What is ERP

Is ERP a Misnomer Let us know what do you think

ERP is acronym of Enterprise Resource Planning, integrated software for managing all the resources of the business for planning, recording and control by digitizing the business processes. In simple words ERP stands for modular software that help business manage every function of business from procurement, inventory management, production,sales and marketing,  human resource management and financials providing capability to manage every aspects of your business to improve visibility and actionable insights through out the business. ERP acronym has evolved for business management software which evolved with improvement in underlying hardware and communication technology. Of course evolving operating systems played important role along with database technologies.

History of ERP

  • Mainframe computing of 1960s

    Mainframe computing of 1960s brought inventory control application to business. First time computers were sold without pre-installing applications on it This made users to purchase computers and applications seperately.

  • Mid-range computing of 1970s-MRP

    MRP stands for Material Resource Planning .where computer systems were use to plan requirement of raw material and comonents based on production which was planned outside conputer systems. Given large number of materials and components required for manufacture of products. Solution had to estimate requirement of material, look at availability of stock and place orders in time to support un-interrupted manufacturing.

  • Client Server Computing of 1980s-MRPII

    MRP-II was extension of MRP by using conputer systems for productio planning (and scheduling as some reports say). Initial planning was infinite capacity planning to meet customer orders. Later on finite capacity planning based on machine and labour resources.

  • Internet Technology and GUI- ERP 1990s

    It was introduction of Internet and modern Graphical User Interface with Windows which resulted into introduction of ambitious solutions like Enterprise Resource Planning. ERP was trying to be everything that organization requires with projects running into 3-5 years but without achieving its obectives.

  • Service Oriented Archtecture 2000s

    But soon these solutions abandoned production planning which is computationally very difficult to achieve and instead focussed on sales and distribution and financials controls. Core planning was left to Supply Chain Panning where as elevated customer serivce was left to CRM.

  • Cloud Computing ERP-2.0

    Cloud computing is moving from monolithic ERP applications to more user friendly cloud interface. Planning process is firmly entrenched in SCM solutions with pre-sales activity moving to CRM. But solutions would rub in combination of private and public cloud. Like KamatSoft eValueMax which has cloud architecture but can be run on primises or off premises. Further appicatios would be acessed with rich client user interface and mobile interface.

ERP is misnomer for what ERP does

So now you know why term ERP is misnomer. Sure it works at enterprise level. It handles resources across the enterprise. But there is very little planning in that. That planning has moved to SCM with which ERP interfaces. But that change in focus in evolution of ERP does not reduce ERP’s importance in enterprise value maximisation which is goal of every enterprise creating value for all its stake holders for business continuity and longetivity.

So what is Modern ERP of 2020s

ERP would continuously keep on evolving serving enterprise needs with higher efficiency and effectiveness. But in present times Modern ERP is modular system which covers all the functional areas of the business by interfacing with each other to ensure that there is single version of truth. Many vendors like to claim their software as ERP with basic modules  for transactions processing and basic reporting. However these are at best business accounting solutions which can never provide scalability and competitive edge the business needs for profitable growth. Ease of use is important but it can not be at the cost of creating competitive edge for the business. From this perspective modern ERP should have following basic capabilities:

  • Modern ERP has to be based on Cloud Computing

    Whether you want to run on-premise ERP or subscribe in cloud or run it in combination of on premises or cloud modern ERP has to be based on cloud computing for scalability with lowest investment and cost.

  • Modern ERP is Comprehenesive with moduar structure

    Modern ERP has to be comprehensive to cover every functional area of different types of business via modules which must seamless interface with each other. These modules should include procurement, inventory control, production in manufacturing organisations, operations, sales and distribution, Financials and Control, Human resource managemet and payroll, Key Performance Indicators, Projects and Budgetary Control.

  • Modern ERP provides visibility across the enterprise

    ERP has to make information which was hitherho available in silos and make it visible across the organzation on need to know basis so that there is single version of truth with which organization works to improve efficiencies and provide unparalleed customer service.

  • Modern ERP provides intelligent actionable inputs

    Modern ERP has to provide intelligent actionable input with exceptional reporting, by budgetary controls filtering large amount of data every enterprise would have.

  • Modern ERP provides strong internal control while becoming great enabler.

    ERP has to provide strong internal controls while enabling people for innovation and profitable growth. ERP should not become rigid in pretext of best practices to cover its lack of configurabiliy requiring heavy coding for basic changes.

  • Modern ERP supports enterprise value maximization

    ERP does not automate processes to achieve enterprise value maximisation. But it must focus on Key Performance Indices and measure them accurately and make available to right peope for proactive action by its employees at every level of the organisation structure. It has to also seamlessly interface with SCM, CRM, PLMs to support enterprise value maximization.

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