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What is an ERP System and Its Features

by Nathan Zachary

     An ERP is a computer system for planning business resources. It is a set of programs that allow the integration of the various functions of a company, especially those related to production, logistics, inventory, distribution and accounting. An ERP works as an integrated system and although it is divided into modules, it forms a single program that accesses a central database. To know more about ERP and its Features, you should continue reading this article.

ERP system

     ERP or Enterprise Resource Planning systems conform as the complete solution for any company, because of its enormous potential, but mainly because of the flexibility it provides to the entire production process. Although the acronym ERP stands for “Enterprise Resource Planning”, an ERP system is in no way associated with its name, since it does not plan or create resources, but the business part (Business) is its immediate purpose and ambition.

     With ERP, it is intended to integrate all areas and functions of a company or organisation in particular into a single computer system that must serve and meet the specific requirements of each of these areas. Its primary purpose is to develop a single software system that is useful for the needs of accounting operators as well as personnel and warehouse operators for material inflows and outflows and related guides.

It is normal for each region or department to have its own IT systems, which have been adapted to the specific requirements of each sector. An ERP system usually blends them all into a single, integrated software program that runs on a single database so that different departments can more easily share information and communicate with each other. This sector proximity can be very beneficial to the company if the software is installed correctly.

Let’s take a request from a customer as an example. Regularly, when a customer places an order for products, a process begins from shelf to shelf, from desk to desk, from region to region, undergoing systematic variations and different coding as it passes through the computer system of each department of the company.

     All these transitions and variations create delays and lost orders, and all the different coding of the various systems leads to errors. Furthermore, there is no one person in the company who knows specifically what state the order is in at this stage of the process, as it is not possible, for example, for customer service to access the warehouse’s computer system to find out whether the order X has already been packed, and if already shipped, what was the date. The usual answer is “You need to contact the store”.

For reasons such as the above, it is necessary to carry out appropriate resource planning through the so-called business information systems. In this sense, the ERP planning system arose from the need to include all the information concerning the entire production chain of the companies, in order to offer reliable data in real time.

Historical evolution of ERP software

     ERP systems have developed a vast curriculum for almost four decades, in which they have accumulated some failures but mostly successes. Its initial advancement was as a strategic tool in times when information technologies were also evolving and through continuous improvements in administrative techniques.

     Prior to the 1960s, and in order to ensure proper organizational performance of companies, most businesses relied on inventory management techniques. The most popular among them was the EOQ Economic Order of Quantities.

     In this technique, each product in the inventory was analyzed according to the order cost value and the storage cost, that is, the annual sales are usually calculated to optimize the final cost of the products and their quantity. In the 1960s, a new technique emerged called MRP Material Resource Planning, a system that will have its second stage in the 1980s, which we will discuss below.

     It was an active method of inventory management and planning, investigating the search of finished products through a specific production schedule and converting it into an organised order table and production orders, without neglecting the quantities in stock.

     MRP is simple and logical, but in a real case, it produces a huge amount of data, which makes it very cumbersome to implement on a computer. It becomes very tedious and slow, especially if the process is done manually, so the use of computers is necessary to make it work properly. It should be noted that MRP has been successful in the following areas:

  • The reduction of inventory quantities in the warehouse.
  • The reduction of production and distribution times, since with the increase of coordination, the delays were thus reduced.
  • Increased efficiency at all levels.

     This technique proved to be a wonderful method of inventory management, but it was often wrong in other related organisational areas. With the advent of the 1970s, a new technique appears similar to MRP, but altered at the level of the original logic operation. It was called CLMRP Closed Loop Material Resource Planning.

Fundamental Characteristics of ERP

     Knowing the features of an ERP is fundamental, as it is a set of highly complex but integrated applications that usually integrate various company functions and resources. An ERP system incorporates cross-functional functions that are not typical of other computer systems, such as the synchronization of information, its standardization, as well as its complexity and modularity.

     Over time, new functional aspects have been incorporated into the ERP software evaluation process. As has been pointed out, ERP is a complete system of great complexity that includes functions and resources. Therefore, it must provide secure, reliable and real-time information. Added to its modularity, performance of core functions, data synchronization and other contractual requirements, there are a number of aspects of an ERP that need to be evaluated.

Functionality

     Functionality is the quality of the system to provide the resolution of requirements represented as user requests. To evaluate this characteristic, it has been divided into four sub-characteristics:

  • Accuracy
  • Air conditioning
  • Interoperability
  • Invulnerability

     The adequacy of the functionality of an ERP software must provide a solution to, among others, requirements known as:

  • Funding Procedures
  • Crew management
  • Supply Chain Processes
  • Production processes
  • Customer Service Procedures

It must also cover specific procedures when used under certain conditions.

Reliability

     Reliability is the quality of software to deliver services at a specified level of performance under specified conditions over a specified period of time. Reliability has three sub-characteristics:

  • Expiry
  • fault tolerance
  • restoration

     Reliability could be described in other terms: the probability of a faulty ERP installation due to a given problem over a period of time.

Usability or Ease of Use

     Ease of use is the quality of software so that operators learn it, use it, and find it attractive when used in specific conditions. Ease of use has three sub-characteristics:

  • Understanding
  • teaching
  • Functionality

Efficiency

     By efficiency we refer to the ability of a system to provide a certain performance in relation to the resources used, under already defined conditions. To quantify it, three subcategories have been defined:

  • behaviour
  • Employment of resources
  • Performance

Ease of Maintenance

     Ease of maintenance is the quality of the program that you need to edit with minimal effort. It consists of four sub-features:

  • Simplicity of Analysis
  • Simplicity of Variations/Modifications
  • Stability
  • Simplicity test

Portability

     It is the quality of the software that is transferred from one environment to another. Therefore, management software must be able to run on different operating systems, installed in different departments or organisations, and on different kinds of hardware. Portability incorporates three sub-features:

  • Adaptability
  • installation
  • Coexistence

 

Compatibility

     The ERP system is a series of functional models based on modules, each of which has its own particular functions. To perform a specific function, data must be able to be exchanged between modules or with external programs. In other words, compatibility refers to the quality of ERP system modules to exchange data with each other and with other applications.

Complexity

     The fact that an ERP is complex is due to the interaction between the different modules. It will be necessary to resolve this complexity at the level of programming, as well as in maintenance, as well as the requirement of the end user to move between different modules.

Articulation

     All modules should be implementable according to the requirements of each of the customers and show compatibility with their resources.

Reuse

   As such is defined the quality of software code that will be used in one project or another without requiring new development. The quality of reuse is usually assessed for different reasons, among which stand out:

  • Shorter development time frame
  • resource economy
  • Tested and validated features, ready to use

     Any of the individual characteristics (such as adaptability) are broken down into attributes. A characteristic is a value that can be verified or measured in the software product. The attribute values ​​of an ERP are not specified in the standard, as they tend to vary between different software products. The best way to ensure that the ERP to be installed meets business requirements is through a software evaluation and selection process.

Major ERP software providers

     There are many companies that provide ERP systems, which provide a whole range of computer products and solutions. They have a whole range of different options for their customers, from sales, installation and customization to maintenance and update services.

Partial or complete Outsourcing of the entire installation and configuration process is quite common these days, due to a lack of special techniques in the companies in question or to increase the speed of the entire process. Here are some of the major companies that provide ERP systems worldwide:

SAP

     It was created in Germany in 1972 by five engineers working at IBM and today it is the largest company in this field. Its R/3 release system has improved the management of production and management processes, logistics and personnel. Today, after more than 3 decades, it already has more than 12 million customers, 64,500 installations, 1,500 partners and 23 computing tools. It is considered the largest ERP distribution company in the world, thanks in large part to being one of the pioneers.

PeopleSoft

     It ranks second as the world’s largest distributor, with its most outstanding product being personnel management units. Peoplesoft is currently in the process of channelling its products into the service sector, with cost control systems. SAP and Peoplesoft have continued success due to the broad offering of new functionality to their customers, as well as the continued growth of customers representing world-class organisations.

Oracle

     This company has been designing and selling ERP applications since 1987, with most of its customers being organisations linked to the production and consumption of products, making it a direct rival to SAP. Interestingly, almost 80% of the time, SAP software runs on top of an Oracle database. However, Oracle has been facing some problems in recent years due to the change in its business structure.

Baan

     It is an original Dutch company and a strong rival of SAP. Lately, like other providers, it has paid special attention to the small and medium business market, which results in a huge variety of products that provide rapid financial return.

JD Edwards

     Despite being in the software market for many years, they only became globally recognized a few years ago. Ever since they launched the OneWorld version of their ERP software, they have achieved a significant share of the global ERP market.

Limitations of ERP systems

     Despite the enormous virtues that usually characterize ERP systems for improving the production processes of organizations, it is still true that the implementation of this type of software also entails a series of disadvantages that can be inconvenient for the operation of a company.

     We mentioned earlier that the primary benefit of ERP systems is that they provide a unique tool that enables the interaction of the different areas that make up a company. This usually translates into reliable, accurate and timely information that will assist in the decision-making process to improve production and reduce costs by leveraging all of the organisation’s resources.

     However, ERPs can also present some limitations and obstacles to the evolution of processes, causing future problems in operations. It should be noted in this regard that most of the inconveniences that arise in companies when implementing an ERP system are often due to poor staff training, lack of appropriate corporate policy, insufficient software updates and inappropriate investments.

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