Enterprise Resource Planning Saad Ahmed Javed National College of Business Administration & Economics

Core Components (Modules) of ERP Chapter # 02

3 Learning Outcomes Compare core ERP components (modules) and extended ERP components Describe the three primary components found in core ERP Describe the four primary components found in extended ERP systems Explain the benefits and risks associated with ERP systems Assess the future of ERP systems

4 Introduction ERP – integrates all departments and functions throughout an organization into a single IT system so that employees can make enterprisewide decisions by viewing enterprisewide information on all business operations Core ERP components – traditional components included in most ERP systems and they primarily focus on internal operations Extended ERP components – extra components that meet the organizational needs not covered by the core components and primarily focus on external operations

6 Accounting and Finance Components manage accounting data and financial processes within the enterprise with functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management

7 Production and Materials Management Components handle the various aspects of production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control

8 Human Resource Components track employee information including payroll, benefits, compensation, performance assessment, and assumes compliance with the legal requirements of multiple jurisdictions and tax authorities

9 Extended ERP Components Business intelligence - information that people use to support their decision-making efforts. It also involves seeking competitors’ information. CRM - involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization’s profitability SCM - involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability E-commerce - means conducting business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners

10 E-Business Components E-logistics – manages the transportation and storage of goods E-procurement – the business-to-business (B2B) purchase and sale of supplies and services over the Internet

Other Modules/Components of ERP 11

Business and Strategic Planning Module BSP- Process of developing a business & strategic plan The strategic plan (by top executives) is then converted into the business plan (by functional managers) Business Plan in terms of dollars, grouped by product family, and extends between one and five years into the future 12

Continue… BSP modules help ERP systems to perform simulations by testing multiple versions of the business plan to determine possible outcomes and possible needs of the organization. The executives of the organization can run through different scenarios to determine how best to prepare for the future. 13

Resource Planning Module Business plan can’t work if capacity is unavailable. Capacity planning conducted at the Business Plan level is called resource planning. Capacity is tied to the “What If” functionality of the ERP system RPM is for items/products that may take long periods of time to acquire or build ( e.g., construction, engineering of highly innovative designs etc ) 14

Continue… modeling & probability analysis capabilities to examine critical resource requirements such as bottleneck processes (under-capacity processes), equipment, or vendor capabilities 15

Executive Decision Support Module “executive dashboard” or Executive Information System (EIS) Color coded & graphical information Trigger & alert functions Resource Planning Modules: “What If” analyses Executive Decision Support Systems: “What’s Best” analyses 16

Forecasting Module Forecast future demand to make sound purchasing & production decisions Tests different forecasting methods 17

Customer Relationship Management (CRM) Module CRM can include notes on customer buying habits, payment history, contact information, service agreements, acceptable forms of payment, engineering or manufacturing preferences, and the ability to be electronically reminded to send a follow-up message to a customer Enables the sales staff to prioritize prospective and existing customers by pulling relevant information from the ERP system 18

Order Entry, Quoting, and Product Configurator Modules ERP systems even allow orders to be directly entered via Electronic Data Interchange (EDI) EDI is paperless (electronic) exchange of trading documents, such as purchase orders, shipment authorizations, advanced shipment notices, and invoices. Product configuration involves assigning different product numbers to different products based on their difference of features. 19

Master Production Schedule (MPS) Module MPS is time-phased anticipated build schedule for manufacturing products MPS looks at manufacturing products from one of three alternatives: make-to-stock, make-to-order, or assemble-to-order 20

Rough Cut Capacity Planning (RCCP) Module MPS is followed by RCCP Module RCCP determines if the proposed schedule can actually be developed Converts MPS into requirements for key resources (labour, machinery, money etc) 21

Material Requirements Planning Module Basic framework for many functions of an ERP system 4 Inputs to MRP system: Basic Planning Data – how to perform calculations; techniques, tools etc Bills of Material (BOMs) – list of components required to produce a product/item Dynamic Data – continuously changing data e.g., data of sales, purchases, orders etc Master Schedule – a statement of the finished goods that firm intends to produce 22

Detailed Capacity Planning Module looks at the available capacity for every work cell in the manufacturing process. 23

Production Activity Control (PAC) Module Once it is determined that the capacity is available at each work cell to meet the schedule, manufacturing orders are released to the shop floor. PAC module does sequencing of manufacturing orders 24

Continue… PAC module assigns a priority to each order, maintains work-in-process quantity data, provides information for the accounting modules in terms of inventory and labor transactions, and provides measurements of efficiency, utilization, and productivity of manpower and machines. 25

Manufacturing Execution System (MES) Module MES is a factory floor information and communication system with several functional capabilities. Linked with machines ‘Production manager of ERP’ 26

Advanced Planning and Scheduling (APS) Module It uses both material & capacity in its scheduling Integrates MRP and capacity schedules Help planners create a feasible schedule within identified constraints 27

Financial Modules creates and feeds transactional information to the general ledger as soon as the transaction occurs. includes accounts payable, accounts receivable, the general ledger, and often, a fixed assets and/or a payroll package Etc. 28

Other Modules Costing Modules Engineering Modules Human Resource Management Modules e-Commerce Modules Sales & Operations Planning Module 29

Companies before ERP Systems

Example: Before ERP Systems

New Printer Purchasing Process 1.Purchase order form for a new printer 2.Head of Department Confirmation- Faculty Head 3.Purchase order document sent to E.M.U. Account Office 4.Account Office Secretary sents the purchase order to the Responsibles 5.Purchase order- Responsible personal Confirmation 6.Purchasing department- Manager Confirmation 7.Transfer to Finance Department Secretary for processing 8.Finance Department Responsible’s Confirmation 9.Transfer to Rector’s Office 10.Rector’s Secretary- Confirmation 11.Confirmation Transfer, to Purchase Department Secretary 12.Purchase Responsible personal commends with Purchase:

After ERP Implementation

Companies after ERP Systems

ERP Benefits

Online Data Flow decreases the process time Fast & Online Confirmation Less Paperwork No need for folder storage Database Security Less Employee needed Easy Financial Management Better Inventory Management Other Benefits of ERP systems

ERP Risks

ERP Software Companies & Marketshares Software Market Share SAP15.6 PeopleSoft4.9 Oracle 4.8 Baan3.0 CA3.0 JDE2.2 SSA2.1 GEAC2.0 IBM1.8 JBA1.7 Others 59.0

39 The Future of ERP Lines between SCM, CRM, and ERP will continue to blur Internet – continue to help organizations integrate data and process across functional departments Interface – customizable employee browsers Wireless technology – support a mobile workforce

40 Closing Case One: PepsiAmericas’ Enterprises PepsiAmericas generates $2.97 billion in revenues yearly The company implemented PeopleSoft’s ERP solution to provide complete integration between PepsiAmericas’ front-office and back-office systems PepsiAmericas also implemented PeopleSoft’s supply chain management component to automate its inventory

Istanbul Fast Ferries (IDO) Annually 91 million passanger Annually 5,5 million vehicles Dailly 1,200 navigation capacity 90 Ships 82 Terminals 3,200 personel 314 Million YTL endorsement

42 Closing Case Two Questions 1. How have core ERP components helped PepsiAmericas improve its business? 2. How have extended ERP components helped PepsiAmericas improve its business? 3. Explain how future ERP systems will help PepsiAmericas increase revenues 4. Assess the impact on PepsiAmericas’ business if it failed to implement the CRM component of PeopleSoft’s ERP system 5. Review the different PeopleSoft components in Figure B5.5. Which component would you recommend PepsiAmericas implement if it decides to purchase an additional PeopleSoft component?

43 Closing Case Two: Demanding Chocolate Ghirardelli is the longest continuously operating chocolate manufacturer in the Untied States Ghirardelli improved inventory management and profitability through the implementation of an ERP system

44 Closing Case Two Questions 1. Which additional core ERP components would you recommend Ghirardelli implement? 2. Which additional extended ERP components would you recommend Ghirardelli implement? 3. How can implementing an Advanced Planning ERP component help Ghirardelli’s business?

Ref. Kapp, Karl, M. (2001). CRC Press. 45