Enterprise resource planning (ERP) systems integrate the planning, management, and use of all of an organization’s resources. The major objectives of ERP systems are to tightly integrate the functional areas of the organization and to enable information to flow seamlessly across the functional areas. Tight integration means that changes in one functional area are immediately reflected in all other pertinent functional areas.
ERP systems provide the information necessary to control the business processes of the organization. A business process is a set of related steps or procedures designed to produce a specific outcome. Business processes can be located entirely within one functional area, such as approving a credit card application or hiring a new employee. They can also span multiple functional areas, such as fulfilling a large order from a new customer. ERP software includes a set of interdependent software modules, linked to a common database, that provide support for the internal business processes in the following functional areas: finance and accounting, sales and marketing, manufacturing and production, and human resources. The modules are built around predefined business processes, and users access them through a single interface. The business processes in ERP software are often predefined by the best practices that the ERP vendor has developed. Best practices are the most successful solutions or problem solving methods for achieving a business objective.
Business Processes Supported by ERP Modules
• Financial and accounting processes: general ledger, accounts payable, accounts receivable, fixed assets, cash management and forecasting, product-cost accounting, cost-center accounting, asset accounting, tax accounting, credit management, financial reporting • Sales and marketing processes: order processing, quotations, contracts, product configuration, pricing, billing, credit checking, incentive and commission management, sales planning • Manufacturing and production processes: procurement, inventory management, purchasing, shipping, production planning, production scheduling, material requirements planning, quality control, distribution, transportation, plant and equipment maintenance • Human resources processes: personnel administration, time accounting, payroll, personnel planning and development, benefits accounting, applicant tracking, compensation, workforce planning, performance management
Although some companies have developed their own ERP systems, most organizations use commercially available ERP software. The leading ERP software vendor is SAP (www.sap.com), with its SAP R/3 package (the one adopted by IGT). Other major vendors include Oracle (www.oracle.com) and PeopleSoft (www.peoplesoft.com). For up-to-date information on ERP software, visit http://erp.ittoolbox.com. Despite all of their benefits, ERP systems have drawbacks. To begin with, they can be extremely complex, expensive, and time consuming to implement. For companies with well-established procedures, this requirement can be a huge problem. Finally, companies must purchase the entire software package even if they require only a few of the modules. For these reasons, ERP software is not attractive to everyone. During the late 1990s, companies began to extend ERP systems along the supply chain to suppliers and customers. These extended systems add functions to help companies manage customer interactions and relationships with suppliers and vendors.
CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS
Customer relationship management (CRM) is an enterprisewide effort to acquire and retain customers. CRM recognizes that customers are the core of a business and that a company’s success depends on effectively managing its relationships with them. CRM focuses on building long-term and sustainable customer relationships that add value for both the customer and the company. For additional...