96. Enterprise Resource Planning (ERP)

The concept of ERP seems to have evaluated way back in the 1960, but its name – ERP was born around 1972. The ERP was the vision of a group of ex-IBM managers. They then formed a company, which today stands tall, SAP. Over the years ERP has undergone a lot of changes, yet the basic concept of integration remains the same. Taking one word at a time ERP will literally mean Enterprise – an undertaking, especially one with some scope, complication and risk. Resource – something that can be used as a support or help. Planning – A scheme program or method worked out beforehand for accomplishment of an objective. ERP software aids and controls the ERP management system, which is a system that integrates and automates all facets of business operations. This includes planning, manufacturing, and sales, while more recent ERP software products encompass marketing, inventory control, order tracking, customer service, finance and human resources as well.

Of the three words the word enterprise has more relevance with the other two trying to add importance. But ERP is always defined focusing on its role to integrate. ERP integrates the entire operations of any organization. In simple terminology ERP is software which can be used by both small and big organizations to integrate all its operations across departments. There was a time when ERP was a word of nightmares, when ERP was 'walking on landmines' and ERP was meant only for the 'big and the rich' companies. But today the benefits are understood, talked about. We have a number of small players entering into the ERP race. We have a number of ERP products to meet needs of even the SMEs we even have vertical ERPs.

In the absence of an ERP system, a large manufacturer may find itself with many software applications that neither talk to each other nor interface effectively. Tasks that need to interface with one another may involve: Integration among different functional areas to ensure proper communication, productivity and efficiency. Design engineering (how to best make the product). Order tracking, from acceptance through fulfillment. The revenue cycle, from invoice through cash receipt. Managing inter-dependencies of complex processes bill of materials. Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced). The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level.

Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data-tampering scenario, for example, might involve a disgruntled employee intentionally modifying prices to below-the-breakeven point in order to attempt to interfere with the company's profit or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools.

No matter which ERP system you ultimately choose, how do you know you're making the *right* choice for your company? No two manufacturers run exactly the same way, and similarly no two ERP systems run exactly the same way. So, it’s critical to research the product and the vendor to ensure that you select the right system for your business. You've got to have a system that fully integrates all aspects of running your manufacturing business, offers advanced features and options but is intuitive and easy to use, and adapts to the way you do business rather than forcing you to adapt to the software. With ERP, you’re buying more than just a software package. You’re engaging in a long-term relationship with a business partner that will have a huge impact on the future of your company. The more time you spend in the research process, the better your chances of selecting the best ERP product and the right partner for your business.