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What Is ERP, Anyway?

Written By: David Clark
Published On: November 26 2007

We get asked this question a lot, so I thought I'd provide a brief overview.

Enterprise resource planning (ERP) software unifies traditional management functions within a coherent, integrated system. These management functions may vary from product to product, but comprehensive ERP software applications encompass the following areas:

• sales
• marketing
• human resources
• customer care
• finance
• manufacturing
• supply chain management
• IT management

The integration of so many management aspects means that sophisticated planning is required for ERP evaluation and implementation. An ERP evaluation process for a small to medium business (SMB) can be planned and delivered within three months; however, a complex implementation for a large company can take years.

While many ERP systems are applied to non-manufacturing environments, many others provide the specialized functionality required by different manufacturing industries.

Discrete ERP systems, for example, typically address the manufacturing of distinct items, such as auto parts or chairs. Process ERP systems, on the other hand, address issues for mixing, separating, forming, or performing chemical reactions (as for paint manufacturers or refineries).

Why An Effective ERP Evaluation Process is Vital

ERP systems can boost your bottom line. But an ineffective ERP evaluation and implementation can bring a company to its knees.

• Due to problems with an ERP module rollout, medical care product manufacturer Invacare reported a $30 million (USD) shortfall for the fourth quarter of 2005.
• Grainger, a Fortune 500 distributor of manufacturing supplies and spare parts, lost $19 million (USD) in sales and $23 million (USD) in earnings during the second and third quarters of 1999. The culprit: Grainger’s new ERP system, which was counting more products than were actually on hand in the company's warehouses.
• In 1999, Hershey launched a $112 million (USD) dollar ERP system. Because of various implementation snafus, Hershey was unable to effectively ship its products to retailers for Halloween and Christmas of 1999. The result: a 19 percent drop in 1999 Halloween candy sales, and a 12 percent drop in 1999 revenue overall.

Benefits of ERP
Selecting the right ERP system can help get you on the right track:

• efficient handling of order processing and production scheduling
• management and analysis of business processes within an interactive environment
• synchronization of activity within departments
• the ability to monitor, share, and track information throughout the organization
• accurate records of warehoused goods
• dynamic control of raw materials purchasing
• data entry process automation
• harmonization of order entry, quote processing, and reporting
• reduction of assembly-line downtime, inventory carrying costs, and production costs
• maximum value from company resources and equipment

Want to find out more about selecting the right ERP solution for your organization? Visit our ERP Evaluation Center for more information, as well as an overview of the ERP products currently available on the market.

Don't forget, you can also get a free ERP shortlist by clicking on the "Start Your ERP Comparison" button.

Want to get in touch with our industry analysts for questions regarding ERP or any other software? You can--just go to our Ask the Experts page and drop them a line.
 
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