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Major topics Modules of ERP Human Resources Management Financial Management Inventory Management Quality Management Sales and Distribution (Murlidhar Group of Institutions, Bhavnagar Road, Rajkot) by:-assist. Prof. Vijay Vora (ERP: 3: Modules of ERP) MCA-I 2
What is Business? Not just buildings, machinery or money. Business is people who voluntarily come together because they can do much more working together than they could work alone. There are also people who work on their own known as Entrepreneurs. Land, labor and capital when combined in a rational way becomes productive. ERP Systems help the management by making the planning process more productive and efficient. 3
In a non ERP situation! Company receives a purchase order Order entry clerk enter the order details Order details passed on to the finished goods inventory section Inventory clerk will check whether the items ordered are available or not. If items are available, the distribution department is notified, they will pack the item and send it to the customer. 4
If the item is not in stock then the production planning department is notified, which in turn schedules the item for production. The manufacturing department receives the production plan and checks whether all the items required to make the in the inventory. If not, the purchasing department is asked to procure raw materials. If the materials are available, then the production department in association with the plant maintenance sets up the machines for production. 5
In an ERP situation! Order processing in an ERP System (Murlidhar Group of Institutions, Bhavnagar Road, Rajkot) by:-assist. Prof. Vijay Vora (ERP: 2: ERP and related Technology) MCA-I 6
Same activities happens differently in an ERP System. As soon as order entry clerk, enters the order into the system, the system clerk checks the inventory records, and finds out whether the items are available or not. If the items are available, procedures are triggered automatically that will inform the people in the sales and distribution department and finance department. The information will contain the details of the items shipped, the most economic route to the customer and so on. 7
System will trigger the procedures in the financial module so that invoices are sent to the customer. The information is transferred electronically through electronic data transfer and payments received through Electronic Funds transfer. If items are not available, then the production planning module makes a production schedule which is available to the production, material management and plant maintenance so that everybody is prepared to start the production schedule. 8
Functional Modules of ERP Software All ERP packages contain many modules. The number and features of the modules vary with the ERP packages. Some of the most common modules available in almost all packages are: Financial module Manufacturing module HR module Materials management module Production planning module Plant maintenance module Purchasing module Marketing module Sales and distribution module 9
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1. Human Resources Management
Introduction Human Resources is another widely implemented ERP module. HR module make more efficient the management of human resources and human capitals. HR modules routinely maintain a complete employee database including contact information, salary details, attendance, performance evaluation and promotion of all employees. Advanced HR module is integrated with knowledge management systems to optimally utilize the expertise of all employees. 12
The different ERP systems offer many different sub-systems systems under the HR umbrella. Listed below are some of the most common sub- systems. Personnel management Organizational management Payroll accounting Time management Personnel development 13
Personnel management Personnel management includes numerous software components, which allow to deal with human resources tasks more quickly, accurately and efficiently. Personnel management includes.. Personnel administration Information shared and administrate by multiple entities across organization. This eliminates duplicate entries, the chance for error and improves data accuracy. Employee Master Data The HR module has a centralized database with integration to multiple components for processing employee information. 14
Recruitment Management This subsystem helps in hiring the right people with the right skills. Travel management This module helps to process the travel expenses effortlessly in several currencies and formats. 15
Benefits administration This system bring flexibility and power to benefits program. As organizations continue to grow, as laws change and employee requirements expand, organization need a flexible system to satisfy all their requirements. The benefits administration component provides the capabilities and flexibility to effectively manage benefits programs for diverse employee populations. Salary Administration This function helps in simplifying the process of rewarding employees 16
Organizational management With this module one can maintain an accurate picture of organization s structure. It will assist in maintaining an accurate picture of organization s structure, no matter how fast it changes. Payroll accounting The payroll accounting system can fulfill the payroll requirements and provide with the flexibility to respond to changing needs. Payroll accounting should address payroll functions from a global point-of-view. 17
Time management This module assists in simplifying the administration and evaluation of time data. Time management is a powerful tool that helps to administer and evaluate data related to the employees spend working. This component can simplify efforts whether organization uses centralized or decentralized data, to determine employees working hours. Time management module includes.. Shift planning Work schedules Time recording Absence determination 18
Personnel development This function helps in selecting the best people and enhancing careers more effectively. Effective personnel development planning ensures that the goals of the organization and the goals of the employee are in synchronization. The benefits of such planning include improvements in employee performance, employee potential, staff quality, working climate and employee morale. Training and Event Management module comes under the Personnel development module 19
Training and Event Management Every successful organization should plan the training and events faster then ever before. A A good HR system will have features to assist with planning, managing and analyzing scheduled seminars, training courses, and business events. 20
2. Financial Management
Introduction A A set of processes are required so that they can provide the financial information in the form that is required by the user The financial application component of the ERP provides the information of financial functionality across the different business area. The finance module of ERP also provides analysis support to the business. 22
The finance module of the most ERP system will have the following subsystems: 1. Financial Accounting General Ledgers Accounts Receivable / Payable, Fixed Asset Accounting Legal Consolidation. 2. Investment Management Investment Planning / Budgeting / Controlling, Depreciation Forecasting/Simulation/Calculation 23
3. Controlling Overhead Cost Controlling, Activity Based Costing, Product Cost Cost Object Controlling Profitability Analyses 4. Treasury Cash Management, Treasury Management, Market Risk Management, Funds Management 5. Enterprise Controlling EIS, Business Planning and Budgeting, Profit Center Accounting By:-Assist. Prof. Vijay Vora (ERP: 3: Modules of ERP) MCA-I (Murlidhar Group of Institutions, Bhavnagar Road, Rajkot) 24
1. Financial Accounting The financial accounting system objective is to provide company-wide control and integration of financial information which is required for strategic decision making. The Financial Accounting Module of an ERP system, gives the ability to centrally track financial accounting data within an international framework of multiple currencies, companies and languages. Eg: When raw material moves from inventory into manufacturing, the system reduces quantity values in inventory and subtracts value for inventory account in the balance sheet. 25
1.1 General Ledgers The general ledger is essential to both financial accounting system and to strategic decision making. The general ledger supports all the functions which are required in financial accounting system. The GL provides document parking, posting, reporting, and an integrated financial calendar for automating periodic activities. The output generated by the general ledger is the data summary that can be used in planning, distribution and reporting. 26
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1.2 Accounts Receivable / Payable ERP system provides a financial overview of business partner relationships by maintaining accounts payable & receivable. These accounts are integrated with general ledger and it is associated in sales and distribution & material management. The accounts receivable and payable functions include: Internet Integration Document Management Automatic Integration with Cash Management The module also provides, enterprise wide credit management with workflow integration. 28
1.3 Fixed Asset Accounting This module manages the company s fixed asset It provides the detailed information on asset related transactions. The functions performed by this module are: Provides with depreciation charge. Support throughout the complete lifecycle of the asset. Management of capital assets. Integration with Plant Maintenance for management of machinery and equipment. Fixed Assets: It does not change. Eg: Land & Building Current Assets: It keeps on changing. Eg: Cash 29
1.4 Legal Consolidation (merge). All the financial statements should be integrated effectively with the operational data. The legal consolidation helps in the direct data transfer from individual statements into the consolidated report. The legal consolidation helps to create multiple views of consolidated data and thus one can generate separate reports for the different functions of an organization. 30
2. Investment Management Investment management process starts from the planning of an organization till the settlement of an organization. The investment programs are carried out in each and every department and it also tells the up to date information about funds, plant cost and actual cost from external and internal activities. The investment program allows to distribute budgets which help to monitor the budget and avoid over run. It also helps to manage and plan capital projects. The investment measures that need to be monitored are done from time to time according to the internal order. 31
3. Controlling This module gathers the functions required for effective internal cost accounting. It offers a flexible information system, with standard reports and helps in analysis. Overhead Cost Controlling The over head cost controlling system focuses on monitoring and the allocation of overheads. Cost center Accounting It analyses where the overheads have occurred in the organization. 32
Overhead Orders This system collects and analyses costs and also checks and monitors the budget that has been assigned. Activity based Costing This module gives a response to the growing need for monitoring and controlling cross- departmental business processes. Product cost controlling It determines the cost arising from manufacturing a product or providing a service. 33
Cost Object Controlling This module helps in monitoring the manufacturing orders. Follow up calculations determine and analyze the variances between actual manufacturing cost, and the plan cost resulting from product cost planning. Profitability Analyses Profitability analysis subsystem examines the sources of returns. 34
4. Treasury The organization can gain a significant competitive advantage by efficiently managing the short term, medium term and long term payment flows and managing the risk. All these operating divisions are linked so that the financial transactions can be planned and these positions in treasury have a significant impact on the organizations success. The treasury component provides us with the following sub components: Cash Management Treasury Management Market Risk Management Funds Management 35
5. Enterprise Controlling Enterprise controlling comprises of those functions that will optimize share-holder holder value, while meeting internal objectives for growth and investment. This module includes: Executive Information System (EIS) It provides an overview of the critical information necessary to manage the organization. It integrates data from other ERP components and non-erp data sources both inside and outside the enterprise. Drill-down reporting and report portfolio are available to evaluate and present the data. 36
Business Planning and Budgeting, Business Planning and Budgeting supports the management team of business units and groups in the calculation of business targets such as return on investment. Profit Center Accounting It analyzes the profitability of internal responsibility centers. All business transactions in financial accounting, material management, asset management,and sales and distribution, which affects profit, are automatically reflected in profit center accounting. 37
3. Material Management
Introduction The Material Management module optimizes all purchasing processes with workflow-driven processing functions. It also enables Automated supplier evaluations, Lower procurement cost, Warehousing costs with accurate inventory, Warehouse management, Integrates invoice verification, etc 39
The main modules of the Material Management module are: Pre-Purchasing Purchasing Activity. Purchasing. Vendor Evaluation. Inventory management. Invoice verification and material inspection. 40
Pre-Purchasing Purchasing Activity. This system supports the complete cycle of tenders It also contract and acceptance of services and also include maintaining a service master database, in which the descriptions of all services that are to be procured can be stored. 41
The steps that are followed in the pre-purchasing purchasing activity are shown in the diagram that follows: 42
Purchasing. Purchasing is a very important component of the material management module. It supports all the phases of material management, material planning and control, purchasing, goods receiving, inventory management and invoice verification. Good communication between all parties in the procurement process is necessary for purchasing to function smoothly. 43
Purchasing communicates with other modules in the system to ensure a constant flow of information. For example it works side-by-side with the following modules : Cost Accounting System Financial Accounting, Sales and distribution 44
Vendor Evaluation. The vendor evaluation component has been completely integrated into the Material Management module. Information such as delivery dates, prices and quantities can be taken from purchase orders. Vendor Evaluation also uses data from Quality Management, such as the results of incoming inspections or quality audits. 45
The vendor evaluation system supports the optimization of the procurement process in the case of both material and service. By evaluating vendors, one can improve enterprises competitiveness. Most of the vendor evaluation systems offers a point-based evaluation system, based on certain selection criteria. Most systems have their own pre-defined set of criteria, but will allow the user-defined set of criteria also. Using these criteria, the performance of the vendors is measured and points are given. The main criteria that are usually used are price, quality, delivery, service and support, replacement of returns, lead time and so on. 46
Inventory management. Inventory management systems allows to manage stocks on a quantity and value basis, plan, enter and check any goods movements. The user can easily obtain an overview of the current stocks of any given material. For each material not only are the stocks in the warehouse shown, but also the stocks ordered but not yet delivered, reserved for production or for customer, and the stocks in quality inspection can be monitored. Special stocks from the vendor or from the customer are managed separately from the company s own stock Most inventory management systems support inventory methods like periodic inventory, continuous inventory, inventory sampling and cycle counting. 47
Invoice verification and material inspection. The invoice verification component is part of the material management system. It provides the link between materials management components and the financial accounting, controlling and asset accounting components. Invoice verification does not handle the payment or the analysis of invoices. The information required for these processes is passed on to other departments. 48
4. Quality Management
Introduction The ISO9000 series of standards defines the functions of quality management and the elements of a quality management system Quality Management in ERP is 100% configurable module. This module allows a wide variety of characteristics and parameters to be specified in the standard inspection operation and maintain an extensive history to improve product quality and identify recurring problems. ERP Quality Management allows the quality department to define its own quality test cases required at different stage of production, beginning from quality check required during the inward of raw materials. By:-Assist. Prof. Vijay Vora (ERP: 3: Modules of ERP) MCA-I (Murlidhar Group of Institutions, Bhavnagar Road, Rajkot) 50
CAQ and CIQ CAQ : Computer-Aided Quality Management CIQ : Computer-integrated Quality Management The requirements for quality management system changed as a result of the quality standards like ISO 9000 standards, and the term Computer-aided quality Management must also re-defined. Computer-integrated Quality Management (CIQ) is more appropriate term in comparison to Computer-Aided Quality Management (CAQ), because an isolated CAQ system cannot carry out the complete tasks of a quality management system. 51
Quality Management Module- Functions The quality Management module fulfills the following functions: 1. Quality planning 2. Quality Inspection 3. Quality Control 52
Computer-integrated Quality Management The integration of Quality Management in the ERP systems considerable advantages because only an integrated system can support all the elements of a quality management system. The Quality Management module is integrated with the master data and processes of the following applications: Materials management (purchasing, inventory management, warehouse management, material requirements planning). Production ( work scheduling, shop floor control) sales and distribution ( delivery, creation of quality certificates) 53
5. Sales and Distribution
Introduction With today s business environment characterized by growing competition decrease cycle times and the accelerating speed of technological innovation companies are increasingly being forced to make more efficient business processes. Here, increased efficiency in sales and distribution is a key factor to insure that companies retain a competitive edge and improve both profit margins and customer service. The sales and distribution module very actively interacts with the material management and financial accounting modules for delivery and billing. 55
Sales related business transactions are : Sales queries, such as inquiries and quotations Sales orders Outline agreements, such as contracts and scheduling agreements Delivery/Shipment Invoicing/Billing After sales support 56
During sales order processing, the following basic functions are carried out: Inquiry handling Quotation preparation and processing Contracts and contract management(order management) Monitoring the sales transactions Checking for availability Transferring requirements to material planning(mrp) Scheduling the delivery Calculating pricing and taxes Checking credit limits Invoicing/Billing Creating printed or electronically transmitted documents (confirmations and so on) 57
Sub system of sales and distribution module: Master data management Order management Warehouse management Shipping Billing Pricing Sales support Transportation Foreign trade 58
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Master data management Every company will have products, customers and will require raw materials and will have suppliers. The task of the Master data management module is to keep information about all these entities, so that these can be made available to the decision makers and also for the automatic generation of reports, contracts, invoices and so on. In addition to sales and distribution, other departments of the company, such as accounting or materials management access the master data. 60
Order management This module includes.. Sales order management and purchase order management It also supports the entire sales and purchase processes from start to finish. 61
Sales order management and Applications in sales order management represents a company s most important point of contact with the customer. These applications allow a company to manage sales operations quickly and efficiently and provide comprehensive solutions for the management of quotes, orders, contracts, prices, and customer discounts. purchase order management 62
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Purchase order management Purchase order management is increasingly essential in more competitive business environment because it enables a company to make the correct purchase decisions about quality and price, where quality refers to supply lead-time as well as to the (to be purchased) product itself. Purchase order management includes online requisitioning, centralized contract management, just in time schedules and vendor management. Purchase order Analysis enables historical as well as statistical data to be used to assist in the analysis of purchase activities. 64
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Warehouse management This module provides real time information about inventory levels across the enterprise and tools to manage the daily operational needs of single-site site or multiple-site warehouses. Components of a good warehouse management application include the following: Inventory Planning Inventory handling Intelligent location assignment Inventory reporting Inventory analysis Lot control Distribution data collection 66
Inventory Planning Comprises of planned inventory movements, so that customers receive right order in the right quantity at the right time. Inventory handling Allows for monitoring of all warehouse order scenarios such as the receipt, issue and transfer of inventory. Intelligent location assignment Used to create intelligent storage put away lists. Inventory reporting This function permits full visibility of inventory at (Murlidhar Group of Institutions, single Bhavnagar or multiple Road, Rajkot) By:-Assist. sites. Prof. Vijay Vora (ERP: 3: Modules of ERP) MCA-I 67
Inventory analysis This module enables the analysis of information that result from warehousing activities and the use of feedback in process optimization. Lot control This facility offers lot tracking and tracing, so that a company can trace all the raw materials and the finished goods that its products require. Distribution data collection This is an essential element in paperless warehousing that provides the communication link between storage and shipping systems and warehousing equipment like bar coding scanners. 68
Shipping The shipping module supports the functions: Monitoring dates of orders due for delivery Creating and processing deliveries Planning and monitoring work lists, for shipping activities. Monitoring material availability and processing outstanding orders. Selection (can be linked to the Warehouse Management System) Packing deliveries. Information support for transportation planning. Support for foreign trade requirements. Printing and sending shipping output Data update in goods issue 69
The shipping Process: 70
Billing A A business transaction is completed for Sales and Distribution once it has been billed. The ERP systems support billing functions like issuing of invoices on the basis of goods and services, issuing of credit and debit memos based on corresponding requests and Performa invoices, canceling billing transactions, giving rebates, transferring billing data to Financial Accounting, Purchasing and so on. The billing system is integrated with the other modules like Financial Accounting, so that the documents are automatically generated. 71
Pricing The term pricing is used broadly to describe the calculation of prices (for external use by customers or vendors) and costs (for internal purposes, such as cost accounting). The pricing module keeps the information about the prices of the various items, the details about the quantity discounts, the discounts to the different customer categories and so on and enables the organization to generate documents like quotations, delivery notes, invoices and so on. Also, since this information is available to all the sales people, they can make better decisions thus improving the sales performance. 72
Sales support The Sales Support component helps the sales and marketing department to support existing customers and, at the same time, to develop new business. Sales Support provides an environment where all sales personnel both the field sales people and the staff in the sales office can can contribute to and access valuable information about customers, sales prospects, competitors and their products, and contact people. 73
Transportation The transportation functionality fulfills the requirements in the areas of transportation planning and processing, for both inbound and outbound shipments. One can control and monitor the entire transportation process from the planning stage right through to the dispatch of the goods from shipping point (outbound shipment) or the vendor location (inbound shipment) and their arrival at the customer location (outbound shipment) or one's own plant (inbound shipment). 74
Foreign trade In domestic and in international trade, person has to strictly follows the laws and regulations. The growing tendency towards the formation of trade areas is a further challenge to a company operating on, a worldwide basis. The entire logistics chain, from the import of raw materials, finished and unfinished goods, to the sale of goods and the transfer of data to materials management and financial accounts, is significantly influenced by foreign trade activities. These main tasks in foreign trade processing can be carried out using the foreign' trade system. 75
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