ERP FUNCTIONAL ARCHITECTURE

KARTHIKA SASIKUMAR

SCHOOL OF MANAGEMENT STUDIES

CUSAT, KOCHI-22

E-mail: [email protected]

ABSTRACT: The key role of an ERP system is to provide support for such business functions
as accounting, sales, inventory control, and production. ERP vendors, including SAP, Oracle,
and Microsoft, etc. provide modules that support the major functional areas of a business. The
ERP software embeds best business practices that implement the organization’s policy and
procedure via business rules. Enterprise resource planning (ERP) is the integrated
management of main business processes, often in real-time and mediated by software and
technology.

Key words: ERP, ERP Architecture, ERP Modules

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1.0. INTRODUCTION

Enterprise resource planning (ERP) is business process management software that allows an
organization to use a system of integrated applications to manage the business and automate
many back office functions related to technology, services and human resources. ERP software
typically integrates all facets of an operation — including product planning, development, ma
ERP software is considered to be a type of enterprise application, that is software designed to
be used by larger businesses and often requires dedicated teams to customize and analyze the
data and to handle upgrades and deployment. In contrast, Small business ERP applications
are lightweight business management software solutions, often customized for a specific
business industry or vertical.

Today most organizations implement ERP systems to replace legacy software or to incorporate
ERP applications because no system currently exists. In fact, a 2016 study by Panorama
Consulting Solutions, LLC., indicates that organizations implement ERP for the following
reasons:

 To replace out-of-date ERP software (49%)

 To replace homegrown systems (16%)

 To replace accounting software (15%)

 To replace other non-ERP systems / had no system (20%)

manufacturing, sales and marketing — in a single database, application and user interface.

1.1. ERP

Enterprise resource planning (ERP) is the integrated management of main business

processes, often in real-time and mediated by software and technology.

ERP is usually referred to as a category of business management software — typically a

suite of integrated applications—that an organization can use to collect, store, manage, and
interpret data from many business activities.

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ERP provides an integrated and continuously updated view of core business processes
using common databases maintained by a database management system. ERP systems
track business resources—cash, raw materials, production capacity—and the status of
business commitments: orders, purchase orders, and payroll. The applications that make
up the system share data across various departments (manufacturing, purchasing, sales,
accounting, etc.) that provide the data. ERP facilitates information flow between all
business functions and manages connections to outside stakeholders.

ERP report is used to document all the processes and activities of the business
organisation.
Enterprise resource planning (ERP) is the integrated management of core business
processes. Enterprise Resource Planning implementation is a difficult task, which takes
many months to complete and cost more than the software and hardware involved. ERP
can be implemented on time, within budget, and deliver excellent return on investment
(ROI).
ERP system can be a difficult implementation but if planned properly, managed and
supported adequately with senior management support, the new system can supply tools
and industries best practices that will take your company to next level of performance and
profit.
ERP can be used in all the departments of the company and helps you analyse the profit
and loss in the company. ERP has the ability to run the business on its own level. ERP
software helps you to manage the quality of the products of the business.
The ERP system and software minimizes implementation time and also reduces risks. ERP
for manufacturing is regarded as a great help to the manufacturing unit as almost all the
managing work of the unit is handled by ERP. ERP can help you maintain data of the
production in a organised and systematic manner. It can also help to integrate all the
processes in the department. The data maintained in ERP is secure and easy to maintain.
In this dynamically changing environment companies who want to lead in the competitive
world must adapt quickly to the changing conditions and should be able to use solutions.
Our main objective is to provide fast and effective solutions to your problems which helps to
stay ahead of the competition.
The ERP is considered to be the best solution to your business. ERP has the capability of
saving one’s business from going in loss and has been specially designed for the
manufacturing industry. Now to go with the information provided by the ERP software it is
correct

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1.1.1. ERP CHARACTERISTICS

ERP systems typically include the following characteristics

 An integrated system, where the a specific information is introduced just once in the
system

 Operates in (or near) real time

 A common database that supports all the applications

 A consistent look and feel across modules

 Installation of the system with elaborate application/data integration by the Information

Technology (IT) department, provided the implementation is not done in small steps [21]

 Deployment options include: on-premises, cloud hosted, or SaaS

1.1.2. IMPORTANCE OF ERP IMPLEMENTATION

Benefit 1 – Operating costs reduction

If you want to unite all the business processes across departments into a unified enterprise-
grade system, ERP is a perfect fit. You will improve coordination across departments and
enhance the efficiency of your employees. The immediate profit you can get from implementing
a new system is the reduction of costs like lower inventory expenses, marketing costs,
production costs, and lower desk support expenses.

Benefit 2 – Facilitation of day-to-day management

Enterprise planning software helps easily access data to make data-driven decisions faster. It
also tracks the actual costs of activities and performs activity-based costing.

Benefit 3 – Strategic planning support

Strategy planning processes define targets, objectives, goals according to work needs, assets,
and outcomes executives want to see.

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1.1.3. BENEFITS OF ERP SOFTWARE

Organizations need to be well aware of the various advantages of enterprise resource planning
software before deciding to invest in a world-class solution. Here are some major advantages
of modern ERP tools that can bring about a world of positive change in business firms:

 Increases Productivity

ERP systems enhance overall efficiency by integrating all vital business functions. Accounts,
supply chain management, marketing, and human resource processes can all be managed by
a single portal. It automates routine day-to-day tasks and is able to display data through
analytical reports. Visual dashboards allow managers to have a quick glance at parameters
and take better decisions.

 Promotes A Culture Of Collaboration

ERP is a useful system that breaks down the walls between various company departments. It
promotes the smooth flow of information between departments and helps teams work together
in an atmosphere of collaboration. This boosts innovation and also aids in keeping the work
culture healthy and harmonious.

 Stringent Data Protection

One of the best aspects of enterprise resource planning software is that it does not
compromise data security. Most modern ERP tools have a number of in-built regulatory
features that protect data from unauthorized access. It has the flexibility to detect suspicious
activity and lock out users that are not authorized to view sensitive information. This makes
sure that there are no fraudulent activities and data remains protected from miscreants or
hackers.

 Enhances Compliance

ERP solutions make sure that companies adhere to mandatory regulations and do not default
on any taxation or financial issues. They follow all essential protocols and ensure that business
organizations do not get penalized for wrongful actions. ERP platforms are indeed a smart way
to escalate industry compliance and regulation of all legal issues.

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  Accurate Business Forecasting

Advanced databases and analytical abilities make it possible for ERP systems to give accurate
business forecasts. They can throw light on strategic key areas such as expected sales,
revenues or cash flows. ERP software is an intelligent tool that facilitates organizations to
remain more proactive and gain a competitive edge in the market.

2.0. ERP FUNCTIONAL ARCHITERCTURE

An ERP system covers the following common functional areas. In many ERP systems, these
are called and grouped together as ERP modules:

 Financial accounting: general ledger, fixed assets, payables including vouchering, matching
and payment, receivables and collections, cash management, financial consolidation
 Management accounting: budgeting, costing, cost management, activity based costing
 Human resources: recruiting, training, rostering, payroll, benefits, retirement and pension
plans, diversity management, retirement, separation
 Manufacturing: engineering, bill of materials, work orders, scheduling, capacity, workflow
management, quality control, manufacturing process, manufacturing projects,
manufacturing flow, product life cycle management
 Order processing: order to cash, order entry, credit checking, pricing, available to
promise, inventory, shipping, sales analysis and reporting, sales commissioning
 Supply chain management: supply chain planning, supplier scheduling, product
configurator, order to cash, purchasing, inventory, claim
processing, warehousing (receiving, putaway, picking and packing)
 Project management: project planning, resource planning, project costing, work breakdown
structure, billing, time and expense, performance units, activity management
 Customer relationship management (CRM): sales and marketing, commissions, service,
customer contact, call center support – CRM systems are not always considered part of
ERP systems but rather business support systems (BSS)
 Data services: various "self–service" interfaces for customers, suppliers and/or employees

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 Fig 1 ERP architecture

Fig 2 ERP architecture

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 2.1. ERP MODULES

The key role of an ERP system is to provide support for such business functions as
accounting, sales, inventory control, and production. ERP vendors, including SAP, Oracle,
and Microsoft, etc. provide modules that support the major functional areas of a business.
The ERP software embeds best business practices that implement the organization’s
policy and procedure via business rules.

Fig 3 Typical ERP module

2.1.1. OVERVIEW OF MODULES

• Production
Helps in the planning and optimizing of the manufacturing capacity, parts, components, and
material resources using historical production data and sales forecasting.
• Purchasing
Streamlines the procurement process of required raw materials and other supplies.
• Inventory Management
Facilitates the processes of maintaining the appropriate level of stock in a warehouse.
 Sales and Marketing
Implements functions of order placement, order scheduling, shipping, and invoicing.
 Finance
Can gather financial data from various functional departments and generate valuable
financial reports.
 Human Resource

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 Streamlines the management of human resources and human capitals.
 Miscellaneous Modules
Nontraditional modules such as business intelligence, self-service, project management, and
e-commerce

2.1.2. BENEFITS OF ERP MODULES

 Self-Services
Flexible support for employees’ business functions.
Simplified access to relevant information.
 Performance Management
Delivery of real-time, personalized measurements and metrics.
Provides executives with access to such information as business statistics and key
performance measurements.
 Financials
Ensure compliance and predictability of business performance.
Gain deeper financial insight and control across the enterprise.
Automate accounting and financial SCM.
Rigorous support for financial reporting—SOX Act.
 HR Management
Attract the right people, develop and leverage talents, align efforts with corporate
objectives, and retain top performers.
Increase efficiency and help ensure compliance with changing global and local regulations
by using standardized and automated workforce processes.
Enable creation of project teams based on skills and availability, monitor progress on
projects, track time, and analyze results.
Manage human capital investments by analyzing business outcomes, workforce trends
and demographics, and workforce planning.
 Procurement and Logistics Execution
Sustain cost savings for all spending categories by automating such routine tasks
as converting requisitions into purchase orders and by allowing employees to use
electronic catalogs to order products and services.
Reduce costs through process automation, integration of suppliers, and better
collaboration.

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 Improve resource utilization with support for cross-docking processes and data
collection technologies. (RFID and bar codes).
Enhance productivity of incoming and outgoing physical goods movements.
Reduce transportation costs through better consolidation and collaboration
 . Product Development and Production
Shorten time to market.
Deliver higher quality products and ensure timely delivery.
Real time visibility and transparency (availability check).
 Sales and Service
Higher number of sales orders processed and reduction in administrative costs.
Easy access to accurate, timely customer information.
Cost-effective mobile access for field employees.
Reduce travel costs by using online functions.
Adhere to environmental, health, and safety reporting requirements.
Improve the management of incentives and commissions.
Realize more effective real estate management

3.0. CONCLUSION

Enterprise resource planning software can make a business more efficient than ever by
managing a wide range of business functions. It is a highly cross-functional solution that has
impressive and innovative modules. Each module is tailor-made for a specific business
function. The various ERP system modules help organizational departments undertake their
respective tasks and maintain smooth collaboration in all processes.
There are many vendors in the market who are providing cloud-based ERP platforms. Most
service providers customize personalized packages for organizations that suit their business
needs. The best aspect about enterprise resource planning software is that it is scalable, hence
it can easily expand and grow to accommodate organizational requirements. Installing an ERP
system is simple and quick – it hardly takes any time and does not have any complex hardware
requirements. ERP tools are very user-friendly and have navigable dashboards that display all
important real-time information. They do not require any technical know-how, and employees
across the organization generally easily adapt to this intuitive solution.

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 Enterprise resource planning software acts as a single unified platform despite having a wide
array of ERP system modules. It is a novel unique solution that has a centralized database that
remains accessible to all departments for better task efficiency and collaboration. It facilitates
seamless management of large volumes of data by enhancing visibility, ultimately leading to
better decision making. ERP tools can handle production, inventory, invoices, shipments,
marketing and accounting functions in organizations. They save a tremendous amount of time,
money and effort by automating routine tasks.
Enterprise resource planning tools are the future of technology. Investing in a world-class ERP
software is a sure shot way to gain a strong competitive edge and increase all your bottom line
results instantly.

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