Enterprise Resource Planning

ERP stands for enterprise resource planning. It usually refers to the methodology used to integrate 'back office' computer systems for functions such as planning, manufacturing, distribution, dispatch, and accounting. Although not a single piece of software, ERP integrates most of the functions and therefore does introduce new management capabilities such as supply chain management.

An ERP implementation is a major investment, often costing millions of dollars and ties up significant company resources including computer infrastructure and skilled human resources. Implementations are always unique and should match the business processes of the company. Modern ERP software utilises the 'best of breed' philosophy in that it automates the best processes for a particular industry. So, if a company's business processes do not match what is required for the software implementation, additional efforts is required to re-engineer the processes of the company.

Many companies use an ERP implementation as a catalyst to improve their business processes. The first step is to simplify existing processes. Then the company should integrate the various processes. Finally, the integrated new processes should be automated using either an existing system or a new system which might - or might not - be available from the ERP vendor. So in short: 'Simplify, Integrate, Automate' in that sequence!

Some companies prefer to implement ERP in stages in order to reduce risk. This is a wise decision, as ERP implementations are, by definition, very risky especially if processes and workflows need to be redeveloped. A staged implementation does however introduce its own set of risks. Unavailability of key staff and cost blowouts are examples of such risks. Many ERP software vendors provide their software in a modular format to accommodate this type of implementation.

It is important to manage staff fears and expectations. Many ERP implementations are characterised by changes in staff roles and responsibilities. Companies therefore face resistance from staff and the project is sometimes even sabotaged by staff fearing their jobs. This fear is real because the company after an ERP implementation will look very different and may well require staff with new skills sets.

In spice of all the risks, a well managed ERP implementation has many advantages. As the key information systems are now linked together, the company's various departments can easily share data. In addition, the workflow between the various departments should now be more streamlined and, of course, automated. The net result of these improvements is a faster and more cost-effective operation and better customer service.

Enterprise Resource Planning |