Enterprise Resource Planning (ERP)
What is Enterprise Resource Planning
(ERP)
Enterprise Resource Planning (ERP) is an end
to end fully integrated e-enabled system that
encompasses all basic functions of an organization.
It is a system designed to chart out optimal utilization
of an enterprise’s resources. It uses both
computer software and hardware.
ERP systems can be used in manufacturing, inventory,
distribution, logistics or accounting for a company.
ERP can also assist in activities like sales,
marketing, quality control and human resource
management.
ICT enablers like ERP enhance productivity and
operational efficiency. Use of such systems reduces
transaction and coordination costs. It brings
about standardization and has low maintenance
compared to other stand alone applications. ERP
enables companies to transform its business processes
to best practices.
ERP requires skilled workforce for its effective
management and can be expensive to install. However,
customized ERP solutions to match the need and
financial capacity of the firms would help in
increasing its acceptability among medium and
small enterprises.
How an ERP works
Typically in an organization, each department,
be it finance, human resources or warehouse has
its own computer system that does not effectively
interface with each other. An ERP attempts to
integrate all departments and functions across
a company with a single unified software program.
Let us take the example of tracking a customer
order both pre and post ERP installation. In a
typical organization, the paper based order moves
from department to department keyed into respective
computer departments. This journey causes delays
and errors. At any given point of time the finance
department for example wouldn’t know the
status of the order.
In the post ERP scenario, where a single software
program replaces stand-alone departmental systems,
ERP takes a customer order and provides a software
roadmap for automating the process involved in
fulfilling the order. When a customer service
representative for instance enters a customer
order into an ERP system, he will have all the
necessary information to complete the order. For
example, the customer’s credit rating and
order history from the finance module, the company’s
inventory levels from the warehouse module and
the shipping dock’s trucking schedule from
the logistics module. The entire order process
moves speedily through the organization. Personnel
from different departments can access the same
information and update it. They can track down
the order at any point by logging onto the ERP
system. This reduces cost and time overruns, brings
in overall efficiency, minimizing errors and helps
in serving the customers faster.
ERP thus can be used for other business processes
to optimize resources.
ERP in India is gaining popularity among corporates.
For effective implementation ERP should be done
on a modular basis, should be grounded in reality
and should be a complete package in its coverage.
Most MSMEs in the manufacturing sector due to
lack of awareness, technical know how and low
monetary resources continue to use inflexible,
stand-alone applications. But they are fast realizing
the necessity for developing intra and inter networks
and leveraging IT applications for achieving reduction
in costs and product development time.
There is tremendous scope for adoption of ERP
among MSMEs. In today’s times of intense
competition, as large corporations are streamlining
their business processes, they would require MSMEs
to streamline and upgrade their operations to
facilitate integration with supply chain systems
to gain competitive advantage.
ERP should be viewed not as an expense but an
investment that will reap benefits in terms of
higher sales, profitability and better customer
services.
Some companies have invested in IT applications
for logistics and supply chain management using
computer software, hardware ensuring connectivity
through Electronic Data Interchange, Bar Code
System, ERP, Intranet and Extranet as follows:
Primers for ERP implementers
Successful ERP implementation would involve what?
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