ERP system – effective way running a business that helps manage the work process as a whole, plan the activities of individual business elements of the enterprise, and also improve the operation of all production facilities.
You will learn:
- What is an ERP system and when is it needed?
- What are the advantages and disadvantages of an ERP system.
- What functions does the ERP system perform in an enterprise?
- How to choose an ERP system.
- How to properly implement an ERP system in an enterprise.
- What training do staff who will work with the ERP system need to undergo?
- What determines the cost of an ERP system?
What is an ERP system and when is it needed?
To better understand the meaning of an ERP system, it is not enough just to know the decoding of these letters (Enterprise Resources Planning) and the translation this definition into Russian (enterprise resource planning), it is better to study the history of its occurrence.
At the end of the 20th century, a massive business process automation: PCs quickly spread, programs for managing financial and accounting, electronic document management, checking the functioning of machinery and equipment.
The difference in the principles of doing business was not only in the transfer of information into digital form, but also in the emergence of new methods of analyzing and exchanging data, combining initially different types information. The result of this was the opportunity to see the entire work of the enterprise as a whole and analyze the functioning of its individual areas (the work of the main production, warehouse, accounting department). The information obtained made it possible to more competently distribute the use of production capacity and make the right decisions.
It is this way of doing business that is called ERP, and software, used for these purposes, is defined as an EPR system.
Thus, all programs designed for accounting, personnel management, etc. are parts of the ERP system, while CRM (customer relationship management system) also belongs to ERP and is translated as “customer relationship management system.”
Currently, all of the above components of the basic ERP system are often used as separate programs. For example, only accounting can be automated at an enterprise, while all other information is stored in various programs of the standard MS Office package.
There is no point in arguing whether CRM and electronic accounting are components of an ERP system, however, it is clear that over time the level of automation of business workflows will only grow along with the number of software licenses sold, as well as the volume of services installation and further maintenance.
In a situation where an enterprise has recently started its activities, there is no need for deep automation of work processes. Documents can be prepared using standard computer applications, and the director will be able to clarify the necessary information from one of the staff. However, along with the expansion of the entire business, the number of operations, documentation, and employees increases, which entails the need to store and analyze all information in electronic form.
If the company as a whole does not use an ERP system, then, as a rule, all the information is stored haphazardly, making it difficult to find. Sometimes there are situations in which the operation of the ERP system is established only in a certain department.
What functions does the ERP system perform in an enterprise?
The functionality within which an ERP system can be used depends on the scale and direction of activity of a particular company, the specifics of its work, but in general it should be aimed at general management business. The standard functionality is as follows:
1. Production
- drawing up specifications for goods produced or services provided to calculate the volumes of necessary consumables and employee working hours;
- drawing up plans and managing the work of the company on various scales: from specific production equipment to entire departments.
2. Finance
- drawing up plans for the use of the organization’s financial resources and monitoring results;
- current accounting, accounting for taxes and other payments to the budget and extra-budgetary funds, financial reporting and controlling;
- work with company assets, which include funds in bank accounts, securities, fixed assets (for example real estate).
3. Logistics
- management of the supply of materials and dispatch of finished products: maintaining a database of contracts and contractors, drawing up plans and reports on goods in the warehouse, etc.;
- preparation of data on all necessary consumables in order to fulfill previously calculated production standards.
4. Personnel
- personnel accounting and maintaining time sheets, preparation of staffing schedules, payroll calculations;
- search and registration of employees;
- preparation of workforce plans.
- drawing up plans for product sales;
- preparation and implementation of advertising campaigns and marketing communications;
- calculating prices for manufactured products, developing discount programs, holding sales, etc.
6. Projects. Reporting
- the presence of a large number of standard reporting forms for all areas of the organization’s activities, as well as the ability to create additional reports;
- check and performance analysis enterprises;
- development of a general policy for the organization’s work, including setting deadlines for each of the assigned tasks, calculating the resources required for these purposes ( cash, materials, workers).
ERP system in an enterprise: 4 stages of implementation
Full implementation of an ERP system in an organization can take from a couple of weeks to several years (depending on the volume and scale of the company’s activities). At the same time, both the enterprise’s own IT specialists and employees of the development company can install the ERP system.
The implementation of an ERP system can be divided into the following stages:
Stage 1. Primary organization
The stage in which tasks are determined, goals are set, after which a technical project plan.
Stage 2. Project development
Next, the work of the enterprise is studied: development plans, production processes. This information is the basis for selecting the structure of the ERP system, as well as for making adjustments to the technical plan (if necessary).
Stage 3. Project execution
The procedure for carrying out business processes at the enterprise will be based on the installed ERP system, therefore at this stage it is necessary to transfer data from the accounting systems that were used previously to the ERP system and unify them with each other. In a situation where it turns out that the ERP system modules are not enough for a given enterprise, it can be modified at this stage. Upon completion of the installation, the basic principles of the ERP system are communicated to the organization's employees and trial tests are carried out.
Stage 4. Commissioning
On final stage you can find and eliminate problems that arise during the operation of the ERP system.
What methods are used to implement an ERP system?
The following methods can be used to implement an ERP system:
- Phased implementation, when the ERP system is introduced one by one into some interrelated processes, which minimizes risks of problems.
- “Big Bang” - the entire system is installed at once. This approach can be used in a small organization with simple production processes. In this case it is necessary special attention pay attention to the testing stage in order to identify all possible errors in the operation of the ERP system.
- Deployment is a partial installation of software with subsequent distribution to other enterprise structures. In a separate area, the deployment method can be applied either gradually or simultaneously, since in general the risks of unsuccessful implementation are low.
The choice of method for implementing an ERP system for each enterprise must be made very carefully, by analyzing possible costs, as well as taking into account the experience of other companies.
Who trains staff on what an ERP system is?
Explaining the basics of working with an ERP system is one of the most difficult stages of its implementation. Doing business using an ERP system can change business processes in an enterprise, which entails the need to implement job responsibilities as well as the functionality associated with the use of this software package. Thus, the main point for the company’s management is to mentally prepare staff to work with the ERP system.
When implementing an ERP system, the problem may arise that ordinary employees lack the desire to learn how to work with it, because such automation makes the work of management easier. In this situation, the solution is to transfer such employees to other positions. Most staff tend to think in the long term and understand the need for training to use the acquired knowledge in their work.
From the quality of the training The effectiveness of using the ERP system will depend. Employees must have a good understanding of the basics of its work and have appropriate motivation, because if the staff does not understand for what purposes such innovations are used, then the results of implementing an ERP system will not be noticeable. Thus, employees must understand that the use of this software package can be an important lever for improving the efficiency of the entire enterprise.
Training employees in the basics of working with an ERP system should begin early. It is possible to carry out internal advertising campaign, prepare accessible information about the goals that will be achieved after starting to use this software package. In a specially developed document - “Staff Training Strategies” - this task is identified first. In this document, all employees of the enterprise are divided into groups depending on the volume of necessary training activities, and also lists all other training steps.
As a rule, there are several groups into which all personnel are divided. For example, a separate group can be distinguished company management and middle managers who will directly manage the operation of the enterprise and make the necessary decisions. Another group is that portion of users who perform the main functionality in working with the ERP system, without delving into the details of business processes, but having in-depth knowledge of how the software complex works. And the third group is the main part of the employees who will enter primary data into the program.
The first two groups should be trained by employees of the organization that developed the ERP system, while the bulk of the personnel from the third group can learn the basics of the program remotely or through colleagues who have already received the necessary knowledge.
Training can be carried out both in training centers of consulting agencies and directly at the enterprise. In some cases, ERP system developers determine prerequisite obtaining the appropriate certificate from employees of the second group.
Consulting agencies enter into agreements with major vendors such as SAP, Microsoft, Oracle, Sun, Cisco, which gives them the right to teach how to use the program and issue supporting documents upon completion of training. Information about this can be found on the official websites of such companies. Domestic developers - Parus and Galaktika - have opened their own training centers.
ERP system: an example of successful implementation
One of the enterprises engaged in the production and sales of refrigeration equipment is Howe Corporation(USA) – in order to conduct business more efficiently, we decided to implement an ERP system based on service-oriented architecture (SOA) of the 2nd generation. This made it possible to immediately get results and see the benefits of using this ERP system, since the quality and profitability of all business processes have significantly increased.
This organization was able to better analyze the volume of material reserves and the need for their replenishment. After implementing the ERP system, Howe Corporation has everything necessary tools for planning activities both in the short and longer term, which eliminates the need to use an unreliable calendar method of planning.
An international company also appreciated all the possibilities of using the ERP system. Alfa Laval, which has set itself the goal of achieving improved production performance by increasing the efficiency of business processes. One of Alfa Laval's offices in Bulgaria used the Epicor iScala ERP system to help implement detailed analysis use of materials and production raw materials, control the timing of their purchase for the execution of relevant orders, which influenced reduction of production waste levels. At the same time, since the ERP system fully automated all business processes, this made it possible to reduce the volume of excess products in warehouses, as well as minimize downtime in production.
Another company - IO Electronics– can also serve as an example of successful use of an ERP system. Their goal was to successfully achieve the targets set for the next 4 years.
As the director of IO Electronics said, with the rapid development of activities and the development of other production areas, the profitability of the enterprise can significantly decrease if there are failures in the exchange of information between internal divisions. However, when using an ERP system, all information becomes available online. Upon completion of the task, the ERP system undergoes updates, which allows you to track the entire production process and see actual availability of one or another product, as well as to avoid an excess of inventories in warehouses.
The practitioner tells
How an ERP system made it possible to reduce the need for working capital by 40%
Sergei Sukhinin,
Since our company previously did not have an ERP system, it was impossible to promptly note changes in the business process, which entailed a shortage of materials for assembling finished products, uncoordinated activity of workshops, deterioration in the quality of the final product and increased consumption of raw materials. All these unnecessary costs could only be reduced by implementing an ERP system.
The main activity of our organization is production, so the tasks of automating planning and managing business processes were a priority. Having determined that an ERP system would help us in solving our problems, we wanted to achieve the following goals:
- Increasing the efficiency of using working capital.
- Reducing inventories stored in warehouses.
- Creation of a production program taking into account existing capacities.
- Reducing the level of work in progress.
- Creation general list materials used in production.
- Improvement of the process for calculating material standards.
- Increasing the accuracy of purchasing plans, which will help reduce the volume of illiquid inventories in warehouses.
Only after the implementation of the ERP system were we able to correctly plan the volume of materials required for production based on the analysis of stocks in warehouses, which resulted in a reduction in costs working capital by 40%. Further, such an analysis helps to purchase only those materials that are necessary for a specific business process. Has also been optimized organizational structure company, which contributed to the reduction of employees in the production and dispatch department by 50% without reducing the quality of work.
We can summarize the following results of the implementation of the ERP system in our company:
- Production balances in warehouses decreased by 60 million rubles.
- In all areas of activity, control is carried out based on the results of the analysis of measured indicators. Employees' income depends on the work they have completed or not performed, and they are independently responsible for this.
- The purchase of production raw materials and its further distribution to the workshops are fully controlled.
- The balance of illiquid materials decreased by 20 million rubles.
- The procurement plan has become optimal; changes are made to it in a timely manner when the need arises.
- It became possible to plan the load on production capacities and, accordingly, the number of workers required for this.
What ERP system is in demand among Russian companies?
Software systems that currently exist on the IT technology market can be developed by domestic and foreign companies. Moreover, they differ not only in the country of development, but also in the built-in functionality.
Foreign ERP systems, such as programs from SAP, Oracle, PeopleSoft, Sage, Baan, Microsoft Business Solution, can be used in enterprises of any category and are examples to follow. However, when working with such systems in Russia, some difficulties may arise:
- lack of the required number of specialists trained at the appropriate level for implementation and further support of the ERP system;
- the reluctance of domestic organizations to rebuild established business processes, since foreign management systems have significant differences from those used in Russia;
- high cost of implementation.
However, Russian developers are also trying to expand the capabilities of their own software systems in accordance with the needs of customers. Such ERP systems successfully cope with the assigned tasks in cases where it is necessary to automate certain areas of the organization’s work and there is no need to introduce a software package into the work of the entire enterprise as a whole. As an example, we can cite the software of 1C and Galaktika companies.
11 mistakes in implementing an ERP system
To improve the efficiency of a business, installing an ERP system is practically the most expensive and most difficult task. The final cost of implementation, as well as the period required for this, will depend on the number of errors that occur during the process.
Mistake 1. Poor planning.
This fact may lead to a misunderstanding of the current and future state of the ERP system and incorrect automation of business processes.
Mistake 2. Superficial analysis of organizations developing ERP systems.
As a rule, the main criterion is low cost, but sometimes developers deliberately underestimate the cost of services in order to test the implementation process on the first customer. After such an installation, serious shortcomings and failures in the system may be identified.
Mistake 3. Failure to understand the needs of the enterprise.
After deciding that it is still necessary to implement an ERP system, the customer company does not fully understand which software modules they need to install. This can be used by unscrupulous suppliers who will include many unnecessary components in the ERP system or, conversely, the installed functionality will be lacking.
Error 4. Underestimating time and material costs.
Incorrect determination of the implementation time and cost of installing an ERP system may lead to unreasonable expectations of a rapid increase in the efficiency of business processes.
Error 5. Lack of qualified employees at the customer company.
The enterprise team must include employees who have a sufficient level of knowledge in any area, from management and accounting to warehouse accounting, procurement of materials, etc.
Mistake 6. Lack of priorities.
If you do not initially set the right priorities, then during the installation of an ERP system you will have to frequently switch between various tasks, and this may lead to a delay in the installation process, the occurrence of unforeseen problems, etc.
Error 7. Insufficient staff training.
If you do not show employees all the functionality of the ERP system and how to use it, the organization’s personnel may refuse to work in the system altogether or use its capabilities only partially.
Error 8. Underestimating the accuracy of primary information.
Since the key point in the operation of an ERP system is the analysis of information, the result of its work will largely depend on the correctness of the initial data. You must avoid typing errors and carefully check the information provided.
Error 9. Using irrelevant applications.
Very often, enterprises use both an ERP system and previously installed software in parallel - duplicate data entry occurs. This increases the time frame for the final implementation of the ERP system.
Error 10. Lack of a test period.
Sometimes testing of the installed software package is carried out only on a few users, which does not allow timely visibility of all the shortcomings and the current load on the ERP system.
Error 11. Lack of a maintenance and update implementation plan.
Without this, the software package will very soon become irrelevant. For the hardware component of the ERP system, it is necessary to regularly increase production capacity, since the volume of processed information will also grow. The software component may require adjustments if, for example, changes are made to legislation.
These errors are the most common, but each company may have individual problems. To minimize them, you need to very carefully prepare a plan for installing an ERP system at each stage.
What determines the cost of an ERP system?
The final price of the ERP system will be a combination of the following components:
- Prices of the software package itself: the main set of modules and additional components.
- Cost of installation services.
- Making improvements and adjustments to the program based on the needs of the customer company.
- Further service and support.
To reduce the cost of implementing an ERP system, you must first of all pay attention to Russian suppliers, since foreign programs have more high price acquisitions and require significant changes to comply with domestic legislation.
Expert opinion
The implementation of the ERP system cost the company $2.5 million
Sergei Sukhinin,
Head of the Automated Control Systems Department of JSC Scientific and Production Complex Elara, Chuvashia
The license to install the ERP system cost us $470,000, and the final implementation price was $2,500,000. However, already in the process of using the ERP system, a positive effect was achieved, and the costs were fully reimbursed 1.5 years after installing this software package.
Information about the experts
Sergey Bratukin, Director of Distribution Practice, Columbus IT&Russia, Moscow. Sergey Bratukin worked as a consultant in the Russian division of Columbus IT in 1997-2005. Participated in the implementation of large-scale projects for the implementation of ERP systems in such companies as Torgovaya Ploshchad, MVO, Starik Hottabych, Formula Kino, Avtomir, etc. International consulting company Columbus IT provides consulting services on the selection, implementation and maintenance of corporate information systems, as well as management consulting. Founded in 1989 in Denmark, it currently has representative offices in 28 countries. Over the eight years of operation of Columbus IT in Russia, more than 200 enterprises have become clients of the company, including SSM-Tyazhmash, TD Perekrestok, Dixie, L'Etoile, Unimilk, Istok, Toyota. and many others
Sergei Sukhinin, Head of the Automated Control Systems Department of JSC Scientific and Production Complex Elara, Chuvashia. OJSC "Research and Production Complex "Elara"" is a leading Russian manufacturer flight and navigation systems, automatic and remote control, onboard computer technology and display systems for aircraft military and civil aviation. As part of the cooperation agreement with OJSC Russian railways» JSC Elara is preparing for the production of devices and systems for railway transport in Russia.
Recently, interest in integrated business process management systems has been growing in Russia. It is due to many factors, including active support for implementation modern technologies into the Russian economy from the government. In particular, there is an objective need to automate the functioning of an enterprise to optimize management and control processes. Solving such problems within the enterprise can be undertaken by ERP systems s.
ERP (Enterprise Resource Planning) is an integrated system based on a wide class of disciplines and areas of activity related to technologies for creating and processing data for managing internal and external resources of an enterprise. Simply put, ERP is an enterprise resource management system. This term was first used by the consulting company Gartner Group in the early 90s. Since then, the ERP concept has gone through many stages of development.
The main tasks solved by ERP systems are:
General and structured planning of enterprise activities;
Company financial management;
HR management;
Accounting for material resources;
Accounting and management of supply and sales;
Operational management of current activities and monitoring the implementation of plans;
Document flow of the enterprise;
Analysis of business results.
At a certain stage of development, a business is faced with the need to automate the processes and functions of the company, especially if we are talking about a large corporation or holding company. Then there is a need for specialized software that can organize the management process as efficiently as possible. ERP systems are based on the principle of creating a single repository of the enterprise’s information base accumulated in the process of doing business, in particular, financial information, data related to production, personnel, etc.
Modern business practices generally require individual approach. This fully applies to accounting and planning. Therefore, the most effective software is adapted directly to the complex tasks of a specific enterprise. The cost of such development is quite high due to the individual approach and implementation features, but, as a rule, the economic effect justifies the costs.
The process of implementing an ERP system at an enterprise is a technically complex undertaking that takes a long period of time. In addition to software installation and staff training, psychological factors of implementation should be taken into account new system into the corporate culture, as well as the importance of the smooth functioning of each link.
ERP concept.
Historically, the ERP concept has become a development of the simpler concepts of MRP (Material Requirement Planning) and MRP II (Manufacturing Resource Planning). The software tools used in ERP systems allow for production planning, modeling the flow of orders and assessing the possibility of their implementation in the services and departments of the enterprise, linking it with sales.
Functions of ERP systems.
ERP systems are based on the principle of creating a single data warehouse containing all corporate business information and providing simultaneous access to it by any required number of enterprise employees vested with appropriate authority. Data changes are made through the functions (functionality) of the system. The ERP system consists of the following elements:
Model of information flow management (IP) in an enterprise;
Hardware and technical base and means of communication;
DBMS, system and application software;
A set of software products that automate IP management;
Regulations for the use and development of software products;
IT department and supporting services;
Actually users of software products.
Main functions of ERP systems:
Maintaining design and technological specifications that determine the composition of manufactured products, as well as the material resources and operations necessary for their manufacture;
Formation of sales and production plans;
Planning the requirements for materials and components, timing and volumes of supplies to fulfill the production plan;
Inventory and procurement management: maintaining contracts, implementing centralized procurement, ensuring accounting and optimization of warehouse and workshop inventories;
Planning of production capacities from large-scale planning to the use of individual machines and equipment;
Operational financial management, including drawing up a financial plan and monitoring its implementation, financial and management accounting;
Project management, including milestone and resource planning
The difference between ERP systems and electronic document management systems(EDS) is that, as a rule, in ERP documents are machine-readable, and they are not “maintained”, but “posted” - after they have completed their life cycle, that is, they have been created, discussed, verified, agreed upon , approved, etc. And the EDMS supports such life cycle human-readable documents in the enterprise.
Advantages.
The use of an ERP system allows you to use one integrated program instead of several separate ones. A single system can manage processing, logistics, distribution, stocks, delivery, display invoices And accounting.
The information access control system implemented in ERP systems is designed (in combination with other enterprise information security measures) to counter both external threats (for example, industrial espionage), and internal (for example, theft). Implemented in conjunction with CRM-system and quality control system, ERP systems are aimed at maximizing the needs of companies for business management tools.
Flaws.
The main difficulties at the stage of implementation of ERP systems arise for the following reasons:
The distrust of company owners in high-tech solutions results in weak support for the project on their part, which makes the implementation of the project difficult to implement.
Departmental resistance to providing confidential information reduces the effectiveness of the system.
Many problems associated with the functioning of ERP arise due to insufficient investment in personnel training, as well as insufficient policies for entering and maintaining the relevance of data in ERP.
Restrictions.
Small companies cannot afford to invest enough money in ERP and adequately train all employees.
Implementation is quite expensive.
The system may suffer from a "weak link" problem - the effectiveness of the entire system may be undermined by one department or partner.
Compatibility issue with legacy systems.
There is a misconception that sometimes ERP is difficult or impossible to adapt to document flow company and its specific business processes. In fact, any implementation of an ERP system is preceded by the stage of describing the company’s business processes, most often associated with the subsequent stage business reengineering. In essence, the ERP system is a virtual projection of the company.
Integrated enterprise systems. Levels of management of an integrated enterprise.
Automated enterprise management system m.b. presented as a set of AS, interacting levels: control enterprise ERP, MES production management, SCADA technology management.
ERP – Enterprise Resource Planning. Information system to determine and plan enterprise resources, necessary for receiving, manufacturing, shipping and accounting for consumer orders.
ERP II - resource management and external relations enterprises. Has two control loops: traditional internal, control internal processes enterprise, and external – managing the interactions between the customer and the supplier. That. ERP II – ERP system with the ability to closely interact with customers and suppliers.
MRP is a system for planning requirements for materials that allows you to optimally load production capacity, and at the same time purchase as many materials as necessary to fulfill the order plan.
MRP II – production resource planning system. The main goal is to take into account and analyze all events in production: everything that happens in at the moment and everything that is planned for the future. As soon as there is a defect in production, as soon as the production program is changed, the system instantly reacts to what happened, indicates problems that may be result of this, and determines what changes need to be made to the production plan to avoid these problems.
MES – production management system. A system that integrates all processes of an enterprise with the production process.
SCADA systems – supervisory control and data collection. System providing software control and dispatch control in TP management.
ERP system. Evolution of ERP.
ERP systems are the result of 40 years of evolution of management integrated systems. The operation is based on the concept of product specification BOM and systems production programs MPS. The BOM showed the product in terms of components, and the MPS contained information about the time, quantity and type of products programmed for release. With the help of BOM and MPS, the company received information about the required quantity of materials. The need for planning is due to the fact that the majority of delays are caused by delays in the receipt of individual components, as a result of which, with a decrease in production efficiency, an excess of materials appears in warehouses.
In practice, an MRP system is a computer program that logically can presented using the following diagram:
Description of the condition of materials is the main input element of an MRP program. In it d.b. reflected as much as possible full information about the components necessary for the production of the product.
A production program (MPS) is an optimized schedule for allocating time to produce a required batch of products over a planned period.
Using MRP allows you to achieve: 1) Reducing the level of stock of materials in warehouses; 2) Reducing the level of inventories in work in progress; 3) Reduction of order fulfillment time. MRPs have one drawback - they do not take into account the production capacity of the enterprise. This led to the expansion of the functionality of MRP systems into CRP capacity requirements planning modules. Later appeared new class enterprise resource planning MRP-II. The main difference between MRP-II is that they are designed to plan all production resources in an enterprise. The improvement of MRP-II systems led to the creation of ERP systems. They are intended not only for manufacturing enterprises, but also for companies providing services. ERP systems are based on the principle of creating a single data warehouse containing all information about the organization. ERP-II – integration of the enterprise information environment with suppliers and customers through information channels.
ERP functions.
ERP systems are based on the principle of creating a single data warehouse that contains all information and provides simultaneous access to it by any number of enterprise employees. Data changes are made through system functions. The ERP system consists of the following elements:
Model of information flow management (IP) in an enterprise;
Hardware and technical base and means of communication;
DBMS, system and supporting software;
A set of software products that automate IP management;
Regulations for the use and development of software products;
IT department and supporting services;
Users of software products.
Functionality of integrated ERP systems:
1) Formation of sales and production plans;
2)Planning of production capacities from integrated planning to the use of individual machines;
3) Operational financial management, including drawing up a financial plan and monitoring its implementation;
4) Project management, including planning of stages and resources;
5) Inventory and procurement management: maintaining contracts, implementing purchases, ensuring inventory accounting;
6)Planning the requirements for materials, timing and volumes of supplies to fulfill the production plan;
7)Maintaining design and technological specifications that determine the composition of manufactured products;
8) Demand management;
9) Cost management;
10)Routing or logistics;
11) Personnel management.
4. Classification of ERP systems. ERP examples.
1)Large integrated systems. They have the capabilities of integrated management of all processes in large holding structures. Systems of this class cover the following areas of enterprise activity:
Production management;
Financial management;
Supply management;
Personnel management;
The implementation of such systems takes more than a year. Cost: $500,000;
Large integrated systems include:
Oracle E-Business Suite;
SAP Business Suite.
2) Medium integrated systems. Designed for managing medium-sized manufacturing enterprises. In these systems, the main automation links are purchasing, production and sales. A feature of the systems is their more rigid setup compared to flexible financial and management systems. The implementation period for such systems is longer and ranges from six months to a year. Cost: $100,000-500,000; Medium integrated systems include: Infor ERP SyteLine; Symex; Compaq computer; Galaxy ERP;
3) Financial and management systems. To a greater extent, they are aimed at automating non-production enterprises (small and medium-sized enterprises in the field of trade and services). Cost: $50,000-100,000; Financial and management systems include: Compass; Parus - Enterprise 8; 1C: Trade Management 8; Galaxy;
4) Local systems. Most accounting programs include the function of automating warehouse activities and settlements with personnel. Local systems automate enterprise accounting in one or more areas. Price:<50000$; К системам локального класса относятся: 1С: Комплексная автоматизация 8,
1C: Managing a small company 8.
5. Large ERP systems. Main ERP modules – BAAN, SAP systems.
Large integrated systems. They have the capabilities of integrated management of all processes in large holding structures. Systems of this class cover the following areas of the enterprise:
Production management;
Product life cycle management;
Materials management;
Management of fixed assets;
Financial management;
Sales and purchasing management;
Supply management;
Personnel management;
Customer relationship management.
The implementation of such systems takes more than a year. Cost: $500,000; Large integrated systems include: SAP R/3; Oracle E-Business Suite;
SAP Business Suite.
Basic ERP modules – BAAN systems:
1) Enterprise modeling. Helps reduce implementation time.
2) Production module. Requirements planning, product configurator, serial production management.
3) Process module. Supports the manufacturing process from research and development to production, procurement, sales.
4) Finance module. Financial accounting system.
5) Supply and warehouses. Manages sales and purchasing.
6) Project module. Designed for working on projects and preparing commercial proposals.
7) Enterprise activity administrator module. Tools for improving business activities.
8) Transport module. Transportation.
9) Service module. Management of all types of services.
Basic modules of ERP – SAP systems:
1) Finance module. Designed for organizing accounting records.
2) Control module. Provides accounting of costs and profits of the enterprise.
3) Fixed assets management module. Designed for accounting and management of fixed assets (maintenance, depreciation).
4) Project management. Supports project planning, management and monitoring.
5) Production planning. Used to organize planning and control of production activities of an enterprise (introduction of specifications, production management).
6) Material flow management. Supports procurement functions (material procurement, warehouse management).
7)Sales. Solves distribution problems.
8) Quality management.
9) Maintenance and repair of equipment. Takes into account costs and plans resources for maintenance.
10) Personnel management. Personnel administration, salary calculation, travel expenses calculation.
11) Information flow management. Links application modules with common ones for all applications (office system with e-mail).
12) Industry solutions. Combines application modules and additional functionality specific to a particular industry.
13)Basic system. SAP R/3 basis. Guarantees integration of all application modules and independence from the hardware platform.
6. Architecture of ERP systems. Client-server architecture type.
It is built on a client-server architecture. It consists of 3 levels:
1)Level of presentations. Manages the dialogue between the end user and the application.
2) Application level. Performs data transformation.
3) Database level. Stores, updates and presents data at the application level.
Depending on the location of these levels, 5 types of system are distinguished: 1) Distributed representation of x/xia in that operations associated with the application level are carried out both on the server and on the terminal. 2) Remote presentation of x/xia in that the applications and database are located on the server, and the application program is on the terminal. 3) Distributed level - logical operations distributed between the server and the terminal. 4) Remote data management - the user interface and logical operations are carried out on the terminal, the databases are located on the server. 5) Distributed database - a database divided into 2 parts: server, terminal.
7. Light, medium, heavy ERP systems. Classification by architecture.
Light ERP- a system capable of using only 1 database server and 1 application server. Disadvantage: impossibility of simultaneous work of a large number of users. To serve a large number of users working simultaneously, complexes are used, launched by lightweight ERP systems, each of which works with its own type of user.
The use of a lightweight ERP complex is advisable in the following cases: 1) All peripheral divisions are engaged in the same type of activity and use a single standard for recording information transmitted to the central office.
2) Not all functionality of the ERP system is used at peripheral facilities.
3) Access to current data of all objects in ONLINE mode is not required.
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Four times lower than in the USA. The task of modernizing the economy has been set at the state level, and enterprises, especially those using high-tech technologies, need to look for internal optimization reserves.
ERP solutions are systems for managing key business processes of an enterprise. The ERP system includes modules: company activity planning, budgeting, logistics, accounting, personnel management, production management, customer management. Corporate, managerial, and accounting reporting allows senior management to obtain a comprehensive picture of the enterprise’s activities, which makes the ERP system an indispensable tool for automating operational activities and supporting current and strategic management decisions. In essence, an ERP system is a comprehensive storage and use of information, the ability to obtain data on the areas of an organization’s activities within the framework of work in one system.
The ERP system implementation project can be divided into the following stages: project planning, goal setting; diagnostics and requirements analysis; selection and justification of a platform, a ready-made solution; information system design; documentation and coordination of design solutions; software development; information system testing; system deployment; user training; operation and support, and evaluation of results. Project management is based on best practices and methodologies. Depending on the wishes, needs and scale of the customer’s project, the implementation of ERP systems can last from three months to 24 months.
The cost of a project to implement ERP systems includes the cost of purchasing licenses (there is also the possibility of renting licenses) and the cost of services for setting up and implementing a system or industry solution. The cost of the project, of course, depends on the implementation methodology, the scope of consulting services, and the desires and needs of the customer. You also need to consider the costs of IT infrastructure, team motivation and system operation.
The implementation of an ERP system allows companies to increase their income through the loyalty of old customers and attracting new ones; reduce management and operating costs by an average of 15%; reduce commercial costs by 35%; save on working capital; reduce the implementation cycle; reduce the insurance level of warehouse stocks; reduce accounts receivable; increase the turnover of funds in settlements; increase inventory turnover; improve the recycling of fixed assets.
It is necessary to implement an ERP system in cases where the purpose of implementation is clearly defined, there is an interest of top management in the clarity and automation of business processes in the organization, the company has resources for implementation and motivation, the customer has decided on the platform and the team of implementers - developers.
ERP concept
Historically, the ERP concept has become a development of the simpler concepts of MRP (Material Requirement Planning) and MRP II (Manufacturing Resource Planning). The software tools used in ERP systems allow for production planning, modeling the flow of orders and assessing the possibility of their implementation in the services and departments of the enterprise, linking it with sales.
One of the important questions is whether the system belongs to the ERP class or is an accounting system. To answer this question, we should not forget that an ERP system (as the name suggests) is first and foremost a resource planning system. It describes not only the situation “as it was” and “as it is,” but also “as it will be,” “as it should be.” ERP systems not only store data about what is happening at the enterprise, but also include modules for planning and optimization of all types of resources (financial, material, human, time, etc.), and most of the accounting functions implemented in the system are aimed at to support the functioning of these modules.
To implement planning and optimization functions, it is necessary to have feedback in the system. Those. Based on management goals, a plan is drawn up, then, as the work progresses, real indicators are recorded, analyzed, and based on a comparison of the goals set and the results achieved, a corrective action is developed. The accounting system only allows you to record results. It, unlike the ERP system, does not include functions for automating planning and comparison between plan and fact. In other words, with the help of accounting systems it is possible to perform only some analytical part of management, but not a synthetic one. This is the fundamental difference between an ERP system and an accounting system.
Functions of ERP systems
ERP systems are based on the principle of creating a single data warehouse containing all corporate business information and providing simultaneous access to it by any required number of enterprise employees vested with appropriate authority. Data changes are made through the functions (functionality) of the system. Main functions of ERP systems:
- maintaining design and technological specifications that determine the composition of manufactured products, as well as the material resources and operations necessary for their manufacture;
- formation of sales and production plans;
- planning the needs for materials and components, timing and volumes of supplies to fulfill the production plan;
- inventory and procurement management: maintaining contracts, implementing centralized procurement, ensuring accounting and optimization of warehouse and workshop inventories;
- production capacity planning from large-scale planning to the use of individual machines and equipment;
- operational financial management, including drawing up a financial plan and monitoring its implementation, financial and management accounting;
- project management, including planning stages and resources.
Features of implementation
Classic ERP systems, in contrast to the so-called “boxed” software, belong to the category of “heavy” software products that require quite a lot of setup in order to start using them. CIS selection, acquisition and implementation usually require careful planning as part of a long-term project with the participation of a partner company - a supplier or consultant. Since CIS are built on a modular basis, the customer often (at least at the early stage of such projects) does not purchase a full range of modules, but a limited set of them. During implementation, the project team usually spends several months configuring the supplied modules.
Any ERP system, as a rule, is designed for a specific market segment. Thus, SAP is more often used in large industrial enterprises, Microsoft Dynamics - in medium-sized companies of various profiles, 1C - in small companies, as well as in cases of limited budget.
The cost of ERP implementation, depending on the size of the company, complexity and the chosen system, can range from 20 thousand USD to several million USD. This amount includes software licenses, as well as services for implementation, training and support at the stage of putting the system into operation.
HISTORY OF ERP SYSTEMS
In the early 60s, due to the growing popularity of computer systems, the idea arose to use their capabilities to plan enterprise activities, including planning production processes. The need for planning is due to the fact that the bulk of delays in the production process are associated with delays in the receipt of individual components, as a result of which, as a rule, in parallel with a decrease in production efficiency, there is an excess of materials in warehouses that arrived on time or earlier than planned. In addition, due to an imbalance in the supply of components, additional complications arise with taking into account and tracking their condition during the production process, i.e. it was virtually impossible to determine, for example, which batch a given component element belonged to in an already assembled finished product. In order to prevent such problems, the MRP (Material Requirements Planning) methodology was developed. The implementation of a system working according to this methodology is a computer program that allows you to optimally regulate the supply of components to the production process, controlling stocks in the warehouse and the production technology itself. The main task of MRP is to ensure the availability of the required quantity of required materials and components at any time within the planning period, along with a possible reduction in permanent inventories, and therefore unloading of the warehouse.
In order to increase planning efficiency, in the late 70s, Oliver White and George Plosl proposed the idea of reproducing a closed loop in MRP systems. The idea was to introduce a wider range of factors into consideration when planning, by introducing additional functions. To the basic functions of planning production capacity and planning material requirements, it was proposed to add a number of additional ones, such as monitoring the compliance of the quantity of products produced with the number of components used in the assembly process, drawing up regular reports on order delays, volumes and dynamics of product sales, suppliers, etc. d. The term “closed loop” reflects the main feature of the modified system, which is that the reports created during its operation are analyzed and taken into account at further stages of planning, changing, if necessary, the production program and, consequently, the order plan. In other words, additional functions provide feedback to the system, providing planning flexibility in relation to external factors, such as the level of demand, the state of affairs of suppliers, etc.
Subsequently, improvements to the system led to the transformation of the closed-loop MRP system into an expanded modification, which was subsequently called MRPII (Manufactory Resource Planning), due to the identity of the abbreviations. This system was created for effective planning of all resources of a manufacturing enterprise, including financial and human resources. In addition, a MRRPII class system is able to adapt to changes in the external situation and emulate the answer to the “What if” question. MRPII is an integration of a large number of individual modules such as business process planning, material requirements planning, capacity planning, financial planning, investment management, etc. The results of each module are analyzed by the entire system as a whole, which actually ensures its flexibility in relation to external factors. It is this property that is the cornerstone of modern planning systems, since a large number of manufacturers produce products with a deliberately short life cycle that require regular improvements. In this case, there is a need for an automated system that allows you to optimize the volumes and characteristics of products by analyzing current demand and the situation in the market as a whole.
WITHThe MRP II (Manufacturing Resource Planning) standard was developed in the USA and is supported by the American Production and Inventory Control Society (APICS). APICS regularly publishes the MRP II Standard System document, which describes the basic requirements for manufacturing information systems. The last edition of this system of industry standards was published in 1989.
MRP II is a set of sound principles, models and procedures of management and control, proven in practice, that serve to improve the economic performance of an enterprise. The idea of MRP II is based on several simple principles, such as dividing demand into dependent and independent. MRP II Standard System contains a description of 16 groups of system functions:
Sales and Operation Planning.
Demand Management.
Master Production Scheduling.
Material Requirement Planning.
Bill of Materials (Product Specifications).
Inventory Transaction Subsystem (Warehouse Management).
Scheduled Receipts Subsystem.
Shop Flow Control (Management at the production workshop level).
Capacity Requirement Planning.
Input/output control.
Purchasing (material and technical supply).
Distribution Resource Planning.
Tooling Planning and Control (Planning and control of production operations).
Financial Planning.
Simulation.
Performance Measurement.
With the accumulation of experience in modeling production and non-production operations, these concepts are constantly refined, gradually covering more and more functions.
In its development, the MRP II standard went through several stages of development:
60-70 years - planning of material requirements, based on data on stocks in the warehouse and composition of products, (Material Requierment Planning)
70-80 years - planning of material requirements in a closed cycle (Closed Loop Material Requirment Planning), including drawing up a production program and its control at the workshop level,
late 80-90s - based on data received from suppliers and consumers, forecasting, planning and production control,
90s - planning distribution and resource requirements at the enterprise level - Enterprise Resource Planning and Distributed Requirements Planning.
In recent years, MRPII class planning systems in integration with the financial planning module FRP (Finance Requirements Planning) have been called ERP (Enterprise Requirements Planning) business planning systems, which allow you to most effectively plan all commercial activities of a modern enterprise, including financial costs for projects equipment upgrades and investments in the production of a new product line. In Russian practice, the feasibility of using systems of this class is determined, in addition, by the need to manage business processes in conditions of inflation, as well as severe tax pressure, therefore, ERP systems are necessary not only for large enterprises, but also for small firms conducting active business. ( Based on articles G. Vernikova)
Since 1999, a new trend has been noted in the development of ERP systems. Developers began to develop new functionality of the system that went beyond the traditional framework of automation and optimization of business processes within the framework of the ERP methodology. Traditionally, the ERP concept involved, first of all, working with the internal resources of the enterprise: resource planning, careful inventory management and ensuring transparency of production processes. Now the functionality of the system has begun to be supplemented with modules such as SCM (supply chain management) and CRM (customer relationship management), which are responsible for optimizing the enterprise’s external relations. At the same time, a distinction was made between the concepts: the control loop traditional for ERP was called back-office, and the external applications that appeared in the system were called front-office. These changes allowed the American analytical company Gartner Group to announce in 2000 the end of the ERP era and the emergence of a new standard - ERP II (Enterprise Resource and Relationship Processing), which can be translated as “Management of internal resources and external relations.”
There are three main directions that determine the development of ERP II class systems:
Deepening ERP functionality.
The emergence of technologies that simplify the process of creating specialized industry solutions.
Creation of new and improvement of existing modules for managing intercorporate business processes.
The shift in emphasis to the inter-corporate sector in new systems is explained by the accelerated development of e-commerce and the establishment of interactive interaction between companies and their partners, suppliers and customers via the Internet. Therefore, ERP II class systems receive a Web-based architecture, which becomes a significant difference from ERP systems. Data used in ERP II class systems are designed for use in a geographically distributed Web community. In addition, ERP II systems can be fully integrated into the Internet, can work with data not located in their own repository, can support client-initiated publication or subscription, and can interact with other applications that use EAI - Enterprise Application Integration (EAI) adapters. ) and XML language.(gorod.ru)
