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Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) is a term for a broad set of activities to help a manufacturing managing the business 1). It is defined as a computer-based system to manage external and internal resources. An ERP system provides visibility for Key performance Indicators (KPI). It manages product planning, purchasing, inventories, as well the interaction with suppliers, provision of customer service and order tracking. Also an ERP system might include modules for finance and human resources aspects of the business. 2). The scope of an ERP system is to enhance the firm’s capabilities by fully utilizing capacities, schedule production, reduce inventory meet delivery due dates and to enhance the efficiency and effectiveness of the supply chain 3).

History

ERP system evolution started more than 30 years ago. The aim to integrate business processes by utilizing computer programs was first introduced in the late 1960s by developing material requirement planning (MRP). In the 1980s MRPII was developed. MRP II integrated inventory with financial transactions, sales orders with material planning and finance transactions. The establishment of modern ERP systems started in the 1990s 4).

Major differences of new ERP systems are:

  • Utilization of the client server technology
  • The possibility to run on personnel computers

Today also web-based ERP systems are available. These advantage of these systems is that no installation on the customer side is needed. The ERP web-based systems can be access via web browser.

Characteristics

General characteristics of an ERP-System 5):

  • Real time system
  • Flexibility based on the client server technology to run across various back ends through Open Data Base Connectivity (ODBC)
  • Open system architecture to interface or detach modules without affecting other modules
  • Enabeling the online connectivity to other business entities of the organization
  • Availability of collection of best business processes
  • Possibility to simulate the reality of business processes

ERP Software Modules

In general ERP systems consist of many modules. These modules are linked together and share the same database. These modules perform different functions within the organization and each module can be installed independently 6) Typical Software Modules are:

  • Accounting and Finance
  • Customer relation management
  • Human resource management
  • Manufacturing
  • Supplier relationship management
  • Supply chain management

Advantages of ERP Systems

An ERP System provides several advantages for managing the supply chain. Typical advantages of an ERP System are 7):

  • Streamlining processes and workflows
  • Covering all functional areas like manufacturing, selling and distribution, HR
  • Single integrated system
  • Reduction of processes and the costs of data entry
  • Availability of information across different departments
  • Improvement of workflow and efficiency
  • Improvement of customer base

Disadvantages of ERP Systems

Typical disadvantages of ERP-Systems are 8):

  • High investment needed to implement an ERP System
  • Time consuming implementation process. Implementation of an ERP-System might need 12-18 months
  • Involvement of the entire organization of the company during the implementation process

ERP vendors

Some of the well-known ERP vendors are:

  • Baan
  • IBM
  • IFS
  • Invensys
  • Microsoft Dynamics
  • Oracle
  • PeopleSoft
  • SAP

See also

1) , 5) , 8) Sharma, Pankaj. Enterprise Resource Planning. New Delhi: APH Publishing Corporation 2004
2) Brislen Paul and K. R. Krishnakumar. “ERP (enterprise resource planning)” 13.05.2011. http://searchsap.techtarget.com/definition/ERP
3) Wishner, Joel D, Keah-Choon Tan and G. Keong Leong. Principles of Supply Chain Management. Mason: South-Western 2009
4) Bidgoli, Hossein. The Internet encyclopedia, Volume 1. New Jersey: John Wiley & Sons Inc. 2004
6) Wishner, Joel D, Keah-Choon Tan and G. Keong Leong. Principles of Supply Chain Management. Mason: South-Western 2009.
7) Atlantic. Encyclopedia Of Information Technology. New Delhi: Atlantic Publishers and Distributors (p) Ltd. 2007.
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concepts/erp.txt · Last modified: 2014/10/19 13:38 (external edit)