- What is ERP?
ERP stands for “enterprise resource planning”. The definition of enterprise resource planning is an integrated software solution used to manage a company’s resources. ERP systems integrate all business management functions, including planning, inventory/materials management, engineering, order processing, manufacturing, purchasing, accounting and finance, human resources, and more.
More about what is ERP?
- Why implement an ERP system?
ERP software integrates all departments and functions across a company onto a single computer system that can serve all those different department’s particular needs. ERP combines finance, HR, manufacturing and distribution all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. This integrated approach can have a tremendous payback provided the software is installed and used correctly.
- What are the benefits of an ERP System?
The benefits derived from ERP can far outweigh the costs of the system, providing that the system is selected carefully and is appropriate for your company from a feature, cost, and technology standpoint. Some of the benefits realized are:
More about Benefits of ERP.
- A single integrated system
- Streamlining processes and workflows
- Reduce redundant data entry and processes
- Establish uniform processes that are based on recognized best business practices
- Information sharing across departments
- Improved access to information
- Improved workflow and efficiency
- Improved customer satisfaction based on improved on-time delivery, increased quality, shortened delivery times
- Reduced inventory costs resulting from better planning, tracking and forecasting of requirements
- Turn collections faster based on better visibility into accounts and fewer billing and/or delivery errors
- Decrease in vendor pricing by taking better advantage of quantity breaks and tracking vendor performance
- Track actual costs of activities and perform activity based costing
- Provide a consolidated picture of sales, inventory and receivables
- How are ERP & BPR related?
BPR as an acronym stands for Business Process Re-engineering. It used to be a buzzword until a few years ago. Overzealous BPR pundits caused so much havoc through job cuts, it is a controversial subject today in many countries. An organization can go for standalone BPR or they can choose ERP. Since ERP anyway comes bundled with several of the best practices, a well implemented ERP exercise leads to some amount of BPR, though the re-engineering effort may not be full-blown. However, re-engineering through ERP, generally termed package enabled process re-engineering (PEPR) leads to less drastic change in an organization. Such package enabled re-engineering through ERP has been received much better by the end users rather than stand alone BPR in many companies around the world.
- Should BPR & ERP be taken in any order?
There is no easy algorithm that can give a simple answer. A BPR exercise preceding the ERP implementation can help the organization significantly. It may also increase a combined time of implementing BPR and ERP significantly. There is also a risk that a particular ERP software selected later may not be able to implement the re-engineered processes. A simultaneous BPR and ERP exercise saves time and also minimizes the risk of sequential implementation of BPR followed by ERP. One rarely comes across the instance where BPR is followed by ERP. As such the ordering of ERP & BPR must be based on the needs of a specific organization.
- What is the ERP life cycle?
The set of activities through which ERP is implemented in an organization constitutes the ERP life cycle. This can be compared to the well developed System Development Life Cycle (SDLC) in the traditional Structured System Analysis and Design (SSAD). Typical ERP project consists of the following steps:
ERP Implementation Life Cycle.
- ERP readiness assessment
- Preparing the organization for ERP
- ERP Feasibility Study
- Process modelling and documenting the “AS IS” processes & “TO BE” processes (along with BPR)
- Detailed plan for ERP implementation (includes ERP software selection, selection of implementation partners, implementation methodology – “Big Bang” or Modular Implementation – and the final and precise extent of implementation)
- Detailed implementation including development, quality assurance and production system
- Preparing to “go live” including data migration
- Going live
- Performance assessment, documentation, training (continues in early stages also) and future plans.
- How do you decide a fit between an organization and ERP software?
There is no precise algorithm that can measure the fit for an organization to particular ERP software. One generally goes by experiences of similar organizations that have implemented ERP. In general, every ERP software has exceptional strengths in some area. It is better to stay with that ERP software which has special strengths for your area. For example, BaaN & Oracle have outstanding manufacturing modules; People Soft and Marshall have outstanding HR modules. If your core business centers around one of these modules your choice becomes easier. An academic way to evaluate the fit is to carefully study all the business processes that characterize your business and to look for matching business processes that are supported by particular ERP software. Often such an exercise would call for several man-years of effort. The skill set needed for such an exercise may not be easily available within the organization. Getting an outside consulting group to do this exercise may be very expensive. Often most organizations decide the ERP software vendor based on the broad needs of the industry in which they operate and the support offered by particular ERP software for that industry.
- What is the drawback of over customization?
An ERP system provides the solid operational backbone manufacturers and distributors need to improve the volume of production and fulfillment of orders while reducing costs. By optimizing your manufacturing and distribution operations with ERP, you’ll also be able to focus on new business opportunities.