All about Enterprise Resource Planning
By CXOtoday Staff
Mumbai, Apr 15, 2008

What is ERP?

Enterprise Resource Planning (ERP) tries to integrate all departments and functions across an organization onto a single computer system, which serves all different departments' specific needs. In other words, ERP is a set of software programs that integrate an organization s various business processes like human resource, marketing, finance, sales, manufacturing, logistics, operations etc. This also enables a comprehensive analysis of the data to plan production, predict sales and analyze quality matrix. The term, however, is most commonly perceived as commercial software system.

ERP encompasses organization' s business processes to drive system requirements and capabilities. It supports and facilitates the organization's transformation with the help of best practice deployment. Best practice transformation of companies can be achieved by deploying a Continuous Process Improvement (CPI) approach. CPI strategically develops a culture of continuous development in areas like quality, consumption and productivity. While reducing waste and cycle time, it augments productivity and quality standard.

India and ERP

Industry analyst ARC Advisory states that the ERP market was $83 million in 2004, and is forecast to be over $250 million in 2009. According to a study from International Data Corporation (IDC), in the next four years the ERP market is expected to touch Rs. 1,550 crore ($341 million). It states, SMB potential in India is expected to be Rs 728 crore ($160 million), which stands at 47% of the total market. ARC Advisory estimates that Indian ERP will be growing at a Compound Annual Growth Rate (CAGR) of 25.2% for over the next 5 years.

Access Market International's (AMI) India Small Business Market Overview and Comprehensive Market Opportunity Assessment (2006-2007) and India Medium Business Market Overview and Comprehensive Market Opportunity Assessment studies (2006-2007)highlight 5 factors that determine the purchasing decision of Indian SMBs. They are: (a) purchase and installation price, (b) ease of implementation and ROI, (c) product flexibility and scalability, (d) functional fit with the SMB's business process, and (e)long-term support.

Advantages of ERP

*Elimination of manual re-entry of data
*Minimal Paperwork
*Modular and open in nature
*Improved work process
*Increased access to available data for decision making
*Tracking of the product, consignment on move
*Timely and accurate information
*Improved coordination between departments and functions
*Increased customer response time
*Quick response to changing business operations and market conditions resulting in improved competitive advantage
*Integrated address book for customers, vendors and employees


ERP vendors

* SAP: To achieve excellence and innovation in business processes, SAP ERP is considered ideal bet for the small, midsize and large organizations across all industries and sectors.

* Oracle Applications: ERP services from Oracle on different business verticals (like financials, manufacturing, HR, CRM etc.) are set of application software products specific to the concerned area.

* PeopleSoft: Oracle acquired PeopleSoft in June 2005. Oracle's PeopleSoft Enterprise applications address complex business issues and help them perk up performance.

* JD Edwards: JD Edwards was bought by PeopleSoft in 2003, and later merged with Oracle. Flexible and scalable, JD Edwards EnterpriseOne is an integrated applications suite of dynamic ERP software that combines business value, standards-based technology, and deep industry experience into a business solution.

* The Sage Group: The group has The Sage Accpac (Enterprise Resource Planning) ERP solution for India, an accounting operating system for SMBs.

* Microsoft Dynamics: Broadly designed for midsized and large companies, 4 Microsoft Dynamics products for business management and ERP are: (a) Microsoft Dynamics AX, (b) Microsoft Dynamics GP, (c) Microsoft Dynamics (New) and (d) Microsoft Dynamics SL.

* SSA Global Technologies (now Infor Global Solutions):Renowned for ERP solutions for manufacturing industry, the company was acquired by Infor Global Solutions in 2006. The solutions are built on an open, flexible, service-oriented architecture (SOA) with modern, web-based user interfaces. In 2003, SSA Global technologies bought Baan Corporation for US$ 135 million.

* Baan: Baan was created in 1979, and over the years became real market threat to SAP. After being acquired and re-acquired a couple of times, now, Baan belongs to Infor Global Solutions. Infor ERP Baan is an advanced ERP solution that supports the critical manufacturing requirements of industrial equipment and machinery, commercial aerospace, component producers, high-tech electronics, shipbuilding and other companies.


* IBM: ERP solutions from IBM deliver a roadmap, based on the best industry processes,integrating critical data for a single view of customer information,inventory levels, shipping details and more.

* abas Software: abas ERP/abas Trade is a flexible standard ERP software application,which optimizes business processes - from warehouse management,financial accounting, purchasing and sales to production.

* Ramco Systems: Ramco's ERP solution for SMB series is service oriented Architecture (SOA) based and built by using business assets, rather than individual software modules. It can be migrated later to a bigger platform.It also has on-demand ERP solutions for fast growing businesses.

Open source ERP

Open source software application is always good, as it can realize any small organization's ERP dream possible without much investment. Generally, for non-proprietary technologies no license fees have to be paid. Also, organizations can implement only need-based solutions instead of going broad. However, before you decide to implement an open source ERP, please take note of the fact that, during critical circumstances and breakdown moments, you won't be serviced by a battery of qualified and experienced engineers.

Let's take a look at some open source ERP software:

* ADempiere: ADempiere is a commons-based peer-production of Open Source ERP Applications.

* Compiere: The application and source code is provided on the basis of the GNU General Public License version 2. A commercial license, documentation and support contracts are available for a fee.

* ERP5: ERP5 is a complete high-end Open Source/Libre Software solution delivered under GPL license, and used for mission critical ERP / CRM / MRP / SCM / PDM applications by industrial organizations and government agencies.

* GNU Enterprise: GNU Enterprise (GNUe) is a meta-project and can be regarded as a sub-project of the GNU Project. GNU's goal is to create free enterprise-class data-aware applications.

* JFire: JFire is open-source software. It uses the technologies like J2EE 1.4, JDO 2.0, Eclipse RCP 3.3 and is designed to be customizable.

* LedgerSMB: It is a free double entry software accounting system. Accounting data is stored in an SQL Database Server and a standard web browser can be used as its user interface.

* OpenBlueLab: An open source ERP published as per the model-driven software development (MDSD) paradigm. It is derived from model driven architecture (MDA).

* Openbravo: It's an open source web-based ERP business solution for small and medium sized companies. It is released under the Openbravo Public License, based on the Mozilla Public License.

* Opentaps: It's is a web based ERP and CRM for small to medium sized businesses. It's functions include eCommerce, Point-of-Sales, inventory, warehouse, order, customer management and general ledger.

* Postbooks: PostBooks is a full-featured, well-integrated accounting, ERP, and CRM system. It's based on the OpenMFG ERP Suite.

* Tiny ERP: It's an ERP/CRM system with separate client and server components.

* SQL-Ledger: SQL-Ledger ERP is a double entry accounting/ERP system.

* webERP: webERP is a multi-inventory location, multi-language, multi-currency web based accounting/ERP software.

Industry practice

For different industries ERP deliver different operations and applications. Each industry is dynamically unique in its own way, and deals with enterprise applications services with its share of drawbacks and advantages.

Industries mostly benefited from deployment of ERP are:

* Manufacturing:

One of the maximum IT deployments in the manufacturing industry has happened in the enterprise applications. Over last few years, ERP has successfully augmented the efficiency, and quality of manufacturing processes across the world. ERP solutions broadly have eliminated or minimized issues like improper communication, wrong or lack of communication. ERP solutions while coordinating the actions of supply chain, logistics and warehousing deliver robust solutions to these issues.

Industries in manufacturing:

1.Aerospace and Defense: Not SAP, but Oracle is the leader in this space. Top 11 global aerospace and defense organizations run Oracle's integrated enterprise solutions.

2.Automobile: Greater control over automotive sales and distribution, warranty claims, spare parts, accessory stock and supply, productivity of staff, while delivering all these and more, ERP solutions improve efficiency, speed-to-market and product quality for the automobile companies.

3.Chemical: From managing chemical formulas to manufacturing and shipping out the order in accordance with regulatory requirements, ERP solutions enable chemical manufacturers efficiently manage record formulation, customer, quality matrix, production and financial reporting.

4.Consumer Goods: From improving electronic collaboration with distributors and customers to manage product promotions and complex pricing, ERP solutions help FMCG businesses optimize the use of existing assets.

5.Oil & Gas: SAP has select set of ERP functions for this industry enabling the core business processes are most critical to its success. The software provides a solid software foundation and enables a modular approach to deploying additional functions as needed.

6.Electronics: ERP model for this rapidly growing industry can control product design changes, improve collaboration, communication and integration with the supply chain, plan for and manage seasonal demand, monitor safety compliance for hazardous goods disposal etc.

7.Biotechnology/Life Science: Biotech companies deploy heavy duty ERP for better operational efficiencies, procurement procedure, transaction management, full tracking of all scientific processes, real time revenue forecasts and more. It also should speed up regulatory approval process as success in this sector often requires an enormous amount of up-front investment.

8.Food & Beverage: ERP system complies with food safety regulations, manage capacity and different units of measure for al levels of product recipes, ensure quality and traceability of raw materials and manufactured products and more.

9.Plastics: For companies in the plastics industry, ERP provides capabilities that accommodate variable ingredients, recipes and routings, manage volume constrained resources, track lots, batches and work in progress, reduce costs of everyday small production runs and more.

* Logistics and Supply Chain

From purchasing to pay roll, ERP can successfully manage end-to-end procurement and logistics business processes, for complete business cycles. From self-service requisition to custom invoicing and ensuring payment while maximizing the flow of materials all are possible through ERP. There are applications that deliver inventory management, material movement and processing, accounting support capabilities, production outflow etc. ERP also helps in tracking down the status of a product on the move. Consumers can check the status of the product on the web. In a nutshell, for logistics and supply chain ERP can manage processes from purchasing to pay roll.

* Software

After manufacturing and logistics, it's software industry that reaps most benefits of leveraging ERP. As far as implementation is concerned, compared to other industries, spoilage is less here. It s easier to deploy and run the application, as people are apt with functional and technical expertise. ERP's usage in the software industry has reached a new high in the recent years, because with the software it becomes easy to manage the deadline. ERP software also have been used to coordinate and execute turnkey software projects, at quicker turn around time.

* Insurance

Enterprise Resource Planning broadly covers 3 core areas. Firstly, it creates a common platform for insurers and agents, thus making the transaction process easy between both the agents and the insurers. Secondly, it curbs down the procedural delays. Other than analyzing different matrix of the market it also helps in checking out performance of agents, as every product moved by the agent gets placed on the central database. IBM ERP insurance is an ideal example here.

* Healthcare

Like Insurance, Healthcare is another hot industry with immense scopes. ERP implementation has made segregating bills and patient records much easier. Database of patient records are kept in a common reservoir, which can be shared by hospitals. A critical patient's records can instantly be checked by a doctor and lives can be saved without much ado.

* Retail

Small retail companies deploy ERP software broadly for inventory management and demand forecasting functions, which capture and report POS (Point-of-Sale) data in number of combinations. For bigger players, more advanced integrated ERP applications play an important role in managing every facet of retail operations, from POS solutions, inventory reporting, cashier with integrated accounting billing, product database to back-end inventory management and financials.

* Pharmaceuticals

Pharmaceutical is a highly regulated industry, and from time to time receives instructions on how to process and control products. ERP solutions while refining the compliance factors increase the effectiveness, improve efficiency of organization's process and streamlines internal operations. The solution broadly tracks lot numbers based on criteria such as machine, manufacturing date, sequence, prefix, class, repackaging, renumbering etc.

* Telecommunication

ERP solutions for telecommunication industries deliver capabilities that support and enhance processes associated with producing and delivering telecommunication products and services. On the basis of requirements, ERP can deliver solutions on contract accounting (receivables and collection capabilities), collections management (handling receivables and prioritizing accounts by risk), dispute management (processing receivable related disputes), partner and vendor management (managing relationships with partners and dealers), regulatory compliance and corporate governance (centralizing documentation of internal controls to help manage compliance) and, data and application integration (for changing business processes and strategies flexibly and quickly). SAP offers plethora of ERP solutions for telecommunication businesses.


ERP implementation

*On-demand model
1.SAP Business ByDesign
2.NetSuite
3.Ramco OnDemand ERP

*Traditional Model
1.Implementation Tool Kits (with roadmaps and documentation)
2.Packaged, produced services (fixed price, time and scope)
3.Pre-configured systems (tools, documentation, methodology)

ERP functions

Functions derived from an ERP project can be direct or indirect. Indirect functions are difficult to value, while it is easy to measure direct benefits. From delivering role-based access to crucial data, applications, and analytical tools, a robust ERP can redefine enterprise resource planning for an organization.

1.End user service delivery: Employees get access to critical data and analytical tools to perform everyday functions effectively. Through shared services they can also bring value to other inter-departmental processes.

2.Financial insight: Compliance and predictability of business performance can be attained from a right ERP solution. It not only tightens control of finances, but also gives a deeper financial insight across the organization.

3.Human capital management: It optimizes organization s HR processes. While enabling growth, innovation and elasticity, it can maximize the potential of complete workforce.

4.Performance management: While delivering real time metrics and personalized measurements, an ERP leverages the entire life cycle of performance management.

5.Purchase: Dealing with critical multi-sourcing purchase orders to scheduling, suggestions about stock level etc. are provided by an ERP model.

6.Customer relationship management: Broadly, the CRM module in an average ERP software system gives a hand in generating leads, customer support, and order placement.

7.Sales: Subset of CRM, the ERP software can help trend forecasting, sales development, sales territory management, performance tracking and customer segmentation.

8.Materials management: Protecting cost effective provisioning of the organization.

9.Scheduling: ERP enables adequate material and production capacity to process orders on time.

10.Costing: Product and order related costing for the strict valuation of the operating result.

11.Compliance: Comply with local and international environmental and safety regulations.

12.Manage: Manage large inventories, material yields, distribution, raw material quality, by-products, seasonal demand etc.


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