An ERP system is a business support system that maintains in a single database the data needed for a variety of business functions such as Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management.
An ERP system is based on a common database and a modular software design. The common database can allow every department of a business to store and retrieve information in real-time. The information should be reliable, accessible, and easily shared. The modular software design should mean a business can select the modules they need, mix and match modules from different vendors, and add new modules of their own to improve business performance.
Ideally, the data for the various business functions are integrated. In practice the ERP system may comprise a set of discrete applications, each maintaining a discrete data store within one physical database.
Origin of the term
The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning) and CIM (computer-integrated manufacturing) and was introduced by research and analysis firm Gartner. ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organization's business or charter. Non-manufacturing businesses, non-profit organizations and governments now all use ERP systems.
To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package.
However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits ranging from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database).
Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System.
Overview
Some organizations — typically those with sufficient in-house IT skills to integrate multiple software products — choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. For example, one may choose to use human resource management system from one vendor, and the financial systems from another, and perform the integration between the systems themselves.
This is very common in the retail sector[citation needed], where even a mid-sized retailer will have a discrete Point-of-Sale (POS) product and financials application, then a series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics.
Ideally, ERP delivers a single database that contains all data for the software modules, which would include:
Engineering, Bills of Material, Scheduling, Capacity, Workflow Management, Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects, Manufacturing Flow
Inventory, Order Entry, Purchasing, Product Configurator, Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing, Commission Calculation
General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets
Costing, Billing, Time and Expense, Activity Management
Human Resources, Payroll, Training, Time & Attendance, Rostering, Benefits
Customer Relationship Management
Sales and Marketing, Commissions, Service, Customer Contact and
and various Self-Service interfaces for Customers, Suppliers, and Employees
Enterprise Resource Planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP).[2] MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the standard software activity.[citation needed] ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, marketing, delivery, billing, production, inventory management, quality management, and human resource management.
ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. Many companies took this opportunity to replace their legacy information systems with ERP systems. This rapid growth in sales was followed by a slump in 1999, at which time most companies had already implemented their Y2K solution.[3]
ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems.
ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information technology, this would include accounting, human resources, marketing, and strategic management.
ERP II means open ERP architecture of components. The older, monolithic ERP systems became component oriented.[citation needed]
EAS — Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business, using ordinary Internet browsers as thin clients.[citation needed]
Advantages
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.
Change how a product is made, in the engineering details, and that is how it will now be made. 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.
Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company, or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools.[12]
Disadvantages
Problems with ERP systems are mainly 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.
Disadvantages
- Customization of the ERP software is limited.
- 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 leading to a new category of "ERP light" solutions
- 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.
- Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, 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.
- Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.
- The system may be too complex measured the actual needs of the customer.
* source : http://en.wikipedia.org/wiki/Enterprise_resource_planning, 07/15/2008 Read More...
Posts
