What is ERP?
How can ERP improve a company's business performance?
Value of ERP?
How long will an ERP project take?
What is ERP?
Being the acronym for enterprise resource planning) that is: information systems that integrate and automate the business practices associated with the operations or production aspects of a company.
An ERP integrates and automates business processes in a company. It helps mangers invest internal resources to utilize activities associated with: Accounting, Invoicing, Inventory, Manufacturing, Logistics and Distribution. It grants full control over the company’s business activities: Sales, delivery and billing; production and inventory management; in addition to human resources management.
ERP is fully integrated cross-functional environment. Management is performed through a central engine with associated modules. Each department performs its functional requirements independently, still collaborates with the other in a smooth secured workflow system.
Typically, an ERP system uses or is integrated with a relational database system. The deployment of an ERP system can involve considerable business process analysis, employee retraining, and new work procedures.
The true ambition of ERP is to attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.
Though this may seem tall order, building 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, often being manually keyed into different departments' computer systems along the way causing 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. 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.
How can ERP improve a company's business performance?
ERP's best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes it into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn't handle the up-front selling process (although most ERP vendors have recently developed CRM software to do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer's credit rating and order history from the finance module, the company's inventory levels from the warehouse module and the shipping dock's trucking schedule from the logistics or delivery module, for example).
People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. Later, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee management or financial reporting.
How can ERP improve a company's business performance?
ERP's best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes it into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn't handle the up-front selling process (although most ERP vendors have recently developed CRM software to do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer's credit rating and order history from the finance module, the company's inventory levels from the warehouse module and the shipping dock's trucking schedule from the logistics or delivery module, for example).
People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. Later, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee management or financial reporting.
Value of ERP?
People don't like to change, and ERP asks them to change how they do their jobs. That is why the value of ERP is so hard to pin down. The software is less important than the changes companies make in the ways they do business. If you use ERP to improve the ways your people take orders, manufacture goods, ship them and bill for them, you will see value from the software. If you simply install the software without changing the ways people do their jobs, you may not see any value at all—indeed, the new software could slow you down by simply replacing the old software that everyone knew with new software that no one does.
How long will an ERP project take?
Companies that install ERP do not have an easy time of it. Because ERP is a two way project that requires the effort of both: the client and the vendor. the implementation time varies depending on the ERP modules to be installed, and the current situation at the clients business process level. To do ERP right, the ways you do business will need to change and the ways people do their jobs will need to change too. And that kind of change doesn't come without a price.
