isca notes

Chapter 7 | An Overview of Enterprise Resource Planning

7.1

Chapter 7

AN OVERVIEW OF ENTERPRISE RESOURCE PLANNING

(ERP)


7.2

1. ERP- DEFINITION

1. Fully integrated, global, closed-loop business management system integrating functional areas of an

enterprise like Logistics, Production, F&A and HR - to make optimum use of resources

2. 1 database, 1 application, and 1 UI

3. ERP package works on the fundamental premise that the whole being greater > sum of its parts

4. Integrated information storehouse where information needs to be stored only once and can be further

processed and reported to anyone in the value chain

“ERP solutions seek to streamline & integrate operation processes & information flows to synergise the

resources of an organisation - men, material, money and machine”

2. Enabling Technologies

The new era of PC, advent of C-S technology (client-server) and scalable RDBMS (Relational Database

Management System) - all have contributed for the ease of deployment of ERP systems.

Power of 3-Tier Client Server Architecture. Server stores the data, maintaining its integrity and consistency

and processes the requests of the user from the client desktops. The load of data processing and application

logic is divided between the server & client.

Companies implementing ERP solutions have multiple locations of operation and control. Hence, the online

data transfer has to be done across locations. To facilitate these transactions, the other important enabling

technologies for ERP systems are � Workflow, Work group, Group Ware, Electronic Data Interchange (EDI),

Internet, Intranet, Data warehousing, etc

[STORY: PC, 3-tier C-S Technology, Scalable RDBMS, Others- EDI, Internet, Intranet etc]

3. Characteristics of ERP (Evaluation of ERP done on following criteria – refer Step 5 of Methodology)

1. Flexibility

• Should respond to changing needs

• Able to run data back-ends through ODBC - Open Database Connectivity

2. Modular and Open

• Should have open system architecture - any module can be added/deleted � no effect on other modules

• Should support multiple HW platforms, 3rd party add-ons

3. Beyond the Company

• Should not be confined to organizational boundaries

• Should support on-line connectivity

4. Comprehensive

• Should support variety of organizational functions

• Must be suitable for wide range of business organizations

5. Best Business Practices

• Must adhere to best business processes applicable worldwide

[STORY: F M Opened ERP Company with Comprehensive Business practices ]


7.3

4. Features of ERP

1. Support Multi-facilities- Multi-platform, multi-mode manufacturing, multi-currency, multi-lingual facilities.

2. Supports Planning & Execution- Supports strategic & business planning, operational, execution activities,

optimization of resources

3. Supply Chain Management- Supports end-to-end SCM to optimize overall demand and supply data.

4. Corporate Image- Performs core activities and improves customer service. Augments corporate image.

5. Bridges Information Gap across organizations

6. Integrated Information system- Covers all functional areas: Mfg, selling, distribution, F&A, HR etc

7. Integrated Systems- Provides complete integration of systems - across departments and subsidiaries.

8. Better Project management

9. Supports Latest technologies- Should support EFT, EDI, Internet and Intranet, Video conferencing, E-

commerce

10. Provides Intelligent Business tools- DDS and EIS, data mining tools for better decision making

11. Eliminates business problems- material shortages, inventory problems, customer service, cash mgmt, etc.

[STORY: Multi - PL EX Supply-Chain Corp -> Big Info. Int. Proj -> Latest tech & Tool -> Problem solved]

5. Why Companies Undertake ERP (FACTORS to be considered BEFORE undertaking implementation)

1. Integrate financial information-

• Financial reports made by different persons or dept. may create different versions of truth. ERP

standardizes reports by integrating all facts and provides a uniform reporting system.

• E.g. Finance vs. Sales dept

2. Standardise HR information

• In companies with multiple business units – HR may not have a unified, simple method for tracking

employees’ time and informing them about benefits & services. ERP helps.

3. Standardise and speed up Mfg. processes

• Manufacturing companies esp. those in M&A - multiple business units across company make same

transaction/ recording/ report using different methods and computer systems

• Standardization and automation of these steps reduces costs, increases productivity and reduce headcount

4. Integrate customer order information-

• ERP integrates all customer related processes from receiving of orders to invoicing and delivery.

Communication & order tracking improves.

• Coordinate manufacturing, inventory and shipping among different locations

5. Reduce inventory

• ERP improves flow of goods and information across processes resulting in reduced RM, WIP, FG inventories

resulting in saving of costs and improved inventory control

[STORY: Fin + HR -----> Mfg -> Order -> Inventory ] Also, refer Chap 1


7.4

6. Benefits of ERP

1. Unified customer database - Better monitoring and quicker resolution of queries.

2. Quick response to changes - competitive advantage ↑

3. Cost control ↑

4. Improves supply-demand linkage

5. AP- Personnel has increased control of invoicing and payment & thus productivity & self-reliance ↑

6. AR- Faster response and follow-up on customers, Efficient cash collection

7. Reduce paper documents by providing on-line formats for data entry/retrieval

8. Information access & timely information ↑

9. Accurate information with detailed content, better presentation, satisfactory for the auditors

10. International operations ↑ - different tax structures, currencies, accounting period & languages etc

11. Others- solution for problems like Y2K and Single Monetary Unit (SMU-Euro)

[STORY: “Dominos Pizza” - Client -> Goods Purchased (AP) -> Goods Sold (AR) -> Timely Paper work & reports -> Auditors ☺

-> Intl. expand]

7. BUSINESS PROCESS REENGINEERING (BPR)

BPR refers to the fundamental rethinking and radical redesign of processes to achieve dramatic

improvement/breakthroughs in critical, modern measures of performance such as cost, quality, service &

speed.

• Cleanslate approach – “Whatever you were doing in the past is all wrong”

• Radical redesign – X improvement of 5%-10% But 80%-90%

• Fundamental rethinking - “Why do you do what you do” (Redesign it afresh)

• May NOT require IT

8. ERP & BPR

Every company that intends to implement ERP has to reengineer its processes in one form or the other. Some

typical processes:

• Forecasting- e.g. sales, fund flow

• Fund management- e.g. sources, risks, what-if analysis

• Price Planning- e.g. sensitivity analysis

• Budget Allocation- e.g. Mix of funds (D/E)

• Material requirement planning (MRP)- e.g. RM -> FG; production scheduling, requirement planning

• Quality control- Products are of desired quality

9. Business Engineering (BPR+IT) or Methods of BE

BE - rethinking of Business Processes to improve speed, quality and output of materials or services.

• Efficient redesigning of company’s value added chains. (Value added chains are a series of connected

steps running through a business which when efficiently completed add value to enterprise and

customers)

• IT (client-server model) helps to develop business models

• Adapt to changes


7.5

10. Business Management

• ERP merges very well with common business management issues like BPR, TQM etc.

• Basic objective of implementing an ERP program - put in place applications & infrastructure architecture

that effectively and completely support the Enterprise’s business plan and business processes

11. Business Modelling (“1st step in ERP implementation”)

“Approach of ERP implementation carried out using MIS planning.”

Develop business process model (consisting of CORE business processes) using MIS planning-

• Show process interconnections & sequence

• Top-down approach is used (wheras MIS implementation where Bottom-up approach is used)

• Information is a vital resource in managing other resources

> Data model consists of 2 elements:

1. A diagram describing various Business processes and their interactions.

2. An underlying Data Model.

> Reference model can be used to list processes and data entities and if needed can be later modified. (-Refer

Book for diagrams-)

Example: List of some entities forming a data model-

ENTITY DESCRIPTION (DATA REGARDING …)

External Data External entities, environment

Internal Data Transaction, projections

Sales forecast Product-wise and period-wise

Mktng. Research Data Surveys

Funding Data Sources & Availability

Production Data Time & material

Inventory data RM, WIP, FG

Personnel data Nos., profiles, skills

Payroll data Salaries, tax etc

General Ledger Payroll, AR etc

The general principles of Business Process Analysis and classification and methodology of looking at a Business

Information system to support a series of interlocking subsystems are universally applicable.

Business Modeling in Practice

• Most ERP programs enable flow charting business processes for analysis

• Also provide standard template for analysis of Actual vs. Expected and resultant deviation

• E.g. SAP uses event driven process chain (EPC) methodology to model Business Process


7.6

12. ERP IMPLEMENTATION

Risky - Requires time, effort, valuable resources + Success not guaranteed

During-implementation (-impediments for the successful implementation OR challenges involved in ERP

implementation-)

• Std. package may undergo changes- may be simple/major – Called Customization

• ERP package > Modules > Components

• Changes in module(s) may affect functioning of others

• Beneficial if package is implemented in totality

• Success depends on how closely implementation consultants, users and vendors work together. Consultants

understand users’ needs + Users’ active involvement

• Roles & resp. have to be clearly identified, understood & configured in the system. Staff must accept them

• Processes and procedures have to be simple and user friendly

• ERP should be expandable and adaptable to changes

Conclusion: Post-implementation, ERP expected to improve information flow and formalize and

standardize business processes. ROI upto 200% if implemented well otherwise as low as 25%

13. Key Planning and Implementation decisions

13.1 ERP or not to ERP? (-Strategic PPT?-)

Decision should be based on a business case rationale. Considerations:

• Strategy- implementing new strategies w.r.t. competition, customer service etc

• Process improvements- address personal and IT cost reductions

• Productivity improvements- include the need to close the financial cycle and overall production ↑

• Technology justifications- include Y2K problem, integrate/replace/merge functionalities

13.2 Follow Software’s Processes or Customize? (-Std. vs. Customize-)

(+) Best industry practices - improve and standardize processes - facilitate future change

(-) May require employees to change their ways of doing business

(+) Employees will not have to experience the pain and stress related to change

(-) Costly to customize & sustain

(-) Interfaces modular compatibility X

13.3 Outsource or In-house?

(+) Focus on core activities

(+) Company need not manage / recruit experts & avoid financial commitment

(+) Minimize impact on MIS dept

(-) Security issues & employee morale

In-house NA if lack of internal expertise and personnel to support


7.7

13.4 “Big Bang” or Phased Implementation?

> “Big Bang” Implementation – ERP implemented with all the modules in place on day one. Characteristics-

• No need for Temporary interfaces

• Limited requirement to maintain legacy (old) software

• Cross-module functionality

• Low overall cost IF no contingencies arise

> “Phased” implementation- one or a group at a time, often a single location at a time. Benefits-

• Smoothing of resource requirements

• Focus on select modules

• Availability of existing legacy systems as fallback - reduced risk

• Knowledge gained with each phase and the usefulness of demonstrable working system

13.5 Other implementation approaches include:

• Wave approach: Conversion is implemented in waves of change to diff. business units, branches or regions

• Parallel approach: Both existing system and new ERP system run together for some time. Features-

o Basis of comparison

o Existing system serves as backup

o More costly - Requires more computing and HR

o Existing system may not be properly maintained during the period

o Re-engineering not supported by existing systems

• Instant cut-over (flip-the-switch): Old system is completely replaced with the ERP system on a pre-

determined date. Features- Low cost, Risky & stressful, motivates user to convert, No redundant system

14. ERP Implementation Methodology

Several steps are involved in the implementation of a typical ERP package

1. Identifying needs

2. Evaluating ‘As Is’ situation (existing strength & weakness)

3. Deciding ‘Would be’ situation (changes expected)

4. Reengineering existing Business Process

5. Evaluating available ERP packages

6. Finalising ERP packages

7. Installing the required hardware & network

8. Finalising ERP Consultant

9. Implementing the ERP package.


7.8

Step 1 - Identify needs

• Ask basic questions- Why? Benefits (Cost, profit, time, customer service, and productivity)?

• Information flow, decision making, X manual work, integration etc.

Step 2 - Evaluating the “As Is” situation of the business

• Functions, transaction processes should first be listed

• Details by mapping process to functions to find time taken, no. of dept, decision & reporting points,

information flow & routing,

Step 3 - Deciding the desired ‘Would Be’ situation

• ‘Benchmark’ (with best in industry) on factors like costs, quality, service to optimize processes

Step 4 - Reengineering the business process

• Reduce business process cycle time

• Minimizing number of decision points

• Streamline information flow

Step 5 – “Evaluation of various ERP packages based on following criteria”

• Flexibility

• Comprehensive

• Beyond the company

• Best business practices

• Price & Cost of implementation

• Obsolescence

• Ease of implementation

• Market Targeted by the package

• Global presence / Local presence - Post-implementation support

• Integrated

• New technologies

Step 6 - Finalizing ERP package

• Make comparison of critical factors through matrix analysis

Step 7 - Installing hardware & networks

• Carried out in a phased manner -Depends on schedule & available hardware

Step 8 - Finalizing Implementation consultants

• Selection factors: Skill set, Industry specific experience, Cost of hiring


7.9

Step 9 – “Implementation of ERP package”

• Form team -> prepare of plan -> mapping of business processes to package -> Gap analysis (deviation)

• Customization - User-specific reports and transactions

• Uploading of Data from existing system.

• Test runs

• Parallel run

• User acceptance

• Migration to the new system

• User Training

• User documentation

• Post-implementation support

• System monitoring and fine tuning

[STORY: Team � Work �Tests � User accepts � Migrate � Training � Doc � Support & Monitor]

15. Implementation GUIDELINES for ERP (BEFORE starting the ERP implementation) –orgn/team/user-

• Understanding organisation’s corporate needs and culture

• Doing a business process redesign exercise

• Estb. a good communication network

• Providing a strong and effective leadership - capable project manager

• Balanced team of implementation consultants

• Training end user

• Adapting to changes

• Selecting a good implementation methodology with minimum customization

16. POST- IMPLEMENTATION – Expectations & Fears

Wrong expectations and fears because of ERP vendors and their pre-implementation sales hype

Expectations:

• Process ↑

• Productivity ↑

• Performance indicators ↑ (Key PIs)

• Automation – X Manual process & manual record keeping

• Real time information

• Total integration


7.10

Fears:

• Job redundancy – Loss of Job

• Change in job profile

• Loss of authority

• Loss of proper control and authorization

• Loss of importance

• ↑ Stress caused by greater transparency

17. RISK AND GOVERNANCE ISSUES IN AN ERP

“Organizations face several new business risks when they migrate to real-time, integrated ERP systems.”

Those risks include:

1. Single point of failure (SPF)- Since all data & transaction processing is done within 1 application system

2. Program interfaces and data conversions- Extensive interfaces and data conversions from legacy systems

are often necessary. Data integrity, security and capacity requirements is high

3. Structural changes- Significant personnel & organizational structures changes associated with

reengineering or redesigning business processes.

4. Job role changes- 1) Traditional roles to empowered-based roles with greater access to real-time

information and 2) point of control shifting from the back-end financial processes to front-end point of

creation.

5. Change management- User acceptance essential. They must understand their action’s impact. Training /

awareness required

6. Online, real-time- An online, real-time system environment requires a continuous business information

flow

7. Distributed computing experience- Inexperience pose significant challenges

8. Broad system access- Increased remote access by users and outsiders + increased access due to high

integration

9. Dependency on external assistance- Organization may have to rely on external help. Unless properly

managed, security and resource management risk ↑ 10. Audit expertise- Specialist expertise is required to effectively audit and control an ERP environment.

18. “Additional” risks & good governance issues introduced by e-enabled ERP environments concern

11. Data content quality- As enterprise applications are opened to external suppliers and customers, the need

for integrity is high

12. Single sign on- It reduces the security administration effort associated with administrating web-based

access to multiple systems, but simultaneously introduces additional risk in that an incorrect assignment of

access may result in inappropriate access to multiple systems.

13. Privacy and Confidentiality- Regularity and governance issues surrounding the increased capture and

visibility of personal information

[STORY: SPF Conversions ∆s Online Computing Access - > Dependence on External Auditors � � Data on Single PC ]


7.11

19. Why do ERP projects fail so often?

Staff resistance to change -> Political fights -> Push IT dept for Customization -> Customized ERP difficult to

maintain -> ERP unstable

20. HOW DOES ERP FIT WITH E-COMMERCE?

ERP is complex and not intended for public consumption – Basic assumption is that users highly trained and

comfortable with the tech jargon

Today customers and suppliers are demanding access to the same information company’s employees get

through the ERP system. E.g. order status, inventory levels and invoice reconciliation. BUT through website and

not via-ERP software jargon.

E-commerce means IT departments need to build two new channels of access into ERP systems,

• one for customers (B2C) who want order status and billing information

• one for suppliers and partners (B2B) who want everything else

21. LIFE AFTER IMPLEMENTATION [CSF-KPI]

Effective use of ERP is a direct result of steps taken at the time of implementation toward preparing the

organization.

• Change integration has to be embedded

• Communication in all forms-written, oral, workshops, meetings, etc.

• Critical success factors (CSFs) for respective functionalities or departments

• From these CSFs, performance measures (KPI-Key Performance Indicators) required to address these CSFs

Having evolved the processes while the configuration, construction and implementation are in progress, the

organization needs to “ready itself for the post-implementation period”. Some of the tasks that are to be

performed are:

• Develop NEW job descriptions and organization structure

• Determine SKILL GAP between existing & envisioned jobs

• Assess TRAINING REQUIREMENTS, and create/implement PLAN

• Develop and amend HR, financial and operational POLICIES

• Develop a plan for workforce LOGISTICS ADJUSTMENT


7.12

22. Post-implementation “BLUES”

• To monitor KPIs and take correct decisions to improve them

o If indicators non-existent, then set achievable goals

o Realistic way- Stretched target to be achieved in phases

• Resistance to change when choice of legacy vs. new system is available. Mgmt’s will is needed

During post-implementation there will be need for “course correction (changes) many times”. It may be

because of the following reasons:

• ∆ business environment -> ∆ CSFs -> ∆ KPIs -> ∆ reconfiguration

• New additions to business require changes

• Review require changes in some process

• Vision changes in the ERP

• Improvements in hardware & communication technology require changes

Emerging trends-

• To outsource the activity of maintenance and upgradation to enable the company to concentrate on its

core business activity.

• ERP audit (general vs. specific) - to evaluate the security, authorization and controls and ROI

23. SAMPLE LIST OF ERP VENDORS (For details, refer Study Material)

a) Mapics XA (Marcam Corporation): Dated, legacy application. Mapics is a suite of 40 modules with 'good

enough' functionality. It offers robustness, easy implementation and reasonable value for money.

b) Prism (Marcam Corporation): Prism is a specialist process manufacturing solution for the AS/400. Its

production model, which is akin to a flowchart, handles process industry problems elegantly. Although out

dated, it does the job.

c) MFG/Pro (QAD): QAD's strength is in repetitive manufacturing. Originally designed to meet the MRP II

criteria published by Oliver Wight, MFG/Pro's reputation includes reliable manufacturing functionality and

straightforward implementations.

d) System 21 (JBA): Its software license revenues are small compared to those of other major ERP vendors.

Nevertheless, it is a world player. It does not offer leading-edge technology, but does offer a rugged,

reliable manufacturing solution.

e) Baan (The Baan Company): Established in 1994. Sound Technology base and a broad functional scope.

Offers credible tools for business process analysis linked to implementation of its software.

f) Oracle Applications (Oracle)-

o Internet-enabled, network-centric computing

o A one-stop shop - offers the database, tools, implementation, applications and Unix OS

o Runs on a wide choice of hardware


7.13

g) R/3 (SAP)-

o Market leader

o Matches business processes to modules

o No major shortcomings - Few people get fired for buying it

o However, it remains complex, because it offers much

o Few people know how to get the best from it.

24. SAP has a number of Application Modules in the package

FINANCIAL MODULES LOGISTIC MODULES OTHER MODULES

FI - Financial Accounting PP - Production Planning &

Control �

HR - Human Resource

Management CO - Controlling PM - Plant Maintenance � PS - Project System

EC - Enterprise Controlling MM - Materials Management � Internet Applications

Component TR - Treasury PDM - Product Data Management

�

IM - Investment Management QM - Quality Management �

SD - Sales and Distribution �

SM - Service Management

[STORY: FI CO mey Enterprise Time Invest karta hai]

25. Appendix (SAP)

� Financials: Includes: Financial Accounting, GL, AR & AP, FA Accounting.

� Controlling Cost: Includes: Cost Center Accounting, OH Cost Control, OH Orders, Activity based Costing,

Product Cost Control, Cost Object Controlling, Profitability Analysis.

� Investment Management: Includes: Corporate wide budgeting, Appropriation requests, Investment

measures, Automatic settlement to FA, Depreciation Forecast.

� * TREASURY: Includes: Cash Management, Treasury Management, Funds Management, Market risk

management

� Cash Mgmt: Budget | Source & Use of funds | Monitors in/out cash flows | ST Invt./Borrowing |

Liquidity | Forex | Forecast | Monitors & Controls

� * ENTERPRISE CONTROLLING: Enterprise can be managed by using an Integrated Enterprise Management.

This consists of getting accounting data prepared by subsidiaries for corporate reporting which will be

automatically prepared simultaneously within the local books of each subsidiary. This data is transferred to

a module called Enterprise Controlling (EC). Enterprise Controlling consists of 3 modules:

� EC-CS- Consolidation: Financial Statutory & Management Consolidation

� EC-PCA- Profit Center Accounting: T/F Pricing, Correct Profit/Cost centre

� EC-EIS- Executive information system: Combines above with external data


7.14

� Product Data Management (PDM): PDM supports in creating and managing product data throughout

product lifecycle. SAP supports two basic scenarios in PDM environment

� Sales and Distribution: The system's Sales and Distribution application offers access to real-time, online

information from sales support to the billing process.

� Production Planning and Control: This module is used for planning, executing and controlling production.

This covers the complete production process starting from creation of master data, production planning,

MRP, capacity planning, production control and costing. Product planning modules are: Sales and

Operation Planning (SOP), Production Control Modules, Quality Management, Project System, Project

Information System.

� Materials Management: The system's materials management module contains all functions required

to simplify business processes in Requirements planning, Purchasing, Inventory Management,

Warehouse management and Invoice Verification. It also introduces a high degree of automation into

standard procedures.

� Human Resource Management (HR): HR provides comprehensive process driven solutions that can address

organization's human resources needs worldwide. The module consists of various components such as

Personnel Management, Personnel administration, Recruitment management, Travel Management, Benefits

administration, Salary administration etc.

� Payroll Accounting: R/3 HR payroll accounting addresses payroll functions from a global point of view. It is

possible to centralize or decentralize payroll processing based on country or legal entities. It also enables

to establish business rules without modifying existing payroll. This includes: Payroll Processing, Integration,

Global Solutions, Time Management, Time data, Time evaluation, Time management Review, Integration

and Interfaces, and Shift Planning.

� Internet and Intranet: The R/3 system offers a special Internet functionality for large number of business

processes. It also gives an opportunity to advertise vacancies to potential applicants all over the world. The

application itself could be carried out online by calling up an application form filling it out and returning it

by e-mail. The application would be processed automatically in R/3 HR.


7.15

26. Case Study – Videocon Group (SAP)

Problem-

• Multiple branches- Each factory and branch had different software, varied platforms

• Difficult to Consolidate/Collate/Analyse data uniformly + Data duplication

• Needed common platform with dealers

• Needed responsive and fast system

Mandate-

• Consultant suggested SAP ERP

• Issues to be addressed- integrated system, financial reporting and control, automation of certain tasks,

production planning, inventory management and control, accurate costing, credit control, cash flow

planning, quality-control, after-sales-service

Implementation-

• Pilot project at the first site

• Factories (parent units) went live first

• Mix of leased lines, ISDN, VSATs and Internet connectivity to optimise the costs

• Training & education to increase awareness and remove fears

Lessons to Learn-

• Modules not specific to Indian requirements- Taxes, LCs, import clearances

• Product evolution module great help to management

Looking ahead-

• Roll-out SAP in all group companies

• IT initiatives- e-business and Internet-based customer relationship management systems, extended to

partners and dealers

• CRM

27. Case Study – Telecom: Airtouch Cellular (Oracle)

Problem-

• Financial analysts - located in five different geographic regions

• Could not have timely access to budgeted and actual data resided in different systems

• Needed to control costs, analyze performance, evaluate opportunities

Implementation-

• Oracle Online analytical processing (OLAP) tools: provided on-site expertise, concept

• Project completed within budget in 6 months. Few post-implementation changes

Benefits-

• More than $85mn savings. Helps them stay on budget / shift business direction

• Reduced length of budgeting cycle

• Analysts access data warehouse for analysis

• VP get budget data on timely basis


7.16

28. Case Study - Nov 2009

Q: Worldwide, a global telecom company is serving to more than 10 million customers in the area of

communications through fixed land lines, mobiles, internet services, digital TV and satellite system etc. The

financial analysts of the company are located in different functional groups in six geographical regions. These

analysts are missing the access to the same data, as well as timely access to the information. Dated budget

and actual numbers for each business unit reside in seven different systems, separating critical components of

the Profit and Loss account and inhibiting analyst’s ability to assess results. The problem gets further

complicated as the field analysts are not able to go to one universal place to retrieve the data themselves and

they have to rely upon the home office for the same.

The objective of the company is to set some critical financial goals so that the company could remain

competitive and increase market share. Read the above carefully and answer the following with justifications:

• To overcome the problems which the financial analysts are facing, what kind of software the company

should select? (10 Marks)

Solution:

As the financial analysts of the company are working in six different geographical locations and the financial

data is stored on seven different systems, located world wide, therefore they are facing several problems. Few

of them are as under :

o Missing the access to the same data as well as timely access to information.

o Dated budget and actual numbers for each business unit reside in seven different systems,

separating critical components of the profit and loss account thus failing the financial analysts to

assess results.

o The field analysts are not able to retrieve the data themselves from one universal place and

therefore they have to rely upon the home office for the same.

It is therefore important that the company should buy new software for the solution of the problems as

mentioned above.

As far as software is concerned, of course the company should select the one which could make same data

available to all the financial analysts. One such software is available from Oracle Corporation known as On Line

Analytical Processing (OLAP) tool for better control over costs, analyze performance, evaluate opportunities,

and formulate future directions. To improve the basis for making decisions quickly and accurately with real

time, to provide consistent data which will improve cost control and to simplify and shorten the budgeting

process, the software should be capable of the following:

o hands on ability to consolidate budgets, based on actual data in the process,

o enabling business units to make real-time, online decisions based on more accurate information,

o user friendly.

The company is expected to be benefited by significant financial saving and therefore it should reduce the

length of the budgeting cycle and the number of people involved in the process, thus keeping the company

financially competitive in a growing market. The system should provide online, real time access to the

information.


7.17

29. Case Study - Jun 2009

Q: XYZ Company, engaged in the manufacturing of several types of electronic goods is having its branches all

over the World. The company wishes to centralize and consolidate the information flowing from its branches in

a uniform manner across various levels of the Organization.

The factories are already working on legacy systems using an intranet and collating information. But each

factory and branch is using different software and varied platforms, which do not communicate with each

other. This not only results in huge inflow of data which could not be consolidated for analysis but also the

duplication of data. Even one percent change in any data entry or analysis translates into millions of Rupees

and can sometimes wipe out the profits of the organization. So the company needs a system that would help

them to be responsive and act fast. Read the above carefully and answer the following with justifications:

a. What are the problems that the company is facing now? (5 Marks)

b. Should the company go for ERP solution? If yes, will the company be able to share a common

platform with its dealers to access servers and database to update the information of issues of

mutual interest? (5 Marks)

c. For the selection of ERP package, state the issues to be considered. (5 Marks)

d. Suggest how to go about the implementation of ERP package. (5 Marks) [Steps]

Solution:

a) XYZ company, having its branches all over the world, is engaged in manufacturing of several types of

electronic goods. It is confronted with the problem of centralizing and consolidating the information flowing in

from its various branches in uniform manner across various levels of the organization.

No doubt, the factories are working on legacy systems using an intranet and collating information. As each

factory is using different type of software on varied platforms, therefore, they are not able to communicate

with each other. Because of this reason, there is a huge inflow of data which could not be consolidated for

analysis. Lack of communication among factories has not only resulted into duplication of the data entry which

is not only costly, slight change in data entry and analysis may translate into millions of rupees that can

sometimes wipe out the profits of the organization. Hence, there is an urgent need of a system that would help

the branches to be responsive and to act fast.

b) Yes, the company should go for ERP solutions. [ERP implementation brings different business functions,

personalities, procedures, ideologies and philosophies on one platform, with an aim to pool knowledge base to

effectively integrate and bring worthwhile and beneficial changes throughout the organization.] Some of the

major features of ERP are that it provides the support to multi platform, multi facility, multi mode,

manufacturing, multi currency, multi lingual facilities. It supports strategic and business planning activities,

operational planning and execution activities, creation of material and resources. All these functions are

effectively integrated for flow and updation of information immediately upon entry of any information,

thereby providing a company-wide Integrated Information System.

In case, the company decides to include a module for dealers which provides limited/restricted access to

company databases and server, dealers will be able to update the information of issues of mutual interest.

c) While selecting the ERP package, the performance of following issues should be taken into account:

i. Better inventory management and control.


7.18

ii. Improved financial reporting and control.

iii. Automation of certain takes that were performed manually to increase productivity.

iv. Improved production planning.

v. Better information on stocks at various locations.

vi. Using an integrated system as opposed to disparate systems at different locations, thereby eliminating

errors of duplicate entries.

vii. More accurate costing of products.

viii. Better credit control.

ix. Improved cash flow planning.

x. Automatic quality control and tracking.

d) In the stated scenario, several steps involved in the implementation of a typical ERP package are

enumerated below:

i. Identifying the needs for implementing an ERP package.

ii. Evaluating the ‘As Is’ situation of the business i.e., to understand the strength and weakness prevailing

under the existing circumstances.

iii. Deciding the ‘Would be’ situation for the business i.e., the changes expected after the implementation

of ERP.

iv. Reengineering the Business Process to achieve the desired results in the existing processes.

v. Evaluating the various available ERP packages to assess suitability.

vi. Finalizing of the most suitable ERP package for implementation.

vii. Installing the required hardware and networks for the selected ERP package.

viii. Finalizing the Implementation consultants who will assist in implementation.

ix. Implementing the ERP package.


7.19

Question Bank

Past Year Questions [M05–N11] Para

Ref. Year

1) Enumerate the characteristics of ERP Systems. (5 Marks MICS) 3 N10,N08,

N09

2) Briefly explain the characteristics and features of an ERP. (5 mks) 3, 4 M08,M05

3) What is ERP? Briefly describe its benefits. (10 Marks) 1, 6 N07

4) What are the benefits achieved by implementing the ERP packages? (MICS 10 marks) 6 N05

5) If you are the CEO of a company, what factors would be considered before undertaking

implementation of an ERP system? (5 marks) 5 M10

6) Briefly describe the method of Business Engineering (4 mks) 9 N10

7) Short Notes: Business engineering (5 mks) 9 N05

8) How will you get over the impediments for the successful implementation of ERP? Mention

any five. 12 M10

9) You are entrusted with the duty of implementing an ERP in your office. You have taken

care of all the preparations during the implementation. However, during post

implementation, there will be a need for course correction many times. What can be the

reasons for them? (4 Marks)

22 N10

10) Why does an organization implement an ERP package and evaluate the various available ERP

packages for assessing suitability? Mention the various evaluation criteria that are required

to assess suitability of an ERP package on implementation. (4 Marks)

14 (5) N10

11) Explain the various criteria used for evaluation of the ERP packages. (5 mks) 14 (5) M06

12) Explain the process of evaluation of various ERP packages. (10 marks MICS) [Hints: Criteria] 14 (5) M10

13) Discuss the factors to be considered for evaluation of a vendor’s proposal. (MICS 4 mks) Chap 2 M09

14) What are the tasks for which the company should be ready for post-implementation period

of an ERP System? (4 Marks) 21 M11

15) List the fears that are expected to arise among employees of an organization during

implementation of ERP (MICS 4 mks) 16 M09

16) ABC Limited has migrated from traditional systems to new real-time integrated ERP systems.

The technical advisor of the company advised the owner that the company should take

necessary steps to analyze several types of risks. Explain those risks in brief (ISCA 5 mks)

17, 18 N09

17) How will you establish and implement Critical Success Factors (CSFs) and Key Performance

Indicators (KPIs) in an organization for achieving the benefits of implementation of ERP?

[Hints: Life After Implementation]

21 M07

18) List any five ERP Vendors and briefly describe the ERP packages offered by them. (MICS 5

marks) 23 M05

19) Short Notes: Enterprise Controlling (5 mks) 25 * N06

20) Discuss the functions and facilities provided by Treasury Cash Management module of

an ERP package. (MICS 5 mks) 25 * N08

21) List the items of information provided by cash management of Treasury module of SAP.

(MICS 8 mks) 25 * M09

22) “XYZ Company, engaged in the manufacturing of several types of electronic goods…”

[PM Case Study] (ISCA 20 mks) Ref PM M09

23) “Worldwide, a global telecom company…” [PM Case Study] (ISCA 20 mks) 29 N09


7.20

24) Worldwide, a global telecom company is serving to more than 10 million customers in the

area of communications through fixed land lines, mobiles, internet services, digital TV and

satellite system etc. The financial analysts of the company are located in different

functional groups in six geographical regions. These analysts are missing the access to the

same data, as well as timely access to the information. Dated budget and actual numbers

for each business unit reside in seven different systems, separating critical components of

the Profit and Loss account and inhibiting analyst’s ability to assess results. The problem

gets further complicated as the field analysts are not able to go to one universal place to

retrieve the data themselves and they have to rely upon the home office for the same.

The objective of the company is to set some critical financial goals so that the company

could remain competitive and increase market share.

Read the above carefully and answer the following with justifications:

a) To overcome the problems which the financial analysts are facing, what kind of

software the company should select? (10 Marks) [Hints: Problems faced & On Line

Analytical Processing (OLAP) tool from Oracle Corporation; Para 27-28]

b) The company is advised that the adoption of BS7799 International Standard will help in

overcoming the problems and achieving its goals. Discuss. (5 Marks) [Hints: NA]

c) How should the human resources be enriched for effective utilization of the proposed

new systems and standards? (5 Marks) [Hints: NA]

M10

Practice Manual

1) What is an ERP system? *Bring out the major challenges involved in its implementation. 1, 12

2) Write short notes on Business Engineering. 9

3) What are the steps involved in the implementation of an ERP package? 14

4) Write down the general guidelines which are to be followed before starting the implementation of an

ERP package. 15

5) ABC Limited has recently migrated to real-time Integrated ERP System. As an IS Auditor, advice the

company as to what kinds of businesses risks it can face? 17, 18

6) Identify the risks and governance issues an organization faces while migrating to an integrated ERP

system. 17, 18

7) Write a detailed note on the expectations, fears and the ground realities that a corporate management

faces during the post-implementation phase of ERP. [Hints: Ground realities – NA] 16

8) Write short notes on the following:

a. Benefits of ERP [Para 6]

b. Business Process Reengineering (BPR) [Para 8]

9) Discuss the functions and facilities provided by Treasury Cash Management module of an ERP package. 25 *

10) Identify the SAP module used to consolidate the financial statements including elimination of inter-

company transactions. [Hints: Enterprise Controlling] 25 *


7.21

11) * XYZ Company, engaged in the manufacturing of several types of electronic goods is having its branches

all over the World. The company wishes to centralize and consolidate the information flowing from its

branches in a uniform manner across various levels of the Organization.

The factories are already working on legacy systems using an intranet and collating information. But

each factory and branch is using different software and varied platforms, which do not communicate

with each other. This not only results in huge inflow of data which could not be consolidated for analysis

but also the duplication of data. Even one percent change in any data entry or analysis translates into

millions of Rupees and can sometimes wipe out the profits of the organization. So the company needs a

system that would help them to be responsive and act fast. [ISCA Exam May 09]

Read the above carefully and answer the following with justifications:

a) What are the problems that the company is facing now?

b) Should the company go for ERP solution? If yes, will the company be able to share a common

platform with its dealers to access servers and database to update the information of issues of

mutual interest?

c) For the selection of ERP package, state the issues to be considered.

d) Suggest how to go about the implementation of ERP package.

29

12) Explain the following terms with respect to ERP:

a) Business Engineering [Para 9]

b) Business Management [Para 10]

c) Business Modeling [Para 11]

9 to 11

13) What is Enterprise Controlling? Briefly explain its modules. 25 *

14) A company is developing several types of biscuits, having its branches all over the country. The owner of

the company wishes to centralize and consolidate the information flowing from its branches in a uniform

manner across various levels of the organization. The technical advisor of the company recommended

that the company should go for the implementation of the ERP Package. Why the company should

“undertake” ERP? [Hints: Benefits + Why Undertake]

5, 6

RTP [M05–N11] Para

Ref Yr

1) What are the major features of ERP? 4 N08

2) What is an ERP system? Bring out the major challenges involved in its implementation. 12 N06

3) Reasons for failure of ERP projects 19 N11

4) What are the main benefits achieved by implementing the ERP package? 6 M11

5) XYZ Company developed an information system for the integration of various organizational

processes. The company wanted to sell this system as an ERP solution. But, any system has to

possess few characteristics to qualify for a true ERP solution. What are those characteristics?

Explain in brief.

3 N10

6) ABC company has presence across India in manufacturing of medicine. The management of

the company intends to centralize and integrate the information flow across its different

manufacturing units in a uniform manner at various levels of the company. Presently the

company has its functioning at different units being automated as per the local

requirements, technical expertise and on an ad-hoc basis. The technical advisor of the

company recommends that the company should go for the implementation of the ERP

Package. List out the reasons for ERP adoption by the company?

[Feature + Benefits + Why Undertake]

4, 6, 5 M10

7) A company is developing several types of biscuits, having its branches all over the country.

The owner of the company wishes to centralize and consolidate the information flowing from

its branches in a uniform manner across various levels of the organization. The technical

advisor of the company recommended that the company should go for the implementation of

the ERP Package. Why the company should undertake ERP?

5 N09

8) Explain the general model of the ERP. M10


7.22

9) What is Business Modelling? How can it be used for judging the suitability of ERP Package. 11 M05

10) List out some of the entities forming a data model in business modelling. M10

11) List out various steps involved in the implementation of a typical ERP package [Hint: 9 main

steps] 14 N09,M06

12) What do you mean by ERP ? Discuss the nature of ERP packages that are available in the

market and the criteria applied in evaluating these packages ?

1,23,14

(5) M07

13) Write a short notes on BPR (Business Process Re-Engineering). [Hints: Include BE, BM] 7, 9, 10 N07

14) How an ERP is important to an organization? Describe the implementation of the ERP package

in short.

1,

14 (5) N07

15) What are the steps involved in the implementation of an ERP package? 14 N08

16) Explain in brief the ERP implementation methodology. 14 M09

17) Short Notes: Implementation Guidelines for ERP. 15 M06

18) What are the general guidelines which are to be followed before starting the implementation

of an ERP package. 15 M08

19) ‘ERP implementation also engenders a host of fears.’ What are those fears? Explain in brief. 16 M11

20) Identify the risks and governance issues an organization faces while migrating to an

integrated ERP system. 17, 18 M09

21) Short Notes: Product Data Management (PDM) 25 * M07

22) Short Notes: Quality Management Module 25 * M09

23) Short Notes: SAP 23-G,

24 N07

24) Describe the following processes in brief:

i. Forecasting

ii. Fund management

iii. Price Planning

iv. Budget Allocation

v. Material requirement planning

vi. Quality control

8

N10

25) Explain the useful tasks served by budgeting function, in brief.

[Hints: Original Budget approval and release; Budget supplements, returns, transfers; Fund

centers and their hierarchical structures provide a base for top down budgeting and

represent responsibility areas within the budget control; Commitment management system

enables control of funds tracking; Analyses by responsibility area and commitment items

allow identification of any budget bottlenecks.]

- N10

isca notes

Documents