Enterprise Resource Planning (ERP) systems attempt to integrate all data 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 initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning). ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organization's business or charter. Non-manufacturing businesses, non-profit organizations and governments now all utilize ERP systems.
MRP vs. ERP — Manufacturing management systems have evolved in stages over the past 30 years from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP).
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.
Some organizations — typically those with sufficient in-house IT skills to integrate multiple software products — choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. For example, one may choose to use human resource management system from one vendor, and the financial systems from another, and perform the integration between the systems themselves.
This is very common in the retail sector[citation needed], where even a mid-sized retailer will have a discrete Point-of-Sale (POS) product and financials application, then a series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics.
Ideally, ERP delivers a single database that contains all data for the software modules, which would include:
Manufacturing
Engineering, Bills of Material, Scheduling, Capacity, Workflow Management, Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects, Manufacturing Flow
Supply Chain Management
Inventory, Order Entry, Purchasing, Product Configurator, Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing, Commission Calculation
Financials
General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets
Projects
Costing, Billing, Time and Expense, Activity Management
Human Resources
Human Resources, Payroll, Training, Time & Attendance, Rostering, Benefits
Customer Relationship Management
Sales and Marketing, Commissions, Service, Customer Contact and Call Center support
Data Warehouse
and various Self-Service interfaces for Customers, Suppliers, and Employees
Enterprise Resource Planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP). MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the standard software activity.[citation needed] ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, marketing, delivery, billing, production, inventory management, quality management, and human resource management.
ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. Many companies took this opportunity to replace their legacy information systems with ERP systems. This rapid growth in sales was followed by a slump in 1999, at which time most companies had already implemented their Y2K solution.
ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems.
ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information technology, this would include accounting, human resources, marketing, and strategic management.
ERP II means open ERP architecture of components. The older, monolithic ERP systems became component oriented.
EAS — Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business, using ordinary Internet browsers as thin clients.
Before
Prior to the concept of ERP systems, departments within an organization (for example, the human resources (HR)) department, the payroll department, and the financial department) would have their own computer systems. The HR computer system (often called HRMS or HRIS) would typically contain information on the department, reporting structure, and personal details of employees. The payroll department would typically calculate and store paycheck information. The financial department would typically store financial transactions for the organization. Each system would have to rely on a set of common data to communicate with each other. For the HRIS to send salary information to the payroll system, an employee number would need to be assigned and remain static between the two systems to accurately identify an employee. The financial system was not interested in the employee-level data, but only in the payouts made by the payroll systems, such as the tax payments to various authorities, payments for employee benefits to providers, and so on. This provided complications. For instance, a person could not be paid in the payroll system without an employee number.
After
ERP software, among other things, combined the data of formerly separate applications. This made the worry of keeping numbers in synchronization across multiple systems disappear. It standardized and reduced the number of software specialties required within larger organizations.
Implementation
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.
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.
Source : Wikipedia
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