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In the late 1990s, the year 2000, or Y2K, problem motivated many companies to move to ERP systems. As it became clear that the date turnover from December,1999 to January 1,2000 would wreak havoc on some information systems, companies searched for ways to consolidate data, and ERP systems provided one solution.
The Y2K problem originated from programming shortcuts made by programmers in the preceding decades. With memory and storage space a small fraction of what is today, early programmers developed software that used as few computer resources as possible. To save memory, programmer could just store the date as 10/29/75, rather than 10/29/1975. While this may not seem like a big storage savings, with millions of transactions needing to be manipulated, it adds up. These programmers never imagined that software written in the 1970s would still be running major companies and financial institutions in 1999. These old systems were known as legacy systems. Many companies were faced with a choice: pay programmers millions of dollars to correct the Y2K problem and in their old, limited software - or invest in an ERP system that would not only solve the Y2K problem, but potentially provide better management of their business processes as well. Thus Y2K led to the dramatic increase in business for ERP vendors in the late 1990s.
People soft was founded by David Duffield, a former IBM employee who like SAP's founders, faced opposition from IBM for his ideas. PeopleSoft with software for human resources and payroll accounting, achieved considerable success, even with companies that already were using SAP for accounting and production. Peoplesoft's success caused SAP to make significant modifications to its Human Resources module. People Soft strengthened its offerings in the supply chain area with its acquisition of JD Edwards. Today, people soft, under oracle, is a popular software choice for managing human resources and financial activities at universities.
Oracle began in 1977 as software development laboratories(SDL). Its founders, larry elison, Bob miner and Ed oates, won a contract from the central intelligence agency(CIA) to develop a system, called Oracle, to manage large volumes of data and extract information quickly. Although the oracle, to manage large volumes of data and extract information quickly. Although the oracle project was cancelled before a successful product was developed, the three founders of SDL became relational software, inc, and released its first commercial database product.
The concept of an enterprise resource system are similar for large vendors, such as SAP and Oracle, and for the many smaller vendors of ERP software. Because of SAPs leadership in the ERP industry the coming discussion focuses on the SAP ERP system.
SAP ERP software has changed over the years due to product evolution and for marketing purposes. The latest versions of ERP systems by SAP and other companies allow all business areas to access the same database. Perhaps most importantly the system allows data to be entered once, and then used throughout the organization. In information system. ERP systems ensure that data are entered only once, where they are most likely to be accurate. For example, with access to real time stock data, a salesperson taking an order can confirm the availability of the desired material. When the salesperson enters the sales order into the system, the order data are immediately available to production, so manufacturing can update production plans, and materials management can plan the delivery of the order.
The basic functions of each of the modules are as follows.
- Sales and distribution module: Records the sales orders and scheduled deliveries. Information about the customer (pricing, how and where to ship products, how the customer is to be billed, and so on) is maintained and accessed from this module.
- Material management module: Manages the acquisition of raw materials from suppliers (purchasing) and the subsequent handling of raw materials inventory, from storage to work-in-progress goods to shipping of finished goods to the customer.
- Production planning module: Maintains production information. Here production is planned and scheduled and actual production activities are recorded.
- Quality management module: Plans and records quality control activities such as product inspections and material certifications.
- Plant maintenance module: Manages maintenance resources and planning for preventive maintenance of plant machinery, to minimize equipment breakdown.
- Asset management module: Helps the company to manage fixed asset purchases (plant and machinery) and related depreciation.
- Human resource module: Facilitates employee recruiting, hiring and training. This module also includes payroll and benefits.
- Project system module: Allows the planning for and control over new R&D, construction and marketing projects. This module allows for costs to be collected against a project, and it is frequently used to manage the implementation of the SAP ERP system. PS manages build to order items, which are low volume, highly complex products such as ships and aircrafts.
- Financial accounting module: Records transactions in the general ledger accounts. This module generates financial statements for external reporting purposes.
- Controlling module: Serves internal management purposes, assigning manufacturing costs to products and to cost centers, so that the profitability of the company's activities can be analyzed. The CO module supports managerial decision making.
- Workflow module: Is not a module that automates a specific business function. It can perform task flow analysis and prompt employees if they need to take action.