Enterprise Resource Planning (ERP) Systems
ERP
Dr. Wurood albayati
•
It is an overall business management system that caters need of all the people
connected with the organization. Every organization uses variety of resources in
achieving its organization goals.
•
It
designed to coordinate all the resources
, information, and activities needed to
complete business processes.
•
Accounting and Finance function is considered as
backbone
for any
business,
hence Financial & Accounting Systems are an
important and integral part of ERP
systems.
•
An ERP system supports most of the business system such as Manufacturing,
Supply Chain Management, Financials, Projects, Human Resources and Customer
Relationship Management.
ERP Enterprise resource Planning
ERP design to coordinate all the resource in any
enterprise,
why financial and accounting considered as an
elementary component of ERP?
An ERP system is based on
a common database
and
a modular software
design.
•
The
common database
allows storing and retrieving information in real-time.
•
The
modular software
design means a business can select the modules they
need, mix and match modules, and add new modules of their own to improve
business performance.
In practice the ERP system may comprise a set of applications, each maintaining
a data store within one physical database
.
An ideal ERP system is that system where a single database is utilized and
contains all data for various software modules
ERP Design
A
Non-Integrated System
is a system of maintaining data in a decentralized way.
Each department shall maintain its own data separately and not in an integrated
way. This is the major problem with non-integrated systems.
T
he problems that could occurs in non integrated system are:
a.
Communication Gaps
b.
Mismatched Data
Communication between different business units is a major aspect for
success of any organization.
Integrated System
Advantages of an ERP System
•
Ability to customize an organization's requirements;
•
Integrate business: e.g. itegerate operations with accounting and financial
reporting functions;
•
Increased data security and application controls;
•
Build strong access and isolation of duties controls;
•
Automate many manual processes thus eliminating errors;
•
Process huge volumes of data within short time frames; and
•
Strong reporting capabilities which aids
management
and
other stakeholders
in appropriate
decision making.
W
h
a
t
i
s
t
h
e
r
i
s
k
o
f
E
R
P
In Non-Integrated System
, data is stored by each department separately,
hence this is risk is low in such an environment
Major feature of an ERP System is
central database
. As the complete data is
stored centrally at one place, ensuring safety of data and minimizing risk of loss
of data is a big challenge.
•
In an ERP environment, all the persons in the organization access the same set of data
on a day to basis. This again poses the risk of
leakage of information or access of
information to non-related people ( unauthorized) .
E.g. A person from sales
department checking salary of a person in production.
•
Again, as there is central database, all users shall use the same data for recording of
transactions. Hence there is one
more risk of putting incorrect data in the system by
unrelated users
. E.g. a person in human resource department recording a purchase
order.
•
Physical safety of data : Risk of total loss of data and Risk of partial loss of data
CASE STUDY #1- A CHARTERED
ACCOUNTANT FIRM
The working environment in CA(a Chartered Accountant ) firm ( service company)
let us consider possibility of implementing ERP system in a CA Firm.
•
Case 1 –)
A
hmed
a client of a service company provider (
CA Firm))
receives a notice for
inspection assessment from Income Tax Department. Following shall be the events in normal
case.
✔
Ahmed (Client ) informs about receipt of notice to
CA.
the partner (
Baqer)
on phone and
sends the copy of
notice to CA Firm
.
✔
Notice is received at CA firm, read and understood. A task for giving reply to
Income Tax Department i
s
assigned to an employee1
( Nada
an article clerk).
✔
Emplyee1 (Nada )
asks for some original documents (PAN, Memorandum of Articls, Agreements etc.) from
client
for working.
These documents need to returned to client after the work.
✔
Nada
works on this task, prepare the reply and submits it with Income Tax Department. Also she updates CA.
Baqer and the accountant about it.
•
Bill is prepared by
the accountant
and approved by CA.
Baqer
.
•
Bill is submitted with client.
•
Documents are returned to client.
•
Cheque received from client against the bill submitted.
•
Receipt is recorded in books of accounts.
This is how a simple case is handled in a CA Firm. Let us now discuss
important points regarding this case.
In case of any ERP System, two aspects are very important.
•
Communication (Internal and External)
•
Documentation
Work Flow using Integrated System
Communication in this case is starting from client
Suggest a good ERP solution to this scenario
In this whole process, two important aspects,
•
i.e
. Communication and Documentation
are taken care of in the best possible manner. Instead of a person
communicating with other, system is communicating automatically after every
updating.
Things to remembered
•
In case of
Integrated System
, there shall be only one system of
communication with others
•
But in case of
non-integrated system
people use multiple modes for
communication like making a phone call, sending SMS, Email,
WhatsApp or personal meeting.
The major problem with these
multiple option is that there is no inter- connectivity between these
modes and hence track of the overall process is not available.
ERP
case study #2: Hershey Candies – failure
•
Not every ERP ends in success, this case study reviews the failure of Hershey,
a 147 year-old confectioner, headquartered in Hershey Pennsylvania. The
enterprise saw the
implementation of an ERP platform
as being central to its
future growth.
•
Consequently, rather than approaching its business challenge on the basis of
an iterative approach ( or
continuous improving
) , it decided to execute a
holistic plan, involving every operating centre in the company (
redesign
/reengineering
). Subsequently
SAP was engaged
to
implement a $10 million
systems
•
The impact of this decision represented complete chaos, where the company
was
unable to conduct business
,
because virtually every process, policy, and
operating mechanism was in flux simultaneously
.
•
The consequent result was the loss of
$150 million in revenue
,
a 19%
reduction in share price
, and the loss
of 12% in international market share.
ERP case study #3: - success
Nestle SA
•
As a enormous international candy-maker,
Nestle SA
headquartered in Konicki
Switzerland, had harboured a goal of integrating ERP across all three of its
operating companies; Nestle SA, Nestle UK, and Nestle USA.
•
The latter operation had been working toward complete integration of a set of
ERP solutions since in the late 90s,
but various requirements, organizational, and
policy problems had plagued the complete initiation.
•
By the turn of the millennium, its management finally decided that a complete
re-approach to its business requirements were in order. Consequently, this
effort paid dividends that allowed SAP to finally get the $200 million job done.
•
Ultimately,
positive business impacts
included :
•
the merging of an outdated accounting structure,
•
better and more efficient communications throughout its supply-chain,
•
and a much more confident workforce.
Enterprise Resource Planning (ERP) systems are comprehensive business management systems designed to coordinate resources, information, and activities within an organization. From integrated systems to non-integrated ones, ERP offers various advantages such as customization, increased data security, automation of processes, and strong reporting capabilities. Discover the key features, benefits, and risks associated with ERP systems in this insightful overview.
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Presentation Transcript
ERP Dr. Wurood albayati
ERP Enterprise resource Planning It is an overall business management system that caters need of all the people connected with the organization. Every organization uses variety of resources in achieving its organization goals. It designed to coordinate all the resources, information, and activities needed to complete business processes. Accounting and Finance function is considered as backbone for any business, hence Financial & Accounting Systems are an important and integral part of ERP systems. An ERP system supports most of the business system such as Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management.
ERP Design An ERP system is based on a common database and a modular software design. The common database allows storing and retrieving information in real-time. The modular software design means a business can select the modules they need, mix and match modules, and add new modules of their own to improve business performance. In practice the ERP system may comprise a set of applications, each maintaining a data store within one physical database. An ideal ERP system is that system where a single database is utilized and contains all data for various software modules
A Non-Integrated System is a system of maintaining data in a decentralized way. Each department shall maintain its own data separately and not in an integrated way. This is the major problem with non-integrated systems. The problems that could occurs in non integrated system are: a. Communication Gaps b. Mismatched Data Communication between different business units is a major aspect for success of any organization.
Advantages of an ERP System Ability to customize an organization's requirements; Integrate business: e.g. itegerate operations with accounting and financial reporting functions; Increased data security and application controls; Build strong access and isolation of duties controls; Automate many manual processes thus eliminating errors; Process huge volumes of data within short time frames; and Strong reporting capabilities which aids management and other stakeholders in appropriate decision making.
What is the risk of ERP In Non-Integrated System, data is stored by each department separately, hence this is risk is low in such an environment Major feature of an ERP System is central database. As the complete data is stored centrally at one place, ensuring safety of data and minimizing risk of loss of data is a big challenge. In an ERP environment, all the persons in the organization access the same set of data on a day to basis. This again poses the risk of leakage of information or access of information to non-related people ( unauthorized) . E.g. A person from sales department checking salary of a person in production. Again, as there is central database, all users shall use the same data for recording of transactions. Hence there is one more risk of putting incorrect data in the system by unrelated users. E.g. a person in human resource department recording a purchase order. Physical safety of data : Risk of total loss of data and Risk of partial loss of data
CASE STUDY #1- A CHARTERED ACCOUNTANT FIRM The working environment in CA(a Chartered Accountant ) firm ( service company) let us consider possibility of implementing ERP system in a CA Firm. Case 1 ) Ahmed a client of a service company provider ( CA Firm)) receives a notice for inspection assessment from Income Tax Department. Following shall be the events in normal case. Ahmed (Client ) informs about receipt of notice to CA. the partner (Baqer) on phone and sends the copy of notice to CA Firm. Notice is received at CA firm, read and understood. A task for giving reply to Income Tax Department is assigned to an employee1 ( Nada an article clerk). Emplyee1 (Nada )asks for some original documents (PAN, Memorandum of Articls, Agreements etc.) from client for working. These documents need to returned to client after the work. Nada works on this task, prepare the reply and submits it with Income Tax Department. Also she updates CA. Baqer and the accountant about it.
Bill is prepared by the accountant and approved by CA. Baqer. Bill is submitted with client. Documents are returned to client. Cheque received from client against the bill submitted. Receipt is recorded in books of accounts. This is how a simple case is handled in a CA Firm. Let us now discuss important points regarding this case. In case of any ERP System, two aspects are very important. Communication (Internal and External) Documentation
Work Flow using Integrated System Communication in this case is starting from client Suggest a good ERP solution to this scenario
In this whole process, two important aspects, i.e. Communication and Documentation are taken care of in the best possible manner. Instead of a person communicating with other, system is communicating automatically after every updating.
Things to remembered In case of Integrated System, there shall be only one system of communication with others But in case of non-integrated system people use multiple modes for communication like making a phone call, sending SMS, Email, WhatsApp or personal meeting. The major problem with these multiple option is that there is no inter- connectivity between these modes and hence track of the overall process is not available.
ERP case study #2: Hershey Candies failure Not every ERP ends in success, this case study reviews the failure of Hershey, a 147 year-old confectioner, headquartered in Hershey Pennsylvania. The enterprise saw the implementation of an ERP platform as being central to its future growth. Consequently, rather than approaching its business challenge on the basis of an iterative approach ( or continuous improving) , it decided to execute a holistic plan, involving every operating centre in the company ( redesign /reengineering). Subsequently SAP was engaged to implement a $10 million systems
The impact of this decision represented complete chaos, where the company was unable to conduct business, because virtually every process, policy, and operating mechanism was in flux simultaneously. The consequent result was the loss of $150 million in revenue, a 19% reduction in share price, and the loss of 12% in international market share.
ERP case study #3: - success Nestle SA As a enormous international candy-maker, Nestle SA headquartered in Konicki Switzerland, had harboured a goal of integrating ERP across all three of its operating companies; Nestle SA, Nestle UK, and Nestle USA. The latter operation had been working toward complete integration of a set of ERP solutions since in the late 90s, but various requirements, organizational, and policy problems had plagued the complete initiation.
By the turn of the millennium, its management finally decided that a complete re-approach to its business requirements were in order. Consequently, this effort paid dividends that allowed SAP to finally get the $200 million job done. Ultimately, positive business impacts included : the merging of an outdated accounting structure, better and more efficient communications throughout its supply-chain, and a much more confident workforce.
