Resource Planning (ERP)
Enterprise Resource Planning (ERP)
refers to the integration of all data and processes of an organization
into a single unified system. This is achieved by using a single
software package that serves all the data crunching needs of the various
departments within the organization. This software package must
also be connected to just a single, central database to effect full
integration. Such a fully-integrated software system allows the
various departments to conveniently communicate and share information
with each other.
major reasons why companies implement ERP are: 1) to integrate financial
information, creating a single 'true' picture of the organization's
financial performance; 2) to integrate customer order information,
facilitating the real-time tracking of an order from the time it is
placed until it is shipped to the customer; 3) to standardize and speed
up manufacturing processes, thereby reducing cycle times and manpower
requirements; 4) to reduce inventory, since an effective ERP system will
ensure a smooth manufacturing process flow and align it with actual
customer requirements; and 5) to standardize human resources (HR)
An ERP system
is a tool for managing various aspects of the organization's operations
under a single system. It may consist of several software modules,
each catering to a special need or application, but all of these modules
must be controlled by a single ERP control program. Examples of
operational aspects for which ERP system modules have been created
include supply chain management, human resources,
financial operations, warehousing, distribution, and of course, the
manufacturing operations itself. An ERP system is essentially the
opposite of using stand-alone computers to manage different operations
The acronym 'ERP'
is somewhat of a misnomer for what it now represents, since it does much
more than planning. In fact, if installed correctly, an ERP system
can give the organization tremendous payback. Because of an ERP's
'integrated' approach, everyone within the organization is on 'the same'
page all the time. Conflicts in data and financial figures are
eliminated, since everyone sees the same numbers - those stored in the
ERP's single database. Information sharing is also facilitated,
allowing people to take orders efficiently and check their progress
along the manufacturing line in real time. As such, lost or
misplaced orders are prevented, and all orders are promptly served.
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Implementation of an ERP system within an organization is not easy.
A true ERP program that is wide in scope is a complex system, since data
must be shared smoothly between different operations. As such,
companies often seek the help of an ERP supplier or third-party ERP
consultant for ERP installation.
consulting is often done at three levels: 1) architecture level, wherein
the systems architect designs the over-all flow of data; 2) business
process level, wherein the business consultant studies the
organization's existing business processes and configures the ERP system
according to these processes; and 3) and technical level, which involves
programming to modify the ESP software to suit the business needs of the
customer. Since customizing an ERP system to completely suit an
existing operation is expensive, most companies simply opt to implement
the best known practices embedded within off-the-shelf ERP systems.
It is also very important for a company to understand why they need an
ERP system and how they can use it as a tool to improve their business
before implementing one.
Supply Chain Management;
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