Enterprise Resource Planning.doc

Enterprise Resource PlanningAbstract: Enterprise resource planning attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments particular needs.Keywords: software,organization,Enterprise resource planning, integrate, process,managementEnterprise Resource Planning or ERP is actually a process or approach which attempts to consolidate all of a companys departments and functions into a single computer system that services each departments specific needs. It is, in a sense, a convergence of people, hardware and software into an efficient production, service and delivery system that creates profit for the company. While the idea is easy to grasp in theory, the reality has been different. Most companies have a conglomeration of different systems and procedures (as well as hardware and software) designed specifically for their own needs. Employee records (including payroll, medical and other benefits) are held by Human Resources. Financial data and processing, which includes payroll computations and employee compensation as well as invoicing and billing for company products and services, are held by the Finance Department. Production data is held by manufacturing. Inventories are held by warehousing. Customer orders are held by Customer Relations, and so on.The dream of ERP is to have a single software solution integrating the different functions and activities into a seamless whole where information needed for decision-making is shared across departments, and the action taken by one department results in the appropriate follow-up action up and down the line.The most often-cited example of an ERP software is customer ordering and delivery where a customers order moves smoothly from Sales, where the deal is consummated, to Inventory and Warehousing, which retrieves and packages the order for delivery, to Finance, where invoicing, billing and payments are handled, and on to Manufacturing, where replacement of the bought-and-paid-for product is done.HistoryOrigin of ERPIn 1990 Gartner Group first employed the acronym ERP as an extension of material requirements planning (MRP), later manufacturing resource planning and computer-integrated manufacturing. Without supplanting these terms, ERP came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing. Not all ERP packages were developed from a manufacturing core. Vendors variously began with accounting, maintenance and human resources. By the mid1990s ERP systems addressed all core functions of an enterprise. Beyond corporations, governments and nonprofit organizations also began to employ ERP systems. ExpansionERP systems experienced rapid growth in the 1990s because the year 2000 and the Euro disrupted legacy systems. Many companies took this opportunity to replace such systems with ERP. This rapid growth in sales was followed by a slump in 1999 after these issues had been addressed. ERP systems initially focused on automating back office functions that did not directly affect customers and the general public. Front office functions such as customer relationship management (CRM) dealt directly with customers, or ebusiness systems such as ecommerce, egovernment, etelecom, and efinance, or supplier relationship management (SRM) became integrated later, when the Internet simplified communicating with external parties.citation neededERP II was coined in the early 2000s. It describes webbased software that allows both employees and partners (such as suppliers and customers) realtime access to the systems. Enterprise application suite is an alternate name for such systems.citation neededComponents Transactional database Management portal/dashboard Business intelligence system Customizable reporting External access via technology such as web services Search Document management Messaging/chat/wiki Workflow managementPrimary BenefitPrior to ERP, each department may be considered an independent fiefdom. Once a departments particular function is completed, it no longer cares for what happens afterwards. A customer following up with Sales for his product will be told, “Check with Warehouse”, who will then say, “Check with Delivery”, who can tell the customer, “Please check with Finance to see if your invoice has been cleared”.Efforts to integrate the system before always met with the stumbling block of different software and procedures. A sales person could not access the finance database to find out the customers billing status, nor can he easily access the warehouse, inventory or delivery to find out the status of the customers order.With ERP, all elements in the supply and production chain can be easily accessed by all those who need the information. This leads to efficiency in customer management and perceived company effectiveness in delivering on customer expectations.Other AdvantagesAn oft-overlooked advantage in having a workable and efficient ERP system in place is savings in relation to energy consumption and data management.Having an ERP system in place implies having a single hardware system to handle the different requirements, translating into reduced power consumption operating off a single database which translates into savings on storage.The savings generated from a minimum of hardware and storage, coupled with operational efficiencies created from a single system across all departments, translates into measurable profit for the company.Best practicesBest practices are incorporated into most ERP systems. This means that the software reflects the vendors interpretation of the most effective way to perform each business process. Systems vary in the convenience with which the customer can modify these practices. Companies that implemented industry best practices reduced timeconsuming project tasks such as configuration, documentation, testing and training. In addition, best practices reduced risk by 71% when compared to other software implementations. The use of best practices eases compliance with requirements such as IFRS, Sarbanes-Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is because the procedure can be readily codified within the ERP software and replicated with confidence across multiple businesses who share that business requirement.ModularityMost systems are modular to permit automating some functions but not others. Some common modules, such as finance and accounting, are adopted by nearly all users; others such as human resource management are not. For example, a service company probably has no need for a manufacturing module. Other companies already have a system that they believe to be adequate. Generally speaking, the greater the number of modules selected, the greater the integration benefits, but also the greater the costs, risks and changes involved.What will ERP fix in my businessThere are five major reasons why companies undertake ERP. 1. Integrate financial informationAs the CEO tries to understand the companys overall performance, he may find many different versions of the truth. Finance has its own set of revenue numbers, sales has another version, and the different business units may each have their own version of how much they contributed to revenues. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system. 2. Integrate customer order informationERP systems can become the place where the customer order lives from the time a customer service representative receives it until the loading dock ships the merchandise and finance sends an invoice. By having this information in one software system, rather than scattered among many different systems that cant communicate with one another, companies can keep track of orders more easily, and coordinate manufacturing, inventory and shipping among many different locations at the same time. 3. Standardize and speed up manufacturing processesManufacturing companiesespecially those with an appetite for mergers and acquisitionsoften find that multiple business units across the company make the same widget using different methods and computer systems. ERP systems come with standard methods for automating some of the steps of a manufacturing process. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce head count. 4. Reduce inventoryERP helps the manufacturing process flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories of the stuff used to make products (work-in-progress inventory), and it can help users better plan deliveries to customers, reducing the finished good inventory at the warehouses and shipping docks. To really improve the flow of your supply chain, you need supply chain software, but ERP helps too. 5. Standardize HR informationEspecially in companies with multiple business units, HR may not have a unified, simple method for tracking employees time and communicating with them about benefits and services. ERP can fix that. In the race to fix these problems, companies often lose sight of the fact that ERP packages are nothing more than generic representations of the ways a typical company does business. While most packages are exhaustively comprehensive, each industry has its quirks that make it unique. Most ERP systems were designed to be used by discrete manufacturing companies (that make physical things that can be counted), which immediately left all the process manufacturers (oil, chemical and utility companies that measure their products by flow rather than individual units) out in the cold. Each of these industries has struggled with the different ERP vendors to modify core ERP programs to their needs.To help address industry-specific problems and customization needs, ERP vendors have recently begun to offer specially tailored application sets to take care of each vertical segments needs. There still is customization work to do to satisfy each and every customer, but packaged applications now target such industries as: retail, media, utilities, high-tech, public sector, higher education and banking. In addition, ERP vendors have further tailored application to address the individual concerns within the broad manufacturing space. These range from consumer products to construction to HVAC to aerospace and defense companies.Will ERP fit the ways I do businessIts critical for companies to figure out if their ways of doing business will fit within a standard ERP package before the checks are signed and the implementation begins. The most common reason that companies walk away from multimillion-dollar ERP projects is that they discover the software does not support one of their important business processes. At that point there are two things they can do: They can change the business process to accommodate the software, which will mean deep changes in long-established ways of doing business (that often provide competitive advantage) and shake up important peoples roles and responsibilities (something that few companies have the stomach for). Or they can modify the software to fit the process, which will slow down the project, introduce dangerous bugs into the system and make upgrading the software to the ERP vendors next release excruciatingly difficult because the customizations will need to be torn apart and rewritten to fit with the new version.Needless to say, the move to ERP is a project of breathtaking scope, and the price tags on the front end are enough to make the most placid CFO a little twitchy. In addition to budgeting for software costs, financial executives should plan to write checks to cover consulting, process rework, integration testing and a long laundry l