ERP in Supply Chain Management

Introduction to Enterprise Resource Planning (ERP) Software

There are a growing number of software suites that can help companies maximize efficiencies in
their supply chain. There are specific software packages that can be implemented for purchasing
or planning, but there is a software product, called Enterprise resource planning, that can be
implemented across the company incorporating all aspects of the enterprise.
What is ERP?
ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes
of an organization into one single system. Usually ERP systems will have many components
including hardware and software, in order to achieve integration, most ERP systems use a unified
database to store data for various functions found throughout the organization.

The term ERP originally referred to how a large organization planned to use organizational wide
resources. In the past, ERP systems were used in larger more industrial types of companies.
However, the use of ERP has changed and is extremely comprehensive, today the term can refer
to any type of company, no matter what industry it falls in. In fact, ERP systems are used in
almost any type of organization - large or small.
In order for a software system to be considered ERP, it must provide an organization with
functionality for two or more systems. While some ERP packages exist that only cover two
functions for an organization (QuickBooks: Payroll & Accounting), most ERP systems cover
several functions.
Today's ERP systems can cover a wide range of functions and integrate them into one unified
database. For instance, functions such as Human Resources, Supply Chain Management,
Customer Relations Management, Financials, Manufacturing functions and Warehouse
Management functions were all once stand alone software applications, usually housed with their
own database and network, today, they can all fit under one umbrella - the ERP system.
ERP for the Supply Chain
Enterprise resource planning (ERP) software has been implemented by a large number of
Fortune 500 companies in the last twenty years. The common database and real-time processing
has allowed companies to benefit from reacting to situations in the supply chain that would not
have been possible without ERP software. The market leader in ERP software is the German
company.
Supply Chain Management: Enterprise Resource Planning
The goal of ERP (Enterprise Resource Planning) systems is the successful integration of a
companys data and processes in to a single unified system. Usually, several components of
computer software and hardware are employed in order to realize this goal. A unified database
must be employed in order to store data for the various modules of the system.
History of Enterprise Resource Planning
Originally, the term enterprise resource planning was employed to designated systems used by
enterprise wide resources. It was originally used in the context of manufacturing, but in todays
world, enterprise resource planning is used in a variety of spectrums. It can be used to unite all
basic functions of a company, no matter what kind of company it is. Indeed, enterprise resource
planning is used by governments, non profits, and corporations alike.
In order to be considered a legitimate enterprise resource planning system, the software package
has to provide functionality in a single package that would normally involve two or more
systems. To give one example, a software program that provides payroll and accounting is a
legitimate enterprise resource planning software package. But the term is usually used in relation
to bigger, more broadly based software applications. Using an enterprise resource planning
system can not only replace several functioning applications, it will also eliminate the need for
external interfaces that systems might have required before, as well as supplying further benefits
that might range from lower maintenance and standardization to more convenient reporting
abilities.
ERP Overview
Many companies that boast the necessary in house IT skills to integrate several software
programs decide to implement just a few portions of an enterprise resource planning system.
They will then develop an external interface to other similar systems being employed to take care
of their other application needs. To use an example, in some instances the PeopleSoft HRMS
system might be perceived to be better than SAPs HRMS system, or vice versa. So a company
might choose to buy an enterprise resource planning system, but desire the PeopleSoft HRMS
and Financial modules, but then buy the remaining applications from the SAP company.
Even in the retail world, this is a very common practice. Even middle sized retailers often have
discreet Point of Sale products and financial applications, which are then rounded out by an
application series that will take care of such facets of the business as merchandising, logistics,
warehouse management, and the rostering of staff.
In an ideal enterprise resource planning system, the database would take care of all data,
including manufacturing, supply chain management, finances, projects, human resources,
customer relations management, as well as data warehousing.
Originally, enterprise resource planning systems were rooted in material requirements planning.
When the routings became part of a software architecture and the organizations planning
capacity became part of standard software activity, the enterprise resource planning system was
born. Usually, an enterprise resource planning system will oversee the logistics, production,
inventory, distribution, accounting, invoicing, and shipping facets of an organization. Enterprise
resource planning system software helps numerous business activities; these might include sales,
inventory management, human resource management, quality management, marketing, billing,
delivery, and manufacturing.
Enterprise resource planning systems tend to be mislabeled back office systems. This infers
that customers are not involved at all with the systems. Front office systems, such as customer
relationship management, deal with customers directly, as to e Business systems like e
commerce, as well as supplier relationship management systems.
Cross functionality defines enterprise resource planning systems. All the departments involved in
manufacturing or operations can be effectively integrated in to a single functioning system. This
could include accounting departments, as well as marketing, strategic management, and human
resources, in addition to warehousing, Information Technology, logistics, and production.
Before enterprise resource planning systems were developed, all the departments that comprised
a company would have to rely on their own separate computer systems. The system belonging to
the Human Resources department would usually contain employees personal data, as well as
info on the department itself and the reporting structure. The PR department would take care of
paycheck info. The Finances department would have a system that dealt exclusively with the
companys payment transactions. In order to communicate with one another, the various systems
would require a certain amount of common data. For the Human Resources department to be
able to send salary info to the PR department, for example, there would have to be a static
employee number assigned so that the employee in question could be successfully identified by
the two systems. Because of this confusing system, many complications would arise.
The development of enterprise resource planning systems led to the combination of data among
applications that used to be strictly separate. Organizations thus no longer had to worry about
keeping their data in synchronization across numerous different systems. Larger organizations no
longer had to worry about the vast number of software specialties that were previously required
to keep the business running.
Enterprise Resource Planning Best Practices
One benefit of installing an enterprise resource planning system is known as Best Practices. If a
company does not wish to customize their enterprise resource planning system, they can choose
the Best Practice function, which comes with the softwares basic version.
Best Practice usually applies to larger companies that have compliance requirements, or where
the process depends on commodities like electronic fund transfers, owing to the fact that the
process of capturing and reporting such content can be easily codified within the enterprise
resource planning system, and subsequently replicated across several different businesses that
have similar requirements.
Implementation
Enterprise resource planning software systems can be quite complex. Installing such a system
almost certainly requires major changes within the companys work practices. A specialist will
typically have to be employed in order to soothe the transition, as such systems are not typically
in house skills. How long it takes to install such a system depends on how large the business is,
as well as the extent of the changes being made. Smaller projects can be installed within a period
of three months. In order to install a large system, however, it could take several years. What is
most important, however, is for the company who has purchased the enterprise resource planning
system to eventually take control over it. First, they will generally have to employ a consulting
company to help them. Consulting companies generally help the company in three phases:
consulting, customization, and support.
The consulting phase takes care of the enterprise resource planning system implementation and
helps the system go live. The tailoring involve might include product training, the creation of
process triggers as well as workflow optimization, advice on how to improve the way the system
is being used in the business, the optimization of the overall system, as well as help with writing
reports or assisting in the implementation of Business Intelligence. The consulting operation also
includes planning and testing the system. This part of the process should not be forgotten about
it is of vital importance for the systems future functionality.
The three levels of enterprise resource planning system consultation include systems
architecture, business process consulting, and technical consulting. The systems data flow will
have to be designed by a systems architect; this design should include a future data flow plan.
The firms current business processes will then be studied in depth by the consultation team, who
will match the current business processes with the enterprise resource planning systems
capabilities and configure all the firms needs. The process of technical consulting might include
programming operations. Most of the businesses that sell enterprise resource planning system
software will allow their software to be modified in order to suit particular business needs.
The customization process involves changing how the firms system works via the writing of
new user interfaces as well as application codes. Typically, these operations are not included in
the enterprise resource planning system software and must be done by a specialist team.
It can be incredibly expensive to customize an enterprise resource planning system. Most of
these packages are not designed to support extensive customization. As a result, the vast majority
of firms choose to utilize Best Practices, a method that is outlined above. On the other hand,
there are some enterprise resource planning systems that are so general that customization will
have to take place on every level. For such packages, it is advisable to purchase third party plug
ins that interface well with the enterprise resource planning system software.
Once the system has been successfully implemented, your consultant should provide you with
support in order to assist your company with any enterprise resource planning system related
problems that may occur in the future. This ensures that the system stays running. It is advisable
to create a committee to be headed by the consultant using a participative management approach
throughout the design stage in order to provide hands on management control and minimize
additional costs for the units that are going to be affected by the new enterprise resource planning
system.
Usually, a maintenance agreement program supplies the business with all the patches of the
current version, including major and minor releases. Your staff should be allowed to make
support calls whenever necessary. The price of this type of agreement is usually around twenty
percent of the enterprise resource planning systems user licenses.
Enterprise Resource Planning: The Technological Backbone of e-Business
Benefits of ERP
Quality and Efficiency
Decreased Costs
Decision Support
Enterprise Agility
Failures in ERP Do Exist

Causes of ERP Failures
Underestimating the Complexity of Planning, Development, and Training Needed
Failure to Involve Affected Employees
Trying to do Too Much Too Fast
Over Reliance by Company on Claims of Software Companies

ERP model in Supply Chain Management: