ERP stands for Enterprise Resource Planning, which refers to a system that attempts to integrate data and information company wide, including financial and accounting data, human resources, manufacturing, sales and marketing, quality assurance, customer relationship management information, and more.
What is ERP
Many people who function in executive business management roles should understand what is ERP. Also known as Enterprise Resource Planning, this system integrates the external and internal management of information across entire organizations. It incorporates finance and accounting, sales and service, manufacturing, the management of customer relationships, human resources, and business development.
ERP systems automated, integrated software programs. The central purpose is to facilitate and control the flow of information among all internal business functions, as well as manage its connections to external stakeholders. These systems can run on a variety of network configurations and hardware. They generally rely upon a central database of information.
The foundation of an effective system is based upon nine components. Among them are workflow and document management, chat and messaging wikis, search functions, and the production of customizable reports. A comprehensive, transactional database is also essential. In addition, a user-friendly management portal (dashboard), business intelligence system, and the ability for external access through web portals are the remaining core components of this system.
Best practices involve techniques and methods which have produced consistent and superior results compared to alternative methods. They define industry standards, or benchmarks, for various activities and processes. Compared with other applications, Best Practices reduce risks by more than 70 percent. They are recognized as elements of accredited management standards.
Best Practices are fully incorporated into the majority of Enterprise Resource Planning systems. Research has shown companies who embrace industry-defined Best Practices effectively reduce time-consuming tasks. Enhanced tasks include training, testing, documentation, and configuration.
The specific characteristics of these systems incorporate the following. Integrated ERP systems should have the ability to function in real-time, do not rely on periodic updates, utilize a central database which supports all relevant applications, and incorporate consistent modes of operation throughout each separate module. In addition, these system installations should be user-friendly, and do not require extensive application or data integration by information technology (IT) professionals.
Finance and accounting functions are numerous. They integrate general ledgers, payables, budgeting, consolidation, receivables, fixed assets, and cash management. Among the human resource functions are recruiting, payroll, diversity management, 401K plans, training, and benefits.
Manufacturing elements incorporated into the system are extensive. Among them are work orders, capacity, quality control, engineering, scheduling, cost management, material billings, work-flow management, and manufacturing projects. In addition, the management of product life-cycles, activity-based cost assessments, and manufacturing processes and flows are managed through the system.
The components of supply chain management are as follows. They include commissions, the processing of claims, inspection of goods, scheduling suppliers, organizing supply chains, and configuring products. Also, purchasing, order entries, inventory control, and order-to-cash processes are among the functions managed through this comprehensive system.
The project management elements include performance units, billing, and administering activities, as well as tracking costs, time and expenses. The consolidation of activities related to building, retaining and enhancing customer relationships is also important. Functions may include call center support, customer contact, service, commissions, marketing, and sales.
Data services and access control are among the remaining core elements of the Enterprise Resource Planning system. They may include a variety of user-friendly, self-service interfaces for clients, employees, subcontractors, and suppliers. An effective system also manages user privileges and access to various processes and data.
The scope of ERP generally requires significant modifications to the functions and practices of staff members. As a result, three types of services are available to organizations who wish to implement this system. They include customization, consulting, and support.
Implementation time varies. It is dependent upon several factors, including the size of a business, number of modules needed, scope of process modifications, levels of customization, and readiness of executives to take control of the process.
The typical time-frame for a small organization to get set-up may involve several months. Large enterprises may require the guidance of about 150 consultants over a 14-month period. The implementation phase for international projects can extend across several years.
To ensure success, businesses should analyze all their processes before moving into the implementation stage. A main reason for projects to fail is the misunderstanding or misinterpretation of the process changes that are needed before entering the initial phase.
Studies have shown the mismatch of business processes can be minimized through the following pre-implementation steps. Current processes should be linked to the company’s business strategy. The effectiveness of each process should be thoroughly analyzed. Existing automated solutions should be fully comprehended.
Understanding what is ERP can result in many organizational advantages. This system can save time, reduce expenses, enhance decision-making skills, centralize business data, reduce errors, and make relevant data visible and accessible across organizations.