Enterprise Resource Planning: Introduction, Objectives and Modules

By | April 28, 2020

Enterprise Resource Planning (ERP) is defined as a system which is capable of delivering a highly integrated package of enterprise applications. ERP techniques share a similar mechanism and data model that encompasses wide-ranging end to end operations and maintenance processes such as supply chain, HR, manufacturing, distribution and finance etc. It is a system by which the significant aspects of the business are managed and integrated.

ERP programs simplify and help support a variety of corporate operations across various industries, comprising of the business line, wealth management, administrative, customer-facing and other aspects of the business.

ERP deployments, however, usually come at a huge premium and it is hard to justify and comprehend the economic benefits. ERP is software for managing the operations of the business or organisation, enables an organisation to choose a highly integrated application system to run the company.

These mechanisms are large computer mechanisms that assimilate application programs into sales like placing an order, production functions like product shipping, auditing and accounting operations such as receivable accounts and many other functions within the company.

To attain integration, a typical modern ERP structures use a centralised database to store information for different system components.

Objectives of ERP:

  • The manager can manage the business in an effective manner as the various processes are automated. This helps the senior management focus on core activities. There is the synchronisation of data and a common database.
  • All the processes get simplified and the data can be easily accessed and relevant information can be generated which results in precise decision-making.
  • Though it is a software-based module approach, it integrates diverse such as inventory, customer relationship management accounting etc. Thus, a single database helps in multiple functions in the business.
  • It also facilitates simple accounting, because accounting procedures comprise various procedures that require double ERP posting and tedious clerical work. ERP automates such process. It assists in financial reporting and data can be easily presented and analysed for arriving at financial decisions.
  • It facilitates transparency in the entire organisation. The integrity and security of the crucial business data are maintained by using a single software. The same data is accessed by all the departments, here there is no scope of ambiguity or inaccessibility. There is transparency in the organisation which facilitates smooth functioning.
  • It helps in eliminating the redundancy because there is a centralised data, hence duplicate recording of data can be eliminated.

Modules of ERP:

In an organisation, through the centralised application, ERP helps in managing the business process of different departments and functions. By monitoring the data provided by ERP, the manager can simply make all the other major decisions. Although systems for design and application are fundamentally unlike, there are some basic and common ERP modules that which are often found in any ERP system. Integrated components are needed system is developed. Most of the modules listed below are available in an ERP system:

1. Supply Chain Management (SCM):

Typically, the supply chain ecosystem comprises of customers, retailers, distributors and producers. SCM includes planning, carrying out, controlling and tracking the activities in the supply chain. ERP provides a solution to issues like storage and transportation along with the management of supply and demand of the customers.

2. Sales and Marketing:

Typical sales process encompass procedures such as sales requests and enquiry assessment along with its management, preparation of proper taxation sales invoice, drafting of quotations, acceptance of sales orders, dispatching and shipping of product or service, following any pending order. The ERP sales module manages all these other sales transactions. In an ERP system, the sales module usually manages a company’s national and export sales functions. That is why the module holds the database of customers and products.

3. Purchase:

Purchase modules handle all the procedures and methods that are necessary for the organisation that are part of the obtaining items or raw materials. It includes features such as receiving and recording quotations, manufacturing and item linking supplier/seller listing, the following purchase items, sending quotation requests to vendors, quotation analysis, arranging purchase orders, making Good Receipt Notes (GRNs) and redesigning and stocks and various reports. Inventory module and engineering and production module for inventory updation are integrated with the purchase module.

4. Human Resource:

The human resource module enables the HR team to handle human capital efficiently. HR sub-system helps control relevant information about employees, track records of employees such as tracking time, performance evaluations, skill matrix, jobs and designations, job requirements and attendance.

payroll system is one of the crucial sub-modules in the HR sub-system that aids to manage the compensation reports and manage salaries etc. It may also comprise travel expenses and tracking reimbursement. It also handles employee training tracking.

5. Inventory:

The production or storage manager can use the inventory module to record items that are related to stock. Various unique serial numbers can be used to identify the items. This also assists the manager in identifying the current location of the item in the organisation along with tracking it. e.g. If a company has purchased 1000 machines, then it can identify how many machines have been installed. This also shows how many machines are left and what is the cause of delay in their instalment. This can also lead to identifying whether there is any defect in the machine.

6. Finance and Accounting:

The finance module manages the entire inflow and outflow of money and capital. This module helps in tracking the transactions relating to the accounts. These transactions include bank statements, account ledgers, spending sheets, cost sheet, payment receipts, tax liability and payments and other cost and revenue management functions.

ERP facilitates in financial planning. If the manager requires any financial data i.e. required to handle the business, then it can be obtained from the finance module. This also presents and stores the data with regard to previous performance. This also helps in conducting thorough analysis with ratios and other variable ERP module in finance generally comprises of accounts receivable module, accounts payable module, cash management, general ledger etc.