Saturday, November 24, 2012

Enterprise Resource Planning 101

The Gartner group was responsible for spurring the rise of Enterprise Resource Planning (ERP) as we know it today.  In the 90’s they came out with the terms material resource planning (MRP) and manufacturing resource planning (MRP II) which were ERP’s predecessors.  The only difference is that while MRP and MRP II were manufacturing specific, ERP transcended and became a holistic tool for corporate resource governance.

Any enterprise is comprised of SALES, PRODUCTION, FINANCE, HUMAN RESOURCES, LOGISTICS and BILLING.  What ERP does is to BRIDGE the information in between these departments and create a seamless work flow.

Addressing the Database Issue
Before the advent of ERP, businesses were tasked with a lot of paper work and very cumbersome and storage hungry data management.  When computerization came, done were the days of records keeping in huge warehouses.  Data is now stored in large capacity hard disk drives.  Each department now conveniently houses their own database. 

Problem solved---partly.

Multiple Software System Disaster
While the issue of storage has been addressed by computerization, it created multiple databases that are managed by different software solutions.  With the different silos in place transactions tends to get lost along the way and keeping track was a matter of inter department coordination---as if each department cared. 

In a multi-silo set up, each department’s goal is to get the data, process it, and then provide this to their stakeholders.  Inter-department coordination is often times non-existent and information sharing is a matter of unending red tape.

Bridging the Gap
With the existence of multiple software within a company, there is a need to consolidate information in such a way that there is transparency in the flow of transaction and at the same time provide a peace of mind that the data flowing to each department silos are correct.  This is what an ERP software can do for the company.

With proper implementation, an ERP system can unify the transaction gaps existing in a traditional corporate set up and the mayhem that goes with it.  Inter-department walls are brought down as department dashboards are put up for ready access and faster decision making capability.

Living in an Imperfect World
In a perfect world, ERP implementation is easy enough to deploy.  However, we do not live in a perfect world and there will be stumbling blocks that would make ERP a challenge to put in place. 
First of all, there is a question of BUDGET.  A solid cost benefit analysis should be clear to the decision makers to justify the cost of implementation.  Mind you---ERP is not cheap.
Then there’s the matter of integrating the existing legacy systems.  This is where the real challenge is.  The more the legacy systems there are, the more complicated the integration. 
But the complication does not stop there.  Selecting the ERP software can be a subject of much debate.  You can base your decision on market share.  But then, choosing the vendor who will implement your chosen system can be a daunting task.  A common trait of these vendors is that they are all PROMISING.  They will promise to give you the stars and the moon just to get the contract.  So it is up to you to weed out the undesirable and pick from those who has the competency to deliver the right solution for your company. 


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