Enterprise Resource Planning

AuthorR. Inman, Laurie Hillstrom

Page 256

Enterprise resource planning (ERP) refers to a computer information system that integrates all the business activities and processes throughout an entire organization. ERP systems incorporate many of the features available in other types of manufacturing programs, such as project management, supplier management, product data management, and scheduling. The objective of ERP is to provide seamless, real-time information to all employees throughout the enterprise. Companies commonly use ERP systems to communicate the progress of orders and projects throughout the supply chain, and to track the costs and availability of value-added services.

ERP systems offer companies the potential to streamline operations, eliminate overlap and bottle-necks, and save money and resources. But ERP systems are very expensive and time-consuming to implement, and surveys have shown that not all companies achieve the desired benefits. According to the online business resource Darwin Executive Guides, it is "a tall order, building a single software program that serves the needs of people in finance as well as it does the people in human resources and the warehouse… To do ERP right, the ways you do business will need to change and the ways people do their jobs will need to change too. And that kind of change doesn't come without pain."

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ERP is a part of an evolutionary process that began with material requirements planning (MRP). MRP is a computer-based, time-phased system for planning and controlling the production and inventory function of a firm-from the purchase of materials to the shipment of finished goods. It begins with the aggregation of demand for finished goods from a number of sources (orders, forecasts, and safety stock). This results in a master production schedule (MPS) for finished goods. Using this MPS and a bill-of-material (a listing for all component parts that make up the finished goods), the MRP logic determines the gross requirements for all component parts and subassemblies. From an inventory status file, the MRP logic deducts the on-hand inventory balance and all open orders to yield the net requirements for all parts. Then all requirements are offset by their lead times to provide a date by which an order must be released in order to avoid delaying the production of finished goods.

From this MRP logic evolved manufacturing resource...

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