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Enterprise resource planning (ERP)

A look at the make up and structure of a typical enterprise resource planning system for an efficient business also known as erp.

A typical modern, large business can be likened to a small country consisting of many independent states, each looking after its own affairs and managing their own resources with little concern for its neighbors affairs. The separate states of this kingdom have to communicate with each other in order that the country runs as a successful whole but, at times, it is as if each state speaks a different language and the sharing of necessary information is inefficient and laborious.

Human Resources, The Financial Department, Supply Chain Management, Stock Control, Manufacturing, Customer Relations, Project Management – each aspect of the business has its own particular needs and problems. Since the dawn of the computer age software has existed to help with all these different functions but the aim of Enterprise Resource Planning is to unite all these independent fiefdoms under a single ruler.

The Goal of ERP

Integration is the key to ERP. It aims to be the lingua franca of the business, overcoming the stumbling block of different software systems and procedures and allowing the free flow of information required for decision making across departments.

Built around a single, centralized database, an ideal ERP system is accessible by all, in a coming- together of workers, software and hardware, resulting in an efficient and streamlined production, service and delivery system, which benefits both the company and the consumer.

The Implementation of ERP

So much for the dream. Much like the Utopia of all nations of the world living together in peace and harmony, the idea is simple and beautiful but the implementation is staggeringly complex and fraught with difficulties.

In practice, the first step in implementing an ERP is to engage the services of a professional ERP consultancy. It will be their task to research the business thoroughly to identify its business requirements, to customize an ERP package to match those requirements and to provide technical support during the often traumatic transition from the old system to the ERP system.

There are many “off-the-shelf” ERP systems available which usually provide the basic modules for the ERP but which must be customized to the needs of the particular business. This is cheaper and faster than having a system custom made.

Bearing in mind that implementing an ERP system requires a fundamental change in the way different departments communicate with each other, staff training is crucial to the success of an ERP migration.

With all these steps in place a company can achieve huge benefits in data management, hardware and storage savings, operational efficiencies, energy savings and increased efficiency in customer management.

Some problems with ERP systems

The sheer complexity of the software makes it difficult and expensive to put into place and limits its use by smaller enterprises, although now there exist some cheaper “light” solutions.
Customization of the ERP system is limited and is often seen by companies as too rigid to adapt to their own working practises which have developed over many years.
The integration of all departments can lead to problems of accountability and the demarcation of new lines of responsibility. Boundaries which were previously clear-cut become less distinct, with a corresponding decline in employee morale.
If staff are not adequately trained the accuracy of data required by such a system may not be achieved with a reduction in reliability over time.
Some resistance to the sharing of sensitive information across the department boundaries can also lead to an eroding of the system’s efficiency.
Once a system is in place it is very expensive and difficult to move to a different one, should it prove to be unsuccessful or inadequate for requirements.

The Major Players in the ERP systems market

Probably the most well known ERP system is that provided by SAP, a German company founded in 1972, which had a market share of approximately 30% in 2007. Such famous international companies as General Motors, IBM, Deloitte & Touche and the Institute of Migration (IOM) all use SAP ERP software systems.

SAP is closely followed by Oracle (Bank of America, BMW, Toshiba), and Microsoft Dynamics (used by 300,000 companies world-wide). There are dozens of other providers of alternative systems, including some lower-cost packages aimed at bringing smaller companies into the ERP fold.

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