WHAT IS ERP?
ERP stands for enterprise resource planning. The definition of enterprise resource
planning is an integrated software solution used to manage the company resources.
ERP systems integrate all business management functions, including planning,
inventory/materials management, engineering order processing, manufacturing,
purchasing, accounting and finance, human resources, and more.
WHY IMPLEMENT AN ERP SYSTEM?
ERP software integrates all departments and functions across a company onto
a single computer system that can serve all those different department particular
needs. ERP combines finance, HR, manufacturing, and distribution all together
into a single, integrated software program that runs off a single database so
that the various department can more easily share information and communicate
with each other. This integrated approach can have a tremendous payback provided
the software is installed and used correctly.
THE BENEFITS OF THE ERP SYSTEM
1. A single integrated system.
2. streamlining processes and workflows
3. reduce redundant data entry and processes
4. establish uniform processes that are based on recognized best business practices
5. information sharing across departments
6. improved access to information
7. improved workflow and efficiency
8. improved customer satisfaction
9. reduce inventory costs resulting from better planning, tracking and forecasting of requirements.
10. turn collections faster based on better visibility into accounts and fewer billing and/ or delivery errors.
WHAT WILL ERP CAN FIX IN MY BUSINESS?
Integrate financial information
As the CEO tries to understand the company's 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 truth that cannot be questioned because everyone is using the same system.
Integrate customer order information
ERP 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 can't 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.
Standardized and speed up manufacturing processes
Manufacturing companies- especially those with an appetite for mergers and
acquisitions- often 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 reduced headcount.
ERP 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.
Standardized HR information
Especially in companies with multiple business units, HR may not have a unified, simple method for tracking employees' time and communicating with them about benefits ands services. ERP can fix it.. In the race to fix these problems, companies often lose sight of the fact that ERP packages are nothing more than generic representation 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 out in cold. Each of these industries has struggled with the different ERP vendors to modify core ERP programs to their needs.
ERP encompasses a broad set of activities supported by multi-module application
software that aids companies in management of various business operations including
manufacturing and logistic, human resources and finance.
SUPPLIERS OFF ERP
SAP, the forerunner of ERP, founded in 1972 by five former IBM engineers, is
the biggest of the group. SAP's software is R/3 and designed to help organize
manufacturing processes and accounting. SAP also offer modules for logistics
and human resources.
PeopleSoft is the number two ERP vendor. PeopleSoft made its mark with human resource software. The company currently targets the services sector with products designed to help companies handle their intangible costs.
Oracle has been selling ERP applications designed to work with its databases since 1987. Oracle sells most of its application to manufacturers and consumer goods companies, making them a direct competitor with SAP.
Baan is a 19-year-old Dutch company and sells manufacturing software.
FINANCIAL AND ACCOUNTING APPPLICATIONS
Briefly speaking, ERP vendors provide financial modules that are designed for a broad number of financial and bookkeeping applications. For instance, these modules maintain centralized charts of accounts and financial balances for the corporations' general ledger. Next, ERP is employed to monitor and control organizational expenses associated with products, overhead and manufacturing orders. Further, financial modules have application in the management of corporate fixed assets though the tracking of depreciation and other costs related to capital asses such as equipment, property and manufacturing facilities. Cash holdings, financial deals and investment risk can also be monitored. In addition, ERP can accommodate payables and receivables. Financial ERP modules can be employed to follow the status of customer accounts as well as schedule the payment of bills to distributors and suppliers. Lastly, ERP has found uses in activities based costing which helps pinpoint the true cost inherent in a particular business operations, which ultimately facilitates both the production and the strategic management process.
ERP AND HUMAN RESOURCES DEPARTMENT
In the past, managing a company's human resources involved massive amounts
of paper. When a new hire came on boar there were many forms that had to be
filled out by both the company and the new hire. Forms included, applications,
benefits selections, drug test results, government taxations forms and pension
options. Due to the complexity of managing human resources these were some of
the first departments to use information technology to make routine procedures
APPLICATIONS IN MANUFACTURING AND LOGISTICS Some
of the key aspects of manufacturing and logistics inclulde:
1. Production Planning: performs capacity planning and creates a daily production.
2. Materials management: controls purchasing of raw materials needed to build products. Manage inventory stocks.
3. Order entry and processing: automates the data entry processes for customers and keeps track of the status of orders.
4. Warehouse management: maintains records of warehoused goods and processes movement of products through warehouse.
5. Transportation management: arranges, schedules and monitors delivery of products to customers via trucks, trains and other vehicles.
6. project management: monitors costs and work schedules on a project-by-project basis.
7. Plant maintenance: set plans and overseas upkeep of internal facilities.
8. Customer service management: administer installed-based service agreements and checks contract and warranties when customer calls for help.
WHAT ARE THE HIDDEN COSTS OF ERP?
2. Integration and testing
4. Data conversion
5. Data Analysis
6. Consultants ad infinitum
7. Replacing your best and brightest
8. Waiting for ROI
WHY DO ERP PROJECTS FAIL SO OFTEN?
At its simplest level, ERP is a set of best practices for performing different
duties in your company, including finance, manufacturing and the warehouse.
To get the most from the software, you have to get people inside your company
to adopt the work methods outlined in the software. If the people in the different
departments that will use ERP don't agree that the work methods embedded in
the software are better than the ones they currently use, they will resist using
the software or will want IT to change the software will be installed. IT gets
bogged down in long, expensive customization efforts to modify the ERP software
to fit with powerful business barons' wishes. Customizations make the software
more unstable and harder to maintain when it finally dies come to life. The
horror stories you hear in the press about ERP can usually be traced to the
changes the company made in the core ERP software to fit its own work methods.
Because ERP covers so much of what a business does, a failure in the software
can bring a company to a halt, literally.
But IT can fix the bugs pretty quickly in most cases, and besides, few big companies can avoid customizing ERP in some fashion-every business is different and is bound to have unique work methods that a vendor cannot account for when developing its software. The mistake companies make is assuming that changing people's habits will be easier than customizing the software. It's not. Getting people inside your company to use the software to improve the ways they do their jobs is by far the harder challenge. If your company is resistant to change, then your ERP project is more likely to fail.