More and more enterprises of various sizes around the world are striving to introduce a powerful management tool known as an ERP system into their work. Its use is designed to establish effective control and planning of all strategically important business processes for the organization, to optimize the functioning of the main production and auxiliary facilities.
The concept of ERP and ERP systems
The ERP business strategy (EntERPrise Resource Planning) is an integration of all organizational divisions and processes: production capacities, financial, personnel and client profile departments and many others. Such an association is primarily aimed at optimizing the distribution of various resources within the enterprise.
If earlier it was a purely marketing concept, today ERP-system is most often understood as a class of specialized software tools. In a broad sense, it is a methodology for planning and managing all the resources of an enterprise. Historically, the ERP strategy was formed on the basis of its predecessors:
- MRP - material needs planning.
- MRP II - Resource Planning.
In contrast, the ERP system can be used for very large enterprises, often geographically distributed. In this case, we are talking about planning corporate resources, because it pays attention not only to production, but also to comprehensive financial planning. An essential feature of the ERP-system is also the possibility of its application in absolutely any enterprise, regardless of the specifics of work, including those not involved in production activities. Considering it as a software product, it should be noted that it is equipped with a more powerful complex of technical tools that facilitate or replace the decision-making process.
The purpose of the ERP-system in the enterprise
In order to decide on radical transformations in the activities of his company related to the implementation of an information management system and the implementation of a new business strategy, management should clearly recognize the whole necessity of this step, which should be expressed in the following key points:
- unwillingness to accept the current state of affairs;
- the existence of the need to use modern technologies to strengthen the position of a business entity in the market in a competitive environment;
- expecting significant benefits from the implementation.
First of all, the use of an ERP system is designed to contribute to the successful implementation of a similar business strategy, the implementation of which should ensure the effective planning of enterprise resources and their management. To do this, it is necessary to optimize the work of its units, namely, to achieve maximum consistency between them and reduce administrative costs. This can be achieved through the benefits provided by the information system. It:
- Improving the transparency of business processes.
- Solving problems with organizing and finding the right information.
- Improving the reliability and relevance of data.
- Increase the speed of workflow between departments.
- Organization of a single information space between the head office and remote branches.
- Reducing the time for filling out documentation and getting rid of possible errors.
- Increased decision-making speed at all levels.
ERP-system provides an increase in the competitiveness of an object not only due to the implementation of more efficient business processes in its work. Its use should also lead to a reduction in the overall costs of the enterprise. Advanced planning, modeling and analysis tools help optimize the resources of production activities, the financial sector, as well as the work of warehouse, transport and other units.
Key Features
In various companies, even engaged in the same business, all business processes can proceed in completely different ways. The standardized scheme of work offered by the enterprise management information system may differ significantly from that used here before. For this reason, considering it only as a software product is fundamentally wrong, since its implementation requires large-scale internal changes from the company in the form of reorganization of existing business processes.
The conceptual features of these systems are directly related to their essence. Recall that the ERP methodology involves the consolidation of all vital departments of the enterprise to organize the effective management of its resources. Such a combination is implemented within the information system through the presence of a single public database. Information comes to the store only once, and subsequently can be repeatedly processed and used by various internal and external consumers. Compared to real life, in this case, there is a reduction in the time and effort of the employees of the enterprise for decision-making. It should also be noted that the ERP system is not an automated process control system, but an integrated information system based on their abstract model, the information into which is entered by living people.
The structure of the database, as well as the operation of the software complex as a whole, should be arranged in such a way as to reflect the activities of all departments without exception. This approach makes it possible to monitor the total combination of resources and business processes of the enterprise in almost real time, and therefore to carry out operational and strategic management of them.
One of the main tasks of ERP-systems is to optimize the planning process and control over the implementation of the plan. Built-in intelligent algorithms greatly simplify its solution for its users. For example, the planning and management of a manufacturing enterprise has many specific features associated with the heterogeneity of its components. So, in one plant there may exist workshops operating both continuously and discretely. From this point of view, the implemented ERP-class system should be universal and contain the widest range of specialized modules.
Since modern enterprises today are often geographically distributed, it is very important that branches remote from the main office should be provided with full access to a common information data warehouse. This is implemented by the most advanced network technologies involved in the development of ERP systems, which also provide for the delimitation of user access rights to the information stored in them.
Functionality of ERP-class systems
Speaking about functions, one should not forget that any product of an ERP-class is a system of enterprise management as a whole. The range of its capabilities will primarily depend on the scale and features of the facility for which it is being used. Consider the classic feature set:
Production
- Maintaining design and technological specifications of manufactured goods or services to determine the amount of required materials and labor costs.
- Drawing up production plans.
- Planning and managing the technical capacities of the enterprise in various approximations: from individual units to workshop and production associations.
Finance
- Operational accounting, financial, managerial, tax accounting and controlling.
- Asset management of an enterprise, including fixed assets, securities, bank accounts, etc.
- Comprehensive planning of financial resources of the enterprise and control of its results.
Logistics
- Formation of planned indicators of the required volumes of materials, raw materials, parts, components in accordance with production plans.
- Supply and sales management: accounting of counterparties, maintaining a register of contracts, supply chain management, implementation of warehouse planning and accounting.
Frames
- Managing the recruitment process.
- Operational personnel and personnel records, maintaining staffing, payroll.
- Workforce planning.
Marketing and advertising
- Maintaining sales plans.
- Managing pricing in various types of markets in order to formulate an adequate overall strategy for the enterprise, a transparent policy for calculating the value of goods: discounts and special conditions for sales.
- Planning and control of ongoing advertising and marketing events.
Projects Reporting
- Providing a wide selection of standardized accounting, financial and management reporting forms, as well as a flexible mechanism for creating custom ones.
- Drawing up a general strategy: phased planning of the necessary deadlines, material, financial and human resources for the successful implementation.
- Monitoring of key project performance indicators.
Which enterprises can use ERP systems
At first glance, it might seem that systems of this class are intended exclusively for large-scale industries, since it is precisely for them that the complexity of the structure of resource flows and processes of various types is more characteristic. However, there are situations where the use of MRP or MRP II classes may not be sufficient for a small enterprise. Today on the market you can buy software products with various capabilities. Depending on the scale of the enterprise where they can be effectively used, they distinguish heavy, medium and light solutions.
As for non-production organizations, the ERP class systems are applicable, including for them. For such enterprises there will be enough and not too wide functionality. At the moment, there are small integrated or local varieties of systems that can satisfy the needs of trading companies or organizations working in the service sector. It should also be noted that many developers offer their customers industry products.
About classification methods
The most obvious sign by which all ERP enterprise management systems can be classified is the scale of the organization where they can be applied. From this point of view, depending on the number of jobs, it is customary to allocate solutions for:
- Large corporations (over 10 thousand people).
- Medium-sized corporations (from 1 thousand to 10 thousand people).
- Medium-sized enterprises (from 100 to 1 thousand people).
- Small enterprises (less than 100 people).
An important sign of the systematization of such information products is functionality. Depending on the volume of tasks performed, there is the following generally accepted division into:
- Large integrated.
- Medium integrated.
- Financial and managerial.
- Local.
The local version is usually a unified boxed information product with a narrow focus, with a relatively low total cost. Most often, it covers one or more blocks in the field of finance of the organization or its accounting activities. Such systems are suitable for small manufacturing or trading firms.
The financial and managerial system of enterprise management can be used mainly in non-production organizations, mainly trading or working in the provision of services. In addition to financial and accounting, logistics management modules are also involved here .
Integrated information systems, depending on the scale of the target object, can be medium or large. They cover all business processes of corporate structures, namely, interaction with suppliers and consumers, production of the final product, flows of materials and finances, relations with personnel, supply, storage and marketing, implementation of projects and many others.
The modern market for ERP systems
All software products presented on the domestic market today can be divided into two main categories: Russian and foreign production. The differences between them are not only in the place of creation, but also in functionality.
Powerful Western developments serve as standards for what is commonly called ERP class systems. The most striking examples of such are the products of SAP, Oracle, PeopleSof, SAGE, Baan, Microsoft Business Solution. All of them can be used at target facilities of any level, including very large ones. However, their use by Russian companies can often be difficult due to the possible occurrence of the following problems:
- Unavailability of enterprises for a serious reorganization of existing business processes. The scale of such changes is difficult to exaggerate. The business processes of foreign enterprise management systems are fundamentally different from those that are commonly used in our country.
- Insufficient number of specialists capable of implementing the project of introducing an imported ERP system in Russia with the proper level of quality.
- The high cost of using such solutions.
Despite the general lag behind Western counterparts, modern Russian developments are gradually increasing their functionality. They are fully adapted to the work of domestic enterprises. And they can be successfully implemented if, in a particular case, a wide coverage of business processes is not required, but it is enough to establish accounting in some areas of activity using the ERP system. Examples of advanced domestic developments are the products of 1C and Galaxy.
Looking to the Future - ERP II
The concept of ERP II, which appeared some time ago, was the result of improving the ERP methodology. Enterprise resource planning and management remain among the main tasks here. However, the rapid development of the Internet, which initiated the emergence of a new methodology, left its mark, making traditional business partly electronic. ERP II is a combination of a classic enterprise management system with specific network commerce solutions.
Now it has become extremely important to interact with your counterparties over the network. There are two important areas for this: supply chain management and customer relations. Intrafirm information ceases to be just that, goes into the external environment and becomes the basis for cooperation with other business entities. The new concept in this case is formulated as the management of resources and external relations of the enterprise. In addition to ideological reorientation, ERP II systems received their own technological features.
Solving the issue of choosing a system
Choosing software of this level is an extremely responsible process. An incorrect decision on this issue, especially for large-scale projects, can entail impressive time and money costs in the absence of the expected result.
The effective implementation of a large-scale system, which, for example, should provide effective management of a manufacturing enterprise, will necessarily require reengineering of business processes. It is important to prevent a situation in which, upon completion of the program implementation procedure, it would collect unused data or not solve the necessary problems. For this reason, it is better for the project to invite a team of experts who have proven themselves in this matter to cooperate.
There is a list of criteria on the basis of which the project team, in agreement with the administration of the target company, can make an optimal, cost-effective decision on the choice of software product:
- Correspondence of the technical and functional capabilities of the system to the main goals of the enterprise.
- The total cost of ownership should fit in the budget allocated for these purposes. In addition to the cost of purchasing the system, this includes operational and other types of indirect costs.
- The implemented ERP-class information system must comply with all generally accepted technical requirements, and therefore, be scalable, reliable, resistant to possible failures, and have anti-virus and anti-hacker protection.
- The supplier must guarantee the subsequent maintenance and support of the installed software.
The process of implementing ERP class systems
The introduction of ERP-systems in enterprises accompanies the implementation of the strategies of the same name on them. This procedure, depending on the size of the target, usually lasts from several weeks to several years.An organization can engage in implementation on its own or take advantage of the help of companies specializing in this. The main stages of this process can be distinguished:
- Primary organization. Here it is necessary to determine strategic goals, objectives and indicate the expected effect of the implementation for a particular organization. Based on these data, it will be possible to draw up a technical project plan.
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The ERP-class management system today is not just a copy of expensive software installed on all computers in the organization, but also the main driving force of a promising business strategy. Its selection should be based on existing needs and capabilities of the target. The further success of the business as a whole depends on the correctness of the decision made and the implementation of the steps for subsequent implementation.