ERP stands for Enterprise Resource Planning. It refers to integration of several data sources of a given organization into a single and unified computer system. This means that a software that caters for different departments in an organization (for instance Human Resources as well as the public relations, legal department investor relations and so on) needs to be developed. Also, the various departments need to communicate with each other effectively. A soundly developed ERP system can have a significant payback if the companies invest properly.
A good ERP can increase efficiency across the board resulting in timely distribution of information, better customer relationship and consultative decision making process that takes into consideration all aspects of the organization. This is how a typical and ideal ERP system may function.
A customer places an order, and the customer services representative will feed in all the transactional information about the particular order into the system. The transactional informational will also include order history and the credit history as well. Anyone in the company who wants to access this information may do so by accessing the database.
When one department (e.g. accounting department) finishes with the transaction, the order is channeled through the ERP system to the next department in waiting. If someone wants to find out what happened to the order, or where has it reached, he or she can simply log into the ERP system and have a look. That way, customer orders are dealt with more expeditiously and with a diminished possibility of errors. It is also easier to find out which department is underperforming. For instance using an ERP system, one may find out that the sales department is selling around 10 percent of what the production department manages to produce.
ERP systems typically involve wide scope of applications, they would naturally involve making drastic changes to employee work practices and full implementation of ERP may take anything from 3 months for a small organization to several years for giant corporations. Big organizations may utilize the best practices, especially where there are industry standards or some rules to comply with, for example, GAAP, IFRS or Sarbanes Oxley Act. The procedure of capturing all the requirements of such rules or standards would be included in the ERP software package.
Some of the advantages of the ERP system are the enhanced communication mechanism within an organization, which usually results in efficiency. It is also possible to install security features in an ERP system to curb malpractices such as industrial espionage as well as harmful insider activities, which would include embezzlement.
Among the major letdowns of an ERP would include lack of strategies or policy to protect data contained in ERP as well as inadequate investment in the system to include training and maintenance. Success of the ERP is not premised on how good the software is, but also the skills and the experience of the workforce. And not all companies may have their business processes fit into the ERP system. This is a major limitation of ERP and a major cause of failure.
For more information on ERP read
What is ERP?
What is ERP?
ERP
