ERP Enterprise Resource Planning

ERP is a packaged business software system that processes transactions on a single software platform and a single database.

• Integrates information across all departments
• Facilitates the flow of information among the different functions and processes of an enterprise
  - functions: manufacturing, finance, HR
  - processes: order entry

• Tracks a wide range of events in the enterprise in an integrated fashion
• Plans future activities based on these events
• Supports analysis of trends in these events, to improve the performance of the enterprise.
• Allows users to
  - input data in one location, that can be processed with other data and accessed as informational reports in a real-time environment
  - share common data and practices across the entire enterprise
  - reengineer the majority of its processes

1. Technology

• Need for an infrastructure that will provide information across all functions and locations within the organization
• Difficulty maintaining existing legacy systems
• Difficulty integrating acquisitions
• Obsolete hardware

2. Business Processes

• Complex, ineffective business processes
• Business processes are not integrated
• Need for a set of tools for planning and monitoring the various functions and processes in a company
• Opportunity to reengineer business processes

3. Strategy

• Globalization
• New products, new services
• Need to be more responsive to customers
• Cost structures too high
• Poor quality or visibility of information
• Foundation for e-business

4. Competition

• Competitors have an ERP system

1. Inventory Control

• Most common approach:
  - If the inventory drops below a minimum quantity, it is replenished with the Economic Order Quantity (EOQ)
• Disadvantages
  - very large inventory investment
  - unreliable with a highly varying demand rate
  - large investment in safety stock
  - requires forecasts for all items
  - based on past demand data
  - material obsolescence is more likely

2. MRP (Material Requirements Planning)

• Calculates component requirements based on the Master Production Schedule (MPS), Bill of Material (BOM) and inventory data
• Determines batch sizes for purchasing and manufacturing, and sends out purchasing / manufacturing orders for them at the appropriate times

3. Closed-Loop MRP

• Considers material and capacity requirements
• Prior to releasing production orders to shopfloor, it adds the planned workload to existing workload, and compares it with the available capacity
• Assesses whether work should be rescheduled in order to smooth out any peaks in capacity utilization (CRP)

4. MRP II (Manufacturing resource planning)

• Ccloses the loop with sales, financial and operations planning
• Includes the allocation of production equipment and labor
• can manage changes in the production plan
• includes JIT capabilities

5. ERP (Enterprise resource planning)

• ERP systems go beyond the barrier of manufacturing organizations
• Data are generated as a result of diverse transactions and integrated to be used by multiple users, for multiple purposes and at multiple places

1. Financials

• General ledger
• Accounts receivable
• Accounts payable
• Asset management
• Treasury management
• Controlling

2. Human Resources

• Human resources administration
• Payroll
• Self-service
• Planning
  - personnel development
  - workforce
  - shift

3. Sales and Distribution

• Prospect and customer management
• Sales order management
• Billing, invoicing and dispatch
• Sales history

4. Manufacturing

• Bills of materials, routings
• Different planning functions
  - production planning
  - capacity planning
  - shop floor control
  - production scheduling
• Project management
• Plant maintenance
• Quality management
• Multi-mode manufacturing functionalities
  - make-to-stock
  - make-to-order
  - assemble-to-order
  - engineer-to-order
  - JIT
• Industry-specific solutions
  - discrete manufacturing: automotive, high tech
  - process industries: chemicals, oil & gas
  - services: public services, banking, insurance

5. Materials Management

• Procurement
  - generate purchase orders
  - know the prices
  - measure vendor performance
  - receive goods into inventory
  - pass invoices to accounts payables
• Inventory management
  - where is all stock
  - what is it worth
  - stock movement tracking

6. Logistics

• Warehouse management
  - maintains records of warehoused goods
  - process movement of products through warehouses
• Transportation management
  - manages delivery of products to customers
  - produces legal documents for tax, customs, shipping agents

7. Reporting

• Information is made available to particular users in the form of specific reports.
• In addition, there are other approaches to generating data from the system, including database queries.
• Recently, ERP reporting capabilities have begun to evolve as ERP vendors have tried to increase the accessibility and ease of use of the ERP software.

An editable ERP Powerpoint Presentation (44 slides) can be downloaded at http://www.managementsupport.com