Enterprise Resource Planning (ERP)

What is ERP?
Enterprise Resource Planning systems use database technology and a single interface to control all information related to a company's business including customer, product, employee and financial data. The ERP system uses software that allows a company to automate and integrate its business processes in order to share common data and processes across the enterprise. It streamlines a company's data flows and provides management with direct access to real time operating information. At its core is a single comprehensive database. The database collects data and supports virtually all of a company's business activities - across functions, across business units and across the world.

Some who have experienced the installation of an ERP system say it can be a backbreaking task which eats up a company's time and resources and leaves managers physically and mentally drained. The proponents of ERP argue that it is never a painless process but if it is properly implemented, it can be the most cost efficient project a company ever undertakes.

How can ERP improve a company's business performance?
ERP automates the tasks involved in performing a business process - such as order fulfilment, which involves taking an order from a customer, shipping it and billing for it. That order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and re-keyed into different department's computer systems along the way.

With ERP, when a customer service representative takes an order from a customer, he or she has all the information necessary to complete the order (the customer's credit rating and order history, the company's inventory levels and the shipping dock's trucking schedule). Everyone in the company sees the same information as there is one single database that holds the customer's new order. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any one time, you just log into the ERP system and track it down.

Why implement ERP?
There are three major reasons why companies undertake ERP:

• To integrate financial data

  When looking at a company's overall performance, the figures from each separate department may conflict. Each division may have a different take on how they have contributed to the overall revenue of the enterprise. ERP creates a single version of the company's performance which cannot be disputed because everyone is using the same system.

• To standardise manufacturing processes

  Large engineering companies may be producing the same item at different plants using different techniques and computer systems. ERP results in standardising those processes, leading to efficiency savings.

• To standardise HR information

  ERP offers a simple method of tracking employee time and communicating with them about benefits and services.

• Supplier facing, to meet the needs of E-supply chain (E-SCM)
• Customer facing, with Customer Relationship Management (CRM) enhancements
• Management facing, to support the requirements for the effective management of enterprises (SEM)

What is the link between ERP and supply chains?
ERP systems are also being linked into companies' supply chains, thus providing - in theory, at least -a seamlessly integrated corporate IT network. ERP vendors have scrambled to adapt their packages for supply chain management, CRM and e-business.

What is the link between ERP and CRM?
Although first developed before e-business overwhelmed the corporate world, ERP systems are now seen as the backbone for business in the Internet age. Not only can they make companies more efficient by automating and linking the accountancy, manufacturing, marketing, sales and other functions, but they can also be extended into customer relationship management (CRM) systems. ERP and CRM fit very closely together. By linking the two, companies can use huge flows of customer information to target sales effort more effectively.

What is the link between ERP and SEM?
ERP systems work at an operational rather than a strategic level. They do not show how a business can best create value for customers and meet its objectives, from maximising shareholder value to fulfilling responsibilities to employees, business partners and the communities in which it operates.

In response to this shortcoming, the last 18 months have seen the emergence of strategic enterprise management (SEM) software offerings from the top three ERP vendors. SEM is designed to improve the effectiveness of strategic management processes by providing managers with business performance monitoring, consolidation, and data warehousing/business intelligence capability. Alongside this data and information management capability, vendors are also attempting to include techniques such as shareholder value management, balanced scorecard and activity-based management as part or their SEM offerings. SEM systems will sit on top of ERP systems widely introduced in the early 1990s by large corporations.

What are the benefits of ERP?
ERP software can benefit an organisation by facilitating:

• Organisational change
  Tighter integration of functions to support process-based management.
  
  
• Better co-ordination of cross-site processes
  Enterprise can manage multiple sites as a single entity.
  
  
• Implementation of proven processes
  For example, build-to-order versus build-to-inventory approach (as employed by Compaq) allows them to benefit from industry-based solutions and adopt best practices.
  
  
• Growth into new areas of business and improved customer service
  ERP software can provide an organisation with a powerful foundation to support growth. Flexibility, scalability and functionality allow enterprises to open new areas of business and provide improved customer service.
  
  
• Profitability, productivity and effectiveness
  For example, cost reductions, revenue enhancements, improvements in management reporting and control, improved efficiency and more timely access to accurate information.

Implementing ERP
ERP has been one of the major driving forces of technology change over the last 10 years with worldwide sales in the billions of pounds a year and related hardware, software and consultancy costs accounting for many times more than this again.

Top management needs to look down into the organisation and ask what it wants to improve - productivity, customer service or whatever. Then it should analyse the systems, business processes and management hierarchies. Once a company has decided to invest in a new ERP package, implementation must be kept under clear control. Clear, defined procedures must be enforced.

Contact us www.alcaidc.com for how we can help you to improve your ERP implementation with your Human Resource Management and Inventory Control management.