1) ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes of an organization into one single system. Usually ERP systems will have many components including hardware and software, in order to achieve integration, most ERP systems use a unified database to store data for various functions found throughout the organization.
2) The term ERP originally referred to how a large organization planned to use organizational wide resources. In the past, ERP systems were used in larger more industrial types of companies. However, the use of ERP has changed and is extremely comprehensive, today the term can refer to any type of company, no matter what industry it falls in. In fact, ERP systems are used in almost any type of organization - large or small.
3) Integration is an extremely important part to ERP's. ERP's main goal is to integrate data and processes from all areas of an organization and unify it for easy access and work flow. ERP's usually accomplish integration by creating one single database that employs multiple software modules providing different areas of an organization with various business functions.
4) An ideal ERP system is when a single database is utilized and contains all data for various software modules. These software modules can include:
Manufacturing: Some of the functions include; engineering, capacity, workflow management, quality control, bills of material, manufacturing process, etc.
Financials: Accounts payable, accounts receivable, fixed assets, general ledger and cash management, etc.
Human Resources: Benefits, training, payroll, time and attendance, etc
Supply Chain Management: Inventory, supply chain planning, supplier scheduling, claim processing, order entry, purchasing, etc.
Projects: Costing, billing, activity management, time and expense, etc.
Customer Relationship Management: sales and marketing, service, commissions, customer contact, calls center support, etc.
Data Warehouse: Usually this is a module that can be accessed by an organizations customers, suppliers and employees.
5) ERP Improves Productivity:
Before ERP systems, each department in an organization would most likely have their own computer system, data and database. Unfortunately, many of these systems would not be able to communicate with one another or need to store or rewrite data to make it possible for cross computer system communication. For instance, the financials of a company were on a separate computer system than the HR system, making it more intensive and complicated to process certain functions.
Once an ERP system is in place, usually all aspects of an organization can work in harmony instead of every single system needing to be compatible with each other. For large organizations, increased productivity and less types of software are a result.
6) Advantages of ERP Systems:
There are many advantages of implementing an EPR system; here are a few of them:
A totally integrated system
The ability to streamline different processes and workflows
The ability to easily share data across various departments in an organization
Improved efficiency and productivity levels
Better tracking and forecasting
Improved customer service
7) Disadvantages of ERP Systems:
While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:
Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the workforce to quickly adapt to the new system.
Customization in many situations is limited
The need to reengineer business processes
ERP systems can be cost prohibitive to install and run
Technical support can be shoddy
ERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future.
With Warm Regards,
13th November 2009 From India, Madras