Enterprise Resource Planning (ERP) is a process-oriented methodology that integrates systems used across different departments of a company, enabling the easy and uniform flow of information under defined controls, aided by the use of software applications and defined best practices.
This article describes the tools used in ERP and their characteristics for the various functions they cater to. To better understand the tools, let’s begin with the functional requirements.
What Is Needed from an ERP System?
Any ERP system basically needs to fulfill the following functional requirements.
- It must be a unified system, with easy-to-use applications and interfaces, that works seamlessly across multiple departments with the necessary controlled access
- A common database (or multiple but shared databases) accessible through different applications
- Search and reporting utilities to generate reports based on various parameters (like “all unshipped orders as of yesterday in the 'toys' category”)
- Scalability, customization, and easy integration of ad hoc modules, as needed
To meet the needs of the above-mentioned functional requirements, the following tools and applications are mandatorily integrated into the ERP system.
Information Management Tools
Data storage and information management with established workflow across different departments and functions are the backbones of any ERP system. Multiple solutions and tools are available for data storage, which include relational databases from companies like Oracle, Sybase, DB2, and open source free offerings like Microsoft MySQL, PostgreSQL, Apache Derby, etc. Other information management tools may include Content Management Systems (CMS) and repository applications.
Depending upon the industry and required functions, an appropriate one needs to be selected. A manufacturer may find a transactional database like Oracle or MySQL to be more relevant as transaction-based data moves through different statuses (from manufacturing to inventory to order capture to sale to supply status). On the other hand, an online content writing company may find a CMS repository system with version control a better fit for their needs.
The database or repository can be either a single centralized one, or multiple with automatic data flow from one database to the other. The defined workflow ensures seamless data movement. Databases can be hosted locally or remotely, or even in the cloud.
Applications and Interfaces with Suitable Permission Control
Data storage and management require read-only or editing access to process the data. Once items are manufactured, they need to be marked as ready inventory. The stock management department then updates it as ready for sale. Following a purchase, the item should be updated to sold status and so on.
To accomplish this, easy-to-use applications and interfaces make an integral part of any ERP system that also has defined controls and permissions. For example, once an item is marked as sold, only logistics department operators should be able to update it further, while the ones from the manufacturing or inventory department should get view-only access.
Similarly, for a content writing ERP tool, once a writer submits the content to the editor for review, only the editor should be able to modify it, to avoid any duplication and content conflicts.
To enable such permission-based controls, applications, and interfaces to be built in, any ERP solution that may be browser based, desktop installations, or tablet/mobile apps. A manufacturing team at a stationary location will prefer a desktop-based interface, while a sales team constantly on the move will benefit from a browser-based interface or mobile app.
Workflow Management Tool
An ERP system constitutes of multiple modules and data repositories where data updates and actions follow a logically defined sequence based on the business needs. This constitutes the workflow. Workflow can be thought of as the mind-controlling the various body functions (flow of blood, air, food and other supplies, body parts movement, etc.). A clearly defined workflow with appropriate access at various levels is a necessary part of any ERP solution.
Management level, department level, team level, or individual level report generation is another important requirement for an ERP system. It is usually available in either a dashboard form (with a real-time data view, showing such info as orders received but not yet shipped, failed payments of the last week, etc.) or customizable reports generated in common word- or data-editing applications like spreadsheets.
Most reporting tools and dashboards operate in real-time (or with a minimal time lag). Like the applications used by departments for data updates, these reporting tools/dashboard views are available as browser-based or desktop installations. They also include end-of-day reporting features offering to email reports with charts/graphs/tables as Microsoft Excel or Word attachments.
Within any system working across multiple departments, communication is mandatory. ERP systems facilitate this by offering tools for action-based automated mail generation, instant messaging, chat, or general broadcast features at individual and group levels.
Say once an order is marked as “Ready to Ship,” an automated mailer should be triggered to the logistics department to initiate the dispatch process (or if a pizza shop kitchen has developed a problem); a general broadcast message can be sent to all other departments to stop taking further orders.
Further instant messaging functions (like those from Lync, Chatter, or Yammer) are incorporated to enable easy and instant communication.
In addition to the above tools that are an integral part of any ERP system, there are additional ones that can be integrated on an as-needed basis.
A lot of analytical tools can be integrated within ERP system for business intelligence, predictive analysis, data mining and related analysis. These analytical tools are used to get valuable insights for creating strategic business decisions based on available data (like tracking consumer behavior around holiday shopping, comparative results for products in red colored shelf having more sales than those in blue colored shelf, etc.)
Resource Allocation and Task Scheduling Tools
ERP systems can also integrate tools for allocating resources across departments and tasks (for labor-intensive industries). These tools work on the simple principle of defined time taken by a task/project against the resource availability schedule. On task completion, the resource is automatically assigned a new task matching his skills or is put in a pool for the next assignment.
Tools have functionality for manual intervention at the supervisor level in case a task is delayed. Benefits include clear visibility about current and future workload, optimum resource utilization, exploring possibilities for automation, etc.
Other Add-On Features
ERP systems can integrate modules for human resource management, project management, time tracking systems, and document management, according to the business's needs. There are a large number of tools available specific to each industry and function type, and ERP vendors provide their assistance to interested clients on selecting the best fit. Internet is always available for self-help on getting required info.
The Bottom Line
ERP is a complex framework to implement and usually needs a dedicated vendor for implementation. Two big bottlenecks identified with ERP implementations are high costs and the failure to adhere to best practices. While cost can be mitigated to a certain extent by careful valuation of different vendors and assessment of free open-source tools, the other challenge of failures due to lack of adherence to best practices can be mitigated by focused training to employees. Proper assessment at initial stages, partnering with vendors with right expertise and being clear on requirements from the start will help an efficient and successful implementation of ERP tools. (For related reading, see "Case Studies of Successful Enterprise Resource Planning")