From the course: Inventory Management Foundations
Enterprise resource planning (ERP)
- Enterprise Resource Planning or ERP coordinates your inventory, as well as your company's efforts to manage and control that inventory. As the name implies, an ERP software system allows the enterprise to effectively plan the use of its resources by connecting all functional areas of the organization. The key is that the system, and therefore all of its users, share one database for all departments and all applications. So everyone has the same inventory-related information. The purpose of enterprise resource planning is to support planning and execution systems and the decisions they drive throughout your company. For example, a customer order is tracked as it moves through the process and transactions are automatically updated. This gives people in each part of operations management the information they need to make appropriate decisions, like people in planning, quality, and materials management. And the system helps you keep track of the inventory needed for that customer order. As software modules have been added to coordinate logistics, transportation, suppliers and customers, ERP systems have moved beyond the organizational boundaries allowing planning and control for supply chain management. In fact, over the years, the E in ERP has come to represent not just the enterprise, but the enterprise's supply chain. This allows you to analyze, monitor, and manage your inventory throughout the entire supply chain, adjusting as problems and issues come up. ERP systems can be used to effectively control inventory in global operations, but it is much harder. As with any successful project, the right input from the right resource must be available at the right time. You not only need input from your company's different departments, but also from suppliers, customers, and contractors who might be located all around the world. ERP implementation projects take a lot of time and a lot of resources. There are many horror stories in the business world about projects that failed, but today's companies would be impossible to manage without the ability to coordinate all these activities and all this information. Such projects are further complicated by mergers and acquisitions because every time you buy a company, you buy their ERP system, which now must be converted to your system. The best approach for implementing or updating an ERP system is to pilot new software in one focused location or with one product family, prove it works, and then roll your success out to other locations and other product lines. Overall, a very slow but sure approach is more successful and helps you ensure that inventory management in your company is a coordinated activity.
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