| Enterprise Resource Planning |
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| CATEGORIES ABOUT ENTERPRISE RESOURCE PLANNING | |
| supply chain management | |
| production and manufacturing | |
| erp software | |
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OVERVIEW Enterprise resource planning is a term derived from Manufacturing Resource Planning (MRP II) that followed Material Requirements Planning (MRP). 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 , Delivery , billing, production, inventory management, Quality Management , and Human Resources Management . ERPs are often called '' Back Office systems'' indicating that Customer s 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 that deal with the suppliers. 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 . IMPLEMENTATION Because of their wide scope of application within the firm, ERP software System s rely on some of the largest bodies of software ever written. Implementing such a large and complex software system in a Company used to involve an army of Analyst s, Programmer s, and users. This was, at least, until the development of the Internet allowed outside consultants to gain access to company computers in order to install standard updates. ERP implementation, without professional help, can be a very expensive Project for bigger companies, especially Transnationals . Companies specializing in ERP implementation, however, can expedite this process and can complete the task in under six months with solid pilot testing. Enterprise resource planning systems are often closely tied to Supply Chain Management and Logistics Automation systems. Supply chain management software can extend the ERP system to include links with suppliers. To implement ERP systems, companies often seek the help of an ERP vendor or of third-party Consulting companies. Consulting in ERP involves two levels, namely business consulting and technical consulting. A business consultant studies an organization's current business processes and matches them to the corresponding processes in the ERP system, thus 'configuring' the ERP system to the organisation's needs. Technical consulting often involves programming. Most ERP vendors allow modification of their software to suit the business needs of their customer. Customizing an ERP package can be very expensive and complicated, because many ERP packages are not designed to support customization, so most businesses implement the Best Practices embedded in the acquired ERP system. Some ERP packages are very generic in their reports and inquiries, such that customization is expected in every implementation. It is important to recognize that for these packages, it makes more sense to buy Third Party reporting packages that interface well to particular ERP, than to reinvent what tens of thousands of other clients of that same ERP have needed to develop. Today there are also web-based ERP systems. Companies would deploy web-based ERP because it requires no client side installation, and is cross-platform and maintained centrally. As long as you have an Internet connection, you can access web-based ERPs through typical web browsers. ADVANTAGES In the absence of an ERP system, a manufacturer in need of what it has to offer, 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 best to make the product); order tracking from acceptance through fulfillment; managing interdependencies of complex Bill Of Material s; tracking the 3-way match between Purchase Order s (what was ordered), Inventory receipts (what arrived), and Cost ing (what the vendor invoiced); and the Accounting for all of these tasks, tracking the Costs and Profits on a granular level. Change how a product is made, in the Engineering details, and that is how it will now be made. Effectivity 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. Computer Security is included within an ERP, to protect against both outsider crime, such as Industrial Espionage and insider crime, such as Embezzlement . A data tampering scenario might involve a Terrorist altering a Bill Of Materials so as to put Poison in food products, or other sabotage. ERP security helps to prevent abuse as well. There are concepts of Front Office (how the company interacts with customers), which includes CRM or Customer Relationship Management ; Back End (internal workings of the company to fulfill customer needs), which includes Quality Control , to make sure there are no problems not fixed, in the end products; Supply Chain (interacting with suppliers and transportation infrastructure). All of these can be integrated through an ERP, although some systems have gaps in comprehensiveness and effectiveness. Without an ERP that integrates all these, it can be quite complicated for a manufacturer to manage. DISADVANTAGES Many of the problems that organisations have with ERP systems are due to the inadequate level of investment in ongoing training for all personnel involved, including those implementing and testing changes, as well as a lack of corporate policies protecting the integrity of the data held in the ERP systems and how it is used. Limitations of ERP include:
SEE ALSO ERP covers following
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