ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM

Introduction
In any industry, some of the demands managers face is to be cost effective. In addition to that, they
are also faced with challenges such as to analyze costs and profits on a product or consumer basis,
to be flexible to face ever altering business requirements, and to be informed of management
decision making processes and changes in ways of doing business.
However, some of the challenges holding managers back include the difficulty in attaining
accurate information, lack of applications that mimic existing business practices and bad
interfaces. When some challengers are holding a manager back, that is where Enterprise Resource
Planning (ERP) comes into play.

Enterprise Resource Planning is a software solution that tackles the needs of an organization,
taking into account the process view to meet an organization's goals while incorporating all the
functions of an organization.
Its purpose is to make easy the information flow between all business functions within the
boundaries of the organization and manage the organization's connections with its outside
stakeholders.
In a nutshell, the Enterprise Resource Planning software tries to integrate all the different
departments and functions of an organization into a single computer system to serve the various
needs of these departments.

The following diagram illustrates the differences between non-integrated systems versus an
integrated system for enterprise resource planning.
The Driving Force behind ERP

There are two main driving forces behind Enterprise Resource Planning for a business
organization.
 In a business sense, Enterprise Resource Planning ensures customer satisfaction, as it leads
to business development that is development of new areas, new products and new services.
 Also, it allows businesses to face competition for implementing Enterprise Resource
Planning, and it ensures efficient processes that push the company into top gear.
 In an IT sense: Most software’s do not meet business needs wholly and the legacy systems
today are hard to maintain. In addition, outdated hardware and software is hard to maintain.
Hence, for the above reasons, Enterprise Resource Planning is necessary for management in
today's business world. ERP is single software, which tackles problems such as material shortages,
customer service, finances management, quality issues and inventory problems. An ERP system
can be the dashboard of the modern era managers.

Ways Enterprise Systems Affect your Business

The following are ways that enterprise systems can benefit the companies that successfully
implement them:

i. Store Business Data in a Usable Format

One of the most important aspects of improving the customer experience is having data stored in
a way that can be easily analyzed. As the saying goes, “what gets measured, gets managed,” and
the same applies for business data. Some examples of data that should be stored include
customer order history, when and where they made those orders, and how long it took for those
orders to be processed. A company’s ability to quickly retrieve this type of information in order
to answer customers’ questions can go a long way toward improving customer satisfaction.

ii. Automate the Customer Service Process for Employees

Using an Enterprise Resource Planning (ERP) system can be a major benefit for companies
looking to streamline their customer service experience. ERPs allow businesses to automate their
customer service process, which helps ensure that each employee is giving customers a
consistent experience, and also ensuring that back office functions are as streamlined as possible.
Automation saves time, which can then be used towards efforts to respond to customer requests
for product information and to forecast for new products. If employees are spending less time on
tracking down a customer’s order, they can spend more time developing long-lasting, profitable
customer relationships.
 iii. Scale Available Resources (Up and Down) as Needed

The enterprise systems have ability to scale the IT capabilities of a business up or down as
needed. This means that companies that need to store additional data or require access to
additional processing power can get that excess capacity using a cloud, software as a service
(SaaS), or an Internet-based enterprise system instead of needing to invest in IT hardware. This
also means that if less IT capabilities are needed for any reason, those same services can be
scaled down. These flexible solutions allow a company to control costs while continuing to meet
their customers’ needs.

iv. Maximize the Reliability of IT Infrastructure Necessary for Customer Service

Another benefit of enterprise systems is their increased reliability compared to small-scale IT

solutions. This means that the systems will have greater “uptime” and little to no “downtime.”
Making sure IT systems are collecting data and operating properly as close to 100% of the time
as possible is an essential part of a strong and consistent customer experience.

v. Secure Customer Data

Over the past few years, number of security breaches into corporate servers has greatly
increased. Large multinational corporations have seen their supposedly secure data centers
breached, often at the cost of hundreds of millions, or even billions of dollars. Securing customer
data is not just imperative for a good customer experience; it is an essential financial priority as
well.

vi. Real-Time Access to Information

Business environments are always changing, and that means that waiting months for data is
simply no longer feasible. Having access to real-time information about a business’s operations
is a powerful feature of enterprise systems. A high level of access to data allows leadership to
assess and improve upon the company’s processes far more efficiently than if they had to wait
months before having actionable data.

vii. Reduce the Cost of Doing Business

Enterprise systems ultimately reduce the cost of running a business, which means that a company
will have more of its budget free to increase customer service capabilities or invest in other
assets that can improve the customer experience. One example is inventory control, as keeping
too much or too little inventory can have a significant effect on a business’ bottom line.

viii. Standardized Process

One of the greatest challenges in larger enterprises is producing a consistently positive customer
experience. One of the benefits that comprehensive and real-time data storage, in conjunction
with the use of ERPs, provides is the ability to ensure standardization of the customer experience
to a significantly greater degree than would otherwise be possible.

ix. Improve Supply Chain Management

Enterprise systems can help streamline supply chain management, in large part through the use
of data about where, when, and how customers order and suppliers deliver. This again
emphasizes the importance of storing business data in a usable format. Ultimately, the ability to
streamline the supply chain means that products are delivered to customers more reliably, and at
a lower cost, than would otherwise be possible.

x. Ensure Regulatory Compliance

Regulation has long been a reality of business, but over the past several years, regulations have
become increasingly stringent and enforced. One of the benefits of enterprise management
systems is that much of the data these regulations require can be collected through automated
means. Thus, enterprise systems can be used to ensure compliance with increasingly onerous
federal regulations without taking personnel away from their essential customer service
functions.

Major types of enterprise software

Currently, there are distinguished three main types of enterprise systems: customer relationships
management (CRM), enterprise resource planning (ERP), and supply chain management (SCM).
 Each of them can exist separately, out of the ES system and comprise various modules, each
addressing a specific business requirement.

Customer Relationships Management (CRM).

The use of information technology to create a cross-functional enterprise system that integrates
and automates many of the customer-serving processes in sales, marketing, and customer
services that interact with a company’s customers

The CRM system is designed to collect customer data and forecast sales and market opportunities. It
tracks all communications with clients, assists with lead management, can enhance customer service
and boost sales.
CRM usually closely integrates with the sales and marketing module. The sales module handles
workflows like inquiries, quotations, orders, and invoices. It helps boost leads, speed up the sales
cycle, and earn more profits. Marketing software helps build highly personalized marketing
campaigns, automate communications via social media, email, and advertisements based on customer
segmentation features.
Both modules provide detailed reports, be it on sales pipelines, lead sources' effectiveness, activity,
forecast, case logs, and profitability or marketing campaigns performance to measure the effectiveness
of efforts and shape plans and spend.

CRM Functions

 Managing contacts
 Data collection
 Marketing policy management
 Driving more conversions
 Workflow automation
 Improved interaction
 Quote-to-Order option
 Report generation
 Analytical tools
 Forecasting
 Integrations
 Mobile-friendliness

CRM Types

i. Analytical

Analytical CRM creates efficient processes to respond to customer desires. It provides thorough
data analytics, giving organizations insights into how to build stronger customer relations and
improve the quality of service.

 Clients’ data collection

 Data analysis
 Improved business functions
 Better client relationships
 Improving CRM effectiveness

ii. Operational

Operational CRM contacts clients, stores all the necessary information on them, helps companies
during the entire customer lifecycle. With this CRM, companies can optimize the performance of
various units.

 Acquisition of new customers

 Dealing with existing customers
 Quote-to-Order management
 Marketing campaigns:
o Email messages
o Telephone verbal communication
o Personal meet-ups
o Social media advertisement
 Forecasting
 High-quality customer support

iii. Collaborative

Collaborative CRM shares data among several departments. For example, marketing staff can
use the information from the sales about the most frequent client’s needs, and the sales
specialists can benefit from the marketers’ database.

 Information distribution among a number of units:

o Sales team
o Marketing team
o Tech team
o Customer service team

CRM process cycle

It’s one of the first concepts you learn as a sales rep to understand how a person becomes a loyal
customer.
The CRM cycle involves marketing, customer service, and sales activities. It starts with outreach
and customer acquisition and ideally leads to customer loyalty.
There are five key stages in the CRM cycle:

1. Reaching a potential customer

2. Customer acquisition
3. Conversion
4. Customer retention
5. Customer loyalty
The CRM process is that concept in action. It’s the tangible steps an organization must take to
help drive consumers through the cycle of learning about your brand and ultimately becoming
repeat customers.
According to the customer lifecycle, we know that the first step in the CRM process is
maximizing reach with leads. In practice, reach is using your CRM platform to generate brand
awareness through targeted marketing campaigns.
Every stage in the customer lifecycle corresponds with an actionable step in the CRM process.
The key is knowing what those steps are and how to execute them.

Steps in the CRM process

The five steps of the CRM process are a collaborative effort between marketing, sales, and
support departments.

i. Generate brand awareness

The first step to acquiring new customers is to introduce them to your business. The marketing
team typically takes on this task through a number of measures:

 Learning about your target audience. Marketers will conduct research to identify
their audience’s target demographics, interests, preferred channels of communication,
what messaging they respond most to, and what they care about.
  Segmenting your target audience. Audience personas are created to segment a brand’s
target audience into similar groups based on similar interests or demographics. This
helps marketers identify which types of people are most likely to become customers
and who their campaigns should target.
 Creating marketing campaigns that speak to those target demographics. Marketing
automation can be used to identify what works and what doesn’t, to create unique
campaigns for unique customer segments such as on social media or email, and to
create strategies for lead acquisition.
When it comes to completing these steps, a CRM solution is a wealth of information. The tool
can show patterns in past leads and customers to give marketing teams a clear picture of their
target audience. Beyond understanding similarities in demographics, marketers can also analyze
sales notes in their CRM technology to understand what led to conversions in the past. By
understanding what resonated with leads, marketers are better equipped to create effective
campaigns.

ii. Acquire leads

Introducing your brand to a potential customer is just the beginning of the CRM process. From
there, you have to encourage them to learn more about your business and engage with it.
Depending on how your company is structured, this lead acquisition step could be a marketing or
sales team responsibility — or both. Your marketing team, for example, might encourage
website visitors to share their email with a newsletter signup or a social media giveaway. Sales,
on the other hand, could use their CRM system to set up live chat on your site. With this feature,
your team can proactively reach out to potential customers who land on your website.

iii. Convert leads into customers

You’ve successfully engaged with your leads, and they’re interested. Now it’s time to turn those
leads into customers.
To do so, sales reps must first be skilled at identifying how interested leads are and, specifically,
whether they’re interested enough to make a purchase. A CRM system is very helpful here. The
historical data from past successful sales can be used to identify lead-qualification criteria. These
criteria can be added as “attributes” to your CRM’s lead-scoring tool to help reps identify
opportunities with the highest probability of a sale.
If leads do seem likely to make a purchase, reps must then be able to nurture them further and
build their trust enough to convert. One way to do this is for reps to send leads case studies,
white papers, and other resources that may sway their decision.
Reps should also use their CRM platform to set reminders and tasks to follow up with interested
leads. After all, studies have shown that “63% of consumers need to hear a company’s claim 3-5
times before they actually believe it.” Use your CRM’s dashboard to help you remember to
follow up to ensure that no opportunities are missed.

iv. Provide superior customer service

You’ve successfully converted your lead into a customer. Great! But the CRM process doesn’t
end when a customer converts. In order to grow as a company, you need to retain customers.
How do you keep that customer coming back? Excellent service from support.
Customer service is the biggest factor that determines a consumer’s loyalty to a brand.
Conversely, poor customer service can cost you customers and negatively impact your
reputation. Support teams must be able to deliver superior support whenever, wherever, and
however their customers expect it.
49% of customers say being able to resolve their issue quickly is the most important aspect of a
good customer service experience. With CRM tools, support agents can easily access the
historical customer information they need to resolve a ticket quickly.
57% of customers expect to have a choice of channels when reaching out to customer support.
With the right CRM, your agents have the customer information and resources they need to
resolve a customer’s issues quickly and effortlessly. This allows for a stress-free and efficient
experience for both the customer and the support agent.

v. Drive upsells

When we think of a returning customer, we imagine a shopper continually coming back to the
same business to buy the products they know and love. But there is another key way existing
customers provide value — by upgrading to more expensive products.
How do you convince customers to switch products? Personalized recommendations via email
are a great place to start. You can use your CRM to organize customers into smart lists based on
similar purchase histories. You can then create custom email templates that send relevant product
releases to entire lists of customers at once. This way, you can be sure the promotional deals or
releases you send are reaching the people most likely to buy them.

Advantages of CRM

 Provides better customer service and increases customer revenues.

 Discovers new customers.
 Cross-sells and up-sells products more effectively.
 Helps sales staff to close deals faster.
 Makes call centers more efficient.
 Simplifies marketing and sales processes.

Disadvantages of CRM

 Sometimes record loss is a major problem.

 Overhead costs.
 Giving training to employees is an issue in small organizations.

Supply Chain Management (SCM)

The SCM system streamlines your entire supply chain, ensures a smooth flow of goods from supplier
to customer, and makes these processes adjustable to market shifts. This module helps employees,
such as purchasing agents, inventory planners, warehouse managers and senior supply chain leaders,
to get detailed information and optimize inventory levels, prioritize orders, maximize on-time
shipments, avoid supply chain disruptions and identify inefficient processes.

 Procurement module
The procurement module helps assess the needs of an organization in terms of goods consumption. It
provides automation, tracking, and quotes analysis, along with invoice management, contracts, and
billing.
 Inventory management
The module enables inventory control by tracking item quantities and location, offering a complete
picture of current and incoming inventory and preventing stock-outs and delays. The module can also
compare sales trends with the available products to help a company make informed decisions,
boosting margins and increasing inventory turn.
 Warehouse management system (WMS)
The WMS primarily aims to control the movement and storage of materials within a warehouse,
including the receipt, storage and movement of goods to intermediate storage locations or to the final
customer.
 Transportation management system (TMS)
The TMS assists with the logistics within the SCM by optimizing loads and delivery routes, tracking
freight across local and global routes, along with automating previously time-consuming tasks, such
as trade compliance documentation and freight billing.

SCM consists of −
 operations management
 logistics
 procurement
 information technology
 integrated business operations

Objectives of SCM

 To decrease inventory cost by more accurately predicting demand and scheduling

production to match it.
 To reduce overall production cost by streamlining production and by improving
information flow.
 To improve customer satisfaction.
Advantages of SCM
SCM have multi-dimensional advantages −
 To the suppliers −
o Help in giving clear-cut instruction
o Online data transfer reduce paper work
 Inventory Economy −
o Low cost of handling inventory
o Low cost of stock outage by deciding optimum size of replenishment orders
o Achieve excellent logistical performance such as just in time
 Distribution Point −
o Satisfied distributor and whole seller ensure that the right products reach the right
place at right time
o Clear business processes subject to fewer errors
o Easy accounting of stock and cost of stock
 Channel Management −
o Reduce total number of transactions required to provide product assortment
o Organization is logically capable of performing customization requirements
 Financial management −
o Low cost
o Realistic analysis
 Operational performance −
o It involves delivery speed and consistency.
 External customer −
o Conformance of product and services to their requirements
o Competitive prices
o Quality and reliability
o Delivery
o After sales services
 To employees and internal customers −
o Teamwork and cooperation
o Efficient structure and system
 o Quality work
o Delivery

Enterprise Resource Planning (ERP).

ERP software helps support organizational goals by providing a cross-functional, company-wide
communication system. It allows efficient collection, storage, interpretation, and management of
information.
The core ERP modules include CRM (Customer relationships management), SCM (Supply chain
management), finance and accounting, human resources management (HRM), manufacturing, finance
and accounting, and business intelligence (BI).
We have described the CRM and SCM modules above and are going to take a closer look at the
remaining ones.
 Human Resources Management (HRM)
HRM software allows its specialists to automate administrative tasks and speed up internal processes.
Provided functions are integrated into a single module that makes general management and decision-
making easier. It features standard HRM tools as a timesheet, database for employee records,
recruitment, and employee evaluations.
The module may also include performance reviews and payroll systems, and the last is usually
integrated with the financial module to manage wages, compensation, and travel expenses.

 Manufacturing
The key functionalities of this module are developed to help businesses make manufacturing more
efficient through product planning, materials sourcing, daily production monitoring, and product
forecasting. The module is tightly integrated with SCM, especially in areas like product planning and
inventory control.

 Finance and Accounting

This module keeps track of the organization’s finances and helps automate tasks related to billing
tasks, account reconciliation, vendor payments, and others. Its key features include tracking accounts
payable (AP) and accounts receivable (AR) and managing the general ledger. Financial planning and
analysis data help prepare key reports such as Profit and Loss (P&L) statements.
The finance module also shares information with other modules, such as manufacturing, procurement,
and others, allowing the generation of financial reports for different departments and business units.

 Business Intelligence (BI)

BI provides predictive analytics in a format of various graphs, charts, and tables to optimize work
performance and give executives actionable insights to help make better organization’s decisions. The
system collects and analyzes data from various sources, like marketing, sales, manufacturing, HR,
etc., using data mining, benchmarking, and advanced statistical algorithms.

Key Business Benefits of ERP Software

i. Enhanced Business Reporting:

 Better reporting tools with real-time information
 A single source of truth – one integrated database for all business processes
ii. Better customer service:
 Better access to customer information
 Faster response times
 Improved on-time delivery
 Improved order accuracy
iii. Improved Inventory Costs:
 Only carry as much inventory as needed, avoid these common issues
 Too much inventory, and higher overhead costs
 Too little inventory, and longer customer fulfillment times
iv. Boosted Cash Flow:
 Better invoicing and better collections tools to bring cash in faster
 Faster cash means more cash on-hand for the business
v. Cost Savings:
 Improved inventory planning
 Better procurement management
 Better customer service
  Improved vendor relationship management
vi. Better Data & Cloud Security:
 Dedicated security resources
 Avoid installing malicious software
 Data distributed across multiple servers
vii. Business Process Improvements:
 Automate manual or routine tasks
 Implement smarter workflows
 Gain efficiency
viii. Supply Chain Management:
 Effective demand forecasting and lean inventory
 Reduce production bottlenecks
 Transparency through the business

Disadvantages of ERP
i. Costs of an ERP Software
 Third-party software add-ins
 Implementation costs
 Maintenance
 Initial and continuous training
ii. Complex Data Conversion
 Developing a solid data conversion strategy can be difficult
 You have to define, examine and analyze data sources
 Bad data conversion will cause delays and increased costs
iii. Requires thorough training
 Training needs to cover all of the ERP system’s features.
 ERP training sessions need to be in line with business processes
 IT users need to be trained for the technical aspects of the ERP System
ERP projects are an investment of time and money and the most successful ERP software
implementations require:

 Alignment between the business and IT

 Executive sponsorship and support
 Internal team leaders
 Trusted external partners (consulting and software vendors)

ERP software is like any business technology – the tool on its own doesn’t cause failure or
success. The business environment, leadership, and end-users determine the ROI of an ERP
system – along with the project planning, methodology, and implementation.
What can cause an ERP implementation failure?

 Data conversion
 One of the biggest issues during an ERP project is data conversion – moving data
from the old system and mapping it into the new ERP.
 Integrations
 Early in the project, you need to start thinking about what other systems need to
integrate with your ERP system and have a solid plan for integrations.
 People
 An executive needs to be involved in the ERP project, and other key business
leaders need to be included. Having a communication plan is also key.
 Training
 Training needs to be an integral part of the ERP project. Internal teams and end-
users have to be comfortable with the new software.
 Project planning
 Planning is crucial to ERP implementation success. Following a methodology is
also fundamental to avoiding failure.

Assignment
Discuss the trends in ERP