Enterprise resource planning

VEL TECH VEL TECH MULTI TECH VEL TECH HIGH TECH

STUDY MATERIAL
ENTERPRICE RESOURCE PLANNING
DEPARTMENT OF IT

R S
Vel Tech
Vel Tech Multi Tech Dr.Rangarajan Dr.Sakunthala Engineering College
Vel Tech High Tech Dr. Rangarajan Dr.Sakunthala Engineering College

SEM - VIII

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INDEX

UNITS PAGE NO.

I. Introduction 06

II. ERP Implementation 25

III. The Business Modules 40

IV. The ERP Market 64

V. ERP – Present and Future 89

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R S


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academic year 2009 – 2010 in Tamil Nadu, India.
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Preface to the First Edition

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This edition is a sincere and co-ordinated effort which we hope has made a
great difference in the quality of the material. “Giving the best to the students,
making optimum use of available technical facilities & intellectual strength” has
always been the motto of our institutions. In this edition the best staff across the
group of colleges has been chosen to develop specific units. Hence the material, as a
whole is the merge of the intellectual capacities of our faculties across the group of
Institutions. 45 to 60, two mark questions and 15 to 20, sixteen mark questions for
each unit are available in this material.

Prepared By : Mr. Einstein. J.
Asst. Professor.

IT1006 ENTERPRISE RESOURCE PLANNING

UNIT 1 INTRODUCTION 9

ERP: An Overview, Enterprise – An Overview, Benefits of ERP, ERP and Related Technologies,
Business Process Reengineering (BPR), Data Warehousing, Data Mining, OLAP, SCM

UNIT II ERP IMPLEMENTATION 9

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ERP Implementation Lifecycle, Implementation Methodology, Hidden Costs, Organizing the
Implementation, Vendors, Consultants and Users, Contracts with Vendors, Consultants and
Employees, Project Management and Monitoring

UNIT III THE BUSINESS MODULES 9

Business modules in an ERP Package, Finance, Manufacturing, Human Resources, Plant
Maintenance, Materials Management, Quality Management, Sales and Distribution

UNIT IV THE ERP MARKET 9

ERP Market Place, SAP AG, Peoplesoft, Baan, JD Edwards, Oracle, QAD, SSA

UNIT V ERP – PRESENT AND FUTURE 9

Turbo Charge the ERP System, EIA, ERP and e-Commerce, ERP and Internet, Future Directions

TEXT BOOK
1. Alexis Leon, “ERP Demystified”, Tata McGraw Hill, New Delhi, 2000

REFERENCES
1. Joseph A Brady, Ellen F Monk, Bret Wagner, “Concepts in Enterprise Resource Planning”,
Thompson Course Technology, USA, 2001.
2. Vinod Kumar Garg and Venkitakrishnan N K, “Enterprise Resource Planning – Concepts and
Practice”, PHI, New Delhi, 2003

UNIT – I
PART – A

1. What is ERP?

Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the
integrated management of businesses as a whole, from the viewpoint of the effective use of
management resources, to improve the efficiency of an enterprise. Ideally the data for various
business functions are integrated.

2. Write the advantages of ERP.

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Installing an ERP system has many advantages – both direct and indirect. The direct
advantages include improved efficiency, information integration for better decision making, faster
response time to customer queries, etc. The indirect benefits include better corporate image,
improved customer goodwill, customer satisfaction, and so on.

3. Direct benefits of ERP.

The following are some of the direct benefits of an ERP system:
♦ Business Integration
♦ Flexibility
♦ Better analysis and planning capabilities
♦ Use of latest technology

4. Discuss evaluation of ERP.

As the department become large, they became closed & water tight. Each had their own set
of procedures & hierarchy, each & every department maintain information separately which
causes waste of resources.
Hence ERP is implemented to integrate all the department together and limit the waste of
resources.

5. How business integration achieved by ERP system?

ERP packages are considered to be integrated, is the automatic data updation (automatic
data exchange among applications) that is possible among the related business components.

6. Why are ERP systems said to be flexible?

Different languages, currencies, accounting standards and so on can be covered in one
system, and functions that comprehensively manage multiple locations of a company can be
packaged and implemented automatically.

7. Why do many ERP Implementation fails?
Many a company fails in this because of a wrong product, incompetent and haphazard
implementation and inefficient or ineffective usage.

8. What are the reasons for the growth of the ERP market?

♦ To enable, improved business performance
♦ To support business growth requirements
♦ To provide flexible, integrated, real-time decision support

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♦ To eliminate limitation in legacy systems
♦ To take advantage of the untapped mid – market (medium size organizations)

9. How do conventional application packages and ERP packages differ?

The first answer to this question is that ERP packages cannot only handle individual
business functions such as accounts and inventory, but also the entire range of business functions
necessary for the company’s operations.

The second difference is that ERP packages are targeted at everything from small
businesses to the largest organizations, and that they can be composed of a highly flexible
decentralised database and an information system cluster linked by a network.

The third difference is global adaptation, represented by ERP packages’ multilingual and
multi-currency capacity. In the present day, when companies, irrespective of their size and
market share, are manufacturing and selling in various areas of the world, the globalization of
management platforms is being hastened, along with the global adaptation of enterprise
information systems.

10. What is an integrated information system?

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, procedures and data. People follow procedures to manipulate data to produce
information. In today’s computer world, the definition of information systems has undergone a
slight change. Today, an information system is an organized combination of people, hardware,
software, communication networks and data resources that collects, collates, transforms and
disseminates in an organization.

11. What is MIS?

MIS or Management Information System is a computer – based system that optimises the
collection, collation, transfer and presentation of information throughout an organization through
an integrated structure of databases and information flow.

12. Why are the integrated information system important for the organization’s success?

ERP system that treats the organization as a single entity and caters to the information
needs of the whole organization. If this is possible, and if the information that is generated is
accurate, timely and relevant, then these systems will go a long way in helping the organization in
realizing its goals.

13. What is business modeling?

In business modeling, we model the business as an integrated system, taking the processes

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managing its facilities and materials as resources. Information is a very important resource and is
very critical in managing all the other resources.

Thus, the business model is a representation of the actual business – what are the various
business functions of the organization, how are they related, what are their interdependencies,
and so on. The business model is usually represented in the graphical form using flow charts and
flow diagrams. From the business model, the data model of the system is created.

14. What is integrated data model?

It should clearly depict the organization; it should reflect the day-to-day transactions and it
should be updated continuously. At any given time, the database should give a snapshot of the
organization at that point in time. So if an order is entered, the sale is done and the goods are
dispatched, then the database should reflect those changes. The inventory should be reduced and
the account receivables should be increased. All these things have to happen instantaneously and
automatically. That is the challenge and that is the advantage of the integrated database and the
integrated data model.

15. What are the limitations of ERP?

1. Managers cannot generate custom reports or queries without help from a programmer
and this inhibits them from obtaining information quickly, which is essential for
maintaining a competitive advantage.
2. ERP systems provide current status only, such as open orders. Managers often need to
look past the current status to find trends and patterns that aid better decision – making.
3. The data in the ERP application is not integrated with other enterprise or division
systems and does not include external intelligence.

16. How to overcome the limitations of ERP?

Some of these technologies are:

♦ Business Process Reengineering (BPR)
♦ Management Information System (MIS)
♦ Decision Support Systems (DSS)
♦ Executive Information Systems (EIS)
♦ Data Warehousing
♦ Data Mining
♦ On-line Analytical Processing (OLAP)
♦ Supply Chain Management
♦ Customer Relationship Management (CRM)

17. What is BPR?

The fundamental rethinking and radical redesign of business processes to achieve dramatic

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improvements in critical, contemporary measures of performance such as cost, quality, service
and speed.

18. What is data warehousing?

The primary concept of data warehousing is that the data stored for business analysis can
be accessed most effectively by separating it from the data in operational systems. The most
important reason for separating data for business analysis, from the operational data, has always
been the potential performance degradation on the operational system that can result from the
analysis processes.

19. What is Data mining?

Data mining is the process of identifying valid, novel, potentially useful and ultimately
comprehensible information from databases that is used to make crucial business decisions.

20. What do you mean by OLAP?

OLAP can be defined in five words – Fast Analysis of Shared Multidimensional
Information.

FAST means that the system is targeted to deliver most responses to users within about five
seconds, with the simplest analysis taking no more than one second and very few taking more
than 20 seconds. ANALYSIS means that the system can cope with any business logic and
statistical analysis that is relevant for the application and the user, and keep it easy enough for the
target user. SHARED means that the system implements all the security requirements for
confidentiality (possibly down to cell level) and, if multiple write access is needed, concurrent
update locking at an appropriate level. MULTIDIMENSIONAL means that the system must
provide a multidimensional conceptual view of the data, including full support for hierarchies
and multiple hierarchies. INFORMATION is refined data that is accurate, timely and relevant to
the user.

21. Explain the concept of supply chain management?

A supply chain is a network of facilities and distribution options that performs the function
of procurement of materials, transformation of these materials into intermediate and finished
products, and the distribution of these finished products to customers. Supply chains exist in both
service and manufacturing organizations, although the complexity of the chain may vary greatly
from industry to industry and firm to firm.

22. What is the use of common database?

The common database can allow every department of a business to store and retrieve

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information real time. The information should be reliable, accessible and easily shared.

23. List the Reasons for the growth of the ERP Market

 To improve business performance
 To support business growth requirements
 To eliminate limitations in legacy system

PART – B

1. Describe the overview of ERP.

Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the
integrated management of business as a whole, from the viewpoint of the effective use of
management resources, to improve the efficiency of an enterprise. ERP packages are integrated
(covering all business functions) software packages that support the above ERP concepts.

Originally, ERP packages were targeted at the manufacturing industry, and consisted
mainly of functions for planning and managing core businesses such as sales management,
production management, accounting and financial affairs, etc. However, in recent years,
adaptation not only to the manufacturing industry, but also to diverse types of industry has
become possible and the expansion of implementation and use has been progressing on a global
level.

ERP software is designed to model and automate many of the basic processes of a
company, from finance to the shop floor, with the goal of integrating information across the
compnayand eliminating complex, expensive links between computer systems that were never
meant to talk to each other.

Strategic & Operational
Figure shows how information is integrated within an organization using an ERP system.
Finance
Planning

Human
Manufacturing Resource

ERP
System Logistics Management
Materials Management

Maintenance Management
VEL TECH Quality Management VEL TECH MULTI TECH VEL TECH HIGH TECH
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Sales &
Distribution


Figure. Information integration through ERP systems.
ERP software is a mirror image of the major business processes of an organization, such as
customer order fulfillment and manufacturing. Its success depends upon reach-a circumscribed
ERP system isn’t much better than the legacy system it replaces. In many cases, it is worse,
because the old code at least was written specifically for the company and the task. ERP systems’
set of generic processes, produce the dramatic improvements that they are capable of only, when
used to connect parts of an organization and integrate its various processes seamlessly. When a
warehouse in Noida enters a customer order, for example, the data flows automatically to others
in the company who need to see it-to the finance department at the company headquarters in
Mumbai and to the manufacturing plant in Chennai. The lure of information integration struck a
chord with CEOs and CFOs and CFOs-ERP vendors’ primary targets-and sales of ERP took off in
the early 1990s.

REASON FOR THE GROWTH OF THE ERP MARKET

The is no doubt that the market for Enterprise Resource Planning (ERP) systems is in great
demand. Industry analysts are forecasting growth rates of more than 30% for at least the next five
years. Why are so many companies replacing their key business systems? The answer is:

° To enable improved business performance
 Cycle time reduction
 Increased business agility
 Inventory reduction
 Order fulfillment improvement

° To support business growth requirements
 New products/product lines, new customers
 Global requirements including multiple languages and currencies

° To eliminate limitation in legacy systems
 Century dating issues
 Fragmentation of data and processing
 Inflexibility to change
 Insupportable technologies

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° To take advantage of the untapped mid-market (medium size organizations)
 Increased functionally at a reasonable cost
 Client server/open systems technology
 Vertical market solutions

These are some of the reasons for the explosive growth rate of the ERP markets and the
ERP vendors. As more and more companies are joining the race, the ERP vendors are shifting
their focus from big-Fortune 1000-companies to different market segments (medium size
companies, small companies, etc). The future will see fierce battle for market share and mergers
and acquisitions for strategic and competitive advantage. The ultimate winner in this race will be
the customer, who will get better products and better service at affordable prices.

2. Benefits of ERP.

The Advantages of ERP

Installing an ERP system has many advantages-both direct and indirect. The direct
advantages include improved efficiency, information integration for better decision making, faster
response time to customer queries, etc. The indirect benefits include 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

Business Integration

The first and most important advantage lies in the promotion of integration. The reason
why ERP packages are considered to be integrated, is the automatic data updation (automatic data
exchange among applications) that is possible among the related business components. Since
conventional company information systems were aimed at the optimization of independent
business functions in business units, almost all were weak in terms of the communication and
integration of information that transcended the different business functions. In the case of large
companies in particular, the timing of system construction and directives differs for each product
and department/functions 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 ERP packages,
the data of related business functions is also automatically updated at the time a transaction
occurs. For this reason, one is able to grasp business details in real time, and carry out various
types of management decisions in a timely manner, based on that information.

Flexibility

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The second advantage of ERP packages is their flexibility. Different languages, currencies,
accounting standards and so on can be covered in one system, and functions that comprehensively
manage multiple locations of a company can be packaged and implemented automatically. 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 in terms
of management.

Better Analysis and Planning Capabilities

Yet another advantage is the boost to the planning functions. But enabling the
comprehensive and unified management of related business and its data, it becomes possible to
fully utilize many types of decision support systems and simulation functions. Furthermore, since
it becomes possible to carry out, flexibly and in real time, the filling and analysis of data from a
variety of dimensions, one is able to give the decision-makers the information they want; thus
enabling them to make better and informed decisions.

Use of Latest Technology

The fourth advantage is the utilization of the latest development in Information Technology
(IT). The ERP vendors were very quick to realize that in order to grow and to sustain that growth,
they had to embrace the latest developments in the field of Information Technology. Therefore,
they quickly adapted their systems to take advantage of the latest technologies like open systems,
client/server technology, Internet/Intranet, CALS (Computer-Aided Acquisition and Logistics
Support), electronic-commerce, etc. It is this quick adaptation to the latest changes in Information
Technology that makes the flexible adaptation to changes in future business environments
possible. It is this flexibility that makes the incorporation of the latest technology possible during
systems customization; maintenance and expansion phases.

As has been stated above, ERP includes many of the functions that will be necessary for
future systems. However, undertaking reforms to company structures and business processes, so
as to enable the full use of these major features, is the greatest task for companies that will use
them. It is necessary to take note that casually proceeding with the implementation of ERP,
merely for reasons of system reconstruction or preparation for the year 2000, is likely to result in
turning the above mentioned advantages into disadvantages.

3. Describe Integrated Management Information.

Integrated Management Information

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,
procedures and data. People follow procedures to manipulate data to produce information. In
today’s computer world, the definition of information systems has undergone a slight change.
Today, an information system is an organized combination of people, hardware, software,

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communication networks and data resources that collects, collates, transforms and disseminates in
an organization.

Management Information System(MIS) is a planned system of the collecting, processing,
storing and disseminating data in the form of information needed to carry out the functions of
management. Information system include systems that are not intended for decision making. But
MIS intended for decision making also.

Figure. An enterprise where all departments know what the others are doing

Management Information Systems, also called information-reporting systems, were the
original type of management support systems, and they still are a major category of information
systems. MIS produce information products that support many of the day-to-day decision
making needs of the management. Reports, charts, graphs, displays and responses produced by
such systems provide information that managers have specified in advance. Such predefined
information satisfies the needs of managers at the operational levels of the organization who are
faced with the structured type of decision-making.

But the problem with these information systems is that they only give information that has
been predefined. So each department will have its own database and information systems. These
systems will produce different reports of varying detail that were specified when the systems

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were built.

This method of information gathering has two major disadvantages. One, people in one
department do not have any information about what is happening in the other departments. May
be at the top management level the summary reports are being circulated to other departments
also, but these summary reports often fail in capturing the real picture. The second drawback is
that these systems give only the information that they were designed to produce at the time they
were built. Suppose a manager wants some information which is not in the reports, then these
systems are of no help.

These systems lack the integrated approach. There will be an accounting system for the
finance department, a production planning system for the manufacturing department, an
inventory management system for the stores department, and so on. All these systems will
perform in isolation. So if a person wanted some information which has to be derived from any of
these two systems, he has to get the necessary reports from both systems and then correlate and
combine the data.

Because the systems work in isolation, collecting and analyzing the data needed for one
department’s functioning, can be a difficult task, since, getting information about some aspect that
is dependent on more than one department can be tedious. No business executive or decision-
maker can take good decisions with the isolated data that he gets from the various reports
produced by each department. Even if he collates the data and produces the information that he
requires, he would have lost valuable time that could have been better spent in decision-making.

In reality, an organization cannot function as islands of different departments. The
production planning data is required for the purchasing department. The purchasing details are
required for the finance department and so on. So if all the information islands, which were
functioning in isolation, were integrated into a single system, then the impact of that would be
dramatic. For example, if the purchase department can see the production planning details, it can
make the purchasing schedule accordingly. If the finance department can see the purchase details
as soon as it is entered in the system, they can plan for the cash flow that will be necessary for the
purchases.

We have seen that in today’s competitive business environment, the key resource of every
organization is information. If the organization does not have an efficient and effective
mechanism that enables it to give the decision makers the right information at the right time, then
the chances of that organization succeeding in the next millennium are very remote.
The three fundamental characteristics of information are accuracy, relevancy and
timeliness. The information has to b e accurate, it must be relevant for the decision-maker and it
must be available to the decision-maker when he needs it. Any organization that has the
mechanism to collect, collate, analyze and present high quality information to its employees, thus
enabling them to make better decisions, will always be one step ahead of the competition. Today,
the time available for an organization to react to the changing market trends is very short. To
survive, the organization must always be on its toes, gathering and analyzing the data – both

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internal and external. Any mechanism that will automate this information gathering and analysis
process will enhance the chance of the organization to beat the competition.

So, what is needed is a system that treats the organization as a single entity and caters to
the information needs of the whole organization. If this is possible, and if the information that is
generated is accurate, timely and relevant, then these systems will go a long way in helping the
organization in realizing its goals.

4. Describe Business Modeling in ERP.

Business Modeling:

Business modeling or creating a business model is one of the first activities in any ERP
project. As said earlier, the ERP systems should mirror the business processes. A business model
is not mathematical model, but it is a representation of the business as one large system showing
the interconnections and interdependencies of the various subsystems and business processes as
shown in figure.

Based on the organization’s goals, objectives and strategic plans, a business model
consisting of the business processes is developed. These business processes are controlled by
different individuals in the organization (the people) to achieve common goals. Based on the
business model, the ERP system is developed with the aim of providing the required information
and necessary assistance to the various individuals, to help them perform their business processes
more effectively and efficiently.

Figure: Real world
Processe Interrelationsh
s ip &
Interdependen
cies
Plant Material

Customer Order

Contract Invoice
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Figure: Business Model

In business modeling, we model the business as an integrated system, taking the processes
managing its facilities and materials as resources. Information is very important resources and is
very critical in managing all the other resources.

Thus, the business model is a representation of the actual business – what are the various
business functions of the organization, how are they related, what are their interdependencies,
and so on. The business model is usually represented in the graphical form using flow charts and
flow diagrams. Form the business mode, the data model of the system is created.

5. Describe Integrated Data Model.

Integrated Data Model:

One of the most critical steps in the ERP implementation is the creation of an Integrated
Data Model. As we have seen earlier, one of the advantages of having an ERP system is that all
employees from the different departments get access to the data – the integrated data. The
company uses this integrated data for its analysis and decision-making.

With the implementation of ERP systems, the departmental information systems and the
departmental databases will have to go. There can no longer be isolated databases, which cater to
the needs of a particular department. All the data has to be from the integrated database. This
approach will reduce data redundancy and provide updated information about the entire
organization to all employees.

For the integrated database to be effective it should clearly depict the organization; it
should reflect the day-to-day transactions and it should be updated continuously. At any given
time, the database should give a snapshot of the organization at the point in time. so if an order is
entered, the sale is done and the goods are dispatched, then the database should reflect those
changes. The inventory should be reduced and the account receivables should be increased. All
these things have to happen instantaneously and automatically. That is the challenge and that is
the advantage of the integrated database and the integrated data mode. The integrated data
model is derived from the business model as shown in figure.

So, when designing the data model for the ERP system, the most important thing that
should be kept in mind is the information integration and the process/procedure automation.
The data model should reflect the entire organization and it should successfully depict and
integrate the data structures of the entire organization.

6. Describe Business Process Reengineering.

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Business Process Reengineering (BPR)

BPR has been around for quite some time and a lot has been written about it in both, the
practitioner trade press and the academic research journals. However, the controversy still
remains about whether there is any accurate description of BPR, or BPR is just a fad – an
appealing label to tag on to whatever your company is doing, to suggest that your latest and
greatest work is ‘in vogue’. But if reengineering is to continue in the long run, then it must do
more than advertise its considerable successes to date. It must become more proactive and
inclusive with regard to human, organizational and motivational change issues.

Dr Michael Hammer defines BPR as “…… the fundamental rethinking and radical redesign
of business processes to achieve dramatic improvements in critical, contemporary measures of
performance such as cost, quality, service and speed.” One of the main tools for making this
change is the Information Technology (IT). Any BPR effort that fails to understand the importance
of IT, and goes through the pre-BPR analysis and planning phases without considering the
various IT options available, and the effect of the proposed IT solutions on the employees and the
organization, is bound to crash during takeoff.

We have seen that the ERP systems help in integrating the various business processes of the
organization with the help of modern developments in IT. With a good ERP package, the
organization will have the capability of achieving dramatic improvements in critical areas such as
cost, quality, speed and so on. So many BPR initiatives and up in the ERP implementation.

7. Describe Data Warehousing.

Data Warehousing:

If operational data is kept in the databases of the ERP system, it can create a lot of
problems. As time passes, the amount of data will increase and this will affect the performance of
the ERP system. So it is better to archive the operational data once its use is over. When I say “the
use is over’, it does not mean that the archived data is useless. On the contrary, it is one of the
most valuable resource of the organization. However once the operational use of the data is over,
it should be removed from the operational databases. For example, once the financial year is over,
the daily transactional data can be archived. Figure shows what happens if the data is not
archived.

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Figure: Operational data vs. archive data

It is evident from the figure that even though the operational data volume is nearly the
same each year, since the data is not archived, the total amount of data that is stored in the
operational database will go on increasing. Figure shows the effect of keeping this huge amount
of data in the operational database.

It is clear from the above graph that as the volume of the data in the database increases, the
performance of the database and the related applications decreases.

Figure: Data volume vs. performance

From the above discussions, it is evident that we should separate the operational data from
the non-operational data. I am not using the term archive data, because if the non-operational

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data is archived, there is little or no use for it. But this data is a very valuable resource and is too
precious to be kept in some archive. It is in this situation that a data ware house comes in handy.

The primary concept of data warehousing is that the data stored for business analysis can
be accessed most effectively by separating it from the data in operational systems. The most
important reason for separating data for business analysis, from the operational data, has always
been the potential performance degradation on the operational system that can result from the
analysis process. High performance and quick response time is almost universally critical for
operational systems. The reasons to separate the operational data from the analysis data have not
significantly changed with evolution of the data warehousing systems, except that now they are
considered more formally during the data warehouse building process. Advances in technology
and changes in the nature of business have made many of the business analysis processes much
more complex and sophisticated. In addition to producing standard reports, today’s data
warehousing systems sup port very sophisticated online analysis, including multi-dimensional
analysis.

8. Explain the concept of Data Mining.

Data Mining:

We are living in the information age. The importances of collecting data that reflects ones
business, or of activities that achieve competitive advantage, are widely recognised now.
Powerful systems for collecting data and managing it in large databases are available in most
organizations. However, the major bottleneck of converting this data into effective information is
the difficulty faced in extracting knowledge about the system from the collected data. Modeling
the investigated system discovering relations that connect variables in a database are the subjects
of data mining.

Data mining is the process of identifying valid, novel, potentially useful and ultimately
comprehensible information from databases that is used to make crucial business decisions.
Modern data mining systems self learn from the previous history of the investigated system,
formulating and testing hypotheses about the rules, which the system obeys. When concise and
valuable knowledge about the system of interest has been discovered, it can and should be
incorporated into some decision support system which helps the manager make wise and
informed business decisions.

The main reason for needing automated computer systems for intelligent data analysis is
the enormous volume of existing and newly appearing data that require processing. The amount
of data accumulated each day by various businesses, scientific and governmental organizations
around the world is daunting. Research organizations, academic institutions and commercial
organizations create and store huge amounts of data each day. It becomes impossible for human
analysts to cope with such overwhelming amounts of data.

The other problems that surface when human analysts process data are:

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 The inadequacy of the human brain when searching for complex multifactorial
dependencies in the data

 The lack of objectiveness in analyzing the data

A human expert is always a hostage of the previous experience of investigating other
systems. Sometimes this helps, sometimes this hurts, but it is almost impossible to get rid of this
fact.

One additional benefit of using automated data mining systems is that this process has a
much lower cost than hiring an army of highly trained (and paid) professional statisticians. While
data mining does not eliminate human participation in solving the task completely, it
significantly, it significantly simplifies the job and allows an analyst, who is not a professional in
statistics and programming, to manage the process of extracting knowledge from data.

9. Describe OLAP.

On-Line Analytical Processing (OLAP):

According to Business Intelligence Ltd (http://www.OLAPReport.com), OLAP can be
defined in five words – Fast Analysis of Shared Multidimensional Information.

FAST means that the system is targeted to deliver most responses to users within about five
seconds, with the simplest analysis taking no more than one second and very few taking more
than one second and very few taking more than 20 seconds. ANALYSIS means that the system
can cope with any business logic and statistical analysis that is relevant for the application and the
user, and keep it easy enough for the target user. SHARED means that the system implements all
the security requirements for confidentiality (possibly down to cell level) and, if multiple write
access is needed, concurrent update locking at an appropriate level. MULTIDIMENSIONAL
means that the system must provide a multidimensional conceptual view of the data, including
full support for hierarchies and multiple hierarchies. INFORMATION is refined data that is
accurate, timely and relevant to the user.

Simply put, OLAP describes a class of technologies that are designed for live ad-hoc data
access and analysis. While transaction processing (OLTP) generally relies solely on relational
databases, OLAP has become synonymous with multidimensional views of business data. These
multidimensional views are supported by multidimensional database technology and provide the
technical basis for calculations and analysis required by Business Intelligence applications.

OLAP technology is being used in an increasingly wide range of applications. The most
common are sales and marketing analysis; financial reporting and consolidation; and budgeting

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and planning. Increasingly however, OLAP is being used for applications such as product
profitability and pricing analysis; activity based costing; manpower planning; and quality
analysis, or for that matter any management system that requires a flexible, top down view of an
organization.

10. Explain the concept of Supply Chain Management.

Supply Chain Management:

A supply chain is a network of facilities and distribution options that performs the function
of procurement of materials, transformation of these materials into intermediate and finished
products, and the distribution of these finished products to customers. Supply chains exist in both
service and manufacturing organizations, although the complexity of the chain may vary greatly
from industry to industry and firm to firm.
Traditionally, marketing, distribution, planning, manufacturing, and the purchasing
organizations along the supply chain operated independently. These organizations have their
own objectives which are often conflicting. Marketing’s objective of high customer services and
maximum sales revenue conflict with manufacturing and distribution goals. Many manufacturing
operations are designed to maximize throughput and lower costs with little consideration for the
impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated
with very little information beyond historical buying patterns. The result of these factors is that
there is not a single, integrated plan for the organization- there are as many plans as businesses.
Clearly, there is a need for a mechanism through which these different functions can be integrated
together. Supply chain management is a strategy through which such integration can be achieved.

Lambest and cooper identified that SCM having the following management components :
• Planning and control
• Work structure
• Organization structure
• Production flow facility structure
• Information Flow facility structure
• Management methods
• Risk and reward structure
• Culture and attitude

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UNIT – II
PART – A

1. Write different phases of the ERP implementation.

The different phases of the ERP implementation are given below:

♦ Pre-evaluation Screening
♦ Package Evaluation
♦ Project Planning Phase
♦ Gap Analysis
♦ Reengineering
♦ Configuration
♦ Implementation Team Training
♦ Testing
♦ Going Live
♦ End – user Training
♦ Post – implementation

2. Define Pre – evaluation Screen.

The Company should do a pre-evaluation screening to limit the number of packages that
are to be evaluated by the committee. Not all packages are equal – each has its own strengths and
weakness. The pre-evaluation process should eliminate those packages that are not at all suitable
for the company’s business processes.

3. Describe package evaluation.

The evaluation / selection process is one of the most important phases of the ERP
implementation, because the package that you select will decide the success or failure of the
project. Since ERP systems involve huge investments, once a package is purchased, it is not an
easy task to switch to another one. So it is a ‘do it right the first time’ proposition.

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4. Write the important points for evaluating ERP software.

♦ Fundamental fit with the company’s business processes
♦ Degree of integration between the various components of the ERP system
♦ Flexibility and scalability
♦ Complexity
♦ User friendliness
♦ Quick implementation
♦ Ability to support multi – site planning and control
♦ Technology – client / server capabilities, database independence, security
♦ Availability of regular upgrades
♦ Amount of customization required
♦ Local support infrastructure
♦ Availability of reference sites
♦ Total costs, including cost of license, training, implementation, maintenance, customization
and hardware requirements.

5. Describe the project planning phase for ERP.

This is the phase that designs the implementation process. It is in this phase that the details
of how to go about the implementation are decided. Time schedules, deadlines, etc. for the project
are arrived at. The project plan is developed. Roles are identified and responsibilities are
assigned. The organizational resources that will be used for the implementation effort are decided
and the people who are supposed to head the implementation are identified. The implementation
team members are selected and task allocation is done. This phase will decide when to begin the
project, how to do it and when the project is supposed to be completed. This is the phase which
will plan the ‘what to do’ in case of contingencies; how to monitor the progress of the
implementation; what control measures should be installed and what corrective actions should be
taken when things get out of control. The project planning is usually done by a committee
constituted by the team leaders of each implementation group. The committee will be headed by
the ERP incharge (usually the CIO or COO). The committee will meet periodically (during the
entire implementation lifecycle) to review the progress and chart the future course of actions.

6. Why is the pre-evaluation screening required?

There are hundreds of ERP vendors – of all sizes and shapes – all claiming to have the
solution that is ideal for your company. Analyzing all the packages before reaching a decision is
not a viable solution. It is also a very time consuming process. So it is better to limit the number
of packages that are evaluated to less than 5. It is always better to do a through and detailed
evaluation of a small number of packages, rather than doing a superficial analysis of dozens of
packages. It is to identify these packages that we need the pre – evaluation screening.

7. What are the factors to be considered when selecting an ERP package?

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When selecting an ERP package, the following factors should be considered:
 Functional fit with the company’s business processes
 Degree of integration between the various components of the ERP system
 Flexibility and scalability
 Complexity
 User friendliness
 Quick implementation
 Ability to support multi – site planning and control
 Technology – client / server capabilities, database independence, security
 Availability of regular upgrades
 Amount of customisation required
 Local support infrastructure
 Availability of reference sites
 Total costs, including cost of license, training, implementation, maintenance, customisation
and hardware requirements.

8. What is Gap analysis?

Gap analysis is a phase in the ERP implementation, where the organization tries to find out
the gaps between the company’s existing business practices and those supported by the ERP
package. Put very simply, this is the process through which companies create a complete mode of
where they are now and where they are heading. The trick is to design a model, which both
anticipates and covers any functional gaps. It has been estimated that even the best ERP package,
customer tailored to a company’s needs, meets only 80% of the company’s functional
requirements.

9. How are the ‘gaps’, found out during the gap analysis phase filled?

This can be done in different ways. One of the most affordable, but most difficult, solutions
entails altering the business to ‘fit’ the ERP package. Another solution is that the company can
simply agree to live without a particular function (the cheap but annoying solution). Other
solutions include:

♦ Pinning your hopes on an upgrade (low cost but risky)
♦ Identifying a third – party product that might fill the gap (hopefully it also partners with
the ERP packages, keeping interfacing to a minimum)
♦ Designing a custom program
♦ Altering the ERP source code, (the most expensive alternative; usually reserved for mission
– critical installations)

10. Define Reengineering.

Reengineering Business Process Reengineering. The radical transformation of a business

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process to achieve orders of magnitude and improvement in one or more performance measures
relating to fitness – for – purpose, quality, cycle – time and cost; usually requiring the application
of technology enablers. Reengineering projects typically take a minimum of two years to
complete.

11. Explain the main functional area of ERP implementation.

Rule of ERP implementation is, synchronising existing company practices with the ERP
package rather than changing the source code and customising it to suit the company. In order to
do so, business processes have to be understood and mapped in such a way that the arrived at
solutions match up with the overall goals of the company.

12. Define Testing.

This is the phase where you try to break the system. You have reached a point where you
are testing real case scenarios. The system is configured and now you must come up with
extreme-case scenarios-system overloads, multiple users logging on at the same time with the
same query, users entering invalid data, hackers trying to access restricted areas and so on. The
test cases must be designed specifically to find the weak links in the system and these bugs should
be fixed before going live.

13. Explain End User Training.

This phase starts much before the system goes live. The employees who are going to use
the new system are identified. Their current skills are noted and based on the current skill levels,
they are divided into groups. Then each group is given training on the new system. This training
is very important as the success of the ERP system is in the hands of the end – users. So these
training sessions should give the participants an overall view of the system and how individual
actions would affect the entire system.

14. Explain Maintenance mode.

The post – ERP organization will need a different set of roles and skills than those with less
integrated kinds of systems. At a minimum, everyone who uses these systems needs to be trained
on how they work, how they relate to the business process and how a transaction ripples through
the entire company whenever they press a key. The training will never end; it is an ongoing
process; new people will always be coming in, and new functionality will always be entering the
organization.

15. Who are ERP vendors?

Vendors are the people who have developed the ERP packages. They are the people who
have invested a huge amount of time and effort in research and development, to create the
packaged solutions.
16. Write important skills that ERP should possess.

♦ Knowledge of how to organize and run a project of this magnitude

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♦ Enough experience in handling problems and issues that arise during the
implementation
♦ Good people skills
♦ Good leadership skills
♦ Excellent training skills

17. Describe Vendors.

have invested huge amounts of time and effort in research and development to create the
packaged solutions. If one studies the history of the ERP packages and finds out how each
package evolved, it soon becomes evident that every ERP package grew out of the experience or
opportunity of a group of people, working in a specific business, who created systems that could
deal with certain business segments.

18. Write the role of vendor.

The vendor should supply the product and its documentation as soon as the contract is
signed. Only after the software is delivered, can the company develop the training and testing
environment for the implementation team. The vendor is responsible for fixing any problems in
the software that the implementation team encounters. So the vendor should have a liaison officer
who should constantly interact with the implementation team.

Another role the vendor has to play is that of the trainer – to provide the initial training for
the company’s key users, people who will play lead roles in the implementation of the system.

19. Write briefly about consultants.

Business consultants are professional who specialize in developing techniques and
methodologies for dealing with the implementation and with the various problems that will crop
up during the implementation. They are experts in the administration, management and control
of these types of projects. Each of them will have many man – years of implementation experience
with various industries and would have time – tested methodologies and business practices that
will ensure successful implementation. They will be good at all phases of the implementation
lifecycle, right from package evaluation to end – user training.

20. Write the role of the consultant.

The consultants should guarantee the success of the project and should be able to show the
results (quantifiable results like reduction in cycle time, increased response time, improved
productivity and so on) to the satisfaction of the company management.

Consultants are responsible for administering each of the phases of the implementation, so

27


that the required activities occur at the scheduled time and at the desired level of quality and with
effective participation of all those who must participate.

21. Who is an end users and why are the so critical for the success of the ERP implementation?

End users are the people who will be using the ERP system once it is in place. These are the
people who were doing the functions that are being automated or computerised by the ERP
system. With the implementation of the ERP system, the old job descriptions will change, the
nature of the job will undergo drastic transformation. It is human nature to resist change. When
we are talking about implementing an ERP system we are talking about change in a very massive
scale. Employees will fear that system will feat that system will replace existing jobs, as many
functions will be automated. Also people will be afraid of the amount of training they have to
undergo and learning they have to do to use the new system. Job profiles will change, job
responsibilities will undergo drastic alterations, and people will be forced to develop new skill
sets. If these fears are not addressed and alleviated well in advance, it will cause trouble for the
organization.

22. Explain the steps of data migration strategy.

• Identifying the data to be migrated
• Determining the timing of data migration
• Generating data templates
• Freezing the tools for data migration
• Deciding on migration related steps
• Deciding on data arching

PART – B

1. Explain ERP implementation lifecycle.

The different phases of the ERP implementation are given below:

• Pre-evaluation Screening
• Package Evaluation
• Project Planning Phase
• Gap Analysis
• Reengineering

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• Configuration
• Implementation Team Training
• Testing
• Going Live
• End-user Training
• Post-implementation

Vendors Pre-Selection Company
Pre-Selection Managemen
Screening
Screening t

Package Evaluation
Package Evaluation

Project Planning
Project Planning

Gap Analysis Testing Configuration
Gap Analysis Testing Configuration

Re- engineering Implementation End-user Training
Re- engineering Implementation End-user Training
Tram training
Tram training

Going Live
Going Live

Post Implementation
Post Implementation
Phase
Phase
Fig. ERP implementation lifecycle – different phases
PRE - EVALUATION SCREENING

Once the company has decided to go in for the ERP system, the search for the perfect
package starts. But there are hundreds of ERP vendors – of all sizes and shapes – all claiming to
have the solution that is ideal for you. Analyzing all the packages before reaching a decision is not
a viable solution. It is also a very time consuming process. So it is better to limit the number of
packages that are evaluated to less than five. It is always better to do a thorough and detailed
evaluation of a small number of packages, than doing a superficial analysis of dozens of packages.
Hence, the company should do a pre-evaluation screening to limit the number of packages that
are to be evaluated by the committee. Not all packages are equal – each has its own strengths and
weakness. The pre-evaluation process should eliminate those packages that are not at all suitable
for the company’s business processes. One can zero in on the few best packages by looking at the
product literature of the vendors, getting help from external consultants and most importantly, by
finding out what package is used by companies which are similar. It is always better to find out
how the different packages are performing in environments similar to yours.

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PACKAGE EVALUATION

The evaluation / section process is one of the most important phases of the ERP
implementation, because the package that you select will decide the success or failure of the
project. Since ERP systems involve huge investments, once a package is purchased, it is not an
easy task to switch to another one. So it is a ‘do it right the first time’ proposition. There is little
room for error.

The most important factor that should be kept in mind when analyzing the different
packages is that none of them are perfect. The idea that there is no perfect package needs to be
understood by everyone in the decision-making team. The objective of the selection process is not
to identify a package that covers each and every requirement (a perfect fit). The objective is to find
a package that is flexible enough to meet the company’s needs, or in other words, a software that
could be customized to obtain a ‘good fit’.

Once the packages to be evaluated are identified, the company needs to develop a selection
criteria that will permit the evaluation of all the available packages on the same scale. To choose
the best system, the company should identify the system that meets the business needs, that
matches the business profile and that which identifies with the business practices of the company.
It is impossible to get a system that will perform, exactly as the company does business, but the
aim should be to get the system that has the least number of differences.

According to S. Shankaranarayanan, Senior Consultant with Baan Infosystems India Pvt.
Ltd. (ERP Systems-Using IT to gain a competitive advantage), some important points to be kept in
mind while evaluating ERP software include:
• Functional fit with the company’s business processes.
• Degree of integration between the various components of the ERP system.
• Flexibility and scalability
• Complexity
• User friendliness
• Quick implementation
• Ability to support multi-site planning and control
• Technology –client/server capabilities, database independence, security
• Availability of regular upgrades
• Amount of customization required
• Local support infrastructure
• Availability of reference sites
• Total costs, including cost of license, training, implementation, maintenance,
customization and hardware requirements.

2. Explain implementation Methodology.

IMPLEMENTATION TEAM TRAINING

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Around the same time that the configuration is taking place, the implementation team is
being trained, not so much how to use the system, but how to implement it. This is the phase
where the company trains its employees to implement and later, run the system. The ERP vendors
and the hired consultants will leave after the implementation is over. But for the company to be
self-sufficient in running the ERP system, it should have a good in-house team that can handle the
various situations. Thus, it is very vital that the company recognizes the importance of this phase
and selects those employees who have the right attitude – people who are willing to change, learn
new things and are not afraid of technology – and good functional knowledge.

TESTING

This is the phase where you try to break the system. You have reached a point where you
are testing real case scenarios. The system is configured and now you must come up with extreme-
case scenarios – system overloads, multiple users logging on at the same time with the same
query, users entering invalid data, hackers trying to access restricted areas and so on. The test
cases must be designed specifically to find the weak links in the system and these bugs should be
fixed before going live.

GOING LIVE

This is it. Lights on, switches thrown, gloves off. On the technical side, the work is almost
complete – data conversion is done, databases are up and running; and on the functional side, the
prototype is fully configured and tested and ready to go operational. The system is officially
proclaimed operational, even though the implementation team must have been testing it and
running it successfully for some time. But once the system is ‘live’ the old system is removed, and
the new system is used for doing business.

END-USER TRAINING

This is the phase where the actual users of the system will be given training on how to use
the system. This phase starts much before the system goes live. The employees who are going to
use the new system are identified. Their current skills are noted and based on the current skill
levels, they are divided into groups. Then each group is given training on the new system. This
training is very important as the success of the ERP system is in the hands of the end-users. So
these training sessions should give the participants an overall view of the system and how
individual actions would affect the entire system. In addition to these general topics, each
employee is trained on the job or task that he/she is supposed to perform once the system goes
live. It is human nature to resist change. Also many people are afraid of computers and other new
technologies. So there will be resistance to change. Another factor is that not all people will be
successful in making the changeover. The company management should address these concerns
and take necessary actions to avoid failure. The end-user training is much more important and
much more difficult (since most end-users are not thrilled at having to change) than the
implementation, team training. Companies are beginning to take this phase seriously, as there is

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statistical evidence now, which shows that most implementations fail because of a lack of end-user
training.

POST- IMPLEMENTATION (MAINTENANCE MODE)

One important factor that should be kept in mind is that the post-implementation phase is
very critical. Once the implementation is over, the vendors and the hired consultants will go. To
reap the full benefits of the ERP system, it is very important that the system should get enterprise-
wide acceptance. There should be enough employees who are trained to handle the problems that
might crop-up. There should be people, within the company, who have the technical prowess to
make the necessary enhancements to the system as and when required. The system must be
upgraded as and when new versions or new technologies are introduced. Here the organization
should think in terms of the incremental benefits of the new enhancements. Because with any
upgradation or enhancements, there will be a lot of other aspects like user training that have to be
considered. So instead of going in for upgradation as and when a new version is announced by
the vendor, the organization should first analyse the costs and benefits.

The post-ERP organization will need a different set of roles and skills than those with less
integrated kinds of systems. At a minimum, everyone who uses these systems needs to be trained
on how they work, how they relate to the business process and how a transaction ripples through
the entire company whenever they press a key. The training will never end; it is an ongoing
process; new people will always be coming in, and new functionality will always be entering the
organization.

Just as courtships and honeymoons are different from marriages, living with ERP systems
will be different from installing them. Projects for implementing the ERP systems get a lot of
resources and attention. However, an organization can only get the maximum value of these
inputs if it successfully adopts and effectively uses the system.

3. Who is an ERP vendors and what are his roles?

VENDORS

have invested huge amounts of time and effort in research and development to create the
packaged solutions. If one studies the history of the ERP packages and finds out how each
package evolved, it soon becomes evident that every ERP package grew out of the experience or
opportunity of a group of people, working in a specific business, who created systems that could
deal with certain business segments. Now with the ERP market place becoming crowded with
more and more players entering the market and the competition becoming hot, today’s ERP
packages have features and functionality to cater to the needs of businesses in almost all sectors.
The ERP vendors spent billions of rupees in research to come up with innovations that make the
packages more efficient, flexible, and easy to implement and use. Also with the evolution of new
technologies, the vendors have to constantly upgrade their product to be able to use the best and

32


latest advancements in technology.

Role of the Vendor

First and foremost, the vendor should supply the product and its documentation as soon as
the contract is signed. Only after the software is delivered, can the company develop the training
and testing environment for the implementation team. The vendor is responsible for fixing any
problems in the software that the implementation team encounters. So the vendor should have a
liaison officer who should constantly interact with the implementation team.

Another role the vendor has to play is that of the trainer-to provide the initial training for
the company’s key users, people who will play lead roles in the implementation of the system.
These key users are the ones who will define, together with the consultants, how the software is to
serve the company. In other words, it is these in-house functional experts who will decide how the
functionalities are to be implemented, as well as how to use or adapt the product to suit the
company’s unique requirements. So it is very critical that these key users are given a thorough
training on the features of the package. Vendor’s training should achieve the goal of showing the
key users how the package works, what are the major components, how the data and information
flows across the system, what is flexible and what is not, what can be configured and what cannot,
what can be customized and what should not, what are the limitations, what are the strengths and
weaknesses and so on.

Now some of you might ask: we are hiring consultants who are experts in the package so
why can’t we get training from the consultants? This is true. Most of the consultants are capable of
providing sound training for the packages. But we are hiring the consultants for implementing the
system. The objective of the vendor training is to show how the system works, not to show how it
should be implemented. This means that the vendor demonstrates the product as it exists and
highlights what are the possible options available. The company’s employees who are
participating in the vendor training should try to understand the characteristics of the package
and the impact of the system on their business processes. The trainees should use these training
sessions to question the vendor on all aspects of the system.

The consultants also have a role to play during this vendor training. They should
participate in the training sessions to evaluate how the users react to the reality that is starting to
take shape from the detailed presentations and demos. Consultants should also ask questions that
the vendors are trying to avoid and the users are unaware of. This is the best way to present the
real picture to the users and it will also prevent the vendors from making false claims.

The role of the package vendor does not end with the training. The vendor also plays an
important project support function and must exercise the quality control with respect to how the
product is implemented. It is the vendor who understands the finer details and subtleties of the
product and can make valuable suggestions and improvements that could improve the
performance of the system. It is also in the best interests of the vendor that this participation
continues, because if the implementation fails, most of the blame will fall on the vendor. Also a

33


successful implementation means another satisfied client, improved goodwill and good referrals
and so on. So the vendor will continue to participate in all the phases of the implementation,
mostly in an advisory capacity, addressing specific technical questions about the product and
technology.

The vendor has other responsibilities also. There will be ‘gaps’ between the package and
the actual business processes. The software might have to be customized to suit the company’s
needs. Customizing means altering the product so that it is suited for the company’s purposes.
The choice of whether to customize or not is the one that can have enormous impact on the project
and it often constitutes a point of conflict between the consultants and users. But if the decision to
customize has been taken, it is the vendor’s duty to carry out the necessary modifications. This is
because only the vendor knows the product well enough to make the necessary changes without
affecting the other parts. Moreover, the company should get a guarantee (in writing) from the
vendor that despite the customization, it will be able to benefit from the future software
improvements introduced by the vendor.

4. Who are consultants and what are their roles?

CONSULTANTS

Business consultants are professional who specialize in developing techniques and
methodologies for dealing with the implementation and with the various problems that will crop
up during the implementation. They are experts in the administration, management and control of
these types of projects. Each of them will have many man-ears of implementation experience with
various industries and would have time-tested methodologies and business practices that will
ensure successful implementation. They will be good at all phases of the implementation lifecycle,
right from package evaluation to end-user training. The only problem with them is that they are
expensive-very expensive. Many of the big consulting firms, having forecasted the ERP boom,
invested a great deal of money in developing a range of consulting services in this field and
assigned many of their professionals to become specialists in the various aspects of ERP-packages
and their implementation. These firms researched the various products, developed an in depth
understanding of each product’s strengths and weaknesses, worked by the side of the ERP
vendors, confirmed that the vendor’s package worked and learned the tricks and techniques of the
trade, found out the pitfalls and mistakes that should be avoided and thus created a pool of
experts who could handle the ERP implementation without failure.

Thus, consultants are people who have made the business of ERP implementation their
business and have invested huge amount, of money and manpower for that purpose. So when
you want to get the services of these consultants, the first question that will be asked is –“Are they
going to be expensive?” The answer is a definite YES. The consultants will be expensive, so the
company will have to formulate a plan regarding best optimum utilization of the money spent on
consultants. If we study the statistics, we can see that a well-selected, integrated system that was
successfully implemented and which is successfully working usually pays for itself in a relatively
short period – between 10 and 30 months. If you analyze the cost break-up, you will find that the

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most expensive part of the implementation was the consultation charges. For a typical ERP
implementation, the cost of consultants is 1.5 to 3 times for every rupee invested in the software
product. Sounds amazing; but it is true and it is also true that the software will pay for itself-the
software cost, the consultant’s charges and other expenses incurred during implementation – in
the above mentioned period (10-30 months). But the catch is that the product has to be the right
one and the implementation has to be successful. That is why the expertise of the consultants
becomes invaluable and the money spent on good consultation is never wasted. So finding the
right consultants – people who have the necessary know-how, who will work well with the
company personnel, people who will transfer their knowledge to the company’s employees and
people who are available in case their services are required again – is very important.

Role of Consultants

The role of the consultants is very familiar to all of us because we have seen many of them
in action. The company places its trust in the consultants, that its business objectives will be
achieved. In fact, it is a better practice that the contract between the company and the consultants
should have all the performance clauses in place. The consultants should guarantee the success of
the project and should be able to show the results (quantifiable results like reduction in cycle time,
increased response time, improved productivity and so on) to the satisfaction of the company
management.

Consultants are responsible for administering each of the phases of the implementation, so
that the required activities occur at the scheduled time and at the desired level of quality and with
effective participation of all those who must participate. For keeping the promises that the
consultants have made during the negotiations, they have to transform their approaches and
methodologies into detailed work plans. The methodology will have to be converted into tasks
and should be allocated to the right people. The time schedule for each phase and each task has to
be determined and the project plan has to be finalized.

Consultants should add value to the project. They bring the know-how about the package
and about the implementation-the know-how that is not included in the standard documentation.
This know-how (also know as practical knowledge) is derived from their expertise which stems
from practical experience. Because the consultants have seen many projects and have made or
seen many mistakes, they can avoid the phenomenon of ‘reinventing the wheel’. They will know
what will work and what will not. Thus by eliminating the trial-and-error method of
implementation, and by doing it right the first time, the consultants help in saving huge amounts
of money, time and effort .

Consultants should also know how to remain impartial while questioning current company
processes in an effort to promote better businesses practices and better implementation results.
They should strive to improve the company’s business processes so that the software package can
be used as it was originally intended by its developers. Refining the company’s processes can only
optimize the performance of the system and maximize future user satisfaction. The consultants are
also responsible for analyzing and clearly addressing the customization issues. They must be able

35


to distinguish between the ‘must have’ and ‘nice to have’ items and decide on the level of
customization. This is an area where the consultants have to use their diplomatic skills, as the
company people might want to customize all the aspects. It is the duty of the consultants to
present the advantages and drawbacks of each area and reach a consensus decision, which should
also be the right one. Consultants need to position themselves in such a way as to balance their
loyalty to the client and the project, with that of defending the package vendor, when such
defense is technically correct. This is indeed a very difficult job (like a tight-rope walk) and that is
why consultants are being paid such huge amounts for their services.

It is the duty of the consultant to understand the total context and scope of the envisioned
work and to know when to alert the company management about actions and decisions that must
be undertaken so that the job will not be compromised and the implementation will not be
jeopardized. Maintaining technical documentation on the project also falls within the duty of the
consultant. The consultants will leave once the project is complete, but the knowledge of the
project must stay within the organization. So the consultants should create a knowledge base and
should train enough people so that the work they have started is continued.

5. Explain End users in detail.

End-Users:

End users are the people who will be using the ERP system once it is in place. These are the
people who were doing the functions that are being automated or computerized by the ERP
system. With the implementation of the ERP system, the old job descriptions will change, the
nature of the job will undergo drastic transformation. It is human nature to resist change. When
we are talking about implementing an ERP system we are talking about change in a very massive
scale. Employees, will fear that system will replace existing jobs, as many functions will be
automated. Also people will be afraid of the amount of training they have to undergo and
learning they have to do to use the new system. Job profiles will change, job responsibilities will
undergo drastic alterations, and people will be forced to develop new skill sets. If these fears are
not addressed and alleviated well in advance, it will cause trouble for the organization.

It should be worth noting the fact, that while the ERP systems eliminate many existing jobs,
it creates many new ones-ones with more responsibilities and value addition. It is easy to see that
the automation of the business processes, through technology, can eliminate the jobs of many
employees whose function it is to record, control, calculate, analyze, file or prepare reports. But it
must be pointed out to the employees that the same automation creates many more opportunities
for them, because they can get away from the monotonous clerical work and transform themselves
into highly valued individuals, in a new and challenging working environment using modern
technology. If the company can succeed in making its employees accept this fact and assist in
making the transformation (by giving them training), then the major (and most critical) obstacle in
the path of an ERP implementation is solved.

UNIT – III

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PART – A

1. What are the modules available in ERP Package?

♦ Finance
♦ Manufacturing and Production Planning
♦ Sales and Distribution
♦ Plant Maintenance,
♦ Quality Management
♦ Materials Management, etc.

2. What is financial data?

The entire concept of information technology is based on the premise that providing the
right information, to the right people, at the right time can make a critical difference to the
organization. Much of this key information could be taken from the financial data. But merely
having the financial data is not enough. You need a set of processes and views of your data that
provides up-to-the-minute financial information in exactly the form you need it to make that
critical difference and help with that crucial decision. Accounting software needs access to
information in each area of your organization, from R & D and market research through
manufacturing, distribution and sales. Your financial solution must provide the management
with information that can be leveraged for strategic decisions, in order to achieve competitive
advantage.

3. Define financial module in ERP module.

The finance modules of most ERP systems provide financial functionality and analysis
support to thousands of businesses in many countries across the globe. These ERP systems
include not only financial application components, but also Human Resources, Logistics, Business
Workflow and links to the Internet. Hundreds of business processes are covered in these systems.

4. Write the types of subsystem in financial module.

 Financial Accounting (General Ledger, Accounts Receivable / Payable, Special
Ledgers, Fixed Asset Accounting, Legal Consolidation)
 Investment Management (Investment Planning/Budgeting/ controlling,
Depreciation Forecast/ Simulation/ Calculation)
 Controlling (Overhead Cost Controlling, Activity-Based Costing, product Cost
Accounting, Profitability Analysis)
 Treasury (Cash Management, Treasury Management, Market Risk Management,
Funds Management).
 Enterprise Controlling (Executive Information System, Business Planning and
Budgeting, Profit Centre Accounting).

37


5. Describe financial accounting.

The objective of a good financial accounting system is to provide company wide control
and integration of financial Accounting Module of an ERP system, gives you the ability to
centrally track financial accounting data within an international framework of multiple
companies, languages, currencies, and charts of accounts. For example, when raw materials move
from inventory into manufacturing, the system reduces quantity values in inventory and
simultaneously, subtracts values for inventory accounts in the balance sheet. Most of the Financial
Accounting modules comply with international accounting standards, such as GAAP and IAS.
They also fulfill the local legal requirements of many countries.

6. Define Investment Management.

Investment Management provides extensive support for investment processes right from
planning through settlement. Investment management facilitates investment planning and
budgeting at a level higher than that needed for specific orders or projects.

7. Define Controlling.

The controlling system gathers the functions required for effective internal cost accounting.
It offers a versatile information system, with standard reports and analysis paths for the most
common questions. In addition, there are features for creating custom reports to supplement
standard reports.

8. Define Treasury.

You can gain a significant competitive advantage by efficiently managing the short,
medium, and long – term payment flows and the resulting risk exposure. Tasks such as short –
term monitoring and concentration of bank account balances, medium – term planning, and
forecasting of incoming and outgoing resources in accounts receivable and payable, to a long –
term view of areas such as materials management and sales, underline the importance of inter-
grating information from various company divisions. Linking these operating divisions to
realised and planned financial transactions and positions in treasury, has a significant impact on
the company’s success. Such integration also facilities management and control of cash flows, and
risk positions through all the divisions in the company. The treasury component provides you
with a basis for effective liquidity, portfolio and risk management.

9. Define Enterprise Controlling.

Enterprise controlling comprises of those functions that will optimise share holder value,
while meeting internal objectives for growth and investment. This module usually include
executive information system, business planning and Budgeting, Consolidation, and Profit Centre
Accounting.

38

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