The ERP Path

The ERP Path
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Introduction - The need for ERP
The major ERP packages
Advantages of ERP
Problems with ERP
Conclusions

20 years ago, the biggest influence on manufacturing industry was seen as Japanese production methods and the emerging production control programs called Manufacturing Resource Planning (MRP) packages.

The first generation of these programs, in essence were simple order book processing type packages, a customer places an order and the resulting production schedules were produced by the MRP software.

The second generation of MRP software arrived during the later part of the 1980's. In essence the software was much the same as it's predecessor, except more emphasis was placed on inventory control. MRP II software is capable of generating both production schedules, but also full stock inventory status, order materials to suppliers, etc.

During the 1990's a new type of software emerged, the Enterprise Resource Planning (ERP) software. The basic logic isthe same as the MRP II software, except it provides more accurate information.

The problems found by businesses during the 1980's was the sheer diversity of software packages needed to run a business. In a typical business you could have one type of software package to control your production control and associated records. You may have another software package to to carry out accounting functions. You use another package to hold sales records, another package to hold personnel records and yet another package to communicate between employees. The sheer diversity of packages meant problems in data accuracy and communication between employees.

The whole logic of ERP software has been to encompass all the business activities into a single business package, where all the business transactions are recorded. In essence a ERP is the total business package, it allows up-to-date reports to be generated at the push of a button.

THE MAJOR ERP PACKAGES

The major global ERP packages are those from:

Oracle
SAP
Baan
JD Edwards
PeopleSoft

Links to these web sites are available in the eCommerce Business Index section.

ADVANTAGES OF ERP

A single uniform source of information is used throughout a business. This should lead to a reduction in errors like insufficient inventory levels which could lead to unfulfilled orders which mean unpaid creditors, which in turn leads to poor cashflow management, which we call know leads to a business going under.

PROBLEMS WITH ERP

Problems with using ERP packages in your business include:

The high price of the software, associated license fees and annual charges which need to be adhered to.
There is a very high cost of training involved with most ERP packages, employees have to be trained and re-educated it can in the transitional phase cause a dip in morale.
If your business does go ahead with an ERP package you need to ensure all your records are correct and honest. An ERP system is only as honest as the data entered into it!.
Check all stock records, raw materials, wip orders, are correct. Its better to accept stock losses before a new ERP system is up and running than when it is up and running when it will not allow for stock errors. Stress this over and over again to your line-managers, as they are the ones that know which stock data is true and which is false.
ERP like MRP packages are often very rigid in design and wording, for example SAP is inflexible to changing labelling on its fields, any business considering adopting a new ERP type package must accept the new terminology that arises.
New ERP systems will require new skills to be used, this will mean additional expertise, therefore additional employees may be required.
The current ERP packages have been left a little sitting as regards the potential of eCommerce. Take SAP for example, an excellent package in its own right, but it will lack full internet capabilities until 2002.
As a result of ERP packages at present being unable to support eCommerce, businesses are currently having to invest additional funds into eCommerce packages which need to run side by side to the ERP packages.
Businesses which have embraced ERP often criticize the ERP software companies for taking excessive amounts of time to bring about change. The realities are often down to businesses buying ERP packages which were inadequate for their business needs. Check and make sure the packages your business decides to buy have full back up support, and that the vendor can supply your business with specialist programmers at the implementation stage.

CONCLUSIONS

Now it may appear that we are being a little harsh towards ERP, but having experienced the implementation of new MRP and ERP systems in both electronics and aerospace industries we feel the more problems that can be exposed the better businesses can be equipped to deal with them.

There is little doubt that the path towards ERP is the correct one for most businesses to follow, as it ensures errors are kept to a minimum, most ERP cut out human error as much as possible. If your business is thinking of buying an ERP make sure the package is flexible to change and mirrors your business as much as possible.

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