Imagine living in a place where you have all the shops you need facilitate your needs, but there's no clear path from one store to the other. None have any idea what the others are doing or how they fit in with each other as they relate to you. Instead, there's one long major road (we'll call that your 'company') that branches into a variety of relatively unconnected side streets where your shops (we'll call them your 'departments') are located. Fulfillment of your needs takes a long time, and in that time your needs and the world around you changes.
Then, imagine a place where your company is not linear, but is a central core through which all departments move and are interconnected. In this, your company-your 'enterprise'-has immediate access to what it needs to live and breathe. Information is fresh and, in order to make purposeful decisions that benefit the company, all departments have real-time insight into what the others are doing. In short: The resources of your enterprise are fully integrated for optimal planning. This is ERP.
ERP makes the corporate heart beat steadily in the business body. Built upon notions of lean manufacturing, the principles of ERP are designed to not only make the paths to information quick and clear, but to also avoid the logjams that come with having too much traffic on any single road at any one time. Indeed, in manufacturing today, the plethora of data moving through an operation is often to large as to negate its usefulness.
In other words, too much unmanaged information (i.e, not attended to with regularity or too voluminous) can actually be a detriment to an operation. Think of the various departments part and parcel of the modern manufacturing operation, and you will realize the pitfalls that can come through the lack of communication of its various departments. Sales orders don't inform purchasing, production scheduling doesn't inform maintenance, inventory doesn't inform purchasing , payroll doesn't inform general ledgers, receiving doesn't inform in ventory, and so on and so forth. In this, chaos accelerates and profits decline.
What is required is a single system approach to enterprise management. A single system approach in manufacturing is one in which the corporate body thinks and breathes as an organic whole. It is still chaos, but it is a systemic chaos wherein each department informs all others simultaneously. As one department moves, the others move in concert with it. As a sales order arrives, materials are automatically ordered and production scheduled. When the materials for the sales order arrives, just in time for the scheduled production, receiving informs inventory and the shop floor. Production commences, products are made, and shipping sends them off for delivery. The desired outcomes of ERP is to maximize yield from materials and shop capacity, while minimizing production delays. If all goes right, products come out the shop and are delivered right on time and when promised.
The goal, then, of ERP is to enhance bottom-line profits through the streamlining of the manufacturing operation (e.g, job shop, make-to-order, make-to-stock, etc.). By streamlining, the manufacturer should be able to focus more on other desirable functions such as the elimination of scrap in production and enhance quality in the finished goods.
However, as modern manufacturing takes place in companies of various sizes and operational complexities, no longer can simple spreadsheets or basic accounting software handle the wealth of data a company either generates or needs on a regular basis. Instead, ERP requires a single system software designed to rapidly and easily integrate the whole operation in a single database of shop data. The more robust the ERP software, the better the flow of information and strength of analyses through the body.
As a result of analyses (reports) produced by an ERP software system, management is better informed as to how the corporate body is function ing-what is working, what can be improved. The ultimate point of ERP in manufacturing is to eliminate the wastes that come through redundant or inefficient actions by each and every department within the company. Finally, in an increasingly competitive world, where both lead times and margins are being reduced, it is only in the elimination of wastes that manufacturer's can hope to build better profits and business stability.
http://globalshopsolutions.com/erp_learning_center.cfm
Victor Viser, Ph.D., is Corporate Communications Consultant of Global Shop Solutions. Global Shop Solutions is the largest privately held ERP software company in the United States.
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