What is ERP?

A common question that we see on the discussion forums is 'what is ERP?'. This short article is aimed to clear up this question, provide a little background and share a few additional thoughts.

Let's cut to the chase. In the world of manufacturing software, ERP stands for 'Enterprise Resource Planning'. In plain English it is a computer system that joins up your physical business processes. The aim of an ERP system is to reduce complexity and improve productivity.

ERP systems have evolved over several decades, that's for sure. Let me quickly explain the common elements of most ERP systems.

MRP 1975 (Materials Requirements Planning)

In 1975 the first MRP systems were coming into the marketplace. MRP is the core of most ERP systems, taking care of inventory, Bills of Materials, sales orders and works orders.

MRP II 1978 (Manufacturing Resources Planning)

Shortly after MRP's introduction came MRP II, the scheduling and capacity planning engine that also features in many of the ERP system we see today. MRP II brought with it the idea of work centres, utilisation / planning constraints, scheduling operations and basic shop floor data collection.

ERP 1990s (Enterprise Resource Planning)

Roll on into the early 1990s and with desktop computer speeds radically improving, the functionality of the software exploded too. The whole business could now be mapped out and CRM (Customer Relationship Management) modules started to appear, along with extended engineering functions, warehousing, quality and finance. Bolt ons for Advanced Planning and Scheduling soon started to appear, bringing us right up to the cloud computing era.

ERP in the cloud

Like most other cloud applications, ERP has been shifting slowly into the cloud for the last few years. The usual advantages of a cloud based system are starting to be clear. No installation time / costs for the end user. Continuous micro improvements being rolled out, no longer requiring days of downtime and consultancy costs. Professional data backups is another neat advantage too.

Some common misconceptions about ERP

We hear a lot of weird and bad things about ERP. We'll review some of them here.

Lean vs ERP

"You can use an ERP system if you want to go Lean."

Yes, this really is a common concern. Thankfully, Lean and ERP can go hand in hand. They both want the same goal of streamlined operations and minimal stock / work in progress. The convoluted methods some business get themselves into, however, is the complete opposite of Lean.

Don't confuse poor management and mis-understanding of how to use an ERP system with anti-Lean intentions!

ERP will make my life easier

Yes, it should do (and can do).

If I was to be really blase about ERP system implementations it would be something like:

  • We don't really understand how an ERP system works.
  • Our staff aren't fully trained.
  • The project deadline is looming so let's get on with it.
  • We'll get through the infancy stage....

And then nothing further happens...

No wonder this type of approach gives ERP a bad name!

ERP systems have to be complicated

No they don't.

Some are, some aren't.

If you don't have complex business processes then you don't need a complex ERP solution. The ERP system should follow your business processes closely.

A simple ERP system setup, where people understand how to use it properly, professionally managed, can produce fantastic results.

Don't get hung up thinking more complicated solutions are better.

Can Fraction ERP help your business?

We designed Fraction ERP because we were frustrated with expensive, complicated, poorly executed ERP systems. The Fraction system is stripped back to provide simple functionality and maximum results; we have a price tag that makes using us affordable too (especially if this is your first ERP system).

You can access a free demo to see it in action and see if it is something that would work for your business.

To access the free demo, drop us a line using this link, or use the form below.

I hope that you now have a better understanding of what ERP is, where it came from and some of the common mis-conceptions that people have around these kinds of systems. Properly introduced, an ERP system can truly give you a competitive edge over your competition.

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