In everyday life, there is no single concept of “ERP-system”. This abbreviation designates various inherently integrated information structures. Its purpose is to automate the accounting and management of corporate resources of the organization. Further, you will learn from our article on how to develop a competent ERP Implementation methodology for your enterprise.
What is the ERP SYSTEM?
To understand the essence of the ERP system and realize the need, you should develop the ERP Implementation methodology for its successful implementation.
The end of the 20th century begins with mass automation of various business processes. The spread of computers led to the active development of financial and accounting programs—also, electronic document management, and testing of the operation of machinery and equipment. Business automation allowed digitizing all available information and introducing new methods for analyzing and exchanging information, thereby combining data of various types.
That is, thanks to computerization. New levers of management and control over the processes occurring in the enterprise. As well as the ability to analyze the results of work in individual areas. Else the organization as a whole itself, have appeared.
The results of the automated analysis contributed to a more intelligent distribution of production capacity.
The subsequent adoption of optimal solutions for business development, the method of doing business using various automated enterprise resource management programs was called ERP. And the software used for this purpose was called the ERP system. That is, all computer programs designed for accounting, personnel management, etc. They are part of the ERP system, while the CRM also serves as a module of the ERP system.
It is worth noting that the ERP system was the result of the development of simpler concepts: MRP (Material Requirement Planning – planning material needs) and MRP II (Manufacturing Resource Planning – planning resources). The implementation of manufacturing ERP software allows for production planning, to simulate the flow of orders and evaluate the possibility of their implementation in services and departments of a subordinate organization.
The capabilities of most ERP systems allow you to cover all the main activities of the enterprise.
Before you purchase and implement an information system in the activities of your organization. You should accurately determine the purpose of the purchase and understand which software version your business needs. Whether an ERP class system or an accounting system. Remember that the ERP system is designed to draw up plans for the optimal use of enterprise resources. ERP-system programs help you to answer various questions that arise within the enterprise.
The implementation of the ERP system will not only allow to keep track of current information. But to develop plans for modelling and optimizing the use of all types of organization resources (financial, material, human, temporal, and so on). Most of the software functions of the system are explicitly aimed at achieving the above objectives.
As for the accounting system, it can only be used to record the results. Unlike ERP systems, accounting programs are not equipped with automation planning functions. And do not allow comparing current results with predictable indicators. That is, accounting systems have limited ability to manage the organization in terms of planning and optimizing the use of enterprise resources.
Pros and cons of the ERP system implementation
The implementation of the ERP system will necessarily change the quality of your business. Significant advantages are the rational distribution of work between organizational units as it reduces the cost of duplication of functionality and other possible costs associated with the lack of a unified system of company management.
Benefits of implementing the ERP system
Through the implementation of the ERP system, you can streamline data acquisition. And also exchange at interrelated stages of the organization, this, in turn, will have a positive effect on the performance of each unit. The overall picture of the production processes depends on the totality of the results.
The implementation of the ERP system allows you to control all the work processes. That takes place in a subordinate organization, from the simplest operational functions to the strategic regulation of the entire enterprise.
Unification of reporting
With the help of ERP software, all financial and statistical reports are displayed according to a single model facilitating the cumulative analysis of the current performance of the departments.
Standardization of information systems
The use of all modules of the ERP system eliminates the need to install and maintain other computer programs and information systems.
Expanded range of leadership functions
The implementation of the ERP system makes it possible to use the company’s corporate knowledge management bases actively, thereby increasing the functionality of the manager.
Integration with counter-parties
Some ERP-systems provide for the participation of clients of the organization. For example, they can independently form an order, track its status. Also, analyze the availability of inventories and replenish them if necessary.
Adaptation to the needs of the enterprise
The implementation of the ERP system can be complete or partial since its modules work both autonomously. And in conjunction with the entire system. The choice of the project should be based on the needs of a particular company.
The administrator can categorize all users of the ERP system, giving each category access to specific resources and functions. But at the same time, the actions of each user can be easily traced and verified.
Centralization of information
The implementation of the manufacturing ERP allows you to store all the data of the organization in one place. So, if necessary, you can always get the necessary information.
Integration with other systems
In the case of using the API-interface, ERP-systems can interact with systems of a lower level. Such as to process equipment, production complexes, and machine tools.
Improving the efficiency of interaction
The implementation of the ERP system demonstrates the results of work done by each unit, thereby helping to improve the interaction between them.
The development and implementation of an ERP system are particularly relevant for companies who have offices in another region since its modules allow for centralized management and for scaling up decisions made.
Providing control in adjacent directions, ERP-systems are a set of programs with different functionality. That helps to control all areas of the company, from tracking order statuses, material support indicators, to financial flows. It also helps in the main areas of work of the enterprise.
But, despite all the above advantages, the ERP system cannot be called perfect, because it has some negative points:
- Long installation. Execution of the ERP implementation methodology in a large corporation can last from six months to three. Some installed programs in some modules may not work correctly even after final implementation.
- High price. The total cost of the ERP system consists of several price factors: software, related technical equipment, as well as work on the installation, configuration, testing, and further maintenance.
- The difficulty of use. The most effective use of system modules is possible only after comprehensive training of employees since the software in question has a rather complicated interface.
- Additional expenses. After the implementation of the ERP system, it will require a periodic update of the software. Equipment and communication channels, which is directly related to additional financial investments.
- Transfer of information. It is worth noting that with the implementation of the ERP system in the activities of the enterprise. Additional costs often arise with the transfer of information from the programs that were used by the organization earlier.
Step-by-step: ERP Implementation plan
The organizational phase also includes the creation of a working group in the enterprise. As a rule, it includes:
- Head (it is better to choose among the top managers of the organization). He should be aware of all business processes occurring in the enterprise. Besides, the project manager of the ERP implementation should have the authority to make some decisions on any issues.
- Specialists who control the compliance of the system being implemented with current regulations and corporate standards. These can be executive director, chief accountant or head of IT-service.
- The heads of all departments will continue to use the new software. They will have to advise specialists while implementation of the latest business processes of the enterprise. As well as organize the work of subordinate employees after completion of automation.
- IT-specialist generalist. His main task will be technical support of the plan for the implementation of the ERP system.
It is worth noting that the plan for implementing the ERP system will work at full capacity only if the software is used actively and effectively by all employees of the organization, to do this, employees need to be trained. About the basic rules for the use of ERP and strictly control the actions of staff at the initial stage of operating the program. Responsible for training subordinates and adjusting their actions are also members of the working group.
Plus, at the organizational stage, you need to decide on the sources of financing and select an integrator company.
Stage of the enterprise survey:
After the end of organizational measures, the next stage of the plan begins. The study and analysis of the company’s main business processes this is necessary to accurately determine the time and cost of work on the implementation. Focusing on the scale of the upcoming work and goals. The IT-integrator offers the customer two plans for an enterprise survey:
- Express survey: Takes 1.5 to 2 months. The result of the survey is a “Pre-project analysis”. That describes all the nuances of automated accounting—also, a list of tasks to be solved during implementation.
- Full examination: Lasts 3-5 months. Based on the thorough survey, a “Technical Task” is formed. Business processes of automated accounting are prepared. Also, indicating the list of necessary software adjustments.
The choice of a specific survey plan depends primarily on ERP implementation methodology.
Choosing an ERP implementation methodology:
There are four main options for implementing ERP solutions:
- Evaluate the time and material resources available.
- The IT integrator conducts a rapid survey of the organization.
- Draws up a plan for the ERP system implementation project
- Calculates the maximum possible cost of work.
All the above details will be prescribed in the contract. The work plan for the implementation of the ERP system is divided into several months. Depending on the total amount of working hours, the amount of monthly expenses is determined. The fixed amount of payment is also reflected in the agreement between the companies.
The actual needs of the organization determine the list and sequence of tasks. The main advantage of the technology is its flexibility. Changes are made to the implementation plan of the ERP system in accordance with customer needs.
Among the disadvantages of ERP implementation methodology include the inability to determine the exact timing of software implementation.
ERP system design
After examining the organization, programmers determine the basic requirements for the basic modules of the ERP system. Like the need to load initial data, as well as settings for moving information from the programs used by the organization. System modules are programmed following the company’s main business processes. Also, necessary adjustments are made to the software functionality.
Implementation of ERP-System in the enterprise
According to the implementation plan, the installation of the ERP-system programs on the workplaces of staff is carried out. Configure access rights and reports. Data from previously used enterprise software programs are loaded.
Starting up the system
Training the users after the completion of the automation processes. And developing instructions for working in the system.
Maintenance of the implemented system
Uninterrupted operation of the ERP system is possible, subject to support after implementation.