Enterprise resource planning (ERP)

Enterprise resource planning (ERP) is a process by which a company (often a

manufacturer) manages and integrates the important parts of its business. An ERP
management information system integrates areas such as planning, purchasing,
inventory, sales, marketing, finance and human resources. Enterprise resource
planning (ERP) is business process management software that allows an
organization to use a system of integrated applications to manage the business and
automate many back office functions related to technology, services and human
resources. Enterprise Resource Planning (ERP) System implementation is both an
art and science that consists of planning, implementation, and ongoing maintenance.
This methodology is designed to automate the drudgery of implementation and
provide organized approaches to problem solving by listing, diagramming, and
documenting all steps. Structured methodologies help to standardize and systemize
ERP implementation and maintenance by approaching them as an engineering
discipline rather than as whims of individual software developers.

When an organization purchases an ERP system, the intent is that the purchased
ERP system provides specific functions and benefits. These functions and benefits
need to be articulated to ensure that the ERP system performs as desired. This
process is called conducting a feasibility analysis. The purpose of the feasibility
study is to provide:
• An analysis of the objectives, requirements, and system concepts.
• An evaluation of different approaches for reasonably achieving the
objectives.

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 • Identification of a proposed approach. The feasibility analysis normally
covers:
• Current working practices. These are examined in depth, revealing areas in
the business where there is duplication of effort, or where procedures
instituted in the distant past are carried out even though there is no longer any
need for them.
• Channels of information. These are examined because the feasibility study
is concerned primarily with the input and output information of each internal
system. Such a study ignores departmental boundaries and prejudices. When
the true information patterns within a business are exposed, it is often possible
to reorganize resources so that all relevant data is captured at the point where
it can be used for decision.
• Alternative approaches. Alternative methods of handling or presenting the
data should be considered.
• Cost factors. These must be clearly identified and show definite cost savings
or related benefits. Existing costs must be examined and used as a basis for
comparison. Since this presentation is likely to be related to the information
structure rather than to the departmental organization, the new approach may
suggest possible improvements that were hidden under the existing system.
• Supporting services offered. The training and the systems and programming
assistance that will be available during the installation period.
• Range compatibility. If the workload expands, can the configuration be
increased in power without extensive reprogramming?

Evolution of ERP

In the ever growing business environment the following demands are placed on the
industry:

o Aggressive Cost control initiatives

o Need to analyze costs / revenues on a product on customer basis
o Flexibility to respond to changing business requirements
o More informed management decision making
o Changes in ways of doing business

Difficulty in getting accurate data, timely information and improper interface of

the complex natured business functions have been identified as the hurdles in the
growth of any business. Time and again depending upon the velocity of the

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growing business needs, one or the other applications and planning systems have
been introduced into the business world for crossing these hurdles and for
achieving the required growth. They are:

o Management Information Systems (MIS)

o Integrated Information Systems (IIS)
o Executive Information Systems (EIS)
o Corporate Information Systems (CIS)
o Enterprise Wide Systems (EWS)
o Material Resource Planning (MRP)
o Manufacturing Resource Planning (MRP II)
o Money Resource Planning (MRP III)

Need for ERP

Most organizations across the world have realized that in a rapidly changing
environment, it is impossible to create and maintain a custom designed
software package which will cater to all their requirements and also be
completely up-to-date. Realizing the requirement of user organizations some
of the leading software companies have designed Enterprise Resource
Planning software which will offer an integrated software solution to all the
functions of an organization.
Features of ERP
Some of the major features of ERP and what ERP can do for the business system
are as below:

o ERP facilitates company-wide Integrated Information System

covering all functional areas like Manufacturing, Selling and
distribution, Payables, Receivables, Inventory, Accounts, Human
resources, Purchases etc.,
o ERP performs core corporate activities and increases customer service
and thereby augmenting the Corporate Image.
o ERP bridges the information gap across the organization.
o ERP provides for complete integration of Systems not only across the
departments in a company but also across the companies under the
same management.
o ERP is the only solution for better Project Management.
o ERP allows automatic introduction of latest technologies like
Electronic Fund Transfer (EFT), Electronic Data Interchange (EDI),
Internet, Intranet, Video conferencing, E-Commerce etc.

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 o ERP eliminates the most of the business problems like Material
shortages, Productivity enhancements, Customer service, Cash
Management, Inventory problems, Quality problems, Prompt delivery
etc.,
o ERP not only addresses the current requirements of the company but
also provides the opportunity of continually improving and refining
business processes.
o ERP provides business intelligence tools like Decision Support
Systems (DSS), Executive Information System (EIS), Reporting, Data
Mining and Early Warning Systems (Robots) for enabling people to
make better decisions and thus improve their business processes.

What do the Organizations opt form ERP?

1. Improve the decision-making process.

As overtook the beginning of the article, ERP systems can create a shared database with more and
higher quality that those responsible be displayed on your screen in real time streamlining and
improving the process of decision making.
2. Planning realistic future scenarios.
By having better information can make realistic estimates and forecasts anticipating future
scenarios.
3. The minimum duplication.
Companies that do not yet have an ERP solution is easy to see that its departments operate
somewhat independently of each other, so they end up creating duplicate records and reports.
Integrating ERP, accounting for drastically reducing enable these duplications.
4. ERP systems are modular.
ERP is formed by modules. This way you can implement modules your company needs at all
times. If in the future your company evolves and grows with your ERP will do it if you incorporate
new features.
5. Total adaptation to the needs of your company.
All companies are different. Therefore the provider of your ERP system should perform a
preliminary analysis of the needs of your organization to ensure that the application is perfectly
suited to it. The ERP solution must fit your business, not vice versa.
6. Greater control and traceability.
The ERP systems facilitate product tracking throughout the organization, from entering the raw
material to delivery of finished product to customers.
7. Integration with other members of the value chain.
The new concept ERP II exceeds the limits of the company by adding other members of the value
chain: customers and suppliers.

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So the company becomes a strategic partner who can draw a competitive advantage by actively
participating in the design and development of new products contributing their experience.
Regarding customers, ERP allows to have more information and better quality that allows you to
adjust production orders and purchase your needs. On the other hand, we will have a database of
segmented our customers allow us to perform marketing campaigns targeting specific segments.
8. Improved Internal Communication.
The ERP suppresses information barriers between departments by integrating and improving
internal communication.
9. Automation of Tasks.
The heavy ERP systems to automate repetitive tasks formerly performed by hand (generation of
delivery notes, invoices etc.).
In this way our operators can focus on more productive tasks that really are what give us value.
But it is by reducing the human component, will fall the number of errors (although not entirely
eliminated because certain manual actions such as data entry will still be necessary).
10. Lower costs, more competitive.
The higher efficiency achieved, the decrease in the number of errors and reducing duplicate tasks
help decrease business costs. Cost reduction will she allowed us to

 Increase our profit margin to drop the unit cost.

 Reduce the price of each product to reduce its cost.
11. Increased performance and return on investment in the long term.
Thanks to all the above advantages it can achieve increased profitability and benefits. In other
words, the increase in performance achieved with the implementation of Enterprise Resource
Planning compensated in the long run, the initial investment.
12. Access to reliable information. This benefit is achieved by:

 The use of a common database

 The consistency and accuracy of data
 Improved reporting system
13. Avoid data redundancy and operations and. Arial
As the various modules of the ERP system in real access to the same central database time, two
things are avoided,

 Duplicate or multiple records of the same data in the system, and

 Duplication of operations for lack of updating the record on them.
14. Reduced cycle time and delivery.
This benefit is achieved on the one hand, to minimize the recovery process, and secondly, when
reporting on the production or delivery delays.
15. Cost Reduction.

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This reduction is due both to the economy of time, and to improvements in the control and analysis
of business decisions.
16. Ease of Adaptability.
ERP systems can be modified through the redefinition of its different business processes, this
makes it easy to adapt and restructure to meet the new requirements.
17. Improvements in “Scalability”.
Due to a modular design and structured ERP systems allow additions or scalar functions to increase
the initial solution.
18. Improved maintenance.
The existence of a long-term maintenance provider as part of the acquisition of ERP system allows
better process to keep the information system up to date with advances in technology and
management.

Components of ERP
 EDI(Electronic data interchange)
 CAD(computer aided design)
 DMS(Document management system)
 AMS(Attendance management system)
 SMS(Security management)
 CMS(Communication management system)

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