MB 11 – 02 : ENTERPRISE RESOURCE PLANNING

1. Justify the importance of ERP in

a). Improving the resource utilization in an organization

As manufacturing processes become more sophisticated and as the philosophies of elimination of waste and constraint management achieve broader acceptance, manufacturers place increased emphasis upon planning and controlling capacity. The creation of an accurate, achievable production schedule requires the availability of both material and capacity. It is useless, and indeed wasteful, to have financial resources tied up in material, if the capacity is insufficient or improperly planned. Waste not only raises costs, it also affects customer service levels and customer goodwill.

The capacity planning features of most ERP systems offer both rough-cut and detailed capacity planning. The system loads each resource with production requirements from Master Production Scheduling. Material Requirements Planning and Shop Floor Control (detailed capacity planning). All planned, firm planned and released production is evaluated and loaded against capacity definitions for each resources and all capacity requirements are pegged back to the orders comprising the lead. Capacity definitions are provided from work center and machine records. Work centers can be facility specific or enterprise-wide. Thus the ERP systems help the organization in drastically improving the capacity and resource utilization.

b). Improving the customer satisfaction

Customer satisfaction means meeting or exceeding customers’ requirements for a product or service. Assessment of the degree of satisfaction is usually made on at least three measures.

Ø Whether the product or service includes the features that are most important to the customer.

Ø Whether the company can respond to the customers’ demands in a timely manner, a criterion that is especially important for custom products and services.

Ø Whether the product or service is free of defects and performs as expected.

ERP systems have proved that they can produce goods at the flexibility of make-to-order approach without loosing the cost and time benefits of made-to-order operations. This means that the customer will get individual attention and the features that he-she wants, without spending more money or waiting for long periods.

c). Increasing the flexibility

Because competition is growing, the companies must learn to respond more rapidly to customer’s wishes as well as changes in the market. They will need to design new products are redesign old products quickly and efficiently. Only then will companies have the chance to capitalize on opportunities while they are available. The window of opportunity is often quite small. The manufacturing process must be flexible enough to accommodate new product designs with minimal disruption or time loss.

Flexibility is a key issue in the formulation of strategic plans in companies. Some times flexibility means quickly changing something that is being done or completely to changing to adjust to new product designs. At other times flexibility is the ability to produce in small quantities in order to produce a product mix that may better approximate actual demands and reduce work-in-progress inventories.

d). Improved decision making

The three fundamental characteristics of information are accuracy, relevancy and timeliness. The information has to be accurate, it must be relevant for the decision-maker and it must be available to the decision-maker when he needs it. Any organization that has the mechanism to collect, collate, analyze and present high quality information to its employees, thus enabling them to make better decisions, will always be one step ahead of the competition. Today, the time available for an organization to react to the changing market trends is very short. To survive, the organization must always be on its toes, gathering and analyzing the data both internal and external. Any mechanism that will automate this information gathering and analysis process will enhance the chances of the organization to beat the competition.

b. In what context BPR is discussed with ERP

Dr. Michael Hammer defines BPR as “the fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality service and speed”. One of the main tools for making this change is the Information Technology (IT), any BPR effort that fails to understand the importance of IT, and goes through the pre-BPR analysis and planning phases without considering the various IT options available and the effect of the proposed IT solutions on the employees and the organization, is bound to crash during takeoff. So many BPR initiatives end up in the ERP implementation.

2. a). How OLAP is beneficial

Successful OLAP applications increase the productivity of business managers, developers and whole organizations. The inherent flexibility of OLAP systems means business users of OLAP applications can become more self-sufficient. Managers are no longer dependent on IT to make schema changes, to create joins and so on. Perhaps mire importantly; OLAP enables managers to model problems that would be impossible using less flexible systems with lengthy and inconsistent response times. More control and timely access to strategic information equals more effective decision making.

OLAP reduces the application backlog still further, by making business users self-sufficient enough to build their own models. However, unlike stand alone departmental application running on PC networks, OLAP applications are dependent on Data Warehouses and transaction processing systems to refresh their source level data. As a result, IT gains more self-sufficient users without relinquishing control over the integrity of the data.

b). What are the technologies used in data mining

Modeling the investigated system and discovering that connect variables in a database are the subject of data mining.

Modern data mining system self learn from the previous history of the Investigated system, formulating and testing hypotheses about the rules, which this system obeys. When concise and valuable knowledge about the system of interest has been discovered, it can and should be incorporated into some decision support system which helps the manager to make wise and informed business decisions.

Data mining techniques are the result of a long process of research and product development. This evolution began when business data was first stored on computers, continued with improvements in data access and more recently, generated technologies that allow users to navigate through their data in real time. Data mining takes this evolutionary process beyond retrospective data access and navigation to prospective and proactive information delivery.

Data mining is ready for application in the business community because it is supported by three technologies that are now sufficiently mature:

1. Massive Data Collection
2. Powerful Multiprocessor computers
3. Data mining algorithms

3. a). Write short note on ‘ SAP AG ’

Founded in 1972, SAP (Systems, Application and Products in Data Processing), based in Walldorf, Germany, is the leading global provider of client / server business application solutions. Today SAP has installations in more than 107 countries.

SAP’s ERP package comes in two versions: the mainframe version (SAP R/2) and the client / server version (SAP R3/2)

Since 1988, SAP AG has been a publicly held corporation, with its shares being traded on the German and Swiss stock exchanges. In 1955, the company was added to the DAX, the index of German blue-chip companies. SAP listed its ADR’s (American Depository Rights) on the NYSE (New York Stock Exchange) in August 1998.

b). What are the Submodules of ‘ Finance Module’ of ERP

The finance modules of most ERP systems will have the following subsystems:

• Financial Accounting (General Ledger, Accounts Receivables, / Payable, Special Ledgers, Fixed Asset Accounting, Legal Consolidation)
• Investment Management (Investment Planning / Budgeting / Controlling, Depreciation Forecast / Simulation / Calculation)
• Controlling (Overhead Cost Controlling, Activity-based Costing, Product Cost Accounting, Profitability Analysis)
• Treasury (Cash Management, Treasury Management, Market Risk Management, Funds Management)
• Enterprise Controlling (Executive Information System, Business Planning and Budgeting, Profit Centre Accounting)