The Essence of ERP
ERP is an outcome of 40 years of trial and error. It has evolved as a strategic tool because of continuous improvement in the available techniques to manage business and the fast growth of information technology. Prior to 1960s, the business had to rely on the traditional ways of inventory management to ensure smooth functioning of organisation. The most popularly known amongst them is EOQ (Economic Order Quantity). In this method, each item in the stock is analysed for its ordering cost and the inventory carrying cost. A trade off is established on a phased out expected demand of one year, and this way the most economic ordering quantity can be decided. This technique in principle is a reactive way of managing inventory.
A D V E R T I S E M E N T
How does an ERP system make it all happen? The essence of it is the fundamental premise that the whole being greater than the sum of its parts. The traditional application systems, which the organisations generally employ, treat each transaction separately. They are built around the strong boundaries of specific functions that a specific application is meant to cater. For an ERP, it stops treating these transactions separately as stand-alone activities and considers them to be the part of the inter-linked processes that make up the business.
Almost all the typical application systems are nothing but the data manipulation tools. They store data, process them and present them in the appropriate form whenever requested by the user. In this process, the only problem is that there is no link between the application systems being used by different departments. An ERP system also does the same thing, but in a different manner. There are hundreds of such data tables, which store data generated as a result of diverse transaction, but they are not confined to any departmental or functional boundaries, rather integrated to be used by multiple users, for multiple purposes and at multiple places.
The first of these is flexibility. Many companies need to change their
operations and transactions on a regular basis, and the ideal ERP system must be
able to adapt to these changes. Client server technology is important, because
it will allow the ERP system to operate on multiple database back ends, and it
will do this through a process that is called ODBC, or Open Data Base
Connectivity. Another important feature of ERP systems is modularity. The term
modularity is used to describe a system that is "open." The module must be
capable of being detached whenever it is needed to work with other system
modules. It should also be capable of supporting multple computer platforms.
Most companies will use a variety of system platforms, and they may also be in
need of third party platforms. The ideal ERP system must be capable of offering
this. It is also important for an ERP system to be comprehensive. It must be
able to support a large number of different functions that are related to the
company. In addition to this, it must be calibrated for a diverse range of
companies and organizations. When one is looking at the quality of an ERP
system, they must look beyond the company. Instead of limiting it to boundaries
within the company, they should make sure it supports the internet and other
elements within the company. It is also crucial for the organization to look at
best business practices. A collection of these business process should be used
on an international scale. The overall goal of a company should be to take the
business processes of the physical world and apply them to computers.