It was in the 1990s that the term Enterprise Resource Planning – usually referred to by its initial letters as ERP – was introduced to replace Manufacturing Resource Planning (MRPII). The principle of this business software application suite is the same as MRPII, the name change reflecting the growth of the software over the years.
Essentially, ERP systems manage information from all departments of an organization to bring together data that is collated in one central database. The original software had programs that managed inventory and developed material requirements plans to which a number of other functions were added. These included master planning and forecasting, purchasing, production control, financials and costing. All these functions contributed to an integrated suite that manufacturers could rely on to gather data in one place and communicate information across the business.
The usefulness of ERP
Since MRPII, ERP has developed a range of additional integrated applications to address other core parts of business operations. It is a module-based solution, meaning that customers can pick and choose what suits their own needs, with many opportunities for customization of the software.
Applications can include warranty tracking and field service, customer relationship management (CRM), supplier relationship management, shop floor data collection, distribution planning, e-commerce and web-based collaboration. It is up to the individual organization to determine the most appropriate applications to integrate.
ERP is not solely used for the manufacturing industry, with integrated solutions being used in the education sector, by service providers and hospitals, and by businesses in a range of other sectors, such as construction.
The central database is made highly secure, and managers and others who need access to real time data to track how their department or the overall business is operating, can receive immediate, accurate updates.
Development of Cloud ERP
One drawback for smaller businesses was that ERP could be expensive to implement initially, with the necessity for capital outlay on new servers and computer systems, and considerable expense for training staff properly. Solutions to cut those initial costs have led to developments for web-based software. Online ERP is hosted by a provider offsite in the Cloud, and customers pay only for what they need, without the requirement for major hardware additions. This Software as a Service (SaaS) has the added benefit of being accessible from anywhere, so it is particularly useful for managers and sales people who have to do a lot of traveling. Another bonus is that it can be accessed by various devices, including tablets and cell phones.
It is essential to discuss with an ERP provider exactly what end use is required, so that the right system can be implemented. Some failures have been down to poorly developed software or long customization processes.
Once the decision has been made to go down the ERP route, it helps to have a champion to motivate staff who may have to make significant changes to their previous working practices. Low staff morale can be a serious barrier to integration of ERP, so keeping them in the loop and providing high quality training can help to mitigate the situation.