The key to staying alive in the new millennium
Enterprise resource planning or ERP does not really live up to its acronym, but its function covers almost every activity in a company. It is able to serve the needs of people in finance, in human resources or in the warehouse.
Each of those departments have their own computer system to handle their jobs. But ERP combines them all together in a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.
ERP is a necessary for anyone who is interested in being competitive and perhaps, staying alive in business beyond 2000.
"If the 1980s were about the quality and the 1990s were about reengineering. The 2000s will be about velocity. When the velocity of business is great enough, the very nature of business changes," Microsoft Chairman Bill Gates once said.
"A manufacturer or retailer that responds to changes in sales in hours instead of weeks is no longer at heart a product company, but a service company that has a product offering," he added.
If you believe in Gates's philosophy then the implementation of ERP in your company is necessary.
ERP, as a technical term, means a total integrated computerized business management system that covers every functional area of the organization enabling it to drive the utmost competitive advantage. Though it looks easy, the reality is much harsher, and it costs a lot, the use of ERP requires a major change in the way people in a company do their jobs.
"So don't be fooled if ERP vendors tell you about a three or six month average implementation time. That's right, six months is too short," IT expert Christopher Koch advises in his article posted at CIO.com online business magazine.
According to him, there are five major reasons why companies undertake ERP:
- Integrate financial information: The CEO tries to understand the company's overall performance, he may find many different versions of the truth. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system.
- Integrate customer order information: ERP systems can become the place where the customer order lives from the time a customer service representative receives it until the loading dock ships the merchandise and finance sends an invoice. By having this information in one software system, companies can keep track of orders more easily, and coordinate manufacturing, inventory and shipping among many different locations at the same time.
- Standardize and speed up the manufacturing process. ERP systems come up with standard methods for automating some of the steps of a manufacturing process. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce overhead costs.
- Reduce inventory: ERP helps the manufacturing process flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories of the stuff used to make products and it can help users better plan deliveries, reducing the finished good inventory at the warehouses and shipping docks.
- Standardize HR information: Especially in companies with multiple business units, HR many have a unified, simple method for tracking employees' time and communicating with them about benefits and services. ERP can fix that. In the race to fix these problems, companies often lose sight of the fact that ERP packages are nothing more than generic representations of the ways a typical company does business.
Will ERP fit the ways you do your business? It's critical for companies to figure out if their ways of doing business will fit within a standard ERP package before the checks are signed and the implementation begins.
The most common reason that companies walk away from multi- million-dollar ERP projects is that they discover the software does not support one of their important business processes. At that point, there are two things they can do: They can change the business process to accommodate the software, which will mean deep changes in long-established ways of doing business and shake up important people's roles and responsibility. Or they can modify the software to fit the process, which will slow down the project and make upgrading the software to the ERP vendor's next release excruciatingly difficult because the customization will need to be torn apart and rewritten to fit with the new version.
Needless to say, the move to ERP is a project of breathtaking scope, and the price tags on the front end are enough to make the most placid chief financial officer a little twitchy. In addition to budgeting for software costs, financial executives should plan to write checks to cover consulting, process rework, integration testing and a long list of other expenses before the benefits of ERP start to manifest themselves. -- The Jakarta Post