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Enterprise Resource Planning (ERP)

INTRODUCTION:

An enterprise resource planning system cuts across all department-specific functions and affects the overall control of the organization. An ERP system integrates business processes and information from entire enterprise and helps coordinate the operation of business functions. An important part of most ERP systems is the use of a unified database to store data for the various system modules.

ERP systems are software packages that can be used for the core systems necessary to support enterprise systems. They are complete solutions, catering to the needs of any industry, particularly a manufacturing concern. They provide an integrated environment whereby all the departments of the organization can work in coordination with each other, thus improving the organization's overall efficiency and performance.

HISTORY of ERP SYSTEMS:

The history of ERP dates back to the 1960's, the main focus in those days was towards inventory control. A major part of the software's developed were based on traditional inventory concepts. The next decade witnessed a shift of focus towards Material Requirement Planning (MRP). The purpose of MRP's was to translate the schedule for individual units. The 1980's brought the concept of MRP-II (Manufacturing Resource Planning).

This system helped in optimizing the entire production process. MRP-II was later extended to include areas such as Finance, HR, Engineering, Project Management etc. This gave birth to ERP (Enterprise Resource Planning). Its job was to integrate core business areas. The advantage ERP had over its ancestors was that it included the entire range of a company's activities.

However, ERP systems have skyrocketed in the last 5 years and have seen record revenues by the software companies. In the past, ERP software was not used to to its full potential. Today, the business model of an organization (domestic or global) is based on ERP. It is used as a management tool and gives organizations a great competitive advantage.

The superfluous amount of data and global competition required the ERP to be enhanced and thus ERP-II was formed. They not only form the backbone of an enterprise but also act an information link in the supply chain.

The challenge for ERP II is two-fold. First, it's to aggregate and manage the data surrounding all the transactions of an enterprise as accurately as possible in real time. Then, it's to open up the system to make that information available to trading partners.

OVERVIEW:

Organizations worldwide, whether public or private, are moving away from developing Information Systems (IS) in-house and are instead implementing Enterprise Resource Planning (ERP) systems and other packaged software.

Enterprise resource planning systems (ERPs) are Management Information Systems (MISs) that integrate and automate many of the business practices associated with the operations or production and distribution aspects of a company engaged in manufacturing products or services.

ERP systems primarily support business operations those activities in an organization that support the selling process, including order processing, manufacturing, distribution, planning, customer service, human resources, finance and purchasing.

In reality, there are huge problems in achieving any of these goals, and how successful a company is in achieving these aims will depend to a large extent on how well the company overcomes these problems.

Despite warnings in the literature, many organizations apparently continue to underestimate the issues and problems often encountered throughout the ERP life cycle, as evidenced by suggestions that: more than 40% of large software projects fail, 90% of ERP implementations end up late or over budget, and 67% of enterprise application initiatives could be considered negative or unsuccessful.

ERP life cycle-wide management and support are ongoing concerns rather than a destination. The pre-implementation, implementation and post-implementation stages continue throughout the lifetime of the ERP as it evolves with the organization. Unlike the traditional view of operational IS that describes a system life cycle in terms of development, implementation, and maintenance, examination of ERP implementations is revealing that their life cycle involves major iterations.

Following initial implementation there are subsequent revisions, reimplementations and upgrades that transcend what is normally considered system maintenance. As the number of organizations implementing ERP increases and ERP applications within organizations proliferate, improved understanding of ERP life cycle implementation, management and support issues is required so that development, management, and training resources can be allocated effectively.

About the Author

The author- Qassim Dada, is currently pursuing a Bachelor's degree in Computer Sciences from The IBA.

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