What
is
Enterprise Resource Planning enables companies to automate activities such as product planning, purchasing, inventory management, supplier management, and order tracking. More recently it has evolved to include other applications that are used in accounting and human resource functions. More generally, it is a method for the effective planning and control of all resources needed to take, make, ship, 10210s181k and account for customer orders in a manufacturing, distribution, or service company.
It includes any software system designed to support and automate the business processes of medium and large businesses. This may include manufacturing, distribution, personnel, project management, payroll, and financials.
ERP systems are information systems for identifying and planning the enterprise wide resources needed to take, make, distribute, and account for customer orders. Basically ERP combines departments all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. This process increases company communication and most of all it increases efficiency, that is if it is properly installed and implemented. An example of how Enterprise Resource Planning might be useful to a company is a simple customer order. This process usually begins on paper. The order is then passed around the office from desk to desk until it is typed into the computer. This process leaves much room for delays, which soon add up to lost orders, which lead to, lost revenues. With ERP much of the room for error is cut out and lengthy delays are eliminated. This is due to the integration of all the companies departments.
How does ERP improve business?
So how exactly does ERP improve businesses? ERP automates everyday tasks that businesses bury themselves in. Let's look at the order taking example again. With ERP, when a customer service representative takes an order from a customer, he or she has all the information necessary to complete the order (the customer's credit rating and order history, the company's inventory levels and the shipping dock's trucking schedule). Everyone else in the company sees the same computer screen and has access to the single database that holds the customer's new order. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, one needs only log into the ERP system and track it down. With luck, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee benefits or financial reporting.
The problem with ERP lies not in the process itself but simply in the hands of the employees using it. ERP places very important information such as credit information and the product inventory levels from the warehouse. Will the customer pay on time? Will we be able to ship the order on time? These are decisions that customer service representatives have never had to make before and which affect the customer and every other department in the company. But it's not just the customer service representatives who have to wake up. People in the warehouse who used to keep inventory in their heads or on scraps of paper now need to put that information online. If they don't, customer service will see low inventory levels on their screens and tell customers that their requested item is not in stock. Accountability, responsibility and communication have never been tested like this before.
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