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Nov 6, 2010

What is ERP? What will ERP fix in my business?

ERP Stands for Enterprise resource Planning system.These systems are comprehensive organizational strategies, implemented at both the technical and operational levels. At its most fundamental level, ERP is a methodology for effectively applying resources—people, processes and technology—to the mission and operational goals of an organization. This methodology encompasses three phases: understanding the goals and strategies of the business; describing how best to implement those objectives; and mapping individual IT projects to the appropriate processes.

ERP is not a pure technical undertaking; it integrates business process reengineering (BPR) with proven IT methodologies. The following principles are intrinsic to achieving best business practices through ERP:

  1. A process orientation—Automating workflow ensures that activities are accomplished smoothly and with consistently high quality. This can generate savings in time, money and personnel, and improve the quality of services.
  2. A common data model—To share and utilize meaningful information across an enterprise, data definitions and formats and communications protocols must be standardized. Additionally, a common relational database (RDB) can simplify querying, reporting and data analysis.
  3. Integrated systems development—Systems within an ERP solution must be conversant. Ideally, each module would use the same components; minimally, they must meet the same technical specifications.
  4. A simple architecture—A careful assessment of the existing IT architecture against ERP business requirements will produce many opportunities to reduce costs improve performance and expand services by simplifying the architecture to reduce redundancies and inefficiencies in systems and processes.

The critical components of ERP include:

  • A strategic plan describing what will be done.
  • A set of process designs that state how the work will be accomplished.
  • A set of integrated IT project plans that will support the processes.
  • A body of standards to which the data, databases, applications, networks and hardware must conform
  • Management support and human resources education.

What will ERP fix in my business?
There are five major reasons why companies undertake ERP.
Integrate financial information—
As the CEO tries to understand the company's overall performance, he may find many different versions of the truth. Finance has its own set of revenue numbers, sales has another version, and the different business units may each have their own version of how much they contributed to revenues. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system.

Integrate customer order information—ERP systems can become the place where the customer order lives from the time a customer service representative receives it until the loading dock ships the merchandise and finance sends an invoice. By having this information in one software system, rather than scattered among many different systems that can't communicate with one another, companies can keep track of orders more easily, and coordinate manufacturing, inventory and shipping among many different locations at the same time.

Standardize and speed up manufacturing processes—Manufacturing companies—especially those with an appetite for mergers and acquisitions—often find that multiple business units across the company make the same widget using different methods and computer systems. ERP systems come with standard methods for automating some of the steps of a manufacturing process. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce head count.

Reduce inventory—ERP helps the manufacturing process flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories of the stuff used to make products (work-in-progress inventory), and it can help users better plan deliveries to customers, reducing the finished good inventory at the warehouses and shipping docks. To really improve the flow of your supply chain, you need supply chain software, but ERP helps too.

Standardize HR information—Especially in companies with multiple business units, HR may not have a unified, simple method for tracking employees' time and communicating with them about benefits and services. ERP can fix that.

In the race to fix these problems, companies often lose sight of the fact that ERP packages are nothing more than generic representations of the ways a typical company does business. While most packages are exhaustively comprehensive, each industry has its quirks that make it unique. Most ERP systems were designed to be used by discrete manufacturing companies (that make physical things that can be counted), which immediately left all the process manufacturers (oil, chemical and utility companies that measure their products by flow rather than individual units) out in the cold. Each of these industries has struggled with the different ERP vendors to modify core ERP programs to their needs.
NOTE - For above Blog I collected the information from various site and compiled here.

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