Enterprise Resource Planning term is derived from the Material Resource Planning (IMP). The aim of ERP is to integrate all the data and processes into a single system. To perform the integration (all data and processes into a single system), the ERP system uses the multiple software and hardware components. The unified database is one of the key components of an ERP system. These databases store the data for various System Module. ERP system uses various techniques and concepts to increase the use of organizational resources in order to improve the working process of the entire organization.
According to James O’Brien, “ERP is the technological backbone of e-business, an enterprise-wide transaction framework with links into sales order processing, inventory management and control, production and distribution planning, and finance.”
With the help of ERP, all the departments in an enterprise are able to share information and communicate with each other more efficiently due to the fact that ERP combines all the business processes into an integrated and unified software program, Before the implementation of ERP, each department computer system optimized according to the needs of that department. It uses. a single database to maintain the data. The main concept of the ERP system is to replace the old standalone computer systems of individual departments (having separate software that manages departmental function, related to manufacturing, finance, FIR, etc.).
So, employees from various departments such as purchasing, finance, and manufacturing are able to carry out functions, related to their own area using the software and can also use the enterprise-wide information to improve the quality of decisions. For example, a finance manager can use the ERP system to know the status of the shipment of the sales order (from the warehouse) to plan working capital management for the upcoming time.
Functions of ERP
1) Finance management:
All Activities of the business such as planning, production, marketing and so on are preceded by the financial module. In order to understand the finance function of the business, the knowledge of accounting, marketing, economic and production is necessary. Some of the important aspects of finance are financial decisions, investment decisions, and dividend decisions. Financial management follow both modern and traditional approaches for its proper functioning. The main task of Financial management is to acquire adequate funds and utilize it according to the interest of one or all.
2) Manufacturing and Production Management:
Sometimes the term ‘operations’ of ‘production’ is used in place of ‘manufacturing’. This is because the methods of modern production were first used in the manufacturing industries. These days, the production also finds a place in services like dry cleaning !hough it does not produce any tangible object. When production is viewed as a process, it becomes evident that services like dry cleaning starts with the utilization of resources like cleaning fluids, machines, presses and people and results in clean clothes that are thought of as products.
The main aim of the manufacturing module is to match the business process of the enterprise with the technology, in order to come up with an integrated solution. This module provides an information base, upon which the whole operation is running. It must specify business rules that govern the management of the entire supply chain process whether it exists within, between the facilities, or in the whole supply chain.
3) Sales and Distribution:
Using the Sales and Distribution module, the organization is able to get its business goals by taking key elements into consideration. Every organization has to maintain records regarding the orders, customers, and suppliers. It is necessary to deliver the product properly, once it has been billed. To determine the cost of the product, the company must have a well-defined pricing strategy. The purchase order has to be placed to the supplier at the right time, depending on the customer’s order so that the customer receives the proper delivery of the product. These functions are continuous in nature and thus proper monitoring is needed in order to ensure smooth functioning of the sales and distribution process. To ensure this, the concerned departments must be given necessary directions.
Also Read:- What is MIS
4) Human Resources Management:
One of the vital modules in an ERP package is the HR module. There are many enterprises that have replaced their existing HR management system with an ERP based HR module. These organizations are able to continuously monitor the activities of thousands of their employees in an automatic manner with the help of the HR module. HR module reduces the manpower in the HR team and speed up the various processes related to human resource management and also helps in forecasting human resource requirements, appraising the employees, career advancement, training, interface with financial management and effective decision making.
5) Plant Maintenance:
An integrated solution, having the ability to support the enterprise-wide operational needs of an organization is provided by the ‘Plant Maintenance module’. With the help of this module, it is possible to improve the processes as it contains an entire set of products that cover all the aspects of equipment or plant maintenance. The module supports numerous options with the help of which it is possible to structure the technical systems with the concerned object, type, and function-related views. It also allows navigation in a flexible manner. Data related to planning, processing, and history of maintenance tasks are documented in the system in a well-defined manner which further fulfills business verification requirements.
6) Material Management (MM):
Almost all the manufacturing companies prefer the Materials Management Module over any other module of the ERP package. Some of the most common problems that are faced by these enterprises are the inabilities to meet the deadlines, maintenance of the stock in a proper manner and to provide proper service to the customers. With the help of the MM module, it is possible to monitor and manage the inventory properly, thereby to cope up with the foresaid issues. For any manufacturing company, the suppliers and the customers are the backbone. So the top management can use the reports, generated by the MM module, to take suitable steps to retain the customers and suppliers to improve the company position.
7) Quality Management:
The ISO 9000 series and other standards define the functions and elements of the quality management system. These elements are supported by the Quality Management module of the ERP system. According to standards of quality management, it is necessary that quality management practices propagate through all the processes in the enterprise. The functions are complemented by other modules that are integrated in the ERP system. Determining the task priorities, the shift from production to production planning, product development to procurement and sales and distribution of the product, are some of the functionalities of this module.