Overview ERP(Enterprise Resource Planning)

Some organizations typically those with sufficient in-house IT skills to integrate multiple software products choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. For instance, the PeopleSoft HRMS and financials systems may be perceived to be better than SAP's HRMS solution. And likewise, some may perceive SAP's manufacturing and CRM systems as better than PeopleSoft's equivalents. In this case these organizations may justify the purchase of an ERP system, but choose to purchase the PeopleSoft HRMS and financials modules from Oracle, and their remaining applications from SAP.

This is very common in the retail sector, where even a mid-sized retailer will have a discrete Point-of-Sale (POS) product and financials application, then a series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics.

Ideally, ERP delivers a single database that contains all data for the software modules, which would include:

Manufacturing
Engineering, Bills of Material, Scheduling, Capacity, Workflow Management, Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects, Manufacturing Flow
Supply Chain Management
Inventory, Order Entry, Purchasing, Product Configurator, Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing, Commission Calculation
Financials
General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets
Projects
Costing, Billing, Time and Expense, Activity Management
Human Resources
Human Resources, Payroll, Training, Time & Attendance, Benefits
Customer Relationship Management
Sales and Marketing, Commissions, Service, Customer Contact and Call Center support
Data Warehouse
and various Self-Service interfaces for Customers, Suppliers, and Employees

Enterprise Resource Planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP).MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the standard software activity.ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, marketing, delivery, billing, production, inventory management, quality management, and human resource management.

ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. Many companies took this opportunity to replace their legacy information systems with ERP systems. This rapid growth in sales was followed by a slump in 1999, at which time most companies had already implemented their Y2K solution.

ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems.

ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information technology, this would include accounting, human resources, marketing, and strategic management.

ERP II means open ERP architecture of components. The older, monolithic ERP systems became component oriented.

EAS Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business, using ordinary Internet browsers as thin clients

Advantages

In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve:

• design engineering (how to best make the product)
• order tracking from acceptance through fulfillment
• the revenue cycle from invoice through cash receipt
• managing interdependencies of complex Bill of Materials
• tracking the 3-way match between Purchase orders (what was ordered), Inventory receipts (what arrived), and Costing (what the vendor invoiced)
• the Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a granular level.

Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Part of the change can include labeling to identify version numbers.

Computer security is included within an ERP to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company, or other sabotage. ERP security helps to prevent abuse as well.

Disadvantages

Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used.

Limitations of ERP include:

Success depends on the skill and experience of the workforce, including training about how to make the system work correctly. Many companies cut costs by cutting training budgets. Privately owned small enterprises are often undercapitalized, meaning their ERP system is often operated by personnel with inadequate education in ERP in general, such as APICS foundations, and in the particular ERP vendor package being used.

• Personnel turnover; companies can employ new managers lacking education in the company's ERP system, proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP.
• Customization of the ERP software is limited. Some customization may involve changing of the ERP software structure which is usually not allowed.
• Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.
• ERP systems can be very expensive to install often ranging from 30,000 US Dollars to 500,000,000 US Dollars for multinational companies.
• ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability.
• Technical support personnel often give replies to callers that are inappropriate for the caller's corporate structure. Computer security concerns arise, for example when telling a non-programmer how to change a database on the fly, at a company that requires an audit trail of changes so as to meet some regulatory standards.
• ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.
• Systems can be difficult to use.
• Systems are too restrictive and do not allow much flexibility in implementation and usage.
• The system can suffer from the "weakest link" probleman inefficiency in one department or at one of the partners may affect other participants.
• Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.
• Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).
• The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.
• Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.
• Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.
• There are frequent compatibility problems with the various legacy systems of the partners.
• The system may be over-engineered relative to the actual needs of the customer.