Enterprise systems are commercial software packages that enable the integration of transaction-oriented data and business processes throughout an organization (and perhaps eventually throughout the entire inter-organizational supply chain). Enterprise systems include Enterprise Resource Planning (ERP) software and related packages as advanced planning and scheduling, Sales Force Automation, Customer Relationship Management, and product configuration.
ERP systems started as a means for inventory control and grew to replace islands of information by integrating traditional management functions, such as finance, payroll, and human resources, with other functions including manufacturing and distribution. Currently, the complexity of business is creating new user needs and the growth of computers is developing new potential. The quest for new markets has contributed to make ERP a must for any organization serious about their business.
Applications/Modules
Each ERP vendor provides a number of ERP applications (or modules) for their systems. These are the functional software packages for each individual business unit (Finance, Human Resources, Purchase Sales etc.) Most ERP systems start with a set of core modules, and offer additional modules from which a company can choose. All of these applications are fully integrated to provide consistency and visibility for all the activities across entire operations. It also helps in setting up a system inside the organisation, in line with worldwide best practices, as ERP systems require users to comply with the processes and procedures as described by the application.
What does ERP really do?
ERP provides a backbone for enterprise. It allows a company to standardize its information systems. Depending on the applications, ERP can handle a range of tasks from keeping track of manufacturing levels to balancing the books in accounting. The result is an organization that has streamlined the data flow between different functions of a business. In essence, ERP systems get the right information to the right people at the right time. ERP software, among other things, combines the data of formerly separate applications. It standardizes and reduces the number of software specialties required within organizations.
Tangible benefits of ERP
Introduces business best practices – It helps companies to do away with the incorrect ways of carrying out the different business functions and introduces business best practices. This helps to provide greater control and introduces standardized ways to perform business processes.
Ready-made solutions for most of the problems – As the vendors who develop ERP software packages, take the best ideas from all their customers and incorporate them into their products, they develop systems that help resolve most of the pain areas.
Easy enterprise wide information sharing – in an ERP, the data is entered into a single database. Hence, everyone in the organization (who has the rights) has access to information in the same format. This enables easy sharing of data between different functions. Moreover, the top management gets reports in a standard format.
Improve resource productivity – This is achieved by eliminating duplication in data entry, reducing inter-departmental conflicts on integrity of data, reducing audit time etc.
Improve Cash Management – with tight controls on credits and Cashflow, ERPs improve the Cash Management substantially.
Reduce wastage and Inventory costs – the effective Inventory planning and Production cycles in ERP helps organisations in reducing wastage and Inventory costs substantially.
Business Intelligence – This is a key offering in ERP systems. The system collates right information to the right people to help them take timely, informed decisions.
Ease of use – The ERP System is very user friendly and with the right amount of training, it is easy for the employees to use the system.
Intangible benefits of ERP
Improvement in customer satisfaction.
Improvement in order management.
Improvement in production planning based on forecast received from sales.
Materials planning generated from the system to optimise inventory levels along with making material consumption details available on-line.
Automation of the import process with item valuation details after considering the impact of freight, insurance, customs duty, other charges.
On-line availability of the inventory and its valuation, leading to visibility of both raw material and finished goods inventory at all stages.
Product wise tracking of costs and revenues with consolidation of financial information.
Integration of cost and financial books, elimination of the need for reconciliation between the two, improved account transactions.
Real time tracking of material price and usage variances.
Current and future developments in ERP
Currently, the goal of integrated ERP is to replace islands of information with cross-communication to ensure enterprise-wide coherency. Though ERP promises quick access to information, it is still plagued with problems it inherited from MRPII: assumptions of infinite capacity and inflexible scheduling dates. However, ERP can be purchased as a product. Vendors now offer broad functional coverage nearing best-of-breed capabilities, vertical industry extensions and strong technical architectures. This combined with product enhancements, global support, and technology partners, is narrowing the gap between desired and actual features.
Traditionally the biggest purchasers of ERP solutions have been large Fortune 100 companies, however, the surge of IT investments in the nineties dropped in 1998. It continued to fall in 2000s, and has not yet reached the same numbers. As a result, vendors are now looking to increase their market share by meeting the needs of small and medium businesses. However, entering a new market is not enough to build a strong repertoire. What will truly differentiate the leaders in this industry is the breadth, depth, and diversity offered at the plant level, and the ability to meet the requirements of distribution centers. Furthermore, planning functionality will have to extend from the shop floor to distribution centers. This includes flow-based manufacturing, work instruction, dynamic dispatching, and other elements. Web-based, service oriented architecture will also have to be factored in. New systems will also have to be more customer-focused, incorporating e-commerce interaction and collaboration with business partners.
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