For the ones that don’t know what is an Enterprise Resource Planning (ERP) system, Wikipedia defines it very well:
“…a system that is used to manage and coordinate all the resources, information, and functions of a business”.
An ERP can support all the essential functions of the company’s business processes: Human Resources processes; Logistic processes; Finance processes; Sales processes… . The ERP objective is to increase the operational efficiency and productivity of business processes of the companies.
Now, let me give some examples to show you how useful an ERP can be. Imagine your company operates in Europe and you are on a business trip at USA and you want to know what were today sales of your company. Easy, you just need to access your ERP and run a report and you will get all the information regarding today sales. Another example, imagine that your company has several warehouses all around the Europe and you need product A in warehouse 1, before you buy the product you should check if you have product A in other warehouses and if the answer is yes, you should transfer the product to warehouse 1, avoiding you to spend money in a product that you have on stock. These were just a few examples to illustrate you how an ERP can improve your company productivity and efficiency. The ERPs are amazing sources of information, in a good ERP you can find all the information you want about any functional area of your company and with this online information make better decisions. Using the ERP you can have access to information like: stock levels; free capacity in your plant; total assets; people working; products with higher margins; … . All the operations/transactions performed in the company are recorded at real time in the ERP system, the ERP is like the camera that records everything that happens in your company and keeps all that information available for when you need it.
Today there are several ERP systems but the most known at very large global companies are the ones provided by SAP, Oracle.
Going to the question “Should companies adapt to ERPs or should ERPs adapt to companies?”. The answer to the question is simples, ERPs should adapt to companies. A company can’t change its processes, the way it operates just to have or adapt to an ERP. The ERP should be designed taking into account the company processes, it should reflect the company processes and be a source of competitive advantage for the company. A good ERP (or ERP implementation) is the one that allows the company to have the most efficient processes for the company. From my experience with ERPs at very large global companies I can say that ERPs can be very useful and powerful tools but they have to adapt to the companies and not the other way around.
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Very interesting take Afonso. You obviously have a lot of experience with ERP implementation as a useful tool.
ReplyDeleteGood post! What about a company, which has messy processes and implements ERP to discipline itself and perform process re-design based on best practice processes in the ERP?
ReplyDeleteGood question. Well the first thing I think is: Why that company don’t re-design its processes in order to have comparatives advantages against his competitors (instead of just adopting the ERP best practices) and then implement the ERP? The only answers I can think are: the company don’t have enough money and resources to implement a system 100% designed for it, or can’t wait anymore and needs to do a fast implementation. In these cases I would accept this and I would think that the company is moving a step forward. Any way if the company makes a decision like this and re-design its process based on the best practice processes in the ERP, it is just doing what averages companies in the same industry do. Would this be enough in our days for a company to perform well and survive?
ReplyDeletevery well written Afonso.... I especially liked your approach, mentioning the benefits of an ERP, and the fact that they need to adapt to the companies needs......
ReplyDeleteHello Afonso, I totally agree with your post. You have defined perfectly what ERP is and why a company should has got it. It's true that the main point is that company has got their processed well designed, otherwise, the adoption of an ERP will not solve their problems if there are.
ReplyDeleteI have worked for a company with well designed processes and the implementation of the ERP was a success. However, at the moment, I'm working for a company where the processes are a mess and the implementation of the ERP is making everything more difficult.
Hi Afonso,
ReplyDeleteI don't agree with you totally . By saying that only the ERP should adapt to companies processes and not the other way around we are ignoring the best practices that are the basis for ERP based processes. No one better than the companies should know the core processes of their activities and the best practices, however, in some cases the ERP could work as way to improve non-core processes and optimize companies performance and resources.
Nuno Frazão
Hi Nuno,
ReplyDeleteThanks for your post. If the processes are non-core and the company don't pursue any competitive advantage with that processes, I agree with you.
The answer - it depends.
ReplyDeleteFor the most part, companies should dictate their processes and the ERP should be customized to meet their business requirements. However, companies should also leverage best practices and streamline processes when moving to an ERP. Broken and inefficient processes should be modified to the streamlined processes...now change management is a whole other story!