ERP – Enterprise Resource Planning

A number of people have asked what is ERP and how does it relate to me? I’ll bet you’ve received one of those tech emails with information about ERP from many various vendor resource suggestions. I am guessing this has prompted the interest in ERP and the question “Do I really need this?” This brief description should help.

Two common things that people usually talk about ERP : ERP system and ERP software. In my opinion ERP system refers to all components required to establish the system, such as ERP software, IT Infrastructure, business process and so on. Thus, ERP software is part of the ERP system. But sometime people do not distinguish ERP system and ERP software.

Many people, from scholar, employees until business owner talk about it. When they are talking about business software, they must be talking about ERP. Sometime they have difference understanding what ERP system / software is all about so that you most likely will find some different ERP definition out there. Some of them may define ERP as SAP or other ERP vendors while some others think that ERP is integrated system, manufacturing software or it could be accounting software or perhaps human resource software or… you name it. So with this confusion, I’ve come across the following reference to help define what ERP actually refers to as well as MRP and MRPII, the basis for today’s use of ERP –

ERP definition:

  • It is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores.
  • ERP relates to the integrated software infrastructure that supports the entire company business process.
  • ERP refers to a view of a company and all its parts as connected whole, rather than smaller departments of activity

The term of ERP is originally derived from Manufacturing Resource Planning (MRP II) and Material Requirements Planning (MRP). MRP evolves into ERP when capacity planning activity and routing become a part of the standard software activity.

Here is the general concept of MRP and MRP II.
MRP and MRPII are both incremental information integration business process strategies that are implemented using hardware and modular software applications linked to a central database that stores and delivers business data and information.

MRP is concerned mainly with materials of manufacturing while MRPII is concerned with the whole manufacturing production coordination, including materials, human relations and finance. The objective of MRPII is to provide consistent data to all players in the process of manufacturing as the product moves through the production line.

MRPII systems start with MRP. MRP allows for the input sales and marketing forecasts. These forecasts will determine demand of the raw materials. Then MRP and also MRPII systems draw on a schedule of master production, the break down of specific plans for each product on a line. While MRP allows for the coordination of raw materials purchasing, MRPII facilitates the development of a detailed production schedule that accounts for labor and machine capacity, production schedule runs according to the arrival of materials. An MRPII output is a final labor and machine schedule. Data regarding with production cost, including labor time machine, time and materials used, as well as final production numbers, is provided from the MRPII system to finance and accounting (Monk and Wagner).

ERP system typically handles company’s accounting, logistic, distribution, shipping, manufacturing, procurement and sales order.

ERP software can aid in the control of many business activities such as sales, marketing, finance management, inventory management, delivery, production, quality management and so on.

Today the most ERP software provide Business Intelligence feature for leveraging ERP database into Decision Support System because the decision makers need to analyse company’s performance to prepare appropriate actions. Implementing ERP solution is high-risk decision because it will incur significant costs and also affect your whole company. Unfortunately ERP is not a magic button that can solve all your business problems, no matter what vendor you choose.If your business strategies or key business processes are flawed, even the most advanced IT system is not going to help. ERP is a popular buzzword but may not be the proper track for everyone at this time.

ERP vendors include Oracle, SAP, Lawson, Epicor, Deltek, QAD and Netsuite to name a few.

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About SCB Enterprises
System Solutions and Integration

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