Fundamentals of Enterprise Resource Planning ERP

Enterprise Resource Planning (ERP) plays a critical roleprogram. Similar types of strict-standards used in ERP
in business, requiring people to have a generalsoftware conform to industry standard business
understanding of the key components of ERP topractices throughout the ERP software, including bolt
function well in any organization. Businesses haveon products. According to author Jim Welch:
been transitioning to computer technology at anCompanies can learn from lessons of past
increasing rate since the advent of the desktopimplementations. Many programs were overly
computer in the early 80's. The focus of computerfocused on IT functionality at the expense of
technology in business has always been to increasebusiness process development. As a result, their
productivity through information management. Sinceexpected benefits were compromised or delayed.
the introduction of the Internet and advances inConversely, the best performers ensured that
networking technologies and software, businessesprocess management, governance, and other
must implement some form of computer technologynontechnical issues were addressed properly (2007).
to automate common tasks like word processing,One of the primary considerations of ERP software
accounting, and Internet access by employees, tois whether a business's processes and practices will
more advanced software applications covering all orconform to ERP software (best business practices)
most of an organization's business processes. Thesestandards without radical modification of the
advanced software applications, generally known assoftware. This can, and often does, mean that a
ERP, capitalize on computer technology and enablebusiness will have to change its business processes
businesses to have detailed perspectives into a wideto conform to the software, rather than the reverse.
range of business operations, allowing them to shareThis is practical for a number of reasons; first,
information quickly between organizations,software modifications can be cost prohibitive to
departments and personnel for better management.smaller companies and secondly, software
ERP is a loosely used term primarily describingmodifications can put data integrity at risk,
software but encompasses hardware and softwarejeopardizing the very purpose of ERP. Additionally,
systems used by an enterprise to gather, store,software modifications can make software upgrading,
retrieve, and use information flows through aneven with the same vendors and software
enterprise. The term ERP, therefore, can apply to aapplication (ERP2.0 to ERP 2.1, for example),
single microcomputer using an accounting packageextremely complex and costly.
(Quick Books for example) to track sales, inventory,One of the key considerations in selecting an ERP
billing and accounting, to more complex ERP systemssoftware system is how well the business processes
that automate business processes across the supplywill fit into the best business practice standards of an
chain from manufacturing, distribution, retail, serviceERP program and potential integration with present
and, ultimately, the customer, who may be eitherand future bolt-on programs. This is a complex issue
downstream or upstream in the supply chain. Thesewell outside the scope of this document and requires
functional abilities of ERP are generally grouped intoa thorough analysis of the individual software
software categories known as Supply Chainpackages on the market in conjunction with senior
Management (SCM) and Customer Relationshipmanagement working with IT consultants who
Management (CRM) and can be implemented in small,represent the ERP software vendors.
medium, or large businesses using various hardwareIn summary, the software component of an ERP
and software configurations. Complex ERP systemssystem is the heart of business information and is
can be designed (hardware and softwarecomparable to the arterial system of the human
architecture) to service large multi-nationalbody, data flows through it, the lifeblood of the
corporations using the Internet, Intranets, andorganization.
Extranets in their business operations. An IntranetSoftware Vendors
functions like the Internet; however, it is limited toThe major players in ERP software are Oracle
the organization and its users and denies access toPeopleSoft and SAP and both companies are highly
the public. An Extranet, on the other hand, is arespected in the ERP industry. While there are
mechanism that allows authorized persons to accesscompetitors, these two companies dominate the
portions of an enterprise's Intranet (over themarket with nearly 20 billion in combined annual
Internet) with a username and password. Forrevenue, with Oracle at $10 billion and SAP at $9.7
example, a manufacturer may allow dealers to accessbillion. This does not mean these two software
their Extranet to view product and pricing data,companies represent the best ERP solution for every
proprietary information limited to authorized dealersbusiness. Indeed, one of the most important
only.elements of acquiring an ERP system is due diligence
ERP is an extremely complex subject bestto find the right application software for the business,
understood by looking at the major components ofor, according to Dustin Alexander of Global Shop
an ERP system including hardware, software, andSolutions; "you can't invest too much time in the
primary areas of concern for business owners andevaluation process" (2007).
managers. By looking at these major componentsThe selection of the software component(s) of an
from a conceptual viewpoint, we can side stepERP system is one of the single most important
technical jargon allowing for a greater understandingissues facing a business considering an ERP
of the purpose of ERP and its importance in businessimplementation. Most businesses do not have the IT
and the workplace.staff to oversee and manage the entire acquisition
Hardwareprocess, which requires careful management scrutiny
The size of an organization dictates the type offrom many different angles to safeguard the IT
hardware used in an ERP system. For smallinvestment. Depending on the size and scope of the
businesses, the hardware component of an ERPERP acquisition, a business can expect to draw upon
system could be a single microcomputer or a fewoutside professionals to conduct a variety of
microcomputers connected together over a local areaanalyses including feasibility, business process, and
network (LAN). In the case of a small LAN, one ofvendor/software performance. Implementing an ERP
the microcomputers would act as a server, which issolution in an organization is a deep science requiring
simply a dedicated computer with the primary taskthe best of business and IT minds, working together
of acting as a centralized data warehouse whereto help ensure the success of the project across a
data is stored. The server accepts data inputs,wide spectrum of issues. Among these issues are
processes those inputs and "serves up data" to otherfunctionality, effectiveness, usefulness and user
software applications, or, provides output in variousfriendliness with an eye on acquisition costs, phased
forms including screen information, print output orimplementation, training, process transition, and
other types of digital output.ongoing development that achieves the goals and
Typically, in larger ERP environments, an enterpriseobjectives of the organization.
will use a dedicated server, which, in most cases, is aTop Business Issues
mini-computer. Mini-computers have greater operatingThere are many important issues facing a business
and storage capacity than desktop computers andconsidering implementing ERP and management must
can service many users at one time. Users accessperform due diligence throughout the process to
the server via either dumb terminals (a monitor andsafeguard against system failure. Successful projects
keyboard) or a smart terminal (a fully functionalbegin with a well-written plan detailing each step of
desktop microcomputer) networked to the serverthe acquisition process in a way people can
via a Local Area Network (LAN). How the server andunderstand so that management can take ownership
the new (or existing microcomputers, known asof the project and employees will use the system.
legacy systems) are connected lays the foundationAmong these issues are contract negotiations
for the hardware component of the systemcovering hardware and software, software-licensing
architecture. How these systems are connected toagreements, modifications, upgrades, technical
the server and, to each other, form the topology (orsupport, service, training and assistance transitioning
layout) of the system throughout an organization.people and processes. Further, the business must
One of the primary concerns facing many businesses;establish a governance model to control all aspects of
new computer hardware acquisitions, has a twofoldan ERP systems implementation with emphasis on
dimension; on one hand, it is critical to acquire statebusiness process transition that address the
of the art computer equipment that will not becomeorganizational needs and keep the business mission at
antiquated quickly by changes in technology while, onthe forefront.
the other hand, attempting to interface older, existingConclusion
systems into the ERP system. This is especiallySmall, medium, and large businesses use computer
important if the existing legacy systems performtechnology to manage their businesses operations
many business processes, making the transition toand streamline data flows for better business
ERP, and systems integration, more complicated.management. Business applications can be as simple
There are many technical issues involved withas using Quick Books to manage inventory, billing and
hardware configurations, requiring the expertise ofother financial processes, or very complex systems
Information Technology (IT) Specialists.known as Enterprise Solutions. ERP systems can
User-operators of an ERP system rarely deal withencompass departments or organizations and use a
these technical issues, have little or no input regardingvariety of hardware and software configurations to
system configurations and rely on technical supportsupport and automate business operations. Among
personnel to handle technical issues, training, andthe more complex systems, the use of
support.microcomputers, servers, operating systems, and
In summary, the hardware component of an ERPapplication software support the Internet, Intranets,
system is comparable to the skeletal system of theExtranets, local area networks (LANS) and wide area
human body; it is the framework, or platform, whichnetworks (WANS) to communicate and share data
the software "rides "on and provides the interfacebetween departments and organizations.
for users interaction.ERP is a complex but understandable topic that plays
Softwarea huge and growing role in business and government,
ERP software encompasses most business processesrequiring people to have a greater perspective into
and, according to the Department Of Defense, U.S.this technology and application in the workplace. The
Enterprise Solutions Competency Center:three major components of an ERP system are
The activities supported by ERP systems include allhardware, software and the people who operate it.
core functions of an enterprise, including financialThe important thing to remember is that ERP is highly
management, human resources management, andtechnical, and no single person has all the answers
operations. Increasingly, ERP vendors are offeringwhen it comes to implementing ERP systems. In
"bolt-on" products that provide specializedorder to ensure the success of ERP implementation in
functionality to augment the core, such as Advancedenterprise, many qualified business, and IT
Planning and Scheduling (APS), and Customerprofessionals must work together across a variety of
Relationship Management (CRM) (2007).disciplines to maximize the potential for a seamless
ERP software design uses a "best business practices"transition to a digital enterprise.
approach that helps ensure data accuracy andBibliography
integrity. For example, all accounting software designAlexander, D. (2007, September 26). "What is
forces users to enter financial data according to theERP-Get ERP Right The First Time." Retrieved
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(GAAP) standards. This GAAP standard helps ensureWelch, J. Dmitry, Kordysh. (2007). "Seven Keys to
that financial statements and reports reflect the trueERP Success." Strategic Finance, 89(3), 40-47,61.
financial condition of an enterprise. AccountingRetrieved September 26, 2007, from ABI/INFORM
software achieves this conformity by controlling theGlobal database. (Document ID: 1339921401).
entry of financial information into the softwareUnkown. (2007, June 12). ERP Overview.