ERP (Enterprise Resource Planning) is a type of software system that helps organizations manage

and integrate core business processes.

It centralizes data from different departments, enabling better decision-making, improved efficiency,
and streamlined operations.

An organization must deal with all stakeholders such as employees, stakeholders, and the environment
to sustain and grow.
Business processes are prioritized based on strategies that provide faster and higher returns on
investment (ROI).

Key Features of ERP Systems:

1. Integration: Combines various business processes like finance, HR, supply chain,
and customer relationship management (CRM).
2. Automation: Reduces manual tasks through automated workflows.
3. Data Management: Ensures consistent and accurate data across the organization.
4. Reporting and Analytics: Provides real-time reports and insights for informed
decisions.
5. Customization: Can be tailored to meet specific business needs.

Common Modules in ERP:

• Finance and Accounting: Manages budgets, payroll, and financial reporting.

• Human Resources (HR): Oversees recruitment, payroll, and employee management.
• Supply Chain Management: Tracks Procurement(Obtaining), inventory, and
distribution.
• Customer Relationship Management (CRM): Manages customer interactions and
sales.
Evolution of ERP

1. Pre-ERP Era (Before 1960s)

• Before the concept of ERP, businesses used disconnected, manual systems for
managing various functions like accounting, inventory, and human resources. These
were often paper-based and time-consuming.

2. Materials Requirements Planning (MRP) (1960s–1970s)

• MRP emerged to streamline the manufacturing process, focusing on inventory control

and production planning.
• It helped businesses calculate the materials required for production based on
forecasted demand, aiming to reduce inventory costs and avoid production delays.
• Early systems were often standalone and used mainframe computers, which were
expensive and required specialized operators.

Problems faced by organizations:

• Stock-out situation
• Quality issues
• Excess inventory

MRP-I helps tackle these challenges by answering three critical questions:

• What items are required?
• What is the required quantity of each item?
• When will these items be available?

Objectives of MRP-I:
• Ensure required input materials are available for production.
• Ensure finished products are made from input materials and delivered to customers.
• Maintain an optimal level of inventory.
• Schedule manufacturing activities to meet customer delivery schedules.
• Schedule purchasing activities to align with manufacturing requirements.
Problems with MRP-I (Material Requirements Planning - I)
• Lead Time Inaccuracies
• Challenges with Multi-location Factories
• Inability to Handle Customization and Dynamic Changes
• Lack of Capacity Management
3. Manufacturing Resource Planning (MRP II) (1980s)

• MRP II expanded on MRP by integrating other aspects of the manufacturing process,

including capacity planning, scheduling, and shop-floor management.
• MRP-II covered manufacturing, scheduling, operational planning, financial planning,
and distribution management.
• It was more comprehensive, encompassing the entire manufacturing process, from
raw materials to finished goods.
• MRP II systems also allowed for more accurate forecasting and resource optimization,
helping businesses better plan production and meet customer demand.

Problems with MRP-II (Manufacturing Resource Planning - II)

• Limitations in Specialized Industries:
o Pharmaceutical Industry:
▪ In pharmaceuticals, chemicals need to be stored under specific conditions
(e.g., temperature and humidity) for a certain period of time. MRP-II was not
designed to handle these specialized storage and regulatory requirements.
o Food Industry:
▪ Food products have a limited shelf life, and MRP-II was not tailored to
manage perishable goods or address their time-sensitive nature.
• Less Complex Industries:
o Handicraft and Tableware Industries:
▪ These industries have simpler production processes and lower wages, which
means they do not require the complex planning and resource management
systems offered by MRP-II.
▪ MRP-II's advanced features were not needed in these less complex
environments.
 • Challenges in Knowledge-Based Industries:
o Knowledge Industries (e.g., IT, consulting, and creative industries):
▪ These industries rely on intellectual skills rather than capital or
manufacturing processes. MRP-II's focus on material and resource planning
was not relevant.
▪ Support functions such as HR, finance, and administration play a more
significant role in knowledge industries, and the complex planning of MRP-II
is not suited for managing intellectual or service-based work.
▪ Employee motivation, benefits, and organizational culture become more
important in these industries than the operational efficiencies MRP-II is
designed to optimize.

4. ERP Emergence (1990s)

• In the early 1990s, ERP systems began to emerge, combining various business
functions (such as finance, HR, sales, Procurement(OBTAINING), and customer
service) into a single integrated system.
• SAP(Systems, Applications, and Products ) was one of the first companies to offer
a complete ERP system.
• ERP systems were modular, allowing businesses to select and integrate the modules
relevant to their operations.
• The focus shifted to integrating all aspects of a business to enable seamless data
sharing, process automation, and real-time reporting.

5. Post-ERP Expansion and Customization (2000s)

• In the 2000s, ERP systems continued to evolve to meet the growing needs of
businesses. The key developments during this period included:
o Customization: Companies sought tailored ERP solutions to address their
specific business processes.
o Enterprise-wide integration: ERP systems continued to integrate not only
core functions but also other business areas like customer relationship
management (CRM), supply chain management (SCM), and business
intelligence (BI).
o Web-Based ERP: ERP systems began moving to web-based platforms,
allowing for easier access and collaboration across multiple locations.
6. Cloud-Based ERP (2010s)

• Cloud-based ERP became more prevalent in the 2010s, allowing businesses to reduce
infrastructure costs and improve scalability.
• The software-as-a-service (SaaS) model gained traction, making ERP systems more
accessible to smaller businesses that couldn't afford on-premise solutions.
• Cloud ERP offered flexibility, lower upfront costs, automatic updates, and the ability
to access systems from anywhere.

7. AI, Machine Learning, and Advanced Analytics (2020s and Beyond)

• The next phase of ERP systems incorporates artificial intelligence (AI), machine
learning (ML), data analytics, and Internet of Things (IoT) integration to improve
decision-making, predictive analytics, and automation.
• AI and ML are helping businesses predict demand, optimize supply chains, automate
tasks, and improve user experience through intelligent chatbots and virtual assistants.
• Integration with other business technologies: Modern ERPs integrate with various
other business tools, such as e-commerce platforms, social media, and mobile
applications, creating a unified digital ecosystem.
Need for ERP (Enterprise Resource Planning)
In the early 1990s, organizations, including those in the manufacturing sector, recognized the need for
a more comprehensive system to enhance productivity and gain a competitive advantage. This shift
led to the development of ERP systems. Key factors that highlighted the need for ERP include:

1. Effective Utilization of Resources:

o Organizations aimed to develop competitive advantage by utilizing resources
effectively, not just in the production department but across support departments as
well.
o It became clear that achieving corporate objectives required optimizing resources
throughout the entire organization, including both core and support functions.
2. Addressing Internal Customers:
o The concept of an internal customer was introduced, emphasizing the importance of
seamless information flow between departments.
o This internal customer approach recognized that business processes must serve both
external customers (end consumers) and internal departments, ensuring that internal
functions work together efficiently.
3. Coexistence of Departments:
o For an organization to achieve sustainable growth and development, all departments
need to operate at the same level of efficiency and productivity.
o Gaps between departments must be addressed to ensure smooth operations across the
entire organization, and consistent efficiency needs to be maintained.
4. Seamless Information Flow:
o A key requirement for maintaining efficiency is the seamless flow of information
throughout the organization.
o This information flow needs to be accurate and consistent, helping management make
fast and effective decisions.
5. Need for Comprehensive Applications:
o To meet the demands of efficient resource utilization and seamless information flow,
organizations needed applications that could integrate all these functions while
fulfilling the capabilities of MRP-II.
o At the enterprise level, such applications would support quick decision-making and
strategic planning, driving overall business success.
Overview of ERP (Enterprise Resource Planning)
ERP is a comprehensive system designed to integrate and streamline business processes across
different departments within an organization. Key features and concepts of ERP include:
1. Integration of Business Processes:
o ERP integrates the business processes of various departmental functions into a unified
system.
o It uses a combination of software and hardware components to manage different
business processes, ensuring that each department operates in sync.
2. Modular Structure:
o The business processes are organized into different models, and each ERP
component is designed to handle an individual model.
o All the modules are eventually integrated to provide the organization with a unified
view of operations, allowing for better coordination and decision-making.
3. Unified Database:
o A key feature of ERP is the use of a single, unified database that serves as the
backbone for the system, providing consistent and accurate data across all
departments.
4. Stakeholder Benefits:
o Stakeholders across the organization benefit from the integration provided by ERP, as
it ensures accurate, real-time data and better decision-making.
5. Customization and Integration:
o Organizations with sufficient IT skills may opt to implement some ERP modules
while integrating them with other stand-alone modules, especially if the stand-alone
modules are providing satisfactory results.
o For example, a company may implement modules like PeopleSoft’s HRMS and
financial systems while integrating them with a separate project management tool.
o Similarly, a company might prefer SAP’s manufacturing and CRM tools over others and
integrate these from different vendors to meet specific business needs.
6. Vendor Integration:
o ERP allows for the integration of different modules from various vendors,
enabling the organization to tailor its ERP system to best fit its needs, even if modules
come from different sources.
Modules of ERP :
There will be different modules such as: finance asset management; materials management;
production management; project management; quality management; maintenance
management, sales and distribution; HR management; CRM, etc.

Components of the Material Management (MM) Module in ERP

The Material Management (MM) module in ERP is designed to streamline
Procurement(oBTAINING) and inventory activities, ensuring smooth operations through the
automation and management of these processes.
Cycle Process of Procurement(oBTAINING)
• While the specific details of the cycle process (Figure 1.6) are not provided here, the
Procurement(oBTAINING) cycle typically involves several steps:
1. Purchase requisition (triggered by a need for materials).
2. Vendor selection and creation of purchase orders.
3. Goods receipt and inspection.
4. Invoice verification and payment processing.
5. Inventory management and stock updates.
ERP Life Cycle :
This passage describes the typical life cycle stages of an ERP (Enterprise Resource Planning)
project implementation. Here's a breakdown of the stages:

1. Project Initiation and Scoping:

o The customer decides to implement an ERP system for specific business
benefits.
o The scope of implementation is determined by selecting critical business
processes and defining the ‘to be’ process, representing the desired future
state.
o The current processes (‘as is’) are documented, and the difference between the
two (GAP) helps estimate project costs.
2. Requirement Gathering and Validation:
o Vendors gather and validate requirements from end users and subject matter
experts based on the ‘to be’ process.
o ERP solutions are selected to meet the defined business benefits.
3. Technical Planning and Customization:
o Detailed planning includes database migration, implementation roadmaps, and
customization to align the ERP system with business processes.
o End-user training is conducted to ensure smooth adoption.
4. Testing and Feedback:
o End users test the system to detect and resolve bugs.
o Feedback is used to fine-tune the solution.
5. Go-Live:
o After successful implementation and data migration, the ERP system is
declared ‘live.’

Benefits of Automation Through ERP

Collaboration Approach
Cross Functional Barrier is Broken
Integration of Island of Automation