Scope of Implementation of ERP in Manufacturing Industry

INTRODUCTION: Enterprise Resource Planning (ERP) is an integrated computer-based system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate all business operations into a uniform and enterprise-wide system environment. An ERP system can either reside on a centralized server or be distributed across modular hardware and software units that provide "services" and communicate on a local area network. The distributed design allows a business to assemble modules from different vendors without the need for the placement of multiple copies of complex and expensive computer systems in areas which will not use their full capacity.

ORIGIN OF THE TERM: The initials ERP was first employed by research and analysis firm Gartner Group in 1990 as an extension of MRP (Material Requirements Planning; later manufacturing resource planning) and CIM (Computer Integrated Manufacturing), and while not supplanting these terms, it has come to represent a larger whole. It came into use as makers of MRP software started to develop software applications beyond the manufacturing arena.ERP systems now attempt to cover all core functions of an enterprise, regardless of the organization's business or charter. These systems can now be found in non-manufacturing businesses, non-profit organizations and governments.
To be considered an ERP system, a software package should have the following traits:
    Should be integrated and operate in real time with no periodic batch updates.
    All applications should access one database to prevent redundant data and multiple data definitions.
    All modules should have the same look and feel.
    Users should be able to access any information in the system without needing integration work on the part of the IS department.

Components /Modules.
Transactional backbone
•    Financials
•    Distribution
•    Human resources
•    Product lifecycle management


Assistant Professor, Pioneer Institute of Professional Studies, Indore
Student, Pioneer Institute of Professional Studies, Indore

Advanced applications
•    Customer relationship management (CRM)
•    Supply chain management software
    Purchasing
    Manufacturing
    Distribution
•    Warehouse management system.
•    Management portal/dashboard
•    Decision support system

These modules can exist in a system or can be utilized in an ad-hoc fashion.

OBJECTIVES:
I.    To analyze the implementation of ERP (Enterprise Resource Planning) in Manufacturing Industry.
II.    To analyze the positive impact of ERP on efficiency of Manufacturing Industry.
III.    To identify the limitations in implementing ERP.

LITERATURE REVIEW: According to Chung, Boo Young even though the use of ERP systems is growing and becoming more popular, these systems are still somewhat unfamiliar in the construction industry. Many engineering and construction firms know how beneficial ERP systems are, but they still hesitate to adopt these systems due to their high cost and risk. Without a doubt, a successful ERP implementation is an essential for the benefits from such systems, so this issue is always considered top priority in the ERP related research area. It is obvious that several important factors must be considered for successful implementation, but most engineering and construction firms have no idea what factors should be considered most heavily. Therefore, the main goal of this research is to help these firms better understand the critical factors that need to be considered to ensure the success of ERP systems.
As per Negahben Sam Siamak Enterprise Resource Planning (ERP) utilization in the Construction Industry has been limited to a few large organizations. Significant segments of the industry are either not aware of or have not been able to adopt this new technology successfully. The largest groups of construction organizations that either have failed in their efforts to adopt this technology, or are not familiar with it are the Small to Mid Size Construction Organizations (SMSCO). Failure in or refusing to adopt ERP by this group, despite all its potential benefits, was the problem that was addressed in this research. This research sets out not only to formulate the reason(s) why SMSCO fail to utilize ERP systems, but also to propose a decision-making model which could be utilized when they decide to adopt an ERP system. After a careful review of existing technology models, a new ERP Adoption Model (EAM) is formulated and projected.
Article of Young B. Moon is a review of work published in various journals on the topics of Enterprise Resource Planning (ERP) between January 2000 and May 2006. A total of 313 articles from 79 journals are reviewed. The article intends to serve three goals. First, it will be useful to researchers who are interested in understanding what kinds of questions have been addressed in the area of ERP. Second, the article will be a useful resource for searching for research topics. Third, it will serve as a comprehensive bibliography of the articles published during the period. The literature is analyzed under six major themes and nine sub-themes.

ERP SOFTWARES:
1)    SAP
2)    Oracle Applications
3)    The Sage Group
4)    Microsoft Dynamics
5)    SSA Global Technologies

Applications
1.    Manufacturing
2.    Engineering, bills of material, work orders, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow.
3.    Supply chain management
4.    Order to cash, inventory, order entry, purchasing, product configuration, supply chain planning, supplier scheduling, inspection of goods, claim processing, commission calculation.
5.    Financials
6.    General ledger, cash management, accounts payable, accounts receivable, fixed assets.
7.    Project management
8.    Costing, billing, time and expense, performance units, activity management.
9.    Human resources
10.    Human resources, payroll, training, time and attendance, rostering, benefits.
11.    Customer relationship management
12.    Sales and marketing, commissions, service, customer contact, call-center support.
13.    Data services
14.    Various "self-service" interfaces for customers, suppliers and/or employees.
15.    Access control
16.    Management of user privileges for various processes.

RESEARCH METHODOLOGY: All manufacturing companies using ERP technology are the part of study. Mainly secondary data used for study. Data collected through
•    Articles
•    Factsheet
•    Management generals
•    Research papers
•    Internet
•    News papers

Major Finding
After valuation of the data we are finding out some positive and some negative result for scope of implementing ERP in manufacturing industry
Positive results
In the absence of an ERP system, a large manufacturer may find itself with many software applications that cannot communicate or interface effectively with one another. Tasks that need to interface with one another may involve
1.    ERP systems connect the necessary software in order for accurate forecasting to be done. This allows inventory levels to be kept at maximum efficiency and the company to be more profitable.
2.    Integration among different functional areas to ensure proper communication, productivity and efficiency.
3.    Design engineering (how to best make the product).
4.    Order tracking, from acceptance through fulfillment.
5.    The revenue cycle, from invoice through cash receipt.
6.    Managing inter-dependencies of complex processes bill of materials.
7.    Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced).
8.    The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level.
ERP systems centralize the data in one place. Benefits of this include:
1.    Eliminates the problem of synchronizing changes between multiple systems - consolidation of finance, marketing and sales, human resource, and manufacturing applications.
2.    Permits control of business processes that cross functional boundaries.
3.    Provides top-down view of the enterprise (no "islands of information"), real time information is available to management anywhere, anytime to make proper decisions.
4.    Reduces the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure.
5.    Shorten production lead time and delivery time.
6.    Facilitating business learning, empowering, and building common visions.
Negative results
Problems with ERP systems are mainly due to inadequate investment in ongoing training for the involved IT personnel - including those implementing and testing changes - as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and the ways in which it is used.
Disadvantages
    Customization of the ERP software is limited.
    Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.
    ERP systems can be very expensive. (This has led to a new category of "ERP light" solutions.)
    ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.
    Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.
    Once a system is established, switching costs are very high for any partner (reducing flexibility and strategic control at the corporate level).
    The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.
    Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.
    Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc., and consolidation into a single enterprise may yield limited benefits.

IMPLEMENTATION: Businesses have a wide scope of applications and processes throughout their functional units; producing ERP software systems that are typically complex and usually impose significant changes on staff work practices. Implementing ERP software is typically too complex for "in-house" skill, so it is desirable and highly advised to hire outside consultants who are professionally trained to implement these systems. This is typically the most cost effective way .There are three types of services that may be employed for - Consulting, Customization, Support .The length of time to implement an ERP system depends on the size of the business, the number of modules, the extent of customization, the scope of the change and the willingness of the customer to take ownership for the project. ERP systems are modular, so they don't all need be implemented at once. It can be divided into various stages, or phase-ins. The typical project is about 14 months and requires around 150 consultants. A small project (e.g., a company of less than 100 staff) can be planned and delivered within 3–9 months; however, a large, multi-site or multi-country implementation can take years .The length of the implementations is closely tied to the amount of customization desired.
To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies. These firms typically provide three areas of professional services: consulting; customization; and support. The client organization can also employ independent program management, business analysis, change management, and UAT specialists to ensure their business requirements remain a priority during implementation.

DATA MIGRATION: Data migration is one of the most important activities in determining the success of an ERP implementation. Since many decisions must be made before migration, a significant amount of planning must occur. Unfortunately, data migration is the last activity before the production phase of an ERP implementation, and therefore receives minimal attention due to time constraints. The following are steps of a data migration strategy that can help with the success of an ERP implementation:
1.    Identifying the data to be migrated
2.    Determining the timing of data migration
3.    Generating the data templates
4.    Freezing the tools for data migration
5.    Deciding on migration related setups
6.    Deciding on data archiving


PROCESS PREPARATION: ERP vendors have designed their systems around standard business processes, based upon best business practices. Different vendor(s) have different types of processes but they are all of a standard, modular nature. Firms that want to implement ERP systems are consequently forced to adapt their organizations to standardized processes as opposed to adapting the ERP package to the existing processes .Neglecting to map current business processes prior to starting ERP implementation is a main reason for failure of ERP projects. It is therefore crucial that organizations perform a thorough business process analysis before selecting an ERP vendor and setting off on the implementation track. This analysis should map out all present operational processes, enabling selection of an ERP vendor whose standard modules are most closely aligned with the established organization. Redesign can then be implemented to achieve further process congruence. Research indicates that the risk of business process mismatch is decreased by:
    Linking each current organizational process to the organization's strategy.
    Analyzing the effectiveness of each process in light of its current related     business capability.
    Understanding the automated solutions currently implemented.
ERP implementation is considerably more difficult (and politically charged) in organizations structured into nearly independent business units, each responsible for their own profit and loss, because they will each have different processes, business rules, data semantics, authorization hierarchies and decision centers. Solutions include requirements coordination negotiated by local change management professionals or, if this is not possible, federated implementation using loosely integrated instances (e.g. linked via Master Data Management) specifically configured and/or customized to meet local needs.
A disadvantage usually attributed to ERP is that business process redesign to fit the standardized ERP modules can lead to a loss of competitive advantage. While documented cases exist where this has indeed materialized, other cases show that following thorough process preparation ERP systems can actually increase sustainable competitive advantage.

CONFIGURATION: Modules — Most systems are modular simply for the flexibility of implementing some functions but not others. Some common modules, such as finance and accounting are adopted by nearly all companies implementing enterprise systems; others however such as human resource management are not needed by some companies and therefore not adopted. A service company for example will not likely need a module for manufacturing. Other times companies will not adopt a module because they already have their own proprietary system they believe to be superior. Generally speaking the greater number of modules selected, the greater the integration benefits, but also the increase in costs, risks and changes involved.
Configuration Tables – A configuration table enables a company to tailor a particular aspect of the system to the way it chooses to do business. For example, an organization can select the type of inventory accounting – FIFO or LIFO – it will employ or whether it wants to recognize revenue by geographical unit, product line, or distribution channel.

CONNECTIVITY TO PLANT FLOOR INFORMATION: ERP systems connect to real-time data and transaction data (data accumulated into collections to deliver sets of information) in a variety of ways. These systems are typically configured by systems integrators, who are able to bring in their unique knowledge on process, equipment, and vendor solutions.
Direct integration – ERP systems connectivity (communications to plant floor equipment) as part of their product offering. This requires the ERP system developers to offer specific support for the variety of plant floor equipment that they want to interface with. ERP Vendors must be expert in their own products, and connectivity to other vendor products, often those offered by competitors.
Relational database (RDB) integration – ERP systems connect to plant floor data sources through a relational database staging table. Plant floor systems will deposit the necessary information into a relational data base. The ERP system will remove and use the information from the RDB Table. The benefit of RDB Staging is that ERP vendors do not need to get involved in the complexities of plant floor equipment integration. Connectivity becomes the responsibility of the systems integrator.
EATM (enterprise appliance transaction modules) – These devices have the ability to communicate directly with plant floor equipment and will transact data with the ERP system in methods best supported by the ERP system. Again, this can be through a staging table, Web Services, or through system specific business system APIs. The benefit of an EATM is that it offers a complete, off the shelf solution, minimizing long term costs and customization.
Custom-integrated solutions – Many system integrators designs offer custom crafted solutions, created on a per instance basis to meet site and system requirements. There are a wide variety of communications drivers available for plant floor equipment and there are separate products that have the ability to log data to relational database tables. Standards exist within the industry to support interoperability between software products, the most widely known being OPC, managed by the OPC Foundation. Custom-integrated solutions typically run on workstation or server class computers. These systems tend to have the highest level of initial integration cost, and can have a higher long term cost in terms on maintenance and reliability. Long term costs can be minimized through careful system testing and thorough documentation.

ERP Limitations
Many of the problems that organizations have with ERP systems are due to the inadequate level of investment in ongoing training for all personnel involved, including those implementing and testing changes, as well as a lack of corporate policies protecting the integrity of the data held in the ERP systems and how it is used.
Limitations of ERP include:
    Some customization may involve changing ERP software structure to adapt to the specific workflow and business process of some companies, which is usually not allowed.
    Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.
    Systems can be complex to use. The system may be over-engineered relative to the actual customer needs.
    System can suffer from the "weakest link" problem - an inefficiency in one department or at one of the partners may affect other participants in the business process.
    Resistance in sharing sensitive internal information between departments can reduce effectiveness of the software.
    There are frequent compatibility problems with various legacy systems of the partners.
    Technical support personnel often give replies to callers that are inappropriate for the caller's corporate structure. Computer security concerns arise, for example when telling a non-programmer how to change a database on the fly, at a company that requires an audit trail of changes so as to meet some regulatory standards.
    ERP systems can be very expensive to install. Vendors can charge sums of money for annual license renewal that is unrelated to size of the company using ERP or its profitability.

CONCLUSION: Looking at the past developments and combining it with the current trends by implementing ERP modules in manufacturing units it can be concluded that the future of Enterprise resource planning has lot of positive things to offer to the manufacturing industry.

REFRENCES:
1.    King. W., "Ensuring ERP implementation success," Information Systems Management, Summer 2005.

2.    Turban et al. (2008). Information Technology for Management, Transforming Organizations in the Digital Economy. Massachusetts: John Wiley & Sons, Inc., p. 320. ISBN 978-0-471-78712-9

3.    Ramaswamy V K (2007-09-27). "Data Migration Strategy in ERP". Retrieved 2008-04-08.

4.    Monk, Ellen; Wagner, Bret (2006). Concepts in Enterprise Resource Planning (Second ed.). Boston: Thomson Course Technology. ISBN 0619216638

5.    Sheilds, Mureell G., E-Business and ERP: Rapid Implementation and Project Planning. (2001) John Wiley and Sons, Inc. p. 9-10

WEBLIOGRAPHY:
http://en.wikipedia.org/wiki/Enterprise_resource_planning.
http://en.wikipedia.org/wiki/SAP_AG
http://www.sap.com/asia/solutions/business-suite/erp/index.epx
http://www.oracle.com/technetwork/indexes/downloads/index.html#em
http://www.sagesoftware.co.in/Customer-Relationship-Management-Crm-ERP-Payroll-Software-Company-India-Sage-Accpac-ERP.aspx
http://www.microsoft.com/dynamics/en/us/erp.aspx