ERP

WHAT IS ERP?

ERP is the short form of Enterprise Resource Planning. Enterprise resource planning (ERP) is
business process management software that allows an organization to use a system of
integrated applications to manage the business and automate many back-office functions
related to technology, services and human resources. ERP software integrates all facets of an
operation including product planning, development, manufacturing, sales and marketing
in a single database, application and user interface.

ERP IS AN ENTERPRISE APPLICATION

ERP software is considered to be a type of enterprise application, that is software designed to

be used by larger businesses and often requires dedicated teams to customize and analyze the
data and to handle upgrades and deployment.

In contrast, Small business ERP applications are lightweight business management software
solutions, often customized for a specific business industry or vertical.
ERP SOFTWARE MODULES EXPLAINED

ERP software typically consists of multiple enterprise software modules that are individually
purchased, based on what best meets the specific needs and technical capabilities of the
organization. Each ERP module is focused on one area of business processes, such as product
development or marketing.

Some of the most common ERP modules include those for product planning, material
purchasing, inventory control, distribution, accounting, marketing, finance and HR. A business
will typically use a combination of different modules to manage back-office activities and tasks
including the following:

Distribution process management, supply chain management, services knowledge base,

configure, prices, improve accuracy of financial data, facilitate better project planning,
automate employee life-cycle, standardize critical business procedures, reduce redundant tasks,
assess business needs, accounting and financial applications, lower purchasing costs, manage
human resources and payroll.

As the ERP methodology has become more popular, software applications have emerged to
help business managers implement ERP in to other business activities and may incorporate
modules for CRM and business intelligence, presenting it as a single unified package.

The basic goal of using an enterprise resource planning system is to provide one central
repository for all information that is shared by all the various ERP facets to improve the flow of
data across the organization.

THE IDEAL ERP SYSTEM

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).

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HUMAN RESOURCE
Recruitment, benefits, compensations, training, payroll, time and attendance, labor rules,
people management.

SUPPLY CHAIN 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.

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POTENTIALITY OF ENTERPRISE RESOURCE PLANNING

ERP is an industry acronym for Enterprise Resource Planning. Broadly speaking, it refers to
automation and integration of a companys core business to help them focus on effectiveness &
simplified success.

An ERP system automates and integrates core business processes such as taking customer
orders, scheduling operations, and keeping inventory records and financial data. This can drive
huge improvements in the effectiveness of any organization by:

assisting you in defining your business processes and ensuring they are complied with
throughout the supply chain;
protecting your critical business data through well-defined roles and security access
enabling you to plan your work load based on existing orders and forecasts
providing you with the tools to give a high level of service to your customers
translating your data into decision making information

BENEFITS OF ERP FOR BUSINESS

Integration across all business processes To realize the full benefits of an ERP system
it should be fully integrated into all aspects of your business from the customer facing
front end, through planning and scheduling, to the production and distribution of the
products you make.
Automation enhances productivity By automating aspects of business processes, ERP
makes them more efficient, less prone to error, and faster. It also frees up people from
mundane tasks such as balancing data.
Increase overall performance The integration of disparate business processes benefits
by ensuring coherence and avoids duplication, discontinuity, and people working at cross
purposes, in different parts of the organization. The cumulative positive effect when
business processes integrate well is overall superior performance by the organization.
Quality Reports and Performance Analysis Analysis will enable you to produce
financial and boardroom quality reports, as well as to conduct analysis on the
performance of your organization.
Integrates across the entire supply chain A best of breed system should extend
beyond your organization and integrate with both your supplier and customer systems
to ensure full visibility and efficiency across your supply chain.

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ADVANTAGES OF ENTERPRISE RESOURCE PLANNING

1. Complete visibility into all the important processes, across various departments of an
organization (especially for senior management personnel).

2. Automatic and coherent workflow from one department/function to another, to ensure

a smooth transition and quicker completion of processes. This also ensures that all the
inter-departmental activities are properly tracked and none of them is missed out.

3. A unified and single reporting system to analyze the statistics/status etc. in real-time,
across all functions/departments.

4. Since same (ERP) software is now used across all departments, individual departments
having to buy and maintain their own software systems is no longer necessary.

5. Certain ERP vendors can extend their ERP systems to provide Business Intelligence
functionalities, that can give overall insights on business processes and identify potential
areas of problems/improvements.

6. Advanced e-commerce integration is possible with ERP systems most of them can
handle web-based order tracking/ processing.

7. There are various modules in an ERP system like Finance/Accounts, Human Resource
Management, Manufacturing, Marketing/Sales, Supply Chain/Warehouse Management,
CRM, Project Management, etc.

8. Since ERP is a modular software system, its possible to implement either a few modules
(or) many modules based on the requirements of an organization. If more modules
implemented, the integration between various departments may be better.

9. Since a Database system is implemented on the backend to store all the information
required by the ERP system, it enables centralized storage/back-up of all enterprise data.

10. ERP systems are more secure as centralized security policies can be applied to them. All
the transactions happening via the ERP systems can be tracked.

11. ERP systems provide better company-wide visibility and hence enable better/faster
collaboration across all the departments.

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 12. It is possible to integrate other systems (like bar-code reader, for example) to the ERP
system through an API (Application Programing Interface).

13. ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales
forecasting and related activities.

14. ERP systems are especially helpful for managing globally dispersed enterprise
companies, better.

DISADVANTAGES OF ENTERPRISE RESOURCE PLANNING

1. The cost of ERP Software, planning, customization, configuration, testing,

implementation, etc. is too high.

2. ERP deployments are highly time-consuming projects may take 1-3 years (or more) to
get completed and fully functional.

3. Too little customization may not integrate the ERP system with the business process &
too much customization may slow down the project and make it difficult to upgrade.

4. The cost savings/payback may not be realized immediately after the ERP
implementation & it is quite difficult to measure the same.

5. The participation of users is very important for successful implementation of ERP

projects hence, exhaustive user training and simple user interface might be critical. But
ERP systems are generally difficult to learn (and use).

6. There may be additional indirect costs due to ERP implementation like new IT
infrastructure, upgrading the WAN links, etc.

7. Migration of existing data to the new ERP systems is difficult (or impossible) to achieve.
Integrating ERP systems with other standalone software systems is equally difficult (if
possible). These activities may consume a lot of time, money & resources, if attempted.

8. ERP implementations are difficult to achieve in decentralized organizations with

disparate business processes and systems.

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 9. Once an ERP systems is implemented it becomes a single vendor lock-in for further
upgrades, customizations etc. Companies are at the discretion of a single vendor and
may not be able to negotiate effectively for their services.

10. Evaluation prior to implementation of ERP system is critical. If this step is not done
properly and experienced technical/business resources are not available while evaluating,
ERP implementations can (and have) become a failure.

END OF THE STUDY