Enterprise Resource Planning

ERP is an integrated computer-based system used to manage all the resources effectively used in an organization. It basically included current asset, financial resources, materials and human resources.

Purpose of ERP is to facilitate the flow of information between all function within the organization premises.

An ERP system has a centralized database and software units that provide service and communicate on local area network. The distributed design allows a business to assemble modules from different vendors without the need for the placement of multiple copies of complex and expensive computer systems in areas which will not use their full capacity.


Modules of ERP

Modules present in the ERP are as follows:

  • Financial Management - Includes creation of General ledger, cash management, accounts payable, accounts receivable, fixed assets.
  • Human Resource Management - Includes employee management in Human resources, payroll, training, time and attendance, roistering, benefits.
  • Customer Relationship Management - Includes the record of Sales and marketing, commissions, service, customer contact, call-center support.
  • Supplier Relationship Management - Includes the records of purchases, supplier contact, Bill payable.
  • Product Lifecycle Management - Costing, billing, time and expense, performance units, activity management.
  • Supply Chain Management - Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commission calculation.
  • Business Intelligence - One of the newer components of most modern midmarket ERP packages, BI shines a bright light into the heart of a company's performance. In general, an ERP suite's analytics or BI tools allow users to share and analyze the data that the ERP applications collect from across the enterprise from a unified repository. The end result is more informed decision making by everyone from executives to line managers to human-resources professionals to accountants. A variety of automated reporting and analysis tools can help streamline operations, as well as improve an organization's business performance. With greater control and visibility of data across the enterprise, business leaders can better align the company's operations with its overarching strategic goals.


Benefits of ERP

ERP implementation can reduces inventory costs, manufacturing operating costs and administrative costs. It helps in proper flow of data. There is less chance of loss of data. Instant generation of report help in taking decision on time.

Advantages of ERP implementation:

  • It improves in efficiency of information system.

  • Faster response to customers.

  • Better decision making.

  • Helps in taking decisions on time because of accurate and faster access of data.

  • Improves customer's response.

  • Facilitates strategic planning.

  • Uniform reporting according to global standards.

  • Improves productivity.

  • Inventory Reduction.

  • Lead time Reduction.

  • Reduced stock obsolescence.

  • Saves order processing time.

  • Reduces paper works.

  • Permits control of business processes.

  • Reduces delivery time.

  • Ease of order tracking.

  • Proper synchronization of finance, marketing and sales, manufacturing and human resource.


Disadvantages of ERP implementation

Along with all the benefits ERP has got disadvantages also:

  • Large investment at the initial stage.

  • Investment for the IT personnel- includes training, implementation and testing changes.

  • Re-Engineering the business processes to fit the standards prescribed by the ERP system.

  • Sometimes ERP won't provide the precise data required for the adequate calculation. It loses its reliability.

  • Once system is implemented it is very hard to switch to other application.

  • Strategic control at the corporate level becomes limited to the boundary of the ERP.

  • Resistance by departments in sharing internal information. Reduces the effectiveness of the software.



(source: management programmes)