Definition of Enterprise Resource Planning

Enterprise Resource Planning is an integrated software package that integrates all

facets of thebusiness, including planning, manufacturing, sales, inventory, HRIS
(Human Resource Information Systems), finance and marketing. ERP software is
multi module application that integrates cross functional department centrally.
Basic Information
- Minimum three modules should be there (Sales, Purchase and Inventory) or other
combinations.
- It comes in different suites - Manufacturing suite and Non-manufacturing suite.
- CRM (Customer Relationship management), SCM (Supply Chain Management) are
the extended category of Enterprise Resource Planning to fulfill the complete
requirements of organization.
- It improve and streamline the internal business process effectively, which typically
requires reengineering of current business process. While CRM and SCM attempts to
enhance the relationship with customers and suppliers respectively.
- It's components are the common components like a MIS (Management Information
System). It generates all kinds of report; top customers, top suppliers, WIP (Work In
Process), shop floor, order tracking, production reports, AP/AR (Account
Payable/Account Receivable), GL (General Ledger), Balance sheet, Trail balance,
HRIS reports etc.
- Most of the software is module based, which is the core of the system. Each
module automates the business activities of a particular functional area. i.e. Sales
module will cover all sales activity in the organization, Manufacturing module will
cover all production activity etc. In every ERP all the modules are highly linked
because all the functional areas of business process are
interconnected with each other.
- There are three levels of business processes - Strategic Planning, Management
Control and Operational Control. The software has been designed to support or
streamline business processes at all three levels.
- ERP software can not take decisions. It will work like DSS (Decision Support
system). It will provide you all the relevant information. Based on that information
business managers will take decisions and they can do advance planning for the
organization.
- It can be used by all levels of employees - workers, supervisors, managers,
executives, top level management.

- Selection is crucial and important for the organization - If you choose a wrong
software you will
be in trouble. There are so many failures stories. Always see a complete software
demo before
finalizing any Enterprise Resource Planning for organization.
- At the time of selection, check two-three pakages that is made for similar types of
industry.
Always consider following points before finailizing software and vendor- Who is
going to implement? What will be the implementation time? What are the track
records of Company?
Vendor track record? (If software is going to implemented by third party)
- When selected software does not have a unique features that you are looking for
your
organization. Customizations will come in the picture.
- The implementer or consultants will do the complete process mapping and GAP
analysis for
implementation. They will map the current business process with software to
identify the
customization.
- Customization should be limited. Too much customization will ruin the original
features of the
system and it will be costly. Customization services are chargeable basis and it will
take time too.
- It is available in all range. It will vary from user wise, company size, etc. Earlier this
software
was used mainly by the big organizations but now it is also available for small and
medium size
enterprises (SMEs).

Advantages of ERP
ERP is software which integrates all functionalities of the organization in a single
database. It streamlines all the business processes and gives desired result on a
click of a button. Earlier ERP was for big organization due to its cost, but now it is
made for SMEs (Small and Medium Enterprises) of different segments.
ERP software incorporates a large amount of industry specific business
functionalities which will ensure less customization or sometime no customization
(except reports) to make the package suitable to your business operations.
Most important advantage of ERP software is integration of all the business
solution in a single platform, which reduces unnecessary paper work,
documentation, repeated entry, cycle time etc.
The software also comes with its framework of upgrades to changing technologies.
In the ERP software business functionalities and operating processes are built into
standard software codes, thus it require lesser time to understand process related
issue of implementation and gives industry specific best practices.
ERP software automates the business processes and also forces its own logic
(industry specific) on the business. Verticalization (industry specific) of ERP is
increasingly becoming the buzzword across all the ERP vendors. While the other
standard solutions may give 55-65% to your business, the same can be as high as
90% with industry specific solutions.
Accounting applications is another advantage of ERP. It can integrate the costing,
profit, and
revenue information of sales that are made etc.
Other Advantages
* Speeding up the whole manufacturing process
* Better and systematic inventory handling with ABC analysis
* WIP (work in progress) control
* Easy project management
* Accessing the status of the goods on a click of a button
* Fast transmit commodities through online transactions
* Fastens the creation of reports
* Reduce paper works and repeated entry
* Quick processing of information
* Serving the customer efficiently in time
* Solve the customer problem quickly
* Information based decision
* Better finance reports
* Better supply chain management
* Better vendor management
* Reduce process cycle time

Disadvantages

What Are the Disadvantages of Enterprise Resource Planning?

ERP systems have many advantages like improve cycle time, automate the
business process,
integrity of various departments, easy workflow, better reporting, etc. but it has
also some
disadvantages due to inadequate investment in regular training for users, testing
charges, limited
customization, reengineering of business process up to some extend, AMC charges
for the
software and updates, difficult to use, etc.
Complete system can be expensive for your organization, although they are coming
for SMEs at
lower cost too, but organization should be very careful in selecting the appropriate
software that
fulfills their requirements in a budget. There are some limitations in customizations;
some
customization may involve changing of the software structure which is usually not
allowed.

Re-engineering of business processes to fit the "industry standard" prescribed by

the ERP system
may create some problem to the user to understand, they may do some mistakes.
New system
can be too complex measured against the actual needs of the customers. There is a
risk of loss
of data in the event of a security breach, because of centralized database in the
systems. It has
some limitations and do not allow much flexibility in implementation and usage. The
new system
may be over-engineered relative to the actual needs of the customer. If
implementation fails,
due to any reason, all the work done by organization in this project will be zero.
Organization
should be very careful about implementation process.
There may be some compatibility problem between new technology and old legacy
system like
organization may have to buy new database, new PCs, new servers to implement
the software.
This will increase the cost of the project. If organization does not have IT
department, they may
required a new IT manger to implement the system.
There are other disadvantages seen by the organizations who have implemented
ERP system, but
they are very happy with advantages over disadvantages. Disadvantages cannot
effect the
organization if planned well to implement the software.

Pitfalls

ERP solutions have solved many problems of business enterprises, but ERP software
has many
pitfalls, which should be analyzed during the implementation of this software.
Some of the common pitfalls of ERP software are:
Poor compatibly to other software systems: The improper design of software
implementation may make enterprise software inefficient. For example: If the
company buying
the enterprise software is using software products of some other company, or if to a
previously
installed system a new ERP software is integrated, then the new software may
reduce the
system's efficiency. If the integration of two systems such as CRM and
manufacturing is not done
suitably, the production unit may not get consistent data to design products. The
customer
buying enterprise software should use compatible products to get high efficiency.
ERP implementation can be expensive: Large companies have suitable
infrastructure to
maintain software and hardware terminals, but mid-size businesses and small
companies may
find the expenses on computers and hardware too much for their budgets. Many
companies
prefer to keep previous software modules to prevent expenses on taking new
enterprise resource
planning modules and if the implementation is not done at base level, it may not
help the
company completely. Companies buying enterprise software may find ERPs
extremely expensive
initially.

ERP Software security depends on people who using it: Enterprise resource
planning
software provides high security to the company's data, but if it is not maintained
properly, the
data may face security problems. Companies may have to hire support staff at high
pay scale to
maintain this Software security. Sometimes, companies wish to reduce buying cost
and are not
willing to take expensive training needed for high quality security and it may
ultimately result in
security issues.
ERP Software cannot be customized to meet the user's needs accurately:
Although, this
software use standard methods to design the modules such as finance, HR,
production, inventory
and manufacturing, but each company follows its own way of working. Sometimes,
companies
change their procedures to match the needs of the ERP software because to change
software is
very difficult. If you make changes to a single module of this Software, the complete
software
functioning has to be redefined, which is very expensive.
Extra costs and time spent on ERP implementation: Companies buying ERP
have to spend
money on buying software and hardware, and the burden of extra expenses on
implementation
makes it further difficult for the buyers. Technically proficient staff has to be
employed or
training has to be given to previous employees to run enterprise resource planning
system.
Initially, the implementation may take a lot of time and many companies are not
ready to spend
money and time on implementation. Companies have to pay to get extra license of
the software,
which is a biggest pitfall of software.

Some changes cannot be implemented to previously installed ERP

Software: Sometimes, changes in manufacturing unit or market needs brings a lot
of changes in production procedure and in such cases, previously installed
enterprise resource planning software becomes outmoded.
Changes in software market and introduction of new technologies can also makes
enterprise resource planning software obsolete.

Enterprise Resource Planning Features and Functions

ERP reengineered the delivering role-based access to crucial data, applications,
critical tools and
other processes of the organization. You can efficiently deal with organization
challenges in the
following areas:
End-user service delivery ensures that your employees can willingly access the vital
data,
applications, and analytical tools they need to do all their job functions efficiently
and effectively.
ERP offers role-based right of entry and self-services through portal.
Finance module ensures compliance and predictability of business performance, so
your
organization can gain a strong financial insight across the enterprise with better
control. It
automates financial and management accounting. It also provides better support for
corporate governance.
Human Resource Management (HRM) will optimize your human resource processes
with a
complete and integrated HRM solution. ERP provides this HR solution for all types of
organizations
in all verticals. You can maximize the efficiency of your employees and also better
support,
growth, and flexibility. Human resource solution automates capacity management,
core HR
processes like recruiting, training, performance appraisal etc.

ERP Operation functions manage end-to-end procurement and supply chain

processes and other
business process for complete business cycles. It optimizes the flow of materials-
better inventory
management. It also supports discrete and process manufacturers manage the
complete life
cycle of product development and manufacturing.
The software automates the complete manufacturing processes and reduces costs
by better
controlling and adapting the manufacturing process in real time (WIP). Apart from
these function,
after implementation you will be enjoying the following features and benefits -
Sales and marketing realize they must provide the highest quality forecast of future
demand they
are reasonably able to in the form of a regularly updated forecast of the product
they need to
meet the market needs and when they need it. Planning realize their plans must be
realistic and
achievable (any plan with due dates in the past is neither realistic nor achievable)
and they
should only release orders when they have checked that the material is available.
Operations recognize that it is in everyone's best interests to follow the plan,
advising planning in
advance if they may miss the plan date. CRM realizes that orders must only be
accepted on the
basis of available, planned capacity (based on the sales forecast) unless agreed
with operations.

Different Types of ERP Software

Types of ERP – SAP R/3, SAP B1, LN (BaaN), Microsoft Dynamics AX, Microsoft Dynamics NAV, JD
Edwards, Oracle Financials, PeopleSoft.
SAP R/3 is software from SAP. SAP is a world's leading provider of business software. SAP
software runs in more than 120 countries world wide with more than 86000 customers. SAP
solution is transforming your business process into a best-run business. SAP services are so
good; they provide superior services and supports.
SAP B1 (business one) software is also form SAP. It is made for SME (small and medium
enterprise) segment to fulfill their requirement at lower cost. SAP B1 localization is quite good. It
contains 15 core modules. Report module is discontinued in 2009 due to purchase of Business
Object, XL Reporter and Crystal Reports 2008 Basic(One Free License per customer)
LN/BaaN is software from Infor Global offers the breadth and depth of support for order-driven,
project-based discrete manufacturing. It increase user productivity, operational efficiency, better
control of processes, better communication and collaboration, enhance performance and
scalability, leverage IT infrastructure and information assets and reduce costs. LN is ideal for
companies in make-to-stock, assemble-to-order, make-to-order, or engineer-to-order
environments.

Microsoft Dynamics AX 2009 (Microsoft Axapta) is a comprehensive enterprise solution for

mid-sized and larger organizations to help people improve productivity. Microsoft Dynamics ERP
applications and services made for retailers, manufacturers, wholesale distributors, and service
companies, doing business domestically or in multiple countries.
Microsoft Dynamics NAV (Microsoft Navision) is an ERP software to assist with finance,
manufacturing, CRM (customer relationship management), SCM (supply chain management),
analytics and e-commerce for small and medium-sized enterprises.
JD Edward EnterpriseOne is an integrated applications suite of comprehensive enterprise
resource planning software from Oracle that combines business value, standards-based
technology, and deep industry experience into a business solution with a low total cost of
ownership.
Oracle E-Business Suite Financials is easy to operate shared services across businesses and
regions. It delivers pre-integrated financial and industry-specific processes. It provides consistent
financial and operational information, dynamic planning, budgeting and forecasting, multidimensional
profitability analysis, etc.

Oracle PeopleSoft Enterprise applications are designed for the most complex business
requirements. They provide comprehensive business and industry solutions, enabling
f--
heterogeneous application environments, and a broad choice of technology infrastructure.