ERP (Enterprise Resource Planning) is a way to integrate the data and
processes of an organization into one single system, using sub-systems
that include hardware, software and a unified database in order to
achieve integration, to store the data for various functions found
throughout the organization.
The term ERP used to refer about how
large organizations of the industrial type planned to use organizational
wide resources. Today ERP is used in almost any type of organization it
doesn't matter whether its large, small or what industry it falls in.
How do we know what software system can be considered ERP? First, it
must provide an organization with functionality for at least two systems
or more.
However, many of today's ERP systems can cover more than
just two functions and integrate them into one unified Data Base. Human
Resources, Supply Chain Management, Customer Relations Management,
Financial, Manufacturing functions and Warehouse Management functions
can be found on modern companies under one umbrella - the ERP system.
The
Key to ERP is integration. Its main goal is to integrate data and
processes from all areas of the organization and unify it, to provide
ease of access and an efficient work flow. ERP Systems usually
accomplish this through one single database that employs multiple
software modules.
The ideal configuration is then to have one ERP
system for an entire organization, but organizations that are very large
have been known to create an ERP system and then add external
interfaces for other stand alone systems considered more powerful or
able to fulfill the organization's needs in a better way.
The Ideal ERP System
The ideal ERP system would have a single database for all areas of the
company and contain all of the data for various software modules, such
as:
- Workflow management, quality control, bills of material, manufacturing process, engineering, etc.
- Accounts (payable & receivable), general ledger and cash management, fixed assets.
- Training, payroll, time and attendance, benefits.
- Purchasing, Inventory, supplier scheduling, claim processing, order entry, supply chain planning.
- Activity management, time and expense, billing, costing.
- Call Center Support, service, commissions, customer contact, sales & marketing.
ERP and Productivity
Before ERP systems appeared, in most organizations each department had
their own operating system, data and database. The problem was that many
of those systems would not be able to communicate with each other, so
for example the financial of a company would have been on a separate
computer system than the Human Resources information, thus complicating
the processing of certain functions.
When a company sets up an ERP
system, all aspects of the organization can work in harmony. As a
result the organization enjoys increased productivity and may use less
types of software.
Implementation of an ERP System
Implementing an ERP system is not an easy task. It takes considerable
planning and consulting. The timeline for an ERP implementation may
range between 3 months and more than 1 year.
ERP systems are
extraordinarily wide in scope and can be extremely complex for many
organizations. For instance, Changes on staff and work practices might
be required. It is advisable (and more cost effective) to use specially
trained ERP implementation consultants and not only the "in-house" IT
staff.
Ownership of the project of the most important traits that
an organization should have when implementing an ERP system. So many
changes take place and it has such an effect on almost every individual
in the organization, that it is important to make sure everyone is on
board and will help make the new ERP system a success.
Organizations
may implement their customized ERP system using ERP vendors or
consulting companies. 3 types of professional services are needed when
implementing an ERP system: Consulting, Customization and Support.
Consulting: responsible for the initial stages of ERP implementation, training, workflow, etc.
Customization:
extend the use of the new ERP system or change its use creating
customized interfaces and/or underlying application code. Some things
may still need to be built or customized for an organization's specific
needs. Support: Technical support and maintenance of ERP systems.
Advantages of ERP Systems
There are many advantages of implementing an EPR system:
- It's totally integrated.
- It has the ability to streamline different processes and workflows.
- It is easy to share data across various departments in an organization.
- It improves efficiency and productivity levels.
- It provides better tracking and forecasting.
- Its costs are lower.
- It provides improved customer service.