Enterprise Resource Planning (ERP) systems which are coming into vogue are built with the vision to provide businesses with an integrated information system. These systems implement business processes within the organisation to achieve synergy in operation across various business units. The challenge for ERP systems is to set up and integrate information resources across geographically spread business units, to enable optimisation across the organisation.
Even though a multitude of technologies is involved in building ERP systems, the implementation and post-implementation maintenance should be made simple. Towards this objective, it is imperative that the ERP systems satisfy some basic requirements of the customer.
The business landscape is constantly changing and enterprises are seeking to gain competitive advantage through mergers and acquisitions as well as increased proximity to customers and suppliers. This consolidation, along with the more macro trend toward globalisation, means that many enterprises now operate from several different geographical sites, between which large volumes of time-sensitive, mission-critical data is transferred. Now the business organisations are demanding such technologies which can deliver complete (best business practices), usable (high productivity) and adaptable (easy installation and post implementation maintenance) business systems.
With this ever-changing business environment, enterprises are adopting ERP systems to set up and integrate information resources across geographically spread business units, to enable optimisation across the organisation.
Enterprise Resource Planning (ERP) has originated from material requirement planning which is the fundamental aspect of production management, planning and control. In today’s world ERP system provides an integrated information system for all departments and functions across a company that can serve all those different departments’ particular needs. These systems implement business processes within the organisation to achieve synergy in operation across various business units.
ERP is back office software which focuses on the key business functions of manufacturing, supply chain management, CRM, financial management and Project Management. These software solutions have gone through over 35 years of evolution. A well implemented ERP solution will improve the efficiency of the enterprise, reduce money tied up in stock/work in progress, and run a Just in Time inventory system.
That is a tall order, building a single software program that serves the needs of people in finance as well as it does the people in human resources and in the warehouse. Each of those departments typically has its own computer system optimized for the particular ways that the department does its work. But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.
That integrated approach can have a tremendous payback if companies install the software correctly.
Take a customer order, for example, typically, when a customer places an order, that order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and re-keyed into different departments’ computer systems along the way.
All that lounging around in in-baskets causes delays and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse’s computer system to see whether the item has been shipped. “You’ll have to call the warehouse” is the familiar refrain heard by frustrated customers.”
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems. For example, in non-ERP environment a sales invoice is printed and distributed to various departments to process update necessary transaction. However, in ERP system, once a quotation for sales order is processed then the entries are utilized by different departments without incurring duplication of work and risk of inaccurate data.
Finance, manufacturing and the warehouse all still get their own software, except now the software is linked together so that someone in finance can look into the warehouse software to see if an order has been shipped.
Most vendors’ ERP software is flexible enough that you can install some modules without buying the whole package. Many companies, for example, will just install an ERP finance or HR module and leave the rest of the functions for another day.
The objectives of ERP are as follows:
Provide support for all variations of best business practices
Enable implementation of these practices with a view towards enhancing productivity
Empower the customer to modify the implemented business processes to suit their needs.
Definitions of ERP
Enterprise resource planning systems or enterprise systems are software systems for business management, encompassing modules supporting functional areas such as planning, manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, transportation and e-business.
The architecture of the software facilitates transparent integration of modules, providing flow of information between all functions within the enterprise in a consistently visible manner. Corporate computing with ERP allows companies to implement a single integrated system by replacing or re-engineering their mostly incompatible legacy information systems.
American Production and Inventory Control Society (2001) has defined ERP systems as “a method for the effective planning and controlling of all the resources needed to take, make, ship and account for customer orders in a manufacturing, distribution or service company.” We quote several definitions from the published literature to further explain the concept:
“ERP (enterprise resource planning systems) comprises of a commercial software package that promises the seamless integration of all the information flowing through the company–financial, accounting, human resources, supply chain and customer information.” (Davenport, 1998)
“ERP systems are configurable information systems packages that integrate information and information-based processes within and across functional areas in an organization.” (Kumar & Van Hillsgersberg, 2000)
“One database, one application and a unified interface across the entire enterprise.” (Tadjer, 1998)
“ERP systems are computer-based systems designed to process an organization’s transactions and facilitate integrated and real-time planning, production, and customer response.” (O’Leary, 2001)