ERP - What Does It Mean to Us Today?

Introduction

That wonderful TLA ERP, we have heard this term banded about now for last 2 decades, but what does it really mean and in particular how does it helps in today’s changing world. Well let’s start by expanding the TLA, ERP stands for Enterprise Resource Planning.

If we go back to what we did back in the 70’s when I left university and joined Rolls Royce as a commercial postgraduate apprentice. The key then was to be able to plan our production schedule of what we expected to build and then work back to determining the material resources that we would need to use. Materials requirement planning (MRP) and of course its development MRP II was some of the first software I used – a whole weekend to get the plan for the repair and overhaul line (God help us if the punch cards were dropped or out of sequence!). But of course there are other resources that we need to plan, human financial, etc. And so was born the term ERP in 1990 by Gartner. InvestorWords.com defines ERP as, “An amalgamation of a company's information systems designed to bind more closely a variety of company functions including human resources, inventories and financials while simultaneously linking the company to customers and vendors”.

ERP software packages are based around a single premise of their ability to manage all the information and functions of a company from shared data stores in a seamless manner. Wikipedia expands the definition by stating, “An ERP system typically has modular hardware and software units and services that communicate on a local area network. The modular design allows a business to add or reconfigure modules (perhaps from different vendors) while preserving data integrity in one shared database that may be centralized or distributed”.

An ERP package therefore consists of a number of function silo support components on top of a common infrastructure. The key is that the software vendor has incorporated best practice into the processes supported in the package. On top of this, the vendor provides the ability to customise and extend the package to fit special requirements of the purchaser. The current modular structure in the majority of current ERP packages is still based on functional silos.

Figure 1: A simplified model of ERP
(Source: ERP Past, Present and Future, Ronald McGaughey and Angappa Gunasekaran)

Changing World

With money being tight, companies are looking closely at the investments that they have made and ERP is one of those, that for some the question is still not answered! So what are the business issues that ERP has to cover and what do these issues mean to way ERP has to work? Table 1 gives you my list.

Table 1: Holloway’s Key Business Issues for ERP

Oracle in their whitepaper on Globalisation[1] state, “Organizations that thrive in this new environment share several key characteristics: They’ve simplified and standardized their business processes. They’ve automated those processes. They’re providing real-time information across their enterprises.” So Globalisation means that we need to not only understand our business process, but simplify them so that information can be provided in real time to right people in the right format. John Hammann, SAP UK’s Industry Principal for Manufacturing told me, “All out new enhancement packs are about enabling a process, which crosses functional silos.” So Business Process support is key then.