7 ERP Modules: Finance, Sales, Manufacturing, HR, Plant Maintenance, Quality & Materials Management Module

Enterprise Resource Planning (ERP) is a software system used by organisations to integrate their functions in a seamless fashion. This software consists of multiple modules that are based on the needs and technical capabilities of the organisations. Every module represents a functional area of the organisation.

For example, the marketing module is used by the marketing department, the finance module is used by the finance department and the human resource module is used by the human resource department. An organisation need not use all the modules but choose only those that are required.

Various organisations such as SAP, Oracle, PeopleSoft and BAAN, have developed their own versions of ERP modules. These modules differ from each other in terms of functionality but they also share some common features. This means that ERP software modules can be customised according to the needs of organisations.

ERP Modules

• Finance Module
  
• Sales and Distribution Module
  
• Manufacturing and Production Planning Module
  
• Human Resources Module
  
• Plant Maintenance Module
  
• Quality Management Module
  
• Materials Management Module

Finance Module

Businesses today run on knowledge and information sharing, and most of this information is financial in nature. Organisations require financial reports and data for decision making.

However, reports and data are of little use to an organisation if they cannot be made available to the user as and when required. This is where the role of the finance module of ERP comes into the picture.

The ERP finance module is a software module that uses the financial data available in an organisation’s database and generates various financial statements such as ledgers, trial balance, balance sheet, etc. Quarterly and annual reports are also generated with the help of the ERP finance module.

Sub Module of Finance Module

The finance module of ERP basically consists of four sub-modules, which are as follows:

• Financial (FI): The FI sub-module is used to generate reports pertaining to accounts payable, accounts receivable, general ledger, balance sheet, profit and loss and capital investments. The sub-module is also used for posting entries in the books of accounts.
  
  
• Controlling (CO): This sub-module generates reports related to cost centre, profit centre, enterprise accounting, planning, profitability analysis, etc.
  
  
• Asset Management (AM): The AM sub-module helps in the management of the assets of an organisation. It generates reports related to investment planning and budgeting; thus is also called the investment management module.
  
  
• Treasury Management (TM): This sub-module helps in managing the funds of an organisation. The main aim of the TM module is to manage and control the organisation’s liquidity and lessen financial risks.

An organisation uses the finance module not only to store financial data but also to perform financial analysis.

For example, after creating a balance sheet and a profit and loss account, an organisation may use the financial module to perform financial ratio analysis by using the balance sheet and Profit and Loss (P&L) data. Such analysis can help in making effective decisions related to funds in the organisation.

Sales and Distribution Module

An ERP sales and distribution module provides a complete sales and distribution management solution for an organisation. This module supports pre-sales activities (such as quotation creation), sales order processing (creation of the sales order), shipping (creation of delivery documents) and billing (creation of bills and invoices).

Manufacturing and Production Planning Module

When a sales order is confirmed in an organisation, the production department starts production to fulfil the order. An organisation uses the manufacturing and production planning module to streamline and speed up the production process. This module helps to plan production by optimally utilising existing resources.

The major aims of the module are to provide a short delivery cycle time, assure quality and make continuous improvement. This module is the largest and most complex of all ERP modules.

Main Characteristics of Manufacturing and Production Module

The following are the main characteristics of the manufacturing and production module:

• It simplifies and speeds up the process of information exchange within the different functional units of an organisation.
  
  
• It provides different manufacturing applications for different manufacturing processes.
  
  
• It responds to the requirements of users in case any data is needed.
  
  
• It minimises the production cycle time and assures quality.

As mentioned earlier, the manufacturing and production planning module is the largest and most complex module of the ERP system.

Sub Module of Manufacturing and Production Planning Module

It has several sub-modules, which can be listed as follows:

• Material and capacity planning
• Shop floor control
• Quality management
• JIT/repetitive manufacturing
• Cost management
• Engineering data management
• Engineering change control
• Configuration management
• Serialisation/lot control
• Tooling

Let us discuss these sub-modules one by one in the following sections.

Material and Capacity Planning

Today, organisations deal in an environment where the customer is the focus. The importance of the customer to the organisation can never be emphasised enough. An organisation can go to great lengths to satisfy the customer.

Customers expect fast delivery of their products. For fulfilling these requirements, an organisation needs to develop an effective production schedule by planning material and capacity requirements.

Material planning can be defined as a process of managing the supply of raw materials, while capacity planning refers to a process that ensures the level of production remains sufficient to meet the demand.

The material and capacity planning sub-module helps an organisation to access information about the different components of a machinery or equipment used in the production process. The material and capacity planning module is used for the following purposes:

• Providing a quick response to customers’ demands
• Planning alternative production plans in case of contingencies
• Selecting the best plan and making effective purchase decisions
• Making an optimum utilisation of the organisation’s resources
• Generating graphical reports on planned and utilised capacity
• Identifying order-processing priorities with changing business needs

Shop Floor Control

The shop floor of an organisation refers to the space where the production or manufacturing activity is carried out. In other words, it is a part of the factory where machines are kept and human resources are directly engaged in production activities.

The shop floor control sub-module of the manufacturing and production planning module helps in managing the shop floor activities of a manufacturing organisation by providing the right information at the right time.

An organisation uses the shop floor module to minimise the production cycle time. This can be done by efficiently monitoring and controlling activities on the shop floor. The module also enables the organisation to execute its manufacturing operations according to the schedule, thereby preventing delays in production and maintaining on-time delivery of products.

Quality Management

Using the quality management sub-module, an organisation can test and inspect product quality on the basis of different parameters. This sub-module is also used to store the history of products as well as issues related to quality.

The objective of this module is to identify, store and solve quality-related issues. It makes use of established benchmarks for product design, process engineering and quality assurance. In addition, it supports root cause analysis and continuous improvement of manufacturing processes.

The sub-module also helps manufacturers to conform to the standards of quality assurance defined by the industry.

JIT/Repetitive Manufacturing

Just-in Time (JIT) can be defined as an approach in a manufacturing organisation that improves timeliness, quality, productivity and flexibility utilising various methods of work simplification and waste elimination. JIT simplifies processes by eliminating waste.

The JIT sub-module enables an organisation to complete its manufacturing activities as per the schedule and make on-time delivery of products. It aims to reduce inventories and paper work and enhance data accuracy.

Cost Management

In order to maximise profits, every organisation aims at cost reduction. The cost management sub-module is used for controlling the different costs of the organisation such as manufacturing costs, transportation costs, etc.

The different costing methods used in this module are Last-in-First-out (LIFO), First-in-First-Out (FIFO), moving average, activity-based costing, etc. Apart from this, the cost management sub-module helps to compare the costs for the different work centres of an organisation so that an appropriate action can be taken in case some centres show high costs.

Engineering Data Management

To ensure timely delivery of its products, an organisation aims to reduce the manufacturing cycle time. The engineering data management sub-module is used to reduce the product development cycle. This is done by reducing errors, increasing design productivity and reducing data transfer time.

This module reduces the time taken in data transfer from one module to another in the ERP system and minimises errors in data transfer. The engineering data management sub-module works in association with Computer Aided Design (CAD) software to facilitate an easy exchange of information among the people engaged in the manufacturing process.

This module also ensures that the right information is provided to the right people at the right time.

Engineering Change Control

An organisation may require changes in its product due to the changing needs of customers, technology obsolescence, and change in market trends. Engineering change implies the alteration or modification in the product development process. This change may affect the material requirements and the production schedule of a product.

The engineering change control module can be implemented after strictly defining the authorisation steps for change. After implementing engineering change control in processes, the module reflects these changes in the manufacturing database.

Configuration Management

Configuration management is a process that reduces the order cycle time by eliminating lengthy engineering reviews of products. Engineering review refers to a process of reviewing a particular engineering change.

The configuration management module reduces the time taken in product engineering reviews. The cost and configuration feasibility of the final product is analysed by using this module. The module is based on attributes such as height, weight, and volume. A user-defined database is developed that consists of information related to product engineering, sales, and cost management.

Serialisation/Lot Control

To avoid shortages and oversupply in production processes, organisations purchase an adequate amount of components and materials. In order to know the adequate amount of materials and the number of lots (of materials) to be purchased, the serialisation/lot control sub-module is used.

This sub-module gives a sequence (serial) of operations to be performed while producing the final product by giving the adequate lot size. A unique number is allocated to each lot, which helps in finding the sequence of operations.

Using the lot control and serialisation module, organisations can also track the materials that have expired and cannot be used in the manufacturing of products.

Tooling

Apart from raw materials, various tools are also required in the production process. It is important that the required tools and materials reach the production area in time for the production function. The tools must be stored in the inventory and allocated as per the production order. Using the tooling sub-module, the availability of the tool can be determined.

In a manufacturing organisation, the availability of proper tools plays a crucial role in the conversion of raw materials into finished products. The tooling sub-module helps an organisation in identifying the types and requirements of tools for performing manufacturing operations.

This sub-module is closely integrated with capacity planning and inventory management modules in order to identify the requirements of various tools. This integration helps an organisation to keep track on the delivery of tools so that there can be proper utilisation of productive capacity.

Apart from this, the tooling sub-module allows an organisation to estimate the useful life of tools and identify their maintenance needs.

Human Resources Module

No organisation can survive without human resource. It is the most productive resource and helps in creating profit for the organisation by using its skills and knowledge. In fact, HR is one of the key departments of an organisation.

To automate the work of the HR department, the HR module of ERP is integrated with the other modules. The HR department has to deal with many critical areas such as attendance, compensation, training and development, etc.

Sub Module of Human Resources Module

The HR module of the ERP system consists of various sub-systems, which are as the follows:

• Personnel management: This sub-module contains the master data of the HR department and deals with personnel administration. It also maintains the database regarding the recruitment, travel management, benefits and salary administration for employees. The various sub-components of this sub-module are as follows:
  
  
• Personnel administration: This sub-module is used for storing personnel data centrally. This data is therefore available to all the departments of the organisation.
  
  
• Employee master data: This sub-module helps to store the employee database at a centralised location so that it can be processed easily by the members of the organisation.
  
  
• Recruitment management: This sub-component is used to automate the entire recruitment process, which helps an organisation to find the right set of candidates with the desired skills, thereby reducing recruitment costs. This sub-component can be used to streamline a range of tasks such as managing vacant positions in an organisation, screening and selecting candidates, hiring the candidates, etc.
  
  
• Salary administration: This module simplifies the process of salary compensation to employees. It helps in managing deductions and benefits in salaries. Salary budgets are also planned in this module.
  
  
• Organisational management: This sub-module contains data about the structure of an organisation as well as staffing activities and job descriptions. Changes in the designation of employees or their transfer to other locations, etc., can be managed easily through this sub-module.
  
  
• Payroll accounting: This sub-module provides information on the salary details of employees. The module can prepare leave and attendance reports, employee reports, and taxation reports. It also allows employees to generate their monthly pay slips.
  
  
• Personnel development: This sub-module contains provisions for the career and succession planning of employees. Using this module, the additional training needs for employees can also be determined. The module also helps in training and event management.

Plant Maintenance Module

For an organisation to achieve obstacle-free production, it must ensure that its machinery, tools and plant are under good working conditions at all times. The production and delivery schedule of an organisation may be hampered if there is a lack of plant maintenance and this may in turn lead to frequent equipment breakdowns.

Using the plant maintenance module, process improvement can be achieved as this module covers provisions for the entire plant and equipment maintenance. The plant maintenance module comprises different sub-modules, such as preventive maintenance control, equipment tracking, component tracking, plant maintenance calibration tracking and plant maintenance warranty claims tracking.

Sub Module of Plant Maintenance Module

Preventive Maintenance Control

Preventing a tool or equipment wear out through systematic inspection and detection of failure before it occurs is called preventive maintenance. The preventive maintenance control sub-module has provisions for planning, scheduling and controlling tasks in the maintenance of the plant and equipment.

This module prevents breakdowns during the production process. As a result of using this module, repair and downtime costs and machine breakdowns can be lowered. This is done by collecting information about hourly operations, units of output, fuel consumption and serviceable life of the equipment.

Equipment Tracking

Equipment is subject to wear and tear in an organisation. An organisation needs to track the performance of equipment on a continuous basis so that it can be repaired before it affects the output. In the equipment tracking module, the information regarding equipment is stored in the database by the serial number and model number of the equipment.

The equipment tracking system provides details related to the operating conditions of equipment in terms of its hourly, daily, weekly, monthly and yearly performance. This helps an organisation to identify potential failures in equipment and rectify them.

Component Tracking

A component is a sub-part of equipment. Components are also called spare parts of equipment. It is important for an organisation to ensure whether all the spare parts of a machine are functioning properly.

Using the component tracking module, the components that require repair can be identified as this module provides information related to every spare part in terms of its pre-defined codes.

Organisations use the component tracking module to identify the components that require chronic repair. On the basis of the information gathered with the help of this module, technicians can decide whether to replace or repair the components while they are still in a working condition.

They can also determine if the components are covered by warranty or not. Getting the components repaired or replaced reduces the possibility of failure and downtime.

Plant Maintenance Calibration Tracking

Plant and equipment used in production processes should be as per the standards set by the organisation. The plant maintenance calibration tracking module helps in tracking plant maintenance calibration as per the ISO 9001 requirements. In other words, this module tracks whether the set-up of equipment is in compliance with the quality requirements defined under ISO 9000.

Plant Maintenance Warranty Claims Tracking

Vendors or manufacturers provide a warranty for the operation of equipment with an aim to ensure the expected efficiency of equipment. The plant maintenance warranty claims tracking module helps to track and control the items that are covered under warranties.

In case, any replacements or repairs are to be done to any component of the equipment, this sub-module helps to identify whether the warranty or replacement is available on the component or not. This sub-module also helps to keep track of the type and the duration of the warranty.

Quality Management Module

Nowadays, organisations focus on quality management by ensuring that it is implemented in each functional unit. The term ‘quality’ can be defined from two perspectives, namely the customer’s perspective and the organisation’s perspective.

From the customer’s perspective, quality can be defined as expectations that he/she may have while buying a product. On the other hand, from the organisation’s perspective, quality can be defined as a measure of product’s conformation to the specified standards.

Generally, quality standards are a combination product’s attributes–such as performance, reliability and appearance of the product and commitment to delivery time—be produced by an organisation.

There are different international quality standards that help in quality management, such as the ISO 9000 series. In the ERP system too, the quality management module generates necessary information and technical support required by an organisation to adopt appropriate quality standards and make continuous improvement in its products and processes.

Moreover, the module helps organisations to implement the procedures for quality inspection and control.

Let us now study the important functions of the quality management module in the next section.

Quality Management Module–Functions

Every module of an ERP system is responsible for bringing quality in the production process. The major functions of the quality management module of an ERP system are as follows:

• Quality planning: The quality management module helps in data management in order to plan for product quality, inspections, etc. For this, the module collects basic data to decide the required level of quality for materials, operations, and finished products.
  
  
• Quality inspection: The quality management module helps to inspect products on a regular basis. This helps an organisation to maintain the desired levels of quality.
  
  
• Quality control: With the help of inspection, the quality management module controls quality issues by taking various steps to maintain quality

CAQ and CIQ

In the recent times, there have been a lot of advancements in quality-related applications, which have helped manufacturing organisations in controlling and improving the quality of their products. Two notable advancements are Computer-Aided Quality Management (CAQ) and Computer-integrated Quality Management (CIQ).

CAQ is a quality management tool that helps to gather and analyse data related to the quality of output to be produced by a manufacturing organisation. It helps to achieve the desired quality of the final output. In addition, CAQ provides operational specifications to help the organisation in attaining the desired levels of quality in its products.

There is growing competition in the market and the demands for rapid modifications in the quality of products are immense. As a result, organisations cannot rely on CAQ systems alone.

Therefore, to improve quality management, organisations have adopted CIQ systems. CIQ is a computer-aided quality management tool that is used in combination with the other modules of the ERP system, such as finance, manufacturing and sales and distribution.

The advantage of using the CIQ system is that it can support all activities involved in quality management. This module is majorly integrated with the master data, the materials management module, the production module and the sales and distribution module.

Materials Management Module

Materials management is concerned with the planning, procurement, storage and distribution of materials in an efficient manner. It aims to get the right quality and quantity of materials at the right time from the right source so as to carry out the production process effectively.

This ultimately results in increased sales, improved customer service and reduction in the manufacturing cost of an organisation. Materials management encompasses various activities such as materials planning and control, purchase management, stores management, materials handling and supply chain management.

The materials management module is specifically designed to help in the effective management of materials. This module helps to handle, store, and transport materials. It also allows an organisation to make judicious purchasing, reduce wastage, utilise materials efficiently, thereby minimising material cost.

Sub Module of Materials Management Module

Pre-Purchasing Activities

The pre-purchasing activities module involves planning raw materials to be purchased for manufacturing products. These activities are related to bidding, supplier search, sample acceptance, and supplier selection. A master database is also maintained in this module that stores all the details of products or services to be procured. This sub-module develops a set of service specifications for every procurement project proposed in the organisation.

Purchasing

The purchasing sub-module helps in keeping a tab on activities involved in the purchase of raw materials. This sub-module provides support for all the phases of materials management such as material planning, material control, purchasing, receiving goods, inventory management and invoice verification.

Major purchase activities are order placement, receipts of goods, inventory management and invoice verification. The module facilitates the timely exchange of information among the members of the supply chain of an organisation, such as suppliers, transporters and distributors.

Vendor Evaluation

Vendor evaluation is a process in which an organisation evaluates the potential suppliers of materials by performing measurable assessments. The evaluation is based on a point-based system and the selection criterion is also defined.

Usually, the selection criterion is pre-defined; however, there is also a provision for entering the user-defined criteria. The criterion includes points such as price, quality, delivery, replacement, repairs, lead time, etc. The performance of different vendors is measured and points are given to them accordingly.

Inventory Management

Inventory management is all about supervising the inflow and outflow of inventory in an organisation. Effective inventory management is integral to successful business operations. It protects an organisation against adverse situations, such as a shortage or excess of materials or products.

The inventory management module provides complete information about the quality and quantity of the current and ordered stock and daily consumption of stock. In this module, all the transactions that affect the physical stock are reflected, and the stock level is always updated in the system.

The sub-module also contains the details of the stock available, stocks ordered but not delivered, stock reserved for production, stock reserved for customers, stock in quality inspection, etc.

Invoice Verification and Material Inspection

Proper inspection of materials ensures that they meet the required specifications. When the materials are accepted after verification, the invoice is generated, which needs to be verified by the finance department.

The invoice verification and material inspection sub-module serves as a connecting link between the materials management module and the finance module. The major function of this sub-module is that it aids in the final step of the purchase process, i.e., inspection and invoice verification.

The invoice verification and material inspection module provides complete and accurate information related to the quality and quantity of materials ordered and received by an organisation.

Using this information, the module generates an invoice automatically, which can be modified as per the requirements. The invoice verification and material inspection sub-module can also compare the information of ordered and received material to verify the generated invoice.

---

FAQ