Enterprise resource planning is integrated management of major business functions, usually in real-time and mediated through technology and software. It integrates planning, manufacturing, sales, marketing, and distribution in order to boost organizational performance and improve overall business productivity. These business functions, when properly implemented, can bring dramatic increases in profit margins and market share to a company. But achieving these benefits can only be achieved if businesses have a well-organized enterprise resource planning system that efficiently integrates the different elements of the business.
A key component of enterprise resource planning is inventory management. The entire process starts by collecting adequate data on the present stock levels of all company resources such as equipment and inventory, and information on anticipated future demands for products and services. Data is then processed to provide useful information on how to best handle existing inventory and meet future demand. This requires a thorough understanding of the supply chain, the factors influencing the supply chain, and the implications that adverse events may have on inventory levels and market conditions.
One way to integrate this component of enterprise resource planning with supply chain practices is to use real-time information provided by sensors to monitor inventory levels and to establish a strategy for improving supply chain performance. The benefits of ERP can be further strengthened by integrating its components with other business functions such as marketing, manufacturing, and customer service. This leads to the creation of a more comprehensive picture of a company’s entire supply chain, allowing managers to make informed decisions regarding key business processes.
Another aspect of ERP that is often overlooked is human resources management. The process includes recruiting, training, retaining, and motivating quality professionals in an efficient manner. In addition, it involves developing and managing the overall human resources processes such as employee development, employee compensation, and employee benefits. All of these activities contribute to the positive image that a company can cultivate in the minds of consumers and other decision makers. The positive image in turn can help boost sales, increase profitability, reduce the cost of doing business and improve employee relations.
The advantages of ERP and its integration with other business functions are further highlighted when combined with strategic business intelligence (SBI) tools. ERP and BI can work hand in hand to provide managers with critical information regarding their company’s various business functions. This information can allow managers to determine the most strategic business functions to execute, identify business drivers for those functions, and determine the most optimal staffing, working capital, and assets to support those activities. In addition, ERP and other available BI tools can help ensure the continuity of these activities in the face of unexpected emergencies or changes in internal business processes. Finally, an integrated database, including information from all of these components, can support an enterprise resource planning system’s goal of becoming a unified whole.
How does ERP integrate with supply chain management? ERP, as explained above, provides a single integrated view of an enterprise’s entire supply chain. When integrating ERP and the other important tools of business intelligence, it is crucial for ERP implementation companies to consider how each business function directly or indirectly affects the other functions. For example, by examining how supply chain management and inventory control affect each other, an enterprise resource planning system can become more useful in an overall effort to enhance overall business performance. ERP integration typically includes tasks like building and maintaining a standard inventory database, analyzing the interrelationship among inventory control and shipping management, analyzing the relationship between order processing and shipping management, analyzing the effect of seasonal fluctuations on company revenues and costs, analyzing the effect of increases in demand and decreases in supply on company capacity, and analyzing the effect of fluctuating exchange rates on the costs of producing and distributing goods and services. Each of these processes can impact the cost and availability of raw materials, which can have a profound effect on company revenues and profit margins.
Another aspect of ERP integration that has the potential to substantially improve company profitability is the management of inventory levels. Many ERP applications make use of built-in tools to keep track of inventory levels of key components of the business. By properly integrating ERP and MRP applications, you can gain valuable insight into how changes in inventory levels can affect business revenues and profits, as well as how changes in inventory levels can affect the efficiency with which employees within your organization move from one part of the business to another.
Enterprise resource planning applications also play a vital role in the detection and resolution of any undesirable changes in the company’s supply chain processes. In short, resource planning aids in managing the complexities inherent in the entire supply chain process. An ERP solution can greatly improve the management of all business functions, including human resources, production, sales, and distribution. By taking full advantage of an ERP system, you can make your enterprise resource planning and inventory management activities more efficient. This in turn can result in a substantial improvement in the overall productivity of the enterprise, as well as lower costs and more accurate information regarding the state of its inventory and supply chain. Implementing ERP solutions can bring the much-needed efficiency and accuracy to a business that has traditionally been plagued by inefficiencies in its supply chain processes.