Enterprise resource planning

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Enterprise Resource Planning systems (ERPs) integrate (or attempt to integrate) all
data and processes of an organiation into a single unified system! " typical ERP system
#ill use multiple components of computer soft#are and hard#are to achieve the
integration! " key ingredient of most ERP systems is the use of a single, unified data$ase
to store data for the various system modules!
%he term ERP originally implied systems designed to plan the utiliation of enterprise&
#ide resources! "lthough the acronym ERP originated in the manufacturing environment,
today's use of the term ERP systems has much $roader scope! ERP systems typically
attempt to cover all $asic functions of an organiation, regardless of the organiation's
$usiness or charter! (usiness, non&profit organiations, non governmental organiations,
governments, and other large entities utilie ERP systems!
"dditionally, it may $e noted that to $e considered an ERP system, a soft#are package
generally #ould only need to provide functionality in a single package that #ould
normally $e covered $y t#o or more systems! %echnically, a soft#are package that
provides $oth Payroll and "ccounting functions (such as )uick(ooks) #ould $e
considered an ERP soft#are package!
*o#ever+ the term is typically reserved for larger, more $road$ased applications! %he
introduction of an ERP system to replace t#o or more independent applications
eliminates the need for interfaces previously re,uired $et#een systems, and provides
additional $enefits that range from standardiation and lo#er maintenance (one system
instead of t#o or more) to easier and-or greater reporting capa$ilities (as all data is
typically kept in one data$ase)!
E.amples of modules in an ERP #hich formerly #ould have $een stand&alone
applications include: /anufacturing, 0upply 1hain, Financials, 1R/, *uman Resources,
and Warehouse /anagement!
Contents
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4 5vervie#
o 4!4 (efore
o 4!6 "fter
6 (est Practices
7 8mplementation
9 "dvantages
: ;isadvantages
< 0ee also
= E.ternal links
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Overview
>ooking more closely at ERP systems, a key factor is the integration of data from all
aspects of an organiation! %o accomplish this, an ERP system typically runs on a single
data$ase instance #ith multiple soft#are modules providing the various $usiness
functions of an organiation!
?ota$ly, some organiations choose to only implement portions of an ERP system and
develop an interface to other ERP or stand&alone systems for their other application
needs! For instance, the People0oft *R/0 and Financials systems are generally
considered $etter than 0"P's *R/0 solution! "nd 0"P's manufacturing and 1R/
systems are generally considered $etter than People0oft's e,uivalents
2citation needed3
! 0o an
organiation large enough to @ustify the purchase of an ERP system, may choose to
purchase the People0oft *R/0 and Financials modules from 5racle, and their remaining
applications from 0"P!
"n e.ample of a complete ERP implementation is very rare indeed! 5rganiations large
enough to @ustify ERP purchases typically have specialied needs that are not met $y any
one ERP soft#are vendor! %his re,uires either heavy customiation, use of different
modules from different vendors, or e.tensive re&engineering! 8n an ideal #orld, an
e.ample of a complete ERP implementation #ould $e a manufacturing company running
the same package for all relevant systems! " single data$ase #ould contain all data for
the soft#are modules, #hich #ould include:
/anufacturing
Engineering, (ills of /aterial, 0cheduling, 1apacity, Workflo# /anagement,
)uality 1ontrol, 1ost /anagement, /anufacturing Process, /anufacturing
Pro@ects, /anufacturing Flo#
0upply 1hain /anagement
8nventory, 5rder Entry, Purchasing, Product 1onfigurator, 0upply 1hain
Planning, 0upplier 0cheduling
Financials
Aeneral >edger, 1ash /anagement, "ccounts Paya$le, "ccounts Receiva$le,
Fi.ed "ssets
Pro@ects
1osting, (illing, %ime and E.pense, "ctivity /anagement
*uman Resources
*uman Resources, Payroll, %raining, %ime B "ttendance, (enefits
1ustomer Relationship /anagement
0ales and /arketing, 1ommissions, 0ervice, 1ustomer 1ontact and 1all 1enter
support
;ata Warehouse
and various Self-Service interfaces for 1ustomers, 0uppliers, and Employees
Enterprise Resource Planning is a term originally derived from manufacturing resource
planning (/RP 88) that follo#ed material re,uirements planning (/RP)! /RP evolved
into ERP #hen CroutingsC $ecame ma@or part of the soft#are architecture and a
company's capacity planning activity also $ecame a part of the standard soft#are activity!
ERP systems typically handle the manufacturing, logistics, distri$ution, inventory,
shipping, invoicing, and accounting for a company! Enterprise Resource Planning or ERP
soft#are can aid in the control of many $usiness activities, like sales, marketing, delivery,
$illing, production, inventory management, ,uality management, and human resources
management!
ERPs are often incorrectly called back office systems indicating that customers and the
general pu$lic are not directly involved! %his is contrasted #ith front office systems like
customer relationship management (1R/) systems that deal directly #ith the customers,
or the e(usiness systems such as e1ommerce, eAovernment, e%elecom, and eFinance, or
supplier relationship management (0R/) systems!
ERPs are cross&functional and enterprise #ide! "ll functional departments that are
involved in operations or production are integrated in one system! 8n addition to
manufacturing, #arehousing, logistics, and 8nformation %echnology, this #ould include
accounting, human resources, marketing, and strategic management!
ERP 88 means open ERP architecture of components! %he older, monolithic ERP systems
$ecame component oriented!
E"0 & Enterprise "pplication 0uite is a ne# name for formerly developed ERP systems
#hich include (almost) all segments of $usiness, using ordinary 8nternet $ro#sers as thin
clients!
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Before
Prior to the concept of ERP systems, departments #ithin an organiation #ould have their
o#n computer systems! For e.ample, the *uman Resources (*R) department, the Payroll
(PR) department, and the Financials department! %he *R computer system (5ften called
*R/0 or *R80) #ould typically contain information on the department, reporting
structure, and personal details of employees! %he PR department #ould typically
calculate and store paycheck information! %he Financials department #ould typically
store financial transactions for the organiation! Each system #ould have to rely on a set
of common data to communicate #ith each other! For the *R80 to send salary
information to the PR system, an employee num$er #ould need to $e assigned and
remain static $et#een the t#o systems to accurately identify an employee! %he Financials
system #as not interested in the employee level data, $ut only the payouts made $y the
PR systems, such as the %a. payments to various authorities, payments for employee
$enefits to providers, and so on! %his provided complications! For instance, a person
could not $e paid in the Payroll system #ithout an employee num$er!
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After
ERP soft#are, among other things, com$ined the data of formerly disparate applications!
%his made the #orry of keeping employee num$ers in synchroniation across multiple
systems disappear! 8t standardised and reduced the num$er of soft#are specialties
re,uired #ithin larger organiations! 8t ena$led reporting that spanned multiple systems
much easier! "nd it allo#ed for the development of higher level analysis functions
ena$ling larger organiations to identify trends #ithin the organiation and make
appropriate ad@ustments more ,uickly!
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Best Practices
(est Practices #ere also a $enefit of implementing an ERP system! When implementing
an ERP system, organiations essentially had to choose $et#een customising the soft#are
or modifying their $usiness processes to the C(est PracticeC functionality delivered in the
vanilla version of the soft#are!
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Implementation
(ecause of their #ide scope of application #ithin the firm, ERP soft#are systems rely on
some of the largest $odies of soft#are ever #ritten! 8mplementing such a large and
comple. soft#are system in a company used to involve an army of analysts,
programmers, and users! %his #as, at least, until the development of the 8nternet allo#ed
outside consultants to gain access to company computers in order to install standard
updates! ERP implementation, #ithout professional help, can $e a very e.pensive pro@ect
for $igger companies, especially transnationals! 1ompanies specialiing in ERP
implementation, ho#ever, can e.pedite this process and can complete the task in under
si. months #ith solid pilot testing!
Enterprise resource planning systems are often closely tied to supply chain management
and logistics automation systems! 0upply chain management soft#are can e.tend the
ERP system to include links #ith suppliers!
%o implement ERP systems, companies often seek the help of an ERP vendor or of third&
party consulting companies! 1onsulting in ERP involves three levels, namely top level
systems architecture, $usiness process consulting (primarily re&engineering) and technical
consulting (primarily programming and tool configuration activity)! " systems architect
designs the overall dataflo# for the enterprise including the future dataflo# plan! "
$usiness consultant studies an organiation's current $usiness processes and matches
them to the corresponding processes in the ERP system, thus 'configuring' the ERP
system to the organiation's needs! %echnical consulting often involves programming!
/ost ERP vendors allo# modification of their soft#are to suit the $usiness needs of their
customer!
1ustomiing an ERP package can $e very e.pensive and complicated, $ecause many
ERP packages are not designed to support customiation, so most $usinesses implement
the $est practices em$edded in the ac,uired ERP system! 0ome ERP packages are very
generic in their reports and in,uiries, such that customiation is e.pected in every
implementation! 8t is important to recognie that for these packages, it makes more sense
to $uy third party reporting packages that interface #ell to particular ERP, than to
reinvent #hat tens of thousands of other clients of that same ERP have needed to
develop!
%oday there are also #e$&$ased ERP systems! 1ompanies #ould deploy #e$&$ased ERP
$ecause it re,uires no client side installation, and is cross&platform and maintained
centrally! "s long as you have an 8nternet connection, or a net#ork connection to a
system installed on the >"?, you can access #e$&$ased ERPs through typical #e$
$ro#sers!
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Advantages
8n the a$sence of an ERP system, a large manufacturer may find itself #ith many
soft#are applications that do not talk to each other and do not effectively interface! %asks
that need to interface #ith one another may involve:
design engineering (ho# $est to make the product)
order tracking from acceptance through fulfillment
the revenue cycle from invoice through cash receipt
managing interdependencies of comple. (ill of /aterials
tracking the 7&#ay match $et#een Purchase orders (#hat #as ordered), 8nventory
receipts (#hat arrived), and 1osting (#hat the vendor invoiced)
the "ccounting for all of these tasks, tracking the Revenue, 1ost and Profit on a
granular level!
1hange ho# a product is made, in the engineering details, and that is ho# it #ill no# $e
made! Effectivity dates can $e used to control #hen the s#itch over #ill occur from an
old version to the ne.t one, $oth the date that some ingredients go into effect, and date
that some are discontinued!Part of the change can include la$eling to identify version
num$ers!
1omputer security is included #ithin an ERP, to protect against $oth outsider crime, such
as industrial espionage and insider crime, such as em$element! " data tampering
scenario might involve a terrorist altering a (ill of /aterials so as to put poison in food
products, or other sa$otage! ERP security helps to prevent a$use as #ell!
%here are concepts of Front office (ho# the company interacts #ith customers), #hich
includes 1R/ or 1ustomer relationship management+ (ack end (internal #orkings of the
company to fulfill customer needs), #hich includes ,uality control, to make sure there are
no pro$lems not fi.ed, in the end products+ 0upply chain (interacting #ith suppliers and
transportation infrastructure)! "ll of these can $e integrated through an ERP, although
some systems have gaps in comprehensiveness and effectiveness! Without an ERP that
integrates all these, it can $e ,uite complicated for a manufacturer to handle!
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Disadvantages
/any of the pro$lems that organiations have #ith ERP systems are due to the
inade,uate level of investment in ongoing training for all personnel involved, including
those implementing and testing changes, as #ell as a lack of corporate policies protecting
the integrity of the data held in the ERP systems and ho# it is used!
>imitations of ERP include:
0uccess depends on the skill and e.perience of the #orkforce, including training
a$out ho# to make the system #ork correctly! /any companies cut costs $y
cutting training $udgets! Privately o#ned small enterprises are often
undercapitalied, meaning their ERP system is often operated $y personnel #ith
inade,uate education in ERP in general, such as "P810 foundations, and in the
particular ERP vendor package $eing used!
Personnel turnover+ companies can employ ne# managers lacking education in
the company's ERP system, proposing changes in $usiness practices that are out
of synchroniation #ith the $est utiliation of the company's selected ERP!
1ustomiation of the ERP soft#are is limited! 0ome customiation may involve
changing of the ERP soft#are structure #hich is usually not allo#ed!
Re&engineering of $usiness processes to fit the Cindustry standardC prescri$ed $y
the ERP system may lead to a loss of competitive advantage!
ERP systems can $e very e.pensive to install!
ERP vendors can charge sums of money for annual license rene#al that is
unrelated to the sie of the company using the ERP or its profita$ility!
%echnical support personnel often give replies to callers that are inappropriate for
the caller's corporate structure! 1omputer security concerns arise, for e.ample
#hen telling a non&programmer ho# to change a data$ase on the fly, at a
company that re,uires an audit trail of changes so as to meet some regulatory
standards!
ERPs are often seen as too rigid, and difficult to adapt to the specific #orkflo#
and $usiness process of some companies & this is cited as one of the main causes
of their failure!
0ystems can $e difficult to use!
%he system can suffer from the C#eakest linkC pro$lem & an inefficiency in one
department or at one of the partners may affect other participants!
/any of the integrated links need high accuracy in other applications to #ork
effectively! " company can achieve minimum standards, then over time Cdirty
dataC #ill reduce the relia$ility of some applications!
5nce a system is esta$lished, s#itching costs are very high for any one of the
partners (reducing fle.i$ility and strategic control at the corporate level)!
%he $lurring of company $oundaries can cause pro$lems in accounta$ility, lines
of responsi$ility, and employee morale!
Resistance in sharing sensitive internal information $et#een departments can
reduce the effectiveness of the soft#are!
%here are fre,uent compati$ility pro$lems #ith the various legacy systems of the
partners!
%he system may $e over&engineered relative to the actual needs of the customer!
List of ERP vendors
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Jump to: navigation, search
" list of Enterprise resource planning (ERP) vendors!
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ree software ! Open source ERPs
1ompiere
ERP:
A?D Enterprise
0)> >edger
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"ome ERP vendors
%his section does not cite its references or sources!
Eou can help Wikipedia $y introducing appropriate citations!
Fendors of popular ERP soft#are include (sorted roughly according to #orld#ide ERP
related revenue):
4! 0"P
6! 5racle "pplications
7! /icrosoft ;ynamics (Formerly /icrosoft (usiness ;ivision)
9! %he 0age Aroup
:! >a#son 0oft#are
<! Fisma
=! 8ndustrial and Financial 0ystems
G! E.act 0oft#are
H! )";
4I! Epicor
44! ?et0uite
46! 08F!"A
47! 690even5ffice
Fendors #ithout kno#n revenue figures (sorted alpha$etically):
1ompiere
1A8 Aroup
8nfor
/ade6/anage 0ystems
Ramco 0ystems
0unAard
0E0PR5
DF8;"