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ERP and Business Management

ERP, or Enterprise Resource Planning, is used to integrate all processes and information of an organization into one system. The systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc.

ERP systems automate this activity with an integrated software application. Their purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. ERP systems can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information.

ERP Characterictics

ERP systems typically include the following characteristics:

  • Finance/Accounting.
  • Human resources.
  • Manufacturing.
  • Supply chain management.
  • Project management.
  • Customer relationship management.
  • Data services .
  • Access control.

Furthermore, ERP should have:

  • An integrated system that operates in real time (or next to real time), without relying on periodic updates.
  • A common database, which supports all applications.
  • A consistent look and feel throughout each module.
  • Installation of the system without elaborate application/data integration by the Information Technology (IT) department.

A Required Basic Understanding

An extensive study of ERP is required before purchasing an ERP program and implementing it. ERP can be used in any type of business, large or small, and it covers all important functions of businesses. Prior to implementing an ERP system, businesses should recognize that careful planning is important. The better a company plans for this implementation, the faster it can be implemented.

ERP software implementation is a typically a complex job that involves quite an amount of risk. ERP implementation requires top management support and willingness to complete ERP project in a given time. Usually ERP implementation takes 3–36 months. The implementation time depends on the size of the company, number of sites, number of users, scope of the change, customization and complexity of the business requirements. It also depends on the willingness of the customer to take ownership of the project. To implement ERP, companies generally use to take consultation services from ERP vendors or third party consulting companies. These consultancy services include consultation, customization of product and long term support.

For an organization/company to implement ERP, they should go through the following steps:

  • Understand the basic of ERP: It's very important to know ERP and its capabilities. An extensive study of ERP and the company produces a smooth transition into the implementation of an ERP system.
  • ERP packages varies: Compare ERP software packages. All ERP have benefits, but how it benefits depends on how it can be suited to the organization/company requirements.
  • ERP systems are expensive: ERP is costly to purchase and implement. Many companies fail to recognize that the maintenance costs of an ERP system are even higher than purchasing the system.
  • Human resource: A company can choose to have a member of its staff to implement it, have the ERP vendor to implement it or hire an ERP consulting firm to do it. Making this decision is often based on price.

In consulting service, consultants used to map the software with existing business process. They understand the business in detail and define the role of the ERP user. In the standard implementation they will suggest to finish vital part only. After standard implementation of ERP software they will find the gap to fulfill a organization's essential and desirable. They will do customizations to fulfill and complete the wish list. For support, customers can take AMC (Annual Maintenance Contract). In AMC customer will get product updates, upgrades, new features and few month free of cost. AMC charges vary from company to company. However it's always recommendable to go for an ERP system if your turnover is worth of implementing such a system.

Advantages and Disadvantages

Advantages

The advantage of ERP is that integrating the processes by which businesses operate saves time and expense. Tasks that benefit from this integration include:

  • Sales prediction, which allows inventory optimization.
  • Chronological history of transactions through relevant data in any given area.
  • Order tracking, from acceptance through fulfillment.
  • Revenue tracking, from invoice through cash receipt.
  • Matching purchase orders, inventory receipts, and costing.
  • Eliminate the need to synchronize changes between multiple systems.
  • Bring legitimacy and transparency in each statistical data.
  • Enable standard product naming/coding.
  • Provide a comprehensive enterprise view.
  • Make real–time information available to management anywhere, any time to make proper decisions.
  • Protect sensitive data by consolidating multiple security systems into a single structure.

Disadvantages

WIth the many benefits an ERP system can bring, implementing it can give several problems especially to customers who have limited resources. Some of the disadvantages are:

  • Customization can be problematic.
  • Re-engineering business processes to fit the ERP system may damage competitiveness.
  • ERP can cost more than less integrated and/or less comprehensive solutions.
  • Overcoming resistance to sharing sensitive information can divert management attention.
  • Integration of truly independent businesses can create unnecessary dependencies.
  • Extensive training requirements take resources.
  • Due to ERP's architecture, ERP systems are not well suited for production planning and supply chain management (SCM).