ERP – Enterprise Resource Planning
The term ERP originally referred to the way a large organization planned to use its resources. Formerly, ERP(Enterprise Resource Planning) systems were used in larger and more industrial company types.An ERP system’s key objective is to integrate information and processes from all functional divisions of an organization and merge it for effortless access and structured work flow. Today’s ERP software architecture can possibly envelop a broad range of enterprise functions and integrate them into a single unified database repository. For instance, functions such as Human Resources, Supply Chain Management, Customer Relationship Management, Finance, Manufacturing Warehouse Management, and Logistics were all previously stand alone software applications, generally housed with their own applications, database, and network. Today, they can all work under a single umbrella – the ERP architecture.The integration is typically accomplished by constructing a single database repository that communicates with multiple software applications, providing different divisions of an organization with various business statistics and information.
Let’s say we received an order for 100 units of Product A. ERP system will helps us to calculate how that can be produced by any the limited resources available that we have today. If the resources is not sufficient, the ERP system can calculate how many more additional resources needed, and helping us in the procurement process as well. When we want to distribute products, ERP systems can also determine how to optimal loading and transport to the destination specified by customer. In this process, of course, all aspects related to the financial will be recorded in ERP system includes calculating how cost of production for 100 units of product A.
List of ERP modules:
The following are some key business processes (or procedures) which can be managed using ERP software. Some of these, or all of these, modules may be applicable in your organization, depending on the business requirements.
- Item Master Management (IMM)
- Bill Of Material (BOM)
- Demand Management (DM)
- Sales and Order Management (SOM)
- Master Production Scheduling (MPS)
- Material Requirements Planning (MRP)
- Capacity Requirement Planning
- Inventory Mangement (INV)
- Shop Floor Control (SFC)
- Purchasing Management (PUR)
- General Ledger (GL)
- Account Payable (AP)
- Account Receivable (AR)
- Cost Control (CO)
- Financial Reporting (FIR)
- Customer relationship management (CRM) and pre-sales module
- Helpdesk Module
- Payroll and HR module
The ERP implementation process goes through five major stages: Structured Planning, Process Assessment, Data Compilation & Cleanup, Education & Testing, and Usage & Evaluation.
- Structured Planning: is the foremost and the most crucial stage where any capable project team is selected, present business processes are studied, information flow within and outside the organization is scrutinized, vital objectives are set, and a comprehensive implementation plan is formulated.
- Process Assessment: is the next important stage where the prospective software capabilities are examined, manual business processes are recognized, and standard working procedures are constructed.
- Data Compilation & Cleanup: helps to identify data to be converted and the new information that would be needed. The compiled data is then analyzed for accuracy and completeness, throwing away the worthless/unwanted information.
- Education & Testing: aids in proofing the system and educating the users with ERP mechanisms. The project team tests and verifies the complete database via multiple testing methods and processes. A broad in-house training is held where all the concerned users are oriented with the functioning of the new ERP system.
- Usage & Evaluation: is the final and an ongoing stage for the ERP. The lately implemented ERP is deployed live within the organization and the project team checks it regularly for any flaw or error detection.
Advantages of ERP Systems
There are many advantages of implementing an EPR system. A few of them are listed below:
- A perfectly integrated system chaining all the functional areas together
- The capability to streamline different organizational processes and work flows
- The ability to effortlessly communicate information across various departments
- Improved efficiency, performance, and productivity levels
- Enhanced tracking and forecasting
- Improved customer service and satisfaction
Some tasks get benefits from the integration such as:
- Sales forecasting, which allows inventory optimization
- Chronological history of every transaction through relevant data compilation in every area of operation.
- Order tracking, from acceptance through fulfillment
- Revenue tracking, from invoice through cash receipt
- Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)
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:
- The scope of customization is limited in several circumstances
- The present business processes have to be retaught to make them synchronize with the ERP
- ERP systems can be extremely expensive to implement
- There could be lack of continuous technical support
- ERP systems may be too rigid for specific organizations that are either new or want to move in a new direction in the near future