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Enterprises Resource Planning!

ERP package is used in many companies worldwide. The full form of ERP is Enterprise Resources Planning. Previously companies used to do MRP i.e. Material Resource Planning. ERP is the up gradation of the same. The need for ERP arose due to lack of proper / common database available for all the functions in an organization. Best ERP training institute Webcom Technologies offers ERP training and ERP training programs.

For example, customer records as per sales department may be showing a different balance /address in comparison to the records maintained by the accounts department. Stock balance and value as per Stores department could vary vis-à-vis the values as recorded by the accounts department. Also typically data / records of various departments were maintained on different formats or on different platforms. Certain departments of a company could be working in a computerized environment and that too on different packages / operating systems like Unix /oracle. Some other departments could be maintaining their records manually.

The situation leads to improper data available to the Management to plan and run their business. Therefore a need was felt to have a package that has a Common database and interconnects all departments / functions and also enables ON LINE entry / access to data/ records. This consequently led to the development of ERP packages worldwide like , BAAN, Peoplesoft and J.D.Edwards.

The features of erp include various modules and sub-modules. The main modules are financial accounting-FI, Production planning-PP, Sales and Distribution-SD, Controlling (costing)-CO, Materials management (MM) and Human Resources (HR). There are various other modules like Plant maintenance, Quality management etc.

If you're still looking for that list of modules, here they are:

FI Financial Accounting - essentially your regulatory 'books of record', including
General ledger
Book close
Accounts receivable
Accounts payable
Special ledger
CO Controlling -basically your internal cost/management accounting, including
Cost elements
Cost centres
Profit centres
Internal orders
Activity based costing
Product costing
HR Human Resources -- ah yes, people, including
Employment history
Career management
Succession planning
MM Materials Management - underpins the supply chain, including
Purchase orders
Goods receipts
Accounts payable
Inventory management
Master raw materials, finished goods etc
QM Quality Management - improve the quality of your goods, including
PP Production Planning -manages your production process, including
Capacity planning
Master production scheduling
Material requirements planning
Shop floor
SD Sales and Distribution -from order to delivery, including
Sales orders
Picking (and other warehouse processes)

The database is common for all modules and avoids duplication of maintaining master records. For e.g. the customer records will be maintained in SD module like customer code, customer type, Credit/payment terms, address etc. The same would be used by the FI module while perusing the customer accounts or entering the receipt of payments. Similarly the sales manager can view the customer balances in the FI module for follow up with the customer. Another example would be Vendor Master maintained in MM module which can be accessed by the FI module user to check the purchase order details, Delivery schedule, Payment terms etc. Also one can access information on whether the material order has been received by the stores department, whether the same is under inspection or if there is any shortage or rejection. Once the material has been accepted and entered, the systems will automatically pick up the value of the material from the purchase order. The accounts department on receipt of the invoice can verify the same through' the MM module and say whether the Goods Inward Notice is available on the system and give credit to the Vendor's account for the value of the material purchased.

A notable feature of ERPis, wherever a transaction of a financial nature takes place, whichever module is in use, the system generates an accounting entry, this is contrary to the normal belief that-transaction takes place only in the accounting department. For example, withdrawal of material /item through an indent from the stores will not only result into the physical stock being reduced but also an accounting entry being generated whereby the material consumed A/c (P/L expense /Revenue A/c) will be debited and the stock account will be reduced (Balance sheet item). This will lead to generation of an accounting document in MM module itself. The value of the item drawn could depend on the policy of the company whether it adopts FIFO, LIFO, and standard cost method s of valuation of stock.

A natural question can arise -- whether the non-financial personnel of a company can undertake accounting transactions. Herein the initial mapping of the systems and the processes will be done at the time of the ERP implementation and the accounting impacts will be studied and built into the Masters for automatic accounting effects for various types of transactions. There is a Master called Chart of Accounts, which is the backbone of ERP. It contains all accounts with their code, nature linkages, Groupings etc. Of course this master has to be built very carefully and exhaustively.

The transaction-taking place in ERP will be recorded with the user identification, time and date. No transaction can be erased. Any erroneous transaction can only be rectified or reversed. Each transaction being recorded will lead to a specific document number being created based on the transaction type and the number ranges as defined in the document masters. The user by now can appreciate that it is a system, which envisages lot of diligence and security. Therefore only authorized personnel can deal with the system in order to avoid malfunctioning and misuse of the system. User identification is to be given only to key personnel who are well trained and well aware of the impact of the transactions to be undertaken by them. Authorizations are given either for module based and /or screen based transactions. For example, a user in MM module will not be allowed to operate on FI module. However " view " authorizations for certain personnel can be given on case-to-case basis. Authorization and monitoring of users have to be done by the System Administrator. This is a key function and it is very important to avoid misuse/ malfunctioning of the system. Large and fast servers should be made available for quick access of data. Proper facilities of back up and UPS should be provided. Care should be taken to avoid loss of data.

ERP is a package with minimal customizations and the company implementing the same may have to re-orient its business processes to fall in line with ERP requirements.