Legacy systems such as separate accounting, payroll, inventory and personnel systems typically result in duplicate entry of the same data in the different applications. Sharing of data among different systems becomes difficult or impossible owing to different proprietary practices adopted by each system. In such a context, it will typically require additional data entry and processing to obtain a picture of enterprise wide scenarios.
ERP in Practice
In an ideal situation, ERP implementations will use a common database that all departments can use to store and retrieve information. For example, the attendance data recorded at different workstations become immediately available to the payroll department. In the earlier scenario, payroll would have to re-enter the attendance data into their system (with consequent possibility of errors and omissions).
In this ideal situation, all transactions occurring anywhere in the enterprise will be entered in a uniform manner into a global database. Processing takes place in real time and authorized persons can get up to date information any time.
In actual practice, ERP implementation is carried out in a phased manner. ERP software typically comes in different modules, such as manufacturing, financials, supply chain and customer relationship. Customized business processes prevailing in an organization can also make implementation of standard ERP systems difficult.
ERP software typically assumes certain best practices for carrying out business processes. A user of the software can either change existing practices and adopt these best practices, or try to customize the software to their own practices. The latter option not only requires highly skilled in-house IT staff but can even lead to failure of the implementation.
Benefits of ERP
The ideal situation mentioned above points to the benefits of Enterprise Resource Planning. In a global enterprise with operations in geographically separated locations, getting a total picture of the state of affairs becomes a herculean task. It is an enterprise wide ERP implementation with a common database and standardized practices that makes this task manageable.
The best practices implementation offers another potential benefit. If the enterprise can successfully manage a changeover to best practices from traditional processes, it is likely to lead to greater effectiveness and efficiencies.
Best practices implementation also makes it easier to comply with regulatory requirements because ERP vendors would have updated their offerings to incorporate these.
ERP implementations can also reduce the cost and complexity of the IT infrastructure from the earlier disparate hardware, software, operating systems, databases and training requirements into a cohesive whole.
ERP Software Modules
ERP packages typically come with modules for:
- Manufacturing
- Supply Chain Management
- Financials
- Customer Relationship Management
- Projects
- Human Resources Management
The software will also typically come with data warehousing facilities, and interfaces that can be customized by users such as employees, suppliers and customers. Access to data will be controlled so that only authorized persons can access each kind of data.
ERP systems can help enterprises integrate different functions from top level strategy formulation to day-to-day operations and progress reporting. Implementation of enterprise resource planning systems however requires successful change management, and the major task of data migration from legacy systems to the ERP databases.
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