Enterprise Resource Planning
What Is ERP?
ERP is an integrated management process for company-wide management of a business enterprise. The concepts and techniques of ERP must be applied across all company functions. ERP integrates management processes to assure that decisions and planning are born out of the same databases, assumptions and methodology and language—and includes Continual improvement techniques and supply chain management. ERP solutions focus on optimizing productivity by focusing on planning and executive reporting of the Enterprise as an integrated unit. When used as an integrated management process companies significantly improve their business performance and competitive positions.
ERP is much more than a manufacturing software tool. It is a management philosophy for making and keeping promises—to better manage the supply and demand sides of the business using directly integrated management systems. The focus is on results –improving competitiveness in the marketplace and improving overall company business performance.
Resource utilization must be properly measured to properly manage the supply and demand sides of the business. Inefficient utilization of resources drives costs up and customer service down. Methods and approaches for resource management and ERP planning are changing with the introduction of Hoshin Kanri.
Effective ERP requires that integrated management processes extend horizontally across the company, including product development, sales, marketing, manufacturing, and finance. It must extend vertically throughout the company's supply chain to include the acquisition of raw materials, suppliers, customers, and consumers. The fundamental purpose of ERP is to establish a process that links projected demand plans to supply plans, so that the resources of manufacturers, their suppliers, and especially their customers are utilized in the most efficient and cost effective way.
To do so requires a process for anticipating demand and planning and scheduling resources in a manner that supports a company's strategic and financial goals.
There are five major elements required for correctly defining a closed-loop planning & scheduling system:
An integrated business operating process links strategic plans & business plans to sales plans & operations plans.
A people-driven process that is supported by a computer system.
A formal resource planning process that involves all functions within a company.
Defined responsibilities and performance measurements for all functions in a company.
Communications across all company functions as well as communications across all divisions & sister companies.
Strategies must be tied to tactics, supply is resolved with demand, the financial system is tied to the operating system, aggregate planning is translated into detailed planning, and planning and execution are linked together via a two-way flow of information and a spirit of cooperation among all functions.
ERP is a people process supported by the computer, rather than the other way around. People -- and their behavior and discipline in utilizing the ERP process -- is vital. When people understand how to utilize the ERP process, tools, and techniques, the data and information will be highly accurate, and they will make sound decisions.
ERP creates organizational synergy that drives the development of highly effective processes that are properly managed for continual success. The dramatic results are derived from a deep organizational understanding of ERP philosophy. Proactive strategies become the mainstay of the company-wide operating system. Without this organizational understanding, well-intended efforts will deliver wrong results. Organizational profitability is derived from the organization’s overall willingness and ability to improve. Therefore people at every level must see beyond their local functions and interactively understand how their individual actions increase or decrease profitability.
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