What is an ERP system? A lot more than many people realize. We also may also wish to ask what is ERP software? There are important distinctions to be made, so let us explore. Enterprise Resource Planning and the systems that define its form have been around for a good spell. One can trace its roots back to the 1960s, though it did not begin to gain meaningful traction until the 1990s. This business quality improvment system has a lot to do with integration of information by managing the flow of data across an entire organization. This results in a more efficient, streamlined and cohesive set of business units such as business finance, accounting, purchasing and distribution, material handling andinventory management, service and sales, marketing, strategic business planning and development, manufacturing operations, quality management systems, project management, training and human resource and so forth. Once implementation is complete, an integrated business enterprise focused database emerges along with servicable application modules which facilitates automation and enhanced information sharing in everyday business activity. Effective ERP systems implementation is an enabler which drives process standardization, storing information and recalling that database when it is required in a real time environment.
The business process inefficiency usually prompts organizations to start considering the implementation of ERP solutions because it promises the obvious advantages of business process automation, enhanced operational efficiencies and easier accessibility of information. ERP system implementation, if one choosse appropriate ERP software and follows the best practice of implementation process, definitely will improved the system by which acompany executes its day by day processes.
Organizations think about purchasing an ERP system when they deal with a number of complex and interrelated business issues. Most of them expect to get business advantages through ERP implementation, such as :
- Achieving company’s financial goals as a result of productivity gains as well as efficiency resulting from business process automation.
- Enable to track order from acceptance through fulfillment
- Managing and streamlining the large-scale the company’s operational processes, that may have raised in complexity due to acquisitions in the recent past or current significant organic growth, and also acquiring multi-currency, multi-office, multi-geography support
- Capability to track revenue from invoice through cash receipt
- Obtaining the benefits of improved information management through the enhanced information accessibility, reduced data duplication and also better forecasting features which will optimize inventory.
In fact, many organizations fail in implementing ERP system because they don’t know what exactly an ERP system is. Because of this insufficient information, they may struggle with establishing the required preparation properly. The following is some things about ERP system you should take into consideration before launch.
1. Not an Ideal Fit: Never will you find an ERP software package that can meet all the needs of a company. Some level of customization is not unusal and in these cases configuration software management is the solution.
2. Modules vs. suite : Most companies will only roll out a couple of modules as needed or at least until they gain a better understanding of the integration of the modules into their organization.
3. Mix and match modules: You will find many ERP system modules and functionalities across different ERP module packages. Look for at least three types of categories which include sector-specific, what can also be described as cross-industry and then ERP system modules.
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4. Add-on features / functionalities drive ERP: As with any complex software business soluitons the commoditization of core ERP features which would inlcude add-on features or other cutomized applications that meet the needs of various customers are becoming an important delivery for ERP vendors and drives the business marketplace.
5. Options For On-Premise Exist: ERP implementation has moved from the traditonal rollout and to a greater reliance on open source ERP and also on-demand / SaaS ERP as appropriate ERP deliverables to the customer. Open source ERP systems have yet to be fully realized in the marketplace , while SaaS ERP systems as it applies to HCM and CRM, are becoming more deeply rooted.
6. Pricing models: Pricing model for a fully integrated ERP system is generally Licensed-based pricing. In such cases the software expenses are paid up front. Many options consisting of user-based (concurrent user and named user) pricing, package-based pricing, location-based and / or location based are part of the overall menu. One more pricing model-subscription-based pricing is typically used for on-demand ERP systems. In these cases, service fees are met periodically such as on a monthly basis.
7. Return On Investment (ROI) expectations: Do not expect for the ROI to be fully realized in the early stages after the ERP solutions is implemented. ROI is recognized from process enhancements and not only from ERP software. When ERP is fully function, the realignment of business processes in any company is impacted by numerous factors and given the sheer complexity of this process, patience is best exercised.
8. Customization or configuration: The beauty of an ERP system is that it can be configured to perform in accordance with the specific needs of the organization. Additionally, the client may choose to change the soruce code or develop modifications to the software in order to meet its requirments. Though one should exercise caution regading too many modifications given the sheer complexity of the system.
9. ERP Implementation Tactics: An ERP implementation phase is critical and therefor requires expertise in order to avoid flawed migration of data or conversion and insufficient support of post implementation can cause even feature-rich software perform poorly. A comprehensive implementation strategy is key and that also includes post launch analyses to ensure their is congruency among business units.
10. Evaluate Cost components: Costing out the entire project can be a slipperly slope as fees for standard license and implementation services are very difficult to accurately projecct in some cases, particularly if software modifcations are needed or issues with the data migration occur, not to mention the overall cost of training. This calls for a greater level of coordination and planning to avoid surprises of the kind that alienate the client.
The ERP systems evolution tightly followed substantial innovations in the field of computer software and hardware.
In 1960s, inventory control was the focus of manufacturing systems. There needed to be a way of managing the inherent complexities of these elaborate systems. Therefore, inventory control/. The concept MRP or Material Requirements Planning systems which is a more exact way of describing the idea, evolved in the 1970s and primarily involved planning product or parts requirements. The process took a turn down the path to morph into what was characterized as Manufacturing Resource Planning (MRP II as it goes by) and this unfolded in the 1980s. The MRP II was a natural extension of MRP with a focus manufacturing process optimization by synchronizing production requirements with material delivery. MRP II involved departments such as accouonting, inventory control, engineering, distribution management, shop floor, marketing project management and human resources.
The following diagram summarize the ERP system evolution.
Resource : Focus Research
ERP definition
MRP system
Top ERP vendors
How to choose the best ERP for your company
ERP system implementation best practice
An anatomy of typical ERP implementation failure
Should I Implement Enterprise Resource Planning ?
Erp systems are sooo nice – They are really good for saving time!
Thankyou SO much for clearing up some of my issues with ERP! I am supposed to research it for my company and was getting confused about a lot of things.
A lovely guide to ERP systems and the software within them – five stars *****
I agree with both of the comments above me – This is a really nice article! It is perfect for someone just starting out with ERP
This has been really heplful in my research on erp systems and software – Especially the diagram.
I agree with your point on ROI. It’s very unusual to see profits straightaway.
Your point on implementation is very nice… You need to implement ERP correctly…
Buying the wrong modules can be an expensive mistake…
I usually get someone to customise the source code for me, instead of hiring someone else just to do that job…
I prefer to use open source ERP as it is often cheaper than getting someone to develop it for you.
Very informative article. Nowadays, in software market SaaS software providers are gaining the major market share. Even some software vendors are more focusing on online software solutions. To illustrate, our company has a subscription to WorkForceTrack that offers simple ERP solution consisting of such tools like CRM, HRM, Accounting and Finance, Project Management, Ecommerce and they have full Google integration. What’s more, they charge fair prices and do excellent customer customization.
nice & clear information about ERP.
hi my freand and tks for your guide. i realy like to grow up my Knowledge about every thing that relate to manageing- because i work in a computer company in iran and this company have a good E.R.P sw but i am not really good for this since if u have every thing that can help me plz guide me.
tks and best regard
This is one of the crucial requirement to work as IT Executive in factory in my country
ERP systems are great!
am going to do a research thesis for M.Phil, so could u pls suggest some topics related to erp
Perhaps you can consider this topic :
- The driving, as well as the barrier for organization in implementing ERP
- The challenge of ERP implementation
- Study case of ERP implementation (success and fail implementation)
- The best practice of ERP implementation, starting from vendor (software) selection until post implementation
I wish other visitors can add the topic list.
Really the ERP systems are boon to the industry.
The writeup on ERS is very informative especially for new comers who want to have good understanding of the subject
You have a typo in your advertisement which causes intent of sentence to be reversed in meaning:
“organization decides to impalement ERP solution”
“impalement” should be “implement”
Hi, Steve..
Thank you soooooo much for correcting the mistake..
I am looking for and have found a job that I am interested in but has no expeerience in ERP, it sounds like a wonderful system, do you provide training for individuals or to employees of companies that have incorporate the ERP into their operations
This is relatively informative, but poorly edited. With all the typos I find the information less trustworthy.
You have some spelling errors.
“soruce” code – should be “source” code.
“choosse” appropriate ERP software – should be “chooses” appropriate ERP software.
“therefor” requires – should be “therefore” requires.
to ensure “their” is – should be “there” is.
exercise caution “regading” – should be “regarding”
“acompany” – should be “a company”
Sorry to pick, but doesn’t your system have a “splee” checker?
We have been building a software system to streamline our processes and get better and faster reporting. A mini ERP solution. The cost of internal development of the solution where I can match it with our business process is being paid back with substantial business improvements in our efficiency.
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