The Meaning of ERP
ERP Modules |
Nominal Ledger |
Point of Sale |
Stock (Inventory) Control |
The meaning of ERP
There has been a lot of information doing the rounds on various forms of media about ERPs. So what is ERP? First used in the 1990s, the term ERP stands for Enterprise Resource Planning and not as some business owners may hope, Emergency Revival Programme. Whilst this may bring a smile to some faces and the dashing of hope in the hearts of others, implementing an ERP system will not, repeat not, rescue or revive an ailing business. In fact, the implementation of such a system at that point may just sound the death knell as the time and resources taken may far outstrip the benefits.
Breaking It Down
Enterprise Resource Planning (ERP) is a process used by companies to integrate and manage the important functions of their organisations. Initially used to integrate typically back-office functions such as Accounting, Planning and Logistics, ERP systems have come to encompass front-office functions such as managing interactions with customers/suppliers and e-business systems, for example, e-commerce websites as well. ERP Vendors are also ensuring that their systems run across a variety of platforms such as integrating with mobile devices and other equipment which assist in freeing up employees to do more value-adding tasks.
Many Enterprise Resource Planning software applications exist to assist companies to implement resource planning by integrating many, if not all, of the processes it needs to run with a single system. An ERP software system may integrate Planning, Purchasing, Stock, Production, Sales, Marketing, Finance, Human Resources and other business functions.
These systems run on a variety of computer hardware and network setups. The software typically uses a database to store its information.
Of course, bear in mind that the more comprehensive the ERP system is, the more expensive it will be and more time and resources it will take to implement.
It is prudent to choose an ERP system which is able to grow with the business whether the business is run by one person or is a large corporation – all may benefit. Omni ERP Accounting Software is a good example as business owners can choose the most critical processes they want to integrate immediately and then bring online other functions as and when it suits them and their budget taking into account business growth.
Typically an Enterprise Resource Planning system is the brain which controls the nervous system which runs through all different silos (departments) of a business and manages its connections to outside stakeholders.
Without which, each department remains operating in its own silo, at its own pace, with little cognisance of the needs of the other departments. Information may flow sporadically, ineffectively and sometimes not at all within and outside the business.
With ERP software in place, each department will retain its own processes but all of the systems can be accessed through one application retaining a similar look and feel throughout. It also negates the use of costly duplicate and possibly mismatched systems running within departments. ERP systems smooth processes by allowing different departments to communicate and deliver information regarding the status of various events in their “silo”.
Implementing an ERP system can assist with ensuring a business conforms to “best practice” procedures. Check that ERP system under consideration complies with requirements such as IFRS etc. and de facto industry standards with regards to terminology eg EFT – Electronic Funds Transfer.
What Are The Main Goals of An Enterprise Resource Planning System?
- Efficiency – over and above improving the decision-making process by easing the collection, analysis and reporting of data, it also reduces the need and costs of maintaining multiple databases or systems. Also, assist in implementing “best practice” processes.
- Cost Reduction – perhaps the most important consideration in implementing an ERP system. It helps reduce wastage in all forms of resources, human included and increases productivity. This contributes directly to a business’s profitability.
- Quality – by ensuring the implementation of a system which meets “best practice” requirements, it assists management to ensure the business is on an equal footing or better with competitors.
- Decentralisation – although this seems counter-intuitive, a good ERP system will assist in the decentralisation of the decision-making process as all relevant users can now have real-time access to the same information. It also ensures transparency across the board and reduces the possibility of the manipulation of data to make a department seem as if it functions better than it actually does.
Where To From Here?
Where are Enterprise Resource Planning systems heading to in the near future? ERP systems have evolved over the years and many are now offering cloud-based solutions.
It is important to ensure that your ERP vendor offers a variety of deployment options when implementing your ERP system. It basically boils down to weighing up the costs of implementing and maintaining your own system, its related procedures around backups, the costs and risk of having expensive equipment on the premises OR having your data hosted by a service provider, those related costs and possible lack of control over sensitive data. ROI (Return on Investment) and Risk Analysis 101. For example, it’s no use choosing the cloud-based deployment option if your internet connection is not reliable.
In conclusion, to come full circle and to wrap up, choose your ERP system wisely and for the right reasons, implement (and review it) timeously and it will add value to your business and assist in ensuring its future success.
Back to Articles