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The value of ERP is the opportunity to integrate an entire organization by having a single point of entry and sharing of data across the enterprise. Creates less need to reconcile data and rekey. Inefficient business processes that were disjointed become much more efficient. The legacy system layout: each dept, business unit might have their own systems (end user computing etc), leads to inefficiencies and delays. The trend now is toward integration of data. Example: in a horizontally integrated ERP system, the Purchasing department would process a purchase order in a central database with a common General Ledger. Both Accounts Payable and Receiving have access to the same General Ledger so the data would be immediately available to them. There is no time lag, re-entry of information, or heavy dependency on paper documents.
Benefits of ERP
Companies usually have a business case rationale for adopting ERP and take this rationale to the Board. A business case normally includes tangible as well as intangible benefits. Some key benefits:
Integrate financials Have one view of the customer Standardize manufacturing processes Reduce inventory Standardize information such as HR and Customer data there are othersdepends on company
In reality, an ERP implementation is usually just one part of a more complex environment, including bolt-ons, legacy applications retained, possible data warehouse(s), enterprise application integration solutions and connections to external business partners.
What is ERP?
The practice of consolidating an enterprises planning, manufacturing, sales and marketing efforts into one management system.1 Combines all databases across departments into a single database that can be accessed by all employees.2 ERP automates the tasks involved in performing a business process.1
Sources: 1. http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002 2. CIO Enterprise Magazine, May 15, 1999.
Financial Applications
Suppliers
Service Applications
Employees
Source: Davenport, Thomas, Putting the Enterprise into the Enterprise System, Harvard Business Review, July-Aug. 1998.
ERP Components
Finance: modules for bookeeping and making sure the bills are paid on time. Examples:
General ledger Accounts receivable Accounts payable
Manufacturing and Logistics: A group of applications for planning production, taking orders and delivering products to the customer. Examples:
Production planning Materials management Order entry and processing Warehouse management
HR: software for handling personnel-related tasks for corporate managers and individual employees. Examples:
HR administration Payroll Self-service HR
Why ERP?
3 Major Reasons:
To integrate financial data.
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