White Paper:

INTRODUCTION TO ERP
The Advantages and Benefits to an ERP System

Key Software, LLC Phone | 888.860.2074

Email | info@keysoftwarellc.com
Wenatchee | Seattle
Web | www.keysoftwarellc.com
INTRODUCTION TO ERP
"ERP (Enterprise Resource Planning Systems) comprises of a commercial software package that
promises the seamless integration of all the information flowing through the company -
financial, accounting, human resources, supply chain and customer information " (T.J.
Davenport, Harvard Business Review, July
July-Aug., 1998).
ERP Systems provide information management and analysis to organizations.

5 major ERP benefits:

1. On-line/real
line/real time information throughout all the functional areas of an organization
2. Data standardization and accuracy across the enterprise.
3. Best-practices"
practices" included in the applications
4. The efficiency they force an organization to u
undertake
5. The analysis and reporting that can be used for long term planning.

Examples of ERP packages are HRMS, Financials, Manufacturing, Distribution, and Sales. Each
ERP Package may offer different functionality for different industries.

In implementation,
ation, ERP Systems include several basic features. They are installed on a Database
Management System. Database platforms to choose from are: DB2/Unix, Informix, MS SQL
Server, Oracle, and Sybase. They require initial setup according to the organization's process.
They may be customized according to the organization's process through the ERP's tool set.
Workflow can be setup to automate approval processes through chains of command. Once
installed, the user only enters data at one point, and the information is transferred through
processes to other modules. Finally, the ERP System includes reporting tools for main reports as
well as adhoc reporting.

ERP systems, fundamentally, integrate the different processes necessary in a business into a
centralized pool that
hat facilitates data sharing and eliminates redundancy.

Advantages:

Information entered once into system

Forces use of "best practices"

Allows customization

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Based on reliable file structure

Provides functionality to interact with other modules

Provides tools for adhoc inquiries

ERP is first and foremost a business tool

Information Technology (IT) has always played a key role in providing businesses a competitive
edge. In the beginning, IT performed mainly financial functions such as payroll, A/R, A/P,
invoicing etc. and was used mainly as a reporting tool; what have we done and did we make or
lose money.

Over time IT has evolved. Its overall reporting capabilities have become awesome with the
surreal performances of computing power, and the refinement o off software operating systems
and application packages today. This reduction of processing time together with the
proliferation of IT beyond financial functions and into sales and Marketing and Manufacturing,
have pushed IT from the strict business reportin
reportingg realm to the much larger and dynamic
dyna realm
of business PLANNING. In other words, the more the information was accurate, available when
needed, and applicable to the core areas of our businesses, the more we could dynamically plan
our strategies and make concrete business decisions from it. This is where we started seeing
concepts of Materials Requirement Planning (MRPII) come into light which over the ‘80’s
evolved into Enterprise Resource Planning (ERP).

IT could no longer live in its own kingdom of DATA PROCESSING; it had become a
BUSINESS PROCESSING and business emulation tool, and thereby had to create a solid bridge
with the business imperatives as its foundations. IT is in the midst of yet another change. We
are now fast approaching the era of enterp
enterprise knowledge system. The combination of on-
on
line/real-time
time information, ERP (all enterprise and 100% accuracy of data), supply chain rapport
(internal and external links between all activities), Ecommerce, and Advanced Planning and
Scheduling Systems are causing a revolution in transforming a reporting and planning tool into
an intelligent BUSINESS EXECUTION tool.

At Key Software,, IT is seen as a resource and not as expenditure. A lot of software companies
and client organizations see IT and an ERP So Software
ftware package as an end in itself. While our ERP
Software incorporates the latest technologies etc., we strictly promote our ERP Software as a
business tool; it is the total integration of this software into the business processes that is the
total solution.

Prerequisites for effective implementation and usage of IT?

First and foremost is the top management's commitment. To get the maximum benefit from a
technology, there has to be a change in attitude. IT cannot be looked at as expenditure. It has

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to be considered as a resource. Also, the entire organization-right
right from the sales people to the
guy on the shop floor-has
has to be educated [about IT].

Main difference between ERP and MRP II?

MRP II is a management concept while ERP is its technical subset. Today,, ERP is in vogue, and is
selling, as there is a push from the ERP vendors to sell their software.

However, mere software implementation cannot be seen as a complete solution. The aim
should be to deploy IT for gaining business advantage. ERP is a mere subset
set of MRP II, which is
a company-wide
wide management system aiming at lowering costs and inventories and increasing
productivity and customer service. While ERP can be implemented in isolation, the complete
benefit can only be gained if the entire reengineeri
reengineering process is followed.

Major problems faced by the user companies in implementing IT?

Lack of commitment and availability from the client’s organization’s key people (executive
commitment and availability of key users go hand in hand). The other issue could
uld be the nature
of commitment of the software vendor. Does the vendor have the wherewithal to support a
rigorous implementation: proven implementation method, industry experts on staff, strong
track record, or is he more interested in the initial license revenue?

Going the ERP Way

It must be remembered that ERP is an opportunity for business re re-engineering.
engineering. One gets the
opportunity to restructure and reorganize people and departments to meet new challenges and
global competition. Information is a vital fa
factor
ctor along with quality, cost, and delivery to
establish competitive advantage. As such, it calls for attitudinal changes, which will help, in a
smooth transition, learning best practices, and adopting them into the business. No doubt,
these changes will reap
eap good profits in a short time.

In most cases, it is not possible to run both old and new systems simultaneously. The software
is tested and used in many organizations in different situations across boundaries. Hence one
can assume its accuracy and reliability to a great extent; as such, in most cases errors are on
account of incorrect data, poor understanding, or improper tuning of the package. Thus, the
importance of a tightly integrated package spanning every areas of the business. You can't
enter transactions unless all cross business rules have been fully defined. This ensures
discipline in the working of the entire organization. But once data is accepted, it will furnish the
right information at all levels and at all places. It is this consistency
cy of information that is one of
the greatest advantages of integrated ERP packages such as ES/2000.

As we mentioned before, ERP is an opportunity for business re

re-engineering. It is possible to
implement the package in three broad segments
segments-manufacturing, finance,
inance, and distribution.

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However, some packages like SAP do not allow such an approach. This approach calls for
building bridges from and to legacy systems and, can in some cases become a costlier situation.
While training users, importance of 'password' and 'controlled access' must be emphasized.
Further, well-defined
defined procedures must be adopted to monitor access to the information.
Depending on the levels of the people, various privileges should be allocated (read, write, or
both). The authorization to approve
prove a transaction is also a requirement for certain critical
functions. The periodic dumps of data and consistency of databases and their fine-tuning
fine must
be ensured as in the case of legacy systems.

Finally, it is always remembered that these packages aare

re tools to support the business.
Close linkage to business must be reviewed and monitored to ensure that the required
information is made available to the right people at the right cost and in the right format so as
to gain competitive edge in the era of global competition. It is observed that, when a business
crosses the boundaries of the nation and becomes multinational, it has no other option but to
use ERP so as to standardize operations worldwide.

If you have any questions please contact us by phone at 888.860.2074 or email at

info@keysoftwarellc.com.. You can also visit us on the web at www.keysoftwarellc.com.
www.keysoftwarellc.com

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