As we all understand ERP means Enterprise Resource Planning (ERP). It is a single system which contains the data and processes for the various functions of the organization in well integrated manner. ERP has a number of components and modules and often these are implemented module by module. The implementation methodologies of ERP also include the ‘Big Bang’ theory where the whole organization goes live in one go – all modules and all locations. Of course there are number of other methodologies between these two extremes.
Most of these systems started as the Material planning and scheduling or Material Resource Planning packages helping industry/manufacturing units to work out and schedule material and jobs required to meet the production plan. Later these were expanded to cover the other functions – Finance, Marketing, Sales, and Personnel etc. etc.. Subsequently Supply Chain Management (SCM) systems were added on one side, the Customer Relation Management (CRM) systems on the other side and Knowledge Management (KM) systems for capturing knowledge base which resides with the different functions and employees to automate almost all operations and functions of any organization. As is clear from the above it is an enterprise-wide all encompassing (Human Resources, Supply Chain Management, Customer Relations Management, Financials, Manufacturing functions and Warehouse Management functions etc. etc.), well integrated, comprehensive system. By the very definition of ERP all applications/systems that once existed as standalone applications do not continue their independent existence but get merged in ERP system just as the rivers merge into the oceans.
Integration is certainly the key feature of ERP packages. Integration supported by the security system ensures easy yet secure, ‘role based’ access to the different players – employees (workers, office staff, supervisors, management), customers, suppliers etc. etc... It also ensures that the same unified system is approached by all concerned not only for information but also for discharging duties and functional responsibilities. In this system the work-flows are managed so that they smoothly flow from one unit to another or form one level to another level or from one person to another as may be required by the job on hand to ensure that everyone works in harmony – perfect unison. Such a system obviously has advantages and disadvantages:
What does an ERP system do for the organization?
It is difficult to make a comprehensive list and only a few of them are listed below:
- It gives a totally integrated well-knit system;
- It streamlines different processes and gives smooth workflows;
- It makes way for easy, secure and role-based sharing of data and information;
- It improves effectiveness and efficiency;
- It ensures better tracking, forecasting, planning, improved customer service; and
- It eliminates redundant functions and lowers costs
Is it really so smooth?
We all know nothing happens easy – like a dream. There are a number of reservations people have about ERP too. Some of them are listed below:
· ‘Not invented here’ syndrome - how can anything work here if it is not home grown? There is always a sufficintly large group, mostly conssting of the current custodians of computers and computers systems and they take introduction of ERP system as an insult believing that the ERP has come because they could not maintain the older systems better or more suited to the internal customer’s needs.
They do not realize that no matter how well you maintain your bullock cart or horse carriage they will be replaced by automobiles, locomotives, ships and aeroplanes and supersonic jets. It has to be appreciated that older systems which were designed to meet the needs of the earlier times cannot meet the needs of the changing times. Those who have read ‘Who moved my Cheese’ will appreciate that this group does not realize that the ‘Cheese’ has moved.
· ERP costs are prohibitive: This is another 'very strong argument' against the ERP systems. However, cost is always matter of perception. There is an old story about an Arab Sheikh –a diamond merchant, who lost his way in the desert. He had run out of his stock of water. At one point he lost all hopes and realized that he cannot do anything but just wait for his end to come. Fortunately his prayers were heard. Another Arab Skeikh, a cloth merchant happened to pass by. He was willing to spare some water for this dying diamond merchant in exchange of one good diamond. Of course the deal was struck and both were happy and went on to their way. Each with a happy story. The cloth merchant was happy that he sold off one pitcher of water costing half a Dinar for one diamond. The diamond merchant was happy that he had to part with only one diamond to save life and not the full collection of diamonds.
Those who think that ERP are expensive and keep flogging the 'legacy systems/home grown systems', make the mistake of not comparing the costs of implementing these systems with the costs of opportunities missed and cost of working at sub-optimal level.
· Customization in many situations is limited: Those who find this as a shortcoming do not realize that this is how the system is designed and it is the strength of the system - 'no one should be allowed to tamper with the system and to puncture it'.
There is a story that once a man, who was used to wearing a ‘Dhoti’, was asked to wear a pant. He wanted the pants to be loose enough so that he could wear a dhoti under the pants. He was to afraid of wearing pants fearing that it might slip down. So as a measure of safety he wanted to wear the ‘dhoti’ underneath. There is perhaps no point in building customizing oversized ‘pants’ to suit the comfort levels of this group. There are a number of such people around us just that the symbols/variables (i.e., 'pants') have changed.
ERP's provide for all the good practices. But it is difficult (in fact impossible) to customize it to work sub-optimally or to adopt a bad/sub-optimal practice.
· It is difficult to reengineer business processes: any change is difficult and change for the better is more difficult. If any process has outlived its live/utility it must be reengineered. ERP offers a God sent an opportunity to do a ‘zero’ based review of all processes.
Is it all or nothing situation?
No it is not that you have to face ‘all or nothing’ situation. It is well accepted fact that the ideal situation is that one ERP system covers the whole organization – all functions, all ‘ranks and files’. However, there is another way available to us. It has been adopted by some of the very large organizations. They have the core ERP system at the heart and over that system they built interface to the external systems which existed in the organization to suit the needs better. Of course this would mean that one has to spend extra time, energy and efforts to fit the components and to make them work in unison.
