Understanding Enterprise Resource Planning - For Engineers

ERP or Enterprise Resource Planning is a term which I believe is hard to miss if one has anything to do with any business process. Otherwise also any person who has any interest in business organizations, their strategies of growth, and their path to ultimate success will know the role of ERP systems in making a modern organization. In today’s competitive world an efficient and effective ERP system can make a huge difference in any organizations growth story.

#-Link-Snipped-#To understand ERP let us understand a simple business process of a shopkeeper selling goods to customers. In a typical process he orders different goods in various quantities to his dealers, and then he receives them and sells it to his end customers. He collects payment from customers and pays his dealers back the amount he owes them.

Now to carry this process efficiently he needs to first anticipate the quantity and variety of different goods likely to get sold in a month, place order and coordinate with dealers for receipt of goods, record all the financial and physical transactions with customers and dealers, link these transactions to his accounting books for tax liabilities etc.

With a small shopkeeper selling around a 10-20 items and catering to a small locality of 50 households these activities can be managed by a human with some effort and meticulous recording. But just come to think about any big organization such as an automobile company where thousands of parts are sourced from hundreds of vendors, assembled and then sold to millions of customers; these activities are beyond human capabilities and needs computing and storage capabilities of computers. It is here in managing these types of business processes ERP is required.

A typical ERP system is an integration of various business processes each catering to various areas of a value chain of an organization, with information systems. For a typical ERP system in a manufacturing organization these areas could be manufacturing, financial, human resource, supply chain management, customer relationship management etc.

A database forms the central part of any ERP system. Thousands of entries are created, updated, deleted, and retrieved from this database per day, as a result of various business processes interacting with this data and with each other.

With this database and business processes integration in place, it is just a matter of clicks on mouse to perform any business operation and get live updates about any desired detail related to any area of business since storage and computing abilities of modern computers make it a cakewalk.

An effective ERP system should have a very powerful information system. It should allow a user to do all the relevant analysis for business purposes.

With a good ERP system it is very easy for any organization to plan, implement, monitor and improve any business process and improve its top line although cost of implementing ERP does not justifies its implementation for a small business.