Saturday, October 17, 2009

Introduction-whats ERP?


Before I start with SAP, I found like to point out the fundamnetals of ERP and its origin.ERP stands for Enterprise Resource Planning.Prior to the concept of ERP systems, it was not unusual for each department within an organization to have its own customized computer system. For example, the human resources (HR) department, the payroll department, and the financial department might all have their own computer systems.Typical difficulties involved integration of data from potentially different computer manufacturers and systems. For example, the HR computer system (often called HRMS or HRIS) would typically manage employee information while the payroll department would typically calculate and store paycheck information for each employee, and the financial department would typically store financial transactions for the organization. Each system would have to integrate using a predefined set of common data which would be transferred between each computer system. Any deviation from the data format or the integration schedule often resulted in problems.ERP software, among other things, combined the data of formerly separate applications. This simplified keeping data in synchronization across the enterprise, it simplified the computer infrastructure within a large organization, and it standardized and reduced the number of software specialties required within larger organizations.
What ERP does?

Enterprise resource planning (ERP) systems attempt to integrate several data sources and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules.The two key components of an ERP system are a common database and a modular software design. A common database is the system that allows every department of a company to store and retrieve information in real-time. Using a common database allows information to be more reliable, accessible, and easily shared. Furthermore, a modular software design is a variety of programs that can be added on an individual basis to improve the efficiency of the business. This improves the business by adding functionality, mixing and matching programs from different vendors, and allowing the company to choose which modules to implement. These modular software designs link into the common database, so that all of the information between the departments is accessible in real time.To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package.However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database).Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System.Because of their wide scope of application within a business, ERP software systems are typically complex and usually impose significant changes on staff work practices.[citation needed] Implementing ERP software is typically not an "in-house" skill, so even smaller projects are more cost effective if specialist ERP implementation consultants are employed.[citation needed] The length of time to implement an ERP system depends on the size of the business, the scope of the change and willingness of the customer to take ownership for the project.[citation needed] A small project (e.g., a company of less than 100 staff) may be planned and delivered within 3-9 months; however, a large, multi-site or multi-country implementation may take years.[citation needed]To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies. These firms typically provide three areas of professional services: consulting, customization and support.Data migration is one of the most important activities in determining the success of an ERP implementation. Since many decisions must be made before migration, a significant amount of planning must occur. Unfortunately, data migration is the last activity before the production phase of an ERP implementation, and therefore receives minimal attention due to time constraints. The following are steps of a data migration strategy that can help with the success of an ERP implementation:
1.Identifying the data to be migrated.
2.Determining the timing of data migration.
3.Generating the data templates.
4.Freezing the tools for data migration.
5.Deciding on migration related setups.
6.Deciding on data archiving.
Advantages of ERP?
In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve:
1.design engineering (how to best make the product) .
2.order tracking from acceptance through fulfillment.
3.the revenue cycle from invoice through cash receipt.
4.managing interdependencies of complex Bill of Materials .
5.tracking the 3-way match between Purchase orders (what was ordered), Inventory receipts (what arrived), and Costing (what the vendor invoiced) the Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a granular level.
Disadvantages of ERP?
Problems with ERP systems are mainly due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used.
1.Customization of the ERP software is limited.
2.Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.
3.ERP systems can be very expensive leading to a new category of "ERP light" solutions.
4.ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.
5.Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.
6.Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).
7.The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.
8.Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.
9.Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.
10.The system may be too complex measured against the actual needs of the customer.

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