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What Is ERP ?

Among the issues facing many business is the capture and use of data not only for regulatory purposes but also for accountability of resources and the efficient and proper use of those resources as well as use of data for planning purposes. Due to lack of resources or time, the solutions to these problems are often the best value software we can find or general business software like spreadsheets and so on. Due to developments in technology, the more successful firms have taken advantage of more comprehensive and yet cost effective software systems known as enterprise resource planning systems.

This solution to the information needs of modern day management is actually the integration of software to capture the data in the finance and operations areas. This is not to say that all the information needs in the manufacturing and engineering areas will be replaced by enterprise resource planning systems (ERP). The more technical problems and solutions will continue to be best handled by more specialist software fairly independent of business systems. ERP only focuses on the business and management aspects of operations and finance, such as supply chain management, equipment maintenance, asset control, labour efficiency, materials usage, placement of orders, besides capturing the more traditional finances of the firm.

The question naturally arises why we must consider an ERP system and not just any software that suits our purpose. ERP systems are designed with the knowledge that certain performance measures are very common in all businesses and the data for these are shared by executives in many departments and so can be captured in a way that satisfies most parties and avoid duplication of data throughout the enterprise. For example, the backlog of purchase orders in a firm are of interest obviously to the purchasing departments in terms of proportions delivered on time as it represents overdue orders and it is also of interest to the sales or engineering departments as it may imply potentially sales or maintenance orders not serviced and it may be of interest to the finance department who may have committed funds to finance it. All this is based on the performance of a single order by a single vendor and need only be captured once in an ERP system whereas under the older systems several systems captured it.

Besides helping to control a business's operations, ERP systems today have powerful simulation and planning capabilities as orders and inventory balances for a product for example can be simulated for several periods into the future and help ensure we do not over or under commit resources to our plans. As businesses grow and reach some size, it becomes too difficult to manage by rules of thumb that work for smaller enterprises. So unless one employs systems like a lot waste and inefficiency and goes undetected. In more advanced operations, ERP systems are a key factor in the level of productivity and competitive strengths of the company.

ERP is not a substitute for good management. Expensive installations of ERP systems have known to flounder and be totally ineffective in the absence of good management and design of management control systems. Unlike engineering systems, management and economic systems are far more complex and will continue to rely on managerial judgement and decisions to be effective and adapt and grow with the business. Part of this management is the clear and unambiguous delineation of objectives, which are dependent as much on strategies as on control engineering.

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