ERP system – what is it?
ERP system problem, ERP system or ERP system are concepts that often appear in the context of company management and production optimization that you should definitely know them. We present an introduction to the subject, in a condensed form, explaining its character and meaning.
ERP systems – definition
The term ERP comes from English Enterprise Resource Planning i means exactly what Enterprise Resource Planning is. This short description already indicates how wide and capacious is the issue. Although it is most often associated with a computer system that is intended to support the implementation of individual processes in production, as well as enable efficient management of it. In practice, the ERP system refers to the control strategy of the production process, focused on the maximum use of production and increase its profitability.
The ERP system is a complex IT system created to support the operation of a company or organization.
In practice, an ERP class system can be responsible for:
– accounting , ie business processes related to financial accounting, < / p>
– frames and wages i.e. human resource management,
– production products,
– control inventory,
– collecting orders, sales control,
– quality monitoring manufactured products.
In the context of the above examples – the resources on which the ERP system operates are all resources of the company, from cash, through raw materials, products and machinery park, finishing with employees. As a result, thanks to ERP software, optimization changes can be made in all company activities affecting production, logistics, sales, human resources management, and finances. A good-quality ERP system covers all of the production and distribution processes taking place in a given company, and its aim is to integrate all the organization’s activities, streamline data flow and significantly simplify business processes. Therefore, the ERP system can be considered as the basis for business management, but for production companies an essential tool for successful operation is the MES system for planning, controlling and managing production.
ERP system, where it came from, a short historical outline.
It all started with the development of computerization, which together with the increase in the use of databases, allowed for the creation of an MRP system for planning material demand. It happened in the sixties of the twentieth century. The next step was to extend the MRP with a material requirement planning module, but with a closed loop – this system allowed for quick response to dynamic changes in production parameters. In addition to the aspect of planning material needs, related issues arose, namely the issue of production control, or the subject of the flow of materials and finished products to the warehouse. The next step in development was MRP II, used to plan production resources. It has been expanded with sales items and related to the settlement of production resources.
The term ERP appeared in use for the first time in 1990 and was a consequence of the development of the MRP II model. Expanded by modules supporting decision making in the field of business management, based on the use of artificial intelligence that gathers, stores, and above all analyzing data from various areas of the company’s operations. All this to integrate all areas of activity and make the most of the resources available to the organization. A definitely invaluable function of ERP systems is the ability to simulate decisions and test their effects, which avoids many errors, including financial ones.
ERP II systems have been operating on the market for several years. It is a new standard of management systems that allow you to work on the network. What are the differences between ERP II systems and their predecessors? First and foremost, they enable access to the system and information using classic internet browsers. This functionality allows for seamless management of customer contacts (CRM). ERP II systems also use modern Business Intelligence analytical tools. In addition, in their case it is possible to create web systems with access for partners and clients.
Enterprise resources, that is what the ERP information system manages.
To illustrate the multifaceted range of the ERP system’s impact, you need to think about the company’s resources, because they are the company’s potential and the way their use depends on the overall health of a given business. Enterprise resources are all elements that the company has at its disposal. It can be anything that gives the company the possibility of faster and more efficient development. Business practitioners share resources according to different criteria, but the most practical division is for material and non-material resources.
What exactly counts as company resources? Below are some examples:
- Human resources , which is the most important resource, especially affecting the existence and operation of other resources. All employees of the company and their abilities belong to it.
- Material means – from real estate, through equipment, production machines, means of transport, to office supplies.
- Funds , that is, cash resources that are necessary at every stage of company development, from its foundation, through development, to maintaining an advantage over competition. For all these stages it is necessary to have finance for investments.
- Knowledge resources – know-how of the company, including patents and official licenses, but also internal procedures or unique recipes. < / li>
- Infrastructure resources – the form in which they appear depends on the industry in which the company operates. For example, for the accounting office, the infrastructure resource will be specialized accounting software.
- Imagination – a unique resource that allows you to create an unlimited number of ways to meet your clients’ needs and defeat competing companies.
Why is there so much talking about resources in business? Because it is rational management that determines the position of the company. Although it sounds simple, in practice it means co-ordination of so many areas of the company’s activity that it is difficult to expect a person to be able to do it quickly and without error. Changing business environment, competition emerging from day to day, growing customer expectations, technological development, difficulty in accessing qualified employees and quality raw materials – these are just a few of the challenges modern businesses have to cope with.
One thing is for sure, the sooner the company deals with effective resource management, the more likely it is to acquire and maintain a stable position on the market. ERP systems help in this.
What is the ERP class system for?
This solution, when made to measure the enterprise, will take over many processes and precisely respond to current needs. A few examples:
however, it is worth remembering that the aim of deeper penetration into problems and production needs, as well as optimization its processes are worth investing in a dedicated production system, like OptiMES ;
– on the human resources level, it can support graphic planning, training, control and time settlement work
– in the aspect of financial analysis – collects and analyzes data eg about production costs or sales process .
ERP for production. What to expect?
The key to success lies in the processing of data whose reliable collection, smooth flow and rational analysis determine the success of a manufacturing company. To simplify it, the ERP system is used to collect data, which is then processed and passed on to users in the form of structured information. What’s more, the shared data meets all the conditions to be useful and profitable, namely: accurate, complete, real-time. How it’s working? ERP class systems enable real-time changes, so data is available as soon as they are entered into the system. It’s a lot easier for employees, which obviously translates into an increase in work efficiency and a lower risk of making a mistake. The entire data is saved in a database common for the whole enterprise, which is completely safe and there is no risk of losing them.
Examples of the practical operation of the ERP system can be extracted from any process occurring in the enterprise. The scheme is very simple – the user responsible for a particular stage of production introduces data about his operation to the system, subsequent users add their information, and as a consequence, create a set of data available to all interested parties. On the basis of such information flow, even in a very complex enterprise, the most complex processes are precisely planned and implemented – it is, for example, timely delivery of raw materials for the production of a specific batch of products, ordered for a specific date. However, it should be remembered that the ERP system does not reflect the production process, therefore it is not able to collect information about, for example, production status, its schedule or problems. For this type of issue, an indispensable tool is the MES system, which will allow to optimize production and increase its efficiency.
ERP system characteristics
Due to the extremely important role played by the ERP system in the functioning of the enterprise, it is worth to indicate the most important features of a useful system.
ERP information systems belong to the modular software, so they consist of several independent but cooperating applications. As a rule, they are universal solutions that work independently of the industry or the way of running a business. The most frequently used modules are those for managing accounts and finances, sales and purchases, fixed assets and warehouse management. In contrast, for production management the best choice is the MES system.
ERP systems are included in integrated information systems, because they integrate functionalities from various areas of operation. Once entered into the system, information is immediately available in all areas of the system and can be used further, eg when making operational or strategic decisions.
The company is a kind of organism in which some elements are closely related to others, and their work depends on each other. Therefore, it is important that the ERP system is complete and comprehensive – it should cover all areas of the company’s operation, because only then will it be able to collect key information and analyze it in such a way that the obtained data will be useful. It does not mean that such a system is to be implemented simultaneously in the entire company, on the contrary – a good ERP system consists of modules related to individual fields of activity and can be introduced in stages, so as to precisely match the systems already in operation. Such a stepwise implementation of the system is also a certainty that all processes analyze correctly and accurately collects data from individual subsystems, which is ideally suited to the needs of the enterprise.
Importantly, a good ERP system should be updated regularly, e.g. especially in legal matters in the subject of human resources management or in tax matters. Without this, it will lose its functionality over time, because without current legal data it will simply be useless.
The ERP system should be integrated with the MES system, responsible for production management. It is only with their close cooperation that reliable data and the possibility of their full use for business purposes are gained.
ERP system – why it’s worth it
The decision to implement an ERP system should and even must involve numerous thoughts, analyzes and tests. It is only thanks to them that we gain a chance to choose a solution that perfectly fits into the organization of the company and will help achieve the set goals. All efforts are worth the effort, because ERP systems are a remarkable support in managing a profitable company. Where do you get that confidence? This is indicated by the dynamics of the industry development, management support systems are more and more developed and effective, they are used by millions of companies, because it is an investment that pays off.
The benefits of system implementation are perceived at all levels of the company’s operations. Below are examples:
|COMPANY AREA’S BUSINESS AREA||BENEFITS FROM AN ERP SYSTEM’S APPLICATION|
|Production||– production planning and accounting takes less time;
– scheduling becomes more efficient;
– the system enables the automation of frequently repeated processes, which translates into a decrease in the number of mistakes and errors in production;
– performance increases;
– the use of resources is planned more precisely, making their use more efficient;
– production time is shortened
– delivery timeliness increases;
|Material management||– inventory can be smaller;
– it’s easier to rationally rotate materials;
|supply||– inventory management costs are falling;
– the purchase processes are optimized, which results from access to current data on the delivery status;
|Accounting and finances||– unlimited access to historical and current financial data, which allows for smooth monitoring of company finances and responsible management of receivables and liabilities;|
|Contacts with clients||– the quality of customer service increases;
– it is possible to respond faster to customer and market needs;
– the quality of after-sales and service support increases;
– customer loyalty is growing, appreciating the timely deliveries and high service standards;
– all above points translate into direct sales increase;
|Human resources||– smooth job management for employees and work chapter;
– workload optimization;
– reduce labor costs;
– information flow is faster and more efficient;
– the same team can do more, because some of them are automated.
It is worth remembering that the scale of benefits that can be achieved by implementing a good ERP system depends on the nature of the company’s activity and its level of development . Other goals will be a company with one production line, another international corporation and factories in several countries. However, in each case, the ERP system, if integrated with other enterprise systems, eg MES system , will support company management and a way to achieve higher profits with lower resource engagement.
Signals for the need to implement an ERP system.
Today’s business reality requires that you produce a lot, quickly and cheaply. The one who does not meet these conditions has no chance of success. Therefore, it is impossible to run a competitive company without using all possible elements of business support – and the right ERP system is a strong support.
ERP class software enables efficient acquisition of knowledge about current resources, tasks and processes in the company, based on these data it makes it possible to improve everyday work through the automation of frequently repeated activities, and also provides the basis for controlling the compliance of processes with the assumed schedule, and elimination of possible production errors or delays. A wide range of solutions is available – those that will work in micro-enterprises and multi-module systems for medium and large companies. Their great advantage is the ability to select such functions that will actually be useful in a given business and adequate to the level of its development. At any time, you can buy and implement further modules that will allow you to optimize the company’s operations on new levels, consistent with the direction and dynamics of the selected business. However, in the case of international operations, it is worth taking into account the fact that a professional ERP system is the ability to manage a team of factories or a single company. As part of ERP systems, each activity will find something for itself.
Why is it worth searching? First of all, because the business environment and customer expectations require it. Increasing competition enforces great flexibility of action and the ability to instantly adapt offers and production to the dynamic market situation. It is expected that products will be produced in shorter series and new products will appear periodically, which is why modern production is one that can be quickly switched to the production of different products. An area that can not be neglected is the flow of information between the organization and customers who expect instant and simple information about the products ordered, the stage of their production and error-free service support.
ERP system – do you really need it?
This question is asked by every entrepreneur considering the topic. It is worth diagnosing problems in a solution that the company requires intervention and support. The most frequent ailments of companies that do not use the ERP system are low profitability and high costs, including administrative, low work efficiency and planning difficulties, product quality that differs from customer expectations, needs improvement, lack of customer loyalty, lack of information about the production status and its course, lack of reliable grounds for accurate business decisions.
Those who already use ERP systems define them as an additional resource that strongly supports work. It is an ideal employee, guarding schedules and deadlines, caring for proper layout of work, both between employees and machines, rationally assessing the state of inventory and maintaining inventory levels at the level that is appropriate for a given production. All this to reduce costs and maximize efficiency.
If, however, the first thoughts about problem areas in the company are directed towards production and its operation, it is by far the best way to optimize production and performance growth is the implementation of the MES system, preferably as effective as OptiMES.
span style=”font-weight: 400;”>ERP IT systems are a river theme, and this article does not exhaust the multitude of benefits and conditions indicating the profitability of investment in this solution. ERP systems fulfill an important function which is the integration of processes taking place in a production enterprise. After all, every day, in every company, whether small or large, hundreds of processes occur that can not be observed, controlled and analyzed only by employees. ERP systems are the effective use of achievements in the field of artificial intelligence, which at any moment can start working on the development and profits of a given company.
The next questions that naturally arise about the implementation of the ERP system are: how? i with kim?
The OptiMES team has been dealing with professional selection of solutions and their implementations for years. We successfully work with dozens of companies from various industries and at various stages of business development. Therefore, we invite you to take advantage of our experience, non-binding consultations, and even a free test of our software. Together, we will work out a way to succeed your business. We cordially invite you to contact us or register for free in our system.