Enterprise resource planning: ERP Life Cycle

Enterprise Resource Planning

Enterprise resource planning (ERP) is the integrated management of core business processes, often in real-time and mediated by software and technology. ERP is usually referred to as a category of business-management software — typically a suite of integrated applications—that an organization can use to collect, store, manage, and interpret data from these many business activities.

Enterprise resource planning systems track business resources—cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments like manufacturing, purchasing, sales, accounting etc. ERP facilitates information flow between all business functions and manages connections to outside stakeholders.

The Enterprise resource planning system integrates varied organizational systems and facilitates error-free transactions and production, thereby enhancing the organization’s efficiency. However, developing an ERP system differs from traditional system development. ERP systems run on a variety of computer hardware and network configurations, typically using a database as an information repository.

Characteristics of ERP

  • An integrated system.
  • Operates in real time.
  • A common database that supports all the applications.
  • A consistent look and feel across modules.
  • Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps.

Enterprise resource planning Life Cycle

  • Pre evaluation Screening
  • Evaluation Package
  • Project Planning
  • GAP analysis
  • Reengineering
  • Team training
  • Testing
  • Post implementation

1. Pre evaluation Screening: Once the company has decided to go for the ERP system, the search for the package must start as there are hundreds of packages it is always better to do a through and detailed evaluation of a small number of packages, than doing analysis of dozens of packages. This stage will be useful in eliminating those packages that are not suitable for the business process.

2. Evaluation Package: Implementation of an Enterprise resource planning involves huge investments and it is not easy to switch between different packages, so the right thing is ‘do it right the first time’. Once the packages to be evaluated are identified, the company needs to develop selection criteria that permit the evaluation of all the available packages on the same scale.

3. Project Planning: This is the phase that designs the implementation process. It is in this phase that the details of how to go about the implementation are decided. Time schedules deadlines, etc for the project are arrived at. The plan is developed, roles are identified and responsibilities are assigned. It will also decide when to begin the project, how to do it and it completion.

4. GAP analysis: This is the process through which the companies create a complete model of where they are now, and in which direction will they opt in the future. It has been estimated that even the best packages will only meet 80% of the company’s requirements. The remaining 20% presents problematic issues for the company’s reengineering.

5. Re-engineering: While every implementation is going to involve a significant change in number of employees and their job responsibilities, as the process becomes more automated and efficient, it is best to treat ERP as an investment as well as cost cutting measure.

6. Team training: This is the phase where the company trains its employees to implement and later, run the system. Thus, it is vital for the company to choose the right employee who has the right attitude- people who are willing to change, learn new things and are not afraid of technology and a good functional knowledge.

7. Testing: This is the phase where one tries to break the system. The system is configured and now you must come up with extreme cases like system overloads, multiple users logging on at the same time, users entering invalid data, hackers trying to access restricted areas and so on. This phase is performed to find the weak link so that it can be rectified before its implementation.

8. Post implementation: One the implementation is over, the vendor and the hired consultants will go. There should be enough employees who are trained to handle problems those crops up time to time. The system must be updated with the change in technology. The post implementation will need a different set of roles and skills than those with less integrated kind of systems.