ERP
The initials ERP originated as an extension of MRP (material requirements planning; later manufacturing resource planning) and CIM (Computer Integrated Manufacturing). It was introduced by research and analysis firm Gartner in 1990.
Enterprise resource planning (ERP) 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. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders
This is common to retailers, where even a mid-sized retailer will have adiscrete Point-of-Sale (POS) product and financials application, then a series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics.Ideally, ERP delivers a single database that contains all data for the software modules, which would include:
•Manufacturing Engineering, bills of material, scheduling, capacity,workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow
•Supply chain management Order to cash, inventory, order entry,purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commission calculation
•Financials General ledger, cash management, accounts payable,accounts receivable, fixed assets
•Project management Costing, billing, time and expense, performance units, activity management
•Human resources Human resources, payroll, training, time and attendance, rostering, benefits Customer relationship management - Sales and marketing, commissions,
•service, customer contact and call center support
•Data warehouse - and various self-service interfaces for customers,suppliers, and employees
•Access control - user privilege as per authority levels for process execution
•Customization - to meet the extension, addition, change in process flow
Advantages of ERP
In the absence of an ERP system, a large manufacturer may find itself with many software applications that cannot communicate or interface effectively with one another. Tasks that need to interface with one another may involve: Integration among different functional areas to ensure proper
•communication, productivity and efficiency
*Design engineering (how to best make the product)
••Order tracking, from acceptance through fulfillment
•The revenue cycle, from invoice through cash receipt
•Managing inter-dependencies of complex processes bill of materials
•Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)
*The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level.
ERP Systems centralize the data in one place. Benefits of this include:
*Eliminates the problem of synchronizing changes between multiple systems
*Permits control of business processes that cross functional boundaries
*Provides top-down view of the enterprise (no "islands of information")
*Reduces the risk of loss of sensitive data by consolidating multiple
*permissions and security models into a single structure.
Disadvantages
•Customization of the ERP software is limited.
•Re-engineering of business processes to fit the "industry standard"prescribed by the ERP system may lead to a loss of competitive advantage.
•ERP systems can be very expensive (This has led to a new category of "ERP light" {Expand section} solutions)
•ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.
•Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.
•Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).
•can reduce the effectiveness of the software.Some large organizations may have multiple departments with separate,
•The system may be too complex measured against the actual needs of the customers.
•ERP Systems centralize the data in one place. This can increase the risk of loss of sensitive information in the event of a security breach.
A Proper System Selection Methodology
Structured Approach
The first step in selection of a new system is to adopt a structured approach tothe process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements; invitation to tender; how potential vendors will be selected;
Focused Demonstrations
Demonstrations by potential vendors must be relevant to the business.However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business.
Objective Decision Process
"Choosing which ERP to use is a complex decision that has significant
economic consequences, thus it requires a multi-criterion approach.". There are two key points to note when the major decision makers are agreeing on selection criteria that will be used in evaluating potential vendors. Firstly, the criteria and the scoring system must be agreed in advance prior to viewing any potential systems. The criteria must be wide-ranging and decided upon by as many objective people as possible within and external to the enterprise. In no circumstance should people with affiliations to one or more systems be allowed to advise in this regard.
Full Involvement by all Personnel
The decision on the system must be made by all stakeholders within the enterprise. "It requires top management leadership and participation…… it involves virtually every department within the company".
Important Issues to Consider Before ERP Implementation
Fundamental Issues
First, managers must consider the fundamental issues of system integration by analyzing the organization’s vision and corporate objectives. For instance, does management fully understand its current business processes, and can it make implementation decisions in a timely manner? Is management ready to undertake drastic business process reengineering efforts to yield dramatic outcomes? Is management ready to make any changes in the structure,operations, and cultural environment to accommodate the options configured in the ERP system? Is the organization financially and economically prepared to invest heavily in an ERP implementation? Next, management needs to decide on the key related implementation and business issues and how to proceed.Certainly, ERP is not suitable for companies that are experiencing rapid growth and change in an unstable environment are undergoing change in the corporate management and philosophy, or that will be experiencing merger or liquidation in the near future.
The initials ERP originated as an extension of MRP (material requirements planning; later manufacturing resource planning) and CIM (Computer Integrated Manufacturing). It was introduced by research and analysis firm Gartner in 1990.
Enterprise resource planning (ERP) 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. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders
This is common to retailers, where even a mid-sized retailer will have adiscrete Point-of-Sale (POS) product and financials application, then a series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics.Ideally, ERP delivers a single database that contains all data for the software modules, which would include:
•Manufacturing Engineering, bills of material, scheduling, capacity,workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow
•Supply chain management Order to cash, inventory, order entry,purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commission calculation
•Financials General ledger, cash management, accounts payable,accounts receivable, fixed assets
•Project management Costing, billing, time and expense, performance units, activity management
•Human resources Human resources, payroll, training, time and attendance, rostering, benefits Customer relationship management - Sales and marketing, commissions,
•service, customer contact and call center support
•Data warehouse - and various self-service interfaces for customers,suppliers, and employees
•Access control - user privilege as per authority levels for process execution
•Customization - to meet the extension, addition, change in process flow
Advantages of ERP
In the absence of an ERP system, a large manufacturer may find itself with many software applications that cannot communicate or interface effectively with one another. Tasks that need to interface with one another may involve: Integration among different functional areas to ensure proper
•communication, productivity and efficiency
*Design engineering (how to best make the product)
••Order tracking, from acceptance through fulfillment
•The revenue cycle, from invoice through cash receipt
•Managing inter-dependencies of complex processes bill of materials
•Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)
*The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level.
ERP Systems centralize the data in one place. Benefits of this include:
*Eliminates the problem of synchronizing changes between multiple systems
*Permits control of business processes that cross functional boundaries
*Provides top-down view of the enterprise (no "islands of information")
*Reduces the risk of loss of sensitive data by consolidating multiple
*permissions and security models into a single structure.
Disadvantages
•Customization of the ERP software is limited.
•Re-engineering of business processes to fit the "industry standard"prescribed by the ERP system may lead to a loss of competitive advantage.
•ERP systems can be very expensive (This has led to a new category of "ERP light" {Expand section} solutions)
•ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.
•Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.
•Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).
•can reduce the effectiveness of the software.Some large organizations may have multiple departments with separate,
•The system may be too complex measured against the actual needs of the customers.
•ERP Systems centralize the data in one place. This can increase the risk of loss of sensitive information in the event of a security breach.
A Proper System Selection Methodology
Structured Approach
The first step in selection of a new system is to adopt a structured approach tothe process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements; invitation to tender; how potential vendors will be selected;
Focused Demonstrations
Demonstrations by potential vendors must be relevant to the business.However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business.
Objective Decision Process
"Choosing which ERP to use is a complex decision that has significant
economic consequences, thus it requires a multi-criterion approach.". There are two key points to note when the major decision makers are agreeing on selection criteria that will be used in evaluating potential vendors. Firstly, the criteria and the scoring system must be agreed in advance prior to viewing any potential systems. The criteria must be wide-ranging and decided upon by as many objective people as possible within and external to the enterprise. In no circumstance should people with affiliations to one or more systems be allowed to advise in this regard.
Full Involvement by all Personnel
The decision on the system must be made by all stakeholders within the enterprise. "It requires top management leadership and participation…… it involves virtually every department within the company".
Important Issues to Consider Before ERP Implementation
Fundamental Issues
First, managers must consider the fundamental issues of system integration by analyzing the organization’s vision and corporate objectives. For instance, does management fully understand its current business processes, and can it make implementation decisions in a timely manner? Is management ready to undertake drastic business process reengineering efforts to yield dramatic outcomes? Is management ready to make any changes in the structure,operations, and cultural environment to accommodate the options configured in the ERP system? Is the organization financially and economically prepared to invest heavily in an ERP implementation? Next, management needs to decide on the key related implementation and business issues and how to proceed.Certainly, ERP is not suitable for companies that are experiencing rapid growth and change in an unstable environment are undergoing change in the corporate management and philosophy, or that will be experiencing merger or liquidation in the near future.