Enterprise Resource Planning

Enterprise resource planning, or ERP, originally began in the manufacturing sector, but has grown to encompass most industries. The use of enterprise resource planning can assist companies with all aspect of their business. An ERP system can be very complicated as well as complex, and if a company does not plan well, it can be a waste of money. However, with the right guidance, support, and planning, an ERP can save on maintenance repairs as well as costs and make employees' jobs easier.

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One Product and E-Business
The wonderful thing about enterprise resource planning is that all business processes can be brought under one program. This includes tracking orders from the acceptance to fulfillment phase and tracking revenue from the invoice phase to the cash receipt phase. This is in contrast to some companies that have several programs to perform these tasks, and many times these companies will experience problems with compatibility and a lag time in reporting. A company will often employ the use of enterprise integration to make these multiple programs work. Enterprise integration assists in linking multiple programs and business applications together in order to assure compatibility. Enterprise resource planning helps eliminate enterprise integration, since enterprise resource planning often bridges the gap between departments in a company by allowing everyone to use the same program. While enterprise resource planning often encompasses all departments of a company that does not perform a lot of business over the web, e-business assists companies who do by bridging the gap between the customers and the business. Some people may think of e-business as e-commerce, which is actually a totally different aspect of business. The goal of e-commerce is to raise profits and form relationships with clients over the Internet and has nothing to do with internal business practices. This is the opposite goal of e-business whose goal is to bring external (sales) business processes and internal business processes together, much like an ERP program would bring all internal practices together. E-business encourages a relationship between the company, suppliers, and customers by linking sales to inventory, customer service, and other internal departments of a company.

Reporting Capabilities
Since the goal of an ERP system is to bring all functions of a company under one program, then one of the primary benefits one will see right away is the ease with which reports can and are generated. This is sometimes referred to as business intelligence. Business intelligence enables companies to have a better understanding of the income, production, and internal factors in order to allow the company to make the best possible business decisions. With ERP and a good implementation of business intelligence, there is no longer a need for one person to print a report for another because everyone can print their own reports. One department does not have to wait on another department’s report or information in order to generate and print a report. Furthermore, by bringing everything under the functionality of one program, the reports can be more detailed, or a new type of report could be used, since the system can use all the company’s data instead of just a portion of it as in a non-ERP system.

Lower Cost and Maintenance
Another benefit you will notice upon the implementation of an enterprise resource planning system is that cost will go down while productivity will go up. As previously stated, employees will no longer need to wait on other employees and departments because all the information can be accessed by anyone. This allows employees to perform their jobs faster, which in turn provides them with the opportunity to take on more tasks. In addition, a company will notice fewer maintenance calls and repairs. Since there would be only one program instead of multiple programs, then the amount of maintenance a company will experience automatically goes down. The lower amount of maintenance can also be seen in terms of money. Many times, when a product needs maintenance, work has to stop until after the maintenance is complete. This can be costly; however, if a company has fewer maintenance calls and repairs, then the number of costly work delays is also diminished.

Investing in an ERP
Purchasing and implementing an ERP can be an extremely big investment to make, but what happens if you do not like the entire ERP product, or you simply cannot afford the entire product? Sometimes, a company will really like the human resources portion of an ERP product, but may believe that the financial side of it would not work for their company. In this situation, the ERP can be split up and only the human resources portion of the product installed and implemented. The same is true if a company finds that it needs a better way to streamline their business practices, but has little money to invest. A portion of an ERP product that does fit their budget and is compatible with their present workflow can be installed and implemented. When doing this, foresight will need to be used to see into the future when profits may be higher or the workflow may change. The ERP will need to be designed in order to accommodate these and any other changes that may occur in the future of the company. When splitting up the ERP, a company will also need to use enterprise integration to ensure that all facets of the business work together.

Obtaining an ERP
When obtaining an ERP, a company should seek the help of a consulting company who offers such services as product training, creation of a user-friendly workflow, and the implementation of business intelligence. Selecting the right consulting company for your business is often an overlooked aspect of selecting and implementing an ERP. When selecting a consulting service, a company should examine whether or not the consultant would offer good dataflow for not only the present but also for the future use of the ERP. The flow of data is often referred to as system architecture, and if foresight is not properly used in this stage of obtaining an ERP, the company’s money could be wasted down the road. Other aspects to examine when obtaining an ERP include the consulting company’s business processing, programming, and configuration track record, as well as how adept they are at applying business intelligence to the customer’s particular industry. Of course, some of this research can be done by directly asking the client and seeing models of their work, but it can also be accomplished by contacting other clients, asking about problems they have encountered, and how the consulting company handled these problems.

Customizable
Different businesses, whether they are in the same industry or not, have different business practices and the flow of work will also vary from company to company. Therefore, some enterprise resource planning products will not work for every company. However, ERP products can be customized to fit the flow of a company, but you must be warned when considering this option. There are a few ERP products that are made with customization in mind, but most ERP products are not designed to be customized; therefore, it is extremely expensive and complicated to customize these products. The few products that are made with customization in mind are very basic to begin with and only offer the most generic reporting capabilities. If a company is interested in customizing an ERP product, they must expect to spend at the very minimum $200 per hour. Companies that choose to customize their ERP product must also be aware that often there is no documentation (i.e., “how to manual”) for the customization changes, and employees can often be left floundering, lost, and frustrated. Prior to contracting with someone to customize a product, arrangements should be made for how to documentation in order to avoid employee discontent. The last thing a company should be aware of when deciding whether or not to customize an ERP product is that customization is not covered by the ERP’s maintenance agreement, and a company should make sure that any customization changes will not void the original ERP maintenance agreement.

Staying Positive
One of the difficult things about the implementation of an ERP system is that it can take an extremely long time to completely implement. When a company has fewer than 100 employees, implementation can take three months. However, implementation can take years for larger companies. Major leaders within the company must take ownership of the implementation process and the ERP system, as well as maintain a good relationship with employees. Employees must be kept in the loop and listened to while the implementation process is going on. The employees will be the ones using the system, so the system must work for them. If the employees are not listened to and not kept well informed, then the result will be a frustrated work force with a high turnover rate. High turnover rates can lead to more difficulties with the implementation process, because employees will have to be constantly trained on the system. One approach that is very beneficial to staying positive and taking ownership is participative management, where department heads are heavily involved in the design and implementation process of the ERP product. This allows the product to truly work for the company and for department heads to be aware of the implementation status of the ERP. This knowledge can then be passed down so that everyone is “on the same page.”

Support for ERP
Usually, after an ERP is completely installed, the consulting company will enter into a support agreement. A company should expect to spend 15% to 20% of the cost of the list price for the ERP’s user agreement for support services. These services often include on-site maintenance/assistance, if needed, and telephone support. However, for those companies who customize their ERP, employees may find telephone support very difficult to use since the support staff would only be trained in the basic ERP product and not the customized ERP product. This makes the previously mentioned need for how to documentation after customization extremely important. Other support can come from in house, that is, if participative management were used during the design phase of the ERP. While participative management allows for ownership of the ERP system, it also allows employees to truly understand how the system works. This can eliminate some support calls and result in employees that work as a team instead of as individuals. Furthermore, department heads that do assist in the design of the ERP system can take their knowledge back to their departments to train their employees and possibly cross-train other departments.

Fail to Plan, Plan to Fail
Many companies purchase an excellent ERP, but fail to correctly plan for it. A company looking to invest in an ERP should be prepared to make an adequate investment in employee training. Inadequate training budgets are very common among companies that own an ERP, and this can be very detrimental to the business. A training budget is an ongoing investment, because employees will leave for many reasons and whoever takes their place will need to understand what to do. A company should consider a best practices policy for using their system prior to purchasing an ERP system. Many times, a company fails to make a best practices policy and the end result can be legal troubles, sabotage, and spying. Keep in mind the whole point behind an ERP is that all facets of a business are combined. This means that numerous employees can look at a wide variety of information. This information, of course, could very well be extremely sensitive information that, if in the wrong hands, could spell trouble. The many topics that a best practices policy should cover include protecting the integrity of data within the ERP, how the data should be used, the penalty for misuse, and the sharing of information between departments. The purchase and implementation of an ERP system can prove extremely beneficial to a company, but it is also extremely complex. When a company is considering the purchase on an ERP system, time should be taken to correctly research all facets of the installation, implementation, and effects on the employees in order to make the right decision as to whether an ERP product is the right decision.


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