Introduction to ERP (Part 1)

Serial posts published with intention to share knowledge and experience about ERP follow micro-learning practice and hopefully are useful for those who would like to basically learn about ERP. These posts are compiled from various sources ranging from print and online reference sources to personal work experience. I will try my best to deliver these posts in as understandable language as possible and in the case you have any concerns or feedback, feel free to leave comments.

What is ERP?

ERP standing for Enterprise Resource Planning is simply defined as “a process of managing all resources and their use in the entire enterprise in a coordinated manner”. While ERP system is a category of business management software – typically a set of integrated applications or modules – is responsible to carry out most of business activities. In other words, ERP system can support business organizations by tracking, maintaining and optimizing business functions such as procurement of goods and services, sales and distribution, finance, accountings, human resource, manufacturing, production planning, logistics & warehouse management.

Intro to ERP 1

ERP integrates all functions into a single system and serve needs of every different department within the enterprise.

ERP breaks down business functions into business process, for example HRM, Distribution, Manufacturing and Financials. Every business, no matter which industry it belongs to, requires connected systems with efficient information flowing from one business process to another and vice versa. Hence, Business Process Integration (BPI) is designed to solve integration challenges and allow organizations to internally and externally connect systems. To be specific, BPI allows:

  • Automation of business processes
  • Integration of systems and services
  • Automation of management, operational and supporting process
  • Secureness of sharing data across different applications
BPI

The above illustration shows an overview of various business processes running in an enterprise & how they are integrated.

Why has ERP become important and popular?

Before ERP systems, it is popular that each department in an organization would have their own computer system, data and database. Unfortunately, many of these systems would not be able to communicate with one another or need to store or rewrite data to make it possible for cross computer system communication. Once an ERP system is in place, usually all aspects of an organization can work in harmony instead of every single system needing to be compatible with each other. So it definitely improve organizations’ productivity.

Additionally, thanks to the integrated systems (where all components are joined together), all departments are now able to easily and quickly share information; and the workflow between different departments can be more automated. Going far beyond being just a simple piece of software, a well-implemented and well-designed ERP system enables to create significant efficiency across business, which then results in timely business information, better customer relationships, a more cost-effective supply chain, improved internal process, etc. and, ultimately, enhancement of profitability.

Regardless of how ERP is approached, it certainly changes the way in which a company runs its business. It should be remembered that “One size does not fit all”, therefore, ERP needs to be done well and be specific for each business/ department. It is the main justification accounting for why each ERP implementation is unique and is designed to correspond to the implementer’s various business processes.

Functions of ERP & Functional areas of ERP

Typically, an ERP system can perform the following functions:

  • Support the integrated business process inside the organization.
  • Improve capital planning and help in executing organizational plans and strategies.
  • Help to speed up decision-making process over the analysis of accurate data.
  • Help to extend the business network to wider domains, expand products and services to reach more customers, suppliers, and partners.
  • Identify operational risks to improve governance.
  • Provide protection against organizational data breaches and security threats to leakage of information.
  • Make the organization adaptable to the rapid changes in the business process according to the needs.
  • Give long-term profit by providing means to increase the customer base.

ERP, a business management software, is usually a set of integrated applications used to collect, store, manage, and interpret data from many functional areas including:

  • Accounting and Finance: general ledger, financial reporting, costing, budgeting, accounts payable, accounts receivables
  • Sales and Marketing: lead tracking, sales forecasting, customer management
  • Operations: order management, inventory management, customer service
  • Manufacturing: inventory, planning
  • Human Resources: recruiting, compensation, assessment, development and training, planning
  • Business Intelligence: analyze data and convert to information

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(to be continued)

Reference

http://projectmanagement.ittoolbox.com/documents/research/

http://www.tutorialspoint.com/sap/sap_introduction.htm

ERP (Enterprise Resource Planning), Tech-faq.com, March 5, 2014

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