The ERP full form refers to the integrated process implemented by the companies for an amalgamated management principle enabling the smooth operation of the company using specialized software and technology.
Erp Full Form
The full form of ERP is Enterprise Resource Planning which is a practice well implemented and quite rigorously followed in the corporate world.
Uses of ERP
An ERP system has some basic functional areas, which enables the company to use the same in providing efficient management. Some of these are
Financial AccountingÂ
In this regard, ERP plays an important role. Not only it helps to organize the general ledger of the company, keep track of the assets of the company, but it also takes care of other financial computation aspects such as cash management, vouchering, receivables, and payments and, in totality generates financial consolidation for the entire company.
Management Accounting
All the financial aspects, which are key decisions taken by the management, fall under this category. Budgeting and Costing, and other such key elements are set by the management by using Enterprise Resource Planning.
ERP is a system that has numerous databases embedded in it. Using these databases, it can be easily compared how the budget has undergone a change in respect to the expenditure of the company in the preceding fiscal year and also make future projections about the same. This collated information helps the management to make informed decisions.
Human Resources
The most vital resource of any company is its human resource. Therefore the selection of the same is done after extreme scrutiny and through several rigorous processes. All the allied activities of the human resource sector i.e., recruiting, training, rostering, payroll, retirement plans, are all achieved by Enterprise Resource Planning.
Also Read: Turkey Creek Middle School
Order processing
This is extremely practical in today’s world of online shopping. Online shopping sites and their platforms provide top-notch order processing services. The entire process of placing the order to the payment for the order on delivery is done through Enterprise Resource Planning. Other aspects such as pricing, inventory, shipping, and sales commissioning are all done by ERP.
Supply chain management
The entire process of supply of the product and all the other activities that go with it are done through Enterprise Resource Planning. Making proper supplier schedule fixing the supply rates and quantity, configuring the product as per the company and the consumer’s needs. Other aspects such as claim processing, warehousing are also done by the ERP.
Project and Customer Relationship management
Project management includes resource planning, project costing, billing, time and expense, performance, and activity management. All these are accomplished through Enterprise Resource planning. The very important method by which the longevity of a company is determined, and it’s goodwill is created is customer management.
Therefore customer relations is a very important part of the company’s progress. Call center supports, customer contact all of these falls under ERP. However, sometimes customer services are considered to be under Business Support Systems. (BSS)
Types of ERP modules.
Traditional Types
Supply chain management.
This module of ERP helps the employees to understand all the pertinent questions regarding the supply chain. For example, a particular costing plan to determine the supply rate and to calculate commission rates for the middlemen
Product lifecycle management
This type of ERP module are for those companies which are having their own production. Design and quality control are two important aspects of this module. Calculating the pertinent costs and expenditures and optimizing the consumption rates of the product and the materials.
Customer relationship management
This type of module is used for establishing a connection between marketing specialists and the customers.
Human Resources
For a company of any size, be it small, medium, or large it is not possible to keep in mind all the employees for the management. For this particular reason, this traditional module of ERP is used, which via the help of multiple databases, keeps a track of employee contact information, their salaries and the engagement and the attendance of the employees.
Finance Module
This module of ERP is strictly employed for asset management. The efficiency of machines in this regard nullifies the human error factor. Not only it does its primary function, but also this module gathers all the financial data from all the department’s analyses the data and makes reports which are essential for the company’s operations.
Classification of the ERPS.
There are several classifications based on various parameters.
Based on architecture
Indivisible Architecture
This ERP has a very beneficial advantage of adjustment and integration rates. Due to the rigid interconnectedness between its foundational blocks, the error percentage is brought down significantly. But it does not provide the facility of step-by-step integration, which consumes more time, labor and resource.
Modular architecture.
This architecture provides the facility of step-by-step integration and implementation. All the instruments within this module can be customized and personalized to perform specific functions. The flexibility of the components easily solves the problem of the module incomparability.
Based on purpose
Industry-level purpose
This type of ERP is generally used in two cases. The specific processes of one particular industry are quite unique in their own right and cant be implemented in other sectors of other industries. Therefore this module of ERP is employed in this regard where the ERP is made from the foundation and is modeled strictly, keeping the need and requirements of that particular company in mind. Also, this ERP is used in the management of large companies where the results justify the investments via a 0.1% ROI( RETURN ON INVESTMENT).
General purpose
In this system of ERP, data volumes is given more priority and importance than the specific needs of the company. In these cases the differences between the computing process and the manufacturing process are not so great that they are adaptable to the needs of the company. Therefore in these modules, the price of a less unique product goes much lower.
ERP for E-Commerce
This module is quite complex and needs special technical assistance and supervision. Many software manufacturers provide such systems which enable working virtually from anywhere where there is an internet connection.
Based on the type of organization
Public cloud
This system of ERP helps the users to gain access to the resources and platform. Since all the users get this access, the uniqueness of the platform comes down, and therefore the service costs are also low. In this system, the standard product has a low price.
Private cloud
This system is highly personalized as it is usually installed in the company’s rented or there or on their own computers. This model can be updated anytime according to the need of the company by adjusting the software by isolating all the data. This affects the scalability and viability of the project and increases the cost significantly.
Hybrid cloud
This is an amalgamation of the preceding two systems. This enables effective expansion and a better adaptation to the need of the client. It raises the cost, but advantages of SAAS systems are guaranteed.
Based on licensing
Proprietary
This type of ERP is usually considered to be a finished product, but it is usually subjected to extra modifications as per the need and the requirements of the company. However, such a license needs to be paid for at the time of the purchase.
Open-source
This type of ERP has an open-source code that can be used at a nominal price. Costs can go up in case of personalization or customization according to the needs of the company or the user. The one drawback can be to set up the people experts need to be hired or employed, which in itself increases the cost of production by some margin.
Advantages of ERP
- The basic advantage of the ERP system is that it oversees a lot of processes of the company through digital platforms and therefore saves a lot of time. Some specific advantages are-
Sales forecasting and thereby enabling inventory optimization - Showing all the transactions of the company in a chronological manner for future references
- Enables specialized order tracking
- Revenue tracking throughout the entire process, starting from the billing invoice of the order to the cash receipt at the time of delivery.
- Providing required legitimacy to all statistical data
- Protects sensitive data proprietary to the company by consolidating multiple security systems into a single structural entity.
Disadvantages of ERP
- Just like every entity, ERP has its limitations as well. Some of them are
- The high cost of acquisition – To set up the entire ERP network according to the need of the company is a tedious job which is a costly endeavor for most small or medium-sized companies.
- Forced change of processes – The ERP completely changes the outlook of the operation of the company. After the implementation, the entire company has to follow the protocols of the ERP.
- Very complex software – This is another limitation of ERP. Due to its complex technical aspects, it is difficult to operate.
- Lack of trained people – Due to its complex technical aspects, only specialized and trained personnel can operate ERP.
- The flexibility of software system upgrades – Once implemented, it is difficult to upgrade an ERP model. Even it is done, it is a very tedious and expensive job.
- Availability of internal technology and resources; the lack of these two mentioned components is another glaring limitation of the ERP system.
- Education and training- To operate these system specialized education and training has to be imparted without which it is not possible to operate the ERP system.
Application of ERP
Some of the applications are Program Management, Functional Consulting, Technical Consulting, Implementation, Upgrade, Migration, Report generation, Customizations.
Conclusion
So to conclude the article we can observe that ERP is quite the bedrock of the modern corporate scenario. Yes, it might not be technically or economically feasible for small-sized firms and companies, once set up it undergoes lot of functions and in different sectors. Although a tedious job. But the ERP module can be tweaked by making software upgrades and as per the need of the company and so on. It helps the company in all sectors be it finance, management, or dealing with human resources on a daily basis. Therefore if proper education and training are imparted then ERP will be irreplaceable in the upcoming years.