Enterprise Resource Planning (ERP)

ERP integrates the control of your production, distribution, and finance

The availability of faster computers, database, computer networking, and client-server software architecture have enabled company nowadays to have integrated information system. For manufacturing companies, these factors have given birth to a class of software called Enterprise Resource Planning (ERP). In essence, ERP is software that controls production and distribution of your goods, along with financial accounting involved in the operations. It has been proven to be so useful that even distribution companies make use of the distribution and finance control integration available in ERP.

In companies without integrated information system, each department carries their own records, some of them redundant. One example of this is in recording of production output. Production Planning and Control (PPC) department records production volume, warehousing records the finished goods arriving in the warehouse, while accounting department produces stock card to record financial value associated with these goods movement. Essentially the same event, but three separate processing efforts are required. Reporting can also be a troublesome task. Compiling cross departmental reports is a gargantuan task involving numerous personnel and long period of time. It is hard to make timely informed decision based on such data. Lastly, to run a coordinated effort in day to day operation means extensive paper trail and communication among personnel in multiple departments.

With ERP, a company has pool of interconnected information from many departments. This integration enables, for example, warehousing department to know beforehand how many finished goods are inbound and finance department to see value added in manufacturing process, all from the quantity produced and work hour consumed data entered by PPC department. It makes it possible for sales representatives to check stock data, available manufacturing capacities, and financial credit limit, while receiving purchase order from customer.

ERP also provides uniform platform to work on across production, distribution (warehousing, sales, purchasing), and finance departments. It not only links the interdepartmental information together, it links their operations. It makes it possible for PPC department to know when raw materials should be ready, when production should start, and when finished goods should be ready, right after sales representative sends sales order acknowledgement to customer. As PPC department confirms the need to provide raw materials, buyer is notified to source raw materials for the date they are required. Warehousing then will prepare to receive the purchased raw materials while finance will prepare the necessary payment after materials received. This integration accelerates the pace of interdepartmental cooperation.

With information from multiple departments stored centrally, it is very easy to compile these into complex reports encompassing data from multiple departments. Once compiled, subsequent generation of the reports will only takes minutes, even seconds, instead of days in companies without integrated information system. It allows the making of informed decisions based on real time data.

More than that, ERP gives a company a solid foundation upon which to launch initiatives that will propel the company higher. ERP from leading vendors usually carries with them the knowledge of best practices for many parts of company operation. As a result, it provides a template to which a company can adjust itself in order to be on par with the best in its field. Such a process is called Business Process Reengineering (BPR). Having ERP is also one of the key factors in ensuring that a company's venture into electronic commerce (e-commerce) will be successful. E-commerce is a natural extension to ERP. With ERP acting as the backbone, order information can flow between e-commerce front end, for entry and status tracking, and ERP back end, for processing and delivery. Without ERP, however, adding e-commerce simply means adding loose component into an already chaotic pool of multiple disconnected information systems.

In today world of global competition, every little advantage over competitors is important. Having integrated information system like ERP gives employees access to information needed for day to day execution, knits the operation of multiple departments together, eases analysis of company performance, and provides a stepping stone for further improvements. ERP integrates the control of your production, distribution, and finance. Those are not little advantages.