Supply Chain Management : Enterprise Resource Planning

The goal of ERP (Enterprise Resource Planning) systems is the successful integration of a company’s data and processes in to a single unified system. Usually, several components of computer software and hardware are employed in order to realize this goal. A unified database must be employed in order to store data for the various modules of the system.

History of Enterprise Resource Planning

Originally, the term “enterprise resource planning” was employed to designated systems used by enterprise wide resources. It was originally used in the context of manufacturing, but in today’s world, enterprise resource planning is used in a variety of spectrums. It can be used to unite all basic functions of a company, no matter what kind of company it is. Indeed, enterprise resource planning is used by governments, non profits, and corporations alike.

In order to be considered a legitimate enterprise resource planning system, the software package has to provide functionality in a single package that would normally involve two or more systems. To give one example, a software program that provides payroll and accounting is a legitimate enterprise resource planning software package. But the term is usually used in relation to bigger, more broadly based software applications. Using an enterprise resource planning system can not only replace several functioning applications, it will also eliminate the need for external interfaces that systems might have required before, as well as supplying further benefits that might range from lower maintenance and standardization to more convenient reporting abilities.

ERP Overview

Many companies that boast the necessary in house IT skills to integrate several software programs decide to implement just a few portions of an enterprise resource planning system. They will then develop an external interface to other similar systems being employed to take care of their other application needs. To use an example, in some instances the PeopleSoft HRMS system might be perceived to be better than SAP’s HRMS system, or vice versa. So a company might choose to buy an enterprise resource planning system, but desire the PeopleSoft HRMS and Financial modules, but then buy the remaining applications from the SAP company.

Even in the retail world, this is a very common practice. Even middle sized retailers often have discreet Point of Sale products and financial applications, which are then rounded out by an application series that will take care of such facets of the business as merchandising, logistics, warehouse management, and the rostering of staff.

In an ideal enterprise resource planning system, the database would take care of all data, including manufacturing, supply chain management, finances, projects, human resources, customer relations management, as well as data warehousing.

Originally, enterprise resource planning systems were rooted in material requirements planning. When the routings became part of a software architecture and the organization’s planning capacity became part of standard software activity, the enterprise resource planning system was born. Usually, an enterprise resource planning system will oversee the logistics, production, inventory, distribution, accounting, invoicing, and shipping facets of an organization. Enterprise resource planning system software helps numerous business activities; these might include sales, inventory management, human resource management, quality management, marketing, billing, delivery, and manufacturing.

Enterprise resource planning systems tend to be mislabeled “back office systems.” This infers that customers are not involved at all with the systems. “Front office systems,” such as customer relationship management, deal with customers directly, as to eBusiness systems like eCommerce, as well as supplier relationship management systems.

Cross functionality defines enterprise resource planning systems. All the departments involved in manufacturing or operations can be effectively integrated in to a single functioning system. This could include accounting departments, as well as marketing, strategic management, and human resources, in addition to warehousing, Information Technology, logistics, and production.

Before enterprise resource planning systems were developed, all the departments that comprised a company would have to rely on their own separate computer systems. The system belonging to the Human Resources department would usually contain employees’ personal data, as well as info on the department itself and the reporting structure. The PR department would take care of paycheck info. The Finances department would have a system that dealt exclusively with the company’s payment transactions. In order to communicate with one another, the various systems would require a certain amount of common data. For the Human Resources department to be able to send salary info to the PR department, for example, there would have to be a static employee number assigned so that the employee in question could be successfully identified by the two systems. Because of this confusing system, many complications would arise.

The development of enterprise resource planning systems led to the combination of data among applications that used to be strictly separate. Organizations thus no longer had to worry about keeping their data in synchronization across numerous different systems. Larger organizations no longer had to worry about the vast number of software specialties that were previously required to keep the business running.

Enterprise Resource Planning Best Practices

One benefit of installing an enterprise resource planning system is known as Best Practices. If a company does not wish to customize their enterprise resource planning system, they can choose the Best Practice function, which comes with the software’s basic version.

Best Practice usually applies to larger companies that have compliance requirements, or where the process depends on commodities like electronic fund transfers, owing to the fact that the process of capturing and reporting such content can be easily codified within the enterprise resource planning system, and subsequently replicated across several different businesses that have similar requirements.

Implementation

Enterprise resource planning software systems can be quite complex. Installing such a system almost certainly requires major changes within the company’s work practices. A specialist will typically have to be employed in order to soothe the transition, as such systems are not typically in house skills. How long it takes to install such a system depends on how large the business is, as well as the extent of the changes being made. Smaller projects can be installed within a period of three months. In order to install a large system, however, it could take several years. What is most important, however, is for the company who has purchased the enterprise resource planning system to eventually take control over it. First, they will generally have to employ a consulting company to help them. Consulting companies generally help the company in three phases: consulting, customization, and support.

The consulting phase takes care of the enterprise resource planning system implementation and helps the system go live. The tailoring involve might include product training, the creation of process triggers as well as workflow optimization, advice on how to improve the way the system is being used in the business, the optimization of the overall system, as well as help with writing reports or assisting in the implementation of Business Intelligence. The consulting operation also includes planning and testing the system. This part of the process should not be forgotten about – it is of vital importance for the system’s future functionality.

The three levels of enterprise resource planning system consultation include systems architecture, business process consulting, and technical consulting. The system’s data flow will have to be designed by a systems architect; this design should include a future data flow plan. The firm’s current business processes will then be studied in depth by the consultation team, who will match the current business processes with the enterprise resource planning system’s capabilities and configure all the firm’s needs. The process of technical consulting might include programming operations. Most of the businesses that sell enterprise resource planning system software will allow their software to be modified in order to suit particular business needs.

The customization process involves changing how the firm’s system works via the writing of new user interfaces as well as application codes. Typically, these operations are not included in the enterprise resource planning system software and must be done by a specialist team.

It can be incredibly expensive to customize an enterprise resource planning system. Most of these packages are not designed to support extensive customization. As a result, the vast majority of firms choose to utilize Best Practices, a method that is outlined above. On the other hand, there are some enterprise resource planning systems that are so general that customization will have to take place on every level. For such packages, it is advisable to purchase third party plug ins that interface well with the enterprise resource planning system software.

Once the system has been successfully implemented, your consultant should provide you with support in order to assist your company with any enterprise resource planning system related problems that may occur in the future. This ensures that the system stays running. It is advisable to create a committee to be headed by the consultant using a participative management approach throughout the design stage in order to provide hands on management control and minimize additional costs for the units that are going to be affected by the new enterprise resource planning system.

Usually, a maintenance agreement program supplies the business with all the patches of the current version, including major and minor releases. Your staff should be allowed to make support calls whenever necessary. The price of this type of agreement is usually around twenty percent of the enterprise resource planning system’s user licenses.