The Hindu Business Line : ERP – Enterprise Resource Planning

I shall attempt to explain this concept using very simple examples. Essentially, an ERP package is a very large application that integrates all the functions of the organisation.

For instance, let us consider a company manufacturing printers and distributing them through a nation-wide network of sales offices. Say, the Delhi sales office gets an order to supply around 100 printers to a customer. At the time of giving the customer the proposal, a proposal number A would have been logged into the ERP system. When the order gets confirmed, an entry in the order log of the ERP will lead to the following automatically happening:

A status update entry in the proposal log for the proposal A

A requisition to the delivery team for supply

An update in the inventory records that 100 printers are about to move out

A message to the accounts / commercial department to raise an invoice

A message to the legal department to draw up a purchase contract for signing

A message to the head office to ship more printers to fill up the Delhi inventory

The above is clearly a hypothetical example, and may bear little resemblance to the way a printer manufacturer functions, but it gives an idea of the kinds of things an ERP does. Most importantly, it indicates the key function — that of integration of the functions of an organisation.

As the example shows, ERP is based on a simple idea, but for it to work well, a whole lot of complexity has to be built into the application which should closely follow the business work flow of the organisation.

The implementation of an ERP is a long-drawn out affair and often faces many problems. The single biggest obstacle to implementation is that of resistance from the employees; for ERP to be successful people have to change their style of functioning and that is not easily done. It is also probably true that some companies take the ERP decision in haste without thinking through the implementation issues completely.

When implementing ERP, it is probably a good idea to run the ERP system and the earlier legacy system in parallel for sometime till everyone settles down and gets comfortable with the ERP. Incidentally, an ERP implementation can be done for just one function or department, and can also be carried out in phases. While SAP and BAAN are probably the most commercially popular ERP systems, several other packages are also available, including some that are tailor-made for specific industries.

(Contributed by Ashok R. Sankethi, CEO, Kaybase, a business consulting firm. Mail: ashok@kaybase.com)

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ERP – Enterprise Resource Planning