Enterprise Resource Planning (ERP) is an automated information system that integrates all departments within an enterprise. First developed by manufacturing companies, ERP systems generally use pre-packaged configurable software rather than proprietary software written by or for one enterprise. The goal of a team of ERP integration consultants will be to configure business processes using the ERP software that enable the enterprise client to adopt the best business practices embedded in the ERP system.
- A typical sequence for this module would be to receive orders from customers, approve them and send the orders to material management for direct filling or to production for manufacture.
- A typical sequence for the production module would receive the order from the order module, order production-related material from the inventory module and use the scheduler to assign human and machine assets to manufacture the product needed to fill the order. If the company makes products for stock as well, production will receive manufacture instructions from the inventory module as well.
- The inventory module will receive orders from the production module for material required for the production process. After it ships the required material to production, it will adjust the on-hand balance. When the on-hand falls below the order point, it will reorder from the company's suppliers. The inventory module will also carry any finished goods made for stock, as opposed to those made to order. When finished goods inventories fall below minimum, the module will send a production order to the production control module.
- Accounts receivables tracks customer sales from the sales module and posts them automatically to the general ledger. Accounts receivables also analyzes customer behavior with regards to aging receivables. Accounts payable records account postings generated from vendor purchasing recorded by the material management module. The asset accounting module manages fixed assets for the purpose of depreciation.
Funds management enables company staff to set budgets for expenses and revenues as well as track them by cost center. The general ledger posts all accounting transactions. There may also be special purpose ledgers established for reporting purposes using data gathered from the other accounting and finance modules. - The cost control module extracts information pertinent to the costs and revenue for the enterprise from the financial and accounting modules and the general ledger. The cost control module has the ability to assign any and all departments as cost centers, as well as those individuals responsible for critical business and functional areas, such as Purchasing, Marketing, Human Resources, Facilities, Finance, Information Systems, Legal, Administrative Support, Shipping and Receiving and Quality Control. This module assists senior management identify costs associated with manufacturing various products and weed out unprofitable parts of the enterprise.
The cost control module has other ways to look at both profitability and costs. It can assign profit centers to analyze their profitability (or lack of it). It can also assign costs to activities using activity-based costing to provide a cross-functional view of profitability for those activities that span mor e than one work unit. This ability to enable an organization to identify its most profitable activities--and thereby help it determine its core business--is the real value of ERP. It explains why these systems have become so widely used in the last few decades.
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