14-08-2012, 04:28 PM
ENTERPRISE RESOURCE PLANNING (ERP) & MATERIAL RESOURCE PLANNING (MRP)
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ENTERPRISE RESOURCE PLANNING (ERP)
Enterprise resource planning popularly known as ERP, is today’s buzz-word
in the corporate world. Companies world-wide use ERP to integrate business
processes and thereby reduce costs and increase productivity. It has
established its base as global phenomena.
What is ERP?
ERP is software package developed for optimum use of resources of an
enterprise in a planned manner. ERP integrates the entire enterprise starting
from the supplier to the customer covering logistics, financial and human
resources. This will enable the enterprise to increase productivity by
reducing costs. ERP is a package for cost saving. Once the ERP is
implemented, a single solution addresses the information needs of the whole
organisation.
Functioning of ERP
Suppose an order is placed by the dealer, then the ERP checks for the stock
reserves, the inventory for dispatch, opens the dealer account to verify the
credit limits of the dealer and processes the order. If the credit limit exceeds,
then it places hold on the order. All these functions are carried out
simultaneously, as ERP integrates production, logistics, marketing, human
resource development and finance.
Features of ERP
The general ERP has a central data base shared by all functions of the
enterprise. The figure represents the concept of enterprise resources planning
and execution-
1. Accommodating variety: The ERP software solution provides each multilingual
ad multi-currency capabilities.
2. Integrated management information: Today’s business managers use ERP
for the flexible reporting tools to extract the information as when needed
without depending on information system department.
3. Seamless integration: Integration of new product introductions or changes
to existing products fully into the enterprise system, also known as
‘engineering change management’ is crucial to the enterprise. Electronic
change management should include electronic approval, routing, change
order process routing, revision-level control and automatic generation of
product structures.
4. Supply chain management: End-to-end supply chain management is
crucial for enterprises having multiple manufacturing units and distribution
network.
SELECTION OF ERP PACKAGE
As the money involved ranges from a few crores, careful selection of ERP
PACKAGE assumes greater importance before going for ERP
implementation, a thorough introspection of the company’s activities is
necessary to understand one’s exact requirements, Lack of proper planning
and preparation may result in the wrong vendor which in turn may not
ensure the expected returns on the resources employed. Implementation
period may take 12 to 24 months, depending on the scale and scope of
operation.
Once the platform is built, then the company should decide to go
in for the right vendor for the right software and the right consultant for the
implementation. It is necessary to evaluate the services offered by different
ERPs before selecting the appropriate one.
The giants in the ERP field are SAP, Oracle applications and
Baan. Other vendors are JD Edwards, Peoplesoft, Scala, Ramco Marshal,
QAD etc. While ERP can be tailor made to suit needs of specific customers,
packaged product is gaining more popularity compared to customised
software. If ERP can’t be tailor made to fit into company’s requirement, then
the company’s requirement can be tailored to fit the ERP. However, it is
important to remember that the ERP implementation will be successful,
unless there is a very high commitment from the management.
Material Requirements Planning (MRP) is software based production
planning and inventory control system used to manage manufacturing
processes. Although it is not common nowadays, it is possible to conduct
MRP by hand as well.
An MRP system is intended to simultaneously meet 3 objectives:
· Ensure materials and products are available for production and
delivery to customers.
· Maintain the lowest possible level of inventory.
· Plan manufacturing activities, delivery schedules and purchasing
activities.
For a manufacturing company to produce end items to meet demands the
availability of sufficient production capacity must be coordinated with the
availability of all raw materials and purchased from which, the end items are
to be produced. In other words, there is a need to manage the availability of
dependent demand items from which the products are made. Departmentdemand
items are the components i.e. material or purchased items.
MRP and MRPII: History and Evolution
Material Requirements Planning (MRP) and Manufacturing Resource
Planning (MRPII) are predecessors of Enterprise Resource Planning (ERP),
a business information integration system. The development of these
manufacturing coordination and integration methods and tools made today’s
ERP systems possible. Both MRP and MRPII are still widely used,
independently and as modules of more comprehensive ERP systems, but the
original vision of integrated information systems as we know then today
began with the development of MRP and MRPII in manufacturing.
The vision for MRP and MRPII was to centralize and integrate business
information in a way that would facilitate decision making for production
line managers and increase the efficiency of the production line overall. In
the 1980s, manufacturers developed systems for calculating the resource
requirements of a production run based on sales forecasts. In order to
calculate the raw materials needed to produce products and to schedule the
purchase of those materials along with the machine and labor time needed,
production managers recognized that they would need to use computer and
software technology to manage the information. Originally, manufacturing
operations built custom software programs that ran on mainframes.