Enterprise Resource Planning 

What is ERP?

Enterprise resource planning is basically a Information technology business system which integrates all the basic structures of business planning and management. It is basically a planning of how the resources are move from one place to another. ERP can also be refereed as an integrated view of resource planning. ERP is a multibillion Dollar industry. It also allowed error free transactions. There are two key components in ERP. The first key component is common database. This is a very helpful component. Common database reduces so many problems. Common database provides the access to everyone attached to that particular database. With the help this common database the feeding of the data is to be done once which could bring transparency and lead to standardisation. We can also retrieve information at real-time. 

The second key component which ERP includes is modular software design. This directly implies that this will allow the selection of modules which are required. They also mix and match the modules and lead to the required module. This will lead to improvement in business performance. ERP system can also be considered as a software package. The introduction of the term ERP replaces two or more independent applications. And this could eliminate the requirement of external interfaces. ERP also allowed to have a proper maintenance of the production which is a very key component in resource planning.

As ERP is basically a software. Advantages of using software are as follows:-

(1)    Avoids human errors:- The biggest advantage of using ERP is that it avoids human errors. With the help of this we can avoid very big and costly errors. This can also be a double checker software which would enable us to keep an eye on the human errors.

(2)    Avoid unnecessary overstocking:- With the help of this we are able to manage and analyse our stock. And due to this we can avoid overstocking.

(3)    Reduce paperwork:- This is the need of 21^st century. By using this software we can reduce the paperwork.

Origin

The Gratner group had used this term Enterprise Resource Planning. This term was used in the early 1990’s. Terms such as  material requirement planning (MRP), manufacturing resource requirement planning (MRP II) and computer integrated manufacturing are the extended are those which extend the capabilities of Enterprise resource planning. Without replacing these terms Enterprise Resource Planning came in to effect to represent the resource planning model which ultimately reflects the evolution of application integration beyond manufacturing.

Later another Enterprise resource planning(ERP II) came into action known as ERP(II). It was launched in the 2000’s. This ERP(II) was  more flexible than the ERP(I).  ERP(II) led to many key things such as Globalisation, transparency, standardisation. With the help of globalisation this enabled organisations to share data with the other organisations also. By increasing the transparency it allowed to remove the confusions and saved a lot of time.  ERP(II) is the extended version of ERP(I). It also led to the optimization of resource planning. Earlier the ERP(I) was only used in back office work but ERP(II) was modified such that it was used in both back office as well as front office. Later even the Government and the Non Profit Organisations(NPO’s) started to use this ERP model

ERP has five main components which are as follows:-

(1)    Supply Chain Management

(2)    Financial management System

(3)    Manufacturing Resource Planning

(4)    Human Resource Management

(5)    Customer Relationship Management

1)    Supply Chain Management

In Supply chain management there are five key components which make a chain:

(1)    Raw materials

(2)    Work-in progress

(3)    Inventory or stock

(4)    Finished goods

(5)    Consumption by customer

The first key component is raw material. In resource planning it is very crucial to manage the raw materials. Proper management could to very effective results. The next component is Work-in progress. With the help of this component the ERP can be more stabilised. Proper management of the next component which is inventory or stock is very vital. Inventory could lead to proper management of the resources. Now the finished goods are another component which is to be designed as per the consumer. The final component is the consumption by customer. This is the last step in the supply chain management.

Hence, Supply chain management is basically the flow of goods.

(2)    Financial Management System

Financial management system is a method by which companies or organisations monitor there:-

(1)    Income

(2)    Expense

(3)    Assets

The main objective of this system is to maximise the profit. It also tries to ensure sustainability. There are certain ways in which financial system can be effective. And those are as follows:-

(1)    Streamlining Invoicing

(2)    Bill Collection

(3)    Eliminating accounting errors

(4)    Minimizing record keeping redundancy

(5)    Ensuring compliance with tax

(6)    Offering flexibility

This can be done by keeping all payments and receivables transparent. This is the most crucial step in financial management system. The next we need to follow is keeping track of all the liabilities we have.  Here we also need to balance multiple bank accounts. With the help of this the accounting section could also be managed and could lead to accuracy. The best step would be to minimize the paper work. By minimizing paperwork it could lead to a lot of profit.  While managing our finance system we need to keep a very important aspect in our mind which is the security.  Ensuring the security is very important. At last we just need to coordinate our balance sheets, income statements, and expense statements.

(3)Manufacturing Resource Planning

Manufacturing Resource Planning is evolved from Material Requirement Planning. The main objective of this is to ensure that enough products are available as per the requirement of the customer. Management of material is very important in this. As per the customer needs proper updates are very important to make sure proper resource planning takes place. For small scale businesses manufacturing resource planning is very costly.  Also this process could consume a lot of time which may lead to wrong calculations of the market.

(4)    Human Resource Management

The first thing we need to focus here is training. In Human Resource training is very important. This could lead to proper development of resources. Also proper recruitment is very crucial in this process.  Skills are the most important in this which are needed to pay more emphasis. Communication is the first priority while observing the skills. Attendance is another thing which helps a lot in developing and managing the Human Resource development. Payroll classifies the above all. The higher payroll leads to more advancement of these skills.

It comprises of five management strategies.

(1)    Personnel Management

(2)    Organizational Management

(3)    Payroll System

(4)    Time Management

(5)    Personal Development

(5) Customer Relationship Management

The main objective of this model is to make sure that the customer is satisfied with the goods and services provided. It is very important to provide timely services to the customer. Managing customer services is very crucial. Keeping in mind the various needs of the customer we need to plan. The best way to deal customers would be to make the customers feel important. This strategy could lead to enormous amount of response from the customer. With this the other strategy that is customer satisfaction could also be achieved.

Role of ERP in Supply Chain

Integration of supply chain and ERP makes the distribution and business possible. ERP plays a very vital role in supply chain management. Here are various roles which ERP plays in supply chain.

(1)    Supply Chain Planning:-  Firstly it includes the determination of the stock and inventory system.  It also allows to decide the various promotional strategies.

(2)    Purchasing Procurement and Execution:- ERP provides a efficient way to handle the goods i.e the stock with the help of this we can handle the stock also.

(3)    Monitoring and Maintenance:- We can monitor the supply chain process with the help of ERP. Further the maintenance could also be done with the help of this.

A successful organization must be able to manage the supply chain by effectively using the ERP.  The difference in ERP and Supply chain is that the focus in supply chain is optimization over the entire chain whereas in ERP the focus is on optimization within a single organization.  The same is the case with the scope of these two. In Supply chain the scope is integrating all inter - organizational activities whereas the scope of ERP is integrating all activities within a single organization.