Enterprise resource planning

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Enterprise resource planning (ERP) integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, CRM, etc. ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.[1] ERP systems can run on a variety of hardware and network configurations, typically employing a database to store data.[2] ERP systems typically include the following characteristics: An integrated system that operates in real time (or next to real time), without relying on periodic updates.[citation needed]  


A common database, which supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the Information Technology (IT) department.[3]

1 Functional areas 2 History

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2.1 Origin of "ERP" 2.2 Expansion

3 Components 4 Best practices 5 Modularity 6 Connectivity to plant floor information 7 Implementation

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7.1 Process preparation 7.2 Configuration

inspection of goods. supplier scheduling. Product lifecycle management Supply chain management Order to cash. cash management. quality control. manufacturing process.2 Disadvantages 9 See also 10 References 11 Further reading [edit]Functional Finance/Accounting areas General ledger. commissions. supply chain planning.4 Extensions 7. product configurator. bill of materials. consolidation Human resources payroll. capacity. budgeting. commissions Project management Costing. diversity management Manufacturing Engineering. billing. time and expense.5 Data migration 8 Comparison to special±purpose applications o o 8. cost management. inventory. receivables. fixed assets. 401K. training. suppliers and/or employees Access control Management of user privileges for various processes [edit]History [edit]Origin of "ERP" . purchasing. manufacturing flow. service. benefits. scheduling.1 Advantages 8.activity based costing. payables.3 Customization 7.o o o 7. call center support Data services Various "self±service" interfaces for customers. workflow management. performance units. work orders. customer contact. activity management Customer relationship management Sales and marketing. order entry. manufacturing projects. recruiting. claim processing.

governments and non±profit organizations also began to employ ERP systems. maintenance and human resources. reflecting the evolution of application integration beyond manufacturing. and e±finance. e± telecom. It describes web±based software that allows both employees and partners (such as suppliers and customers) real±time access to the systems. later manufacturing resource planning[5][6] and computerintegrated manufacturing. Without supplanting these terms.[8] [edit]Expansion ERP systems experienced rapid growth in the 1990s because the year 2000 and the Euro disrupted legacy systems. ERP came to represent a larger whole.[9] ERP systems initially focused on automating back office functions that did not directly affect customers and the general public. or e±business systems such as e±commerce. e±government. Vendors variously began with accounting. By the mid±1990s ERP systems addressed all core functions of an enterprise. "Enterprise application suite" is an alternate name such systems.[citation needed] "ERP II" is coined in the early 2000s. Beyond corporations. Front office functions such as customer relationship management (CRM) dealt directly with customers. or supplier relationship management (SRM) became integrated later. This rapid growth in sales was followed by a slump in 1999 after these issues had been addressed.[7] Not all ERP packages were developed from a manufacturing core. Many companies took this opportunity to replace such systems with ERP.[citation needed] [edit]Components  Transactional database .In 1990 Gartner Group first employed the acronym ERP[4] as an extension of material requirements planning (MRP). when the Internet simplified communicating with external parties.

[citation needed] [edit]Modularity Most systems are modular to permit automating some functions but not others. or Basel II. others such as human resource management are not. This means that the software reflects the vendor's interpretation of the most effective way to perform each business process. Generally speaking. This is because the procedure can be readily codified within the ERP software and replicated with confidence across multiple businesses who share that business requirement. best practices reduced risk by 71% when compared to other software implementations. Some common modules. In addition. Other companies already have a system that they believe to be adequate. documentation. such as finance and accounting. a service company probably has no need for a manufacturing module.[11] The use of best practices eases compliance with requirements such as IFRS. are adopted by nearly all users.[10] Companies that implemented industry best practices reduced time±consuming project tasks such as configuration. the greater the number of .        Management portal/dashboard Business intelligence system Customizable reporting External access via technology such as web services Search Document management Messaging/chat/wiki Workflow management [edit]Best practices Best practice are incorporated into most ERP systems. For example. Sarbanes-Oxley. Systems vary in the convenience with which the customer can modify these practices. testing and training. such as electronic funds transfer. They can also help comply with de facto industry standards.

but also the greater the costs. who bring unique knowledge on process. These systems tend to have the highest level of initial integration cost. Custom±integration solutions²Many system integrators offer custom solutions. Long term costs can be minimized through careful system testing and thorough documentation. . equipment. The benefit of staging is that ERP vendors do not need to master the complexities of equipment integration. These systems are typically configured by systems integrators. and vendor solutions. and connectivity to other vendor products. This requires the vendors to offer specific support for the plant floor equipment that their customers operate. Web Services. Connectivity becomes the responsibility of thesystems integrator. including competitors. Direct integration²ERP systems connectivity (communications to plant floor equipment) as part of their product offering. Enterprise appliance transaction modules (EATM)²These devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system. or system± specific program interfaces (APIs). The benefit of an EATM is that it offers an off±the±shelf solution. Database integration²ERP systems connect to plant floor data sources through staging tables in a database. EATM can employ a staging table. ERP vendors must be expert in their own products. the greater the integration benefits. Plant floor systems deposit the necessary information into the database. and can have a higher long term maintenance and reliability costs. The ERP system reads the information in the table. risks and changes involved.[citation needed] [edit]Connectivity to plant floor information ERP systems connect to real±time data and transaction data in a variety of ways. Custom±integrated solutions typically run on workstation or server class computers.modules selected.

The typical project for a large enterprise consumes about 14 months and requires around 150 consultants. customization. number of modules. customization. understandingexising automated solutions.[17][18]    ERP implementation is considerably more difficult (and politically charged) in decentralized organizations. three types of services are available to help implement such changes²consulting.[citation needed] Customization can substantially increase implementation times.[16] It is therefore crucial that organizations thoroughly analyze business processes before implementation. and support. the most widely known being OPC[12] [edit]Implementation ERP's scope usually implies significant changes to staff work practices. Modular ERP systems and can be implemented in stages. It also enables an assessment of the alignment of current processes with those provided by the ERP system. because they often have . multinational and other large implementations can take years. and the readiness of the customer to take ownership for the project. This analysis can identify opportunities for process modernization. the scope of process changes.[14] Small projects can require months. analyzing the effectiveness of each process. Research indicates that the risk of business process mismatch is decreased by: linking current processes to the organization's strategy.[13] Generally.[15] Poor understanding of needed process changes prior to starting implementation is a main reason for project failure.Standard protocols²Communications drivers are available for plant floor equipment and separate products have the ability to log data to staging tables.[14] [edit]Process preparation Implementing ERP typically requires changing existing business processes.[13]Implementation time depends on business size. Standards exist within the industry to support interoperability between software products.

)  . the customer can rewrite part of the code. increasing overall competitive advantage. business rules.[19] This may require migrating some business units before others. data semantics.[citation needed] A potential disadvantage is that adopting "standard" processes can lead to a loss of competitive advantage. setting up cost/profit center structures.[20][21] [edit]Configuration Configuring an ERP system is largely a matter of balancing the way the customer wants the system to work with the way it was designed to work. purchase approval rules. linking via Master data management) or customizing the system to meet specific needs. etc. authorization hierarchies and decision centers.[citation needed] Key differences between customization and configuration include: Customization is always optional. product line. whereas the software must always be configured before use (e. losses in one area often offset by gains in other areas.[citation needed] [edit]Customization When the system doesn't offer a particular feature. Both options add time and cost to the implementation process and can dilute system benefits. or interface to an existing system.different processes. For example.g. delaying implementation to work through the necessary changes for each unit. organisational trees. ERP systems typically build many changeable parameters that modify system operation.. Customization inhibits seamless communication between suppliers and customers who use the same ERP system uncustomized. While this has happened. possibly reducing integration (e. an organization can select the type of inventory accounting²FIFO or LIFO²to employ. or distribution channel and whether to pay for shipping costs when a customer returns a purchase.g. whether to recognize revenue by geographical unit.

customization offers the potential to obtain competitive advantage vis a vis companies using only standard features. since migration is one of the .g. those involving changes to fundamental data structures) are overwritten during upgrades and must be reimplemented. though they require retesting. capturing transactional data. The effect of customization is less predictable. reporting and republishing. Nevertheless. The software was designed to handle various configurations. and behaves predictably any allowed configuration. such as syndicated marketing data and associated trend analytics. code that uses pre± defined "hooks" that are called before/after displaying data screens) survive upgrades. [edit]Data migration Data migration is the process of moving/copying and restructuring data from an existing system to the ERP system.  Configuration changes survive upgrades to new software versions. tills or RFID  access to specialized data/capabilities.  The effect of configuration changes on system behavior and performance is predictable and is the responsibility of the ERP vendor. using scanners. e. Unfortunately. [edit]Extensions ERP systems can be extended with third±party software. Customization can be expensive and complicated. Some customizations (e. ERP vendors typically provide access to data and functionality through published interfaces. Migration is critical to implementation success and requires significant planning. is the customer's responsibility and increases testing activities. Other customizations (e. Extensions offer features such as:[citation needed]   archiving. and can delay implementation.g.g.

Tasks that benefit from this integration include:[citation needed] Sales forecasting.final activities before the production phase. which allows inventory optimization Order tracking. from invoice through cash receipt Matching purchase orders (what was ordered). from acceptance through fulfillment Revenue tracking. They provide a comprehensive enterprise view (no "islands of information"). Data becomes visible across the organization. They make real±time information available . inventory receipts (what arrived). The following steps can structure migration planning:[22] Identify the data to be migrated Determine migration timing Generate the data templates Freeze the toolset Decide on migration-related setups Define data archiving policies and procedures       [edit]Comparison to special±purpose applications [edit]Advantages The fundamental advantage of ERP is that integrating the myriad processes by which businesses operate saves time and expense. bringing the following benefits: They eliminate the need to synchronize changes between multiple systems²consolidation of finance. human resource. it often receives insufficient attention. and costing (what the vendor invoiced) ERP systems centralize business data. and manufacturing applications        They enable standard product naming/coding. marketing and sales. Decisions can be made more quickly and with fewer errors.

[23] [edit]Disadvantages   Customization is problematic. maintenance and upgrade expenses. anytime to make proper decisions.  Extensive training requirements take resources from daily operations.  They protect sensitive data by consolidating multiple security systems into a single structure.to management anywhere.  High switching costs increase vendor negotiating power vis a vis support.  Overcoming resistance to sharing sensitive information between departments can divert management attention.  Integration of truly independent businesses can create unnecessary dependencies. . Re±engineering business processes to fit the ERP system may damage competitiveness and/or divert focus from other critical activities  ERP can cost more than less integrated and/or less comprehensive solutions.

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