Basic ERP concepts

1. 03. Basic ERP Concepts
ERP Demystified (Second Edition) By Alexis Leon (2008)

2. Introduction
• ERP is a set of tools and processes that integrates departments and
functions across a company into one computer system.
• ERP runs off a single database, enabling various departments to
share information and communicate with each other.
• ERP is an enterprise reengineering solution that uses new business
computing paradigms to integrate IT processes across a company's
division and departments.
• ERP offers a means of effectively increasing and managing the
required resources.
• For each resources ERP can identify what is required, when it is
needed and how much is needed, thus making the operation of the
organization efficient and effective.
ERP Demystified (Second Edition). Copyright 2008, Alexis Leon. All rights reserved.

3. Customizing ERP Packages to Suit the
Company’s Business
• In many cases ERP packages have to be customized to fit
the way in which the company does business.
• This will slow down the project, introduce dangerous
bugs into the system and make upgrading the software to
the ERP vendor's next release very difficult.
• In some other cases, the organization’s business process
have to changed, if they are inefficient.
• This will mean making changes in long-established ways
of doing business and redefine the roles and
responsibilities. This if not done properly, can create
employee resistance.
ERP Demystified (Second Edition). Copyright 2008, Alexis Leon. All rights reserved.

4. Importance of ERP Systems
• ERP is most important to companies because of their improvement in the way the
company takes a customer order and processes it into an invoice and revenue (order
fulfillment process).
• ERP systems makes the business process automated and more streamlined and makes the
organization more agile and competitive so that it can respond to the changing customer
needs and competition quickly and efficiently.
• Some of the characteristics of ERP systems are:
1. It affects almost all organizations
2. It forces the competition to change their business strategies and processes
3. It influences business partners to become more competitive and agile
4. It improves the profits of the organizations engaged in implementation consultancy
5. It helps the business process reengineering process
6. It enforces best practice business processes in organizations
7. It fully utilizes the true potential of client/server computing and other latest
technologies
8. It changes the information systems function and job profiles of IT professionals
9. It changes the nature of jobs in all functional business areas of the organization
10. It is very expensive and its implementation is very costly and risky
11. Its implementation is a long and complex project
12. It requires the cooperation of all in the organization for succeed
ERP Demystified (Second Edition). Copyright 2008, Alexis Leon. All rights reserved.

5. ERP and Value Creation
• ERP facilitates value creation by changing the basic nature of organizations in a
number of different ways:
1. It integrates the organizations’ activities
2. It eliminates data redundancy
3. It provides accurate, timely, relevant and up-to-date information to the decision
makers
4. It provides on-line and real-time information
5. It enables better and faster decision-making
6. It forces the use of best practices
7. It enables organizational standardization
8. It eliminates information asymmetries
9. It allows simultaneous access to the same data for planning and control
10. It facilitates intra-organization communication
11. It enables inter-organization collaboration
12. It enables the organization to be more agile and competitive
ERP Demystified (Second Edition). Copyright 2008, Alexis Leon. All rights reserved.

6. Review Questions
1. Why is ERP important to a company?
2. Explain the main characteristics of the ERP systems.
3. How does ERP create value?
ERP Demystified (Second Edition). Copyright 2008, Alexis Leon. All rights reserved.