All About ERP

ERP is Enterprise Resource Planning. The current evolution of manufacturing resources planning (MRP and MRPII) systems. ERP provides the foundation for integrating enterprise-wide information systems. These systems will link all aspects of a company's operations including human resources, financial planning, manufacturing, and distribution, as well as connect the organization to its customers and suppliers.

ERPS (Enterprise Resource Planning Systems) comprises of a commercial software packages that promises the seamless integration of all the information flowing through the company - financial, accounting, human resources, supply chain and customer information.

ERP Systems provide information management and analysis to organizations.

Benefits.  There are five major benefits of ERP: 
1. On-line/real time information throughout all the functional areas of an organization.
2. Data standardization and accuracy across the enterprise.
3. Best-practices or optimized solutions are included in the applications.
4. Creates efficiencies that organizations would not otherwise have. 
5. The analysis and reporting that can be used for long-term planning.

Examples of ERP packages are HRMS, Financials, Manufacturing, Distribution, and Sales. Each ERP Package may offer different functionality for different industries.

In implementation, ERP systems include several basic features. They are installed on a Database Management System. Database platforms to chose from are: DB2/400, DB2/MVS, DB2/Unix, Informix, MS SQL Server, Oracle, SQLBase, and Sybase. They require initial setup according to the organization's process. They may be customized according to the organization's process through the ERP's tool set. Work flow can be setup to automate approval processes through chains of command. Once installed, the user only enters data at one point, and the information is transferred through processes to other modules. Finally, the ERP system includes reporting tools for main reports as well as ad hoc reporting.

ERP systems, fundamentally, integrate the different processes necessary in a business into a centralized pool that facilitates data sharing and eliminates redundancy.

Advantages of an ERP system
1.  Information entered once into system .
2.  Forces use of the best practices. 
3  Allows customization .
4.  Based on reliable file structure.
5.  Provides functionality to interact with other elements in the process. 
6  Provides tools for ad hoc queries. 

ERP is a business tool. 
Information Technology (IT) has always played a key role in providing businesses a competitive edge. In the beginning, IT performed mainly financial functions such as payroll, A/R, A/P, invoicing etc. and was used mainly as a reporting tool; what have we done and did we make or lose money. 

Over time, IT has evolved. Its overall reporting capabilities have become awesome with the surreal performances of computing power, and the refinement of software operating systems and application packages today. This reduction of processing time together with the proliferation of IT beyond financial functions and into sales and Marketing and Manufacturing, have pushed IT from the strict business reporting realm to the much larger and dynamic realm of business planning.  In other words, the more the information was accurate, available when needed, and applicable to the core areas of our businesses, the more we could dynamically plan our strategies and make concrete business decisions from it. This is where we started seeing concepts of Materials Requirement Planning (MRPII) come into light which over the 80s evolved into Enterprise Resource Planning (ERP). IT could no longer live in its own kingdom of data processing, it had become a business processing and business emulation tool, and thereby had to create a solid bridge with the business imperatives as its foundations. IT is in the midst of yet another change. This time though we facing a revolution rather than an evolution. We are now fast approaching the era of enterprise knowledge system. The combination of on-line/real-time information, ERP (all enterprise and 100% accuracy of data), supply chain rapport (internal and external links between all activities), e-commerce, and advanced planning and scheduling systems are causing a revolution in transforming a reporting and planning tool into an intelligent business execution tool.

IT as a resource
We see IT is seen as .a resource and not as an expenditure. A lot of software companies and client organizations see IT as an end in itself. While our vendors incorporate the latest in E-commerce/internet, Java-client, WAN technologies etc., we strictly promote our systems as a business tool. 

Prerequisites for effective implementation and usage of IT.
First and foremost is the top management's commitment. To get the maximum benefit from a technology, there has to be a change in attitude. IT cannot be looked at as an expenditure. It has to be considered as a resource. Also, the entire organization-right from the sales people to the guy on the shop floor-has to be educated (about IT). 

Differences between ERP and MRP II.
MRP II is a management concept while ERP is its technical subset. Today, ERP is in vogue, and is selling as there is a push from the ERP vendors to sell their software. However, mere software implementation cannot be seen as a complete solution. The aim should be to deploy IT for gaining business advantage. ERP is a mere subset of MRP II, which is a company-wide management system aiming at lowering costs and inventories and increasing productivity and customer service. While ERP can be implemented in isolation, the complete benefit can only be gained if the entire re engineering process is followed. 

Major problems faced by the user companies in implementing IT.
Lack of commitment and availability from the clientís organizationís key people (executive commitment and availability of key users go hand in hand). The other issue could be the nature of commitment of the software vendor. Does the vendor have the wherewithal to support a rigourous implementation: proven implementation method, industry experts on staff, strong track record, or is he more interested in the initial licence revenue.

ERP re engineers business. 
It must be remembered that ERP is an opportunity for business re engineering. One gets the opportunity to restructure and reorganize people and departments to meet new challenges and global competition. Information is a vital factor along with quality, cost, and delivery to establish competitive advantage. As such, it calls for attitudinal changes which will help in a smooth transition, learning best practices, and adopting them into the business. No doubt, these changes will reap good profits in a short time. 

In most cases, it is not possible to run both old and new systems simultaneously. The software is tested and used in many organizations in different situations across boundaries. Hence one can assume its accuracy and reliability to a great extent; as such, in most cases errors are on account of incorrect data, poor understanding, or improper tuning of the package. Thus the importance of a tightly integrated package spanning every areas of the business. You can't enter transactions unless all cross business rules have been fully defined. This ensures discipline in the working of the entire organization. But once data is accepted, it will furnish the right information at all levels and at all places. It is this consistency of information that is one of the greatest advantages of integrated ERP packages. 

ERP versus SAP
As we mentioned before, ERP is an opportunity for business re-engineering. It is possible to implement the package in three broad segments-manufacturing, finance, and distribution. However, some packages like SAP do not allow such an approach. This approach calls for building bridges from and to legacy systems and, can in some cases become a costlier situation. 

While training users, importance of 'password' and 'controlled access' must be emphasized. Further, well-defined procedures must be adopted to monitor access to the information. Depending on the levels of the people, various privileges should be allocated (read, write, or both). The authorization to approve a transaction is also a requirement for certain critical functions. The periodic dumps of data and consistency of databases and their fine tuning must be ensured as in the case of legacy systems. 

In Summary
Finally, it is always remembered that these packages are tools to support the business. Close linkage to business must be reviewed and monitored to ensure that the required information is made available to the right people at the right cost and in the right format so as to gain competitive edge in the era of global competition. It is observed that, when a business crosses the boundaries of the nation and becomes multinational, it has no other option but to use ERP so as to standardize operations worldwide.

© ERP Software Solutions 2003