Benefis of ERP systems by Applied Technology Research Center.
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Reasons to use our ERP video
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What is ERP?
An ERP system is an integrated solution, sharing a centralized database, with all ‘users’…. Human Resources/Payroll/Benefits, E-procurement, Accounting, Budgets, etc …. being served by the same database through one point of entry.
ERP, or Enterprise Resource Planning, is a software system that integrates various business functions and processes into a single platform. Some benefits of implementing an ERP system include:
Improved efficiency and productivity: An ERP system can automate many business processes, reducing the time and effort required to perform them. This can lead to increased efficiency and productivity.
Enhanced data accuracy and visibility: An ERP system can provide real-time data on various business processes, enabling managers to make informed decisions based on accurate and up-to-date information.
Better collaboration and communication: An ERP system can streamline communication and collaboration among different departments and teams, reducing the likelihood of miscommunication and ensuring that everyone is working towards common goals.
Improved customer service: An ERP system can provide better customer service by enabling employees to access customer information quickly and easily, allowing them to respond to customer inquiries and requests more efficiently.
Reduced operational costs: By automating many business processes, an ERP system can help reduce operational costs associated with manual tasks, such as data entry and record keeping.
Better supply chain management: An ERP system can provide greater visibility into the supply chain, enabling companies to manage inventory levels, track shipments, and respond to changes in demand more effectively.
Overall, an ERP system can help companies streamline their business processes, improve efficiency, and reduce costs, leading to greater competitiveness and profitability.
Data need only be entered or updated once, reducing errors, time and labor for reports, analysis, planning and program management. Ultimately, time and resources are shifted to innovating,problem solving and direct service to customers rather than inputting, processing, organizing, verifying and related “busy work” that burns through time and money.
Enterprise resource planning software attempts to integrate all departments and functions across a company onto a single computer system that can serve all those departments’ particular needs.
1. Real time information throughout all entire company 2. Better visibility into the performance of operational areas 3. Data standardization and accuracy across the enterprise. Single version of “The Truth!” 4. Best-practices or proven methodologies are included in the applications 5. Creates organizational efficiencies. 6. Allows for analysis and reporting for long-term planning
Significant Features on an ERP System
1. Information entered once into system 2. Can allow for the use of the best practices 3. Can be further developed 4. Based on reliable file structure 5. Provides functionality to interact with other elements in the process 6. Provides report writers and other tools for data inquiries
ROI and Cost Savings Here are some areas to look for possible ROI:
1. Reduce Inventory through better visibility and efficiency 2. Savings through the reduction in duplicated efforts 3. More efficient operations allowing for increase in ability to process transactions (added capacity) 4. Reduction in non-value added activities (lean processing) 5. Higher utilization of employees (less transactional, more analytical) 6. Improvement in decision making through more accurate and real-time data
General Services/E-Procurement Benefits of an ERP system:
! Can reach more vendors, producing more competitive bids and
widening participation in government contracts, lowering the cost of
products and services purchased
! Potential of $10-$15 million in total yearly savings
! Significant paper and postage cost reductions as part of the yearly
savings
! Faster product/service look-up and ordering, saving time and money
! Automated ordering and payment, lowering payment processing and
paper costs
! Fast access to detailed account histories, providing more abundant
information and improved planning and analysis
! Ability to distribute, receive and award contracts out for bid much
faster
! Wider participation by city and county purchasing entities, multiplying cost savings and
management improvements, and offsetting system operation costs
Management/Budget An ERP system in the Department of Management would:
! Save enormous time and effort in data entry and report production for budgets
! Allow more innovative and extensive budget report content and analysis
! Through Web access, allow lawmakers, directors, managers, even taxpayers to view real-time
budget information.
! Link the budget system to payroll, accounting, Legislative Fiscal Bureau, personnel and other
departments, allowing nearly instant data exchange and ensuring such information is consistent
and uniform across the board
! Provide easy access to trend data—financial information from years past is quickly combined into
an up-to-date long-term view
! Empower departments to more closely measure program performance and results
Building a single software program that serves the needs of people in finance and human resoures is a large task.
Each department has its own computer system optimized for the particular ways that the department does its work.
But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.
That integrated approach can have a tremendous payback if companies install the software correctly.
For example : Take a customer order.
When a customer places an order, that order begins a mostly paper-based journey from inbox to inbox throughout the company, often being keyed and rekeyed into different departments’ computer systems along the way.
All that time wasted in the inbox causes delays and lost orders, and all the keying into different computer systems invites errors.
Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse’s computer system to see whether the item has been shipped. “You will have to call the warehouse” is the familiar statement heard by frustrated customers.
ERP eliminates the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems.
Finance, manufacturing and the warehouse all still get their own software, except now the software is linked together so that someone in finance can look into the warehouse software to see if an order has been shipped.
Early in the 1990s ERP was developed as a tightly integrated monolith, but most vendors’ software has since become flexible enough that you can install some modules without installing the whole package.
How can ERP improve a company's business performance?
ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes that into an invoice and revenue—otherwise known as the order fulfillment process.
ERP is often referred to as back-office software. It doesn’t handle the up-front selling process (although most ERP vendors have recently developed CRM software to do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling the order.
When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer’s credit rating and order history from the finance module, the company’s inventory levels from the warehouse module and the shipping dock’s trucking schedule from the logistics module, for example).
People in these different departments all see the same information and can update it.
When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system to track it down. The order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee benefits or financial reporting.
Let’s go back to those inboxes for a minute. That process may not have been efficient, but it was simple. Finance did its job, the warehouse did its job, and if anything went wrong outside of the department’s walls, it was somebody else’s problem. Not anymore. With ERP, the customer service representatives are no longer just typists entering someone’s name into a computer and hitting the return key. The ERP screen makes them businesspeople. It flickers with the customer’s credit rating from the finance department and the product inventory levels from the warehouse. Did the customer pay for the last order yet? Will we be able to ship the new order on time? These are decisions that customer service representatives have never had to make before, and the answers affect the customer and every other department in the company. But it’s not just the customer service representatives who have to wake up. People in the warehouse who used to keep inventory in their heads or on scraps of paper now need to put that information online. If they don’t, customer service reps’ screens will show low inventory levels and reps will tell customers that the requested item is not in stock. Accountability, responsibility and communication have never been tested like this before.
People don’t like to change, and ERP asks them to change how they do their jobs. That is why the value of ERP is so hard to pin down. The software is less important than the changes companies make in the ways they do business. If you use ERP to improve the ways your people take orders and manufacture, ship and bill for goods, you will see value from the software. If you simply install the software without trying to improve the ways people do their jobs, you may not see any value at all—indeed, the new software could slow you down by simply replacing the old software that everyone knew with new software that no one does.
How long will an ERP project take?
Companies that install ERP do not have an easy time of it. Don’t be fooled when ERP vendors tell you about a three- or six-month average implementation time. Those short (that’s right, six months is short) implementations all have a catch of one kind or another: The company was small, or the implementation was limited to a small area of the company, or the company used only the financial pieces of the ERP system (in which case the ERP system is nothing more than a very expensive accounting system). To do ERP right, the ways you do business will need to change and the ways people do their jobs will need to change too. And that kind of change doesn’t come without pain. Unless, of course, your ways of doing business are working extremely well (orders all shipped on time, productivity higher than all your competitors, customers completely satisfied), in which case there is no reason to even consider ERP.
The important thing is not to focus on how long it will take—real transformational ERP efforts usually run between one and three years, on average—but rather to understand why you need it and how you will use it to improve your business.
Will ERP fix my integration problems?
No. It seems almost quaint to think of it today, but back in the days before Y2K, enterprise software vendors, and, more forcefully, the management consultants who installed the stuff, sold ERP as a magic bullet that companies could use to escape the coming Y2K apocalypse, create seamless technology integration across the company and force your silos of isolated, sociopathic bureaucrats to start working together. It was an irresistible sell to businesspeople.
It’s true that ERP was designed to solve integration problems, but it worked only in the theoretical environment of the vendors’ development labs. Developers who believe they are modeling an entire business in software don’t spend much time thinking about how that system will connect with other systems. Who needs other systems when we’re creating the whole thing right here?
Of course, as soon as companies began buying these products, it became clear that enterprise software was another chunk—a much larger and better integrated chunk to be sure, but still a chunk—of software in a complex architecture of IT systems that desperately needed to talk to one another and exchange information. The vendors created clunky, proprietary methods of connecting their systems with others, which have improved over the years, but that misses the point. The architecture of these systems, in a broad sense, was just like the ones that they were intended to save you from—monolithic, highly integrated and difficult to change.
No problem, said the vendors. Some of your maintenance and support fees are going to future R&D. As we develop new pieces to add in to our highly integrated suites, we’ll let you upgrade to the next version for free and you can gradually get rid of all those other troublesome chunks. Again, it sounded great to the people buying the stuff—businesspeople.
But who could afford to install enterprise software as it was envisioned in the vendors’ R&D labs? Very few. CIOs built complex integration links from enterprise software to other systems to keep the business running. Or they chunked up the installation, building dozens or even hundreds of unique installations of the same enterprise software to meet the needs of individual departments or businesses that all had to be linked together. The high degree of integration envisioned in the R&D lab was tenuous at best inside most organizations.
Gradually, enterprise software vendors came to realize that to serve customers better, they needed to break up their suites into application components and create complex ways to link to them over the Internet so that customers would not have to rewrite connections to pieces of the suite such as financials, which didn’t change much.
The final death knell for the original enterprise software architecture model came in 2004 when the major enterprise software vendors all announced that they were offering packages of integration middleware—tacitly acknowledging the reality that had been clear since middleware was first invented decades ago: Integration happens best outside of specific software applications, not inside them. The enterprise software vendors have been conspicuously absent from the Web services standards movement, looking ever more like the Dark Princes of Lock-In while the originators of the lock-in concept, IBM and Microsoft, looked like white knights for doing the lion’s share of work to create free (so far, anyway) standards for integration in Web services. And it’s great stuff. How ironic that those companies that were going to save your CEO from integration in 1999 have been the laggards in developing truly useful enterprise integration.
This is not to say that ERP is a boondoggle, or even that the software isn’t valuable to the companies that bought it. Even though most vendors have had some big bumps in the road, most of their products work well. The happiest customers are those who used enterprise software to create new capabilities and processes that they could not express in software with their old systems. But back in 1999, many CIOs talked about ERP as an integration strategy, about replacing systems that had more and better functionality than the enterprise software they were installing in order to be more integrated, more efficient when the new software was installed. For the few companies that could afford to install enterprise software in the manner envisioned in the vendors’ R&D labs, they may have gotten there. Many are still maintaining the custom code they had to write for outraged business users who lost capabilities they had in the old software.
ERP Benefits - Operational Control, Management Control and Strategic Planning
Organizational processes fall into three levels - strategic planning, management control and operational control.
ERP systems facilitating operational coordination across functional departments.
ERP systems also benefit strategic planning and manegment control one way or other.
Help reduce operating costs
ERP software attempts to integrate business processes across departments onto a single enterprise-wide information system.
The major benefits of ERP are improved coordination across functinal departments and increased efficiencies of doing business.
The immediate benefit from implementing ERP systems we can expect is reduced operating costs, such as lower inventory control cost, lower production costs, lower marketing costs and lower help desk support costs.
Facilitate Day-to-Day Management
ERP systems facilitate day-to-day management.
The implementations of ERP systems nurture the establishment of backbone data warehouses.
ERP systems offer better accessibility to data so that management can have up-to-the-minute access to information for decision making and managerial control.
ERP software helps track actual costs of activities and perform activity based costing.
Support Strategic Planning
Strategic Planning is “a deliberate set of steps that assess needs and resources; define a target audience and a set of goals and objectives; plan and design coordinated strategies with evidence of success; logically connect these strategies to needs, assets, and desired outcomes; and measure and evaluate the process and outcomes.”
Part of ERP software systems is designed to support resource planning portion of strategic planning.