What is ERP?

ERP is an acronym for Enterprise Resource Planning, but even its full name doesn't express much on what an ERP is or what it does. To have a better understanding, one must take a step back and think about all of the various processes that are essential to running a business, including inventory and order management, accounting, human resources, customer relationship management (CRM), and beyond. At the fundamental level, an ERP application combines these modules into one absolute system to organise processes and information.

The core feature of any ERP system would be its shared database that supports multiple functions used by different business units. In practice, this means that employees in different divisions—for example, accounting and sales—can rely on the same information for their specific needs.

ERP softwares provide a degree of synchronized reporting and automation to a certain extent. Instead of forcing employees to constrain with separate databases and spreadsheets that have to be manually merged to generate reports, some ERP solutions allow staff to pull reports from one system. For instance, with purchase orders automatically flowing into the financial system without any manual re-keying, the order management department can process orders more quickly and accurately, and the finance department can close the books faster. Other common ERP features include a control panel to enable employees to quickly understand the business performance on key metrics.

ERP Integration

One of the most important characteristics of ERP systems is that they are built on a single comprehensive database to share information across the enterprise. ERP system integration, on the internal side, can be assumed to be complete and comprehensive. And as long as the ERP systems covers all of your information management needs, and there are no external systems or applications in place or planned, integration should not be a concern.

ERP system integration with the outside world is another matter entirely. Most companies have more than just an ERP system and many also want to exchange information and documents with trading partners. The good news is that information and document exchange with partners is pretty straightforward these days through web-based application design, included collaboration functionality in most systems, and accepted standards for business document and transaction exchange through EDI (Electronic Data Interchange, a rather dated but still widely used protocol for exchanging purchase orders, acknowledgements, ship notices, etc.) and the newer and more capable Web services / SOA protocols and standards.

Integrating ERP with other enterprise applications is the more problematic area of ERP system integration. In addition to the ERP business information backbone, many companies have other systems for Manufacturing Execution (MES) and data collection, Quality management and process control (may be a part of MES), Warehouse Management (WMS), Transportation Management (TMS), and/or other “outside” systems that could benefit from integration with the ERP backbone.

One of the most frequent requirements is the need to connect to a separate Customer Relationship Management system or CRM. The customer interface is perhaps the most critical aspect of business communication and the areas where companies tend to be the most unique and exhibit their competitive edge (providing excellent customer service). As such, many find that generic ERP customer order fulfillment falls short of their CRM needs, so they seek out a “best-of-breed” or specialty application to handle the marketing and sales support functions of CRM. Integration with the rest of the ERP suite provides the critical link between demand (CRM) and supply (ERP).

There are several approaches to CRM integration (also applies to MES integration, WMS integration, etc.) including the following, in order of increasing cost, delays and risk:
 Single source –buy CRM from the same supplier that provides your ERP solution. It is likely that full integration is already built-in.
Pre-integrated – find a (third-party) CRM supplier who has already developed an integration with your brand and version of ERP.
Fourth-party integration – Some independent (or perhaps not-so-independent) software suppliers may have developed a packaged integration between your ERP and your chosen CRM. This may be a rather rare opportunity limited mostly to ERP and CRM products with a large installed base
Middleware – integration can be accomplished through middleware toolsets, using SOA and Web Services design. This approach is most beneficial when there a number of integrations to be built and maintained since the tools can be expensive.
Custom programming – best suited for one-to-one integration projects. Relatively expensive. Take the longest to build and test. Often less comprehensive than other approaches because the links are all hand-built. Most expensive and troublesome to maintain.


Material Requirements Planning:

MRP calculates and maintains an optimum manufacturing plan based on master production schedules, sales forecasts, inventory status, open orders and bills of material. If properly implemented, it will reduce cash flow and increase profitability. MRP will provide you with the ability to be pro-active rather than re-active in the management of your inventory levels and material flow.

Implementing or improving Material Requirements Planning can provide the following benefits for your company:
  • Bullet Reduced Inventory Levels
  • Bullet Reduced Component Shortages
  • Bullet Improved Shipping Performance
  • Bullet Improved Customer Service
  • Bullet Improved Productivity
  • Bullet Simplified and Accurate Scheduling
  • Bullet Reduced Purchasing Cost
  • Bullet Improve Production Schedules
  • Bullet Reduced Manufacturing Cost
  • Bullet Reduced Lead Times
  • Bullet Less Scrap and Rework
  • Bullet Higher Production Quality
  • Bullet Improved Communication
  • Bullet Improved Plant Efficiency
  • Bullet Reduced Freight Cost
  • Bullet Reduction in Excess Inventory
  • Bullet Reduced Overtime
  • Bullet Improved Supply Schedules
  • Bullet Improved Calculation of Material Requirements
  • Bullet Improved Competitive Position

The consultants at Inventory Solutions can provide an un-biased review of your operations and make suggestions on how you can improve your process. If you want the productivity improvements that MRP can deliver, contact Inventory Solutions today.

MRP uses the following elements to plan optimal inventory levels, purchases, production schedules and more:
  • Bullet Master Production Schedule (MPS)
  • Bullet Bill of Materials (BOM)
  • Bullet Quantity on Hand (QOH)
  • Bullet Part Lead Times
  • Bullet Sales Order Quantities / Due Dates
  • Bullet Scrap Rate
  • Bullet Purchase Order Quantities / Due Dates
  • Bullet Lot Sizing policies for All Parts
  • Bullet Safety Stock Requirements

MRP will plan production so that the right materials are at the right place at the right time. MRP determines the latest possible time to product goods, buy materials and add manufacturing value. Proper Material Requirements Planning can keep cash in the firm and still fulfill all production demands. It is the single most powerful tool in guiding inventory planning, purchase management and production control. MRP is easy to operate and adds dramatically to profits.

What is ERP & ERP2 ?

Gartner defines ERP2 as collaborative e-Commerce which sees ERP working with CRM ie ERP2=ERP+CRM

International Data Corporation (IDC) does not use the term ERP2/ERP but defines Enterprise Applications as comprising ERM, SCM and CRM

Basically, Gartner’s ERP2 = IDC’s ERM+SCM+CRM

Legend :

ERP2 = Extended Enterprise Resources Planning
ERP = Enterprise Resources Planning
ERM = Enterprise Resources Management (FMS+HRIS)
SCM = Supply Chain Management (SDS+MRP+LMS+PPS)
CRM = Customer Relationship Management