What Is Erp

ERP PROJECT

Introduction

In today's fiercely competitive business environment, there has to be much greater interaction between the customers and manufacturers. This means that, in order to produce goods tailored to customer requirements and provide faster deliveries, the enterprise must be closely linked to both suppliers and customers. In order to achieve this improved delivery performance, decreased lead times within the enterprise and improved efficiency and effectiveness, manufacturers need to have efficient planning and control systems that enable very good synchronization and planning in all the processes of the organization. Today, however, the challenge is intense and requires a strong integration across the value chain. Enterprise Resource Planning (ERP) is such a strategic tool, which helps the company to gain competitive edge by integrating all business processes and optimizing the resources available. This paper throws light on how ERP evolved, what makes up an ERP system and what it has to offer to the industries.

History

In 1960s, a new technique of Material Requirements Planning, popularly known as MRP, evolved. This was a proactive manner of inventory management. This technique fundamentally explodes the end product demand obtained from the Master Production Schedule (MPS) for a specified product structure (which is taken from Bill of Material) into a detailed schedule of purchase orders or production orders taking into account the inventory on hand. MRP is a simple logic but the magnitude of data involved in a realistic situation makes it computationally cumbersome. If undertaken manually, the entire process is highly time consuming. It therefore becomes essential to use a computer to carry out the exercise.

MRP successfully demonstrated its effectiveness in:

* Reduction of inventory

* Reduction in production and delivery lead times by improving

* Co-ordination and avoiding delays

* Making commitments more realistic

* Increased efficiency

MRP proved to be a very good technique for managing inventory, but it did not take into account other resources of an organization. In 1970s, this gave birth to a modified MRP logic, popularly known as Closed Loop MRP. In this technique, the capacity of the organization to produce a particular product is also taken into account by incorporating a module called Capacity Requirements Planning (CRP). Hence, a feedback loop is provided from the CRP module to MPS if there is not enough capacity available to produce.

In 1980s, the need was felt to integrate the other resources of a manufacturing organization. Hence, evolved an integrated manufacturing management system called Manufacturing Resources Planning (MRPII). MRPII has been defined by APICS as:

"A method for effective planning of all the resources of manufacturing company. Ideally it addresses operational planning in units, financial planning in dollars and has a simulation capability to answer 'what-if' questions. It is made up of a variety of functions each linked together: Business Planning, Production Planning, Master Production Scheduling, Material Requirements Planning, Capacity Requirements Planning and the execution system for capacity and priority. Outputs from these systems would be integrated with financial reports, such as the business plan, the purchase commitment report, shipping, budget, inventory production, etc."

The Manufacturing Resources Planning suffered from a few drawbacks, like it assumed the lead times to be fixed, the capacity to be infinite, the batch sizing concept, etc. Over the years, other tools had evolved to automate the manufacturing management process like Computer Aided Design, Computer Aided Manufacturing, Computer Integrated Manufacturing, Customer Oriented Manufacturing Management System, etc. The shortcomings of MRPII and the need to integrate these new techniques, led to the development of a total integrated solution called Enterprise Resource Planning (ERP) in the early 1990s.

It began as a group of applications or software focused on combining multiple systems into one integrated system where data could be shared across the enterprise, presumably reducing redundant data entry and processes. It was originally proposed for manufacturing and production planning. In the mid 1990s, ERP solutions expanded to include ordering systems, financial and accounting systems, asset management and human resource management systems.

Finally, in the late 1990s, the solutions were again broadened to include systems that made it possible for Universities and other governmental entities to consider these solutions for their business processes.

Concept - Definition

Enterprise Resource Planning (ERP) is a systematic method of dynamically balancing and optimizing the resources of a company. When used effectively it can enable a company to achieve world-class results in growth, profitability, and product and service development. It works within the paradigm that every business is uniquely similar.

Your business is unique, but it is also similar to a vast number of other businesses. It is similar in terms of wanting the same things, better service, cheaper products, more profits and unique in how you track, manage and communicate your needs ­ internal needs for financial information, production schedules and sales data; external needs for sales quotes, purchase orders and shipping instructions. Most companies develop unique methods of tracking, managing and communicating, not from some consciously thought-out master plan for world leadership, but from some evolutionary process often initiated by persons long-gone and even forgotten.

How does an ERP system make it all happen? The essence of it is the fundamental premise that the whole being greater than the sum of its parts. The traditional application systems, which the organizations generally employ, treat each transaction separately. They are built around the strong boundaries of specific functions that a specific application is meant to cater. ERP attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.

That is a tall order, building a single software program that serves the needs of people in finance as well as it does the people in human resources and in the warehouse. Each of those departments typically has its own computer