to the new system

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Steps to determining the need,
budgeting & choosing the ERP System

Recognizing hidden costs during implementation and long-term basis

(continued)

- Account for expenses on customizing the software both during

implementation and addition of patches in future
- Account for archiving requirements that might be required in future
- Account for additional hardware costs for data backup systems, firewall
and UPS

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Sample costs for implementing
an ERP system for a company of 30 million
Dollars Canadian
Hardware - 40,000 (main server)
- 10,000 (gateway)
Software - 140,000 (CMS400)
Training - 12,000
Licensing - 7,000 per year
Miscellaneous - 10,000
Maintenance - 800 per year
______________________________________
Total - 219,800

(Note that hidden costs are not covered)

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Why do ERP systems fail ? And
how could failures be prevented?

- Business processes not driven by business or operating strategy

- Presence of a sense of true accountability for every ERP
feature
- Lack of commitment from top management
- Implementation process taking longer time than what was anticipated
- Loss of commitment from management/employees
- Plan the timeline carefully, allow flexibility
- Review timeline at every stage of the implementation process
- Poor pre-implementation preparations
- Careful anticipation of change in processes due to ERP
- Maintain transparency to suppliers and customers

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 Why do ERP systems fail ? And
how could failures be prevented?

- Lack of testing/assessments of the ERP systems

- Testing at every stage of the implementation process
- Develop a highly structured assessment plan
- Recognizing the interrelations between various processes
- Insufficient training of employees on the ERP system
- Recognize that no amount of advanced information
technology offsets incompetent users
- Cost of the implementation process exceeding the planned budget
- Mistakes in budgeting can prove to be disasters
- Recognizing the hidden costs
- Company not employing qualified personals to implement ERP

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

Conclusion

Regardless of the costs and risks involved in

implementing an ERP system, if implemented well, the
organization will save tremendous amount of capital. If an
organization has sufficient capital we recommend them to
look in to ERP implementation.

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT

 ?
Q & A Session

INTERNATIONAL SCHOOL OF TELECOM TECHNOLOGY & MANAGEMENT