Enterprise Resource planning

Enterprise resource planning is an industrial term, it is a process by which a company manages and integrates the important parts of its business say

1. Purchasing (Raw Material)

2. Inventory

3. Sales

4. Human Resource

5. Finance

6. Marketing

7. Quality Management

ERP is a process of optimizing the resources of an Enterprise such that the cost is minimized and profit is maximized. 

(Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise.

ERP systems integrate all the functions and departments within an organization through a common information system.

An ERP system can include software for manufacturing, order entry, accounts receivable and payable, general ledger, purchasing, warehousing, transportation and human resources. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. ERP modules may be able to interface with an organization's own software with varying degrees of effort, and, depending on the software, ERP modules may be alterable via the vendor's proprietary tools as well as proprietary or standard programming languages.

What are enterprise resources?

This is an important question to answer, just as we have natural resources like water, wind, sun etc Enterprise also has resources like Human Resources, Hardware, Software, Machinery, anything out of which work can be taken out.

It is very important to plan resources of an enterprise in such a manner that you get maximum work done in minimum cost but this doesnt mean that one start exploiting resources.

The calculation for optimizing use of a resource such that it benefits the organization in long term is basic goal of Enterprise Resource Planning.

How can we calculate optimum usage of any resource?

To check how much can a resource be utilize we apply some formulas or in big enterprises they use software which have this formulas in built. It is very important to check how much a resource can be utilized and how much to invest on it.

Brief History of ERP
The focus of manufacturing systems in the 1960's was on Inventory control. Most of the software packages then (usually customized) were designed to handle inventory based on traditional inventory concepts. In the 1970's the focus shifted to MRP (Material Requirement Planning) systems that translated the Master Schedule built for the end items into time-phased net requirements for the sub-assemblies, components and raw materials planning and procurement.
In the 1980's the concept of MRP-II (Manufacturing Resources Planning) evolved which was an extension of MRP to shop floor and Distribution management activities. In the early 1990's, MRP-II was further extended to cover areas like Engineering, Finance, Human Resources, Projects Management etc i.e. the complete gamut of activities within any business enterprise. Hence, the term ERP (Enterprise Resource Planning) was coined.

The Ideal ERP System:

An ERP system would qualify as the best model for enterprise-wide solution architecture, if it chains all the below organizational processes together with a central database repository and a fused computing platform.

1. Manufacturing

Engineering, resource & capacity planning, material planning, work flow management, shop floor management, quality control, bills of material, manufacturing process, etc.

2. Financials

Accounts payable, accounts receivable, fixed assets, general ledger, cash management, and billing (contract/service)

3. Human Resource

Recruitment, benefits, compensations, training, payroll, time and attendance, labor rules, people management

4. Supply Chain Management

Inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration, procurement planning, transportation and distribution

5. Projects

Costing, billing, activity management, time and expense

6. Customer Relationship Management

Sales and marketing, service, commissions, customer contact and after sales support

Features of ERP

1. ERP facilitates company-wide Integrated Information System covering all functional areas like Manufacturing, Selling and distribution, Payables, Receivables, Inventory, Accounts, Human resources, Purchases etc.,
2. ERP performs core Corporate activities and increases customer service and thereby augmenting the Corporate Image.
3. ERP bridges the information gap across the organization.
4. ERP provides for complete integration of Systems not only across the departments in a company but also across the companies under the same management.
5. ERP is the only solution for better Project Management.
6. ERP allows automatic introduction of latest technologies like Electronic Fund Transfer ( EFT), Electronic Data Interchange (EDI), Internet, Intranet, Video conferencing, E-Commerce etc.
7. ERP eliminates the most of the business problems like Material shortages, Productivity enhancements, Customer service, Cash Management, Inventory problems, Quality problems, Prompt delivery etc.,
8. ERP not only addresses the current requirements of the company but also provides the opportunity of continually improving and refining business processes.
9. ERP provides business intelligence tools like Decision Support Systems (DSS), Executive Information System (EIS), Reporting, Data Mining and Early Warning Systems (Robots) for enabling people to make better decisions and thus improve their business processes

Advantages

The fundamental advantage of ERP is that integrating many processes by which businesses operate saves time and expense. Decisions can be made more quickly and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

·        Sales forecasting, which allows inventory optimization

·        Order tracking, from acceptance through fulfillment

·        Revenue tracking, from invoice through cash receipt

·        Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)

·        A perfectly integrated system chaining all the functional areas together

·        The capability to streamline different organizational processes and work flows

·        The ability to effortlessly communicate information across various departments

·        Improved efficiency, performance, and productivity levels

·        Enhanced tracking and forecasting

·        Improved customer service and satisfaction

ERP systems centralize business data, bringing the following benefits:

·         They eliminate the need to synchronize changes between multiple systems—consolidation of finance, marketing and sales, human resource, and manufacturing applications

·         They enable standard product naming/coding.

·         They provide a comprehensive enterprise view (no "islands of information"). They make real–time information available to management anywhere, any time to make proper decisions.

·         They protect sensitive data by consolidating multiple security systems into a single structure.

Disadvantages

Customization is problematic.

·        Re–engineering business processes to fit the ERP system may damage competitiveness and/or divert focus from other critical activities

·        ERP can cost more than less integrated and/or less comprehensive solutions.

·        High switching costs increase vendor negotiating power vis a vis support, maintenance and upgrade expenses.

·        Overcoming resistance to sharing sensitive information between departments can divert management attention.

·        Integration of truly independent businesses can create unnecessary dependencies.

·        Extensive training requirements take resources from daily operations.

·        ERP systems can be extremely expensive to implement

·        There could be lack of continuous technical support

·        ERP systems may be too rigid for specific organizations that are either new or want to move in a new direction in the near future

The limitations of ERP have been recognized sparking new trends in ERP application development, the four significant developments being made in ERP are, creating a more flexible ERP, Web-Enable ERP, Interenterprise ERP and e-Business Suites, each of which will potential address the fallbacks of the current ERP.

Scope of ERP:

1. SCM: Supply chain management

2. MRP: Manufacturing resource planning

3. CRM: Customer relationship management

4. HRM: Human resource management

5. FRM: Finance resource management

6. E-commerce

Name of vendors of ERP:

1. SAP (30.33%)

2. Oracle Coorporation

3. People Soft

4. JD Edwards & Company

5. Baan International

6. SAGE Group

7. Microsoft Business Solution

8. SSA global technologies

Future of ERP:

ERP vendors are expected to put more effort into e-commerce, CRM and SCM initiatives, with leaders redirecting between 50% and 75% of their R&D budget to these projects.

Languages for ERP:

1. AIERP in JAVA, alliance technologies

2. Fedena Ruby, Apache, India

3. Dolibarr in PHP & MYSQL, free license

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