Unit 1

Introduction to Enterprise Resource Planning (ERP )

Definition of Information System
 “Information systems (IS) is the study of complementary networks of hardware
and software that people and organizations use to collect, filter, process, create,
and distribute data.”
 “Information systems are combinations of hardware, software, and
telecommunications networks that people build and use to collect, create, and
distribute useful data, typically in organizational settings.”
 “Information systems are interrelated components working together to collect,
process, store, and disseminate information to support decision making,
coordination, control, analysis, and viualization in an organization.”
 As you can see, these definitions focus on two different ways of describing
information systems: the components that make up an information system and
the role that those components play in an organization.

Information System and Its Components

Components of
information system Definitions

Data Input the system takes to produce information

A computer and its peripheral equipment: input, output and storage devices;
Hardware hardware also includes data communication equipment

Sets of instructions that tell the computer how to take data in, how to process it, how
Software to display information, and how to store data and information

Hardware and software that facilitates fast transmission and reception of text, pictures,
Telecommunications sound, and animation in the form of electronic data

Information systems professionals and users who analyse organisational information

needs, design and construct information systems, write computer programs, operate
People the hardware, and maintain software

Rules for achieving optimal and secure operations in data processing; procedures
Procedures include priorities in dispensing software applications and security measures
The first way to describe information systems that they are made up of five
components: hardware, software, data, people, and process. The first three, fitting
under the technology category, are generally what most students think of when asked
to define information systems. But the last two, people and process, are really what
separate the idea of information systems from more technical fields, such as
computer science. In order to fully understand information systems, students must
understand how all of these components work together to bring value to an
organization.

Hardware
Information systems hardware is the part of an information system you can touch –
the physical components of the technology. Computers, keyboards, disk drives, iPads,
and flash drives are all examples of information systems hardware.

Software

Software is a set of instructions that tells the hardware what to do. Software is not
tangible – it cannot be touched. When programmers create software programs, what
they are really doing is simply typing out lists of instructions that tell the hardware
what to do. There are several categories of software, with the two main categories
being operating-system software, which makes the hardware usable, and application
software, which does something useful. Examples of operating systems include
Microsoft Windows on a personal computer and Google’s Android on a mobile phone.

Data
The third component is data. You can think of data as a collection of facts. For
example, your street address, the city you live in, and your phone number are all
pieces of data. Like software, data is also intangible. By themselves, pieces of data
are not really very useful. But aggregated, indexed, and organized together into a
database, data can become a powerful tool for businesses.

People
When thinking about information systems, it is easy to get focused on the technology
components and forget that we must look beyond these tools to fully understand how
they integrate into an organization. A focus on the people involved in information
systems is the next step. From the front-line help-desk workers, to systems analysts,
to programmers, all the way up to the chief information officer (CIO), the people
involved with information systems are an essential element that must not be
overlooked.
Process
The last component of information systems is process. A process is a series of steps
undertaken to achieve a desired outcome or goal. Information systems are becoming
more and more integrated with organizational processes, bringing more productivity
and better control to those processes. But simply automating activities using
technology is not enough – businesses looking to effectively utilize information
systems do more. Using technology to manage and improve processes, both within a
company and externally with suppliers and customers, is the ultimate goal.

Porters Value Chian:-

The idea of the value chain is based on the process view of organisations, the idea of
seeing a manufacturing (or service) organisation as a system, made up of
subsystems each with inputs, transformation processes and outputs. Inputs,
transformation processes, and outputs involve the acquisition and
consumption of resources - money, labour, materials, equipment, buildings,
land, administration and management. How value chain activities are carried out
determines costs and affects profits.

Most organisations engage in hundreds, even thousands, of activities in the process

of converting inputs to outputs. These activities (Value) can be classified generally
as either primary or support activities that all businesses must undertake in some
form. According to Porter (1985),the primary activities are:
 Inbound Logistics- involve relationships with suppliers and include all the
activities required to receive, store, and disseminate inputs.
 Operations- are all the activities required to transform inputs into outputs
(products and services).
 Outbound Logistics- include all the activities required to collect, store, and
distribute the output.
 Marketing and Sales- activities inform buyers about products and services,
induce buyers to purchase them, and facilitate their purchase.
 Service- includes all the activities required to keep the product or service
working effectively for the buyer after it is sold and delivered.
Secondary activities are:
1. Procurement - is the acquisition of inputs, or resources, for the firm.
2. Human Resource management - consists of all activities involved in
recruiting, hiring, training, developing, compensating and (if necessary)
dismissing or laying off personnel.
3. Technological Development - pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's transformation
of inputs into outputs.
4. Infrastructure - serves the company's needs and ties its various parts together,
it consists of functions or departments such as accounting, legal, finance,
planning, public affairs, government relations, quality assurance and general
management.

Role Of ERP in Organization

What is ERP and How Does it Work?

1. Enterprise Resource Planning (ERP) is a business process management

software.
2. This is used by an organization to manage the office and automate the
business functions. These system make the data easily accessible and
more usable in terms or organization of files.
3. This allows accurate planning by the company and have result oriented
approach.
 4. The company can also schedule the daily activities with the help of ERP
software solutions. It also helps in managing the finances well.
5. These software play a very crucial role in the development of a company.
6. ERP solutions also help in managing the records of the employees and
allow the employer to plan the growth accordingly.
7. This also allows the company to have fluent communication with the
clients.
8. It is a very cost effective system and the benefits are always greater than
investment. This helps in long-term planning and management.
9. This eliminates the need of multiple management software. It helps to
integrate the interaction between marketing, sales, quality control, product
processes, supply lines, stocks, human resource module, customer
relationship management, information technology, and many other
functions in a single database.
10. It reduces the chances of typing errors and re-entry.
11. Enables the company to use a single software and maintain one
database for the whole company.

ERP software Why is Important for Business?

 ERP tools help in managing accounts, employee records and internal and
external factor affecting the company.
 It reduces cost in the long term by increasing the productivity.
 Reduces the time and effort of managing records as compared to the
paper records.
 The merger of financial and operational information allows the company
to analyse the business needs and act in a more effective manner.
 By combining all the records in one whole, ERP makes the management
of data easier and more productive.
 Apart from records, ERP also helps in the management of material and
ensures that no material is lost or stolen. It would also automate the
process of buying and maintaining material after analyzing the stock.
 Helps the company to predict market trends and decide the course of
action accordingly.
 Allows the company to expand business using the internet.

Dig:ERP system Concept

 Evolution of ERP system:
 ERP systems surfaced in the market in the late 1980s and the beginning
of the 1990s, targeting mainly large complex business organizations.
During the 1960s, most organisations designed, developed, and implemented
centralised computing systems, mostly automating their inventory control
systems using inventory control (IC) packages.
 Material requirements planning (MRP) systems were developed in the 1970s
and involved mainly planning the product or parts requirements according to
the master production schedule.
 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 synchronising the materials with production
requirements. MRP II included areas such as shop floor and distribution
management, project management, finance, human resource, and engineering.
 Based on the technological foundations of MRP and MRP II, ERP systems
integrate business processes including manufacturing, distribution, accounting,
finances, human resource management, project management, inventory
management, service and maintenance, transportation providing accessibility,
visibility, and consistency across the enterprise.
Three-Tier Architecture of ERP system

ERP applications are most commonly deployed in a distributed and often widely dispersed
manner. While the servers may be centralized, the clients are usually spread to multiple
locations throughout the enterprise.

Generally there are three functional areas of responsibility that is distributed among the
servers and the clients. First, there is the (1.) database component - the central repository
for all of the data that is transferred to and from the clients. Then, of course, the (2.) clients -
here raw data gets inputted, requests for information are submitted, and the data satisfying
these requests is presented. Lastly, we have the(3) application component that acts as the
intermediary between the client and the database. Where these components physically
reside and how the processes get distributed will vary somewhat from one implementation to
the next. The two most commonly implemented architectures are outlined below.

Two-tier ImplementationsIn typical two-tier architecture, the

server handles both application and database duties. The
clients are responsible for presenting the data and passing user
input back to the server. While there may be multiple servers
and the clients may be distributed across several types of local
and wide area links, this distribution of processing
responsibilities remains the same.

Three-tier Client/Server Implementations

In three-tier architectures, the database and application
functions are separated. This is very typical of large production
ERP deployments. In this scenario, satisfying client requests
requires two or more network connections. Initially, the client
establishes communications with the application server. The application server then creates
a second connection to the database server.