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Andrew Sutojo

Enterprise Resource Planning 

What is ERP?

Enterprise Resource Planning  is a software that attempts to integrate the relationship with all company departments and functions as a single computer system. ERP software help companies to control business activities, like sales, inventory management, payroll, E-commerce, vendor integration accounting, and purchasing. ERP systems are often called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management systems that deal directly with the customer.

In the beginning of business computing, companies used to write their own software to control their business processes which is an expensive approach. Since many of these processes occur in common across different types of business, common reusable software may provide cost-effective alternatives to custom software. Thus some ERP software caters to a wide range of industries from service sectors like software vendors and hospitals to manufacturing industries and even to government departments.


Implementing ERP system in a company usually involves  a lot of human resources, and often costs millions of dollar for bigger companies, especially for multinational corporation. Enterprise resource planning systems are often closely tied to supply chain management and logistics automation systems. Supply chain management software can extend the ERP system to include links with suppliers. To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies.  A business consultant studies an organization's current business processes and matches them to the corresponding processes in the ERP system. Technical consulting often involves programming. Most of ERP vendors are allowed to change change their software to suit the business needs of their customer.

According to wikipedia, there are couple factors that we should monitor in implementing an ERP system. These factors are:

  • User Resistance/Revolt - Users who fear being downsized may sabotage the system.

  • Mismatch between ERP system and Organizational Culture - If a system attempts to implement best practices inappropriate to the organization, the system may suffer from "culture clash" consequences.

  • Inability to control technology

  • Illogical processing

  • Inability to stop processing quickly

  • Cascading errors

  • Repetition of Errors

  • Concentration of data

  • Inability to substantive processing

  • Concentration of responsibility

Selecting the right system

To derive the benefits of an ERP implementation, a number of considerations must be evaluated. These include considering:

  • both the current and future/growth business requirements (scalability);

  • the appropriate trade-off between application software complexity and related user needs (usually a mid-market vs. high-end software application acquisition decision);

  • an assessment of the "time-to-benefit" for key business processes in the organization's strategic plans;

  • the key metrics that indicate relative application software complexity and time to benefit, such as the historical ratio of consulting dollars to initial license fees (the application software vendor and/or consulting firm can provide this);

  • the software version of the application being selected (leading edge vs. bleeding edge);

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  • the stability of the software vendor;

  • the ability of the organization to devote sufficient resources (people, amount of dedicated project time per person, minimum funding) over time;

  • the involvement of key users in the planning process (when key players "plan the battle" they don't "battle the plan");

  • producing a specific, measurable, achievable, realistic, time-oriented project plan and budget; and

  • selecting application software certified implementation consultants with relevant industry experience.

    Importance of ERP

The integration of the business processes improves coordination between, stream workflows and processes that give benefits to satisfy customers by delivering customers orders "just-in-time" and keeping them to track their status order  rather than keeping customers waiting without enough of information. ERP has the effect of making an enterprise more time-sensitive. Another benefit of is marketing opportunities. ERP penetrates one segment after the other and addresses solutions to many debacles existing in an enterprise.

Different ERP systems have been made to facilitate organizations in Enterprise Resource Planning. Leading ERP giants making ERP systems are Microsoft, Oracle, PeopleSoft and JD Edwards, SAP AG etc. These systems link all the supply chain managements in the company to provide a better, fast and accurate information that available to everyone.

They also enhance management decision making by forecasting the sales during a certain period of a certain product. Management would have a vision to make a decision whether to increase or decrease production of that particular product which would help save resources from being wasted which could be used for making other products. They also help managers make decisions about introducing some new value added features to an existing 'hot-demand' product to enhance sales further. This is how product quality is also enhanced. Inventory cost reduction must be given a great importance in every organization. ERP helps reduce inventory costs by better planning and forecasting of requirements. ERP system also helps getting higher rate of returns in short time period. Therefore, ERP is an important tools that increase company revenues and customer satisfaction.