1

Introduction to Enterprise Resource

Planning

Module I
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Business Process Reengineering(BPR)

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BPR

• BPR involves discovering how business

processes currently operate, how to
redesign these processes to eliminate the
wasted or redundant effort and improve
efficiency, and how to implement the
process changes in order to gain
competitiveness.
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• The aim of BPR, according to Sherwood-

Smith (1994), is “seeking to devise new
ways of organising tasks, organising people
and redesigning IT systems so that the
processes support the organisation to realise
its goals”
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What is BPR?

• Reengineering is the fundamental rethinking

and redesign of business processes to
achieve dramatic improvements in critical,
contemporary measures of performance,
such as cost, quality, service and speed.
(Hammer & Champy, 1993)
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BPR is Not?

• Automation

• Downsizing

• Outsourcing
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What is a Process?

• A specific ordering of work activities across

time and space, with a beginning, an end,
and clearly identified inputs and outputs: a
structure for action.
(Davenport, 1993)
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What is a Business Process?

• A group of logically related tasks that use the

firm's resources to provide customer-
oriented results in support of the
organization's objectives
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Why Reengineer?

• Customers
– Demanding
– Sophistication
– Changing Needs

• Competition
– Local
– Global
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Why Reengineer?

• Change
– Technology
– Customer Preferences
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Why Organizations Don‟t Reengineer?

• Complacency(Security)

• Political Resistance

• New Developments

• Fear of Unknown and Failure

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Performance

• BPR seeks improvements of

– Cost

– Quality

– Service

– Speed
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Key Characteristics

• Systems Philosophy
• Global Perspective on Business Processes
• Radical Improvement
• Integrated Change
• People Centred
• Focus on End-Customers
• Process-Based
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Systems Perspective

Feedback

Inputs Transformation Outputs

Environment
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Process Based

• Added Value
– BPR Initiatives must add-value over and above
the existing process

• Customer-Led
– BPR Initiatives must meet the needs of the
customer
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Radical Improvement

• Sustainable
– Process improvements need to become firmly
rooted within the organization

• Stepped Approach
– Process improvements will not happen over
night they need to be gradually introduced
– Also assists the acceptance by staff of the
change
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Integrated Change

• Viable Solutions
– Process improvements must be viable and
practical

• Balanced Improvements
– Process improvements must be realistic
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People-Centred

• Business Understanding
• Empowerment & Participation
• Organizational Culture
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Focus on End-Customers

• Process improvements must relate to the

needs of the organization and be relevant to
the end-customers to which they are
designed to serve
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Radical Improvement

• Sustainable
– Process improvements need to become firmly
rooted within the organization

• Stepped Approach
– Process improvements will not happen over
night they need to be gradually introduced
– Also assists the acceptance by staff of the
change
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Integrated Change

• Viable Solutions
– Process improvements must be viable and
practical

• Balanced Improvements
– Process improvements must be realistic
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People-Centred

• Business Understanding
• Empowerment & Participation
• Organizational Culture
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Focus on End-Customers

• Process improvements must relate to the

needs of the organization and be relevant to
the end-customers to which they are
designed to serve
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BPR Symbols
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Business Process Flowchart Symbols

An Activity

A Document

A Decision

Data (input as outputs)

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Business Process Flowchart Symbols

A Predefined Process

Start The Start of a Process

End The End of a Process

Representing a Relation
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Business Process Flowchart Symbols

Continuation of the process at the same page

at an equal symbol with the same number. Used
when a relation arrow crosses another relation arrow

Off-Page Connector - Process will continue on the

next page

Integration Relation - A relation to another module is

identified and described
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Data Flowchart Symbols

An Activity

A Document

A Decision

Flat Data File (input as outputs)

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Data Flowchart Symbols

Manual Data Item

A Database File

Representing a Relation

Continuation

Off-Page Connector
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Rules For Data Symbols

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Rules For Data Symbols

Start Symbol used to identify the start of a business

process
Generate
Purchase
Order Activities must be described as a verb

OK? Yes
Decisions have only two possibilities (Yes & No)
No

Crossing lines are not allowed

End
If one side of the decision has no further processes
defined this symbol has to be used
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Rules For Data Symbols

I Continuation symbol within the same number must

be present twice on the same page

Purchase
Order Name the document

Off- Page Connector is used to continue a process

A at the next page or to let the process to flow over at
the previous to the next page. If more than one is
needed use A, B, C, D …

Posting
of Bonus Name the data
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Rules For Data Symbols

Predefined Processes always have a relation to

Sub-Process level and stream by a number in the line below a
Delivery sub-process description

BC 4.04 A predefined process must be described in a

different flowchart. To make the relation clear
between the predefined process and the belonging
flowchart a unique alpha numeric number should be
assigned to this predefined process.
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Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan
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Select the Process & Appoint Process Team

• Two Crucial Tasks

– Select The Process to be Reengineered

– Appoint the Process Team to Lead the

Reengineering Initiative
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Select the Process

• Review Business Strategy and Customer

Requirements

• Select Core Processes

• Understand Customer Needs

• Don‟t Assume Anything

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Select the Process

• Select Correct Path for Change

• Remember Assumptions can Hide Failures

• Competition and Choice to Go Elsewhere

• Ask - Questionnaires, Meetings, Focus

Groups
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Appoint the Process Team

• Appoint BPR Champion

• Identify Process Owners

• Establish Executive Improvement Team

• Provide Training to Executive Team

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Core Skills Required

• Capacity to view the organization as a whole

• Ability to focus on end-customers

• Ability to challenge fundamental

assumptions

• Courage to deliver and venture into unknown

areas
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Core Skills Required

• Ability to assume individual and collective

responsibility

• Employ „Bridge Builders‟

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Use of Consultants

• Used to generate internal capacity

• Appropriate when a implementation is
needed quickly
• Ensure that adequate consultation is sought
from staff so that the initiative is
organization-led and not consultant-driven
• Control should never be handed over to the
consultant
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Understand the Current Process

• Develop a Process Overview

• Clearly define the process
– Mission
– Scope
– Boundaries
• Set business and customer measurements
• Understand customers expectations from the
process (staff including process team)
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Understand the Current Process

• Clearly Identify Improvement

Opportunities
– Quality
– Rework
• Document the Process
– Cost
– Time
– Value Data
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Understand the Current Process

• Carefully resolve any inconsistencies

– Existing -- New Process
– Ideal -- Realistic Process
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Develop & Communicate Vision of Improved Process

• Communicate with all employees so that

they are aware of the vision of the future

• Always provide information on the progress

of the BPR initiative - good and bad.

• Demonstrate assurance that the BPR

initiative is both necessary and properly
managed
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Develop & Communicate Vision of Improved Process

• Promote individual development by

indicating options that are available

• Indicate actions required and those

responsible

• Tackle any actions that need resolution

• Direct communication to reinforce new

patterns of desired behavior
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Identify Action Plan

• Develop an Improvement Plan

• Appoint Process Owners

• Simplify the Process to Reduce Process

Time

• Remove any Bureaucracy that may hinder

implementation
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Identify Action Plan

• Remove no-value-added activities

• Standardize Process and Automate Where

Possible

• Up-grade Equipment

• Plan/schedule the changes

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Identify Action Plan

• Construct in-house metrics and targets

• Introduce and firmly establish a feedback

system

• Audit, Audit, Audit

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Execute Plan

• Qualify/certify the process

• Perform periodic qualification reviews
• Define and eliminate process problems
• Evaluate the change impact on the business
and on customers
• Benchmark the process
• Provide advanced team training
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Information Technology & BPR

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Benefits From IT

• Assists the Implementation of Business

Processes
– Enables Product & Service Innovations
– Improve Operational Efficiency
– Coordinate Vendors & Customers in the Process
Chain
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Computer Aided BPR (CABPR)

• Focus
– Business Processes
– Process Redesign
– Process Implementation
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BPR Challenges
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Common Problems

• Process Simplification is Common - True

BPR is Not
• Desire to Change Not Strong Enough
• Start Point the Existing Process Not a Blank
Slate
• Commitment to Existing Processes Too
Strong
– REMEMBER - “If it ain‟t broke …”
• Quick Fix Approach
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Common Problems with BPR

• Process under review too big or too small

• Reliance on existing process too strong
• The Costs of the Change Seem Too Large
• BPR Isolated Activity not Aligned to the
Business Objectives
• Allocation of Resources
• Poor Timing and Planning
• Keeping the Team and Organization on
Target
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Summary
• Reengineering is a fundamental rethinking
and redesign of business processes to
achieve dramatic improvements

• BPR has emerged from key management

traditions such as scientific management
and systems thinking

• Rules and symbols play an integral part of all

BPR initiatives
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BPR TOOLS AND TECHNIQUES

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Following are some of the tools and

techniques for the successful application of
reengineering.
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• Process Visualisation: For a process to be

reengineered the “end state” is to be
visualized in prior to the defining and
establishment of the systems needed to
implement the new innovation. The
development of the vision of a process is the
key to the successful reengineering
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• Process mapping/operational method

study: Operational method study is one of
suitable tool to reengineering. It involves the
systematic investigation of the present way
of doing a particular job with an aim of doing
the same job in a better way at reduced cost
and/or time.
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• Change Management: It refers the management of

organizational Change and is an important tool for
successful reengineering. This refers the human
side of reengineering. Generally there will be
resistance from employees to change as if it affects
their level of performance. So change management
is to be effectively used to overcome the resistance
that arises because of reengineering. Benchmarking:
Benchmarking is an essential and integral part of
reengineering. It allows the visualization of the best
processes that are in use in other organizations.
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• Process and customer focus: Sometimes

the primary objective of reengineering is
solely to redesign the processes to improve
the customer satisfaction. This provides a
lead to improve the process to improve the
quality and/or minimise the costs.
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MRP & ERP

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MATERIAL REQUIREMENT PLANNING

• Material requirement planning is not only a technique

for planning “material” requirements. It is also a logic
that relates all the activities in a company to customer
demands.

• People can manage all the resources in a company by

using MRP logic together with data processing in other
areas. This entire system is called a Manufacturing
Resources Planning System, or MRP II.
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• With the introduction of technological

enhancements such as open systems
platforms and client/server architecture,
MRP II systems are now evolving into
Enterprise Resource Planning Systems
(ERP).
• An ERP system plans not only the allocation
of manufacturing resources but also other
resources, and has applications in service as
well as manufacturing industries.
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MRP Input Data

• MRP is to translate the requirement of end

products stated in MPS into the requirement
of components and materials. MPS is the
most direct input to MRP. Other input data
include inventory status, bill of material
(BOM), fundamental data in item master file,
and shop calendar.
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MPS :

• It is the schedule for end items. It states the

quantity and timing of production of specific end
items. Master Production Scheduling is a
procedure to determine the production schedules
and the available-to-promise (ATP) of the end
products. Based on MPS, MRP calculates the
replenishment plans from the items in the level
below the end products down to the raw materials
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BOM :

• describes the structure of the products. It

states, from level to level, the components
needed to make the parent items. By using
BOM, the requirements of end products are
expanded to include the requirements of the
components, and hence the requirements of
all the lower level materials.
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Inventory Status:

• In expanding the lower level requirements, what we obtain

are gross requirements. Gross requirement is not the real
requirement. Net requirement is calculated by subtracting the
inventory from the gross requirement. Since MRP is time-
phased, both on-hand and on-order inventories are
considered. On-hand inventory is the present inventory; on-
order inventory is the future inventory, and has to be
represented by both quantity and receiving date.
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Fundamental data in item master file :

• The attributes of all items including raw materials, works-in-

process, semi-finished goods, or finished goods, are
expressed in the item master file. Part number, lead-time,
safety stock, lot-sizing rule, low level code, etc. are required by
the MRP processor. Low level code is used to determine the
sequence of MRP calculation. Safety stock and lot-sizing rule
are used to decide the quantity of the material replenishments.
Lead-time is used to decide the time to replenish the required
materials.
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Shop Calendar

• MRP systems are time-phased. Time bucket is an interval

used to break time into discrete chunks. The length of a time
bucket is defined according to the characteristics of a
business. Commonly used time bucket includes week and
day, i.e., numbered-week calendar (00-99) and numbered-
day calendar (M-day calendar, 000-999). Planning horizon is
the amount of time the master schedule and MRP extend into
the future. The planning horizon should cover at least the
cumulative lead-time to produce a product.
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MRP Procedure
• MPS procedure consolidates the independent demands of forecasts
and customer orders to determine the requirements of the end products
in each time bucket in the planning horizon.

• After netting the on-hand and on-order inventory, and offsetting the
lead-time, the production schedule of the end products, MPS, is
determined.

• In MPS procedure, the available-to-promise (ATP) is also determined.

• MPS is then fed into the MRP procedure to determine the requirements
of the lower level components and raw materials.
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Evolution of ERP

• ERP (Enterprise Resource Planning) is the

evolution of Manufacturing Requirements
Planning (MRP) II.
• From business perspective, ERP has
expanded from coordination of
manufacturing processes to the integration
of enterprise-wide backend processes.
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The following table summarizes the evolution of ERP from

1960s to 1990s.
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Evolution of ERP Systems

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• In 1960s most organizations designed, developed and

implemented centralized computing systems, mostly
automating their inventory control systems using inventory
control packages (IC).

• These were legacy systems based on programming

languages such as COBOL, ALGOL and FORTRAN.

• Material requirements planning (MRP) systems were

developed in the 1970s which involved mainly planning the
product or parts requirements according to the master
production schedule.
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• Following this route new software systems called manufacturing

resources planning (MRP II) were introduced in the 1980s with an
emphasis on optimizing manufacturing processes by synchronizing the
materials with production requirements.

• MRP II included areas such as shop floor and distribution management,

project management, finance, human resource and engineering. ERP
systems first appeared in the late 1980s and the beginning of the 1990s
with the power of enterprise-wide inter-functional coordination and
integration.
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• Based on the technological foundations of MRP and MRP II,

ERP systems integrate business processes including
manufacturing, distribution, accounting, financial, human
resource management, project management, inventory
management, service and maintenance, and transportation,
providing accessibility, visibility and consistency across the
enterprise.
• During the 1990s ERP vendors added more modules and
functions as “add-ons” to the core modules giving birth to the
“extended ERPs.” These ERP extensions include advanced
planning and scheduling (APS), e-business solutions such
as customer relationship management (CRM) and supply
chain management (SCM). Figure summarizes the historical
events related with ERP.
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ERP

• Enterprise resource planning systems or enterprise

systems are software systems for business
management, encompassing modules supporting
functional areas such as planning, manufacturing,
sales, marketing, distribution, accounting, financial,
human resource management, project
management, inventory management, service and
maintenance, transportation and e-business.
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• The architecture of the software facilitates

transparent integration of modules, providing
flow of information between all functions
within the enterprise in a consistently visible
manner.
• Corporate computing with ERPs allows
companies to implement a single integrated
system by replacing or re-engineering their
mostly incompatible legacy information
systems.
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Some definitions

• “a method for the effective planning and controlling of all

the resources needed to take, make, ship and account for
customer orders in a manufacturing, distribution or service
company.”

• “ERP (enterprise resource planning systems) comprises of

a commercial software package that promises the
seamless integration of all the information flowing through
the company–financial, accounting, human resources,

supply chain and customer information”

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• “ERP systems are configurable information

systems packages that integrate information
and information-based processes within and
across functional areas in an organization”

• “One database, one application and a unified

interface across the entire enterprise”
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REASONS FOR THE GROWTH OF ERP

• Growth Reasons for a New Manufacturing ERP System

There are lots of reasons that might make you consider implementing a
new manufacturing ERP system. If you're having problems with the
following growth situations than it is definitely time for new ERP software
that better fits your needs.

• Does your ERP solution offer simple implementation options for

more efficient new technologies and functionality, such as barcodes,
warehouse management, and fixed asset tracking?

Customers are attracted to easy solutions to their business needs and

technology is developed based on that need. If your ERP software doesn't
allow your functionality to keep pace with current technology and business
options, then new customers will be hard to find.
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Benefits of ERP

• One common system - less duplication, more

efficient
• Customer focus - better customer service 
Open communications among business
partners
• Adherence to standard business practices
• Removes need for in-house development
• Good reporting capabilities
• Support for multiple currencies and
languages.
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Disadvantages of ERP

• High cost
• Forced change of processes
• Very complex software
• Lack of trained people
• Not Internet-ready
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ERP Vendors

• SAP - Systems Applications Products in

Data Processing
• BAAN -
• Peoplesoft
• Oracle
• J.D. Edwards
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END OF MODULE I