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The very basic [question] is why Enterprise resource planning?
Also called erp is required
to answer let's examine this typical business scenario
A client approaches the sales Team to buy a particular product
The sales team approaches the inventory Department to Check the availability of the product
in this case the product is out of stock the sales team approaches the production planning Department to
manufacture the product
the production planning team checks with the inventory department for availability of raw material
If raw material is not available within the inventory the production planning team buys the raw material from the vendors
Then production planning forwards the raw materials to the shop floor execution for actual production
Once ready the [shop] floor team forwards the goods to the sales team who in turn deliver it to the client
the sales Team updates the finance Department with revenue generated [by] the sale of the product
The production planning team updates the finance department with payments to be made to different vendors for raw materials
All departments approach Hr. For any human resource related issue
That is the typical business process of any manufacturing company
some key inferences one could derive from the scenario would be a
Typical Enterprise has many departments or business units
These departments or business units continuously communicate and exchange data with each other
the success of any organization
lies in its effective communication and Data exchange
Within these departments as well as associated third parties such as vendors outsources and customers
Based on the Manners in Which communication and Data exchange is managed
Enterprise software systems can be broadly classified as
decentralized systems
Or centralized systems which are also called
[erp], let's look at decentralized systems first in a company with a decentralized system of Data Management data
Is maintained locally at the individual departments?
Departments do not have access to information or data of other departments
to identify the problems arising from
Decentralized Enterprise management systems let's look at the same business process again
the customer approaches the sales team for a product
But this time he needs the product on an urgent basis
The sales team do not have real-time information access to the products inventory
So they approach the inventory Department to check the availability [of] the product
This process takes time and the customer chooses another vendor
leading to loss of Revenue and customer dissatisfaction
Now suppose the product is out of stock and the sales team approaches the production planning team to manufacture the product for future use
The production planning team checks the availability of the raw materials required
Raw Material information is separately stored by production planning as well as the inventory department
Thus data maintenance cost goes up a particular raw material
Required to manufacture the product is available in the inventory
but according to the database of [the] production planning team the raw material is out of stock, so
They go ahead and buy the raw material
Thus material as well as inventory costs go up
Once the raw material is available the shop floor department suddenly realizes. They are short of workers
They approach the hr. Who in turn hire temporary employees and higher than market rates
thus labor cost increases
The production planning department fails to update the Finance Department on the materials they have purchased
the Finance Department
Defaults the payment deadline set by the vendor causing the company loss of its reputation and even inventing a possible legal action
These are just a few of the many problems with decentralized systems
Some major problems with the decentralized system are
Numerous disparate information systems that are developed individually over time and are difficult to maintain
Integrating the Data is time and money consuming
inconsistencies and duplication of data
lack of timely information leads to customer dissatisfaction loss of revenue and reputation
High inventory Material and human resource costs
These are just some of the major drawbacks [for] which we need a solution
Well the solution lies in
Centralized systems that is e rp in a company with a centralized system of information and Data Management data
Is maintained at a central location and is shared with various departments?
Departments have access to information or data of other departments
Let's look at the same business process again to understand
how a centralized enterprise system helps overcome problems posed by a
decentralized Enterprise system
In this case all departments update a central information system
When a customer approaches the sales team to buy a product on an urgent basis the sales team has real-time information
access to the products in inventory
Which is updated by the inventory department in the centralized system?
The sales team responds on time leading to increased revenue and customer delight
In case manufacturing is required the sales team updates the centralized database
Production planning Department is auto updated by the centralized database for requirements
The production planning team checks the availability of the raw materials required Via central database
Which is updated by the inventory department?
Thus data duplication is avoided and accurate Data is made available
The shop floor team updates their manpower status regularly in the central database which can be accessed by the Hr. Department
In case of a shortage of Workforce the Hr
Team starts recruitment process with considerable lead time to hire a suitable candidate at market price thus labor costs go down
Vendors can directly submit their invoices to the centralized Enterprise system
Which can be accessed by the finance department?
Thus payments are made on time and possible legal actions are avoided
The key benefits of the centralized system are it eliminates the duplication?
Discontinuity and Redundancy in Data it provides information across departments in real time it
Provides control over various business processes it increases productivity provides better inventory Management promotes quality
reduces material cost allows for effective human resources management and reduces overhead while boosting profits
better customer interaction increased throughput and
Improved customer service
Hence a centralized Enterprise management system is required
Si p is a centralized enterprise management system also known as Enterprise resource planning
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黃文君 published on May 29, 2020
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