The Importance of Implementing an ERP System in an Organization

ERP Implementation

An ERP ( Enterprise Resource Planning ) system is a system for planning organizational resources.

It is an information system used for data processing that handles all of an organization's data-processing needs (for example: human resources, finance, marketing, logistics, operations, etc.) as a single, unified whole.

ERP implementation can be extremely beneficial for an organization because the ERP approach differs from the classic approach: it consolidates all of the organization's information systems into one system, allowing shared data to be used in an integrated way through a single, unified interface.

In organizations without an ERP computing system, you will find a number of software applications that support the different activities within the organization.

These applications help with managing the organization's various information systems - production, inventory, logistics, human resources, customers, procurement, accounting and finance.

In such organizations, when management asks for managerial reports that combine several parameters from different systems, the relevant data must be pulled from each system and combined manually, or through interfaces and other external systems, in order to get the full picture. This is why an ERP system should be implemented in the organization.

An example of the complexity: checking the profitability forecast of a specific product the company sells

To prepare a suitable managerial report, an information systems implementer is needed to extract the data that exists across all the systems:

• Product tree – from the production system, raw material inventory – from the inventory system
• Raw material costs – from the procurement or accounting system
• Direct labor costs – from the production system and the human resources system
• Quantities sold per customer – from the customer management system or accounting
• Sales prices – from the customer system or accounting.

To prepare such a basic report, an information systems implementer has to pull data from different software and systems and merge it into a single report by hand, or alternatively an interface is needed that pulls the data from the various systems into one report. Even then, the data must be checked, reconciled between the different systems, and processed into the report.

The difficulty of obtaining such data and reports usually leads management to give up on focused managerial reports at the product / customer level and similar, and to settle for a top-down analysis of company activity. Alternatively, management receives focused reports that take inefficient work to prepare, leave plenty of room for errors, and may contain significant inaccuracies.

Implementing an ERP system in the organization solves the problems described above

In an ERP system, the organization's different systems are managed under a single computing roof.

The system's various modules are synchronized with one another, and preparing focused managerial reports becomes a relatively simple and far more accurate task.

After a new information system is implemented and the information systems are managed, the ERP system provides convenient and fast access to information. This gives management accurate managerial tools that support decision-making in areas such as products, customers, profit centers, procurement and more. As a result, management can keep track continuously and efficiently, and always have a "finger on the pulse".

Department managers also get ongoing managerial tools after ERP implementation

Thanks to implementing a system that provides ERP solutions, the production manager can plan production according to the prioritization of customer orders on one hand, and the actual raw material inventory on the other, and not be "surprised" in the middle of production.

The procurement manager can receive purchasing recommendations based on inventory status, future production planning, trade terms with suppliers and delivery dates, allowing the system to run without delays and shortages.

The finance system receives chained information from the moment of a customer order or purchase order, through the delivery note or goods receipt, and up to the invoice for collection or payment.

This way, for example, a cash flow forecast can be prepared not only on the basis of invoices recorded in accounting, but already from the level of purchase orders and customer orders.

 

An information systems implementer in the organization

Implementing ERP information systems in the organization allows every part of the organization to operate more efficiently and upgrades management's toolbox.

Implementing an ERP system through an information systems implementer significantly improves the level of day-to-day management, in both the short and the long term.

The managerial tools allow management to anticipate the company's operational and financial needs, and thereby make decisions and prepare better.

The more focused and accurate the information, the more confidence it gives management in making decisions and the more efficient the planning it enables, which ultimately shows up in the company's business results, as seen on the ERP system implementation site.

Questions and answers on the importance of implementing an ERP system:

Question 1: What is the key advantage of the ERP approach compared with the classic computing approach in an organization?
Answer: Unlike the classic approach, which uses several separate applications for each activity, an ERP system consolidates all information systems (finance, production, procurement, human resources and more) into a single whole. It allows shared data to be used in an integrated way through a unified interface, removing the need to manually merge data from different sources.

Question 2: Why do management teams without an ERP system sometimes give up on focused managerial reports?
Answer: Without a unified system, preparing a basic report (such as a product profitability forecast) requires complex manual data extraction from the production, inventory, procurement and accounting systems. The difficulty of collecting the data, the inefficient working time and the high risk of errors and inaccuracies lead many management teams to settle for a general "top-down" analysis instead of drilling down into precise details.

Question 3: How does implementing the system improve the planning ability of production and procurement managers?
Answer: The system synchronizes the different departments in real time: the production manager can plan work according to customer order priorities and existing inventory without being surprised by shortages, and the procurement manager receives accurate purchasing recommendations based on future production planning and supplier terms, preventing delays in the process.

Question 4: What is the advantage of an ERP system in managing the cash flow forecast in the finance department?
Answer: Thanks to the full chaining of information in the system, the finance department does not have to wait for the final invoice to be recorded in accounting. An accurate cash flow forecast can be built already from the level of purchase orders and customer orders, enabling much better forward visibility of the financial position.

Question 5: How does ERP implementation contribute to management's confidence in decision-making?
Answer: The more focused, accessible and accurate the information, the greater management's confidence in planning its steps. The system makes it possible to anticipate operational and financial needs, respond quickly to changes and keep a "finger on the pulse" on the profitability of products, customers and profit centers, which ultimately translates into improved business results for the company.

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