What is ERP?
ERP, Enterprise Resource Planning, is a business management system that is absolutely integrated. Information flows are spruced up and harmonized in pursuance of effecting optimum use of resources. This is cast out to be employed by large businesses to handle the trade and mechanize several operations like Finance, Production, Logistics, Accounting and Human Resources. For the whole business, enterprise resource planning guarantees one single database, an individual application and a unique user interface.
Each and every ERP should own certain essential attributes. Few of the characteristics are as recorded below:
- Ability to be comprehensive by assisting various organizational functions
- Bearing a compilation of best business processes is a prerequisite
- Organizational limits should not be a confinement
- An open system architecture is preferred
- In order to address the diverse needs of the enterprise, it should be flexible
ERP imparts multi-platform, multi-facility, multi-mode manufacturing, multi-currency, multi-lingual facilities. It supports strategic, operational and business planning activities along with execution activities. All functional areas like manufacturing, distribution, payables, inventory, accounts, human resources, purchases etc. can be taken care of. It performs core activities. Information gap across organizations is bridged thereby rendering complete integration of systems across departments and across companies under the same management. Automatic introduction of current technologies like electronic fund transfer, electronic data interchange, internet, intranet, video conferencing, e-commerce are granted. Intelligent business tools are equipped like decision support system, executive information system, data mining and easy working systems to enable better decisions. ERP is the solution for better project management.
The triumph of an Enterprise Resource Planning implementation mainly depends on how implementation consultants, users and vendors work hand in hand. The implementation consultants have to be aware of the needs of the users and prevailing business realities to formulate the business solutions. ERP is an enabling tool and it naturally needs additional efforts. During the course of implementation, the standard package may undergo changes which may be a simple or major ‘functionality’ change. Implementing such changes is known as customization. The contents of the package are modules which are further divided into components. The roles and responsibilities of the employees have to be clearly identified, understood and the employees will have to accept new processes and procedures configured in the system. These processes and procedures should be user friendly. A well organized and executed ERP package can give a 200 percent return on investment where as a poorly implemented one can yield a return on investment as low as 25 percent.
Change integration has to be inevitably embedded in the task list for any ERP implementation. The main tool for this is the process of communication; be it written, oral, workshops or meetings. The critical success factors (CSFs) of the company have to be listed in the beginning of the project. These should be drilled down to CSFs for respective functionalities or departments. From these CSFs, performance measures required to validate these CSFs should be called out. The numeric figures against these performance measures can be classified as the Key performance Indicators (KPIs). As configuration, construction and implementation are in progress, the organization needs to make itself ready for the post-implementation period.
The vital task is to monitor KPIs and make correct business decisions to improve them. Certain KPIs, though existing in the system, are better monitored and controlled after the ERP system attains maturity. Even with all the preparations, during post-implementation, there will be a necessity for course correction. This may be due to a change in the business environment which in turn requires a change in the CSFs, resulting in a new or changed set of KPIs necessitating reconfiguration. A review may indicate a need for change in some process or vision changes in the ERP and improvements in hardware and communication technology require changes. Most of all, new additions to the business require extra functionality.