Enterprise Resource Planning

Enterprise Resource Planning

Enterprise resource planning (ERP) systems have become the heart or, more accurately, the spine of many corporate technology initiatives, having been widely adopted in the late 1990s by companies eager to streamline their operations. Goals for ERP ranged from reducing inventory levels to increasing process efficiencies across the supply chain or even integrating core business systems.

ERP systems were the focal point of new work processes across these companies. Because ERP products offer easier information-sharing across various organizations from purchasing to manufacturing to finance to human resources, corporate procedures were aligned with the way ERP products worked.

Gone were the archaic general ledger systems and warehouses brimming with file cabinets full of purchase orders. ERP automated key corporate functions, and the companies buying these systems compiled with their inherent business processes, including

Order processing and fulfilment

Production planning and scheduling

Logistics management

Accounting

Human resource allocation and planning

Major ERP vendors such as PeopleSoft and SAP not only automated these and other functions; they also linked them for companies who previously had disparate systems that had never been interrelated. These companies replaced their outdated legacy systems and enabled integrated operations across the enterprise. The products themselves required hefty investments, often into the millions of dollars, and ERP implementation resources usually doubled those budgets.

The integration piece alone was a boon to companies. With ERP, salespeople could access a single system to check inventory, a purchasing agent could look up a supplier’s pricing history, and a marketing product manager could track defects. Despite war stories about underestimated budgets and overestimated consultants, ERP delivered across-the –board efficiencies.

This integration had dramatic effects on downstream customer-facing business processes. Ravi Kalakota and Marcia Robinson describe Colgate’s ERP success in their book e-Business Roadmap for success

Before SAP R/3…distribution planning and picking used to take up to four days;today it takes 14 hours. In total, order-to-delivery time has been cut in half.

In other words, Colgate’s customers—including heavy-hitter retailers such as Wal-Mart and Rite Aid—were getting products faster, which can in turn increase satisfaction rates. Companies were also reducing out-of-stock situations, an influential factor in enhancing factor in enhancing customer loyalty.

The marriage between ERP and CRM is stronger than ever. For instance, a company’s accounts receivable staff might choose not to open collections on past-due customers who have in-process trouble tickets.

Likewise, CRM business users can use accounting and supply chain information to decide how to treat customers who don’t meet provisioning deadlines. ERP vendors have recognized the link between tighter, more integrated operations and business customer satisfaction and are now busy releasing CRM modules that tie into their core products, rendering the customer a key link in the supply chain.