Enterprise Resource Planning and Collaboration Systems

---

1. What is ERP?

Tom Hoffman (1998) defines ERP as:

“Enterprise Resource Planning (ERP) software is a set of applications that automate finance and human resources departments and help manufacturers handle jobs such as order processing and production scheduling. ERP systems such as SAP AG's R/3 are notoriously complex, and installing the software often forces users to change their internal processes. ERP vendors are branching out into applications such as supply chain management and sales force automation, but whether those functions fit under the ERP banner is debatable”

It is software that attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs. ERP integrates a number of core business systems such as general ledger, accounts payable, and manufacturing into a single, software program that runs off a single database, so that the various departments can more easily share information and communicate with each other. Thus the software helps decision makers consider all the resources, such as labour, raw material, money, equipment, and time required to produce a product and deliver it to the customer.

As we see organisations grow from national, medium size companies to global, multinational, multi-billion corporations it becomes necessary not to have conflicting data views and information views within the organisation. If properly used ERP provides the best use of your organisations Information System. All data resources are centralised removing duplication and everyone in the organisation has the same view of the business process. Thus an ERP must be able to support multiple legal entities, multiple languages, and multiple currencies.

ERP automates the tasks involved in performing a business process. 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 easily. 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 to understand why you need it and how you will use it to improve your business.  There are three major reasons why companies undertake ERP:

• To integrate financial data
• To standardise manufacturing processes
• To standardise HR information

Although the adoption of ERP technology has been increasing, so far very few expected benefits has been seen. The purpose of implementing information systems in an organisation is to better manage your business, and not just to automate the business operations. It stands in the case of ERP too.

Early ERP implementations have proved to be costly and time-consuming. It's critical for companies to figure out if their ways of doing business will fit within a standard ERP package before the checks are signed and the implementation begins. Needless to say, the move to ERP is a project of breath taking scope, and the cost can be very high. In addition to budgeting for software costs, financial executives should plan for consulting; process rework, integration testing and a long list of other expenses before the benefits of ERP start to manifest themselves. The price of teaching users their new job processes, data warehouse integration requirements, and the cost of extra software to duplicate the old report formats should not be underestimated. A few oversights in the budgeting and planning stage can send ERP costs spiralling out of control faster than oversights in planning almost any other information system undertaking.

The difficulty is in the implementation of the software. This can be seen by the many unsuccessful stories, some of which are described under the section ‘Examples’.

2. Example of ERP

Warner-Lambert uses an ERP system for its Listerine product, which is a complex concoction. Its ingredients are extracted from several continents and its production process requires the co-ordination of countless individuals and business partners. The system co-ordinates sales, marketing, manufacturing, finance, and quality control decisions around the world. Decisions may originate from anywhere from Australia, famous for its eucalyptus tree oil, to New Jersey, where Warner-Lambert's sales team forecasts demand for the product (You can read about this from 'The incredible Journey' by Jennifer Bresnahan in CIO Enterprise Magazine, August 15, 1998 – see www.cio.com).

System problems can have an especially big impact on warehouses by delaying shipments to customers and causing product inventories to build up. For example: according to a report by Craig Stedman in ComputerWorld, January 3rd Volkswagen AG in Germany had difficulties delivering spare parts to some car dealers after they implemented SAP R/s software in their central parts warehouse. This caused some owners to wait up to several weeks for needed repairs where the delivery time was one or two days before the implementation of the software. The same article reports about Hershey Foods Corporation which had order processing problems after they installed R/3 and other applications in their warehouses. This hampered the company's ability to ship candy and other products to retailers during the lucrative Halloween season.

---

Reference(s)
	Book		Bocij, P., Chaffey, D., Greasley, A. & Hickie, S. (1999) Business Information Systems: Technology, Development and Management for the E-Business. 4th Edition. Financial Times Prentice Hall: United States of America (USA), New York (NY). [ISBN: 9780273638490]. [Available on: Amazon: https://amzn.to/3TTKFk1].
	Book		Gupta, U. G. (1999) Information Systems: Success in the 21st Century. Prentice Hall: United States of America (USA), Virginia (VA), Fairfax, Langley. [ISBN: 9780130108579]. [Available on: Amazon: https://amzn.to/3WeHDZy].
	Book		Stair, R. M. & Reynolds, G. W. (1999) Principles of Information Systems: A Managerial Approach. 4th Edition. Thomson Course Technology: United States of America (USA), Massachusetts (MA), Middlesex, Cambridge. [ISBN: 9780760010792]. [Available on: Amazon: https://amzn.to/3F8ncY4].

---

Reference (or cite) Article
	Kahlon, R. S. (2012) Enterprise Resource Planning & Collaboration Systems [Online]. dkode: United Kingdom, England, London. [Published on: 2012-05-25]. [Article ID: RSK666-0000044]. [Available on: dkode | Ravi - https://ravi.dkode.co/2012/05/enterprise-resource-planning.html].

---