What is ERP?
ERP stands for Enterprise
Resource Planning, and it is an item of software that allows a business to
combine functions from many departments into one system. It is typically a type
of financial planning that takes the workload off managers and provides
information that can be used to make decisions. ERP has many advantages, and
companies that use ERP tend to achieve greater success because of it. But how
does ERP work, and what does it take to implement an ERP system? The answers to
those questions can be found below:
Why do organizations need ERP?
Large companies around the
world are realizing that due to the changing nature of business, it is
extremely hard to create and maintain custom software packages that can cater
to all their daily business requirements. Instead, they have designed ERP
packages that control all the functions of their business. These ERP packages
are used to meet the demands of aggressive cost control initiatives, and to
respond to the ever-changing ways of doing business in the modern world.
Features of ERP
ERP has a number of main features, including:
Company-wide information system
ERP allows for the facilitation of a company-wide
information system. This system covers all functional aspects of a company,
from manufacturing to distribution and human resources. ERP packages can bridge
the gap between departments and help them to work together as a cohesive whole.
Core activities
ERP also performs all of the core activities within a
company, thus increasing customer service efficiency and so improving the
company’s image.
Introduction of technology
ERP makes it easier to
introduce the latest technologies, such as Intranet and electronic funds
transfers. This means your business can keep up and even stay ahead of other
companies, and allows for quick and easy changes to occur.
Eliminates business problems
ERP can help to eliminate
business problems in most areas, including material shortages, poor customer
service, quality problems and distribution issues. ERP addresses both current
problems and also looks forward to make sure the company continually improves.
ERP Implementation
The implementation of ERP can be extremely challenging,
and it is usually a long and difficult process. This is because it requires
both technical and functional skills as well as a change in user mindsets.
Every area of the company has to be consulted, and managers with enough
knowledge of all company activities are needed to liaise with the departments. ERP
implementation is usually done in phases, because it requires less immediate
adjustment and usually gives better results. Total implementation of ERP can
take around 18 months to 2 years. The steps involved are usually split into
these four phases:
- Detailed discussions
- Design &
Parameterization
- Implementation
- Production
Detailed discussions
phase
In this phase of ERP, the project is fully planned, and
all aspects of finance planning and project set-up are discussed. Processes
within the company are evaluated, and teams are assigned.
Design and
Parameterization phase
This phase of ERP is concerned with mapping the
organization and its business processes into the ERP system, and correctly
configuring the system. The ERP system is effectively designed and built in
this phase ready for launch.
Implementation phase
The implementation phase of ERP is when system is readied
for launch, and is tested. Reports are made on its implementation, and any
features that need altering are looked at.
Production phase
The
final phase of ERP is when the system becomes fully operational Trial
productions are carried out and the system is maintained. At this point the ERP
should be working effectively throughout the whole company, and most major
problems will have been ironed out. Now that the ERP is implemented, the
company will start to see the benefits.