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INFORMATION TECHNOLOGY BUSINESS
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.
The advantages of an ERP package are.
Integration
Integration can be the highest benefit of them all. The only real project aim for
implementing ERP is reducing data redundancy and redundant data entry. If
this is set as a goal, to automate inventory posting to G/L, then it might be a
successful project. Those companies where integration is not so important or
even dangerous tend to have a hard time with ERP. ERP does not improve
the individual efficiency of users, so if they expect it, it will be a big
disappointment. ERP improves the cooperation of users.
Efficiency
Generally, ERP software focuses on integration and tends to not care about
the daily needs of people. Individual efficiency can suffer by implementing
ERP. The big question with ERP is whether the benefit of integration and
cooperation can make up for the loss in personal efficiency or not.
Less personnel
ERP software focuses on integration and tend to not care about the daily
needs of people. Less reporting or accounting personnel, but more sales
assistants etc.
Accuracy
People are not accurate. What ERP does is makes the lives of inaccurate
people or organization a complete hell and maybe forces them to be accurate
(which means hiring more people or distributing work better), or it falls.
Help reduce operating costs
ERP software attempts to integrate business processes across departments
onto a single enterprise-wide information system. The major benefits of ERP
are improved coordination across functional departments and increased
efficiencies of doing business. The immediate benefit from implementing ERP
systems we can expect is reduced operating costs, such as lower inventory
control cost, lower production costs, lower marketing costs and lower help
desk support costs.
Facilitate Day-to-Day Management
The other benefits from implementing ERP systems are facilitation of day-to-
day management. The implementations of ERP systems nurture the
establishment of backbone data warehouses. ERP systems offer better
accessibility to data so that management can have up-to-the-minute access to
information for decision making and managerial control. ERP software helps
track actual costs of activities and perform activity based costing.
Support Strategic Planning
Strategic Planning is "a deliberate set of steps that assess needs and
resources; define a target audience and a set of goals and objectives; plan
and design coordinated strategies with evidence of success; logically connect
these strategies to needs, assets, and desired outcomes; and measure and
evaluate the process and outcomes." (source) Part of ERP software systems
is designed to support resource planning portion of strategic planning. In
reality, resource planning has been the weakest link in ERP practice due to
the complexity of strategic planning and lack of adequate integration with
Decision Support Systems (DSS).
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)
Human Resource
Recruitment, benefits, compensations, training, payroll, time and attendance,
labour 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
ERP IN A MANUFACTURING COMAPANY
In the absence of an ERP system, a large manufacturer may find itself with
many software applications that do not talk to each other and do not
effectively interface. Tasks that need to interface with one another may
involve:
design engineering (how to best make the product)
order tracking from acceptance through fulfillment
the revenue cycle from invoice through cash receipt
managing interdependencies of complex Bill of Materials
tracking the 3-way match between Purchase orders (what was ordered),
Inventory receipts (what arrived), and costing(what the vendor invoiced)
the Accounting for all of these tasks, tracking the Revenue, Cost and
Profit on a granular level.
Change how a product is made, in the engineering details, and that is how it
will now be made. Effective dates can be used to control when the switch over
will occur from an old version to the next one, both the date that some
ingredients go into effect, and date that some are discontinued. Part of the
change can include labelling to identify version numbers.
Computer security is included within an ERP to protect against both outsider
crime, such as industrial espionage, and insider crime, such as
embezzlement. A data tampering scenario might involve a terrorist altering a
Bill of Materials so as to put poison in food products, or other sabotage. ERP
security helps to prevent abuse as well.
Conclusion
According to Anthony R. A, organizational processes fall into three levels -
strategic planning, management control and operational control. Even though
much of ERP success has been in facilitating operational coordination across
functional departments, successful implementation of ERP systems benefit
strategic planning and management control one way or other.
