Productivity improvement Enterprise Resource Planning (ERP) solution can significantly

improve the productivity of the Manufacturing ERP sector. Use of ERP should not be
looked at as a tool for automation of the transaction system. The major objective of ERP
application should be improvement of business process.

ERP systems are designed to address the problem of fragmentation of information in

manufacturing organizations. ERP systems promise to integrate an entire business with
a suite of software modules covering activities in all areas of the business. Furthermore,
ERP is now being prompted as a desirable and critical link for enhancing integration
between all functional areas within the manufacturing enterprise.

ERP system has been defined as a packaged business software system that allows a
company, to automate and integrate the majority of its business processes, and share
common data and practices across the enterprise. Through integration of various
functions in the organization, managers and staff alike can use timely information to
make better decisions and to perform activities, which add value to the company.

Here are some of generic ERP capabilities that can

be used in the Manufacturing sector:
 ERP can transform unstructured processes into routine transactions such as
electronic approval of purchase orders based on predefined company policies.
 ERP can replace or reduce the human labour involved in processes, like
matching of supplier invoices based on accepted purchase receipts.
 ERP can transfer information rapidly and with ease over large distances. It is now
possible for various offices and factories of an organization to perform
transactions and analysis on the same server, reducing geographical distances.
 ERP can help manufacturing companies in carrying out analysis such as:
Forecasting of market demand based on statistical models; Capturing of hidden
market trends through multi-dimensional analysis; Identification of potential
improvement areas.
 ERP can bring a vast amount of detailed information into the process.
 ERP can enable changes in the sequence of task in the process, often allowing
multiple tasks to be performed concurrently.
 ERP allows the capture and dissemination of knowledge and expertise to
improve the process.
 ERP allows detailed tracking of task status, inputs and outputs.

What are the latest ERP trends?

The hype around Internet-of-Things and artificial intelligence notwithstanding, ERP trends
revolve around predictable tech developments. This niche is playing catch up to other SaaS
solutions, possibly due the more complex setup of ERP. The following are trends that are
gaining traction among ERP vendors, both legacy and startups.
1. Mobile ERP. Some ERP solutions now offer native apps for iOS, Android and
Windows. Most of these however are pared-down version featuring only the most
important KPIs like sales, leads and web traffic. Still, this means you can remain
connected and productive outside of the office.
But mobile access can be a double-edged sword. Security risk is heightened when
sensitive data is accessed anywhere and via a device not issued by the company. A
good mobile ERP allows a separate user permission to help you manage who can
access company data on their phones.
2. Social ERP. Billed as ERP 2.0, social ERP adds social media data like Twitter and
Facebook profiles and posts into the system. The integration is mainly a CRM
initiative as businesses leverage online customer engagement, brand mentions,
public data, friend network and likes and shares to gain tacit customer knowledge.
An IFS North America and Affinity Research Solutions study pointed out a number
of social ERP benefits, mainly to increase customer engagement and, ultimately,
conversion rates.
3. SaaS and On-Premise Hybrid. ERP, because of its complexity, has a lot of grey shades
in between SaaS and on-premise. There are companies that prefer a hybrid
approach, integrating cloud inventory management into their on-premise accounting-
centric ERP or a cloud payroll into a local HR-focused ERP. From a cost and
process perspective, this strategy makes sense, driving vendors both legacy and
startups to offer hybrid ERP. For example, Oracle isn’t replacing its on-premise
licensing, but co-opting it with cloud solutions. Similarly, Salesforce, a pioneer
enterprise cloud platform, offers integration with legacy on-premise solutions like
SAP and Siebel.
4. Two-tier ERP. Large multinational companies are favoring a two-tier ERP approach.
In this setup, two ERP systems are in place, tier 1 at the corporate level and tier 2 at
the subsidiary level. This strategy is borne out of the limitations realized by big
corporations in building an overarching ERP system across a multi-country
organization replete with stark regulatory, cultural, geopolitical and market
differences.
What are examples of ERP software?
 Brightpearl – a retail management ERP that focuses on order management, inventory,
accounting, customer data and reporting. If you need a reliable Brightpearl alternative check
out our other comparison articles.
 Intacct – one of the most popular cloud accounting solutions for small and medium businesses
that features ERP capabilities via integration, such as, financial management, wholesale
distribution and retail management.
 NetSuite ERP – a fully integrated ERP targeted at fast-growing companies that require scalable
financial management, fixed assets, billing, order management and inventory management. A
solid Intacct alternative.
 Odoo – among our examples of ERP software, Odoo is uniquely open-sourced, but it’s also a
commercialized ERP aimed at companies with an IT development team; it can integrate with
third-party apps for MRP, POS and ecommerce.
 PeopleSoft – an Oracle-owned HRM-focused ERP that specializes in workforce forecasting and
HR-related business strategies. It’s a really reliable NetSuite ERP alternative.
 MobilityeCommerce – an integrated marketplace and ERP solution offered as a SaaS for
distributors, wholesalers, drop shippers, and companies that sell on a global scale via online
marketplaces such as Walmart. Sears, Amazon, eBay, and more.
 VersAccounts Cloud ERP – aimed primarily at small businesses, providing them with advanced
features and functionalities to help manage, monitor, report, and consolidate data across
their inventories, finances, reports, and revenue.
 Scipio ERP – an open source enterprise resource planning (ERP) software that provides e-
commerce businesses with a framework for their workflows and processes.
SaaS ERP brings to the table more competitive advantages like:
 Scalability – add more features as your business grows without instaling a new system
 Mobility – access ERP data and tools anywhere, anytime via internet
 Flexibility – integrate existing apps to ERP or export ERP data to business apps
 Low capital outlay – minimum budget only for hardware, software, setup
 Maintenance-free – vendor takes care of patches, updates, troubleshooting, downtime
What are the types of ERP software?
You’ve learnt what is ERP software, let’s now look at the different types. The fluidity of ERP
dynamics and diversity of factors affecting it make it difficult to classify the category. It can
 be grouped by functional levels, business size and deployment. To simplify the types, ERP can
be grouped as follows:
1. Generalist ERP. Many legacy and cloud ERP solutions are generalists. They adapt to
processes across industries. These solutions have strong customization and integration to
match varying industry requirements. It’s also not a surprise given its large market
generalist ERP vendors are also one of the largest.
Examples: Oracle, SAP, Netsuite
2. Vertical ERP. These are industry-specific ERPs. Often, vertical ERP vendors are startups or
smaller companies that try to focus on a niche, such as, construction, supermarket
distribution or retail fashion.
Examples: Microsoft Dynamics AX, Brightpearl, Epicor Retail
3. Small business ERP. These are off-the-shelf cloud or on-premise ERP solutions. Often, the
ERP is modularized with pared-down features. Instead of delivering a fully integrated
system, small business ERP serves one or two business processes and leaves out the others.
For instance, it features HRM and accounting function only, with add-on options for CRM,
inventory or supply chain management. For this, small business ERP is also referred to as
lightweight ERP.
Example: PeopleSoft
4. Open-source ERP. Open-source ERP solutions are still a tiny fraction of the total ERP
market. But solutions like Odoo ERP lend to companies with resident tech teams the
flexibility to develop and integrate their own apps into the ERP. For developers, open-
source increases usability and user adoption because the ERP can churn out highly
customized processes.
Example: Odoo
What are the factors to consider when choosing ERP
software?
Suppose you already weighed the cost-benefit ratio of getting an ERP and you’re convinced
it’ll drive overall profitability. You now need to consider these key factors to ensure you
optimize its ROI.
1. Upgrade vs. replacement. Evaluate first if you need to get a new ERP system or just an
upgrade. Many ERP solutions today are modularized; you can simply integrate a module, for
instance payroll, with your current applications. This way you minimize disruption and costs.
But if your ERP system is ten years or older, it may be wise to replace it. You can leverage
today’s ERP solutions for mobility, integration, scalability and deployment options. Similarly,
machine learning, predictive analysis and advanced reporting are pushing ERP to the next level.
2. Customization. Aside from ensuring the ERP processes match your key business workflows, look
closely at your departments. They may have different priorities and culture, which may even
be contradictory. For example, Marketing spends, while Accounting saves or Production lives by
daily output, while Sales lives by monthly quota. All these lead to myriad workflows that won’t
fit into a one-size solution. Look for an ERP solution with customization tools, localized
dashboards and configurable workflows, among others, that allow departments to define their
goals and set the ERP based on their parameters.
3. Reporting and dashboards. Go beyond spreadsheet and PDF exports. ERP solutions today
feature advanced reporting that can generate compliant financial statements based on your
region. The latest ERP reporting tools also allow in-system query and smart filters coupled with
real-time data. Likewise, look for agile and ad hoc reporting to quickly adjust to evolving
business needs and disruptions. Dashboards, on the other hand, should let you mash up
quantitative vs. qualitative data at user, role and department levels. Look for the standard
dashboard function of displaying KPIs with drill-down links.
4. Integration. ERP should work seamlessly with your existing business applications. There are a
number of integration points you need to consider from top to bottom. These include system-
to-system (example, ERP to your existing CRM or HRMS), module-to-system (example, ERP
payroll to your existing HRMS) and file transfer capabilities (example, exporting/importing PDF,
JPG, DOC, CSV files). An ERP with flexible integration can work with existing infrastructure,
expand its functionalities or, in fact, replace it while ensuring smooth records and files
migration.
5. Training and setup. On-premise ERP solutions need to be installed by someone with technical
knowhow. If you lack a tech team, make sure you understand your service level agreement or
SLA. Installation is often charged separately from license, but some vendors offer all-in
bundled plans. For SaaS ERP, setup is as easy as activating an account to access the vendor’s
server.
Likewise, ERP is more complex than most business solutions, so it requires user training. Does
your vendor provide this service? Whether bundled in or exclusive to the plan, the kind of
training you’ll receive should suffice for average users to adopt the system.

Key features to consider when

evaluating ERP software options
Expertise In Your Industry
For many companies selecting an ERP system is the most expensive IT decision they will make. The
most important criteria to use in narrowing down your company’s list of ERP software providers is
previous experience and expertise in your industry. There’s no one-size-fits-all ERP system that can
scale to the nuances and unique requirements of your business. Your company is unique, and you
need to find the ERP software providers who understand the unique needs and nuances of your
business and industry and translate them into an ERP system that delivers you a competitive
advantage. In selecting an ERP software provider, find those who have a successful track record of
translating your industry’s specific needs into scalable features. Second, see if there are any
customer references you can speak with in your industry, and arrange calls with them. Third,
attend ERP providers’ user conferences if possible and talk with customers in your industry and
across their entire base.
Professional Services Track Record
Interpreting specific business and strategy requirements then translating them into a reliable,
scalable ERP system that can flex and grow as your business does is what ERP providers’
professional services teams do. Professional services implementation costs for small to mid-size
implementations cost between two to four times the cost of software alone. When evaluating an
ERP software provider, get a call scheduled with VP of Professional Services and find out which
customers are going live soon and which are already launched most like your business. What’s the
average length of time it takes for a project to go live? What is their approach or methodology to
ensure customers’ needs are included in system design to the screen level? Can customers manage
the user interface or does everything have to go through professional services? Be sure to get these
questions answered at the onset to make sure expectations are on the same level with ERP
providers you are evaluating.
Committed To Usability As a Design Goal
The ERP providers that deserve to be on your short list are making ongoing investments to improve
the usability of their applications and improve the overall user experience. ERP systems are known
to be the most challenging to learn and use, and with the emphasis on user adoption driving today’s
ERP providers’ business models, improving usability is critical to their growth. Finding out how
committed the ERP providers you’re evaluating are to delivering excellent usability starts with
demos and progress to seeing actual, live customer implementations. Ask to see the last three
versions of the ERP system to see if there is progress being made on the user interface and
navigation. Ask for and get product demos that illustrate how the ERP systems you’re evaluating
complete the top five workflows most important to your business. For an excellent overview of this
and other aspects of the challenges of implementing ERP systems please see the working
paper, Challenges in Implementing Enterprise Resource Planning (ERP) system in Large
Organizations: Similarities and Differences Between Corporate and University Environment from
the MIT Sloan School of Management.
Platform Stability
Platforms available to ERP providers are proliferating accelerated by rapid the development in
cloud platforms. Early in your review cycle of ERP providers, find out which platform(s) they
support and are planning to. Finding this out will help to plan your ERP internal roadmap, ensuring
no interruption to your business when platforms change, or new ones are introduced. ERP providers
are actively competing against each other to deliver the richest set of application functionality,
integration options, usability enhancements and performance improvements. When evaluating ERP
providers ask to see the platform roadmap. Be sure also to ask if the platform is based on
proprietary code or an open architecture that scales to support expansion as your business changes
and grows. The bottom line is that the platform strategy must allow for scale and speed in flexing
to the needs of your company’s changing information needs.
Integration Expertise
Look for ERP providers who have a proven track record of excelling at integrating their system and
applications with third party platforms, systems, and applications. Integrating with legacy systems
is the most challenging area of this requirement, so be sure to ask for customer references where
the ERP providers you are evaluating have completed this level of integration. Additional questions
to ask include how much experience the ERP provider has with accounting & finance, cloud, CRM,
database, purchasing and diverse 3rd party system integration. Find out in detail how these were
completed and see how these integrations are performing from an accuracy and speed standpoint.
Scalability
The platform an ERP provider selects determines how scalable their applications and overall system
are. Scaling applications to deliver the highest performance possible requires ERP providers to have
precise metrics of how well they are performing today. Ask to see the dashboard of how the ERP
provider is tracking scalability, performance, and speed. Any cloud-based ERP provider will have
this immediately available as they are using it to manage all customer instances. For on-premise
ERP providers, ask to see the benchmarks they have done that show scale of their applications on a
variety of processors and servers. The bottom line is that scalability will make or break the success
of your ERP system to make sure to get as much data as possible on how the ERP providers you are
looking at are performing on this dimension.
Agility
How quickly an ERP system can be tailored to your changing requirements determines its agility.
Evaluating potential ERP providers on this dimension starts with a demo and walk-through of how
easy or difficult it is to change their application screens, followed by the processes to redefine the
structural components of workflows. Go through a rigorous audit of changing everything from data
elements on a screen, to the screens of interest, modifying workflows and finally changing and
adding new databases to the ERP system itself. Go through the steps required to unify diverse
databases and see how easy or difficult it is to create a new system of record for the entire ERP
system as well. The second aspect of agility is how scalable an ERP system is in supporting any web-
enabled device. State-of-the-art ERP platforms are optimized for mobile devices including
smartphones, tablets, laptops and all other Web-enabled devices. An ERP systems’ agility is also
measured in how well the user experience is delivered on all mobile devices. Leading ERP providers
concentrate on delivering excellent usability of their applications on any device, capitalizing on the
scale of their platforms to support a range of diverse devices.
Security and Data Reporting
Evaluating ERP providers on the dimensions of security and data reporting need to begin with a
thorough analysis of how well individual role-based logins, role authentication, and role-based
reporting is supported. Advanced ERP providers have the ability to define specific role-based
security and authentication, and their data security model extends to reporting and analytical tool
access and support. There is a wide variation in how much ERP providers support role-based
authentication in reporting. It is common for leading ERP providers to support over 100 potential
roles. Included in these role assignments are provided parameters and controls on specific types of
data and reports. Check to make sure your ERP provider supports this level of security and
authentication to the role and privilege level, so confidential data doesn’t get shared. All reports
need to have a document and report history option also to multi-site accounting reports that are
traceable to original data sources. Audit to the role and privilege level is also essential to keep
financial information safe in your ERP system.

ERP AND THE INTERNET

Another trend in ERP development and use involves vendors making the software
available to client companies on the Internet. Known as hosted ERP or Web-
deployed ERP, this trend has also contributed to making ERP systems available to
smaller businesses. When a company chooses to run its ERP systems through a
Web-based host, the software is not purchased by or installed at the client company.
Instead, it resides on the vendor's host computer, where clients access it through an
Internet connection. "Rather than dispersing ERP to multiple corporate sites and
incurring the costs of many servers needed to run the software, Web-deployed ERP
centralizes the system," Forger noted. "Using the Web to access a single ERP
system at a central location, companies can reduce their IT investment on two
fronts—hardware and personnel."

Running ERP systems on a host computer relieves small businesses from the need
to purchase a mainframe computer or hire information technology specialists to
support the system. In addition, this arrangement allows client companies to save
money by paying only for the ERP applications they use rather than having to buy a
certain number of modules. In effect, ERP vendors act as application service
providers (ASPs) for several client firms. "Systems supplied by ASPs are particularly
attractive to start-up companies

BPR/ ERP first

Business process reengineering (BPR) and enterprise resource planning (ERP)
implementation go hand-in-hand. But which should be done first: BPR, ERP, or both
concurrently?

Performing BPR first ensures that business processes are optimized before software
is configured and also ensures that software functionality will closely match the
actual process steps. This optimization can improve the ERP implementation by the
inclusion and configuration of relevant software features and the elimination the
unnecessary ones. Conducting a BPR exercise provides a common understanding
of business processes for employees, as well as process documentation that can
facilitate ERP education and implementation efforts

The implementation of ERP software, by its very nature, will require a review and
adjustment of business processes in order to properly install and configure the
software. While such a review and adjustment is not the equivalent of BPR, it can
accomplish some measure of process improvement and can do so more efficiently,
cost effectively, and with less prolonged disruption of personnel.

Doing BPR independently, before ERP implementation, can identify software

modifications to make “the software fit the process.” The modification of a tightly
integrated ERP system can complicate upgrades to future releases and diminish the
useful life and ROI of the overall ERP investment.

Performing BPR in conjunction with ERP implementation may not only be more cost
effective but may lead to a better end result. Most ERP systems incorporate “best
practices” within a specific industry or in general. ERP software may offer process
alternatives that were not considered in the BPR exercise. Additionally, the ERP
consultants employed to implement the software may provide process and industry
expertise that was not available during a separately performed BPR exercise.
Whether you do BPR first or concurrently with ERP implementation, you may get to
the same place. However, doing BPR as an integral part of ERP implementation may
bring together more expertise and alternatives, which can yield a better result.

SAP MM module (process flow)

MM Process flow:
The typical procurement cycle for a service or material consists of the following
phases:
1. Determination of Requirements
Materials requirements are identified either in the user departments or via materials
planning and control. (This can cover both MRP proper and the demand-based
approach to inventory control. The regular checking of stock levels of materials
defined by master records, use of the order-point method, and forecasting on the
basis of past usage are important aspects of the latter.) You can enter purchase
requisitions yourself, or they can be generated automatically by the materials
planning and control system.
2. Source Determination
The Purchasing component helps you identify potential sources of supply based on
past orders and existing longer-term purchase agreements. This speeds the process
of creating requests for quotation (RFQs), which can be sent to vendors
electronically via SAP EDI, if desired.
3. Vendor Selection and Comparison of Quotations
The system is capable of simulating pricing scenarios, allowing you to compare a
number of different quotations. Rejection letters can be sent automatically.
4. Purchase Order Processing
The Purchasing system adopts information from the requisition and the quotation to
help you create a purchase order. As with purchase requisitions, you can generate
Pos yourself or have the system generate them automatically. Vendor scheduling
agreements and contracts (in the SAP System, types of longer-term purchase
agreement) are also supported.
5. Purchase Order Follow-Up
The system checks the reminder periods you have specified and - if necessary -
automatically prints reminders or expediters at the predefined intervals. It also
provides you with an up-to-date status of all purchase requisitions, quotations, and
purchase orders.
6. Goods Receiving and Inventory Management
Goods Receiving personnel can confirm the receipt of goods simply by entering the
Po number. By specifying permissible tolerances, buyers can limit over- and under
deliveries of ordered goods.
7. Invoice Verification
The system supports the checking and matching of invoices. The accounts payable
clerk is notified of quantity and price variances because the system has access to
PO and goods receipt data. This speeds the process of auditing and clearing
invoices for payment.

SAP Sales and Distribution is one of the key components of SAP ERP
system and is used to manage shipping, billing, selling and
transportation of products and services in an organization.

SAP Sales and Distribution module is a part of SAP Logistics module that
manages customer relationship starting from raising a quotation to sales
order and billing of the product or service. This module is closely
integrated with other modules like SAP Material Management and PP.

Key Components in SAP SD

The key components in SAP Sales and Distribution module are −

 Customer and Vendor Master Data

 Sales Support

 Shipping of Material

 Sales Activities

 Billing related

 Transportation of products

 Credit Management

 Contract Handling and Management

 Foreign Trade

 Information System

SAP Sales and Distribution Cycle

SAP SD - Organizational Structure
SAP provides many components to complete SAP Sales and Distribution
organizational structure like Sales Areas, Distribution Channels,
Divisions, etc. The SAP SD organization structure majorly consists of two
steps −

 Creation of Organization elements in SAP system, and

 second is to link each element as per requirement.

On top of this organization structure in the SD module, sales organization

is at highest level and is responsible for distribution of goods and
services. SAP recommends to keep the number of sales organization in
an organizational structure to be minimum. This will help in making the
reporting process easy and ideally it should have a single sales
organization.

The next level is distribution channel, which tells the medium by which
the products and services are distributed by an organization to its end
users. Division in an organizational structure, which represents a product
or service line in a single organization.

A sales area is known as entity, which is required to process an order in

a company. It comprises of sales organization, distribution channel and a
division.
In SAP SD organizational structure, each sales organization is assigned
to a company code. Then the distribution channel and divisions are
assigned to sales organization and all of these comprise to make a sales
area.

In the first step of an SD organizational structure, sales organization is

assigned to a company code and then is to define a distribution channel
and then division to a sales organization.

The following diagram shows the organizational structure of a Sales and

Distribution module −

Material management
Material Management is one of the key modules in SAP ERP System and
covers the day to day business operations related to inventory and
procurement. This module is closely integrated with other modules of R/3
systems like Finance Accounting and Controlling, Sales and Distribution,
Quality Management, Product Planning.

Integration with Sales and Distribution SD Module

Consider an example of creating a sales order in SAP SD, it involves
copying the details of items from Material Management. Availability check
of the item and price details are also taken from MM, but this can be
controlled in the SD module. To create inbound and outbound delivery of
goods for a sales order, shipping details, loading point etc. also comes
from the Material Master.

The item that is placed using a Sales order must be extended to the
sales area of an organization to sales order/customer, otherwise it won’t
be possible to transact with this material. This confirms that there is a
link between SAP SD and MM module, when a sales order is created and
fulfilled. Similarly, there are many other links between two modules.