ERP, which is an abbreviation for
Enterprise Resource Planning, is principally an integration of
business management practices and modern technology. Information
Technology (IT) integrates with the core business processes of a
corporate house to streamline and accomplish specific business
objectives. Consequently, ERP is an amalgamation of three most
important components; Business Management Practices, Information
Technology and Specific Business Objectives.
In simpler words, an ERP is a massive software architecture that
supports the streaming and distribution of geographically scattered
enterprise wide information across all the functional units of a
business house. It provides the business management executives with
a comprehensive overview of the complete business execution which
in turn influences their decisions in a productive
way.
At the core of ERP is a well managed centralized data repository
which acquires information from and supply information into the
fragmented applications operating on a universal computing
platform.
Information in large business organizations is accumulated on
various servers across many functional units and sometimes
separated by geographical boundaries. Such information islands can
possibly service individual organizational units but fail to
enhance enterprise wide performance, speed and
competence.
The term ERP originally referred to the way a large organization
planned to use its organizational wide resources. Formerly, ERP
systems were used in larger and more industrial types of companies.
However, the use of ERP has changed radically over a period of few
years. Today the term can be applied to any type of company,
operating in any kind of field and of any
magnitude.
Today's ERP software architecture can possibly envelop a broad
range of enterprise wide 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,
but today, they can all work under a single umbrella - the ERP
architecture.
In order for a software system to be considered ERP, it must
provide a business with wide collection of functionalities
supported by features like flexibility, modularity
& openness, widespread, finest business processes
and global focus.
Integration is an exceptionally significant
ingredient to ERP systems. The integration between business
processes helps develop communication and information distribution,
leading to remarkable increase in productivity, speed and
performance.
The key objective of an ERP system is to integrate information and
processes from all functional divisions of an organization and
merge it for effortless access and structured workflow. 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.
Although the perfect configuration would be a single ERP system for
an entire organization, but many larger organizations usually
deploy a single functional system and slowly interface it with
other functional divisions. This type of deployment can really be
time-consuming and expensive.
An ERP system would qualify as the best model
for enterprise wide solution architecture, if it chains all the
below organizational processes together with a central database
repository and a fused computing platform.
Manufacturing
Engineering, resource & capacity planning, material planning, workflow management, shop floor management, quality control, bills of material, manufacturing process, etc.
Financials
Accounts payable, accounts receivable, fixed
assets, general ledger, cash management, and billing
(contract/service)
Human Resource
Recruitment, benefits, compensations, training,
payroll, time and attendance, labour rules, people
management
Inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration, procurement planning, transportation and distribution
Projects
Costing, billing, activity management, time and expense
Customer Relationship Management
Sales and marketing, service, commissions, customer contact and after sales support
Data Warehouse
Generally, this is an information storehouse that can be accessed by organizations, customers, suppliers and employees for their learning and orientation
Prior to evolution of the ERP model, each department in an enterprise had their own isolated software application which did not interface with any other system. Such isolated framework could not synchronize the inter-department processes and hence hampered the productivity, speed and performance of the overall organization. These led to issues such as incompatible exchange standards, lack of synchronization, incomplete understanding of the enterprise functioning, unproductive decisions and many more.
For example: The financials could not coordinate with the procurement team to plan out purchases as per the availability of money.
Hence, deploying a comprehensive ERP system
across an organization leads to performance increase, workflow
synchronization, standardized information exchange formats,
complete overview of the enterprise functioning, global decision
optimization, speed enhancement and much more.
Implementing an ERP system in an organization is an extremely complex process. It takes lot of systematic planning, expert consultation and well structured approach. Due to its extensive scope it may even take years to implement in a large organization. Implementing an ERP system will eventually necessitate significant changes on staff and work processes. While it may seem practical for an in-house IT administration to head the project, it is commonly advised that special ERP implementation experts be consulted, since they are specially trained in deploying these kinds of systems.
Organizations generally use ERP vendors or consulting companies to implement their customized ERP system. There are three types of professional services that are provided when implementing an ERP system, they are Consulting, Customization and Support.
The ERP implementation process goes through five major stages which are Structured Planning, Process Assessment, Data Compilation & Cleanup, Education & Testing and Usage & Evaluation.
Advantages of ERP Systems
There are many advantages of implementing an EPR system. A few of them are listed below:
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:
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