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The characteristics of an ERP system

There is no doubt that ERP systems should be a fundamental piece of any company, due to their enormous possibilities, but above all because of the flexibility that they bring to the entire production process. Although the acronym ERP corresponds to “Enterprise Resourse Planning”, ERP  has nothing to do with the name that characterizes it, since it does not plan or create resources,  but the part of the company (Enterprise) is its direct objective and ambition . the characteristics of an erp include

It is the attempt to  integrate all the departments and functions of a certain company or organization in a single computer system that serves and responds to the particular needs of each department.  Its main objective is to build a single software program that serves the needs of accounting operators as well as those of human resources and those of the warehouse for the management of inputs and outputs of material and respective guides.

Normally, each of these departments has its own computer systems optimized for the particular needs of each sector,  but the ERP combines them all in a single and integrated software program that launches a single database so that the various departments can, more easily, divide information and communicate with each other. This sectoral approach can bring enormous benefits to the company, if the software were correctly installed.

For example, an order from a customer. Generally, when a client places an order with the company, a process begins from shelf to shelf, from office to office, from department to department, undergoing systematic alterations and various coding as it passes through each computer system of each department of the company. business.

All these transitions and alterations cause delays and loss of orders and all the various encodings of the various softwares lead to the appearance of errors. In addition, no one in the company knows specifically what the status of the order  at any height because it is not possible, for example, that the customer support department can enter the warehouse’s computer system to know if the order X has already been packed, and he left, what the date. The common response is you have to phone the store.  the characteristics of an erp include

That is why, when faced with this type of situation, it is necessary to carry out  an adequate planning of resources through the so-called management information systems . In this sense, the ERP planning system arose from the need to encompass all the data referring to the entire production chain of the companies , in order to provide reliable information in real time.

What is ERP?

Through ERP systems, the various areas of a company are monitored , from the manufacture of a product, through logistics, distribution, stock control, organizational accounting and others.

It is basically  a software developed for the effective management of company information, which allows making the right decisions at the right times,  thanks to the veracity of the data handled through the ERP.

the characteristics of an erp include

For this reason, ERP systems are generally referred to in the business environment as Back Office systems, since  only the different sectors of the company are involved in it. 

On the contrary, the systems called Front Office or more commonly called  CRM , are those that, as their name indicates,  allow a direct relationship with customers , such as e-commerce businesses, among others.

the characteristics of an erp include

Thanks to the use of ERP,  all the departments of an organization manage to be communicated and integrated in order to improve the productivity of the company , since having concrete information in real time makes intelligent decision-making possible.

The fundamental characteristic of the ERP resides in that it  contains different parts, each one of them destined to the different areas of the company, and integrates them into a single program to compile the information  that can be used at the same time by any of the sectors that make up an organization. the characteristics of an erp include

Therefore, one of the most important objectives of ERP systems will be  to achieve the greatest optimization of all the processes  of a company. This is possible thanks to the fact that ERPs allow permanent access to the information generated by each area of ​​the company, being able to  use the data in a reliable and timely manner .

Likewise, the optimization of information is achieved by  eliminating irrelevant data , which could lead to unnecessary operations and poor decision-making.

Thanks to the articulated work between sectors that ERP systems allow,  the operations carried out result in important benefits for companies , since through the use of this type of systems it is possible to efficiently manage information, which will allow not only the effective completion of the operation, but also  get immediate answers to problems that may arise and a significant decrease in operating costs. 

It should be noted that although on some occasions ERP can be erroneously defined as a business administration suite, thus causing an incorrect use of the software, the truth is that  it is a single application that works using a variety of libraries, and the information entered in it is compiled in an extensive and organized centralized database. 

For this reason, the fundamental characteristic of this type of software resides in  collecting and keeping available and updated the information  that all sectors of the company can make use of, at any time that is required.

On the other hand, it should be noted that among all the alternatives that currently exist in the field of  business management tools, the ERP system is undoubtedly the one that offers the greatest possibilities and is best suited to the different needs of each company .

Historical Evolution of ERP Software

ERP systems have a long curriculum of about 40 years,  accumulating some errors and successes. Its evolution occurred as a strategic tool at the same time that information technologies also evolved, and through successive improvements in management techniques. the characteristics of an erp include

the characteristics of an erp include

Before the 1960s, and in order to guarantee the correct organizational functioning of companies, a large part of the businesses were supported by inventory management techniques . The most popular of them all was the EQQ Economic order of Quantities.

In this technique, any item in stock will be analyzed based on its order cost value and storage cost, that is, sales per year are estimated in order to optimize the final cost of the items and the quantity of the items. same to have in stock in the warehouse.

From the 60s, a new technique emerged with the name MRP Material Resource Planning (Material Order Planning) , a technique that will go to know its second phase, the 80s that will be discussed below.

It was an active way of managing and planning inventories, exploring for the final products through a specific production planning and its transformation into an ordered table of orders and production orders, not leaving aside the quantities in stock.

MRP is simple and logical, but in a real situation, it generates a huge amount of data, which makes it very uncomfortable to be implanted in a computer.  It becomes very heavy and slow, especially if the process is done manually, which is why the use of computers is essential for its proper functioning.

It should be noted that the MRP obtained excellent results at the level of: the characteristics of an erp include

  • Reduce the quantity of stocks in warehouse; 
  • Reduce production and distribution times , as they improved coordination, thus reducing delays;
  • Increased efficiency at all levels.

This technique proved to be an excellent inventory management method, but it failed in other important areas of companies or organizations. the characteristics of an erp include

With the advent of the 70s, a new technique similar to MRP appeared but modified to the level of the original operating logic. It was a CL MRP Closed Loop Material Resource Planning.

In this new technique, the production capacity came to be taken into account, resulting in a new inclusion of a method in the system, the CRP Capacity and requiring Planning. 

Around the 80s, and as already mentioned when the MRP was addressed, the evolution of this emerged , the MRP-II that addressed the concept of production resource planning and the need to broaden the management of the other areas of the company. the characteristics of an erp include

Thus, an effective method of managing all the resources of a company emerges that transforms operational planning into units, financial planning into money and, for its part, has the ability to carry out simulations based on What If? Questions  (what if?) .

From a variety of functions that are integrated with each other, the first ERP concept arises already:  business planning, production planning, production time tables, material and requirements planning, capacity planning and the operation of the system for capabilities and priorities.

What results from this  system must be integrated with other financial reports , such as balance sheets, orders, purchases, stocks, production, etc.

The MRP II had serious setbacks, as they assumed fixed production times, infinite capacities, batch processing, etc. Meanwhile, over the years, other important tools evolved automating the entire production management process:

  • Computer-aided drawing
  • Computer-aided production
  • Computer-integrated production
  • Production management systems influenced by customers

After, more or less, a decade, around 90, and already with all the technological innovations of the time and their need for expansion, such distinguished areas as Engineering, Finance, Human Resources, Project Management, Services and Banking, is that is, all the activities that are inherent to any company, fully integrated into a solution.

ERP Enterprise Resource Planning (Business Management Software) arises. An important fact is that  all the existing subsystems in a company are integrated , ERPs achieve better results than the total of the subsystems separately (the whole is greater than the sum of its parts).

The traditional application systems generally used by companies treat all transactions separately. They are made and used to answer the specific functions that were intended.  ERPs stopped looking at a transaction in isolation, but as an integral part of a set of interlinked processes that characterize the entire existence of a company or institution.

Almost all traditional application systems used separately by some companies are nothing more than data manipulation tools. They store data, process it and present it in an appropriate way required by the user.  In this process, the only problem is that there is no apparent connection between the various systems used by the different departments.

An ERP system does the same thing, but in a different way . Hundreds of tables full of data generated as a result of various transactions easily appear, remaining only in the department that originated them, instead of being treated and integrated in such a way that they are used by multiple users in multiple departments and for different purposes that they were not the initial objective.

It was this evolution that took, from the 60s to the present day, that is why we cannot stop talking about the importance that the evolution of technology had in the birth of ERP, that is, of all  its technological infrastructure and that it does not It is possible to separate from the current way of doing business. 

The constant evolution of technology and the reduction in the price of hardware made it possible for small and medium companies to have an ERP system.  The first ERPs were initially developed to run on mainframes.

With the arrival of the famous PCs and multilayer client / server architectures in Unix, La as / 400 and  Windows  NT, the relationship with SGBD (Database Management Systems) and its integration with Web technologies contributed greatly for the ease of use of ERP systems. the characteristics of an erp include

The transfer of data electronically by the various departments of a company is also important, since they are distributed by stores, distribution posts, warehouses, and not even everything is in the same place, in fact, they can be found more than 300 km away. Systems such as Internet, Intranet, Workflow, Workgroups, Groupware, Datamining, Datawarehousing, etc., influence ERPs for an evolution towards the future. the characteristics of an erp include

ERPs have evolved to this day and continue to evolve constantly, as they try in one way or another to accompany the evolution of computational technologies themselves. All this led companies to believe that  ERP systems could improve the performance of a company. 

Fundamental characteristics of ERP

The  ERP systems  not only serve to integrate various departments of a company. To truly be considered ERP,  the system has some of the following fundamental characteristics: 

  • Flexibility  An ERP system is flexible in such a way that it responds to the constant transformations of companies. Client / server technology allows the ERP system to operate on different databases through open database connections, since it is highly likely that the same product will migrate from one production area to another during the total production cycle.
  • Modularity  The ERP system is an open architecture system, that is, you can use a module freely without affecting the others. The system supports multiple hardware platforms as many companies have heterogeneous systems. It should also facilitate the expansion and / or adaptability of other modules later. the characteristics of an erp include
  • Comprehensive  The system must be able to support the different organizational structures of companies, as well as a vast business area.
  • Connectivity  The system should not be confined to the physical space of the company and allow connection with other entities belonging to the same business group.
  • Selection of different forms of business  should contain a selection of the best business practices from around the planet.
  • Reality Simulation  should allow the simulation of the reality of the company on the computer. In no way, control of the system should be outside the business process and reporting should be possible for users who control the system.

Top ERP Software Providers

There are countless ERP system vendors, supplying an entire suite of products and solutions . From the sale, to the installation and parameterization, maintenance and updates, there is a whole range of different options for customers to take.

Quite common today is the partial or total Outsourcing of the entire installation / parameterization process, due to the lack of  specialized technicians  in the companies or to increase the speed of the entire process. Some of the large companies that provide ERP systems worldwide are:

SAP  the characteristics of an erp include

It was founded in 1972 in Germany by five IBM engineers, and is today the largest company in its field. Its R / 3 system was optimized to manage production and management processes, logistics and human resources .

Today, after more than 30 years, it already has more than 12 million users, 64,500 installations, 1,500 partners and 23 IT solutions. It is considered the largest ERP provider in the world, contributing to that, having been one of the pioneers.

PeopleSoft  the characteristics of an erp include

It is the second largest provider in the world, its strongest weapon being the human resource management modules. The Peoplesoft company is currently directing its products to the service areas, with  cost control products .

Sap and Peoplesoft have maintained continuous success due to the offer of new potentialities to their clients, as well as the constant increase in clients that are world-renowned companies.

Oracle

It has been  producing and selling ERP applications since 1987, with the majority of its clients being companies related to the production and consumption of products , thus being a direct adversary of SAP.

Interestingly, in about 80% of cases, SAP software operates on an Oracle database. However, Oracle has resisted some problems in recent years, due to the change in the structure of the group.

Baan 

It is a Dutch company and a strong competitor to SAP. Recently, like other vendors, it has paid special attention to the small and medium-sized business market, which results in  a huge variety of products that it offers as well as a quick financial return. 

JDEdwards

Despite selling software for many years, they only became known worldwide for a few years. Since they launched  OneWorld, ERP software , they have achieved a significant share of the global ERP market.

Limitations of ERP Systems

Despite the great virtues that characterize ERP systems to improve the productive processes of companies , the truth is that  the implementation of this type of software  can also entail a series of disadvantages that can be an inconvenience for the operations of a company .

Above we have mentioned that ERP systems have the main benefit of offering a single tool  that allows the interaction of the various sectors that make up a company. This translates into reliable, accurate and timely information that collaborates with the decision-making process  to improve productivity and reduce costs by taking advantage of all the resources of our company. the characteristics of an erp include

However, ERPs can also present certain limitations and obstacles in the development of processes,  resulting in future inconveniences in operations. It should be noted that in this regard, most of the problems arising in companies due to  the implementation of an ERP system  are due in many cases to the lack of training of personnel, the lack of an adequate corporate policy, the lack of updating of the software , and inappropriate investments.

However, it is important to note that ERP can be difficult to operate , since it is a rigid system, which sometimes does not have an adequate adaptation to business processes.

On the other hand, according to the experience of some companies , the effectiveness of the functionality of an ERP system can be impaired when a problem or data inconsistency arises in any of the modules corresponding  to any of the company’s sectors.

This can cause the appearance of unreliable information, or the omission of relevant data for the production process, in  addition to the possibility of some kind of manipulation of the data, in cases in which the personnel of any of the company’s areas It resists sharing internal information with the rest of the sectors of the organization.

For this reason, before the implementation of an ERP system, it is extremely necessary to train and educate company personnel  not only in the use of this type of software, but also in an idiosyncrasy that aims to broaden job prospects, establishing as points Sharing is fundamental to success and thus becoming one of the important links in the production chain.

Due to the necessary education of the personnel and the inclusion of machinery and software to carry out a business management system,  it should be noted that the implementation of ERPs is usually very expensive.

However, the implementation of any type of management software implies a significant investment , but the fundamental difference is that in the case of an ERP system we will be using an integral tool that allows the interaction of all the departments of our company, that is, a same software for all, contrary to other types of computer tools.

The truth is that before implementing an ERP system in our company, we must evaluate the real need for it in the production processes of our organization , since many times the computer engineering of this type of systems can be extremely excessive with respect to the real needs of our company. the characteristics of an erp include

Free software ERP systems

Although there is a large amount of  ERP software  to effectively manage the operations of a company, the truth is that  many times there is a lack of financial resources to carry out the implementation of this type of systems , especially in the sector of small and medium-sized enterprises.

For those organizations that want to incorporate the ERP system into their production, but due to the high investment costs in software have not yet been able to implement this tool,  there is the possibility of using one of the many free software ERPs that are available in the present.

In principle, let us remember that as we have seen earlier in this article, the ERP system basically consists of an application that gathers in a single system all the processes related to the business of a company, that is, it is  a single program in which all the departments of a company interact.

This characteristic differentiates ERP from the rest of the management systems called suites, which are based on  multiple independent applications centralized in a single database.

For this reason,  ERPs and management suites occupy a different place in the business software market,  and as each company is a different case, there are companies that will be able to manage their information through a suite, and others that will instead need without you doubt an ERP system.

As we have already mentioned,  the implementation of an ERP system requires a significant investment of money, not only in machinery, but also in software,  since if a proprietary program is used, the corresponding license must be paid. The same happens in the case of renting this type of service.

An interesting alternative for those medium and small companies that do not have the necessary money for the investment of the ERP implementation, is to opt for the use of  free software programs, with all the configuration and customization advantages that this type of software includes , as long as you have some knowledge about it.

Here we review some of the ERP software in the free world that stands out the most today.

ADempiere the characteristics of an erp include

Among the alternatives available today, we find the software called  ADempiere  that has been created by a community of developers, who are constantly working to improve and expand the possibilities of this tool.

the characteristics of an erp include

It has Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Supply Chain Management (SCM) functions, thus providing a  complete business management system.

This software has been based on its predecessor Compiere and developed under free technologies, so it is licensed under GPLv2. It should be noted that it  supports PostgreSQL databases  and has been integrated into iText, thus allowing the  generation of PDF files.

For more information about ADpremiere visit this link .

CK-ERP

It is a system that  consists of 20 modules and has a very simple graphical interface , ideal for those who are starting to implement this type of business management systems for the first time.

the characteristics of an erp include

CK-ERP  is fully configurable to respond to the needs of each company,  and to function it only requires the previous installation of any operating system except Microsoft Windows, that is, it can be  used without inconvenience in Linux, Solaris, FreeBSD, OpenBSD, among others.

GNUe the characteristics of an erp include

For those companies that require an ERP system without too much complexity , one of the most recommended options is GNUe, which consists of a group of applications that due to their joint operation can be used as an ERP.

the characteristics of an erp include

However, each of the tools that make up GNUe are developed separately, since they correspond to different communities,  so it is not the best option for those who require a complete ERP.

For more information about this software you can visit this link .

Openbravo the characteristics of an erp include

An interesting alternative is the Openbravo business management system, which  has a fully integrated structure and its platform has been developed based on free software,  and designed to be used through an Internet connection.

the characteristics of an erp include

Openbravo has support for PostgreSQL and Oracle databases, but  its limitation resides specifically in the fact that it cannot be used by users who do not have an Internet connection , since it is used through a web browser.

For more information, visit this link .

Odoo

For those who own an SME and want to implement an ERP system to manage operations, one of the most recommended tools is Odoo, formerly known as OpenERP, which  has been precisely developed based on the needs of small and medium-sized companies.

the characteristics of an erp include

Odoo can be used in Microsoft Windows and GNU / Linux operating systems, and can  handle more than 350 modules . It should be noted that it was created in Python, PyGTK and on PostgreSQL and uses QT libraries.

If you are interested in this software, you can find more information at this link .

SugarCRM

If we are looking for  a simple system that allows us to manage our business , the ideal in the case of owning a small business is the implementation of SugarCRM, highly recommended also for professionals who offer services, since it includes an effective information management functionality. of the type agenda of contacts, management of sales, stocks, and others.

the characteristics of an erp include

SugarCRM is free software that is distributed under the GPLv3 license, and was developed based on PHP and MySQL, and despite its limitations, it  is currently used by large and recognized organizations such as Yahoo and NASA.

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