Enterprise Resource Planning LRIp5AaDcO PDF

Enterprise Resource Planning
S
IM
M
N
ENTERPRISE RESOURCE PLANNING
S
IM
M
N
COURSE DESIGN COMMITTEE
Chief Academic Officer

Dr. Sanjeev Chaturvedi
NMIMS Global Access – School for Continuing Education
TOC Reviewer Content Reviewer

Ms. Brinda Sampat Ms. Brinda Sampat
Assistant Professor, NMIMS Global Assistant Professor, NMIMS Global
Access - School for Continuing Education Access - School for Continuing Education
Specialization: Information Technology Specialization: Information Technology
S
IM
M
Author : Dr. Dharm Bir Singh

Reviewed By: Ms. Brinda Sampat
N
Copyright:
2015 Publisher
ISBN:
978-93-5119-801-7
Address:
4435/7, Ansari Road, Daryaganj, New Delhi–110002
Only for
NMIMS Global Access - School for Continuing Education School Address
V. L. Mehta Road, Vile Parle (W), Mumbai – 400 056, India.
NMIMS Global Access - School for Continuing Education

C O N T E N T S
CHAPTER NO. CHAPTER NAME PAGE NO.
1 Introduction to Enterprise Resource Planning 01
2 An Overview of Enterprises 15
3 ERP and Related Technologies 29
S
4 Systems, Applications and Products (SAP)
IM 47
5 ERP Modules 73
6 ERP In Manufacturing 95
7 ERP in Purchase and Sales 119

M
8 ERP in Inventory Management 133

N
9 ERP Implementation 145
10 ERP Vendors, Consultants and Users 159
11 ERP Market 173
12 Exploring ERP II 207
13 Future Directions in ERP 223
14 Case Studies 237

ENTER P R I SE R E S O U R CE PLA N N I N G
C U R R I C U L U M
Introduction to Enterprise Resource Planning: Introduction to Enterprise Resource Planning

(ERP), Reasons for Growth of ERP, Scenario and Justification of ERP in India, Evolution of ERP,
What is ERP?, Evaluation of ERP, Various Modules of ERP, Advantages of ERP, ERP vs. CRM
and SCM
An Overview of Enterprises: Organisation or Enterprise, Integrated Management Information,

Business Modeling, ERP for Small Business, Indian Industries with International Brands,
Manufacturing Strategies, ERP for Make to Order, Business Process Mapping for ERP Module
Design, Hardware Environment and its Selection for ERP Implementation
S
ERP and Related Technologies: Business Process Re-engineering, Characteristics of BPR,
IM
Business Process, Redesign: An Overview: What is a Business Process?, ERP and BPR, Decision
Making, Categories of Information System, Scope of Information System, Data Warehousing, Data
Mining, Online Analytical Processing
SAP: What is SAP?, What Makes SAP Different?, SAP Application Modules, Business Processes
and SAP, Functionality, SAP R/3 System Overview, R/3 as the Vehicle for Business Integration
M
ERP Modules: Modules of ERP, ERP Production Planning Module, ERP Purchasing Module, ERP
Inventory Control Module, Warehouse Management, ERP Sales and Distribution Module, ERP
N
Financial Module, HR Module, CAQ and CIQ, Plant Maintenance
ERP Market: SAP AG, Baan Company, Oracle Corporation, PeopleSoft, J.D. Edwards World
Solution Company, SSA Inc., QAD, Selection of ERP Packages and Modules
ERP Implementation: ERP – An Overview, Role of Consultants, Vendors and Users, ERP Post
Implementation Options, ERP Implementation Methodology
Vendors, Consultants and End Users: Vendors, Consultants, End Users, In-house Implementation

Future Direction in ERP: New Market, New Channels, Future Directions in ERP, Faster Implementation
Methodologies, Business Models and Business Application Programming Interfaces (BAPIs),
Convergence of Windows NT, Application Platforms, New Business Segments, More Features, Web
Enabling
ERP-II: Exploring ERP-II, What are the Added Features in ERP II?, What the Future Holds for ERP?,
An Introduction to Open Source ERP Technologies, What are the Facilities Offered by Web-Enabled
ERP Services?, Benefits of ERP Logistics Package
S
IM
M
N

N
M
IM
S
C H A
1 P T E R
INTRODUCTION TO ENTERPRISE
RESOURCE PLANNING
S
CONTENTS
1.1 Introduction
1.2 Introduction to Enterprise Resource Planning
1.2.1
IM
Evolution of ERP
1.2.2 Reasons for Growth of ERP
Self Assessment Questions
Activity
1.3 Advantages of ERP
M
Activity
1.4 ERP vs CRM and ERP vs SCM
Activity
1.5 Scenario and Justification of ERP in India
N

Activity
1.6 Summary
1.7 Descriptive Questions
1.8 Answers and Hints
1.9 Suggested Readings for Reference

2 ENTERPRISE RESOURCE PLANNING
INTRODUCTORY CASELET
N O T E S
DEPLOYMENT OF SAP SOLUTION AT AJINOMOTO GROUP
Ajinomoto Group is a Japan-based company that is engaged in

the manufacturing of a wide range of food products, weight man-
agement products, nutrition products, pharmaceuticals products,
and many more. The company has a proven history of 100 years
and has achieved tremendous success in its home country and
abroad. It has presence in more than 26 countries, and its prod-
ucts are sold in over 130 countries.
Considering the ever-increasing growth, the company wanted to

implement an automated system across all its branches in South-
east Asia in order to better respond to customers’ and business
demands. After a thorough research, Ajinomoto selected a leg-
S
acy enterprise system. After a few months of implementing this
system, the company faced a number of issues, such as changes
in processes, inadequate technical support and lack of functional
IM
skills of employees. Expansion in Southeast Asia required a ro-
bust information system, which the existing system was unable
to deliver. The legacy enterprise system failed to deliver adequate
support to the business functions of the company.
After the failure of the legacy system, the company partnered with
a consulting group named HP GDPC to find the best solution. The
consulting group had a vast experience of enterprise consulting,
M
operations and maintenance. The group suggested Ajinomoto

to opt for the SAP solution, which is a globally recognised and
widely used ERP system. The SAP system was customised after
considering the factors associated with Southeast Asian markets.
The major modules of SAP, such as finance and accounting, sales
N
and marketing, distribution and business intelligence, were also

included in the system.
The implementation of SAP turned out to be a great success in

Southeast Asia. This implementation led to many positive results,
such as improved efficiency of employees, high level of organisa-
tional performance, strong customer relationships and reduced
costs.

INTRODUCTION TO ENTERPRISE RESOURCE PLANNING 3
N O T E S
LEARNING OBJECTIVES
After studying this chapter, you will be able to:

> Discuss the concept of ERP
> List the advantages of ERP
> Compare ERP and CRM and ERP and SCM
> Explain the scenario and justification of ERP in India
1.1 INTRODUCTION
Enterprise Resource Planning (ERP) is an information system that
enables an organisation to manage and automate its business func-
S
tions. It facilitates optimum utilisation of resources in an organisation
by providing accurate and real-time information. The system supports
various functions of an organisation, including manufacturing, inven-
tory, supply chain, production, finance, etc. Moreover, an ERP system
IM
assists in coordinating between the internal and external stakeholders
of an organisation by providing a centralised database.
An ERP system consists of different modules specially designed to ca-

ter to the needs of an organisation. It collects, stores and manages
business information that can be easily accessed by different depart-
ments of an organisation, thereby facilitating informed decision mak-
M
ing.
In addition, the implementation of an ERP system reaps many bene-

fits for an organisation, such as improved inventory control, increased
flexibility, enhanced productivity, higher efficiency, reduced lead and
N
cycle time and enriched transparency. In this chapter, you will study
about the concept of ERP, its functions, advantages and modules.
INTRODUCTION TO ENTERPRISE
1.2
RESOURCE PLANNING
To understand the concept of ERP, let us first discuss the three terms
enterprise, resource and planning separately.
Enterprise: An enterprise is a system of people who work towards
achieving common goals. Private organisations, businesses, ed-
ucational and research institutions and government bodies are
examples of enterprises. People, processes and resources are the
common components of an enterprise.
Resource: A resource can be defined as an asset that helps an en-
terprise in achieving pre-defined goals. Anything that adds value
to a business is called a resource. Land, labour, machine, human
resource, capital, etc. are some examples of resources.

N O T E S
Planning: It refers to a process of looking into the future through

an organised series of activities with an aim to attain the desired
results. In other words, it is deciding in advance what is to be done
next.
Thus, ERP can be defined as an information system that integrates all

the resources of an organisation. The concept became prevalent in the
1990s when the need for managing all the resources of an enterprise
emerged widely. An ERP system provides complete, accurate and
timely information on business processes, customers, sales, suppliers,
employees, production, finance, etc. to the different departments of
an organisation. This further facilitates independent decision making
across departments. The following are some popular definitions of
ERP:
S
According to Nah and Lau, ERP is a packaged business software sys-
tem that enables a company to manage the efficient and effective use
of resources (materials, human resources, finance, etc.) by providing a
total, integrated solution for the organization’s information-processing
IM
needs.
According to American Production and Inventory Control Society,

ERP system is a method for the effective planning and controlling of all
the resources needed to take, make, ship and account for customer or-
ders in a manufacturing, distribution or service company.
M
Many organisations face issues, such as lack of real-time data, poor
coordination among different departments and increased cost. To
manage these issues, organisations implement ERP systems that help
in streamlining business processes, reducing costs, maintaining a
smooth flow of information, etc. An ERP system provides integrat-
N
ed information to various departments of an organisation, which are

shown in Figure 1.1:
Human
Resource
Production Sales
ERP
Supply
Finance
Chain
Marketing
Figure 1.1: Information Areas of an ERP System

N O T E S
Let us discuss these functions in detail.

Human Resource (HR): The HR department of an organisation
plays a key role in hiring and maintaining a pool of skilled em-
ployees. In addition, the department performs various activities
such as compensation, performance appraisal, training and de-
velopment, etc. These activities can be performed effectively if an
organisation has accurate information related to employees, such
as employees’ background, qualifications, date of joining, salary
details, performance, etc. An ERP system provides information re-
lated to all employees to the HR department of an organisation,
thereby facilitating better decision making.
Sales: Sales is the primary source for an organisation to generate
revenues. An organisation’s sales volume depends on how quickly
S
it is able to fulfil the requirements of customers. To meet custom-
ers’ requirements, an organisation needs information related to
customers’ buying preferences, contact details, purchase history,
past relationships and buying capacity. An ERP system provides
IM
accurate and timely information related to customers, which ulti-
mately boosts an organisation’s sales.
Supply chain: The supply chain network of an organisation is re-
sponsible for the timely procurement of raw materials to the final
delivery of products to end users. For this, it requires the accurate
and exact status of products in transit. An ERP system serves in-
formation needs related to the supply chain of an organisation.
M
Marketing: Marketing is one of the most important functions of an

organisation as it is directly related to the organisation’s sales. It
involves a number of activities, such as competitors’ analysis, mar-
ket research, demand and supply analysis, branding and promo-
tions. To perform these activities effectively, an organisation needs
N
adequate information related to market trends. These information

needs can be served by an ERP system.
Finance: Finance is about managing the monetary aspects of an
organisation. It involves activities such as raising funds, dealing
with debtors and creditors, preparing financial reports, etc. An
ERP system is able to provide information related to debtors, cred-
itors, revenues, etc., thereby facilitating efficient decision making.
Production: The production function of an organisation is respon-
sible for converting tangible and intangible inputs (raw materials,
semi-finished goods, ideas, information and knowledge) into the
desired output (final goods and services). For this, it is important
to procure raw materials on time and have set processes, up-to-
date technology and skilled human resource. An ERP system helps
the production department by providing information on the per-
formance of different processes, latest technology, deployment of
human resources for different production activities, procurement
needs, etc.

N O T E S
1.2.1 EVOLUTION OF ERP

ERP has evolved as a result of continuous research and advancement
over the years. Before the 1960s, business processes were handled
manually. Inventory was managed by using traditional methods, such
as the EOQ (Economic Order Quantity), fixed order quantity, optional
replenishment and periodic order method. However, these methods
were ineffective in managing inventory.
Considering the shortcomings of the traditional methods of managing
inventory,
Material Requirements Planning (MRP) system was developed in the
1970s. The system was used to determine organisations’ requirements
related to materials. In addition, MRP helped organisations in reduc-
ing their inventory levels and lead time, which led to on-time delivery
S
performance of organisations. Later, with the advent of various soft-
ware tools, the functions of MRP systems were upgraded. This upgrad-
ed version of MRP (popularly called closed-loop MRP) was capable of
performing activities like sales planning, customer order processing
IM
and capacity planning. Later, in the 1980s, the need for integration of
financial resources of an organisation with production activities was
realised. This led to the evolution of a new system called Manufactur-
ing Resource Planning (MRP II).
MRP II was an integrated system that helped organisations in esti-
mating material and capacity requirements for producing products.
However, this modified system too suffered from some major draw-
M
backs, such as limited focus on manufacturing activities, assumption

of repetitive production setups and ineffective budgetary and costing
controls. These shortcomings of MRP II led to the advent of ERP in
the 1990s.
N
ERP was developed as a complete business solution that integrated all

the business functions of an organisation by maintaining a smooth flow
of information. To meet changing business needs, ERP systems are
constantly being improved. Currently, extended ERP systems are avail-
able in the market. Figure 1.2 depicts how ERP evolved over the years:
1960s Inventory Control Package
1970s Material Requirements Planning (MRP)
1980s Manufacturing Resource Planning (MRP II)
1990s Enterprise Resource Planning (ERP)
2000s Extended and Updated ERP
Figure 1.2: Evolution of ERP

N O T E S
1.2.2 REASONS FOR THE GROWTH OF ERP
An ERP system not only helps an organisation in managing its re-

sources well but also increases its productivity. As per an ERP histo-
ry report, the growth rate of ERP has been recorded 30% every year
since 1970. As per a report presented by Forrester Research, the over-
all ERP market is expected to grow $50.3 billion by 2015. The main
reason for such growth is that ERP systems have provided organisa-
tions with accurate and real-time information for business decision
making. Apart from this, the following are some other reasons for the
growth of ERP:
Globalisation: This is one of the major reasons for the growth of
ERP. Earlier, organisations were restricted to their national bound-
aries, and the size of businesses was comparatively small. Howev-
S
er, with the advent of globalisation, organisations are attracted to
operate across the borders. Managing and operating businesses
at multiple locations with uniformity in processes is not possible
without real-time information on market trends, changes in busi-
IM
ness environment, etc. An ERP system provides integrated infor-
mation that can be accessed from any location across the world.
Advancement in technology: As discussed earlier, organisations
were using traditional methods for managing their resources.
However, advancement in technology led to the evolution of many
automated systems like ERP, which could integrate the different
business processes of organisations.
M
Increased focus on high efficiency: With the advent of globalisa-

tion and increased competition, it became difficult for organisa-
tions to remain efficient and sustain their businesses. To overcome
such challenges, many organisations have implemented ERP sys-
N
tems, which help in reducing lead times, cycle times, inventory

levels, etc. This in turn improves organisations’ efficiency and de-
cision making.
SELF ASSESSMENT QUESTIONS
1. An enterprise is a system of ______ who work towards

achieving common goals.
2. ERP can be defined as an information system that integrates
all the resources of an organisation. (True/False)
3. Manufacturing Resource Planning (MRP II) was developed
to meet the needs of integrating financial resources of an
organisation. (True/False)
4. As per Forrester Research, the overall ERP market is expected
to grow $_________ by 2015.

N O T E S
ACTIVITY
With the help of the Internet, evaluate the reasons for the growth
of ERP.
1.3 ADVANTAGES OF ERP

From the discussion so far, it can be said that an ERP system has made
a tremendous contribution to the success of businesses. The following
are the advantages of ERP in an organisation:
Reduced lead time: Lead time refers to the time taken between
the starting and end of a process. For example, when you place a
food order at your nearest restaurant and receive the order in 20
S
minutes, those 20 minutes are considered to be lead time. An ERP
system brings down lead time by providing accurate information
related to order placement, delivery status, etc.
Reduced overall costs: As discussed earlier, an ERP system pre-
IMvents the duplication of work and reduces inventory levels, which
ultimately lowers the overall operating costs of an organisation.
Increased transparency: Information stored in an ERP system
can be easily accessed by different departments of an organisa-
tion. For example, the production department of an organisation
can access marketing-related information, such demand for prod-
M
ucts in the market. Such information helps the production depart-
ment to decide the level of production. This facilitates visibility in
an organisation and informed decision making.
Reduced cycle time: Cycle time refers to the time taken to complete
a particular task from start to finish. Sometimes, lead time is con-
N
fused with cycle time, but both the terms are different. Lead time is
important from the perspective of customers as they want the deliv-
ery of their product on time. On the other hand, cycle time is import-
ant from the viewpoint of an organisation as it needs to complete
production on time. However, lead time is dependent on cycle time.
This is because a product can be delivered as soon as it is manufac-
tured. Thus, reduced cycle time may lead to reduced lead time.
An ERP system helps in maintaining a free flow of information
related to the procurement of raw materials, production activities,
supply chain, etc. Such information provides a fair idea to an or-
ganisation about lead time and cycle time.
Improved supplier performance: A timely supply of raw materials
plays a significant role in the success of an organisation in terms
of on-time production and fast delivery of products. An ERP sys-
tem is able to provide information on raw material requirements,
criteria for supplier selection and receipt and verification of raw
materials. This in turn leads to strong relationships between an
organisation and suppliers.

N O T E S
5. An ERP system does not help in maintaining a free flow of

information related to the procurement of raw materials,
production activities, supply chain, etc. (True/False)
6. The advantages of an ERP system include reduced overall
costs, increased transparency, enhanced decision making and
improved supplier performance. (True/False)
ACTIVITY
Using the Internet, find some renowned organisations that have

successfully implemented ERP systems. Prepare a report on the
S
advantages received by these organisations after implementing
such systems. IM
1.4 ERP VS CRM AND ERP VS SCM
The three terms Enterprise Resource Planning (ERP), Customer
Relationship Management (CRM) and Supply Chain Management
(SCM) are often perceived to be the same by most people. However,
these three are different altogether. Let us now compare these three
systems.
M
ERP VS CRM
ERP is a system that integrates all the business functions of an or-

ganisation, such as finance, inventory, operation, manufacturing and
human resource, by providing easy access to accurate information. On
N
the other hand, CRM is restricted to customer information and rela-

tionships. However, the role of CRM cannot be ignored in today’s stiff
competition. An ERP system may contain CRM as its part to serve a
function of an organisation. However, CRM can be implemented and
used as a separate module to handle customers’ segment. An ERP sys-
tem attempts to improve the internal business processes of an organ-
isation by improving efficiency, while CRM focuses on understanding
customers’ needs and fulfilling them, thereby increasing customer
satisfaction. Therefore, the need for CRM is also recognised in today’s
competitive business environment. Although the roles and areas of
ERP and CRM are different, both move hand in hand to improve or-
ganisational efficiency.
ERP VS SCM
ERP is an integrated system that combines all the functions of an or-
ganisation through a common data platform, while SCM is restrained
to the adequate supply of products so that they can be delivered to
customers on time. ERP helps an organisation’s employees at various
levels in the hierarchy, such as workers, supervisors, mid-level man-

N O T E S
agers and executives, by providing information for making decisions.

On the other hand, SCM collaborates between various parties such
as organisations, suppliers, manufacturers, partners, distributors and
customers.
7. ERP is an integrated system that combines all the functions of

an organisation through a common data platform, while SCM
is restrained to the adequate supply of products so that they
can be delivered to ___________ on time.
ACTIVITY
S
Using the Internet, find some popular ERP and CRM software. Dis-
tinguish between their features.
IM
SCENARIO AND JUSTIFICATION OF ERP
1.5
IN INDIA
Over the years, ERP has witnessed enormous growth across the globe.
Today, most organisations look for effective ERP systems in place. An
ERP system has evolved as a strategic tool that contributes to the suc-
M
cess of an organisation. As mentioned earlier, Forrester Research’s re-

port says that the ERP market is likely to grow $50.3 billion by 2015,
which is a positive sign for the ERP market.
At present, ERP is witnessing massive growth in not only the manufac-

N
turing industry but also various other industries, such as oil and gas,
export, service, automobile, steel and pharmaceutical. Organisations
that have implemented ERP systems have seen remarkable growth
in their customer base. Many companies in India have successfully
implemented ERP systems, such as Tata Chemicals, Mahindra & Ma-
hindra, Bajaj Auto, Tata Motors and Hindustan Times.
Apart from this, 60% of the Indian SME segment has implemented
an ERP system. However, organisations face a number of challenges
in the implementation of ERP. One of the major challenges faced by
organisations is to select a system that best suits their requirements.
In addition, other challenges include high implementation cost, exten-
sive training, etc.
8. _______ of the Indian SME segment has implemented an ERP

system.

N O T E S
ACTIVITY
Using the Internet, find the names of some Indian companies that
offer ERP solutions.
1.6 SUMMARY
An enterprise is a system of people who work towards achieving
common goals.
A resource is an asset that helps an enterprise in achieving pre-de-
fined goals.
Planning refers to a process of looking into the future through an
organised series of activities with an aim to attain the desired re-
S
sults.
ERP can be defined as an information system that integrates all
the resources of an organisation.
ERP
IM
has evolved as a result of continuous research and advance-
ment over the years.
Before the 1960s, business processes were handled by using tra-
ditional methods. Considering the shortcomings of the traditional
methods of managing inventory, Material Requirements Planning
(MRP) system was developed in the 1970s.
M
ERP was developed as a complete business solution that integrat-

ed all the business functions of an organisation by maintaining a
smooth flow of information.
As per an ERP history report, the growth rate of ERP has been
N
recorded 30% every year since 1970.

As per Forrester Research, the overall ERP market is expected to
grow $50.3 billion by 2015.
Following are some major advantages of an ERP system:
Reduced lead time
Reduced overall costs
Increased transparency
Enhanced decision making
Reduced cycle time
Improved supplier performance
The three terms Enterprise Resource Planning (ERP), Customer
Relationship Management (CRM) and Supply Chain Management
(SCM) are often perceived to be the same by most people. Howev-
er, three of them perform different functions.

N O T E S
KEY WORDS
Enterprise: It refers to a system of people that work towards

achieving common goals.
ERP: It is an information system that integrates various busi-
ness functions of an organisation, such as finance, human re-
source, sales, marketing and supply chain.
Lead time: It refers to the time taken between placing an order
and receipt of the product by a customer.
Planning: It refers to a process of determining and organising
activities to be performed for achieving pre-defined goals.
S
1.7 DESCRIPTIVE QUESTIONS
1. Define Enterprise Resource Planning (ERP). Also, discuss the
reasons for the growth of ERP.
IM
2. Write a short note on the advantages of ERP.
3. Discuss ERP vs CRM and SCM.
4. Discuss the scenario and justification of ERP in India.
1.8 ANSWERS AND HINTS

M
ANSWERS FOR SELF ASSESSMENT QUESTIONS
Topic Q.No. Answers

Introduction to Enterprise 1. People
N
Resource Planning
2. True
3. True
4. 50.3 billion
Advantages of ERP 5. False
6. True
ERP VS CRM and ERP VS 7. Customers
SCM
Scenario and Justification 8. 60%
of ERP in India
HINTS FOR DESCRIPTIVE QUESTIONS

1. ERP can be defined as an information system that integrates
all the resources of an organisation. By implementing an ERP
system, an organisation not only manages its resources well

N O T E S
but experiences tremendous growth in its productivity. Refer to

Section 1.2 Introduction to Enterprise Resource Planning.
2. An ERP system has made a tremendous contribution to the
success of businesses. It is a complete solution for managing all
the resources of an organisation. Refer to Section 1.3 Advantages
of ERP.
3. The three terms Enterprise Resource Planning (ERP),
Customer Relationship Management (CRM) and Supply Chain
Management (SCM) are often perceived to be the same by most
people. However, these three are different altogether. Refer to
Section 1.4 ERP vs CRM and ERP vs SCM.
4. Over the years, ERP has witnessed enormous growth across
the globe. Today, most organisations in the world look for an
S
effective ERP system in place. Refer to Section 1.5 Scenario and
Justification of ERP in India. IM
SUGGESTED READINGS FOR
1.9
REFERENCE
SUGGESTED READINGS
Pamungkas, B. (2009). ADempiere 3.4 ERP solutions. Birmingham,
UK: Packt Pub.
M
Ray, R. (2011). Enterprise resource planning. New Delhi: TATA Mc-

Graw Hill Education.
Sheikh, K. (2003). Manufacturing resource planning (MRP II). New
York, N.Y.: McGraw-Hill.
N
Sumner, M. (2005). Enterprise resource planning. Upper Saddle

River, N, J.: Prentice Hall.
E-REFERENCES
(2015). Retrieved 18 February 2015, from https://faculty.biu.
ac.il/~shnaidh/zooloo/nihul/evolution.pdf
(2015).Retrieved 18 February 2015, from http://eiilmuniversity.
ac.in/coursepack/Management/ENTERPRISE_RESOURCE_
PLANNING.pdf
(2015).Retrieved 18 February 2015, from http://www.personal.psu.
edu/faculty/a/x/axk41/ERP-intro.pdf
(2015).Retrieved 18 February 2015, from http://panorama-consult-
ing.com/Documents/Advantages-of-Single-ERP-Solution.pdf
Erp.wiziontech.com,. (2015). ERP vs. CRM and SCM - Enterprise
resource planning (ERP). Retrieved 18 February 2015, from http://
www.erp.wiziontech.com/erp-vs--crm-and-scm

N O T E S
excITingIP.com,. (2011). Advantages & Disadvantages of ERP (En-

terprise Resource Planning) Systems. Retrieved 18 February 2015,
from http://www.excitingip.com/2010/advantages-disadvantag-
es-of-erp-enterprise-resource-planning-systems/
Referenceforbusiness.com,. (2015). Enterprise Resource Planning -
organization, system, business, system, Evolution of erp. Retrieved
18 February 2015, from http://www.referenceforbusiness.com/
management/Em-Exp/Enterprise-Resource-Planning.html
S
IM
M
N

C H A
2 P T E R
AN OVERVIEW OF ENTERPRISES
S
CONTENTS
2.1 Introduction
2.2 Concept of an Enterprise
IM Self Assessment Questions
Activity
2.3 Integrated Management of Information
Activity
2.4 Business Modelling
M

Activity
2.5 ERP for Small Businesses
Activity
N
2.6 Summary

N O T E S
A STUDY OF AMAZON AS AN ENTERPRISE
Amazon is one of the largest online retailers in the world. Initially,

it used to retail in the traditional way, but gradually, it changed it-
self as an online retail giant. Today, the company has an extensive
range of products in various segments, including lifestyle, books,
watches, jewellery, electronics, shoes, sports, etc. It has a number
of business lines, such as online retailing, publishing, advertising,
digital content subscription, etc.
The company is based in Seattle, Washington and was founded

by Jeff Bezos in 1994. In 2014, Amazon earned revenue of $88 bil-
lion. It has a workforce of more than 1, 50, 000 employees. The
S
company has separate websites for India, Australia, Brazil, Can-
ada, China, France, Germany, Italy, Japan, Mexico, Netherlands,
Spain, the United Kingdom and the United States. The business
model of the company comprises nine building blocks or key el-
IM
ements. These elements include key partners, key activities, key
resources, value propositions, customer relationship, channels,
customer segments, cost structure and revenue streams.
The vision of the company states “To be Earth’s most customer cen-
tric company; to build a place where people can come to find and
discover virtually anything they want to buy online”.
M
The company is committed to provide a safe and secure online

ordering experience, cash on delivery, easy returns, convenient
electronic payments and 24x7 customer support services to cus-
tomers. Amazon entered the Indian market by launching Jun-
glee.com in 2012. This website was launched for retailers in India
N
so that they could advertise their products and reach their target
audience.
In their words, “With Amazon.in, we endeavour to build that same

destination in India by giving customers more of what they want –
low prices, vast selection, fast and reliable delivery, and a trusted
and convenient experience – and provide sellers a world-class
e-commerce platform”.

AN OVERVIEW OF ENTERPRISES 17
N O T E S
LEARNING OBJECTIVES

> Describe the concept of an enterprise
> Explain integrated management of information
> Discuss the concept of business modelling
> State the importance of ERP for small businesses
2.1 INTRODUCTION
In the previous chapter, you have studied about the importance of En-
terprise Resource Planning (ERP) in an organisation. In this chapter,
S
you will have an overview of an enterprise.
An enterprise can be defined as a group of people who work together

to accomplish common goals. It is a combination of people, processes,
IM
resources and goals. An enterprise is established with a vision for
long-term existence. In order to achieve its vision, an enterprise con-
stantly strives to excel in its business by developing a business model
that reflects its value creation, plans, processes and products.
In today’s world, enterprises are more inclined to adopt the latest

technology to keep pace with the world. Integrated information sys-
M
tem facilitates an enterprise with a centralised control of information,
thereby enhancing productivity and efficiency. This chapter begins by
explaining the concept of an enterprise. Further, it lays emphasis on
the integrated management of information. It also discusses the con-
cept of business modelling and integrated data model. Towards the
N
end, it discusses ERP for small businesses.
2.2 CONCEPT OF AN ENTERPRISE

The term enterprise is perceived differently by different people. Some
people refer to an enterprise as a type of organisation, whereas some
may associate enterprise with money, irrespective of the nature of its
business. To put simply, an enterprise is a system of people who work as
a team to achieve pre-defined business goals. It is driven by a number
of goals. The most important goal of an enterprise is to maximise profit
(except for non-profit organisations). This is because without profits,
the survival of an enterprise is difficult. However, in the initial years, an
enterprise may not generate huge profits. It takes years for an enter-
prise to reach its break-even point and start making profits. Break-even
point is a point where an enterprise makes no profit no loss.

N O T E S
Enterprises are highly dependent on the effectiveness of their systems

for success. The existence of an enterprise can be at stake if the sys-
tem is not reliable. Here, the system refers to the integration of people,
processes and resources. The bigger the system, the more complexi-
ties and challenges an enterprise has to face. This is because the scope
of interaction between people, processes and resources increases
manifolds in the case of a big system. Figure 2.1 shows the elements of
an enterprise’s system:
People
S
IM
Enterprise
Processes Resources
M
Figure 2.1: Elements of an Enterprise’s System

N
Here, people are employees or stakeholders, processes are a set of

rules or methods employed for successful operations and resources
are support utilities, such as machines, money and raw material, used
to run a business.
Let us consider an example of a prominent enterprise that built a strong

system out of efficient people, effective processes and lasting resources.
Infosys is a renowned multinational corporation that offers business
consulting, technology, software engineering and outsourcing services.
It was established by N. R. Narayana Murthy and six other engineers
in 1981. Infosys, which was started with a base capital of just $250, has
reported revenues of $8.25 billion in the financial year 2014.
Today, the company has a workforce of more than 165,000 employees.

It took the company about 30 years to achieve such milestones. How-
ever, it still strives to excel in the services offered.

N O T E S
1. An _______________is a group of people who work as a team to

achieve pre-defined business goals.
2. An enterprise’s system comprises three elements, namely,
people, processes and resources. (True/False)
ACTIVITY
Using the Internet, perform research on the system of some popu-

lar IT companies. Prepare a report on how they have grown over
the years.
S
INTEGRATED MANAGEMENT OF
2.3
INFORMATION
IM
In an enterprise, information needs to be integrated so that different
elements of an enterprise’s system (people, processes and resources)
can interact with each other in an effective manner. The integration of
information is performed using various information systems in organ-
isations. An information system can be defined as an open system that
collects, stores, processes, generates and disseminates information for
effective business decision making. The following are the benefits of
M
an information system:
It reduces delays in processes.
It facilitates decision making.
N
It helps in avoiding duplication of work processes.

It provides a centralised and secured database.
Earlier, the role of information systems was restricted to processing

data and making it accessible at various levels of an enterprise. How-
ever, this data could be accessed by individuals at different levels of
an enterprise for their respective work requirements. For example,
individuals working in the marketing department were able to access
information related to marketing only. It made difficult for managers
to obtain integrated information and prepare reports as and when
required. Moreover, managers also required information of other de-
partments for decision making. This led to delays in the decision-mak-
ing process.
Thus, a need for an information system with an ability to integrate or-

ganisational information was felt. Consequently, Management Infor-
mation System (MIS) was introduced. According to Schwartz, “MIS is

N O T E S
the system of people, equipment, procedures, documents and communi-

cation that collects, validates, operates on, transforms, stores, retrieves
and presents data for use in planning, budgeting, accounting, control-
ling and other management processes”.
MIS enables managers to carry out various managerial activities, such

as planning, organising, reporting and controlling, by providing inte-
grated information. It includes three main resources to support effec-
tive decision making, namely, people, procedures and data.
3. _____________ enables managers to carry out various

managerial activities, such as planning, organising, reporting
S
and controlling by providing integrated information.
4. The three main resources that support effective decision
making through MIS are people, procedures and __________.
IM
ACTIVITY
Using the Internet, search any two instances where MIS implemen-
tation failed. Prepare a report on the reasons for the failure.
M
2.4 BUSINESS MODELLING

A business model summarises the essence of an enterprise and re-
flects its core business idea. It defines the structure of value creation,
processes and delivery as well as the mechanism of an enterprise. The
N
model is simply a description of what an enterprise is going to do and

how it is going to do. In other words, a business model states pro-
cesses, methods, mechanism, structure and operations that an enter-
prise incorporates to generate revenue. The following are some popu-
lar definitions of a business model:
According to Joan Magretta, “a business model is the story that ex-

plains how an enterprise works”.
According to Peter Drucker, “a business model answers the questions

to who is your customer, what does the customer value, and how do you
deliver value at an appropriate cost?”
A business model can be represented in the form of flowcharts and

data diagrams so that it can be easier for individuals to understand
the processes and functions of an enterprise. A business model can be
simple or complex, depending on the nature of an organisation’s busi-
ness. For example, the business model of a movers and packers com-
pany will be simple as compared to that of a telecom service company.

N O T E S
Mark W. Johnson, in his book, ‘Seizing the White Space: Business

Model Innovation for Growth and Renewal’ proposed a four-box busi-
ness model. This model works as an effective tool to structure a busi-
ness model by highlighting the interaction between customer value
proposition, profit formula, key resources and key processes. Figure
2.2 shows the four-box business model:
Four Box Model
Customer Value Proposition
S
Key Resources Key Processes Profit Formula
IM
Figure 2.2: Four-Box Business Model
Let us discuss these four basic elements of the four box business
model as follows:
M
Customer value proposition: A customer value proposition de-

scribes the experience and values that a user would get after us-
ing a product. Traditionally, organisations believed that customers
usually buy what producers produce. Thus, these organisations
did not believe in quality, features or style. This notion is reflected
N
in the concept of mass marketing. However, this belief is not appli-

cable in today’s competitive era where people have a number of
choices to make the most suitable selection.
At present, an organisation is required to deliver products in ac-
cordance with the needs of the target customers so that they can
derive maximum value from the purchased products. Some organ-
isations use the word ‘realisation’, which is a formal term used for
the value that customers get out of what they buy.
The customer value proposition creates a foundation for realising
how a product will be valued by the target user. It evaluates ad-
vantages and disadvantages that a target user would experience
after using a product. The sum of all these experiences helps an
organisation to determine the value of its products in its market.
Profit formula: It is the next important element in the business
model. Profit formula refers to a method that a business employs
to identify how it will produce value for its shareholders as well as
customers.

N O T E S
A significant component within the profit formula is the revenue

model, which determines the price that an organisation should charge
at a given volume of sales for covering fixed costs. This helps an organ-
isation to reach the break-even point and achieve any desired profit
margins. While generating the profit formula, the following questions
need to be answered:
What are the profit margins that each market segment can earn?
What is the revenue that can be produced for each product or mar-
ket area?
What fixed and variable costs would be incurred to produce sales?
What are the main financial measures that can help to assess the
business model?
S
For each target market segment, an organisation should examine each
question and determine the degree of price sensitivity, the frequency,
and the quantity of buying.
IM
Key resources: They include unique products, people, technol-
ogy, facility, funding, brand and equipment. Key resources deliver
the value proposition to customers. However, there are certain
resources or a unique combination of resources that create a dif-
ference in between success and failure. An organisation, in order
to provide maximum value proposition to its customers, needs to
identify and manage its key resources. For example, people are
M
the essential key resources for any service delivery. Therefore, it
becomes essential for an organisation to recruit employees with
good skills and abilities.
Key processes: They help an organisation to deliver customer
value proposition in a sustainable and manageable way; develop
N
an effective profit formula; and optimise key resources. For exam-

ple, customers walk into a fast food restaurant and get the meal
delivered within a few minutes. The delivery of the meal involves
the key processes of order taking, meal preparation and delivery.
These key processes generate maximum value for customers. An
organisation that successfully identifies its key processes distin-
guishes itself from its competitors.
Therefore, a business model is a representation of the actual business,

its functions, their inter-relationships, interdependencies, and so on.
It is usually represented in a graphical form using flowcharts and flow
diagrams. Figure 2.3 shows a business model and its practical appli-
cation:

N O T E S
Real
World
Processes Interrelationships &

Interdependencies
Plant Material
Business
Model
Customer Order
Contract Invoice
S
Figure 2.3: Real World and the Business Model
Source: ERP Demystified By Alexis Leon

IM
5. A _____________ summarises the essence of an enterprise and
reflects its core business idea.
6. An effective business model comprises four elements:
__________, profit formula, key resources and key processes.
M
ACTIVITY
Using the Internet, study the business model of an e-commerce

company.
N
2.5 ERP FOR SMALL BUSINESSES

Earlier, ERP systems were mainly implemented by large or multina-
tional organisations because of huge costs associated with them. How-
ever, a need for an integrated, automated and organised information
system is also being realised by small organisations. In today’s fast
and competitive world, small businesses also want to keep pace with
the growing industry. Although small organisations are not able to af-
ford expensive ERP packages for their businesses, they want to capi-
talise on modern technologies.
Considering the needs of small businesses, many ERP vendors have

come up with a toned-down version of ERP, which is specifically de-
signed for the requirements of small businesses. ERP packages de-

N O T E S
signed for small businesses are generally economical. However, they

may not include features as in the ERP systems of large organisations.
An ERP system integrates all the essential functions of an organisa-

tion, whereas ERP for small businesses works typically as SaaS (Soft-
ware as a Service).
The services provided by ERP packages designed for small businesses

may not include features such as reporting, analysis, handling large
data, etc. However, they are able to manage the basic functions of an
organisation, including finance management, inventory management,
etc. ERP for small businesses has the following benefits:
It is economical and thus, can be afforded by small businesses.
It does not require a specially trained team for its management
S
and use.
It improves the productivity of an organisation.
There are a number of ERP solutions for small businesses, such as

IM
Tally, Suchan, Marg, Navision, eLite, Flexi ERP, iWeb, ERP Next, and
cflow.
7. An ERP system integrates all the essential functions of

an organisation, whereas ERP for small businesses works
M
typically as ____________.
8. Services provided by ERP packages designed for small
businesses may not include features such as reporting,
analysis, handling large data, etc. (True/False)
N
ACTIVITY
Using various sources, such as magazines, newspapers and the In-

ternet, find some popular organisations that offer ERP solutions for
small businesses. Also, prepare a report on the features of products
provided by these organisations.
2.6 SUMMARY
An enterprise is a system of people who work as a team to achieve
pre-defined business goals.
The most important goal of an enterprise is to maximise profit (ex-
cept for non-profit organisations).
The important elements of an enterprise’s system are people, pro-
cesses and resources.

N O T E S
An information system can be defined as an open system that col-

lects, stores, processes, generates and disseminates information
for effective business decision making.
Earlier,the role of information systems was restricted to process-
ing data and making it accessible at various levels of an enterprise.
MIS enables managers to carry out various managerial activities,
such as planning, organising, reporting and controlling, by provid-
ing integrated information.
A business model summarises the essence of an enterprise and
reflects its core business idea.
A business model states processes, methods, mechanism, structure
and operations that an enterprise incorporates to generate revenue.
S
There are four elements of an effective business model, namely,
customer value proposition, profit formula, key resources and key
processes.
Considering
IM
the needs of small businesses, many ERP vendors
have come up with a toned-down version of ERP, which is specifi-
cally designed for the requirements of small businesses.
An ERP system integrates all the essential functions of an organi-
sation, whereas ERP for small businesses works typically as SaaS
(Software as a Service).
M
KEY WORDS
Business modelling: It explains processes, methods, mecha-

nism, structure and operations that an organisation pursues to
generate revenue.
N
Enterprise:It refers to a system of people who work towards

accomplishing common goals.
Stakeholders: They refer to people who are associated with an
organisation and are impacted by its actions or decisions, such
as employees, customers and suppliers.
Value proposition: It refers to a description of how an organisa-
tion is going to deliver value to its customers by offering distinct
products or services.

1. Explain the concept of an enterprise.
2. Write a short note on MIS.
3. Discuss business modelling.
4. Explain ERP for small businesses.

N O T E S
Topic Q. No. Answers

Concept of Enterprise 1. Enterprise
2. True
Integrated Manage- 3. MIS
ment of Information
4. Data
Business Modelling 5. Business model
S
6. Customer value proposition
ERP for Small Busi- 7. SaaS (Software as a service)
nesses
IM 8. True
1. An enterprise is a system of people sharing common goals. Refer

to Section 2.2 Concept of an Enterprise.
2. MIS enables managers to carry out various managerial activities,
M
such as planning, organising, reporting and controlling, by

providing accurate information. Refer to Section 2.3 Integrated
Management of Information.
3. A business model defines the structure of customer value
N
creation, processes and delivery as well as the mechanism of an

enterprise. Refer to Section 2.4 Business Modelling.
4. Earlier, ERP systems were meant for large or multinational
organisations. However, gradually, the need for having an
integrated, automated and organised system was also realised by
small businesses. Refer to Section 2.5 ERP for Small Businesses.

2.9
REFERENCE
SUGGESTED READINGS
Pamungkas, B. (2009). ADempiere 3.4 ERP solutions. Birmingham,

UK: Packt Pub.
Ray, R. (2011). Enterprise resource planning. New Delhi: TATA Mc-

N O T E S
Sheikh, K. (2003). Manufacturing resource planning (MRP II). New

York, N.Y.: McGraw-Hill.
Sumner, M. (2005). Enterprise resource planning. Upper Saddle
River, N, J.: Prentice Hall.
E-REFERENCES
(2015). Retrieved 14 March 2015, from http://www.qaa.ac.uk/en/Pub-

lications/Documents/enterprise-entrepreneurship-guidance.pdf
(2015). Retrieved 14 March 2015, from http://ec.europa.eu/research/
innovation-union/pdf/expert-groups/ERIAB-BMI_PB_new_busi-
ness_models.pdf
Dataintegration.info,.(2015). Data Integration | Data Integration
S
Info. Retrieved 14 March 2015, from http://www.dataintegration.
info/data-integration
Harvard Business Review,. (2011). How to Design a Winning Busi-
IM
ness Model. Retrieved 14 March 2015, from https://hbr.org/2011/01/
how-to-design-a-winning-business-model
In.teradata.com,.(2015). Retrieved 14 March 2015, from http://
in.teradata.com/resources/white-papers/Enterprise-Data-Ware-
house-Roadmap-Modeling-eb4321/?LangType=16393&LangSe-
lect=true
M
N

N
M
IM
S
C H A
3 P T E R
ERP AND RELATED TECHNOLOGIES
S
CONTENTS
3.1 Introduction
3.2 Business Process Re-engineering
3.2.1
IM
Characteristics of BPR
3.2.2 ERP and BPR
Activity
3.3 Information Systems
Activity
3.4 Transaction Processing System
M

Activity
3.5 Management Information System
Activity
N
3.6 Decision Support Systems

Activity
3.7 Executive Information Systems
3.7.1 Advantages and Disadvantages of EIS
Activity
3.8 Data Warehousing
Activity
3.9 Data Mining
Activity
3.10 Online Analytical Processing
Activity
3.11 Summary

N O T E S
BPR APPLICATION AT FORD
Ford Motor Company is a US-based automobile manufacturer

that sells passenger and commercial vehicles across the globe.
The company is headquartered in Dearborn, Michigan, a suburb
of Detroit. In the 1960s, the company joined hands with Mazda, a
leading Japanese automobile manufacturer. The partnership was
formed due to financial difficulties faced by the latter.
In the mid-80s, Ford was facing a major problem in cash flow man-
agement with its vendors (who were providing components to the
company). The process of making payments to vendors was time
consuming and took several weeks to be completed. The main
reason for the delay was the deployment of around 500 employees
S
in the accounts payable department. These employees spent con-
siderable time in settling documents, such as purchase orders and
vendor bills. To overcome this problem, the company streamlined
IM
its payment process, which led to reduction in process time. The
company also achieved 25 per cent reduction in its workforce.
However, Ford felt improvement as futile when it discovered that

its newly acquired company Mazda had employed only five peo-
ple to take care of the payment process in Japan. This impelled
Ford to study the cash management process of Mazda to redefine
the payment process. Ford further discovered that, in Mazda, no
M
purchase orders were maintained and the payment to vendors

was credited through the Electronic Funds Transfer application
installed in the production line at Japan. After studying Mazda’s
cash management processes, Ford changed its payment process
from ‘payment on vendor invoice’ to ‘payment on receipt of goods.’
N
The newly adopted process resulted in the automation of the pay-

ment process and elimination of redundant processes comprising
vendor bills. In addition, business process re-engineering helped
the company in achieving around 50 percent reduction in its staff.

ERP AND RELATED TECHNOLOGIES 31
N O T E S
LEARNING OBJECTIVES

> Define business process re-engineering
> Explain information systems
> Discuss transaction processing system
> Describe management information systems
> State the importance of decision support systems
> List the functions of executive information systems
> Explain data warehousing
> Discuss data mining
> Describe on-line analytical processing
S
3.1 INTRODUCTION
IM
In the previous chapter, you studied about various models used in
ERP in organisations. However, ERP cannot be used as a standalone
system. To implement an ERP system in an organisation successfully,
various other related technologies are to be used, such as Business
Process Re-engineering (BPR).
BPR involves the strategic analysis of existing processes in an organ-

M
isation with an aim to identify key areas of improvement. This helps

in bringing major transformation of the organisation. Apart from
BPR, organisations also make use of different types of information
systems to collect, store and retrieve relevant information as and
when required. Some of the important information systems used in
N
organisations are Management Information System (MIS), Transac-

tion Processing System (TPS), Decision Support System (DSS), and
Executive Information System (EIS).
To ensure the success of ERP, it is important to manage data properly.

For this, organisations adopt various techniques such as data ware-
housing, data mining and On-Line Analytical Processing (OLAP). In
this chapter, you will study about different technologies, information
systems and techniques used for the successful integration of an ERP
system.
3.2 BUSINESS PROCESS RE-ENGINEERING

To achieve consistent performance,organisations are required to make
continuous improvement in their existing processes. In the modern
scenario, organisations are adopting Business Process Re-engineer-
ing (BPR) to improve and enhance the efficiency of their existing pro-
cesses. In order to understand how BPR helps an organisation, let

N O T E S
us first understand the concept of BPR. According to Hammer and

Champy, BPR is the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical, con-
temporary measures of performance, such as cost, quality, service and
speed.
In this definition, focus is laid on three words: radical, redesign, and

processes. Thus, it can be implied that:
BPR involves radical and innovative reorientation of existing busi-
ness processes.
BPR is about redesigning existing business processes to achieve
goals more effectively.
BPR can help an organisation in achieving its aims more effectively
S
by removing redundancy. Let us understand this with the help of an
example: IBM Credit Corporation re-engineered its credit checking
and approval process by replacing specialists with generalists. These
generalists were solely responsible for deciding customers’ credit-
IM
worthiness. As a result, the number of checks and controls reduced.
Moreover, a lot of time was saved in assessing the creditworthiness of
customers. Consequently, the company was able to deliver services to
customers on time. As a result, customer satisfaction increased great-
ly.
In order to re-engineer processes successfully, an organisation must

M
follow a step-by-step approach. The steps involved in BPR are dis-
cussed as follows:
1. Ascertaining the business process that needs to be redesigned
2. Determining the areas of improvement in the process and the
N
measures to rectify them

3. Bringing an improved process in practice and administering
changes
4. Integrating the improved process with other business processes
of the organisation
5. Taking regular feedback from employees to ensure that the
process is in accordance with the requirements of the organisation
3.2.1 CHARACTERISTICS OF BPR
BPR has become an effective tool for the organisations to operate ef-
ficiently in today’s dynamic and competitive business environment.
The following are some important characteristics of BPR:
Fast speed: BPR compresses time taken to perform strategic busi-
ness processes. For instance, if the average cycle time of a process
before BPR was 4 hours, after BPR, the same can be reduced to
an hour.

N O T E S
Customer focus: BPR focusses on serving customers by designing

customer- oriented processes. This helps an organisation in elimi-
nating customer complaints.
Flexibility: Through BPR, organisations can transform their tra-
ditional processes into highly adaptive processes to respond quick-
ly to changes taking place in the business environment.
Adoption of technology: BPR requires innovative use of technolo-
gy to achieve the challenging goals defined by an organisation. For
example, Information Communication Technology (ICT) is being
used in various organisations to reform existing processes.
3.2.2 ERP AND BPR
S
As discussed in the previous chapters, Enterprise Resource Planning
(ERP) is an application that supports an organisation in determining
the best possible ways to manage its available resources. On the other
hand, BPR involves analysing the performance of business processes
IM
and determining the possible changes that can help in streamlining
operations.
To improve their overall performance, organisations can deploy both

BPR and ERP together. For instance, organisations can use BPR to
redesign their existing processes and improve their efficiency. For
this, they need accurate information related to processes. Such infor-
mation needs can be fulfilled by ERP.
M
1. BPR involves ____________ of the existing business processes

to achieve goals more effectively.
N
a. Redesigning b. Processing
c. Changing d. Modifying
2. BPR can help an organisation in achieving its aims more
effectively by removing redundancy. (True/False)
ACTIVITY
Search any five organisations that have implemented BPR. Also,

prepare a report on the impact of BPR on these organisations.
3.3 INFORMATION SYSTEMS

Information can be defined as output retrieved by analysing data col-
lected from different sources such as employees, customers, suppliers
and competitors. Today, organisations expect accurate and timely in-
formation for making various business decisions. Thus, it is of utmost

N O T E S
importance for organisations to manage information in such a manner

that it can be retrieved as and when required. To ensure the timely
availability of information, organisations are adopting various types
of information systems.
An information system is a set of interrelated components that col-
lects, stores, analyses and disseminates information for effective busi-
ness decision making. For example, an organisation wishes to increase
its profits by boosting its sales. In such a case, an information system
can help the organisation in making effective sales-related decisions
by providing information on current market trends, needs and prefer-
ences of customers, availability of substitutes, etc. The following are
the key components of an information system:
Hardware: It includes physical devices for information processing
S
such as computers, keyboards, mouse, scanners, pen drives, etc.
Software:It includes a set of instructions to direct the computer’s
hardware. Software is broadly divided into two types: programs
and procedures. Programs comprise operating system and appli-
IMcation software, whereas procedures include instructions for data
entry and information distribution.
Data: It includes facts and observations (collected from various
sources) used by programs to produce meaningful information.
Data is stored in a machine-readable form on disk or tape.
People: They are one of the main components of an information
M
system. People are responsible for the development and operation

of an information system. They can be categorised into two types:
specialists and end users. Specialists include system analysts, soft-
ware developers, system operators, programmers and other IT
personnel. On the other hand, end users are individuals (market
N
researchers, production managers, customers and accountants)

who use information produced by a system for various purposes.
In an organisation, information systems are used at all levels. Figure

3.1 shows different types of information systems used at various levels
in an organisation:
Transaction Processing System
Management Information System
Decision Support System
Executive Information System
Figure 3.1: Types of Information Systems

N O T E S
Let us discuss these different types of information systems in the sub-

sequent sections.
3. Which of the following is not a component of an information

system?
a. People b. Hardware
c. Software d. Organisation
ACTIVITY
List the main benefits of implementing an information system in a
S
manufacturing organisation.
3.4 TRANSACTION PROCESSING SYSTEM

IM
Transaction Processing System (TPS) is a type of information system
that is used to gather, record, manipulate and retrieve data related to
day-to-day business transactions of an organisation. In simple words,
TPS is used by organisations to record the business transactions that
take place with various parties such as vendors, suppliers and custom-
ers. Figure 3.2 shows a model of TPS:
M
Data Information
Environment
N
Management
Data
processing
software
Database
Transaction processing
system
Input Output
physical Transform physical
resources resources
Environment
Figure 3.2: Model of TPS

Source: https://books.google.co.in/books?id=zPnnFx4ZCG4C&pg=PA40&dq=Trans-
action+Processing+system+in+MIS&hl=en&sa=X&ei= -jgAVa-WHIOJ8QWO-
q4GACw&ved=0CDQQ6AEwBA#v=onepage&q=Transaction%20Processing%20system%20
in%20MIS&f=false

N O T E S
In TPS, there are two ways of processing transactions: batch pro-

cessing and real-time processing. In batch processing, data related to
transactions is collected over a period of time, say a week or a month,
and processed from time to time. On the other hand, in real-time pro-
cessing, data is processed immediately once a transaction takes place.
Some of the important advantages of TPS are discussed as follows:
It processes transactions quickly and makes data available for per-
forming various business processes.
It integrates both comprehensive safeguards and disaster recov-
ery systems to reduce the chances of failure.
It ensures standardised transaction processing by obtaining iden-
tical data for all types of transactions.
S
4. _____________ is a type of information system that is used to

gather, record, manipulate and retrieve data related to day-to-
IM day business transactions of an organisation.
ACTIVITY
List any three applications for both batch processing and real-time
processing.
M
3.5 MANAGEMENT INFORMATION SYSTEM

To facilitate effective decision making in an organisation, managers
N
require accurate information. However, in an organisation, there is al-

ways a pool of information that needs to be managed. Therefore, most
organisations use Management Information System (MIS), which col-
lects data from various internal and external sources, processes it and
provides meaningful information.
According to Davis and Olson, MIS is an integrated user-machine sys-

tem designed for providing information to support operational control,
management control and decision making functions in an organisation.
Thus, MIS can be defined as an information system that:
comprises various tools for data analysis
delivers information to support managerial functions, such as
planning, organising, etc
gathers information as per the defined rules

N O T E S
The importance of MIS is explained in the following points:

It provides access to useful and timely information to managers.
It lays a basis for logical decision making.
It distributes integrated information among different departments
of an organisation.
It establishes a rational basis for developing business strategies.
The main objective behind using MIS is to help managers in making

multifaceted business decisions with ease. Besides, an organisation
implements MIS due to the following reasons:
To operate in the dynamic business environment: The environ-
ment in which businesses operate is changing tremendously due to
S
continuous advancement in technology. This leads to an increase
in the complexities of different business functions. For instance,
if an organisation has its branches in various countries, it faces
difficulties in controlling operations performed at all branches. In
IM
order to function efficiently in such a complex business environ-
ment, MIS offers integrated information to all the branches.
To survive in competition: By providing accurate and updated in-
formation about the latest changes and market trends, MIS helps
an organisation to sustain its position in the market. With the help
of updated information, managers can make various strategic de-
cisions effectively.
M
To accomplish managerial functions efficiently: In the current

business scenario, managers are responsible for performing var-
ious functions such as business planning, decision making, and
forecasting. MIS provides information in a presentable form that
N
can be easily understood by managers, thereby helping them in

performing their functions effectively and quickly. For example,
MIS helps managers in comparing the sales of the last five years
with the sales of the current year by representing sales data in a
graphical or tabular form.
5. By providing inaccurate and obsolete information about the

latest changes and market trends, MIS helps an organisation
to sustain its position in the market. (True/False)
ACTIVITY
Search for an example where MIS application has failed and pre-
pare a report on it.

N O T E S
3.6 DECISION SUPPORT SYSTEMS

In the present business environment, decision making has become far
more complicated than it was in the past. Moreover, if decisions are
not made on time, organisations may not be able to exploit opportuni-
ties or defend against threats. The major problem that managers face
while making decisions is the availability of abundant information.
Sometimes, abundance of information causes distortion of its accura-
cy, which makes it difficult for managers to make a complete analysis
of the problem. This gives rise to a need for computerised decision
support that can enable managers to make effective decisions on time.
Decision Support System (DSS) is an interactive information system
that is developed to help managers in making critical business deci-
sions by performing logical data analysis and testing hypothesis.
S
According to Hicks, DSS is an integrated set of computer tools that al-
low a decision-maker to interact directly with computers to create infor-
mation useful in making decisions.
IM
In the words of Keen and Scott-Morton, A DSS couples the intellectual
resources of individuals with the capabilities of the computer to improve
the quality of decisions. It is a computer-based support system for man-
agement decision-makers who deal with semi-structured problems.
DSS mainly gathers and presents information related to legacy and

relational data sources, relative data figures, estimated figures based
M
on assumptions and data available, and possible outcomes of different

decision alternatives. The main characteristics of DSS are explained
as follows:
It helps individuals in performing decision-making activities and
processes.
N
It is an interactive system designed to enable decision-makers or

staff users to understand the procedure of interaction and opera-
tions performed.
It is developed to be used as both routine and ad-hoc decision sup-
port task.
It offers various tools to support multiple tasks related to decision
making, such as data analysis, identification and design of alterna-
tives, selection of alternatives and decision implementation.
It is an independent system that gathers or duplicates data from
other information systems or subsystems.
6. _________ is an interactive information system that is developed

to help managers in making critical business decisions by
performing logical data analysis and testing hypothesis.

N O T E S
ACTIVITY
Using the Internet, find information on tools offered by DSS that

help managers in decision making.
3.7 EXECUTIVE INFORMATION SYSTEMS

In the previous sections, you have studied about different information
systems like TPS, MIS, DSS, etc. These information systems serve
various levels of management by providing relevant information. How-
ever, the top management of an organisation requires more accurate
information as it is responsible for making strategic decisions. Execu-
tive Information System (EIS) is a tool that supports decision making
S
at the top level of an organisation. It presents information in the form
of customised reports to help executive levels in making a comparison
of trends. For instance, by providing a report on sales figures of an
organisation in the past five years, EIS can help the top executives
IM
of the organisation in setting sales targets for the next three years.
It presents a report in a graphical format that can be easily analysed
by top-level executives in a short period of time. Figure 3.3 shows an
example of a report generated byEIS:
6
M
4 Target Sales (in lakhs)
2 Actual sales (in lakhs)
0
2008 2009 2010 2011
N
Figure 3.3: An Example of EIS Report
In Figure 3.3, it is shown that. In 2008, the target sales level was higher
than the actual sales volume. However, in 2009, the sales target de-
clined considerably to motivate salespeople to make higher achieve-
ments. This information is useful for top-level managers to determine
an optimum sales target for the succeeding year.
3.7.1 ADVANTAGES AND DISADVANTAGES OF EIS
As said earlier, EIS is basically designed for top-level executives to

retrieve updated information in a graphical format so that they can
understand the business scenario in less time. The following are some
important advantages of EIS:
It enables top management to quickly access both internal and ex-
ternal information.

N O T E S
Ithelps executive-level managers in handling strategic issues and

making efficient decisions by providing updated information.
It displays the relevant information in the form of graphics, tables,
and equations, which helps top-level executives in making quick
analysis.
It establishes sync between executives working on different sys-
tems within an organisation.
By providing correct and timely information, it helps executives in
identifying critical success factors.
Though EIS is highly competent in improving the strategic efficiency

of an organisation, it is not free from faults. Some of the important
disadvantages of EIS are as follows:
S
Its functionality is limited as it is meant only for top-level manage-
ment.
Sometimes, the graphical representation may not answer the
IMquestions in the mind of top-level managers. This makes it diffi-
cult for top managers to perform complete analysis and arrive at
a conclusion.
In terms of functions, it is difficult to separate EIS from DSS as
both offer similar decision-making tools.
The organisations incur huge cost for its implementation.
M
7. EIS helps executive-level managers in handling ______________

issues and making efficient decisions by providing updated
N
information.
8. The organisations incur huge cost for EIS implementation.
(True/False)
ACTIVITY
Find out how EIS can help a marketing firm in making strategic
decisions related to the launch of a new product. Prepare a report
on it.
3.8 DATA WAREHOUSING

Data comprises various qualitative or quantitative variables that can
be analysed to produce meaningful information. Generally, it is re-
corded and stored in a database. However, with the growing use of
information systems in organisations, a large amount of data is re-
quired to be stored for later use. The excess load of data may slow

N O T E S
down the performance of an information system. To prevent it, a tech-

nique called data warehousing is used. Data warehousing is a process
of amalgamating all the data required by an information system at a
centralised location. According to Bill Inmon, A data warehouse is a
subject-oriented, integrated, time-variant and non-volatile collection of
data in support of management’s decision-making process.”
In simple words, data warehousing is a process of building a data ware-

house. A data warehouse is a database that is designed for the purpose
of reporting and analysis. Through data warehousing, an organisation
can store data in such a manner that it can be easily analysed and con-
verted into meaningful information. Moreover, the data is protected
from various risks such as damage, theft and misuse. Some important
advantages of data warehousing are as follows:
S
It enables integrated storage of data for quick access.
It offers backup for a large amount of data produced in the past.
Itenhances the efficiency of an ERP system in the long run by re-
ducing the load of stored data.
IM
It
offers a view of cross-functional data that is helpful in decision
making.
9. ______________ is a database that is designed for the purpose

M
of reporting and analysis.
ACTIVITY
N
List down issues that can be faced by an organisation while main-

taining a data warehouse.
3.9 DATA MINING

Data mining is a process of extracting maximum information (as re-
lated to the consumer behaviour) from a data set and converting it
into meaningful observation for further application. It is widely used
by organisations involved in market research, business development,
advertising, investment analysis, etc.
Modern data mining systems are capable of comparing past patterns,

formulating inferences, and testing hypothesis to generate operation-
al rules. For example, if an organisation desires to enter into a new
market, it needs to analyse data related to the purchasing behaviour
of customers, level of competition, entry and exit barriers, etc. This
can be easily done with the help of data mining. However, locating da-
tabases on the Web is a constant challenge for organisations. To over-

N O T E S
come this challenge, various data mining techniques are used. Two
commonly used techniques are as follows:
Transactional log: It is a method of data collection in which web
servers record and store interactions between users and the search
engine in a log file. The information includes users’ IP addresses,
query, search engine access time, websites visited, etc. Transac-
tional log analysis is performed in order to extract meaningful in-
formation out of transactional logs.
Clickstream data: It is the data generated as a result of each user’s
session. When a user clicks on a webpage, hyperlink, or website,
clickstream data is generated. However, not all data generated
through clickstream is useful for online businesses. They aim to ex-
tract clickstream data in a way that useful information is separated
S
from the unwanted data. This can be achieved by using “granular-
ity manager,” which is software to summarise, aggregate, merge
or compress clickstream data, to generate useful information for
e-commerce organisations.
IM
10. Modern data mining systems are capable of comparing past

patterns, formulating inferences, and testing hypothesis to
generate operational rules. (True/False)
M
ACTIVITY
With the help of the Internet, find information on how data mining
can be useful in the banking sector.
N
3.10 ONLINE ANALYTICAL PROCESSING

On-Line Analytical Processing (OLAP) is a technology that is used to
arrange and analyse data stored at large databases or data warehous-
es. It facilitates data analysis at multiple databases simultaneously. By
OLAP, databases are divided into OLAP cubes, which are designed
and arranged by the cube administrator to generate information re-
ports required by users. The main characteristics of OLAP are:
It analyses data by performing statistical operations and logical
reasoning.
It controls the access of multiple users at a time. Moreover, it pre-
vents unauthorised access to information as well as maintaining
its confidentiality.
It provides a multi-dimensional view of data according to the re-
quirements of users.
It evaluates data quickly and provides meaningful information.

N O T E S
OLAP is used in a number of business applications like market re-

search, financial analysis, business consolidation, planning, budget-
ing, forecasting, product profitability analysis, pricing, activity-based
costing, workforce planning, quality assurance, etc. There are main-
ly three types of OLAP used in organisations, which are listed in
Figure 3.4:
Relational OLAP
Multidimensional OLAP
Hybrid OLAP
S
Figure 3.4: Types of OLAP
IM
Let us discuss these different types of OLAP:
Relational OLAP (ROLAP): It functions on the lines of relational
database and stores data in the form of rows and columns. The re-
quirement of ROLAP occurs when data is frequently manipulated.
Multidimensional OLAP (MOLAP): It stores data in a multidi-
mensional array, which makes data storage quick and efficient. It
M
responds quickly to user requests as compared to relational OLAP.

Hybrid OLAP (HOLAP): It incorporates the properties of both
multidimensional and relational databases for storing data. In
HOLAP, data is stored in a relational database for large data pro-
cessing, whereas for speculative processing, the data is stored in a
N
multidimensional database.
11. Name the type of OLAP that functions on the lines of relational
database and stores data in the form of rows and columns.
ACTIVITY
Using the Internet, find any two applications of HOLAP.
3.11 SUMMARY
In the modern scenario, organisations are adopting Business Pro-
cess Re-engineering (BPR) to improve and enhance the efficiency
of their existing processes.

N O T E S
BPR involves radical and innovative reorientation of existing busi-

ness processes to achieve goals more effectively.
To improve their overall performance, organisations can deploy
both BPR and ERP together. BPR helps organisations to redesign
their existing processes and improve their efficiency. For this, they
need accurate information related to processes. Such information-
al needs can be fulfilled by ERP.
An information system is a set of interrelated components that col-
lects, stores, analyses and disseminates information for effective
business decision making.
In an organisation, different types of information systems are used
at various levels. Some of these information systems include TPS,
MIS, DSS and EIS.
S
TPS is a type of information system that is used to gather, record,
manipulate and retrieve data related to day-to-day business trans-
actions of an organisation.
IM
MIS collects data from various internal and external sources, pro-
cesses it, and provides meaningful information.
DSS is an interactive information system that is developed to help
managers in making critical business decisions by performing log-
ical data analysis and testing hypothesis.
EIS is a tool that supports decision making at the top level of an
organisation.
M
Data warehousing is a process of amalgamating all the data re-

quired by an information system at a centralised location.
Data mining is a process of extracting maximum information (as
related to the consumer behaviour) from a dataset and converting
N
it into meaningful observation for further application.

On-Line Analytical Processing (OLAP) is a technology that is used
to arrange and analyse data stored at large databases or data ware-
houses.
KEY WORDS
Business process re-engineering: It is the exploration and re-

design of existing workflows in an organisation to automate var-
ious tasks and eliminate redundant activities.
OLAP cube: It is a multidimensional array used for storing data.
Data mining: It is a process of exploring large databases to pro-
duce new and relevant information.
Data warehousing: It is a process of storing all or some parts of
data gathered by an organisation.
OLAP: It involves analysis of business data by performing com-
plex calculations, trend analysis and sophisticated data model-
ling.

N O T E S

1. Discuss the steps involved in the BPR process.
2. Write a short note on TPS.
3. Explain the main characteristics of DSS.
4. List the advantages of EIS.
5. Explain the techniques used for data mining.
S
Topic Q.No. Answers
Business Process Re-engi- 1. a. Redesigning
neering
2.
IM
True
Information Systems 3. d. Organisation
Transaction Processing 4. TPS
System
Management Information 5. False
Systems
M
Decision Support Systems 6. DSS

Executive Information 7. Strategic
Systems
8. True
N
Data Warehousing 9. Data warehouse

Data Mining 10. True
On-Line Analytical Pro- 11. Relational OLAP
cessing

1. The first step in the BPR process is to ascertain the business
process that needs to be redesigned. Refer to Section 3.2 Business
Process Re-engineering.
2. TPS is a type of information system that is used to gather, record,
manipulate and retrieve information related to the business
transactions of an organisation. Refer to Section 3.4 Transaction
Processing System.
3. An important characteristic of DSS is that it helps individuals
in performing decision-making activities and processes. Refer to
Section 3.6 Decision Support Systems.

N O T E S
4. EIS is designed exclusively for top-level executives to retrieve

updated information in a graphical form. Refer to section
3.5 Executive Information Systems.
5. There are two techniques used for data mining: transactional
logs and clickstream data. Refer to Section 3.7 Data Mining.

3.14
REFERENCE
SUGGESTED READINGS
Gupta, H. (2011). Management information system. New Delhi: In-
ternational Book House.
S
Halale, M. (2010). Management information system. Mumbai: Hi-
malaya Pub. House.
IM
E-REFERENCES
Relational S.A.,. (2015). Business Process Reengineering. Retrieved
12 March 2015, from http://www.relationalfs.com/services/sys-
tems-services/business-process-re-engineering/
Small Business - Chron.com,. (2015). Types of Information Sys-
tems in an Organization. Retrieved 12 March 2015, from http://
smallbusiness.chron.com/types-information-systems-organiza-
M
tion-43097.html
Tutorialspoint.com,.(2015). MIS Introduction. Retrieved 12 March
2015, from http://www.tutorialspoint.com/management_informa-
tion_system/management_information_system.htm
N

C H A
4 P T E R
SYSTEMS, APPLICATIONS AND PRODUCTS (SAP)
S
CONTENTS
4.1 Introduction
4.2 Introduction to SAP
4.2.1
IM
Characteristics of SAP
4.2.2 History of SAP
Activity
4.3 SAP Application Modules
M
Activity
4.4 Business Processes and SAP
Activity
4.5 SAP R/3 System
N
4.5.1 R/3 as a Vehicle for Business Integration

Activity
4.6 Summary

N O T E S
CADBURY: INTEGRATING THE SYSTEMS
Cadbury, owned by Mondelez International, is the second largest

British confectionary company in the world. The company was
founded in 1824 by Mr. John Cadbury, and is based in Birming-
ham, UK. Cadbury started its operations in India in 1948, by im-
porting chocolates. At present, Cadbury India has four running
segments, viz., Chocolate Confectionery, Milk Food Drinks, Candy
and Gum. Cadbury enjoys a leadership position in the chocolate
confectionery business. It has approximately 140,000 employees
working in around 70 countries.
The Indian operation of Cadbury is fully owned by Kraft Foods
Inc. In the 1990s, Kraft Foods Inc. decided to implement ERP to
S
enhance competitiveness, efficiency and customer service in the
company.
The main purpose for implementing ERP was to integrate all
the major processes of the business and reduce operational cost.
IM
These processes comprised the finance system, the procurement
system, human resources and other individual supportive func-
tions. The various departments of the company were working in
a decentralised manner, where only the finance department was
centralised.
Kraft Foods Inc. chose to implement the SAP ERP 6.0 software
system across its 16 locations. The objective of ERP implementa-
M
tion was to centralise the systems in these locations.

In 1995, Kraft Foods Inc. decided to adopt the Big Bang approach
for implementing the ERP software system. This approach in-
volved the implementation of the selected ERP solution system
across the whole organisation simultaneously. Kraft decided to
N
hire external ERP vendors for ERP implementation. It selected

Siemens (software vendor) for the ERP software and IBM (tech-
nical infrastructure provider) for its infrastructure.
The implementation of SAP ERP 6.0 provided the following ben-
efits to Kraft Foods Inc.:
Introduction of a regular and swift feedback system.
Implementation of a new method of a warehouse manage-
ment system, which coordinated the branch offices along with
the warehouse depots.
Enhancement of transparency across the company.
Automation of all manual processes across all functions.
Availability of real-time data throughout the company.
Implementation of a proper Management Information System
(MIS).
Replacement of the old accounting system with a new stock
accounting system.

SYSTEMS, APPLICATIONS AND PRODUCTS (SAP) 49
N O T E S
LEARNING OBJECTIVES

> Describe the basic concepts of SAP
> Identify the SAP application modules
> Describe how various business processes are related to SAP
> Discuss SAP R/3
4.1 INTRODUCTION
In the previous chapter, you have studied about ERP-related tech-
nologies. The concepts of Business Process Re-engineering (BPR),
S
Management Information System (MIS) and Decision Support Sys-
tem (DSS) were also explained to you. In addition, you studied the
processes of data warehousing and data mining. Though each of these
systems and processes are important to the ERP system, data ware-
IM
housing and data mining form the backbone of the system.
ERP implementation has enhanced the quality, uniformity and speed

of information. This information is shared internally within the or-
ganisation as well as externally with clients, service providers, ven-
dors, stakeholders and customers. SAP is one of the most sought-after
vendors for ERP solutions as it helps in the efficient management of
M
information in organisations. Many small and mid-sized organisations

have adopted SAP to meet organisational objectives. Different SAP
application modules have also been developed to enhance business
operations in various areas. These modules include the sales and dis-
tribution module, the business intelligence module, the customer rela-
N
tionship management module, etc., and they help by providing strong

technical support in the respective areas.
In the earlier chapters, you were acquainted with the basic concept of
ERP. You also learned why ERP enjoys a dominant place among other
available software systems. In this chapter, you will study about the
SAP software and its various application modules in detail.
4.2 INTRODUCTION TO SAP

SAP (Systems, Applications and Products) in Data Processing is a
software company that is known as a leader in Enterprise Resource
Planning (ERP) software. The company, which was founded in 1972,
is based in Walldorf, Germany. Its product, SAP, is a well-integrated
software package that provides client/server business solutions. It has
managed to acquire a large stake in the market in spite of strong com-
petitors. This is because SAP is the most sought-after vendor for ERP
solutions.

N O T E S
According to Earl (1997), the introduction of client/server computing

and usage of Business Process Re-engineering (BPR) applications has
led to a sudden increase in demand of SAP ERP systems.
In common parlance, SAP ERP is also called just SAP. Technically,

SAP retrieves and stores data in a third-party database known as Da-
tabase Management Systems (DBMS), for example, Oracle, Informix,
etc. Thus, it only serves as an interface between the input provider
and DBMS.
In a business process, the graphic user interface of SAP that is imple-

mented on the end-user side performs the following roles:
Receives all inputs given by the user by generating appropriate
windows and buttons
S
Processes and transmits all inputs and requests of the user to the
SAP system
Provides compiled, conclusive data to the end user
IM
SAP has different software modules for processing different business
functions. These include the following:
Finance
Sales and Distribution

Materials Management
M
Production and Planning

Human Resource Management
Quality Management
N
Let us study the features and characteristics of SAP in more detail in

the next sections.
4.2.1 CHARACTERISTICS OF SAP
The main characteristics or features of the SAP ERP system, which

make it popular among the users, are listed as follows:
It is a complete software package as it provides client/server solu-
tions on the majority of business processes in any industry.
It integrates most of the business processes of an organisation.
It stores the data in a DBMS.
It provides real-time access of data to users.
It contains procedures to process most of the business transac-
tions of a different nature.
It integrates and processes all business-planning activities with
different business transactions.

N O T E S
Itis adaptable to frequent changes in business requirements. It

has a system that provides the ease of configuration resulting in
higher adaptability.
Itcan be customised according to the needs of the user and the
type of industry.
Itmaintains data integrity by using its powerful data verification
system.
Ithas low running cost. Once the system is established and imple-
mented, it can be run and maintained with a small, well-trained
support staff.
Elimination of loopholes from business processes helps synchro-
nise all business processes, resulting in increased productivity.
S
It provides real-time data reporting and processing.
It is used throughout the world.
Itprovides updated and customised reports from all departments
to the management.
IM
It supports multiple languages and currencies.
It maintains data consistency throughout the system—internally
as well as externally.
Itprovides customised solutions according to the needs of the
business and industry.
M
Continuous support is guaranteed.

It reduces various operational and production costs of the busi-
ness, such as sales order processing cost, distribution cost and
freight cost.
N
It reduces the total operational time, which includes calculation

time, request-to-quote time, order-to-delivery time, delivery-to-in-
voice time.
Availability of better product results in higher customer satisfac-
tion.
It helps in increasing cash flow and investment potential.
It provides a faster payment and billing process due to better man-
agement and fewer reconciliations.
These characteristics are a major reason for SAP being the most
powerful ERP system. SAP synchronises all business areas of an en-
terprise by integrating different functions, including Human Capital
Management (HCM), Financial Management (FM), Production Man-
agement (PM), Customer Relationship Management (CRM), sales,
customer services, logistics and materials management and procure-
ment. These characteristics enable organisations to benefit from SAP
implementation.

N O T E S
In spite of its many advantages, SAP suffers from one serious disad-
vantage, i.e., its complex and high cost of implementation. Hence, it is
suited only for medium to large organisations. However, any company
can achieve higher ROI with proper SAP implementation. Before we
move to the next section, it is important to understand the architec-
ture of SAP.
The SAP (client/server) architecture consists of three main layers, as

shown in Figure 4.1:
Database
Database
Layer
Server
S
SAP Server
Communication
IM Application
R/3
Application
Layer
Server
SAP Access
Communication
M
Presentation SAP gui SAP gui SAP gui

Layer
N
Figure 4.1: SAP Architecture
The layers shown in Figure 4.1 can be explained as follows:

1. Presentation Layer: This layer interacts with the database layer
through the application layer. This layer also includes the SAP
Graphical User Interface (GUI). Users provide inputs to the GUI
by using keystrokes, mouse-clicks and function keys, which are
passed on to the application server for processing. Similarly, the
results sent by the application server are formatted by the GUI
so that the users can understand them.
2. Application Layer: This layer interacts with the presentation
and database layers. The application comprises an application
server that decodes the ABAP/4 language and programs. The
application server includes a set of executables, which control
the input and output from the application layer.

N O T E S
3. Database Layer: This layer passes the data or information

received to the application layer. It stores all data of the ERP
SAP systems. The layer comprises a set of executables, which
process the database requests as received from the application
server. It transfers these requests to the Relation Database
Management System (RDBMS), which provides the requested
data to the database server.
EXHIBIT
SAP WEB-ENABLED INITIATIVES
SAP has launched certain Web-enabled systems in recent years.

These initiatives are as follows:
S
MySAP.com: Launched as a marketplace portal and a general
portal
SAP Online Store: Launched for Business-to-Business (B2B)
IM
and Business-to-Customer (B2C) transactions
SAP B2B procurement: Launched for business purchasing pro-
cesses
SAP Employee-Self-Service: Launched for corporate users
Let us now learn the history of SAP.

M
4.2.2 HISTORY OF SAP
SAP stands for Systems, Applications and Products. Originally, SAP

was founded in June 1972 as Systemanalyse und Programmentwick-
N
lung (System Analysis and Program Development) in Mannheim,

Baden-Württemberg, Germany, by five former IBM engineers from
the Artificial Intelligence (AI) department. The engineers were Diet-
mar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus Tschira and
Claus Wellenreuther.
SAP is now based in Walldorf, Baden-Württemberg, Germany. It has

numerous regional offices across 130 countries.
The founder members, who were earlier working on an enter-

prise-wide system, were asked to leave the project. However, they
decided to resign from IBM and founded their private company, Sys-
teme, Anwendungen und Produkte in der Datenverarbeitung (Systems,
Applications and Products in Data Processing).
Their first client was Imperial Chemical Industries, for which they de-
veloped a payroll and accounting program.

N O T E S
Figure 4.2 presents the evolution of SAP over the years:
1972 SAP founded in Germany
1973 SAP R/98 launched as first commercial software
1976 SAP GmbH founded
1979 SAP R/2 launched for mainframe computers
SAP GmbH became SAP AG and listed under Frankfurt

1988
S
and Stuttgart Stock Exchange
1992 SAP R/3 launched as client-server application

IM 1996 SAP R/3 became Web-enabled partially
1997 New product line including CRM, SCM, DBMS launched
1999 mySAP.com released

M
2000-2005 mySAP business Suite, NetWeaver, XApplications launched
2014 SAP AG become SAP SE

N
Figure 4.2: Timeline of SAP
The benefits of SAP implementation in different enterprises can be

understood better by studying the various SAP application areas,
SAP modules and SAP sub-modules. These are discussed in the fol-
lowing sections.
1. High integration of different modules is the most important

characteristic of SAP. (True/False)
2. Imperial Chemical Industries was the first client of SAP. (True/
False)
3. What was the first commercial software of SAP?
4. SAP was founded in _________ and is headquartered in
_____________.

N O T E S
ACTIVITY
Using the Internet, search the names of SAP software versions

launched during the period 1990–2000.
4.3 SAP APPLICATION MODULES

The SAP system has multiple layers and is arranged in the form of
different functional modules, with each module covering a distinctive
function of a business organisation.
Each business task is handled by a specific module, and these modules

are linked to one another other according to the requirement. Some of
S
the most commonly used SAP functional modules are Financials and
Controlling (FICO), Human Resources (HR), Materials Management
(MM), Sales & Distribution (SD) and Production Planning (PP).
Let us now understand the SAP application modules.

IM
There are 12 major application areas or SAP application modules, as
they are called. These 12 SAP application modules are further divided
into a number of sub-modules.
From the business point of view, SAP application modules are the
centre of a SAP system. A typical company may not have all these
M
modules, but there would definitely be a relationship among all the
modules. The various application modules are shown in Figure 4.3:
Financial Accounting (FI)

N
Controlling (CO)
Asset Management (AM)

SAP Application Modules
Project System (PS)
Workflow (WF)
Industry Solutions (IS)
Human Resources (HR)
Plant Maintenance (PM)
Materials Management (MM)
Quality Management (QM)
Production Planning (PP)
Sales and Distribution (SD)
Figure 4.3: SAP Application Modules

N O T E S
The various SAP application modules shown in Figure 4.3 can be

briefly explained as follows:
Financial Accounting (FI): It is one of the most important modules
of SAP as it takes care of the data related to financial transactions.
It is used for recording, collecting and processing financial data
and generating reports for financial decision making. It involves
recording information on accounts receivable, payable, ledger
account and sub-ledger account. In simple terms, FI aims at de-
signing the books of accounts that show an organisation’s current
financial status. This module includes the following sub-modules:
General Ledger Accounting
Accounts Receivables
S
Accounts Payable
Asset Accounting
Bank Accounting
IM Consolidation
Special Purpose Ledger

Travel Management
Controlling (CO): This module performs the function of generat-
ing internal reports to help the management in decision making.
M
CO processes the financial transactions, which reflect the cost

and revenue of a company. This module includes the following
sub-modules:
Cost Element Accounting
N
Cost Centre Accounting

Profit Centre Accounting
Internal Orders
Product Cost Controlling
Profitability Analysis
Order Contribution Analysis
Asset Management (AM): This module helps in handling and
monitoring individual aspects of fixed assets by acquiring, depre-
ciating, evaluating and retiring assets. The AM modules include
the following sub-modules:
Purchase and Sale of Assets
Depreciation
Investment Management

N O T E S
Project System (PS): This module provides support for planning,

managing, controlling and monitoring highly complex long-term,
high-risk projects with defined goals. The PS module contains the
following sub-modules:
Payments
Confirmation
Costs
Resources
Dates
Documents
S
Information System
Material
Progress
IM
Revenues and Earnings
Simulation
Versions
Workflow (WF): This module associates the integrated SAP R/3

M
application modules with cross-application technologies, tools
and services, including e-mail. The WF module helps in design-
ing, modifying and managing the structure of an organisation on
the basis of work responsibility, and makes a particular person ac-
countable for each standard workflow template.
N
Industry Solutions (IS): This module is specifically designed for

particular industries. It merges the SAP application modules with
modules that are specifically designed for a particular industry.
For instance, separate techniques have been designed for special
industries, such as banking, oil and gas, pharmaceuticals, retail,
healthcare, automotive, utilities, insurance, wholesale distribu-
tion, chemical, media, etc. The various sub-modules of the IS mod-
ules are as follows:
SAP Banking
SAP Aerospace and Defense
SAP Automotive
SAP Engineering and Construction
SAP Chemicals
SAP Consumer Products

N O T E S
SAP Telecommunication
SAP Utilities
SAP Service Provider
Human Resources (HR): This module is focused on all the events
related to Human Resource management of the organisation,
starting from the entry to the exit of an employee. The SAP HR
module is an integrated system that manages the employee life-
cycle and payroll, and provides support for the planning and con-
trolling of personnel activities. The sub-modules of the HR module
are as follows:
Organisational Management
S
Personnel Administration
Personnel Planning and Development
Recruitment
IM Time Management
Travel Management
Payroll
Benefits
Compensation Management
M
Personal Cost Planning

Budget Management
Training and Event Management
N
Plant Maintenance (PM): This module takes care of the plant

maintenance function. It consists of the planning activity for plant
maintenance, which includes scheduling daily routine mainte-
nance activities so that they do not disrupt plant operations. This
module also takes care of processing and implementation of the
plant maintenance plan as per the schedule, and lastly, the com-
pletion of all the maintenance activities in conjunction with the
Production Planning (SAP PP) module. The sub-modules of the
PM module are as follows:
SAP PM-WOC: Maintenance Orders Management
SAP PM-SM: Service Management
SAP PM-EQM: Equipment and Technical Objects
SAP PM-IS: PM Information System
SAP PM-PRM: Preventive Maintenance
SAP PM-PRO: Maintenance Projects

N O T E S
Materials Management (MM): This module helps in processing

information related to day-to-day procurement and inventory
functions. It is designed to record data on the following:
Purchasing
Goods Receiving
Material Procurement
Inventory Management
Consumption-based Planning
Reorder Point Processing
The procurement process of the MM module is depicted in Figure 4.4:
S
Demand
IM
Determination
Payment Source
Processing Determination
M
Invoice Supplier
Procurement
Verification Selection
N
Goods Purchase Order

Receipt Processing
Order
Monitoring
Figure 4.4: Procurement Process of the Materials

Management Module
Figure 4.4 illustrates the procurement function of a business, which

includes an eight-step process, where each step depicts the sub-mod-
ule of this particular business process. Here, the procurement func-
tion starts by determining the demand and source of material. This is
followed by the selection of the supplier, preparation and processing
of the purchase order, monitoring of the order, receiving of the goods,
verification of the invoice with the purchase order and, finally, making
the payment. The SAP MM module records information at each step

N O T E S
of the procurement function and generates reports of the inventory

available to the organisation.
Quality Management (QM): This module deals with the quality
aspect of the organisation or business, including business units
such as sales, purchase, production, R&D, procurement, etc. Qual-
ity control is the most important concern of the SAP QM module.
This module consists of the quality planning activity, followed by
quality inspection and quality control activities. The sub-modules
of the QM module are as follows:
SAP QM-QP: Quality Planning
SAP QM-IM: Quality Inspection Processing
SAP QM-QC-AQC: Quality Control
S
SAP QM-IT: Test Equipment Management
SAP QM-PT-RP: Control in Logistics
IM SAP QM-QN: Quality Notifications
SAP QM-CA: Quality Certificates
SAP QM-CR: General Functions
Production Planning (PP): This module is used for processing in-
formation related to planning and controlling of the production
function of an organisation. The module is designed to record data
M
on bills of material, work centres, routings, shop floor control,

product costing, etc. The sub-modules of the PP module are as
follows:
SAP PP-SOP: Sales and Operations Planning
N
SAP PP-CRP: Capacity Requirement Planning

SAP PP-MP: Master Planning
SAP PP-ATO: Assembly Orders
SAP PP-BD: Basic Data
SAP PP-IS: Information System
SAP PP-KAB: Kanban/Just-in-Time
SAP PP-MRP: Material Requirements Planning
SAP PP-PDC: Plant Data Collection
SAP PP-PI: Production Planning for Process Industries
SAP PP-REM: Repetitive Manufacturing
SAP PP-SFC: Production Orders
SAP DS: Detailed Scheduling

N O T E S
The manufacturing process of the Product Planning module is depict-

ed in Figure 4.5:
Order
Creation
Machine
Goods Receipt
Occupancy
Confirmations Manufacturing Order Release
S
Order Execution
IM Order Printing
Material Staging
M
Figure 4.5: Manufacturing Process of the Production

Planning Module
Figure 4.5 illustrates the manufacturing function of the business, which

includes an eight-step process, and each step depicts the sub-module
N
of this particular business process. Here, the manufacturing module

involves creation of the order, which leads to the occupancy of ma-
chine or equipment. This is followed by release of the order, printing
of the order, material staging, order implementation, order confirma-
tion, and finally, receiving of the goods. The SAP PP module records
information at each step of the manufacturing process and generates
reports on the available raw material, goods produced, etc., to the or-
ganisation.
Sales and Distribution (SD): This module processes information
related to the sales, delivery and billing functions of an organisa-
tion. It is designed to record data about sales orders processed,
sales quotation processed, sales inquiry processed, pre-sales sup-
port, delivery process, etc. The sub-modules of the SD module are
as follows:
SAP SD-MD: Master Data
SAP SD-CAS: Sales Support
SAP SD-SLS: Sales

N O T E S
SAP SD-SHP: Shipping

SAP SD-TR: Transportation
SAP SD-BIL: Billing
SAP SD-SIS: Sales Information System
SAP SD-EDI: Electronic Data Interchange (EDI)
SAP SD-GF: General Sales Functions
SAP LE: Logistic Execution
The order processing phase of the Sales and Distribution module is

depicted in Figure 4.6:
S
Sales Order
IM
Payment Availability
Processing Check
Order Outbound
Billing
M
Processing Delivery
Transportation
Goods Issued
N
Planning
Picking
Figure 4.6: Order Processing of the Sales and Distribution Module
Figure 4.6 illustrates the order processing function of a business,

which includes an eight-step process. Here, order processing starts
with the receipt of the sales order. After this, the sales order is checked
for availability of the required goods or services; the subsequent ac-
tivities include processing the outbound delivery, planning for the de-
livery of the order, picking the goods to be transported, issuing and
billing the goods for delivery and finally, processing the payment. The
SAP SD module records information at each step of the sales order
processing and distribution function and generates reports on the
goods or services sold, billed, and delivered by the organisation to the
customers.

N O T E S
5. The Financial Accounting (FI) SAP application module has

nothing to do with accounts receivables and accounts payable.
(True/False)
6. Briefly explain the SAP Industry Solutions (IS) module.
7. Which module of SAP supports the functioning of all modules?
ACTIVITY
Using the Internet, make a list of all the SAP functional modules in
the SAP R/3 system.
S
4.4 BUSINESS PROCESSES AND SAP
IM
In a typical business organisation, there are several business process-
es that work together in an integrated manner. These business pro-
cesses aim at achieving the business goals and objectives of the organ-
isation. A business process is defined as a set of connected activities
belonging to different functional areas, which generate value for the
organisation. Business processes can be further divided into various
sub-categories as per SAP, which are as follows:
M
1. Application Core Processes: These refer to the core business
processes that are critical for business operations. Although
these core processes are well packaged and pre-defined, they can
be customised according to the SAP applications; for example,
SAP CRM is customised to address customer relation issues of
N
an organisation.
2. Composite Business Processes: These refer to the processes
made for specific business requirements. Generally, composite
business processes are driven by sudden changes in the business
or by critical business events. These processes are aimed at
adding value to the business over and above the application
core processes. They can be further classified into collaborative
processes (human-centric) and integration processes (system-
centric).
These sub-processes help to provide a competitive edge to the busi-

ness. They are used for aligning the existing business partners and
legacy systems (core processes) along with the new processes (com-
posite processes) and applications.
SAP implementation through automation or computerisation of any

function or business unit requires a thorough understanding of the
business and its processes. Integration and reorganisation of all busi-
ness processes is known as Business Process Engineering. Let us un-

N O T E S
derstand the business processes and SAP functionality with the help
of Figure 4.7:
Business Process - Overview
Financial Controlling
Cost Controlling
Sales Initial Customer Inventory Customer

Delivery Invoicing
Contact order Sourcing payment
Production Planned Prod. Prod.
S
SOP MPS MRP
order order control
Procurement
Purch. Vendor Purch. Goods Invoice Vendor
IM req. selection order issue verificat payment
Logistics Controlling Sales, Production, Purch., Warehouse Mgmt
Figure 4.7: Business Processes and SAP Functionality

Source: http://www.slideshare.net/Rashaaaaad/sap-overview-26176420
M
Figure 4.7 shows how various business functions are interlinked to
form an integrated system that can provide one single facet of infor-
mation across the entire business unit. Once integrity is established in
business processes, a process-based IT infrastructure is build, which
serves as a pre-requisite for the introduction and implementation of
N
the SAP system.
Once implemented, the SAP system records and updates data on mul-
tiple functions of the business simultaneously. For instance, SAP au-
tomatically updates the inventory database and manufacturing plans
whenever new sales is made by the Sales function. Similarly, SAP up-
dates the material stock level whenever there are changes in the man-
ufacturing plans, thus notifying the management to order raw materi-
al on a timely basis. The SAP system also enables organisations to bill
customers immediately after the goods are shipped to them.
SAP R/3 is a powerful system that is able to meet all the needs of an
organisation, by effective flow of data to distant locations while main-
taining data consistency and reliability. We will study about SAP R/3
in detail in the subsequent section.
8. What are the two types of business processes?

N O T E S
ACTIVITY
Using the Internet, make a list of five successful clients of SAP that
have benefited from the implementation of the software.
4.5 SAP R/3 SYSTEM

The SAP R/3 (R stands for Real Time and the number 3 denotes the
three-tier application architecture) system is packaged business soft-
ware that helps in integrating all functions and processes of a busi-
ness. It is one of the most popular SAP software applications, and
organisations across the world have already implemented SAP R/3
software successfully in their work processes.
S
The popularity of SAP R/3 as client–server software is chiefly due
to the fact that it is made up of groups/layers that run concurrently
across multiple individual computer systems. The term, “client–serv-
IM
er” is composed of two parts—client and server, where client is that
component/layer that requests services and server is that component/
layer that provides services.
SAP R/3 is considered as the most successful SAP version so far and
has benefitted many organisations and businesses. Its success is due
to a number of characteristics, which are shown in Figure 4.8:
M
Why - SAP R/3 has been successful

N
-Secure -Integrated
-Multi-Lingual
Information
SAP
-Multi-Currency
Best Business Enterprise-Wide

Practices
Figure 4.8: SAP R/3 Characteristics
We can explain these characteristics briefly as follows:

Integrated: SAP R/3 integrates all business functions and mod-
ules to provide unified information to the business.

N O T E S
Secure Information: SAP R/3 prevents information from being

deleted, modified or shared by any unauthorised person. Only spe-
cific, authorised users can make the changes.
Enterprise-wide: SAP R/3 has an enterprise-wide reach, as it col-
lects and processes data simultaneously from all functions and
business units. It can be implemented in any organisation or even
to individual business units. SAP R/3 provides and maintains a
single database for all business master data, without redundancy.
Multi-Lingual: SAP R/3 can input, collect, store or process infor-
mation in multiple languages. This makes the system easy to use.
Multi-Currency: SAP R/3 accepts data in multiple currencies.
Best Business Practices: SAP R/3 offers multiple benefits to busi-
S
nesses as it provides high adaptability, flexibility and data consis-
tency. It can be customised according to the changes in business
requirements or as per any specific one-time event.
IM
4.5.1 R/3 AS A VEHICLE FOR BUSINESS INTEGRATION
Conventionally, organisations used to buy and evaluate individual

products or applications themselves from different software vendors
and then compile the group of data processing applications. These in-
dividual products needed interfaces to assemble them into a system.
For instance, the sales and distribution system would need links to the
M
production planning and financial systems, and the controlling sys-
tem would require input from the material management system. This
implementation of interfaces between individual applications and sys-
tems demands a significant amount of time and money.
When SAP was introduced, organisations hoped that the system would
N
enhance the efficiency of their business processes and save their time
and money. SAP R/3 version fulfilled their expectations. SAP R/3 is
a pre-defined packaged system containing all core business applica-
tions required by the majority of business organisations.
These core business applications use a single, common database and

a set of tables that are developed and maintained in one standardised
environment. For instance, a standard R/3 product contacts approxi-
mately 8,000 database tables.
The statement, “R/3 as a Vehicle for Business Integration” is very apt

for the SAP R/3 enterprise solutions system. The R/3 system aims at
providing a group of integrated, large-scale business applications to
the end-user. Owing to this, R/3 is famously known as a business suite
package.
The following features of SAP R/3 make it a pre-defined packaged

integrated system:

N O T E S
Common database
Common data dictionary
Application update flows to all related systems
One point of data entry in the system
Data consistency
Redundant data removal
Consistent user interface
SAP R/3 integrates all core business functions to create one integrated
data model, which provides one single facet of data across the whole
business entity. SAP R/3 offers fast and faultless access to data where
data is entered only one time and at one point only. SAP R/3 was de-
S
signed while considering the organisation as a whole. Owing to this,
SAP R/3 system is considered as a vehicle for business integration.
The standard set of core business applications included in each R/3
system comprises 12 core application modules (as discussed under
IM
SAP application modules), which are as follows:
Financial Accounting (FI)
Controlling (CO)
Production Planning (PP)
Materials Management (MM)
M
Sales and Distribution (SD)

Fixed Assets Management (FM)
Project System (PS)
N
Workflow (WF)
Industry Solutions (IS)
Human Resources (HR)
Plant Maintenance (PM)
Quality Management (QM)
These core business applications are known as functional areas, appli-

cation areas, or the functional modules of SAP R/3.
The enormous benefits of an integrated information system provided

by SAP R/3 software to big companies are very evident. For instance,
a sale is made by the sales department and generation of sales order
on a computer updates all functions of the entire company with the
newly made transaction. Material and Inventory management func-
tions are updated automatically, worldwide. Delivery schedules and
the Profit & Loss report reflect the updation and modifications. Im-

N O T E S
portantly, every employee is provided with the updated function to

be performed. The customer service department becomes active and
handles customer queries promptly.
However, these benefits are not realised by all organisations that have
implemented SAP R/3. Some businesses have experienced serious
problems, such as events where budgets exceed, incomplete instal-
lations, long delays and so on. This is because the success of SAP
R/3 implementation requires changes at all levels in the organisation
and in all functional key areas, such as information technology, strat-
egy, planning, human resources, management systems, organisation
structure and culture. Organisations usually give importance to the
technical aspect of the SAP R/3 system and ignore the elements of
change management, thus experiencing failure in SAP implementa-
tion. Hence, the SAP R/3 system performs the role of a vehicle that
S
transfers the best practices to the business, which originally forms the
basis of its generic processes. This has made SAP R/3 the most ap-
propriate software application that takes care of data and business
IM
processes equally and closes the gap in business practices.
9. Which one of the following is true of SAP R/3 system

architecture?
a. It uses 2-tier architecture.
M
b. It uses 3-tier architecture.

c. It combines the front end and database in a single applica-
tion server.
d. None of the above
N
ACTIVITY
Using the Internet, find an example to show how SAP is able to

customise its applications according to sudden changes in business
requirements.
4.6 SUMMARY
SAP is well-integrated software package that provides client/serv-
er business solutions available in the market today.
SAP has different software modules that perform processing pro-
cedures for different business functions, such as finance, sales and
distribution, material management, production planning, human
resource management, quality management, etc.
The biggest advantage of SAP is that it is adaptable to frequent
changes.

N O T E S
SAP stands for Systems, Applications and Products in Data Pro-

cessing and was founded in the year 1972 by five ex-IBM employ-
ees.
Financials and Controlling (FICO), Human Resources (HR), Mate-
rials Management (MM), Sales and Distribution (SD) and Produc-
tion Planning (PP) are the most commonly used SAP functional
modules.
A Business process is a set of connected activities related to differ-
ent functional areas, generating value for the business. There are
two sub-types of business process—application core processes and
composite business processes.
SAP R/3 is one of the most popular SAP software applications. In
SAP R/3, R stands for Real Time and the number 3 denotes the
S
three-tier application architecture of the system.
SAP R/3’s (client/server) architecture includes three layers—pre-
sentation layer, application layer and database layer.
IM
KEY WORDS
ABAP: It stands for Advanced Business Application Program-

ming, which is an object-oriented programming language used
to develop applications for the SAP R/3 system.
B2B: It stands for Business-to-Business transaction, which in-
M
cludes exchange of products, services or information from one

business to another.
Customisation: It refers to the process of adapting the SAP sys-
tem to the desired business requirements. This further involves
the process of mapping SAP to the specific business process.
N
ERP: It stands for Enterprise Resource Planning, which is a

business management system that integrates all core business
areas, including planning, manufacturing, sales, human re-
source and marketing.
Servers: They refer to those components/layers that provide
services to a group of clients in a controlled environment.

1. Write a short note on the characteristics of SAP.
2. What is the relationship between a business process and SAP?
3. What are the various SAP application modules?
4. Describe the 3-tier architecture of SAP R/3.
5. Validate the statement “R/3 as a vehicle for business integration”.

N O T E S
Topic Q.No. Answers

Introduction to SAP 1. True
2. True
3. SAP R/98
4. 1972, Germany
SAP Application Modules 5. False
6. The IS module is designed spe-
S
cifically for particular industries.
It merges the SAP application
modules with the modules that are
specifically designed for a particu-
IM lar industry.
7. The Workflow (WF) module
Business Processes and 8. Application Core Processes, Com-
SAP posite Business Processes
SAP R/3 System 9. b. It uses a 3-tier architecture
M

1. SAP is a complete software package as it provides client/server
solutions on a majority of business processes in any industry. It
is a system that integrates most of the business processes in an
organisation. Refer to Section 4.2 Introduction to SAP.
N
2. SAP has different software modules that perform processing

procedures for different business functions. Refer to Section
4.2 Introduction to SAP.
3. SAP application modules are the centre of a SAP system. It
includes Financial Accounting (FI), Controlling (CO), Asset
Management (AM), Project System (PS), Workflow (WF)
modules, etc. Refer to Section 4.3 SAP Application Modules.
4. SAP R/3 is one of the most popular SAP software applications. In
SAP R/3, R stands for Real Time and the number 3 denotes the
three-tier application architecture. Refer to Section 4.5 SAP R/3
System.
5. The statement, “R/3 as the vehicle for business integration” is very
apt for the SAP R/3 enterprise solutions system. The R/3 system
aims at providing a group of integrated, large-scale business
applications to the end-user. Owing to this, R/3 is famously
known as a business suite package. Refer to Section 4.5 SAP R/3
System.

N O T E S

4.9
REFERENCE
SUGGESTED READINGS
Pamungkas B. (2009). ADempiere 3.4 ERP Solutions. Birmingham,
UK: Packt Publications.
RayR. (2011). Enterprise Resource Planning. New Delhi: Tata Mc-
Sheikh K. (2003). Manufacturing Resource Planning (MRP II). New
York, NY: McGraw-Hill.
Sumner M. (2005). Enterprise Resource Planning. Upper Saddle
S
River, NJ: Prentice Hall.
E-REFERENCES
SAP Online Tutorials. Retrieved from http://www.saponlinetutori-
IM
als.com/what-is-sap-erp-system-definition/.
Slideshare. Retrieved from http://www.slideshare.net/Rashaaaaad/
sap-overview-26176420.
M
N

N
M
IM
S
C H A
5 P T E R
ERP MODULES
S
CONTENTS
5.1 Introduction
5.2 Modules of ERP

Activity
5.3 Finance Module
Activity
5.4 Sales and Distribution Module
M

Activity
5.5 Manufacturing and Production Planning Module
5.5.1 Material and Capacity Planning
5.5.2 Shop Floor Control
N
5.5.3 Quality Management

5.5.4 JIT/Repetitive Manufacturing
5.5.5 Cost Management
5.5.6 Engineering Data Management
5.5.7 Engineering Change Control
5.5.8 Configuration Management
5.5.9 Serialisation / Lot Control
5.5.10 Tooling
Activity
5.6 Human Resources Module
Activity
5.7 Plant Maintenance Module
5.7.1 Preventive Maintenance Control
5.7.2 Equipment Tracking

CONTENTS
5.7.3 Component Tracking

5.7.4 Plant Maintenance Calibration Tracking
5.7.5 Plant Maintenance Warranty Claims Tracking
Activity
5.8 Quality Management Module
5.8.1 Quality Management Module – Functions
5.8.2 CAQ and CIQ
Activity
5.9 Materials Management Module
S
5.9.1 Pre-Purchasing Activities
5.9.2 Purchasing
5.9.3 Vendor Evaluation
5.9.4 Inventory Management
5.9.5
IM
Invoice Verification and Material Inspection
Activity
5.10 Summary
M

N

ERP MODULES 75
N O T E S
IMPLEMENTATION OF ERP AT BHARAT

PETROLEUM CORPORATION LIMITED (BPCL)
In 1951, the Government of India (GOI) agreed to establish an oil

refinery in Bombay (present day Mumbai). This was a result of an
S
agreement between GOI and Burmah Oil Company and Shell Pe-
troleum Co. Consequently, Burmah Shell Oil Refineries Ltd. was
established in 1952 and its operations started in 1955. The refinery
IM
started processing crude oil that came from Ankleshwar in Guja-
rat. In 1975, Government of India passed the Burmah-Shell (Ac-
quisition of Undertaking in India) Bill and acquired control over
the operations of the refinery. During this time, the government
held 100% stake in the organisation. The refinery was renamed as
Bharat Refineries. This was the first Indian organisation to make
LPG or cooking gas available to the people. In 1977, Bharat Refin-
eries was once again renamed as Bharat Petroleum Corporation
M
Limited (BPCL). After the liberalisation of the Indian economy in

1991, major changes were introduced in BPCL. It entered into a
number of agreements with Indo-Burmah Petroleum (IBP), Ma-
dras Refineries Ltd. (MRL) and Cochin Refineries Ltd. (CRL). In
1992, the government disinvested 30% of its stake in the organ-
N
isation. By the late 1990s, BPCL had acquired the distinction of

being the second largest oil company in India.
Till 2000, the work at BPCL was done in a non-ERP environment.

However, by mid-2000, the organisation had started the process
of implementing ERP, which went on till November 2001. ERP
implementation was achieved with the help of the SAP R/3 ERP
package. One of the main objectives of BPCL for implementing
ERP was to respond quickly to customer requirements and in-
crease its customer base. The organisation also wanted to differ-
entiate itself from its counterparts in terms of service quality and
customer retention. The percentage of industrial and commer-
cial customers of BPCL increased from 14.9% in 2000 to 15.8% in
2001. The organisation’s revenue also increased by 2.28% in 2000-
01. This increase, along with improvement in the functioning of
BPCL, can be attributed to ERP implementation.
Source: Icmrindia.org,. (2015). ERP Implementation at BPCL | Free Management Articles
| Free Management Case Studies. Retrieved 13 March 2015, from http://www.icmrindia.
org/free%20resources/casestudies/IT%20and%20Systems%20freecasestudyp1.htm

N O T E S
LEARNING OBJECTIVES

> Explain the different modules of ERP
> Outline the functions of the finance module
> Describe the sales and distribution module
> Explain the manufacturing and production planning module
> Discuss the concept of the human resources module and ex-
plain its sub-modules
> Describe the plant maintenance module and its sub-modules
> Examine the importance of the quality management module
> List and explain various sub-modules of the materials man-
S
agement module
5.1 INTRODUCTION
IM
In the previous chapter, we studied about Systems, Applications and
Products (SAP) in data processing and the SAP R/3 system in detail.
An ERP system typically consists of several modules that are knit to-
gether in a structured manner. This chapter discusses the different
modules of ERP.
M
The world of computer technology has enabled organisations to use
ERP software to manage and streamline their work processes. Thus,
a modular approach to ERP software is used. We know that the main
functional areas in an organisation are finance, sales and distribution,
manufacturing and production planning, human resources, plant
N
maintenance, quality management, materials management, etc. A

separate ERP module is created for each of these functions. These
modules help an organisation in the decision-making process. As the
modules are integrated with each other, they help to track the perfor-
mance of an organisation from a broader perspective. The modules of
an ERP system vary as per the requirements of organisations. There-
fore, it is imperative for organisations to define their requirements
clearly in order to choose the right combination of ERP modules.
In this chapter, you will study about the different modules and
sub-modules of ERP in detail.
5.2 MODULES OF ERP

Enterprise Resource Planning (ERP) is a software system used by
organisations to integrate their functions in a seamless fashion. This
software consists of multiple modules that are based on the needs and
technical capabilities of the organisations. Every module represents a
functional area of the organisation. For example, the marketing mod-

ERP MODULES 77
N O T E S
ule is used by the marketing department, the finance module is used

by the finance department and the human resource module is used by
the human resource department. An organisation need not use all the
modules but choose only those that are required. The most commonly
used ERP modules are shown in Figure 5.1:
Finance Module
Sales and Distribution Module
Manufacturing and Production
S
Planning Module
IM
Human Resources Module
Plant Maintenance Module
Quality Management Module

M
Materials Management Module

N
Figure 5.1: Major Modules of an ERP
These modules are explained in the subsequent sections of the chap-

ter. Various organisations such as SAP, Oracle, PeopleSoft and BAAN,
have developed their own versions of ERP modules. These modules
differ from each other in terms of functionality but they also share
some common features. This means that ERP software modules can
be customised according to the needs of organisations.
1. Every ERP module represents a functional area of the

organisation. (True/False)
ACTIVITY
Select an Indian ERP solution provider and list the modules devel-
oped by it. Also, describe the features of these modules.

N O T E S
5.3 FINANCE MODULE

Businesses today run on knowledge and information sharing, and
most of this information is financial in nature. Organisations require
financial reports and data for decision making. However, reports and
data are of little use to an organisation if they cannot be made avail-
able to the user as and when required. This is where the role of the
finance module of ERP comes into the picture.
The ERP finance module is a software module that uses the financial
data available in an organisation’s database and generates various fi-
nancial statements such as ledgers, trial balance, balance sheet, etc.
Quarterly and annual reports are also generated with the help of the
ERP finance module.
The finance module of ERP basically consists of four sub-modules,
S
which are as follows:
Financial (FI): The FI sub-module is used to generate reports
pertaining to accounts payable, accounts receivable, general led-
IMger, balance sheet, profit and loss and capital investments. The
sub-module is also used for posting entries in the books of accounts.
Controlling (CO): This sub-module generates reports related to
cost centre, profit centre, enterprise accounting, planning, profit-
ability analysis, etc.
Asset Management (AM): The AM sub-module helps in the man-
agement of the assets of an organisation. It generates reports re-
M
lated to investment planning and budgeting; thus is also called the

investment management module.
Treasury Management (TM): This sub-module helps in manag-
ing the funds of an organisation. The main aim of the TM module
N
is to manage and control the organisation’s liquidity and lessen

financial risks.
An organisation uses the finance module not only to store financial
data but also to perform financial analysis. For example, after creating
a balance sheet and a profit and loss account, an organisation may use
the financial module to perform financial ratio analysis by using the
balance sheet and Profit and Loss (P&L) data. Such analysis can help
in making effective decisions related to funds in the organisation.
2. _________is a software module that uses the financial data

available in an organisation’s database.
ACTIVITY
Using the Internet, find out how well-known organisations use the
various sub-modules of the finance module.

ERP MODULES 79
N O T E S
5.4 SALES AND DISTRIBUTION MODULE

An ERP sales and distribution module provides a complete sales and
distribution management solution for an organisation. This module
supports pre-sales activities (such as quotation creation), sales order
processing (creation of the sales order), shipping (creation of delivery
documents) and billing (creation of bills and invoices).
The sales and distribution module and its various sub-modules are
listed in Figure 5.2:
Sales and
Distribution
S
Module
Order
IM
Warehouse
Master Data Shipping Billing
Management Management
Management Module Module
Module Module
Sales Order
M
Management
Purchase
Order
N
Management
Figure 5.2: Sales and Distribution Module
A detailed explanation of the sales and distribution module and its

various sub-modules is given in chapter 7.
3. An ERP sales and distribution module supports pre-sales

activities. (True/False)
ACTIVITY
Using the Internet, select an IT organisation and study its sales and
distribution module.

N O T E S
MANUFACTURING AND PRODUCTION

5.5
PLANNING MODULE
When a sales order is confirmed in an organisation, the production
department starts production to fulfil the order. An organisation uses
the manufacturing and production planning module to streamline
and speed up the production process. This module helps to plan pro-
duction by optimally utilising existing resources. The major aims of
the module are to provide a short delivery cycle time, assure quality
and make continuous improvement. This module is the largest and
most complex of all ERP modules.
The following are the main characteristics of the manufacturing and

production module:
S
It simplifies and speeds up the process of information exchange
within the different functional units of an organisation.
It provides different manufacturing applications for different man-
IMufacturing processes.
It responds to the requirements of users in case any data is needed.
It minimises the production cycle time and assures quality.
As mentioned earlier, the manufacturing and production planning

module is the largest and most complex module of the ERP system. It
has several sub-modules, which can be listed as follows:
M
Material and capacity planning

Shop floor control
Quality management
N
JIT/repetitive manufacturing
Cost management
Engineering data management
Engineering change control
Configuration management
Serialisation/lot control
Tooling
Let us discuss these sub-modules one by one in the following sections.
5.5.1 MATERIAL AND CAPACITY PLANNING
Today, organisations deal in an environment where the customer is

the focus. The importance of the customer to the organisation can
never be emphasised enough. An organisation can go to great lengths
to satisfy the customer.

ERP MODULES 81
N O T E S
Customers expect fast delivery of their products. For fulfilling these

requirements, an organisation needs to develop an effective produc-
tion schedule by planning material and capacity requirements. Mate-
rial planning can be defined as a process of managing the supply of
raw materials, while capacity planning refers to a process that ensures
the level of production remains sufficient to meet the demand.
The material and capacity planning sub-module helps an organisation

to access information about the different components of a machinery
or equipment used in the production process. The material and capac-
ity planning module is used for the following purposes:
Providing a quick response to customers’ demands
Planning alternative production plans in case of contingencies
S
Selecting the best plan and making effective purchase decisions
Making an optimum utilisation of the organisation’s resources
Generating graphical reports on planned and utilised capacity
Identifying
IM
order-processing priorities with changing business
needs
5.5.2 SHOP FLOOR CONTROL
The shop floor of an organisation refers to the space where the pro-
duction or manufacturing activity is carried out. In other words, it is
M
a part of the factory where machines are kept and human resources
are directly engaged in production activities. The shop floor control
sub-module of the manufacturing and production planning module
helps in managing the shop floor activities of a manufacturing organ-
isation by providing the right information at the right time. An organ-
N
isation uses the shop floor module to minimise the production cycle
time. This can be done by efficiently monitoring and controlling activ-
ities on the shop floor. The module also enables the organisation to ex-
ecute its manufacturing operations according to the schedule, thereby
preventing delays in production and maintaining on-time delivery of
products.
5.5.3 QUALITY MANAGEMENT
Using the quality management sub-module, an organisation can test

and inspect product quality on the basis of different parameters. This
sub-module is also used to store the history of products as well as is-
sues related to quality. The objective of this module is to identify, store
and solve quality-related issues. It makes use of established bench-
marks for product design, process engineering and quality assurance.
In addition, it supports root cause analysis and continuous improve-
ment of manufacturing processes. The sub-module also helps manu-
facturers to conform to the standards of quality assurance defined by
the industry.

N O T E S
5.5.4 JIT/REPETITIVE MANUFACTURING
Just-in Time (JIT) can be defined as an approach in a manufactur-

ing organisation that improves timeliness, quality, productivity and
flexibility utilising various methods of work simplification and waste
elimination. JIT simplifies processes by eliminating waste. The JIT
sub-module enables an organisation to complete its manufacturing
activities as per the schedule and make on-time delivery of products.
It aims to reduce inventories and paper work and enhance data accu-
racy.
5.5.5 COST MANAGEMENT
In order to maximise profits, every organisation aims at cost reduc-

tion. The cost management sub-module is used for controlling the
S
different costs of the organisation such as manufacturing costs, trans-
portation costs, etc. The different costing methods used in this module
are Last-in-First-out (LIFO), First-in-First-Out (FIFO), moving aver-
IM
age, activity-based costing, etc. Apart from this, the cost management
sub-module helps to compare the costs for the different work centres
of an organisation so that an appropriate action can be taken in case
some centres show high costs.
5.5.6 ENGINEERING DATA MANAGEMENT
To ensure timely delivery of its products, an organisation aims to re-

M
duce the manufacturing cycle time. The engineering data manage-

ment sub-module is used to reduce the product development cycle.
This is done by reducing errors, increasing design productivity and
reducing data transfer time. This module reduces the time taken in
data transfer from one module to another in the ERP system and mi-
N
nimises errors in data transfer. The engineering data management

sub-module works in association with Computer Aided Design (CAD)
software to facilitate an easy exchange of information among the peo-
ple engaged in the manufacturing process. This module also ensures
that the right information is provided to the right people at the right
time.
5.5.7 ENGINEERING CHANGE CONTROL
An organisation may require changes in its product due to the chang-

ing needs of customers, technology obsolescence, and change in mar-
ket trends. Engineering change implies the alteration or modification
in the product development process. This change may affect the mate-
rial requirements and the production schedule of a product.
The engineering change control module can be implemented after

strictly defining the authorisation steps for change. After implement-
ing engineering change control in processes, the module reflects these
changes in the manufacturing database.

ERP MODULES 83
N O T E S
5.5.8 CONFIGURATION MANAGEMENT
Configuration management is a process that reduces the order cycle

time by eliminating lengthy engineering reviews of products. Engi-
neering review refers to a process of reviewing a particular engineer-
ing change.
The configuration management module reduces the time taken in

product engineering reviews. The cost and configuration feasibility
of the final product is analysed by using this module. The module is
based on attributes such as height, weight, and volume. A user-defined
database is developed that consists of information related to product
engineering, sales, and cost management.
S
5.5.9 SERIALISATION/LOT CONTROL
To avoid shortages and oversupply in production processes, organi-

sations purchase an adequate amount of components and materials.
IM
In order to know the adequate amount of materials and the number
of lots (of materials) to be purchased, the serialisation/lot control
sub-module is used. This sub-module gives a sequence (serial) of op-
erations to be performed while producing the final product by giv-
ing the adequate lot size. A unique number is allocated to each lot,
which helps in finding the sequence of operations. Using the lot con-
trol and serialisation module, organisations can also track the mate-
M
rials that have expired and cannot be used in the manufacturing of

products.
5.5.10 TOOLING
N
Apart from raw materials, various tools are also required in the pro-
duction process. It is important that the required tools and materials
reach the production area in time for the production function. The
tools must be stored in the inventory and allocated as per the produc-
tion order. Using the tooling sub-module, the availability of the tool
can be determined.
In a manufacturing organisation, the availability of proper tools plays

a crucial role in the conversion of raw materials into finished prod-
ucts. The tooling sub-module helps an organisation in identifying the
types and requirements of tools for performing manufacturing oper-
ations. This sub-module is closely integrated with capacity planning
and inventory management modules in order to identify the require-
ments of various tools. This integration helps an organisation to keep
track on the delivery of tools so that there can be proper utilisation of
productive capacity. Apart from this, the tooling sub-module allows
an organisation to estimate the useful life of tools and identify their
maintenance needs.

N O T E S
4. _______________of an organisation refers to the space where

production or manufacturing activity is carried out.
ACTIVITY
Differentiate between the serialisation/lot control module and the

tooling module.
5.6 HUMAN RESOURCES MODULE
S
No organisation can survive without human resource. It is the most
productive resource and helps in creating profit for the organisation
by using its skills and knowledge. In fact, HR is one of the key depart-
ments of an organisation. To automate the work of the HR depart-
IM
ment, the HR module of ERP is integrated with the other modules.
The HR department has to deal with many critical areas such as atten-
dance, compensation, training and development, etc. Therefore, the
HR module of the ERP system consists of various sub-systems, which
are as the follows:
Personnel management: This sub-module contains the master
data of the HR department and deals with personnel administra-
M
tion. It also maintains the database regarding the recruitment,

travel management, benefits and salary administration for em-
ployees. The various sub-components of this sub-module are as
follows:
Personnel administration: This sub-module is used for storing
N
personnel data centrally. This data is therefore available to all the

departments of the organisation.
Employee master data: This sub-module helps to store the em-
ployee database at a centralised location so that it can be processed
easily by the members of the organisation.
Recruitment management: This sub-component is used to auto-
mate the entire recruitment process, which helps an organisation
to find the right set of candidates with the desired skills, there-
by reducing recruitment costs. This sub-component can be used
to streamline a range of tasks such as managing vacant positions
in an organisation, screening and selecting candidates, hiring the
candidates, etc.
Salary administration: This module simplifies the process of sal-
ary compensation to employees. It helps in managing deductions
and benefits in salaries. Salary budgets are also planned in this
module.

ERP MODULES 85
N O T E S
Organisational management: This sub-module contains data

about the structure of an organisation as well as staffing activi-
ties and job descriptions. Changes in the designation of employ-
ees or their transfer to other locations, etc., can be managed easily
through this sub-module.
Payroll accounting: This sub-module provides information on the
salary details of employees. The module can prepare leave and at-
tendance reports, employee reports, and taxation reports. It also
allows employees to generate their monthly pay slips.
Personnel development: This sub-module contains provisions for
the career and succession planning of employees. Using this mod-
ule, the additional training needs for employees can also be deter-
mined. The module also helps in training and event management.
S
5. The _________module includes leave and attendance reports,

IM
employee reports, and taxation reports.
ACTIVITY
Pick any organisation that has a full-fledged HR module of ERP in

place and study the functions of its sub-modules.
M
5.7 PLANT MAINTENANCE MODULE

For an organisation to achieve obstacle-free production, it must en-
sure that its machinery, tools and plant are under good working con-
N
ditions at all times. The production and delivery schedule of an organ-

isation may be hampered if there is a lack of plant maintenance and
this may in turn lead to frequent equipment breakdowns.
Using the plant maintenance module, process improvement can be

achieved as this module covers provisions for the entire plant and
equipment maintenance. The plant maintenance module compris-
es different sub-modules, such as preventive maintenance control,
equipment tracking, component tracking, plant maintenance calibra-
tion tracking and plant maintenance warranty claims tracking. All
these sub-modules have been explained in the subsequent sections.
5.7.1 PREVENTIVE MAINTENANCE CONTROL
Preventing a tool or equipment wear out through systematic inspec-

tion and detection of failure before it occurs is called preventive
maintenance. The preventive maintenance control sub-module has
provisions for planning, scheduling and controlling tasks in the main-
tenance of the plant and equipment. This module prevents break-

N O T E S
downs during the production process. As a result of using this module,

repair and downtime costs and machine breakdowns can be lowered.
This is done by collecting information about hourly operations, units
of output, fuel consumption and serviceable life of the equipment.
5.7.2 EQUIPMENT TRACKING
Equipment is subject to wear and tear in an organisation. An organ-

isation needs to track the performance of equipment on a continu-
ous basis so that it can be repaired before it affects the output. In the
equipment tracking module, the information regarding equipment is
stored in the database by the serial number and model number of the
equipment. The equipment tracking system provides details related
to the operating conditions of equipment in terms of its hourly, daily,
S
weekly, monthly and yearly performance. This helps an organisation
to identify potential failures in equipment and rectify them.
5.7.3 COMPONENT TRACKING

IM
A component is a sub-part of equipment. Components are also called
spare parts of equipment. It is important for an organisation to en-
sure whether all the spare parts of a machine are functioning properly.
Using the component tracking module, the components that require
repair can be identified as this module provides information related
to every spare part in terms of its pre-defined codes. Organisations
M
use the component tracking module to identify the components that
require chronic repair. On the basis of the information gathered with
the help of this module, technicians can decide whether to replace
or repair the components while they are still in a working condition.
They can also determine if the components are covered by warranty
N
or not. Getting the components repaired or replaced reduces the pos-

sibility of failure and downtime.
5.7.4 PLANT MAINTENANCE CALIBRATION TRACKING
Plant and equipment used in production processes should be as per

the standards set by the organisation. The plant maintenance calibra-
tion tracking module helps in tracking plant maintenance calibration
as per the ISO 9001 requirements. In other words, this module tracks
whether the set-up of equipment is in compliance with the quality re-
quirements defined under ISO 9000.
5.7.5 PLANT MAINTENANCE WARRANTY

CLAIMS TRACKING
Vendors or manufacturers provide a warranty for the operation of

equipment with an aim to ensure the expected efficiency of equip-
ment. The plant maintenance warranty claims tracking module helps
to track and control the items that are covered under warranties. In

ERP MODULES 87
N O T E S
case, any replacements or repairs are to be done to any component of

the equipment, this sub-module helps to identify whether the warran-
ty or replacement is available on the component or not. This sub-mod-
ule also helps to keep track of the type and the duration of the war-
ranty.
6. Preventing an item from wearing out with the help of

systematic inspection and detection of incipient failure is
called _________________
ACTIVITY
S
Using the Internet, find more information about the plant mainte-
nance calibration tracking sub-module.
IM
5.8 QUALITY MANAGEMENT MODULE
Nowadays, organisations focus on quality management by ensuring
that it is implemented in each functional unit. The term ‘quality’ can
be defined from two perspectives, namely the customer’s perspective
and the organisation’s perspective. From the customer’s perspective,
M
quality can be defined as expectations that he/she may have while buy-
ing a product. On the other hand, from the organisation’s perspective,
quality can be defined as a measure of product’s conformation to the
specified standards. Generally, quality standards are a combination
product’s attributes–such as performance, reliability and appearance
N
of the product and commitment to delivery time—be produced by an

organisation.
There are different international quality standards that help in qual-

ity management, such as the ISO 9000 series. In the ERP system too,
the quality management module generates necessary information and
technical support required by an organisation to adopt appropriate
quality standards and make continuous improvement in its products
and processes. Moreover, the module helps organisations to imple-
ment the procedures for quality inspection and control.
Let us now study the important functions of the quality management

module in the next section.
5.8.1 QUALITY MANAGEMENT MODULE–FUNCTIONS
Every module of an ERP system is responsible for bringing quality in

the production process. The major functions of the quality manage-
ment module of an ERP system are as follows:

N O T E S
Quality planning: The quality management module helps in data

management in order to plan for product quality, inspections, etc.
For this, the module collects basic data to decide the required level
of quality for materials, operations, and finished products.
Quality inspection: The quality management module helps to in-
spect products on a regular basis. This helps an organisation to
maintain the desired levels of quality.
Quality control: With the help of inspection, the quality manage-
ment module controls quality issues by taking various steps to
maintain quality.
5.8.2 CAQ AND CIQ
In the recent times, there have been a lot of advancements in quali-
S
ty-related applications, which have helped manufacturing organisa-
tions in controlling and improving the quality of their products. Two
notable advancements are Computer-Aided Quality Management
(CAQ) and Computer-integrated Quality Management (CIQ).
IM
CAQ is a quality management tool that helps to gather and analyse
data related to the quality of output to be produced by a manufactur-
ing organisation. It helps to achieve the desired quality of the final out-
put. In addition, CAQ provides operational specifications to help the
organisation in attaining the desired levels of quality in its products.
M
There is growing competition in the market and the demands for rap-
id modifications in the quality of products are immense. As a result,
organisations cannot rely on CAQ systems alone.
Therefore, to improve quality management, organisations have adopt-

ed CIQ systems. CIQ is a computer-aided quality management tool
N
that is used in combination with the other modules of the ERP sys-
tem, such as finance, manufacturing and sales and distribution. The
advantage of using the CIQ system is that it can support all activities
involved in quality management. This module is majorly integrated
with the master data, the materials management module, the produc-
tion module and the sales and distribution module.
7. The quality management module helps in data management in

order to plan for quality, inspections, material specifications,
etc. (True/False)
ACTIVITY
Using the Internet, search real-life applications of CIQ and find in-
formation on how it has impacted the management of quality.

ERP MODULES 89
N O T E S
5.9 MATERIALS MANAGEMENT MODULE

Materials management is concerned with the planning, procurement,
storage and distribution of materials in an efficient manner. It aims to
get the right quality and quantity of materials at the right time from
the right source so as to carry out the production process effectively.
This ultimately results in increased sales, improved customer service
and reduction in the manufacturing cost of an organisation. Materials
management encompasses various activities such as materials plan-
ning and control, purchase management, stores management, materi-
als handling and supply chain management.
The materials management module is specifically designed to help in

the effective management of materials. This module helps to handle,
S
store, and transport materials. It also allows an organisation to make
judicious purchasing, reduce wastage, utilise materials efficiently,
thereby minimising material cost.
IM
The materials management module consists of five major sub-mod-
ules, as shown in Figure 5.3:
Pre-Purchasing Activities
M
Purchasing
Vendor Evaluation
N
Inventory Management
Invoice Verification and Material Inspection
Figure 5.3: Major Sub-Modules of the Materials Management Module
Let us discuss these sub-modules in detail in the following sections.
5.9.1 PRE-PURCHASING ACTIVITIES
The pre-purchasing activities module involves planning raw mate-

rials to be purchased for manufacturing products. These activities
are related to bidding, supplier search, sample acceptance, and sup-
plier selection. A master database is also maintained in this module
that stores all the details of products or services to be procured. This
sub-module develops a set of service specifications for every procure-
ment project proposed in the organisation.

N O T E S
5.9.2 PURCHASING
The purchasing sub-module helps in keeping a tab on activities in-

volved in the purchase of raw materials. This sub-module provides
support for all the phases of materials management such as materi-
al planning, material control, purchasing, receiving goods, inventory
management and invoice verification. Major purchase activities are
order placement, receipts of goods, inventory management and in-
voice verification. The module facilitates the timely exchange of in-
formation among the members of the supply chain of an organisation,
such as suppliers, transporters and distributors.
5.9.3 VENDOR EVALUATION
Vendor evaluation is a process in which an organisation evaluates the
S
potential suppliers of materials by performing measurable assess-
ments. The evaluation is based on a point-based system and the selec-
tion criterion is also defined. Usually, the selection criterion is pre-de-
IM
fined; however, there is also a provision for entering the user-defined
criteria. The criterion includes points such as price, quality, delivery,
replacement, repairs, lead time, etc. The performance of different
vendors is measured and points are given to them accordingly.
5.9.4 INVENTORY MANAGEMENT
Inventory management is all about supervising the inflow and outflow

M
of inventory in an organisation. Effective inventory management is

integral to successful business operations. It protects an organisation
against adverse situations, such as a shortage or excess of materials or
products.
N
The inventory management module provides complete information

about the quality and quantity of the current and ordered stock and
daily consumption of stock. In this module, all the transactions that af-
fect the physical stock are reflected, and the stock level is always updat-
ed in the system. The sub-module also contains the details of the stock
available, stocks ordered but not delivered, stock reserved for produc-
tion, stock reserved for customers, stock in quality inspection, etc.
5.9.5 INVOICE VERIFICATION AND MATERIAL

INSPECTION
Proper inspection of materials ensures that they meet the required

specifications. When the materials are accepted after verification, the
invoice is generated, which needs to be verified by the finance depart-
ment. The invoice verification and material inspection sub-module
serves as a connecting link between the materials management mod-
ule and the finance module. The major function of this sub-module is
that it aids in the final step of the purchase process, i.e., inspection and
invoice verification.

ERP MODULES 91
N O T E S
The invoice verification and material inspection module provides

complete and accurate information related to the quality and quan-
tity of materials ordered and received by an organisation. Using this
information, the module generates an invoice automatically, which
can be modified as per the requirements. The invoice verification and
material inspection sub-module can also compare the information of
ordered and received material to verify the generated invoice.
8. ______________ module involves planning the raw materials

to be purchased for the production of products.
S
ACTIVITY
Visit any organisation and learn how the inventory management

module works there. What are the benefits of using this module?
IM
5.10 SUMMARY
An ERP system consists of various modules such as finance, man-
ufacturing and production planning, human resource, quality
management, materials management, and plant maintenance.
M
The finance module of the ERP system uses the financial data
available in an organisation’s database and helps to generate var-
ious financial statements such as ledgers, trial balance, balance
sheet, etc.
An ERP sales and distribution module provides a complete sales and
N
distribution management solution for an organisation. This module

supports pre-sale activities (such as quotation creation), sales order
processing (creation of the sales order), shipping (creation of deliv-
ery documents) and billing (creation of bills and invoices).
An organisation uses the manufacturing and production planning
module to streamline and speed up the manufacturing process.
This module helps to plan production by utilising the existing re-
sources optimally.
The human resource module enables an organisation to perform
its human resource activities. Its sub-modules include personnel
administration, organisational management, payroll management,
workforce management and employee development.
The plant maintenance module is used to achieve process im-
provement as the module covers provisions for the entire plant
and equipment maintenance. The module comprises different
sub-modules such as preventive maintenance control, equipment
tracking, etc.

N O T E S
An organisation uses the quality management sub-module to test

and inspect product quality on the basis of different parameters.
This sub-module is also used to store the history of products as
well as issues related to quality. The objective of this module is to
identify, store and solve quality-related issues.
The materials management module enables an organisation to
handle, store and transport materials throughout the supply chain
while minimising its cost.
KEY WORDS
Asset management (AM): This is a sub-module of the finance

module of the ERP system. It helps in tracking and managing
all the assets of an organisation. It also provides support for
S
fund flow management, cash flow treasury and investment.
Breakdown: It refers to a condition in which machines or equip-
ment stop functioning fully or partly, rendering it unfit for use
IM in the production process.
Controlling (CO): This sub-module of the finance module of
ERP helps to record transactional data and generate reports.
Financial (FI): This sub-module of the finance module of ERP
generates reports pertaining to accounts payable, accounts re-
ceivable, general ledger, balance sheet, profit and loss and cap-
M
ital investments.
Idle time: The period for which a machine is kept unused due
to breakdown is called idle time.
Project System (PS): This sub-module of the finance module of
N
ERP helps to track the costs of major projects and activities of

an organisation.

1. Discuss the importance of modularity in ERP. Briefly describe
the different modules of ERP.
2. Explain the manufacturing and production planning module
and its sub-modules in detail.
3. Write a note on quality management and the ERP module used
for managing quality. Also discuss the concept of CAQ and CIQ.
4. Explain the importance of the plant maintenance module in ERP.

ERP MODULES 93
N O T E S
Topic Q.No. Answers

Modules of ERP 1 True
Finance Module 2 ERP finance module
Sales and Distribution 3 True
Module
Manufacturing and Pro- 4 Shop floor
duction Planning Module
Human Resources Module 5 Payroll
S
Plant Maintenance Module 6 Preventive maintenance
Quality Management 7 True
Module
Materials Management 8
IM
Pre-purchasing activities
Module
1. An ERP consists of various modules, and each module represents

a functional area of the organisation. The most commonly used
M
ERP modules include finance module, sales and distribution

module, manufacturing and production planning module,
human resources module, plant maintenance module, quality
management module and materials management module. Refer
to Section 5.2 Modules of ERP.
N
2. When a sales order is confirmed in an organisation, the

production department takes over and starts production to
fulfil the order. An organisation uses the manufacturing and
production planning module to streamline and speed up the
manufacturing process. This module helps to plan production
by optimally utilising the existing resources. Refer to Section
5.5 Manufacturing and Production Planning Module.
3. Every module of an ERP system is responsible for bringing
quality in the production process. The major functions of the
quality management module focus on three areas: quality
planning, quality inspection, and quality control. Refer to Section
5.8 Quality Management Module.

N O T E S
4. The production and delivery schedule of an organisation may be

hampered if there is a lack of plant maintenance and this may
in turn lead to frequent equipment breakdowns. Using the plant
maintenance module, process improvement can be achieved as
this module covers provisions for entire plant and equipment
maintenance. Refer to Section 5.7 Plant Maintenance Module.

5.13
REFERENCE
SUGGESTED READINGS
Leon, A. (2008). ERP demystified. New Delhi: Tata McGraw-Hill.
S
E-REFERENCES
(2015).Retrieved 13 March 2015, from http://www.infochief.com.
vn/news/erp-modules.pdf
IM
Go.sap.com,. (2015). Explore SAP Solutions | SAP. Retrieved 13
March 2015, from http://go.sap.com/solution.html
M
N

C H A
6 P T E R
ERP IN MANUFACTURING
S
CONTENTS
6.1 Introduction
6.2 ERP in Manufacturing
Activity
6.3 Computer-Aided Design/Computer-Aided Manufacturing (CAD/CAM)
Activity
6.4 Material Requirement Planning (MRP)
M
6.4.1 Master Production Schedule (MPS)

6.4.2 Bill of Material (BOM)
6.4.3 Inventory Records
6.4.4 Closed Loop MRP
6.4.5 Manufacturing Resource Planning (MRP II)
N

Activity
6.5 Distribution Requirement Planning (DRP)
Activity
6.6 Product Data Management (PDM)
6.6.1 Data Management
6.6.2 Process Management
6.6.3 Benefits of PDM
Activity
6.7 Manufacturing Operations
6.7.1 Make-to-Order (MTO) and Make-to-Stock (MTS)
6.7.2 Assemble-to-Order (ATO)
6.7.3 Engineer-to-Order (ETO)

CONTENTS
6.7.4 Configure-to-Order (CTO)

Activity
6.8 ERP Logistics Package
Activity
6.9 Summary
S
IM
M
N

ERP IN MANUFACTURING 97
N O T E S
MRP II SYSTEM IMPLEMENTATION AT RYAN

MANUFACTURING PVT. LTD.
Ryan Manufacturing Pvt. Ltd. is a manufacturing organisation that

mainly deals in home appliances. The organisation has a global
customer base, making it necessary for its management to main-
tain customer data in such a way that it can be easily retrieved as
and when needed. But here was a hindering factor: Ryan still de-
pended on paperwork with a detached legacy system for managing
operations, which were hard to integrate and modify.
In order to manage its operations effectively, Ryan decided to im-

plement a Manufacturing Resource Planning (MRP) system.For
S
it believed that the system would enhance the overall efficiency of
the organisation by providing a central information source.
A well-known ERP vendor installed the MRP II system at Ryan.

IM
The system integrated all manufacturing functions, such as re-
ceipts of materials, inventory management, production, finance,
marketing, shipping, etc.
Here are some of the post-implementation benefits reaped by

Ryan:
Decrease in costs incurred on paperwork
M
Integration of various departments

Greater Returns On Investment (ROI)
Faster response to customers’ queries
N

N O T E S
LEARNING OBJECTIVES

> Explain ERP in manufacturing
> Describe Computer-Aided Design/Computer-Aided Manu-
facturing (CAD/CAM)
> Describe Material Requirement Planning (MRP)
> Discuss Distribution Requirement Planning (DRP)
> Explain Product Data Management (PDM)
> Discuss manufacturing operations
> Explain ERP logistics package
S
6.1 INTRODUCTION
In the previous chapter, you studied about the different modules of
IM
Enterprise Resource Planning (ERP), some of which are finance mod-
ule, sales and distribution module, manufacturing and production
planning module, human resources module, plant maintenance mod-
ule, quality management module and materials management module.
This chapter discusses the role and benefits of ERP in manufacturing.
In most countries, the manufacturing sector serves as a major impetus

M
to economic growth. This sector employs a large number of people
and is subject to frequent technological changes and stiff market com-
petition, making it necessary for manufacturing organisations to dis-
tinguish their products from those of their competitors, improve pro-
cesses and maintain an effective customer relationship. Implementing
N
ERP processes helps manufacturing organisations to integrate, auto-

mate and streamline their various business operations. For instance,
an ERP system with a manufacturing module enables managers to
effectively perform multiple tasks such as production planning and
scheduling, quality management and inventory control. This contrib-
utes to better organisational performance and more customer satis-
faction.
In this chapter, you will study the concept of ERP in manufacturing.

The chapter will also discuss the concepts of Computer-Aided Design/
Computer-Aided Manufacturing (CAD/CAM), Material Requirement
Planning (MRP), Distribution Requirement Planning (DRP) and
Product Data Management (PDM). You will also learn about different
manufacturing operations and the ERP logistics package.

N O T E S
6.2 ERP IN MANUFACTURING

ERP refers to a range of business solutions supported by multi-mod-
ule application software that enables organisations to manage essen-
tial business operations, such as product planning, maintaining inven-
tories, tracking orders, providing customer service, etc.
ERP is an application of the Management Information Systems (MIS),

and integrates and automates various business practices related to
production, operation and distribution aspects of a manufacturing
firm.
In order to sustain competition, organisations need to achieve high cus-

tomer satisfaction, maintain good relationships with suppliers and min-
imise operational and distribution costs. This can be possible if organisa-
S
tions produce goods of high quality and add unique features for product
differentiation. ERP solutions aid organisations in achieving these goals.
According to Panorama’s Manufacturing ERP Report 2014, there
IM
are some major reasons for implementing ERP in manufacturing or-
ganisations, which are shown in Figure 6.1:
To reduce working capital 7.2%
To position the company for growth 9.2%

M
To ensure reporting /regulatory compliance 10.4%
To make employees’ jobs better 11.2%
To replace an old ERP or legacy system 17.9%
To standardise global business operations 21.9%

N
To better integrate systems across multiple 22.3%

locations
Figure 6.1: Reasons to Implement ERP in Manufacturing

Organisations
Source: Panorama’s Manufacturing ERP Report 2014
It is not surprising that one of the major objectives of most multi-

national manufacturing organisations today is to integrate systems
across multiple locations through ERP.
ERP manufacturing modules include designing and manufacturing

of products with the help of Computer-Aided Design (CAD)/Comput-
er-Aided Manufacturing (CAM), Product Data Management (PDM)
and various planning tools like Material Requirement Planning (MRP)
and Distribution Requirement Planning (DRP).

N O T E S
This is shown in Figure 6.2:
ERP in
Manufacturing
CAD/CAM PDM Planning Tools
S
MRP DRP
IM Figure 6.2: ERP in Manufacturing
Let us now discuss how these ERP manufacturing packages help

manufacturing organisations.
Manufacturing organisations use CAD/CAM to design and manufac-

ture products. Where CAD systems are used to create, modify, analyse
M
and optimise a product design, CAM systems convert these graphics
and designs into components/products through computer-controlled
production equipment, such as robots or machine tools. PDM involves
controlling and distributing data and processes efficiently. MRP sys-
tems are used by organisations for both production scheduling and
N
inventory control. DRP is usually used with the MRP system to in-
tegrate inventory information with physical distribution activities for
efficient production planning and control. DRP aids manufacturing
organisations (involved in maintenance of distribution inventories)
by integrating market requirements and manufacturing activities. We
will further discuss these ERP manufacturing modules in detail in the
subsequent sections.
ERP systems provide many benefits to manufacturing organisations.

Some of these are given as follows:
Enhanced project management for customised orders
Improved designs in manufacturing units. This is particularly true
for companies involved in designing unique features in their prod-
ucts by CAD/CAM tools.
Automated manufacturing processes
Controlled inventory levels at various manufacturing levels

N O T E S
Let’s consider here the case of Epicor Software Corporation. It is a

business consultancy firm based in Texas. The company offers com-
prehensive ERP solutions to manufacturing organisations that pro-
mote effective planning, scheduling, executing and monitoring of all
manufacturing processes. The following are the benefits derivable
through Epicor’s ERP system:
For production planning and scheduling: Managers can plan and
schedule production activities easily, and within limited cost and
deadlines – as the ERP system offers clarity and accuracy regard-
ing the utilisation of existing and potential resources across plants
and resources.
For quality management: It defines certain quality metrics that
help manufacturers in achieving desired levels of quality in pro-
S
cesses as well as products.
For inventory control: Managers can achieve better control on in-
ventory levels, as well as compliance, through enhanced and seri-
alised tracking and tracing systems.
IM
1. CAD systems are used to create, modify, analyse and optimise

a product design. (True/False)
M
ACTIVITY
Visit a manufacturing company availing itself of the services of an

ERP system and prepare a report on the benefits/limitations of the
system solutions.
N
COMPUTER-AIDED DESIGN/COMPUTER-
6.3
AIDED MANUFACTURING (CAD/CAM)
CAD systems are integrated computer packages that allow manufac-
turers to easily draw and modify designs on a computer. They also
allow manufacturers to store the design characteristics of current
products and components. In addition, these systems let automatic
evaluation of product specifications. This helps manufacturing organ-
isations to reduce their overall development time and cost, and simul-
taneously enhance the product quality.
CAM helps in converting these computerised designs automatically

into software programs for computerised production machines, Com-
puter Numerical Control (CNC) machining for example. This auto-
matic conversion helps manufacturing organisations to save both cost

N O T E S
and time. Various models and assemblies can be developed through

the CAM software. In addition, this software helps to generate tool
paths to drive the machines that turn designs into physical parts.
CAM software is most commonly used for machining of prototypes
and finished product parts. Earlier, only organisations in some spe-
cific sectors such as automobile, aerospace etc., used to employ the
services of CAD and CAM. However the increasing competition has
led more and more manufacturing organisations to use CAD and CAM
for product designing.
Mahindra and Tata Johnson Controls have successfully applied CAD

and CAM to their manufacturing systems. The application has helped
Mahindra to enhance its production design capacity, which in turn has
improved the manufacturing capacity and business development of
the organisation. The use of CAD/CAM in manufacturing systems has
S
not only improved product designing capacity but has also increased
the customer base of the organisations.
IM SELF ASSESSMENT QUESTIONS
2. __________ is a computer-based application that manufacturing

organisations use to create, modify and analyse a product
design.
M
ACTIVITY
Search the Internet and make a list of some other techniques and
software used for product designing, besides CAD/CAM.
N
MATERIAL REQUIREMENT
6.4
PLANNING (MRP)
Material Requirement Planning (MRP) can be defined as an ERP
manufacturing planning module that evaluates materials requirement
and schedules supply to meet the demand of a variety of products at
different manufacturing units.
The main objective of MRP is to enable manufacturing organisations

to get the right materials at the right place at the right time. An effec-
tive MRP helps to maintain proper cash levels in an organisation and
determine the minimum possible time required for buying materials
and producing goods to meet production demands. Due to these ben-
efits, MRP is considered by manufacturers to be an effective tool for
planning inventory, making purchase- and storage-related decisions,
and controlling production procedures.

N O T E S
Figure 6.3 shows the three types of inputs required by an MRP system:
Master Production Schedule (MPS)
Bill of Material (BOM)
Inventory Records (IR)
Figure 6.3: Inputs in MRP
On processing of these inputs, the following outputs are obtained:

Planned order quantities
S
Planned order release dates
Planned order due dates
Let us now discuss these inputs in detail.

IM
6.4.1 MASTER PRODUCTION SCHEDULE (MPS)
Master Production Schedule (MPS) can be defined as a schedule de-
veloped by a manufacturing organisation for producing goods, plan-
ning inventory, staffing, etc. It is referred to as a detailed production
schedule linked to finished products. The information can be related
M
to the nature and amount of finished products and the time taken for
manufacturing these products. MPS is usually prepared on the ba-
sis of customer demands, product demands, etc. It is usually a long-
term schedule as it covers the lead time of almost all the components
needed to manufacture the finished product.
N
The features of MPS are:

Itoperates at an aggregate level, which means it focusses on the
entire production levels of the organisation.
Itis cost-driven, which means it aims to meet the production
scheduling of the organisation at minimum costs.
Some of the MPS inputs include the following:

Demand forecast
Sales
Production lead times
Resource capacity
Inventory levels
Shelf life
Batch size rules

N O T E S
Some of the MPS outputs include the following:

Manufacturing plan
Resource requirements
Available stock projections
6.4.2 BILL OF MATERIAL (BOM)
Bill of Material (BOM) can be defined as a comprehensive list of parts,

assemblies, subassemblies, etc., required to create a final product. It
details all the information about the materials to be purchased, how
to purchase them, from where to purchase them and how to assemble
products.
S
A well-organised, accurate and updated BOM facilitates smooth func-
tioning of various business activities such as parts sourcing, outsourc-
ing, manufacturing, etc. Organisations that outsource manufacturing
activities usually provide a well-planned BOM to their suppliers or
IM
contract manufacturers. It helps in ensuring that the product is built
correctly as per the given specifications and on time. Figure 6.4 shows
the information that needs to be included in a BOM:
BOM Level
M
Part Number
Part Name
N
Phase
Description
Quantity
Unit of Measure
Procurement Type
Reference Designators
BOM Notes
Figure 6.4: Information to be Included in a BOM

N O T E S
A well-documented BOM must include the following information:

BOM level: It refers to the number of a part or assembly, which en-
ables manufacturers, having the knowledge of the BOM structure,
to decipher the BOM quickly.
Part number: It refers to a number assigned to a part or assembly
so that each part can be recognised quickly. Manufacturers need to
remember not to create multiple part numbers for the same part.
Partname: It refers to the unique name of each part or assembly,
which enables manufacturers to recognise parts more easily.
Phase: It refers to the stage of each part at a specific time in its
lifecycle. For example, ‘In production’ is used for parts in produc-
tion, ‘Unreleased’ or ‘In design’ is used for unapproved parts. This
S
helps in new product introduction, tracking progress and setting
up well-defined project timeframes.
Description: It helps in part identification and distinction more
easily by providing detailed information.
Quantity:
IM
It helps to record the number of parts required per as-
sembly or subassembly. This helps in taking effective buying and
manufacturing decisions.
Unit of measure: It outlines a classification of the measurement
in which a part will be bought or used. For example, measures
such as inches, feet, etc., can be used as suitable classifications.
M
The measures have to be same for each similar part as the infor-
mation will ensure that correct levels are bought and delivered to
production lines.
Procurement type: It documents the manner in which each part is
bought or made. This helps to make manufacturing, planning and
N
procurement activities efficient.

Reference designators: These designators provide detailed infor-
mation about the location where a part fits, especially if a product
consists of printed circuit board assemblies. This prevents time
loss and confusion.
BOM notes: These are notes that provide any other necessary in-
formation to the personnel working on BOM.
6.4.3 INVENTORY RECORDS (IR)
Inventory records (IR) are the manuals or computer-based records

that are maintained to keep track of inventories at various production
levels. These records may comprise lead time information, stock level
details, scrap material details, physical location, quantity, required
floor space, supporting equipment required, amount of supplies, etc.
Any errors related to maintenance and storage of inventories can be

N O T E S
identified and addressed using an effective IR. A sample IR format is

shown in Table 6.1.
TABLE 6.1: INVENTORY RECORD FORMAT

Inventory Description Date Inventory Name of Date of
Number of Article Received Cost Manufacturer Sale
The traditional MRP system lacks flexibility in operating many pro-

cesses. The issue has been addressed by revising the system. The re-
S
vised MRP system is known as the closed loop MRP as it provides
feedback at almost every stage – from planning to the execution of
tasks. This enables manufacturers to evaluate and modify plans as
and when needed.
IM
Later, manufacturers further revised the closed loop MRP to efficiently
translate the manufacturing terms (expressed in units, e.g., kilograms)
to financial terms (e.g., rupees) in their operating plan. This extended
iteration of the closed loop system is known as MRP II.
Let’s now discuss the closed loop MRP and MRP II.
M
6.4.4 CLOSED LOOP MRP
MRP helps to develop plans and schedules for the production system of a
manufacturing organisation. However, due to uncertainty in lead times,
differences in the number of parts supplied or produced, inaccurate in-
N
ventory records, variation in customer orders, inadequate production

capacity, etc., MRP plans and schedules are frequently disrupted.
A closed loop MRP system helps here by providing a continuous and

systematic feedback from various manufacturing entities. This feed-
back helps the management to keep inventory records and other pro-
duction data in valid, updated and accurate form.
Furthermore, the closed loop MRP system enables manufacturing

organisations to finish all production operations on time, thereby
enhancing the organisation’s production capacity. It also helps to
synchronise the materials procurement plan of a manufacturing or-
ganisation with its MPS.
6.4.5 MANUFACTURING RESOURCE PLANNING (MRP II)
MRP II system is an extension of the closed loop MRP system. It en-

courages interaction among various manufacturing units by facilitat-
ing continuous information flow.

N O T E S
MRP II system is defined as an integrated technique of operational

and financial planning for manufacturing organisations. A typical
MRP II system applies a modular organisational structure with sepa-
rate modules to maintain and regulate different organisational func-
tions such as product design and specifications, order management,
purchase, inventory, etc.
Some of the benefits provided by MPR II system to the many depart-

ments of an organisation are discussed as follows:
Sales and Marketing department: MRP II offers product avail-
ability information to this department, which helps in providing
accurate delivery dates to customers.
Finance department: MRP II helps organisations to carry out
their financial planning by converting material schedules into cap-
S
ital requirements.
Production department: MRP II helps organisations to compile
an effective production plan and manage their production pro-
IM
cesses by providing integrated management information. This, in
turn, increases the production efficiency of the organisation.
3. Which of the following can be defined as a comprehensive list

of parts, assemblies, subassemblies, etc., required to create a
M
final product?
a. Inventory Records
b. Bill of Material
c. Master Production Schedule
N
d. None of the above

4. MRP II system is an extension of the __________.
ACTIVITY
Form a group and discuss the differences between:

a. Master Production Schedule and Bill of Material
b. Bill of Material and Inventory Records
c. Inventory Records and Master Production Schedule
DISTRIBUTION REQUIREMENT
6.5
PLANNING (DRP)
The requirement for more elaborate distribution planning led to the
emergence of DRP during the 1970s. DRP is commonly used as a

N O T E S
technique for helping outbound logistics systems to manage and re-

duce inbound inventories. In the 1980s, DRP became an established
approach for planning and controlling distribution logistics activities.
The concept has now become applicable in all business functions in
the supply channel, and not just in inventory and logistics.
The underlying rationale for DRP is to forecast demand more pre-

cisely and then utilise that information to develop delivery schedules.
In this way, distribution firms can reduce inbound inventory by apply-
ing MRP in conjunction with other schedules.
The key information regarding DRP is stored in the DRP table, which
comprises the following elements:
Forecast demand for each Stock Keeping Unit (SKU)
S
Present inventory level of the SKU
Target safety stock
Recommended replenishment quantity
IM
Replenishment lead time
Some of the main benefits of DRP are given as follows:

It reduces freight costs through better coordination of shipments.
It enables an organisation to manufacture the right quantity of
products at the right time, resulting in reduction of excess inven-
M
tory.
It helps to synchronise both logistics and manufacturing activities.
It helps in forming a correct estimation of the inventory and trans-

portation needs under multiple planning situations.
N
DRP is usually used with an MRP system; however, most DRP models
are more comprehensive than the stand-alone MRP models. Table 6.2
depicts the differences between DRP and MRP.
TABLE 6.2: DIFFERENCES BETWEEN MRP AND DRP

MRP DRP
It operates on the basis of the It operates on the basis of demand
production schedule, which is of the market, which is not under
formulated and managed by the organisational control.
organisation.
It enables an organisation to co- It enables an organisation to
ordinate materials in the manufac- coordinate between demand and
turing system. supply sources.
It helps in inventory control until It helps in inventory control at the
the completion of the manufactur- end of manufacturing and as-
ing and assembly processes of an sembly processes.
organisation.

N O T E S
5. The underlying rationale for DRP is to forecast demand more

precisely and then utilise that information to develop delivery
schedules. (True/False)
ACTIVITY
Describe the significance of DRP/MRP in e-commerce.
6.6 PRODUCT DATA MANAGEMENT (PDM)
S
Managers in manufacturing organisations need accurate product
data in order to take right business decisions. The product data must
be such that it can be retrieved as and when needed. Product Data
Management (PDM) is defined as a tool that helps manufacturers
IM
to manage product-related data throughout the production process
(from product design to shipping). The product-related data usually
comprises technical product specifications, manufacturing details,
product development specifications, etc. PDM tools also offer revision
management and storage, enabling multiple users to share informa-
tion in a combined manner.
In addition, PDM tools help in securing essential files, search capabil-

M
ities, revision, lifecycle states, etc. They help in automatic file routing
for quicker approvals. In some manufacturing organisations, PDM
systems also enable the creation of customised workflows for file re-
view and approval. This helps in the integration of the system in an
organisation’s internal processes.
N
A PDM system manages various data types such as number of parts,

description of parts, vendors of materials, product price, CAD draw-
ings, material data sheets, etc. Thus, in order to manage and control
product-related data, a PDM system mainly carries out two major ac-
tivities: data management and process management. Let us now study
these activities in detail.
6.6.1 DATA MANAGEMENT
A manufacturing organisation requires effective maintenance of de-

tailed data related to components, parts and assemblies; for example,
structure, size, weight, usage, etc. Data needs to be managed effi-
ciently so that it can be accessed easily and timely. A PDM system en-
ables an organisation to organise the product-related data by storing
it at a reliable location so that it can be retrieved as and when needed.
For this, the following two key activities are carried out by the PDM:

N O T E S
Product component classification: Product components are

placed under various classes in a database. These classes are, in
turn, put under various heads. In this way, manufacturing organi-
sations can easily access the data.
Document classification: The assembly and component documen-
tation are classified according to their attributes such as quantity,
entry date, etc. This helps manufacturing organisations to easily
acquire information from the documents related to various com-
ponents.
6.6.2 PROCESS MANAGEMENT
Process management is defined as the application of knowledge,

skills, tools and various approaches to measure, control and enhance
S
performance of business processes. Its objective is to meet the re-
quirements of customers. Process management incorporates mainly
three activities:
IM
Work management: PDM helps managers to access updated prod-
uct information, which facilitates work management.
Workflow management: PDM enables manufacturing organisa-
tions to manage all activities involved in product development.
Furthermore, it offers a routing list, which comprises various ac-
tivities required in product development, and the list of activities
differs across organisations.
M
Work history management: Along with maintaining a database of

the current set of activities, a PDM system also records the activi-
ties at various stages of product development for future reference.
In this way, PDM also serves as a major source for product audits.
N
6.6.3 BENEFITS OF PDM
PDM supports concurrent task management and secures data man-

agement of products by allowing only authorised access. PDM system
also offers the following benefits:
Time-to-Market: PDM helps in speeding up tasks by making data
instantly available as and when needed.
Enhanced productivity: The time taken for retrieving, storing, fil-
ing, etc., documents can be minimised with a PDM system. Search
capabilities and classification help in data retrieval.
Enhanced control: PDM allows only authorised personnel to work
with the confidential data, thereby providing better and secure op-
tions to control data.

N O T E S
6. A PDM system enables an organisation to organise product-

related data and store it at a reliable location so that it can be
retrieved easily. (True/False)
7. __________ is defined as the application of knowledge, skills,
tools and various approaches to measure, control and enhance
the performance of business processes.
ACTIVITY
Use the Internet to find more about PDM and delineate the benefits
of implementing its services in the manufacturing sector.
S
6.7 MANUFACTURING OPERATIONS
IM
Manufacturing operations represent the individual processes that or-
ganisations engage in to produce products for consumers. The main
components of manufacturing operations are direct materials, direct
labour and manufacturing overhead that consists of minor expenses
related to the production process.
Direct materials consist of raw materials required to produce prod-

M
ucts. For example, a computer manufacturer needs chips, hard drives,
circuit boards, etc., to make computers. On occasions, the computer
manufacturer may not produce the required memory chip and instead
buy it from a chip manufacturer.
Direct labour in manufacturing operations includes people hired to

N
operate machines or handtools. Direct labour is usually skilled labour

and, in some cases, maybe even non-skilled (if the manufacturing op-
erations have a strong assembly line system in place).
Manufacturing overhead includes costs of utilities, labour, quality con-

trol, etc. Manufacturers try to keep the overhead costs to a minimum
level because these costs can increase the cost of the goods produced.
Manufacturers quite often try to categorise their production activities

by type, which creates a logical flow of producing products. For in-
stance, the production begins with the acquirement of raw material,
getting them into the required shape, refining them and eliminating
the unwanted parts. The parts are then assembled, prepared for fin-
ishing and finalised as the end product.

N O T E S
Figure 6.5 shows the types of manufacturing operations:
Make-to-Order (MTO) and Make-to-Stock (MTS)
Assemble-to-Order (ATO)
Engineer-to-Order (ETO)
Configure-to-Order (CTO)
Figure 6.5: Types of Manufacturing Operations
S
Let us now discuss these manufacturing operations.
6.7.1 MAKE-TO-ORDER (MTO) AND MAKE-TO-STOCK (MTS)

IM
In the Make-to-Order (MTO) manufacturing operation, organisations
begin producing goods after customers place their orders. This type of
manufacturing operation is mainly adopted by organisations compet-
ing on the basis of product customisation. These organisations plan
their production process depending on the orders received from cus-
tomers.
M
On the other hand, in the Make-to-Stock (MTS) manufacturing oper-

ation, organisations manufacture and store the final product before
an order is placed by the customer. Organisations using this type of
manufacturing operation deliver their products to customers through
retail outlets or distribution centres and plan their production process
N
on the basis of market analysis and demand forecasting.
6.7.2 ASSEMBLE-TO-ORDER (ATO)
In the Assemble-to-Order (ATO) manufacturing operation, organisa-

tions assemble various product components after receiving customer
orders. In this case, the main product components are already manu-
factured and stocked in anticipation of a customer order. For instance,
automobiles are manufactured (according to market demands) by as-
sembling its various components such as tyres, seating systems, etc.
In this case, the components are pre-manufactured assuming the fu-
ture automobile demand.
6.7.3 ENGINEER-TO-ORDER (ETO)
In the Engineer-to-Order (ETO) manufacturing operation, organisa-

tions manufacture products according to customer requirements, but
at a higher price. In this case, minute product details are taken into

N O T E S
consideration by manufacturers in order to better serve the needs of

customers.
6.7.4 CONFIGURE-TO-ORDER (CTO)
In the Configure-to-Order (CTO) manufacturing operation, the cus-

tomer chooses a base product while placing an order. After that, all
the variable features associated with the product are configured. This
type of manufacturing operation is based on customer demands for
specific products.
8. Name the component of the manufacturing operation that
S
includes people hired to operate machines or hand tools.
9. In the Make-to-Order (MTO) manufacturing operation,
organisations manufacture and store the final product before
an order is placed by the customer. (True/False)
IM
10. In the Assemble-to-Order (ATO) manufacturing operation,
organisations assemble various product components after
receiving customer orders. (True/False)
ACTIVITY
M
Form a group and discuss the differences between MTO and MTS.
6.8 ERP LOGISTICS PACKAGE

N
Logistics is a department responsible for maintaining details regard-

ing transportation and its network. It is important for organisations
to maintain a proper record of all its products in transit. ERP logistics
package helps in smooth coordination of various distribution activities
in a manufacturing organisation. Distribution is an essential part of lo-
gistics, and a distribution centre should be efficient in the inbound as
well as outbound flow of data and products.
The ERP logistics package helps in integration of the logistics data

of the entire organisation into a single relational or object-oriented
database related to different transaction-processing modules. These
modules comprise applications involved in activities like warehous-
ing, distribution, transportation, etc. The functions of the distribution
centre management and warehousing are generally accessed through
one of these modules.
Some of the major benefits that can be acquired by manufacturing

organisations from the ERP logistics packages are listed as follows:

N O T E S
Enhanced MRP
Better supplier-contracts registration
Real-time budget control
Improved monitoring of supplier reliability
Enhanced inventory turnover visibility
Minimum wastage through better expiry date information
Efficient handling and management of bulk orders
11. Logistics is a department responsible for maintaining details
S
regarding transportation and its network. (True/False)
ACTIVITY
IM
Using Various Sources, Find More About The Erp Logistics Pack-
age And Its Benefits In Various Industries.
6.9 SUMMARY
ERP refers to a range of business solutions supported by multi-
M
module application software that enables organisations to manage

essential business operations, such as product planning, maintain-
ing inventories, tracking orders, providing customer service, etc.
ERP manufacturing modules include designing and manufactur-
N
ing of products with the help of Computer-Aided Design (CAD)/

Computer-Aided Manufacturing (CAM), Product Data Manage-
ment (PDM) and various planning tools like Material Requirement
Planning (MRP) and Distribution Requirement Planning (DRP).
CAD systems are integrated computer packages that allow manu-
facturers to easily draw and modify designs on a computer.
CAM helps in converting these computerised designs automat-
ically into software programs for computerised production ma-
chines, Computer Numerical Control (CNC) machining for exam-
ple.
Material Requirement Planning (MRP) can be defined as an ERP
manufacturing planning module that evaluates materials require-
ment and schedules supply to meet the demand for a variety of
products at different manufacturing units.

N O T E S
Master Production Schedule (MPS) can be defined as a schedule

developed by a manufacturing organisation for producing goods,
planning inventory, staffing, etc.
Billof Material (BOM) can be defined as a comprehensive list of
parts, assemblies, subassemblies, etc., required to create the final
product.
Inventory records are the manuals or computer-based records,
which are maintained to keep track of inventories at various pro-
duction levels. These records may comprise lead time information,
stock level details, scrap material details, physical location, quan-
tity, required floor space, supporting equipment required, amount
of supplies, etc.
Product Data Management (PDM) is defined as a tool that helps
S
manufacturers to manage the product-related data throughout the
production process (from product design to shipping).
The types of manufacturing operations are Make-to-Order, Make-
IM
to-Stock, Assemble-to-Order, Engineer-to-Order and Config-
ure-to-Order.
KEY WORDS
Lead time: It refers to the time taken between the start and
completion of a production process.
M
Order promising: It refers to the act of delivering products or

services to customers on time as per their requirements.
Safety stock: It refers to the inventory that is held as a buffer
for future use.
N
Scrap: It refers to the small parts or material pieces left out af-
ter product manufacturing.
Time-phased inventory: It refers to the distribution of inven-
tory over an appropriate time scale for the scheduled comple-
tion of the production plan.

1. Explain the concept of ERP in manufacturing.
2. Discuss the CAD/CAM processes.
3. List the elements that need to be included in the BOM record.
4. What are the benefits of PDM?
5. Discuss ERP logistics package.

N O T E S

ERP in Manufacturing 1. True
Computer-Aided Design/ 2. CAD
Computer-Aided Manufac-
turing (CAD/CAM)
Material Requirement 3. b. Bill of Material
Planning (MRP)
4. Closed loop MRP system
S
Distribution Requirement 5. True
Planning (DRP)
Product Data Management 6. True
IM
(PDM)
7. Process management
Manufacturing Operations 8. Direct labour
9. False
10. True
M
ERP Logistics Package 11. True

1. ERP is an application of the Management Information Systems
(MIS), and integrates and automates various business practices
N
related to production, operation and distribution aspects of a

manufacturing firm. Refer to Section 6.2 ERP in Manufacturing.
2. CAD systems are integrated computer packages that allow
manufacturers to easily draw and modify designs on a
computer. CAM helps in converting these computerised
designs automatically into software programs for computerised
production machines. Refer to Section 6.3 Computer-Aided
Design/Computer-Aided Manufacturing (CAD/CAM).
3. BOM level, part number, part name, etc., are some of the things
that need to be included in the list of elements of the BOM record.
Refer to Section 6.4 Material Requirement Planning (MRP).
4. Time-to-Market, enhanced productivity and enhanced control
are some of the benefits of PDM. Refer to Section 6.6 Product
Data Management (PDM).

N O T E S
5. ERP logistics package helps in smooth coordination of various

distribution activities in a manufacturing organisation. Refer to
Section 6.8 ERP Logistics Package.

6.12
REFERENCE
SUGGESTED READINGS
Alavudeen A.,Venkateshwaran N. (2008). Computer Integrated
Manufacturing,1sted.New Delhi: PHI Learning Pvt. Ltd.
Graham D., Manikas I.,Folinas D. (2013). E-Logistics and E-Sup-
ply Chain Management: Applications for Evolving Business,1sted.
Hershey, PA, US: IGI Global.
S
E-REFERENCES
Closed-Loop Material Requirements Planning (2000). Ency-
IM
clopaedia of Production and Manufacturing Management, 95–96.
doi:10.1007/1-4020-0612-8_141.
Inventorysolutions.org (2015). MRP or Material Requirements
Planning, What is it? By Inventory Solutions. Retrieved from
http://www.inventorysolutions.org/def_mrp.htm.
Sage.co.uk (2015). What is a Master Production Schedule? Re-
M
trieved from http://www.sage.co.uk/sage1000v2_1/form_help/

workingw/subfiles/mps.htm.
N

N
M
IM
S
C H A
7 P T E R
ERP IN PURCHASE AND SALES
S
CONTENTS
7.1 Introduction
7.2 Purchase Module
7.2.1
IM
Characteristics of Purchase Module
7.2.2 Functioning of ERP Purchase System
7.2.3 Benefits of ERP Purchase Module
Activity
7.3 Sales and Distribution Module
M

Activity
7.4 Sub-modules of Sales and Distribution
7.4.1 Master Data Management
7.4.2 Order Management
N
7.4.3 Warehouse Management

7.4.4 Shipping and Transportation
7.4.5 Billing and Sales Support
7.4.6 Foreign Trade
Activity
7.5 Summary

N O T E S
IMPLEMENTATION OF ERP PURCHASE SYSTEM

IN EUROSPEC MANUFACTURING
Eurospec Manufacturing, established in 1985, is a full-service sup-

plier of stamped metal parts. It serves many renowned organisa-
tions in the automotive industry in North America. The compa-
ny had been using an ERP purchase and sales solution for quite
some time. However, with recent advancement in technology and
fierce market competition, the company needed to replace its ex-
isting ERP purchase and sales solution with the latest one. Thus,
Eurospec Manufacturing selected Solarsoft iVP, a modern ERP
purchase and sales solution, to manage its business operations
effectively. The new ERP purchase and sales solution automated
S
all sales and purchase functions of Eurospec. Besides, Solarsoft
iVP helped Eurospec in:
Estimating an optimum order quantity by evaluating suppli-
IMers’ performance.
Generating automated purchase orders in accordance with
material planning and forecasts.
Keeping records of historical data that can be easily accessi-
ble.
Carrying out functions like order tracking, invoice verifica-
M
tion, supplier payments, etc.
Resolving issues related to the integration of information.
N

ERP IN PURCHASE AND SALES 121
N O T E S
LEARNING OBJECTIVES

> Explain the importance of the ERP purchase module
> Discuss the significance of the ERP sales and distribution
module
> Describe the sub-modules of the sales and distribution
module
7.1 INTRODUCTION
In the previous chapter, you have studied the importance of ERP in
S
manufacturing. However, the manufacturing function of an organisa-
tion hinges on its purchasing, sales and distribution functions.
Purchasing can be defined as a managerial activity that involves the

IM
selection of materials, supplies, equipment, etc. for production. In or-
der to manage the entire purchasing process, organisations implement
an ERP system with a purchase module. The module helps organisa-
tions to generate and track purchase orders quickly as well as monitor
the overall material procurement process from vendor quoting to final
material payment. This reduces manual purchasing processes, mini-
mises inventory and enhances vendor performance.
M
The ERP’s sales and distribution module helps in automating the en-
tire sales and distribution process of an organisation. This enables
organisations to develop a detailed logistics plan, thereby maintain-
ing just-in-time deliveries. Besides, the module allows organisations
to generate sales orders and invoices, offer faster replies to customer
N
queries, etc. In this chapter, you will study the functions of the pur-
chase and sales and distribution modules of an ERP system.
7.2 PURCHASE MODULE

Purchasing is a vital function of an organisation as it is directly related
to the timely execution of projects. For example, a manufacturing or-
ganisation needs to purchase raw materials to start production, while
a retail store has to purchase finished products in order to meet the
demands of end users. Organisations need to purchase materials in
right quantities and of right quality. Purchasing is a systematic pro-
cess that involves a number of steps. These steps are as follows:
1. Firstly, requirements of materials to be purchased are identified.
2. After identifying the requirements, the availability of funds to
purchase the required materials is determined.
3. Lastly, an appropriate supplier to obtain the required materials
within the organisation’s budget is selected.

N O T E S
Therefore, it can be said that purchasing is a comprehensive task for

any organisation. In order to successfully manage their entire pur-
chasing process, most organisations use an ERP system with purchas-
ing functionality. The purchase module of an ERP system supports
the overall purchasing function of an organisation right from pur-
chase requisition to the final payment of raw materials. The module
also helps in streamlining the procurement of required raw materials,
packaging material, sub-assemblies, etc. In addition, it automates var-
ious processes, such as supplier selection, supplier quote evaluation,
purchase order and billing.
7.2.1 CHARACTERISTICS OF PURCHASE MODULE
The ERP purchase module helps to improve the entire purchase func-
S
tion of an organisation by automating various activities, such as vendor
evaluation, order placing and tracking, invoicing, purchase requisition,
material receipt and inspection, recordkeeping and report generation.
Some of the major characteristics of this module are as follows:
IM
Database management: The purchase module collects, stores and
manages all data related to material purchasing. Further, the mod-
ule also enables organisations to modify data and retrieve it when-
ever needed.
Flexibility: This module can easily adapt to changes taking place
in the business environment. For example, in case of changes in
M
production schedules, the purchase module suggests built-in lead
times so that purchasing needs can be met on time.
Integrated approach: The purchase module can be integrated
with various other modules like production, finance, inventory
management, etc. Such integration facilitates a smooth flow of in-
N
formation and better coordination across an organisation.

Automation: The purchase module automates the generation,
modification and cancellation of purchase orders on the basis of
the production plan and schedule. This saves time, cost and efforts
of the purchasing department of an organisation.
7.2.2 FUNCTIONING OF ERP PURCHASE SYSTEM
The ERP purchase module helps an organisation in acquiring prod-

ucts in accordance with organisational needs. To purchase efficiently,
various steps are followed in the ERP purchase module. Some of the
common steps involved in the ERP purchase module are discussed as
follows:
1. Purchase requisition: It is a document prepared to notify the
purchasing department about the items required. In other
words, this document informs the purchasing department about
what is to be ordered, in which quantities and what is the time
period to acquire the items.

N O T E S
2. Purchase requisition review: After the requisition is created,

it is forwarded to the purchase department for approval. The
purchase module enables the purchase department to verify
the purchase requisition by comparing the identified material
requirements with the total materials present in the organisation.
3. Order placement: After the purchase requisition is approved,
the purchase department gets involved in the search of a suitable
supplier so that the order can be placed. The ERP purchase
module allows the purchase department to identify the right
supplier by providing relevant information, such as the market
image and financial position of the supplier. Further, it helps in
generating new orders or modifying the previous ones.
4. Material receipt and inspection: The purchase module
S
ensures a smooth flow of the materials acquisition process by
automating activities such as order tracking, material inspection
and recordkeeping. After the order is received, the purchase
module enables the purchasing department to verify whether
IM
the received order is as per the requirements.
5. Order acceptance/return: After the inspection of the materials
received, the order may be accepted or returned back to the
supplier, in case of any mismatch between what was required
and what is received. It is important to note that the materials
can only be returned before invoicing.
M
6. Invoicing: If the order is accepted, the invoice is generated for
the related purchase order. The purchase module helps in this
process by matching the cost, quality and quantity of materials
accepted and ordered.
7. Recordkeeping and report generation: The purchase module
N
stores purchasing data that can be easily retrieved whenever

needed. With the help of this data, the module generates reports
that enable managers to take purchasing decisions easily.
7.2.3 BENEFITS OF ERP PURCHASE MODULE
From the discussion so far, it can be said that the ERP purchase mod-
ule automates the entire purchase process of an organisation. Apart
from this, the following are the major benefits of the ERP purchase
module:
It helps to reduce paperwork and manual operations.
Itreduces inventory levels; thereby lowering overall inventory
cost.
Itprevents production delays by keeping track on the available
inventory.
The module helps to determine the performance of current ven-
dors and identify prospective vendors.

N O T E S
The module also maintains and updates data associated with pur-
chasing activities.
It helps to generate invoices and receipts.
1. The purchase module of an ERP system supports an

organisation’s overall purchasing function right from purchase
requisition to the final payment of raw materials. (True/False)
2. The purchase module cannot integrate with various other
modules like production, finance, inventory management, etc.
(True/False)
3. _________________ document informs the purchasing
S
department about what is to be ordered, in which quantities
and what is the time period to acquire the items.
4. The ERP purchase module automates the entire purchase
IM process of an organisation. (True/False)
ACTIVITY
Using the Internet, find information on the functions of the ERP

purchase system of an IT company of your choice and make a re-
port on it.
M
7.3 SALES AND DISTRIBUTION MODULE

A fast and reliable distribution network is of paramount importance
N
for a successful business as it enables customers to avail products and

services as and when required. Moreover, it helps organisations to
explore new geographical areas, thereby creating awareness among
prospects. A sales and distribution network of an organisation com-
prises various parties, such as wholesalers, retailers, distributors and
commission agents. The sales and distribution module of an ERP sys-
tem streamlines the sales and distribution activities of an organisa-
tion.
To understand the sales and distribution module of an ERP system,

let us first discuss the sales and distribution process of organisations.
The sales and distribution process involves the following steps:
1. Pre-sales: Before any sales take place, there are certain activities
that must be carried out by an organisation to attract customers;
for example, arranging product demos to invite buying enquiries.
2. Sales order processing: After a customer is satisfied by enquiring
about the product, he/she may place an order to buy that product.
Various mediums can be used by customers for placing their

N O T E S
orders. For example, customers nowadays feel comfortable in

buying products online as it saves time and efforts.
3. Shipping: The next step in the sales and distribution process
is to make products available to customers by drafting delivery
schedules, transporting goods, tracking transit details, etc.
4. Invoicing: This is the last step in the process of sales and
distribution. After a product is received by a customer, an invoice
is generated and handed over to the customer and the payment
is collected.
The sales and distribution module of an ERP system enables an or-

ganisation in performing the following functions:
Formulating an effective logistics plan for Just-in-Time (JIT) de-
S
liveries
Processing sales and purchase orders
Offering a faster response to customers’ queries
Monitoring sales transactions
IM
Ensuring resource availability at all times
Maintaining timely delivery performance
Estimating pricing and taxes related to product delivery
Checking credit limits and generating work orders and invoices
M
5. A fast and reliable distribution network is of paramount

importance for a successful business as it enables customers
N
to avail products and services as and when required. (True/

False)
6. Which of the following is the last step in the sales and
distribution process?
a. Pre-sales b. Invoicing
c. Shipping d. Sales order processing
7. The sales and distribution module of an ERP system enables
an organisation to offer a faster response to customers’
queries. (True/False)
ACTIVITY
Using the Internet, find out what type of sales and distribution net-
work exists in Parle Products Pvt. Ltd. Prepare a report on it.

N O T E S
SUB-MODULES OF SALES AND

7.4
DISTRIBUTION MODULE
Sales is considered to be a comprehensive function of an organisation
as it comprises various activities such as shipping, invoicing and or-
der tracking. The sales and distribution module of an ERP system al-
lows organisations to carry out such activities with the help of various
sub-modules. Figure 7.1 depicts sales and distribution sub-modules:
Master Data
Management
S
Order
Foreign Trade
Management
IM
Sub-modules
of Sales and
Distribution
M
Billing and Warehouse
Sales Support Management
Shipping and
Transportation
N
Figure 7.1: Various Sub-modules of Sales and Distribution Module
Let us now discuss these sub-modules in detail in the next sections.
7.4.1 MASTER DATA MANAGEMENT
As mentioned earlier, there are various modules used in an ERP sys-

tem, such as procurement, logistics and manufacturing. These mod-
ules require the sharing of reference data to perform all activities
efficiently. This reference data is known as master data in an ERP
system. Master data is required by organisations to coordinate various
activities in the value chain. Any error in the master data can result
in failed business transactions and inconsistent reporting. Therefore,
organisations must maintain consistent master data to offer reliable
information whenever required.

N O T E S
The master data management module enables an organisation to

maintain its master data in such a way that it can be easily accessed
by authorised personnel. In sales and distribution, the master data
management module is used to maintain data linked to customers,
products, sales orders, suppliers, etc. Therefore, a need arises to de-
velop accurate and consistent master data to maintain authenticity
and security. For this, generally, a provision is defined to allow only
authorised personnel to make changes in the data.
7.4.2 ORDER MANAGEMENT
In an organisation, various types of orders are placed such as pur-

chase order and sales order. Usually, these orders are generated in
bulk. In such a case, there are major chances of mistakes taking place,
S
which may further lead to delays in product delivery and customer
dissatisfaction. Thus, these orders need to be efficiently managed by
an organisation. To do so, most organisations use the order manage-
ment module. This module can be of two types, which are as follows:
Sales
IM
order management: This module enables organisations to
carry out their sales operations effectively. Further, it helps or-
ganisations to manage their sales orders, contracts, customer dis-
counts, etc. This module also ensures timely product delivery to
customers.
Purchase order management: This module enables organisations
M
to carry out essential operations like on-time purchase requisition,
contract management, vendor selection and management, etc.
Further, this module helps an organisation in managing vendor
activities and purchase orders.
N
7.4.3 WAREHOUSE MANAGEMENT
Warehousing refers to a process of storing goods on a large scale in

an organised manner such that they are easily available whenever
required. It involves holding and preserving products that are to be
dispatched to resellers or consumers. It enables an organisation in
carrying out uninterrupted production activities and selling goods as
and when there is adequate demand. Therefore, organisations must
follow a step-by-step approach to manage each aspect of warehousing.
Some of the important aspects that must be covered under warehouse
management are:
Receipt and issue of supplies
Quality control or verification
Good storage
Control of stock
Documentation flow

N O T E S
Management of rejected material

Management of unwanted material or scrap
The warehouse management module provides updated information

about an organisation’s inventory levels. Further, it offers tools to
manage day-to-day warehouse activities and integrate the warehouse
functions of an organisation with its different departments. Some of
the important functions that are performed with the warehouse man-
agement module are as follows:
Inventory planning: It enables an organisation to plan its inven-
tory requirements by making accurate forecasts of market trends
and adjusting reordering points, safety stock, lead-times, service
levels, etc.
S
Inventory reporting: It helps to track inventory maintained at
multiple locations. Moreover, it enables organisations to estimate
and communicate accurate product delivery dates to customers.
Inventory analysis: It allows organisations to estimate optimum
IMinventory levels, thereby preventing situations like overstock and
stock outs.
7.4.4 SHIPPING AND TRANSPORTATION
Shipping and transportation forms an essential component of an or-

ganisation’s supply chain by ensuring the availability of products in
M
the market. An effective shipping and transportation function enables

organisations to deliver products and receive raw materials on time.
Hence, organisations require the shipping and transportation module
to design an effective plan for moving products from one place to an-
other. This module allows an organisation to carry out its shipping and
N
transportation activities effectively. Besides, the module also helps an

organisation to:
Provide exact delivery dates to customers
Plan and monitor work lists for shipping operations
Ensure material availability
Process outstanding orders
Aid effective shipping and transportation planning
Estimate foreign trade requirements
Update data associated with the arrival of materials and delivery
of products
7.4.5 BILLING AND SALES SUPPORT
The billing and sales support module allows organisations to carry out
billing functions like invoice generation, termination of billing trans-

N O T E S
actions, transfer of billing data to accounting department, etc. In a

general transaction cycle, an invoice is generated after the comple-
tion of the sales and contract process. The invoicing process generally
comprises the following steps:
1. At first, an order for a product is placed by a customer.
2. After order placement, the order is processed by locating the
product in the available inventory or manufacturing the product
on demand to make it available to the customer.
3. Further, the product is moved from the manufacturer’s site or
warehouse to the customer’s site.
4. After delivering the product to a customer, the bill/invoice is
given to the customer and the payment is received from him/her.
S
The invoicing process mentioned above is also known as the purchase-
to-pay process from the perspective of a buyer and order-to-cash from
the perspective of a seller. The billing and sales support module helps
IM
in the invoice generation process of an organisation. Besides, this
module records and administers orders received from customers. It
also allows an organisation to deliver products to customers on time.
7.4.6 FOREIGN TRADE
With an increase in cross-border trade, there has been a significant

M
growth in competition in international markets. In addition, low entry

barriers have increased difficulties for organisations to sustain their
position in the global market. The foreign trade sub-module of an
ERP system helps to automate and optimise overall operations relat-
ed to import and export activities. The ERP foreign trade sub-module
N
also provides the following financial and operational benefits to or-

ganisations:
Enhanced decision-making process
Increased global competitive power
Minimised operational costs
The ERP foreign trade sub-module enables an organisation to meet

the changing needs of foreign trade. Besides, some of the key func-
tions of the foreign trade module are:
Handling import and export activities
Fulfilling foreign trade license requirements
Automating the foreign trade reporting system
Providing updated data associated with foreign trade activities

N O T E S
8. The billing and sales support module helps in the

______________ process of an organisation.
9. ______________ refers to a process of storing goods on a
large scale in an organised manner such that they are easily
available whenever required.
10. Which of the following helps to track inventory maintained at
multiple locations?
a. Inventory reporting b. Inventory analysis
c. Inventory planning d. Inventory handling
11. The foreign trade sub-module helps to automate and optimise
S
overall operations related to import and export activities.
IM (True/False)
ACTIVITY
Write a brief note on how an import-export firm can successfully

use the ERP foreign trade module.
7.5 SUMMARY
M
Organisations need to purchase the right quality and quantity of

materials.
The purchase module of an ERP system supports an organisa-
tion’s overall purchasing function right from purchase requisition
N
to the final payment of raw materials.

An effective distribution network allows the delivery of the right
product to the right customer at the right time, which ultimately
helps in enhancing organisational sales and profit.
The sales and distribution module of an ERP system streamlines
the sales and distribution activities of an organisation.
In sales and distribution, the master data management module is
used to maintain data linked to customers, products, sales orders
and suppliers.
Master data is required by organisations to coordinate various ac-
tivities in a value chain. Any error in the master data can result in
failed business transactions and inconsistent reporting.
The warehouse management module provides updated informa-
tion about an organisation’s inventory levels.
The ERP foreign trade sub-module enables an organisation to
meet the changing needs of foreign trade.

N O T E S
KEY WORDS
Inventory planning: It is a process in which a plan is formulat-

ed to estimate an organisation’s inventory needs.
Inventory reporting: It refers to a process in which an organi-
sation tracks inventory available at various locations.
Invoice: It refers to a document that contains information linked
to various purchased materials.
Shipping: It is a process of moving goods from one place to the
other.
Warehouse: It refers to a facility used for storing raw materials
or manufactured goods.
S
IM
1. Explain the characteristics of the purchase module.
2. Discuss the functioning of an ERP purchase system.
3. How does the ERP sales and distribution module help an
organisation?
4. What are the two types of order management modules?
5. Write a brief note on the ERP foreign trade sub-module.
M

N
Topic Q.No. Answers

Purchase Module 1. True
2. False
3. Purchase requisition
4. True
Sales and Distribution 5. True
Module
6. b. Invoicing
7. True
Sub-modules of Sales and 8. Invoice generation
Distribution Module
9. Warehousing
10. a. Inventory reporting
11. True

N O T E S

1. Database management, flexibility, integrated approach and
automation are some of the major characteristics of the purchase
module. Refer to Section 7.2 Purchase Module.
2. The functioning of the ERP purchase system revolves around
purchase requisition, purchase requisition review, order
placement, etc. Refer to Section 7.2 Purchase Module.
3. The ERP sales and distribution module helps an organisation
to maintain on-time delivery performance. Refer to Section
7.3 Sales and Distribution.
4. Sales order management and purchase order management are
the two types of order management modules. Refer to Section
S
7.4 Sub-modules of Sales and Distribution Module.
5. The foreign trade sub-module helps to automate and optimise
overall operations related to import and export activities. Refer
to Section 7.4 Sub-modules of Sales and Distribution Module.
IM
7.8
REFERENCE
SUGGESTED READINGS
M
Alavudeen, A. and Venkateshwaran, N. (2008). Computer Integrat-
ed Manufacturing. (1st ed.). New Delhi: PHI Learning Pvt. Ltd.
Graham, D., Manikas, I. and Folinas, D. (2013). E-Logistics and
E-Supply Chain Management: Applications for Evolving Business.
(1st ed.). Hershey, PA, USA: IGI Global.
N
E-REFERENCES
Eresourceerp.com. (2015). Purchase Management ERP module
from eresource ERP. Retrieved 17 February 2015, from http://www.
eresourceerp.com/Purchase_Module_in_ERP.html
Log.logcluster.org. (2015). Retrieved 17 February 2015, from http://
log.logcluster.org/response/warehouse-management/
Tfig.unece.org. (2015). Invoicing process. Retrieved 17 February
2015, from http://tfig.unece.org/contents/invoicing-process.htm

C H A
8 P T E R
ERP IN INVENTORY MANAGEMENT
S
CONTENTS
8.1 Introduction
8.2 Concept of Inventory Management
Activity
8.3 ERP Inventory Management Module
8.3.1 Sub-modules of ERP Inventory Management Module
8.3.2 Features of ERP Inventory Management Module
8.3.3 Benefits and Limitations of ERP Inventory Management Module
M

Activity
8.4 Summary
N

N O T E S
ERP INVENTORY MANAGEMENT AT BOEING
Boeing is the largest aerospace organisation in the world. It is

based in the US and engaged in the designing, manufacturing, and
selling of airplanes, rotorcrafts, rockets and satellites. It has many
divisions and branches around the world, which require working
in close integration with each other. Earlier, Boeing faced major
issues in maintaining efficient information transfer with regard to
its inventory processes across all its departments and branches.
It tried to address these issues by installing different information
systems. But since the installed systems lacked complete integra-
tion, unnecessary lags in product delivery occurred.
After much deliberation and research, Boeing changed all the in-
S
stalled information systems for an efficient ERP inventory man-
agement system. The new system helped Boeing in maintaining
a continuous flow of information related to its various inventory
IM
processes across all its departments and branches globally. It also
enabled the managers at Boeing to manage its inventory efficient-
ly.
M
N

ERP IN INVENTORY MANAGEMENT 135
N O T E S
LEARNING OBJECTIVES

> Explain the concept of inventory management
> List the features of the ERP inventory management module
> Discuss the installation of the ERP inventory management
module
8.1 INTRODUCTION
In the previous chapter, you studied about the purchase, sales and dis-
tribution modules of an ERP system. For a mistake-proof purchasing,
S
organisations require precise tracking of its inventory levels; and for
which, they use various ERP inventory modules.
In an organisation, an inventory comprises total materials or goods

IM
kept for production and sales purposes at a specific point of time.
Inventory is usually categorised into raw materials, work in process
(WIP) and finished goods. These inventory categories hold high value
for organisations hence, the latter should exert themselves to manage
their inventory as efficiently as possible.
Inventory management is a process of supervising the inflow and out-

flow of an organisation’s inventory. Effective inventory management
M
is integral to successful business operations because excess inventory

may increase organisational costs, whereas low inventory levels may
affect the organisation’s manufacturing process and sales. Hence, in
order to manage inventory efficiently, an ERP inventory management
module is being adopted by many organisations today.
N
The module is used by organisations to track the movement of inven-

tory. It is usually integrated with the other modules of an ERP system,
thereby providing real-time inventory information across all business
functions. The chapter will discuss about the ERP inventory manage-
ment module.
CONCEPT OF INVENTORY
8.2
MANAGEMENT
Before discussing the concept of inventory management, let us dis-
cuss what does inventory mean. Inventory is a stock of goods or ma-
terials maintained by a business for different purposes such as pro-
duction and sales. It comprises raw materials (these are inputs used
to produce output), WIP (these are semi-finished goods used for pro-
duction), and finished goods (these are the final output). Sufficient
amount of inventory helps organisations to maintain the availability

N O T E S
of goods and meet increasing customers’ demands. Moreover, by de-

termining an optimal level of inventory, an organisation can avoid the
situations of overstocking or under-stocking.
Organisations are required to manage their inventories to ensure

timely availability of products and optimise resources to achieve high-
er efficiencies. Inventory management is a process of monitoring and
controlling the inflow and outflow of stock. In an organisation, a typi-
cal inventory management process consists of the following activities:
Identifying the requirement of stock
Developing production schedule
Implementing methods of information sharing
Monitoring inventory inflow-outflow
S
Coordinating with suppliers for maintaining an optimum level of
inventory
Generating an inventory report and forwarding/presenting it to
IMthe procurement department
An important aspect of inventory management is the estimation of

buffer stock (additional units above the prescribed quantity required
to maintain production levels). This helps organisations in minimising
the chances of interruptions in production, which may occur due to
unavailability of required inventory.
M
1. _____________ is a stock of goods or materials maintained by a

business for different purposes, such as production and sales.
N
2. By determining an optimal level of inventory, an organisation

can avoid the situations of overstocking or under-stocking.
(True/False)
3. Organisations are required to manage their inventories to
ensure timely availability of products and optimise resources
to achieve higher efficiencies. (True/False)
4. An important aspect of inventory management is the
estimation of _____________.
5. Inventory management may lead to interruptions in
production. (True/False)
ACTIVITY
Find information on the right steps that can be taken by a retail

store to manage its inventory.

N O T E S
ERP INVENTORY MANAGEMENT

8.3
MODULE
The ERP inventory management module comprises automated pro-
cesses for tracking, measuring and replenishing inventories. Conse-
quently, organisations can maintain large inventories at different loca-
tions without compromising on efficiencies. Some of the key functions
of the inventory management module of an ERP system are:
The module maintains information related to the inventory needs
of different departments of an organisation.
The module enables an organisation to keep records on the type
and quantity of materials issued to the concerned department, etc.
S
The module records both qualitative and quantitative material de-
tails at the time of their receipt.
The module keeps a record of all internal material transfers in
terms of the amount of materials transferred, details of the branch
IM
to which the materials are transferred, etc.
The module carries out automatic inspection of inventoried ma-
terials and offers detailed information on the inspection process.
8.3.1 SUB-MODULES OF ERP INVENTORY MANAGEMENT

MODULE
M
The ERP inventory management module works with its various

sub-modules in order to manage the entire inventory management
process. Some of these sub-modules are as follows
Inventory requisition: This sub-module helps different depart-
N
ments of an organisation to notify their inventory requirements to

the inventory department. At the same time, it helps the inventory
department to access the details of inventory needed by various
departments. Besides, the inventory requisition sub-module offers
information related to the current inventory level, and the mini-
mum and maximum amount of inventory to be purchased. This in-
formation helps the inventory department to estimate an optimum
inventory level to be purchased.
Inventory order assessment: After the optimum level of inventory
is estimated, a purchase order is to be placed by an organisation
in order to fulfil inventory requirements identified. However, be-
fore a purchase order is placed, the identified inventory require-
ments are compared with the minimum inventory needed to fulfil
the requisition. Thereafter, the final inventory to be purchased is
estimated. The inventory order assessment sub-module also helps
to generate a list of potential suppliers to obtain the inventory.

N O T E S
Inventory order placement: After a list of prospective suppliers is

generated, the inventory order placement sub-module generates a
purchase order. This purchase order comprises the following de-
tails:
Purchase order date
Quality desired
Supplier details
Name of the department in need of inventory
Itemised purchase cost
Order shipping mode
S
Payment mode
Supplier pro forma: This sub-module of the ERP inventory man-
agement module allows an organisation to collect sales proposals
IMor quotations from its prospective suppliers. A sales proposal or
quotation comprises the following particulars:
The quantitative and qualitative material specifications pro-
vided by a supplier
The timeframe in which materials can be supplied
The cost of each type of material to be supplied
M
The shipment mode

The preferred date and time for the payment of material to be
supplied
N
Based on the details provided by prospective suppliers, organisa-

tions are able to take a rational purchase decision.
Order receipt and inspection: After the order is received, it is
properly reviewed and analysed before payment for it is made.
This is mainly carried out to ensure that the received materials
match with the ordered materials with regard to quality and quan-
tity. Thereafter, if the materials received are as per the materials
ordered, organisations accept the order and store materials re-
ceived in its warehouse.
Invoicing: After the received order is accepted, organisations car-
ry on with the suppliers’ payment. Organisations need to ensure
that the correct payment is made to the right person through the
right mode. Here, the invoicing sub-module helps in ensuring that
the due amount is paid to the rightful supplier safely. While doing
so, this sub-module also maintains a record of essential informa-
tion related to payment like amount paid, mode of payment, re-
ceipt number of payment, etc.

N O T E S
8.3.2 FEATURES OF ERP INVENTORY MANAGEMENT

MODULE
The main feature of an ERP inventory management module is that it

enables an organisation to regularly respond to customers’ require-
ments by tracking inventory levels for quick replenishments. Some of
the other key features of this system are as follows:
Itinvolves quality check parameters, which help to identify the
expected quality level of materials.
Ithelps in continuous inventory analysis, which ensures that an
optimum level of stock is always maintained.
It helps in extensive inventory monitoring by taking into consider-
ation the rate of inventory consumption.
S
Ithelps in automatically updating the status of stock on hand, re-
served stock, ordered stock, defective and rejected stock, etc.
IM
8.3.3 BENEFITS AND LIMITATIONS OF ERP INVENTORY
MANAGEMENT MODULE
The ERP inventory management module brings flexibility in an or-

ganisation’s ways of handling complex storage needs by maintaining
production as per schedules and delivering products to customers on
time. Apart from this, the ERP inventory management module pro-
vides the following benefits:
M
Ithelps an organisation in continuously tracking the current in-

ventory level and planning the stock to be purchased accordingly.
It eases tracking the movement of materials.
N
It
provides details of all operations taking place in the inventory
management process.
Although the module enhances overall organisational efficiency, it has

certain limitations. Some of the major limitations of the ERP invento-
ry management module are as follows:
It cannot be completely customised according to various organisa-
tional requirements.
It calls for high cost, time and efforts of an organisation.
It needs previous data and proper user training for its installation,
which can be a complex process.
Itis not so effective for information sharing unless users want to
share information.

N O T E S
6. The ERP inventory management module maintains

information related to the inventory needs of different
departments of an organisation. (True/ False)
7. Which sub-module helps different departments of an
organisation to notify their inventory requirements?
8. The main feature of an ERP inventory management module
is that it enables an organisation to regularly respond to
customers’ requirements by tracking inventory levels for
quick replenishment. (True/False)
9. The ERP inventory management module helps to enhance
overall organisational efficiency. (True/False)
S
10. The ERP inventory management module cannot be completely
customised according to various organisational requirements.
(True/False)
IM
11. ____________ sub-module maintains a record of essential
information related to payment like amount paid, mode of
payment, receipt number of payment, etc.
ACTIVITY
M
Using the Internet, find out how can a manufacturing company
maintain quality of its inventory through ERP? Prepare a report
on it.
N
8.4 SUMMARY
Inventory is a stock of goods or materials maintained by a business
for different purposes such as production and sales.
Inventory management is a process of observing and controlling
the flow of goods into and out of the current inventory.
Through effective inventory management, different types of in-
ventories present in an organisation can be controlled. Moreover,
organisations can prepare precise records of inventories existing
to determine taxes due on each inventory type.
The main feature of the ERP inventory management module is
that it enables an organisation to regularly respond to customers’
requirements by tracking inventory levels for quick replenish-
ments.
The ERP inventory management module brings flexibility in an
organisation’s ways of handling complex storage needs by main-
taining production as per schedules and delivering products to
customers on time.

N O T E S
The module cannot be completely customised and calls for high

cost, time and efforts of the organisation.
Installation of this module is a tedious process that consumes a
lot of time depending on the organisation’s size and requirements.
KEY WORDS
Bar code: It is an image of black vertical lines (bars) with white

spaces that is affixed to products to identify a particular product
number as well as its vendor.
Buffer stock: It is the inventory preserved to safeguard against
the situations of shortage or stock-outs.
Requisition: It is all about presenting formal demand for a
S
product or service.
Sales quotation: It is a detailed document with information re-
garding cost, quantity and product description.
IM
1. What is inventory management?
2. Discuss the main functions of the inventory management module
of an ERP system.
M
3. Write a short note on various sub-modules of ERP inventory

management module.
4. State the main features of the ERP inventory management
module.
N
5. List some benefits and limitations of ERP inventory management

module.
Topic Q.No. Answers

Concept of Inventory Man- 1. Inventory
agement
2. True
3. True
4. Buffer stock
5. False

N O T E S
Topic Q.No. Answers

ERP Inventory Manage- 6. True
ment Module
7. Inventory requisition
8. True
9. True
10. True
11. Invoicing

1. Inventory management is a process of controlling the flow of
S
goods into and out of the current inventory. Refer to Section
8.2 Concept of Inventory Management.
2. An important function of the ERP inventory management
IM module is to maintain information related to inventory needs
identified by various departments. Refer to Section 8.3 ERP
Inventory Management Module.
3. Various sub-modules of ERP inventory management module
include inventory requisition, inventory order assessment,
inventory order placement, supplier pro forma, etc. Refer to
Section 8.3 ERP Inventory Management Module.
M
4. The main feature of the ERP inventory management module is that

it enables an organisation to respond to customer requirements
quickly by tracking inventory levels for replenishment. Refer to
Section 8.3 ERP Inventory Management Module.
N
5. The ERP inventory management module brings flexibility

in an organisation’s ways of handling complex storage needs
by maintaining production as per schedules and delivering
products to customers on time. However, the module cannot
be completely customised and calls for high cost, time and
efforts of the organisation. Refer to Section 8.3 ERP Inventory
Management Module.

8.7
REFERENCE
SUGGESTED READINGS
Alavudeen, A. and Venkateshwaran, N. (2008). Computer Integrat-
ed Manufacturing. (1st ed.). New Delhi: PHI Learning Pvt. Ltd.
Graham, D., Manikas, I. and Folinas, D. (2013). E-Logistics and
E-Supply Chain Management: Applications for Evolving Business.
(1st ed.). Hershey, PA, USA: IGI Global.

N O T E S
E-REFERENCES
Computac.com,. (2015). Inventory Management Software. Re-
trieved 14 March 2015, from http://www.computac.com/inventory/
management-software.html
Eresourceerp.com,. (2015). Inventory Management Module in ERP |
ERP Inventory Management Module | EresourceERP. Retrieved 14
March 2015, from http://www.eresourceerp.com/Inventory-Man-
agement-and-Orders.html
Small Business - Chron.com,. (2015). Top Ten Ways to Manage In-
ventory. Retrieved 14 March 2015, from http://smallbusiness.chron.
com/top-ten-ways-manage-inventory-11099.html
S
IM
M
N

N
M
IM
S
C H A
9 P T E R
ERP IMPLEMENTATION
S
CONTENTS
9.1 Introduction
9.2 ERP Implementation
Activity
9.3 Reasons for Implementing ERP
Activity
9.4 ERP Implementation Methodology
M

Activity
9.5 Post-Implementation
Self Assessment Question
Activity
N
9.6 ERP Implementation Challenges

Activity
9.7 Factors for the Success of ERP Implementation
Activity
9.8 Summary

N O T E S
FAILURE OF SOFTWARE IMPLEMENTATION AT HERSHEY
Hershey, a confectionery company was founded in 1894 by Milton

S. Hershey. The company is headquartered in Hershey, Pennsyl-
vania. In 1999, Hershey came across its worst nightmare when it
realised that its supply chain management has come to a stand-
still. The company was unable to complete its orders that were
worth more than $100 million. The failure of ERP implementation
was considered to be one of the major reasons behind this situa-
tion.
Halted business processes and paralysed operations further led to

a decline in quarterly profits by more than 19%. It further resulted
S
into a decline in the stock price by 8%. Consequently, Hershey de-
cided to upgrade its ERP to SAP R/3 ERP software by employing
supply chain management and CRM modules. The implementa-
tion of these modules required a minimum period of 48 months.
IM
However, the company wanted to implement them in around 30
months. This cornered the critical testing phase and caused some
unforeseen issues in the system, which hindered the booking of
orders. The process of implementation also skipped the systems
testing stage, which was a major mistake, and consequently, many
issues remained undetected.
Generally, organisations must undergo three rounds of testing

M
prior to ERP implementation. In the first testing phase, the users

test the business scenario of one functional department at once.
This phase is called Conference Room Pilot Phase, which vali-
dates key business processes. The second phase is Departmen-
tal Pilot Phase that includes the testing of the ERP system under
N
realistic conditions. The third phase is Integrated Pilot Phase,

which involves testing the integrity of all modules.
Hershey’s decision of taking a shortcut by skipping the testing

phase and squeezing complex projects to a short timeline was a
major cause for the failure of its supply chain management pro-
cesses.

ERP IMPLEMENTATION 147
N O T E S
LEARNING OBJECTIVES

> Explain ERP implementation
> List the reasons for implementing ERP
> Define the ERP implementation methodology
> Explain factors to be considered post the implementation of
ERP
> Discuss ERP implementation challenges
> Identify factors responsible for the success of ERP imple-
mentation
S
9.1 INTRODUCTION
In the previous chapter, you have studied about the role and impor-
IM
tance of ERP in managing the human resource and finance functions
of an organisation. In order to ensure the successful implementation of
an ERP system, it is important for organisations to plan and consider
various aspects, such as availability of resources, budget and time. In
addition, employees from all departments (production, finance and
accounting) must be encouraged to participate in the implementation
process of ERP.
M
Apart from this, organisation should impart end-user training to its

employees so that they can easily work with the ERP system. More-
over, an environment that promotes cooperation among different de-
partments must be created. In this chapter, you will study about the
ERP implementation process followed in an organisation and various
N
challenges that are faced in the process.
9.2 ERP IMPLEMENTATION

After the selection of an appropriate ERP system, the main challenge
for an organisation is the implementation of the system. ERP imple-
mentation is a process of putting ERP processes in action. In other
words, it is a process that brings momentous changes in an organisa-
tion’s work, system and practices. It consists of planning, organising
and maintaining tasks. According to Turban et al. (2008), “Implement-
ing ERP typically requires changes in existing business processes. Poor
understanding of needed processes changes prior to starting implemen-
tation is a main reason for project failure. The problems could be related
to the system, business process, infrastructure, training, or lack of mo-
tivation”.

N O T E S
Most organisations face the following challenges while implementing

ERP systems:
Timelines are longer than expected
Poor planning that leads to the over-budget of the ERP project
According to C. Brown and I. Vessey, “Implementation time depends

on business size, number of modules, customisation, the scope of process
changes, and the readiness of the customer to take ownership for the
project. Modular ERP systems can be implemented in stages. The typical
project for a large enterprise takes about 14 months and requires around
150 consultants.”
An organisation must adopt the following best practices for the right
and successful ERP implementation:
S
Develop a clear understanding with the management
Evaluate vendors and their ERP implementation deliverables
IM
Prepare a cohesive plan of desired objectives
Conduct research and development before implementation
Focus on main business objectives
Identify performance metrics
Use continuous improvement methods
M
Conduct test runs before finalising deliverables

N
1. ________________ is a process that brings momentous changes

in an organisation’s work, system, and practices.
2. Which of the following is not a best practice for successful
ERP implementation?
a. Prepare a cohesive plan of the desired objectives
b. Eliminate the process of research and development before
implementation
c. Focus on main business objectives
d. Identify performance metrics
ACTIVITY
Prepare a report on performance metrics that can be used to mea-

sure the performance of an ERP system.

N O T E S
9.3 REASONS FOR IMPLEMENTING ERP

ERP has gained importance in the market for its never-ending ben-
efits to organisations. Today, many organisations are changing their
key business systems and adopting new ERP packages. The main rea-
sons for implementing ERP systems are given as follows:
Increases performance of the business: ERP helps to reduce
manufacturing cycle time, eliminate inventory storage problems
and speed up order deliveries.
Increases revenue: ERP increases an organisation’s sales through
CRM and sales force automation processes.
Increasesproductivity: ERP enables an organisation to get more
work done with fewer people; thereby, increasing productivity.
S
Improves the efficiency of business processes: An ERP system
automates business processes and eliminates non-value added
activities. In addition, an ERP system allows an organisation to
IM
match customers’ demands, which results in reduced inventory
and carrying costs.
Leverages the available resources: ERP processes lead to the ef-
fective utilisation of organisational resources, such as capital and
human resource. An ERP system helps an organisation to gain a
clear insight of all resources so that they can be utilised more ef-
fectively to improve business efficiency.
M
Provides high security: An ERP system provides security to the

critical information of an organisation such as financial and custom-
ers’ details. An ERP system does not allow unauthenticated users to
access any critical information that can harm the organisation.
N
Standardises business practices: An ERP streamlines business

practices of an organisation; thereby preventing inaccuracies, in-
consistencies and delays in work processes.
Combines operational, financial and strategic insight: An ERP
system integrates and analyses the data of all the departments of an
organisation and delivers crucial operational, financial and strate-
gic insight, which ultimately lead to effective decision making.
3. ERP helps to reduce manufacturing cycle time, eliminate

inventory storage problems and speed up order deliveries.
(True/False)
4. An ERP system does not allow _____________ users to access
any critical information about an organisation.
5. An ERP system helps to increase an organisation’s sales by
following ____ and __________.

N O T E S
ACTIVITY
Visit an organisation that has implemented an ERP system. Hold

a discussion with a manager on benefits of ERP implementation.
9.4 ERP IMPLEMENTATION METHODOLOGY

The ERP implementation methodology is a sequence of phases in-
volved in the deployment of an ERP system. These phases are shown
in Figure 9.1:
Pre-evaluation Screning
S
Package Evaluation
IM Project Planning Phase
Gap Analysis
Re-engineering
M
Configuration
Training
N
Testing
Going Live
Post Implementation
Figure 9.1: ERP Implementation Methodology
The ERP implementation methodology varies across organisations

depending on their requirements and work processes. Thus, it is not
necessary that the methodology of every organisation involves all the
mentioned phases. The following are the different phases of the ERP
implementation lifecycle:
1. Pre-evaluation screening: In this phase, all the available ERP
systems are analysed and the ones that fulfil the requirements
of an organisation are shortlisted. Packages that do not suit the
requirements are eliminated.

N O T E S
2. Package evaluation: In this phase, all the shortlisted ERP

systems are analysed in detail. This phase is considered very
critical for the successful implementation of an ERP system.
Package evaluation is done mainly on the basis of the cost, time
and the number of users involved.
3. Project planning: At this stage, a detailed plan is formulated
for the implementation of the ERP process. The project plan
specifies resources required for implementation, the timeline for
the completion of the implementation process and the targets
that need to be achieved by implementing the ERP system. This
stage also involves preparing a contingency plan and deciding
control measures and methods for the evaluation of the ERP
system.
S
4. Gap analysis: This is an important phase in the ERP
implementation process. Gap analysis is a critical stage that
helps an organisation to identify gaps between its current status
and future targets.
IM
5. Re-engineering: With the emergence of ERP, business
processes are restructured, employee roles are changed and
new technologies are used. Thus, ERP leads to re-engineering
processes. Re-engineering integrates Business Process Re-
engineering (BPR) with the ERP system.
6. Configuration: This is a functional phase in the ERP
M
implementation process. The existing systems are synchronised
with ERP systems. An organisation should properly analyse all
its existing business processes to achieve its overall objectives.
7. Training: In this phase, employees are trained to use the ERP
system. After the implementation of the ERP system, vendors
N
and external consultants leave the organisation. Thus, it is

necessary for an organisation to learn each and every detail of
the ERP system to avoid any contingencies.
8. Testing: This stage encompasses the verification of various
ERP processes by creating real situations. These situations can
be related to system overloads, invalid data entry or hacking
attacks. In case some activities fail in the testing phase, the ERP
system should be re-evaluated.
9. Going live: It is the stage wherein the new ERP system is
introduced by replacing the older one. The ERP system is now
ready to be used technically and functionally and employees are
allowed to work on the live system.
10. Post implementation: In this phase, a regular follow-up record
is maintained for the working of ERP processes. This stage
mainly includes maintenance and enhancement processes that
are carried out on the basis of the performance reports of the
ERP system.

N O T E S
6. In which phase of the ERP implementation process, all

available ERP systems are analysed and the most appropriate
ones are shortlisted?
a. Pre-evaluation screening b. Package evaluation
c. Project planning phase d. Gap analysis
7. With the emergence of ERP, business processes are restructured,
employee roles are changed and new technologies are used.
(True/False)
8. In the ______________ phase, various ERP processes are
verified by creating real situations.
S
ACTIVITY
IM
Use the Internet and other sources to find more information on pro-
cesses involved in ERP implementation. Prepare a report on ‘Why’
and ‘How’ ERP methodologies followed by different organisations
vary from each other.
9.5 POST-IMPLEMENTATION
M
Post-implementation is a crucial phase in the lifecycle of an ERP sys-

tem. It is a continuous process that generally starts after the ERP sys-
tem has been successfully implemented in an organisation, and the
employees have been trained to work on it. Some of the processes of
the post-implementation stage include tracking the performance of the
N
ERP system and maintaining a detailed follow-up record; facilitating

the seamless integration of the system with all the work processes of an
organisation; training employees on the optimal utilisation of the ERP
system and taking necessary steps to further improve its functioning.
To reap full benefits of an ERP system, organisations must keep up-

grading the system with new versions or technologies introduced in the
market. However, before upgrading the system, organisations should
weigh its pros and cons in terms of benefits offered, compatibility with
the existing system and costs involved. Effective post-implementation
measures, taken at the right time, contribute significantly in enhanc-
ing the productivity and increasing the life of the ERP system.
9. To reap full benefits of an ERP system, organisations must

keep upgrading the system with new versions or technologies
introduced in the market. (True/False)

N O T E S
ACTIVITY
Find information on methods used for training employees so that

they can better adapt to the changes that may occur after ERP im-
plementation.
9.6 ERP IMPLEMENTATION CHALLENGES

Every organisation faces challenges while adapting to a new system.
The implementation of a new ERP system is not a technical job but
requires a lot of planning and proper communication. The common
challenges that are faced during the implementation process are given
as follows:
S
Stages to be followed: The ERP implementation process should
follow all the implementation phases. It leads to a chaotic situation
if the sequence of phases is followed randomly by an organisation,
which further leads to confusion in the organisation.
Training:
IM
During and after the implementation stage, it is impor-
tant to impart training to employees. This is because training helps
to enhance cooperation and build trust among employees, and pre-
vent situations such as job insecurity or functional inefficiencies.
Lack of proper analysis: For successful ERP implementation, an
organisation must analyse its requirements. This is because if the
organisation does not analyse its requirements, it may not be able
M
to select the right ERP system.

Lack of support from the top management: Support of top man-
agement is necessary for the implementation of an ERP system.
Lack of support from top management may lead to ineffective de-
N
cision making.
Compatibility issues with ERP modules: Any incompatibility
issues in ERP processes with respect to existing systems pose a
major problem for organisations. Different companies come in
partnership with different vendors of ERP; thus, it is their respon-
sibility to solve any compatibility issues.
Infrastructure investment: It is important for an organisation to
make investments in infrastructure development for ERP implemen-
tation. Lack of proper infrastructure slows down the progress of ap-
plication development. This further leads to the wastage of resources.
10. _______________ helps to enhance cooperation and build

trust among employees, and prevent situations such as job
insecurity or functional inefficiencies.
11. Lack of adequate budget for infrastructure slows down the
progress of application development. (True/False)

N O T E S
ACTIVITY
Form a group and discuss some instances of organisations where

ERP implementation had failed and list the reasons for the failure.
FACTORS FOR THE SUCCESS OF ERP

9.7
IMPLEMENTATION
Apart from the implementation process, the success or failure of any
ERP project depends on the vendor selected by an organisation for
purchasing software. Some factors responsible for the success of ERP
implementation are explained as follows:
Focus on business processes and requirements: The focus of an
S
organisation to check business operations and identify key re-
quirements helps to formulate a more effective ERP software se-
lection process.
IM
Strong project management and resource commitment: The top
management also plays a vital role in providing the required re-
sources for ERP implementation. Cooperation and coordination
among managers and employees are necessary in successful ERP
implementation.
Adequate planning: A feasible plan for implementing an ERP sys-
tem should be taken into account. This would reduce errors and
M
make the process of implementation easier.
A clear understanding of business objectives and a proper vision of what

to achieve with an ERP system maximise the business benefits of ERP.
N
12. The ______ plays a vital role in providing the required

resources for ERP implementation.
13. The focus of an organisation to check business operations and
identify key requirements helps to formulate a more effective
ERP software selection process. (True/False)
ACTIVITY
Apart from the abovementioned factors, what other factors can

lead to the success of ERP in an organisation.
9.8 SUMMARY
In order to ensure the successful implementation of an ERP system,
it is important for organisations to effectively plan and consider var-
ious aspects, such as availability of resources, budget and time.

N O T E S
After the selection of an appropriate ERP system, the main chal-

lenge for an organisation is the implementation of the system. ERP
implementation is a process of putting ERP processes in action. It
is a process that brings momentous changes in an organisation’s
work, system, and practices.
ERP helps an organisation to get more work done with fewer peo-
ple; thereby, increasing productivity.
ERP integrates and analyses the data of all the departments of an
organisation and delivers crucial operational, financial and stra-
tegic insights, which ultimately lead to effective decision making.
The ERP implementation methodology is a sequence of phases in-
volved in the deployment of an ERP system. These phases include
pre-evaluation screening, package evaluation, project planning,
S
gap analysis, re-engineering, configuration, training, testing, going
live and post implementation.
The ERP implementation methodology varies across organisa-
IM
tions depending on their requirements and work processes. Thus,
it is not necessary that the methodology of every organisation in-
volves all the mentioned phases.
Post-implementation is a crucial phase in the lifecycle of an ERP
system. It is a continuous process that generally starts after the
ERP system has been successfully implemented in an organisa-
tion, and the employees have been trained to work on it. Support
M
of top management is necessary for the implementation of an ERP

system. Lack of support from top management may lead to ineffec-
tive decision making.
KEY WORDS
N
Configuration: It refers to the functional phase of the ERP im-

plementation process.
Gap analysis: It is a process of comparing the actual perfor-
mance of a system with the desired performance.
Package evaluation: It refers to a detailed analysis of all short-
listed ERP systems with an aim to select a final system.
ERP project manager: He/she is an individual who manages
activities involved in the selection of an ERP system.

1. What do you understand by ERP implementation?
2. Discuss the main reasons for implementing ERP systems.
3. Explain various phases involved in the ERP implementation
process.

N O T E S
4. Discuss the post-implementation stage of ERP.

5. List the challenges faced by an organisation during the ERP
implementation process.

ERP Implementation 1. ERP
2. b. Eliminating research and
S
development before imple-
mentation
Reasons for 3. True
Implementing ERP
IM 4. Unauthenticated
5. CRM and sales force automa-
tion processes.
ERP Implementation 6. a. Pre-evaluation screening
Methodology
M
7. True
8. Testing
Post-Implementation 9. True
ERP Implementation Chal- 10. Training
N
lenges
11. True
Factors for the Success of 12. Top management
an ERP Implementation
13. True
1. ERP implementation is a process of putting ERP processes in

action. It is a process that brings momentous changes in an
organisation’s work, system and practices. Refer to Section
9.2 ERP Implementation.
2. One of the main reasons for implementing ERP is that it helps
to reduce manufacturing cycle time, eliminate inventory storage
problems and speed up order deliveries. Refer to Section
9.3 Reasons for Implementing ERP.

N O T E S
3. The ERP implementation methodology comprises a number of

phases, such as pre-evaluation screening, package evaluation,
project planning phase, gap analysis and re-engineering. Refer
to Section 9.4 ERP Implementation Methodology.
4. Post-implementation is a continuous process that generally
starts after the ERP system has been successfully implemented
in an organisation, and the employees have been trained to work
on it. Refer to Section 9.5 Post-Implementation.
5. Some of the common challenges that are faced during the
implementation process include lack of proper analysis, absence
of support from the top management and compatibility issues
with ERP modules. Refer to Section 9.6 ERP Implementation
Challenges.
S
9.11
REFERENCE
IM
SUGGESTED READINGS
Harwood S. (2003). ERP. Oxford: Butterworth-Heinemann.

Salimi F. (2005). ERP Implementation Methodologies. Rotterdam:
The Printer.
M
E-REFERENCES
NetSuite.com (2015). Do You Know the Best Way to Implement

an ERP System? Learn More with this Best Practice Guide. Re-
trieved from http://www.netsuite.com/portal/resource/articles/erp/
N
erp-implementation.shtml.
Plan 6 (2013). 6 Phases of an ERP Implementation Plan. PC Ben-
nett Solutions. Retrieved from http://www.pcbennett.com/erp-im-
plementation-plan-6-phases/.
Schiff J. (2015). 13 Common ERP Mistakes and How to Avoid Mak-
ing Them. CIO. Retrieved from http://www.cio.com/article/2397802/
enterprise-resource-planning/13-common-erp-mistakes-and-
how-to-avoid-making-them.html.

N
M
IM
S
C H
10 A P T E R
ERP VENDORS, CONSULTANTS

AND USERS
S
CONTENTS
10.1 Introduction
10.2 In-house Implementation
Activity
10.3 Vendors
10.3.1 Role of a Vendor
Activity
M
10.4 Consultants
10.4.1 Role of a Consultant
Activity
10.5 End Users
N

Activity
10.6 Contracts with Vendors, Consultants and Users
Activity
10.7 Summary

N O T E S
SELECTION OF ERP VENDORS
Infosys is known for offering efficient and unmatchable ERP solu-

tions for business organisations according to their needs. Herbal-
ife, one of the clients of Infosys, is a renowned brand worldwide
in the field of healthcare services. The company has its headquar-
ters in South California, US, and its sales account for more than
USD 1.3 billion.
Herbalife is known for releasing products on a regular basis. Be-

fore Infosys became the service provider to the company, it was
looking for an efficient interface that helps in analysing the de-
mand for its products in the market. The company needed a sin-
gle platform that offers solutions for supply chain planning across
S
its entire range of product categories. Moreover, it wanted to shift
to a Linux operating system to be more cost-effective.
Earlier, Herbalife had implemented Oracle ERP Release 11.0.3

IM
Inventory and Planning Modules for supply chain management.
In addition, it had other Oracle ERP Release 11i Financial, which
included the solutions provided by Infosys.
Infosys implemented Oracle Application R 11.5.9, which was a

very efficient and cost-effective solution for Herbalife. It helped
the company in reducing the complexities faced during various
M
processes. Moreover, it enhanced the overall efficiency of the
company’s processes. This solution also facilitated better supply
chain management that further reduced the problems related to
stockouts and improved inventory management.
N

ERP VENDORS, CONSULTANTS AND USERS 161
N O T E S
LEARNING OBJECTIVES

> Discuss the in-house implementation of ERP
> Explain the role of vendors
> Describe the role of consultants
> Identify end users
> Explain contracts with vendors, consultants and usersa
10.1 INTRODUCTION
The previous chapter discussed the implementation of Enterprise Re-
S
source Planning (ERP). For an organisation that intends to implement
ERP, vendors, consultants and end users are significant players in the
process. The roles of these players will be discussed in this chapter.
IM
ERP is considered to be the most important part of an organisation
that helps in increasing the accessibility of information. It also helps
in organising business processes as well as the workflow of the or-
ganisation. Previously, the implementation of ERP was considered to
be a complex and daunting task for any organisation. However, to-
day, business organisations understand the importance and benefits
offered by ERP implementation. Right implementation of the ERP
M
programme plays an important role in the success of an organisation.

It is a multifaceted process that involves various subprocesses, such
as identification of business needs, determination of the ERP budget,
management of data, etc.
N
Successful implementation of ERP involves three key players, name-

ly, vendors, consultants and employees. In this chapter, we will study
these players in detail. ERP packages are developed by vendors, who
are responsible for understanding the requirements of the clients.
For providing customised solutions to their clientele, vendors carry
out a detailed research and development process. After this, the con-
sultants take the responsibility to monitor the ERP implementation
process. Moreover, it is their responsibility to ensure that all ERP ac-
tivities are executed at the accurate time. After the completion of the
implementation process, the employees/end users of the organisation
are considered responsible for supporting it. This helps in obtaining
maximum benefits from the system.
The efficiency of the employees defines the effectiveness of the ERP

system. Thus, it can be rightly concluded that employees are the key
players in the functioning of any organisation. Job insecurity is one of
the main reasons that creates resistance among employees for adopt-
ing this system. It may also be considered as one of the major issues
for a successful implementation of the ERP process.

N O T E S
In this chapter, you will study about the in-house implementation of

ERP, vendors, consultants and end users and contracts with vendors,
consultants and users.
10.2 IN-HOUSE IMPLEMENTATION

In-house implementation refers to the process of implementing ERP
in an organisation by carrying out certain activities within the organ-
isation, such as research and development. In this, the organisation
does not outsource the services, and the employees are assigned the
job for maintaining flexibility in the business.
ERP implementation is a complex process, which requires a large

amount of capital. If the ERP package is implemented successfully,
S
it helps in generating profits for the organisation. However, in case of
implementation failure, the organisation either faces a loss of revenue
or may even go out of business.
IM
When carrying out the ERP implementation process, it is important to
complete it accurately within the defined time frame. For this, the em-
ployees performing the implementation should be knowledgeable and
possess the necessary skills to perform the job effectively. They should
be familiar with the technical issues and the ERP package. Some of
the important skills that are required by the employees participating
in the implementation process are listed as follows:
M
Organising and managing the project: The employees should

possess certain skills that help in the smooth running of the proj-
ect. These skills include organisational skills, team management
and project management skills.
Handling problems related to the implementation process: Em-
N
ployees come across several problems and issues during the im-
plementation process. Thus, it becomes really important to handle
all such issues for ensuring the success of the project.
Interpersonal skills: Implementation of an ERP system always
creates a sense of job insecurity among the employees working on
it. Thus, it is important that the implementation team is able to
build trust among the employees and seek their cooperation for a
successful implementation.
Leadership skills: The implementation process calls for an inter-
action with many people across departments. Thus, it is import-
ant for the implementation team to have good communication and
leadership skills.
Training skills: ERP project involves training at various levels.
For instance, executive programmes for top management and
functional training for team members and end users are required
for familiarising the individuals with the system.

N O T E S
1. __________________ refers to the process of implementing ERP

in an organisation by carrying out certain activities within the
organisation, such as research and development.
2. ERP project involves training at various levels. (True/False)
3. The ERP implementation process should be completed within
the defined time frame. (True/False)
4. ERP implementation is a simple process, which requires a
small amount of capital. (True/False)
ACTIVITY
S
Research on the Internet for the in-house implementation of ERP
in Indian organisations and prepare a report.
IM
10.3 VENDORS
Organisations or individuals who customise ERP packages according
to the requirements of different organisations are called vendors. In
other words, vendors are known for developing ERP packages that
are customised according to the needs and requirements of the clients.
In developing customised solutions for the clients, vendors consume
M
their invaluable resources, skills and knowledge. It is the responsibil-

ity of the vendors to provide an adaptable, efficient and simple solu-
tion. Before developing ERP packages, both the vendor and the client
decide the price with mutual agreement. The cost generally depends
on the complexity involved in developing an ERP package.
N
Earlier, there were a limited number of ERP vendors in the market.

However, now, most of the organisations know the benefits of the ERP
system, and many have implemented the same. This has certainly in-
creased the demand for ERP vendors.
Today, many vendors offer ERP packages that comprise various new
and innovative features, providing a competitive edge over competit-
ing products. Moreover, for keeping up with the competition, vendors
also upgrade their ERP packages with the latest technologies. The in-
tensive competition in the market makes it difficult for organisations
to select the right vendor who would provide the best ERP package
according to their needs.
Vendors manage the overall installation of ERP systems in organisa-

tions and provide a proper training to employees so that they can work
efficiently with the newly implemented system. Although vendors are
completely responsible for the ERP installation, the success or failure
of the system depends on the organisation.

N O T E S
10.3.1 ROLE OF A VENDOR
The vendor agrees to provide a customised solution to the client on the

mutually agreed price. Before providing the service, both the client
and vendor sign a contractual agreement for agreeing on some com-
mon terms that are related to the price, time, quality, requirements of
the client, performance, etc.
Once an organisation purchases the ERP system, it becomes the re-

sponsibility of the vendor to send a team of experts who would help in
installing the system in the organisation. This team is also responsible
for ensuring the efficiency and effectiveness of the operations. Liaison
officers are hired by the vendors to help in tracking the activities and
operations performed by the implementation team. Vendors usually
provide training for using the ERP system, its components and fea-
S
tures.

IM5. ____________ are known for developing ERP packages that
are customised according to the needs and requirements of
the clients.
6. The success or failure of the ERP system depends on the
_________________.
7. Organisations select vendors on the basis of good market
M
reputation and the same is true in the case of the ERP market.
(True/False)
8. Implementation team is also responsible for imparting
training to the end users and mostly it includes the key users.
N
(True/False)
ACTIVITY
List the major ERP vendors in India.
10.4 CONSULTANTS
Consultants are system experts who are a part of the implementation
process, apart from the vendors. They are responsible for tackling and
monitoring all the issues related to ERP implementation. They have a
sound knowledge of the ERP system and can help in monitoring the
performance of the system or with any issues related to it. In addition
to this, they possess expertise in different fields, such as the admin-
istration, management and control of ERP implementation projects.

N O T E S
The major functions performed by consultants in ERP implementa-

tion are as follows:
To maintain documents used during the ERP implementation
project
To examine the existing market conditions and business processes
of the organisation
To perform time study and gap analysis during the implementa-
tion process
To customise the system and review its operations
Consultants form an integral part of the implementation process as

their role begins right from the evaluation process and remains until
the training is imparted to the employees. In an organisation, a con-
S
sultant may be in the role of a project manager, team leader or repre-
sentative of the vendor. Mostly, the consultants possess technical ex-
pertise that makes them fit for handling technical issues faced while
implementing ERP. In addition, they possess a thorough knowledge of
IM
the current market situation and various software applications nec-
essary for integrating ERP. They also possess problem-solving and
relationship-building skills and effective communication. All these
qualities and skills make them indispensable for the job. However, the
fee charged by consultants is considerably high and not every organi-
sation finds it easy to afford it.
M
The different types of consultants that may be engaged in the ERP

implementation process are as follows:
Management consultants: The main focus of these consultants is
on performing the basic managerial functions that include plan-
ning, organising, directing and controlling. All these functions
N
are performed keeping in mind the ERP implementation process.

Throughout the implementation and usage process, it is the re-
sponsibility of the management consultants to guide and direct the
organisation.
Application consultants: They are mainly concerned with the
configuration of the system as per the needs and requirements
mentioned by the organisation. They are also responsible for guid-
ing the organisation regarding the functions of the organisational
systems.
Technical consultants: These people are mainly concerned with
sorting out any technical issues related to ERP implementation.
These issues may be related to database conversion, communica-
tion protocols, operating system management and programme in-
tegration.

N O T E S
10.4.1 ROLE OF A CONSULTANT
Consultants carry out an extensive research to understand the re-

quirements of the organisation or the client. This helps in defining the
functionality of the system required. We have already studied that the
vendors impart the training, while the consultants determine whether
the training objectives have been achieved in a proper manner or not.
Some of the major responsibilities of ERP consultants are given as
follows:
To handle the ERP implementation process
To decide the activities to be performed and ensure that all these
activities are performed properly
To ensure equal participation from all members who are a part of
S
the ERP implementation process
To add value to the ERP implementation project through their ex-
pertise and knowledge
IM
To ensure cost-effectiveness by a proper utilisation of the resourc-
es within a specific time frame
To provide necessary support to the organisation in such a manner
that the benefits of the ERP system can be brought to use
To customise the ERP package by carrying out a detailed research
M
9. ____________ are system experts who are a part of the

implementation process apart from the vendors.
10. Give any two skill sets of the consultants.
N
ACTIVITY
Prepare a report after carrying out research on the difference be-

tween vendors and consultants.
10.5 END USERS

Individuals who use the ERP system after its implementation are
known as end users. These can be the employees or clients of the or-
ganisation. The end users or the employees are given training so that
they can adapt to the new system and gain confidence. These users
take pilot training from vendors so that the ERP system could become
successful.
End users play an important role in supporting the proper and suc-
cessful implementation of the ERP package. It requires trust, loyalty

N O T E S
and cooperation of the end users/employees to derive benefits for the

organisation with the help of a new ERP package. ERP implementa-
tion changes the roles and responsibilities of the employees, which
further creates a sense of job insecurity and makes them resistant to
change.
In today’s business environment, change is an inevitable aspect that

has to be accepted. When employees become resistant to change, it
becomes the responsibility of the management to build trust among
them.
Some of the main reasons for employee resistance are as follows:

Fear of being dismissed: An ERP system automates all the busi-
ness functions of an organisation. Thus, an ERP system introduces
S
several changes in the existing job profile of the employees in the
organisation. In such a case, the employees may feel redundant
and develop job insecurity.
Fear of getting failed: Sometimes, the employees develop a feel-
IM
ing that ERP implementation would make things more complex
than ever. This further makes the employees develop a mindset
that they would fail to learn the skills required for operating the
new system.
Passive attitude towards change: Some employees also feel that
changes affect the existing way of life. Employees with such an at-
M
titude always resist change as they fail to look at the brighter side
of the change.
Some of the steps that the management should take for overcoming
resistance by the employees are given as follows:
N
Address employee issues: Employees show resistance towards

change when they are not properly informed about the benefits
offered by the new system. Thus, it is very important to educate
the employees about the benefits that would be derived from the
ERP package.
Provide proper training and knowledge: Imparting a proper
training to employees will boost their confidence as it would give
them on-the-job training.
Conduct pilot programme: In this type of project, a specific num-
ber of competent employees are picked. These employees are im-
parted with training that boosts the confidence of others to be-
come a part of the project.
Encourage employee participation: Equal and fair participation
from both the employees and the management plays a key role in
the successful implementation of an ERP package.

N O T E S
11. ____________ plays an important role in supporting the proper

and successful implementation of the ERP package.
ACTIVITY
Research on the Internet and prepare a report on the importance of

end users in ERP implementation.
CONTRACTS WITH VENDORS,

10.6
CONSULTANTS AND USERS
S
According to Webster’s dictionary, a contract is defined as, “an agree-
ment between two or more people to do something, especially one for-
mally set forth in writing and enforceable by law”. A contract clear-
IM
ly establishes the boundaries as well as the extent of the rights and
responsibilities of the parties. Examples of a contract include loan
agreements, sales agreements, service agreements, etc. Contracts
play an important role in the ERP implementation process. It is im-
portant to draft an unambiguous contract for the successful ERP im-
plementation. The contracts with vendors, consultants and end users
are explained as follows:
M
Contract with vendors: Generally, software vendors have legal

departments that facilitate the development of a standard format
for a contract. These formats consist of all the legal requirements
and clauses that help to safeguard their own interests. The con-
tracting company’s legal department must check and ensure the
N
authenticity of the documents and should proceed by signing the

documents.
Contract with consultants: Consultants form part of the group
that plays a key role in the implementation process. Consulting
services are subjective in nature; thus, it becomes difficult for the
organisation to analyse whether it is realising the real value for
money on the consulting services being provided. Therefore, con-
tracts are necessary for setting the terms and conditions.
Contract with end users: End users are the most important re-
source of an organisation. These are the people who would be
working on the project after training is provided by the organi-
sation on its expense. When they receive training on a particular
project, their market value increases, and they get lucrative offers.
If these employees leave the organisation for some other lucrative
offer, the company would have to bear the loss. Thus, it is in the
interest of the organisation to sign a contract with the employees.

N O T E S
12. Consulting services are subjective in nature. (True/False)
ACTIVITY
Form a group of students and discuss why is it important for the

parties to sign a contract for carrying out any ERP programme/
process.
10.7 SUMMARY
S
In-house implementation refers to the process of implementing
ERP in an organisation by carrying out certain activities, such as
research and development, within the organisation.
Vendors are known for developing ERP packages that are custom-
IM
ised according to the needs and requirements of the clients.
Consultants are system experts who are a part of the implementa-
tion process apart from the vendors.
Therole of both the vendors and the consultants ends once the
ERP implementation process is complete.
A contract clearly establishes the boundaries as well as the extent
M
of the rights and responsibilities of the parties.
KEY WORDS
Resource Planning (ERP): It is the business man-

N
Enterprise
agement software that helps in collecting, storing, managing
and interpreting data.
Research and development: It is an activity that focuses on the
innovation, introduction and improvement of processes.
Vendor: A person who is responsible for developing ERP pack-
ages that are customised according to the needs and require-
ments of the clients.

1. What is in-house implementation?
2. Explain the concept of vendor.
3. Who are end users?
4. Explain the concept of contract with vendors, consultants and
users.

N O T E S
Topic Q.No. Answers

In-house Implementation 1. In-house implementation
2. True
3. True
4. False
Vendors 5. Vendors
6. Organisation
S
7. False
8. True
IM
Consultants 9. Consultants
10. Problem solving and technical
expertise
End Users 11. End users
Contracts with Vendors, 12. True
Consultants and End users
M

1. In-house implementation is defined as a process that focuses
on implementing ERP in an organisation by carrying out
certain activities, such as research and development, within the
N
organisation. Refer to Section 10.2 In-House Implementation.

2. Vendors develop ERP packages that are customised according
to the needs and requirements of the clients. Refer to Section
10.3 Vendors.
3. The roles of both the vendors and the consultants end once
the ERP implementation process is complete. Refer to Section
10.5 End Users.
4. According to Webster’s dictionary, a contract is defined as, “an
agreement between two or more people to do something, especially
one formally set forth in writing and enforceable by law”. Refer to
Section 10.6 Contracts with Vendors, Consultants and Users.

N O T E S

10.10
REFERENCE
SUGGESTED READINGS
Leon A. (2008). Enterprise Resource Planning. New Delhi: Tata Mc-
Graw-Hill.
Sumner M. (2005). Enterprise Resource Planning. Upper Saddle
River, NJ: Prentice Hall.
E-REFERENCES
Abouterp.com (2015). In-house Implementation, ERP Inhouse.
Retrieved from http://www.abouterp.com/erpimplementation/in-
S
house%20implementation%20.html.
Erpandmore.com (2015). ERP Vendors—ERP and More! Retrieved
from http://www.erpandmore.com/erp-reference/erp-vendors/.
Erpcloudnews.com
IM
(2013). Top 5 Cloud ERP Vendors|ERP Cloud
News. Retrieved from http://erpcloudnews.com/2013/09/top-5-
cloud-erp-vendors/.
M
N

N
M
IM
S
C H
11 A P T E R
ERP MARKET
S
CONTENTS
11.1 Introduction
11.2 ERP Market
Activity
11.3 SAP SE
11.3.1 Products and Technology
11.3.2 R/3 Overview
11.3.3 SAP Advantage
M

Activity
11.4 BAAN Corporation
11.4.2 BAAN ERP Modules
N
11.4.3 Global Support, Education and Consulting

Activity
11.5 Oracle Corporation
11.5.2 Oracle Applications
11.5.3 Vertical Solution
Activity
11.6 PeopleSoft
11.6.1 Business Management Solutions
11.6.2 Commercial Solutions
11.6.3 Industry Solutions
11.6.4 Applications
Activity

CONTENTS
11.7 JD Edwards World Solutions Company

11.7.2 Modules
Activity
11.8 Systems Software Associates Inc. (SSA)
11.8.2 BPCS Applications
Activity
11.9 QAD Inc.
S
11.9.1 Application MFG/PRO
11.9.2 Modules
Activity
11.10 Summary
IM
M
N

ERP MARKET 175
N O T E S
TALLY.ERP 9 IN INDIAN ERP MARKET
According to research and the markets, the Enterprise Resource

Planning Software market in India is expected to grow at a rate
of 22 per cent over the period 2011–2015. A major factor in this
growth is the increasing demand for ERP solutions in small- and
medium-sized organisations in India. Most small- and medi-
um-scale Indian businesses are using ERP solutions to integrate
their data, reduce operational costs and maximise profits. To
meet this demand, many ERP vendors are developing affordable
ERP software for these businesses. One of the leading provid-
ers of ERP software is Tally Solutions. Tally Solutions Pvt. Ltd
is based in Bangalore, India, and caters to about 100 countries,
S
including the UK, Bangladesh and the Middle East. It entered the
ERP market in India with its brand series, Tally.ERP 9, which em-
powers stable, effective accounting software products. Tally.ERP
9 includes all features essential for high-performance business
management.
IM
Tally.ERP 9 is a comprehensive ERP tool that offers support to all
business functionalities, such as accounting, finance, inventory,
sales, purchase, point of sales, manufacturing, costing, job cost-
ing, payroll and branch management along with capabilities such
as statutory processes, excise, etc.
M
N

N O T E S
LEARNING OBJECTIVES

> Discuss the ERP market
> Describe the ERP products and applications of SAP SE
> Outline the ERP products and tools offered by BaaN Corpo-
ration
> Discuss the ERP software tools of Oracle Corporation
> Describe the ERP tools of PeopleSoft
> Discuss JD Edwards World Solutions Company and its ERP
tools
> List the ERP tools provided by Systems Software Associates
S
Inc. (SSA)
>
IM Explain the products offered by QAD Inc.
11.1 INTRODUCTION
In the previous chapter, you have studied about the vendors, consul-
tants and end users of ERP systems. In this chapter, you will study
about the ERP software sold by these vendors in the ERP market.
The ERP market emerged globally in 1990s and entered India in the
2000s, and the market in India became one of the biggest contribu-
M
tors to ERP sales worldwide. The ERP market flourished in the last
decade as organisations were able to operate their business transac-
tions, deals, etc., more efficiently by using the ERP software. The ERP
market or the ERP software market replaced back office functions,
such as administration, book work, etc. The extent of worldwide ERP
N
boom could be assumed from the example of SAP SE, a software com-
pany in Germany that makes enterprise software to manage business
operations and customer relations. The revenue of the company in-
creased to $6.3 billion in 2000 from $255 million in the beginning of
1990. The annual growth rate rose from 18% to as high as 66% during
this period.
The ERP market in India has undergone considerable changes and

is turning out to be a highly competitive and fast-growing market. As
per Advanced Manufacturing Research, an industry and market anal-
ysis firm specialising in enterprise application, the ERP market would
grow at a compound annual growth rate of 37% in the next decade.
The research firm attributes this growth to three primary factors.
These include the following:
ERP vendors are continuing to increase their market presence by
offering new applications for supply chain operations, sales force
automation, customer support services, etc.

ERP MARKET 177
N O T E S
To maintain a high growth rate, ERP vendors would need to sell

more licenses for installing ERP systems. At present, ERP vendors
have reached out to 10–20% of the organisations, which is expect-
ed to grow to 40–60% in the coming years.
Although ERP began with the manufacturing segment, it has
spread to almost all types of enterprises, such as retail, utilities,
public sector and healthcare. These sectors are expected to contin-
ue to purchase new ERP systems in the coming years.
The ERP market in India is expected to expand and grow significant-

ly in the coming years. In this chapter, you will study about the ERP
software market in detail.
11.2 ERP MARKET
S
The increasing competition in the market drives organisations to con-
stantly improve and increase value-added services for attracting cus-
tomers. Some of the factors that have compelled these organisations
IM
to adopt business improvement processes and solutions include the
need for increased efficiency and speed of operations, cost optimisa-
tion, manpower optimisation, constantly evolving market trends, etc.
Adopting a business solution would help these organisations to sus-
tain their competitive advantage. The ERP market offers several such
solutions in the form of ERP software to these organisations. Several
organisations in India have already invested in ERP software while
M
many more are in the process of doing so. The international ERP mar-
ket consists of several software modules, where each of these modules
serves a specific business operation. For example, product manage-
ment, manufacturing, financial management, customer management,
supplier management, project management and HRM are some areas
N
that use ERP software modules.
Some of the recent trends in the ERP market can be briefly explained
as follows:
Dominance of top vendors: The ERP software market has always
been highly consolidated. It is mostly dominated by large vendors,
such as SAP, Oracle and Microsoft. At present, Oracle and SAP
control over half the market. However, the mid-market segment
in India is moving towards lesser known CAPEX cloud SaaS ven-
dors, such as UNIT4 Business Software, NetSuite and Epicor.
Industry-specific ERP products differentiate the vendors in the
market: The ERP market has grown to a level where the most ba-
sic business operations, such as human resource and finance, are
successfully supported by most of the ERP offerings in the market.
Therefore, vendors have now started differentiating on the basis of
industry-specific business operations.

N O T E S
Transfer of focus from large enterprises to small- and mid-sized

enterprises: Issues related to the implementation of ERP systems
and high costs have led organisations to reconsider their plans
for purchasing and implementing enterprise-wide ERP systems.
Therefore, the ERP market is gradually leading towards satura-
tion among large enterprises. This has led to a shift in the focus of
ERP vendors from large businesses to small- and mid-size indus-
tries.
The 2014 Manufacturing Report provides the market share statistics

of the frequency with which each ERP vendor was selected by organ-
isations. Figure 11.1 shows the total market share distribution of ERP
vendors from May 2012 to September 2013:
S
Microsoft
Tier II
7.1%
IM
21.4%
Oracle
14.3%
M
16.7%
SAP
N
Figure 11.1: ERP Vendor Market Share

Source: 2014 Manufacturing ERP Report Copyright © 2013 Panorama Consulting Solutions
SAP has a presence of about 17% in the manufacturing ERP mar-

ket. Oracle and Microsoft trail with about 14% and 7%, respectively.
The Tier II ERP solutions hold almost 21% of the manufacturing ERP
market.
The future trends in the ERP market are assumed to be as follows:

Industry-specific ERP offerings would continue to decide the
success of ERP vendors: With the introduction of new rules, com-
pliance guidelines, industry-specific issues, etc., businesses would
require new ERP products to address particular business require-
ments.
Increased emphasis would be on the user interface: A substantial
ERP product differentiation is expected on the basis of the user in-
terface. Web applications are expected to transform the user inter-
faces of back-end business applications.

ERP MARKET 179
N O T E S
Alternative ERP modules would gain power in the ERP market:

Software as a Service (SaaS) or customised ERP modules would
reinforce their place as the conventional ERP solution model
among the end users.
1. Which of the following is not true for the ERP market?

a. It has shifted focus on small-scale businesses.
b. It is dominated by small ERP vendors.
c. Alternative ERP modules would gain power in the ERP
market.
S
ACTIVITY
Using the Internet, list the names of a few ERP vendors in the In-
dian ERP market.
IM
11.3 SAP SE
M
N
Systems, Applications and Products in Data Processing (SAP SE) is a

software company based in Germany. It offers enterprise software for
managing business operations and customer relations. The company
has its headquarters in Walldorf, Baden-Württemberg, Germany, with
regional offices in 130 countries across the world.
In June 1972, five engineers from IBM founded a company, System-

analyse und Programmentwicklung (System Analysis and Program
Development). The name was later changed to Systeme, Anwendungen
und Produkte in der Datenverarbeitung, which means “Systems, Ap-
plications and Products in Data Processing” or SAP. The company’s
official name became SAP AG in 2005, which was later changed from
AG to a European Company (Societas Europaea or SE).
11.3.1 PRODUCTS AND TECHNOLOGY
SAP ERP offerings provide both sophistication and robustness, which

are unmatched by other business software solutions. This has helped

N O T E S
to turned itself into one of the giants in ERP solutions. SAP has an ex-
tensive product range of more than 800 business processes, covering
several functional software requirements in the areas of asset man-
agement, commerce, finance, human resources, manufacturing, mar-
keting, R&D, engineering, sales, service, sourcing and procurement,
supply chain, etc. SAP offers industry-specific solutions, covering al-
most all industries, such as automotive, banking, chemicals, defence,
construction, insurance, life sciences, media, public sector, retail,
sports and entertainment, telecommunications, travel and transpor-
tation utilities, and many more.
SAP SE offers its ERP products in three versions, which are as fol-
lows:
SAP R/1: This refers to one-tier architecture with three layers—
S
presentation, application and database.
Main Frame Version (SAP R/2): This refers to two-tier architec-
ture with three layers—presentation, application and database––
installed in two separate servers.
IM
Client/Server Version (SAP R/3): This involves three-tier archi-
tecture with three layers—presentation, application and data-
base––installed in three separate servers.
In addition, SAP offers another client/server data management sys-

tem by the name of SAP Advantage. Let us discuss these products and
M
technologies in detail in the subsequent sections.
11.3.2 R/3 OVERVIEW
In 1972, SAP offered its first real-time enterprise solution module as

R/1, which is a single-tier materials management module (R stands for
N
real-time and the number represent the tiers). This was replaced in
1979 by the company’s second product, R/2, which is a two-tier pack-
aged software application that integrates all the functions of an enter-
prise, including materials, accounting, manufacturing, supply chain
logistics and human resources. SAP R/2 was quite successful in the
1980s and early 1990s with large multinational European companies
that needed real-time business applications, with built-in multicur-
rency and multilanguage capabilities. With the introduction of client–
server computing, SAP SE offered a client–server version of its ERP
software by the name of SAP R/3. This was officially launched on July
6, 1992.
The evolution of SAP real-time enterprise solution modules is shown

in Figure 11.2:

ERP MARKET 181
N O T E S
III-tier architecture in which all 3 layers

[Presentation + Application+Database] are installed
SAP R/3 in three separate server
(Server 1: Presentation, Server 2: Application,
Server 3: Database)
II-tier architecture in which all 3 layers

[Presentation + Application + Database] are installed
SAP R/2 in two separate servers.
(Server 1: Presentation, Server 2: Application+
Database)
I-tier architecture in which all 3 layers

[Presentation + Application + Database] are installed
SAP R/1 in one server.
(Server 1: Presentation + Application +
Database)
S
Figure 11.2: Three Versions of the SAP Real-Time
Enterprise Solution
IM
The R/3 version is a three-tier real-time enterprise solution module
with three layers—presentation, application and database––in three
separate servers. SAP R/3 was compatible with multiple platforms
and operating systems, such as Microsoft Windows and UNIX. This
exposed SAP SE to a whole new customer base. Figure 11.3 shows the
client/server architecture of the R/3 enterprise system:
M
Database
Database
Layer
- high packet rate
req. short round trip time
SAP Server high speed LAN - large data volume
N
Communication high available about 10 to 20 times

more than presentation
- high availability
Application R/3
Layer Application
- compressed data
SAP Access - block-oriented
LAN/WAN
Communication - low data volume
about 1.7 KB/dialog step
Presentation R/3
Layer Presentation
SAP gui
Figure 11.3: R/3 Architecture

Source: http://help.sap.com/saphelp_46c/helpdata/en/ea/2941373c1ede6fe10000009b38f936/con-
tent.htm
As already mentioned, the SAP R/3 system has III-tier client/server

architecture. The entire data is stored in a database and processed in
the application layer on the application servers. The SAPgui presen-
tation layer is the user interface. All layers are connected through a
network.

N O T E S
Several other editions of the R/3 version were launched by the compa-
ny, the details of which are given in Table 11.1:
TABLE 11.1: RELEASED EDITIONS OF THE SAP R/3 VERSION

Edition Year
SAP R/1, System RF 1972
SAP R/2, ran on a Mainframe architecture 1979
SAP R/3 Enterprise Edition 1.0 A 1992
SAP R/3 Enterprise Edition 2.0 1993
SAP R/3 Enterprise Edition 4.0 B 1998
S
SAP R/3 Enterprise Edition 4.5 B 1999
SAP R/3 Enterprise Edition 4.6 C 2001
SAP R/3 Enterprise Edition 4.6 F 2002
SAP R/3 Enterprise Release 4.70 2003
IM
SAP R/3 Enterprise Central Component (ECC) 5.0 2004
SAP R/3 Enterprise Central Component (ECC) 6.0 2005
SAP ERP 6.0 Enhancement Packages (1, 2, 3, 4, 5, 6, 7) 2006
M
EXHIBIT
The Client–Server Model
All computers connected to the Internet can be categorised into

two types: client computer and server computer. Computers that
N
provide Web services to other computers in a network are called

server computers while those receiving the services are called cli-
ent computers.
Response
Requests
Network
Examples of computer applications that use the client–server mod-

el are e-mail, network printing and the World Wide Web.
11.3.3 SAP ADVANTAGE
SAP Advantage is a full-featured, easy-to-implement, high-perfor-

mance client/server data management system that is developed for

ERP MARKET 183
N O T E S
business application developers. SAP Advantage is a unique offering

in the SAP database products because it provides the following fea-
tures:
Indexed Sequential Access Method (ISAM): A file management
system created by IBM that accesses data either sequentially (in
the order entered) or randomly (with an index).
Structured Query Language (SQL)-Based Data Access: SQL al-
lows data to be accessed from multiple data sources.
SAP Advantage is available in two main versions, which are as follows:

Advantage Local Server (ALS): It allows access to data files
that are located in shared or peer-to-peer environments. ALS is
a non-client/server solution, which allows both single- and multi-
S
ple-user access to data files on computers that are not using Ad-
vantage Database Server (ADS).
ADS: It is a client/server Relational Database Management System
(RDBMS) for small- and medium-sized businesses. It allows users
IM
to conveniently develop and deploy client/server applications and
Web-based applications.
2. ___________ version is a three-tier real-time enterprise

solution module with three layers—presentation, application
M
and database––in three separate servers.

3. ADS is a non-client/server solution, which allows both single-
and multiple-user access to data files on computers that are
not using ADS. (True/False)
N
ACTIVITY
Using the Internet, explain the working of the SAP R/3 version and
prepare a report of the same.
11.4 BAAN CORPORATION
BaaN Corporation was founded by Jan Baan in 1978, in Barneveld,

Netherlands. The company offered financial and administrative con-
sulting services to businesses. The company was strongly supported

N O T E S
by the local Dutch Reformed Christian business people. Later, Jan’s

brother, Paul Baan, joined the company to develop its first software.
With this, the company became pioneers of the ERP industry. BaaN
Corporation now focused on developing ERP software for its clients.
It acquired several other software companies, including Antalys, Au-
rum, Berclain, Coda and Caps Logistics, to enhance its product port-
folio.
In 1998, BaaN Corporation faced its first big setback when the man-
agement of the company overstated the company’s revenue by book-
ing sales of software licenses that were actually reassigned to an allied
distributor. The discovery of this revenue manipulation led to a sharp
decline in BaaN’s market value by the end of 1998. In June 2000, BaaN
was sold off to Invensys (a UK automation, controls and process solu-
tion) at a price of US $700 million. In June 2003, Invensys sold BaaN
S
to SSA Global Technologies for US $135 million. Further, SSA Global
Technologies renamed BaaN Corporation as SSA ERP Ln. BaaN Cor-
poration is now owned by Infor Global Solutions after it acquired SSA
IM
in May, 2006.
Infor Global Solutions works closely with its customers to ensure the
success of each ERP system’s installation. The company enables its
clients to achieve the highest level of self-reliance through its efficient
systems. The company’s most significant client base comprises indus-
try leaders such as Boeing, Philips, Mercedes Benz, Nortel, Fujitsu
Network Communications and Motorola. Infor Global Solutions fo-
M
cuses on ensuring that each of its customer interactions follows the

“Three I” philosophy:
Integrity in its interactions with its customers, colleagues, part-
ners and shareholders.
N
Innovation in what it builds and how it delivers.

Initiative in speed and focus, which bring it close to all market
opportunities.
BaaN Corporation, which is now owned by Infor Global Solutions, has

long been a pioneer in offering ERP tools to organisations from var-
ious industries. The BaaNSeries-based product family includes the
following:
Baan Enterprise Resource Planning (BaanERP)
BaanFrontOffice
BaanCorporateOffice Solutions
The corporation’s product range (under the umbrella name,

‘BaaNSeries’) has a modular architecture, which enables organisations
to provide client-specific business solutions by using standardised

ERP MARKET 185
N O T E S
components. The modular architecture, which allows flexibility of

deployment and development, sets BaaN apart from its competitors.
BaaN products cover an entire range of manufacturing and business
systems, including inventory and ordering, sales and customer sup-
port services, financial and forecasting systems, etc. Moreover, BaaN
offers the multilingual feature with translations of its software in more
than 20 languages. It has a distribution and support network in about
60 countries. In addition, BaaN offers multicurrency support, Internet
and World Wide Web functionality and support for different operat-
ing systems, including UNIX, Windows and Microsoft BackOffice and
FrontOffice applications.
BaaN is the first business solution provider to receive the ‘Designed

for Microsoft BackOffice’ logo certification. The corporation’s prod-
ucts support relational database systems, such as Oracle, Informix,
S
DB2, Sybase and Microsoft SQL Server. Built on a promise to elimi-
nate the complexity of IT solutions, the corporation’s products include
the best-in-class components. BaaN provides new releases on a regu-
IM
lar basis, which enables organisations to update their infrastructure.
There are three main benefits that differentiate each component el-
ement within BaaNSeries from its competitors. These are listed as
follows:
Best-in-class components
Evergreen delivery
M
Version independent integration
11.4.2 BAAN ERP MODULES
BaaNERP is the successor to BaaN IV and is a verified ERP software

N
application. BaaNERP is a fully integrated system that offers excep-

tional functionality across all areas of an enterprise. BaaNERP has
several interdependent components that could be deployed to meet
business ends. The flexibility offered by BaaNERP through its com-
ponents enables customers to enhance the benefits of the best-in-
class solutions as well as a fully integrated, high-performance system.
BaaNERP comprises the modules shown in Figure 11.4:
Manufacturing Module
Finance Module
Project Module
Distribution Module
Figure 11.4: Modules in BaaNERP

N O T E S
Let us discuss these modules in detail:

Manufacturing module: This module is used for the purpose of
bills of material, cost price calculation, engineering change con-
trol, engineering data management, hours accounting, product
classification, product configuration, production control, produc-
tion planning, project budgeting, project control, repetitive manu-
facturing, routings, shop floor control, tool requirements, planning
and control, capacity requirements planning, master production
scheduling and material requirements planning.
Finance module: This module is used for the purpose of accounts
payable, accounts receivable, financial budgets system, cash man-
agement, financial reporting system, fixed assets, general ledger,
cost accounting and sales invoicing.
S
Project module: This module is used for the purpose of project
budget, project definition, project estimation, project invoicing,
project monitoring, project planning, project progress and project
requirements planning.
IM
Distribution module: This module is used for the purpose of sales
management, purchase management and warehouse manage-
ment.
11.4.3 GLOBAL SUPPORT, EDUCATION AND CONSULTING

M
BaaN’s services can be classified into three main components: global
support, education and consulting services.
BaaN’s global support services offer complete support to large- and

small-scale enterprises that rely on the BaaN ERP solution for critical
business processes. BaaN’s client organisations receive the following
N
support:
Telephone support: This helps in getting answers for any techni-
cal query. It is provided by the local BaaN Support Centre during
office hours.
Critical incident support: This helps in solving high-priority is-
sues that cannot be delayed any further.
24 hours critical incident support: This deals with technical is-
sues that create business standstills or serious disruptions of busi-
ness functions, etc.
Access to interactive support: Consistent interactive support is
offered through a website that is available 24x7.
Subscription to innovation: This comprises new versions, releas-
es and system updates to a client’s current BaaN software.
Other services offered by BaaN are in the area of education. BaaN

Education is a partner in lifetime learning and helps in maximising

ERP MARKET 187
N O T E S
the return on investment in people and technology. Lifetime learning

means that BaaN’s workforce is constantly updated with the latest
technology and business developments. BaaN Education meets the
educational needs of everyone in the organisation, including new em-
ployees as well as seasoned professionals with exhaustive experience
in the use of technology. The corporation offers Web-based learning
modules referred to as the virtual campus. Its process-based course on
education takes care of specific enterprise applications of BaaN Cor-
poration. In addition, the course provides an in-depth understanding
of the business processes of the corporation. Thus, BaaN Corporation
extends education beyond functionality and considers all conditions
within which its applications are used. These include the manufac-
turing, sales, financial and technical environments of an organisation.
In addition, BaaN Corporation offers consultancy services to custom-
S
ers on various ERP tools. BaaN Consulting is committed to extending
BaaN Corporation’s applications across the world. BaaN Consulting
has a successful track record with more than 1000 global customers
IM
with applications to serve almost every business environment. BaaN
Consulting offers a gamut of services, including project management,
business consultancy, application consultancy and technical consul-
tancy. Moreover, it offers support to customers all through the imple-
mentation process and extends even after the customer organisation
goes live with the application. BaaN Consulting interacts with its cus-
tomer base through Web-based BaaN Cyber Consult offering.
M
4. BaanERP comprises the following modules:

a. _____________
N
b. _____________
c. _____________
d. _____________
ACTIVITY
Form a group of students and compare the global support services

of SAP SE with those of BaaN Corporation.
11.5 ORACLE CORPORATION

N O T E S
Oracle Corporation was founded in 1977. It is headquartered in Red-

wood City, California, US. The company develops and markets com-
puter hardware systems and enterprise software products, especially
Oracle database management systems. Oracle Corporation also devel-
ops ERP software, Customer Relationship Management (CRM) soft-
ware and Supply Chain Management (SCM) software. Oracle is the
first software company to have used the Internet computing model for
developing and deploying enterprise software across its entire prod-
uct offerings. These include application development, databases and
relational servers, decision support tools and enterprise business ap-
plications.
S
Oracle offers choice and flexibility through a comprehensive, up-to-
date and secure portfolio of products to fit the business needs of its
customers. Oracle software is used in personal digital assistants, set-
top devices, network computers, personal computers, etc. Oracle da-
IM
tabases allow customers to minimise IT costs and deliver high service
quality by integrating database clouds and engineered systems, such
as Oracle Exadata and Oracle Database Appliance. Oracle Database
12c is a fast, reliable, secure and convenient database that is ideal for
all types of database workloads, including enterprise applications,
data warehouses and data analysis. Some of the product categories in
which Oracle offers a wide range of products are as follows:
M
Engineered systems: Oracle designs engineered systems to re-

duce the cost and complexity of IT infrastructure and increase
productivity and performance.
Enterprise management: Oracle Enterprise Manager helps or-
N
ganisations to implement applications faster, minimise the time

for resolution of service requests and manage user experiences for
its customers.
Enterprise communications: Oracle’s Acme Packet products pro-
vide hyper-connected organisations with solutions that enable
seamless voice, video and integrated communications across sta-
tionary and mobile users.
Java: This is the basis for almost all networked applications and is
the global standard for developing and delivering mobile applica-
tions, games, Web-based content and ERP software.
Middleware: It enables organisations to create and operate intelli-
gent business applications and helps to enhance their IT efficiency.
Operating systems: Oracle Solaris and Oracle Linux provide high
performance, scalability and reliability. Both these operating sys-
tems are capable of running Oracle hardware, databases and mid-
dleware.

ERP MARKET 189
N O T E S
Servers: Oracle’s SPARC, Sun x86, Sun Blade and Sun Netra
carrier-grade servers are developed to provide high performance,
simplified management, high availability and cost-saving efficien-
cies.
11.5.2 ORACLE APPLICATIONS
Oracle applications consist of over 45 software modules, which are di-

vided into different categories, as shown in Figure 11.5:
Oracle Financials
Oracle Human Resource
S
Oracle Projects
Oracle Manufacturing
IM
Oracle Supply Chain
Oracle Front Office

M
Figure 11.5: Oracle’s Application Areas
Let us discuss these in detail:

Oracle Financials: This application helps a finance organisation
N
to deploy financial management functions. The application helps

organisations to work globally, reduce administrative cost and im-
prove cash management. The application also provides strategic
information to take timely and accurate financial decisions.
Oracle Human Resource: This application is used for managing
human resource functions to improve profitability and contribute
to competitive advantage. Oracle Human Resource application
also helps in hiring, motivating and retaining the workforce in an
organisation. Furthermore, it can be used in providing compre-
hensive and up-to-date information.
Oracle Projects: This application improves operational efficiency
by offering an integrated project management system to support
the complete lifecycle of a project as well as enhance returns and
profitability.
Oracle Manufacturing: This application allows organisations to
achieve market leadership through customer responsiveness and

N O T E S
efficiency. Oracle manufacturing also supports organisations in in-

creasing revenue, profitability and customer loyalty by forecasting
demand and planning the manufacturing process accordingly.
Oracle Supply Chain: This application manages the supply chain
process of an organisation by creating a single integrated environ-
ment. Oracle supply chain helps in effective partner collaboration
and supply chain optimisation capabilities. The application also
helps to increase market share, minimise cost and improve cus-
tomer service.
Oracle Front Office: This application enables organisations to im-
prove customer relationship and maintain customer satisfaction
and retention. It also helps to attract and retain profitable custom-
ers through channels, such as digital technology and call centres.
S
11.5.3 VERTICAL SOLUTION
Oracle provides vertical solutions for addressing the functionality of a

IM
specific industry that may have a sub-segment within it. Fundamen-
tally, each organisation is in a vertical market segment. Through verti-
cal solutions, Oracle attempts to address the functional needs of each
vertical segment. Oracle Vertical Solution has a full line of modular
product components, aimed at the unique requirements of major in-
dustries, including automotive, aviation, aerospace and defence, com-
munications, energy, and public undertakings.
M
To address specific vertical industry customers, Oracle customises and

upgrades its software regularly. The company has established centres
of knowledge and expertise around selected vertical industries to ad-
dress the needs of the customers. The centres have employed people
who have in-house professional experience or dedicated partners with
N
vertical knowledge that could be integrated into Oracle’s applications.
5. Operating systems of Oracle include ____________ and

___________________.
6. Oracle ____________ addresses the functional needs of each
segment.
ACTIVITY
Using the Internet, list the features and importance of Oracle’s

most successful product, Java.

ERP MARKET 191
N O T E S
11.6 PEOPLESOFT
PeopleSoft was founded in 1987 by Dave Duffield and Ken Morris, with
an aim to build client/server applications that empower organisations
in the ever-changing marketplace and offer superior customer service.
It is a leading provider of ERP software and offers e-business solutions
entirely over the Internet for Fortune 1000 companies. PeopleSoft ini-
tially provided business solutions in the areas of human resources and
finance applications. Later, it built applications for general business
S
processes, including materials management, customer service, etc. In
addition, the company developed applications for specific industries,
such as automotive, communications and higher education.
IM
In 2000, PeopleSoft launched PeopleSoft8, the first Web-enabled soft-
ware along with PeopleSoft’s e-center, which is the company’s in-
house Application Service Provider (ASP). The company’s Web-based
applications are intended to integrate systems such that the organ-
isations can interact with their customers, suppliers and employees
conveniently.
M
PeopleSoft was acquired by Oracle Corporation in 2005, and Oracle
continues to market the company’s ERP solutions.
11.6.1 BUSINESS MANAGEMENT SOLUTIONS

N
PeopleSoft provides complete business solutions for increasing pro-

ductivity, improving business performance and maintaining low own-
ership cost. Organisations can opt for solutions for a single function
or a complete enterprise-wide solution. The flexible business man-
agement solutions provided by PeopleSoft allow companies to modify
applications for other verticals in the future conveniently. The People-
Soft’s business management solutions cater to the following business
functions:
Human resources management
Accounting and control
Treasury management
Performance measurement
Project management
Sales and logistics
Materials management

N O T E S
Supply chain planning

Service revenue management
Procurement
11.6.2 COMMERCIAL SOLUTIONS
PeopleSoft’s range of products and tools includes commercial solu-

tions for organisations. These include the following:
Supply chain management: PeopleSoft is the only vendor pro-
viding comprehensive ERP solutions that are built around supply
chain optimisation. It includes a Demand Planning module that
enables sophisticated forecasting, using both real-time and histor-
ical information. PeopleSoft’s entire range of SCM products pro-
S
vides comprehensive support for any organisation that produces
or markets a physical product.
Service industry solutions: PeopleSoft also provides a compre-
IMhensive commercial support solution for service industries. It in-
cludes Service Revenue Management applications that support
the tracking of time and labour, payroll processing, project man-
agement, billing and expense and receivables processing. Peo-
pleSoft’s range procurement modules support business functions
such as purchasing, inventory management, payables and expense
processing, and asset management.
M
11.6.3 INDUSTRY SOLUTIONS
PeopleSoft offers industry-specific solutions for several business sec-

tors. The products and tools cater to industry-specific needs, custom-
isation of existing business applications and sales and marketing sup-
N
port through direct channels and business associations.
PeopleSoft owns 11 business units that offer software solutions to a

wide range of public and private sector industries. These business
units help in developing industry-specific solutions for enterprise-wide
functions, including back office and the front lines. PeopleSoft solu-
tions are global, enterprise-wide and customised to unique industry
requirements, covering service industries, manufacturing industries
and the education and government sectors. The different industries
that deploy PeopleSoft industry solutions are as follows:
Communications
Federal Government
Financial Services
Healthcare
Higher Education
Manufacturing

ERP MARKET 193
N O T E S
Public Sector
Retail
Service Industries
Transportation
Utilities
11.6.4 APPLICATIONS
The product series under the name of PeopleTools offered by Peo-

pleSoft is an integrated set of client/server business application tools.
The application allows customers to implement, modify and maintain
PeopleSoft applications and also access, analyse and modify data.
S
PeopleSoft consistently upgrades its technology to optimise custom-
er information systems. The company helps organisations to benefit
from new and emerging technologies, providing more options and the
freedom to build their own innovative business processes. Some pop-
IM
ular PeopleSoft applications are shown in Figure 11.6:
Self-Service Applications
Web Client
M
Multi-layer Transaction Processing
OnLine Analytical Processing (OLAP)

N
Workflow
Figure 11.6: PeopleSoft Applications
Let us discuss these applications in detail:

Self-Service Applications: These applications enable organisa-
tions to improve productivity. PeopleSoft focuses on providing
users with easy access to information and functionality specif-
ic to their needs. Therefore, the company has developed a set of
self-service applications for helping organisations to promptly and
cost-effectively use the software for enterprise-wide functions.
These applications are based on standard Web browsers, such as
Netscape Navigator or Microsoft Explorer. Java-based, cross-plat-
form applications allow customers, employees, suppliers and oth-
er partners to perform self-service administrative tasks. Self-ser-
vice applications are linked to PeopleSoft Accounting and Control,
Human Resources Management and Materials Management.

N O T E S
Web Client: Self-service applications of PeopleSoft are based on

Web Client. Web Client can be accessed through the Internet on
request and runs on a Web browser across multiple platforms. The
open architecture and flexibility allow for delivering ERP solu-
tions to a large number of people. Applications can be accessed
easily through a browser without having to install them on every
computer. In addition, the PeopleSoft Web Client has a Work list
and Query interface, which improves the flow of business process-
es and improves access to information for occasional users. Owing
to its easy accessibility, Web Client comes with common business
rules workflow logic and security features.
Multi-Layer Transaction Processing: PeopleSoft applications
use the Local Area Network (LAN) and Wide Area Network (WAN)
settings in the client organisations. In LAN, the application runs
S
on an application server instead of the client server. The applica-
tion server is designed to free the client from processing intense
SQL transactions. Therefore, it reduces LAN traffic and improves
performance across WANs. The three-tier architecture of a Peo-
IMpleSoft multi-layer transaction provides increased scalability to
include high volumes of parallel users while maintaining a consis-
tent and reliable performance level.
OnLine Analytical Processing (OLAP): To be able to quickly ac-
cess and analyse information, organisations need effective deci-
sion-making tools. OLAP is a powerful tool used to analyse online
M
data. PeopleSoft integrates popular OLAP tools, such as Cognos
PowerPlay and Arbor Essbase, to easily share the multidimension-
al data stored at various locations. Users can outline the data that
they intend to access into an OLAP cube. This enables them to
quickly view information from all perspectives and derive conclu-
N
sions and what-if scenarios and compare alternatives.

Workflow: The PeopleSoft Workflow application enables organi-
sations to achieve enterprise-wide integration of information, ap-
plications and people. This application enables organisations to
automate their time-consuming tasks, back-end operations, while
putting useful data into the hands of the users. Workflow helps
organisations to keep track of their existing projects by initiating
a workflow message to the concerned person when a project devi-
ates from the estimated budget and time.
7. ________ is a powerful tool used to analyse online data.
ACTIVITY
Make a list of all the products and tools included in the PeopleTools
series of PeopleSoft.

ERP MARKET 195
N O T E S
JD EDWARDS WORLD SOLUTIONS

11.7
COMPANY
In 1977, Jack Thompson, Dan Gregory and Ed McVaney formed a

software company that specialised in midrange computing solutions.
Initially, JD Edwards (abbreviated as JDE) developed software for
several small and medium-sized computers. Later in the 1980s, the
company started focusing on IBM System/38. In this way, JDE pio-
S
neered the Computer-Aided Systems Engineering (CASE) software
development and design tool. As JDE’s software business continued
to flourish, servicing a large number of customers gradually became
challenging. JDE could either cease to expand and continue to serve
IM
customers on an individual basis or develop a breakthrough technolo-
gy to become an industry leader in enterprise software. At this point in
time, McVaney and Thompson began to design and implement World-
software that showed them the path to success. By the mid-1980s, JDE
came to be recognised as a leading supplier of applications software
for the highly successful IBM AS/400 computer.
M
With the introduction of OneWorld in June 1996, JDE once again
achieved a technological breakthrough. OneWorld provides organisa-
tions with the capacity to configure their systems and applications as
their needs change.
JDE was however purchased by PeopleSoft, Inc. in 2003. PeopleSoft,

N
in turn, was purchased by Oracle Corporation in 2005, and Oracle con-

tinues to sell and support the company’s applications successfully.
JD Edwards provides its solutions primarily for the AS/400 platform.

The company has two application suites: OneWorld and WorldSoft-
ware/WorldVision. OneWorld enables organisations to configure their
systems and applications as their needs change. WorldSoftware pro-
vides a comprehensive supply chain management functionality. Both
can run parallelly on the same AS/400 platform, share data and inter-
act with each other as a unified solution. Let us discuss these solutions
in detail:
OneWorld: JDE’s OneWorld supports an extended solution by in-
tegrating with the existing, best-of-breed company products with-
out sacrificing the security, integrity or consistency of the existing
systems. OneWorld’s own APIs as well as industry standards, such
as CORBA, ODBC and other packaged integration solutions, help

N O T E S
to provide flexibility. Therefore, organisations are not limited to

the existing technology and can benefit from future opportunities.
WorldSoftware: JDE’s WorldSoftware allows organisations to
selectively mix, match and integrate software applications from
among its diverse industry product suites. It helps them to conve-
niently modify ongoing business processes to suit industry-specif-
ic requirements. WorldSoftware can run parallel with OneWorld
to gradually incorporate other computing platforms into an organ-
isation’s network.
11.7.2 MODULES
JD Edwards provides its customers better control of their business

functions. JDE modules have redefined the way organisations cope
S
with the changing markets, customers and competitive conditions.
The different product modules available from JDE are as follows:
Foundation Suite: Consists of Back Office, CASE Foundation, En-
IMvironment/Toolkit, Financial Analysis Spreadsheet Tool and Re-
port Writer, WorldVision GUI and Electronic Burst and Bind
Financial Suite: Consists of General Accounting, Accounts Pay-
able, Accounts Receivable, Fixed Assets, Financial Modelling and
Budgeting, Multi-Currency Processing, Cash Basis Accounting
and Time Accounting
M
Logistics/Distribution Suite: Consists of Forecasting, Require-
ments Planning, Enterprise Facilities Planning, Sales Order Man-
agement, Advanced Pricing, Procurement, Work Order Manage-
ment, Inventory Management, Bulk Stock Management, Quality
Management and Advanced Warehouse
N
Management Suite: Consists of Equipment Management, Trans-

portation Management, Job Cost and Service Billing
Services Suite: Consists of Contract Billing, Subcontract Manage-
ment, Change Management and Property Management
Manufacturing Suite: Consists of Configuration Management,
Cost Management, Product Data Management, Capacity Plan-
ning, Shop Floor Management and Advanced Maintenance Man-
agement
Architecture, Engineering, Construction, Mining and Real Es-
tate Suite: Consists of Procurement, Inventory Management,
Equipment Management, Job Cost, Work Order Management,
Subcontract Management, Change Management, Contract Man-
agement, Contract Billing, Service Billing, Homebuilder Manage-
ment and Property Management
Energy and Chemical Suite: Consists of Agreement Management,
Advanced Stock Valuation, Sales Order Management, Bulk Stock
Management and Load and Delivery Management

ERP MARKET 197
N O T E S
Government, Education and Not-for-Profit Solutions: Consist

of Financial Administration and Reporting, Budget Administra-
tion, Fund and Encumbrance Accounting, Grant and Endowment
Management, Purchasing and Material Management, Warehous-
ing and Central Stores Management, Human Resources Man-
agement, Service and Work Order Management, Capital Project
and Construction Management, Contract Management and Plant,
Equipment and Fleet Maintenance
Utilityand Energy Solutions: Consist of Customer Information
System, Human Resources Management, Work Management,
Regulatory Reporting, Supply Chain Management, Project Man-
agement and Enterprise Maintenance Management
S
8. JDE’s WorldSoftware allows organisations to selectively mix,
match and integrate software applications from among its
diverse industry product suites. (True/False)
IM
ACTIVITY
Using the Internet, prepare an outline of the Manufacturing Suite

offered by JD Edwards.
M
SYSTEMS SOFTWARE ASSOCIATES,

11.8
INC. (SSA)
N
Systems Software Associates, Inc. was founded in 1981 by Roger E.

Covey, at an early age of 26. Until 1989, SSA had an employee count of
400 with over 4,000 customers in 30 countries. The company offered
business solutions software in eight languages, including French, Ger-
man, Italian, Chinese and Japanese.
Software Associates, Inc. was acquired by Gores and Cerberus Capi-

tal Management to become SSA Global Technologies in August 2000.
SSA Global Technologies is a leading provider of ERP solutions for
manufacturing, distribution, retail, services and public sector organ-
isations across the world. In addition to basic ERP applications, SSA
Global provides organisations with a comprehensive range of integrat-
ed extended ERP solutions for corporate performance management,
customer relationship management, product lifecycle management,

N O T E S
supply chain management and supplier relationship management. On

July 28, 2006, SSA Global Technologies was acquired by Infor Global
Solutions.
The main product line of SSA includes Business Planning and Con-
trol System (BPCS). BPCS is an integrated group of software prod-
ucts that includes applications for manufacturing, distribution and
financial operations.
BPCS is used to control the operations of manufacturing company’s

processes. Some of its features include the following:
It runs on several systems, which include the IBM system, also
S
known as IBM AS/400 or IBM eServer iSeries.
It is written in SQL, AS/Set, RPG and other IBM languages that
are unique to the system.
IM
The product is most suited for manufacturing and planning appli-
cations.
Some of the most popular products of SSA include the following:

Business Performance Management (BPM): It comprises a set
of management and analytic processes that enable businesses to
define strategic goals and measure performance with the use of
M
technology.
Customer Relationship Management (CRM): It includes process-
es that organisations deploy to attract new customers and retain
existing ones. CRM software is also used to store and access infor-
mation about customers and their interactions with organisations.
N
Financial Management (FM): This is a sub-division of finance

that is concerned with the management of funds. It is an interde-
partmental approach that borrows from both managerial account-
ing and corporate finance.
Human Resource Management (HRM): This is a strategic and
rational approach to the management of an organisation’s most
valued assets—the people working there who individually and
collectively contribute to the achievement of the objectives of the
business.
Product Lifecycle Management (PLM): This is the process of
managing the entire lifecycle of a product from its conception,
through design and manufacture, to service and disposal. PLM
integrates data, processes, people and business systems and acts
as an information storehouse for companies and their extended
enterprises.

ERP MARKET 199
N O T E S
Supply Chain Management (SCM): This product manages the

supply chain networks of organisations. It monitors the movement
and storage of raw materials, inventory, work-in-process and fin-
ished goods from the point of origin to the point of consumption.
Supplier Relationship Management (SRM): This product helps
in maximising the potential value of the relationships with the
suppliers by working in cooperation with them.
11.8.2 BPCS APPLICATIONS
BPCS applications are based on BPCS software with additional fea-

tures by partnering with suppliers of applications, such as data min-
ing, bar coding, etc. Some BPCS applications include the following:
S
Financial Applications: These applications are used for functions
such as Costing (CST), Accounts Payable (ACP), Accounts Receiv-
able (ACR), Billing (BIL), General Ledger (GLD), Cash Manage-
ment (CSH), Multiple Currencies (MLT), Currency Translation
IM
(CTR), Financial Assistant (FIN), Fixed Assets (FXA), Payroll
(PAY), Business Modelling and Data Mining.
Planning Applications: These applications are used for functions
such as Forecasting (FOR), Master Scheduling (MPS), Material
Requirements Planning (MRP), Capacity Planning (CAP), Distri-
bution Resource Planning (inter facility) (DRP), Planner’s Assis-
tant (PLN) and Simulations.
M
Distribution Applications: These applications are used for func-

tions such as Inventory (INV), Purchasing (PUR), Customer Order
Processing (ORD), Billing (BIL), Sales Analysis (SAL), Promotions
and Deals (PRO) and Performance Measurement (PRF) (such as
supplier quality and on-time company performance in supplying
N
to the customers, internal quality control, multiple environments,

companies, divisions, facilities, warehouses and locations).
Manufacturing Applications: These applications are used for
functions such as Bill of Material (BOM), Inventory (INV), Shop
Floor Control (SFC), Master Scheduling (MPS), Material Require-
ments Planning (MRP), Capacity Planning (CAP), Laboratory
Management (LMS), Just In Time (JIT), Quality Control (QMS),
Repetitive Manufacturing, CIMPath (Bar coding and Data Col-
lection) (CIM), Advanced Process (chemical) Industries (API) and
Performance Measurement (factory production) (PRF).
Systems Applications: These applications are used for functions
such as Miscellaneous Reports and Retrievals, System Parameters
or Business Rules, Transaction Effects, Documentation, Data Base
X-Reference, Interest Area Menus, Sliding Y2K Window and Data
Base Upgrade.

N O T E S
9. The main product line of SSA is ___________________.
ACTIVITY
Make a list of some industries that make use of the BPCS applica-
tion of SSA.
11.9 QAD INC.
S
IM
QAD is a software company that provides ERP software to manufac-
turing companies around the world. It was established in California
in 1979 by Pamela Lopker, the President and Chairman of the compa-
ny. QAD began with software applications for manufacturing compa-
M
nies based in southern California. Later in 1984, QAD launched its top
product named MFG/PRO. This application is available in 26 different
languages and has more than 4,000 installed sites in over 80 countries.
The company has customers in six main manufacturing industries:
automotive, life sciences configured products, discrete products, con-
N
sumer products and food and beverages.
11.9.1 APPLICATION MFG/PRO
Annually, QAD invests US $40 million on R&D for upgradation of

its software solutions for manufacturing organisations. The compa-
ny provides applications for use by global manufacturers to ensure
smooth and efficient functioning. QAD’s application MFG/PRO was
developed using the Progress Software Corporation’s Fourth-Gener-
ation Language (4GL) and RDBMS. MFG/PRO was among the first
software applications created for use in manufacturing industries.
QAD MFG/PRO is the ERP software developed to streamline the
business functions of global manufacturing organisations. MFG/PRO
was designed and developed on a sound knowledge of manufacturing
operations and processes across the world. The MFG/PRO applica-
tion has three modules—manufacturing, financials and distribution––
which serve to meet the business requirements of global manufactur-
ing organisations.

ERP MARKET 201
N O T E S
These three modules are described as follows:

Manufacturing: This module allows organisations to minimise
production costs and increase output by using the latest manufac-
turing scheduling techniques.
Financials: This module includes complex budget modelling ca-
pabilities, advanced reporting and enhanced audit capabilities.
The module takes care of the typical needs of globally operated
manufacturing enterprises by streamlining financial processes,
such as planning, recording, reporting and complying.
Distribution: This module enables organisations to improve the
management of supply and suppliers through real-time collabora-
tion. It also improves customer responsiveness through the collab-
oration and management of customer demands.
S
In 2007, QAD enhanced its application, MFG/PRO, and re-launched it
as QAD Enterprise Applications. This application consists of a com-
prehensive set of manufacturing software for domestic as well as mul-
tinational organisations.
IM
11.9.2 MODULES
QAD Enterprise Applications has several modules to support global

manufacturers in improving their business functions. In addition to
the three modules (manufacturing, financials and distribution), QAD
M
Enterprise Applications includes the modules shown in Figure 11.7:
Customer Management
N
Service and Support
Enterprise Asset Management
Analytics
System Performance
Figure 11.7: QAD Enterprise Applications Modules
These modules are discussed as follows:

Customer Management: This module offers improved respon-
siveness through customer collaboration, and thus meets custom-
er demand.

N O T E S
Service and Support: This module offers organisations the capac-

ity for after-sale service and support. It allows managers to track
warranty, service calls and returns and repairs.
Enterprise Asset Management: This module is used to support
plant maintenance activities, which include both preventive and
predictive management, work orders and service requests to en-
sure that the equipment is reliable and safe for all uses. It also
ensures compliance with safety and health standards.
Analytics: This module allows organisations to analyse data for
measuring business performance in key business areas.
System Performance: This module provides organisations with a
Performance Monitoring Framework that enables them to moni-
tor system performance and take preventive actions for correcting
S
any issues that may affect optimum performance.

IM
10. In 2007, QAD enhanced its application, MFG/PRO, and re-
launched it as ______________.
ACTIVITY
Search for information related to future developments in QAD ERP

M
software. Prepare a report of the same.
11.10 SUMMARY
The international ERP market consists of several software mod-
N
ules, each of which serves a specific business operation.

Systems, Applications and Products in Data Processing (SAP SE)
is a software company based in Germany. It offers enterprise soft-
ware for managing business operations and customer relations.
SAP has an extensive product range of more than 800 business
processes, covering several functional software requirements in
areas of asset management, commerce, finance, human resourc-
es, manufacturing, marketing, R&D, engineering, sales, service,
sourcing and procurement, supply chain, etc.
SAP R/3 version is a three-tier real-time enterprise solution mod-
ule with three layers—presentation, application and database––in
three separate servers.
BaaN Corporation was founded by Jan Baan in 1978, in Barneveld,
Netherlands. The company offered financial and administrative
consulting services to businesses.

ERP MARKET 203
N O T E S
Oracle
Corporation was founded in 1977. It is headquartered in
Redwood City, California, US.
Oracle software is used in personal digital assistants, set-top devic-
es, network computers, personal computers, etc.
Oracle also provides vertical solutions for addressing the function-
ality of a specific industry that may have a sub-segment within it.
PeopleSoft was founded in 1987 by Dave Duffield and Ken Morris,
with an aim to build client/server applications that empower or-
ganisations in the ever-changing marketplace and offer superior
customer service.
In the year 2000, PeopleSoft launched PeopleSoft8, the first
Web-enabled software along with PeopleSoft e-center, which is the
S
company’s in-house Application Service Provider (ASP).
In 1977, Jack Thompson, Dan Gregory and Ed McVaney formed a
software company that specialised in midrange computing solu-
tions. The company has two application suites: OneWorld and
WorldSoftware/WorldVision.
IM
Systems Software Associates, Inc. was founded in 1981 by Roger
E. Covey, at an early age of 26.
SSA Global provides organisations with a comprehensive range
of integrated extended ERP solutions for corporate performance
management, customer relationship management, product lifecy-
M
cle management, supply chain management and supplier relation-

ship management.
QAD is a software company that provides ERP software to manu-
facturing companies around the world. It was established in Cali-
fornia in 1979 by Pamela Lopker.
N
QAD MFG/PRO is ERP software developed to streamline the busi-

ness functions of global manufacturing organisations.
KEY WORDS
Active Server Pages (ASP): This is a scripting tool used to cre-

ate and run dynamic, interactive Web server applications.
CRM Software: This is ERP software that is used for manag-
ing sales, marketing, customer support and inventory through
a single system.
Middleware: It refers to the software layer that lies between
the operating system and the applications to connect software
components or enterprise applications.
Relational Database Management System (RDBMS): It is a
database management system that is based on the relational
model given by E.F. Codd. It forms the basis for SQL and data-
base systems such as MS SQL Server, IBM DB2, etc.

N O T E S
SaaS: This is a software distribution model where applications

are hosted by a vendor or service provider and made available
to customers over the Internet.
SCM Software: This is ERP software used for executing supply
chain functions, managing supplier relationships, etc.
Structured Query Language (SQL): It is a database language
used for retrieving and managing data in a relational database.

1. Discuss the current and future trends in the ERP market.
2. Describe the ERP products and technology of SAP SE.
S
3. Outline the ERP products and tools offered by Oracle.
4. Describe the ERP products and technology provided by
PeopleSoft.
IM
Topic Q.No. Answers

M
ERP Market 1. b. It is dominated by small ERP

vendors.
SAP SE 2. SAP R/3
3. False
N
BaaN Corporation 4. a. Manufacturing Module

b. Finance Module
c. Project Module
d. Distribution Module
5. Oracle Corporation
6. Vertical Solution
PeopleSoft 7. OnLine Analytical Processing
(OLAP)
JD Edwards World Solu- 8. True
tions Company
Systems Software Associ- 9. Business Planning and Control
ates Inc. (SSA) System (BPCS)
QAD Inc. 10. QAD Enterprise Applications

ERP MARKET 205
N O T E S

1. Some recent trends in the ERP market show dominance of top
vendors, differentiation of vendors on the basis of industry-
specific ERP products, etc. The future trends in the ERP market
are assumed to be that industry-specific ERP offerings would
continue to decide the success of ERP vendors, increased
emphasis would be on the user interface, etc. Refer to Section
11.2 ERP Market.
2. SAP has an extensive product range of more than 800 business
processes, covering several functional software requirements
in areas of asset management, commerce, finance, human
resources, manufacturing, marketing, R&D, engineering, sales,
service, sourcing and procurement, supply chain, etc. Refer to
S
Section 11.3 SAP SE.
3. Some of the products offered by Oracle are Java, Middleware,
OS, Engineered Systems, etc. Oracle also provides vertical
solutions for addressing the functionality of a specific industry
IM
that may have a sub-segment within it. Refer to Section
11.5 Oracle Corporation.
4. PeopleSoft offers various business management solutions,
commercial solutions, industry solutions and applications
to support the functioning of organisations. Refer to Section
11.6 PeopleSoft.
M

11.13
REFERENCE
SUGGESTED READINGS
N
Brady J., Monk E., Wagner B. (2001). Concepts in Enterprise Re-

source Planning. Australia: Course Technology.
Leon A. (2008). Enterprise Resource Planning. New Delhi: Tata Mc-
Graw-Hill.
Vaman J. (2007). ERP in Practice. New Delhi: Tata McGraw-Hill.
E-REFERENCES
Icmrindia.org (2015). ERP Implementation at BPCL|Free Man-
agement Articles|Free Management Case Studies. Retrieved from
http://www.icmrindia.org/free%20resources/casestudies/IT%20
and%20Systems%20freecasestudyp3.htm.
Oracle.com (2015). PeopleSoft Applications—Overview|Applica-
tions|Oracle. Retrieved from http://www.oracle.com/us/products/
applications/peoplesoft-enterprise/overview/index.html.
Qad.com (2015). Enterprise Software Solutions: ERP, MRP, Lean
Manufacturing|QAD Business Software. Retrieved from http://
www.qad.com/erp/Effective-Enterprise/.

N
M
IM
S
C H
12 A P T E R
EXPLORING ERP II
S
CONTENTS
12.1 Introduction
12.2 Extension of ERP to ERP II
12.2.1
IM
Features of ERP II
12.2.2 Framework of ERP II
12.2.3 Best Practices of ERP II
Activity
12.3 An Introduction to Open Source ERP Technologies
M

Activity
12.4 Summary
N

N O T E S
DELL—NO INTEGRATION–NO BENEFIT
In 1993, Dell Computer Corporation was facing a price war from

one of the strongest leaders, Compaq, and suffered huge losses
worth US $65 million within the first two quarters. The reduced
sale and piled up inventory took Dell to the verge of bankruptcy.
At this point of time, Dell realised a need to make certain funda-
mental internal changes and restructure its business processes to
sustain and grow in business.
It integrated its enterprise systems with the Internet and connect-

ed its suppliers and customers to a real-time system. This led to
the alignment of demand with supply and prepared the founda-
tion of purpose-build computers. Dell restructured its business by
S
incorporating the following innovations in its supply chain net-
work (from supplier to customer):
It used the Internet to release orders of customers and suppli-
IMers. Web connectivity provided its customers with a real-time
online experience of configuring their order and determining
the delivery schedule within seconds.
It adopted the strategy of order-based production (which
means manufacturing takes place only after receiving the or-
der). This strategy involved just-in-time production, which, in
turn, provided the following benefits:
M
Minimising marketing and administrative costs

Reducing inventories
Speeding up order deliveries
N
Eliminating the chances of obsolescence

It proposed its major suppliers to maintain their component
warehouses within a perimeter of 10km from the company’s
plant so that it could get components immediately. This strate-
gy helped Dell to maintain and stock new components around
60 days earlier as compared to its major competitors.
The transition of all supply chain processes from offline to on-
line routine helped the company to organise its shipment of
the components from suppliers and orders to customers elec-
tronically and much efficiently.
The company teamed up with its buyers to form an online
discussion forum and brainstorm as a team to generate new
product ideas.

EXPLORING ERP II 209
N O T E S
Dell achieved reduction in product testing time from an aver-

age 75 days to 15 days by aligning the schedule of new product
testing with network testing.
These innovative ideas of Dell laid the foundation for a new term
known as Extended Enterprise (EE), which is mainly concerned
with the supply chain of an organisation. The incorporation of
this EE perspective in the company required the extension of the
conceptual framework of ERP II.
ERP II evolved as an important extension of ERP as its important

aspects benefitted Dell in the following ways:
Simplified supply chain operations by applying ERP.
S
Allowed independently capture application architecture from
any particular vendor and system.
Dell became the world’s most successfully managed and most

profitable market leader in selling PCs by 2001. This was due to
IM
the successful implementation of ERP II and introduction of the
Internet in supply chain processes.
M
N

N O T E S
LEARNING OBJECTIVES

> Describe how ERP II has evolved from ERP
> Explain the concept of Open Source ERP Technologies
12.1 INTRODUCTION
In the previous chapters, you have studied about various aspects of
Enterprise Resource Planning (ERP), its evolution, growth, related
technologies and software. In this chapter, you will study about the
next generation of ERP applications, known as ERP II.
S
Most companies nowadays rely on Information Technology (IT) as the
main strategy to gain a competitive advantage. A competitive IT strat-
egy aims at getting more benefit from business and linking all busi-
IM
ness units by integrating enterprise, customers and suppliers. Several
companies are interested in taking advantage of the integrated in-
formation systems and implementing extended Enterprise Resource
Planning system, known as ERP II.
ERP II integrates different business processes that extend across the

enterprise. The integrated processes include Customer Relationship
Management (CRM), Supply Chain Management (SCM), Human Re-
M
source Management (HRM), etc., in one package.
In this chapter, you will study how ERP II is considered as an exten-

sion to ERP. In addition, open source ERP technologies have also been
discussed in detail.
N
12.2 EXTENSION OF ERP TO ERP II

Initially, ERP systems were designed to bring in automation
across multiple business units simultaneously, and ease out
the flow of the manufacturing process. It helped organisations
to make timely delivery of products, improve product quality
and maintain an adequate level of inventory, thereby increasing
their competitive strength. However, ERP systems failed to ad-
dress other critical functional areas of a business, such as sales,
marketing and client servicing as they were focused mainly on
the manufacturing and supply side of a business. In some cases,
existing ERP systems proved inefficient in providing organisa-
tions an edge over its competitors. For instance, the ERM sys-
tem lacked synchronisation with the Internet and thus, it could
not use websites, customer service forums or online order filling
portal. Therefore, it required efficient Customer Relationship

N O T E S
Management (CRM) capabilities. In addition, ERP required an

appropriate system to manage and catalogue critical documents,
such as purchase orders, order receipt or business contracts. In
view of this, ERP manufacturers developed an extended form of
ERP, called ERP II.
Gartener Inc. has defined ERP II as a business strategy and a set
of industry-domain-specific applications that is used to build customer
and shareholder value by enabling and optimising enterprise, collabora-
tive operational and financial processes.
ERP II is regarded as the next generation of ERP. ERP II is a

more Web-friendly, flexible application that provides quick ac-
cess to business information to different stakeholders of an or-
S
ganisation from any location. It provides several security tools
that prevent the misuse of critical business information. The
system includes many comprehensive features to serve the re-
quirements of different industries.
IM
Applications of ERP II move towards a borderless enterprise by
extending the corporate supply chain in a marketplace. ERP II
integrates back-office functions with front-office functions (such
as customer interaction) and addresses e-enabled business func-
tions, such as e-commerce, e-finance, e-governance, etc.
M
Figure 12.1 illustrates the evolution of ERP II from ERP along

with the functionalities that have been incorporated in the ex-
isting system:
N
• Accounting
• Shop Floor Control
ERP
Evolution of ERP II from ERP
• Material Planning
(1990-1999) • Order Entry
• Distribution
• Warehousing
• Procurement & Logistics
Extended ERP
• E-commerce
(2000-2005) • Scheduling & Forecasting
• Capacity Planning
• Customer Relationship Management

• Knowledge Management
• Project Management
ERP II
• Workflow Management
(2005 Onwards) • Internet & www Integration
• Portal Capability
• Integrated Financials
Figure 12.1: Evolution of ERP II from ERP

N O T E S
ERP II integrates all critical functions of an organisation. It integrates

all traditional functions performed by ERP, such as planning, account-
ing, order entry and distribution with other advanced functions like
CRM, knowledge management, project management, human resource
management and workflow management. ERP II strengthens the ex-
isting ERP system by providing instant information to different busi-
ness entities or departments of an organisation as and when needed.
Let us study the features, framework and best practices of ERP II in

the next sections.
12.2.1 FEATURES OF ERP II
In the year 2000, Garter Group coined the term ERP II and also pub-
lished an article, “ERP is Dead—Long Live ERP II”, in their group pub-
S
lication, Gartner Publication. ERP II is defined as an Internet-based
software solution, which enables employees, suppliers and customers
to have real-time access to enterprise-wide ERP systems.
IM
ERP II performs many important functions. Some of these can be list-
ed as follows:
Provides an open independent application architecture
Extends business processes
Facilitates individual business function-based characteristics
M
Provides support to enterprise processing requirements

Performs the role of an application as well as a deployment strategy
The characteristics of ERP II can be further summarised as follows:

N
Integrates an organisation’s critical operational, financial and col-

laborative processes (both internal and external).
Facilitates the entire corporate information required by business
partners, suppliers, customers, etc.
Offers better efficiency and operational speed by integrating ERP
along with CRM, SCM and Business Intelligence (BI) techniques
and the Internet.
Removes information barriers from departments and ensures an
efficient and transparent information flow.
Facilitates collaboration among different enterprises by controlling
information in resources.
Links with other ERP systems external to an organisation.
Performs an important role in decision making and process stan-
dardisation and ensures transparency across an organisation.
Integrates internal and external business processes by eliminating
a single vendor strategy.

N O T E S
Connects an organisation with its key stakeholders including in-

vestors, business partners, employees, suppliers and customers
directly or indirectly by using the Internet and Web services.
12.2.2 FRAMEWORK OF ERP II
In order to meet emerging business requirements and technological

advancements, the majority of vendors, either partially or completely,
adopted ERP II. Figure 12.2 shows the framework of ERP II:
EAI
S
SCM
SRM CRM
B2B
B2C
ERP
PLM
IM CPM
HRM
B2E
M
Figure 12.2: Conceptual Framework of ERP II
Let us discuss the generic components of the conceptual framework

of ERP II in detail. It comprises four layers, which are depicted in
Table 12.1:
N
TABLE 12.1: FOUR LAYERS OF ERP II

Layers Components Generic Components
Foundation Core Application Framework (AF)
Integrated Database (ID)
Process Central Enterprise Resource Planning (ERP)
Business Process Management (BPM)
Analytical Corporate Supply Chain Management (SCM)
Customer Relationship Management (CRM)
Supplier Relationship Management (SRM)
Product Lifecycle Management (PLM)
Employee Lifecycle Management (ELM)
Corporate Performance Management
(CPM)
E-business Collaborative Business-to-Consumer (B2C)
Business-to-Business (B2B)
Business-to-Employee (B2E)
Enterprise Application Integration (EAI)

N O T E S
Each layer of this framework is described as follows:

Foundation layer: This layer forms the basic architecture of ERP
II and comprises the core components. Integrated database and
application framework are the two core elements that form the
foundation layer. This integrated database is usually distributed.
Process layer: This layer depicts the transaction-based system
and is considered the central component of ERP II. This system
is Web-based not Web-enabled. Therefore, it has the capability
of providing distributed Web services. The central component of
ERP II conceptual framework is ERP. This is owing to the fact
that the traditional ERP functionalities, such as accounts, sales,
manufacturing, human resources and logistics are critical to any
business and when combined with other modules, such as CRM,
SCM, project management and quality management, build the en-
S
terprise-wide ERP system.
Analytical layer: This layer enhances and extends the functions of
the process layer. The analytical layer includes corporate compo-
IMnents and offers decision-making support to the management and
the entire organisation. The components of the analytical layer are
as follows:
Supply Chain Management (SCM): It takes care of the logis-
tics, procurement and delivery functions of a business and pro-
vides support to planning and production functions.
M
Customer Relationship Management (CRM): It takes care of

transactional as well as non-transactional relations with cus-
tomers, which start with the customer identification process
and end with client servicing management.
N
Supplier Relationship Management (SRM): It takes care

of effective management of relationships with suppliers and
hence the management of the supplier base.
Product Lifecycle Management (PLM): It is about the im-
provement of the innovation process so that organisations can
introduce innovative and profitable products in the market.
Employee Lifecycle Management (ELM): It takes care of the
entire information related to an employee, starting from entry
to exit from an organisation. It enables the organisation to re-
cord the competencies of its employees.
Corporate Performance Management (CPM): It includes an
organisation’s processes and procedures that help to monitor
and manage the overall performance of an organisation.
E-business layer: This layer takes care of the integration of ERP
II with external factors and its communication with them. The
e-business layer comprises collaborative components serving as a

N O T E S
portal of ERP II. The components of e-business layer are given as

follows:
Business to Consumer (B2C): It refers to the e-commerce
transactions of enterprises with individual customers by using
the Internet.
Business-to-Business (B2B): It refers to the e-procurement
functions of an organisation, which involve automation and
decentralisation of enterprise procurement process.
Business-to-Employee (B2E): It denotes the intranet platform
including updated and personalised employee data of an or-
ganisation provided to employees.
Enterprise Application Integration (EAI): It refers to the ex-
S
tranet portal integrated with other ERP systems, which are in-
ternal as well as external to an organisation.
The successful implementation of ERP II ensures the integration of

IM
best practices within an organisation. Some of the best practices of
ERP II are discussed in the next subsections.
12.2.3 BEST PRACTICES OF ERP II
ERP II will not yield the intended benefits to organisations if it does

not implement the best practices. Some of the best practices of ERP
M
II are as follows:
Selecting multiple vendors: ERP II can offer best services to an
organisation if it avails the service of more than one vendor. This
is because ERP II is able to handle multiple tasks. Every ERP ven-
dor possesses certain specialisation and competitive advantage
N
over others; for instance, one vendor may have specialisation in a

specific industry, whereas another might specialise in a particular
business function.
Utilising the core strength: ERP II is established to meet the de-
ficiencies of ERP. ERP II aims to address additional areas where
traditional ERP has failed. It explores the additional functions,
such as CRM and SCM, which can reap real benefits for organisa-
tions.
Redefining business processes: ERP II enables an organisation
to restructure its business processes so that the tasks that could
not be carried out with ERP can be performed easily. In the case
of ERP, the organisation has two possibilities, one of modifying
its business and another of altering the ERP system. While in the
case of ERP II, it is wise to modify only the business and restruc-
ture business processes as it has the advancement of core strength
that can make any organisation efficient and profitable.

N O T E S
Evaluating performance periodically: It is necessary to monitor

the performance of ERP II. This periodic assessment of ERP II
provides an organisation an overall idea of the working of ERP
II. Hence, it reduces the chances of errors. The outcome of such
periodic evaluation can be used as guidelines to be implemented in
ERP II to improve it further.
1. ERP II enables an organisation to restructure its business

processes. (True/False)
2. __________________ layer takes care of the integration of ERP
II with external factors and its communication with them.
S
3. ________________ takes care of all the information related to
an employee, starting from entry to exit from an organisation.
4. _______________ is defined as an Internet-based software
solution, which enables employees, suppliers and customers
IM to have real-time access of enterprise-wide ERP systems.
5. Integrated database and application framework are two core
elements that form the foundation layer. (True/False)
6. Which one of the following is not a component layer of the
conceptual framework of ERP II?
M
a. Foundation layer
b. Application layer
c. Process layer
d. Analytical layer
N
ACTIVITY
Find information on differences between ERP and ERP II.
AN INTRODUCTION TO OPEN SOURCE

12.3
ERP TECHNOLOGIES
ERP software models that provide free availability of the source code
of the ERP system to the public are known as open source ERP. Indi-
viduals have free license to use, copy and change the software. Open
source ERP systems are popular among small and mid-sized organi-
sations, as they need not pay for high licensing and technical support
fees to improve and customise their existing ERP systems. These sys-

N O T E S
tems reduce software cost, increase security and stability, and give
more control to users.
Open source ERP software provides users with affordable ERP solu-
tions within a limited budget. The distribution of open source ERP
software is free and users are charged only for installation, techni-
cal support and customisation. Few examples of popular open source
ERP solutions, which provide reliable systems at moderate cost, are
as follows:
Web browsers: Firefox, Google Chrome, Safari, Internet Explorer
E-mail clients: Thunderbird
Multimedia software: VLC media player, MP3, GIMP
S
Similarly, few examples of popular corporate open source ERP solu-
tions that provide reliable and customised systems in limited budget
are as follows:
Apache Web Server
GNU/Linux Operating System
IM
MySQL Database
Open JDK Java
Table 12.2 depicts different open source ERP software systems:

M
TABLE 12.2: OPEN SOURCE ERP SOFTWARE SYSTEMS

Open source License Web sites
offering
Compiere GNU GPL http://www.compiere .org/
OpenMFG Custom http://www.openmfg.com/
N
OfBiz Apache License http://ofbiz.apache.org/

Version 2.0
Tiny ERP GNU GPL http:://sourceforge.et/projects/tinyerp
OpenPro Undisclosed Cost http:://www.openpro.com/

Structure
WebERP GNU http://weberp.org/
ERP5 GPL http://www.erp5.org/
Adempiere GNU GPL http://www.adempiere.com/
AvERP Custom http://www.hk-siftware.net/h-k.de/
content/doc_138099-3-5-0.php
OpenBravo Mozilla Public http://www.openbravo.com/
License 1.1

N O T E S
Table 12.3 depicts the functions performed by open source ERP soft-
ware:
TABLE 12.3: FUNCTIONALITIES OF OPEN SOURCE ERP

Software Platform Functionality
Compiere Independent Quote to cash, requisitions to pay, customer
relations, partner relations, supply chain,
performance analysis, web store/ self ser-
vice
Open MFG Linux, Apple Manufacturing, materials management,
Mac OS X, supply chain( sales order, purchase order,
Windows CRM), Accounting
OfBiz Linux, Berke- Supply Chain Management, E-commerce,
ley Software Manufacturing resource planning, Custom-
S
Distribution er relationship management, warehouse
management, accounting
Tiny ERP Independent Finance and Accounting, CRM, Production,
Project Management, Purchasing, Sales
IM management, Human resources
OpenPro Linux, Win- Financials, Supply Chain, Retail and Man-
dows ufacturing, CRM and E-commerce, Ware-
housing, EDI
WebERP Independent Order entry, accounts receivables, inven-
tory, purchasing, account payable, general
ledger
M
ERP 5 Linux, Win- Customer relationship Management, Pro-
dows duction Management, Supply chain man-
agement, warehouse management, human
resource management
AvERP Linux Sales, Manufacturing ,purchasing, Human
N
resource management, Inventory control,

Master data Management, Business Anal-
yses
Fisterra GNU/Linux Point of Sale, Other Business Process spe-
cific to Automotive glass repair businesses
OpenBravo Linux, Win- Procurement, Warehouse, Project Manage-
dows ment, manufacturing, sales and financial
process, business intelligence
7. The distribution of open source ERP software is expensive.

(True/False)
8. Individuals have free license to use, copy and change the open
source ERP software. (True/False)

N O T E S
ACTIVITY
Conduct research on the importance of LINUX as open source

ERP software in organisations and record your findings. You can
take the help of the Internet for any related searches.
12.4 SUMMARY
Traditional ERP focused mostly on the manufacturing and supply
side of a business. ERP II is regarded as the next generation of
ERP. ERP II is a more Web-friendly, flexible application that pro-
vides quick access to business information to different stakehold-
ers of an organisation from any location.
S
ERP II performs many important roles, such as providing open in-
dependent application architecture, extending business processes
and making available individual business function-based function-
ality.
ERP
IM
II comprises four layers: the foundation layer, process layer,
analytical layer and e-business layer.
Open source ERP systems are popular among small and mid-sized
organisations, as they need not pay for high licensing and technical
support fees to improve and customise their existing ERP systems.
Open source ERP systems reduce the software cost, increase secu-
M
rity and stability and give more control to users.
KEY WORDS
Enterprise Resource Planning (ERP): An information system

N
that controls and integrates all business functions of an enter-

prise.
Information: A well-processed form of data that has a specific
meaning.
Information System (IS): A set of interrelated components used
to collect, store, process, generate and disseminate information
for effective business decision making.

1. List the features of ERP II.
2. Why did ERP II come into existence? Explain briefly.
3. Explain best practices of ERP II.
4. Describe open source ERP technologies.

N O T E S
Topic Q.No. Answers

Extension of ERP to 1. True
ERP II
2. E-business
3. Employee Lifecycle Management
4. ERP II
5. True
S
6. b. The Application Layer
An Introduction to Open 7. False
Source ERP Technologies
IM 8. True

1. ERP II integrates all the critical functions of an organisation.
Refer to Section 12.2 Extension of ERP to ERP II.
2. ERP failed to address other critical functional areas of a
M
business, such as sales, marketing and client servicing.

Refer to Section 12.2 Extension of ERP to ERP II.
3. ERP II can yield the intended benefits for organisations, only if
it implements best practices. Refer to Section 12.2 Extension of
N
ERP to ERP II.

4. Open source ERP software provides users with affordable
ERP solutions in a limited budget. Refer to Section 12.3 An
Introduction to Open Source ERP Technologies.

12.7
REFERENCE
SUGGESTED READINGS
Leon A. (2008).Enterprise Resource Planning. 1sted. New Delhi:
Tata McGraw-Hill.
Sumner M. (2005).Enterprise Resource Planning. 1st ed. Upper
Saddle River, NJ: Prentice Hall.

N O T E S
E-REFERENCES
Eresourceerp.com. (2015).ERP II Systems| What is ERP II. Ex-
plain by E-resourceERP. Retrieved from http://www.eresourceerp.
com/what-is-ERP-II.html
ERP (2015).Open Source ERP. Source Forge. Retrieved from http://
sourceforge.net/projects/opensourceerp/
Groenendaal, W., Hoeven H. (2008).Best Practices in ERP: How
Good are They? Research Gate. Retrieved from http://www.re-
searchgate.net/publication/234025019_Best_Practices_in_ERP_
How_good_are_they
Turek, B. (2015).ERP vs. ERP II|eHow.eHow. Retrieved from
http://www.ehow.com/facts_6981273_erp-vs_-erp-ii.html
S
IM
M
N

N
M
IM
S
C H
13 A P T E R
FUTURE DIRECTIONS IN ERP
S
CONTENTS
13.1 Introduction
13.2 New Markets and New Channels
13.2.1
IM
ERP Trends
Activity
13.3 Faster Implementation Methodologies
Activity
M
13.4 Business Models and Business Application Programming Interface (BAPI)

Activity
13.5 Convergence of Windows NT
N
Activity
13.6 Application Platforms
Activity
13.7 New Business Segments
Activity
13.8 ERP and E-Business
Activity
13.9 Summary

N O T E S
IMPLEMENTATION OF ERP PROCESSES IN ACH
ACH Food Companies Inc. is an American subsidiary of Associat-

ed British Foods, which is a retail group with global sales of $16.3
billion. ACH is involved in the manufacturing of cooking oil, spic-
es, seasoning, baking ingredients, etc. The company sells its prod-
ucts to various countries such as the US, Canada, Puerto Rico and
Mexico.
Till 2006, ACH’s application processes were poorly integrated. Ex-

isting systems hampered the growth objectives of ACH and pre-
vented it to become a consumer-branded company. Other objec-
tives of the company are to:
S
Support an acquisition-based strategic plan.
Improve business processes including forecasting, planning,
profitability analysis and new product development.
IM
To meet its objectives, ACH planned to replace its legacy systems
with an integrated suite of highly reliable applications. For this,
the company implemented SAP® Business Suite software. SAP
applications facilitated process orientation and integrated vari-
ous modules. As per Steward, ACH’s Chief Information Officer
(CIO), “We felt that this solution, based on best practices for our
industry, would allow us to hit the ground running and shorten
M
the blueprint phase.” SAP applications in ACH were based on

SAP Manufacturing Solution, SAP Product Lifecycle Manage-
ment, SAP Recipe Management Application and SAP Advanced
Planning and Optimisation. SAP implementation led to the fol-
lowing benefits:
N
Improved information consistency

Increased speed and flexibility
Addition of new processes such as customer and product prof-
itability analysis and enhancement of the existing ones
According to Steward, “With our SAP implementations, we have

set the stage in terms of the future and where we want this company
to be. For example, we’re looking at one set of numbers—one version
of truth. We have a common terminology across the business and
have issued our first set of company-wide cross-functional KPIs.
We have visibility of total inventory across the organization, and for
the first time, we have customer and product profitability analysis
and reporting. In the past, when we had to get to those numbers and
analyses, it took an extraordinary amount of time.”

FUTURE DIRECTIONS IN ERP 225
N O T E S
LEARNING OBJECTIVES

> Explain the concept of new markets and new channels
> Describe fast implementation methods
> Discuss business models and BAPI
> Explain the convergence of Windows NT
> Describe application platforms
> Explain new business segments
> Explain the concept of ERP and e-business
S
13.1 INTRODUCTION
The previous chapter discussed the emergence of ERP II, which is an
extended ERP system. This chapter focuses on other future directions
IM
in ERP that include the emergence of new ERP markets, channels
and technologies.
ERP systems have been evolving rapidly to keep pace with the latest
technological advancements. This has led to the emergence of var-
ious new trends in ERP. Some of these trends are open source ERP,
Web-enabled ERP and wireless ERP. In addition, ERP vendors have
M
started providing diverse products to medium and small-scale organ-
isations at affordable prices.
In this chapter, you will study new trends in ERP, new channels, new
segments and new ERP application platforms.
N
13.2 NEW MARKETS AND NEW CHANNELS

In the ERP market, software providers and support technicians sell
ERP software to different businesses. There exists stiff competition in
the ERP market. Many major ERP players work constantly towards
promoting the market. The main reasons for the growth of the ERP
market are high speed and faster implementation. Most ERP vendors
focus on targeting big organisations. The increased competition in the
ERP market has forced vendors to target medium and small organisa-
tions too. Following are the initiatives taken by ERP vendors to enter
new markets and channels:
Increasing direct sales force
Lowering initial investment in software implementation to make
ERP implementation financially feasible
Improving implementation procedures for fast work processes

N O T E S
Modifying and customising products to make them adaptable with

various operating systems, such as Microsoft Windows NT
Almost all big organisations are using ERP systems. Consequently,

the market for ERP vendors has become saturated. Thus, vendors
keep seeking new avenues in terms of untouched markets and market
segments as well as new channels to reach customers. Moreover, ERP
vendors are striving to make ERP software more affordable by lower-
ing the entry price point for each module. New channels like the Inter-
net, mobile and local resellers have been identified by ERP vendors to
reach maximum potential customers. The Internet has made it even
easier for the vendors to find and serve customers. ERP vendors, such
as SAP AG Inc. and Oracle Corporation, provide complete one-stop
shopping for their customers by actively appointing resellers.
S
13.2.1 ERP TRENDS
ERP is continuously evolving in terms of integration, flexibility, e-busi-

IM
ness applications and adoption of Internet technologies. For instance,
most organisations have integrated their SCM functions with the In-
ternet. This enables suppliers to access business information from
anywhere in the world.
ERP systems enable a smooth flow of information in organisations

and streamline business processes. They are upgraded continuously
using new and advanced technologies. Following are the latest trends
M
in ERP software:
Open Source ERP: It is an ERP system that can be customised by
organisations without paying any licensing fee. Thus, no licensing
or extra charges are required.
N
Web-Enabled ERP: This allows organisations and its various

stakeholders to access business information as and when required
from anywhere in the world through the Internet.
Wireless ERP: This facilitates information sharing using WiFi on
mobile or other devices on which the ERP application is installed.
Software as a Service (SaaS) ERP: It does not involve the instal-
lation of ERP software as it can be accessed through the Internet.
This helps organisations to reduce purchasing and maintenance
costs.
Emphasis on user-friendly systems: An important trend in ERP
is the adoption of cloud computing wherein clusters of remote
servers and software networks are deployed to enable centralised
data storage and provide online access to different services. Cloud-
based ERP offers user interfaces to develop sync between front-
end interaction and backend operations. This further enables sim-
plified and highly personalised interaction between end users and
software.

N O T E S
Workflow management automation: ERP has automated the

workflow of organisations; thereby reducing the manual work pro-
cedures.
In the modern times, these trends have proved to be beneficial for

both ERP vendors as well as companies availing ERP systems. To
reach maximum customers, ERP vendors are moving from client/
server and browser/server to distributed servers. Moreover, ERP sys-
tems are moving more towards integration with various other technol-
ogies, such as sales force automation (SFA) and customer relationship
management. Such integration leads to bifurcation between back-of-
fice and front-office functionalities.
S
1. In the________________, software providers and support
technicians sell ERP software to different businesses. There
exists stiff competition in the ERP market.
IM
2. ERP is continuously evolving in terms of integration, flexibility,
e-business applications and adoption of Internet technologies.
(True/False)
ACTIVITY
M
Visit a retail store of your choice. Hold a discussion with the store
manager on the ERP software used at the store.
FASTER IMPLEMENTATION
13.3
N
METHODOLOGIES
Speed is a necessity for businesses to stay competitive in the market.
Organisations always prefer high-speed processes to ensure the time-
ly completion of tasks. Similarly, organisations need fast ERP systems
for processing information. SAP has introduced a new method called
Accelerated SAP (ASAP), which reduces the time consumed in the
implementation of SAP ERP. Similarly, Oracle uses a methodology
called Fast Forward, which speeds up the overall ERP implementa-
tion process.
In the past, many instances had taken place where ERP implementa-
tion failed. Such failures took place due to the inability of ERP systems
to meet ever-changing business demands. To prevent such failures,
vendors made certain changes in their products. For example, they
started using the UNIX platform instead of a mainframe. Moreover,
they applied several model-based approaches for easier integration of
business processes.

N O T E S
High-speed ERP software should have the following features:

Create quick reports
Allow quick and informed decision making
Increase employee productivity
Provide information with just a few clicks
3. SAP has introduced a new method called _________________,

which reduces the time consumed in the implementation of
SAP ERP.
S
ACTIVITY
Find information on how ERP systems are implemented in organi-

sations. List the challenges involved in implementation in terms of
IM
cost, time and efforts.
BUSINESS MODELS AND BUSINESS

13.4 APPLICATION PROGRAMMING
INTERFACE (BAPI)
M
As discussed in previous chapters, business models help organisa-

tions to explore any possible future developments. Different organi-
sations have different business models depending on the technology
used by them. For example, e-businesses have entirely different mod-
N
els than conventional businesses. Similarly, organisations working on

ERP software have completely different business models. A business
model describes the revenue sources of an organisation. ERP can help
to achieve the objectives of an organisation’s business models by in-
tegrating the different functions of an organisation into one. An ERP
system helps organisations in constructing their business models by
facilitating data sharing, maintaining a smooth flow of communication
and automating business processes.
However, the major challenge faced by organisations is to integrate

their ERP systems with business models. The guidelines that organ-
isations should follow to align their ERP systems with business are
given below:
Transforming an ERP system database to an object model
Building a global business process model
Identifying business process alternatives

N O T E S
BUSINESS APPLICATION PROGRAMMING

INTERFACE (BAPI)
BAPI is a module in mySAP, which keeps consistent movement of

business data. It provides access to processes and data in business
applications, such as R/3. BAPI is considered to be a method that al-
lows an external application to collaborate with R/3 business objects,
such as customers, accounts and employees. It helps in accessing SAP
functions across formal and stable interfaces. BAPI is a remote-en-
abled function module. Organisations consider BAPI as a global com-
munication standard for business applications.
S
4. BAPI stands for ________________________.
ACTIVITY
IM
Form a group of students and discuss how BAPI helps businesses
to grow.
13.5 CONVERGENCE OF WINDOWS NT

M
ERP vendors make sure that ERP software works well with different
operating systems. Most ERP software are based on UNIX. However,
there are other popular operating systems such as Windows NT and
Linux. Windows NT is an operating system by Microsoft, which is de-
signed to work with uniprocessor or symmetric multi-processor com-
N
puters. BAAN ERP software runs on the Windows NT environment.

BAAN ERP includes various modules like manufacturing, finance,
project management, distribution, etc. Similarly, Tally ERP 9 Client
and Oracle 9i are compatible with Microsoft Windows NT/ME/98.
Oracle 9i for Windows NT includes the following features:

Java Virtual Machine (JVM) helps in storing and running Java
code within the Oracle 9i database.
Support for Common Object Request Broker Architecture (COR-
BA), Internet Inter-ORB Protocol (IIOP) and Enterprise Jav-
aBeans.
Support for SQLJ, a programming syntax that embeds SQL state-
ments in Java programs.
Integrationwith Component Object Model (COM) and Microsoft
Transaction Server.

N O T E S
Integration with Oracle Enterprise Manager Console and front-

end management applications which are fully accessible by clients
(including Web browsers).
5. BAAN ERP software cannot work on Windows NT

environment. (True/False)
ACTIVITY
Perform research on ERP software that works on the Windows NT

environment.
S
13.6 APPLICATION PLATFORMS
IM
Organisations consider various factors while choosing ERP applica-
tions. One such important factor is to select an application that is suit-
able for current work processes of organisations. Apart from this, the
following are some other factors considered while choosing applica-
tion platforms for successful ERP deployment:
Past experience with ERP: If an organisation has worked on a
particular ERP platform in the past, it is familiar with the details
M
of that platform. In case the organisation had bad experience with

the platform, it may not opt for the same platform again.
Networking facilities: Organisations generally opt for those plat-
forms that allow a free flow and exchange of data between differ-
ent networks.
N
Design of the platform: ERP platforms should not be complex.

This is because if the ERP platform is too complex, it may lead to
difficulties in the integration of different business functions.
Flexibility: An ERP platform should be able to adapt to the pro-
cesses running in an organisation; thereby ensuring high process
efficiency.
Various types of comprehensive suites of application platforms are of-

fered by ERP vendors to support a multifaceted deployment of ERP
systems. One such application platform is Unicenter TNG by Comput-
er Associates. Unicenter TNG offers network monitoring functionality
in a heterogeneous environment.

N O T E S
6. An ERP platform should be able to adapt to the __________

running in an organisation.
ACTIVITY
Search on the Internet for various ERP application platforms and

prepare a report.
13.7 NEW BUSINESS SEGMENTS

For surviving in a technologically competitive environment, ERP ven-
S
dors try to deliver special modules. They presently target business
segments such as healthcare, government bodies and financial institu-
tions and focus on diverse areas including supply chain management,
sales automation, etc. ERP vendors have progressively moved from
IM
client/server to browser/server architecture to Web-enabled software.
Some famous vendors that have entered new segments are as follows:
PeopleSoft Inc., provided solutions for human resource manage-
ment, financial management, supply chain management, custom-
er relationship management and enterprise performance man-
agement. For improving its supply chain operations, PeopleSoft
M
bought Red Pepper software. According to computerweekly.com,

“Supply chain planning is a ‘significant potential growth area’ for
PeopleSoft, since the supplier has very little presence in the area
today. PeopleSoft has set itself a goal to become the world’s num-
ber-two SCM (supply chain management), behind SAP.”
N
BAAN purchased Aurum software for Customer Relationship

Management and Hyperion Solution for financial reporting.
Oracle has expanded its cloud portfolio by introducing new plat-
form services. It has included big data analytics, process manage-
ment, integration, Java Platform, Standard Edition and Node.js
to improve its platform services. It has also introduced the first
appliance to deliver zero data loss protection for critical Oracle
databases. This reduces the impact of backups on production serv-
ers by excluding a need for lengthy backup windows. Oracle also
offers a data mart designer for creating data marts. Oracle Discov-
erer is also a tool for reporting and querying data from the Oracle
Application Suite.
SAP introduced SAP S/4HANA for the digital economy. It is built
on an advanced, in-memory platform and drives instant val-
ue across different lines of business. SAP S/4HANA offer cloud,
on-premise and hybrid deployment options; thereby providing
maximum choice to customers.

N O T E S
EXHIBIT
Oracle Hyperion Financial Management
Oracle Hyperion Financial Management is a financial tool that

helps in financial consolidation and reporting application. It is built
with advanced Web technology. It provides an ability to rapidly con-
solidate and report financial results, meet regulatory requirements
and reduce the cost of compliance. It has the following features:
Reduces consolidation, close and reporting cycles by days or
weeks.
Delivers timely results—internally and externally.
Decreases compliance costs and delivers a single version of
S
truth to improve internal and external transparency.
Maintains a regulatory filing to general ledger audit trail, there-
by providing confidence in the financial results.
IM
Conducts in-depth analysis of key performance and operational
metrics easily.
Realises new benefits quickly with packaged regulatory report-
ing functionality.
source: http://www.oracle.com
M
7. SAP has introduced SAP S/4HANA for the digital economy.

(True/False)
N
ACTIVITY
Using various sources, find information on the features of BAAN

system.
13.8 ERP AND E-BUSINESS

Both ERP and e-business play a vital role in the growth of an organ-
isation. An ERP system integrates different business processes of an
organisation, while e-business allows the organisation to establish a
comprehensive value chain across different markets and industries.
ERP is integrated software used to maintain a smooth flow of infor-

mation across the different departments of an organisation. It enables
an organisation to re-design its business processes by identifying and
eliminating non-value-added activities. On the other hand, electron-
ic business (e-business) is a form of business in which an organisa-

N O T E S
tion performs its business activities electronically using the Internet.

E-business has enabled organisations to achieve a competitive advan-
tage in terms of reduced costs, increased revenue and higher custom-
er satisfaction. It helps organisations to reach more and more con-
sumers, thereby, providing a wider market to enhance their business
domains. In other words, e-business provides new business opportu-
nities for organisations and facilitates customers to choose the desired
product from a variety of products offered by different manufacturers.
Organisations nowadays prefer to integrate their ERP systems with

e-business to obtain maximum benefits. For example, suppose you are
a beverage manufacturer and your business yields annual revenue of
Rs. 700 crores. You sell your products through various general stores
and cafes across the country. In such a case, it is difficult for you to
manage your supply chain effectively. You can overcome this problem
S
by implementing an ERP system integrated with your e-business. The
system would help salespeople to conduct online promotion of your
products, identify sales opportunities, receive customer feedback
IM
and enhance supply chain performance. In addition, it would provide
quick access to business information to all your distributors across
the country, thereby achieving higher customer satisfaction and im-
proved organisational efficiency.

M
8. ______________ is a form of business in which an organisation
performs its different business activities electronically using
the Internet.
N
ACTIVITY
Research how e-commerce activities are related to ERP.
13.9 SUMMARY
The main reasons for the growth of the ERP market are high speed
and faster implementation. Most ERP vendors focus on targeting
big organisations. Increased competition in the ERP market has
forced vendors to target medium and small organisations too.
Almost all big organisations are using ERP systems. Consequently,
the market for ERP vendors has become saturated. Thus, vendors
keep seeking new avenues in terms of untouched markets and
market segments as well as new channels to reach customers.
ERP is continuously evolving in terms of integration, flexibility,

N O T E S
ERP systems enable a smooth flow of information in organisations

and streamline business processes. They are upgraded continu-
ously using new and advanced technologies.
SAP has introduced a new method called Accelerated SAP (ASAP),
which reduces the time consumed in the implementation of SAP
ERP. Similarly, Oracle uses a methodology called Fast Forward,
which speeds up the overall ERP implementation process.
A business model describes the revenue sources of an organisa-
tion. ERP can help to achieve the objectives of an organisation’s
business models by integrating the different functions of an organ-
isation into one.
BAPI is a module in mySAP, which keeps consistent movement of
business data. It provides access to processes and data in business
S
applications, such as R/3.
Windows NT is an operating system by Microsoft, which is de-
signed to work with uniprocessor or symmetric multi-processor
IMcomputers.
Organisations consider various factors while choosing ERP appli-
cations. One such important factor is to select an application that
is suitable for current work processes of organisations.
For surviving in a technologically competitive environment, ERP
vendors try to deliver special modules. They presently target busi-
ness segments such as healthcare, government bodies and finan-
M
cial institutions and focus on diverse areas including supply chain

management, sales automation, etc.
An ERP system integrates different business processes of an or-
ganisation, while e-business allows the organisation to establish
N
a comprehensive value chain across different markets and indus-

tries.
KEY WORDS
Accelerated SAP (ASAP): A method developed and used by

SAP to reduce time involved in ERP implementation.
Cloud: This term is used when software, data and related infra-
structure are hosted remotely via the Internet.
E-business: A type of business in which an organisation per-
forms its business operations electronically using the Internet.
Value chain: A sequence of activities performed by an organisa-
tion in order to provide value to its customers.

N O T E S

1. Describe new markets and new channels in ERP.
2. Elaborate on faster implementation methodologies in ERP.
3. Write a short note on the convergence of Windows NT in ERP
software.
4. Explain new business segments of ERP with the help of suitable
examples.
S
Topic Q.No. Answers
New Markets and New 1. ERP market
Channels
2.
IM
True
Faster Implementation 3. Accelerated SAP (ASAP)
Methodologies
Business Models and Busi- 4. Business Application Program-
ness Application Program- ming Interface
ming Interface (BAPI)
M
Convergence of Windows 5. False
NT
Application Platforms 6. Processes
New Business Segments 7. True
N
ERP and e-Business 8. e-business (electronic business)

1. ERP is continuously evolving in terms of integration, flexibility,
Refer to Section 13.2 New Markets and New Channels.
2. Organisations need fast ERP systems for processing workflow.
Refer to Section 13.3 Faster Implementation Methodologies.
3. ERP vendors make their software compatible with the operating
systems. Refer to Section 13.5 Convergence of Windows NT.
4. ERP vendors try to deliver special variants for their products.
Refer to Section 13.7 New Business Segments.

N O T E S

13.12
REFERENCE
SUGGESTED READINGS
Pamungkas B. (2009). ADempiere 3.4 ERP Solutions. Birmingham,
UK: Packt Pub.
Ray R. (2011). Enterprise Resource Planning. New Delhi: Tata Mc-
E-REFERENCES
Discover.sap.com (2015). SAP Business Suite 4 SAP HANA. Re-
trieved from http://discover.sap.com/india-S4HANA.
S
Sap.com (2015). Retrieved from http://www.sap.com/bin/sapcom/
en_us/downloadasset.2015-03-mar-02-23.sap-s-4hana-frequently-
asked-questions-pdf.bypassReg.html.
IM
Sap.com (2015). Retrieved from http://www.sap.com/bin/sapcom/
en_us/downloadasset.2015-03-mar-02-23.sap-s-4hana-frequently-
asked-questions-pdf.bypassReg.html.
M
N

C H
14 A P T E R
CASE STUDIES
S
CONTENTS
Case Study 1 Implementation of Oracle by Herbalife

IM
Case Study 2 Integration of Information and Processes by Star
Union Dai-Ichi Life
Case Study 3 Implementation of Data Warehousing at Godrej
Case Study 4 Implementation of SAP R/3 At Cavalier
Case Study 5 ERP Implementation at Rolls-Royce
Case Study 6 ERP Solution Helping Progress Rail
Case Study 7 Implementation of Ebizframe ERP Software by an International
M
Food Products Company
Case Study 8 Blue Link Helps Golda’s Kitchen Improve its Inventory Management
Case Study 9 Ramco HCM Improves Human Resource Services at Seagate
Case Study 10 Implementation of Microsoft Dynamics AX by Monaco Telecom
Case Study 11 ERP System at PICTCL
N
Case Study 12 Global Trends in ERP Products - A Turning Point for Ramco Systems

CASE STUDY 1
N O T E S
IMPLEMENTATION OF ORACLE BY HERBALIFE
This Case Study discusses how implementation of Oracle applica-

tions helped Herbalife streamline its processes. It is with respect to
Chapter 1 of the book.
Herbalife, a big name in the world of premier health, is well

known in the areas of lifestyle improvement, weight manage-
ment, and nutritional health. The company is headquartered in
Southern California, US, and listed on New York Stock Exchange
(NYSE) as HLF. Today, the company has its offices in more than
65 countries with over one million independent distributors. It
has a unique mission of changing people’s life through its diverse
range of products.
S
Herbalife was established in 1980 and started its operations in In-
dia in 1999. For more than 16 years, now, it has been recognised
for its amazing life-changing nutrition products. Its range of prod-
IM
ucts includes energy drinks and various dietary supplements.
A few years back, Herbalife wanted to expand its market globally

and widen its product range. To facilitate product enlargement,
the company wanted an efficient tool in place for forecasting the
demand for new products. Moreover, it wished to unify all its
product categories through a single supply chain platform and
M
introduce an automated accounting system. Thus, the company

switched to the economical Linux operating system from the cur-
rent HP UNIX system.
Herbalife had already implemented Oracle ERP suite 11.0.3 in-

N
ventory and planning modules for its supply chain processes,

and 11i financial modules of GL, AR, AP and FA in consulta-
tion with Infosys previously. The company partnered with Info-
sys for deploying Oracle Application R11.5.9. Deployment of the
application reduced the complications of processes and enabled
Herbalife in achieving process efficiency. It resulted in improved
inventory levels and warehouse operations. It was challenging to
move from HP UNIX to Linux in terms of application or database.
It helped in reducing the maintenance cost the company. Later,
the existing system was replaced with the upgraded Oracle 11.0.3
system to assimilate with legacy systems. Infosys turned out to be
a great support for Herbalife, and the company followed identical
practices not only for supply chain operations but also for finance
and accounting. This resulted in streamlining all the processes of
the company, such as operations, finance and accounting, distri-
bution and manufacturing.

Case study 1: IMPLEMENTATION OF ORACLE BY HERBALIFE 239
CASE STUDY 1
N O T E S
QUESTIONS
1. What did Herbalife do to facilitate product enlargement?

(Hint: To facilitate product enlargement, the company
introduced an efficient tool in order to forecast the
demand for new products.)
2. What benefits did the company reap in deploying Oracle
applications?
(Hint: Deployment of Oracle applications not only reduced
process complexities but also streamlined processes for
the company.)
S
IM
M
N

N
M
IM
S
CASE STUDY 2
N O T E S
INTEGRATION OF INFORMATION AND PROCESSES

BY STAR UNION DAI-ICHI LIFE
This Case Study discusses the integration of information and pro-

cesses by Star Union Dai-ichi Life with the help of Ramco HCM. It
is with respect to Chapter 2 of the book.
Star Union Dai-ichi Life Insurance Co. Ltd. (SUD Life) is a prom-
inent insurance service provider in India. It is a joint venture be-
tween Bank of India, Union Bank of India, and Star Union Dai-
ichi Life. Star Union Dai-ichi Life is a well-established name in
the insurance industry in Japan while Bank of India and Union
Bank of India are leading public sector banks having a network of
around 7800 branches nationally. These banks serve more than 64
S
million customers. Star Union Dai-ichi Life claims to be the sec-
ond largest insurance company in Japan and one of the top 10 life
insurance service providers in the world. Bank of India claims the
IM
highest stake of 48% while Union Bank and Union Star Dai-ichi
Life each have a stake of 26%. Star Union Dai-ichi Life caters to
the insurance needs of customers with the help of 3000 dedicated
employees and 67 offices.
However, it had not been all smooth sailing for the insurance gi-
ant. The company faced a big challenge of handling geographi-
cally dispersed personnel. Apart from this, there were other is-
M
sues that needed to be resolved. These issues are listed as follows:

Absence of consolidated human resource data
Lack of organised and filtered data for operational purposes
Absence of an automated Performance Management System
N
(PMS) and a proper attendance system

Lack of control, transparency and visibility because of manual
procedures for managing the attendance of employees, their
personal information, leaves, joining dates, etc.
In light of problems stated above, Star Union Dai-ichi Life sought

help from Ramco HCM, an India-based company, which is head-
quartered in Chennai. Ramco provides innovative business solu-
tions and consulting. It helped Dai-ichi by providing an integrated
HR solution across all its 67 branches. Ramco also offered a com-
prehensive business suite for managing 250 employee records. In
addition, it provided solutions for issues related to recruitment,
leaves, attendance, performance and personal details of employ-
ees. Following modules were offered to Star Union Dai-ichi Life
by Ramco HCM:

CASE STUDY 2
N O T E S
A comprehensive Ramco HCM business solution comprising

modules such as Transfer and Confirmation.
Online solution beneficial for both the HR department and
employees. It enabled employees to access and check their
leaves, attendance, pay slips, etc.
As a result, Star Union Dai-ichi Life reaped significant benefits

after deploying the Ramco HCM suite. These benefits can be
broadly listed as follows:
The integrated business suite satisfied all issues related to hu-
man resources and its management.
The online solution provided all employees access to the in-
S
formation required by them, thereby saving time and bringing
transparency.
Real-time information was provided to employees and depart-
ments for the smooth functioning of the company.
IM
As a result of the changes, there was a noticeable improve-
ment in the efficiency of employees
Reporting and data management became simplified and sys-
tematic.
M
QUESTIONS
1. What was the major challenge faced by Star Union Dai-

ichi Life?
(Hint: Handling geographically dispersed personnel.)
2. What were the benefits achieved by Star Union Dai-ichi
N
Life after deploying the solution provided by Ramco

HCM?
(Hint: The integrated business suite provided by Ramco
HCM satisfied all issues related to human resources
and its management; the online solution provided all
employees access to the information required by them,
thereby saving time and bringing transparency, etc.)

CASE STUDY 3
N O T E S
IMPLEMENTATION OF DATA WAREHOUSING AT GODREJ
This Case Study discusses the impact of the implementation of data

warehousing at Godrej. It is with respect to Chapter 3 of the book.
Godrej is a well-known group of companies established in 1897.

It is a diversified group operating in sectors such as real estate,
furniture, consumer products, etc. It is headquartered at Mumbai
with a presence in 120 locations throughout India. Godrej Con-
sumer Products Limited (GCPL) is a subsidiary of the Godrej
group of companies.
Before 1995, ERP data of the company was used only in case of
queries from the database. As a result, a lot of the data lay unused
S
most of the time. The management decided to capitalise on this
ERP data that was enormous and well-organised. It was primarily
for this reason that Godrej decided to implement data warehous-
ing methods, as well as the OLAP (Online Analytic Processing)
tools and data mining techniques.
IM
In 1995, GCPL implemented MFG/PRO, which is an ERP package
from QAD Inc. The implementation, along with the data ware-
housing and data mining capabilities, helped GCPL realise the
following benefits:
Reduction in inventory levels
M
Standardisation of different workflow processes

Better manpower planning
Ability to view product cost information on real-time basis
N
Generation of data in a standard and structured format so that

it could be saved and archived whenever required.
Ability to perform important analysis such as contribution
analysis, profit and loss analysis, and sales breakup analysis.
Improved performance and bottom line owing to the GCPL’s
ERP and data warehousing combination
Ease in determining sales and inventory trends. This was be-
cause the sales records of goods from factory to distributors,
from distributors to retailers and from retailers to end-users
could be uploaded into a common database.
ERP and data warehousing implementation took 25 months to

complete. The combination was implemented on a Pan India basis
in all 120 locations. Data warehousing tools were taken from Ora-
cle for this purpose. These tools included Oracle Express Server
and OLAP Client, which helped in historical sale analysis and cost
pattern analysis as well as in decision making. Putting the ERP

CASE STUDY 3
N O T E S
and data warehousing systems into effect cost Godrej around `10
lacs. The company also implemented an RDBMS from Progress
Software to support its ERP, which it found to be more robust and
efficient than the Oracle Express Server.
As the ERP and warehousing applications were not linked online,

data was extracted from ERP using extraction routines and up-
loaded into the Oracle database using upload routines. This was
done once a month. This warehouse data could be processed us-
ing suitable techniques, and important information could be de-
rived from it. The data was also used by OLAP to perform various
types of analysis and support what-if scenarios. Using the caching
scheme, the Express Server could store, manage and analyse re-
lational data.
S
Mani B. Mulki, General Manager, Information Systems of Godrej
Industries Limited, said You can view interesting trends in sales
and costs. And if you like, you can integrate the findings from stan-
IM
dard reports and the warehouse analyses to create strategic ad-
vances. The limit of the capabilities of a warehouse is bound by the
creativity of the end-user.
In 2001, the management of Godrej decided to improve its supply

chain system by implementing an e-CRM package. The company
also wished to better its relationship with its distributors. For this,
M
it engaged BroadVision as the software provider, and the respon-
sibility for implementation of the project was handed to Satyam
Infoway. The impact of the implementation of CRM was as fol-
lows:
Inventory norms were mandated for all product categories at
N
the distributor level.

Systems at Godrej could interact with the systems at the dis-
tributor’s end.
The values of closing stock, factory dispatch value, etc., could
be extracted.
The system could be used to provide suggestions on minimum
inventory levels, amount of inventory to be ordered, etc.
For the successful implementation of ERP and data warehousing,

it is important for the end users to be well trained. They must be
motivated and made aware of the benefits of data warehousing.
They must also be able to extract useful information (also called
business intelligence) from the data warehouse. These are what
resulted in a staff for Godrej that now performed their everyday
job responsibilities in the company’s best interests.

Case study 3: IMPLEMENTATION OF DATA WAREHOUSING AT GODREJ 245
CASE STUDY 3
N O T E S
QUESTIONS
1. Why was the data uploaded into the Oracle database

manually?
(Hint: As the ERP and warehousing applications were
not linked online, data was extracted from ERP using
extraction routines and uploaded into the Oracle database
using upload routines.)
2. Explain the utility and benefits of the Express Server for
an organisation.
(Hint: Using the caching scheme, the Express server can
store, manage and analyse relational data.)
S
IM
M
N

N
M
IM
S
CASE STUDY 4
N O T E S
IMPLEMENTATION OF SAP R/3 AT CAVALIER
This Case Study discusses the benefits reaped by Cavalier after the
implementation of SAP R/3. It is with respect to Chapter 4 of the
book.
During the mid-1990s, manufactured housing companies were

booming with approximately 3.75 lakh shipments in a year. At
that time, Cavalier also grew up to become one of the major
names in the industry. The company alone shipped over 22,000
homes in 1999. But, in 2001, the number of shipments came down
to around 12,700 homes and 1.93 lakh homes for Cavalier and the
whole industry, respectively. There was a drastic fall in shipping
along with a number of loan defaults. The problems faced by Cav-
S
alier, leading to reduced profitability, could be attributed to the
following reasons:
Redundant raw material orders
Backward business processes
IM
Wasted labour
Missed service calls
Idle customer data
Communication gap among different manufacturing plants;
M
even if they did, there was no protocol to guide that commu-

nication
Dispersed sales data of the company among seven separate
systems
N
Poor customer service
For the purpose of resolving such issues, Jay Wilson, who was the
CIO of the company at that time, decided that it is high time that
his company implemented the SAP ERP system to streamline the
processes of sales, manufacturing, service and finance and pave
the way for Cavalier’s bottom line.
The company thus ended up implementing the SAP R/3 version

4.0B. The ERP modules implemented were PP, MM, SD, SM and
FI/CO. The ERP ran on Microsoft Windows NT 4 and SQL 7.0
database. The company also implemented a structured commu-
nication policy that was used for communication among the man-
ufacturing plants.
As a result of this implementation, the following benefits were

achieved:

CASE STUDY 4
N O T E S
Raw material SKUs (Stock Keeping Units) decreased from

1500 to 1300.
Raw material inventory was reduced to half, so the company
now had more capital at its disposal as well as more space.
More transparency was achieved.
Of the offered options of pre-fabricated homes, those that
were rarely asked for by the customers were identified and
thus rolled back.
The company narrowed down on two most popular deck
boards out of earlier 300 deck board choices.
There was an increase in profitability.
S
QUESTIONS
1. Which supporting infrastructure was used for the

IM implementation of SAP R/3?
(Hint: The company implemented the SAP R/3 version
4.0B. The ERP modules implemented were PP, MM, SD,
SM and FI/CO. The ERP ran on Microsoft Windows NT 4
and SQL 7.0 database.)
2. What according to you were the biggest problems faced
by the company?
M
(Hint: Sales data of the company was dispersed among

seven separate systems. Also, different manufacturing
plants did not communicate; and even if they did, there
was no protocol to guide that communication.)
N

CASE STUDY 5
N O T E S
ERP IMPLEMENTATION AT ROLLS-ROYCE
This Case Study discusses the implementation of ERP at Rolls-

Royce. It is with respect to Chapter 5 of the book.
The first decade of the 21st century saw an increase in the num-
ber of organisations adopting ERP systems for automating and
streamlining their operations. This was because the use of ERP
S
results in the standardisation of information as all the business
units of an organisation are integrated. Not only this, business
processes also get automated. For an ERP system to be effec-
tive, it must be implemented with the view of making changes
IM
throughout an organisation rather than viewing it simply as a
software installation. The ERP system must also be linked to the
existing software. Those in charge of a successful implementation
of ERP should also take organisational resistance into account. In
1994, Rolls-Royce acquired Allison Engine Company, an Ameri-
can manufacturer of gas turbines and aviation, industrial and ma-
rine engine components. With this, it could establish facilities in
M
14 countries by the year 1995. At that time, it was using about 1500
internally developed systems; however, the data and information
provided by these systems were neither consistent nor accurate.
In 1996, it gave the responsibility of implementing ERP to an or-
ganisation, named EDS. EDS formed a project team consisting
N
of specialists who were SAP consultants. The team was further

divided into sub-teams. Each functional unit of the organisation
had its own planning team. The team was responsible for imple-
menting the changes associated with the ERP implementation as
well as training the employees in the new ERP environment.
The implementation team faced three major problems, viz. cul-

tural, business and technical. The organisation now had the chal-
lenge of training its employees and ensuring that the changes
were accepted throughout the organisation. The expected end
users of the ERP system were trained by the SAP specialists, and
other employees were trained by the EDS consultants. The or-
ganisation was also faced with the task of redesigning its business
processes. For this, it performed the following steps:
Mapping the current process
Identifying catches in mapping

CASE STUDY 5
N O T E S
Comparing mapping with the ERP process to identify prob-

lems with the new systems
Remapping for process realignment as per the ERP system
A major technical problem faced by Rolls-Royce was the accuracy

of data. Transition to the ERP system required data from 1500
odd systems to be uploaded in the new system. The implementers
also had to ensure that there was no data redundancy, so they cre-
ated user-friendly customer interfaces. The major business tasks
that had to be integrated into the ERP system were as follows:
Building customer relationship
Creating customer solutions
S
Resolving customer problems
Generating orders
Fulfilling orders
IM
Satisfying shareholders
Managing cash
The implementers devised a systematic release strategy for the

ERP implementation process. To ensure the effectiveness of this
release strategy, they considered four major points. First, if the
M
organisation required third-party software, it must be accredited
by SAP. Second, all business reports that formed a part of ERP
must be justified. Third, the implementers must identify the data
and validate, clean, load and archive it. Fourth, the implementa-
tion required additional hardware, which included 1000 new PCs,
6000 licenses and new servers.
N
The release strategy of the organisation was divided into three

phases and six stages. These phases and stages are shown in the
following figure:
1998 1999 2000 2001

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Phase 1
1
2 SAP
Phase ‘Go Live’
2
3
4 5
Phase
3
6

Case study 5: ERP IMPLEMENTATION AT ROLLS-ROYCE 251
CASE STUDY 5
N O T E S
Phase 1 1 Strategy & Direction

Phase 2 2 Planning Analysis & Convergence
3 Early Deployment
Phase 3 4 Focus on Operations
5 Pilot Testing
6 Focus on Assembly & Spares
Figure: Different Phases of ERP Implementation at Rolls-Royce
Note that Q in the above figure denotes ‘quarter’.
S
The details of the three phases are as follows:
Phase 1- Stage 1: Strategy & Direction
During this phase, i.e. during the first quarter of 1998, a detailed
IM
study of implementing ERP and determining the scope of the
project was carried out. During this time, the implementation
plan outline was prepared, and the cost of the project was deter-
mined. Also, a core team was formed to oversee the entire imple-
mentation process of the ERP system.
Phase 2- Stages 2 and 3: Planning Analysis &Convergence and

M
Early Development
During this phase, a number of workshops were conducted to un-

derstand various business processes. Apart from these, a number
of ‘business simulation’ workshops were also conducted in which
N
a detailed implementation plan was chalked out. Other points

that were discussed with respect to the implementation of ERP at
Rolls-Royce were as follows:
Preliminary design review
High-level review
Critical design review
Implementation realisation
Technical/operation review
Post-implementation review
Phase 3- Stages 4, 5 and 6: Focus on Operations, Pilot Testing

and Focus on Assembly & Spares
This phase was divided into three stages as it was large and com-
plex. Under stages 4 and 5, the 1500 odd old systems were re-
placed with new ones, and at the end of these stages, the pilot

CASE STUDY 5
N O T E S
project was initiated at one of the facilities of Rolls-Royce. A year

later, the pilot project was completed successfully, and the system
could be adopted on an organisation-wide basis. Stage 6 started
from the second quarter of 2000 and ended in the first quarter
of 2001. This stage was concerned with engine assembly, spares,
logistics and human resources. The old systems were phased out
gradually. The changes were implemented in a number of suites.
Under suite 1, the master schedule key program and the supply
chain plan were implemented. Under suite 2, planning and sched-
uling of the factory and the shop floor were implemented. Under
suite 3, other operations were implemented.
Source: (2015). Retrieved 13 March 2015, from http://citeseerx.ist.psu.edu/viewdoc/down-
load?doi=10.1.1.111.7702&rep=rep1&type=pdf
S
QUESTIONS
1. Discuss the problems faced by the team implementing

ERP at Rolls-Royce.
IM (Hint: The implementation team at Rolls-Royce faced
three major problems—cultural, business and technical.
The organisation was faced with the challenge of training
its employees and ensuring that the changes were
accepted by all.)
2. Why do you think the implementation was divided into
M
multiple phases?
(Hint: For the ERP system to be effective, its
implementation must be viewed as an organisation-wide
change rather than viewing it simply as the installation
of software. The implementation must also be done in a
N
phased manner.)

CASE STUDY 6
N O T E S
ERP SOLUTION HELPING PROGRESS RAIL
This Case Study discusses how an ERP system helped Progress Rail
in constructing its railway tracks. It is with respect to Chapter 6 of
the book.
Progress Rail is a division of Balfour Beatty, a global engineering

service provider. Progress Rail helps its clients to set up hospitals,
universities, roads, railway tracks and other major structures.
Balfour Beatty has achieved impressive growth over the years.
However, lately, the company faced major challenges that had

been hindering its growth. These challenges included a lack of or-
ganised business structure, ineffective communication between
S
different departments and inefficient handling of production and
other business processes.
In order to address these issues, Progress Rail required a software

IM
system that could manage its operations efficiently. The company
also needed to simplify and automate its production planning and
purchasing processes. After much deliberation, Project Rail de-
cided to go for Microsoft Dynamics AX.
The selection of the ERP system reaped instant rewards as com-

munication-related issues were significantly reduced. Keith
M
Churm, Managing Director of Progress Rail, stated, “Since the
implementation we haven’t needed to deal with each of our profit
centres separately. Now a lot of transactions have disappeared”.
By incorporating the capacity planning functionality with the Dy-

namics AX solution, Progress Rail was able to locate problematic
N
areas and take corrective actions. As a result,the level of efficiency

increased in the company as a whole.
According to Mark Nash, Manufacturing Director of Progress

Rail, “Microsoft Dynamics AX enables us to use the capacity plan-
ning facility not only to indicate free capacity on one site, but on a
multi-site bases. This helps project managers deal with shifts and the
number of people he needs in areas where the risk of delivery failure
is higher. The system gives the operator a sequence of operations
that he is then charged to undertake according to the task schedule.
Thanks to the implementation, the output level has increased by an
enormous 300 per cent, while the amount of people has stayed the
same”.
Purchasing aided by the system’s automated processing features

also enabled Progress Rail to reduce its stock by 20 per cent.
Churm further explained, “Microsoft Dynamics AX enables us to

CASE STUDY 6
N O T E S
identify the purchase parts automatically – whether they need man-

ufacturing or purchasing. Purchase orders are now done in just 24
hours, earlier it used to take weeks. We can just plug in the desired
parameters or constraints and the system does the rest of it”.
In addition, Microsoft Dynamics AX led to enhanced customer

service by enabling customers to receive accurate information.
The system also enabled Progress Rail to communicate instantly
with its clients through live information access and direct tele and
video conferencing. This helped Progress Rail to save not only
money (paid to intermediaries for client communication) but also
time.
Hence, the solution provided by Microsoft Dynamics AX ERP
S
helped Progress Rail to successfully solve the major issues faced
by it as well as make plans for a secure and prosperous future.
IM QUESTIONS
1. Explain some of the major challenges faced by Progress

Rail.
(Hint: Lack of organised business structure, ineffective
customer communication, inefficient handling of
production and other business processes.)
2. How was Progress Rail able to address these
M
challenges?
(Hint: By incorporating the capacity planning functionality
with the Dynamics AX solution, Progress Rail was able to
locate problematic areas and take corrective actions. As a
N
result, the level of efficiency increased in the company as

a whole.)

CASE STUDY 7
N O T E S
IMPLEMENTATION OF EBIZFRAME ERP SOFTWARE BY

AN INTERNATIONAL FOOD PRODUCTS COMPANY
This Case Study discusses how Ebizframe ERP software was imple-
mented successfully by a well-known international food products
company in India. It is with respect to Chapter 7 of the book.
After successfully opening its subsidiaries in various countries, an

international food products company decided to set up its Indian
subsidiary with the purpose of exploring the Indian food market.
It wanted to gain a significant competitive edge over other food
chains in India and establish a strong presence in the Indian mar-
ket. It timely realised that in order to operate successfully in In-
dia, it needed to strengthen its sales and distribution operations.
S
The subsidiary started using an outsourced network for the sales
and distribution of its products in India. Although it had a good
control over product quality, it was weak in the distribution net-
IM
work. It wanted to set up its own sales and distribution network
and manage it with an integrated ERP system. Implementation
of the ERP system would help it to make better predictions with
regard to sales.
The software that the subsidiary was currently using for its sales
operations was not able to meet the increasing requirements of
M
the organisation as there was difficulty in sales analysis, sales
forecasting, etc. Moreover, with the expansion of the business, the
organisation was facing a lot of problems with material procure-
ment to meet the needs of the production division on time.
Looking at these issues, the company decided to take the help of

N
Eastern Software Systems’ (ESS) Ebizframe ERP software. The

software solutions provider had a proven record of success of var-
ious organisations through its Ebizframe ERP software.
On the implementation of the ESS’s Ebizframe ERP software, the

subsidiary in India now had a better control over its sales and dis-
tribution operations. Servers were set up at the company’s head
offices, while the overall distribution network and other offices
could access the software via a secure Virtual Private Network
(VPN). This enabled real-time access to the information related
to sales and distribution at all times. This also resulted in an en-
hanced coordination between sales and manufacturing activities.
The result of the implementation of Ebizframe ERP software was

that it helped the company to streamline its sales and distribution
operations and manage them all in a more centralised manner.
Managers could now take decisions related to sales and distri-

CASE STUDY 7
N O T E S
bution easily and perform sales analysis and forecasting etc. ef-
ficiently and accurately. The management of the sales and distri-
bution operations was significantly improved as essential details
were provided to the senior management team in a timely man-
ner. Further, enhanced inventory and purchase and production
process control were achieved, making the company’s sales and
manufacturing coordination efficient.
QUESTIONS
1. How did the implementation of ERP software help

the company access real-time sales and distribution
information at all times? Discuss.
(Hint: This was made possible by the use of a secure
S
VPN.)
2. Describe some of the benefits that resulted from the
implementation of ERP software by the company.
IM (Hint: The implementation of ERP software in the
company made it possible to make sales forecasting and
analysis more efficient and accurate.)
M
N

CASE STUDY 8
N O T E S
BLUE LINK HELPS GOLDA’S KITCHEN IMPROVE

ITS INVENTORY MANAGEMENT
This Case Study discusses how Blue Link has helped Golda’s Kitchen
(GK) to improve its inventory management and order processing. It
also discusses how GK switched to a new system without taking any
risk of holding orders placed by customers online. It is with respect
to Chapter 8 of the book.
Golda’s Kitchen, also known as GK, is one of the leading Cana-

dian online retailers with over 13,000 kitchenware products, such
as cooking, baking, measuring equipment, confectionery supplies,
cake decorating, etc. It provides its customers with the facility of
shipping anywhere in Canada and across the world. Apart from
S
the convenient home online shopping, customers can also visit
the retail store at Mississauga.
Since its inception in 1999, GK has been excelling in its kitchen

IM
range, owing to its wide assortment and unmatchable quality. It
has been bestowed upon a number of awards by recognised in-
stitutions, such as Retailer of the Year by the Canadian Gift &
Tableware Association (CGTA), Best of the City Cookware Stores
by Toronto Life magazine and others.
But, despite having such a variety of products, GK was struggling

M
with its growth as the current system was ineffective in handling
large-size inventory. The company needed an advanced system
that could be handy in problematic areas such as inventory, ac-
counting, order processing and purchasing. Even more required
was automation of inventory services as the company’s online
N
shopping and shipping experience were in question because of

lack of an automated and integrated system. For this, in the sum-
mer of 2011, the company sought help from Blue Link, which is
into the wholesale distribution and implementation of Account-
ing and Inventory ERP software.
The first big challenge for the company arose out of transferring
data related to inventory, accounts, customers, suppliers and or-
ders into the new ERP system. The employees were not accus-
tomed to this new system; hence, the need for an extensive train-
ing was realised. The company did not want to go for parallel
testing, which might be expensive. It just could not allow taking
its reputation earned over the years by subjecting its customers
and employees to any kind of inconvenience due to order process-
ing, delays in delivery and day-to-day transactions while switch-
ing the system. Closing its warehouse and not shipping the placed
orders was not sensible enough for a clean image of GK.

CASE STUDY 8
N O T E S
So, it was decided, at 8 of one night, to turn off the existing sys-
tem and turn on the advanced system very next morning at 9. GK
wanted to expedite the process of switching to the new system
and utilise its efficiencies to the maximum for the Christmas rush.
Therefore, all this was done in the very first week of November
2011.
The first few days were quite challenging for GK in gaining fa-
miliarity with the new system, but employees and customers did
their part. As a result, with the deployment of an advanced and
automated inventory and accounting system, GK rose as a profi-
cient online retailer. All along, Blue Link conducted training ses-
sions for employees for a smooth system transition.
S
Now, GK is able to process multiple orders at one single time, and
customers no longer need to suffer for their products because of
improved inventory and fast order processing, which save a lot of
time for the company as well. Apart from quality and wide range
IM
of products, enhanced order fulfilment and inventory replenish-
ment have been made part of GK’s services, leading to an im-
proved customer service.
QUESTIONS
1. How did GK switch to a new system?

M
(Hint: GK did not want to go for parallel testing as it

might be expensive. It did not want to stake its reputation
earned over the years either, by making its customers
suffer for the orders they had already placed.)
2. What were the major reasons that forced GK to switch to
N
a new system?
(Hint: Lack of an integrated and automated system and
inefficiency in handling large-size inventory.)

CASE STUDY 9
N O T E S
RAMCO HCM IMPROVES HUMAN RESOURCE

SERVICES AT SEAGATE
This Case Study discusses how Ramco HCM has helped Seagate to
improve its payroll process and HRM functions. It is with respect to
Seagate is a global leader in data storage solutions. It offers a va-

riety of products, such as disc drives and solid state drives, along
with a wide line of individual consumer and small business prod-
ucts. The company decided to centralise its human resource of-
ferings for sustaining its leadership. It also decided to revise its
payroll processing for facilitating country-specific requirements
of employees and realising web-based self-service solutions for
S
them.
To attain these new goals, Seagate partnered with Ramco HCM,

a consultation and ERP solutions provider. At this time, the com-
IM
pany was facing the following challenges pertaining to its HR-re-
lated services:
The existing manual payroll processing was not effective
enough to meet the needs of the company.
The company’s current system was unable to manage the scal-
ability of a large number of employees and their requirements.
M
The company was also facing problems with reporting and an-
alyzing large volumes of data related to employees for which it
required a centralised system.
Ramco HCM came as a great saviour to Seagate. After perform-

N
ing a comprehensive analysis of all the HR requirements and pro-

cesses of the company, Ramco helped it by providing the follow-
ing benefits:
Payroll outsourcing by using advanced technology
A real-time web-based system capable of helping employees
to access, record and maintain information related to them
A centralised HR system capable of facilitating country-spe-
cific governing requirements by integrating all the HR func-
tions
Strong outsourcing processes with clear service-level agree-
ments
An extensive training program after the implementation of
the system in order to cater to the needs at different levels,
such as employees, IT and HR.

CASE STUDY 9
N O T E S
After effecting these changes, there was a dramatic improvement

in Seagate’s HR functions and services. Ramco indeed turned out
to be a great choice for Seagate for handling its payroll and hu-
man resource related requirements.
As a result of the help provided to it, Seagate reaped the following

benefits:
Centralised information system improved communication be-
tween the employees
Web-based real-time self-service enabled the employees to
know their status with regard to attendance, leave, salary, etc.
Increased data accuracy and decreased data duplication re-
S
sulted in improved data management
Much better coordination with other departments
Automated analysis and reporting
IM
QUESTIONS
1. What were the major challenges faced by Seagate in

managing its global workforce?
(Hint: Existing manual payroll processing being slow
and error-prone, inability to handle scalability of large
M
employee data, lack of a centralised system to help in
decision making)
2. What benefits did Seagate reap by effecting the changes
as suggested by Ramco HCM?
(Hint: Centralised information system improved
N
communication between the employees, increased data

accuracy and decreased data duplication resulted in
improved data management, etc.)

CASE STUDY 10
N O T E S
IMPLEMENTATION OF MICROSOFT DYNAMICS AX

BY MONACO TELECOM
This Case Study discusses the successful implementation of an ERP

system—Microsoft Dynamics AX—by Monaco Telecom with the
help of a consulting partner, Avanade. It is with respect to Chapter
9 of the book.
Founded in 1997, Monaco Telecom is a leading telecommunica-

tions provider based in Monaco. It has the exclusive rights of pro-
viding the customers with the services of the Internet, mobile and
fixed lines, television, etc. The company’s total revenue was esti-
mated to be €176 million in 2013-14. With an employee strength
of more than 400 today, it operates from multiple locations across
S
the world, such as Afghanistan, Kosovo, and countries in North
and West Africa.
The company is part of Cable & Wireless Group, which is consid-

IM
ered to be the leader in telecom services for small- and medium-
sized economies. Cable &Wireless Group offers services in more
than 33 countries around the world.
Monaco Telecom came across a lot of challenges while working

with its legacy finance system as it only catered to the financial
requirements. The existing system had limited integration of
M
functions. Moreover, it had multiple interfaces and processes that
made the entire process very rigid and complex. Many key pro-
cesses, such as purchase, reporting, analysis, were also manual
and time consuming. In 2006, the company planned to reorganise
its system and processes to improve its efficiency and broaden
N
product lines. It now eagerly wanted to replace its legacy finance

tool with a flexible, transparent, effective, scalable, integrated and
automated system for all the requisite functions.
After deciding on the implementation of a new ERP system, the

next big challenge for the company was to opt for a system that
could be economic and implemented in a short timeframe. The
lack of adequate resources was also a major concern; therefore,
the company decided to go for a medium-sized ERP solution that
could be effective in terms of cost, maintenance, scalability and
sustainability in the long run.
The company selected Microsoft Dynamics AX as it found the

product best for managing sales in various retail outlets, corpo-
rate Intranet, ReQ Logic, and purchasing orders and approvals.
Monaco Telecom successfully implemented Microsoft Dynamics
AX with the help of Avanade, a business-related technical solu-
tions provider. Today, all the requisite processes and functions of

CASE STUDY 10
N O T E S
the company, such as finance, purchasing, inventory and retail,

are well integrated and managed with Microsoft Dynamics AX.
The ERP system enabled Monaco Telecom to not only improve its
efficiency but also grow its business in the competitive interna-
tional marketplace.
QUESTIONS
1. What were the challenges faced by Monaco Telecom with

the legacy finance system?
(Hint: The legacy finance system catered only to the
financial needs of the company. Moreover, the existing
system had limited integration of functions, which made
S
all the processes rigid and complex.)
2. How do you see the implementation of Microsoft Dynamics
AX for the growth of Monaco Telecom?
(Hint: Microsoft Dynamics AX came out to be the best
IM option to manage sales in various retail outlets, corporate
Intranet, ReQ Logic, and purchase orders and approvals.
It led to the integration of all the requisite processes
across all the functions of the company, such as finance,
purchasing, inventory and retail, as well as improvement
of its overall efficiency.)
M
N

CASE STUDY 11
N O T E S
ERP SYSTEM AT PICTCL
This Case Study discusses the state of Punjab Information & Com-
munication Technology Corporation Limited (PICTCL) before and
after the implementation of an ERP system. It is with respect to
PICTCL is a state government enterprise assigned with the re-

sponsibility of promoting IT and knowledge industries in Punjab.
It was established in 1976 as Punjab State Electronics Develop-
ment & Production Corporation Limited but was restructured
and renamed in 2002 as Punjab Information & Communication
Technology Corporation Limited (PICTCL). Some of the major
goals of PICTCL are to take initiatives in infrastructural develop-
S
ment for IT industries and assist existing schemes for enhancing
employability in its areas of operation.
Problems Faced before ERP Implementation

IM
PICTCL worked with outdated procedures and considered pa-
per files to be ‘the Bible of operations’. Information was available
only in the physical form, and data was extracted manually. This
made the entire task of making information available for decision
making tedious and time-consuming. The top management relied
on subordinates to access the relevant information, and employ-
M
ees took advantage of this fact. They performed their tasks as per
their convenience and vested interests.
Because of the lack of effective MIS reporting tools and absence of

relevant data, the top management failed to identify the reasons
N
for the delay in providing services. This resulted in ineffective

planning and affected the decision-making abilities of the man-
agement. Communication with stakeholders, such as investors,
was carried out through physical correspondence only. The entire
system lacked uniformity/standardisation in processing cases and
documentation of the deals.
In 2009, PICTCL decided to restructure and re-engineer itself by

implementing Enterprise Resource Planning (ERP) software in
its work processes. The organisation felt a need to streamline and
automate its internal as well as external operations and took this
decision with long-term business visions in mind.
The main issue faced by PICTCL was the selection of a suitable

ERP vendor to implement the solution. Because of the lack of
documentation and standardisation of processes, it became diffi-
cult for any ERP vendor to extract details of the requirements of
the corporation. At last, System Integrator was identified as the
vendor of ERP software in August 2010. The first phase of ERP in

CASE STUDY 11
N O T E S
PICTCL went live in July 2011, and the whole project went live in
December 2011.
Benefits Realised after ERP Implementation
After the implementation of ERP software, PICTCL became a

system-driven, up-to-date and efficient organisation. Its employ-
ees are now well connected to each other because of the seamless
information flow within the organisation and across its various
divisions. In addition, all interactions with the stakeholders and
associates are now conducted online. This resulted in an any-
time-anywhere functioning of the corporation. With the automa-
tion of a large number of routine operations, employees and se-
nior management now get more time to plan for future projects.
S
The processes of payments; preparing cheques, vouchers and
statutory reports; processing of salary; etc. are now being done
online. All the information related to transactions with clients is
available on the corporation’s online portal, from where external
IM
parties can also view the complete transaction details. Most im-
portantly, the ERP system helped the corporation to conduct reg-
ular assessment and reviews of its existing projects.
QUESTIONS
1. Why do you think PICTCL conducted a prerequisite

M
study before selecting the vendor and type of ERP for the
corporation?
(Hint: Implementing an effective ERP requires adequate
time for conceptualising, designing and deploying a
system as per an organisation’s individual requirements.)
N
2. Why was PICTCL specially concerned about selecting an

ERP vendor?
(Hint: An ERP vendor is the key to the successful
implementation of ERP. It helps in ensuring the alignment
of business goals, mapping all core processes completely,
defining key requirements and providing flexibility and
scalability of the solution for future needs.)

CASE STUDY 12
N O T E S
GLOBAL TRENDS IN ERP PRODUCTS - A TURNING

POINT FOR RAMCO SYSTEMS
This Case Study discusses the challenges faced by Ramco Systems

due to lack of product differentiation in an ERP market dominated
by global players. It also discusses strategies consequently followed
by Ramco to overcome market unacceptability. It is with respect to
Ramco Systems is one of the world-class providers of flexible ERP

solutions in the global market. The corporation is a subsidiary of
the USD 1 billion, diversified conglomerate, the Ramco Group of
Industries. Ramco Systems started as the R&D division of Ramco
Group of Industries in 1992; and by 1999, it had established it-
S
self as an independent entity. The company is headquartered at
Chennai and owns 20 offices across Australia, Canada, Europe,
India, Middle East, South Africa and the US.
IM
M
Ramco aims to provide innovative, cost-effective business solu-

tions for complex business environments. The company has suc-
cessful cloud enterprise software focused on providing adaptive
ERP software to companies in the fields of payroll, defence, civil
aviation, etc. It strongly believes that functionality alone cannot
N
help ERP products to make a place in the highly competitive

global ERP market. However, everything was well in the company
when it began its operations.
Ramco started developing ERP solutions in 1993. But, it neglected

the enormity of the challenge to establish itself among ERP gi-
ants such as SAP, Oracle and Microsoft, which dominated and
controlled nearly 80 per cent of the global ERP business. An en-
terprise-class product needed the efforts of thousands of people
over several years, considering the amount of detail required for
serving different types of industries. But Ramco could not wait for
more than two years and marked its entry in the ERP market in
1995 with the launch of the first version of its ERP product called
Marshal. The year 1997 turned a nightmare for Ramco when its
product Marshal was not well accepted in the ERP market as it
failed to live up to customer expectations. Even in India, the prod-
uct found little acceptability. Between 1994 and 1997, Ramco spent
more than `100 crores for updating Marshal and introducing the

CASE STUDY 12
N O T E S
new versions of the product, but the market remained indifferent.
On analysis, the company found that Marshal 3.0, which was de-
signed on client-server architecture and developed entirely on a
Microsoft platform, failed to impress customers who needed ac-
cess to browser-based products and new languages such as Java.
“Changes in technology gave the new product at best a two-year
market window,” says Shyamala Jayaraman, Senior Vice Presi-
dent, R&D, Ramco Systems. Nonetheless, the company could not
recover the amount spent on developing the product. By 1998,
Ramco’s stakeholders had become highly concerned about the
losses and no major revenues.
The company could no longer rest on its laurels and P.R. Venke-
S
trama Raja, the owner of the Ramco Group, turned his focus on
a different approach to successfully establish itself in the ERP
marketplace. The company came up with its R&D department
to assess the pitfalls of its products. The main reason for the fail-
IM
ure of Marshal was that it had 23 modules and 25 million lines of
code. Thus, when client organisations went through technological
change or updation, they had to rewrite a major chunk of code to
adapt to the change.
To keep pace with rapidly changing technology, Ramco launched

its Web-based ERP product, built using VirtualWorks, in 2002.
M
This received some level of acceptability in the market. Ramco
released one more product called Ramco Aviation Solutions. At
present, Ramco Systems is the market leader in the helicopter
segment and is among the top three in commercial airlines main-
tenance, repair and overhaul business. In 2008, Ramco used Vir-
N
tualWorks (cloud computing) to launch a revolutionary product,

Ramco On-Demand ERP (RODE). This product was easily adapt-
able and rapidly scalable with less manpower for functioning.
QUESTIONS
1. What was the main catalyst in Ramco System’s success

beyond the year 2000?
(Hint: Rapid change in technology, digitalisation, product
differentiation and cloud computing.)
2. Suggest some strategies that could have helped Ramco
to make a mark in the ERP market dominated by global
players in the very first attempt.
(Hint: Create a strong partner ecosystem; include
consulting, training and data migration services; keep
pace with technological trends; etc.)


S
IM
M
N

Enterprise Resource Planning LRIp5AaDcO PDF

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Enterprise Resource Planning LRIp5AaDcO PDF

Enviado por

Direitos autorais:

Formatos disponíveis

Enterprise Resource Planning

Enterprise Resource Planning

Chief Academic Officer

TOC Reviewer Content Reviewer

Author : Dr. Dharm Bir Singh

NMIMS Global Access - School for Continuing Education

CHAPTER NO. CHAPTER NAME PAGE NO.

1 Introduction to Enterprise Resource Planning 01

3 ERP and Related Technologies 29

7 ERP in Purchase and Sales 119

8 ERP in Inventory Management 133

9 ERP Implementation 145

10 ERP Vendors, Consultants and Users 159

11 ERP Market 173

12 Exploring ERP II 207

13 Future Directions in ERP 223

14 Case Studies 237

NMIMS Global Access - School for Continuing Education

Introduction to Enterprise Resource Planning: Introduction to Enterprise Resource Planning

An Overview of Enterprises: Organisation or Enterprise, Integrated Management Information,

Financial Module, HR Module, CAQ and CIQ, Plant Maintenance

NMIMS Global Access - School for Continuing Education

NMIMS Global Access - School for Continuing Education

Self Assessment Questions

NMIMS Global Access - School for Continuing Education

DEPLOYMENT OF SAP SOLUTION AT AJINOMOTO GROUP

Ajinomoto Group is a Japan-based company that is engaged in

Considering the ever-increasing growth, the company wanted to

operations and maintenance. The group suggested Ajinomoto

and marketing, distribution and business intelligence, were also

The implementation of SAP turned out to be a great success in

NMIMS Global Access - School for Continuing Education

After studying this chapter, you will be able to:

An ERP system consists of different modules specially designed to ca-

In addition, the implementation of an ERP system reaps many bene-

NMIMS Global Access - School for Continuing Education

 Planning: It refers to a process of looking into the future through

Thus, ERP can be defined as an information system that integrates all

According to American Production and Inventory Control Society,

ed information to various departments of an organisation, which are

Figure 1.1: Information Areas of an ERP System

NMIMS Global Access - School for Continuing Education

Let us discuss these functions in detail.

 Marketing: Marketing is one of the most important functions of an

adequate information related to market trends. These information

NMIMS Global Access - School for Continuing Education

1.2.1 EVOLUTION OF ERP

backs, such as limited focus on manufacturing activities, assumption

ERP was developed as a complete business solution that integrated all

1960s Inventory Control Package

1970s Material Requirements Planning (MRP)

1980s Manufacturing Resource Planning (MRP II)

1990s Enterprise Resource Planning (ERP)

2000s Extended and Updated ERP

Figure 1.2: Evolution of ERP

NMIMS Global Access - School for Continuing Education

1.2.2 REASONS FOR THE GROWTH OF ERP

An ERP system not only helps an organisation in managing its re-

 Increased focus on high efficiency: With the advent of globalisa-

tems, which help in reducing lead times, cycle times, inventory

SELF ASSESSMENT QUESTIONS

1. An enterprise is a system of ______ who work towards

NMIMS Global Access - School for Continuing Education

Planning: It refers to a process of looking into the future through

Marketing: Marketing is one of the most important functions of an

Increased focus on high efficiency: With the advent of globalisa-

ERP was developed as a complete business solution that integrat-

Enterprise: It refers to a system of people that work towards

Ray, R. (2011). Enterprise resource planning. New Delhi: TATA Mc-

Sumner, M. (2005). Enterprise resource planning. Upper Saddle

excITingIP.com,. (2011). Advantages & Disadvantages of ERP (En-

It helps in avoiding duplication of work processes.