28-02-2013, 10:33 AM
ERP Concept
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INTRODUCTION
IN today's competitive world many major companies have decided to use a popular tool that has evolved over the past few decades. ERP, the descendant of MRPII offers the "answer" to the economic and productivity troubles of manufacturing and service enterprises. Thus, the ERP system has become very popular as an enterprise management software tool.
In order for a software system to be considered ERP, it must provide an organization with functionality for two or more systems. While some ERP packages exist that only cover two functions for an organization (QuickBooks: Payroll & Accounting), most ERP systems cover several functions.
The term ERP originally referred to how a large organization planned to use organizational wide resources. In the past, ERP systems were used in larger more industrial types of companies. However, the use of ERP has changed and is extremely comprehensive, today the term can refer to any type of company, no matter what industry it falls in. In fact, ERP systems are used in almost any type of organization - large or small.
ERP systems today can cover a wide range of functions and integrate them into one unified database. For instance, functions such as Human Resources, Supply Chain Management, Customer Relations Management, Financials, Manufacturing functions and Warehouse Management functions were all once stand alone software applications, usually housed with their own database and network, can now fit under one umbrella
As in any integrated System or Unit, the performance of each one of the parts of an Enterprise has an impact in his cumulative performance results. Specifically, we can say that a 95% performance in independent vital enterprise elements (Item master, Bills of Materials, Production Master Schedule Adherence, Inventories Accuracy, Production Orders Accuracy and Purchase Orders Accuracy), will reflect a cumulative 75% in a ERP environment. This means a percentage of failure possible in productivity terms. Here is where we should support and combine this useful tool with a business strategy based on the desired administration tendency or theory.
On this sense, it is vital to note the point on administration before deciding which ERP software is the one you will be using, you need to have solid administration principles (no matter which administration tendencies you decide to choose) and strong knowledge of ERP methodology.
This will translate into synergy between areas that will allow organizations to have highly effective processes with a continuous success. Only by creating a deep understanding of this philosophy you will have the certainty of obtaining the best results, as well as being in position to face and take proactive actions for any obstacle you could find in the road. If you have not this reference point, your efforts will deliver the wrong results.
Advantages:
Integration
• Integration can be the highest benefit of them all. The only real project aim for implementing ERP is reducing data redundancy and redundant data entry.
• If this is set as a goal, to automate inventory posting to G/L, then it might be a successful project.
• Those companies where integration is not so important or even dangerous, tend to have a hard time with ERP.
ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment. ERP improves the cooperation of users.
Efficiency
• Generally, ERP software focuses on integration and tend to not care about the daily needs of people. I think individual efficiency can suffer by implementing ERP.
• The big question with ERP is whether the benefit of integration and cooperation can make up for the loss in personal efficiency or not.
Cost reduction
• It reduces cost only if the company took accounting and reporting seriously even before implementation and had put a lot of manual effort in it.
• If they didn't care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been fincancially-oriented, then no cost is reduced.
Accuracy
• No. People are accurate, not software. What ERP does is makes the lives of inaccurate people or organization a complete hell and maybe forces them to be accurate (which means hiring more people or distributing work better), or it falls.
Disadvantages:
Expensive
• This entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective.
Not very flexible
• It depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.