What is ERP?

Posted by   Deon Fourie


What is ERP?
By Christopher Koch

I'm tired of pretending I know what ERP is.
Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget about planning-it doesn't do that-and forget about resource, a throwaway term. But remember the enterprise part. This is ERP's true ambition. It attempts to integrate all departments and functions across a company to create a single software program that runs off one database.

That's a tall order. Each of those departments, like finance or human resources, typically has its own computer system, each optimized for the particular department. Typically, when a customer places an order, the order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and rekeyed into different computer systems along the way. All that lounging around in in-baskets causes delays and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one truly knows the order status.

So what can ERP do?
ERP automates the tasks necessary to perform a business process-such as order fulfillment, which involves taking an order from a customer, shipping it and billing for it. With ERP, when a customer service representative takes an order, he or she has all the necessary information-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 can view the same information and has access to the single database that holds the 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 need only log in to the system. With luck, the order process moves like a bolt of lightning through the organization.

Sounds too good to be true. What's the catch?
To do ERP right, your company needs to change the way it does business. And that kind of change doesn't come without pain. It's critical to figure out if your way of doing business will fit within a standard ERP package before signing the check. The move to ERP is a project of breathtaking scope, and the price tags on the front end are enough to make even the most placid CFO a little twitchy. In addition to budgeting for software costs, financial executives should plan to write checks to cover consulting, process rework, integration testing and a long list of other expenses before the benefits of ERP appear. Underestimating the price of teaching users their new job processes can lead to a rude shock, and so can failure to consider data warehouse integration requirements and the cost of extra software to duplicate the old report formats. Oversights in financial planning can send the costs of an ERP project spiraling out of control. The impact will be far greater than any other systems project you have undertaken.

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Miscellaneous
 SubjectNameDate Posted
What is ERP? Deon Fourie04 September 2003
A who's who of ERP Deon Fourie04 September 2003
Tools and Methodology choices Bert Engelbrecht21 November 2003
Our methodology philosophy Bert Engelbrecht10 February 2004