Daniyal Ranmal

October 8, 2015
OPRE 3310.001
Prof. Egan
The ABCs of ERP
Enterprise Resource Planning (ERP) is software that attempts to integrate all
departments and functions across a company onto a single computer system that can
serve all those departments particular needs. A company consists of many function
departments, such as finance, HR, purchasing, manufacturing and logistics, etc. Because
application of information technologies is more and more popular than before, each of
these departments typically has its own computer system adjusted for the particular ways
that the department does its work, not only for office automation, but also for helping
people to analyze data and make the right decision. Its not building a single software
program that serves the needs of specialized functions; ERP combines all them together
into a single, integrated software program that runs off a single database so that the
various departments can easily share information and communicate with each other.
There are two flows across supply chain, one is product flow, and the other is
information flow. In the past, information system tended to be islands, depending on their
functions within the company. For instance, when orders came from customers, they
were processed and recorded by sales department, and then the sales transferred the
information to manufacturing. After the production made the master schedule, the
logistics knew the distribution requirements and then planned the delivery. Finally, the
accounting was able to bill to customers. Under this business process, a lot of problems
might occur, like delay, lost order, input errors, and long lead time. Ideally, everyone
should have access to the same real time data through some interface when they are
needed to. This requires a single-point-of-contact system. That is one of the original ideas
of ERP. Based on the identical system and database, the information flow and product
flow can be processed efficiently.
There are three major reasons why companies undertake ERP. The first is to
integrate financial data. As a CEO of a company you may need to understand the
companys overall performance, but there may be many different versions of the truth.
Finance may have its own set of revenue numbers, sales has another version, and the
other business units may each have their own versions of how much was contributed to
revenues. ERP creates a single version of the truth that cannot be questioned because
everyone is using the same system. The second reason is to standardize the
manufacturing processes. Manufacturing companies often find that multiple business
units across the company make the same widget using different methods and computer
systems. Standardizing those processes and using a single, integrated computer system
can save time, increase productivity, and reduce headcount. And the third reason is to
standardize HR information. In companies with multiple business units, HR may not have
a cohesive, simple method for tracking employee time and communicating with them
about benefits and services. ERP can fix that.

Small businesses that adopt an ERP solution often fail to take into account a
variety of hidden costs related to the system. This can send the project over budget and
sometimes even derail the whole implementation. You pay more for ERP than just the
license costs. Its important to know where those extra expenses will come in ahead of
time. Many small businesses underestimate how much the training for the ERP solution is
going to cost. This is mostly because the employees need to learn a full set of processes
instead of how to use a different interface. Some individuals will quickly grasp the
concepts, while others may take a long time before they can operate the ERP solution
without difficulty. The ERP software will need to be thoroughly tested before it goes live.
This can take a great deal of time since the links between the ERP solution and other
software will have to be created on a case-by-case basis. This can be mitigated somewhat
if your employees run actual purchase orders through the system instead of using fake
data. Data Conversion is another hidden cost. Youre going to need to transfer corporate
data from the old systems to the ERP solution. This can take a great deal of time, and a
lot of the information may be outdated or unnecessary. The data may also need to be
modified in order to match the processes of the ERP solution. Another thing is that its
often a good idea to hire ERP consultants who can answer your questions about the
software. Theyll be able explain in full detail how the solution works and provide ideas
about how to streamline the system. They dont tend to come cheap, however, so you
should take into account their fees when planning out the overall budget.
ERP is complex and not intended for public consumption. It assumes that the only
people handling order information will be your employees, who are highly trained and
comfortable with the tech jargon embedded in the software. But now customers and
suppliers are demanding access to the same information your employees get through the
ERP system. E-commerce means IT departments need to build two new channels of
access in to ERP systemsone for customers (otherwise known as business-toconsumer) and one for suppliers and partners (business-to-business). These two
audiences want two different types of information from your ERP system. Consumers
want order status and billing information, and suppliers and partners want just about
everything else. Traditional ERP vendors are having a hard time building the links
between the Web and their software, though they certainly all realize that they must do it
and have been hard at work at it for years. The bottom line, however, is that companies
with e-commerce ambitions face a lot of hard integration work to make their ERP
systems available over the Web.

References
"Enterprise Resource Planning from Microsoft." Microsoft Dynamics. Web. 11 Nov.
2015.
Stevenson, William J. "Ch. 12: MRP & ERP." Operations Management. 11th ed. New
York: McGraw-Hill/Irwin, 2012. 532-536. Print.