Technology in focus: enterprise resource environment
By Tauqir Haider

Enterprise Resource Plan is software that integrates departments and functions across a company into one computer system. ERP runs off a single database, enabling various departments to share information and communicate with each other. ERP systems comprise function-specific modules designed to interact with the other modules, e.g. accounts receivable, accounts payable, purchasing, etc. ERP systems are used for operational planning and administration and for optimizing internal business processes. ERP systems permit organizations to manage resources across the enterprise and completely integrate manufacturing systems.

ERP software is an integrated solution that includes combining organizational functions, automating and standardizing business processes, sharing common databases by all departments (accounting, manufacturing, logistics, finance, etc.), and producing and accessing information in a real-time environment. ERP systems appeared first in 1980’s but the importance realized after 1990’s. The businesses become more interested in implementing ERP tools as they see these tools as their only survival.

Background

In the history of the evolution and development of ERP systems, Material Requirements Planning (MRP) systems grew to Manufacturing Resource Planning MRP-2 systems and these systems later evolved into ERP systems.

The evolution of the systems dates back to the year 1960 as per ERP history. In the 1970’s companies understood that maintaining large quantities of inventory was not making any sense. For that purpose, MRP systems were introduced to the business. With the use of MRP tools the available quantity of on-hand or scheduled-to-arrive materials could be used to determine net material requirements. As time passed techniques for capacity planning were added to the basic MRP system capabilities and as a result of that during 1980’s MRP-2 systems were introduced, including financial accounting and financial management systems along with the manufacturing and materials management systems. Finally, by the early 1990’s, improvements in technology allowed MRP-2 to be expanded to incorporate all resource planning for the entire enterprise. Thus, ERP term was born.

ERP was a new formation, because it could be used not only in manufacturing companies, but in any company that wants to use its assets effectively. From the start of this century, ERP vendors (such as Baan, Oracle, SAP, J.D. Edwards, and PeopleSoft), have started to look other industries and expanding their existing services, catering for small to medium enterprises and other different industries than those typically implementing ERP systems. Vendors and users are also moving beyond core applications to extend ERP systems to support web-based applications, e-commerce, customer relationship management, and business planning.

 General Ïrequirements

Before processing for any ERP following general questions must be answered:

(1) Why they chose the software?

(2) Hardware and software configuration specified at implementation.

(3) System's actual performance vs. expectations and any more hardware or software required.

(4)Quality of training, preferably the names of any good trainers who are still available.

(4) Availability and performance of implementation team.

(6) Ability of vendor to meet schedules and deadlines.

(7) Attitude and responsiveness of vendor staff (friendly, adversarial, etc.)

(8) Problems during implementation, how they were resolved and any outstanding issues / bugs now.

(9) How new releases / upgrades are handled.

(10) Unexpected surprises (good and bad).

(11) Challenge of finding and retaining IT talent to support the system.

(12) Major benefits of the system.

(13) Major limitations of the system.

(14) Hidden costs.

(15) Customization issues.

Specific requirements of ERP

Plan carefully: doing it right can be rewarding; failing can be devastating. For example, one company went millions into the red as a result of technical problems with the rollout of a supply chain system, leading to inventory shortages and incomplete orders filled. Another company took a several million dollar hit on profits as a result of a product oversupply related to problems with an ERP system.

The software itself is rarely the cause of big problems. The root cause is often due to the huge business and process change required with ERP implementations.

Understand business requirements: understand the value proposition and the business case for your ERP system. What are the key deliverables and objectives? What is driving the project? Where is the win? What assumptions does the sponsor hold? The answers to these questions will help the team understand the target and the expected results.

Organisations that focus on technology and ignore the human element of implementations often fail. ERP by definition is about people, not just technology and organisations. Minimise the people side and run a larger risk of missing the target. In fact, process change is often part of the case for the ERP investment.

Vital to the success of an ERP implementation is a strong tactical team that can manage change and drive toward stability.

Most businesses are not prepared to manage the impact to their day-to-day functions during the implementation. This team is responsible for help desks, testing, training, documentation, database administration and many other operational issues and "fires".

Risk aversion: there are many flavours and complexities of ERP. Know where the major pain points lie for your situation. The risks to the plan must be clearly defined and include an escalation plan. Are there technology risks? Are scarce skills required? Is there a migration path?

Many risks can be mitigated via thorough testing. Testing business cycles is, by nature, a long process. Be certain to have a fallback plan for each implementation milestone where there are risks to mitigate.

If the ERP system is for a small/medium size enterprise (SME) with little or no legacy systems integration, the task is less risky. However, if the replacement of a large, highly integrated, highly customised system is required, get ready for the unexpected. An ERP project should never begin without a clearly defined risk-management plan that has the sponsor's approval.

Ensure compliance: because ERP systems are accounting/ financial based, there are a number of areas to consider for audits and compliance.

Objectives of ERP

The perceived benefits include the following:

(1) Greater access to information from all functional areas.

(2) Timely useful information.

(3) Resources can be shifted from busy work to value added work.

(4) Closely be able to measure operational performance and results.

(5) Improve organizational decision-making.

(6) Increase organizational knowledge.

However for making a successful ERP implementation and having the advantages that ERP offers, organizations should take into account the factors that are stated above (teamwork and composition, top management support, business plan and vision, BPR and minimum customization, effective communication, project management, software development, testing and troubleshooting, monitoring and evaluation of performance, project champion, appropriate business and IT legacy systems).