What is ERP? Why ERP? Does can packaged software fit business needs well? Do we get best business practices through ERP? How are ERP & BPR related? Should BPR & ERP be taken in any order? What are the typical modules of ERP? A quick summary of sales module of typical ERP software A quick summary of production planning A quick summary of materials management A quick summary of the financial module A quick summary of control module A quick summary of project module A quick summary of quality module A quick summary of human resources module BACK TO TOP What is ERP? ERP is an acronym that stands for Enterprise Resource Planning. ERP is package software solution that addresses the enterprise needs of an organization by tightly integrating the various functions of an organization using a process view of the organization. It is a package software and not a custom made software for a specific firm. It understands the needs of any organization within a specific industry segment. Many of the processes implemented in an ERP software are core processes such as order processing, order fulfillment, shipping, invoicing, BOM processing, purchase order processing, preparation of Balance Sheet, Profit and Loss statement etc., that are common to all industry segments. That is the reason why the package software solution works so well. The firm specific needs are met through a process of customization. ERP addresses not merely the needs of a single function such as finance, marketing, production or HR. Rather it addresses the entire needs of an enterprise that cuts across these functions to meaningfully execute any of the core processes. ERP integrates the functional modules tightly. It is not merely the import and export of data across the functional modules. The integration ensures that the logic of a process that cuts across the function is captured genuinely. This in turn implies that data once entered in any of the functional modules (whichever of the module owns the data) is made available to every other module that needs this data. This leads to significant improvements by way of improved consistency and integrity of data. ERP users the process view of the organization in the place of function view which dominated the enterprise software before the advent of ERP. The process view provides a much better insight into the organizational systems and procedures and also breaks the "kingdoms" that work at cross-purposes in many organizations. To implement such a demanding software one needs high performance computing, high availability systems, large, high speed high availability on line storage and high speed, high reliable net works, all at affordable cost. Though many ERP software vendors have been around for more than two decades, ERP software started to make major inroads into the corporate world only in the last couple of years. Interestingly Indian corporate houses are taking the ERP route exceptionally fast, even by world standards in the past two years. The investments on a complete ERP implementation for a Rs. 100+ core corporation would easily run into Rs 10+ crores. ERP is the only software whose deployment decisions are made in the corporate boardrooms and not by EDP / MIS departments. ERP software today represents possibly the single most expensive piece of general-purpose software. BACK TO TOP Why ERP? Corporations go for ERP either to solve the existing problems or to explore new opportunities. I call these two approaches as negative & positive approach respectively. One aspect of the negative approach forces some corporations to go for ERP to solve their Y2K problem. This is particularly true of those corporations that are heavily dependent on legacy systems running on old main frames. The second aspect of the negative approach is to get over the problems of islands of heterogeneous and incompatible information systems that were developed over the past several years in many organizations. Functional IS modules representing areas such as Finance, Marketing, HR, and Production in these organizations would be running on diverse hardware and software platforms leading to nearly insurmountable problems of reconciling data locked up among the diverse systems. From a positive perspective many organization look at the great opportunity provided by ERP software that lead to almost instant access of transactional information across the corporation. Such an information rich scenario permits organization to reduce inventory across multiple units/ departments/ plants; reduce cycle times from weeks to hours; and improve customer satisfaction by orders of magnitude. All these translate to increased profitability or increase in market share and in turn much larger market capitalization. However ERP is only means and not an end by itself. ERP provides an opportunity for a corporation to operate as an agile entity to improve production / operation, customer service and customer satisfaction. The creative ingenuity of an organization to drive towards these corporate goals determines the extent of success an ERP implementation can deliver. BACK TO TOP Does can packaged software fit business needs well? Many IS professionals perceive ERP as a paradox. "How can a software company located in Germany, Netherlands or U.S.A understand the needs of my organization operating in Bangalore?" is the question they generally ask. Many of them feel that custom software should work far better than packaged software. For many of them holding this view, the success of ERP is a paradox. What they miss out is the point that the core processes of most organizations are by and large, the same. Thanks to globalization, there has been a significant amount of uniformity, standardization and simplification of the core processes across the industry. Some of the technologies such as EDI have even standardized the contents of critical documents, such as shipping and purchase orders. Standard processes and procedures, for example, Letter of Credit, have seen a great level of standardization to suit International Trade. These developments permit companies in Germany and Netherlands to develop the world-class software that can be profitably used by a corporation in Bangalore also. By pumping in billions of dollars in understanding the business processed used by thousands of corporations worldwide, the ERP software vendors also bring in world-class practices to any company that implements the ERP software. In a similar vein, large ERP software vendors such as SAP & BaaN are also able to employ and retain thousands of software professionals who can continuously improve their ERP software product. No individual end user company can afford such large pool of software professionals. This is the secret of success of ERP. A possible analogy may drive home the point better. An average Indian has already realized the fact that a ready-made garment made using sophisticated technology can indeed fit him/her better than a street corner tailor. The highly sophisticated technology of Computer Aided Design to model human anatomy and Computer Aided Manufacturing tools to cut complex contours effortlessly at high speed, explain the better fit. Similar is the case of packaged software. BACK TO TOP Do we get best business practices through ERP? The answer to this question is Yes and No. ERP software like SAP R/3 or RAMCO Marshal has the benefit of understanding the best practices followed in thousands of corporations worldwide, where the particular ERP software has been implemented. In a sense, ERP software embeds these best practices inside their software. This explains the Yes part of the answer. One reason why end users pay an exorbitant amount to buy ERP software is the fact that ERP is not just a piece of "shrink wrapped" software. The embedded business processes inside provide the real value to the ERP software. So, ERP can bring "best of the breed" practices to any organization. However, the onus of profiting through these best practices entirely lies on the end users. An organization suffering from " Not invented here" syndrome may do too much over customization and build into ERP implementation the archaic practices followed for decades in a specific company. This in turn may deprive the benefits of the best practices to that company. This explains the No part of the answer. {For core Business Processes it may be the best to follow the best business practices of the ERP vendor, but there is always a percentage of customization required for any ERP implementation. The ability of the ERP to extend easily is a critical factor to evaluate.} BACK TO TOP How are ERP & BPR related? BPR as an acronym stands for Business Process Reengineering. It used to be a buzzword until a few years ago. Overzealous BPR pundits caused so much havoc through job cuts, it is a controversial subject today in many countries. An organization can go for standalone BPR or they can choose ERP. Since ERP anyway comes bundled with several of the best practices, a well implemented ERP exercise leads to some amount of BPR, though the reengineering effort may not be full-blown. However, reengineering through ERP, generally termed package enabled process reengineering (PEPR) leads to less drastic change in an organization. Such package enabled reengineering through ERP has been received much better by the end users rather than stand alone BPR in many companies around the world. BACK TO TOP Should BPR & ERP be taken in any order? There is no easy algorithm that can give a simple answer. A BPR exercise preceding the ERP implementation can help the organization significantly. It may also increase a combined time of implementing BPR and ERP significantly. There is also a risk that a particular ERP software selected later may not be able to implement the reengineered processes. A simultaneous BPR and ERP exercise saves time and also minimizes the risk of sequential implementation of BPR followed by ERP. One rarely comes across the instance where BPR is followed by ERP. As such the ordering of ERP & BPR must be based on the needs of a specific organization. BACK TO TOP What are the typical modules of ERP? Typical Modules of ERP include sales (sales forecasting, customer prospecting, customer follow-up, support for telemarketing, database marketing), order processing (inquiry handling, order taking) shipping, transportation, invoicing, finance (G/L, AR, AP), asset management, cost accounting, financial accounting, manufacturing and materials management. Optionally quality project, warehouse, continuos production and other modules are also present in different ERP software. Industry specific modules to cater to hospitals, retail, banking, insurance, oil, shipping and transportation are also available from some vendors. BACK TO TOP A quick summary of sales module of typical ERP software A quick summary of production planning A quick summary of materials management A quick summary of financials BACK TO TOP A quick summary of control module A quick summary of project module A quick summary of quality module A quick summary of human resources module BACK TO TOP