Basics of ERP

ERP (Enterprise Resource Planning) Enterprise Resource Planning (ERP) is a computerized inventory control and production planning system that was born from Material Requirements Planning (MRP) systems. ERP is a system that organizes functions of an institution; supporting, for example, accounting, finance, human resources and e-commerce applications through the creation of relational databases and graphical user interfaces that unify the tasks of institutions like corporations, government agencies, non-profit organizations, powerful institutions and industries and businesses establishments. Introduction to ERP ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes of an organization into one single system. Usually ERP systems will have many components including hardware and software, in order to achieve integration, most ERP systems use a unified database to store data for various functions found throughout the organization. Enterprise resource planning (ERP) is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores. An ERP system has a service-oriented architecture with modular hardware and software units or services" that communicate on a local area network. The modular design allows a business to add or reconfigure modules (perhaps from different vendors) while preserving data integrity in one shared database that may be centralized or distributed. The term ERP originally referred to how a large organization planned to use organizational wide resources. In the past, ERP systems were used in larger more industrial types of companies. However, the use of ERP has changed and is extremely comprehensive, today the term can refer to any type of company, no matter what industry it falls in. In fact, ERP systems are used in almost any type of organization - large or small. In order for a software system to be considered ERP, it must provide an organization with functionality for two or more systems. While some ERP packages exist that only cover two functions for an organization (QuickBooks: Payroll & Accounting), most ERP systems cover several functions. Todays ERP systems can cover a wide range of functions and integrate them into one unified database. For instance, functions such as Human Resources, Supply Chain Management, Customer Relations Management, Financials, Manufacturing functions and Warehouse Management functions were all once stand alone software applications, usually housed with their own database and network, today, they can all fit under one umbrella - the ERP system. How ERP is related to technology? ERP keeps a fundamental objective of integrating digital technologies and to make them work for a better business management. It thus attempts to integrate computers, networking, communication, broadcasting, instrumentation, sound engineering, graphics, and control. Advances in these technologies and their widespread usage have helped in reducing costs, improving literacy and accelerating the growth again. Technology is making the computers and peripherals more and more cheap, friendly, popular, and tempting. Internet revolution has made Web enabling of the software as a norm. That means the business data can be accessed from anywhere of course with necessary protective measures. Faster and affordable communication has made Accessing Anywhere a mere routine. This is accompanied by spread

of digital communication. Affordability, ease of use, spread, and multifold computer literacy has made use of ERP within the reach of small and medium businesses. Modern digital instrumentation allows direct interfacing with computers. This allows flow of data from instruments to the computer over standard cable and port. The data can be stored and analyzed. Also, the instruments can be controlled or Switched by sending Digital command to them over the same cable. This helps in flexible and synchronized automation. A number of application areas other than manufacturing industries are now open to ERP. Thus there can be an ERP for a college covering student registration, examination schedules, and result processing. There are ERP solutions for application areas like hotel, hospitality, healthcare, transport, services, and governance. Likewise, there have been fine-tuned solutions for specific applications catering to Vertical segments. An ERP vendor offers such kind of variants for Chemical Industry and Automobile Industry and Pharmaceutical Industry. What are typical characteristics of a modern ERP solution? A modern ERP solution is characterized by following attributes that keep it in stride with business requirements, technology options, expandability, and scope. 1. It gives a central database that can be simultaneously shared by all users from within company or over web (web enabled).The transactions are completely integrated. There is no any duplication of data or need of multiple entries. At best, data is entered directly to the system and not copied or retyped from somewhere else. The data updates are on-line, and effects of business transactions are immediately visible in various reports. Same set of records is available to everyone at same instant across the organization, and even beyond. 2. It covers all application areas of the business like finance, sales, materials management, HR, payroll, production planning and control, maintenance management, marketing, customer support, costing, so on and so forth. It covers for statutory requirements and related reporting. Accordingly it covers for the procedures of excise, sales tax, income tax, provident fund, local duties, import-export etc. 3. It offers password based security and a completely controlled access. Depending upon identity, the user is restricted on what options of the software he can (or cannot) access. Interfacing with Thumb-Pads or more advanced devices of identification too is possible. A tag of who has created or approved the business transaction is marked on every business transaction to ensure accountability. 4. It has Audit trail or a log of every change made in confirmed transactions. This captures who and when changed the electronic record for every such change. 5. It has data query facilities that allow user to give ad-hoc queries to the database and dig into its records to be able to take benefit of its huge information contents. There can be query on Earlier rates of purchase, Sale of Sub-Optimal Quantities, a A scrutiny of extra discounts, or Above Average Downtimes of a production machine. It has interfacing capabilities that, with some localization, allow capture of data directly from digital instruments, barcodes, swap cards, programmable logic controllers (PLC) etc. 6. It has integrated workflow facilities that allow users to view and execute the transactions pending for their action. Once executed, the Tasks move as per the configured workflow chart

to their next places of action. This reduces business cycle times dramatically. There are no Missed out or Forgotten tasks. Follow-up is electronic. There can be Pre-Set Alert Mechanisms that inform appropriate users to perform some action based on an event like alert to maintenance engineer on registering of breakdown of an equipment. Workflow is an important facility. Essentially, it synchronizes the organizational functions from end-to-end. This cannot be achieved by shared and integrated database alone. 7. It has configurable business rules in-built, and execution of business transaction is not permitted by the system without compliance to the set policies and procedures. 8. It is adaptive to emerging tools and technologies, and the product developers are on their toes to incorporate them into the interfaces of the solution through constant innovation.

ERP Benefits: Myth or Reality Many industry leaders have believed on the evasive nature of ERP benefits. But how real is the issue of ERP benefits realization? To find out, it helps to look into some key statistics from our ongoing ERP benchmark study. The study, which focuses on companies across the globe that have implemented or are in the process of implementing various ERP packages, reveals some interesting points:

30% of those surveyed did not realize any sort of staff reductions after go-live 18% did not measure benefits after go-live 28% had some type of problem or operational stoppage after go-live

Surprisingly, only 18% of companies did not measure post-go-live benefits (in other words, 82% did indeed measure). Besides almost 100% of the companies that have implemented ERP, does not measure post-implementation benefits. Second, the fact that 28% experienced stoppages seems somewhat alarming. It does highlight that at least 1 in 4 companies have operational problems and/or stoppages because of the disruptions caused by ERP. So what does this all mean? First, the results show that ERP benefits are by no means guaranteed. Second, the risk of ERP disrupting an organization's core operations is a significant business risk. These factors are clearly areas that will affect the ROI of the investment in ERP and should be carefully managed as part of an overall ERP Benefits Realization plan. The Advantages and Disadvantages of ERP There are a number of powerful advantages to Enterprise Resource Planning. It has been used to solve a number of problems that have plagued large organizations in the past. At the same time, it is not without a number of disadvantages. Being able to weigh the two will allow a company to decide if this solution will properly meet their needs. Advantages of ERP: 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.

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 labeling 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. Disadvantages of ERP: Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used. Limitations of ERP include: Personnel turnover; companies can employ new managers lacking education in the company's ERP system, proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP. Customization of the ERP software is limited. Some customization may involve changing of the ERP software structure which is usually not allowed. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive to install often ranging from 30,000 to 500,000,000 for multinational companies ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability. Technical support personnel often give replies to callers that are inappropriate for the caller's corporate structure. Computer security concerns arise, for example when telling anon-programmer how to change a database on the fly, at a company that requires an audit trail of changes so as to meet some regulatory standards. ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies This is cited as one of the main causes of their failure. Systems can be difficult to use. Systems are too restrictive and do not allow much flexibility in implementation and usage. The system can suffer from the "weakest link" problem. Inefficiency in one department or at one of the partners may affect other participants.

Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, and then over time "dirty data" will reduce the reliability of some applications. Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level). The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. There are frequent compatibility problems with the various legacy systems of the partners. The system may be over-engineered relative to the actual needs of the customer.

Conclusion: The success of the system is fully dependent on how the workers utilize it. This means they must be properly trained, and a number of companies have attempted to save money by reducing the cost of training. Even if a company has enough money to implement ERP, they may not be able to successfully use it if they do not have enough money to train their workers on the process of using it. One of the biggest problems with ERP is that it is hard to customize. Very few companies can effectively use ERP right out of the box. It must be modified to suit their needs, and this process can be both expensive and tedious. Even when a company does begin changing the system, they are limited in what they can do.