Hi, hi everyone! My name is Antinio This
time I will try to explain to you what ERP systems are.
So! Let's start!
What is ERP system?
When people talk about a software for
managing companies, they always mention an ERP system.
What that ERP system is all about.
I will explain everything you need to
know.
According to the basic definition, ERP
is a system to manage the entire company, the same as operating system manages
your personal computer.
charteredindia.in |
So, we have one system for all:
Finances, Sales, Production, Inventory, Accounting, CRM, E-commerce, Orders,
Marketing and that is ERP.
ERP is an abbreviation of Enterprise
Resource Planning.
So theoretically, we can say that ERP
is a system to manage enterprises resources.
However, managing the resources is a
bit abstract for me and I will try to explain where it came from.
Let's imagine what kind of resources
we have as a human being.
Your house, a car, a bicycle. You have
money in your wallet. You have money in the bank.
You have a fridge, and you have some
stocks in the fridge like fruits, corn, drinks and some pizza.
You can manage resources on your own and
you know, if you have enough food for the weekend. or you should pay for car
insurance, for example, if you know that you've eaten all the rice or bread,
you will buy more. And you manage it without any software. There may be times
when you hire a babysitter. to help with the children.
You must pay her monthly, plan when
she has a vacation and when she can come to you to work.
So, you manage it without any software
as well. I can say that you have your ERP system in your head. Let's say that
your brain is a software to manage
all your resources. Still managing the
resources sounds weird.
I think it's better when you remember
the definition. that ERP is a system to manage the entire company, such as your
brain manages your whole life.
You don't have many sales, so you
start using just paper to create invoices.
ERP integrates all business processes.
taking place in the company. But what does it mean in practice?
I will try to explain it to you with an
example of the company's development.
Let's imagine that you have created a
small business, for example, you have some flowers in your garden. and you
start to sell them.
Later, you became more modern, and you
started to use Word to create invoices and Excel to control accounting.
You have more and more sales. Some
people are not paying on time.
So, you have not paid invoices, in
business language, accounts receivable. Your Excel becomes more complex. You
buy things for your organization like chairs and desks, boxes for flowers,
ribbons.
So, you have purchase invoices, which
you want to classify as a cost to reduce tax. You use Excel for it as well. Your
accounting keeps on increasing. You start to use a simple accounting program. You
can do sales invoices, and input purchase invoices.
You can see which invoices were paid
or not. Tax every month is calculated automatically. Your company is growing. Your
business is going very well.
You have more and more orders. Garden
flowers are no longer enough to meet your customers' demands.
You decided to buy flowers from other
suppliers and sell them.
Of course, you must store them
somewhere, and a place in the basement is already over.
You rent a warehouse. You have shelves
in stock and nicely sorted products by type, size and so on.
You must carefully record how many
goods you take into the warehouse - goods receipt and how many you. take for
the current sale - goods issue.
You need this information to be able
to see how many goods you have in stock for sale at any time. Here,
You also need a warehouse management system.
after some time. Your paper or Excel
notes and calculations become too complicated.
You are buying software for material
management with warehouse management.
You fill out a goods receipt for each
delivery and a goods issue when you release the goods. The calculations are
done automatically, and you can make inventories from time to time.
Your company is so good that now you
need some help. You start to hire people. If you hire people
You have new things to manage. You
should pay a salary. People have several days of vacation a month. So, you
should manage notification of absence. People go for sick leave and so on. All
are called HR - human resource department. It's too much for Excel and paper
management.
So you buy software to manage payrolls
and HR in general. Your assortment is growing.
People no longer just want cut
flowers, but also potted flowers. You decided to start production. You buy not
only flowers, but also soil and pots.
You create an assembly line where
people and maybe machines later produce beautiful sets of potted flowers.
Each set has its production
prescription, different product requirements and production time.
All production recipes, machine
retooling are so complicated that you don't even try to use Excel here.
You buy a production management system
right away. There are quality assurance and control in this system.
Managing the production process with
design changes, production stages, milestones, product statuses,
history of production, employee
timesheets, estimation, the demand for materials and labor for production, retooling
of production lines and much more.
The company is big a piece of good
work for a guy who started selling flowers in the market square.
You are already the owner of a big
organization. For managing a big business, you need to use reports and
analyses.
It seems that your company is
completely computerized. But look, you have four business areas and four
different systems.
There is a lot of separate
information. None of these systems talk to each other.
Those systems don't share data. This
causes you a lot of problems.
For example, you have always some
problems that your potted flowers are sold and you didn't produce
enough new products. Or the other way
around you produced too much your flowers withered because too much was
produced.
The report to analyze trends across
sales and production would solve the problem.
You cannot do that because you have
all that information in different systems.
Sometimes your production is stuck
because there are no enough subcomponents in your storage, so you
should order them and till delivery your
production is stopped. It is such a lack of efficiency. Your dream is to have
storage and production in one system.
In that way, during the planning of
production, demand for new purchases would be generated automatically. Now you
can't do this because all that information are in different systems.
You plant a hardworking production
week, and it turned out that some of your key employees are off at this time. You
forgot about that. Only the HR department had that information.
You would love to have a system that
checks employees presence during production planning.
You could create a report to check
that and predict new purchases. If you want to make your business decisions, you
need to see the real-time business performance with
dashboards and KPIs meters. Based on
that data
you can do some strategic decisions,
match sales with productions, a stock with sales, supply with demand, production
with HR and so on.
For all of this, you need some data
from one system and some from another. Many more problems of this type would
arise. Uf... It's hard to be a business man.
All that is not possible. Now imagine
your company is growing and opening branches all over the world. So think about
centralized software that has
all your business activities in one
place, make super easy for all company to communicate and share information,
one complete centralized system with
one database. This system covers all business needs and ensures the flow of
information between all departments. This type of system is called ERP.
Most ERP systems are made up of
different application modules that talk to each other and share one database. Look,
now the module reflects a given business area
for which we previously needed a
separate system. Software for invoices that we bought first MM - material
management module, PP is production planning. now is SD - Sales and
Distribution module, replacement of storage management software can be named
Our HR software now is HR module. In
ERP system, there may also be modules specified to industries from
manufacturing to retail. As you know, there can be many ERP systems, and the
names of these areas may be slightly different.
This is just an example, but usually
they are similar and can cover similar areas. Of course, we can have many other
business areas, so modules. On the example of our florist I showed the most
popular areas and the concept of every ERP system, but the most important thing
is that you can combine different modules to meet your needs.
You have all in one. Now, I hope you
understand it much, much better.
Please write in the comments below why
you are interested just in an SAP.
Are you looking for a new job
opportunity? Or have you started using SAP in your current company? Would you
like to develop in that field? And how can I help you?