Posted in Operations & IT Articles, Total Reads: 1334
, Published on 22 August 2016
As defined by American Production and Inventory Control Society (2001), Enterprise resource planning (ERP) system “is a method for the effective planning and controlling of all the resource needed to take, make, ship and account for customer orders in a manufacturing, distribution or service company.”
ERP Signifies “One database, one application and a unified interface across the entire enterprise.”
Enterprise resource planning software as the name suggest helps in planning and managing of resources (men, material, money, machines). With the growth of the organization managing an entire array of information pertaining to different departments became nearly impossible. More people were brought in and number of departments were opened. As these departments grew larger they became closed and air tight with their own set of procedures and hierarchy. Most of this happened because information technology was not integrated into the corporate strategy. Such requirements lead to the invent of ERP Systems.
Common misconceptions about ERP:
1. ERP is a computer based system: Computer is an integral part of ERP but as a whole it is a structured approach which enhance the value chain of an organization. It helps in collecting, storing, cleaning and redesigning of data thus eliminating non value added activities thus helping the company to focus on a core value adding tasks.
2. ERP is used for manufacturing: This misconception is due to historic evolution of ERP through Manufacturing Resource Planning (MRPII). In 1970’s MRP was a fundamental concept of production engineering and manufacturing widely used for ordering of inventories.
An ERP system works on different modules. It uses a centralized common database management system (DBMS) and the modules are integrated thus giving an increased operational transparency throughout the system. The modules are designed to work at real time with online and batch processing technologies.
The core ERP modules found in successful ERP systems are as following:
• Accounting Management
• Financial Management
• Manufacturing Management
• Production Management
• Transportation Management
• Sales and Distribution Management
• Human Resource Management
• Supply Chain Management
• Customer Relationship Management
• Maintenance Management
• Quality Management
The modules of the ERP system can either work as standalone units or several modules can be combined together to form integrated system. The modules are designed to operate under several commonly used operating platform such as UNIX, Windows etc.
ERP System employees two type of server architecture to create decentralized computing environment.
1. Thin Client/server (C/S) technology
2. Client/fat server (C/FS) architecture
Benefits of ERP:
1. Bridge the information gap across the organization
2. Provides an organization wide integrated information system covering all functions like selling, marketing, manufacturing, inventory finance, payroll, purchasing etc.
3. Facilitate quick overview of the organization and hence quick decision making
4. Has built an alarms and alerts
5. Easy to monitor and identify problem area
6. Has uniform look and feel across the organization
7. Eliminate the need to maintain diverse system
8. Help in data mining and business intelligence
9. Easy to upgrade to latest versions or incorporate new technologies
Selecting ERP package: One should consider the following aspects for the process of shortlisting and choosing an ERP package.
1. Identifying and justifying the need: ERP should not be construed upon as a replacement for existing applications. It should enhance the value and user experience. The projected growth of the organization and the accompanying needs must be considered.
2. Constitute a cross functional team: A team of domain expert, users, system and network administrators, database administrator, should be assembled to access the different ERP packages.
3. Vendor Selection: While choosing vendor, following factors must be considered.
• Strength i.e., reputation, user base, number of years since inception
• Technology: Operating system, language used, capability to handle emerging technology
• Stability of code
• Reseller Channels: How many resellers are available and how efficient they are
• Customization needed: Amount of customization to be done before the package becomes ready to use
• User friendly
• Maintenance and support provided by the vendors
• Technical features like stability and reliability
4. Hardware needs
5. Issues related to data migration
6. How easy it is to integrate with existing application
ERP Vendors: There are many ERP vendors in today’s market. Following is the list of important one.
1. Abas Business Solution: Provide services to midsize manufacturing, distribution and service enterprises.
2. Epicor ERP: Specializes in providing industry specific software to over 20,000 customer base in 150 countries.
3. Infor LN: ERP that covers many platforms and has adapters for integration with external applications like SCM.
4. Lawson: Have customers from over 40 countries. The module includes enterprise performance management, enterprise asset management, supply chain management, customer relationship management and human resource management.
5. QAD Enterprise Application: Founded in 1979, it designs specialized ERP software to meet needs of customers in automotive, consumer products, electronics, food and beverages, and medical industries. The service is offered in 27 languages over 90 countries.
6. Oracle: The company work under two flagship brands namely, JD Edwards and PeopleSoft ERP and is second largest ERP service provider.
7. SAP: Is the largest ERP service provider having customer in more than 120 countries. Its suit covers practically all industries.
Thus, Enterprise Resource Planning is a way of managing an organization which requires the discipline of lean coupled with statistical accuracy of six-sigma. It is a platform which integrates both the above mentioned quality tools which are quite anti to each other. With the rightful behavioral change, employee acceptance and vendor selection the tool can work wonders and can easily carve a success path for an organization.
This article has been authored by Saurabh Kumar from IIM Raipur
Book: Operations Management By Heizer, Jay, Render, Barry, Rajashekhar
Journal: Customer Relationship Management and Supply Chain Management, ISSN: 2222-2510