Enterprise Resource Planning

Any business enterprise consists of number of business functions such as marketing, sales, manufacturing, finance, inventory management, human resources, etc. All these business functions need to be managed well in order to run a business enterprise profitably. These business functions cannot be managed in isolation - they need to be managed in an integrated way.

With size of the business enterprise increasing, it becomes more important to automate the management of these business processes by using software systems. Traditionally each of these functions used to have their own dedicated management software system. Each software module will then require complex interfaces with other modules to function. This created immense challenges in maintaining these systems individually and also did not allow the enterprise to truly get a seamless view of all the business information in an integrated and unified manner.

In order to address some of these shortcomings, Enterprise Resource Planning (ERP) software systems came into existence. Project Management Professional PMP Course will aid you in understanding the ERP system.

Enterprise Resource Planning (ERP) is the integrated management of core business processes, often in real-time and enabled by software and technology.

ERP is usually referred to as a category of business-management software — typically a suite of integrated applications for each core business function—that an organization can use to collect, store, manage, and interpret data from these many business activities in real time and use the data for managing the business functions and also for decision making

While the standalone systems will have their individual databases for storing data, ERP will have a common central database from which the various software modules will access information. Having a central common database, easily allows one software module to access the required business information from modules easily. This means that companies using ERP are largely saved from having to make double entries to update information because the system shares the data, in turn, enabling greater accuracy and collaboration between the organization's departments.

Available Options of ERP Solutions

There are many ERP systems which are available in the market. ERP products which are readily available have built-in business processes by taking into consideration global best practices. This helps organizations get access to best practices for each business function. ERP also allows specific customization of business processes on a need basis.

There are many matured ERP software systems available in the industry. Some of the leading ERP systems are being offered from SAP, Oracle, PeopleSoft, JD Edwards, and many more. Some of the business modules offered by these ERP systems include Finance, Human Resource, Inventory, Sales, CRM, Project Management, Manufacturing, Decision Support System, etc. An organization can choose the appropriate modules they need based on their business requirements.

ERP solution implementation has been a very expensive affair in general, demanding huge investments of time and money. Traditionally ERP systems have been implemented as dedicated monolithic systems for individual organizations. But with advent of cloud technology, ERP solutions are also available on cloud as Platform-as-a-Service and Software-as-a-Service from these leading vendors. This has made ERP solutions affordable now.

Advantages of ERP

The most fundamental advantage of ERP is that the integration of business processes saves time and expenses. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Some of the business tasks become more efficient as below:

1. Sales forecasting, leading to inventory optimization.
2. History of every transaction through relevant data capture and stores.
3. Order tracking from acceptance through fulfilment.
4. Revenue tracking, from invoice to cash realization.
5. Synchronization of purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor charged).

ERP systems centralize business data which:

1. Eliminates the need to synchronize data changes between disparate system.
2. Consolidation of finance, marketing, sales, human resource, and manufacturing modules.
3. Brings legitimacy and transparency to each bit of transactional data.
4. Provides a comprehensive enterprise view of information (no 'silos of information').
5. Real-time information availability to management anywhere, anytime to make proper decisions.
6. Protects sensitive data by consolidating multiple security systems into a single structure.

Disadvantages

ERP comes with its fair share of challenges as well. Below is a list of some of the challenges:

1. ERP provides standard best practices of business processes. It will require customization of specific business processes as the need be. Customization is an effort-intensive process.
2. Re-engineering current business processes to align with the ERP processes sometime can become detrimental and lead to losing the uniqueness and competitive advantage.
3. ERP can cost more than less integrated or disparate systems.
4. ERP being very expensive, there is a high changing cost. Hence, there is always the danger of an organization getting stuck with one particular kind of ERP, and increased dependency on a particular ERP vendor for support.
5. Extensive training requirements about the ERP.
6. Harmonization of ERP systems in large companies can be a huge task.

Benefits of ERP

ERP surely brings a lot of benefits to an organization. Below are some of the benefits an organization can expect to harness from an ERP system implementation:

1. ERP can improve quality and efficiency of the business.
2. ERP supports senior management with better decision making.
3. ERP creates a more agile organization that adapts better to change.
4. ERP improves data security in a closed environment.
5. ERP provides increased opportunities for collaboration by providing an integrated platform wherein users can communicate and collaborate seamlessly with different forms of data such as documents, files, forms, audio and video, and emails.

Conclusion

ERP is a need of modern businesses to run them smoothly and profitably. There are different types of ERP solutions available with different capabilities (Small, medium and large business) and with different pricing models. An organization can choose the right ERP system and implement.