The Business Guide to ERP Systems

Enterprise resource planning (ERP) refers to a management system that is used integrate the various departments and functions of business into a unified system. The single system is composed of various software modules and components that handle all the different processes of each department, from manufacturing operations to finance and human resources. An ERP system will generally require both hardware and software components.

The original ERP systems were integrated monolithic packages, but newer ERP systems are more flexible and can be installed as separate components. While ERP is introduced into an organization as a software solution, it is really a work methodology that requires a great deal of business process analysis and system re-engineering beyond the software.

In choosing to implement ERP you are also committing to a complete change of business processes. Enterprise resource planning (ERP) systems are typically used to replace a disparate set of individual systems strung together in a complex and clumsy manner. ERP packages offer a solution to this while bringing specific and tangible business benefits.* ERP systems make it much easier to integrate systems across multiple locations.* Most ERP systems run on a single database, which means there is only one data warehouse to manage and maintain.

This single database system also means there are fewer points of failure in your system as a whole.* The processes that go into fulfilling a customer order are automated and enhanced by a successful ERP system. It creates a software flow chart for each step in the process to give direction to the whole.* Every employee in the chain sees the bigger picture and becomes more accountable for their role in order fulfillment.* ERP systems can speed up the manufacturing process through automation in areas such as procurement and production planning. This can help reduce the costs of carrying inventory and increase inventory turnover.* Simplified supply chain operations mean you gain more responsiveness in terms of both quality control and timeliness.* ERP systems enable you to remain competitive by taking advantage of the latest technologies in your market segment.

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ERP System

“ERP System” is a way of describing Enterprise Resource Planning. An ERP System is a set of people, process and technology that enable an business to optimize and fully utilize all of their resources. So often people think of an ERP System as simply a software package. But it is much more. Let’s look at some of the aspects of a true ERP System.

ERP System Explained

If you consider all of the aspects of an ERP System, you must look at the parts of the business from a process perspective. Take for example a process of “Order-to-Cash”. This process follows the concept of taking an order for a product, checking and requisitioning inventory, preparing it for shipment, and shipping it out. Then it is invoiced, and ultimately the invoice is paid.

If you map out the Order-to-Cash process in your organization, you will likely find a lot of inefficiencies. You don’t want to automate these inefficiencies. That would only make the inefficiencies faster. So you should first look at the system of people, processes and then ultimately automate it with technology.

So your ERP System is all of the inputs and outputs to the process of taking an order and processing it through until your receive payment for that order. Take for example the Order process. The input is the order itself. The output may be the printed order or the picklist for pulling the inventory. This order is input and processed by an order entry clerk. You can see in this simple example the process of taking the order (input) and generating a picklist (output) as the first step in your order-to-cash processs.

Where possible an ERP System drives data inputs to their source. That is why Internet-based shopping carts and order systems are becoming essential. The customer is the source of the data, so they should be the source of the input into the system. You can see the beginning of a supply chain where the customer pulls inventory from the company, who then pulls inventory from a supplier. This customer, processor, supplier model repeats again and again, in both a micro level and a macro level. The order entry station is the micro level processor in the above example, and the distribution company is the macro level processor in the larger picture. You can take any process and look at the input (or the customer pull) and see what makes up the transaction, and who is the supplier for the process.

The ERP System is a many operational and financial processes that are run by people to fulfill the supply and demand of the process and ultimately streamlined and enabled by technology

Steps to improving your ERP System before automating

There are a number of things you can do, but the obvious first thing is to identify your processes and systems. Tools such as Lean Enterprise (or Lean Manufacturing) can help you reduce and eliminate waste in your processes. Based on the Toyota Production system, Lean is a very effective way to reduce wasted efforts, reduce costs, and improve your throughput.

Another area to look at is improving quality. Quality methods and tools can greatly increase your bottom line when properly applied. ISO9000 and similar certifications are both effective at communicating a message internally and externally, that only high quality products and services will be tolerated.

Scaling these two system improvements upon a well matched business software system will create a world-class organization. Key to finding a software to support your ERP System is matching your processes and key functions to an ERP Software solution.

Resources for Improving your ERP System

The first thing you should check out is ERPandmore.com’s free ERP System Tools that you can download. These can help you better define functions within an ERP system, Vendor Evaluations, and compare competing solutions.

Some other resources you should look to include the American Production and Inventory Control Society and the Quality Management Institute. These two organizations have a lot of publications and information about business process improvement.

With regards to the software for your ERP System, you can find a multitude of vendors in our ERP Software Directory. You can also find ERP Vendor reviews and get price quotes from SoftwareAdvice.com.

ERP System

Best Practices in ERP Software Applications: Accounting, Supply Chain Planning, Procurement, Inventory

Product Description
The purpose of Best Practices in ERP Software Applications is to disseminate knowledge about the state-of-the-art in ERP (Enterprise Resource Planning) systems and the business best practices embedded in the systems.It is written for business professionals, project managers, consultants, team leaders, programmers, technicians, vendors, service providers, executives, teachers and students who are working, managing or studying in the field of software application deve… More >>

Best Practices in ERP Software Applications: Accounting, Supply Chain Planning, Procurement, Inventory

ERP investments to slow in 2011

According to analyst group Forrester, ERP investments will continue to slow in 2011, despite growth in IT spending. Almost three quarters of those surveyed said that they would not be investing in ERP this year. That is troublesome for the industry and even ERP giants such as Oracle are being conservative this year.

You can read the full article here.

We would like to see what your plans are, please comment on this article and let us know if you are seeing any ERP investments in your company.

Top 10 Job Shop ERP Software

What are the top 10 Job Shop ERP Software systems available? Based on our experience and software currently available in the market, we have put together a list of likely Job Shop ERP Software that a company may look at when choosing their next ERP solution.

Job Shops are unique and don’t fit into the realm of traditional ERP systems with their large batch run MRP (Manufacturing Resource Planning) systems. What Job Shop ERP Software must provide is the ability to plan and account for small run or even one-off parts manufacturing. A traditional MRP won’t cut it.

Job Shops are often sub-contracted manufacturers who specialize in small jobs or specific small runs of a particular machined part. Often specializing in a particular metal fabrication, or a specialization around certain types of products, ie. fasteners or machined bar stock. They provide unique services for larger manufacturing operations such as working with unique materials, incredibly tight tolerances, the ability to generate quickly manufactured prototypes, design and CAD assistance, reverse engineering, quick-turn parts, in-house tooling amongst other services.

Job Shops serve a number of industries, including Aerospace, Automotive, Furniture Manufacturing, Machining, Medical, and specialty manufacturing. While this is a broad list of industries, the key elements of a job shop remain the same. They all have small runs or batches, unique parts for a contracted order, demands upon them to reduce costs while shortening delivery times, and the requirement to be flexible in their design, setup and manufacturing processes.

Because of these unique factors, most off the shelf manufacturing software does not fit these smaller manufacturers. As such, we have listed below our Top 10 Job Shop ERP Software solutions (in no particular order). Were possible, we have included links to request a demo or get a price quote.

Our List of the Top 10 Job Shop ERP Software

1. Fitrix ERP
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2. Epicor Manufacturing Express Edition
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3. Made2Manage ERP
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4. JOBSCOPE Enterprise Edition
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5. Intuitive ERP
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6. E-Z-MRP Manufacturing Software
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7. ECi M1 ERP Software
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8.DBA Manufacturing
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9. Global Shop Solutions
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10. Exact Globe Manufacturing Software
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Worth Noting: (Not an ERP software, but a Job Shop floor control system)
Shopvue Job Shop Floor Control System
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Other Job Shop ERP Software

The list above is 10 potential vendors, but you may want to look at our Vendor Directory for other candidate Job Shop ERP Software vendors. Keep in mind that sometimes a vendor can support Job Shop ERP Software requirements, but that is not their primary focus. This is something to look for, but also should be something to watch out for. Just because they say they can handle job shop requirements, does not mean that they are successful at it.

If you need more assistance in your search, you can talk to the experts at Software Advice to help you narrow down your search. Call them to schedule a free, no-obligation consultation.

Be sure to check out the Free Software Evaluation and Selection tools we offer. These tools can save you time and money as you proceed on your evaluation of different systems.

We hope that this top 10 list has been useful.
Let us know if there are other Job Shop ERP Software that you think should be included.

Job Shop ERP Software

Adding Value to your ERP Requirements

ERP Requirements Refinement

When you start a system selection, you first need to determine which business process are the “value add” processes. In other words, which processes in the business add to the value of the service or product you are providing to the market. The customer is only willing to pay for those activities that help you produce, ensure quality, or account for your product or service. All other activities are waste.
ERP Requirements

When defining your ERP requirements, you need to be cognizant of these “value add” activities. These are the activities that should be captured in your requirements. Non-value-add activities should not be included in your ERP requirements. These do not produce results that create additional value to the product/service and these are only distractions when it comes down to the actual implementation.

ERP Requirements and Lean

All of this comes from Lean Manufacturing or the Toyota Production method. Essentially, as stated above, you want to eliminate “Muda” or waste in the process. Many firms have successfully implemented this in their manufacturing processes, but a smaller group have implemented this Lean system in their business office processes.

Consider this example. When defining your ERP Requirements you determine that there is an accounting process that has people spending 2 man days per month reconciling the cost of keeping track of the tools used in manufacturing. Does this process add any value to the actual production of the product? Possibly, but it sounds like this process can be reworked and possibly using the new ERP system you can eliminate this process and drive the data down to the actual transactions on the shop floor. You don’t need accountants researching the transactions. What you might need is a system that tracks the tools and their usage as part of the production process and can give a report on what these transactions cost. These transaction costs can then be factored into the pricing of the product, without the overhead of 2 man days of reconciliation.

The time when you are defining your new ERP Requirements is the perfect time to start looking critically at your processes and keying in on what brings value to the process. Then you can design your new system (both process and software) around those items that bring value to not only the customer but also the bottom line.

Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Revised and Updated

Mapping your ERP requirements

When you are cataloging all of your ERP Requirements, you should write down all of your requirements (perhaps on a spreadsheet) and then give them an identifying number (such as R1, R2, R3, etc.) You can then evaluate each of these requirements with the business team to determine if the requirement is one that you want to carry forward into your deliverable of requirements that will be provided to the ERP software vendors. There is an excellent article on how to do this mapping, by author Brett Beaubouef, that describes this process.

He advocates that “Starting with the desired business results ensures that we drive to only those requirements that directly support true business value. First, it is an exercise that really puts into perspective the purpose of a business model (results). This exercise is not only useful to the project team but also the business stakeholders. Second, it is an approach that can help you justify why certain existing business activities are not being carried forward in the new business solution. Third, taking a business results oriented approach enables your project team to be more successful at focusing on the right business requirements and not wasting time on capturing requirements for non-value-add activities. ”

Another useful article that you may want to examine is the article 7 Ways to Fail in an ERP Selection

Keep in mind that some ERP Requirements that you identify may not seem valuable at first, but you need to review these requirements with the functional user team to ensure that key processes are not eliminated by mistake. There may be requirements that are a requirement because of a legal concern or perhaps a health and safety issue.

In the end, if you have successfully mapped out your business processes and defined these in your ERP Requirement list, then you will be a lot closer to selecting a system that actually functions in a way that brings value to everyone.

We hope that this will aid you in better defining your ERP Requirements.

How to determine your ERP Evaluation Criteria

Defining your ERP Evaluation Criteria is essential for paring down the vendors and getting to the final choice. There are two focus areas for determining your selection criteria:

Determining your ERP Evaluation Criteria

1. ERP Evaluation Criteria – Process

The Process analysis for determining your ERP Evaluation Criteria is the method you would use to determine the flow of data through the system and how it would follow along your established or to-be business processes. For example, following a process flow of quoting an order, receiving the order, manufacturing or purchasing the product, shipping, and finally invoicing the order is known as the order-to-cash process flow.

There are other anther ERP Evaluation Criteria processes such as procure-to-pay, which maps the inventory requirement through the accounts payable billings. Another example could be the HR process of recruiting though retirement.

Using Process Flow documentation to determine your ERP Evaluation Criteria

By mapping out these processes in a tool such as Microsoft Visio Standard 2010 and developing a detailed flow diagram, you will have a good understanding of how your business operates. With this knowledge, your evaluation of various business management software will be a lot easier. Further, you can see how closely the software’s process flow mirrors your company’s or how disjointed the software is when it comes to your business.

2. ERP Evaluation Criteria – Functional

ERP Evaluation Criteria for the system is the detailed list of all of the things you need the system to do, from processing purchase orders, processing a sales order, to invoicing a client and producing financial reports. These are the nitty gritty things that your system should do. A good place to start is to evaluate your current system. What are the functions that the current system does well? Include these in your list. What are the things that your system does poorly, include the desired functionality in your list.

Your list should not be 10,000 lines, but rather it should look at those items that make your business unique. For example, most every business has to cut A/P checks. So most systems can do that. So do not list as a requirement that the software should be able to cut A/P checks, rather make your requirement specific to your company, such as “System should be able to cut 3 copy laser checks, with reprint capability.” That very specific requirement will help you distinguish the vendors from one another.

A good place to start is with an ERP Evaluation Criteria Template. ERPandMore has many different templates to assist you in evaluating various ERP software venders and have best practices built in. In using these as a starting point, you will save yourself countless hours in both preparing these criteria templates as well as in differentiating the vendors your are looking at. We hope this has helped to answer How to determine your ERP Evaluation Criteria

Social Networking and ERP?

Social Networking and ERP

Social Networking has become the mainstay of the internet now. Facebook, Twitter, and the like are all drawing people in and essentially training the next generation of computer users. These social media sites are like magnets that people have to go to each and every day to keep up with their friends and share their updates. People are accessing these media sources from all types of devices. It is all absorbing.

One of the biggest problems in most business applications is user adoption. Getting the users to use the Social Networking and ERP together is a key challenge in many applications. So how does the business applications market combine the social media attraction to a financial or manufacturing system? Combining a social media approach to a business management system would seem to be a logical conclusion. But there are obstacles. You have two different elements playing here. The cold hard facts of transactional data and the emotional connectedness of the social media. How can these gel together?

Salesforce.com has begun a trend in combining social media with a business application through their Chatter application. Essentially, Chatter is a Twitter for Salesforce.com. It is an embedded part of Salesforce.com. Users can post status updates and see all of the updates from their chosen connections (friends). But the power of this application is that you can follow business objects within Salesforce.com such as Accounts, Opportunities, Contracts, etc. So anytime an update occurs on these objects, you get a status update, not from a friend, but rather from an application.

Social Networking and ERP in Action

So how would this likely work in an ERP solution? First you could enhance any alerts to post to a status page. Next you could potentially use it to notify you on any changes to any master record, such as customer, supplier, inventory, or BOMs. The next thing you might consider is to have criteria based alerts be in the form of status updates. Post an update when a customer exceeds their credit limit, or post an alert when a critical inventory part is below its optimal stocking level. Together Social Networking and ERP can have an amazing integration of functionality.

The next logical extension of this would be to extend the ERP to the social web. Imagine getting private posts on Facebook when your major customer falls past due or when your shipment that absolutely must go out notifies you that it shipped on time. When Social Networking and ERP converge, you will have seamless integration between your networks, including Twitter, Facebook, and Linkedin.

Social Networking and ERP in the future

The problem with this whole concept is the ability for traditional client server based ERP solutions to move in this direction. Some of the new systems (or recently re-written) solutions may be able to implement this type of functionality quickly, but some of the older technology solutions may have difficulty bringing a social media function quickly to bear. Social Networking and ERP may only be a thing of dreams, but it can very well be reality faster than you might expect. This integration is clearly something that anyone looking for software should watch for and something we should add to our post on What to look out for when selecting software.

As this is a topic with no clear solution yet, what do you our readers think? Where is this going? When will we see it? Please post your comments and thoughts.
Social Networking and ERP