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Enterprise Resource Planning

Enterprise Resource Planning aims to unify all the processes and data of an organization. This integration is achieved using multiple components of software and hardware. There are different system modules that are stored in a single database. Enterprise Resource Planning initially was used in a manufacturing environment but it is now applicable to all forms of businesses. The modules of an Enterprise Resource Planning are Supply Chain, Manufacturing, Customer Relationship Management (CRM), Finance, Warehouse Management and Human Resources (HR).

Before implementing ERP in any organization, some fundamental questions must be asked:

• Which existing processes are important and why?
• Does the existing system meet the organizational goals?
• If change is implemented, who will be the stakeholders?
• Who will champion the change?
• What is the business culture of the firm and what are the strengths of such a culture?
• What challenges are involved with the proposed change?
• How will change management be handled?

Manufacturing module is comprised of Bills of Material, Engineering, Capacity, Scheduling, Quality Control, Workflow Management, Manufacturing Process, Cost Management, Manufacturing Flow, and Manufacturing Projects. Supply Chain Management is comprised of Inventory, Purchasing, Supply Chain Planning, Order Entry, Supplier Scheduling, Product Configuration, Claim Processing, Inspection of goods, and Commission Calculation. Finance module is constituted by General Ledger, Accounts Payable, Cash Management, Fixed Assets and Accounts Receivable. Human Resources is comprised of Training, Payroll, Benefits, Time & Attendance form a part of the Human Resources module.

ERP does not handle the front end process, that is, it is not directly involved in sales. Rather it takes a customer order and provids a road map that fulfills the order in an automated manner. People from all departments have access to the same ERP road map. When they finish doing their part of the job in the road map, they update the system and pass it on to the next department in the process flow. A good ERP implementation would take anywhere between one to three years to transform a business. The average Total Cost of Ownership for an ERP is $15 million, the lowest is $400,000 and the highest is $300 million (according to a survey conducted by Meta Group). The hidden costs involved in the implementation of ERP are training the employees of a whole new range of processes as well as software interface; integration and testing as well as custom designing of the newly developed ERP so that the system meets the requirements of the firm; data conversion involves bringing together of discrete pieces of information and placing them under a unified whole system; waiting for Return of Investment is the longest wait for those who have put in a lot of money for the implementation of ERP.

ERP creates value in a firm by employing the use of best practices, enabling the standardization of an organization, eliminating asymmetry in information, providing real time and on line transformation, allowing simultaneous access to the same data in order to help planning and control, and facilitating intra-organization as well as inter-organization collaboration and communication. One study has shown that SAP R/3 is used by 60% of all multinational firms. 50% of the revenues of SAP is generated by Small and Medium Enterprises (SME).

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