Tuesday, June 17, 2008

Lessons Learned Posting

What is ERP?

It is kurumsal kaynak planlama in Turkish. ERP is software that links each business unit, each software and operations in an organization. It is different than MRP - Materials Requirement Planning.ERP systems are modular with a single databases; the modules can be: HR, Finance, Accounting, Sales…Systems provide right information to right people at the right time. ERP can also be defined as Complete suite of integrated applications. ERP is evolved from MRP, after MRP II which was a more complete solution for organizations in management, ERP with even more complete solutions emerge.
- MRP => MRP II => ERP => ERP2(?)
Modular structure is very important for organizations since the organizations can decide and pay only for the modules they need.

When to implement?

ERP systems are usually expensive, costly and difficult-to-implement systems. Therefore, organizations must make decisions very carefully when implementing ERP system also the timing of implementation is also important. First of all not all of the organizations need ERP systems, even though the systems are very beneficial, especially if the organization is not capable of using the system. During implementation, usually there is consultancy but after that consultants left and organizations must use the system effectively on their own even though some level of support is usually available. In order to assure effective use after the implementation period, some people from the company must participate to the implementation period, it is important to have some people who knows the business especially from departments. In addition to people from departments, upper and/or middle level management are better to join to the process. Also it is always a good idea to analyze operations before implementing the system. Implementing system during the establishment of business is the best way and ideal time but it is not always possible mostly due to the cost issues. Moreover, it is important to know that ERP systems usually causes changes in the business practices in the organizations therefore, it is not a good idea to implement ERP right after radical changes in business practices since additional changes may be needed. This may cause more than doubled costs but changing business practices after both analyses within the company and ERP implementation would a better practice.

Organizational size and ERP system provider types:

All ERP systems come with best practices and these may force the organizations to change their business practices. For a small size organization it may be easier to change its business practices rather than ERP system. However, for a larger organizations business practices cannot be changed that easy, there may be higher costs and higher resistance within the company. It is also noteworthy that ERP systems can be customized depending on the needs of the organizations and also there are sector-specific versions of the systems.
Before looking at the ERP provider types, we can briefly talk about on-demand ERP (SAAS). This type of ERP requires less money since it requires less infrastructure since the SAAS provides online service in which company uses the ERP provider’s servers. However, it is very risky to give company’s whole information to a third party due to the security reasons.
There are basically 3 types of ERP providers:
- Major Players (SAP, Oracle, SSA Global…)
- Small providers (many local companies)
- Open Source (Compiere, OFBiz, WebERP)

Since most of the ERP projects fail, and there are always bugs; it is important to evaluate which provider type has best solutions for us. To do so we need to determine advantages and disadvantages of all three.

Advantages of major players:

Good products, good codes, and better know-how and experience
Better consultancy and stronger support
More sector specific solutions

Disadvantages of major players:
Less company specific solutions

Advantages of small providers:

More company specific solutions
Cheaper than major players
Sometimes very good codes
More care for small size businesses

Disadvantages of small providers:
Sometimes lower quality
Less support
Stability of the provider

Advantages of open sources:

It is free
Better and cheaper or free support (if available)
In-house customization (if possible)

Disadvantages of open sources:
Less support
Weak documantation

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