Enterprise Resource Planning (ERP)
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ERP: AN OVERVIEW
Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the integrated management of business as a whole, from the viewpoint of the effective use of management resources, to improve the efficiency of an enterprise. ERP packages are integrated (covering all business functions) software packages that support the above ERP concepts.
Originally, ERP packages were targeted at the manufacturing industry, and consisted mainly of functions for planning and managing core businesses such as sales management, production management, accounting and financial affairs etc. However in recent years, adaptation not only to the manufacturing industry, but also to adverse types of industry has become possible and the expansion of implementation and use has been progressing on a global level.
ERP software is designed to model and automate many of the basic processes of company and eliminating complex, expensive links between computer systems that were never meant to talk to each other.
For example, when a warehouse in Noida orders a customer order, the data flows automatically to others in the company who need to see it –to the finance department at the company headquarters in Mumbai and to the manufacturing plant in Chennai.
EVOLUTION OF ERP
When companies were small and all the different managerial functions managed by a single person, the decisions were made, keeping in mind the overall company objectives.
But as companies grew, managing the entire operation became impossible for a single person. More and more people were brought in and the different business functions were given to different individuals. When the organization became larger, each person hired
people to assist him/her and the various departments as we see now, evolved. The size of the departments began to increase as more and more people were required to do the job.
As the departments became large, they became closed and watertight. Each had their own set of procedures and hierarchy. People, at most levels within their department, would just collect and pass information upward. Thus information was shared between departments only at top level.
Although IT provided the perfect answer, in the haste, most developers ended up developing need-based, isolated and piecemeal information systems that were non-compatible. And it is no wonder then that IT implementations automated only the existing applications and not the business functions.
ERP IMPLEMENTATION
The ERP implementation project has to go through different phases. There are no clear separating lines between these phases and in many cases, one phase will start before the previous one is completed. But the logical order is followed. Also, all the phases that we are discussing in this session may not be applicable in all cases. For example, in some cases, the organization might have already identified a particular package; then the pre-selection screening and package evaluation phases are not done.
Configuration:
This is the main functional area of the ERP implementation. There is a bit of mystique around the configuration process and for good reason: the Holy Grail or unwritten rule of ERP implementation is, synchronizing existing company practices with the ERP package rather than changing the source code and customizing it to suit the company.
Configuring a company’s system reveals not only the strengths of a company’s business process but also –and perhaps more importantly –its weakness. It’s vital to the health of the company and to the success of the ERP implementation that those configuring the system are able to explain what won’t fit into the package, and where the gaps in functionality occur. For example, a company might have an accounting practice that cannot be configured into the system or some shipping process that won’t conform to the package. The company obviously needs to know which processes have to change in the process of implementation. Finding out what will work and what won’t requires a knowledge of the business process itself , and an ability to work with people throughout the company. So, people with such skills should be assigned to these tasks.
Post-Implementation (Maintenance Mode)
One important factor that should be kept in mind is that the post-implementation phase is very critical. Once the implementation is over, the vendors and the hired consultants will go. To reap the full benefits of the ERP system, it is very important that the system should get enterprise-wide acceptance. There should be enough employees who are trained to handle the problems that might crop up. There should be people, within, the company, who have the technical prowess to make the necessary enhancements to the system as and when required. The system must be upgraded as and when new versions or new technologies are introduced. Here the organization should think in terms of the incremental benefits of the new enhancements. Because with any upgradation or enhancements, there will a lot of other aspects like user training that have to be considered. So instead of going in for up gradation as and when a new version is announced by the vendor, the organization should first analyze the costs and benefits.
REASONS FOR GROWTH OF ERP
There is no doubt that the market for Enterprise Resource Planning (ERP) systems is in great demand. Industry analysts are forecasting growth rates of more than 30% for at least the next five years. Why are so many companies replacing their key business systems? The answer is:
Most companies are not satisfied with their current systems. On an average, there systems were developed over a decade ago. In spite of being chronologically recent, these systems
Are now a part of the distant past, once we take into account the complexities and the requirements imposed upon businesses by today’s global market. Moreover, the role of information technology in business has also changed. The role of technology has evolved from simply a supporting operation to become an integral part of the business. As a result, software vendors developed sophisticated, all-encompassing and integrated software packages to address the needs of modern business.
ERP AND INTERNET
The internet has revolutionized the way in which business is conducted. Now as technology continues its forward leap, newer innovations are being developed each day. Every day we hear about new technologies that are changing the way business is done. Keeping pace with these changes is the most difficult task that the ERP vendors are facing.
Internet is the one technology that has dramatically changed business scenario. We now have e-commerce, online shopping, company web sites, digital verifications, secure transactions and so on. The beauty of these systems is that they are accessible even to the individual customer. Anybody who has a browser and a credit card can make a purchase online. People can sit at their home and place orders for computers, configure the item according to their specifications, and make the payment on line.
CONCLUSION
The success of an ERP implementation depends on a lot of factors, like having the right package, having the right implementation methodology and co-operation of the users. Successful ERP implementations will definitely productivity. The experience in other countries shows that productivity levels have grown 3-4 times after implementing the ERP system. In India it is too early to have any statistics on this matter, but many companies have claimed dramatic improvements in productivity.