Enterprise Resource Planning

• Enterprise resource planning (ERP) refers to a type of software that

organizations use to manage day-to-day business activities such
as accounting, procurement, project management, risk management and
compliance, and supply chain operations.
• A complete ERP suite also includes enterprise performance management,
software that helps plan, budget, predict, and report on an organization’s
financial results.
• ERP systems tie together a multitude of business processes and enable the flow
of data between them. By collecting an organization’s shared transactional data
from multiple sources, ERP systems eliminate data duplication and provide data
integrity with a single source of truth.
• Today, ERP systems are critical for managing thousands of businesses of all sizes
and in all industries. To these companies, ERP is as indispensable as the
electricity that keeps the lights on.
• ERP systems will also provide transparency into your complete business process
by tracking all aspects of production, logistics, and financials. These integrated
systems act as a business's central hub for end-to-end workflow and data,
allowing a variety of departments to access.
ERP Software Selection Myths
• But before we share the key advantages and disadvantages of ERP systems,
we‘d like to dispel some myths around ERP. As we‘ve found in our discussions
with technology buyers, selecting and implementing a new ERP solution can
confound even the most experienced IT professional. It‘s this confusion that
leads to many of the myths and fallacies surrounding ERP software selection.

The Cost of an ERP Should be the Biggest Factor

ERP systems will ideally last for at least five years. Many companies use their
systems for much longer. Because of this, it might be more cost effective to buy a
comprehensive system with a bigger price tag than to ―save‖ money on less
expensive software that doesn‘t fit your company‘s needs.
Weigh what each ERP solution can offer against the goals you have set for your
company. Your return on investment (ROI) will depend on the overall value
derived from your ERP over time. The best ERP system is one that meets your
anticipated requirements now and in the future — and it may not be the cheapest
option.
ERP Selection Should be Entirely Managed by the IT Department
Your IT team will most likely spend the most time conducting research and
performing the implementation, but your entire company will reap the benefits of
an ERP system. It‘s imperative that your ERP selection team includes stakeholders
from your key business operations in addition to your IT department. For example,
you‘ll want to get feedback from those in charge of your company‘s most important
functions. They‘ll have the insight into how the software should support and
enhance current operations.
In addition, make sure to speak to the personnel who will be using the software on
a daily basis. Their needs and wants should be a top concern, as their ability to use
the system will ultimately decide if it‘s a success or a failure.
ERP Selection Should be Entirely Managed by Consultants
While many people believe ERP implementation can be managed solely by their IT
staff, there might be just as many who don‘t consider their input at all. Some
companies hesitate to incorporate their IT team, as they‘re already taxed to the
limit managing day-to-day operations. But that doesn‘t mean consultants are a
replacement for your internal teams who work with your existing systems on a daily
basis.
A consultant will likely have a better understanding of the software and even your
industry, but your own IT team plays a critical role by applying their knowledge of
your company to ensure a successful ERP selection project. Your IT team will have a
better idea of what kind of system is needed in order to provide the security and
scalability required by your business. They‘ll also have first-hand experience
managing any systems you already use and wish to integrate into your ERP.

The More ERP Functionality, the Better

To understand why going for the most ERP features might not be your best
selection strategy, you want to consider two important factors: what makes an ERP
software vendor successful and what drives success for your company. A software
company can thrive by making software that meets the needs of their target market
without overwhelming them with unneeded functionality.
Likewise, many organizations can become more successful by simply streamlining
operations. The takeaway is not to be dazzled by software that has countless
capabilities. Instead, focus on the solution that addresses each of your business‘s
actual needs. Choosing software that can do a lot of what you don‘t need is never
the right solution.
The Research Phase Ends When You Contact a Vendor
Your ERP software choice may seem like the perfect fit on paper, but will it meet
your needs in the real world? It‘s always a good idea to get live demonstrations of
your critical processes or a software trial before signing any long-term deal.
Unfortunately, failed ERP implementations and buyer remorse are far too common.
The cost to your business in wasted resources and lost opportunity can be
devastating. Ask each ERP vendor on your shortlist to provide a reasonable way for
you to experience the software as well as the type of support you can expect.
Buying ERP software means having a long-term relationship with the vendor,
including their customer service reps and technicians. It‘s a good idea to give
yourself time to observe and assess the relationships that come with your new
software.
Advantages of Enterprise Resource Planning:
Enterprise resource planning systems are an asset for many organizations. They
make your business run smoother by unifying and protecting your information,
automating processes, and producing easy-to-understand trends. With these and
many more capabilities, the benefits of ERP systems in an organization make your
day-to-day operations and long-term planning more efficient. Below are several of
the biggest ERP benefits when implementing this type of software:
Focused IT Costs:
Although ERP is often a large investment, it can unify your IT costs and improve
efficiency. Instead of spending resources on multiple systems that all need
dedicated staff, infrastructure, support teams and licenses; you can focus all these
costs into one ERP. Additionally, if you spend more on disparate systems than you
would on a centralized ERP, you might even save on IT costs overall. Using a single
system also reduces training requirements for end-users, since they only need to
learn one system rather than interacting with numerous individual applications.
While an ERP can include numerous functional areas such as customer resource
management (CRM), accounting, HR management and supply chain management,
the design of the system is to be modular. This lets you use only the pieces that
align to your needs. At the core, an ERP is the glue that binds other systems and
their data together. Some ERPs let you integrate numerous third-party systems into
a unified whole.
Total Visibility: This benefit of ERP is one of the biggest selling points for the
software. ERP allows total access to every important process in your business by
making data from every department easily accessible to you and your senior
management. For example, you can monitor inventory levels on a daily basis,
including future consignments that are yet to be received and inventory currently in
transit. By knowing precisely where you stand regarding inventory levels, you can
control your working capital on a more precise level.
In addition, the availability of all of your company‘s information in a centralized location
allows for increased collaboration and more streamlined completion of tasks. This
complete visibility provides more coherent workflows and allows inter-departmental
processes to be easily tracked with maximum efficiency. All of this makes it possible to
make quick decisions in confidence, as you can rest assured that you‘re seeing the full,
complete picture at any given moment.
Improved Reporting and Planning:
Along with improved visibility, better insight is a major advantage of ERP. Implementing
an ERP suite across departments means your organization has a single, unified reporting
system for every process. By having a single source of truth, an ERP system can readily
generate useful reports and analytics at any time. This software gives you the ability to
analyze and compare functions across departments, without the hassle of multiple
spreadsheets and emails. One of the most popular reports involves finances. Standard
financial reports such as income and cash flow statements generally are built-in, and
custom reports can be quickly generated without IT intervention.
In addition to this, many ERP vendors also offer business intelligence services with their
software. This BI functionality allows businesses to gain a deeper level of analytical
insight into their operations. functionality allows businesses to gain a deeper level of
analytical insight into their operations. These insights aid in corporate planning by
identifying both operational strengths and problem areas that need improvement.
Providing this kind of detailed view into a company‘s data gives ERP users the ability to
make better-informed decisions based on trends and metrics.
Complete Customization:
One of the biggest advantages of enterprise resource planning software in the
present day is its modular makeup. Most ERP vendors offer several applications
that can be implemented together according to business needs. Barring a few
exceptions, each application is designed to be able to stand alone or integrate with
the larger suite. This way your company can pick and choose which components
work best and can leave out what you don‘t need.
Another aspect of customization involves how the software is implemented. The
two major deployments are on-premise and through the cloud. With an on-
premise system, physical software must be purchased and installed on all company
computers and servers. With a cloud based system, the entire software bundle is
handled completely off-site by an ERP provider.
Improved Efficiency: Along with reduced IT and training costs, an ERP can reduce
the time and effort required by your workforce to carry out their daily activities.
Properly implemented, an ERP can greatly reduce or eliminate repetitive manual
processes, thus freeing up team members to focus on revenue-affecting tasks. The
system likewise can aid in the adoption and enforcement of industry best-practice
processes, aligning all actions across the enterprise.
Customer Service:
• Your company‘s clients also receive ERP system benefits, even if they don‘t know
it. Because client information is centralized and streamlined, your sales team will
be able to focus on building and maintaining customer relationships instead of
maintaining spreadsheets. At the end of the day, the number one thing a
business should be concerned about is customer acquisition and retention.
Through the end-to-end tracking and insight offered by an ERP, you can provide
better customer interaction from targeted marketing all the way through late-
phase customer service. Most up-to-date ERP suites also support ecommerce
integration. This means your business will be better able to handle web-based
order processing and client interactions.
Data Security and Quality:
• One of the biggest advantages of an ERP system is data security. After all, at the
heart of the ERP concept is data. Sharing data across functional silos such as
customer service, sales, marketing and business development enhances
collaboration throughout a company. The other side to widespread data access
is controlling who can see and edit the information. ERP solutions have intrinsic
controls to ensure the security of your data.
• Further, what helps ERPs maintain a high level of data security is that they
provide a single input system. Merging information from multiple systems often
causes conflicts between sources, but having a single repository of information
helps improve the accuracy, consistency and security of your company‘s data.
• Improved Collaboration and Workflows: Collaboration is an essential part of a
thriving business. But more often than not, companies find their teams working
in silos simply because collaboration requires more time and effort. But ERP
makes collaboration a piece of cake. An ERP platform streamlines the process of
collaborating with others by providing employees with access to the data they
need when they need it. They do this by providing an interdepartmental
database, where information from each department is funneled into one
centralized location.
• This allows for real-time project updates and better communication across the
whole company. With an ERP system in place, every employee has on-demand
access to the entire company‘s wealth of data, which allows them to see the big
picture. In turn, this gives your employees the tools they need to make proactive
decisions while making them feel more valued. The net effect on your business
is increased efficiency and reduced operational costs associated with manual
data tracking, as well as higher employee engagement.
• Standardized Business Processes: Most ERP systems are developed according to
industry best practices. These tried-and-true processes bring major benefits to
the table for businesses of all sizes. It also allows businesses to standardize their
own processes and systems, which further enhances productivity and efficiency.
• These processes deliver consistent results that allow you to continually improve
the way in which you operate your organization. And because many processes
are automated, errors and costs are greatly reduced. As a result, there‘s less
friction and improved synergy between departments.
• Facilitated Regulatory Compliance: One of the most difficult ongoing tasks for
businesses is meeting compliance requirements. Maintaining perfect accuracy
within your financial records isn‘t exactly easy, but needs to be done
nevertheless. ERPs aid in regulatory compliance by virtue of secure and
validated data, combined with built-in reports. These reports can also be
automated to reduce the cost of continual audits.
• Improved Supply Chain Management: For companies that deal with the moving
of physical inventory and production, an ERP system bolsters supply chain
management in a variety of ways. This improvement results in shortened lead
times, more on-time deliveries and many other benefits that enhance the
overall operation and success of your business.
• Through a well designed ERP platform, your supply chain can become better and
more responsive via improved demand forecasting, inventory management,
procurement and more. A streamlined supply chain also facilitates
manufacturing innovations, which can help you reduce costs and develop
exciting new products that give your business the competitive edge it needs to
stay ahead.
• In addition, an ERP can dramatically improve profitability and reduce overages
involving inventory and production. Unified insight into sales, production and
delivery schedules permit stock levels to be optimized rather than relying on
―best guess estimates for upcoming volumes.
Disadvantages of Enterprise Resource Planning:
With so many benefits of enterprise resource planning systems, you might be ready
to start comparing systems. But it‘s equally as important to understand the
drawbacks and risks of this type of software to make sure ERP is the right system for
your business. The following are the main ERP disadvantages buyers might
experience when implementing a new system:
• The cost of the ERP Software. If you choose to invest in a traditional ERP, you
could easily end up spending a single license. For many, this is by far the biggest
disadvantage to ERP software. The upfront cost of the software alone can be
prohibitively high, especially for small-to-medium-sized businesses. SMBs can
avoid the upfront costs with a cloud solution, which typically can be paid for on
a monthly basis. However, this means users only have access to the system as
long as the monthly payments continue, which can make a cloud based solution
the slightly more expensive option over a product‘s lifetime.
• The cost of implementation and maintenance. While the software alone is a
major investment, the implementation process can cost nearly four times as
much. Businesses must take into account the cost of manpower and time
necessary for a successful deployment. You may need to hire additional IT staff,
ERP consultants, software training specialists, etc. Vendors offering traditional
systems typically charge a fee for maintenance on top of the license fee.
Moreover, you might need to invest in new hardware to properly support your
ERP, such as servers and compatible mobile devices. And again, you‘ll need to
designate individuals to maintain them.
• The customization process. Customization is one of the best aspects of ERP, but
it can easily and quickly get out of hand. Customizing your ERP software takes a
lot of time, effort, expertise and money. But too often, businesses completely
underestimate how many resources are needed and either doesn‘t finish their
customization or end up going way over budget. According to Eric Kimberling,
many companies may also lean on customization when their chosen system
doesn‘t really fulfill their business needs. Customization can end up diminishing
the best practices built into the system and make it more difficult to upgrade in
the future.
• The complexity. ERP software solutions provide numerous capabilities, but that
also means the software can be complex and difficult to use. It‘s not unheard of
for companies to get swept up in all the potential of an ERP but fail to plan
properly for its implementation. Some businesses may find themselves with
systems too large and complicated for their processes, leading to a poor ROI.
This is especially true if you can‘t convince your team to adopt the software due
to the complexity.
Advantages of ERP (Enterprise Resource Planning) System:
1. Complete visibility into all the important processes, across various departments
of an organization (especially for senior management personnel).
2. Automatic and coherent workflow from one department/function to another, to
ensure a smooth transition and quicker completion of processes. This also ensures
that all the interdepartmental activities are properly tracked and none of them is
missed out‘.
3. A unified and single reporting system to analyze the statistics/status etc. in real-
time, across all functions/departments.
4. Since same (ERP) software is now used across all departments, individual
departments having to buy and maintain their own software systems are no longer
necessary.
5. Certain ERP vendors can extend their ERP systems to provide Business
Intelligence functionalities that can give overall insights on business processes and
identify potential areas of problems/improvements.
6. Advanced e-commerce integration is possible with ERP systems – most of them
can handle web-based order tracking/ processing.
7. There are various modules in an ERP system like Finance/Accounts, Human
Resource Management, Manufacturing, Marketing/Sales, Supply Chain/Warehouse
Management, CRM, Project Management, etc.
8. Since ERP is a modular software system, it‘s possible to implement either a few
modules (or) many modules based on the requirements of an organization. If more
modules implemented, the integration between various departments may be
better.
9. Since a Database system is implemented on the backend to store all the
information required by the ERP system, it enables centralized storage/back-up of
all enterprise data.
10. ERP systems are more secure as centralized security policies can be applied to
them. All the transactions happening via the ERP systems can be tracked.
11. ERP systems provide better company-wide visibility and hence enable
better/faster collaboration across all the departments.
12. It is possible to integrate other systems (like bar-code reader, for example) to
the ERP system through an API (Application Programing Interface).
13. ERP systems make it easier for order tracking, inventory tracking, revenue
tracking, sales forecasting and related activities.
14. ERP systems are especially helpful for managing globally dispersed enterprise
companies, better.
Disadvantages of ERP (Enterprise Resource Planning) Systems:
1. The cost of ERP Software, planning, customization, configuration, testing,
implementation, etc. is too high.
2. ERP deployments are highly time-consuming – projects may take 1-3 years (or
more) to get completed and fully functional.
3. Too little customization may not integrate the ERP system with the business
process & too much customization may slow down the project and make it
difficult to upgrade.
4. The cost savings/payback may not be realized immediately after the ERP
implementation & it is quite difficult to measure the same.
5. The participation of users is very important for successful implementation of ERP
projects – hence, exhaustive user training and simple user interface might be
critical. But ERP systems are generally difficult to learn (and use).
6. There may be additional indirect costs due to ERP implementation – like new IT
infrastructure, upgrading the WAN links, etc.
7. Migration of existing data to the new ERP systems is difficult (or impossible) to
achieve. Integrating ERP systems with other stand-alone software systems is
equally difficult (if possible). These activities may consume a lot of time, money
& resources, if attempted.
8. ERP implementations are difficult to achieve in decentralized organizations with
disparate business processes and systems.
9. Once an ERP system is implemented it becomes a single vendor lock-in for
further upgrades, customizations etc. Companies are at the discretion of a
single vendor and may not be able to negotiate effectively for their services.
10. Evaluation prior to implementation of ERP system is critical. If this step is not
done properly and experienced technical/business resources are not available
while evaluating, ERP implementations can (and have) become a failure.
ERP Related Technologies:
Business Process Reengineering (BPR):
Business process reengineering (BPR) is an approach to change management in
which the related tasks required to obtain a specific business outcome are radically
redesigned. An important goal of BPR is to analyze workflows within and between
enterprises in order to optimize end-to-end processes and eliminate tasks that do
not provide the customer with value. It is the analysis and redesign of core business
processes to achieve the substantial improvements in its performance, productivity,
and quality.
The business process also refers to the set of interlinked tasks or activities
performed to achieve a specified outcome. Simply, the business process
reengineering means to change the way an individual performs the work such that
better results are accomplished. The purpose of business process reengineering is
to redesign the workflows in order to dramatically improve the customer service,
achieve higher levels of efficiency, cut operational costs and become a worldclass
competitor.
Management Information System (MIS):
Management information system, or MIS, broadly refers to a computer-based
system that provides managers with the tools to organize evaluate and efficiently
manage departments within an organization. In order to provide past, present and
prediction information, a management information system can include software that
helps in decision making, data resources such as databases, the hardware resources
of a system, decision support systems, people management and project
management applications, and any computerized processes that enable the
department to run efficiently.

Executive Information System (EIS):

An executive information system (EIS) is a decision support system (DSS) used to
assist senior executives in the decision-making process. It does this by providing
easy access to important data needed to achieve strategic goals in an organization.
An EIS normally features graphical displays on an easy-to-use interface. Executive
information systems can be used in many different types of organizations to monitor
enterprise performance as well as to identify opportunities and problems.
Decision Support System (DSS):
A decision support system (DSS) is a computerized program used to support
determinations, judgments, and courses of action in an organization or a business. A
DSS sifts through and analyzes massive amounts of data, compiling comprehensive
information that can be used to solve problems and in decision-making. It is a
computer program application that analyzes business data and presents it so that
users can make business decisions more easily.
Supply Chain Management (SCM):
Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products. It involves
the active streamlining of a business's supply-side activities to maximize customer
value and gain a competitive advantage in the marketplace.
SCM represents an effort by suppliers to develop and implement supply chains that
are as efficient and economical as possible. Supply chains cover everything from
production to product development to the information systems needed to direct
these undertakings.
SCM encompasses the integrated planning and execution of processes required to
optimize the flow of materials, information and capital in functions that broadly
include demand planning, sourcing, production, inventory management and logistics
or storage and transportation.
ERP Implementation Lifecycle:
Implementing ERP software reaps many benefits for a business, from streamlining
your business operations to reducing your company costs, which makes an ERP
system is a must every business should have.
Selection of packages: This is the very first stage of the ERP implementation life
cycle, where the company has to select a good ERP package that suits your
company and your business needs, with a proper research. When selecting an ERP
system, degree of matching and customization it can provide your business and
stability and future assistance of the software provider, are few things you should
keep in mind for a successful ERP implementation.
Project Planning: At this phase of the ERP life cycle, you should come up with a
clear and realistic plan for the process. This includes scheduling timelines and
deadlines for projects, identifying roles and assigning responsibilities for the ERP
implementation process.
Analysis GAP: Being one of the important and crucial steps in the ERP life cycle,
GAP analysis is the analysis done to create a clear and complete model to identify
the current state of the company and the direction it will head to in the future
depending on the business goals of the company.
Re-engineering: This is where the human factor of the business comes to spot light.
The step involves many changes and alteration in the number of employees and job
responsibilities which should be performed carefully as it directly affects the
efficiency of the company.
• Training: To enhance the efficiency, having a group of employees who are well
trained and familiar with the new system is essential which is why this step
becomes important in the ERP implementation life cycle. With the help of the
software service provider, at this stage, the company should start training their
employees for the ERP system who been selected after considering the
following qualities; willingness to change, the ability to learn new thing quickly
and accurately and familiarity with new technology.
• Testing: Here the company will test real life extreme scenarios like user error
detections, system overload, simultaneous multiple user log-ins, data security
and more. This will help the company to identify errors, bugs and weak links
before the implementation.
• Application: It is in this stage the ERP system‘s actual implementation
happens. After the data conversion and data base work is over, the
implementation of the new ERP system will be done and then, the old system
will be removed.
• Maintenance: After implementation, maintenance is the lasts step of the ERP
life cycle where the constant maintenance of the system involves. This is the
where the employees will learn to face and deal with system related problems
while the system should be updated corresponding to the future updates of
the software solution provider.
Issues/Challenges in Implementing ERP:
Challenges in implementing ERP solutions are quite normal. Though it is not
completely a technical job, a lot of planning and proper communication is very
much essential to implement ERP across the organization.
• It is very important, that implementation is done in stages. Trying to implement
everything at once will lead to a lot of confusion and chaos.
• Appropriate training is very essential during and after the implementation. The
staff should be comfortable in using the application or else, it will backfire, with
redundant work and functional inefficiencies.
• Lack of proper analysis of requirements will lead to non-availability of certain
essential functionalities. This might affect the operations in the long run and
reduce the productivity and profitability.
• Lack of Support from Senior Management will lead to unnecessary frustrations
in work place. Also, it will cause delay in operations and ineffective decisions. So,
it is essential to ensure that the Senior Management supports the
transformation.
• Compatibility Issues with ERP Modules lead to issues in integration of modules.
Companies associate different vendors to implement different ERP modules,
based on their competency. It is very essential that there is a way to handle
compatibility issues.
• Cost Overheads will result, if requirements are not properly discussed and
decided during the planning phase. So, before execution, a detailed plan with a
complete breakdown of requirements should be worked out.
• Investment in Infrastructure is very essential. ERP applications modules will
require good processing speed and adequate storage. Not allocating suitable
budget for infrastructure will result in reduced application speed and other
software issues. Hardware and Software Security is also equally important.