Name:
Zubair Rasheed
Originally the term ERP was referred to the way how a large organization planned to use its resources. Previously, ERP systems were used in large industrial companies. However, ERP use has changed drastically over a period of few years. Today the term can be applied to any type of company of any size (large or small) operating in any kind of field also today it is commonly used by non-profit organizations, government agencies, and other institutions.
Prior
to the ERP evolution, every department in an organization had their own
isolated software application that did not interface with any other
department software. Such isolated structures could not synchronize the
inter-department processes and hence hindered the organization’s overall
productivity, speed, and performance. These issues led to things such
as lack of synchronization among the departments, incomplete
understanding of the enterprise functioning, unproductive decisions,
etc. For example, the financials department could not coordinate with
the procurement team to plan out purchases as per the availability of
money.
In
simple words ERP is a system that is used to combine all the
information and operations of an organization into a single unit or more
appropriately we can say that information technology (IT) integrates
with an organization core business process to streamline and accomplish
specific business objectives of that organization. In order for system
to be recognized as an ERP, it must provide a business with
functionalities that have features like flexibility, modularity &
openness, broadness, the finest business processes, and global focus.
ERP provides the management executive with a comprehensive overview of
the complete business execution of the organization and help them
influence their decisions in a productive way.
ERP
is a huge software architecture which supports the distribution of
geographically scattered enterprise information across all the
functional units of an organization. ERP includes many components like
the hardware and software. ERP normally uses a database to store the
data for various functions throughout the organization. For instance,
functions such as Human Resources, Supply Chain Management, Customer
Relationship Management, Finance, Manufacturing Warehouse Management,
and Logistics were all previously standalone software applications,
generally housed with their own applications, database, and network.
Today, they can all work under a single umbrella – the ERP architecture.
Deploying
a comprehensive ERP system across an organization leads to performance
increase, work flow synchronization, standardized information exchange
formats, complete enterprise functioning overview, speed enhancement,
etc. An ideal ERP system that would qualify as the best model for the
enterprise- wide solution, if it includes the below organizational
processes together:
Manufacturing:
Engineering, resource & capacity planning, material planning, work flow management, shop floor management, quality control, bills of material, manufacturing process, etc.
Financials:
Accounts payable, accounts receivable, fixed assets, general ledger, cash management, and billing (contract/service).
Human Resource:
Recruitment, benefits, compensations, training, payroll, time and attendance, labor rules, people management.
Supply Chain Management:
Inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration, procurement planning, transportation and distribution.
Projects:
Costing, billing, activity management, time and expense.
Customer Relationship Management:
Sales and marketing, service, commissions, customer contact and after sales support.
Implementing
an ERP system in an organization is an extremely complex process. It
requires systematic planning, expert consultation, and a well-structured
approach. Depending upon the size of the organization the
implementation scope might become so broad that it may take years to
implement the ERP in a large organization. Implementing an ERP system
eventually requires business process reengineering (changes on staff and
work processes). It is commonly advised that special ERP implementation
experts be consulted, since they are specially trained in deploying
these kinds of ERP systems.
There are three types of professional services
that are provided when implementing an ERP system, they are Consulting,
Customization, and Support.
- Consulting Services: They are responsible for the initial stages of ERP implementation where they help an organization to being their new system to life with product training, workflow, improvement in ERP’s use in the specific organization, etc.
- Customization Services: They extend the new ERP system’s use or change its use by creating customized interfaces and/or underlying application code.
- Support Services – include both support and maintenance of ERP systems, for instance, troubleshooting and assistance with ERP issues.
Following are some of the advantages and disadvantages of
an ERP:
Advantages of ERP
system:
- Complete visibility into all the important processes across various departments of an organization which is very important for senior management.
- Automatic work-flow from one department / function to another to ensuresmooth completion of processes.
- A single reporting system to analyze the statistics/ numbers/ status etc. in real time, across all the departments.
- Since same software is used across all departments – this can avoid individual departments having to buy and maintain their own software systems.
- Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities..
- Advanced e-commerce integration is possible with ERP systems that can handle web based order tracking/ processing.
- Since ERP is a modular software system, it’s possible to implement either a few modules (or) many modules based on the requirements of an organization. If more modules implemented, the integration between various departments might be better.
- ERP systems are more secure as centralized security policies can be applied to them and all the transactions happening via the ERP systems can be tracked.
- ERP systems provide visibility and hence enable better and faster collaboration across all the departments.
- It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programing Interface).
- ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities.
Disadvantages
of ERP system:
- The cost of ERP planning, implementation, customization, configuration and testing, is too high.
- Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade.
- The cost savings/ payback may not be realized immediately after the ERP implementation.
- Theadditional indirect costs like new IT infrastructure, upgrading the WAN links, etc.
- Migration of existing data to the new ERP systems is always difficult to achieve as with integrating ERP systems with other stand-alone software systems.
- Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc.